Hysan Development Co Ltd
Annual Report 2000

Plain-text annual report

Hysan Development is committed to building and owning quality buildings, delivering attractive and sustainable returns to shareholders. The Group, with origins back to the 1920s, owns, develops and manages some 4.67 million square feet of high quality investment properties. It is the largest commercial landlord in Hong Kong’s Prime office/retail Causeway Bay area. s t n e t n o C 1 2 4 7 10 13 18 25 26 27 29 31 32 34 62 63 65 67 Group Profile Highlights 2000 Chairman's Statement Chief Executive's Review Financial Review Directors, Officers and Advisers Directors' Report Auditors' Report Consolidated Income Statement Consolidated Balance Sheet Balance Sheet Consolidated Statement of Recognised Gains and Losses Consolidated Cash Flow Statement Notes to the Financial Statements Report of the Valuer Schedule of Principal Properties Five-Year Financial Summary Notice of Annual General Meeting Hysan Development Company Limited Annula Report 2000 Highlights 2000 • • • • Rentals in Grade “A” office sector in prime locations recover Asset value uplift Current earnings continue to be affected by negative reversions Active management to serve the requirements of our customers today and in the future Major Property Portfolio Commercial Hennessy Centre 500 Hennessy Road Causeway Bay: 719,642 ft2 One Hysan Avenue 1 Hysan Avenue Causeway Bay: 169,019 ft2 AIA Plaza 18 Hysan Avenue Causeway Bay: 139,119 ft2 The Lee Gardens 33 Hysan Avenue Causeway Bay: 902,797 ft2 Lee Theatre Plaza 99 Percival Street Causeway Bay: 315,749 ft2 111 Leighton Road 111-117 Leighton Road Causeway Bay: 79,905 ft2 VALUATION AT 31 DEC 2000 HK$ 28,433 million TOTAL INVESTMENT PROPERTY PORTFOLIO 4,674,442 ft2 2 Hysan Development Company Limited Annual Report 2000 Operating Profit Net Profit Net profit excluding investment property sales Earnings per share (basic and diluted) Dividends per share Net asset value per share Shareholders funds Highlights 2000 Year ended 31 December 1999 2000 Change HK$’000 HK$’000 1,474,517 850,173 849,823 1,994,930 1,203,958 721,396 HK$ 0.82 0.42 HK$ HK$ 1.16 0.40 HK$ 22.48 19.50 HK$ (million) 23,159 HK$ (million) 20,217 % (26.1) (29.4) 17.8 % (29.3) 5.0 % 15.3 % 14.6 Residential Sunning Plaza 10 Hysan Avenue Causeway Bay: 279,717 ft2 Entertainment Building 30 Queen’s Road Central Central: 211,148 ft2 Caroline Centre 2-38 Yun Ping Road Causeway Bay: 626,882 ft2 Leighton Centre 77 Leighton Road Causeway Bay: 435,008 ft2 Bamboo Grove 74-86 Kennedy Road Mid-Levels: 697,940 ft2 Sunning Court 8 Hoiping Road Causeway Bay: 97,516 ft2 PORTFOLIO ANALYSIS BY SIZE: • RETAIL • OFFICE 59% 24% • RESIDENTIAL 17% Office Retail Residential Area are approximate gross floor area (GFA) 3 Chairman’s Statement Chairman’s Statement Fundamental drivers of our core market are positive, which will provide a supportive background for our aim to deliver attractive shareholder value through active management. 4 4 Hysan Development Company Limited Annual Report 2000 Chairman’s Statement OVERVIEW HK$1,204 million in 1999, representing a decrease of 29.4% on the equivalent period in The general improvement in the overall leasing 1999. This is after consideration has been market that emerged during the first part of taken of the HK$482 million non-recurring 2000 continued. This was particularly felt in gains from property sales in 1999. The the Grade “A” office sector in prime locations, Group’s rental income decreased by 10.2%, where limited supply and a noticeably stronger mainly attributable to rent reviews and occupier demand provided support for a relettings secured at lower rents. Reduced significant rise in rentals during the review interest expenses have, however, helped to period. alleviate the impact of such negative rental reversions. During the first part of the year, we concentrated our efforts on improving our letting performance. The second half has seen Earnings per share were HK$0.82, also a decline of 29.3% (HK$1.16 for the same further progress on this front, and in addition, period in 1999). we have spent more time and efforts on building and investing for the future. The Group’s investment property portfolio, as valued externally by independent professional Our strategy is to deliver attractive and valuers, increased by 13% to HK$28,433 sustainable results to shareholders by active million (1999: HK$25,173 million). The management. The executive team has carried revaluation has resulted in a surplus as out an important exercise and completed a compared to book value of HK$3,253 million, review of our strategic directions. The very which was accordingly credited to reserves. active management of the business during Year Shareholders’ funds at the year end were 2000 and our directions moving forward are HK$23,159 million, up 14.6% from described under “Chief Executive’s Review”. HK$20,217 million in 1999. Net asset value per share rose 15.3% in 2000, from HK$19.50 While we saw some slowing in the demand to HK$22.48. Improved values reflect the trend in the fourth quarter, demand remains generally improved property investment healthy. New supply of Grade “A” office space markets in which the Group operates. in prime locations will also remain constrained over the year ahead. The fundamental drivers DIVIDENDS of our core market remain positive, providing a supportive background for our objective of delivering attractive shareholder value through active management. These will underpin future values particularly when rental reversions turn positive. PERFORMANCE The Board recommends the payment of a final dividend of HK$0.31 per share, which together with the interim dividend of HK$0.11 per share, represents an aggregate distribution of HK$0.42 per share, an increase of 5 percent for the year. Subject to shareholder approval, the final dividend will be payable in cash with a scrip dividend Net profit for the year ended 31 December alternative. Shareholders who elect for the 2000 was HK$850 million, compared with scrip dividend will be allotted new ordinary 5 Chairman’s Statement shares of HK$5 par value each, credited as retire. The Board has accepted my resignation fully paid, subject further to the Listing as Chairman and Director after the Committee of The Stock Exchange of Hong forthcoming Annual General Meeting. Kong Limited agreeing to grant the listing of Peter T. C. Lee, Managing Director over the and permission to deal in the new shares to be last two years, has been appointed Chairman in issued by way of scrip dividend. A circular addition. containing details of the scrip dividend and the form of election will be mailed to shareholders The success of Hysan Development is very on or about Thursday, 10 May and elections much due to the efforts of the whole team. My will be required to be made on or before thanks go to my dedicated colleagues for many Wednesday, 30 May. years as well as the new generation of management and staff. Under Peter’s The share register will be closed from Friday, 4 May to Tuesday, 8 May, both dates inclusive. leadership, I have every reason to believe that Hysan Group will continue to move forward Definitive share certificates in respect of the into the millennium and add value to our scrip dividend and cheques (for those shareholders. shareholders who do not elect for scrip dividend) will be despatched to shareholders THE WAY AHEAD on or about Tuesday, 5 June. DIRECTORS AND STAFF We clearly have the critical mass and strong market position in our core business to deliver attractive returns through active management. The Honourable Lee Quo-Wei, who has Our corporate strategy review exercise provides served as our Deputy Chairman and as us with a framework against which targets can Chairman of our Emoluments Review be set and progress monitored. We are not, Committee for a considerable period after first understandably, immune to economic joining the Board in 1979, has decided to step conditions outside our control. Careful risk down as from the Annual General Meeting in management will thus be as important as ever. May. The Board is greatly indebted to him for Our strategy therefore also embraces financial his invaluable guidance in attaining continuous objectives, which are founded upon growth for the Group. maintaining a strong and flexible balance sheet and an emphasis upon strong financial We are very pleased to announce that Sir David controls. Looking back on our solid Akers-Jones, who has been on our Board as a foundation and looking forward with the non-executive Director since 1989 and is now considerable confidence we have in our future also Chairman of our Audit Committee, will directions, I believe we are well placed to become our non-executive Deputy Chairman achieve our aim of delivering attractive returns as from 8 May. without undue risk. After some twenty years with the Company, witnessing its listing on the Hong Kong Stock Exchange to being one of the leaders in our H. C. Lee Chairman sector, I have decided that it is time for me to Hong Kong, 20 March 2001 6 Hysan Development Company Limited Annual Report 2000 Chief Executive’s Review Chief Executive’s Review Adding value by active management: anticipating and responding to customers’ ever changing needs for space and services today and in the future. STRATEGIC FOCUS • to continually review the performance of individual properties and improve the As we enter the new millennium, we live quality and value of the portfolio by through a period of considerable change. selective refurbishment and re-development Active management is therefore the key to • to further grow our retail sector located in serving the requirements of our tenants not the retail hub of Causeway Bay only today, but in the future. Hysan • to continually focus on the current and Development’s investment portfolio in Hong future needs of our commercial and Kong comprises of high quality office, retail residential customers who occupy our space and residential properties with a total gross and use our services floor area of 4.67 million square feet. We have • to utilize our relationships and financial the critical mass and strong market position to strength as a competitive advantage in further strengthen the leadership position of pursuing investment opportunities our portfolio in the prime office/retail • to keep risk and return in balance Causeway Bay area. • to upgrade overall operational efficiency including facilities management, Having met the main challenge of optimising emphasizing good customer service occupancy for the first half of the year, we have focused on reviewing our strategic direction The defining features that will differentiate us over the past six months. We shall achieve our and underpin future performance have been aim to maximize shareholder value by active emerging. We have completed the management, with the following directions reorganization of our leasing units into dominating our actions: specialist office, retail, and residential teams to 7 Chief Executive’s Review work the portfolio more actively. These are high-end brands at the Lee Gardens, and further described in the section under specialist niches like the children’s concept at “Activities in the Year” below. Caroline Centre. ACTIVITIES IN THE YEAR A combination of improved consumer Investment Properties Office sentiment and increased tourist arrivals has offered scope for an active year for our retail team. Building on an effectively fully-let position, we began implementing our new initiatives, and fostering even closer Our office portfolio continued to strengthen relationships with our tenants and retailers in during the review period, witnessing a strong general to our mutual benefit. increase in rentals. Supported by noticeably strong demand, the occupancy of our office We have stepped up our marketing activities, portfolio was approximately 97%, and vacancy implemented environmental improvement is likely to remain at a very low level in the works, and generally adopted a more proactive absence of substantial new supply over the year approach in managing the composition of our ahead. tenants. All these factors will enhance our retail assets by providing a more appealing shopping After successfully meeting the challenge of and leisure experience. maximizing occupancy, we focused our resources during the second half of the year on In moving forward, we are actively developing research, on occupier surveys, and on further specialist niches for our centres and understanding the factors affecting the strengthening the synergies between them. changing needs of our business customers. We shall continue to focus on what occupiers Residential need, not only today but in the future so as to build mutually beneficial relationships with The market for high-end residential premises, major occupiers. which the Group focuses on, has been healthy. Retail The Group continually reviews its portfolio and implements steps to enhance its value. We are developing plans to carry out a major Our core retail portfolio, located in the retail repair and refurbishment of the Group’s hub of Causeway Bay, offers a variety of Bamboo Grove residential apartments in the shopping experiences ranging from the Lee Mid-levels to further strengthen its position as Theatre Plaza retail and leisure complex, to a high quality family-friendly complex. 8 Hysan Development Company Limited Annual Report 2000 (cid:1) (cid:1) (cid:1) Chief Executive’s Review Development Properties PEOPLE Singapore Alongside our strategic priorities, we recognize that people are our vital asset. We aim to The Group has minority interests in three employ and motivate the best, while residential projects in Singapore, which has encouraging a culture of service and success. shown recovery during the year under review. We have introduced a performance Construction for all three projects is in management programme to provide a progress. framework for setting clear targets and managing the team. Further information on Pre-sales marketing for the Sanctuary Green our employment policy is set out in the section (Phase I) and the Gardens at Bishan headed “Staff” in the Directors’ Report. I developments is progressing satisfactorily. The would like to take this opportunity to thank all Group has a 10% interest in these projects. staff for their hard work and dedication during this year of progress in our new direction. The Group has a 25% interest in the Amaryllis Ville project and pre-sales are scheduled to THE FUTURE commence in the near term. (cid:1) Shanghai, The People’s Republic of progress and our active management initiatives Undoubtedly Year 2000 has been a year of China have been emerging. We have very clear plans in moving forward and I am confident that we All units in Phase One of the Peace Garden can build on this year’s achievements to deliver residential project have been sold. Phase Two attractive future returns. of the Project has been deferred, whilst we continue to monitor the market situation in Shanghai. The Group has a 45% interest in this project. Peter T. C. Lee Managing Director The Grand Gateway (Phase 1), in which the Hong Kong, 20 March 2001 Group has a 17% interest, is establishing itself as one of the largest and most modern shopping malls in Puxi. The commercial/ residential development is in a prime location in the southwest commercial center, above Shanghai’s largest subway station (Xujiahui). 9 (cid:1) Financial Review RESULTS market in Hong Kong, a revaluation surplus of HK$3,253 million was accordingly taken to The Group’s turnover in 2000 was HK$1,480 reserves. million. This represented a decrease of HK$816 million (35.5%) from the previous year and was mainly caused by the non-recurring income from property sales of HK$647 million in 1999 versus minimal property sales in 2000, and rental income from the Group’s investment properties dropping by 10.2% because of continuing negative rental reversions. These negative effects, however, were reduced by gains on disposal of long-term investment in marketable securities and lower operating and financing expenses. The Group’s profit after tax in 2000 was HK$850 million, a decrease of HK$354 million or 29.4% from the previous year, and earnings per share correspondingly decreased from HK$1.16 to HK$0.82. HK$ (million) Performance Analysis With the Group’s focus on Hong Kong commercial properties and the positive revaluation, the Group’s shareholders fund rose 14.6% year-on-year from HK$20,217 million to HK$23,159 million and net asset value per share increased from HK$19.50 to HK$22.48. Asset Values HK$ (billion) Asset Values Net asset value per share (HK$) 40 70 60 50 40 30 20 10 0 35.97 37.54 33.17 47.94 19.50 17.92 28.07 28.30 22.48 30.78 1996 1997 1998 1999 2000 30 20 10 0 2,500 2,000 1,500 1,000 500 0 -500 -1,000 159.6 482.6 293.8 1,643.8 1,475.9 (834.0) (772.3) Marketable Securities Hong Kong Properties Overseas Properties Net Asset Value per share DEBT AND MATURITY PROFILE Total debt outstanding as at 31 December 2000 was HK$5,106 million (excluding amount due to minority shareholders and 1 9 9 9 2 0 0 0 advances from investees), which represented a Operating and financing expenses Gain on sale of long-term investment in marketable securities Gain on property sales Rental income ASSET VALUES The Group’s investment properties were valued independently by professional valuers at year end. Due to the resurgent commercial property 10 Hysan Development Company Limited Annual Report 2000 reduction of HK$907 million from the previous year end. The decrease was attributed to cash flow from rental income and proceeds from sale of marketable securities. Net debt (gross borrowings less cash, cash equivalent and marketable securities at year-end market value aggregating HK$1,676 million) amounted to HK$3,430 million. Gross and net debt 9,835 3,142 7,224 1,389 6,693 5,835 Cash, Cash Equivalents and securities at market value Net debt 6,013 2,683 5,106 1,676 3,330 3,430 HK$ (million) 10,000 8,000 6,000 4,000 2,000 0 4,626 2,643 1,983 1996 1997 1998 1999 2000 All of the Group’s outstanding debt are denominated in Hong Kong dollars, unsecured and on a committed basis. Financial Review The Group also has strong recurring cash flow and sufficient stand-by financing facilities to meet maturing borrowings and to facilitate a swift response to potentially attractive investment opportunities. INTEREST COVER AND GEARING Principally as a result of debt reduction in 1998-2000 and improved investment property value, the Group’s net debt as a percentage of shareholder equity on 31 December 2000 improved from 16.5% to14.8% year-on-year. Net interest expenses coverage was a healthy 3.6 times (1999: 4.2 times). The maturity profile of the Group’s gross debt FINANCIAL RISK AND at 31 December 2000 was as follows: MANAGEMENT 1999 HK$ (Million) HK$ (Million) 2000 Repayable within a period – Not exceeding 1 year – Between 1 to 2 years – Between 2 to 5 years 816 2,150 2,140 5,106 1,953 1,510 2,550 6,013 The Group sourced its debt facilities from diversified sources to maintain a balance between cost and risk. Sources of debt facilities Bank bilateral loans 33% Capital market issuances 47% The Group’s financial risk management strategies include accessing diversified funding sources, extending the tenor of facilities, spreading out the maturity dates, as well as using interest rate swaps and other instruments to manage interest rate risks and to reduce exposure to volatility in interest rates. As of 31 December 2000, 46% of the Group’s borrowings were at fixed interest rates. The Group’s foreign exchange exposure is minimal. All debt outstanding are Hong Kong dollars denominated, and investment in overseas projects total the equivalent of HK$687 million or 3.0% of the Group’s shareholder equity. 20% Syndicated and Club loans 11 Financial Review CREDIT RATING During 2000, the Group maintained its credit rating of BBB+ from Standard & Poor’s Rating Agency. The agency recently changed the Group’s outlook from negative to stable because of the improved Hong Kong property market and the Group’s strong financial position. CAPITAL EXPENDITURES The Group incurred capital expenditures totaling HK$75 million in 2000, of which HK$46 million was for developing The Grand Gateway project, HK$27 million for completing construction payments for The Lee Gardens, and HK$2 million for one of the Singapore residential property development projects. CONTINGENT LIABILITIES The Group has provided guarantees for banking facilities granted to associated companies and investee companies. For 2000, the guarantees and counter guarantees were to cover the Group’s obligations in respect of the three Singapore development projects. As of 31 December 2000, the Group’s share of guarantees and counter guarantees amounted to approximately HK$153 million (1999: HK$159 million) and HK$84 million (1999: HK$191 million) respectively. 12 Hysan Development Company Limited Annual Report 2000 Directors, Officers and Advisers BOARD OF DIRECTORS Hon Chiu LEE, D.B.A. (Hon), LL.D. (Hon), G.B.S., J.P. Chairman Hon Chiu Lee has served the Company as Managing Director since 1981. He became Chairman and Managing Director in 1988 and Chairman in 1999. He is a non-executive director of Cathay Pacific Airways Limited, China Unicom Limited, Hang Seng Bank Limited, The Hong Kong and China Gas Company Limited, and a director of a number of other Hong Kong companies. Also a director of Lee Hysan Estate Company, Limited. He is chairman of the Council of The Chinese University of Hong Kong. Received a Bachelor of Science Degree in Electrical Engineering from Massachusetts Institute of Technology and a Master of Science Degree in Electronics from Stanford University. He is aged 72. The Honourable LEE Quo-Wei, G.B.M., J.P. Non-Executive Deputy Chairman Honorary Chairman of Hang Seng Bank Limited. He is also a non-executive director of Miramar Hotel and Investment Company Limited, New World Development Company Limited, Shaw Brothers (Hong Kong) Limited and Shanghai Industrial Holdings Limited. Life Member of the Council of The Chinese University of Hong Kong. Appointed a Director and Deputy Chairman of the Company in 1979 and 1983 respectively and is aged 82. Peter Ting Chang LEE, J.P. Managing Director Peter T. C. Lee first joined the Board in 1988 and was appointed Managing Director in 1999. A non- executive director of South China Morning Post (Holdings) Limited, United Chinese Bank Limited, Western Harbour Tunnel Company Limited and a director of a number of other companies. Received a Bachelor of Science Degree in Civil Engineering from the University of Manchester, he also qualified as a Solicitor of the Supreme Court of England and Wales. Also a director of Lee Hysan Estate Company, Limited. He is aged 47. Pauline Wah Ling YU WONG Director, Property Responsible for the Group’s property portfolio. Having obtained a Bachelor of Arts Degree from The University of Hong Kong, she qualified as a Fellow Member of the Chartered Institute of Housing. Joined the Company in 1981 and has over twenty-six years of experience in the property field. She was appointed a Director in 1991 and is aged 52. Michael Chi Kung MOY Chief Financial Officer and Director Responsible for Group finance. Received a BSE in Aeronautical Engineering from Princeton University, a Master Degree in Aeronautical Engineering from the University of Washington, and MBA with Distinction from The Wharton School of the University of Pennsylvania. Before joining the Company in 1999, he was a management consultant with Mckinsey & Company, and head of Asia for an international direct investment firm. He became Chief Financial Officer and Director in 1999 and is aged 44. Sir David AKERS-JONES, K.B.E., C.M.G., J.P. Independent Non-Executive Director Chairman of AXA China Region Limited and Global Asset Management (HK) Limited. Vice chairman of CNT Group Limited and a non-executive director of various other companies. He is also a chairman and member of various voluntary organisations. Received his Master of Arts Degree at Oxford University. He was formerly the Chief Secretary of Hong Kong. Appointed a Director in 1989 and is aged 73. Dr. Victor Kwok King FUNG Independent Non-Executive Director Chairman of the Li & Fung Group, Prudential Asia Investments Ltd. and the Hong Kong Airport Authority, a non-executive director of Pacific Century Cyberworks Limited, Kerry Properties Ltd., Orient Overseas (International) Ltd., DBS Kwong On Bank, Ltd. and Sun Hung Kai Properties Limited and a director of a number of other companies. From 1991 to September 2000, Dr. Fung was Chairman of the 13 Directors, Officer and Advisors Hong Kong Trade Development Council. He holds a Bachelor and a Master Degree in Electrical Engineering from the Massachusetts Institute of Technology, a Doctorate in Business Economics from Harvard University. Appointed a Director in 1998 and is aged 55. Fa-kuang HU, C.B.E., J.P. Non-Executive Director Chairman of Ryoden Development Limited and its group companies. Also a director of The Cross- Harbour (Holdings) Limited, i-CABLE Communications Limited and the PRC-listed Shanghai Jin Jiang Tower Co., Ltd. Holds a Bachelor of Science Degree from Shanghai Jiao Tong University. Appointed a Director in 1979 and is aged 77. Hans Michael JEBSEN Non-Executive Director Chairman of Jebsen and Company Limited as well as a director of other Jebsen Group companies worldwide. Appointed a Director in 1994 and is aged 44. Per JORGENSEN Independent Non-Executive Director A director of A.P. Moller, Denmark and a number of A.P. Moller-Maersk companies in Asia, Africa and Europe; also a non-executive Chairman of Lee Gardens International Holdings Limited. Appointed a Director in 1981 and is aged 65. Anthony Hsien Pin LEE Non-Executive Director A director and substantial shareholder of the Australian-listed Beyond International Limited, principally engaged in television programme production and international sales of television programmes and feature films. Received a Bachelor of Arts Degree from Princeton University and a Master of Business Administration Degree from The Chinese University of Hong Kong. Also a director of Lee Hysan Estate Company, Limited. Appointed a Director in 1994 and is aged 43. Chien LEE Non-Executive Director A director of Scottish and Eastern Investments Limited, Lee Gardens International Holdings Limited and a number of other companies. Non-executive director of Swire Pacific Limited. Also a director of Lee Hysan Estate Company, Limited. Received a Bachelor of Science Degree in Mathematical Science, a Master of Science Degree in Operations Research and a Master of Business Administration Degree from Stanford University. Appointed a Director in 1988 and is aged 47. Michael Tze Hau LEE Non-Executive Director Managing Director of Asia Strategic Investment Management Limited, he has extensive experience in equity investments in the Asia-Pacific region and is a registered investment advisor in Hong Kong. Non- executive director of Tai Ping Carpets International Limited. Also a director of Lee Hysan Estate Company, Limited. Received his Bachelor of Arts Degree from Bowdoin College and a Master of Business Administration Degree from Boston University. Appointed a Director in 1990 and is aged 39. Dr. Deanna Ruth Tak Yung RUDGARD Non-Executive Director Received a Master of Arts Degree, Bachelor of Medicine and of Surgery Degree from Oxford University. Also a director of Lee Hysan Estate Company, Limited. Appointed a Director in 1993 and is aged 61. Dr. Geoffrey Meou-tsen YEH, S.B.S., M.B.E., J.P., D.C.S., M.Sc., F.C.I.O.B., F.Inst. D. Non-Executive Director Chairman of Hsin Chong Construction Group Ltd. Holds a Bachelor of Science Degree from University of Illinois and a Master of Science Degree from Harvard University. Appointed a Director in 1979 and is aged 69. 14 Hysan Development Company Limited Annual Report 2000 Directors, Officers and Advisers SECRETARY Wendy Wen Yee YUNG Graduated from Oxford University with a Master of Arts Degree and is a solicitor of the High Court of the Hong Kong SAR. Prior to joining the Company in 1999, she was a partner of an international law firm in Hong Kong. She is aged 39. SENIOR MANAGEMENT Mark Sun Wa CHIM General Manager, Office Leasing Responsible for the Group’s office leasing activities. Before joining the Company in 1999, he was National Director, Commercial Department, of an international real estate consultancy firm with over thirteen years’ experience in leasing. Graduated from The Hong Kong Polytechnic University in Building Technology and Management. He is aged 37. Ben Sau Shun LUI Head of Project and Technical Services Responsible for the Group’s project and technical services. A Chartered Civil and Structural Engineer, he holds a Master of Science Degree in Project Management and a Bachelor of Science Degree in Civil Engineering, both from the University of Hong Kong. Before joining the Company in 2000, he has served senior project management positions in other major listed companies. Aged 42. Lora Wing Sze LUKE General Manager, Retail Leasing Responsible for the Group’s retail leasing activities. Prior to joining the Company in 2000, she was senior leasing manager of a major listed property investment company. She holds a M.B.A. degree from University of Reading in Real Estate and Construction. Aged 40. Connie Kit Mei PANG Head of Corporate Planning Responsible for the Group’s corporate planning activities. She holds M.B.A. and M.A. degrees from the Columbia University of New York and a Bachelor degree in Management and Economics from the University of Hong Kong. Prior to joining the Group in 2000, she was a principal with an international management consulting firm. Aged 37. ADVISERS Auditors Deloitte Touche Tohmatsu Principal Bankers The Hongkong & Shanghai Banking Corporation Limited Hang Seng Bank Limited Registered Office 49th Floor, Manulife Plaza The Lee Gardens 33 Hysan Avenue Hong Kong Share Registrars and Transfer Office Standard Registrars Limited 5th Floor Wing On Centre 111 Connaught Road Central Hong Kong Further information about the Group can be found at our Internet website: “www.hysan.com.hk” 15 Notes 16 Hysan Development Company Limited Annual Report 2000 Directors’ Report and Accounts 2000 17 Directors’ Report The Directors submit their report together with the audited financial statements for the year ended 31 December 2000, which were approved by the Board on 20 March 2001. PRINCIPAL ACTIVITIES The principal activities of the Group continued throughout 2000 to be property development and investment and investment holding. Details of the Group’s associates and subsidiaries at 31 December 2000 are set out in notes 15 and 37 respectively to the financial statements. An analysis of Group turnover and contribution to the Group’s operating profit of each principal activity is set out in note 3 to the financial statements. Detailed review of the development of the business of the Group during the year, and likely future developments, are set out in the Chairman’s Statement on pages 4 to 6, the Chief Executive’s Review on pages 7 to 9 and the Financial Review on pages 10 to 12. RESULTS AND APPROPRIATIONS The results of the Group for the year ended 31 December 2000 are set out in the consolidated income statement on page 26. An interim dividend of HK$0.11 per share amounting to HK$113,686,270 was paid to shareholders during the year. Your Board recommends the payment of a final dividend of HK$0.31 per share with a scrip alternative to the shareholders on the register of members on 8 May 2001, absorbing HK$319,377,904. The ordinary dividends paid and proposed in respect of the full year 2000 will absorb HK$433,064,174, the balance of the profit will be retained. RESERVES Movements during the year in the reserves of the Group and the Company are set out in notes 29 and 30 to the financial statements. INVESTMENT PROPERTIES All of the Group’s investment properties were revalued by an independent valuer at 31 December 2000. The revaluation resulted in a surplus as compared to book value amounting to HK$3,253 million, which has been credited directly to the investment property revaluation reserve. Details of movements during the year in the investment properties of the Group and the Company are set out in note 13 to the financial statements. MAJOR PROPERTIES Details of the major properties of the Group at 31 December 2000 are set out on pages 63 and 64 of the annual report. PROPERTY, PLANT AND EQUIPMENT Details of movements during the year in the property, plant and equipment of the Group and the Company are set out in note 12 to the financial statements. 18 Hysan Development Company Limited Annual Report 2000 Directors’ Report SHARE CAPITAL AND CONVERTIBLE BONDS The Company was authorised at the Annual General Meeting held in 2000 to purchase its own ordinary shares not exceeding 10% of the aggregate nominal amount of its issued share capital at that time. The Company periodically repurchases its ordinary shares when they are significantly undervalued, in order to enhance shareholder value. During the financial year, the Company repurchased an aggregate of 10,207,000 ordinary shares at the total consideration of HK$90,887,630 on The Stock Exchange of Hong Kong Limited. In addition, on 1 June 2000, a wholly-owned subsidiary of the Company redeemed US$117.98 million in nominal value of the 6.75% convertible bonds due 2000 (“2000 Bonds”) in accordance with its terms of issue. Such bonds, guaranteed by the Company, were listed on the Luxembourg Stock Exchange. Such issuer also repurchased US$320,000 in nominal value of the 2000 Bonds at an aggregate consideration of US$319,200 during the year. Save as disclosed above, neither the Company nor its subsidiaries repurchased, sold or redeemed any of the Company’s listed securities during the year. Details of movements during the year in the share capital of the Company are set out in note 27 to the financial statements. Except as disclosed in note 28 to the financial statements, there were no other warrants, options or convertible securities issued by the Company or its subsidiaries during the year. CORPORATE GOVERNANCE The Company is committed to high standard of corporate governance. This section describes how the principles of corporate governance are applied to the Company and the Company’s compliance with the Code of Best Practice (the “Code of Best Practice”) as set out in the Listing Rules of The Stock Exchange of Hong Kong Limited. Statement of Compliance with the Code of Best Practice The Company has complied throughout the review period with the Code of Best Practice. The workings of the Board and its Committees (cid:1) The Board The Board currently comprises H. C. Lee, Chairman, Peter T. C. Lee, Managing Director, Pauline W. L. Yu Wong, Director, Property and Michael C. K. Moy, Chief Financial Officer and Director, and eleven non- executive Directors. The biographies of the Directors appear on pages 13 and 14. These demonstrate a range of experience and calibre to bring valuable judgment on issues of strategy, performance, and resources which are vital to the success of the Group. The Board meets at least quarterly, reviewing trading performance, ensuring adequate funding and monitoring strategy. To enable the Board to discharge its duties, all Directors receive appropriate and timely information. 19 Directors’ Report CORPORATE GOVERNANCE (continued) In accordance with the Company’s articles of association, the three Directors who have been longest in office as at each Annual General Meeting will retire from office. This applies to all Directors, including non- executive Directors. In accordance therewith, Pauline W. L. Yu Wong, F. K. Hu and Geoffrey M. T. Yeh will retire from office at the forthcoming Annual General Meeting and, being eligible, offer themselves for re- election. During the year, Ulrik Brandt, Claus Michael Valentin Hemmingsen, Raymond L. M. Hu, Markus Friedrich Jebsen and V-nee Yeh served as alternate Directors. The following committees deal with the specific aspects of the Group’s affairs. (cid:1) Audit Committee The Audit Committee which is chaired by Sir David Akers-Jones, its other current members being Per Jorgensen and Chien Lee, meets not less than twice per annum. The Committee provides a forum of reporting by the Group’s external auditors. Meetings are also attended, by invitation, by the Managing Director and the Chief Financial Officer. The Audit Committee is responsible for reviewing a wide range of matters including the half-year and annual accounts before their submission to the Board, monitoring the controls which are in force to ensure the integrity of information reported to the shareholders, and overseeing compliance generally. (cid:1) Emoluments Review Committee The Group’s Emoluments Review Committee comprises three non-executive Directors and is chaired by The Honourable Lee Quo-Wei. Its other members are F. K. Hu and Geoffrey M. T. Yeh. It reviews the remuneration of the executive Directors, within agreed terms of reference. Further details on the remuneration, service contracts of Directors are listed in the section headed “Directors’ remuneration and interests” below. Investment Committee The Group’s Investment Committee comprises the Managing Director, Victor K. K. Fung, H. M. Jebsen, Michael T. H. Lee, with Anthony H. P. Lee as the Chairman. The five Directors, demonstrating a range of valuable experience and background, meet as necessary to advise and make recommendations on the investment strategies of the Group within agreed terms of reference. Directors’ remuneration and interests (cid:1) Emoluments Details on Directors’ emoluments are set out in note 5 to the financial statements. (cid:1) Service Contracts No Director has a service contract that is not determinable by the Group within one year without payment of compensation (other than statutory compensation). 20 Hysan Development Company Limited Annual Report 2000 (cid:1) Directors’ Report CORPORATE GOVERNANCE (continued) (cid:1) Directors’ Interests in Shares As at 31 December 2000, the interests of the Directors and Alternate Directors in the ordinary shares of the Company, as recorded in the register maintained by the Company pursuant to Section 29 of the Securities (Disclosure of Interests) Ordinance (the “SDI Ordinance”) were as follows: Name H. C. Lee Lee Quo-Wei No. of shares held Personal Interests Family Corporate Interests Interests Other Interests Total 3,211,705 – – – 3,211,705 1,540,298 1,843,878 3,993 (Note 1) 1,376,314 (Note 2) 4,764,483 Peter T. C. Lee 2,000,000 F. K. Hu H. M. Jebsen Per Jorgensen Chien Lee Michael T. H. Lee Deanna R. T. Y. Rudgard Pauline W. L. Yu Wong Geoffrey M. T. Yeh V-nee Yeh (alternate to Geoffrey M. T. Yeh) Notes: – 60,000 6,678 970,000 1,023,233 1,871,600 304,000 – 41,355 – – – – – – – – – – 3,843,030 (Note 3) 255,012 (Note 4) 2,432,914 (Note 3) – – – – – 3,843,030 (Note 3) 3,750,000 (Note 5) – – – 1,000 (Note 3) 80,852 (Note 3) – – – – – 5,843,030 255,012 2,492,914 6,678 8,563,030 1,023,233 1,871,600 304,000 1,000 122,207 1. The Honourable Lee Quo-Wei and Mrs. Lee were together entitled to control no less than one-third of the voting power at general meetings of a private company which beneficially held all those shares described above as his corporate interests. 2. 809,546 ordinary shares were held by a charitable foundation which was exempted from tax under Section 88 of the Inland Revenue Ordinance and of which The Honourable Lee Quo-Wei and Mrs. Lee were members of its Board of Trustees. 566,768 ordinary shares were held by two trusts of which Mrs. Lee was one of the two trustees. Neither The Honourable Lee Quo-Wei nor Mrs. Lee was a beneficiary of the shareholdings as referred to in this note. 3. Such shares were held through corporations in which the respective Directors were members entitled to exercise one- third or more of the voting power at general meetings. 4. Such shares were held by another corporation which is wholly-owned by Mr. F. K. Hu and he thus beneficially held all those shares. 5. Such shares were held through discretionary trusts of which Mr. Chien Lee was a beneficiary. 21 Directors’ Report CORPORATE GOVERNANCE (continued) As at 31 December 2000, certain Directors had personal interests in options to subscribe for ordinary shares in the Company granted under the Company’s Executive Share Option Scheme, details of which are set out below under “Executive Share Options” (also see note 28 to the financial statements). Apart from the above, as at 31 December 2000, there were no other interest or right recorded in the register required to be kept under Section 29 of the SDI Ordinance. (cid:1) Executive Share Options On 28 April 1995, an Executive Share Option Scheme (the “Scheme”) was approved by the shareholders under which the Directors may, at their discretion, offer any employee (including any Director) of the Company or of any of its wholly-owned subsidiary options to subscribe for ordinary shares in the Company subject to the terms and conditions stipulated in the Scheme. The following executive share options granted by the Company to Directors to subscribe for ordinary shares of the Company, were outstanding and not yet exercised: Date of Grant Exercise price per share (HK$) Exercise period Number of options as at 1.1.2000 Number of options granted during the year Number of options as at 31.12.2000 3 May 1995 13.46 3 May 1997 to 2 May 2005 1,125,000 Peter T. C. Lee 7 January 1999 9.22 Pauline W. L. Yu Wong 3 May 1995 13.46 7 January 2001 to 6 January 2009 1,350,000 3 May 1997 to 2 May 2005 900,000 Michael C. K. Moy 23 December 1999 7.54 23 December 2001 to 22 December 2009 1,200,000 The consideration paid on each grant of option was HK$1.00. – – – – 1,125,000 1,350,000 900,000 1,200,000 Apart from the Scheme (also see note 28 to the financial statements), at no time during the year was the Company or any of its subsidiaries a party to any arrangements to enable the Directors to acquire benefits by means of the acquisition of shares in or debenture of the Company or any other body corporate. (cid:1) Directors’ interests in contracts of significance Except as stated in note 36 to the financial statements, no contract of significance to which the Company or any of its subsidiaries was a party and in which a Director had a material interest, whether directly or indirectly, subsisted at the end of the year or at any time during the year. 22 Hysan Development Company Limited Annual Report 2000 Name Directors H. C. Lee Directors’ Report CORPORATE GOVERNANCE (continued) (cid:1) Disclosure of Directors’ interests in competing business under the Listing Rules The Group is engaged principally in the development, ownership and management of high quality investment properties in Hong Kong. The following Directors are considered to have interests in other activities (“Deemed Competing Business”) that compete or are likely to compete with the said core business of the Group, all within the meaning of the Listing Rules. For reasons stated below, and coupled with the diligence of the Group’s Independent non-executive Directors and the Audit Committee, the Group is capable of carrying on its business independent of and at arm’s length from the Deemed Competing Business. (i) H. C. Lee, Peter T. C. Lee, Anthony H. P. Lee, Chien Lee, Michael T. H. Lee and Deanna R. T. Y. Rudgard are members of the founding family whose range of general investment activities include property investments in Hong Kong and overseas. In the light of the size and dominance of the portfolio of the Group, such disclosed Deemed Competing Business is considered immaterial. (ii) (a) The Honourable Lee Quo-Wei is the Chairman of Wideland Investors Limited which through its subsidiaries holds investment properties for rental purpose. He is also a non-executive director of Miramar Hotel and Investment Co. Ltd. and one of its principal businesses in Hong Kong is that of owning and managing investment properties. (b) F. K. Hu (and his alternate, Raymond L. M. Hu) are substantial shareholders and directors of Ryoden (Holdings) Limited, Ryoden Development Limited, Designcase Limited and their respective subsidiaries and associated companies, which are engaged in property investment, development, property agency and management, project management in both the PRC and Hong Kong. (c) Geoffrey M. T. Yeh (and his alternate, V-nee Yeh) are substantial shareholders and directors of Hsin Chong Construction Group Limited. He is also a substantial shareholder of the ultimate holding company of (and his alternate, V-nee Yeh, is a director of) Hsin Chong Holdings (H.K.) Limited. Certain subsidiaries and related companies of the afore-mentioned companies are engaged in property leasing, marketing, investment and development businesses both in Hong Kong and overseas. The Company’s management team is separate and independent from that of the companies listed above. In addition, the afore-mentioned Directors have a non-executive role and are not involved in the Company’s day-to-day operations and management. SUBSTANTIAL SHAREHOLDERS The register of substantial shareholders maintained under Section 16(1) of the SDI Ordinance shows that as at 31 December 2000, the Company has been notified of the following interests, being ten per cent (10%) or more of the Company’s issued share capital: Lee Hysan Estate Company, Limited and certain of its subsidiaries These interests are in addition to those disclosed above in respect of the Directors. No. of shares 429,046,912 23 Directors’ Report STAFF The Group aims to attract, retain and motivate high calibre individuals committed to attaining our objectives. Total number of employees as at 31 December 2000 was 482. Our remuneration policy has been designed with the view to give employees incentives to perform while aligning any performance awards with returns to shareholders. In addition to cash incentives, the total remuneration package includes staff housing loan, medical insurance and retirement benefits. The Company also operates an Executive Share Option Scheme. Details of the scheme are set out in note 28 to the financial statements. Individual performance is regularly appraised pursuant to our performance management programme. The Group recognises the importance of people development. It trains and develops its staff to help them perform in the most productive way to achieve our business objectives. MAJOR CUSTOMERS AND SUPPLIERS The aggregate turnover attributable to the Group’s five largest customers was less than 30% of total turnover. The aggregate purchases attributable to the Group’s five largest suppliers was less than 30% of total purchases. DONATIONS During the year, the Group made donations totalling HK$1,703,900 for charitable and other purposes. AGM NOTICE Accompanying this report is the Notice of the Annual General Meeting setting out the full texts of the resolutions for the meeting and explanatory notes thereon. AUDITORS A resolution will be submitted to the Annual General Meeting to re-appoint Messrs. Deloitte Touche Tohmatsu as auditors of the Company. By order of the Board H. C. Lee Chairman Hong Kong, 20 March 2001 24 Hysan Development Company Limited Annual Report 2000 Auditors’ Report TO THE SHAREHOLDERS OF HYSAN DEVELOPMENT COMPANY LIMITED (cid:1)(cid:2) !"#$% (Incorporated in Hong Kong with limited liability) We have audited the financial statements on pages 26 to 61 which have been prepared in accordance with accounting principles generally accepted in Hong Kong. RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS The Companies Ordinance requires the directors to prepare financial statements which give a true and fair view. In preparing financial statements which give a true and fair view it is fundamental that appropriate accounting policies are selected and applied consistently. It is our responsibility to form an independent opinion, based on our audit, on those statements and to report our opinion to you. BASIS OF OPINION We conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong Society of Accountants. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Company’s and Group’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurances as to whether the financial statements are free from material misstatement. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. We believe that our audit provides a reasonable basis for our opinion. OPINION In our opinion the financial statements give a true and fair view of the state of the affairs of the Company and the Group as at 31 December 2000 and of the Group’s profit and cash flows for the year then ended and have been properly prepared in accordance with the Companies Ordinance. DELOITTE TOUCHE TOHMATSU Certified Public Accountants Hong Kong, 20 March 2001 25 Consolidated Income Statement For the year ended 31 December 2000 Turnover Property expenses Cost of property sales Gross profit Gain on disposal of investments in securities Other revenue Administrative expenses Profit from operations Finance costs Impairment loss reversed (recognised) in respect of interests in associates Share of results of associates Profit before taxation Taxation Profit after taxation Minority interests NOTES 3 4 7 8 2000 HK$’000 1,480,246 (238,906) (50) 1,241,290 293,842 29,354 (89,969) 1,474,517 (449,020) 3,419 4,210 1,033,126 (117,210) 915,916 (65,743) 1999 HK$’000 2,295,717 (242,227) (164,923) 1,888,567 165,911 11,132 (70,680) 1,994,930 (526,819) (98,418) (4,284) 1,365,409 (86,795) 1,278,614 (74,656) Net profit for the year 9 & 29 850,173 1,203,958 Dividends Earnings per share Basic Diluted 10 11 433,064 412,795 HK$0.82 HK$1.16 HK$0.82 HK$1.16 26 Hysan Development Company Limited Annual Report 2000 Consolidated Balance Sheet At 31 December 2000 NOTES 2000 HK$’000 1999 HK$’000 Non-current assets Property, plant and equipment Investment properties Interests in associates Investments in securities Staff housing loans, secured Current assets Cash and bank balances Time deposits Investments in securities Accounts receivable Staff housing loans, secured – due within one year Prepayments and deposits Taxation recoverable Current liabilities Long term bank loans – due within one year Convertible bonds Creditors and accruals Construction costs payable Rental deposits from tenants Taxation payable Unclaimed dividends Proposed dividends Net current liabilities 12 13 15 16 17 16 18 17 24 25 19 56,632 28,432,700 51,384 2,297,335 28,898 56,443 25,173,000 66,467 2,468,742 43,151 30,866,949 27,807,803 3,421 48,134 – 7,952 2,583 19,900 – 2,814 275,026 591,250 14,968 14,132 15,766 15,887 81,990 929,843 815,500 – 85,907 302 268,584 59,137 2,282 319,378 1,030,000 921,108 115,464 30,468 269,435 36,227 3,275 309,170 1,551,090 2,715,147 (1,469,100) (1,785,304) Total assets less current liabilities carried forward 29,397,849 26,022,499 27 Consolidated Balance Sheet (continued) Total assets less current liabilities brought forward 29,397,849 26,022,499 NOTES 2000 HK$’000 1999 HK$’000 Non-current liabilities Advances from investees Amounts due to minority shareholders Long term loan Long term bank loans – due after one year Floating rate notes NET ASSETS CAPITAL AND RESERVES Share capital Accumulated profits Other reserves MINORITY INTERESTS 20 21 23 24 26 27 29 30 59,482 292,765 263,754 1,890,000 2,393,739 51,316 292,765 263,754 1,660,000 2,390,884 4,899,740 4,658,719 24,498,109 21,363,780 5,151,256 3,436,247 14,571,543 5,183,810 3,110,025 11,923,487 23,159,046 1,339,063 20,217,322 1,146,458 24,498,109 21,363,780 The financial statements on pages 26 to 61 were approved by the Board of Directors on 20 March 2001 and are signed on its behalf by: HON CHIU LEE Director DAVID AKERS-JONES Director 28 Hysan Development Company Limited Annual Report 2000 Balance Sheet At 31 December 2000 Non-current assets Property, plant and equipment Investment properties Investments in subsidiaries Interests in associates Investments in securities Staff housing loans, secured Current assets Cash and bank balances Time deposits Accounts receivable Staff housing loans, secured – due within one year Prepayments and deposits Dividends receivable Current liabilities Loan from a subsidiary – due within one year Long term bank loans – due within one year Creditors and accruals Rental deposits from tenants Amounts due to subsidiaries Taxation payable Unclaimed dividends Proposed dividends NOTES 2000 HK$’000 1999 HK$’000 12 13 14 15 16 17 18 17 22 24 19 8,430 3,740,000 12,395,625 3 2,831 28,898 10,362 3,250,000 12,150,605 3 2,831 43,151 16,175,787 15,456,952 3,277 20,832 3,656 2,583 13,894 107,010 783 258,774 2,969 14,132 8,616 135,450 151,252 420,724 – 815,500 37,734 24,817 69,733 6,322 2,282 319,378 921,108 900,000 46,246 21,356 492,246 9,690 3,275 309,170 1,275,766 2,703,091 Net current liabilities (1,124,514) (2,282,367) Total assets less current liabilities carried forward 15,051,273 13,174,585 29 Balance Sheet (continued) NOTES 2000 HK$’000 1999 HK$’000 Total assets less current liabilities brought forward 15,051,273 13,174,585 Non-current liabilities Long term bank loans – due after one year 24 1,890,000 400,000 NET ASSETS 13,161,273 12,774,585 CAPITAL AND RESERVES Share capital Accumulated profits Other reserves 27 29 30 5,151,256 4,077,068 3,932,949 5,183,810 4,211,773 3,379,002 13,161,273 12,774,585 The financial statements on pages 26 to 61 were approved by the Board of Directors on 20 March 2001 and are signed on its behalf by: HON CHIU LEE Director DAVID AKERS-JONES Director 30 Hysan Development Company Limited Annual Report 2000 Consolidated Statement of Recognised Gains and Losses For the year ended 31 December 2000 Gain recognised on revaluation of land and buildings Gain (loss) recognised on revaluation of investment properties (Loss) gain recognised on revaluation of investments in 2000 HK$’000 2,833 3,063,851 1999 HK$’000 6,119 (108,174) other securities (190,050) 1,511,860 Net gains not recognised in the income statement Net profit for the year 2,876,634 850,173 1,409,805 1,203,958 Total recognised gains 3,726,807 2,613,763 31 Consolidated Cash Flow Statement For the year ended 31 December 2000 NOTE 2000 HK$’000 1999 HK$’000 NET CASH INFLOW FROM OPERATING ACTIVITIES 31 1,166,988 1,298,645 RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest received Interest paid Dividends received from investments in securities Dividends received from associates Dividends paid Dividends paid to minority shareholders of subsidiaries NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF FINANCE TAXATION Hong Kong Profits Tax paid Hong Kong Profits Tax rebate 17,389 (452,121) 7,040 125 (391,179) 8,032 (473,067) 1,862 782 (322,415) (62,671) (74,444) (881,417) (859,250) (78,413) – (62,994) 15,904 NET CASH OUTFLOW FROM TAXATION (78,413) (47,090) INVESTING ACTIVITIES Additions to investment properties Additions to property, plant and equipment Net proceeds received on property sales Net proceeds received on disposal of property, plant and equipment Refund of cost of investment properties Repayments from associates Refund of investment cost on liquidation of associates Net proceeds received on disposal of investments in other securities Advances to investees Development expenditure paid for investment properties completed in previous years NET CASH INFLOW FROM INVESTING ACTIVITIES (9,955) (3,570) 400 23 110 22,971 – (1,530) (869) 640,872 3 145 71,752 475 591,170 (18,643) 559,897 (143,439) (26,937) (51,067) 555,569 1,076,239 NET CASH INFLOW BEFORE FINANCING ACTIVITIES CARRIED FORWARD 762,727 1,468,544 32 Hysan Development Company Limited Annual Report 2000 Consolidated Cash Flow Statement NOTE 2000 HK$’000 1999 HK$’000 NET CASH INFLOW BEFORE FINANCING ACTIVITIES BROUGHT FORWARD 762,727 1,468,544 32 FINANCING Proceeds on issue of shares Share issue expenses Repurchase of own shares Net proceeds on issue of floating rate notes New unsecured bank loans Repayment of unsecured bank loans Repurchase of convertible bonds Advances from investees – (14) (90,887) – 2,305,500 (2,290,000) (923,374) 9,763 91 (32) – 394,790 50,000 (1,466,000) (200,893) 11,552 NET CASH OUTFLOW FROM FINANCING (989,012) (1,210,492) (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT 1 JANUARY CASH AND CASH EQUIVALENTS AT 31 DECEMBER ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances Time deposits (226,285) 258,052 277,840 19,788 51,555 277,840 3,421 48,134 2,814 275,026 51,555 277,840 33 Notes to the Financial Statements For the year ended 31 December 2000 1. GENERAL The Company is a public listed limited company incorporated in Hong Kong and its shares are listed on The Stock Exchange of Hong Kong Limited. The principal activities of the Group are property development and investment and investment holding. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements have been prepared under the historical cost convention, as modified for the revaluation of properties and investments in securities. The financial statements have been prepared in accordance with accounting principles generally accepted in Hong Kong. The principal accounting policies adopted are set out below: Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to 31 December each year. All significant intercompany transactions and balances within the Group have been eliminated on consolidation. Goodwill Goodwill represents the excess of the purchase consideration over the fair value ascribed to the Group’s share of the separable net assets at the date of acquisition of a subsidiary and is eliminated against reserves immediately on acquisition. Negative goodwill, which represents the excess of the fair value ascribed to the Group’s share of the separable net assets at the date of acquisition of a subsidiary over the purchase consideration is credited to reserves. Any premium or discount arising on the acquisition of interests in associates, representing the excess or shortfall respectively of the purchase consideration over the fair value ascribed to the Group’s share of the separable net assets of the associate at the date of acquisition, is dealt with in the same manner as that described above for goodwill. On disposal of an investment in a subsidiary or an associate, the attributable amount of goodwill previously eliminated against or credited to reserves is included in the determination of the profit or loss on disposal. Investments in subsidiaries A subsidiary is an enterprise in which the Company, directly or indirectly, holds more than half of the issued share capital, or controls more than half of the voting power, or where the Company controls the composition of its board of directors or equivalent governing body. Investments in subsidiaries are included in the Company’s balance sheet at cost, as reduced by any impairment loss of the subsidiaries that is other than temporary. The results of subsidiaries are accounted for by the Company on the basis of dividends received and receivable during the year. Interests in associates An associate is an enterprise over which the Group is in a position to exercise significant influence, including participation in financial and operating policy decisions of the investee. 34 Hysan Development Company Limited Annual Report 2000 Notes to the Financial Statements 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Interests in associates (continued) The results and assets and liabilities of associates are incorporated in the consolidated financial statements using the equity method of accounting. The carrying amount of such interests is reduced to recognise any impairment loss, that is other than temporary, in the value of individual investment. Where a group enterprise transacts with an associate of the Group, unrealised profits and losses are eliminated to the extent of the Group’s interest in the relevant associate, except when unrealised losses provide evidence of an impairment of the asset transferred. Interests in associates are included in the Company’s balance sheet at cost, as reduced by any impairment loss of the associate that is other than temporary. The results of associates are accounted for by the Company on the basis of dividends received or receivable during the year. Investments in securities Investments in securities are recognised on a trade date basis and are initially measured at cost. All securities are measured at fair value at subsequent reporting dates. Where securities are held for trading purposes, unrealised gains and losses are included in net profit or loss for the year. For other securities, unrealised gains and losses are dealt with in investment revaluation reserve, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss is included in net profit or loss for the year. Investment properties Investment properties are completed properties which are held for their investment potential, any rental income being negotiated at arm’s length. Investment properties are stated at their open market value based on independent professional valuations at each balance sheet date. Any surplus or deficit arising on the revaluation of investment properties is credited or charged to the investment property revaluation reserve unless the balance on this reserve is insufficient to cover a deficit, in which case the excess of the deficit over the balance on the investment property revaluation reserve is charged to the income statement. Where a deficit has previously been charged to the income statement and a revaluation surplus subsequently arises, this surplus is credited to the income statement to the extent of the deficit previously charged. On disposal of an investment property, the balance on the investment property revaluation reserve attributable to the property disposed of is transferred to the income statement. No depreciation is provided on investment properties except where the unexpired term of the relevant lease is 20 years or less. Property, plant and equipment Property, plant and equipment are stated at cost or valuation less depreciation. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its present working condition and location for its intended use. Expenditure incurred after the asset has been put into operation, such as repairs and maintenance and overhaul costs, is charged to the income statement in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the asset, the expenditure is capitalised as an additional cost of the asset. 35 Notes to the Financial Statements 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Property, plant and equipment (continued) The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the income statement. Where the recoverable amount of an asset has declined below its carrying amount, the carrying amount is reduced to reflect the decline in value. In determining the recoverable amount of assets, expected future cash flows are not discounted to their present values. Land and buildings are stated in the balance sheet at their revalued amount, being the fair value on the basis of their existing use at the date of revaluation less any subsequent accumulated depreciation . Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the balance sheet date. Any surplus arising on revaluation of land and buildings is credited to the asset revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognised as an expense, in which case this surplus is credited to the income statement to the extent of the deficit previously charged. A decrease in net carrying amount arising on revaluation of an asset is dealt with as an expense to the extent that it exceeds the balance, if any, on the asset revaluation reserve relating to a previous revaluation of that asset. On the subsequent sale or retirement of a revalued asset, the attributable revaluation surplus is transferred to accumulated profits. Depreciation is provided to write off the cost or valuation of property, plant and equipment over their estimated useful lives, using the straight line method, at the following rates per annum: Leasehold land Buildings Furniture, fixtures and equipment Computers Motor vehicles Over the remaining term of the lease Over the shorter of the term of the lease, or 40 years 20% 20% 25% Convertible bonds and floating rate notes issue expenses Expenses incurred directly in connection with the issue of Convertible Bonds and Floating Rate Notes are deferred and amortised on a straight line basis over the terms of the Bonds and the Notes respectively. Foreign currencies Transactions in currencies other than Hong Kong dollars are initially recorded at the rates of exchange ruling on the dates of the transactions or at the contracted settlement rate. Monetary assets and liabilities denominated in such currencies are re-translated at the rates ruling on the balance sheet date, with the exception of those items covered under forward exchange contracts, which are re-translated at the contracted settlement rate. Gains and losses arising on exchange are dealt with in the income statement. On consolidation the financial statements of associates which are denominated in currencies other than Hong Kong dollar are translated at the rates ruling on the balance sheet date. Exchange differences arising, if any, are classified as equity and are recognised as income or as expenses in the period in which the interests in associates are disposed of. 36 Hysan Development Company Limited Annual Report 2000 Notes to the Financial Statements 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Taxation The charge for taxation is based on the results for the year as adjusted for items which are non- assessable or disallowed. Timing differences arise from the recognition for tax purposes of certain items of income and expense in a different accounting period from that in which they are recognised in the financial statements. The tax effect of timing differences, computed using the liability method, is recognised as deferred taxation in the financial statements to the extent that it is probable that a liability or asset will crystallise in the foreseeable future. Operating leases Rentals receivable and payable under operating leases are credited and charged respectively to the income statement on a straight line basis over the relevant lease term. Retirement benefits scheme Retirement benefit contributions are charged to the income statement as incurred. Cash equivalents Cash equivalents represent short-term highly liquid investments which are readily convertible into known amounts of cash and which were within three months of maturity when acquired less advances from banks repayable within three months from the date of the advance. Recognition of income Rental income is recognised on a straight line basis over the relevant lease term. Income from property sales is recognised on the execution of a binding sales agreement. Income from disposals of investments in securities is recognised on a trade date basis. Management fee income and security service income are recognised when the services are rendered. Dividend income from investments is recognised when the shareholders’ right to receive payment has been established. Interest income is accrued on a time basis, by reference to the principal outstanding and at the interest rate applicable. 3. TURNOVER Turnover comprises (Note): Gross rental income from properties Income from property sales Management fee and security service income 2000 HK$’000 1,475,941 400 3,905 1999 HK$’000 1,643,810 647,485 4,422 1,480,246 2,295,717 37 Notes to the Financial Statements 3. TURNOVER (continued) The Group operates mainly in Hong Kong. The turnover and contribution to the Group’s profit from overseas operations are insignificant. The turnover and contribution to the Group’s profit from operations of each principal activity are as follows: 2000 Contribution to the Group’s profit from operations HK$’000 1999 Contribution to the Group’s profit from operations HK$’000 Consolidated turnover HK$’000 Consolidated turnover HK$’000 Rental income Income from property sales Management fee and security service 1,475,941 400 1,149,768 350 1,643,810 647,485 1,333,518 482,562 income 3,905 1,707 4,422 2,666 Gain on disposal of investments in securities Other revenue – – 293,842 28,850 – – 165,911 10,273 1,480,246 1,474,517 2,295,717 1,994,930 Note This year, turnover comprises only the revenue from the Group’s core business, property development and investment. Proceeds from disposal of investments in securities, interest and dividend income which were included as part of the turnover in previous years are now presented as gain on disposal of investments in securities and other revenue respectively. Comparative figures have been restated to conform with the current year’s presentation. 4. PROFIT FROM OPERATIONS 2000 HK$’000 1999 HK$’000 Profit from operations has been arrived at after charging (crediting): Staff costs Retirement benefit scheme contributions (Note) Depreciation Auditors’ remuneration Rental income arising from operating leases less out-goings Dividends from – listed investments – unlisted investments Net realised and unrealised gain on trading securities Gain on disposal of investments in other securities (including HK$293,922,213 (1999: HK$42,622,217) previously recognised in investment revaluation reserve) Gain on property sales Interest income 102,208 10,050 112,258 5,624 1,495 (1,240,958) (7,040) (4,790) – 93,583 4,003 97,586 5,679 1,492 (1,405,389) (1,799) – (6,262) (293,842) (350) (17,021) (159,649) (482,562) (8,474) 38 Hysan Development Company Limited Annual Report 2000 Notes to the Financial Statements 4. PROFIT FROM OPERATIONS (continued) Note The Group carries out regular review of its compensation and benefits arrangements to enable it to attract, retain and motivate employees of the appropriate calibre to further its success. As part of the exercise, the Group engaged Watson Wyatt (Hong Kong) Limited (independent consulting actuaries) to review its retirement arrangements, also in the light of the new MPF Legislation. A new enhanced MPF scheme (the “Enhanced MPF Scheme”) was established effective 1 December 2000. The Enhanced MPF Scheme is a defined contribution plan, offering a range of investment choice to members based on different risk and return profiles. The Group targeted to maintain broadly the same benefit at retirement under the Enhanced MPF Scheme. The existing defined benefit scheme (the “Old Scheme”) was terminated at close of business on 30 November 2000 with all assets transferred to the Enhanced MPF Scheme. (A) The Old Scheme The Old Scheme was registered under the Occupational Retirement Schemes Ordinance and its assets were held by HSBC Life (International) Limited under an insurance arrangement. Contributions to the scheme were made by the Group in accordance with the recommendations of the in-house actuary of HSBC Life (International) Limited, who performed valuation of the scheme at regular intervals using the Projected Unit Credit Method. The latest actuarial assessment date of the scheme was 31 December 1999. The principal actuarial assumptions were those relating to the rate of investment return and salaries increase. It was assumed that both the rate of investment return and salary inflation would be 6% per annum. At the date of the latest actuarial valuation, the market value of assets was sufficient to cover 126% of the actuarial value of the benefits that had accrued to members. (B) The Enhanced MPF Scheme The Old Scheme was terminated at close of business on 30 November 2000. All scheme assets were transferred to the Enhanced MPF Scheme. The Enhanced MPF Scheme covers all staff of the Group, providing benefits based on accumulated investment returns. The Group’s contributions to the plan (which are immediately vested) are based on fixed percentages of members’ salary, ranging from 5% of MPF Relevant Income to 15% of basic salary. Members’ mandatory contributions are fixed at 5% of MPF Relevant Income, in compliance with MPF legislation. On 4 January 2001 the Enhanced MPF Scheme was granted a participation certificate by the Mandatory Provident Fund Schemes Authority under Section 124(1) of the Mandatory Provident Fund Schemes (General) Regulation. (C) Transfer Arrangements The Group targeted to maintain broadly the same benefits at retirement under the Enhanced MPF Scheme. A special retirement transfer value was therefore offered to all transferring Old Scheme members. The leaving service benefit of all members of the Old Scheme were also enhanced as incentives to convert. The Group injected HK$4,735,323 to finance such transfer values of which sums of HK$570,398 and HK$146,314 were attributable to the Directors and the employee referred to in note 5 and note 6 to the financial statements respectively. Their retirement transfer values, which make up a substantial part of the aggregate transfer values, would only be fully vested upon their attaining retirement age. Forfeitures will be used to fund future contributions. 39 Notes to the Financial Statements 5. DIRECTORS’ REMUNERATION Directors’ fees Other emoluments: Basic salaries, housing, other allowances and benefits in kind Bonus paid Retirement benefit scheme regular contributions (Note) 2000 HK$’000 1999 HK$’000 857 813 14,500 1,142 578 17,077 15,124 – 339 16,276 Note: As part of the restructuring of its retirement scheme arrangements, the Company injected funds to finance certain transfer values. A substantial part of such transfer values, including the portion attributable to the Directors, are only vested upon the relevant members attaining retirement. Details are set out in note 4 to the financial statements. The number of Directors whose remuneration/fees within the bands set out below is as follows: HK$0 – HK$1,000,000 HK$1,000,001 – HK$1,500,000 HK$1,500,001 – HK$2,000,000 HK$2,000,001 – HK$2,500,000 HK$2,500,001 – HK$3,000,000 HK$3,000,001 – HK$3,500,000 HK$3,500,001 – HK$4,000,000 HK$4,000,001 – HK$4,500,000 HK$4,500,001 – HK$5,000,000 2000 No. of director 1999 No. of director 11 – – – – 1 1 1 1 15 11 – 1 – 1 1 2 – – 16 Directors’ fees paid to independent non-executive Directors during the year totalled HK$170,000 (1999: HK$120,000). They received no other emoluments from the Company or any of its subsidiaries. 40 Hysan Development Company Limited Annual Report 2000 Notes to the Financial Statements 6. EMPLOYEE COSTS The five highest paid individuals included four (1999: four) Directors, details of whose remuneration are set out in note 5 to the financial statements. The remuneration of the remaining individual is detailed as follows: Basic salaries, housing, other allowances and benefits in kind Bonus paid Retirement benefit scheme regular contributions (Note) Remuneration within the band: HK$1,000,001 – HK$1,500,000 HK$1,500,001 – HK$2,000,000 HK$2,000,001 – HK$2,500,000 2000 HK$’000 1999 HK$’000 2,171 84 128 2,383 1,317 315 94 1,726 2000 No. of employees 1999 No. of employees – – 1 1 – 1 – 1 Note: As part of the restructuring of its retirement scheme arrangements, the Company injected funds to finance certain transfer values. A substantial part of such transfer values, including the portion attributable to the employee, are only vested upon the employee’s attaining retirement. Details are set out in note 4 to the financial statements. 7. FINANCE COSTS Interest on – bank loans, overdraft and other loans wholly repayable within five years – convertible bonds – floating rate notes Amortisation of convertible bonds and floating rate notes issue expenses Bank charges Exchange loss 2000 HK$’000 1999 HK$’000 243,409 25,829 165,409 276,065 71,303 131,212 434,647 478,580 5,123 6,077 3,173 9,119 31,863 7,257 449,020 526,819 41 Notes to the Financial Statements 8. TAXATION The charge comprises: Hong Kong Profits Tax – for the year – (over)underprovision in prior years – Tax rebate Taxation attributable to the Company and its subsidiaries Share of tax rebate attributable to associates 2000 HK$’000 1999 HK$’000 117,212 (2) – 117,210 – 117,210 87,485 15,905 (15,904) 87,486 (691) 86,795 Hong Kong Profits Tax is calculated at 16% (1999: 16%) of the estimated assessable profit for the year. No provision for deferred taxation has been recognised in the financial statements as the amount involved is immaterial. Deferred taxation has not been provided on the surplus arising on the valuation of investment properties, land and buildings and investments in securities because profits arising on the disposal of these assets would not be subject to taxation. Accordingly, the surplus arising on valuation does not constitute a timing difference. 9. NET PROFIT FOR THE YEAR Of the Group’s net profit for the year of HK$850,173,491 (1999: HK$1,203,957,528), a profit of HK$389,246,795 (1999: HK$988,509,942) has been dealt with in the financial statements of the Company. 10. DIVIDENDS Ordinary shares: 2000 HK$’000 1999 HK$’000 Interim dividend, paid – HK$0.11 per share (1999: HK$0.10) Final dividend, proposed – HK$0.31 per share (1999: HK$0.30) Additional prior year’s dividend paid on exercise of warrants subsequent to the year end 113,686 319,378 – 103,624 309,170 1 433,064 412,795 42 Hysan Development Company Limited Annual Report 2000 Notes to the Financial Statements 10. DIVIDENDS (continued) During the year, scrip dividend alternatives were offered to shareholders in respect of the 1999 final and 2000 interim dividends. These alternatives were accepted by the shareholders as follows: Dividends: Cash Share alternative 2000 Interim HK$’000 105,919 7,767 1999 Final HK$’000 284,267 24,903 113,686 309,170 The proposed final dividend for 2000 will be payable in cash with a scrip dividend alternative in respect of all shares in issue at the date of these financial statements. 11. EARNINGS PER SHARE The calculation of the basic and diluted earnings per share is based on the following data: 2000 HK$ 1999 HK$ Earnings for the purposes of basic and diluted earnings per share (net profit for the year) 850,173,491 1,203,957,528 Weighted average number of ordinary shares for the purposes of basic earnings per share 1,032,763,163 1,034,513,350 Effect of dilutive potential ordinary shares: Share options 231,730 167,091 Weighted average number of ordinary shares for the purposes of diluted earnings per share 1,032,994,893 1,034,680,441 The computation of diluted earnings per share does not assume: – – the conversion of the Group’s outstanding convertible bonds since their exercise would not have any dilutive effect; and the exercise of certain of the Company’s outstanding share options as the exercise prices are higher than the fair value per share. 43 Notes to the Financial Statements 12. PROPERTY, PLANT AND EQUIPMENT Land and Furniture, buildings in Hong Kong fixtures and under long lease HK$’000 equipment Computers HK$’000 HK$’000 Motor vehicles HK$’000 Total HK$’000 THE GROUP COST OR VALUATION At 1 January 2000 Adjustment resulted from cost variation Additions Disposals Surplus on revaluation 43,800 37,470 2,925 1,820 86,015 – – – 2,200 (587) 1,291 (21) – – 2,279 (405) – – – (209) – (587) 3,570 (635) 2,200 At 31 December 2000 46,000 38,153 4,799 1,611 90,563 Comprising: At cost At valuation 2000 ACCUMULATED DEPRECIATION At 1 January 2000 Provided for the year Eliminated on disposals Adjustment on revaluation – 46,000 38,153 – 4,799 – 1,611 – 44,563 46,000 46,000 38,153 4,799 1,611 90,563 – 633 – (633) 26,656 3,982 (18) – 1,754 645 (405) – 1,162 364 (209) – 29,572 5,624 (632) (633) At 31 December 2000 – 30,620 1,994 1,317 33,931 NET BOOK VALUES At 3l December 2000 46,000 7,533 2,805 294 56,632 At 3l December 1999 43,800 10,814 1,171 658 56,443 44 Hysan Development Company Limited Annual Report 2000 Notes to the Financial Statements 12. PROPERTY, PLANT AND EQUIPMENT (continued) Furniture, fixtures and equipment HK$’000 Computers HK$’000 Motor vehicles HK$’000 Total HK$’000 THE COMPANY COST At 1 January 2000 Additions Disposals Adjustment result from cost variation 19,034 198 (8) (587) 2,925 2,265 (405) – 1,820 – (209) 23,779 2,463 (622) – (587) At 31 December 2000 18,637 4,785 1,611 25,033 ACCUMULATED DEPRECIATION At 1 January 2000 Provided for the year Eliminated on disposals 10,501 2,797 (5) 1,754 644 (405) 1,162 364 (209) 13,417 3,805 (619) At 31 December 2000 13,293 1,993 1,317 16,603 NET BOOK VALUES At 31 December 2000 5,344 2,792 At 31 December 1999 8,533 1,171 294 658 8,430 10,362 The leasehold land and buildings of the Group were revalued at 31 December 2000 by Messrs. Knight Frank, an independent professional valuer, on an open market value basis. The surplus arising on revaluation has been credited to asset revaluation reserve. If leasehold land and buildings of the Group had not been revalued, they would have been included in these financial statements at cost less accumulated depreciation at HK$34,609,137 (1999: HK$35,133,680). Property, plant and equipment of the Group and the Company include assets carried at cost or valuation of HK$19,817,086 (1999: HK$18,736,106) and HK$844,238 (1999: HK$844,238) respectively and accumulated depreciation of HK$17,747,881 (1999: HK$16,624,794) and HK$782,827 (1999: HK$753,367) respectively in respect of assets held for use in operating leases. 45 Notes to the Financial Statements 13. INVESTMENT PROPERTIES THE GROUP THE COMPANY 2000 HK$’000 1999 HK$’000 At 1 January Additions Adjustment resulted from cost variation Refund of cost Disposals Surplus (deficit) on revaluation 25,173,000 9,955 (3,229) (110) (300) 3,253,384 25,949,000 1,530 – (145) (645,850) (131,535) 2000 HK$’000 3,250,000 1,263 – – – 488,737 1999 HK$’000 3,410,000 51 – – – (160,051) At 31 December 28,432,700 25,173,000 3,740,000 3,250,000 The investment properties of the Group and the Company were revalued at 31 December 2000 by Messrs. Knight Frank, an independent professional valuer, on an open market value basis. The surplus arising on revaluation has been credited to investment property revaluation reserve. All of the investment properties of the Group and the Company are held for use under operating leases. All of the investment properties of the Group and the Company are situated in Hong Kong and are held under long lease. 14. INVESTMENTS IN SUBSIDIARIES Unlisted shares, at cost Amounts due therefrom Less: Provision for impairment loss THE COMPANY 2000 HK$’000 1999 HK$’000 5 12,799,620 5 12,554,600 12,799,625 (404,000) 12,554,605 (404,000) 12,395,625 12,150,605 The Directors consider that the unlisted investments are worth at least their cost. Details of the principal subsidiaries held by the Company at 31 December 2000 are set out in note 37 to the financial statements. 46 Hysan Development Company Limited Annual Report 2000 Notes to the Financial Statements 15. INTERESTS IN ASSOCIATES THE GROUP 2000 HK$’000 1999 HK$’000 THE COMPANY 1999 HK$’000 2000 HK$’000 Unlisted shares, at cost Share of net liabilities Amounts due therefrom – (91,495) (91,495) 345,878 – (95,964) (95,964) 368,849 254,383 272,885 Less: Provision for impairment loss (202,999) (206,418) 51,384 66,467 3 – 3 – 3 – 3 3 – 3 – 3 – 3 The aggregate attributable share of results of the associates is based on the unaudited management accounts of Maxdo Investments Limited, Parallel Asia Engineering Company Limited and Wingrove Investment Pte Limited for the year ended 31 December 2000. Details of the Group’s associates at 31 December 2000 are as follows: Form of business structure Place of incorporation and operation Class of share held Proportion of nominal value of issued share capital held by the Company directly indirectly Principal activity Name of associate Maxdo Investments Incorporated Hong Kong Ordinary 47.07895% – Investment holding Limited Parallel Asia Engineering Company Limited Incorporated Hong Kong Ordinary – 25% Investment holding Wingrove Investment Incorporated Singapore Ordinary 25% Pte Limited – Property development 47 Notes to the Financial Statements 16. INVESTMENTS IN SECURITIES THE GROUP Equity securities: Listed in Hong Kong Other investments: Club debentures Unlisted shares Amounts due therefrom Other securities 2000 HK$’000 1999 HK$’000 1,623,930 2,405,230 2,831 2,831 136,856 668,276 136,856 649,633 805,132 786,489 Less: Provision for impairment losses (134,558) (134,558) 670,574 651,931 673,405 654,762 2,297,335 3,059,992 Market value of securities listed in Hong Kong (Note) 1,623,930 3,028,980 Carrying amount analysed for reporting purposes as: Current (Note) Non-current – 2,297,335 591,250 2,468,742 2,297,335 3,059,992 Note: The Group entered into agreements with an independent third party whereby the Group granted an option conferring rights to the third party to purchase certain listed securities from the Group for an aggregate consideration of approximately HK$591,250,000 on 15 May 2000. The market value of those securities at 31 December 1999 was HK$1,215,000,000. For the purposes of these financial statements, the fair value of those securities at 31 December 1999 has been taken to be the amount for which they can be disposed of having regard to the terms of the option. THE COMPANY Other investments: Club debentures Other securities 2000 HK$’000 1999 HK$’000 2,831 2,831 Carrying amount analysed for reporting purpose as: Non-current 2,831 2,831 48 Hysan Development Company Limited Annual Report 2000 17. STAFF HOUSING LOANS, SECURED Staff housing loans, secured Less: Amounts due within one year shown under current assets Notes to the Financial Statements THE GROUP AND THE COMPANY 2000 1999 HK$’000 HK$’000 31,481 (2,583) 28,898 57,283 (14,132) 43,151 Disclosures pursuant to S.161B of the Companies Ordinance are as follows: Name of borrower Position Security Balance at 1 January 2000 Balance at 31 December 2000 Maximum outstanding during year : : : : : : Joseph Kam Shing MAU Company Secretary Property HK$7,699,389 – HK$7,699,389 The secured advances arise in connection with an established Staff Housing Loan scheme granted on the same terms as for other employees who meet the qualifying criteria. The advances bear a fixed interest rate of 4% per annum. 18. ACCOUNTS RECEIVABLE Accounts receivables are mainly in respect of rents which are normally payable in advance. Rents in arrears of the Group as at 31 December 2000 and 1999 were aged less than 90 days. 19. CREDITORS AND ACCRUALS All of the trade payables of the Group as at 31 December 2000 and 1999 were aged less than 90 days. 20. ADVANCES FROM INVESTEES The advances are unsecured, interest free and are not repayable within one year. 21. AMOUNTS DUE TO MINORITY SHAREHOLDERS The amounts are unsecured, interest free and are not repayable within one year. 22. LOAN FROM A SUBSIDIARY THE COMPANY Unsecured loan Less: Amount due within one year shown under current liabilities 2000 HK$’000 – – – The loan bore interest at rate of 6.76% per annum and was repaid in full in June 2000. 1999 HK$’000 921,108 (921,108) – 49 Notes to the Financial Statements 23. LONG TERM LOAN The amount is due to the ultimate holding company of a minority shareholder of a subsidiary and is unsecured, bears interest at the rate of 1.5% per annum over HIBOR and is not repayable within one year. 24. LONG TERM BANK LOANS THE GROUP THE COMPANY 2000 HK$’000 1999 HK$’000 2000 HK$’000 1999 HK$’000 Bank loans, unsecured 2,705,500 2,690,000 2,705,500 1,300,000 The bank loans are repayable as follows: Within one year More than one year, 815,500 1,030,000 815,500 900,000 but not exceeding two years 150,000 1,510,000 150,000 250,000 More than two years, but not exceeding five years 1,740,000 150,000 1,740,000 150,000 Less: Amounts due within one year shown under current liabilities 2,705,500 2,690,000 2,705,500 1,300,000 (815,500) (1,030,000) (815,500) (900,000) 1,890,000 1,660,000 1,890,000 400,000 25. CONVERTIBLE BONDS Convertible bonds Less: Unamortised bonds issue expenses Less: Amount due within one year shown under current liabilities THE GROUP 2000 HK$’000 – – – – – 1999 HK$’000 923,375 (2,267) 921,108 (921,108) – HD Finance (Cayman) Limited (“the Issuer”), a wholly-owned subsidiary of the Company, issued US$175,000,000 convertible bonds on 7 June 1995. The bonds were guaranteed as to principal and interest by the Company, bore interest at the rate of 6.75% per annum and were repaid on 1 June 2000. 50 Hysan Development Company Limited Annual Report 2000 26. FLOATING RATE NOTES Floating rates notes Less: Unamortised notes issue expenses Notes to the Financial Statements THE GROUP 2000 HK$’000 2,400,000 (6,261) 1999 HK$’000 2,400,000 (9,116) 2,393,739 2,390,884 HD Treasury (BVI) Limited and HD Finance (BVI) Limited, wholly-owned subsidiaries of the Company, issued HK$2,000 million and HK$400 million five-year floating rate notes on 27 March 1997 and 3 November 1999 respectively. The notes are guaranteed as to principal and interest by the Company, bear interest at the rate of 0.565% and 1.25% over the 3-month HIBOR and are repayable in full in March 2002 and November 2004 respectively. 27. SHARE CAPITAL Ordinary shares of HK$5 each Authorised: THE COMPANY 2000 HK$’000 1999 HK$’000 At 1 January and 31 December 7,250,000 7,250,000 Issued and fully paid: At 1 January Issued on exercise of warrant rights Issued pursuant to scrip dividend scheme Shares repurchased and cancelled 5,183,810 – 18,481 (51,035) 5,158,136 28 25,646 – At 31 December 5,151,256 5,183,810 During the year, the Company repurchased its own shares through the Hong Kong Stock Exchange as follows: Month of repurchase February November December No. of ordinary shares of HK$5 each 6,194,000 3,513,000 500,000 Price per share Highest HK$ Lowest HK$ Aggregate consideration paid HK$ 8.90 9.75 9.50 8.00 9.00 9.45 52,523,977 33,604,840 4,758,813 The above shares were cancelled upon repurchase. 51 Notes to the Financial Statements 28. EXECUTIVE SHARE OPTION SCHEME On 28 April 1995, an Executive Share Option Scheme was approved by the shareholders under which the Directors of the Company may, at their discretion, offer any employee (including any director) of the Company or of any of its wholly-owned subsidiary options to subscribe for shares (the “Shares”) in the Company subject to the terms and conditions stipulated in the Executive Share Option Scheme. At 31 December 2000, the Company had outstanding options granted to qualifying employees (including Directors) of the Company and any of its wholly-owned subsidiaries to subscribe for shares of the Company as follows: Date of grant 3 May 1995 3 May 1995 7 January 1999 23 December 1999 Exercise price per share HK$ 13.46 13.46 9.22 7.54 Exercise period 3 May 1997 to 2 May 2005 3 May 1997 to 2 May 2005 7 January 2001 to 6 January 2009 23 December 2001 to 22 December 2009 Number of options outstanding 1,125,000 900,000 1,350,000 1,200,000 4,575,000 The consideration paid on each grant of options was HK$1.00. During the year, certain granted options to subscribe for 450,000 shares of the Company have lapsed on resignation. The maximum number of Shares in respect of which options may be granted under the Executive Share Option Scheme (together with the Shares issued and issuable under the Executive Share Option Scheme) by the Company to or for the benefit of employees may not exceed in nominal value three percent of the issued share capital of the Company (excluding Shares issued pursuant to the Executive Share Option Scheme) from time to time. 29. ACCUMULATED PROFITS THE GROUP THE COMPANY 2000 HK$’000 1999 HK$’000 2000 HK$’000 1999 HK$’000 At 1 January 3,110,025 2,318,862 4,211,773 3,636,058 Share repurchased and cancelled: – Nominal value of share repurchased – Premium on shares repurchased – Share repurchase expenses Net profit for the year (51,035) (39,836) (16) 850,173 – – – 1,203,958 (51,035) (39,836) (16) 389,246 – – – 988,510 Profit available for distribution Dividends 3,869,311 (433,064) 3,522,820 (412,795) 4,510,132 (433,064) 4,624,568 (412,795) At 31 December 3,436,247 3,110,025 4,077,068 4,211,773 The accumulated profits of the Group include accumulated losses of HK$85,792,248 (1999: HK$90,002,199) attributable to associates of the Group. The distributable reserves of the Company as at 31 December 2000 amounted to HK$4,177,068,123 (1999: HK$4,311,773,132), being its accumulated profits and general reserve at that date. 52 Hysan Development Company Limited Annual Report 2000 Notes to the Financial Statements 30. OTHER RESERVES Investment Share Capital Asset property Investment Capital Translation redemption premium revaluation revaluation revaluation account Total reserve reserve reserve reserve HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 General reserve reserve reserve THE GROUP At 1 January 1999 Premium on issue of shares upon exercise of warrants Premium on issue of shares pursuant to scrip dividend scheme Share issue expenses Unrealised gain on investments in other securities Recognition of unrealised gain on disposal of investments in other securities transferred to income statement Deficit on revaluation of investment properties Surplus on revaluation of land and buildings Deficit on revaluation of investment properties shared by minority shareholders Realisation on disposal of investment properties transferred to income statement At 31 December 1999 and 1 January 2000 Premium on issue of shares pursuant to scrip dividend scheme Share issue expenses Shares repurchased and cancelled Unrealised loss on investments in other securities Recognition of unrealised gain on disposal of investments in other securities transferred to income statement Surplus on revaluation of investment properties Surplus on revaluation of land and buildings Surplus on revaluation of investment properties shared by minority shareholders Share of reserve of an associate Realisation on disposal of investment properties transferred to income statement 1,224,782 8,941,743 184,939 2,600 500,718 (12,736) 69,140 100,000 11,011,186 63 33,550 (32) – – – – – – – – – – – – – – 1,511,860 (42,622) (131,535) – 23,361 (488,463) – – – – – – – – – – 6,119 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 63 33,550 (32) 1,511,860 (42,622) (131,535) 6,119 23,361 (488,463) 1,258,363 8,345,106 1,654,177 8,719 500,718 (12,736) 69,140 100,000 11,923,487 14,189 (14) – – – – – – – – – – – – – – – (190,050) – (293,922) 3,253,384 – (189,533) – (250) – – – – – – – – – – – 2,833 – – – – – – – – – – – 384 – – – – – – – – – – – – – 51,035 – – – – – – – – – – – – – – – – – 14,189 (14) 51,035 (190,050) (293,922) 3,253,384 2,833 (189,533) 384 (250) At 31 December 2000 1,272,538 11,408,707 1,170,205 11,552 501,102 (12,736) 120,175 100,000 14,571,543 53 Notes to the Financial Statements 30. OTHER RESERVES (continued) Share premium account HK$’000 Investment property revaluation reserve HK$’000 Capital redemption reserve HK$’000 General reserve HK$’000 Total HK$’000 1,224,782 2,111,550 69,140 100,000 3,505,472 63 33,550 (32) – – – – (160,051) – – – – – – – – 63 33,550 (32) (160,051) 1,258,363 1,951,499 69,140 100,000 3,379,002 14,189 (14) – – – – – – 488,737 – – 51,035 – – – – 14,189 (14) 488,737 51,035 THE COMPANY At 1 January 1999 Premium on issue of shares upon exercise of warrants Premium on issue of shares pursuant to scrip dividend scheme Share issue expenses Deficit on revaluation of investment properties At 31 December 1999 and 1 January 2000 Premium on issue of shares pursuant to scrip dividend scheme Share issue expenses Surplus on revaluation of investment properties Shares repurchased and cancelled At 31 December 2000 1,272,538 2,440,236 120,175 100,000 3,932,949 (a) Included in the above are the following Group’s share of post-acquisition reserves of the associates: Capital reserve HK$’000 1,746 384 2,130 Translation reserve HK$’000 (12,736) – Total HK$’000 (10,990) 384 (12,736) (10,606) At 1 January 2000 Increase during the year At 31 December 2000 (b) General reserve General reserve was set up from the transfer of retained earnings. (c) Capital reserve Capital reserve comprises negative goodwill arising from acquisition of subsidiaries, capitalisation issue of a subsidiary and share of capital reserve of an associate. 54 Hysan Development Company Limited Annual Report 2000 Notes to the Financial Statements 31. RECONCILIATION OF PROFIT BEFORE TAXATION TO NET CASH INFLOW FROM OPERATING ACTIVITIES Profit before taxation Impairment losses (reversed) recognised in respect of interests in associates Share of results of associates Net interest expenses Dividend income Depreciation Gain on property sales Gain on disposal of investments in other securities Gain on disposal of property, plant and equipment Gain on repurchase of convertible bonds Exchange loss on convertible bonds Exchange loss on advances from investees Amortisation of convertible bonds and floating rate notes issue expenses Decrease in accounts receivable, prepayments and deposits Decrease in staff housing loans, secured Decrease in trading securities Decrease in rental deposits from tenants, creditors and accruals 2000 HK$’000 1999 HK$’000 1,033,126 1,365,409 (3,419) (4,210) 417,626 (11,830) 5,624 (350) (293,842) (20) (2) – 3,193 5,123 2,513 25,802 – (12,346) 98,418 4,284 470,106 (1,799) 5,679 (482,562) (159,649) – (342) 6,972 – 9,119 52,283 6,719 33,064 (109,056) Net cash inflow from operating activities 1,166,988 1,298,645 55 Notes to the Financial Statements 32. ANALYSIS OF CHANGES IN FINANCING DURING THE YEAR Share capital and share premium HK$’000 Bank loans, other loans and other financing HK$’000 At 1 January 1999 6,382,918 7,905,385 Proceeds on issue of shares Share issue expenses Net proceeds on issue of floating rate notes New unsecured bank loans Repayment of unsecured bank loans Repurchase of convertible bonds Advances from investees Net cash inflow (outflow) from financing Exchange loss on convertible bonds Gain on repurchase of convertible bonds Amortisation of convertible bonds and floating rate notes issue expenses Dividend income from investees Issue of shares pursuant to scrip dividend scheme for 1998 final and 1999 interim dividends 91 (32) – – – – – 59 – – – – – – 394,790 50,000 (1,466,000) (200,893) 11,552 (1,210,551) 6,972 (342) 9,119 (100,756) 59,196 – 59,255 (1,295,558) At 31 December 1999 and 1 January 2000 6,442,173 6,609,827 Share issue expenses Repurchase of own shares New unsecured bank loans Repayment of unsecured bank loans Repurchase of convertible bonds Advances from investees Net cash outflow from financing Exchange loss on advances from investees Dividend income from investees Premium on share repurchase Gain on repurchase of convertible bonds Amortisation of convertible bonds and floating rate notes issue expenses Issue of shares pursuant to scrip dividend scheme for 1999 final and 2000 interim dividends (14) (90,887) – – – – (90,901) – – 39,852 – – 32,670 – – 2,305,500 (2,290,000) (923,374) 9,763 (898,111) 3,193 (4,790) – (2) 5,123 – (18,379) (894,587) At 31 December 2000 6,423,794 5,715,240 56 Hysan Development Company Limited Annual Report 2000 Notes to the Financial Statements 33. CONTINGENT LIABILITIES As at 31 December 2000, there were contingent liabilities in respect of the following: Guarantee to bankers to provide finance to a subsidiary Corporate guarantee to a subsidiary for bonds issue Corporate guarantee to subsidiaries for issue of floating rate notes Share of counter guarantees given to: – A subsidiary of an associate – Partners of property development projects Guarantees to bankers to provide finance to – An associate – Property development project THE GROUP THE COMPANY 2000 Million 1999 Million 2000 Million 1999 Million – – – – – S$18.6 S$12.0 S$22.0 – – – – – HK$1,390.0 US$118.3 HK$2,400.0 HK$2,400.0 HK$55.1 US$6.2 S$18.8 – – – HK$55.1 – – S$12.0 S$22.0 S$12.0 S$22.0 S$12.0 S$22.0 34. CAPITAL COMMITMENTS As at 31 December 2000, there were capital commitments as follows: THE GROUP THE COMPANY 2000 HK$ (Million) 1999 HK$ (Million) HK$ (Million) HK$ (Million) 2000 1999 Uncalled share of shareholders’ loan for property development projects Acquisition of investment properties contracted for but not provided in the financial statements 34.0 77.2 12.0 – – – – – The Group has also participated in two other property development projects in Singapore with 10% interest in each project. The Group has undertaken, in the agreed proportion, to meet all funding requirements necessary for these property developments by way of subscription to share capital, shareholders’ loans or otherwise. At 31 December 2000, the Group’s maximum funding requirements for these two projects is approximately HK$98 million (1999: HK$112 million). Should there be any pre-sale of these two projects, funding requirements will be reduced accordingly. 57 Notes to the Financial Statements 35. LEASE COMMITMENTS As at 31 December 2000, there were annual lease commitments as follows: THE GROUP THE COMPANY 2000 HK$ (Million) 1999 HK$ (Million) HK$ (Million) HK$ (Million) 2000 1999 Operating leases for rented premises which expire – within one year – in the second to fifth year inclusive – – – – – – 0.9 10.9 11.8 7.5 4.0 11.5 36. RELATED PARTY TRANSACTIONS During the year, the Group has the following transactions with related parties: Substantial shareholder Senior management executives Directors 2000 Note HK$’000 1999 1999 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 2000 2000 1999 Interest income from staff housing loans (a) Repairs and maintenance expenses paid to (b) – – – – Gross rental income from (c) 5,936 6,538 Construction cost paid during the year for investment properties completed in previous years (d) – – 134 624 – 8 – – – – – 20,806 21,221 56,357 62,293 – 8,817 8,963 58 Hysan Development Company Limited Annual Report 2000 Notes to the Financial Statements 36. RELATED PARTY TRANSACTIONS (continued) As at 31 December 2000, the Group has the following balances with related parties: Substantial shareholder Senior management executives Directors 2000 Note HK$’000 1999 1999 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 2000 2000 1999 Staff housing loans (a) Amount due to minority shareholder (a) Construction cost payable to (d) – – – – – – – – – 14,451 – – – – 84,486 84,486 179 5,819 (a) The details of the terms of staff housing loans and amount due to minority shareholder are set out in notes 17 and 21 to the financial statements respectively. (b) F.K. Hu (and his alternate, Raymond L.M. Hu) are shareholders and directors of Ryoden Lift Services Limited (“RLL”), Ryoden Lift and Escalator Company Limited (“RLE”) and Ryoden Engineering Contracting Company Limited (“REL”). RLL and RLE entered into a number of lift and escalator maintenance contracts with a subsidiary of the Company. REL entered into a number of electrical installation maintenance and repair contracts with a number of the Company’s subsidiaries. The agreements were entered into on normal commercial terms and on arm’s length basis. (c) The Group has, in the normal course of its business, entered into lease agreements with related parties to lease premises for varying period. The leases were entered into on normal commercial terms and on arm’s length basis. (d) The following Directors are interested in contracts entered into with a subsidiary of the Company relating to the construction of The Lee Gardens: (i) Geoffrey M. T. Yeh (and his alternate, V-nee Yeh) are substantial shareholders and directors of Hsin Chong Construction Group Limited whose associated company entered into a MVAC/BAS contract. (ii) RLE and REL entered into lift and electrical installation contracts. The interests of F.K. Hu are set out in (b) above. The contracts have now been completed, with the relevant sum being the amount paid under the contracts during the review year. Such transactions were entered into on normal commercial terms and on arm’s length basis. 59 Notes to the Financial Statements 37. PRINCIPAL SUBSIDIARIES AT 31 DECEMBER 2000 Name of subsidiary Place of incorporation Place of operation Class of share held Proportion of nominal value of issued share capital held by the Company indirectly directly Principal activity Issued share capital Admore Investments Hong Kong Hong Kong Ordinary HK$2 Limited Golden Capital Hong Kong Hong Kong Ordinary HK$2 Investment Limited HD Finance (BVI) British Virgin British Virgin Ordinary HK$1 Limited HD Treasury (BVI) Limited HD Treasury Management Limited Hysan China Holdings Limited Hysan Project Management (PRC) Limited Islands British Virgin Islands Hong Kong Islands British Virgin Islands Ordinary HK$1 Hong Kong Ordinary HK$2 British Virgin British Virgin Ordinary HK$1 Islands Islands Hong Kong Hong Kong Ordinary HK$2 Hysan Property Hong Kong Hong Kong Ordinary HK$2 Management Limited Kwong Hup Holding British Virgin British Virgin Ordinary HK$1 Limited Kwong Wan Realty Limited Islands Hong Kong Islands Hong Kong Ordinary HK$1,000 Minsal Limited Hong Kong Hong Kong Ordinary HK$2 Mondsee Limited Hong Kong Hong Kong Ordinary HK$2 Stangard Limited Hong Kong Hong Kong Ordinary HK$300,000 Teamfine Enterprises Hong Kong Hong Kong Ordinary HK$2 Limited Tohon Development Hong Kong Hong Kong Ordinary HK$2 Limited – – – – – – – – – – – – – – – 100% 100% 100% Investment holding Investment holding Treasury operation 100% Treasury operation 100% Treasury 100% operation Investment holding 100% Project management 100% Property management 100% Investment 100% holding Property investment 100% Property investment 100% Property 100% 100% investment Provision of security services Investment holding 100% Property investment 60 Hysan Development Company Limited Annual Report 2000 37. PRINCIPAL SUBSIDIARIES AT 31 DECEMBER 2000 (continued) Notes to the Financial Statements Place of incorporation Place of operation Class of share held Issued share capital Proportion of nominal value of issued share capital held by the Company indirectly directly Principal activity Name of subsidiary Bamboo Grove Recreational Services Limited HD Investment Limited Hinway Holdings Limited Jarrow Properties Limited Kochi Investments Limited Leighton Property Company Limited Hong Kong Hong Kong Ordinary HK$2 100% British Virgin Islands British Virgin Islands British Virgin Islands British Virgin Islands Hong Kong British Virgin Islands Ordinary HK$1 100% British Virgin Ordinary HK$1 100% Islands British Virgin Islands British Virgin Islands Ordinary HK$1 100% Ordinary HK$1 100% Hong Kong Ordinary HK$2 100% Main Rise Hong Kong Hong Kong Ordinary HK$2 100% Development Limited OHA Property Hong Kong Hong Kong Ordinary HK$2 100% Company Limited Perfect Win Hong Kong Hong Kong Ordinary HK$2 100% Properties Limited Profit Team Hong Kong Hong Kong Ordinary HK$2 100% Investment Limited Silver Nicety Hong Kong Hong Kong Ordinary HK$20 100% Company Limited South Eagle British Virgin Hong Kong Ordinary US$1 100% Investments Limited Lee Theatre Realty Islands Hong Kong Limited Hong Kong Ordinary HK$10 70% Barrowgate Limited Hong Kong Hong Kong Ordinary HK$10,000 65.36% – – – – – – – – – – – – – – Resident club management Investment holding Investment holding Investment holding Capital market investment Property investment Investment holding Property investment Property investment Investment holding Property investment Property investment Property investment Property investment The Directors are of the opinion that a complete list of all subsidiaries and their particulars will be of excessive length and therefore the above table contains only those subsidiaries which materially affected the results or assets of the Group. 61 Report of the Valuer To the Board of Directors Dear Sirs, Re: Annual revaluation of investment properties as at 31 December, 2000 In accordance with your appointment of Knight Frank to value the investment properties in Hong Kong owned by Hysan Development Company Limited and its subsidiaries, we are pleased to advise that the open market value of the properties as at 31st December, 2000 was in the approximate sum of Hong Kong Dollars Twenty Eight Billion Four Hundred Thirty Two Million And Seven Hundred Thousand Only. (i.e. HK$28,432,700,000). We valued the properties on an open market value basis by capitalizing the net income as provided to us with due allowance for outgoings and provisions for reversionary income potential. However, no allowance has been made in our valuation for any expenses or taxation which may be incurred in effecting a sale. Yours faithfully, KNIGHT FRANK Hong Kong, 5 March 2001 62 Hysan Development Company Limited Annual Report 2000 Schedule of Principal Properties As at 31 December 2000 INVESTMENT PROPERTIES Address Lot No. Use Category of the lease Percentage held by the Group 1. The Lee Gardens 33 Hysan Avenue Causeway Bay Hong Kong 2. Hennessy Centre 500 Hennessy Road Causeway Bay Hong Kong Sec. DD of I.L. 29 and Sec. L of I.L. 457, Sec. MM of I.L. 29, the R.P. of Sec. L of I.L. 29, and the R.P. of I.L. 457 Sec. FF of I.L. 29 and the R.P. of Marine Lot 365 Commercial Long lease 100% Commercial Long lease 100% 3. 4. 5. 6. 7. 8. Bamboo Grove 74-86 Kennedy Road Hong Kong Caroline Centre 2-38 Yun Ping Road Causeway Bay Hong Kong Leighton Centre 77 Leighton Road Causeway Bay Hong Kong Lee Theatre Plaza 99 Percival Street Causeway Bay Hong Kong Sunning Plaza 10 Hysan Avenue Causeway Bay Hong Kong Sunning Court 8 Hoiping Road Causeway Bay Hong Kong ) ) ) ) ) ) ) ) ) ) ) I.L. 8624 Residential Long lease 100% Sec. A and O of I.L. 457 and Sec. G of I.L. 29, Sec. F and the R.P. of Sec. C, D, E, and G, Subsec. 1 of Sec. C, D, E and G and Subsec. 2 of Sec. E of I.L. 457, Sec. H of I.L. 457, Subsec. 1, 2 and 3 and the R.P. of Sec. C of I.L. 461 Sec. B, C and the R.P. of I.L. 1451 Commercial Long lease 65.36% Commercial Long lease 100% I.L. 1452 and the R.P. of I.L. 472 and 476 Commercial Long lease 70% Commercial Long lease 100% The R.P. of Subsec. 1 of Sec. J, Subsec. 2 and the R.P. of Sec. J of I.L. 29 Residential Long lease 100% 63 Schedule of Principal Properties Address Lot No. Use Category of the lease Percentage held by the Group 9. Entertainment Building 30 Queen’s Road Central Hong Kong The R.P. of I.L. 16 and the extension thereto Commercial Long lease 100% 10. One Hysan Avenue 1 Hysan Avenue Causeway Bay Hong Kong 11. AIA Plaza 18 Hysan Avenue Causeway Bay Hong Kong The R.P. of Sec. GG of I.L. 29 Commercial Long lease 100% Sec. N of I.L. 457 and Sec. LL of I.L. 29 Commercial Long lease 100% 12. 111 Leighton Road Sec. KK of I.L. 29 Commercial Long lease 100% 111-117 Leighton Road Causeway Bay Hong Kong 64 Hysan Development Company Limited Annual Report 2000 Five-year Financial Summary CONSOLIDATED INCOME STATEMENT Turnover Operating profit Impairment loss reversed (recognised) in respect of interests in associates Impairment losses on investments in other securities Share of results of associates 1996 HK$’000 (Note 4) 1997 HK$’000 (Note 4) 1998 HK$’000 (Note 4) 1999 HK$’000 2000 HK$’000 1,567,324 2,011,817 3,590,656 2,295,717 1,480,246 1,638,281 1,409,908 1,655,878 1,468,111 1,025,497 – – (108,000) (98,418) 3,419 – (110) – 34,095 (134,558) (75,702) – (4,284) – 4,210 Profit before taxation Taxation Profit after taxation Minority interests 1,638,171 (182,511) 1,444,003 (162,327) 1,337,618 (111,550) 1,365,409 (86,795) 1,033,126 (117,210) 1,455,660 (106,623) 1,281,676 (103,385) 1,226,068 (86,797) 1,278,614 (74,656) 915,916 (65,743) Net profit for the year 1,349,037 1,178,291 1,139,271 1,203,958 850,173 Dividends 1,152,260 1,003,937 381,099 412,795 433,064 Earnings per share – Basic HK$1.31 HK$1.14 HK$1.11 HK$1.16 HK$0.82 – Diluted HK$1.31 HK$1.14 N/A HK$1.16 HK$0.82 65 Five-year Financial Summary 1996 HK$’000 (Note 4) 1997 HK$’000 (Note 4) 1998 HK$’000 (Note 4) 1999 HK$’000 2000 HK$’000 CONSOLIDATED BALANCE SHEET Property, plant and equipment Investment properties Property under development Interests in associates Investments in securities Staff housing loans, secured Net current assets (liabilities) 7,089 34,400,000 4,504,014 339,355 598,421 40,519 925,475 23,936 43,886,000 – 418,038 2,076,193 41,350 (3,376,395) 56,060 25,949,000 – 241,487 1,847,563 53,201 (894,135) 56,443 56,632 25,173,000 28,432,700 – 51,384 2,297,335 28,898 (1,469,100) – 66,467 2,468,742 43,151 (1,785,304) 40,814,873 43,069,122 27,253,176 26,022,499 29,397,849 Advances from investees Amounts due to minority shareholders Long term loan Long term bank loans Convertible bonds Floating rate notes 46,092 292,765 263,754 3,257,000 1,319,775 – 135,114 292,765 263,754 2,614,746 1,273,456 1,992,293 140,520 292,765 263,754 3,796,000 1,108,239 1,994,107 51,316 292,765 263,754 1,660,000 – 2,390,884 59,482 292,765 263,754 1,890,000 – 2,393,739 5,179,386 6,572,128 7,595,385 4,658,719 4,899,740 35,635,487 36,496,994 19,657,791 21,363,780 24,498,109 Share capital Reserves 5,143,934 28,117,343 5,146,629 28,999,953 5,158,136 13,330,048 5,183,810 5,151,256 15,033,512 18,007,790 Shareholders’ funds Minority interests 33,261,277 2,374,210 34,146,582 2,350,412 18,488,184 1,169,607 20,217,322 23,159,046 1,339,063 1,146,458 35,635,487 36,496,994 19,657,791 21,363,780 24,498,109 Notes: (1) In 2000, turnover comprises only the revenue from the Group’s core business, property development and investment. Proceeds from disposals of investments in securities, interest and dividend income which were included as part of the turnover in previous years were presented as gain on disposal of investments in securities and other revenue respectively. Comparative figures have been restated to conform with 2000 presentation. (2) Prior periods figures have been reclassified to conform with the current year’s presentation. (3) Earnings per share information for all periods presented has been re-computed to reflect the provisions of SSAP 5 (Revised). (4) Figures for 1998 have been adjusted to reflect the change in accounting policy for the adoption of SSAP 24. Periods from 1996 to 1997 have not been adjusted to reflect the change in accounting policy for the adoption of SSAP 24 as it is impractical to restate historical amounts in accordance with the requirements of SSAP 24. 66 Hysan Development Company Limited Annual Report 2000 Notice of Annual General Meeting NOTICE IS HEREBY GIVEN THAT the Annual General Meeting of Shareholders of Hysan Development Company Limited(cid:1)(cid:2) !"#$%&'(“the Company”) will be held in the Nathan Room, Lower Lobby, Conrad International Hong Kong, Pacific Place, 88 Queensway, Hong Kong on Tuesday, 8 May 2001 at 12:00 noon for the following purposes: 1. 2. 3. 4. To receive and consider the Statement of Accounts for the year ended 31 December 2000 together with the Reports of Directors and Auditors thereon. To declare a Final Dividend. To re-elect retiring Directors. To re-appoint Auditors and to authorize the Directors to fix their remuneration. As special business, to consider and, if thought fit, pass the following Ordinary Resolutions: 5. “That: (a) (b) (c) subject to paragraph (c), a general mandate be and is hereby unconditionally granted to the Directors of the Company to exercise during the Relevant Period all the powers of the Company to allot, issue and dispose of additional shares in the Company and to make or grant offers, agreements, options or warrants which would or might require the exercise of such powers; the mandate in paragraph (a) shall authorize the Directors of the Company during the Relevant Period to make or grant offers, agreements and options which would or might require the exercise of such powers after the end of the Relevant Period; the aggregate nominal value of share capital allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) by the Directors of the Company pursuant to the mandate in paragraph (a), otherwise than pursuant to (i) Rights Issue, or (ii) any option scheme or similar arrangement for the time being adopted for the grant or issue to the officers and/or employees of the Company and/or any of its subsidiaries of shares or rights to acquire shares of the Company or (iii) any scrip dividend or similar arrangement pursuant to the Articles of Association of the Company from time to time shall not exceed twenty per cent of the aggregate nominal amount of the share capital of the Company in issue and the said mandate shall be limited accordingly; (d) for the purpose of this Resolution: “Relevant Period” means the period from the passing of this Resolution until whichever is the earlier of: (i) the conclusion of the next Annual General Meeting of the Company; (ii) the expiration of the period within which the next Annual General Meeting of the Company is required by law to be held; and (iii) the date on which the authority set out in this Resolution is revoked or varied by an ordinary resolution of the Shareholders in general meeting. “Rights Issue” means an offer of shares open for a period fixed by the Directors of the Company to holders of shares of the Company or any class thereof on the register on a fixed record date in proportion to their then holdings of such shares or class thereof (subject to such exclusion or other arrangements as the Directors of the Company may deem necessary or expedient in relation to fractional entitlements or having regard to any restrictions or obligations under the laws of, or the requirements of any recognized regulatory body or any stock exchange in, any territory outside Hong Kong).” 67 Notice of Annual General Meeting 6. “That: (a) a general mandate be and is hereby unconditionally given to the Directors of the Company to exercise during the Relevant Period all the powers of the Company to purchase or otherwise acquire shares of HK$5.00 each in the capital of the Company in accordance with all applicable laws and the requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, provided that the aggregate nominal amount of shares so purchased or otherwise acquired shall not exceed ten per cent of the aggregate nominal amount of the share capital of the Company in issue. (b) for the purpose of this Resolution: “Relevant Period” means the period from the passing of this Resolution until whichever is the earlier of: (i) the conclusion of the next Annual General Meeting of the Company; (ii) the expiration of the period within which the next Annual General Meeting of the Company is required by law to be held; and (iii) the date on which the authority set out in this Resolution is revoked or varied by an ordinary resolution of the Shareholders in general meeting.” 7. “That, conditional upon the passing of Resolutions numbered 5 and numbered 6 set out in the Notice convening this Meeting, the aggregate nominal amount of the shares which are purchased or otherwise acquired by the Company pursuant to Resolution numbered 6 shall be added to the aggregate nominal amount of the shares which may be issued pursuant to Resolution numbered 5.” By Order of the Board Wendy W. Y. Yung Secretary Hong Kong, 20 March 2001 Notes: 1. 2. 3. 4. 5. A member entitled to attend and vote at the above meeting is entitled to appoint a proxy to attend and vote on his behalf. A proxy need not be a member of the Company. In order to be valid, a form of proxy must be deposited at the Company’s registered office, together with the power of attorney or other authority (if any) under which it is signed or a notarially certified copy of that power or authority, not less than 48 hours before the time for holding the meeting. The Register of Members of the Company will be closed from Friday, 4 May 2001 to Tuesday, 8 May 2001, both dates inclusive. To qualify for the above dividend, all transfers accompanied by the relevant share certificates must be lodged with the Company’s Share Registrars, Standard Registrars Limited at 5/F., Wing On Centre, 111 Connaught Road Central, Hong Kong for registration not later than 4:00 p.m., Thursday, 3 May 2001. Concerning Ordinary Resolution numbered 5, the Directors wish to state that they have no immediate plans to issue any new shares in the Company except those shares that may be issued pursuant to the Executive Share Options or any scrip dividend pursuant to the Articles of Association of the Company from time to time. The Ordinary Resolution is being sought from members as a general mandate in compliance with Section 57B of the Companies Ordinance and the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. Concerning Ordinary Resolution numbered 6, there is no immediate plan for the Directors to exercise the right of the Company to repurchase its own shares. The Ordinary Resolution is being sought from members as a general mandate in compliance with Section 49BA of the Companies Ordinance and the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. 68 Hysan Development Company Limited Annual Report 2000 FINANCIAL CALENDAR Half year results Full year results Financial Statements Annual General Meeting Announced on 5 September 2000 Announced on 20 March 2001 Posted to shareholders on or about 4 April 2001 To be held on 8 May 2001 Press releases and other financial information of the Group can be accessed through the internet at “www.hysan.com.hk” and “www.irasia.com/listco/hk/hysan/index.htm” 

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