ANNUAL REPORT 2001
INVESTING FOR THE FUTURE:
FUNDAMENTALS STRENGTHENED
Inspired by the classic chambered nautilus,
the logo of our flagship Lee Gardens reflects
the notion of strong foundations. The vitality
of the spiralling design symbolises our vision
to move forward to a dynamic future.
A spirit not only true for the Lee Gardens,
but also for our entire portfolio.
A distinctive neighbourhood in Causeway Bay –
to work, shop and enjoy.
CONTENTS
4 Highlights 2001
5 Chairman’s Statement
16 Operating and Financial Review
22 Principal Investment Properties
24 Report of the Valuer
25 Schedule of Principal Properties
26 Our People
28 Directors, Officers and Advisers
34 Corporate Governance
40 Directors’ Report
44 Auditors’ Report
45 Consolidated Income Statement
46 Consolidated Balance Sheet
48 Balance Sheet
49 Consolidated Statement of
Recognised Gains and Losses
50 Consolidated Cash Flow Statement
52 Notes to the Financial Statements
84 Five-Year Financial Summary
86 Notice of Annual General Meeting
With origins of some 450 million years, the spirally
coiled, chambered nautilus has fascinated naturalists,
mathematicians and physicists for years.
Inside back cover Shareholder Information
Back cover Lee Gardens shopping centre
Mission Hysan Development is committed to
building and owning quality buildings, and
being the occupier’s partner of choice in
the provision of real estate accommodation
and services, thereby delivering attractive and
sustainable returns to shareholders.
Year 2001 has been challenging, but rewarding
for the Company strategically. We made solid
steps across all sectors in our portfolio in
strengthening our fundamentals, following the
strategic focus mapped out last year.
Hysan Development Company Limited • Annual Report 2001 1
A distinctive neighbourhood in Causeway Bay –
VICTORIA
HARBOUR
GLOUCESTER ROAD
CROSS
HARBOUR
TUNNEL
T
E
E
R
T
S
L
A
V
I
C
R
E
P
SOGO
Causeway Bay MTR
D
A
O
R
N
E
D
R
A
G
E
E
L
L E I G H T O N R O A D
HYSAN AVENUE
LEIGHTON HILL
L
EIG
HENNESSY ROAD
TIMES SQUARE
M ATH ESO N STREET
H
T
O
Total Investment Property Portfolio 4.7 million ft2
Portfolio Analysis by Size:
HAPPY
VALLEY
• Office
• Retail
2 Hysan Development Company Limited • Annual Report 2001
• Residential
59 %
24 %
17 %
Office
Retail
Residential
N R
O
A
D
to work, shop and enjoy
VICTORIA
PARK
PENNINGTON
STREET
L E I G H T O N R O A D
HONG KONG
STADIUM
Hysan Development Company Limited • Annual Report 2001 3
HIGHLIGHTS 2001
• Office portfolio achieved 98% occupancy
despite challenging market conditions
• Strong balance sheet geared to complement
strategic decisions
• Fundamentals strengthened:
strategic progress across all business sectors
Year ended 31 December
2001
2000
Change
HK$’000
HK$’000
1,066,738
1,474,517
600,343
850,173
727,659
715,067
HK$
0.58
0.38
HK$
HK$
0.82
0.42
HK$
%
(27.7)
(29.4)
1.8
%
(29.3)
(9.5)
%
Operating Profit
Net Profit
Core leasing earnings *
Earnings per share (basic and diluted)
Dividend per share
Net asset value per share
(before final dividend)
20.62
22.79
(9.5)
Note: * before tax
4 Hysan Development Company Limited • Annual Report 2001
CHAIRMAN’S STATEMENT
The year under review has been
challenging, but strategically rewarding
for the Company. Amidst worsened
business conditions, our office portfolio
achieved a 98% occupancy rate. We
made solid steps across all sectors of
our portfolio by strengthening
our fundamentals, following the
strategic directions
mapped out last year.
Peter T. C. Lee
Chairman and Managing Director
Hysan Development Company Limited • Annual Report 2001 5
Hysan Development Company Limited • Annual Report 2001 5
Chairman’s Statement
STRATEGIC FOCUS
It is commonplace to think of
We consolidated the minority interests
The Group’s investment property
in the Lee Theatre Plaza, one of our
portfolio, as valued externally by
property investment as an assets
retail centres, hence further
independent professional valuers,
business. However, asset
strengthening our asset base. We shall
was HK$26,639 million (2000:
accumulation alone will no longer
continue to take advantage of our
HK$28,433 million). Largely due to
deliver the necessary returns to
critical mass and combine this with an
the HK$1,841 million net valuation
satisfy investors. We must look
innovative service-based culture.
deficit, shareholders’ funds at the
beyond the bricks and mortar, by
year end were HK$21,267 million,
actively anticipating and satisfying
We have a strong balance sheet
compared to HK$23,478 million in
occupiers’ ever changing needs for
geared to complement the Company’s
2000. Net asset value per share
real estate accommodation and
strategic decisions. Our Medium Term
(before final dividend) decreased by
services. Occupiers today demand
Note Programme established during
9.5% to HK$20.62.
a broader as well as different range
the year and its first US$200 million
of services.
issuance received solid investment
Detailed commentary on our
Our major refurbishment project for
grade ratings.
performance and assets valuation are
set out in “Operating and Financial
the luxury Bamboo Grove residential
Details of our strategic advancement
Review” on page 16.
development goes beyond upgrading
and financial performance during the
the building facilities as part of our
year are set out in “Operating and
selective building upgrading
Financial Review” on page 16.
programme. A full range of enhanced
and personalized services will also be
introduced.
PERFORMANCE
Net profit for the year ended 31
DIVIDENDS
The Board recommends the payment
of a final dividend of HK$0.28 per
share, which together with the interim
dividend of HK$0.10 per share,
The goal of our retail sector is to
December 2001 was HK$600 million,
represents an aggregate distribution
ensure that our space is not only
29.4% lower than in 2000. The major
of HK$0.38 per share, a decrease of
rented to its maximum capacity but
factor underlying this fall was the
9.5% for the year. Subject to
that the mix of retailers meets the
realization of gains on disposal of
shareholder approval, the final
needs of today’s customers. An
long-term investment in marketable
dividend will be payable in cash with
important step in the delivery of this
securities of HK$294 million
a scrip dividend alternative. Details
strategy is the introduction of a new
recorded in year 2000.
on the payment of final dividend,
“lifestyle” theme in the Lee Theatre
including the scrip dividend
Plaza area. This has further
The Group continues to have solid core
arrangements, are set out in
progressed our objective to
leasing earnings, at HK$728 million.
“Shareholder Information” on the
strengthen our retail portfolio as a
inside back cover.
distinct neighbourhood for shopping
Earnings per share were HK$0.58, a
and entertainment in the retail hub of
decline of 29.3% (HK$0.82 for the
Causeway Bay.
same period in 2000).
6 Hysan Development Company Limited • Annual Report 2001
Chairman’s Statement
SHAREHOLDER FOCUS,
FINANCIAL PRUDENCE AND
TRANSPARENCY
The Company values dialogue with
organizations, through donations,
This has been an active year during
sponsorships and the provision of
which solid progress was made. My
free venues. Members of our
thanks go to all of Hysan’s staff,
management and staff also serve on
whose commitment and efforts have
our shareholders, and aims to
various government as well as
make this possible.
continually improve on the quality of
industry organizations. We believe it
our reporting. This Annual Report
aims to present a balanced and
understandable assessment of the
is important for our business to
support the community in which it
operates and from which it generates
THE WAY AHEAD
It has been a challenging year not
Group’s position and prospects to our
its revenue. For us, this not only
only for most businesses, but for
shareholders. Senior management
means Hong Kong but more
Hong Kong as a whole. At Hysan, we
team also holds regular meetings with
specifically our hub in Causeway Bay.
have chosen to demonstrate our
the investment community to discuss
strategic and other issues.
It is our Company policy to adhere to
DIRECTORS AND STAFF
Mr. H. C. Lee, our former Chairman,
commitment and belief in our vision
by taking significant steps to
strengthen our fundamentals. Recent
positive economic indicators
financial prudence and corporate
retired after the last Annual General
regarding U.S. economy and China’s
transparency. I am very pleased that
Meeting in May 2001 after some
accession to the World Trade
our efforts in this area were
twenty years with the Company.
Organization should add a positive
recognized; our previous Annual
Under H. C.’s distinguished tenure,
tone to the market. We shall build on
Report won the Gold Award (Hang
the Company became one of the
this year’s efforts and believe that
Seng Index company category) of the
leaders in the Hong Kong property
through these actions, our
Year 2001 Best Corporate
sector, laying the foundation for its
shareholders and customers will
Governance Disclosure Award given
continuing development. The
recognize that we are in a position to
by the Hong Kong Society of
Honourable Lee Quo-wei, who has
further grow our business by being
Accountants.
served as our Deputy Chairman, also
the occupier’s partner of choice in
Details on our financial policy are set
Annual General Meeting. The Board
accommodation and services.
decided to step down as from the last
the provision of real estate
out in “Operating and Financial
Review” on page 16.
is greatly indebted to them for their
invaluable guidance and contribution
HYSAN AND THE COMMUNITY
With its long history in Hong Kong,
Hysan has strong ties with the
to the success of Hysan.
Peter T. C. Lee
We are very pleased to have Sir David
Hong Kong, 12 March 2002
Chairman and Managing Director
Akers-Jones as our independent non-
executive Deputy Chairman as from
community. Hysan supports various
8 May 2001. He also chairs our two
charitable and civic institutions in
corporate governance board
Hong Kong, including environmental
committees.
Hysan Development Company Limited • Annual Report 2001 7
Lee Theatre Plaza – a landmark building on a historical site. The retail plaza’s lifestyle theme makes
it an ideal venue for one-stop shopping and dining in the retail hub of Causeway Bay.
8 Hysan Development Company Limited • Annual Report 2001
LOCATION
Hysan is the largest commercial landlord in Causeway Bay, a district that
exemplifies Hong Kong’s very own trademarks of vitality and efficiency.
A prime location for business that offers unrivalled proximity to clients,
peers, business services, and where employees enjoy and relax. This is
true all year round, twenty-four hours a day.
In 2001, we acquired the remaining minority interests in the retail
Lee Theatre Plaza complex, consolidating our dominance in Causeway Bay.
Hysan Development Company Limited • Annual Report 2001 9
Looking through the skylight of the Lee Theatre Plaza dome, with the Plaza soaring,
depicting Hysan’s objective of moving forward to a dynamic future.
10 Hysan Development Company Limited • Annual Report 2001
BUILDINGS
Fine buildings provide the ultimate environment to work. We
continually review our portfolio and improve its quality by
selective enhancement and refurbishment.
In 2001, our Bamboo Grove luxury residential development
underwent a major renovation programme to enhance the value
of the property.
Hysan Development Company Limited • Annual Report 2001 11
An on-site briefing session is one of many such communication channels to ensure effective and efficient
An on-site briefing session is one of many such communication channels to ensure effective and efficient
management of our properties, providing quality service for our tenants. From left: Mr LEUNG Siu Ming
management of our properties, providing quality service for our tenants. From left: Mr LEUNG Siu Ming
(Building Manager, Lee Gardens), discusses issues with his team: NG Ho Lam (customer servicing), TO Lai
(Building Manager, Lee Gardens), discusses issues with his team: NG Ho Lam (customer servicing), TO Lai
Mei (customer servicing), HO Yee Leung (security - traffic control), LI Kai Yin (security), LEUNG Ka On
Mei (customer servicing), HO Yee Leung (security - traffic control), LI Kai Yin (security), LEUNG Ka On
(building services), JIM Tung Cheung (building services).
(building services), JIM Tung Cheung (building services).
12 Hysan Development Company Limited • Annual Report 2001
PEOPLE
It is our people that make our buildings work. We oversee the development,
marketing, leasing and management of our property portfolio to anticipate and to
meet tenants’ needs and to ensure the quality of our investments.
In 2001, our property management has been enhanced with upgraded
operational efficiency, focusing on good customer service. The Bamboo Grove
project will be accompanied by a full range of enhanced and personalized
property management services.
Hysan Development Company Limited • Annual Report 2001 13
The renowned “Tap Dogs” dancers performing at the outdoor Hysan Street Party held on
Hysan Avenue every November. This Party is one of many marketing efforts to the mutual
benefit of ourselves and our tenants.
14 Hysan Development Company Limited • Annual Report 2001
PARTNERSHIPS
We regard our tenants as business partners beyond the traditional
landlord-tenant relationship and have forged lasting partnerships
throughout the years. Many of our tenants have been with us since the
original lettings of our properties.
Hysan Development Company Limited • Annual Report 2001 15
OPERATING AND FINANCIAL REVIEW
strategic directions mapped out
prudence. Our new Medium Term
in the previous year.
Note Programme and the US$200
• Leadership position in Causeway
Bay. We consolidated the minority
million Notes issuance obtained
solid investment grade ratings
(Moody’s: Baa1; Standard and
interests in the retail Lee Theatre
Poor’s: BBB+);
Plaza complex, further
consolidating our dominance in
the prime office/retail area of
Causeway Bay;
• Continual review of the
• Operational efficiency and good
customer service. Our property
management has been further
enhanced with upgraded
operational efficiency, focusing on
performance of individual buildings
good customer service. The
and improve their quality by
selective refurbishment and
Bamboo Grove project will be
relaunched with a full range of
re-development. Our Bamboo
enhanced and personalized
Grove luxury residential
property management services.
development underwent a major
renovation programme which
includes both visible
enhancements and the equally
ACTIVITIES IN THE YEAR
important service upgrades;
Investment Properties
• Strengthening our retail sector
located in the retail hub of
• Office
The period in review witnessed a
worsening of the general market
OPERATING REVIEW
FUNDAMENTALS
STRENGTHENED
In a year when the world’s major
economies receded, the overall
Hong Kong economy also
experienced a downturn
particularly during the second half
Causeway Bay. We further
environment. There was an
of the year. Generally, corporate
expanded our retail sector and
increased secondary stock of office
expenditure were reduced in
advanced our objective to enhance
properties following company cost-
response to a lower level of activity.
our neighbourhood as a distinct
cuttings. These include premises
The rise in unemployment also
hub for dining, shopping and
occupied by telecommunications
affected consumer sentiment.
recreation. A diversity of retail and
and financial institutions. We
Despite this challenging
leisure offers were introduced to
continue to have a diversified but
environment, our office portfolio
our retail portfolio, complemented
focused tenant base covering large
achieved a 98% occupancy rate.
by a new “lifestyle” theme in the
multinationals and Hong Kong
We also made solid progress
Lee Theatre Plaza area;
organizations, and achieved an
across all property sectors (office,
retail and residential) in
implementing steps to strengthen
• Financial prudence. We continued
to have a strong balance sheet
our fundamentals, following the
and emphasize financial
occupancy rate of 98%.
Our strategy of continually
anticipating the needs of our
16 Hysan Development Company Limited • Annual Report 2001
customers stood us in good stead
and we enjoy an excellent
relationship with our tenants. We
interact closely with our tenants to
ensure that we anticipate and
meet their needs, and are
encouraged by the response.
• Retail
Retail markets are generally
sensitive to the overall economic
environment. Consumer
confidence, in particular, was
affected after the events on 11
September. Our portfolio, located
in the retail hub of Causeway Bay,
achieved a 97% occupancy rate.
The proactive approach we
mutual benefit. The annual Hysan
Development Properties
adopted in managing our tenant
Street Party held in November
The Grand Gateway commercial
mix resulted in the introduction of
successfully rounded off a busy
and residential complex in Puxi,
new complementary tenants to the
year for our team.
portfolio, further strengthening the
“lifestyle” theme in the Lee
Theatre Plaza area.
• Residential
Shanghai, where we have a 17%
interest, has established itself as
one of the most popular shopping
The major refurbishment
centers in Puxi area. The retail
programme for the Group’s
podium is virtually fully-let. The
In our retail portfolio, our objective
Bamboo Grove luxury residential
average occupancy rate of the
is to create an attractive
complex in the Mid-levels
residential tower for year 2001
environment for dining, shopping
commenced in 2001. The
was 96%.
and recreation. All these are to be
programme seeks to enhance the
achieved by the provision of a
external façade, apartment
Pre-sales in our two joint-venture
diversity of complementary retail
interiors, as well as clubhouse and
residential developments in
and leisure offers that meet the
common facilities to provide a
Singapore, Sanctuary Green and the
needs of customers. The
comfortable and family-friendly
Gardens at Bishan (10% interest),
introduction of new-style food and
living environment. A full range of
are in progress. Pre-sale in Amaryllis
beverage establishments in our
enhanced and personalized
Ville project (25% interest) is
neighbourhood during the year
property management services will
expected to be launched shortly.
has further advanced this aim. We
be introduced. Re-launch is
continued our marketing efforts,
scheduled to commence in the
partnering with tenants to our
second quarter of 2002.
Hysan Development Company Limited • Annual Report 2001 17
Operating and Financial Review
FINANCIAL REVIEW
December, followed in February
Performance Analysis
2002 by the inaugural issue US$200
HKD (million)
2001 was characterized by a
million 7% 10-year Notes under the
weakening economy and falling
Programme.
interest rates. The weakening local
economy, made worse by the global
slowdown and the negative economic
impact of the September 11 terrorist
RESULTS
The Group’s net profit attributable to
attack in the United States, inevitably
shareholders in 2001 was
led Hong Kong property rental and
HK$600 million, which was 29.4%
asset values to fall during the year.
lower than the HK$850 million in
The U.S. Central Bank aggressively
2000 mainly because of the absence
cut interest rates during the year to
of gains on disposal of long-term
2,000
1,500
1,000
500
0
-500
293.8
1,475.9
(328.9)
(432.0)
1,351.9
(313.6)
(310.7)
2000
2001
counter the U.S. slow down and
investment in marketable securities
-1,000
Hong Kong interest rates followed suit
of HK$294 million realized in 2000.
because of the currency peg.
Earnings per share were HK$0.58
Despite the difficult operating
The Group’s core leasing earnings,
against 2000’s figure of HK$0.82.
Net financing expenses
Operating expenses
Gain on sale of long-term
marketable securities
environment, the Group was able to
however, were up by 1.8%, which more
Rental income
achieve strong occupancy rates,
accurately reflect the Group’s strong
operating profits and cash flows.
effort during the past difficult year.
Financial gearing and interest coverage
were also maintained at comfortable
Rental income from the Group’s
levels such that strong credit ratings
property portfolio dropped by 8.4%
from both Standard & Poor’s Rating
year-on-year as a result of negative
Agency (BBB+) and Moody’s Investor
rental reversions and high vacancy at
Services (Baa1), reflecting the strong
Bamboo Grove with the
and stable financial profile of the
commencement of refurbishment in
Group, were achieved.
July 2001. Excluding Bamboo Grove,
the fall year-on-year was a more
The Group was able to reduce
modest 5.0%. To help cope with
interest expenses significantly during
falling rental income, the Group
the year by keeping debt facilities
tightened expenses. Operating
largely on a floating rate basis to take
expenses fell by 4.7% to
advantage of declining interest rates.
HK$314 million and net financing
The Group also took advantage of the
charges were HK$121 million lower
low rates to lengthen debt tenure and
despite higher debt. The net interest
diversify funding sources. This was
expense cover ratio improved from
achieved by the Group establishing a
2000 year-end’s 3.6 times to 3.7
Medium Term Note Programme in
times at 31 December 2001.
18 Hysan Development Company Limited • Annual Report 2001
Asset Values
Asset Values
HKD (billion)
Net asset value
per share (HKD)
70
60
50
40
30
20
10
0
40
30
20
10
0
33.71
47.94
19.80
18.19
28.07
28.30
22.79
30.78
20.62
28.45
1997
1998
1999
2000
2001
Marketable securities
Hong Kong properties
Overseas properties
Net asset value before final dividend
Operating and Financial Review
additional borrowings and reduced
Gross and Net Debt
REVIEW OF ASSET VALUES
The Group’s investment properties
shareholder equity from lower
were revalued independently by
property asset valuation.
professional valuers at year end 2001
at HK$26,639 million. The resulting
During the year, the Group continued
net revaluation deficit for the year of
to maintain all of its debt in Hong
HK$1,841 million has been charged
Kong dollars and on an unsecured
to reserves. This movement, together
basis. Over 98% of the borrowings
with the decrease in value of the
were on a committed basis.
Group’s marketable security holdings,
was the most significant elements in
The maturity profiles of the Group’s
the fall in shareholders’ funds of
gross debt at 31 December 2001 and
9.4% to HK$21,267 million. Net
31 December 2000 are summarised
HKD (million)
12,000
10,000
9,835
3,142
8,000
7,224
1,389
6,013
5,106
1,676
2,683
3,330
3,430
6,693
5,835
5,628
1,084
4,544
6,000
4,000
2,000
0
1997
1998
1999
2000
2001
2001
2000
HKD(million) HKD(million)
Cash, cash equivalents &
securities at market value
Net debt
asset value per share (before final
as follows:
dividend) correspondingly decreased
from HK$22.79 to HK$20.62.
DEBT AND MATURITY PROFILE
The total debt outstanding at the end
of 2001 amounted to HK$5,628
million (excluding amount due to
minority shareholders and advances
from investees), an increase of
HK$522 million from the previous
Repayable within
a period
– Not exceeding
1 year
– Between
1 to 2 years
– Between
2 to 5 years
– After 5 years
2,140
816
436
2,150
2,572
480
2,140
0
5,628
5,106
year end. Loan draw down from
Sources of funds at 2001 year-end
existing and new facilities during the
comprised of 43% from capital
year were mainly used to finance the
market issuances, 39% from bank
minority interest acquisition in The Lee
bilateral loans and 18% from
Theatre Plaza and the refurbishment
syndicated and club loans.
expenditures at Bamboo Grove. Net
debt (gross borrowings less cash, cash
After the 10-year Notes issue in
equivalent and marketable securities
February 2002 and the repayment of
at year-end market value) amounted
the HK$2 billion Floating Rate Notes
to HK$4,544 million.
in March 2002, about 36% of the
debt will not mature for 5 to 10 years.
Net debt as a percentage of
Similarly, the sources of debt facilities
shareholder equity increased from
from capital market issuances and
14.6% at December 2000 to 21.4%
bank bilateral loans will be changed
at year-end 2001 as a result of the
to 35% and 47% respectively.
Sources of Debt Facilities at 2001 Year-end
39%
43%
18%
Bank bilateral loans
Capital market issuances
Syndicated and club loans
Hysan Development Company Limited • Annual Report 2001 19
Operating and Financial Review
NOTABLE NEW FINANCING
In February 2002, the Group issued
CAPITAL EXPENDITURES
To further strengthen the Group’s
balanced spread of facility maturities.
The Group also uses interest rate swaps
the inaugural US$200 million 7%
dynamic and long-term presence in
and other instruments to manage
Notes under the established
Causeway Bay, HK$508 million were
interest rate risks with an objective to
Medium Term Note Programme. The
paid to acquire the 30% minority
minimize the impact of fluctuations on
Notes have a tenure of 10 years and
interest in The Lee Theatre Plaza in
earnings while achieving a balance with
were priced at 200 basis points over
September 2001. Other capital
cost effectiveness. Transactions are
the benchmark 10-year U.S.
expenditures incurred relate to additions
conducted for hedging purposes only
Treasury Notes with a yield of
and improvements to the Group’s
and no speculative positions have
7.02%. The Notes received a credit
investment properties including the
been or will be undertaken. As of
rating of Baa1 from Moody’s
refurbishment program at Bamboo
31 December 2001, 88% of the Group’s
Investors Service and BBB+ from
Grove. Regarding those Singapore
borrowings were at floating rates.
Standard & Poor’s Rating Agency.
development projects, where pre-sale is
The issue was well received by a
in progress, it is expected that such
The Group’s foreign exchange
wide group of predominately new
proceeds are sufficient to fund the
exposure is minimal. As of
Asian and European investors,
construction costs and future cash flow
31 December 2001, all debt
including assets managers,
requirements would be minimal.
outstanding are Hong Kong dollars
insurance companies, and private
denominated, and investment in
investors. The net proceeds will help
At year end, the Group had
overseas projects totalled the
refinance the HK$2 billion Floating
HK$1,661 million in undrawn
equivalent of HK$703 million or 3.3%
Rate Notes due in March 2002 as
committed bank facilities. This
of the Group’s shareholder equity.
well as fund other Group needs.
availability, together with the Medium
CREDIT RATINGS
With respect to the Group’s credit
strength, Standard & Poor’s Rating
Term Note Programme in place, should
be sufficient to cover the Group’s
refinancing and capital expenditure
CONTINGENT LIABILITIES
As and when required, in the ordinary
needs over the next few years.
course of business, the Group will
provide guarantees, counter
Agency maintained a stable outlook
As planned, the Group will fund its
indemnities or undertakings to cover
on its credit rating of BBB+. In
capital expenditures through debt
the Group’s obligations in respect of
January 2002, Moody’s Investor
while maintaining acceptable gearing
projects undertaken by the Group.
Services assigned a Baa1 credit
and interest expense coverage ratios.
rating to the Company with a stable
outlook. Both investment grade credit
ratings reflect the Group’s strong
financial profile underpinned by
sound financial management and
FINANCIAL RISK AND
MANAGEMENT
The Group’s financial risk management
The Group has provided guarantees
for banking facilities granted to
associated companies and investee
companies. At 31 December 2001,
the Group’s share of guarantees and
stable operations with large recurring
strategies include broadening the
counter guarantees amounted to
rental income cash flows.
Group’s financing channels, expanding
approximately HK$148 million (2000:
the investor base, extending the tenure
HK$153 million) and HK$79 million
of facilities, and achieving a well-
(2000: HK$84 million) respectively.
20 Hysan Development Company Limited • Annual Report 2001
PRINCIPAL INVESTMENT
PROPERTIES
Hysan Development Company Limited • Annual Report 2001 21
PRINCIPAL INVESTMENT PROPERTIES
Hennessy Centre
500 Hennessy Road, Causeway Bay
Located on a busy
thoroughfare, Hennessy
Centre contains 719,642
square feet in a 45-level
office and retail complex. It
is served by a multitude of
public transport, including
Lee Theatre Plaza
99 Percival Street, Causeway Bay
Like its predecessor the
Lee Theatre, Lee Theatre
Plaza is a Hong Kong
landmark and among the
territory’s first Ginza-style
shopping, dining and
entertainment complexes.
Boasting Esprit’s flagship store, the largest in
the world, and Muji – a favourite lifestyle
store – as its anchor tenants, the Plaza is a
Mass Transit Railway and bus and tram stops
popular venue for life-style shopping and
on its doorstep. Home to the popular
one-stop entertainment and relaxation, with
Mitsukoshi Japanese Department Store, it is
its cinema, fitness centres and some of the
a popular family shopping destination.
Principal office tenants
Butterworths, Colgate-Palmolive, EDS,
Lexmark and The Body Shop
finest dining establishments in Causeway
Bay. The Plaza contains 315,749 square feet
in 26 levels.
Principal retail tenants
Esprit, Muji, Lee Theatre Cinema and
California Fitness Centre
AIA Plaza
18 Hysan Avenue, Causeway Bay
A 25-level office and retail
complex with 139,119
square feet of gross floor
area, the building has
food and beverage
facilities on the ground
and first floors.
Principal office tenants
Principal retail tenants
AIA, Occidental Chemical, Miele
Mitsukoshi Japanese Department Store
Caroline Centre
2-38 Yun Ping Road, Causeway Bay
The Lee Gardens
33 Hysan Avenue, Causeway Bay
Leighton Centre
77 Leighton Road, Causeway Bay
A 34-level office and retail
complex of 626,882 square
feet, its retail podium has
established itself as a
centre of variety shopping
including fashion, sports,
hi-fi and children’s wear.
The prime, 53-level,
902,797 square feet office
and retail complex was
completed in 1997, and
comprises the Manulife
Plaza office tower and
a shopping centre.
The 28-level, 435,008
square feet office and retail
complex enjoys close
proximity to all forms of
public transport. Its central
location in the Causeway
Bay area makes it a well-
The complex also has several popular
The Lee Gardens shopping centre is
sought after location for many professional
Asian cuisine outlets, and is linked to
Causeway Bay’s high-end retail centre and
practices. The addition of G.O.D. to Leighton
The Lee Gardens, Causeway Bay’s high-end
houses a concentration of international
Centre makes it another inviting setting for
shopping centre, by a footbridge.
fashion and luxury brands. It has undergone
life-style purchases.
Principal office tenants
Bayer, Jebsen & Company, Merck Sharp
& Dohme and Pepsico
Principal retail tenants
(fashion and accessories): Max & Co and
Fila; (children’s wear): DKNY Kids and
Polo Kids; (lifestyle): Honma Golf,
“Apartment” designer furniture and
lightings and Nakamichi Hi-Fis
aesthetical and environmental improvements
during 2001 to provide added value to its
retail tenants and visitors.
Principal office tenants
Bates, General Electric, Manulife, Oracle
and Sony
Principal retail tenants
Chanel, Christian Dior, Hermes,
Louis Vuitton, Prada and Tiffany & Co.
Principal office tenants
Davis Langdon and Seah
Simon Kwan & Associates
Principal retail tenants
G.O.D and Town Gas Cooking Centre
22 Hysan Development Company Limited • Annual Report 2001
111 Leighton Road
111-117 Leighton Road, Causeway Bay
111 Leighton Road is
located in a pleasant and
tranquil area in the heart of
Causeway Bay. Dining and
Sunning Plaza
10 Hysan Avenue, Causeway Bay
Designed by the renowned
architect I.M. Pei, Sunning
Plaza greets tenants and
visitors with a spacious
entrance and lift lobby. The
office and retail complex
has 30 levels and 279,717
shopping are readily
square feet. Among its tenants are popular
available. The 24-level office
food and beverage outlets, which have
and retail building has a
established the Plaza as a hub for relaxation
size of 79,905 square feet.
and social recreation.
Bamboo Grove
74-86 Kennedy Road, Mid-Levels
Bamboo Grove is a luxury
residential complex in the
Mid-Levels consisting of
345 apartments in six
residential towers.
Tenants enjoy full
clubhouse and sports
facilities. The 697,940 square feet complex
is undergoing extensive refurbishment to
enhance both the building facilities and the
Principal office tenants
Agnes B and Mikli Asia
Principal office tenants
CIGNA, Gillette, Maersk Lines and Yahoo!
equally important management services.
One Hysan Avenue
1 Hysan Avenue, Causeway Bay
Entertainment Building
30 Queen’s Road, Central, Central
Sunning Court
8 Hoiping Road, Causeway Bay
Located at the junction of
three busy streets in the
heart of Causeway Bay,
One Hysan Avenue enjoys a
prime location and a
diversity of retail facilities in
the surrounding area. The
Enjoying a prime location in
The 17-level Sunning Court
Hong Kong’s Central
financial and business
district, the post-modern
design Entertainment
Building has 34 levels,
comprising 211,148 square
is a unique residential
tower in the dynamic
Causeway Bay area.
Located in a pleasant
environment with streets
lined with trees, and within
office and retail complex has 169,019 square
feet. The building has recently undergone
easy reach of all forms of relaxation and
feet in 26 levels.
environmental improvement works to
entertainment activities in the district, the
Principal office tenants
AIWA, BGX, Hong Kong Institute of
Architects and NCR
Principal retail tenants
Maxim’s Restaurant and Starbucks Coffee
enhance the quality of the retail podium.
building is finished to provide maximum
comforts for its tenants.
Principal office tenants
AES, Baden-Württembergische Bank,
Bulgari, Malayan Banking and Morrison
& Foerster
Principal retail tenants
Laurel and Morton’s of Chicago Steak
House
Hysan Development Company Limited • Annual Report 2001 23
REPORT OF THE VALUER
TO THE BOARD OF DIRECTORS
HYSAN DEVELOPMENT COMPANY LIMITED
Dear Sirs,
Annual revaluation of investment properties as at 31 December 2001
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 2001 was in the approximate sum of Hong Kong Dollars Twenty Six Billion Six Hundred Thirty Eight
Million and Five Hundred Thousand Only. (i.e. HK$26,638,500,000).
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, 1 March 2002
24 Hysan Development Company Limited • Annual Report 2001
SCHEDULE OF PRINCIPAL PROPERTIES
as at 31 December 2001
INVESTMENT PROPERTIES
Address
Lot No.
The Lee Gardens
33 Hysan Avenue
Causeway Bay
Hong Kong
Hennessy Centre
500 Hennessy Road
Causeway Bay
Hong Kong
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
1.
2.
3.
4.
5.
6.
7.
8.
9.
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
Use
Category
of the lease
Percentage held
by the Group
Commercial
Long lease
100%
Sec. FF of I.L. 29 and the R.P. of Marine
Lot 365
Commercial
Long lease
100%
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
I.L. 1452 and the R.P.
of I.L. 472 and 476
Commercial
Long lease
65.36%
Commercial
Long lease
100%
Commercial
Long lease
100%
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%
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
The R.P. of Sec. GG of I.L. 29
Commercial
Long lease
100%
1 Hysan Avenue
Causeway Bay
Hong Kong
11. AIA Plaza
Sec. N of I.L. 457 and Sec. LL of I.L. 29
Commercial
Long lease
100%
18 Hysan Avenue
Causeway Bay
Hong Kong
12. 111 Leighton Road
Sec. KK of I.L. 29
Commercial
Long lease
100%
111-117 Leighton Road
Causeway Bay
Hong Kong
Hysan Development Company Limited • Annual Report 2001 25
OUR PEOPLE
People are Hysan’s most vital asset. In a year during
which downsizing and job cuts were announced by
quite a number of businesses, we have elected to
take a different path. We further strengthened
our performance measurement system, invested in
training and fostered our team spirit. All these are
towards maximizing our efficiency to deliver
shareholder value.
Alignment of individual and corporate goals is key to our
human resources practices
26 Hysan Development Company Limited • Annual Report 2001
PERFORMANCE MEASUREMENT
We further strengthened our
performance measurement system,
including building in a specific
customer service focus. Coaching
and performance measurement
workshops were conducted for all
supervisory staff to ensure that the
performance reviews are effectively
conducted, with effective feedback
supported by specific improvement
plans. Clear goals, both corporate
and individual, were identified and
communicated thus aligning all staff
with corporate objectives.
Hysan has always rewarded our
staff based on performance,
reinforcing quality performance and
customer service.
TRAINING AND DEVELOPMENT
Hysan recognizes the significance
of continual training for our staff
and the value such training brings
to our operations. During the year,
we continued to make substantial
investments in staff development
and encouraged a learning culture.
All levels of staff benefited from
strong team spirit and a sense of
our formalized and customized
belonging, and in establishing and
training and development
maintaining trust between
programmes which covered a wide
management and staff members.
range of skills and expertise.
Effective communication channels,
Following the successful roll-out of
including Staff Newsletters, formal
customer service seminars and
and informal briefing and chat
workshops across the organization
sessions by senior management and
last year, customer service
among corporate headquarters and
standards were further reinforced
building staff alike, were introduced.
through vigorous coaching by unit
Activities organized by the Hysan
supervisors and Group self-audits.
Recreation Club further strengthened
Multi-level team briefings and
the team spirit. Despite tough times,
service coaching skills workshops
our medical benefits were enhanced
were also introduced to support
in the year.
teams with different responsibilities
and at different locations.
As a move to encourage innovation
PEOPLE ARE OUR SUCCESS
It is the people who make our
and to involve staff in enhanced
Company a success. At 31
customer service, we launched the
December 2001, we employed a
“Ideas That Work” programme,
total of 561 staff members. Property
which was received positively by
Investment is more than an assets
staff.
FOSTERING TEAM SPIRIT
Hysan is a caring employer and
business. People make assets work.
We shall continue to align our
human resource practices with our
corporate objective so as to
maximize shareholder value and to
enjoys good relations with its staff.
achieve growth.
We spare no efforts in building a
Customer service is the key to our success
Safety and security in a friendly environment
Meticulous management ensures efficiency
Hysan Development Company Limited • Annual Report 2001 27
DIRECTORS, OFFICERS AND ADVISORS
BOARD OF DIRECTORS
Peter Ting Chang LEE (I)
J.P.
Chairman and Managing Director
Peter T. C. Lee first joined the Board in
1988, became Managing Director in 1999,
and Chairman and Managing Director in
2001. A non-executive director of South
China Morning Post (Holdings) Limited and
a director of a number of other companies.
Also a director of Lee Hysan Estate
Company, Limited. 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. He is aged 48.
Dr. Victor Kwok King FUNG (I)
Independent Non-Executive Director
Chairman of the Li & Fung Group, the Hong
Kong Airport Authority and the Hong Kong
University Council, a non-executive director
of Bank of China (Hong Kong) Limited,
Anglogold Limited, Pacific Century
CyberWorks Limited, Kerry Properties Ltd.,
Orient Overseas (International) Ltd., DBS
Kwong On Bank, Ltd., Sun Hung Kai
Properties Limited, Dao Heng Bank Group
Limited and its three operating subsidiaries,
which are authorized institutions. He holds
a Bachelors and a Masters 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 56.
Sir David AKERS-JONES (A,E)
K.B.E., C.M.G., J.P.
Independent Non-Executive
Deputy Chairman
Chairman of 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 became
the Deputy Chairman in 2001. He is aged 74.
Fa-kuang HU (E)
C.B.E., J.P.
Non-Executive Director
Chairman of Ryoden Development Limited
and its group companies. Also a director of
i-CABLE Communications Limited. Holds a
Bachelor of Science Degree from Shanghai
Jiao Tong University. Appointed a Director
in 1979 and is aged 78.
28 Hysan Development Company Limited • Annual Report 2001
Hans Michael JEBSEN (I)
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 45.
Per JORGENSEN (A)
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 66.
Anthony Hsien Pin LEE (I)
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 44.
Chien LEE (A)
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 48.
Michael Chi Kung MOY
Chief Financial Officer & 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 45.
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.
She joined the Company in 1981 and
has over thirty years of experience in
the property field. She was appointed
a Director in 1991 and is aged 53.
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 62.
Dr. Geoffrey Meou-tsen YEH (E)
S.B.S., M.B.E., J.P., D.C.S., M.Sc.,
F.C.I.O.B., F.Inst. D.
Independent 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.
He is aged 70.
Michael Tze Hau LEE (I)
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 40.
(A) Audit Committee
(E) Emoluments Review Committee
(I) Investment Committee
Hysan Development Company Limited • Annual Report 2001 29
Directors, Officers and Advisors
Mr Peter T.C. Lee with Senior Management
Front row, from left: Connie Kit Mei Pang, Wendy Wen Yee Yung, Michael Chi Kung Moy, Peter T.C. Lee, Pauline Wah Ling Yu Wong
Back row, from left: Mark Sun Wah Chim, Lora Wing Sze Luke, Ben Sau Shun Lui
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 40.
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 fourteen years’
experience in leasing. Graduated from
The Hong Kong Polytechnic University
in Building Technology and
Management. He is aged 38.
Ben Sau Shun LUI
General Manager,
Project and Technical Services
Responsible for the Group’s project
and technical services. A Registered
Professional Engineer, he holds a
Master of Science Degree in
Construction 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 43.
ADVISERS
Auditors
Deloitte Touche Tohmatsu
Principal Bankers
The Hongkong and 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
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 41.
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 38.
30 Hysan Development Company Limited • Annual Report 2001
Notes
Hysan Development Company Limited • Annual Report 2001 31
Notes
32 Hysan Development Company Limited • Annual Report 2001
DIRECTORS’ REPORT
AND ACCOUNTS 2001
Hysan Development Company Limited • Annual Report 2001 33
CORPORATE GOVERNANCE
The Company is committed to a 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 Rules Governing the Listing of Securities on The Stock Exchange of Hong
Kong Limited (the “Listing Rules”).
STATEMENT OF COMPLIANCE WITH THE CODE OF BEST PRACTICE
The Company has complied throughout the review period with the Code of Best Practice.
BOARD EFFECTIVENESS
The Board
The Board currently comprises Peter T. C. Lee, Chairman and Managing Director, Pauline W. L. Yu Wong, Director,
Property and Michael C. K. Moy, Chief Financial Officer and Director, and ten other non-executive Directors. Sir David
Akers-Jones acts as the Independent non-executive Deputy Chairman, also chairing the two corporate governance
committees, namely the Audit Committee and Emoluments Review Committee. The biographies of the Directors appear
on pages 28 and 29. 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 four independent non-executive
Directors also sit on the corporate governance committees of the Board.
Under the Company’s articles of association, all Directors are subject to retirement by rotation. The three Directors who
have been longest in office as at each Annual General Meeting will retire from office and be subject to re-election.
Chairman and Deputy Chairman
The Board structure, including the presence of an independent non-executive Deputy Chairman on the Board, is
designed to ensure that the Board functions effectively and independent of management where appropriate. At the same
time, the fact that the Chairman is also Managing Director means that the Chairman has a more detailed knowledge of
the business and activities of the Company than would be possible for a Chairman who was not a member of
management.
Responsibilities, Functioning, and Supply of Information
The Board meets at least quarterly. Its principal task is to formulate strategy and to monitor and control operating and
financial performance in pursuit of the Group’s strategic objectives. Certain significant transactions, including material
bank facilities, material acquisitions and disposals, and material transactions with connected parties are reserved for
Board decision.
An important element of the Board’s corporate governance programme is the continuous improvement in the quality
and timeliness of the dissemination of information to Directors. Where appropriate, communications are sent
electronically. At least quarterly, Directors are provided with comprehensive reports on the management’s strategic
plans, updates by business unit heads on their lines of business, financial objectives, plans and actions. During the year,
following every committee meeting, committee chairs report to the Board on the activities of their respective
committees.
All Directors have access to the Company Secretary who is responsible for ensuring that Board procedures are complied
with and advises the Board on corporate governance and compliance matters.
34 Hysan Development Company Limited • Annual Report 2001
CORPORATE GOVERNANCE continued
BOARD COMMITTEES
The Board currently has three Board committees, namely the Audit Committee, Emoluments Review Committee and
Investment Committee. The Audit and Emoluments Review Committees, being corporate governance committees, have
100% non-executive membership with a majority of independent Directors. These three committees deal with specific
aspects of the Group’s affairs, as detailed below:
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 the Managing Director and the Chief Financial Officer.
The Audit Committee receives reports from and consults with external auditors. It reviews the interim and annual
results, considers any matters raised by the external auditors, and reports thereon to the Board. It also monitors the
controls which are in force to ensure the integrity of information reported to the shareholders, and oversee compliance
generally.
Emoluments Review Committee
The Group’s Emoluments Review Committee is also chaired by Sir David Akers-Jones. Other members are Mr. F. K. Hu
and Dr. Geoffrey M. T. Yeh.
The function of the Committee is to review and determine the remuneration of the executive Directors. The Chairman
and Managing Director makes recommendations to the Committee on the Company’s framework for, and cost of,
executive Director remuneration and the Committee then reviews these recommendations. On matters other than those
concerning him, the Chairman and Managing Director may be invited to Committee meetings. No Director is involved
in deciding his own remuneration.
Details of each Director’s emoluments and options are shown in section headed “Directors’ remuneration and interests”.
Investment Committee
The Group’s Investment Committee comprises the Chairman and Managing Director, Victor K. K. Fung, Hans Michael
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
Executive Director Emoluments
Details on Directors’ emoluments are set out in note 6 to the financial statements. As detailed above, the Emoluments
Review Committee reviews and determines the remuneration of the executive Directors.
Non-Executive Director Emoluments
The annual remuneration of the non-executive Directors for year 2001 was HK$592,534 per annum.
The independent non-executive Deputy Chairman receives an annual fee of HK$65,000, with the other non-executive
Directors being entitled to an annual fee of HK$50,000. Members of the Audit Committee receive an annual fee of
HK$20,000. None of the non-executive Directors receive any pension benefits from the Company, nor do they
participate in any bonus or incentive schemes.
Hysan Development Company Limited • Annual Report 2001 35
CORPORATE GOVERNANCE continued
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).
Directors’ Interests in Shares
As at 31 December 2001, 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
Peter Ting Chang Lee
Fa-kuang Hu
Hans Michael Jebsen
Per Jorgensen
Chien Lee
Personal
Interests
2,000,000
–
60,000
6,678
970,000
Michael Tze Hau Lee
1,023,233
Deanna Ruth Tak Yung Rudgard
1,871,600
Pauline Wah Ling Yu Wong
Michael Chi Kung Moy
Geoffrey Meou-tsen Yeh
V-nee Yeh
(Alternate to
Geoffrey Meou-tsen Yeh)
254,000
–
109,619
43,259
Family
Interests
No. of shares held
Corporate
Interests
Other
Interests
–
–
–
–
–
–
–
–
131,565
(Note 4)
4,020,014
(Note 1)
255,012
(Note 2)
2,432,914
(Note 1)
–
–
–
–
–
4,020,014
(Note 1)
3,750,000
(Note 3)
–
–
–
–
–
–
1,000
(Note 1)
84,575
(Note 1)
–
–
–
–
–
–
Total
6,020,014
255,012
2,492,914
6,678
8,740,014
1,023,233
1,871,600
254,000
131,565
110,619
127,834
Notes:
(1)
(2)
(3)
(4)
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.
Such shares were held by a company which was wholly-owned by Fa-kuang Hu and he was deemed to have beneficial interests in all
these shares.
Such shares were held through a discretionary trust of which Chien Lee was a beneficiary.
These shares were held by the wife of Michael Chi Kung Moy who was therefore deemed to have interest in them.
36 Hysan Development Company Limited • Annual Report 2001
CORPORATE GOVERNANCE continued
As at 31 December 2001, 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 2001, there was no other interest or right recorded in the register required to
be kept under Section 29 of the SDI Ordinance.
Executive Share Options
The Company operates an Executive Share Option Scheme (the “Scheme”) under which options may be granted to
employees of the Company or any of its wholly-owned subsidiaries to subscribe for ordinary shares of the Company,
thereby strengthening the links between individual staff and shareholder interests. Approved by shareholders on 28 April
1995, the Scheme has a term of ten years. The maximum number of shares in respect of which options may be granted
under the Scheme (together with shares issued and issuable under the Scheme) is three percent (3%) of the issued share
capital of the Company (excluding shares issued pursuant to the Scheme) from time to time. The exercise price was
fixed at 80 per cent of the average of the closing prices of the shares on the Hong Kong Stock Exchange for the twenty
trading days immediately preceding the date of grant. Consideration to be paid on each grant of option is HK$1.00, with
full payment for exercise price to be made on exercise of the relevant option.
As at 31 December 2001, Scheme participants were executive Directors of the Company with shares issuable under
options granted representing less than 0.4% of the then issued share capital of the Company. Options expiring, granted
and outstanding to them are as follows:
Opening Balance
as at 1/1/01
Date of
Grant
Lapsed
Granted Exercised
Changes During Year
Options as at 31/12/01
Exercise
price
(HK$)
Closing
Balance
Exercisable
period
Peter Ting Chang Lee
Pauline Wah Ling Yu Wong
1,350,000
900,000
7/1/99
3/5/95
Michael Chi Kung Moy
1,200,000
23/12/99
NIL
NIL
NIL
NIL
NIL
NIL
NIL
NIL
NIL
1,350,000
900,000
1,200,000
9.22
13.46
7/1/01-6/1/09
3/5/97-2/5/05
7.54 23/12/01-22/12/09
All options referred to above are subject to a five-year vesting period and a bar on the exercise of options within the first
two years of their issue.
During the review period, no options were granted to or were exercised by Directors. Certain options granted to Hon
Chiu Lee, former Chairman of the Company who retired on 8 May 2001, to subscribe for 1,125,000 shares of the
Company, had lapsed on his retirement.
Apart from the Scheme, 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 debentures of the
Company or any other body corporate.
The power of grant to executive Directors is vested in the Emoluments Review Committee and otherwise pursuant to
Listing Rules requirements.
Hysan Development Company Limited • Annual Report 2001 37
CORPORATE GOVERNANCE continued
The Managing Director has been delegated by the Board the authority to make grants to other management staff. In this
light, the Company has undertaken a review of the Scheme to seek to further strengthen the links between staff and
shareholder objectives, also with the view to balance the interests of shareholders generally. The exercise price will be at
least the higher of (i) the closing price of the Company’s ordinary shares on the date of grant; and (ii) the average
closing price of such shares for the five days immediately before the grant. Interests of shareholders will be balanced by
having appropriate aggregate and individual grant limits, also being in line with new Listing Rules requirements. A clear
performance criterion will be the main driver.
Directors’ Interests in Contracts of Significance
Except as stated in note 36(A) 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.
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 the 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)
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)
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 associates, which
are engaged in investment holding, property investment and development, property agency and management,
project management in both the People’s Republic of China and Hong Kong.
The Company’s management team is separate and independent from that of the companies listed above. In
addition, the aforementioned Director has a non-executive role and is not involved in the Company’s day-to-day
operations and management.
Connected and Related Party Transactions
The Company acquired during the review period from members of the Sincere Group the remaining 30% minority
interests in its subsidiary, Lee Theatre Realty Limited (“LTRL”). The principal business of LTRL is that of holding the
property “Lee Theatre Plaza”. As the Sincere Group was a substantial shareholder of LTRL, the transactions constituted
a connected transaction for the Company under the Listing Rules. Details of the transaction is set out in note 36(B) to
the financial statements. In the opinion of the Directors, the terms of such transaction were fair and reasonable and in
the interests of the Company and all the shareholders as a whole.
38 Hysan Development Company Limited • Annual Report 2001
CORPORATE GOVERNANCE continued
Save as disclosed therein, there were no other transactions which needed to be disclosed as connected transactions in
accordance with the requirements of the Listing Rules.
The Company also entered into certain transactions with parties regarded as “Related Parties” under applicable
accounting principles. These mainly relate to contracts entered into by the Company in the ordinary course of business,
which contracts were negotiated on normal commercial terms and on an arm’s length basis. Further details are set out in
Note 36(A) to the financial statements.
RELATIONS WITH SHAREHOLDERS
The Company values dialogue with shareholders. Further details on Group efforts in this regard are set out in the
section “Shareholder Focus, Financial Prudence and Transparency” in the Chairman’s Statement.
The Company arranges for the Annual Report and Financial Statements and related papers to be posted to shareholders
so as to allow at least 25 working days for consideration prior to the Annual General Meeting. The Board also welcomes
moves towards a more constructive use of Annual General Meetings and regards the Annual General Meeting as the
principal opportunity to meet private shareholders. Accompanying this Annual Report is the Notice of Annual General
Meeting setting out the full texts of the resolutions for the meeting and explanatory notes thereon.
Financial and other information on the Group is also made available at the Group’s website at www.hysan.com.hk.
HUMAN RESOURCES PRACTICES
The Group aims to attract, retain and motivate high calibre individuals committed to attaining our objectives. The total
number of employees as at 31 December 2001 was 516. The Group’s human resources practices are aligned with our
corporate objective so as to maximize shareholder value and achieve growth. Details on our human resources policy,
including performance measurement and reward, training and development are set out in the section “Our People” in
the Annual Report.
SOCIAL RESPONSIBILITY AND THE COMMUNITY
Further information on the Group’s community efforts is set out in “Hysan and the Community” in the Chairman’s
Statement.
By order of the Board
Wendy W. Y. Yung
Company Secretary
Hong Kong, 12 March 2002
Hysan Development Company Limited • Annual Report 2001 39
DIRECTORS’ REPORT
The Directors submit their report together with the audited financial statements for the year ended 31 December 2001,
which were approved by the Board of Directors on 12 March 2002.
PRINCIPAL ACTIVITIES
The principal activities of the Group continued throughout 2001 to be property development and investment and
investment holding. Details of the Group’s associates and subsidiaries at 31 December 2001 are set out in notes 16 and
38 respectively to the financial statements.
An analysis of Group’s turnover is set out in note 4 to the financial statements. As the Group’s turnover is derived
principally from rental income and wholly in Hong Kong, no segment financial analysis is provided. A detailed review of
the development of the business of the Group during the year, and likely future developments, is set out in the
Chairman’s Statement and the Operating and Financial Review of the Annual Report.
RESULTS AND APPROPRIATIONS
The results of the Group for the year ended 31 December 2001 are set out in the consolidated income statement on
page 45.
An interim dividend of HK$0.10 per share amounting to HK$102,833,355 was paid to shareholders during the year.
The Board of Directors recommends the payment of a final dividend of HK$0.28 per share with a scrip alternative to the
shareholders on the register of members on 14 May 2002, absorbing HK$288,764,945. The ordinary dividends paid and
proposed in respect of the full year 2001 will absorb HK$391,598,300, 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 professional valuer at 31 December 2001. The
revaluation resulted in a deficit as compared to carrying amount amounting to HK$1,972 million, which has been
charged 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 14
to the financial statements.
MAJOR PROPERTIES
Details of the major properties of the Group at 31 December 2001 are set in section under “Schedule of Principal
Properties” of the annual report.
40 Hysan Development Company Limited • Annual Report 2001
DIRECTORS’ REPORT continued
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 13 to the financial statements.
SHARE CAPITAL
The Company was authorised at the Annual General Meeting held in 2001 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 6,964,000 ordinary shares for a total consideration of
HK$64,319,631 on The Stock Exchange of Hong Kong Limited.
Save as disclosed above, neither the Company nor its subsidiaries repurchased, sold or redeemed any of the Company’s
listed securities during the year.
The Company also issued a total of 8,016,072 ordinary shares under the scrip dividend scheme accompanying year 2000
final dividends and year 2001 interim dividends. 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 a high standard of corporate governance and has complied throughout the review period
with the Code of Best Practice (the “Code of Best Practice”) as set out in the Rules Governing the Listing of Securities
on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).
Further information on the Company’s corporate governance practices is set out in the section “Corporate Governance”.
Such section sets out detailed information on (a) Board effectiveness (including workings of Audit Committee and other
Board committees); (b) Directors’ remuneration and interests (including information on Directors’ emoluments, service
contracts, interests in shares, executive share options, interests in contracts of significance and interests in competing
businesses under the Listing Rules); (c) Connected and Related Party Transactions and (d) Human Resources Practices.
THE BOARD
The Board currently comprises Peter T. C. Lee, Chairman and Managing Director, Pauline W. L. Yu Wong, Director,
Property and Michael C. K. Moy, Chief Financial Officer and Director, and ten other non-executive Directors. Sir David
Akers-Jones acts as the Independent non-executive Deputy Chairman, also chairing the two corporate governance
committees, namely the Audit Committee and Emoluments Review Committee. The biographies of the Directors appear
on pages 28 and 29.
Hysan Development Company Limited • Annual Report 2001 41
DIRECTORS’ REPORT continued
Hon Chiu Lee, the former Chairman of the Board, retired after twenty years with the Company, as from the last Annual
General Meeting held on 8 May 2001. The Honourable Lee Quo-Wei, former Deputy Chairman, also stepped down after
the last Annual General Meeting on 8 May 2001.
Under the Company’s articles of association, all Directors are subject to retirement by rotation. The three Directors who
have been longest in office as at each Annual General Meeting will retire from office and be subject to re-election. In
accordance therewith, Per Jorgensen, Deanna R. T. Y. Rudgard and Anthony H. P. Lee will retire from office at the
forthcoming Annual General Meeting and, being eligible, offer themselves for re-election. During the year, Claus
Michael Valentin Hemmingsen, Raymond Liang-ming Hu, Markus Friedrich Jebsen and V-nee Yeh served as alternate
Directors.
DIRECTORS’ RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS
The Companies Ordinance requires the Directors to prepare financial statements for each financial year which give a
true and fair view of the state of affairs of the Company and of the Group as at the end of the financial year and of their
respective profit or loss for the year then ended. In preparing the financial statements, the Directors are required to:
(a)
select suitable accounting policies and apply them on a consistent basis, making judgements and estimates that
are prudent, fair and reasonable;
(b)
state the reasons for any significant departure from accounting standards; and
(c)
prepare the financial statements on the going concern basis, unless it is not appropriate to presume that the
Company and the Group will continue in business for the foreseeable future.
The Directors are responsible for keeping proper accounting records, for safeguarding the assets of the Company and of
the Group and for taking reasonable steps for the prevention and detection of fraud and other irregularities.
SUBSTANTIAL SHAREHOLDERS
The register of substantial shareholders maintained under Section 16(1) of the Securities (Disclosure of Interests)
Ordinance shows that as at 31 December 2001, 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
429,046,912
No. of shares
These interests are in addition to those disclosed above in respect of the Directors.
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.
42 Hysan Development Company Limited • Annual Report 2001
DIRECTORS’ REPORT continued
POST BALANCE SHEET EVENT
Details of the post balance sheet event are set out in note 37 to the financial statements.
DONATIONS
During the year, the Group made donations totalling HK$1,282,650 for charitable and other purposes.
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
Peter T. C. Lee
Chairman and Managing Director
Hong Kong, 12 March 2002
Hysan Development Company Limited • Annual Report 2001 43
AUDITORS’ REPORT
香港中環干諾道中111號
永安中心26樓
TO THE SHAREHOLDERS OF HYSAN DEVELOPMENT COMPANY LIMITED
希 慎 興 業 有 限 公 司
(Incorporated in Hong Kong with limited liability)
We have audited the financial statements on pages 45 to 83 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 circumstance
of the Company and the Group, 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 assurance 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 affairs of the Company and the Group as
at 31 December 2001 and of the profit and cash flows of the Group for the year then ended and have been properly
prepared in accordance with the Companies Ordinance.
DELOITTE TOUCHE TOHMATSU
Certified Public Accountants
Hong Kong, 12 March 2002
44 Hysan Development Company Limited • Annual Report 2001
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2001
Turnover
Property expenses
Cost of property sales
Gross profit
Gain on disposal of investments in securities
Impairment loss reversed in respect of
investments in securities
Other revenue
Release of negative goodwill arising on acquisition of additional
interest in a subsidiary
Administrative expenses
Profit from operations
Finance costs
Gain on disposal of an associate
Impairment loss (arising) reversed in respect of
interests in associates
Share of results of associates
Profit before taxation
Taxation
Profit after taxation
Minority interests
Notes
4
5
8
9
2001
HK$’000
2000
HK$’000
1,355,450
(223,598)
–
1,480,246
(238,906)
(50)
1,131,852
–
1,241,290
293,842
6,225
18,557
60
(89,956)
1,066,738
(314,428)
33,531
(4,880)
(2,338)
–
29,354
–
(89,969)
1,474,517
(449,020)
–
3,419
4,210
778,623
(114,903)
1,033,126
(117,210)
663,720
(63,377)
915,916
(65,743)
Net profit for the year
10 & 29
600,343
850,173
Dividends
Earnings per share
Basic
Diluted
391,598
433,064
11
12
HK$0.58
HK$0.82
HK$0.58
HK$0.82
Hysan Development Company Limited • Annual Report 2001 45
CONSOLIDATED BALANCE SHEET
at 31 December 2001
Non-current assets
Property, plant and equipment
Investment properties
Interests in associates
Investments in securities
Negative goodwill
Staff housing loans, secured
Current assets
Cash and bank balances
Time deposits
Accounts receivable
Staff housing loans, secured – due within one year
Prepayments and deposits
Current liabilities
Long term bank loans – due within one year
Floating rate notes
Creditors and accruals
Construction costs payable
Rental deposits from tenants
Taxation payable
Unclaimed dividends
Notes
2001
HK$’000
2000
HK$’000
(restated)
13
14
16
17
18
19
20
19
25
26
21
50,158
56,632
26,638,500
28,432,700
61,324
1,754,059
(1,136)
20,936
51,384
2,297,335
–
28,898
28,523,841
30,866,949
457
26,612
9,459
2,764
59,459
3,421
48,134
7,952
2,583
19,900
98,751
81,990
139,837
1,999,547
71,380
73
248,911
100,673
2,137
815,500
–
85,907
302
268,584
59,137
2,282
2,562,558
1,231,712
Net current liabilities
(2,463,807)
(1,149,722)
Total assets less current liabilities carried forward
26,060,034
29,717,227
46 Hysan Development Company Limited • Annual Report 2001
CONSOLIDATED BALANCE SHEET continued
Notes
2001
HK$’000
2000
HK$’000
(restated)
Total assets less current liabilities brought forward
26,060,034
29,717,227
Non-current liabilities
Advances from investees
Amounts due to minority shareholders
Long term loan
Long term bank loans – due after one year
Floating rate notes
NET ASSETS
MINORITY INTERESTS
CAPITAL AND RESERVES
Share capital
Accumulated profits
Other reserves
22
23
24
25
26
27
29
30
52,571
292,765
–
3,088,634
397,047
59,482
292,765
263,754
1,890,000
2,393,739
3,831,017
4,899,740
22,229,017
962,092
24,817,487
1,339,063
21,266,925
23,478,424
5,156,516
3,580,672
5,151,256
3,436,247
12,529,737
14,890,921
21,266,925
23,478,424
The financial statements on pages 45 to 83 were approved and authorised for issue by the Board of Directors on 12
March 2002 and are signed on its behalf by:
Peter T.C. Lee
Director
David Akers-Jones
Director
Hysan Development Company Limited • Annual Report 2001 47
BALANCE SHEET
at 31 December 2001
Non-current assets
Property, plant and equipment
Investment properties
Investments in subsidiaries
Interests in associates
Investments in securities
Staff housing loans, secured
Current assets
Cash and bank balances
Time deposits
Accounts receivable
Staff housing loans, secured – due within one year
Prepayments and deposits
Dividends receivable
Current liabilities
Long term bank loans – due within one year
Creditors and accruals
Rental deposits from tenants
Amounts due to subsidiaries
Taxation payable
Unclaimed dividends
Net current liabilities
Total assets less current liabilities
Non-current liabilities
Notes
2001
HK$’000
13
14
15
16
17
19
20
19
25
21
2000
HK$’000
(restated)
8,430
3,740,000
12,395,625
3
2,831
28,898
5,735
3,500,000
12,908,172
3
2,831
20,936
16,437,677
16,175,787
1,023
925
2,416
2,764
15,289
–
22,417
139,837
27,777
27,307
7,473
6,696
2,137
211,227
3,277
20,832
3,656
2,583
13,894
107,010
151,252
815,500
37,734
24,817
69,733
6,322
2,282
956,388
(188,810)
(805,136)
16,248,867
15,370,651
Long term bank loans – due after one year
25
3,088,634
1,890,000
NET ASSETS
CAPITAL AND RESERVES
Share capital
Accumulated profits
Other reserves
13,160,233
13,480,651
27
29
30
5,156,516
3,957,698
4,046,019
5,151,256
4,077,068
4,252,327
13,160,233
13,480,651
The financial statements on pages 45 to 83 were approved and authorised for issue by the Board of Directors on 12 March
2002 and are signed on its behalf by:
Peter T.C. Lee
Director
David Akers-Jones
Director
48 Hysan Development Company Limited • Annual Report 2001
CONSOLIDATED STATEMENT OF RECOGNISED GAINS AND LOSSES
for the year ended 31 December 2001
(Loss) gain recognised on revaluation of land and buildings
(Loss) gain recognised on revaluation of investment properties
Loss recognised on revaluation of investments in other securities
Net (losses) gains not recognised in the income statement
Net profit for the year
2001
HK$’000
2000
HK$’000
(2,823)
(1,840,545)
(566,708)
2,833
3,063,851
(190,050)
(2,410,076)
600,343
2,876,634
850,173
Total net recognised (losses) gains
(1,809,733)
3,726,807
Prior year adjustment arising from the effect
of change in accounting policies
– increase in dividend reserve at 1 January 2000
309,170
Hysan Development Company Limited • Annual Report 2001 49
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2001
NET CASH INFLOW FROM OPERATING ACTIVITIES
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received
Interest paid
Dividends received from investments in securities
Dividends received from associates
Dividends paid
Dividends paid to minority shareholders of subsidiaries
Note
31
2001
HK$’000
2000
HK$’000
985,211
1,166,988
3,826
(316,019)
8,612
–
(351,429)
(63,502)
17,389
(452,121)
7,040
125
(391,179)
(62,671)
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS
AND SERVICING OF FINANCE
(718,512)
(881,417)
CASH OUTFLOW FROM TAXATION
Hong Kong Profits Tax paid
INVESTING ACTIVITIES
Additions to investment properties
Additions to property, plant and equipment
Acquisition of additional interest in a subsidiary
Net proceeds received on property sales
Net proceeds received on disposal of property, plant and equipment
Refund of cost of investment properties
Advance to an associate
Repayments from an associate
Net proceeds received on disposal of an associate
Net proceeds received on disposal of investments in other securities
Advances to investees
Construction costs paid
NET CASH (OUTFLOW) INFLOW FROM
INVESTING ACTIVITIES
(73,367)
(78,413)
(178,098)
(2,380)
(243,947)
–
–
–
(7,288)
1,601
35,929
–
(17,207)
(179)
(9,955)
(3,570)
–
400
23
110
(2,017)
24,988
–
591,170
(18,643)
(26,937)
(411,569)
555,569
NET CASH (OUTFLOW) INFLOW BEFORE FINANCING
ACTIVITIES CARRIED FORWARD
(218,237)
762,727
50 Hysan Development Company Limited • Annual Report 2001
CONSOLIDATED CASH FLOW STATEMENT continued
Note
2001
HK$’000
2000
HK$’000
NET CASH (OUTFLOW) INFLOW BEFORE FINANCING
ACTIVITIES BROUGHT FORWARD
(218,237)
762,727
FINANCING
Share issue expenses
Repurchase of own shares
Repayment of long term loan in respect of
acquisition of additional interest in a subsidiary
New unsecured bank loans
Repayment of unsecured bank loans
Repurchase of convertible bonds
(Repayment to) advances from investees
32
(31)
(64,320)
(14)
(90,887)
(263,754)
1,604,814
–
2,305,500
(1,081,843)
(2,290,000)
–
(1,115)
(923,374)
9,763
NET CASH INFLOW (OUTFLOW) FROM FINANCING
193,751
(989,012)
DECREASE IN CASH AND CASH EQUIVALENTS
(24,486)
(226,285)
CASH AND CASH EQUIVALENTS AT 1 JANUARY
51,555
277,840
CASH AND CASH EQUIVALENTS AT 31 DECEMBER
27,069
51,555
ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS
Cash and bank balances
Time deposits
457
26,612
3,421
48,134
27,069
51,555
Hysan Development Company Limited • Annual Report 2001 51
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2001
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.
ADOPTION OF STATEMENTS OF STANDARD ACCOUNTING PRACTICE / CHANGES
IN ACCOUNTING POLICIES
In the current year, the Group has adopted for the first time a number of new and revised Statements of Standard
Accounting Practice (“SSAPs”) issued by the Hong Kong Society of Accountants. Adoption of these SSAPs has led
to a number of changes in the Group’s accounting policies. The revised accounting policies are set out in note 3.
In addition, the new and revised SSAPs have introduced additional and revised disclosure requirements which
have been adopted in these financial statements. Comparative amounts for the prior year have been restated in
order to achieve a consistent presentation.
The adoption of these new and revised SSAPs has resulted in the following changes to the Group’s accounting
policies that have affected the amounts reported for the current or prior years:
Dividends proposed or declared after the balance sheet date
In accordance with SSAP 9 (Revised) “Events after the Balance Sheet Date”, dividends proposed or declared after
the balance sheet date are not recognised as a liability at the balance sheet date, but are disclosed as a separate
component of equity in the notes to the financial statements. This change in accounting policy has been applied
retrospectively, resulting in a prior year adjustment (see Note 30) as at 31 December 2000 by increasing reserves by
HK$319,377,904 (1999: HK$309,170,399) and the shareholders’ funds to HK$23,478,423,517
(1999: HK$20,526,492,023) from HK$23,159,045,613 (1999: HK$20,217,321,624).
Goodwill
In the current year, the Group has adopted SSAP 30 “Business Combinations” and has elected not to restate
goodwill (negative goodwill) previously eliminated against (credited to) reserves. Accordingly, goodwill arising on
acquisitions prior to 1 January 2001 is held in reserves and will be charged to the income statement at the time of
disposal of the relevant subsidiary or associate, or at such time as the goodwill is determined to be impaired.
Negative goodwill arising on acquisitions prior to 1 January 2001 will be credited to income at the time of disposal
of the relevant subsidiary or associate.
Goodwill arising on acquisitions on or after 1 January 2001 is capitalised and amortised over its estimated useful
life. Negative goodwill arising on acquisitions on or after 1 January 2001 is presented as a deduction from assets
and will be released to income based on an analysis of the circumstances from which the balance resulted.
3.
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.
52 Hysan Development Company Limited • Annual Report 2001
NOTES TO THE FINANCIAL STATEMENTS continued
3.
SIGNIFICANT ACCOUNTING POLICIES continued
Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the
fair value of the identifiable assets and liabilities of a subsidiary or an associate at the date of acquisition.
Goodwill arising on acquisitions on or after 1 January 2001 is capitalised and amortised on a straight line basis
over its useful life. Goodwill arising on the acquisition of an associate is included within the carrying amount of
the associate. Goodwill arising on the acquisition of subsidiaries is presented separately in the balance sheet.
Goodwill arising on acquisitions prior to 1 January 2001 continues to be held in reserves, and will be charged to
the income statement at the time of disposal of the relevant subsidiary or associate, or at such time as the goodwill
is determined to be impaired.
Negative goodwill
Negative goodwill represents the excess of the Group’s interest in the fair value of the identifiable assets and
liabilities of a subsidiary or an associate at the date of acquisition over the cost of acquisition.
Negative goodwill arising on acquisitions on or after 1 January 2001 is presented as deduction from assets and will
be released to income based on an analysis of the circumstances from which the balance resulted.
To the extent that the negative goodwill is attributable to losses or expenses anticipated at the date of acquisition,
it is released to income in the period in which those losses or expenses arise. The remaining negative goodwill is
recognised as income on a straight line basis over the remaining average useful life of the identifiable acquired
depreciable assets. To the extent that such negative goodwill exceeds the aggregate fair value of the acquired
identifiable non-monetary assets, it is recognised in income immediately.
Negative goodwill arising on the acquisition of an associate is deducted from the carrying value of that associate.
Negative goodwill arising on the acquisition of subsidiaries is presented separately in the balance sheet as a
deduction from assets.
Negative goodwill arising on acquisitions prior to 1 January 2001 continues to be held in reserves and will be
credited to income at the time of disposal of the relevant subsidiary or associate.
Investments in subsidiaries
Investments in subsidiaries are included in the Company’s balance sheet at cost less any identified impairment
loss. The results of subsidiaries are accounted for by the Company on the basis of dividends received and
receivable during the year.
Interests in associates
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 identified
impairment loss in the value of individual investments.
Investments in securities
Investments in securities are recognised on a trade date basis and are initially measured at cost.
All securities other than held-to-maturity debt 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 the 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.
Hysan Development Company Limited • Annual Report 2001 53
NOTES TO THE FINANCIAL STATEMENTS continued
3.
SIGNIFICANT ACCOUNTING POLICIES continued
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 accumulated depreciation and any accumulated
impairment losses.
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 items of property, plant and equipment over their
estimated useful lives, using the straight line method, at the following rates per annum:
Leasehold land
Buildings
Over the remaining term of the lease
Over the shorter of the term of the lease, or 40 years
Furniture, fixtures and equipment
Computers
Motor vehicles
20%
20%
25%
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sale
proceeds and the carrying amount of the asset and is recognised in the income statement.
54 Hysan Development Company Limited • Annual Report 2001
NOTES TO THE FINANCIAL STATEMENTS continued
3.
SIGNIFICANT ACCOUNTING POLICIES continued
Impairment
At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is any
indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to
be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount.
Impairment losses are recognised as an expense immediately, unless the relevant asset is carried at a revalued
amount under another SSAP, in which case the impairment loss is treated as revaluation decrease under that SSAP.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised
estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of
an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount
under another SSAP, in which case the reversal of the impairment loss is treated as a revaluation increase under
that other SSAP.
Floating rate notes issue expenses
Expenses incurred directly in connection with the issue of Floating Rate Notes are deferred and amortised on a
straight line basis over the terms of the Notes.
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 dollars 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.
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 the resulting 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 an 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
The retirement benefit costs charged in the income statement represent the contributions paid and payable in
respect of the current year to the Group’s Enhanced Mandatory Provident Fund Scheme.
Hysan Development Company Limited • Annual Report 2001 55
NOTES TO THE FINANCIAL STATEMENTS continued
3.
SIGNIFICANT ACCOUNTING POLICIES continued
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.
4.
TURNOVER
Turnover comprises:
Gross rental income from properties
Income from property sales
Management fee and security service income
2001
HK$’000
2000
HK$’000
1,351,892
1,475,941
–
3,558
400
3,905
1,355,450
1,480,246
As the Group’s turnover is derived principally from rental income and wholly in Hong Kong, no segment financial
analysis is provided.
56 Hysan Development Company Limited • Annual Report 2001
NOTES TO THE FINANCIAL STATEMENTS continued
5.
PROFIT FROM OPERATIONS
Profit from operations has been arrived at after
charging (crediting):
Staff costs
Retirement benefits scheme contributions (Note)
Forfeited contributions
Depreciation
Auditors’ remuneration
Rental income arising from operating leases less
out-goings
Dividends from
– listed investments
– unlisted investments
Gain on disposal of investments in other securities
(including HK$Nil (2000: HK$293,922,213)
previously recognised in investment revaluation reserve)
Gain on property sales
Interest income
Note:
2001
HK$’000
2000
HK$’000
107,645
4,456
(2,742)
109,359
6,029
1,636
102,208
10,050
–
112,258
5,624
1,495
(1,131,580)
(1,240,958)
(8,612)
(5,796)
–
–
(3,749)
(7,040)
(4,790)
(293,842)
(350)
(17,021)
A new enhanced MPF scheme (the “Enhanced MPF Scheme”) was established effective 1 December 2000 to replace the old defined
benefit scheme (the “Old Scheme”), which was terminated at the close of business on 30 November 2000 with all assets transferred to
the Enhanced MPF Scheme. The Group targeted to maintain broadly the same benefit 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. Retirement benefit scheme contribution in 2000 therefore
included these transfer values. 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 notes 6 and 7 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. During the year, a total of HK$2,741,993 forfeited contributions were fully
utilised to fund the Group’s contributions.
The Enhanced MPF Scheme is a defined contribution plan, offering a range of investment choice to all staff of the Group, providing
benefits based on accumulated investment returns. The Enhanced MPF Scheme covers the Group’s contributions to the plan (which
are immediately vested) are based on fixed percentages of members’ salary, ranging from 5% of MPF Relevant Income to 15% of basic
salary. Members’ mandatory contributions are fixed at 5% of MPF Relevant Income, in compliance with MPF legislation.
On 4 January 2001, the Enhanced MPF Scheme was granted a participation certificate by the Mandatory Provident Fund Schemes
Authority under Section 124(1) of the Mandatory Provident Fund Schemes (General) Regulation.
Hysan Development Company Limited • Annual Report 2001 57
NOTES TO THE FINANCIAL STATEMENTS continued
6.
DIRECTORS’ REMUNERATION
Directors’ fees
Other emoluments:
Basic salaries
Housing, other allowances and benefits in kind
Bonus paid
Retirement benefits scheme regular contributions (Note)
2001
HK$’000
2000
HK$’000
792
7,776
3,556
1,625
210
857
9,871
4,629
1,142
578
13,959
17,077
Note:
In 2000, as part of the restructuring of its retirement scheme arrangements, the Group injected funds to finance certain
transfer values. A substantial part of such transfer values, including the portion attributable to the Directors, are only vested
upon the relevant members attaining retirement. Details are set out in note 5.
The number of Directors whose remuneration/fees within the bands set out below is as follows:
HK$ 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
2001
No. of
Directors
2000
No. of
Directors
11
1
–
–
–
1
1
–
1
15
11
–
–
–
–
1
1
1
1
15
Directors’ fees paid to independent non-executive Directors during the year totalled HK$249,740 (2000: HK$170,000).
They received no other emoluments from the Company or any of its subsidiaries.
58 Hysan Development Company Limited • Annual Report 2001
NOTES TO THE FINANCIAL STATEMENTS continued
7.
EMPLOYEE COSTS
The five highest paid individuals included three (2000: four) Directors, details of whose remuneration are set out
in note 6. The remuneration of the remaining individuals is detailed as follows:
Basic salaries, housing, other allowances and benefits in kind
Bonus paid
Retirement benefits 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$2,500,000
2001
HK$’000
2000
HK$’000
3,886
369
24
4,279
2,171
84
128
2,383
2001
No. of
employees
2000
No. of
employees
–
1
1
2
–
–
1
1
Note:
In 2000, as part of the restructuring of its retirement scheme arrangements, the Group injected funds to finance certain
transfer values. A substantial part of such transfer values, including the portion attributable to the employee, are only vested
upon the employees attaining retirement. Details are set out in note 5.
8.
FINANCE COSTS
Interest on
– bank loans, overdraft and other loans:
wholly repayable within five years
not repayable within five years
– convertible bonds
– floating rate notes
Amortisation of convertible bonds and floating rate
notes issue expenses
Bank charges
Exchange loss
Medium Term Note Programme expenses
2001
HK$’000
2000
HK$’000
179,209
4,789
–
117,678
243,409
–
25,829
165,409
301,676
434,647
2,855
7,930
–
1,967
5,123
6,077
3,173
–
314,428
449,020
Hysan Development Company Limited • Annual Report 2001 59
NOTES TO THE FINANCIAL STATEMENTS continued
9.
TAXATION
The charge comprises:
Hong Kong Profits Tax
– for the year
– under(over)provision in prior years
2001
HK$’000
2000
HK$’000
114,799
104
117,212
(2)
Taxation attributable to the Company and its subsidiaries
114,903
117,210
Hong Kong Profits Tax is calculated at 16% (2000: 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 for taxation
purposes.
10. NET PROFIT FOR THE YEAR
Of the Group’s net profit for the year of HK$600,343,225 (2000: HK$850,173,491), a profit of HK$336,547,511
(2000: HK$389,246,795) has been dealt with in the financial statements of the Company.
11. DIVIDENDS
Ordinary shares:
Interim dividend, paid – HK$0.10 per share (2000: HK$0.11)
Final dividend, proposed – HK$0.28 per share (2000: HK$0.31)
2001
HK$’000
2000
HK$’000
102,833
288,765
113,686
319,378
391,598
433,064
The 2001 final dividend of HK$0.28 per share has been proposed by the directors and is subject to approval by the
shareholders in general meeting. The proposed final dividend for 2001 will be payable in cash with a scrip dividend
alternative.
During the year, scrip dividend alternatives were offered to shareholders in respect of the 2000 final and 2001
interim dividends. These alternatives were accepted by the shareholders as follows:
Dividends:
Cash
Share alternative
60 Hysan Development Company Limited • Annual Report 2001
2001
Interim
HK$’000
2000
Final
HK$’000
83,025
19,808
268,259
51,119
102,833
319,378
NOTES TO THE FINANCIAL STATEMENTS continued
12.
EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is based on the following data:
2001
2000
Earnings for the purposes of basic and diluted earnings
per share (net profit for the year)
HK$600,343,225
HK$850,173,491
Weighted average number of ordinary shares for the
purposes of basic earnings per share
1,030,485,146
1,032,763,163
Effect of dilutive potential ordinary shares:
Share options
357,639
231,730
Weighted average number of ordinary shares for the
purposes of diluted earnings per share
1,030,842,785
1,032,994,893
The computation of diluted earnings per share does not assume the exercise of certain of the Company’s
outstanding share options as the exercise prices are higher than the fair value per share.
Hysan Development Company Limited • Annual Report 2001 61
NOTES TO THE FINANCIAL STATEMENTS continued
13.
PROPERTY, PLANT AND EQUIPMENT
Land and
buildings in
Hong Kong
under long lease
HK$’000
Furniture,
fixtures and
equipment
HK$’000
Computers
HK$’000
Motor
vehicles
HK$’000
Total
HK$’000
THE GROUP
COST OR VALUATION
At 1 January 2001
Additions
Disposals
Deficit on revaluation
46,000
–
–
(3,500)
38,153
1,846
–
–
4,799
1,611
532
(51)
–
–
–
–
90,563
2,378
(51)
(3,500)
At 31 December 2001
42,500
39,999
5,280
1,611
89,390
Comprising:
At cost
At valuation 2001
ACCUMULATED
DEPRECIATION
At 1 January 2001
Provided for the year
Eliminated on disposals
Adjustment on revaluation
–
39,999
42,500
–
5,280
–
1,611
–
46,890
42,500
42,500
39,999
5,280
1,611
89,390
–
677
–
(677)
30,620
4,166
–
–
1,994
892
(51)
–
1,317
294
–
–
33,931
6,029
(51)
(677)
At 31 December 2001
–
34,786
2,835
1,611
39,232
NET BOOK VALUES
At 3l December 2001
42,500
5,213
2,445
–
50,158
At 3l December 2000
46,000
7,533
2,805
294
56,632
62 Hysan Development Company Limited • Annual Report 2001
NOTES TO THE FINANCIAL STATEMENTS continued
13.
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 2001
Additions
Disposals
18,637
1,120
–
4,785
532
(51)
1,611
–
–
25,033
1,652
(51)
At 31 December 2001
19,757
5,266
1,611
26,634
ACCUMULATED
DEPRECIATION
At 1 January 2001
Provided for the year
Eliminated on disposals
13,293
3,164
–
1,993
889
(51)
At 31 December 2001
16,457
2,831
NET BOOK VALUES
At 31 December 2001
At 31 December 2000
3,300
5,344
2,435
2,792
1,317
294
–
1,611
–
294
16,603
4,347
(51)
20,899
5,735
8,430
The leasehold land and buildings of the Group were revalued at 31 December 2001 by Messrs. Knight Frank, an
independent professional valuer, on an open market value basis. The deficit arising on revaluation has been
charged 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$34,084,593 (2000: HK$34,609,137).
Furniture, fixtures and equipment of the Group and the Company include assets carried at cost of HK$20,512,083
(2000: HK$19,817,086) and HK$846,317 (2000: HK$844,238) respectively and accumulated depreciation of
HK$18,692,470 (2000: HK$17,747,881) and HK$804,179 (2000: HK$782,827) respectively in respect of assets held
for use under operating leases. Depreciation charges in respect of those assets for the year amounted to
HK$944,589 (2000: HK$1,123,087) and HK$21,352 (2000: HK$29,460) respectively.
Hysan Development Company Limited • Annual Report 2001 63
NOTES TO THE FINANCIAL STATEMENTS continued
14.
INVESTMENT PROPERTIES
At 1 January
Additions
Adjustment resulted from cost
variation
Refund of cost
Disposals
(Deficit) surplus on revaluation
THE GROUP
2001
HK$’000
2000
HK$’000
THE COMPANY
2001
HK$’000
2000
HK$’000
28,432,700
178,098
25,173,000
9,955
3,740,000
1,331
3,250,000
1,263
(50)
–
–
(1,972,248)
(3,229)
(110)
(300)
3,253,384
–
–
–
(241,331)
–
–
–
488,737
At 31 December
26,638,500
28,432,700
3,500,000
3,740,000
The value of investment properties comprises:
Land in Hong Kong:
– Medium term lease
– Long lease
THE GROUP
2001
HK$’000
2000
HK$’000
THE COMPANY
2001
HK$’000
2000
HK$’000
4,300,000
22,338,500
4,600,000
23,832,700
–
3,500,000
–
3,740,000
26,638,500
28,432,700
3,500,000
3,740,000
The investment properties of the Group and the Company were revalued at 31 December 2001 by Messrs. Knight
Frank, an independent professional valuer, on an open market value basis. The deficit arising on revaluation has
been charged to investment property revaluation reserve.
All of the investment properties of the Group and the Company are held for use under operating leases.
15.
INVESTMENTS IN SUBSIDIARIES
Unlisted shares, at cost
Amounts due therefrom
Less: Impairment loss
THE COMPANY
2001
HK$’000
2000
HK$’000
5
13,312,167
5
12,799,620
13,312,172
(404,000)
12,799,625
(404,000)
12,908,172
12,395,625
The Directors consider that the unlisted investments are worth at least their cost.
Details of the principal subsidiaries held by the Company at 31 December 2001 are set out in note 38.
64 Hysan Development Company Limited • Annual Report 2001
16.
INTERESTS IN ASSOCIATES
Unlisted shares, at cost
Share of net liabilities
Amounts due therefrom
Less: Impairment loss
NOTES TO THE FINANCIAL STATEMENTS continued
THE GROUP
2001
HK$’000
2000
HK$’000
THE COMPANY
2001
HK$’000
2000
HK$’000
–
–
(77,164)
(91,495)
(77,164)
149,786
72,622
(11,298)
(91,495)
345,878
254,383
(202,999)
61,324
51,384
3
–
3
–
3
–
3
3
–
3
–
3
–
3
The aggregate attributable share of results of the associates is based on the unaudited management accounts of
Parallel Asia Engineering Company Limited and Wingrove Investment Pte Limited for the year ended 31
December 2001.
Details of the Group’s associates at 31 December 2001 are as follows:
Form of
business
structure
Place of
incorporation
and
operation
Class of
share held
Proportion of
nominal value
of issued share capital
held by the Company
directly
indirectly
Incorporated
Hong Kong
Ordinary
–
25%
Name of associate
Parallel Asia Engineering
Company Limited
Wingrove Investment
Incorporated
Singapore
Ordinary
25%
–
Pte Limited
Principal activity
Investment
holding
Property
development
Hysan Development Company Limited • Annual Report 2001 65
NOTES TO THE FINANCIAL STATEMENTS continued
17.
INVESTMENTS IN SECURITIES
THE GROUP
Equity securities:
Listed in Hong Kong
Other investments:
Club debentures
Unlisted shares
Amounts due therefrom
Less: Impairment losses
Other securities
2001
HK$’000
2000
HK$’000
1,057,222
1,623,930
2,831
2,831
136,856
685,483
136,856
668,276
822,339
(128,333)
805,132
(134,558)
694,006
670,574
696,837
673,405
1,754,059
2,297,335
Market value of securities listed in Hong Kong
1,057,222
1,623,930
Carrying amount analysed for reporting purposes as:
Non-current
THE COMPANY
Other investments:
Club debentures
Carrying amount analysed for reporting purpose as:
Non-current
1,754,059
2,297,335
Other securities
2001
HK$’000
2000
HK$’000
2,831
2,831
2,831
2,831
66 Hysan Development Company Limited • Annual Report 2001
NOTES TO THE FINANCIAL STATEMENTS continued
18. NEGATIVE GOODWILL
Negative goodwill arising on acquisition of additional interest
in a subsidiary during the year and balance at 31 December 2001
Released to income during the year and balance at 31 December 2001
Carrying amount at 31 December 2001
THE GROUP
2001
HK$’000
1,196
(60)
1,136
The negative goodwill which arose on the Group’s acquisition of additional interest in a subsidiary is released to
income on a straight line basis over a period of twenty years.
19.
STAFF HOUSING LOANS, SECURED
Staff housing loans, secured
Less: Amounts due within one year shown under current assets
THE GROUP
AND THE COMPANY
2001
HK$’000
2000
HK$’000
23,700
(2,764)
31,481
(2,583)
20,936
28,898
The secured advances arise in connection with an established Staff Housing Loan scheme granted to the employees
who meet the qualifying criteria. The advances bear a fixed interest rate of 4% per annum.
20. 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 2001 and 2000 were aged less than 90 days.
21. CREDITORS AND ACCRUALS
All of the trade payables of the Group as at 31 December 2001 and 2000 were aged less than 90 days.
22. ADVANCES FROM INVESTEES
The advances are unsecured, interest free and are not repayable within one year.
Hysan Development Company Limited • Annual Report 2001 67
NOTES TO THE FINANCIAL STATEMENTS continued
23. AMOUNTS DUE TO MINORITY SHAREHOLDERS
The amounts are unsecured, interest free and are not repayable within one year.
24.
LONG TERM LOAN
The amount was due to the ultimate holding company of a minority shareholder of a subsidiary and was
unsecured, bore interest at the rate of 1.5% per annum over HIBOR and was not repayable within one year.
25.
LONG TERM BANK LOANS
THE GROUP
AND THE COMPANY
2001
HK$’000
2000
HK$’000
Bank loans, unsecured
3,228,471
2,705,500
The bank loans are repayable as follows:
Within one year
More than one year, but not exceeding two years
More than two years, but not exceeding five years
More than five years
Less: Amounts due within one year shown under current liabilities
139,837
435,500
2,172,634
480,500
815,500
150,000
1,740,000
–
3,228,471
(139,837)
2,705,500
(815,500)
3,088,634
1,890,000
68 Hysan Development Company Limited • Annual Report 2001
NOTES TO THE FINANCIAL STATEMENTS continued
26.
FLOATING RATE NOTES
Floating rate notes
Less: Unamortised notes issue expenses
Less: Amount due within one year shown under current liabilities
THE GROUP
2001
HK$’000
2000
HK$’000
2,400,000
2,400,000
(3,406)
(6,261)
2,396,594
(1,999,547)
2,393,739
–
397,047
2,393,739
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.
Hysan Development Company Limited • Annual Report 2001 69
NOTES TO THE FINANCIAL STATEMENTS continued
27.
SHARE CAPITAL
Ordinary shares of HK$5 each
Authorised:
At 1 January and 31 December
Issued and fully paid:
At 1 January
Issued pursuant to scrip dividend scheme
Shares repurchased and cancelled
THE COMPANY
2001
HK$’000
2000
HK$’000
7,250,000
7,250,000
5,151,256
5,183,810
40,080
(34,820)
18,481
(51,035)
At 31 December
5,156,516
5,151,256
During the year, the Company repurchased its own shares through the Hong Kong Stock Exchange as follows:
Month of
repurchase
June
July
September
No. of
ordinary
shares of
HK$5 each
3,381,000
2,033,000
1,550,000
Price per share
Highest
HK$
10.35
10.05
7.65
Lowest
HK$
9.75
8.95
7.15
Aggregate
consideration
paid
HK$
33,810,136
18,849,934
11,659,561
The above shares were cancelled upon repurchase.
70 Hysan Development Company Limited • Annual Report 2001
NOTES TO THE FINANCIAL STATEMENTS continued
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 2001, the Company had outstanding options granted to qualifying employees (including
Directors) of the Company and its wholly-owned subsidiaries to subscribe for shares of the Company as follows:
Date of grant
3 May 1995
7 January 1999
23 December 1999
Exercise
price per
share
HK$
Exercise period
13.46
9.22
7.54
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
900,000
1,350,000
1,200,000
3,450,000
The consideration paid on each grant of options was HK$1.00. During the year, certain granted options to
subscribe for 1,125,000 shares of the Company lapsed on resignation of the grantee.
The maximum number of Shares in respect of which options may be granted under the Executive Share Option
Scheme (together with the Shares issued and issuable under the Executive Share Option Scheme) by the Company
to or for the benefit of employees may not exceed in nominal value three percent of the issued share capital of the
Company (excluding Shares issued pursuant to the Executive Share Option Scheme) from time to time.
29. ACCUMULATED PROFITS
THE GROUP
2001
HK$’000
2000
HK$’000
THE COMPANY
2001
HK$’000
2000
HK$’000
At 1 January
3,436,247
3,110,025
4,077,068
4,211,773
Share repurchased and cancelled:
– Nominal value of share repurchased
– Premium on shares repurchased
– Share repurchase expenses
Net profit for the year
(34,820)
(29,500)
–
600,343
(51,035)
(39,836)
(16)
850,173
(34,820)
(29,500)
–
336,548
(51,035)
(39,836)
(16)
389,246
Profit available for distribution
Dividends
3,972,270
(391,598)
3,869,311
(433,064)
4,349,296
(391,598)
4,510,132
(433,064)
At 31 December
3,580,672
3,436,247
3,957,698
4,077,068
The accumulated profits of the Group include accumulated losses of HK$88,130,335 (2000: HK$85,792,248)
attributable to associates of the Group.
The distributable reserves of the Company as at 31 December 2001 amounted to HK$4,057,697,703
(2000: HK$4,177,068,123), being its accumulated profits and general reserve at that date.
Hysan Development Company Limited • Annual Report 2001 71
NOTES TO THE FINANCIAL STATEMENTS continued
30. OTHER RESERVES
THE GROUP
At 1 January 2000
– as original stated
– prior year adjustment, derecognition of
liability for final dividend for 1999
– as restated
Premium on issue of shares pursuant to
scrip dividend scheme
Share issue expenses
Shares repurchased and cancelled
Unrealised loss on investments in other
securities
Recognition of unrealised gain on disposal
of investments in other securities
transferred to income statement
Surplus on revaluation of investment properties
Surplus on revaluation of land and buildings
Surplus on revaluation of investment
properties shared by minority shareholders
Share of reserve of an associate
Realisation on disposal of investment
properties transferred to income statement
Final dividend for 1999 paid
Amount set aside for 2000 dividend
Interim dividend for 2000 paid
At 31 December 2000
Premium on issue of shares pursuant to
scrip dividend scheme
Share issue expenses
Shares repurchased and cancelled
Unrealised loss on investments in other securities
Deficit on revaluation of investment properties
Deficit on revaluation of land and buildings
Deficit on revaluation of investment
properties shared by minority shareholders
Reversed on disposal of an associate
Final dividend for 2000 paid
Amount set aside for 2001 dividend
Interim dividend for 2001 paid
Share
premium
account
HK$’000
Investment
property
revaluation
reserve
HK$’000
Investment
revaluation
reserve
HK$’000
1,258,363
8,345,106
1,654,177
–
–
–
1,258,363
8,345,106
1,654,177
14,189
(14)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,253,384
–
(189,533)
–
(250)
–
–
–
–
–
–
(190,050)
(293,922)
–
–
–
–
–
–
–
–
1,272,538
11,408,707
1,170,205
30,847
(31)
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,972,248)
–
131,703
–
–
–
–
–
–
–
(566,708)
–
–
–
–
–
–
–
At 31 December 2001
1,303,354
9,568,162
603,497
72 Hysan Development Company Limited • Annual Report 2001
NOTES TO THE FINANCIAL STATEMENTS continued
Asset
revaluation
reserve
HK$’000
Capital
reserve
HK$’000
Translation
reserve
HK$’000
Capital
redemption
reserve
HK$’000
General
reserve
HK$’000
Dividend
reserve
HK$’000
Total
HK$’000
8,719
500,718
(12,736)
69,140
100,000
–
11,923,487
–
–
–
–
–
309,170
309,170
8,719
500,718
(12,736)
69,140
100,000
309,170
12,232,657
–
–
–
–
–
–
2,833
–
–
–
–
–
–
–
–
–
–
–
–
–
–
384
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
51,035
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(309,170)
433,064
(113,686)
14,189
(14)
51,035
(190,050)
(293,922)
3,253,384
2,833
(189,533)
384
(250)
(309,170)
433,064
(113,686)
11,552
501,102
(12,736)
120,175
100,000
319,378
14,890,921
–
–
–
–
–
(2,823)
–
–
–
–
–
–
–
–
–
–
–
–
1,133
–
–
–
–
–
–
–
–
–
–
12,736
–
–
–
–
–
34,820
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(319,378)
391,598
(102,833)
30,847
(31)
34,820
(566,708)
(1,972,248)
(2,823)
131,703
13,869
(319,378)
391,598
(102,833)
8,729
502,235
–
154,995
100,000
288,765
12,529,737
Hysan Development Company Limited • Annual Report 2001 73
NOTES TO THE FINANCIAL STATEMENTS continued
30. OTHER RESERVES continued
Share
premium
account
HK$’000
Investment
property
revaluation
reserve
HK$’000
Capital
redemption
reserve
HK$’000
General
reserve
HK$’000
Dividend
reserve
HK$’000
Total
HK$’000
THE COMPANY
At 1 January 2000
– as original stated
1,258,363
1,951,499
69,140
100,000
–
3,379,002
– prior year adjustment,
derecognition of
liability for final
dividend for 1999
–
–
–
–
309,170
309,170
– as restated
1,258,363
1,951,499
69,140
100,000
309,170
3,688,172
Premium on issue of
shares pursuant to
scrip dividend scheme
Share issue expenses
Surplus on revaluation of
investment properties
Shares repurchased and
cancelled
Final dividend for 1999 paid
Amount set aside for
2000 dividend
Interim dividend for
2000 paid
14,189
(14)
–
–
–
–
–
–
–
488,737
–
–
–
–
–
–
–
51,035
–
–
–
–
–
–
–
–
–
–
–
–
–
–
14,189
(14)
488,737
51,035
(309,170)
(309,170)
433,064
433,064
(113,686)
(113,686)
At 31 December 2000
1,272,538
2,440,236
120,175
100,000
319,378
4,252,327
Premium on issue of
shares pursuant to
scrip dividend scheme
Share issue expenses
Deficit on revaluation
of investment properties
Shares repurchased and
cancelled
Final dividend for 2000 paid
Amount set aside for
2001 dividend
Interim dividend for
2001 paid
30,847
(31)
–
–
–
–
–
–
–
(241,331)
–
–
–
–
–
–
–
34,820
–
–
–
–
–
–
–
–
–
–
–
–
–
–
30,847
(31)
(241,331)
34,820
(319,378)
(319,378)
391,598
391,598
(102,833)
(102,833)
At 31 December 2001
1,303,354
2,198,905
154,995
100,000
288,765
4,046,019
74 Hysan Development Company Limited • Annual Report 2001
NOTES TO THE FINANCIAL STATEMENTS continued
30. OTHER RESERVES continued
(a)
Included in the above are the following Group’s share of post-acquisition reserves of the associates:
At 1 January 2001
Change during the year
Capital
reserve
HK$’000
2,130
(2,130)
Translation
reserve
HK$’000
(12,736)
12,736
Total
HK$’000
(10,606)
10,606
At 31 December 2001
–
–
–
(b) General reserve
General reserve was set up from the transfer of accumulated profits.
(c) Capital reserve
Capital reserve comprises negative goodwill of HK$516,142,884 (2000: HK$516,142,884) arising from
acquisition of subsidiaries prior to 1 January 2001 and capitalisation issue of a subsidiary.
31. RECONCILIATION OF PROFIT BEFORE TAXATION TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
2001
HK$’000
2000
HK$’000
778,623
1,033,126
Profit before taxation
Impairment loss arising (reversed) in respect of interests in associates
Impairment loss reversed in respect of investments in securities
Share of results of associates
Net interest expenses
Dividend income
Depreciation
Gain on property sales
Gain on disposal of an associate
Gain on disposal of investments in other securities
Gain on disposal of property, plant and equipment
Gain on repurchase of convertible bonds
Exchange loss on advances from investees
4,880
(6,225)
2,338
297,927
(14,408)
6,029
–
(33,531)
–
–
–
–
Amortisation of convertible bonds and floating rate notes issue expenses
2,855
Release of negative goodwill arising on acquisition of additional interest
in a subsidiary
(Increase) decrease in accounts receivable, prepayments and deposits
Decrease in staff housing loans, secured
Decrease in rental deposits from tenants, creditors and accruals
(60)
(41,142)
7,781
(19,856)
(3,419)
–
(4,210)
417,626
(11,830)
5,624
(350)
–
(293,842)
(20)
(2)
3,193
5,123
–
2,513
25,802
(12,346)
Net cash inflow from operating activities
985,211
1,166,988
Hysan Development Company Limited • Annual Report 2001 75
NOTES TO THE FINANCIAL STATEMENTS continued
32. ANALYSIS OF CHANGES IN FINANCING DURING THE YEAR
At 1 January 2000
Share issue expenses
Repurchase of own shares
New unsecured bank loans
Repayment of unsecured bank loans
Repurchase of convertible bonds
Advances from investees
Share capital
and share
premium
HK$’000
Bank loans,
other loans
and other
financing
HK$’000
6,442,173
6,609,827
(14)
(90,887)
–
–
–
–
–
–
2,305,500
(2,290,000)
(923,374)
9,763
Net cash outflow from financing
(90,901)
(898,111)
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
–
–
39,852
–
–
32,670
72,522
3,193
(4,790)
–
(2)
5,123
–
3,524
At 31 December 2000 and 1 January 2001
6,423,794
5,715,240
Share issue expenses
Repurchase of own shares
New unsecured bank loans
Repayment of unsecured bank loans
Repayment of long term loan in respect of acquisition
of additional interest in a subsidiary
Repayment of advances from investees
(31)
(64,320)
–
–
–
–
–
–
1,604,814
(1,081,843)
(263,754)
(1,115)
Net cash (outflow) inflow from financing
(64,351)
258,102
Dividend income from investees
Premium on share repurchase
Amortisation of convertible bonds and floating rate notes issue expenses
Issue of shares pursuant to scrip dividend scheme
for 2000 final and 2001 interim dividends
At 31 December 2001
–
29,500
–
70,927
(5,796)
–
2,855
–
100,427
(2,941)
6,459,870
5,970,401
76 Hysan Development Company Limited • Annual Report 2001
NOTES TO THE FINANCIAL STATEMENTS continued
33. CONTINGENT LIABILITIES
As at 31 December 2001, there were contingent liabilities in respect of the following:
THE GROUP
2001
Million
2000
Million
THE COMPANY
2001
Million
2000
Million
Corporate guarantee to a third party
in respect of the sale of the interest
in an associate
HK$3.6
Corporate guarantee to subsidiaries
for issue of floating rate notes
–
Share of counter guarantees given to
partners of property development
–
–
HK$3.6
–
HK$2,400.0
HK$2,400.0
projects
S$18.6
S$18.6
–
–
Guarantees to bankers to provide
finance to
– An associate
– A property development project
34. CAPITAL COMMITMENTS
S$12.0
S$22.0
S$12.0
S$22.0
S$12.0
S$22.0
S$12.0
S$22.0
As at 31 December 2001, there were capital commitments as follows:
THE GROUP
2000
HK$ (Million) HK$ (Million) HK$ (Million) HK$ (Million)
2001
2000
THE COMPANY
2001
Uncalled share of shareholders’
loan for property development
projects
Contracted for but not provided in
the financial statements:
20.2
34.0
– Acquisition of investment properties
– Building refurbishment
18.5
52.4
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 2001, it is estimated that the pre-sales proceeds for these two projects are sufficient to fund the
construction costs. Accordingly, the Group’s maximum funding requirements for these two projects of
approximately HK$88 million (2000: HK$98 million) is expected not to be required.
Hysan Development Company Limited • Annual Report 2001 77
NOTES TO THE FINANCIAL STATEMENTS continued
35.
LEASE COMMITMENTS
The Group and the Company as lessee
As at 31 December 2001, the Group and the Company had commitments for future minimum lease payments
under non-cancellable operating leases which fall due as follows:
Within one year
In the second to fifth year inclusive
THE GROUP
2001
HK$’000
2000
HK$’000
THE COMPANY
2001
HK$’000
2000
HK$’000
–
–
–
–
–
–
11,916
5,608
12,850
17,523
17,524
30,373
Operating lease payments represent rental payable by the Company for its staff quarters and office premises.
The Group and the Company as lessor
At the balance sheet date, the Group and the Company had contracted with tenants for the following future
minimum lease payments:
THE GROUP
2001
HK$’000
2000
HK$’000
THE COMPANY
2001
HK$’000
2000
HK$’000
Within one year
In the second to fifth year inclusive
After five years
894,372
1,240,792
313,466
1,050,360
1,518,592
345,484
131,887
105,997
16,509
143,248
187,588
5,523
2,448,630
2,914,436
254,393
336,359
78 Hysan Development Company Limited • Annual Report 2001
NOTES TO THE FINANCIAL STATEMENTS continued
36. RELATED PARTY AND CONNECTED TRANSACTIONS
A.
Related party transactions
During the year, the Group has the following transactions with related parties:
Substantial
shareholder
Senior
management
executives
Directors
Notes
2001
HK$’000
2000
HK$’000
2001
HK$’000
2000
HK$’000
2001
HK$’000
2000
HK$’000
(a)
(b)
(c)
–
–
–
–
6,167
5,936
Interest income from
staff housing loans
Repairs and maintenance
expenses paid to
Gross rental income from
Construction cost paid
during the year for
investment properties
completed in previous
years
(d)
–
–
–
–
–
–
134
–
–
–
–
21,070
20,806
46,054
56,357
–
179
8,817
As at 31 December 2001, the Group has the following balances with related parties:
Substantial
shareholder
Senior
management
executives
Directors
Notes
2001
HK$’000
2000
HK$’000
2001
HK$’000
2000
HK$’000
2001
HK$’000
2000
HK$’000
Amount due to a
minority shareholder
(a)
Construction cost payable to
(d)
–
–
–
–
–
–
–
–
84,486
84,486
–
179
Hysan Development Company Limited • Annual Report 2001 79
NOTES TO THE FINANCIAL STATEMENTS continued
36. RELATED PARTY AND CONNECTED TRANSACTIONS continued
A.
Related party transactions continued
Notes:
(a)
The details of the terms of staff housing loans and amount due to a minority shareholder are set out in
notes 19 and 23 respectively.
(b)
Such expenses were incurred in connection with the repair and maintenance charges for lift, electrical
installation and gondola services.
(i)
In relation to the lift and electrical installation services, F. K. Hu (and his alternate, Raymond L.
M. Hu) are directors of Ryoden Lift Services Limited (“RLS”) and Ryoden Engineering
Contracting Company Limited (“REC”) and have an indirect equity interests in RLS and REC.
RLS and REC entered into a number of lift maintenance contracts and electrical installation
maintenance and repair contracts respectively with a subsidiary of the Company.
(ii)
In relation to the gondola maintenance services, Hans M. Jebsen is a director and shareholder of
Jebsen and Company Limited which entered into a number of gondola maintenance contracts
with a number of the Company’s subsidiaries.
These 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) Geoffrey M. T. Yeh (and his alternate, V-nee Yeh) are substantial shareholders and directors of Hsin
Chong Construction Group Limited whose associate entered into a MVAC/BAS contract with a
subsidiary of the Company relating to the construction of The Lee Gardens. The contract has now been
completed, with the relevant sum being the amount fully paid under the contract during the current
year. Such transaction was entered into on normal commercial terms and on arm’s length basis.
80 Hysan Development Company Limited • Annual Report 2001
NOTES TO THE FINANCIAL STATEMENTS continued
36. RELATED PARTY AND CONNECTED TRANSACTIONS continued
B.
Connected transaction
Under an agreement entered into on 20 August 2001, a wholly-owned subsidiary of the Company agreed to
purchase (“Acquisitions”) (i) from Sincere B.V.I. Limited (“Share Vendor”) the remaining 30% interests,
representing 3 fully paid “B” ordinary shares of HK$1.00 each, in its subsidiary Lee Theatre Realty Limited
(“LTRL”); and (ii) from The Sincere Company Limited (“Loan Vendor”) its total outstanding shareholder’s
loan to LTRL. LTRL’s principal business is that of a holding vehicle for a property, known as “Lee Theatre
Plaza” (“the Property”).
As the Share Vendor was a substantial shareholder of LTRL, and the Loan Vendor was the holding company
of the Share Vendor, the Acquisitions constituted a connected transaction for the Company under the
Listing Rules. A press notice regarding the Acquisitions was made on 20 August 2001 pursuant to the Listing
Rules.
The total consideration for the Acquisitions, arrived at after arm’s length negotiations, was the sum of
HK$516,000,000, representing 30% of the value of the Property determined pursuant to the independent
valuation, less 30% of the audited net current liabilities as at the completion. The transaction was completed
on 15 September 2001.
37.
POST BALANCE SHEET EVENT
Subsequent to 31 December 2001, Hysan (MTN) Limited, a wholly-owned subsidiary of the Company, issued
US$200 million Medium Term Notes. The notes are guaranteed as to principal and interest by the Company
bearing interest at 7% and are repayable in full in 2012.
Hysan Development Company Limited • Annual Report 2001 81
NOTES TO THE FINANCIAL STATEMENTS continued
38.
PRINCIPAL SUBSIDIARIES AT 31 DECEMBER 2001
Name of subsidiary
Admore Investments Limited
Golden Capital Investment Limited
HD Finance (BVI) Limited
HD Treasury (BVI) Limited
HD Treasury Limited
HD Treasury Management Limited
Hysan China Holdings Limited
Hysan Treasury Limited
Hysan (MTN) Limited
Hysan Project Management (PRC) Limited
Hysan Property Management Limited
Kwong Hup Holding Limited
Kwong Wan Realty Limited
Minsal Limited
Mondsee Limited
Stangard Limited
Teamfine Enterprises Limited
Tohon Development Limited
Bamboo Grove Recreational Services Limited
HD Investment Limited
Jarrow Properties Limited
Kochi Investments Limited
Lee Theatre Realty Limited
Leighton Property Company Limited
Main Rise Development Limited
OHA Property Company Limited
Perfect Win Properties Limited
Profit Team Investment Limited
Silver Nicety Company Limited
South Eagle Investments Limited
Barrowgate Limited
Place of
incorporation
Hong Kong
Hong Kong
Place of
operation
Hong Kong
Hong Kong
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
Hong Kong
Hong Kong
Hong Kong
Hong Kong
British Virgin Islands
British Virgin Islands
Hong Kong
British Virgin Islands
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
British Virgin Islands
British Virgin Islands
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
British Virgin Islands
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
British Virgin Islands
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
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.
82 Hysan Development Company Limited • Annual Report 2001
Proportion of
nominal value
of issued share capital
held by the Company
indirectly
directly
Class of
share held
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Issued
share
capital
HK$2
HK$2
HK$1
HK$1
HK$2
HK$2
HK$1
HK$2
US$1
HK$2
HK$2
HK$1
HK$1,000
HK$2
HK$2
HK$300,000
HK$2
HK$2
HK$2
HK$1
HK$1
HK$1
HK$10
HK$2
HK$2
HK$2
HK$2
HK$2
HK$20
US$1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
HK$10,000
65.36%
NOTES TO THE FINANCIAL STATEMENTS continued
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
–
–
–
–
–
–
–
–
–
–
–
–
Principal activities
Investment holding
Investment holding
Treasury operation
Treasury operation
Treasury operation
Treasury operation
Investment holding
Treasury operation
Treasury operation
Project management
Property management
Investment holding
Property investment
Property investment
Property investment
Provision of security services
Investment holding
Property investment
Resident club management
Investment holding
Investment holding
Capital market investment
Property investment
Property investment
Investment holding
Property investment
Property investment
Investment holding
Property investment
Property investment
Property investment
Hysan Development Company Limited • Annual Report 2001 83
FIVE-YEAR FINANCIAL SUMMARY
1997
HK$’000
(Note 3)
1998
HK$’000
(Note 3)
1999
HK$’000
2000
HK$’000
2001
HK$’000
CONSOLIDATED INCOME STATEMENT
Turnover
2,011,817
3,590,656
2,295,717
1,480,246
1,355,450
Profit from operations
Finance cost
Gain on disposal of an associate
Impairment loss (arising) reversed in
respect of interests in associates
2,169,169
2,773,264
1,994,930
1,474,517
1,066,738
(759,261)
(1,251,944)
(526,819)
(449,020)
(314,428)
–
–
–
–
–
33,531
(108,000)
(75,702)
(98,418)
(4,284)
3,419
4,210
(4,880)
(2,338)
Share of results of associates
34,095
Profit before taxation
Taxation
Profit after taxation
Minority interests
1,444,003
1,337,618
1,365,409
1,033,126
778,623
(162,327)
(111,550)
(86,795)
(117,210)
(114,903)
1,281,676
1,226,068
1,278,614
(103,385)
(86,797)
(74,656)
915,916
(65,743)
663,720
(63,377)
Net profit for the year
1,178,291
1,139,271
1,203,958
850,173
600,343
Dividends
1,003,937
381,099
412,795
433,064
391,598
Earnings per share
– Basic
HK$1.14
HK$1.11
HK$1.16
HK$0.82
HK$0.58
– Diluted
HK$1.14
N/A
HK$1.16
HK$0.82
HK$0.58
84 Hysan Development Company Limited • Annual Report 2001
FIVE-YEAR FINANCIAL SUMMARY continued
1997
HK$’000
(Note 3)
1998
HK$’000
(Note 3)
1999
HK$’000
2000
HK$’000
2001
HK$’000
CONSOLIDATED BALANCE SHEET
Property, plant and equipment
23,936
56,060
56,443
56,632
50,158
Investment properties
Interests in associates
Investments in securities
Negative goodwill
43,886,000
25,949,000
25,173,000
28,432,700
26,638,500
418,038
241,487
66,467
51,384
61,324
2,076,193
1,847,563
2,468,742
2,297,335
1,754,059
–
–
–
–
(1,136)
20,936
Staff housing loans, secured
41,350
53,201
43,151
28,898
Net current liabilities (Note 2)
(2,825,706)
(615,596)
(1,476,134)
(1,149,722)
(2,463,807)
43,619,811
27,531,715
26,331,669
29,717,227
26,060,034
Advances from investees
Amounts due to minority shareholders
Long term loan
Long term bank loans
Convertible bonds
Floating rate notes
135,114
292,765
263,754
140,520
292,765
263,754
51,316
292,765
263,754
59,482
292,765
263,754
52,571
292,765
–
2,614,746
3,796,000
1,660,000
1,890,000
3,088,634
1,273,456
1,108,239
–
–
–
1,992,293
1,994,107
2,390,884
2,393,739
397,047
6,572,128
7,595,385
4,658,719
4,899,740
3,831,017
Net assets
37,047,683
19,936,330
21,672,950
24,817,487
22,229,017
Minority interests
2,350,412
1,169,607
1,146,458
1,339,063
962,092
34,697,271
18,766,723
20,526,492
23,478,424
21,266,925
Share capital
Reserves (Note 2)
5,146,629
5,158,136
5,183,810
5,151,256
5,156,516
29,550,642
13,608,587
15,342,682
18,327,168
16,110,409
Shareholders’ funds
34,697,271
18,766,723
20,526,492
23,478,424
21,266,925
Notes:
(1)
(2)
(3)
Prior years’ figures have been reclassified to conform with the current year’s presentation.
Figures for all periods have been adjusted to reflect the change in accounting policy for the adoption of SSAP9 (Revised).
Figures for 1998 have been adjusted to reflect the change in accounting policy for the adoption of SSAP 24.
Figures for 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.
Hysan Development Company Limited • Annual Report 2001 85
NOTICE OF ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN THAT the Annual General Meeting of the Members of Hysan Development Company
Limited 希 慎 興 業 有 限 公 司 (“the Company”) will be held in the Nathan Room, Lower Lobby, Conrad International
Hong Kong, Pacific Place, 88 Queensway, Hong Kong on Tuesday, 14 May 2002 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 2001 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 20% 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 Members 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).”
86 Hysan Development Company Limited • Annual Report 2001
NOTICE OF ANNUAL GENERAL MEETING continued
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 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 10% 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 Members 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
Company Secretary
Hong Kong, 12 March 2002
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, 10 May 2002 to Tuesday, 14 May 2002, 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, 9 May 2002.
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.
Hysan Development Company Limited • Annual Report 2001 87
Notes
88 Hysan Development Company Limited • Annual Report 2001
SHAREHOLDER INFORMATION
FINANCIAL CALENDAR 2002
Full year results announced
Ex-dividend date for final dividend
Share registers closed
Annual General Meeting
Record date for final dividend
Despatch of scrip dividend circular and election form
Despatch of final dividend warrants/definitive share certificates
2002 interim results to be announced
2002 interim dividend payable
* subject to change
12 March 2002
8 May 2002
10 to 14 May 2002
14 May 2002
14 May 2002
(on or about) 21 May 2002
(on or about) 13 June 2002
late August 2002*
October 2002*
SHAREHOLDERS SERVICES
For enquiries about share transfer and registration, please contact the
Company’s Registrars:-
Standard Registrars Limited
5/F., Wing On Centre
111 Connaught Road Central
Hong Kong
Telephone : (852) 2528 4511
Facsimile : (852) 2528 3158
Holders of the Company’s ordinary shares should notify the Registrars promptly
of any change of their address.
INVESTORS RELATIONS
For enquiries relating to investors relations, please email to
investor@hysan.com.hk or write to:-
Investors Relations,
Hysan Development Company Limited
49/F., Manulife Plaza
The Lee Gardens, 33 Hysan Avenue
Causeway Bay
Hong Kong
Telephone : (852) 2895 5777
Facsimile : (852) 2577 5153
Press releases and other information of the Group can be found at our Internet
website at “www.hysan.com.hk”
DIVIDENDS
The Board recommends the payment
of a final dividend of HK$0.28 per
share. Subject to shareholder approval,
the final dividend will be payable in
cash with a scrip dividend alternative to
shareholders on the register of
members as at Tuesday, 14 May 2002.
A circular containing details of the
scrip dividend and the form of
election will be mailed to
shareholders on or about Tuesday,
21 May 2002. Shareholders who
elect for the scrip dividend, in lieu of
the cash dividend, in whole or in part,
shall return the form of election to the
Company’s Registrars on or before
Monday, 10 June 2002.
Definitive share certificates in respect
of the scrip dividend and cheques
(for those shareholders who do not
elect for scrip dividend) will be
despatched to shareholders on or
about Thursday, 13 June 2002.
The share register will be closed from
Friday, 10 May 2002 to Tuesday,
14 May 2002, both dates inclusive.
In order to qualify for the proposed
final dividend, all transfer documents
accompanied by the relevant share
certificates must be lodged with the
Company’s Registrars not later than
4:00 p.m. on Thursday, 9 May 2002.
HYSAN DEVELOPMENT COMPANY LIMITED
49/F., Manulife Plaza
The Lee Gardens, 33 Hysan Avenue,
Causeway Bay, Hong Kong
Tel: (852) 2895 5777
Fax: (852) 2577 5153
www.hysan.com.hk
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