Hysan Development Co Ltd Annual Report 2002

FY2002 Annual Report · Hysan Development Co Ltd

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IN A CLEAR DIRECTION

2002ANNUAL REPORT

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.

Contents
Highlights 2002

Chairman’s Statement

Operating and Financial Review

Case Studies

Social Responsibility

Human Resources

Principal Investment Properties

Report of the Valuer

Schedule of Principal Properties

Directors, Officers and Advisers

Corporate Governance

Audit Committee Report

Directors’ Report

Auditors’ Report

Consolidated Income Statement

Consolidated Balance Sheet

Balance Sheet

Consolidated Statement of Changes in Equity

Consolidated Cash Flow Statement

Notes to the Financial Statements

Five-Year Financial Summary

Inside back cover

Shareholder Information

Highlights 2002

ANNUAL
REPORT 2002

Year 2002 remained a difficult one for the Hong Kong economy generally.
We regard it of paramount importance that we keep a clear focus amidst
the challenging environment and continue to invest in areas that will enhance
our asset value and underlying competitiveness.

Achieved strong occupancy: office: 95%, retail: 96%

Strong balance sheet with maturity profile
further strengthened

Asset enhancement programme: re-launch of
Bamboo Grove residential property well-received;
works on Caroline Centre retail podium commenced

Year ended 31 December

2002

2001

Change

HK$’000

926,839

1,066,738

(13.1 )

543,874

600,343

Operating Profit

Net Profit

Gross rental income

1,229,599

1,351,892

Gross rental income=(excluding Bamboo Grove)* 1,170,497

1,231,024

Earnings per share (basic)

Earnings per share (diluted)

Dividend per share

HK¢

52.66

36.5

HK$

HK¢

58.26

58.24

HK$

(9.4)

(9.0)

(4.9)

(9.6)

(3.9)

Net asset value per share (before final dividend)

18.45

20.62

(10.5 )

Note: *in the light of renovations of Bamboo Grove residential property

Hysan Development Company Limited

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ANNUAL
REPORT 2002

Chairman’s Statement

We regard it of paramount
importance that we keep a clear
focus amidst the challenging
environment. Our goal is to
continue investing in areas which
will enhance our asset value and
underlying competitiveness.
Our objective is asset management:
we constantly ask ourselves how
to put our properties to the highest
and best use.

Bamboo Grove residential property.
If Bamboo Grove is excluded, the fall
in gross rental income was 4.9%.

Earnings per share were HK52.66 cents,
a decrease of 9.6% (HK58.26 cents
for the same period in 2001).

The Group’s investment property
portfolio, as valued externally by
independent professional valuers,
was HK$24,841 million as at
31 December 2002 (2001:
HK$26,639 million). Largely due
to the net valuation deficit,
shareholders’ funds at 2002 year-end
were HK$19,087 million, compared to
HK$21,267 million in 2001. Net asset
value per share (before final dividend)
decreased by 10.5% to HK$18.45.

Detailed commentary on our
performance and assets valuation are
set out in “Operating and Financial
Review” on pages 4 to 10.

DIVIDENDS
The Board recommends the payment
of a final dividend of HK26.5 cents per
share, which together with the interim
dividend of HK10 cents per share,
represents an aggregate distribution of
HK36.5 cents per share, a decrease of
3.9% for the year. Subject to
shareholder approval, the final dividend
will be payable in cash with a scrip
dividend alternative. Details on the
payment of final dividend, including
the scrip dividend arrangements, are
set out in “Shareholder Information”
on the inside back cover.

Mr. Peter T.C. Lee

RESULTS
The property investment sector, like
the rest of the Hong Kong economy,
experienced another challenging year
in 2002. In this context, I am pleased
to report that the overall occupancy
levels throughout the Group’s
commercial property portfolio
remained strong during the review
year (office: 95%, retail: 96%).

Net profit for the year ended
31 December 2002 was
HK$543.9 million, 9.4% lower than
in 2001 (HK$600.3 million). The fall
in gross rental income (2002:
HK$1,229.6 million; 2001:
HK$1,351.9 million) was largely
attributable to negative rental
reversions and the upgrading
renovation works at the

Hysan Development Company Limited

ANNUAL
REPORT 2002

A CHALLENGING YEAR
The past year remained a difficult one
for the Hong Kong economy generally.

We regard it of paramount
importance that we keep a clear
focus amidst the challenging
environment. Our goal is to continue
investing in areas which will enhance
our asset value and underlying
competitiveness. As a property
investment company, we look clearly
beyond leasing as our key activity.
Our objective is asset management:
we constantly ask ourselves how to
put our properties to the highest and
best use. This involves developing a
building, leasing, managing as well
as servicing it; and most important of
all, constantly reviewing and
assessing it within its particular
market segment, and following up
with appropriate enhancement
programmes including market
repositioning and upgrades.

In addition to having achieved strong
occupancy rates, we have further
enhanced the asset value of our
portfolio during the year. We
completed the market repositioning
of our Bamboo Grove residential
property, which was well-received
by the market. Upgrades have been
completed for some of our other
buildings.

We further improved our property
service levels and our operating
efficiency generally.

Our balance sheet remains strong
with our maturity profile further
strengthened.

Details of these initiatives and the
progress we made in implementing
our strategic principles, are further
discussed in the “Operating and
Financial Review” on pages 4 to 10.

CORPORATE GOVERNANCE
AND FINANCIAL
TRANSPARENCY
A commitment to good corporate
governance and financial transparency
has always been a clear element of our
management philosophy. I am pleased
that our efforts in this area are being
recognized, with our board having been
elected Directors of the Year by the
Hong Kong Institute of Directors.
General progress we made in these
areas are set out in the “Corporate
Governance Statement” in this report.

SOCIAL RESPONSIBILITY
Hysan is committed to playing its
role as a responsible corporate
citizen. Additional information on our
policies in this area can be found in a
separate section later in this report.

DIRECTORS AND STAFF
Our Company owes much to its
supportive Board of Directors and I
would like to extend my thanks to
them for their wise counsel. Dr. Victor
K. K. Fung, having served on the
board since 1998, gave notice that he
would not stand for re-election as at
the forthcoming annual general
meeting to be held in May. The Board
is greatly indebted to Dr. Fung for his
invaluable guidance and contribution
to the success of Hysan.

of experience and skills.
The Company has been further
strengthened by the appointment of
Michael T.H. Lee as Chief Operating
Officer as from June 2002. My
thanks go to our staff for their hard
work and all they have achieved over
the very challenging year, while
extending my welcome to new
executives who bring different skills
and thinking to the Group.

THE FUTURE
At the strategic level, our aim is to
operate a property investment
company of choice, capable of delivering
attractive returns for investors.

Looking into 2003, works have
commenced for a market
repositioning of the retail podium of
Caroline Centre. We are committed
to further enhancing our portfolio
value generally.

Of course, we are not immune from
economic or financial pressure
outside our control. Current global
political and general economic
uncertainties may continue to
adversely impact the Hong Kong
economy. Well-judged management
decisions, implementation and risk
management will thus be as
important as ever. I am confident that
we have, as demonstrated in the year
under review, a clear focus as well as
the financial and management
capabilities to face these challenges.

It is important that any organization
which is facing a challenging
environment has a combination

Peter T. C. Lee
Chairman and Managing Director
Hong Kong, 11 March 2003

Hysan Development Company Limited

ANNUAL
REPORT 2002

Operating and Financial Review

We have had an active year, making
further progress in implementing the
strategic principles mapped out two
years ago. Market conditions continued
to be challenging, but our underlying
strategic principles remained the same.

OPERATING REVIEW

(cid:1) Maximize tenant retention through

In summing up the work of the past
year, we have followed these
general directions:

Optimize occupancy levels
across the portfolio (achieved:
office: 95%; retail: 96%)

the provision of superior
customer-focused services and
enhancement of our properties

Diligently pursuing leasing
opportunities by closely managing
lease renewals and securing
new leases

Seek asset enhancements:
completed market repositioning
of Bamboo Grove and
renovations of One Hysan
Avenue. Improvement works for
Leighton Centre and Sunning
Court are in progress; with
works having commenced for
repositioning the retail podium
of Caroline Centre in March 2003

Aggressively pursuing revenue
generation opportunities by
stepping up carpark marketing
and leasing

(cid:1) Maximize operating efficiency:
set clear benchmarks for
property services; promoted
energy efficiency. Also further
enhanced credit control
measures and kept rental arrears
at a very low level. In progress in
implementing an enterprise
resource planning system to
enhance administrative
efficiency generally.

Hysan Development Company Limited

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The case studies on pages 11 to 17
illustrate how we have put these
directions in action.

In this way, we minimize
vacancy levels and the
associated disruption to a stable
rental income stream.

INVESTMENT PROPERTIES
Office

Retail

(cid:1) Market Overview

The office market continued to
be soft in the light of the overall
economic conditions, leading to
weakening rentals. Better-quality
buildings under single
ownership, particularly in prime
locations with no major new
supply remain better market-
performers.

Our Performance
In this context, Group achieved
a high occupancy rate of 95% at
year-end 2002. This reflects the
effectiveness of measures that
we have put in place to
maximize tenant retention. We
closely monitor lease renewals
and pursue advance leasing
negotiations with tenants.

While the general economy and
consumer confidence remained
weak, the retail sector had some
support from increased tourist
arrivals. Retail rentals in prime
locations, like Causeway Bay,
continue to be firm. Shopper’s
preference for an attractive shopping
environment with a diversity of
shopping as well as leisure activities
became even more distinct.
The trend for large-scale flagship
stores also continued.

Our Performance
Our retail portfolio achieved a 96%
occupancy rate at year-end 2002. We
made further progress in furthering
our objective to create in our retail
portfolio an attractive environment

ANNUAL
REPORT 2002

Mr. Michael T.H. Lee

for dining, shopping and recreation.
During the year, a hub of specialty
food and beverage outlets was
successfully established. We also
continued our efforts to refine the
tenant mix in our portfolio generally.

Hysan Development Company Limited

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ANNUAL
REPORT 2002

Operating and Financial Review

The planned market repositioning
of Caroline Centre in 2003 to
capitalize its synergy with the
high-end Lee Gardens shopping
centre is another step to further
grow our retail portfolio. Works
commenced in March, 2003.

Residential

(cid:1) Market Overview

Leasing activities in the luxury
residential market remained to be
weak. Relocating activities were
more active, with tenants taking
advantage of the market
environment to relocate to better-
quality premises given the same
budget. The general downward
rental pressure was particularly
felt in multi-owned developments
with some individual owners
having been more willing to offer
incentives.

Our Performance
The re-launch of the repositioned

Bamboo Grove which commenced
during the second half of 2002 was
well received by the market, and
we were particularly encouraged
by the success in capturing a good
market share of new expatriate
arrivals in Hong Kong. We continue
to focus on expatriate tenants,
with a strong tenant base drawn
from multi-national corporations
engaged in a diversity of activities.

DEVELOPMENT PROPERTIES
Shanghai
The retail podium of the Phase I joint-
venture Grand Gateway development
achieved high occupancy. This multi-
level retail complex in Puxi offers a
fascinating one-stop shopping and dining
destination for people of all age groups.

Green and the Gardens at Bishan, and
25% interest in Amaryllis Ville.

PROPERTY SERVICES
At Hysan, we see completion of a lease
as just the beginning of a long-term
partnership. We have always managed
our properties ourselves in furtherance
of this partnership objective.

We further enhanced our service
levels during the year. A system of
tenant service levels was piloted in
selected buildings, which will be
introduced to our portfolio generally
during the first-half of 2003. Energy
efficiency measures were also
introduced to enhance operating
effectiveness without compromising
services.

Singapore
Sales of the three joint-venture
residential developments were
continuing, amidst generally slow
market conditions in Singapore. The
Group has 10% interest in Sanctuary

CAPITAL IMPROVEMENT
PROJECTS
As a continuous process to enhance
long-term value, management
undertake regular reviews of
building performance and, based on

Hysan Development Company Limited

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ANNUAL
REPORT 2002

Implementation of Corporate Strategic Principles

Strategic principles identified

Progress to date

1. To upgrade overall operational
efficiency including facilities
management, emphasizing good
customer service

Introduce Comprehensive Tenants Service
Levels to achieve total customer satisfaction
Introduce energy efficiency initiatives resulting
in enhanced operating effectiveness without
compromising service standards
Customer service generally enhanced with
training and audit efforts stepped up

2. To further grow our retail sector

(cid:1) Occupancy rate of 96% for retail achieved

located in the retail hub of
Causeway Bay

Proactive management of tenant-mix, including the
creation of a food and beverage hub in our neighbourhood
Stepped-up marketing and promotions efforts to
further strengthen partnership relations with tenants

3. To continually focus on the current

(cid:1) Occupancy rate of 95% for office portfolio

and future needs of our commercial
and residential customers who occupy
our space and use our services

4. To continually review the performance
of individual properties and improve
the quality and value of the portfolio
by selective refurbishment and
re-development

5. To utilize our relationships and

financial strength as a competitive
advantage in pursuing investment
opportunities and to keep risk and
return in balance

demonstrates our success in anticipating and meeting
the needs of our customers
Introduce personalized resident service at
Bamboo Grove which was well-received
Introduce a children’s floor in Bamboo Grove
Clubhouse offering one of the largest indoor play
equipment in Hong Kong private residential clubhouses

Completed refurbishment and market repositioning of
Bamboo Grove which was well-received by the market
Completed renovation of external facade for
One Hysan Avenue; improvement works for
Leighton Centre and Sunning Court in progress
Finalized plans for refurbishment and market
repositioning of retail podium of Caroline Centre with
works having commenced in March 2003

Strong balance sheet with debt maturity profile
lengthened and diversified funding sources
Prudent financial management principles and strong
financial position geared to complement strategic
decisions
Continue to strengthen corporate governance
practices; recognition achieved with 2002 Directors of
the Year Award by the Institute of Directors

experience and market knowledge,
assess the future opportunities for
our properties. Appropriate capital
improvement projects, including
refurbishment, renovation,
upgrading of building facilities and
market repositioning initiatives are
recommended and implemented.

The year saw the completion and
market repositioning of Bamboo
Grove. We also finalized design plans
for the renovations and market
repositioning of the retail podium of
Caroline Centre, with works
scheduled to be carried out between
March to October 2003.

In addition, we completed
refurbishment of the building exterior
for One Hysan Avenue. Improvement
works had also commenced for
Sunning Court which include re-tiling
of external walls and renovating the
main lobby; and for upgrading the
building exterior and building facilities
of Leighton Centre.

Hysan Development Company Limited

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ANNUAL
REPORT 2002

Operating and Financial Review

FINANCIAL REVIEW

CONSOLIDATED PROFIT
AND LOSS ACCOUNT
Rental Income
The Group’s gross rental income of
HK$1,229.6 million was 9.0% lower
year-on-year mainly because of
negative rental reversions and high
vacancy at Bamboo Grove due to
renovation for repositioning.
Excluding the impact of Bamboo
Grove, the rental fall was 4.9%.

Operating Expenses
Property expenses increased by 5.5%
to HK$235.8 million year-on-year
largely due to the significant increase in
utilities and insurance expenses which
are largely out of the Group’s control,
and higher marketing expenses
associated with active leasing activities,
in particular for the repositioning of
Bamboo Grove. The higher property
expenses were partly offset by a 4.6%
decrease in administration expenses to
HK$85.8 million due to cost reduction.

Financial Expenses
Further helping with cost reduction
was a substantial 30.6% year-on-year
decrease in net financial expenses to
HK$215.7 million, despite relatively
stable debt level, as the Group was
able to take advantage of Hong
Kong’s prevailing low interest rates.

Profit Attributable to
Shareholders
The Group’s profit attributable to
shareholders for the year ended 31
December 2002 decreased by 9.4%
year-on-year to HK$543.9 million
(recurring profit decreased by 4.1%

as 2001’s result included a gain
on disposal of an associate of
HK$33.5 million). Earnings per share
were correspondingly 9.6% lower at
HK52.66 cents.

CONSOLIDATED
BALANCE SHEET
Assets
Total assets decreased by 7.2% to
HK$26,555.2 million mainly due to
the decrease in the valuation of
investment properties as the Hong
Kong property market continues to
be weak.

Current Liabilities
Current liabilities decreased by
HK$1,280.3 million to HK$1,282.2
million mainly due to the HK$2 billion
five-year floating rate notes being
repaid in March 2002 and
reclassification of long-term bank
loans of HK$597.8 million due within
one year.

Non-current Liabilities
The increase in non-current liabilities
of HK$1,478.6 million to HK$5,309.6
million reflected the refinancing of the
HK$2 billion floating rate notes
through the issue of the US$200
million 7% ten-year fixed rate notes
under the Medium Term Note (MTN)
Programme.

Shareholders’ Funds
Shareholders’ funds decreased by
10.3% to HK$19,087 million
principally due to the decrease in
property valuation of HK$2,073.2
million, partially offset by profits
retained during the year of HK$440.5
million from strong recurring income.

Net Interest Coverage at Year-end

Ratio
5

4.7

4.2

3.1

3.6

3.7

1998

1999

2000

2001

2002

Net Interest Coverage

Note: Net interest coverage ratio (defined as profit

from operations before depreciation less
dividend and interest income, divided by net
interest expenses)

Net Gearing at Year-end

31.1

16.2

14.6

25.7

21.4

35.0

30.0

25.0

20.0

15.0

10.0

5.0

0.0

1998

1999

2000

2001

2002

Net debt / Shareholders’ funds

Note: Net gearing (defined as gross debt less cash
and cash equivalents and marketable
securities at year-end market value, divided
by shareholders’ funds)

Capital Expenditure at Year-end

HK$million
800

600

400

714

399

200

248

208

1998

1999

2000

2001

2002

Hysan Development Company Limited

ANNUAL
REPORT 2002

KEY FINANCIAL RATIOS
Net Interest Coverage
As of year-end 2002, the net interest
coverage ratio (defined as profit from
operations before depreciation less
dividend and interest income, divided
by net interest expenses) was 4.7.
This is the highest the ratio has been
in the past five years principally
because of modest debt outstanding
and low interest rates.

Net Gearing
The year-end 2002 net gearing
(defined as gross debt less cash and
cash equivalents and marketable
securities at year-end market value,
divided by shareholders’ funds) was
25.7%, which is close to its average
for the past five years. The
re-investment in the Group’s property
portfolio, as discussed in the next
section, and the downward
revaluation of assets are reflected in
the gearing rise of the past two years.

CAPITAL EXPENDITURE
Investment Appraisal
The Group appraises the feasibility
and priority of proposed capital
expenditure projects based on their
strategic importance as well as their
ability to improve rental yield or
reduce operating cost. Project
financial feasibility is generally
assessed by net present value and
internal rate of return calculated from
projected discounted cash flows.

Capital Expenditure During 2002
The Group spent HK$399.3 million
during the past year. Most of this
was incurred for refurbishment of
the Group’s investment properties,
including Bamboo Grove and

One Hysan Avenue. In addition,
HK$25 million were incurred on the
China and Singapore projects and
HK$9.4 million were spent for upgrades
to the Group’s computer system.

Capital Expenditure Funding
Capital expenditures were primarily
financed by internally generated funds
from operations. With substantial
committed banking facilities in place
and solid recurrent rental cash flow, the
Group is in a strong liquidity position
and has sufficient financial resources to
satisfy its capital commitments and
ongoing working capital requirements.

CONTINGENT LIABILITIES
The Group has provided guarantees for
banking facilities granted to associated
companies and investee companies. At
31 December 2002, the Group’s share
of guarantees and counter guarantees
amounted to HK$156 million (2001:
HK$148 million) and HK$84 million
(2001: HK$79 million) respectively.

FINANCING
Total gross debt was relatively
unchanged at HK$5.71 billion versus
HK$5.63 billion at 2001 year-end, of
which, all were unsecured and over
97% were on a committed basis.

Sources of Financing
The Group maintains diversified
sources of funding to minimize over-
dependence on any one source as
well as to reach new investors for the
Group’s debt instruments, particularly
as the Group grows going forward.

Within the bank segment, the Group
maintains bilateral funding
relationship with over 15 banks.

Sources of Financing
at 2002 Year-end

34.3%

5.3%

2,266

1,618

60.4%

Capital market issuances

Syndicated and club loans

Bank bilateral loans

Maturity Profile

At 2002 year-end
Total gross debt : HK$ 5,707 million

HK$million

2,500

2,000

1,500

1,000

500

1,086

737

2002

At 2001 year-end
Total gross debt : HK$ 5,628 million

HK$million

3,000

2,500

2,000

2,140

1,500

1,000

500

2,572

436

480

2001

Within 1 year

After 2 years but within
5 years

After 1 year but within 2 years

After 5 years

Note: Subsequent to the balance sheet date, a
HK$300 million loan originally maturing in
2004 has been prepaid and refinanced by a
7-year bank loan with maturity in 2010.

Hysan Development Company Limited

ANNUAL
REPORT 2002

Operating and Financial Review

Fund Raising During 2002
The Group took a major step forward
in the process of developing and
maintaining access to the international
capital markets by launching a MTN
Programme, and subsequently issuing
in early 2002 US$200 million ten-year
inaugural notes on the European and
Asian capital markets. The proceeds
were used to help repay HK$2 billion
five-year floating rate notes that
matured later in the year. The new
ten-year issuance was well received
and established a benchmark for the
Group going forward.

During the past year, the Group also
refinanced HK$1.2 billion of bank and
syndicated loans to take advantage of
the current high-liquidity, low-cost
banking environment in Hong Kong.

Maturity Profile
To improve the tenor matching of
assets and liabilities as well as to
reduce refinancing risk, the Group
during the year moved to a mix of
short-term and intermediate-term
maturities from a previous
dependence on shorter-term
instruments. The 2002 year-end
maturity is significantly stronger with
little short-term maturity pressure and
balanced repayment schedule over
the intermediate term.

CREDIT RATINGS
The current credit ratings assigned by
Moody’s and Standard and Poor’s are
Baa1 and BBB respectively. Both
investment credit ratings continue to
reflect the Group’s strong financial
position. It should be noted that the
Group’s rating is to some extent capped
by Hong Kong’s foreign currency

long-term debt ratings of A3 from
Moody’s and A+ from Standard
and Poor’s.

FINANCIAL RISK
MANAGEMENT
The Group’s normal business
operation involves a number of
financial risks and are mitigated and
managed as described below.

Liquidity Risk
The Group maintains sufficient liquidity
at all times to fund its working capital.
Liquidity requirements are met by
strong recurring cash flows from the
investment property portfolio and low-
cost standby revolving bank facilities. At
year-end 2002, the Group had HK$1,367
million undrawn committed facilities.

Funding Risk
The Group maintains diversified
sources of funding to reduce the risk of
being unable to draw sufficiently from
any one source. The diversification
includes drawing from international
capital markets as well as multiple
banks. The latter include banks of
various nationalities, including a
significant number who have been
working with the Group for many years.
Standby revolving bank facilities are also
maintained to reduce refinancing risk.

Currency Risk
The Group aims to have minimal
mismatches in currency and does not
speculate in currency movements.
Over 97% of the Group’s assets by
value and all rental income are in Hong
Kong and denominated in Hong Kong
dollars, the balance is in Singapore
dollars and Renminbi corresponding to
the Group’s property projects in those

two countries. At year-end 2002, all of
the Group’s debts were in Hong Kong
dollars with the exception of the
US$200 million ten-year notes, which
in turn has been hedged by
appropriate hedging instruments.

Interest Rate Risk
The Group manages its interest rate
exposure based on interest rate level
and outlook as well as potential
impact on the Group’s financial
position arising from volatility. At year-
end 2002, 91% of the Group’s gross
debt were on a floating rate basis, but
could change with changes to the
interest rate trend going forward.
The Group’s weighted average cost of
borrowing for the past year was
3.65% vis-á-vis 5.81% for 2001.

Credit Risk
The Group manages its credit risk
mostly on two fronts: rent receivable
from tenants and counter-party
financial obligations in currency and
interest rate derivative contracts. For
the former, credit checks are part of
the normal leasing process and
stringent procedures are in place to
deal with delinquent rent (over one
month overdue). As of year-end 2002,
the amount of delinquent rent was
HK$0.8 million or less than 1% of the
Group’s average monthly rental income.
To mitigate counter-party risk, the
Group enters into derivative contracts
only with sound financial institutions
with strong investment-grade credit
ratings, limits exposure to each, and
monitors each’s rating regularly.

Michael T. H. Lee
Chief Operating Officer and Director
Hong Kong, 11 March 2003

Hysan Development Company Limited

ANNUAL
REPORT 2002

Case Studies

Hysan's objective is to deliver value by putting our
properties to the highest and best use. We work
with present and prospective tenants to deliver
property that works for them, their employees and
their customers.

The following case studies illustrate how we
have been putting our principles into action over
the past year.

ANNUAL
REPORT 2002

Hysan aims to anticipate and meet the changing needs of our
present and prospective tenants.

Bamboo Grove, our luxurious residential development, has
always been a popular choice for expatriate families with young
children. This is our clear focus when we embarked upon the
recent refurbishment and market repositioning exercise.

We, therefore, dedicated a floor in the clubhouse for a "Children's World", which
houses one of the largest "Tuff N Tumble" indoor play equipment in Hong Kong private
residential clubhouses. Other purpose-built facilities include a music room, a dance
hall and a special play area for toddlers. Even the washroom facilities are built to suit
the needs of children. In addition, the 30,000 square feet traffic-free spacious outdoor
podium is welcome by mothers and children alike.

The refurbishment and market repositioning of Bamboo Grove not only demonstrates
Hysan's foresight to enhance asset value, but also our commitment to meet the
changing needs of our tenants.

" Your enthusiasm and your ability

to motivate your staff have
resulted in making our occupants'
living in Bamboo Grove as
comfortable as humanly possible."

Geoffrey H. Moore
Supervisory General Service Officer
for a major corporate tenant

Delivering value through
Customer Focus
Delivering value through a
Bamboo Grove
Customer Focus
Bamboo Grove

Delivering value through
Market Repositioning
Caroline Centre

ANNUAL
REPORT 2002

Caroline Centre was built
in 1992. Situated right
next to The Lee Gardens
to which it is connected by
a footbridge, it has an
established retail podium
with a particularly
successful children's
concept.

Hysan is committed to
achieving asset enhancement
and income growth through a
continuous programme of
selective refurbishment and
repositioning. Each property's
position within its particular
market segment is continually
reviewed and assessed.

Appropriate capital
improvements, including
renovations and marketing
repositioning initiatives will be
implemented.

In Hong Kong, shopping
destinations with a larger store
layout and a diversity of
shopping and leisure activities
are becoming more distinct.
The trend for flagship store
also continued.

We took the view, as
confirmed by market studies,
that we could further enhance
the value of the Caroline
Centre retail podium by a
market repositioning exercise.
We therefore finalised a major
programme to re-design the
retail podium, to enhance
shop front, internal finishes, as
well as layout. These, coupled
with our efforts to refine the
tenant mix and introduce
appropriate specialty themes,
seek to capitalise the
property's synergy with
The Lee Gardens and enhance
its asset value generally.

Refurbishment works for
Caroline Centre have
commenced in March 2003,
to be completed by late
October.

ANNUAL
REPORT 2002

Delivering value through
Creative Solutions
Retail leasing

In our retail portfolio, our
objective is to create an
attractive environment for
dining, shopping and recreation
in our neighbourhood. Our
leasing team therefore keeps a
constant look-out and is keen
on introducing new retail
concepts and fresh tastes.

Pret A Manger, a trendy boutique

sandwich shop, which has been hugely successful in other international cities like
London, Paris, Milan, New York, Tokyo and Singapore, has opened a major outlet in
our property, AIA Plaza. To create an enjoyable seating environment with indoor
comfort and unobstructed street views, our leasing team has provided useful
suggestions on spatial planning, seating arrangement and shop ambience. The new
shop has been almost an instant success, adding to the rich variety of eateries to
satisfy the diverse tastes and lifestyles for all walks-of-life in our vibrant hub.

" We started to develop our business in
Hong Kong over a year ago. And in a
short space of time, we've recognised
the importance of building strong
relationship with the landlords. We
really appreciate the hard work and
commitment Hysan has shown us.
The emphasis that you place on
customer service is a credit to your
company.

You should be very proud of the
people who are now working for you,
their support has been valuable in our
endeavours to grow a successful
business in the AIA Plaza."

Pret A Manger (Hong Kong) Limited

Delivering value through
Partnership Approach
“Culinary Journey on Hysan Avenue”

ANNUAL
REPORT 2002

Hysan's year-round
marketing programme
aims to enhance the
attractiveness of our
retail portfolio for our
long-term growth as
well as that of our
tenants.

In the light of the many
existing food and lifestyle
outlets in our portfolio, a
special promotional activity
called "Culinary Journey on
Hysan Avenue" was launched.

This seasonal event stretched
over the summer months of
July and August. Activities
covered the whole range of
culinary activities: including
table and social etiquette,
table-setting, cooking
demonstrations, wine and
caviar tasting, floral
arrangements and ballroom
dancing.

" The response to the
joint-promotion of
culinary classes at our
restaurant last summer
was encouraging and
fruitful. The idea was
avant-garde, interesting
and practical, making
use of tenant expertise
to capture the attention
and interest of our
guests in western food,
wine and table
etiquette.

We look forward to
exploring new
promotional ideas with
Hysan."

COVA Caffé-Ristorante

ANNUAL
REPORT 2002

Delivering value through
Innovative Work Processes
Comprehensive Tenant Service Levels

Hysan is committed to
managing our portfolio to the
highest standards, providing
commercial tenants with the
best operating environment for

their businesses and customers, and ensuring the most comfortable
surroundings for residential tenants to build their homes.

A new service model, known as the Comprehensive Tenant Service Levels, was
introduced with an aim to achieving total customer satisfaction. The service levels are sets
of performance measurement standards aiming to deliver cohesive and tenant-focused
services while improving service performance and enhancing operational efficiency.

The service levels cover services such as cleaning, maintenance and security as well as
handling tenant requests and managing hand-over of properties to tenants. The new
system provides clear and specific targets. Staff will know precisely the level of service
standards expected by Hysan in better servicing our tenants.

" We really appreciate that Hysan
management staff have been
responding promptly and
enthusiastically to our every
request and will enlist our
feedback after completing their
services. In fact, the efficient
management service of Hysan has
been one of our major
determinants in substantiating
our recent decision of tenancy
renewal."

Yahoo! Holdings (Hong Kong) Ltd

ANNUAL
REPORT 2002

A key component of our
strategy is to develop
strong relationships with
tenants. We interact
closely with our tenants
to ensure that we
anticipate and meet their
needs.

Willis China (Hong Kong),
an international insurance
brokerage company, was
considering a possible
expansion in Hong Kong
when its lease of our
property expired in mid-
2002. Hysan offered a
solution to Willis so as to
minimise any mismatch of
timing by way of a special
short-term lease. While the
short-term lease was still
subsisting, Willis finalised
its plans for an expansion in
Hong Kong with a 60% rise
in space needs. Again,
Hysan offered a solution to
swap the unexpired short-
term lease with a new lease
for the desired expanded
space in The Lee Gardens.
In this way, the tenant's
expansion needs are
immediately satisfied.

" Hysan delivered a

flexible solution to
what is a mismatch of
timing for corporate
decisions for us. After
scouting around all
office premises in the
territory, we finally
decide Hysan is our
preferred choice for
office accommodation."

Willis China (Hong Kong)

Delivering value through
Flexible Solutions
Office leasing

ANNUAL
REPORT 2002

Social Responsibility

continually investigate energy
efficiency initiatives

(cid:1) monitor fresh air quality within our

buildings and ensure that we provide
an acceptably healthy environment
actively market the need for energy
efficiency and environmentally-
friendly practices to our employees,
contractors and tenants
review the use of environmentally-
friendly and recyclable materials
and supplies in project works and
operations wherever appropriate
and remain aware of developments
in recycling technology
recycle consumables and waste
wherever practical in our business
operations
provide regular safety, health and
environmental training to our
employees to remain current of
regulations, technology and to
continue to raise corporate and
individual SHE awareness

Initiatives implemented during the
review period under the SHE policy
are set out below:

Energy Conservation
We adopt the Government’s Code of
Practice and Guidelines on Energy
Efficiency for the operation and
maintenance of air conditioning
systems.

Following an in-depth review of
individual building operating schedules,
appropriate measures were
implemented resulting in cost savings
without compromising service standards.

Air Quality
Air quality tests were conducted by
independent institutions with

generally satisfactory results.
We are in the process of
implementing further enhancement
measures.

Environmentally Focused
Processes
As part of the campaign for the
environment, we promote recycling
of domestic waste in residential
premises and provide a free paper
recycling service to all commercial
tenants.

Our procurement policy places a
priority on the use of environmentally-
friendly refrigerants in our air-
conditioning system. Strict procedures
are in place to ensure that all waste is
properly handled in accordance with
relevant environmental regulations
and requirements.

We also adopt an enzyme flushing
system in selected buildings and seek
to minimize the use of chemicals
used in seawater toilet sanitation.

COMMUNITY
We support various charitable
institutions in Hong Kong through
donations, sponsorship and the
provision of free venues. Staff
volunteers also organise charitable
events for the less-privileged. Members
of our management continue to serve
on various government and industry
organisations.

We consider it important for our
business to support the community in
which it operates and from which it
generates its revenue. For us, this not
only means Hong Kong but more
specifically our hub in Causeway Bay.

For Hysan, being a socially responsible
company means going beyond
fulfilling regulatory and compliance
requirements and investing in the
environment, the community, and
generally towards developing positive
stakeholder relations.

SAFETY, HEALTH AND THE
ENVIRONMENT (SHE) POLICY
Hysan is committed to practices that
protect safety, health and the
environment. We have formally
adopted a safety, health and
environmental (SHE) policy in 2003
with the Chief Operating Officer
taking overall responsibility at
Board level.

Under the policy, Hysan will:

remain current with all relevant
legislation and ensure compliance
by our employees and contractors
advise tenants on practices that
may impact on safety, health and
the environment and actively
encourage them to be
environmentally aware
reduce energy consumption
wherever possible without
compromising service and

Hysan Development Company Limited

(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
Human Resources

ANNUAL
REPORT 2002

RIGOROUS WORKFORCE
PLANNING
As at 31 December 2002, we have a
total of 550 staff members. 128 are
head office asset management
teams and supporting units; 422 are
building management, technical and
security services staff. In the light of
our corporate strategy, specific job
functions, including property services
with an emphasis on customer
relations, were expanded. This is
achieved by developing and re-
deploying our staff as well as bringing
in new people. Senior executives in
town planning and property services
also joined the Group.

Amidst the challenging business
environment, our human resources
strategy continues to focus on
ensuring that we have the right
number of employees with the right
skills and attitude to serve our
customers and to achieve our
corporate objectives. This was
achieved by strengthening
performance management,
developing our talent pool, and
fostering staff commitment.

PERFORMANCE
MEASUREMENT AND
REWARD
We continued our efforts to
strengthen our performance
management system. As in past
years, clear corporate and individual
objectives were set.
Communications of corporate
objectives, including formal and
informal briefings by top
management, were stepped up; all
towards ensuring alignment of
corporate and individual objectives.

The appraisal system is further
enhanced, emphasizing the need for
ongoing and specific feedback.

Hysan has always rewarded our staff
based on performance. We further
tightened the link between individual
performance and reward during
the year.

TALENT DEVELOPMENT
We have been broadening our training
and development activities across the
Group to ensure that we maximise
the potential of all our employees and
help them achieve their own as well
as the Group’s business objectives:

employee involvement – we actively
involve our staff in developing our
training programmes. Staff
representatives are involved in
designing the Company-wide
customer service enhancement
programme. Special cross-
departmental task forces were
formed in developing new service
levels and concierge training. Staff
are also involved in the delivery
stage, through a “train-the-trainer”
approach that we adopt.
ongoing measurement – effective
measurements after training
sessions were emphasised. We
conducted a series of audit
programmes including telephone
and client-handling skills audits,
the results of which were
satisfactory. These were followed
up by appropriate feedback and
improvement steps.
Graduate trainee programme – our
two-year graduate trainee
programme is designed to
develop our talent pool through

structured job rotations and
project assignments. The
programme is now in its fourth
year, and the results are
encouraging.
A learning culture – in addition to
organizing in-house training
courses, the need for individual
initiative to learn and develop is
stressed and encouraged.

COMMUNICATION AND
COMMITMENT
We understand that effective
communication is crucial to foster
staff commitment to the Group. This
is particularly critical in the context of
a challenging business environment.

We continue to develop our employee
communication programme. This is
currently achieved in a number of
ways, through formal and informal
presentations to employees, updates
and publications of result
announcements and other important
corporate developments, regular
newsletters, and gatherings involving
senior management.

Hysan Development Company Limited

(cid:1)
(cid:1)
(cid:1)
(cid:1)
ANNUAL
REPORT 2002

Principal Investment Properties

AIA Plaza
18 Hysan Avenue,
Causeway Bay

Hennessy Centre
500 Hennessy Road,
Causeway Bay

Lee Theatre Plaza
99 Percival Street,
Causeway Bay

AIA Plaza is a 25-level
office and retail complex
and is within easy
walking distance to the
MTR Causeway Bay station. The building
boasts a bright and spacious lobby, and an
array of specialty food and beverage outlets.

Total Gross Floor Area: 139,119 sq.ft.
Number of Floors
Year Completed /
Renovated

: 1989

: 25

Located on a busy
thoroughfare, Hennessy
Centre is an office and
retail complex. It is served
by a multitude of public transport including
the MTR and the bus and tram stops on its
doorstep. Home to a popular Japanese
Department store and three levels of
Chinese restaurants, it is a popular
destination for shopping and dining.

Total Gross Floor Area: 719,642 sq.ft.
Number of Floors
Carparks
Year Completed /
Renovated

: 45
: 263

: 1981

Caroline Centre
28 Yun Ping Road,
Causeway Bay

This is a 34-level office
and retail complex. A
comprehensive refurbish-
ment of the retail podium

commenced in March 2003 and upon
completion by October 2003, it will be
repositioned to synergise with the
neighbouring Lee Gardens shopping center.

Total Gross Floor Area: 626,882 sq.ft.
Number of Floors
Carparks
Year Completed /
Renovated

: 34
: 193

: 1992 / renovations
of retail podium
to be completed
in 2003

The Lee Gardens
33 Hysan Avenue,
Causeway Bay

Located right at the hub of
Causeway Bay’s commercial
and recreation area, this is
the Company’s flagship
development which comprises an office
tower and a high-end shopping centre. The
development, adjacent to the MTR
Causeway Bay station, enjoys spectacular
views of the Harbour and Happy Valley and
is home to many international corporations
and luxury brands.

Total Gross Floor Area: 902,797 sq.ft.
Number of Floors
Carparks
Year Completed /
Renovated

: 53
: 200

: 1997

Hysan Development Company Limited

Like its predecessor the
Lee Theatre, the Lee
Theatre Plaza is a Hong
Kong landmark and
among the territory’s first Ginza-style
shopping, dining and entertainment
complexes, within easy access to various
kinds of transport and the MTR Causeway
Bay station. The Plaza houses many of the
world’s favourite lifestyle brands and is a
popular venue for shopping and one-stop
entertainment, with cinema, fitness centres
and some of the finest dining establish-
ments in Causeway Bay.

Total Gross Floor Area: 315,749 sq.ft.
Number of Floors

: 24 (with two

basement floors)

Year Completed /
Renovated

: 1995

Leighton Centre
77 Leighton Road,
Causeway Bay

The 28-level 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-sought after location
for many professional practices. Upgrading
work on building facilities are being carried
out in 2003.

Total Gross Floor Area: 435,008 sq.ft.
Number of Floors
Carparks
Year Completed /
Renovated

: 28
: 332

: 1977 / renovations
to be completed
in 2003

111 Leighton Road
111 Leighton Road,
Causeway Bay

111 Leighton Road is an
office and retail complex
located in a pleasant and
tranquil area in the heart
of Causeway Bay, an ideal office location
for professional and designer firms.

Total Gross Floor Area: 79,905 sq.ft.
Number of Floors
Year Completed /
Renovated

: 1988

: 24

Sunning Plaza
10 Hysan Avenue,
Causeway Bay

entrance and lift lobby. The office and retail
complex has 30 levels. Among its tenants
are popular food and beverage outlets,
which have established the Plaza a hub for
relaxation and social recreation.

Total Gross Floor Area: 279,717sq.ft.
Number of Floors
Carparks
Year Completed /
Renovated

: 30
: 150

: 1982

One Hysan Avenue
1 Hysan Avenue,
Causeway Bay

Located at the junction of
three busy streets in the
heart of Causeway Bay,
the office and retail

Entertainment Building
30 Queen’s Road Central

Enjoying a prime location in
Hong Kong’s Central
financial and commercial
district, the post-modern-
design Entertainment

complex enjoys a prime location and a
diversity of retail facilities in the
surrounding area.

In 2002, external facade refurbishment was
completed.

Building has 34 levels, comprising 211,148
square feet of office and retail space. The
building covers a variety of retail mix
including hair & beauty salon, small cafes
and hifi shop, etc.

Total Gross Floor Area: 169,019 sq.ft.
Number of Floors
Year Completed /
Renovated

: 1976 / 2002

: 26

Total Gross Floor Area: 211,148 sq.ft.
Number of Floors
Year Completed /
Renovated

: 1993

: 34

ANNUAL
REPORT 2002

Bamboo Grove
74 - 86 Kennedy Road,
Mid-levels

A luxury residential
complex in the Mid-Levels,
Bamboo Grove underwent
major refurbishment in

2002 to enhance both the value and quality
of the complex. The complex commands
panoramic views of the harbour and the
greenery of the Peak, and is served by a
multitude of public transport. In addition to
superb property management services and
full club house and sports facilities, tenants
also enjoy a personalized Resident Services
which help ensure a comfortable and hassle
free lifestyle.

Total Gross Floor Area: 697,940 sq.ft.
Number of Units
Carparks
Year Completed /
Renovated

: 1985 / 2002

: 345
: 436

Sunning Court
8 Hoi Ping Road,
Causeway Bay

The 17-level Sunning Court
is a unique residential
tower in the dynamic
Causeway Bay area.

Located in a pleasant environment with
streets lined with trees, and within easy
reach of all forms of relaxation and entertain-
ment activities in the district, the building
provides maximum comforts for its tenants.

The building is undergoing external facade
refurbishment to further enhance its value.

Total Gross Floor Area: 97,516 sq.ft.
Total number of units : 59
Carparks

: available at

Year Completed /
Renovated

Sunning Plaza

: 1981 / renovations
to be completed
in 2003

Hysan Development Company Limited

ANNUAL
REPORT 2002

Report of the Valuer

TO THE BOARD OF DIRECTORS
HYSAN DEVELOPMENT COMPANY LIMITED

Dear Sirs,

Annual revaluation of investment properties as at 31 December 2002

In accordance with your appointment of Knight Frank (Services) Limited 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 2002 was in the approximate sum of Hong Kong Dollars Twenty Four Billion Eight
Hundred Forty One Million and Ten Thousand Only (i.e. HK$24,841,010,000).

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 (SERVICES) LIMITED
Hong Kong, 28 February 2003

Hysan Development Company Limited

Schedule of Principal Properties

as at 31 December 2002

ANNUAL
REPORT 2002

Investment Properties

Address

Lot No.

Use

Category
of the lease

Percentage held
by the Group

1. The Lee Gardens
33 Hysan Avenue
Causeway Bay
Hong Kong

2. Hennessy Centre

500 Hennessy Road
Causeway Bay
Hong Kong

3. Bamboo Grove

74-86 Kennedy Road
Hong Kong

4. Caroline Centre

2-38 Yun Ping Road
Causeway Bay
Hong Kong

5. Leighton Centre
77 Leighton Road
Causeway Bay
Hong Kong

Sec. DD of I.L. 29 and Sec. L of I.L. 457, Sec.
MM of I.L. 29, the R.P. of Sec. L of I.L. 29,
and the R.P. of I.L. 457

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

Commercial

Long lease

65.36%

Sec. B, C and the R.P. of I.L. 1451

Commercial

Long lease

100%

6. Lee Theatre Plaza

I.L. 1452 and the R.P. of I.L. 472 and 476

Commercial

Long lease

100%

99 Percival Street
Causeway Bay
Hong Kong

7. Sunning Plaza

10 Hysan Avenue
Causeway Bay
Hong Kong

8. Sunning Court
8 Hoiping Road
Causeway Bay
Hong Kong

9. Entertainment Building
30 Queen’s Road Central
Hong Kong

10. One Hysan Avenue
1 Hysan Avenue
Causeway Bay
Hong Kong

11. AIA Plaza

18 Hysan Avenue
Causeway Bay
Hong Kong

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%

The R.P. of I.L. 16 and the extension thereto

Commercial

Long lease

100%

The R.P. of Sec. GG of I.L. 29

Commercial

Long lease

100%

Sec. N of I.L. 457 and Sec. LL of I.L. 29

Commercial

Long lease

100%

12. 111 Leighton Road

Sec. KK of I.L. 29

Commercial

Long lease

100%

111-117 Leighton Road
Causeway Bay
Hong Kong

Hysan Development Company Limited

ANNUAL
REPORT 2002

Directors, Officers and Advisers

BOARD OF DIRECTORS

Peter Ting Chang LEE J.P. (I)
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 Cathay Pacific
Airways Limited, Hang Seng Bank Limited,
SCMP Group Limited, Maersk Hong Kong
Limited, and a director of a number of other
companies. A vice president of the Real
Estate Developers Association of Hong
Kong. 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 49.

Dr. Victor Kwok King FUNG (I)
Independent Non-Executive Director

Hans Michael JEBSEN (I)
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, PCCW 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 Bachelor and a
Master Degree in Electrical Engineering from
the Massachusetts Institute of Technology, a
Doctorate in Business Economics from
Harvard University. Appointed a Director in
1998 and is aged 57.

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 46.

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 67.

Fa-kuang HU (E)
G.B.S., C.B.E., J.P.
Non-Executive Director

Chairman of Ryoden (Holdings) Limited and
its subsidiary 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 79.

Sir David AKERS-JONES (A,E)
G.B.M., 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 75.

Hysan Development Company Limited

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 45.

ANNUAL
REPORT 2002

Chien LEE (A)
Non-Executive Director

Michael Chi Kung MOY
Chief Financial Officer and Director

Pauline Wah Ling YU WONG
Director, Property

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 49.

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 46.

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 54.

Michael Tze Hau LEE (I)
Chief Operating Officer and Director

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 63.

Michael T.H. Lee first joined the Board in
1990 and became Chief Operating Officer in
2002. A non-executive director of Tai Ping
Carpets International Limited. A member of
the Executive Committee of HK Society for
Protection of Children and Vice Chairman of
Helping Hand. He was formerly Managing
Director of an investment management
company with extensive experience in
equity investments and management in the
Asia Pacific region. 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. He is aged 41.

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

Former Chairman of Hsin Chong
Construction Group Ltd. Holds a Bachelor
degree of Science from University of Illinois
and a Master degree of Science from
Harvard University. Appointed Non-
Executive Director in 1979 and became an
Independent Non-Executive Director in
2001. He is aged 71.

(A)
(E)
(I)

Audit Committee
Emoluments Review Committee
Investment Committee

Hysan Development Company Limited

ANNUAL
REPORT 2002

Directors, Officers and Advisers

Structure

The Board

Audit Committee

Emoluments Review
Committee

Investment Committee

Chairman and Managing Director

Chief Operating Officer and Director

Finance

Secretarial & Corporate
Services

Property
Investment

Property
Services

Property
Development

Chairman and Managing Director

Peter Ting Chang LEE J.P. (I)

Independent Non-Executive
Deputy Chairman

Sir David AKERS-JONES (Chairing A, E)
G.B.M., K.B.E., C.M.G., J.P.

Independent Non-Executive Directors

Dr. Victor Kwok King FUNG (I)
Per JORGENSEN (A)
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.

Non-Executive Directors

Fa-kuang HU (E)
G.B.S., C.B.E., J.P.
Hans Michael JEBSEN (I)
Anthony Hsien Pin LEE (I)
Chien LEE (A)
Dr. Deanna Ruth Tak Yung RUDGARD

Executive Directors

Michael Tze Hau LEE (I)
Michael Chi Kung MOY
Pauline Wah Ling YU WONG

Company Secretary

Wendy Wen Yee YUNG

(A) Audit Committee
(E) Emoluments Review Committee
(I)

Investment Committee

Hysan Development Company Limited

ANNUAL
REPORT 2002

Front row from right: Peter T.C. Lee, Michael T.H. Lee
Middle row from right: Wendy Wen Yee Yung, Michael Chi Kung Moy,
Pauline Wah Ling Yu Wong, Prof. Alex Chun Wan Lui
Back row from right: Deric Probst Wallace, Ben Sau Shun Lui,
Lora Wing Sze Luke, Mark Sun Wah Chim, Hoi Yee Yau

COMPANY SECRETARY
Wendy Wen Yee YUNG
General Counsel and Company Secretary
Responsible for Group corporate services
including legal, secretarial, human
resources, corporate communications and
office administration. She holds a Master of
Arts Degree from Oxford University and is a
solicitor of the High Court of the HKSAR.
Prior to joining the Group in 1999, she was
a partner of an international law firm in
Hong Kong. Aged 41.

SENIOR MANAGEMENT
Alex Chun Wan LUI
Senior Advisor, Urban Design and
Architectural Services
Responsible for the Group’s urban design
and architectural services. A Registered
Architect and an Authorized Person
(Architect). Also a member of the Town
Planning Board. He holds a Master Degree
in City Planning from the Massachusetts
Institute of Technology and a Bachelor of
Architecture Degree from the University of
Hong Kong. Before joining the Group in
2002, he was Professor in Architecture of
the Chinese University of Hong Kong and
has practised architecture & urban design
for almost thirty years in Hong Kong,
Singapore and USA. Aged 59.

Mark Sun Wa CHIM
General Manager, Office Leasing
Responsible for the Group’s office leasing
activities. He holds a MBA Degree from
Heriot-Watt University. Before joining the
Group in 1999, he was National Director,
Commercial Department, of an international
real estate consultancy firm with over
fourteen years’ experience in leasing.
Aged 39.

Ben Sau Shun LUI
General Manager, Project and Technical
Services
Responsible for the Group’s project and
technical services. A Registered
Professional Engineer and a Chartered Civil
and Structural 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
Group in 2000, he has served senior project
management positions in other major listed
companies. Aged 44.

Lora Wing Sze LUKE
General Manager, Retail Leasing
Responsible for the Group’s retail leasing
activities. Prior to joining the Group in 2000,
she was senior leasing manager of a major
listed property investment company. She
holds a MBA Degree from University of
Reading in Real Estate and Construction.
Aged 42.

Deric PROBST-WALLACE
General Manager, Property Services
Responsible for the Group’s property
services. He holds a MBA degree from the
Cranfield School of Management, a diploma
from the Chartered Institute of Marketing
and a Bachelor of Science Degree from the
University of Stirling. Before joining the
Group in 2002, he was a Director of an
international property services and
construction-related consulting firm. Aged 40.

Hoi Yee YAU
Head of Corporate Planning
Heads the Group’s Corporate Planning
Department, Finance Division. She holds a MBA
Degree from Harvard University and a Bachelor
of Science Degree from Stanford University.

Prior to joining the Group in 2002, she has
served senior management positions in
investment and consulting companies.
Aged 34.

Advisers
Auditors
Deloitte Touche Tohmatsu

Principal Bankers
The Hongkong and Shanghai Banking
Corporation Limited
Hang Seng Bank Limited

Share Registrars and Transfer Office
Standard Registrars Limited
G/F., Bank of East Asia Harbour View Centre
56 Gloucester Road, Wanchai
Hong Kong

Registered Office
49/F., Manulife Plaza
The Lee Gardens
33 Hysan Avenue
Hong Kong

Hysan Development Company Limited

ANNUAL
REPORT 2002

Notes

Hysan Development Company Limited

ANNUAL
REPORT 2002

DIRECTORS’ REPORT

AND ACCOUNTS 2002

ANNUAL
REPORT 2002

Corporate Governance Statement

STATEMENT OF CORPORATE GOVERNANCE POLICY

The Board of Directors are committed to maintaining a high standard of corporate governance. The Company 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”). The Board aims to continually
review and enhance corporate governance practices in the light of international best practices, in addition to complying with
applicable statutory requirements. Board efforts in this area are being recognized. The Board was awarded “Directors of the
Year” by the Hong Kong Institute of Directors.

BOARD EFFECTIVENESS

Board Responsibilities and Board/Management Relationship

The principal task of the Board is, firstly, to formulate strategy and, secondly, to monitor and control operating and financial
performance in pursuit of Group strategic objectives.

The Board’s role is not to manage the business which responsibility remains vested with management. The Board is
responsible for overseeing the processes that management has in place to identify business opportunities and risks. The
Hysan Board and management fully appreciate their respective roles and are supportive of building a healthy corporate
governance culture.

Board Composition

The Board currently comprises Peter T. C. Lee, Chairman and Managing Director, Michael T. H. Lee, Chief Operating Officer
and Director, Pauline W. L. Yu Wong, Director, Property and Michael C. K. Moy, Chief Financial Officer and Director, and nine
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 24 and 25. These demonstrate a range of experience and calibre to bring
judgment on issues of strategy, performance, and resources. Independent non-executive Directors also sit on the corporate
governance committees of the Board.

The Board as a whole is responsible for the selection and approval of candidates for appointment to the Board, and has not
therefore established a Nomination Committee. On appointment, new Directors will be given a comprehensive introduction to
Group activities and induction into the responsibilities of non-executive Directors.

Independent Non-executive 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.

The executive Board was further strengthened by the appointment of Michael T. H. Lee as Chief Operating Officer effective
10 June 2002, responsible for the day-to-day management and co-ordination of the overall development of the Company.
The Chairman and Managing Director will continue to have overall responsibility for strategic planning of the Group and
developments generally.

Hysan Development Company Limited

ANNUAL
REPORT 2002

Board Process

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.

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 with a 100% attendance recorded in 2002. The Committee provides a forum of
reporting by the Group’s external auditors. Meetings are also attended by invitation by the Chief Operating Officer and the
Chief Financial Officer. The Committee presents a report to the Board after each meeting, which addresses its work and
findings.

Details on the mandate and work performed by the Audit Committee during the review year are set out in the Audit
Committee Report on page 38.

Emoluments Review Committee
The Group’s Emoluments Review Committee is also chaired by Sir David Akers-Jones. Other members are F. K. Hu and
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, the Chief Operating Officer and Director,
Victor K. K. Fung, Hans Michael Jebsen, with Anthony H. P. Lee as the Chairman. The five Directors, demonstrating a range of
experience and background, meet as necessary to advise and make recommendations on the investment strategies of the
Group within agreed terms of reference.

Hysan Development Company Limited

ANNUAL
REPORT 2002

Corporate Governance Statement

DIRECTORS’ REMUNERATION AND INTERESTS

Director Compensation

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 2002 was HK$546,918 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 additional 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.

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

Directors’ Interests in Shares
As at 31 December 2002, 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:

Family
interests

No. of shares held
Corporate
interests

Other
interests

4,083,823
(Note 1)

255,012
(Note 2)

2,432,914
(Note 1)

—

4,083,823
(Note 1)

3,750,000
(Note 3)

Name

Peter Ting Chang Lee

Fa-kuang Hu

Hans Michael Jebsen

Per Jorgensen

Chien Lee

Michael Tze Hau Lee

Michael Chi Kung Moy

Deanna Ruth Tak Yung Rudgard

Pauline Wah Ling Yu Wong

Geoffrey Meou-tsen Yeh

Personal
interests

2,000,000

—

60,000

6,678

970,000

1,023,233

—

1,871,600

254,000

249,619

V-nee Yeh

(Alternate to Geoffrey Meou-tsen Yeh)

43,259

Hysan Development Company Limited

—

131,565
(Note 4)

—

1,000
(Note 1)

84,575
(Note 1)

Total

6,083,823

255,012

2,492,914

6,678

8,803,823

1,023,233

131,565

1,871,600

254,000

250,619

—

127,834

ANNUAL
REPORT 2002

Notes:

(1)

(2)

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. Corporate interests of Peter T. C. Lee and Chien Lee relate to the same corporation.

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.

(3)

Such shares were held through a discretionary trust of which Chien Lee was a beneficiary.

(4)

These shares were held by the wife of Michael Chi Kung Moy who was therefore deemed to have interest in them.

As at 31 December 2002, 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 31 to the financial statements).

Apart from the above, as at 31 December 2002, 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 per cent of the issued share capital of the
Company (excluding shares issued pursuant to the Scheme) from time to time. The maximum entitlement of each participant
under the Scheme is 25 per cent of the maximum number of shares in respect of which options may at any time be granted
under the Scheme. 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 2002, 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:

Changes During the Year

Balance
as at
1.1.2002

Date of Cancelled/
Lapsed

grant

Granted Exercised

Balance
as at
31.12.2002

Exercise
price
(HK$)

Exercisable period

Peter Ting Chang Lee

1,350,000

7.1.99

Pauline Wah Ling Yu Wong

900,000

3.5.95

Michael Chi Kung Moy

1,200,000

23.12.99

NIL

1,350,000

9.22

7.1.01-6.1.09

NIL

900,000

13.46

3.5.97-2.5.05

NIL

1,200,000

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.

No options have been granted since the coming into force of certain new Listing Rules requirements. Future grants will only
be made under the existing Scheme where new Listing Rules requirements are complied with.

Hysan Development Company Limited

ANNUAL
REPORT 2002

Corporate Governance Statement

The Chairman and Managing Director has been delegated by the Board the authority to make grants to other management
staff, with the view to further strengthening the links between staff and shareholder objectives and to balance the interests of
shareholders generally. The exercise price will be set at 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.

The Group has in place appropriate Code of Practice and procedures regulating dealings in Company shares by Directors and
employees.

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)

(ii)

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.

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.

Related Party and Connected Transactions
The Group has provided shareholder loans to a non-wholly owned subsidiary in proportion to its shareholding. The quasi-equity
loans were provided in the ordinary course of the Group’s business. These activities constitute financial assistance and
“Connected Transactions” under the Listing Rules.

The Group 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 37 to the financial statements.

Directors’ Interests in Contracts of Significance
Except as disclosed above, 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.

Hysan Development Company Limited

ANNUAL
REPORT 2002

INTERNAL CONTROL AND RISK MANAGEMENT

The Group regularly reviews its internal control system. The key features of our system of internal control include:

(a)

(b)

(c)

systems of delegated authorities: there are in place defined organizational responsibilities and limits of authority. Details
on capital projects appraisal process are set out in “Capital Expenditure - Investment Appraisal” under “Operating and
Financial Review - Financial Review”;

financial monitoring: annual and long-term revenue, cashflow, and capital forecasts, updated regularly during the year;
monthly monitoring of revenue, cashflow, and capital expenditure and reporting to top management, quarterly reporting
of key financial information to Board;

risk management: details on financial risk management are set out in the relevant section in “Operating and Financial
Review - Financial Review”.

FINANCIAL TRANSPARENCY AND DISCLOSURE

The Group is committed to open and timely disclosure of relevant information on its activities to stakeholders, subject to
applicable legal requirements. We aim to continually improve on the quality of our reporting. The Group had in operation during
2002 a communication programme, and will continue to enhance the same.

Communication is made through:

•

the Company’s annual and interim reports, which has been enhanced to present a comprehensive, balanced and
understandable assessment of Group position and prospects

notices of and explanatory memoranda for annual and other general meetings, which have been enhanced to provide
shareholders with additional information in an understandable manner

regular analyst briefings

press briefings for Group annual results and other briefings, as appropriate

press releases on major developments of the Group

disclosures to the Stock Exchange of Hong Kong Limited and relevant regulatory bodies

inquiries from investors, media or the public are responded to by Chief Financial Officer, Company Secretary or the
appropriate members of senior management

Company’s web-site at http://www.hysan.com.hk from which shareholders can access information on the Group. The
web-site provides, inter alia, corporate announcements, press releases, annual reports, and corporate information of the
Group

Hysan Development Company Limited

ANNUAL
REPORT 2002

Corporate Governance Statement

SHAREHOLDINGS INFORMATION AND SHAREHOLDER RIGHTS

Shareholdings Information

As at 31 December 2002:

Authorised share capital: HK$7,250,000,000, comprising of 1,450,000,000 ordinary shares of HK$5.00 each.

Issued and fully paid-up capital: HK$5,173,084,625, comprising of 1,034,616,925 ordinary shares of HK$5.00 each.

Class of shares: one class of ordinary shares of HK$5.00 each with equal voting rights.

Top 10 Largest Shareholders

(as at 31 December 2002, as per register of members of the Company)

HKSCC Nominees Limited

HSBC Nominees (Hong Kong) Limited

Hang Seng (Nominee) Limited

Lee Hysan Estate Co, Ltd*

Kenwin Assets Limited*

Overton Holdings Limited*

Atlas Corporate Management Ltd*

Shanghai Commercial Bank (Nominees) Ltd

Liu Chong Hing (Nominees) Ltd

10. Clipperton Company Limited*

Number of Shares

376,077,646

126,597,346

125,602,454

90,118,724

43,902,720

39,809,001

32,510,110

20,248,255

17,019,739

36.35

12.24

12.14

8.71

4.24

3.85

3.14

1.96

1.64

Total

915,788,715

88.51

Note: * denotes entities whose interests are attributable to the substantial shareholder: Lee Hysan Estate Company, Limited (see “Substantial

Shareholders” under Directors’ Report)

Hysan Development Company Limited

ANNUAL
REPORT 2002

Number of shares

1,024,743,032
4,379,714
5,125,512
88,766
279,901

99.04
0.42
0.50
0.01
0.03

1,034,616,925

100.00

Location of Shareholders

(as at 31 December 2002, as per register of members of the Company)

Location of shareholders

Hong Kong
U.K.
US and Canada
Singapore
Others

Total

Shareholder Rights

All ordinary shares of the Company have equal voting rights. The Board 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.

Annual General Meeting proceedings are continually reviewed in the light of corporate governance best practices. Separate
resolutions are proposed at the Annual General Meeting on each substantially separate issue, including the election of
individual directors. Comprehensive information on businesses to be transacted at the forthcoming Annual General Meeting,
together with frequently asked questions regarding the voting procedures, has been included in the circular accompanying the
Annual Report.

The Company arranges for the Annual Report and Financial Statements and related papers to be posted to shareholders so as
to allow at least 35 days for consideration prior to the Annual General Meeting. Financial and other information on the Group is
also made available at the Group’s website at www.hysan.com.hk.

By order of the Board
Wendy W. Y. Yung
Company Secretary

Hong Kong, 11 March 2003

Hysan Development Company Limited

ANNUAL
REPORT 2002

Audit Committee Report

The Audit Committee has three members, a majority of whom are independent non-executive Directors.

The Committee oversees the financial reporting process. In this process, management is primarily responsible for the
preparation of Group financial statements including the selection of suitable accounting policies. External auditors are
responsible for auditing and attesting to Group financial statements and evaluating Group system of internal controls. The
Audit Committee oversees the respective work of management and external auditors to endorse the processes and
safeguards employed by them.

The Audit Committee has reviewed and discussed with management and external auditors the 2002 consolidated financial
statements included in the 2002 Annual Report. In this regard, the Committee had discussions with management with regard
to new or changes in accounting policies as applied, and significant judgments affecting the Group financial statements. The
Committee also received reports and met with the external auditors to discuss the general scope of their audit work, their
assessment of Group internal controls.

Based on these review and discussions, and the report of the external auditors, the Audit Committee recommended to the
Board of Directors approval of the consolidated financial statements for the year ended 31 December 2002, with the Auditors’
Report thereon.

The Audit Committee also reviewed and recommended to the Board of Directors approval of the unaudited financial
statements for the first six months of 2002, prior to public announcement and filing.

The Committee recommended to the Board that the shareholders be asked to re-appoint Deloitte Touche Tohmatsu as the
Group’s external auditors for 2003.

The Committee presents a report to the Board on its findings after each Committee meeting.

MEMBERS OF THE AUDIT COMMITTEE
David AKERS-JONES (Chairman)
Per JORGENSEN
Chien LEE

Hong Kong, 11 March 2003

Hysan Development Company Limited

ANNUAL
REPORT 2002

Directors’ Report

The Directors submit their report together with the audited financial statements for the year ended 31 December 2002, which
were approved by the Board of Directors on 11 March 2003.

PRINCIPAL ACTIVITIES

The principal activities of the Group continued throughout 2002 to be property development and investment and investment
holding. Details of the Group’s associates and principal subsidiaries at 31 December 2002 are set out in notes 15 and 39
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 2002 are set out in the consolidated income statement on page 43.

An interim dividend of HK$0.10 per share amounting to HK$103,355,198 was paid to shareholders during the year.

The Board of Directors recommends the payment of a final dividend of HK$0.265 per share with a scrip alternative to the
shareholders on the register of members on 13 May 2003, absorbing HK$274,173,485. The ordinary dividends paid and
proposed in respect of the full year 2002 will absorb HK$377,528,683, 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 2002. The
revaluation resulted in a deficit as compared to carrying amount of HK$2,158 million, with the Group’s attributable share being
HK$2,073 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 13 to the
financial statements.

Details of the major investment properties of the Group at 31 December 2002 are set out in section under “Schedule of
Principal Properties” of the Annual Report.

PROPERTY, PLANT AND EQUIPMENT

Details of movements during the year in the property, plant and equipment of the Group and the Company are set out in note
12 to the financial statements.

Hysan Development Company Limited

ANNUAL
REPORT 2002

Directors’ Report

SHARE CAPITAL AND FIXED RATE NOTES

The Company issued a total of 3,313,550 ordinary shares under the scrip dividend scheme accompanying year 2001 final
dividends and year 2002 interim dividends. During the year, neither the Company nor its subsidiaries purchased, sold or
redeemed any of the Company’s listed securities. Details of movements during the year in the share capital of the Company
are set out in note 28 to the financial statements.

During the year, a subsidiary of the Company issued an aggregate of US$200 million 7% ten-year notes under the established
medium term note programme with a full guarantee of the Company. The notes were listed on the Luxembourg Stock
Exchange. The net proceeds were predominately used to refinance the maturing debts and for general corporate purpose.

CORPORATE GOVERNANCE

The Company is committed to a high standard of corporate governance and has complied throughout the year 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); and (c) Connected and Related Party Transactions. Further information on Group human resources and
social responsibility are set out in relevant sections of the Annual Report.

THE BOARD

The Board currently comprises Peter T. C. Lee, Chairman and Managing Director, Michael T. H. Lee, Chief Operating Officer
and Director, Pauline W. L. Yu Wong, Director, Property and Michael C. K. Moy, Chief Financial Officer and Director, and nine
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 24 and 25.

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. Dr. Victor K.K.
Fung, having served on the Board since 1998, gave notice that he would not stand for re-election as at the forthcoming Annual
General Meeting. Accordingly, Peter T. C. Lee and Chien 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.

Hysan Development Company Limited

ANNUAL
REPORT 2002

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 judgments 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 2002, 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

No. of shares

429,046,912

These interests are in addition to those disclosed in “Corporate Governance” section of the Annual Report 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.

POST BALANCE SHEET EVENT

Details of the post balance sheet event are set out in note 38 to the financial statements.

DONATIONS

During the year, the Group made donations totalling HK$1,457,382 for charitable and other purposes.

AUDITORS

A resolution for the re-appointment of Messrs. Deloitte Touche Tohmatsu as auditors of the Company is to be proposed at the
forthcoming Annual General Meeting.

By order of the Board
Peter T. C. Lee
Chairman and Managing Director

Hong Kong, 11 March 2003

Hysan Development Company Limited

ANNUAL
REPORT 2002

Auditors’ Report

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 43 to 77 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 2002 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, 11 March 2003

Hysan Development Company Limited

Consolidated Income Statement

for the year ended 31 December 2002

ANNUAL
REPORT 2002

Turnover
Property expenses
Cost of property sales

Gross profit
Impairment loss (arising) reversed in respect

of investments in securities

Other operating income
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 in respect of interests in associates
Share of results of associates

Profit before taxation
Taxation

Profit after taxation
Minority interests

Net profit for the year

Dividends

Earnings per share

Basic

Diluted

Notes

5
8

2002
HK$’000

1,233,398
(235,841)
(50)

2001
HK$’000

1,355,450
(223,598)
—

997,507

1,131,852

(800)
15,908

60
(85,836)

926,839
(220,553)
—
(10,064)
143

696,365
(97,903)

598,462
(54,588)

6,225
18,557

60
(89,956)

1,066,738
(314,428)
33,531
(4,880)
(2,338)

778,623
(114,903)

663,720
(63,377)

543,874

600,343

377,529

391,598

HK52.66 cents

HK58.26 cents

HK52.66 cents

HK58.24 cents

Hysan Development Company Limited

ANNUAL
REPORT 2002

Consolidated Balance Sheet

at 31 December 2002

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
Interest 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
Interest payable
Rental deposits from tenants
Deferred income
Taxation payable
Unclaimed dividends

Net current liabilities

Notes

2002
HK$’000

2001
HK$’000

12
13
15
16
17
18

24
25
20

56,329
24,841,010
61,317
1,483,821
(1,076)
16,452

50,158
26,638,500
61,324
1,754,059
(1,136)
20,936

26,457,853

28,523,841

1,574
21,372
10,117
24,215
1,863
38,183

457
26,612
9,445
14
2,764
59,459

97,324

98,751

737,638
—
108,598
74,234
233,530
686
126,122
1,412

139,837
1,999,547
58,233
13,220
248,911
—
100,673
2,137

1,282,220

2,562,558

(1,184,896)

(2,463,807)

Total assets less current liabilities carried forward

25,272,957

26,060,034

Hysan Development Company Limited

ANNUAL
REPORT 2002

Total assets less current liabilities brought forward

25,272,957

26,060,034

Notes

2002
HK$’000

2001
HK$’000

Non-current liabilities

Advances from investees
Amounts due to minority shareholders
Long term bank loans - due after one year
Floating rate notes
Fixed rate notes
Deferred income
Deferred taxation

MINORITY INTERESTS

NET ASSETS

CAPITAL AND RESERVES

Share capital
Accumulated profits
Other reserves

22
23
24
25
26
21
27

28
29
30

51,676
292,765
3,009,223
398,090
1,551,003
5,541
1,295

52,571
292,765
3,088,634
397,047
—
—
—

5,309,593

3,831,017

19,963,364

22,229,017

876,388

962,092

19,086,976

21,266,925

5,173,084
3,747,017
10,166,875

5,156,516
3,580,672
12,529,737

19,086,976

21,266,925

The financial statements on pages 43 to 77 were approved and authorised for issue by the Board of Directors on
11 March 2003 and are signed on its behalf by:

Peter T.C. Lee
Director

David Akers-Jones
Director

Hysan Development Company Limited

ANNUAL
REPORT 2002

Balance Sheet

at 31 December 2002

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

Current liabilities

Long term bank loans - due within one year
Creditors and accruals
Interest payable
Rental deposits from tenants
Amounts due to subsidiaries
Taxation payable
Unclaimed dividends

Net current liabilities

Total assets less current liabilities

Non-current liabilities

Long term bank loans - due after one year
Deferred taxation

NET ASSETS

CAPITAL AND RESERVES

Share capital
Accumulated profits
Other reserves

Notes

2002
HK$’000

2001
HK$’000

12
13
14
15
16
18

19
18

24
20

24
27

28
29
30

12,475
3,295,000
12,990,625
3
2,031
16,452

5,735
3,500,000
12,908,172
3
2,831
20,936

16,316,586

16,437,677

939
882
1,614
1,863
9,547

14,845

687,638
14,177
11,458
27,366
622,700
16,332
1,412

1,381,083

1,023
925
2,416
2,764
15,289

22,417

139,837
16,711
11,066
27,307
7,473
6,696
2,137

211,227

(1,366,238)

(188,810)

14,950,348

16,248,867

2,200,123
1,295

3,088,634
—

2,201,418

3,088,634

12,748,930

13,160,233

5,173,084
3,741,503
3,834,343

5,156,516
3,957,698
4,046,019

12,748,930

13,160,233

The financial statements on pages 43 to 77 were approved and authorised for issue by the Board of Directors on
11 March 2003 and are signed on its behalf by:

Peter T.C. Lee
Director

Hysan Development Company Limited

David Akers-Jones
Director

Consolidated Statement of Changes in Equity

for the year ended 31 December 2002

ANNUAL
REPORT 2002

At beginning of the year

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

Net losses not recognised in the income statements
Net profit for the year
Dividends paid during the year
Issue of shares in lieu of cash dividend
Premium on issue of shares in lieu of cash dividend
Share issue expenses
Shares repurchased and cancelled
Reversal of capital reserve and translation reserve on disposal of an associate
Realisation on disposal of investment properties

At end of the year

Represented by:

Balance after amount set aside for dividend
Amount set aside for dividend

2002
HK$’000

2001
HK$’000

21,266,925

23,478,424

(284,395)
(2,158,317)
(856)
86,600

(2,356,968)
543,874
(392,120)
16,568
10,199
(10)
—
—
(1,492)

(566,708)
(1,972,248)
(2,823)
131,703

(2,410,076)
600,343
(422,211)
40,080
30,847
(31)
(64,320)
13,869
—

19,086,976

21,266,925

18,812,802
274,174

20,978,160
288,765

19,086,976

21,266,925

Hysan Development Company Limited

ANNUAL
REPORT 2002

Consolidated Cash Flow Statement

for the year ended 31 December 2002

OPERATING ACTIVITIES
Profit from operations
Adjustments for:

Impairment loss arising (reversed) in respect of investments in securities
Interest income
Dividend income
Depreciation
Gain on property sales
Bank charges
Medium Term Note Programme expenses
Loss on disposal of property, plant and equipment
Release of negative goodwill arising on acquisition of

2002
HK$’000

2001
HK$’000

926,839

1,066,738

800
(4,842)
(10,512)
4,793
(1,500)
(9,543)
(509)
2

(6,225)
(3,749)
(14,408)
6,029
—
(7,930)
(1,967)
—

additional interest in a subsidiary

(60)

Operating cash flows before movements in working capital

905,468

1,038,428

Decrease (increase) in accounts receivable, prepayments and deposits
Decrease in staff housing loans, secured
Increase (decrease) in rental deposits from tenants, creditors and accruals

Cash generated from operations
Hong Kong Profits Tax paid

20,604
5,385
35,118

966,575
(71,159)

(41,142)
7,781
(19,856)

985,211
(73,367)

NET CASH FROM OPERATING ACTIVITIES

895,416

911,844

INVESTING ACTIVITIES
Interest received
Dividends received from investments in securities
Dividends received from associates
Additions to investment properties
Additions to property, plant and equipment
Proceeds on disposal of investment properties
Proceeds on disposal of property, plant and equipment
Acquisition of additional interest in a subsidiary
Advance to an associate
Repayments from an associate
Net proceeds received on disposal of an associate
Advances to investees
Construction costs paid

4,222
9,617
150
(362,465)
(11,872)
1,550
50
—
(10,064)
—
—
(14,957)
(38)

3,826
8,612
—
(178,098)
(2,380)
—
—
(243,947)
(7,288)
1,601
35,929
(17,207)
(179)

NET CASH USED IN INVESTING ACTIVITIES

(383,807)

(399,131)

Hysan Development Company Limited

ANNUAL
REPORT 2002

2002
HK$’000

2001
HK$’000

6,855
(171,213)
(366,078)
(53,692)
(10)
—

—
1,750,038
1,550,016
(1,231,648)
(2,000,000)
—

—
(316,019)
(351,429)
(63,502)
(31)
(64,320)

(263,754)
1,604,814
—
(1,081,843)
—
(1,115)

FINANCING ACTIVITIES
Net proceeds received on derivatives
Interest paid
Dividends paid
Dividends paid to minority shareholders of subsidiaries
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
Issue of fixed rate notes
Repayment of unsecured bank loans
Repayment of floating rate notes
Repayment to investees

NET CASH USED IN FINANCING ACTIVITIES

(515,732)

(537,199)

NET DECREASE IN CASH AND CASH EQUIVALENTS

(4,123)

(24,486)

CASH AND CASH EQUIVALENTS AT 1 JANUARY

27,069

51,555

CASH AND CASH EQUIVALENTS AT 31 DECEMBER

22,946

27,069

ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS
Cash and bank balances
Time deposits

1,574
21,372

457
26,612

22,946

27,069

Hysan Development Company Limited

ANNUAL
REPORT 2002

Notes to the Financial Statements

for the year ended 31 December 2002

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

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. The adoption of these SSAPs has
resulted in a change in the format of presentation of the cash flow statement and the statement of changes in equity but
has had no material effect on the results for the current or prior accounting periods. Accordingly, no prior period
adjustment has been required.

Foreign Currencies

The revisions to SSAP 11 “Foreign Currency Translation” have eliminated the choice of translating the income
statements of overseas associates at the closing rate for the period, the policy previously followed by the Group. They
are now required to be translated at an average rate. This change in accounting policy has not had any material effect on
the results for the current or prior accounting periods.

Cash Flow Statements

In the current period, the Group has adopted SSAP 15 (Revised) “Cash Flow Statements”. Under SSAP 15 (Revised),
cash flows are classified under three headings — operating, investing and financing, rather than the previous five
headings. Interests received and interests paid, which were previously presented under a separate heading, are
classified as investing and financing cash flows respectively. Cash flows arising from taxes on income are classified as
operating activities, unless they can be separately identified with investing or financing activities. Cash flows of overseas
associates have been re-translated at the rates prevailing at the dates of the cash flows rather than the rate of exchange
ruling on the balance sheet date. The change in exchange rates used for translation of the cash flows of overseas
associates has not had any material effect on the results for the current or prior accounting periods.

Employee Benefits

In the current period, the Group has adopted SSAP 34 “Employee Benefits”, which introduces measurement rules for
employee benefits, including retirement benefit plans. Because the Group participates only in defined contribution
retirement benefit schemes, the adoption of SSAP 34 has not had any material impact on the financial statements.

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.

Hysan Development Company Limited

ANNUAL
REPORT 2002

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.

The results of associates are accounted for by the Company on the basis of dividends received and receivable during the
year.

Hysan Development Company Limited

ANNUAL
REPORT 2002

Notes to the Financal Statements

SIGNIFICANT ACCOUNTING POLICIES continued

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.

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 and any subsequent impairment
losses. 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.

Hysan Development Company Limited

ANNUAL
REPORT 2002

SIGNIFICANT ACCOUNTING POLICIES continued

Property, plant and equipment continued

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
Furniture, fixtures and equipment
Computers
Motor vehicles

Over the remaining term of the lease
Over the shorter of the term of the lease, or 40 years
20%
20%
25%

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.

Impairment

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible 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 loss is recognised as an expense immediately, unless the asset is carried at 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 asset is carried at revalued amount under another SSAP, in which
case the impairment loss is treated as revaluation increase under that SSAP.

Fixed rate notes / floating rate notes issue expenses

Expenses incurred directly in connection with the issue of fixed rate notes / 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. Income and expense items are translated at the
average exchange rates for the period. 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.

Hysan Development Company Limited

ANNUAL
REPORT 2002

Notes to the Financal Statements

SIGNIFICANT ACCOUNTING POLICIES continued

Taxation

The charge for taxation is based on the results for the year as adjusted for items which are non-assessable or
disallowed. Timing differences arise from the recognition for tax purposes of certain items of income and expense in a
different accounting period from that in which they are recognised in the financial statements. The tax effect of 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 benefit costs

Payments to the Mandatory Provident Fund Scheme are charged as an expense as they fall due.

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.

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.

Financial instruments and derivatives

Interest rate and currency swaps are used to manage the Group’s exposure to interest rate and foreign exchange rate
fluctuation. It is the Group’s policy not to enter into derivative transactions for speculative purposes. The notional
amounts of interest rate and currency swaps are recorded off balance sheet. Interest flows arising on the interest rate
swaps are accounted for on an accrual basis.

TURNOVER

Turnover comprises:

Gross rental income from properties
Income from property sales
Management fee and security service income

2002
HK$’000

2001
HK$’000

1,229,599
1,550
2,249

1,351,892
—
3,558

1,233,398

1,355,450

As the Group’s turnover is derived principally from rental income and wholly in Hong Kong, no segment financial analysis
is provided.

Hysan Development Company Limited

PROFIT FROM OPERATIONS

Profit from operations has been arrived at after charging (crediting):

Staff costs
Retirement benefits scheme contributions (Note 32)
Forfeited contributions

Depreciation
Auditors’ remuneration
Rental income arising from operating leases less out-goings
Dividends from

– listed investments
– unlisted investments

Gain on property sales
Interest income
Loss on disposal of property, plant and equipment

6. DIRECTORS’ REMUNERATION

Directors’ fees
Other emoluments:
Basic salaries
Housing, other allowances and benefits in kind
Bonus paid
Retirement benefits scheme contributions

ANNUAL
REPORT 2002

2002
HK$’000

2001
HK$’000

111,699
4,821
(1,189)

107,645
4,456
(2,742)

115,331

109,359

4,793
1,629
(996,702)

6,029
1,636
(1,131,580)

(3,145)
(7,367)
(1,500)
(4,842)
2

(8,612)
(5,796)
—
(3,749)
—

2002
HK$’000

2001
HK$’000

757

7,809
2,739
1,552
232

792

7,776
3,556
1,625
210

13,089

13,959

Hysan Development Company Limited

ANNUAL
REPORT 2002

Notes to the Financal Statements

6. DIRECTORS’ REMUNERATION continued

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

2002
No. of
Directors

2001
No. of
Directors

9
1
—
—
—
2
—
1
—

11
1
—
—
—
1
1
—
1

Directors’ fees paid to independent non-executive Directors during the year totalled HK$255,000 (2001: HK$249,740).
They received no other emoluments from the Company or any of its subsidiaries.

EMPLOYEE COSTS

The five highest paid individuals included four (2001: three) Directors, details of whose remuneration are set out in note 6.
The remuneration of the one individual (2001: two individuals) is detailed as follows:

Basic salaries, housing, other allowances and benefits in kind
Bonus paid
Retirement benefits scheme contributions

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

Hysan Development Company Limited

2002
HK$’000

2001
HK$’000

2,120
277
12

2,409

3,886
369
24

4,279

2002
No. of
employees

2001
No. of
employees

—
—
1

—
1
1

FINANCE COSTS

Interest on

– bank loans, overdraft and other loans:
wholly repayable within five years
not repayable within five years
– floating rate notes
– fixed rate notes

Amortisation of fixed rate and floating rate notes issue expenses
Bank charges
Net exchange loss
Medium Term Note Programme expenses

TAXATION

The charge comprises:

Hong Kong Profits Tax

– for the year
– (over) underprovision in prior years

Deferred taxation (note 27)

ANNUAL
REPORT 2002

2002
HK$’000

2001
HK$’000

78,625
16,292
24,952
88,149

179,209
4,789
117,678
—

208,018

301,676

2,401
9,543
82
509

2,855
7,930
—
1,967

220,553

314,428

2002
HK$’000

2001
HK$’000

106,703
(10,095)

96,608
1,295

114,799
104

114,903
—

Taxation attributable to the Company and its subsidiaries

97,903

114,903

Hong Kong Profits Tax is calculated at 16% (2001: 16%) of the estimated assessable profit for the year.

Details of the potential deferred tax charge not provided for in the year are set out in note 27.

Hysan Development Company Limited

ANNUAL
REPORT 2002

Notes to the Financal Statements

10. DIVIDENDS

Ordinary shares:

Interim dividend, paid – HK$0.10 per share (2001: HK$0.10)
Final dividend, proposed – HK$0.265 per share (2001: HK$0.28)

2002
HK$’000

2001
HK$’000

103,355
274,174

102,833
288,765

377,529

391,598

The 2002 final dividend of HK$0.265 (2001: 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 2002 will be payable in cash with a
scrip dividend alternative.

During the year, scrip dividend alternatives were offered to shareholders in respect of the 2001 final and 2002 interim
dividends. These alternatives were accepted by the shareholders as follows:

Dividends:
Cash
Share alternative

11. EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share is based on the following data:

Earnings for the purposes of basic and diluted earnings

per share (net profit for the year)

Weighted average number of ordinary shares for the

purposes of basic earnings per share

Effect of dilutive potential ordinary shares:

Share options

Weighted average number of ordinary shares for the

purposes of diluted earnings per share

2002
Interim
HK$’000

96,646
6,709

2001
Final
HK$’000

268,707
20,058

103,355

288,765

2002
HK$’000

2001
HK$’000

543,874

600,343

’000

1,032,758

1,030,485

—

358

1,032,758

1,030,843

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 2002

12. 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

42,500
—
—
(1,500)

39,999
2,441
(305)
—

5,280
9,431
—
—

1,611
—
—
—

89,390
11,872
(305)
(1,500)

THE GROUP

COST OR VALUATION
At 1 January 2002
Additions
Disposals
Deficit on revaluation

At 31 December 2002

41,000

42,135

14,711

1,611

99,457

Comprising:
At cost
At valuation 2002

—
41,000

42,135
—

14,711
—

1,611
—

58,457
41,000

41,000

42,135

14,711

1,611

99,457

ACCUMULATED DEPRECIATION
At 1 January 2002
Provided for the year
Eliminated on disposals
Adjustment on revaluation

—
644
—
(644)

34,786
3,165
(253)
—

At 31 December 2002

—

37,698

2,835
984
—
—

3,819

1,611
—
—
—

39,232
4,793
(253)
(644)

1,611

43,128

NET BOOK VALUES

At 31 December 2002

41,000

4,437

10,892

At 31 December 2001

42,500

5,213

2,445

—

56,329

50,158

Hysan Development Company Limited

ANNUAL
REPORT 2002

Notes to the Financal Statements

12. PROPERTY, PLANT AND EQUIPMENT continued

THE COMPANY

COST
At 1 January 2002
Additions

At 31 December 2002

ACCUMULATED DEPRECIATION
At 1 January 2002
Provided for the year

At 31 December 2002

NET BOOK VALUES

At 31 December 2002

At 31 December 2001

Furniture,
fixtures and
equipment
HK$’000

Computers
HK$’000

Motor
vehicles
HK$’000

Total
HK$’000

19,757
1,126

20,883

16,457
2,363

18,820

2,063

3,300

5,266
8,900

14,166

2,831
923

3,754

10,412

2,435

1,611
—

1,611

1,611
—

1,611

—

26,634
10,026

36,660

20,899
3,286

24,185

12,475

5,735

The leasehold land and buildings of the Group were revalued at 31 December 2002 by Knight Frank (Services) Limited,
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$33,560,049 (2001: HK$34,084,593).

Furniture, fixtures and equipment of the Group and the Company include assets carried at cost of HK$21,897,838 (2001:
HK$20,512,083) and HK$1,266,778 (2001: HK$846,317) respectively and accumulated depreciation of HK$19,216,069
(2001: HK$18,692,470) and HK$841,662 (2001: HK$804,179) respectively in respect of assets held for use under
operating leases. Depreciation charges in respect of those assets for the year amounted to HK$776,954 (2001:
HK$944,589) and HK$37,483 (2001: HK$21,352) respectively.

Hysan Development Company Limited

ANNUAL
REPORT 2002

13.

INVESTMENT PROPERTIES

At 1 January
Additions
Adjustment resulted from cost variation
Disposals
Deficit on revaluation

THE GROUP

THE COMPANY

2002
HK$’000

2001
HK$’000

26,638,500
362,465
(96)
(1,542)
(2,158,317)

28,432,700
178,098
(50)
—
(1,972,248)

2002
HK$’000

3,500,000
2,274
—
—
(207,274)

2001
HK$’000

3,740,000
1,331
—
—
(241,331)

At 31 December

24,841,010

26,638,500

3,295,000

3,500,000

The value of investment properties comprises:

Land in Hong Kong:

– Medium term lease
– Long lease

THE GROUP

THE COMPANY

2002
HK$’000

2001
HK$’000

2002
HK$’000

2001
HK$’000

4,000,000
20,841,010

4,300,000
22,338,500

—
3,295,000

—
3,500,000

24,841,010

26,638,500

3,295,000

3,500,000

The investment properties of the Group and the Company were revalued at 31 December 2002 by Knight Frank
(Services) Limited, 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.

14.

INVESTMENTS IN SUBSIDIARIES

Unlisted shares, at cost
Amounts due therefrom

Less: Impairment loss

THE COMPANY

2002
HK$’000

2001
HK$’000

5
13,394,620

5
13,312,167

13,394,625
(404,000)

13,312,172
(404,000)

12,990,625

12,908,172

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 2002 are set out in note 39.

Hysan Development Company Limited

ANNUAL
REPORT 2002

Notes to the Financal Statements

15.

INTERESTS IN ASSOCIATES

Unlisted shares, at cost
Share of net liabilities

Amounts due therefrom

Less: Impairment loss

THE GROUP

THE COMPANY

2002
HK$’000

—
(77,171)

(77,171)
159,850

82,679
(21,362)

2001
HK$’000

—
(77,164)

(77,164)
149,786

72,622
(11,298)

61,317

61,324

2002
HK$’000

2001
HK$’000

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 2002.

The Group’s share of post-acquisition losses of an associate exceeds the carrying amount of its equity investment in that
associate, since the Group has obligation to meet its funding requirements.

Details of the Group’s associates at 31 December 2002 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

Name of associate

Parallel Asia Engineering

Incorporated

Hong Kong

Ordinary

—

25%

Company Limited

Wingrove Investment

Incorporated

Singapore

Ordinary

25%

—

Pte Limited

Principal activity

Investment
holding

Property
development
and investment

Hysan Development Company Limited

16.

INVESTMENTS IN SECURITIES

THE GROUP

Equity securities:

Listed in Hong Kong

Other investments:
Club debentures
Less: Impairment loss

Unlisted shares
Amounts due therefrom

Less: Impairment losses

ANNUAL
REPORT 2002

Other securities

2002
HK$’000

2001
HK$’000

772,827

1,057,222

2,831
(800)

2,031

136,856
700,440

837,296
(128,333)

2,831
—

2,831

136,856
685,483

822,339
(128,333)

708,963

694,006

710,994

696,837

1,483,821

1,754,059

Market value of securities listed in Hong Kong

772,827

1,057,222

Carrying amount analysed for reporting purposes as:
Non-current

1,483,821

1,754,059

THE COMPANY

Other investments:
Club debentures
Less: Impairment loss

Carrying amount analysed for reporting purpose as:
Non-current

Other securities

2002
HK$’000

2001
HK$’000

2,831
(800)

2,031

2,831
—

2,831

2,031

2,831

Hysan Development Company Limited

ANNUAL
REPORT 2002

Notes to the Financal Statements

17. NEGATIVE GOODWILL

Carrying amount at 1 January
Negative goodwill arising on acquisition of additional

interest in a subsidiary during the year

Released to income during the year

Carrying amount at 31 December

THE GROUP

2002
HK$’000

2001
HK$’000

1,136

—
(60)

1,076

—

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.

18. STAFF HOUSING LOANS, SECURED

Staff housing loans, secured
Less: Amounts due within one year shown under current assets

THE GROUP
AND THE COMPANY
2002
HK$’000

2001
HK$’000

18,315
(1,863)

23,700
(2,764)

16,452

20,936

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.

19. 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 2002 and 2001 were aged less than 90 days.

Hysan Development Company Limited

ANNUAL
REPORT 2002

20. CREDITORS AND ACCRUALS

All of the trade payables of the Group as at 31 December 2002 and 2001 were aged less than 90 days.

21. DEFERRED INCOME

Deferred income
Less: Amount due within one year shown under current liabilities

THE GROUP

2002
HK$’000

2001
HK$’000

6,227
(686)

5,541

—
—

—

In connection with the US$200 million ten-year inaugural notes, the Group has entered into derivative transactions to
lock in the ten-year US Treasury rate so as to manage its interest rate exposures. The gain on the transactions is
deferred and recognised on a straight line basis over the term of the ten-year notes, with final maturity in February 2012.

22. ADVANCES FROM INVESTEES

The advances are unsecured, interest free and are not repayable within one year.

23. AMOUNTS DUE TO MINORITY SHAREHOLDERS

The amounts are unsecured, interest free and are not repayable within one year.

Hysan Development Company Limited

ANNUAL
REPORT 2002

Notes to the Financal Statements

24. LONG TERM BANK LOANS

THE GROUP

THE COMPANY

2002
HK$’000

2001
HK$’000

2002
HK$’000

2001
HK$’000

Bank loans, unsecured

3,746,861

3,228,471

2,887,761

3,228,471

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

737,638

139,837

687,638

139,837

685,600

435,500

685,600

435,500

1,617,600
706,023

2,172,634
480,500

1,200,500
314,023

2,172,634
480,500

3,746,861

3,228,471

2,887,761

3,228,471

Less: Amounts due within one year

shown under current liabilities

(737,638)

(139,837)

(687,638)

(139,837)

3,009,223

3,088,634

2,200,123

3,088,634

25. FLOATING RATE NOTES

Floating rate notes
Less: Unamortised notes issue expenses

THE GROUP

2002
HK$’000

400,000
(1,910)

2001
HK$’000

2,400,000
(3,406)

398,090

2,396,594

Less: Amount due within one year shown under current liabilities

—

(1,999,547)

398,090

397,047

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

26. FIXED RATE NOTES

Fixed rate notes
Less: Unamortised notes issue expenses

ANNUAL
REPORT 2002

THE GROUP

2002
HK$’000

1,559,977
(8,974)

1,551,003

2001
HK$’000

—
—

—

Hysan (MTN) Limited, a wholly-owned subsidiary of the Company, issued US$200 million ten-year fixed rate notes in
February 2002. The notes are guaranteed as to principal and interest by the Company, bear interest at the rate of 7% per
annum and are repayable in full in February 2012.

27. DEFERRED TAXATION

At the balance sheet date, the deferred taxation provided represents the tax effect of timing differences because of
excess of tax allowances over depreciation.

A deferred tax asset has not been recognised in the financial statements in respect of tax losses available to offset
future profits as it is not certain that the tax losses will be utilised in the foreseeable future.

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.

28. SHARE CAPITAL

THE COMPANY

Ordinary shares of HK$5 each

Authorised:

Number of shares

Share capital

2002
’000

2001
’000

2002
HK$’000

2001
HK$’000

At 1 January and 31 December

1,450,000

7,250,000

Issued and fully paid:

At 1 January
Issued in lieu of cash dividend
Shares repurchased and cancelled

1,031,303
3,314
—

1,030,251
8,016
(6,964)

5,156,516
16,568
—

5,151,256
40,080
(34,820)

At 31 December

1,034,617

1,031,303

5,173,084

5,156,516

On 13 June 2002 and 21 October 2002 respectively, the Company issued and allotted a total of 2,248,645 shares and
1,064,905 shares of HK$5 each in the Company at HK$8.92 and HK$6.30 to the shareholders who elected to receive
shares in the Company in lieu of cash for the 2001 final and 2002 interim dividends pursuant to the scrip dividend
scheme announced by the Company on 14 May 2002 and 18 September 2002. These shares rank pari passu in all
respects with other shares in issue.

None of the Company’s subsidiaries purchased, sold or redeemed any of the Company’s listed securities during the year.

Hysan Development Company Limited

ANNUAL
REPORT 2002

Notes to the Financal Statements

29. ACCUMULATED PROFITS

THE GROUP

THE COMPANY

2002
HK$’000

2001
HK$’000

2002
HK$’000

2001
HK$’000

At 1 January

3,580,672

3,436,247

3,957,698

4,077,068

Shares repurchased and cancelled:

– Nominal value of shares repurchased
– Premium on shares repurchased

Net profit for the year

—
—
543,874

(34,820)
(29,500)
600,343

—
—
161,334

(34,820)
(29,500)
336,548

Profit available for distribution
Dividends

4,124,546
(377,529)

3,972,270
(391,598)

4,119,032
(377,529)

4,349,296
(391,598)

At 31 December

3,747,017

3,580,672

3,741,503

3,957,698

The accumulated profits of the Group include accumulated losses of HK$87,987,293 (2001: HK$88,130,335) attributable
to associates of the Group.

The distributable reserves of the Company as at 31 December 2002 amounted to HK$3,841,503,255 (2001:
HK$4,057,697,703), being its accumulated profits and general reserve at that date.

Hysan Development Company Limited

30. OTHER RESERVES

THE GROUP
At 1 January 2001
Premium on issue of shares
in lieu of cash dividend

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

At 31 December 2001
Premium on issue of shares
in lieu of cash dividend

Share issue expenses
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

Realisation on disposal of
investment properties
Final dividend for 2001 paid
Amount set aside for
2002 dividend

Interim dividend for 2002 paid

ANNUAL
REPORT 2002

Investment
property
premium revaluation
reserve
account
HK$’000
HK$’000

Investment
revaluation
reserve
HK$’000

Asset
revaluation
reserve
HK$’000

Capital
reserve
HK$’000

Capital
Translation redemption
reserve
HK’000

reserve
HK$’000

General
reserve
HK’000

Dividend
reserve
HK’000

Total
HK$’000

1,272,538

11,408,707

1,170,205

11,552

501,102

(12,736)

120,175

100,000

319,378

14,890,921

30,847
(31)

—

—
—

—

—
—

—

(566,708)

— (1,972,248)

—

—
—

—

131,703

—
—

—

—
—

—

(2,823)

—

—
—

—

—
—

—

1,133
—

12,736
—

—
—

1,303,354

9,568,162

603,497

8,729

502,235

10,199
(10)

—

—
—

—

—
—

(284,395)

— (2,158,317)

—

—
—

—

86,600

(1,492)
—

—
—

—

—
—

—

(856)

—

—
—

—

—
—

34,820

—

—
—

—

—
—

—

30,847
(31)

34,820

(566,708)

— (1,972,248)

—

(2,823)

—

131,703

—
(319,378)

13,869
(319,378)

391,598
(102,833)

154,995

100,000

288,765

12,529,737

—
—

—

—
—

—

—
—

—

10,199
(10)

(284,395)

— (2,158,317)

—

(856)

86,600

—
(288,765)

(1,492)
(288,765)

377,529
(103,355)

154,995

100,000

274,174

10,166,875

Hysan Development Company Limited

—
—

—

—
—

—

—
—

—

At 31 December 2002

1,313,543

7,494,953

319,102

7,873

502,235

ANNUAL
REPORT 2002

Notes to the Financal Statements

30. OTHER RESERVES continued

Investment
property
premium revaluation
reserve
account
HK$’000
HK$’000

Capital
redemption
reserve
HK$’000

General
reserve
HK$’000

Dividend
reserve
HK$’000

Total
HK$’000

1,272,538

2,440,236

120,175

100,000

319,378

4,252,327

30,847
(31)

—
—

—

—
—

(241,331)

—
—

—

34,820
—

—
—

—

—
—

—

30,847
(31)

(241,331)

—
(319,378)

34,820
(319,378)

391,598
(102,833)

1,303,354

2,198,905

154,995

100,000

288,765

4,046,019

10,199
(10)

—
—

(207,274)
—

—
—

—

—
—

10,199
(10)

—
(288,765)

(207,274)
(288,765)

377,529
(103,355)

THE COMPANY
At 1 January 2001
Premium on issue of shares
in lieu of cash dividend

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

At 31 December 2001
Premium on issue of shares
in lieu of cash dividend

Share issue expenses
Deficit on revaluation of
investment properties
Final dividend for 2001 paid
Amount set aside for

2002 dividend

Interim dividend for 2002 paid

At 31 December 2002

1,313,543

1,991,631

154,995

100,000

274,174

3,834,343

(a)

(b)

General reserve
General reserve was set up from the transfer of accumulated profits.

Capital reserve
Capital reserve comprises negative goodwill of HK$516,142,884 (2001: HK$516,142,884) arising from acquisition
of subsidiaries prior to 1 January 2001 and capitalisation issue of a subsidiary.

Hysan Development Company Limited

ANNUAL
REPORT 2002

31. EXECUTIVE SHARE OPTION SCHEME

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 3% of the issued share capital of the
Company (excluding shares issued pursuant to the Scheme) from time to time. The maximum entitlement of each
participant under the Scheme is 25% of the maximum number of shares in respect of which options may at any time be
granted under the Scheme. The exercise price was fixed at 80% 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 2002, Scheme participants were executive Directors of the Company with shares issuable under
options granted representing less than 0.4% (2001: 0.4%) of the then issued share capital of the Company. Options
expiring, granted and outstanding to them are as follows:

Changes During The Year

Balance as
at 1.1.2001
and 1.1.2002

Date of
grant

Cancelled/
Lapsed

Granted

Exercised

Balance as Exercise
price
(HK$)

at 31.12.2001
and 31.12.2002

Exercisable period

Peter Ting Chang Lee
Pauline Wah Ling Yu Wong
Michael Chi Kung Moy

1,350,000
900,000
1,200,000

7.1.99
3.5.95
23.12.99

NIL
NIL
NIL

1,350,000
900,000
1,200,000

9.22
13.46
7.54

7.1.01-6.1.09
3.5.97-2.5.05
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.

No options have been granted since the coming into force of certain new Listing Rules requirements. Future grants will
only be made under the existing Scheme where new Listing Rules requirements are complied with.

The Chairman and Managing Director has been delegated by the Board the authority to make grants to other
management staff, with the view to further strengthening the links between staff and shareholder objectives and to
balance the interests of shareholders generally. The exercise price will be set at 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.

32. RETIREMENT BENEFITS PLANS

With effect from 1 December 2000, the Group set up an enhanced MPF scheme (the “Enhanced MPF Scheme”), a
defined contribution scheme, for all qualifying employees. The Enhanced MPF Scheme is registered with the Mandatory
Provident Fund Schemes Authority under Section 124(1) of the Mandatory Provident Fund Schemes (General)
Regulation.

Pursuant to the rules of the Enhanced MPF Scheme, the Group’s contributions to the plan are based on fixed
percentages of members’ salaries, 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.

Total contributions made by the Group during the year amounted to HK$4,820,554 (2001: HK$4,456,482). Forfeited
contributions for the year of HK$1,189,078 (2001: HK$2,741,993) were fully utilised to fund the Group’s contributions.

Hysan Development Company Limited

ANNUAL
REPORT 2002

Notes to the Financal Statements

33. CONTINGENT LIABILITIES

As at 31 December 2002, there were contingent liabilities in respect of the following:

Corporate guarantee to a third party

in respect of the sale of the interest
in an associate

Corporate guarantee to subsidiaries
– for issue of floating rate notes
– for issue of fixed rate notes

Undertaking given to a bank in proportion

to shareholding regarding facilities
granted to a joint venture
property project

Guarantees to banks to provide

finance to
– An associate
– A property development project
– Subsidiaries

THE GROUP

THE COMPANY

2002
Million

2001
Million

2002
Million

2001
Million

HK$3.6

—
—

HK$400.0
US$200.0

HK$2,400.0
—

S$18.6

—

S$12.0
S$22.0
—

S$12.0
S$22.0
HK$2,840.0

S$12.0
S$22.0
—

34. CAPITAL COMMITMENTS

As at 31 December 2002, the Group had capital commitments in respect of the following:

(a)

Investment properties:

Contracted but not provided for

(b)

Share of capital commitments for joint ventures:

Contracted but not provided for

2002
Million

2001
Million

HK$171.4

HK$70.9

HK$7.7

HK$20.2

Hysan Development Company Limited

ANNUAL
REPORT 2002

35. LEASE COMMITMENTS

The Group and the Company as lessee

As at 31 December 2002, 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

THE COMPANY

2002
HK$’000

2001
HK$’000

2002
HK$’000

—
—

—

—
—

—

5,884
138

6,022

2001
HK$’000

11,916
5,608

17,524

Operating lease payments represent rental payable by the Company to its subsidiaries for its staff quarters and office
premises which are negotiated and fixed for an average of two years and three years respectively.

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:

Within one year
In the second to fifth year inclusive
After five years

THE GROUP

THE COMPANY

2002
HK$’000

829,154
1,139,991
253,768

2001
HK$’000

894,372
1,240,792
313,466

2002
HK$’000

126,789
148,671
15,525

2001
HK$’000

131,887
105,997
16,509

2,222,913

2,448,630

290,985

254,393

36. OFF BALANCE SHEET FINANCIAL INSTRUMENTS

Details of the Group’s outstanding derivative instruments at balance sheet date are as follows:

Forward rate agreement – less than one year
Interest rate swaps – one to five years
Currency swaps – after five years

Notional Principal Amount
2001
HK$’000

2002
HK$’000

400,000
428,983
1,559,977

—
650,000
—

2,388,960

650,000

The Group has used off balance sheet derivative instruments to manage the interest rate and foreign exchange
exposures. These instruments, such as interest rate swaps and currency swaps, are employed solely for hedging
purpose and no speculative positions have been taken. The Group has also followed the established policy on monitoring
and managing the counter-party risk by restricting the derivative transactions to financial institutions with strong
investment-grade ratings and limiting the exposures to each counter-party at prudent levels.

Hysan Development Company Limited

ANNUAL
REPORT 2002

Notes to the Financal Statements

37. RELATED PARTY AND CONNECTED TRANSACTIONS

A. Related party transactions

During the year, the Group has the following transactions with related parties:

Substantial shareholder
2002
HK$’000

2001
HK$’000

Directors

2002
HK$’000

2001
HK$’000

—

20,823

21,070

6,147

6,167

36,567

46,054

Notes

(a)

(b)

(c)

—

179

Repairs and maintenance

expenses paid to

Gross rental income from

Construction cost paid
during the year for
investment properties
completed in previous
years

As at 31 December 2002, the Group has the following balances with related parties:

Included in creditors and
accruals were repairs
and maintenance
expenses payable to

Amount due to a minority

shareholder

Notes

(a)

(d)

Substantial shareholder
2002
HK$’000

2001
HK$’000

Directors

2002
HK$’000

2001
HK$’000

—

1,737

1,671

84,486

Hysan Development Company Limited

ANNUAL
REPORT 2002

37. RELATED PARTY AND CONNECTED TRANSACTIONS continued

A. Related party transactions continued

Notes:
(a)

Such expenses were incurred in connection with the repair and maintenance charges for lift, electrical installation and
gondola services.

(i)

(ii)

In relation to the lift and electrical installation and maintenance 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 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.

In relation to the gondola maintenance services, Hans Michael Jebsen is a director and shareholder of Jebsen and
Company Limited which entered into a number of gondola maintenance contracts with a subsidiary of the Company.

These transactions were carried out in the normal course of business and the fees were determined with reference to
market rates.

The Group has, in the ordinary course of its business, entered into lease agreements with related parties to lease premises
for varying periods. The leases were entered into in the normal course of business and the rentals were determined with
reference to market rates.

During the year ended 31 December 2001, 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 had been completed, with the
relevant sum being the amount fully paid under the contract last year. Such transaction was entered into on normal
commercial terms and on arm’s length basis.

The sum represents outstanding loan advanced by Jebsen and Company Limited to a non-wholly owned subsidiary of the
Group, Barrowgate Limited, in proportion to its shareholding for general funding purpose. Details of the terms are set out in
note 23.

(b)

(c)

(d)

B. Connected transaction

Loans totalling HK$552,096,609 were advanced by the Group to Barrowgate Limited (The Group: 65.36%; Hang
Seng Bank: 24.64%; Jebsen and Company Limited: 10%) for general funding purpose which sum has been
included in the disclosure in note 14. Loans totalling HK$292,764,698 advanced by the other shareholders in
proportion to their respective shareholdings are disclosed in note 23. These quasi-equity loans are non-interest-
bearing and have no fixed settlement date and are not repayable within one year. The grant of loans by the Group
constitutes a grant of financial assistance and is a connected transaction under Rule 14.25(2) of the Listing Rules.

38. POST BALANCE SHEET EVENT

On 15 January 2003, a subsidiary of the Company acquired additional 1,313,158 ordinary shares of HK$1 each of Country
Link Enterprises Limited, grouped under investments in securities, for an aggregate consideration of HK$1,313,158
which is satisfied by setting off the amounts due therefrom. As a result, the Group increases its shareholding from
18.75% to 26.3%.

Hysan Development Company Limited

ANNUAL
REPORT 2002

Notes to the Financal Statements

39. PRINCIPAL SUBSIDIARIES AT 31 DECEMBER 2002

Name of subsidiary

Place of incorporation

Place of operation

Admore Investments Limited
Golden Capital Investment Limited
HD Finance (BVI) Limited
HD Treasury Limited
HD Treasury Management Limited
Hysan China Holdings Limited
Hysan Treasury Limited
Hysan (MTN) 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
Silver Nicety Company Limited
South Eagle Investments Limited
Barrowgate Limited

Hong Kong
Hong Kong
British Virgin Islands
Hong Kong
Hong Kong
British Virgin Islands
Hong Kong
British Virgin Islands
Hong Kong
British Virgin Islands
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
British Virgin Islands
British Virgin Islands
British Virgin Islands
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
British Virgin Islands
Hong Kong

Hong Kong
Hong Kong
British Virgin Islands
Hong Kong
Hong Kong
British Virgin Islands
Hong Kong
Hong Kong
Hong Kong
British Virgin Islands
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
British Virgin Islands
British Virgin Islands
British Virgin Islands
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.
Other than the fixed rate notes issued by Hysan (MTN) Limited as disclosed in note 26, none of the subsidiaries had
issued any debt securities at the year-end.

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

Hysan Development Company Limited

ANNUAL
REPORT 2002

Class of
share held

Proportion of nominal value
of issued share capital
held by the Company

Issued share capital

indirectly

directly

Principal activities

HK$2
HK$2
HK$1
HK$2
HK$2
HK$1
HK$2
US$1
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$20
US$1
HK$10,000

—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
65.36%

100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
—
—
—
—
—
—
—
—
—
—
—
—

Investment holding
Investment holding
Treasury operation
Treasury operation
Treasury operation
Investment holding
Treasury operation
Treasury operation
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
Property investment
Property investment
Property investment

of operation

Hong Kong
Hong Kong
rgin Islands
Hong Kong
Hong Kong
rgin Islands
Hong Kong
Hong Kong
Hong Kong
rgin Islands
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
rgin Islands
rgin Islands
rgin Islands
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong

cessive length and
ts of the Group.
bsidiaries had

Hysan Development Company Limited

ANNUAL
REPORT 2002

Five-year Financial Summary

1998
HK$’000

1999
HK$’000

2000
HK$’000

2001
HK$’000

2002
HK$’000

CONSOLIDATED INCOME STATEMENT
Turnover

3,590,656

2,295,717

1,480,246

1,355,450

1,233,398

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

2,773,264
(1,251,944)
—

1,994,930
(526,819)
—

1,474,517
(449,020)
—

1,066,738
(314,428)
33,531

926,839
(220,553)
—

(108,000)
(75,702)

(98,418)
(4,284)

3,419
4,210

(4,880)
(2,338)

(10,064)
143

Profit before taxation
Taxation

Profit after taxation
Minority interests

1,337,618
(111,550)

1,365,409
(86,795)

1,033,126
(117,210)

778,623
(114,903)

696,365
(97,903)

1,226,068
(86,797)

1,278,614
(74,656)

915,916
(65,743)

663,720
(63,377)

598,462
(54,588)

Net profit for the year

1,139,271

1,203,958

850,173

600,343

543,874

Dividends

381,099

412,795

433,064

391,598

377,529

Earnings per share

– Basic

HK$1.11

HK$1.16

HK$0.82

HK$0.58

HK$0.53

– Diluted

N/A

HK$1.16

HK$0.82

HK$0.58

HK$0.53

Hysan Development Company Limited

ANNUAL
REPORT 2002

CONSOLIDATED BALANCE SHEET
Property, plant and equipment
Investment properties
Interests in associates
Investments in securities
Negative goodwill
Staff housing loans, secured
Net current liabilities

Advances from investees
Amounts due to minority shareholders
Long term loan
Long term bank loans
Convertible bonds
Floating rate notes
Fixed rate notes
Deferred income
Deferred taxation

1998
HK$’000

1999
HK$’000

2000
HK$’000

2001
HK$’000

2002
HK$’000

56,060
25,949,000
241,487
1,847,563
—
53,201
(615,596)

56,443
25,173,000
66,467
2,468,742
—
43,151
(1,476,134)

56,632
28,432,700
51,384
2,297,335
—
28,898
(1,149,722)

50,158
26,638,500
61,324
1,754,059
(1,136)
20,936
(2,463,807)

56,329
24,841,010
61,317
1,483,821
(1,076)
16,452
(1,184,896)

27,531,715

26,331,669

29,717,227

26,060,034

25,272,957

140,520
292,765
263,754
3,796,000
1,108,239
1,994,107
—
—
—

51,316
292,765
263,754
1,660,000
—
2,390,884
—
—
—

59,482
292,765
263,754
1,890,000
—
2,393,739
—
—
—

52,571
292,765
—
3,088,634
—
397,047
—
—
—

51,676
292,765
—
3,009,223
—
398,090
1,551,003
5,541
1,295

7,595,385

4,658,719

4,899,740

3,831,017

5,309,593

Net assets

19,936,330

21,672,950

24,817,487

22,229,017

19,963,364

Minority interests

1,169,607

1,146,458

1,339,063

962,092

876,388

18,766,723

20,526,492

23,478,424

21,266,925

19,086,976

Share capital
Reserves

5,158,136
13,608,587

5,183,810
15,342,682

5,151,256
18,327,168

5,156,516
16,110,409

5,173,084
13,913,892

Shareholders’ funds

18,766,723

20,526,492

23,478,424

21,266,925

19,086,976

Hysan Development Company Limited

ANNUAL
REPORT 2002

Notes

Hysan Development Company Limited

Shareholder Information

FINANCIAL CALENDAR

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
2003 interim results to be announced
2003 interim dividend payable

* subject to change

11 March 2003
6 May 2003
9 to 13 May 2003
13 May 2003
13 May 2003
(on or about) 20 May 2003
(on or about) 13 June 2003

August 2003 *
October 2003 *

DIVIDEND

SHAREHOLDER SERVICES

The Board recommends the payment of a final dividend of
HK26.5 cents 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, 13 May 2003. The scrip dividend
alternative is conditional upon the granting by the Listing
Committee of The Stock Exchange of Hong Kong Limited
of the listing of and permission to deal in the new shares
to be issued pursuant thereto.

A circular containing details of the scrip dividend and the
form of election will be mailed to shareholders on or about
Tuesday, 20 May 2003. 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, 9 June 2003.

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 Friday, 13 June 2003.

The share register will be closed from Friday, 9 May 2003 to
Tuesday, 13 May 2003, 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 Wednesday, 7 May 2003.

For enquiries about share transfer and registration, please
contact the Company’s Registrars:-

Standard Registrars Limited
G/F, Bank of East Asia Harbour View Centre
56 Gloucester Road
Wanchai, Hong Kong
Telephone : (852) 2980 1768
Facsimile : (852) 2861 1465

Holders of the Company’s ordinary shares should notify the
Registrars promptly of any change of their address.

INVESTOR RELATIONS

For enquiries relating to investor relations, please email to
investor@hysan.com.hk or write to:-

Investor Relations,
Hysan Development Company Limited
49/F., Manulife Plaza
The Lee Gardens, 33 Hysan Avenue
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”

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