With a solid foundation,
Hysan has mapped out
a clear strategic focus for
building today while creating
a platform for tomorrow.
Annual Report 2009
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Hysan Development Company Limited
49/F The Lee Gardens
33 Hysan Avenue, Hong Kong
T 852 2895 5777 F 852 2577 5153
www.hysan.com.hk
STOCK CODE 00014
Hennessy Centre redevelopment
To provide a clear picture of Hysan in 2009,
this Annual Report begins with an Overview on the
key elements of our solid foundation built over many
years, as well as our strategic focus in business.
The Strategy in Action section details the drivers
behind our performance, including our strategies
in operations, financial and risk management.
Underpinning all these are our people and teamwork.
In the following Governance section, we explain how
our long-established corporate governance culture
helped us in meeting the challenges in 2009. All the
information contained in this report illustrates how
the actions Hysan undertakes today can also help
deliver growth and value for our shareholders and
other stakeholders tomorrow.
1. OVERVIEW
2. STRATEGY IN ACTION
06 Peter T.C. Lee Leaves
a Lasting Legacy
07 Hysan Today
07 Mission
07 Responsible Business as
the Guiding Principle
08 Corporate Values
09 Competitive Advantages
10 Strategic Focus
11 Value Creation
12 Year 2009 in Review
14 Chairman’s Statement
18 Market Overview
20
24 Management’s Discussion and Analysis
Investment Properties Portfolio
24 Operations Review
27 Financial Review
34 Financial Policy
Internal Controls and Risk Management
39
42 Human Resources
THE
ESSENTIAL
READ
Year 2009 in Review
Pages 12 - 13
The Group’s performance
at a glance.
Chairman’s Statement
Pages 14 - 15
Sir David Akers-Jones on
how the Group overcame
the challenges of 2009.
Operations and
Financial Reviews
Pages 24 - 33
Detailed information on
the underlying operating
strategies of the Offi ce,
Retail and Residential
sectors and the Group’s
fi nancial results.
3. GOVERNANCE
46 Board of Directors
and Senior Management
50 Corporate Governance Report
65 Directors’ Report
71 Directors’ Remuneration
and Interests Report
79 Audit Committee Report
4. FINANCIAL STATEMENTS
AND VALUATION
82 Directors’ Responsibilities
for the Financial Statements
Independent Auditor’s Report
83
84 Financial Statements
151 Five-Year Financial Summary
153 Report of the Valuer
154 Schedule of Principal Properties
156 Shareholding Analysis
Financial Policy
Pages 34 - 38
An in-depth look at the
Group’s policy of fi nancial
prudence.
Internal Controls and
Risk Management
Pages 39 - 41
An overview of how the
Group manages risks
to achieve business
objectives.
Human Resources
Pages 42 - 43
A review of how the Group’s
core values help to build
strong teamwork.
Corporate
Governance Report
Pages 50 - 64
A detailed account of how
our governance culture and
systems fared in the face
of the challenges of 2009.
“Overview” starts with Hysan’s tribute to the
Group’s past Chairman, whose leadership helped
establish and ground our mission and core values,
as well as strategic focus. Also in this section,
the Chairman’s Statement explains how Hysan
met and overcame the challenges of 2009 to move
forward in strides.
1
OVERVIEW
06 Peter T.C. Lee Leaves a Lasting Legacy
07 Hysan Today
07 Mission
07 Responsible Business as
the Guiding Principle
08 Corporate Values
09 Competitive Advantages
10 Strategic Focus
11 Value Creation
12 Year 2009 in Review
14 Chairman’s Statement
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Peter T.C. Lee Leaves a Lasting Legacy
Peter T.C. Lee, Chairman and Acting Chief
Executive Offi cer, passed away unexpectedly on
17 October 2009. Peter joined the Group as Board
Director in 1988. He became Managing Director in
1999 and Chairman in 2001. He led the Company
to be both a successful and responsible business,
paying attention to the results as well as how they
were achieved. This is now Hysan’s entrenched
Guiding Principle in business.
Peter contributed to transforming Causeway Bay as well as Hysan. Our latest
Hennessy Centre redevelopment project is the fi rst Hong Kong candidate to
have been pre-certifi ed at Platinum level for the United States Green Building
Council’s Leadership in Energy and Environmental Design (LEED).
“We believe our initiative will enhance asset value by creating a better working
and shopping environment for tenants and visitors alike,” remarked Peter.
“Hysan and Causeway Bay’s histories and growth are very much entwined.
We hope this project will not only be the pride of Hysan, but also bring benefi t
to Causeway Bay and Hong Kong.”
Peter’s legacy lies also in his relentless support and guidance in the
development of Hysan’s corporate governance culture.
“We always believe that good governance is the only way to achieve sustainable,
long-term growth,” commented Peter in 2008, on Hysan taking the top honour
in one of Hong Kong’s most prestigious corporate governance awards.
The principle of being a successful and responsible business is also a perfect
refl ection of Peter’s own personal attributes – Peter was a man of the highest
integrity, ethics, and sense of duty. Those who were privileged to work with
Peter know that his genuine respect for others and his passion for doing his
best are truly inspirational. While we mourn his loss, we are all better people
for having known him and shall strive to take Hysan to the next level the way
Peter always intended.
6
Hysan Annual Report 2009
HYSAN TODAY
Mission
To build, own and manage quality buildings,
and being the occupiers’ partner of choice in
the provision of real estate accommodation
and services, thereby delivering attractive and
sustainable returns to our shareholders.
Responsible Business as
the Guiding Principle
Hysan aims to be a successful as well as
responsible business. We pay attention not only
to the results achieved, but also to how we deliver
the same. The principle of being a responsible
business is at the heart of our Company.
Hysan Annual Report 2009
7
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H YSA N TODAY
Corporate Values
We foster the highest business ethics and
accountability. At Hysan, we take pride in our
work, acknowledge responsibility for our actions
and endeavour to complete our tasks in the
right way.
Our thought leadership applies to all strategic
and operational issues in the quest to create
innovative solutions through collective insight.
We aim to take a market leadership position
in whatever we do.
Hysan maintains long-term and mutually
benefi cial partnerships with our shareholders,
clients, business partners, employees and the
community.
We take responsibility by giving back to the
community. This is achieved through everyday
business operations as well as active participation
in community activities.
8
Hysan Annual Report 2009
Competitive Advantages
Largest Commercial Landlord
in Causeway Bay, Hong Kong’s prime offi ce and retail district
Balanced Portfolio
of superior investment properties
Quality Client Base
with prominent multinational and strong local tenants
Sustainable Income
with high occupancy consistently achieved
Established Asset Enhancement Programme
with track record of adding value
Exceptional Services
for our commercial and residential customers
Strong Financial Position
with debts of long maturity and diversifi ed funding sources
Financial Prudence
to keep risk and return in balance
Effective Corporate Governance
with widespread industry recognition achieved
Hysan Annual Report 2009
9
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H YSA N TODAY
Strategic Focus
In the course of conducting our business during the year,
we have adhered to the following:
1. Established asset
enhancement programme
2. Maximising our Causeway Bay
locational advantages
including further growing
the retail sector
3. Anticipating and meeting
customer needs as well as
continuous enhancement
of operational quality
and effi ciency
4. Enhancing corporate governance
5. Strengthening corporate
responsibility
10 Hysan Annual Report 2009
• Hennessy Centre redevelopment
• Various renovation and/or building
upgrades including planning for
rejuvenation of Leighton Centre in 2010
• Avid marketing to attract locals and
visiting Mainland Chinese shoppers to
our retail centres
• Further enhancing tenant mix in
our retail hubs targeting different
customer groups
• Our Grade “A” offi ces, which offer prestige
as well as convenience, successfully
attracted new major tenants from other
districts
• Strengthening the presence of semi-retail
tenants for the rest of our offi ce portfolio,
who require considerable personal
interface with customers and value the
locational advantages
• Creating best expatriate-orientated living
environment for residential portfolio
tenants
• Enhancing property services standards
generally
• Maximising operating effi ciency including
energy savings through hardware as well
as operational improvements, without
compromising service standard
• Maintaining highest standards; industry
recognitions include 2009 Best Corporate
Governance Disclosure Gold Award from
the Hong Kong Institute of Certifi ed
Public Accountants
• Aiming to be successful and responsible
through daily operations and community
involvement; recognised as a constituent
member of FTSE4Good, a renowned
international index for social investment
Value Creation
Recurring Underlying Profit
HK$ million
Adjusted Shareholders’ Funds
HK$ million
0
1
1
,
1
6
6
0
,
1
0
5
9
5
5
7
1
4
6
1,200
960
720
480
240
0
40,000
32,000
24,000
16,000
8,000
0
2
7
0
,
5
3
0
6
6
,
4
3
7
5
0
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7
3
9
2
7
,
0
3
4
3
1
,
7
2
05
06
07
08
09
05
06
07
08
09
Recurring Underlying Earnings per Share
HK cents
Dividends per Share
HK cents
.
7
5
2
0
1
.
9
0
6
0
1
2
3
0
9
.
0
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1
7
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4
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120
96
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32
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Hysan Annual Report 2009 11
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YEAR 2009 IN REVIEW
Overview of the Group’s Financial Performance
TURNOVER
Offi ce sector
Retail sector
Residential sector
2009
HK$ million
2008
HK$ million
CHANGE
HK$ million
CHANGE
%
747
648
285
7201
6261
292
1,680
1,638
27
22
(7)
42
+3.8
+3.5
-2.4
+2.6
• Group turnover rose by 2.6%
• Retail sector remained virtually fully let at 99%
• Office and Residential sectors’ occupancy are 89% (91% on committed basis) and 92% respectively
PROFIT INDICATORS
Recurring Underlying Profi t
Underlying Profi t
Statutory Profi t
2009
HK$ million
2008
HK$ million
CHANGE
HK$ million
1,110
1,113
2,716
1,066
1,201
1,594
44
(88)
1,122
CHANGE
%
+4.1
-7.3
+70.4
• Recurring Underlying Profit increased, reflecting improvements in gross profit generated from our core leasing activities
• Underlying Profit change reflected smaller financial investment returns during the year
• Statutory Profit increased due to higher valuation of the Group’s investment properties
Recurring Underlying Profi t
This is a performance indicator of the Group’s core property investment business. It is arrived at by excluding from Underlying
Profi t gains/losses from disposal of assets, impairment, reversal, recovery and tax provisions for prior year(s).
Underlying Profi t
This is arrived at by excluding from Statutory Profi t unrealised fair value changes on investment properties and related
deferred tax. As a property investor, the Group’s results are principally derived from the rental revenues on its investment
properties. The inclusion of the unrealised fair value change on investment properties in the consolidated income statement
causes an increase in fl uctuation in earnings and poses limitation on the use of the unadjusted earning fi gures, fi nancial
ratios, trends and comparison against prior period(s). Besides, deferred tax on such fair value changes has to be provided
for despite the fact that no capital gain tax liability will arise in Hong Kong on disposal of the Group’s investment properties.
Accordingly, both of these two items are excluded in arriving at the Underlying Profi t.
Statutory Profi t
This is the profi t attributable to owners of the Company. It is prepared in accordance with Hong Kong Financial Reporting
Standards issued by Hong Kong Institute of Certifi ed Public Accountants and the Hong Kong Companies Ordinance.
ASSET VALUE INDICATORS
Total assets
Shareholders’ funds
Adjusted Shareholders’ Funds
2009
HK$ million
2008
HK$ million
CHANGE
HK$ million
43,848
33,668
37,057
41,536
31,469
34,660
2,312
2,199
2,397
CHANGE
%
+5.6
+7.0
+6.9
• Shareholders’ funds mainly attributable to the increase in valuation of the Group’s investment properties and the
profits from our core leasing activities
Adjusted Shareholders’ Funds
This is arrived at by adding back the Group’s share of cumulative deferred tax on property revaluation to shareholders’ funds
fi gure. Deferred tax on property revaluation has to be provided for despite the fact that no capital gains tax liability will arise
in Hong Kong on disposal of properties.
1 Prior year fi gure has been reclassifi ed to conform to current year presentation.
12 Hysan Annual Report 2009
Key Financial Data
PER SHARE DATA
Earnings per share, based on:
Recurring Underlying Profi t
Basic (HK cents)
Diluted (HK cents)
Underlying Profi t
Basic (HK cents)
Diluted (HK cents)
Statutory Profi t
Basic (HK cents)
Diluted (HK cents)
Shareholders’ returns:
Dividends per share (HK cents)
Shareholders’ return per share (HK$)
Total shareholders’ returns per share (HK$)
Assets value:
Net assets value per share (HK$)
Adjusted net assets value per share (HK$)
Net debt per share (HK$)
FINANCIAL DATA
Average fi nance costs
Net debt to equity
Net interest coverage (times)
Floating rate debt (% on total debt)
Average debt maturity
Bank facilities: Capital market issuance
Non-fi nancial Performance
GOVERNANCE
2009
2008
CHANGE
%
106.09
106.05
106.38
106.34
259.60
259.50
68.00
10.21
2.66
32.05
35.27
1.82
102.57
102.56
115.56
115.55
153.37
153.36
68.00
(9.11)
0.10
30.23
33.29
1.96
2009
2008
3.1%
5.1%
11.7x
64.9%
3.4 years
4.4%
5.9%
10.2x
59.5%
3.9 years
37.2% : 62.8% 24.9% : 75.1%
+3.4
+3.4
-7.9
- 8.0
+69.3
+69.2
–
n/m
n/m
+6.0
+5.9
-7.1
CHANGE
-1.3pp
-0.8pp
+1.5x
+5.4pp
n/a
n/a
• Recognitions by industry for excellence in corporate governance including the Gold Award (Non-Hang Seng Index
Large Market Capitalisation Category) in the Hong Kong Institute of Certifi ed Public Accountants’ Best Corporate
Governance Disclosure Awards 2009
• Top 5 Best Corporate Governance Practices in Asia Pacifi c Award for 2009: IR Global Rankings
ENVIRONMENT
• Hennessy Centre redevelopment is the fi rst Hong Kong building pre-certifi ed at the highest Platinum level for the
United States Green Building Council’s Leadership in Energy and Environmental Design standard (LEED Platinum)
• The project is also pre-certifi ed at the top level in Hong Kong’s Building Environmental Assessment Method (BEAM)
COMMUNITY
• A constituent member of the FTSE4Good Global Index, one of the best known indices to track responsible business
practices around the world
n/a – not applicable
n/m – not meaningful
pp – percentage point
Hysan Annual Report 2009 13
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CHAIRMAN’S STATEMENT
Overview
Year 2009 began with the Hong Kong economy being adversely impacted by the global economic
crisis. Signs of stabilisation began to emerge in the second quarter, leading to further improvement
in the second half of the year. The recovery in the local fi nancial and property sales markets from the
second quarter onwards also contributed to the improvement of sentiment.
Performance
Against this background, Hysan maintained revenue growth in its core property investment activities.
The Group’s 2009 turnover was HK$1,680 million, an increase of 2.6% from HK$1,638 million in
2008. The Offi ce and Retail sectors showed turnover growth of 3.8% and 3.5% respectively, while
the Residential sector recorded a slight decline of 2.4%. The Retail sector remained virtually fully let,
while the Offi ce and Residential sectors maintained over 90% occupancy on a committed basis.
Recurring Underlying Profi t, the key measurement of our core business performance, was HK$1,110
million, up 4.1% from HK$1,066 million in 2008. This principally refl ected the improvement in gross
profi t generated from our core leasing activities. Earnings per share based on Recurring Underlying
Profi t correspondingly rose to HK106.09 cents (2008: HK102.57 cents).
Underlying Profi t, which excludes unrealised changes in fair value of investment properties and
related deferred tax, was HK$1,113 million (2008: HK$1,201 million). This refl ected smaller fi nancial
investment returns during the year, when compared to 2008.
Statutory Profi t increased to HK$2,716 million (2008: HK$1,594 million), mainly due to higher
valuation of the Group’s investment properties.
The external valuation of the Group’s investment property portfolio increased to HK$37,363 million,
an increase of 4.2% from HK$35,850 million in 2008. Adjusted shareholders’ funds rose by 6.9% to
HK$37,057 million (2008: HK$34,660 million).
Our fi nancial position remains strong, with improved net interest coverage (2009: 11.7 times;
2008: 10.2 times) and net debt to equity ratio (2009: 5.1%; 2008: 5.9%), highlighting the Group’s
fi nancial strength.
14 Hysan Annual Report 2009
The Board of Directors (the “Board”) recommends the payment of a fi nal dividend of HK54.0 cents
per share (2008: HK54.0 cents). Together with the interim dividend of HK14.0 cents per share
(2008: HK14.0 cents), there is an aggregate distribution of HK68.0 cents per share, which is the
same as the year before. Subject to shareholder approval, the fi nal dividend will be payable in cash
with a scrip dividend alternative.
Moving Forward on a Solid Foundation
Year 2009 was a challenging one for the Group. Like others, we were impacted by the wider economic
conditions, which saw a signifi cant downturn at the beginning of the year. We also experienced the
unexpected passing of our Chairman and Acting Chief Executive Offi cer, Peter T.C. LEE in October
2009. During his eight-year tenure as Chairman, Peter laid a solid foundation for the Group. He
further consolidated our position as a leading property investment company. He also guided the
Group to maintain the highest standards of corporate governance, including the commitment to apply
the principle of meritocracy and professional management. Peter will be greatly missed by us all.
Based on the foundation Peter built, Hysan is moving forward. I am honoured to become the Group’s
Independent non-executive Chairman. I also welcome new non-executive Directors Nicholas C. ALLEN,
Philip Y.H. FAN, Joseph C.Y. POON, and Michael T.H. LEE. They will bring their professional expertise
and experience from diverse backgrounds to further strengthen the Board.
I look forward to leading the Board in raising the Group’s existing high quality properties and
services to the next level. The Hennessy Centre redevelopment is on schedule for completion at
the end of 2011. As Hysan’s future northern gateway, it will further enhance our Causeway Bay hub.
Its sustainability features will also highlight our commitment towards the environment and
the community.
I am delighted to announce the appointment of Gerry L.F. YIM, Executive Director, as our new Chief
Executive Offi cer. Gerry has brought great experience of general management, as well as that of the
banking and fi nance sector from his previous positions in major companies. His background very
much complements and strengthens that of our management team.
I would also like to take this opportunity to express my sincere thanks to our dedicated staff
members. They have worked as a team, and collectively they have taken on the external and internal
challenges. I would like to thank Tom BEHRENS-SORENSEN and Ricky T.F. TSANG, who resigned as
Independent non-executive Director and Executive Director, Finance respectively during the year, for
their contributions.
Outlook
While Grade “A” offi ce rentals began to stabilise, competition remains keen. Hysan has strengthened
its occupancy and our performance is expected to remain stable for the rest of the year. At the same
time, we shall continue to enhance our portfolio to maximise Causeway Bay’s locational advantages
as a prime retail hub as well as offi ce community.
David AKERS-JONES
Independent non-executive Chairman
Hong Kong, 10 March 2010
Hysan Annual Report 2009 15
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“Strategy in Action” comprises a market overview
of Hong Kong’s property leasing business;
a comprehensive description of our portfolio
including a preview of our forthcoming Hennessy
Centre redevelopment project; and a detailed
account on how we operated in 2009 in terms of
the management of our operations, fi nances, risks
and people.
2
STRATEGY IN
ACTION
18 Market Overview
20 Investment Properties Portfolio
24 Management’s Discussion and Analysis
24 Operations Review
27 Financial Review
34 Financial Policy
39 Internal Controls and Risk Management
42 Human Resources
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MARKET OVERVIEW
This market report is to give a general background rather than Group-specifi c information. Views expressed shall not be regarded
as providing any advice or recommendation for whatever purpose. For the Group’s performance – see “Management’s Discussion
and Analysis” section.
Hong Kong Economy
The global fi nancial crisis negatively impacted upon Hong Kong’s economy in early 2009 and led to
a contraction of the GDP (-5.7%) in the fi rst half of the year. As coordinated policy measures taken
by governments around the world brought stability to the global fi nancial markets, the local economy
improved in the second half of the year. Local employment fi gures improved with the unemployment
rate fell to below 5% in December 2009. Although there was considerable liquidity in the economy
and interest rates remained at a historical low, infl ation was contained and the infl ation rate stood at
1.3% in December 2009.
Gross Domestic Product Year-on-Year Growth
Gross Domestic Product Year-on-Year Growth
(%)
(%)
14
0
.
2
1
7
7
.
9
7
.
6
6
.
12
10
8
6
4
2
0
-2
-4
-6
-8
1
1 8
.
.
2 7
6
.
0
9
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9
6
.
1
6
.
4
6
.
7
6
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6
5
.
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8
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6
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9
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2
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5
7
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3
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Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
04
05
06
07
08
09
Source: Census and Statistics Department (data as of March 2010)
Source: Census and Statistics Department (data as of March 2010)
Offi ce
Grade “A” offi ce in core districts faced challenges from both the supply and demand perspectives
during the year. Although no new Grade “A” offi ce project was completed in core districts, supply in
decentralised areas such as Kowloon West and Kowloon East increased by more than 1.5 million
square feet.
The global fi nancial crisis led to weakened demand. Leasing activities were principally cost-driven
relocations, resulting in negative net take-up of Grade “A” offi ce in core districts. Causeway Bay/
Wanchai recorded negative net take-up of around 422,000 square feet in the fi rst three quarters.
Leasing activities, however, picked up during the fourth quarter of 2009, with Causeway Bay/Wanchai
recording a positive net take-up.
In regard to the rental of Grade “A” offi ce space, the fi rst three quarters of 2009 saw a cumulative
decline of 30.9%, but rents recovered slightly in the fourth quarter, increasing by 1.8%.
18 Hysan Annual Report 2009
Grade “A” Offi ce completion – core area*
Grade “A” Offi ce completion – non-core area*
Change in Overall Grade “A” Offi ce rent
Change in Causeway Bay/Wanchai Grade “A” Offi ce rents
* square feet net
Source: Jones Lang LaSalle (data as of March 2010)
2009
2008
–
1,563,650
-29.6%
-29.6%
164,420
3,516,012
+7.4%
+13.5%
Retail
Overall annual retail sales for 2009 remained largely stable, with 0.6% growth as compared to the
previous year. During the fi rst three quarters of 2009, retail sales actually fell by 4.0% year-on-year in
value, but reverted to positive territory for the fourth quarter, leading to overall annual growth.
In the tourism market, 2009 overall arrivals also saw a slight increase as compared to 2008.
An early negative trend stemming from the global fi nancial crisis and the outbreak of human swine
infl uenza was reversed in the third quarter and remained positive in the fourth quarter. Visitors from
Mainland China, in particular, contributed to the overall gain in arrivals in 2009. This group of visitors
accounted for 60% of the total arrivals in 2009.
For the year as a whole, rents for prime street shops fell by 4.0%, while premium prime shopping
centres rents remained unchanged.
Retail sales by value
Total visitor arrivals
Mainland visitor arrivals
Change in prime street shop rents
Change in premium prime shopping centre rents
2009
+0.6%
+0.3%
+6.5%
-4.0%
–
2008
+10.6%
+4.7%
+8.9%
+4.1%
-0.3%
Source: Jones Lang LaSalle, Census and Statistics Department and Hong Kong Tourism Board (data as of March 2010)
Luxury Residential
Demand was weak for luxury residential properties from expatriates, especially from the fi nancial
sector, in the fi rst quarter of 2009, in a period when multinational corporations reduced their
headcounts. However, many major businesses have since resumed hiring and the level of rental
activities have signifi cantly improved since the second quarter of 2009.
A buoyant sales market in recent months also contributed to less supply in the rental market, thus
helping to further improve rents. After decreasing by 9.6% during the fi rst half, overall luxury rents
increased 4.3% for the rest of 2009. Overall, luxury rentals decreased by 5.6% in 2009.
Change in luxury residential rents
Source: Jones Lang LaSalle (data as of March 2010)
2009
-5.6%
2008
-10.2%
Hysan Annual Report 2009 19
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INVESTMENT PROPERTIES PORTFOLIO
Hysan’s premium office and retail
portfolios leverage Causeway Bay’s
unique locational advantages to provide
maximum convenience and benefit to
tenants, their customers and other users.
Our semi-retail offi ce hub (principally comprising Leighton
Centre and One Hysan Avenue) is valued by tenants who
require personal interface with customers and appreciate
Causeway Bay’s central location. On the retail side, Lee
Theatre Plaza is renowned for lifestyle shops and dining
options, while Leighton Centre’s retail podium will be
rejuvenated.
Our Grade “A” offi ce hub (principally comprising
The Lee Gardens, Lee Gardens Two, Sunning Plaza
and AIA Plaza) provides premium facilities with
unparalleled convenience and prestige for tenants
and their clients. Its corresponding Lee Gardens
retail hub is home to international brands which
are synonymous with sophistication and luxury.
4. AIA PLAZA
18 Hysan Avenue, Causeway Bay
AIA Plaza is a 25-level offi ce and
retail complex at the corner of
Hysan Avenue. The building boasts a
bright and spacious lobby.
| Approx. Gross Floor Area 132,000 ft2* | Number of Floors 25 |
| Completed 1989 | Renovated 2009 |
1.
THE LEE GARDENS
33 Hysan Avenue, Causeway Bay
The Lee Gardens is the Group’s
fl agship property comprising an
offi ce tower and a high-end shopping
centre. The development, close to the
MTR Causeway Bay station, enjoys
spectacular views of the Harbour
and Happy Valley and is home to
many international corporations,
luxury fashion brands and renowned
restaurants.
| Approx. Gross Floor Area 903,000 ft2 | Number of Floors 53 |
| Parking Spaces 200 | Completed 1997 |
2. LEE GARDENS TWO
5. 111 LEIGHTON ROAD
28 Yun Ping Road, Causeway Bay
Lee Gardens Two is an offi ce
and retail complex. The complex
is conveniently linked to the
neighbouring The Lee Gardens
and is home to many international
corporations, luxury fashion brands,
renowned restaurants and a
children’s concept fl oor.
111 Leighton Road, Causeway Bay
Located in a pleasant and quieter
area in the heart of Causeway Bay,
111 Leighton Road is an ideal offi ce
location offering convenience as well
as privacy. The retail shops include
some trend-setting stores.
| Approx. Gross Floor Area 627,000 ft2 | Number of Floors 34 |
| Parking Spaces 176 | Completed 1992 |
| Renovation of retail podium 2003 |
| Approx. Gross Floor Area 80,000 ft2 | Number of Floors 24 |
| Completed 1988 | Renovated 2004 |
3. SUNNING PLAZA
6. LEE THEATRE PLAZA
10 Hysan Avenue, Causeway Bay
Designed by the renowned architect
I.M. Pei, Sunning Plaza greets tenants
and visitors with a spacious entrance
and lift lobby. Among its retail tenants
are popular food and beverage
outlets, which have established the
plaza as a hub for relaxation and
social recreation.
99 Percival Street, Causeway Bay
Like its predecessor, Lee Theatre,
the Lee Theatre Plaza is a Hong Kong
landmark, being one of the city’s
best known shopping and dining
complexes, housing many of the
world’s most famous lifestyle brands
and restaurants.
| Approx. Gross Floor Area 277,000 ft2 | Number of Floors 30 |
| Parking Spaces 150 (jointly owned with Sunning Court) |
| Completed 1982 |
| Approx. Gross Floor Area 317,000 ft2 | Number of Floors 26 |
| Completed 1994 |
20 Hysan Annual Report 2009
SOGO
HENNESSY ROAD
10
9
YEE WO STREET
CROSS HARBOUR
TUNNEL
J
A
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D
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E’S B
MID-LEVELS
E’S C
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CENTRAL
TIMES
SQUARE
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H Y S A N A V E N U E
3
4
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POINT
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7
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7.
LEIGHTON CENTRE
77 Leighton Road, Causeway Bay
This offi ce and retail complex
enjoys close proximity to all forms
of public transport. Its central
location in the Causeway Bay area
makes it a much sought-after
address.
| Approx. Gross Floor Area 428,000 ft2* | Number of Floors 28 |
| Parking Spaces 264 | Completed 1977 | Planned renovation 2010 |
8.
ONE HYSAN AVENUE
1 Hysan Avenue, Causeway Bay
Located at the junction of three
busy streets in the heart of
Causeway Bay, this offi ce and
retail complex enjoys a prime
location with a variety of retail
facilities in the surrounding area.
| Approx. Gross Floor Area 169,000 ft2 | Number of Floors 26 |
| Completed 1976 | Renovated 2002 |
9.
HENNESSY CENTRE
REDEVELOPMENT
500 Hennessy Road, Causeway Bay
Hysan’s future northern gateway
under construction.
L
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H
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N R
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5
11
ABERDEEN
TUNNEL
Not to scale
10.
BAMBOO GROVE
74–86 Kennedy Road,
Mid-Levels
A luxury residential complex in
the Mid-Levels, Bamboo Grove
commands panoramic views of
the harbour and the greenery of
the Peak, and is well served by
a multitude of public transport.
In addition to superb property
management services and full
club-house and sports facilities,
tenants also enjoy personalised
resident services that help
ensure a comfortable stay.
| Approx. Gross Floor Area 691,000 ft2 | Number of Units 345 |
| Parking Spaces 436 | Completed 1985 | Renovated 2002 |
11.
SUNNING COURT
8 Hoi Ping Road, Causeway Bay
The Sunning Court is a unique
residential tower in the dynamic
Causeway Bay area. Located in a
pleasant environment with tree-
lined streets, and within easy
reach of all forms of relaxation
and entertainment in the
surrounding district, the building
provides maximum comfort for
its tenants.
| Approx. Gross Floor Area 98,000 ft2 | Number of Units 59 |
| Parking Spaces 150 (jointly owned with Sunning Plaza) |
| Completed 1982 | Renovated 2003 |
Artist’s impression
| Estimated Total Gross Floor Area Approx. 710,000 ft2 |
| Projected Year of Completion 2011 |
Note: The Approximate Gross Floor Areas shown above are
based on accountable gross fl oor area of the relevant building
and rounded to the nearest 1,000 ft2.
* re-calculated in accordance with latest approved building
plans following material Additions & Alterations works.
Hysan Annual Report 2009 21
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Hennessy
5 0 0
H E N N E S S Y
ROAD
Centre
R EDE VELOPME NT
HENNESSY ROAD
Hennessy
Centre
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TWO
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THEATRE
PLAZA
THE LEE
GARDENS
The building will be the
future northern gateway of
Hysan’s portfolio in the heart of
Causeway Bay, Hong Kong’s most
vibrant commercial district.
Hennessy Centre redevelopment project is at the
forefront of international environmental standards,
including pre-certifi cation at Platinum level for the
United States Green Building Council’s Leadership
in Energy and Environmental Design (LEED), and
Hong Kong’s Building Environmental Assessment
Method (BEAM). For more on Hennessy Centre
redevelopment’s green aspirations, please refer
to the accompanying Corporate Responsibility
Report 2009.
710,000
SQUARE FEET OF
GROSS FLOOR AREA
40
OFFICE AND RETAIL
MIXED-USE FLOORS
15+
FLOORS OF RETAIL
OUTLETS
2011
END OF 2011 PROJECTED
COMPLETION
Hysan Annual Report 2009 23
MANAGEMENT’S DISCUSSION AND ANALYSIS
Operations Review
Turnover
The Group’s turnover was HK$1,680 million in 2009, representing an increase of 2.6% from
HK$1,638 million in 2008. The Group maintained rental income growth in its commercial properties
portfolio. There was, however, a small decline in income from the residential sector which typically
has a two-year lease cycle. There was negative rental reversion on residential renewals and new
lettings when compared with rental levels secured in the 2007 market boom.
Profi tability
Recurring Underlying Profi t (the key measurement of the Group’s core leasing business), which is
calculated by excluding from Underlying Profi t gains from disposal of long-term assets and prior
years’ tax provision, was HK$1,110 million, up 4.1% from HK$1,066 million in 2008. The increase
principally refl ected the improvement in gross profi t generated from our core leasing activities.
Underlying Profi t, which is calculated by excluding from Statutory Profi t changes in fair value of
investment properties and the related deferred tax, was HK$1,113 million, decreased by 7.3%
from HK$1,201 million in 2008. This refl ected smaller fi nancial investment returns recorded during
the year.
Statutory Profi t, prepared in accordance with Hong Kong Financial Reporting Standards, was
HK$2,716 million (2008: HK$1,594 million) mainly attributable to the higher revaluation of the
Group’s investment properties. At year end 2009, the independent external valuation of the Group’s
investment property portfolio was HK$37,363 million (2008: HK$35,850 million).
Key Performance Indicators
While many factors contributed to the results of the Group’s businesses, turnover growth and
occupancy rate are the key drivers used by the Group’s management for assessment of the
performance of our core leasing business. In addition, the management uses property expenses
and such expenses as a percentage on turnover to assess cost effectiveness. The nature of these
performance indicators, the way they are measured and their signifi cance to the Group are set
out below.
KEY PERFORMANCE INDICATORS
PERFORMANCE INDICATOR HOW IT IS MEASURED
SIGNIFICANCE TO THE GROUP
Turnover Growth
– Rental revenue in 2009 compared to that
– Refl ects the combined effect of changes in
in 2008
rental rate and occupancy rate
Occupancy Rate
– Percentage of total area leased to
– Rental revenue and management fees are
tenants over total lettable area of each
sector
directly proportional to occupancy rate
– Optimises revenue by balancing occupancy
rate and rental level
Property Expenses
– Principally being direct costs associated
– Measures the direct costs incurred in
with daily operations of the Group’s
property portfolio
– 2009: HK$235 million
(2008: HK$217 million)
managing the Group’s property portfolio
Property Expenses as a
Percentage on Turnover
– Calculated by dividing property expenses
– An indication of the gross margin of our
by turnover
– 2009: 14.0% (2008: 13.2%)
business
24 Hysan Annual Report 2009
Business Units Review
For management purposes, the leasing activity of the Group is organised into three sectors – offi ce, retail
and residential. Each sector has a different tenant base and requires different marketing strategies. The
following discusses the performance, challenges and strategies of each sector for 2009.
Turnover by Sector
Gross Floor Area by Sector
(Excluding Property under Redevelopment)
Properties Value by Sector
17%
39%
44%
21%
24%
55%
15%
19%
38%
28%
Office
Retail
Residential
Property under
Redevelopment
OFFICE SECTOR
Hysan’s offi ce sector recorded growth of 3.8% to HK$747 million (2008: HK$720 million1). While
positive rental reversion continued to benefi t our properties as a whole, negative rental reversion was
also experienced in some transactions towards the end of the year.
Market conditions were particularly challenging during the fi rst half of the year, which saw signifi cant
new supply of Grade “A” offi ce space in decentralised areas coupled with a slow down in the general
economy. These factors coincided with the renewal of a substantial majority of our expiring leases.
While the rental levels appeared to be stabilising towards the end of the year, competition remains
keen. Announced relocations to decentralised locations will also generate additional supply in Central.
We took effective actions to stabilise our occupancy. We fi ne-tuned the market positioning, sales
channels, as well as transaction processes for our offi ce buildings, seeking to maximise Causeway
Bay’s locational advantages. The sector’s occupancy rate stood at 89% as at 2009 year end.
On a committed basis, the occupancy rate was 91%, at the same level as at 30 June 2009
(31 December 2008: 98%).
Our premium offi ce hub (comprising The Lee Gardens, Lee Gardens Two, Sunning Plaza and AIA
Plaza) provides top quality facilities with good proximity to other business services and clients, as
well as an unparalleled range of amenities. We achieved new lettings of around 100,000 square feet
during the last quarter of 2009.
Over the years, we have also successfully built up a growing presence of semi-retail tenants in other
parts of our portfolio. These tenants, including health and beauty operations, are businesses that
require considerable personal interface with customers and value the locational advantages of
Causeway Bay. This segment has proven to be more resilient during the recent economic downturn
and has helped stabilise our overall portfolio.
We continued to invest to improve our assets. The renovated offi ce lobby of AIA Plaza was well
received by the market, and we shall proceed with that of Leighton Centre. We also enhanced our
property services standards generally and at the same time provided better value for money from our
service charges.
1 Prior year fi gure has been reclassifi ed to conform to current year presentation.
Hysan Annual Report 2009 25
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M A NAGEMENT ’S DISCUSSION A ND A NA LYSIS
Hysan’s offi ces
combine quality
facilities with
proximity to other
businesses as well as
an excellent range
of amenities.
RETAIL SECTOR
Our retail sector revenue grew 3.5% over last year to HK$648 million (2008: HK$626 million1). Hong
Kong again saw an increase in Mainland China visitors whose spending helped support the local
retail market. The Group has long believed that landlords and retailers must work closely together
as partners, responding to each other’s needs to create solutions that are mutually benefi cial. We
further stepped up our marketing efforts to support our portfolio’s retail tenants in capturing the
attention and spending power of Mainland Chinese shoppers.
The occupancy rate of our portfolio continued to increase and was virtually fully-let at 99% at 2009
year end (31 December 2008: 97%; 30 June 2009: 98%).
Our retail leasing team has been working diligently to create an optimal tenant mix for our retail
hubs. The Lee Gardens hub (principally comprising The Lee Gardens, Lee Gardens Two, AIA Plaza and
Sunning Plaza) provides “elegant and luxury” premium retail spaces for high-end brands, which now
include a Cartier store in AIA Plaza, as well as other prestigious retailers that are popular with tourists
and locals alike.
Moving forward, in order to maximize the potential of One Hysan Avenue and neighbouring Leighton
Centre, a new fashion fl agship store is to transform the former, while the latter will be revitalised.
RESIDENTIAL SECTOR
Our residential sector revenue decreased 2.4% over last year to HK$285 million (2008: HK$292
million), mainly due to negative rental reversion upon the expiration of leases signed in 2007, but
was partially offset by improving occupancy starting from the second quarter of 2009.
The reduction of demand in the fi rst quarter of 2009, due to expatriate manpower reduction following
the fi nancial upheavals, was reversed from the second quarter onwards. Both the increased leasing
activities and the reduction of supply for leasing due to more sales market activities contributed to
improved market environment.
We successfully strengthened our residential occupancy rate, which rebounded to 92% at 2009
year end from 85% on 30 June 2009 (2008 year end: 90%). We improved marketing channels to
expand our target customer reach, and also enhanced our transaction process to take advantage
of the market momentum. In general, we have striven to provide better services to create the best
expatriate-orientated living environment for our tenants.
1 Prior year fi gure has been reclassifi ed to conform to current year presentation.
26 Hysan Annual Report 2009
Financial Review
CONDENSED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2009
2009
HK$ million
2008
HK$ million
CHANGE
HK$ million
CHANGE
%
Turnover
Property expenses
Investment income
Other gains and losses
Administrative expenses
Finance costs
Change in fair value of
investment properties
Share of results of associates
Taxation
Minority interests
Statutory Profi t
Underlying Profi t
Recurring Underlying Profi t
1,680
(235)
38
(3)
(133)
(131)
1,249
768
(396)
(121)
2,716
1,113
1,110
1,638
(217)
63
146
(134)
(155)
(212)
590
(1)
(124)
1,594
1,201
1,066
42
(18)
(25)
(149)
1
24
1,461
178
(395)
3
1,122
(88)
44
+2.6
+8.3
-39.7
n/m
-0.7
-15.5
n/m
+30.2
n/m
-2.4
+70.4
-7.3
+4.1
Turnover
Turnover comprises rental income and management fee income derived from the Group’s investment
properties portfolio in Hong Kong and was analysed by sectors as follows:
Offi ce sector
Retail sector
Residential sector
2009
HK$ million
2008
HK$ million
CHANGE
HK$ million
CHANGE
%
747
648
285
7201
6261
292
1,680
1,638
27
22
(7)
42
+3.8
+3.5
-2.4
+2.6
The Group maintained rental income growth in its commercial properties portfolio, while it
experienced a small decline in income from the residential sector. The residential sector typically has
a two-year lease cycle and there was negative rental reversion on renewals and new lettings during
the year when compared with rental levels secured in the 2007 market boom. Detailed analysis of
each segment is covered in “Business Units Review” set out on pages 25 and 26.
Property Expenses
Property expenses are the costs directly associated with the daily operations of our investment
properties, being primarily related to utilities’ costs, front-line staff wages, repairs and maintenance,
government rents and rates, as well as agency fees and other revenue generation-related expenses.
The increase in property expenses by HK$18 million or 8.3% to HK$235 million (2008: HK$217
million) was mainly attributable to higher repair and maintenance costs for building refurbishment to
enhance the quality of our portfolio as well as higher agency fees for incentivised schemes for agents
to attract quality tenants.
n/m – not meaningful
1 Prior year fi gure has been reclassifi ed to conform to current year presentation.
Hysan Annual Report 2009 27
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M A NAGEMENT ’S DISCUSSION A ND A NA LYSIS
Investment Income
Investment income of HK$38 million (2008: HK$63 million) mainly comprised dividend and interest
income. The decrease refl ected a lower interest environment in 2009 and lower dividend income
derived from the Group’s equity investments.
Other Gains and Losses
There was a net loss of HK$3 million (2008: net gain of HK$146 million). The present small net loss
arose from mark-to-market movements of fi nancial instruments, which are required to be refl ected
under the current accounting standards, whereas the 2008 net gain was mainly due to the disposals
of long-term securities investments.
Administrative Expenses
Administrative expenses were broadly the same, at HK$133 million (2008: HK$134 million).
Finance Costs
In a lower interest rate environment, the Group’s fi nance costs were reduced to HK$131 million
(2008: HK$155 million). The Group’s average fi nance costs decreased to 3.1% from 4.4% in 2008.
Further discussion of the Group’s fi nancial policy, including debt and interest rate management, are
set out in the “Financial Policy” section.
Change in Fair Value of Investment Properties
At 31 December 2009, the Group’s investment properties were valued at HK$37,363 million
(31 December 2008: HK$35,850 million) by an independent professional valuer, Knight Frank Petty
Limited. Excluding capital expenditures incurred for the Group’s property portfolio, fair value gain on
investment properties of HK$1,249 million (2008: fair value loss of HK$212 million) was recognised
in the consolidated income statement during the year.
Share of Results of Associates
The Group’s share of results of associates improved by 30.2% to HK$768 million (2008: HK$590
million). This increase was mainly attributable to positive rental growth and the favourable movement
in fair value of the Shanghai Grand Gateway project, of which the Group owns 24.7%.
Excluding the change in fair value of investment properties and the gain on disposal of certain car
parks held by the associate, the Group’s share of operating results in the Shanghai Grand Gateway
project increased by 18.2% to HK$162 million (2008: HK$137 million). All the residential units as
well as retail and offi ce properties were virtually fully let at year end 2009.
Under Hong Kong Accounting Standards 40 “Investment Property”, properties at Shanghai Grand
Gateway have been revalued at fair value by an independent professional valuer. The Group’s share
of the revaluation gain, net of the corresponding deferred tax thereon, of the associate amounted to
HK$606 million (2008: HK$412 million).
28 Hysan Annual Report 2009
Taxation
Taxation for the year increased by HK$395 million to HK$396 million (2008: HK$1 million) mainly
due to the addition in deferred tax provision arising from the revaluation of investment properties.
Causeway Bay’s
unparalleled
locational advantages,
coupled with Hysan’s
renowned facilities
and service, ensure
our hub remains
a choice destination
for work and play,
day or night.
Hysan Annual Report 2009 29
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M A NAGEMENT ’S DISCUSSION A ND A NA LYSIS
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2009
2009
HK$ million
2008
HK$ million
CHANGE
HK$ million
CHANGE
%
Investment properties
Available-for-sale investments
Interests in associates
Held-to-maturity debt securities
Time deposits, cash and
bank balances
Other assets
Total assets
Borrowings
Taxation
– current
– deferred
Other liabilities
Total liabilities
Net Assets
Shareholders’ funds
Minority interests
Total Equity
37,363
1,002
2,886
–
1,984
613
35,850
1,022
2,340
700
1,015
609
1,513
(20)
546
(700)
969
4
43,848
41,536
2,312
3,891
3,751
140
45
3,881
1,077
8,894
351
3,648
1,076
8,826
34,954
32,710
33,668
1,286
31,469
1,241
34,954
32,710
(306)
233
1
68
2,244
2,199
45
2,244
2,397
+4.2
-2.0
+23.3
n/a
+95.5
+0.7
+5.6
+3.7
-87.2
+6.4
+0.1
+0.8
+6.9
+7.0
+3.6
+6.9
+6.9
Adjusted Shareholders’ Funds
37,057
34,660
Investment Properties
The Group’s investment properties were revalued at HK$37,363 million (2008: HK$35,850 million).
Available-for-Sale Investments
Available-for-sale investments principally comprised equity securities listed in Hong Kong. In 2009,
the Group disposed of certain equity securities at a net gain of HK$3 million. With regard to the
remaining available-for-sale investments portfolio, the Group will continue to hold them as long-term
investments. Total return for the year from the remaining securities portfolio including both dividend
income and capital value growth, was 6.2%. Total fair value of our listed securities portfolio as at 31
December 2009 was HK$997 million.
Interests in Associates
Interests in associates increased by HK$546 million to HK$2,886 million. This mainly represented
the Group’s share of operating results, change in fair values of investment properties as well as
exchange gain on translation for the Shanghai Grand Gateway projects during the year.
Held-to-Maturity Debt Securities, Time Deposits, Cash and Bank Balances
At the end of 2008, the Group placed cash of HK$700 million in short-term government bills
and notes to preserve the Group’s liquidity during the global fi nancial markets turmoil. In 2009,
with the stress on the banking industry slowly subsiding, funds were placed as time deposits and
bank balances in banks with strong credit ratings. This led to the increase in the Group’s time
deposits, cash and bank balances from HK$1,015 million at year end 2008 to HK$1,984 million
at year end 2009. Further discussion of the Group’s liquidity management is set out in the
“Financial Policy” section.
n/a – not applicable
30 Hysan Annual Report 2009
Borrowings
The carrying amount of the Group’s borrowings was HK$3,891 million at year end 2009 (2008:
HK$3,751 million). HK$550 million fi ve-year fl oating rate notes matured and HK$70 million bank loan
were repaid in the year. To maintain our prudent liquidity position and to enjoy the lower interest rate
environment, a total of HK$799 million was drawn down from both the Medium Term Notes Programme
and banking facilities during the year. The Group entered into hedging transactions to hedge interest rate
and foreign exchange exposures, which reduced the average fi nance cost of the Group’s total borrowings.
Taxation
Provision for current tax decreased to HK$45 million at year end 2009 (2008: HK$351 million), which
was principally due to the settlement of a prior-year tax dispute. As disclosed in the annual reports
published in previous years, the Group had been in dispute for a considerable period of time with the
Hong Kong Inland Revenue Department (the “IRD”) on interest deductions made in years of assessment
dating back to 1995/1996. Taking into consideration professional advice and recent developments, the
Group entered into a settlement with the IRD. Total claim amount of HK$450 million, which was fully
provided at 31 December 2008, was settled during the year by cash payment of HK$268 million and tax
reserve certifi cates of HK$182 million already purchased in prior years.
Provision for deferred tax increased by HK$233 million to HK$3,881 million at year end 2009
(2008: HK$3,648 million) due to the additional provision for the revaluation gain on the Group’s
investment properties.
Shareholders’ Funds
Shareholders’ funds increased by 7.0% from HK$31,469 million at year end 2008 to HK$33,668 million
at year end 2009. This was mainly attributable to the increase in valuation of the Group’s investment
properties and the profi ts generated from the Group’s core leasing activities. Adjusted shareholders’
funds also rose by 6.9% to HK$37,057 million at year end 2009 (2008: HK$34,660 million).
Minority Interests
The increase of HK$45 million in minority interests to HK$1,286 million (2008: HK$1,241 million) was
attributable to profi t contribution as well as revaluation surplus from Lee Gardens Two.
Stepped-up
marketing efforts
and customer
services entice
Mainland Chinese
tourists to our
retail portfolio.
Hysan Annual Report 2009 31
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M A NAGEMENT ’S DISCUSSION A ND A NA LYSIS
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2009
Operating activities
Cash generated from operations
Net tax paid
Investing activities
Payments in respect of
investment properties
Disposals of available-for-sale
investments
(Placement) proceeds upon maturity
of principal-protected deposits
Interest and dividends received
Receipts from overseas projects
Purchase of property, plant and
equipment
Increase in time deposits with original
maturity over three months
Financing activities
Dividends paid
Finance costs
New borrowings
Repayment of borrowings
Proceeds on exercise of share options
2009
HK$ million
2008
HK$ million
CHANGE
HK$ million
CHANGE
%
1,349
(469)
1,362
(183)
880
1,179
(13)
(286)
(299)
-1.0
+156.3
-25.4
(242)
(345)
103
-29.9
44
272
(228)
-83.8
(72)
35
221
(8)
(1,551)
(1,573)
(642)
(127)
799
(620)
1
(589)
(150)
(25)
215
n/m
-41.7
n/m
(3)
+60.0
78
60
6
(5)
–
(1,551)
66
(1,639)
(641)
(140)
765
–
2
(14)
(1)
13
34
(620)
(1)
(575)
n/a
n/m
+0.2
-9.3
+4.4
n/a
-50.0
n/m
Net (decrease) increase in
cash and cash equivalents
(1,282)
1,231
(2,513)
n/m
Operating Activities
Cash fl ows from operating activities decreased by HK$299 million as compared with last year,
mainly due to the settlement of the prior-year tax dispute by cash payment of HK$268 million in the
current year.
Investing Activities
The Group placed cash as time deposits in banks with strong credit ratings. A majority of these
time deposits had original maturity periods for over three months but not exceeding one year. These
investments were counted as the Group’s investing activities in the consolidated statement of cash
fl ows. As a result, the cash used in investing activities increased considerably by HK$1,639 million
as compared with last year.
Financing Activities
Cash used in fi nancing activities increased by HK$575 million as compared with last year, mainly
due to the repayment of a HK$70 million bank loan and HK$550 million fi ve-year fl oating rate notes
maturing during the year. There were no other material changes in use of cash for the Group’s
fi nancing activities.
n/a – not applicable
n/m – not meaningful
32 Hysan Annual Report 2009
Strong teamwork
across-the-board is a
core contributor to
the Group’s customer
focus and continuous
success.
Beyond Financial Statements
Contingent Liabilities
The Group has underwritten cash calls by its associates to fi nance working capital requirements.
Based on currently available information, management does not anticipate any major call for cash
contributions in the foreseeable future.
Capital Expenditure and Management
The Group is committed to enhancing the asset value of its investment property
portfolio through selective refurbishment, repositioning and redevelopment.
The Group also has in place a portfolio-wide whole-life cycle maintenance
programme as part of its ongoing strategy to pro-actively implement preventive
maintenance activities.
Total cash outlay of capital expenditure (excluding purchase of plant and
equipment) during the review year was HK$242 million. The graph on the right
illustrates capital expenditure patterns during the last fi ve years.
The Group has an internal control system for scrutinising capital expenditures.
Detailed analysis of expected risks and returns is submitted to business unit
heads, Executive Directors or the Board for consideration and approval, depending
on strategic importance, cost/benefi t and the size of the projects. The criteria for
assessment of fi nancial feasibility are generally based on net present value, pay
back period and internal rate of return from projected cash fl ow.
Capital Expenditure
HK$ million
400
320
240
160
80
0
0
7
3
5
4
3
2
4
2
5
2
1
1
8
05
06
07
08
09
At year end, the Group had HK$2,250 million undrawn committed bank facilities. These facilities,
together with the Medium Term Notes Programme, available-for-sale investments and positive cash
fl ows from local and overseas operations, provide adequate fi nancial resources to fund the level of
planned capital expenditure, including the Hennessy Centre redevelopment project.
Hennessy Centre Redevelopment
The Hennessy Centre (at 500 Hennessy Road) redevelopment project remains on schedule to be
completed at the end of 2011. Substructure and the tower foundation works have been completed. Lifts
and major building services sub-contracts have been awarded. Basement construction has commenced
and is expected to be completed by June 2010. The 36-storey mixed–use offi ce and retail building, with
four additional levels of basement, will have a gross fl oor area of approximately 710,000 square feet.
This future northern gateway to Hysan’s community in Causeway Bay is the fi rst Hong Kong building
pre-certifi ed at the highest Platinum level for the United States Green Building Council’s Leadership in
Energy and Environmental Design (LEED) standard. The project is also pre-certifi ed for the top Platinum
level in Hong Kong’s Building Environmental Assessment Method (BEAM).
Hysan Annual Report 2009 33
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M A NAGEMENT ’S DISCUSSION A ND A NA LYSIS
Financial Policy
Market Highlight
The world economy was at a crossroads in 2009. The unprecedented uncertainty continued to
undermine the fi nancial markets at the beginning of the year. In the second half of 2009, the global
economy improved mainly due to massive fi scal stimulus programmes and the relaxed monetary
policies of various governments which helped to stabilise the global fi nancial and credit markets.
Under such market condition, the Group will continue to focus on liquidity and interest rate risk
management in 2010.
Objectives
We adhere to a policy of fi nancial prudence. Our objectives are to:
• maintain a strong fi nancial position by actively managing debt level and cash fl ow
• secure diversifi ed funding sources from both banks and capital markets
• minimise refi nancing and liquidity risks by attaining healthy debt repayment capacity, diversifi ed
maturity profi le, and availability of banking facilities with minimum collateral on debt
• manage the exposures arising from adverse market movements in interest rates and foreign
exchange through appropriate hedging strategies
• monitor counter-party risks by imposing proper counter-party limits and reduce fi nancial
investment risks by holding quality marketable securities
KEY PERFORMANCE INDICATORS
PERFORMANCE INDICATOR
PERFORMANCE INDICATOR
HOW IT IS MEASURED
HOW IT IS MEASURED
SIGNIFICANCE TO THE GROUP
SIGNIFICANCE TO THE GROUP
Average Finance Costs
– Interest expenses divided by average
– Our treasury aims to manage and optimise
gross debt for the year
– 2009: 3.1% (2008: 4.4%)
fi nance costs
– HIBOR was generally lower in 2009
compared with 2008
– The proportion of the borrowings from
– As a measure of diversifi cation of funding
Bank Facilities:
Capital Market Issuance
banks and from capital market relative to
the gross debt
– 2009: 37.2% : 62.8%
(2008: 24.9% : 75.1%)
Average Debt Maturity
– The weighted average of remaining
maturity period of the Group’s gross debt
– 2009: 3.4 years (2008: 3.9 years)
sources
– More bank loans were drawn to replenish
matured borrowings in the year to achieve
a more balanced ratio
– An indicator of the pressure for refi nancing
or repaying the existing borrowings in the
near term
– The average maturity was slightly shortened
Floating Rate Debt
(% on Total Debt)
– Debt effectively in fl oating interest rate
– A measure to calculate the percentage of
divided by gross debt
– 2009: 64.9% (2008: 59.5%)
borrowings subject to fl uctuation in market
interest rates
– A higher ratio allowed the Group to benefi t
from the low interest rate environment
34 Hysan Annual Report 2009
KEY PERFORMANCE INDICATORS
PERFORMANCE INDICATOR
PERFORMANCE INDICATOR
HOW IT IS MEASURED
HOW IT IS MEASURED
SIGNIFICANCE TO THE GROUP
SIGNIFICANCE TO THE GROUP
Net Interest Coverage
Net Debt to Equity
– Gross profi t less administrative expenses
before depreciation divided by net interest
expenses
– It represents the Group’s fi nancial strength
from operating activities to meet its
interest payment obligations
– 2009: 11.7 times (2008: 10.2 times)
– Improved ratio refl ects our stable profi t
against lower interest expenses
– Borrowings less short-term investments,
time deposits, cash and bank balances
divided by adjusted shareholders’ funds
– A benchmark as to the healthy debt level
as well as an indicator of the Group’s
ability to raise further debt
– 2009: 5.1% (2008: 5.9%)
– The ratio remains low and the Group’s
ability to raise further debt remains strong
CREDIT RATINGS
Moody’s
Standard and Poor’s
– 2009: Baa1 (2008: Baa1)
– 2009: BBB (2008: BBB)
– Investment-grade ratings unchanged
Hysan’s Treasury policy manual lays down the acceptable range of operational parameters and gives
guidance on the above areas in order to achieve the objective of fi nancial prudence.
Treasury has an overall objective of optimisation of borrowing costs and management of associated
risks: that is to minimise the fi nance costs subject to the constraints of the operational parameters.
The cost of fi nancing was 3.1% for 2009.
Debt Management
Credit markets in Hong Kong remained tight for the fi rst quarter of 2009. Liquidity
improved afterwards when the fi nancial markets stabilised and credit spreads
normalised as banks started to lend to selected companies with strong credits.
At the same time, capital markets also became more active as the risk appetite
of investors returned.
As we had completed the majority refi nancing of debts in 2008, we experienced
little pressure to refi nance during the year. To maintain our prudent liquidity
position, we concluded a new bilateral bank loan of US$25.6 million and issued
HK$200 million of notes from the Medium Term Notes Programme during the year.
The graph on the right shows the strong fi nancial strength of the Group in meeting
the interest payment obligations and to raise further debts if necessary.
The Group always strives to lower the borrowing margin, to diversify the funding
sources and to maintain a suitable maturity profi le relative to the overall use of
funds. As at 31 December 2009, the outstanding gross debt of the Group was
HK$3,889 million, an increase of HK$191 million compared to 2008. All the
outstanding borrowings are on an unsecured basis.
12.0
9.6
7.2
4.8
2.4
0
Net Interest Coverage and
Net Debt to Equity at Year End
%
11.7x
%
7
0
1
.
4.6x
10.2x
.
%
9
7
6.9x
7.8x
.
%
8
%6
9
%5
.
1
.
5
05
06
07
08
09
Net Debt to Equity
Net Interest Coverage (times)
Hysan Annual Report 2009 35
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M A NAGEMENT ’S DISCUSSION A ND A NA LYSIS
In order to diversify the funding sources, the Group has established long-term
relationships with a number of local and overseas banks. Nine local and overseas
banks have provided bilateral banking facilities to the Group and such bank
borrowings accounted for about 37.2% of the Group’s outstanding gross debt.
Notes issued from the Medium Term Notes Programme serve as an important
source of funding for the Group. The Programme allows the Group to access a
broad investor base in both the local and international debt capital markets. These
markets are more fl exible with respect to the longer-tenor debts. As at the end of
2009, about 62.8% of the Group’s outstanding gross debts were sourced from the
debt capital markets through the Programme.
The graph on the right shows the percentages of total outstanding gross debts
sourced from banks and the debt capital markets in the past fi ve years.
The Group also strives to maintain an appropriate maturity profi le. The average
maturity of the debt portfolio was about 3.4 years. As at 31 December 2009,
about HK$1,050 million or 27.0% of the outstanding debts will be due in less
than two years. There will not be signifi cant refi nancing pressure on the Group in
the near term, especially taking into account the level of cash and the undrawn
committed facilities available to the Group. Hysan will continue to monitor the
fi nancial market closely to identify the appropriate time to secure borrowings to
pre-fi nance maturing debts.
The debt maturity profi le of the Group at 2008 and 2009 year end is shown in the
graph on the right.
Liquidity Management
The Group always places great emphasis on liquidity management. Benefi ting from
the strong recurring cash fl ows from its business, the Group was in a favourable
position to withstand the liquidity crunch in early 2009. In the fi rst half of 2009,
when counterparty risk mounted as the banking industry experienced stress, the
Group increased its holding of short-term government bills and notes issued by
the Hong Kong Monetary Authority and US Treasury to preserve both liquidity
and security.
As at 31 December 2009, the Group had funds placed as cash and bank deposits
totalling HK$1,984 million (2008: HK$1,015 million). All the deposits are placed
with banks with strong credit ratings and the counterparty risk is monitored on
a regular basis. Additional liquidity reserve is maintained in the form of highly
liquid securities listed on The Stock Exchange of Hong Kong Limited. The market
value of these securities amounted to HK$997 million at the end of 2009 (2008:
HK$982 million).
Further liquidity, if needed, is available from the undrawn committed facilities
offered by the Group’s relationship banks. These facilities, which amounted to
HK$2,250 million at 31 December 2009, essentially allow the Group to obtain
additional liquidity as the needs arise.
Sources of Financing at Year End
HK$ million
5,000
%
0
.
3
5
%
0
.
7
4
4,000
3,000
2,000
1,000
0
%
8
.
2
6
%
2
.
7
3
%
1
.
5
7
%
3
.
5
7
%
3
.
5
7
%
7
.
4
2
%
7
.
4
2
%
9
.
4
2
05
06
07
08
09
Capital Market Issuances
Bilateral Bank Loans
Debt Maturing Pofile
at 2008 and 2009 Year End
HK$ million
4,000
3,889
3,698
808
2,270
70
550
08
3,200
2,400
1,600
800
0
821
2,018
650
400
09
Maturing in not exceeding
one year
Maturing in more than one year
but not exceeding two years
Maturing in more than two years
but not exceeding five years
Maturing in more than five years
36 Hysan Annual Report 2009
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To offer optimal
services, our
colleagues collaborate
to provide solutions.
Interest Rate Management
Interest expenses account for a signifi cant proportion of the
Group’s total expenses and warrant close monitoring. Appropriate
hedging strategies are adopted to manage exposure to projected
movements in interest rate.
In tandem with the low Fed Fund target rate and ample liquidity
in the interbank market of Hong Kong, the 3-month Hong Kong
Inter-bank Offered Rate (“HIBOR”) hovered at a historical low level
in 2009. As at 31 December 2009, 3-month HIBOR was fi xed at
0.14%. The benefi t of a low interest rate, however, was partly offset
by the widened credit spreads in the credit market.
As at 31 December 2009, about 64.9% of the Group’s debts were
at fl oating rates that can reap the full benefi t of the lower interest
rate environment. As a result, the Group’s average cost of fi nancing
lowered from 4.4% in 2008 to 3.1% in 2009.
The diagram on the right shows the Group’s debt levels and
average fi nance costs in the past fi ve years.
Debt Levels and Average Finance Costs
HK$ million
6,000
4,800
3,600
2,400
1,200
0
5.6%
4.9%
5
7
3
4
,
3.6%
3
7
9
2
,
9
0
9
2
,
1
2
9
2
,
7
3
4
,
2
4
2
5
2
,
6.0%
4.8%
3.6%
3.1%
4.4%
8
9
6
3
,
9
8
8
3
,
3
8
9
,
1
5
0
9
,
1
2.4%
1.2%
0.0%
05
06
07
08
09
Year End Gross Debt
Year End Net Debt
(Gross debt less short-term investments,
time deposits, cash and bank balances)
Average Finance Costs
Hysan Annual Report 2009 37
M A NAGEMENT ’S DISCUSSION A ND A NA LYSIS
Foreign Exchange Management
The Group aims to have minimal mismatches in currency and does not speculate in currency
movements. With the exception of the US$182 million 10-year notes and the US$51 million
bank loans, which have been hedged by appropriate hedging instruments, all of the Group’s other
borrowings were denominated in Hong Kong dollars. On the investment side, US$31 million of
deposits were denominated in US dollars and the investments have also been fully hedged against
foreign exchange exposure. Other foreign exchange exposure mainly relates to investments in the
overseas project in Shanghai. These foreign exchange exposures amounted to the equivalent of
HK$2,886 million or 6.6% of the total assets.
Use of Derivatives
As at 31 December 2009, all outstanding derivatives were related to the hedging of interest rate and
foreign exchange exposures. Strict internal guidelines have been established to ensure derivatives
are used mainly to manage volatilities or adjust the appropriate risk profi le of the Group’s treasury
assets and liabilities.
Before entering into any hedging transaction, the Group will ensure that its counterparty possesses
strong investment-grade ratings to control credit risk. As part of our risk management, a limit on
maximum risk-adjusted credit exposure is assigned to each counterparty which refl ects the credit
quality of the counterparty.
38 Hysan Annual Report 2009
INTERNAL CONTROLS AND RISK MANAGEMENT
Responsibility
Our Board of Directors has the overall responsibility to ensure that sound and effective internal
controls are maintained, while management is charged with the responsibility to design and
implement an internal controls system to manage risks. A sound system of internal controls is
designed to manage rather than eliminate the risk of failure to achieve business objectives, and can
only provide reasonable but not absolute assurance.
Specify Corporate
Objectives
Refine corporate
objectives based on
changes potentially
impacting the
business
Determine
how each of the
other internal
controls components,
both separately and
together, mitigate
such risks
Identify and
analyse risks
to achieve-
ment of
corporate
objectives
R i s k A s s essment
Determine
impact of such
identified risks on
the achievement
of corporate
objectives
i n u o u s Improvement
t
n
o
C
Hysan’s internal controls
system:
• is designed to ensure
corporate objectives are
achieved
• has five components that
work together
Monitoring
• Independent review
by Independent
Advisor in 2006
• Internal audit
function
Information and
Communication
Implement and
operate information
and communication
to support internal
controls
Control Environment
• Strong tradition of
emphasising good
corporate governance
• Human resources
policies
Determine
Effectiveness
Control Activities
• Documented key control
policies and processes
• Annual review update
of risks registers by
department heads
Hysan’s Internal Controls Model
Our internal controls model is based on that set down by the Committee of Sponsoring Organisations
of the U.S. Treadway Commission (“COSO”), and has fi ve components, namely Control Environment;
Risk Assessment; Control Activities; Information and Communication; and Monitoring. In developing
our internal controls model based on the COSO principles, we have taken into consideration our
organisational structure and the nature of our business activities:
• Control Environment --- this is very important as it sets the tone for internal controls in a company.
Hysan is a tightly-knit organisation with around 500 staff members. The actions of management
and its demonstrated commitment to effective governance and control are therefore very
transparent to all. We have a strong tradition of good corporate governance and a corporate
culture based on good business ethics and accountability. We have in place a formal Code of
Ethics that is communicated to all staff (including new recruits). Our “whistle-blowing” system
is monitored by an independent third party service provider with direct reporting to the Audit
Committee Chairman. We aim to build risk awareness and control responsibility into our culture
and regard them as the foundation of our internal controls system.
Hysan Annual Report 2009 39
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INTERNA L CONTROLS A ND RISK M A NAGEMENT
• Control Activities --- our core property leasing and management business involves well-
established business processes. Control Activities have traditionally been built on senior
management reviews, segregation of duties and physical controls. Nonetheless, we recognise
that an appropriate level of further formalisation commensurate with the complexity of business
processes is benefi cial to the continual development of the Group. Over the past few years, we
have been pursuing this goal in line with a general desire to move towards a management style
based on systematic and structured control principles.
Currently, the key features of our system of internal control include:
– Strategic and business planning: each business unit produces and obtains Board approval on
a business plan each year, against which its performance is regularly monitored. Targets for a
wide variety of key performance indicators are set.
– Investment appraisal: capital projects are reviewed in detail and approved by Executive
Directors, Chief Executive Offi cer, or the Board where appropriate, in accordance with delegated
authority limits.
– Financial monitoring: profi tability, cash fl ow and capital expenditure are closely monitored and
key fi nancial information is reported to the Board on a regular basis, including explanations of
variances between actual and budgeted performance.
– Systems of control procedures and delegated authorities: there are clearly defi ned guidelines
and approval limits for capital and operating expenditure and other key business transactions
and decisions.
– During the transitional period between the unexpected passing of the late Chairman and Acting
Chief Executive Offi cer and the appointment of the new Chief Executive Offi cer, Chief-executive
authorities were delegated to management, with the aim of balancing controls and operational
effi ciency. Segregation of duties was observed. Lower fi nancial limits were imposed where
appropriate. Delegation was principally sought for operational matters only. There was periodic
reporting to both the Acting Chairman and Special Board Committee.
• Risk management: we have an ongoing process to identify, evaluate and manage the risks
faced by the Group. We rate each risk in terms of probability of occurrence and potential impact
on performance, and we identify mitigating actions, control effectiveness and management
responsibility. Our approach is supported by an oversight structure under the Audit Committee
and the Board.
Risk Management Process
Annual assessments: department heads review and update the relevant risks registers once a year,
providing assurances that controls are both embedded and effective within the business.
Internal audit: responsible for reviewing and testing key business processes and controls in
accordance with its audit plan, including following up the implementation of management actions and
reporting any overdue actions to the Audit Committee. The Head of Internal Audit reports to the Chief
Executive Offi cer and has direct access to the Audit Committee Chairman.
40 Hysan Annual Report 2009
2009 Review of Internal Controls Effectiveness
The Board is responsible for the Group’s system of internal controls and for reviewing its
effectiveness. Internal Audit reports on reviews of the business processes and activities, including
action plans to address any identifi ed control weaknesses. Management assesses and presents to
the Audit Committee its own assessments of the strengths and weaknesses of the overall internal
controls systems, with action plans to address the weaknesses. External auditors also report on
any control issues identifi ed in the course of their work. Taking these into consideration, the Audit
Committee reviews the effectiveness of the Group’s system of internal controls at least once each
year and reports to the Board on such reviews.
In respect of the year ended 31 December 2009, the Board considered the internal controls system
effective and adequate. No signifi cant areas of concern that might affect the operational, fi nancial
reporting, and compliance functions of the Group were identifi ed. The scope of this review covers
the adequacy of resources, qualifi cation/experience of staff of the Group’s accounting and fi nancial
reporting function and their training and budget.
Way Forward
We recognise that the strengthening of internal controls is a continuing process. We shall continually
review our business processes and control activities accordingly.
Hysan Annual Report 2009 41
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HUMAN RESOURCES
Hysan’s path to success is built on our strong teamwork and people leadership. As at 31 December
2009, we employed a total of 487 staff, including the head offi ce management team and front-line
building management team.
A high standard of business ethics and deep respect for each individual staff member are amongst
the Group’s most cherished core values. They help to create an enabling working environment that
assists in the realisation of our employees’ full potential. This supportive culture is very much
appreciated. Our commitment to forming long-term partnerships with employees proved most
rewarding in 2009, when the Group faced challenges both externally and internally. By dealing with
these issues as a team, the Group overcame all the obstacles and was ready to take our products
and services to the next level.
Teamwork – Towards a common goal of creating success
We focus on building a winning team to achieve the Group’s business objectives.
A clear goal-setting process is in place to cascade company goals into individual ones and to
recognise each individual’s contribution to our business success. Employee participation is highly
valued in the whole goal-setting process, which mobilises team commitment to achieve common
goals. We continuously engage in the progress of the business by holding regular company meetings
and establishing communication channels to share on-going team success and learning.
These activities include staff briefi ng sessions for our results announcements. “Marvellous Hysan”
also updates colleagues regularly on Hysan’s achievements electronically. In a highly encouraging
working environment, the whole team is motivated to work together to achieve that extra mile to
success.
Recently, we held an off-site Company Day for all Head Offi ce staff. Our Chairman, Sir David AKERS-
JONES, kicked off the day with an engaging speech on Hysan’s values and guiding principles. This
was followed by presentations from other senior management members on the coming year’s
objectives. The afternoon session was a team building session in which participants experienced the
signifi cance of cooperation and teamwork through games and projects.
Our Chairman
highlighted Hysan’s
guiding principles to
staff at the Company
Day, when our
tightly-knit team
shared and bonded.
42 Hysan Annual Report 2009
Post-annual results
communications keep
colleagues abreast
of the Group’s latest
development.
Building our talent pool – People development
To develop our employees to their fullest potential, we are committed to providing a
motivating working environment that fosters personal leadership, empowerment, creativity and
open communication.
While we believe staff members should take the initiative to upgrade their own competencies,
we also understand management can help by providing opportunities to broaden staff’s capabilities.
We constantly explore various development opportunities to help our employees recognise their
strengths and development areas and to pursue career paths that match aspirations. We assist our
employees to identify competency gaps and, through training needs analysis, defi ne those areas ripe
for development. Personal growth opportunities include in-house training, fi eld visits, job assignments
and sponsorship for external trainings. Cross-functional teams and task forces are also set up for
special projects to maximise employees’ exposure to different business experiences and knowledge,
thus enhancing skills for all members of the team.
Our human resources policies of “promotion from within” and “inter-departmental transfer” facilitate
the all-round development and advancement of our employees.
The Way Ahead
As stated in our 2010 company slogan “Together we can take the lead”, collaborative teamwork and
people development will continue to be our major focus and platform to support the Group’s growth
plan. We will continue to review and enhance the quality of our internal training curriculum, as well
as support external development opportunities fi nancially and otherwise. We shall develop human
resources programmes to recognise successful teamwork behaviour among employees. All these will
contribute towards developing the next generation of leaders at Hysan.
Hysan Annual Report 2009 43
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Hysan’s “Governance” introduces our board members
and the senior management team. It also showcases
the Group’s ingrained corporate governance culture
and systems, which have been developed and honed
over the years.
3
GOVERNANCE
46 Board of Directors
and Senior Management
50 Corporate Governance Report
65 Directors’ Report
71 Directors’ Remuneration
and Interests Report
79 Audit Committee Report
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BOARD OF DIRECTORS AND
SENIOR MANAGEMENT
STRUCTURE
THE BOARD
Audit
Committee
Emoluments
Review Committee
Nomination
Committee
Investment
Committee
Finance
Corporate Services
CHAIRMAN
CHIEF EXECUTIVE OFFICER
Property
Investment
Property
Services
Property
Development
Independent non-executive Chairman
Sir David AKERS-JONES G.B.M., K.B.E., C.M.G., J.P. (chairing E, N)
Sir David AKERS-JONES is chairman of GAM Hong Kong Limited, deputy chairman of CNT
Group Limited and a non-executive director of China Everbright International Limited and
K. Wah International Holdings Limited. He is also a chairman and member of various voluntary
organisations. He received his Master of Arts Degree at Oxford University. He was formerly
the Chief Secretary of Hong Kong. He was appointed a Director in 1989, became the Deputy
Chairman in 2001 and became Independent non-executive Chairman in January 2010. He is
aged 82.
Chief Executive Offi cer
Gerry Lui Fai YIM
Mr. Yim leads the management team and is responsible for the entire Group’s business and
development. Prior to joining Hysan, he was Managing Director (for the Americas, Middle East
and Africa) of the ports division of a conglomerate and has held senior positions in general
management, fi nance, and investment banking at major organisations in Hong Kong. Mr. Yim
holds a Bachelor’s degree in Economics from the University of Leeds, United Kingdom. He is
a member of the Institute of Chartered Accountants in England and Wales and the Hong Kong
Institute of Certifi ed Public Accountants. He was appointed Executive Director in December
2009 and Chief Executive Offi cer in March 2010. He is aged 50.
Independent non-executive Director
Nicholas Charles ALLEN (chairing A)
Mr. Allen is an independent non-executive director of CLP Holdings Limited and Lenovo
Group Limited. He has extensive experience in accounting and auditing and was a partner
of PricewaterhouseCoopers (PwC) from 1988 until his retirement in June 2007. His other
appointments in Hong Kong prior to his retirement from PwC included: Member of the
Securities & Futures Appeal Panel; Member of the Takeovers & Merger Panel; Member of the
Takeovers Appeal Committee; Member of the Share Registrars’ Disciplinary Committee and
Member of the Disciplinary Panel of the Hong Kong Institute of Certifi ed Public Accountants.
Mr. Allen holds a Bachelor of Arts degree in Economics/Social Studies from Manchester
University, United Kingdom. He is a Fellow of the Institute of Chartered Accountants in England
and Wales and a member of the Hong Kong Institute of Certifi ed Public Accountants. He was
appointed an Independent non-executive Director in November 2009 and is aged 54.
46 Hysan Annual Report 2009
Independent non-executive Director
Philip Yan Hok FAN
Mr. Fan is a non-executive director of China Everbright International Limited and an independent
non-executive director of HKC (Holdings) Limited. Mr. Fan holds a Bachelor’s Degree in Industrial
Engineering and a Master’s Degree in Operations Research from Stanford University, as well as
a Master’s Degree in Management Science from Massachusetts Institute of Technology.
He was appointed Independent non-executive Director in January 2010. He is aged 60.
Independent non-executive Director
Fa-kuang HU G.B.S., C.B.E., J.P. (E)
Mr. Hu is Honorary Chairman of Ryoden Development Limited. He was an independent non-
executive director of i-CABLE Communications Limited and retired effective from the conclusion
of its annual general meeting held on 17 May 2007. He holds a Bachelor of Science Degree
from Shanghai Jiao Tong University. He was appointed a Non-executive Director in 1979 and
re-designated as Independent non-executive Director in 2008. He is aged 86.
Independent non-executive Director
Joseph Chung Yin POON
Mr. Poon is Group Managing Director of a private company and an independent non-executive
director of AAC Acoustic Technologies Holdings Inc. He was formerly managing director and
deputy chief executive of Hang Seng Bank Limited and had held senior management posts
in HSBC Group and a number of international renowned fi nancial institutions. Mr. Poon is
a member of the Board of Inland Revenue of Hong Kong Special Administrative Region and
the Environment and Conservation Fund Investment Committee, also a committee member
of the Chinese General Chamber of Commerce. He was the former chairman of Hang Seng
Index Advisory Committee, Hang Seng Indexes Company Limited. Mr. Poon holds a Bachelor
of Commerce degree from the University of Western Australia, is a member of the Hong Kong
Institute of Certifi ed Public Accountants and the Institute of Chartered Accountants in Australia.
He was appointed Independent non-executive Director in January 2010. He is aged 55.
Independent non-executive Director
Dr. Geoffrey Meou-tsen YEH S.B.S., M.B.E., J.P., D.C.S., M.Sc., F.C.I.O.B., F.Inst.D. (A, E, N)
Dr. Yeh is former Chairman of Hsin Chong Construction Group Ltd. He was an independent
non-executive director of China Travel International Investment Hong Kong Limited until 14
July 2007. He holds a Bachelor of Science Degree from University of Illinois and a Master of
Science Degree from Harvard University. Dr. Yeh was appointed a Non-executive Director in
1979 and as Independent non-executive Director in 2001. He is aged 78.
Non-executive Director
Hans Michael JEBSEN B.B.S. (I)
Mr. Jebsen is Chairman of Jebsen and Company Limited as well as a director of other Jebsen
Group companies worldwide. He is also an independent non-executive director of The Wharf
(Holdings) Limited. He was appointed a Non-executive Director in 1994 and is aged 53.
Non-executive Director
Anthony Hsien Pin LEE (chairing I)
Mr. Lee is 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 fi lms. He is also an alternate director of Television Broadcasts
Limited. He received a Bachelor of Arts Degree from Princeton University and a Master of
Business Administration Degree from The Chinese University of Hong Kong. Mr. Lee is a member
of the founding Lee family and a director of Lee Hysan Estate Company, Limited, a substantial
shareholder of the Company. He was appointed a Non-executive Director in 1994 and is aged 52.
Hysan Annual Report 2009 47
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BOA RD OF DIRECTORS A ND SENIOR M A NAGEMENT
Non-executive Director
Chien LEE (A)
Mr. Lee is a private investor and a non-executive director of Swire Pacifi c Limited and Television
Broadcasts Limited and a number of private companies. He is a member of the founding Lee
family and a director of Lee Hysan Estate Company, Limited, a substantial shareholder of the
Company. Mr. Lee 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. Mr. Lee was appointed a Non-executive Director in 1988 and is aged 56.
Non-executive Director
Michael Tze Hau LEE
Mr. Lee is currently the managing director of MAP Capital Limited, an investment management
company. He is also an independent non-executive director of Hong Kong Exchanges and
Clearing Limited, Chen Hsong Holdings Limited, Tai Ping Carpets International Limited, Trinity
Limited; and a Steward of Hong Kong Jockey Club. Mr. Lee was a member of the Main Board
and Growth Enterprise Market Listing Committees of The Stock Exchange of Hong Kong
Limited. Mr. Lee is a member of the founding Lee family and a director of Lee Hysan Estate
Company, Limited, a substantial shareholder of the Company. He joined the Board in January
2010 having previously served as a Director from 1990 to 2007. Mr. Lee received his Bachelor
of Arts Degree from Bowdoin College and his Master of Business Administration Degree from
Boston University. He is aged 48.
Non-executive Director
Dr. Deanna Ruth Tak Yung RUDGARD O.B.E.
Dr. Rudgard received a Master of Arts Degree, Bachelor of Medicine and of Surgery Degree
from Oxford University. She is a member of the founding Lee family and a director of Lee Hysan
Estate Company, Limited, a substantial shareholder of the Company. She was appointed a
Non-executive Director in 1993 and is aged 70.
Executive Director and Company Secretary
Wendy Wen Yee YUNG
Ms. Yung joined the Group in 1999 and was appointed Executive Director in 2008. She is
responsible for the Group’s offi ce and residential leasing, as well as property management
activities. In addition, she advises the Board on corporate governance systems and
developments generally. Ms. Yung holds a Master of Arts degree from Oxford University, United
Kingdom and is qualifi ed as a solicitor of the Supreme Court of England and Wales as well as
High Court of Hong Kong. She was a partner of an international law fi rm prior to joining the
Group. Ms. Yung is also qualifi ed as a Certifi ed Public Accountant of the Hong Kong Institute of
Certifi ed Public Accountants, and sits on the Institute’s Professional Accountants in Business
Leadership Panel. She is aged 48.
(A) Audit Committee
(E) Emoluments Review Committee
(N) Nomination Committee
(I)
Investment Committee
48 Hysan Annual Report 2009
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Senior management team and advisor to the Board (from left to right): Jimmy Yiu Cho MAK, Lai Kiu CHAN,
Wendy Wen Yee YUNG, Gerry Lui Fai YIM, Cissy Ching Sze CHAN, Roger Shu Yan HAO, Peter Hoo Tim LEE
Director, Retail Portfolio and Marketing
Cissy Ching Sze CHAN
Ms. Chan is responsible for the Group’s retail
portfolio and related marketing activities. She
joined the Group in 2008. Ms. Chan received
a Master of Business Administration Degree
from the Chinese University of Hong Kong and
a Bachelor of Social Science Degree from the
University of Hong Kong. She gained substantial
general management experience in multinational
companies while holding senior positions, with
particular expertise in sales and marketing.
She is aged 44.
Director, Design and Project
Lai Kiu CHAN
Ms. Chan oversees the Group’s design and
project affairs. She joined the Group in 2008.
Ms. Chan holds a Doctor of Philosophy Degree in
Architecture from the University of Hong Kong.
She qualifi ed as a PRC Class 1 Registered
Architect, is a Registered Architect of Architects
Registration Board of Hong Kong, and is also an
Authorised Person (Architect) in Hong Kong. Ms.
Chan has received various international and local
awards for architectural designs. She is aged 47.
Group Financial Controller
Roger Shu Yan HAO
Mr. Hao is responsible for the Group’s fi nancial
control and information technology function. He
joined the Group in 2008. Mr. Hao received a
Bachelor’s Degree in Business Administration
from the Chinese University of Hong Kong, and
is a Chartered Accountant with the Institute of
Chartered Accountants in England and Wales, a
Fellow of the Association of Chartered Certifi ed
Accountants and an Associate of the Hong Kong
Institute of Certifi ed Public Accountants. Mr. Hao
accumulated extensive experience in auditing,
fi nancial management and control, while holding
senior positions in multinational corporations.
He is aged 44.
General Manager, Property Services
Jimmy Yiu Cho MAK
Mr. Mak, who joined the Group in 2009, oversees
the Group’s property management services.
He holds a Master of Business Administration
Degree from The Open University of Hong Kong.
He is a Fellow of Chartered Institute of Housing
and Hong Kong Institute of Housing. Having been
in senior management positions in a number of
property companies, Mr. Mak brings to the Group
extensive experience in enhancement of property
management services in commercial as well as
luxury residential properties. He is aged 51.
Advisor to the Board
Peter Hoo Tim LEE
Mr. Lee has over 35 years of experience
in the property fi eld covering a spectrum
of activities spanning property leasing and
new developments in Hong Kong, as well
as other parts of Asia. He is a former Hong
Kong Chairman of the international property
consultancy fi rm, Jones Lang LaSalle.
Mr. Lee advises Hysan on the Hennessy Centre
redevelopment project.
Hysan Annual Report 2009 49
CORPORATE GOVERNANCE REPORT
Long-Established Corporate Governance Tradition
Corporate governance is a long-established tradition at Hysan. Central to this is a deeply-ingrained
corporate governance culture emphasizing accountability, transparency and integrity. Our governance
model aims to combine the best of family ownership and professional management. Over the years,
governance systems and processes have been established, including the presence of a Senior
Independent non-executive Director (taking the offi ce of Independent non-executive Deputy Chairman),
and the adoption of formal corporate governance guidelines. In this way, constructive relations
between the Board, management, and the major shareholder family were further fostered. Our
corporate governance culture is not limited to our Board of Directors; its reach spans beyond senior
management and cultivates a culture and system of team work across the Company.
Our corporate governance culture and governance system has positioned the Company to be able
to respond quickly and effectively to challenges that may arise. Unfortunately, our preparedness was
called upon last year when we were saddened by the unexpected passing of our Chairman and Acting
Chief Executive Offi cer.
The Board immediately adopted effective transitional measures and consistent with our goal
of transparency, communicated these measures to the market. Sir David AKERS-JONES, then
Independent non-executive Deputy Chairman, assumed the role of Acting Chairman. A Special Board
Committee comprising Anthony Hsien Pin LEE, Chien LEE, and Dr. Deanna Ruth Tak Yung RUDGARD,
was formed to assist him in overseeing the day-to-day management of the Company. The duties and
responsibilities of the late Chairman, in his capacity as Acting Chief Executive Offi cer, were delegated
to members of senior management, achieving a balance between maintaining internal control and
operational effectiveness.
In the meantime, the Board was further strengthened by the addition of four new Non-executive
Directors of diverse backgrounds.
Sir David AKERS-JONES was appointed Independent non-executive Chairman in January 2010.
He has been a member of the Board since 1989, becoming Independent non-executive Deputy
Chairman in 2001 and Acting Chairman in 2009, and ultimately Chairman of the Board. Over his
long tenure on the Board, Sir David has acquired an intimate knowledge of the Company and its
governance processes from working alongside his predecessor and the other members of the Board.
This facilitated a smooth and seamless leadership transition.
Gerry Lui Fai YIM, Executive Director, was appointed Chief Executive Offi cer effective March 2010.
The Company has conducted an open search for a Chief Executive Offi cer for some time. As part of
the Company’s strategic planning process, Gerry Lui Fai YIM was recruited by the late Chairman, Peter
Ting Chang LEE, as Executive Director, with a plan that he ultimately assumes the role of Chief
Executive Offi cer. The late Chairman’s unexpected passing accelerated this process.
50 Hysan Annual Report 2009
In this report, we shall explain how our corporate governance culture and governance system
assisted us in handling the challenges of the past year, highlighting the steps we have implemented
so far.
Further disclosure with respect to internal controls and risk management, and executive
compensation were made in the following reports:
•
• Directors’ Remuneration and Interests Report (pages 71-78)
Internal Controls and Risk Management Report (pages 39-41)
• New approach to AGMs
(2004)
• Proactively established
a programme to
facilitate transmission
of corporate
communication
materials to ultimate
shareholders (2005)
• Corporate Governance
Report (2001)
• Audit Committee
Report (2003)
• Directors’
Remuneration and
Interests Report
(2004)
• Internal Controls and
Risk Management
Report (2006)
• Corporate
Responsibility
Report (2007)
Board Committees:
• Emoluments Review Committee
(1987)
• Audit Committee (1999)
• Nomination Committee (2005)
• Formalised role of Senior
Independent non-executive Director
(Deputy Chairman) (2007)
• Key Corporate Governance
Documents
– Corporate Governance Guidelines
(2004)
– Code of Ethics (2005)
– Board of Directors Mandate (2007)
– Role Requirements of
Non-executive Directors (2007)
– Formal Corporate Responsibility
Policy (2007)
– Roles of Independent
non-executive Chairman (2010)
Establish the infrastructure
Disclosure
Shareholder rights
EVOLUTION OF HYSAN’S LONG-ESTABLISHED CORPORATE GOVERNANCE SYSTEM
• Continual corporate
social responsibility
efforts as an integral
part of good corporate
governance (admission
to FTSE4Good Index,
2008)
• Company-wide
briefing of Code of
Ethics; and engaging
independent third
party to administer
“whistle-blowing”
mechanism regarding
possible breaches
(2008)
• Continual group-wide
reinforcement of
corporate values and
culture
Way forward:
more than a
Board process
Statement of Compliance with The Code on
Corporate Governance Practices
Hysan meets the requirements of the Code Provisions contained in the Code on Corporate
Governance Practices (the “Corporate Governance Code”) set out in Appendix 14 of the Rules
Governing the Listing of Securities (the “Listing Rules”) on The Stock Exchange of Hong Kong Limited
(the “Stock Exchange”), except that its Emoluments Review Committee (established since 1987) has
the responsibility of recommending the fees payable to the Chairman and determining compensation
at executive Director-level only. The Board is of the view that, in light of the current organisational
structure and the relatively simple nature of Hysan’s business activities, the current arrangements are
appropriate. The Board will continue to review this arrangement in light of the needs of the Group.
The Company’s Corporate Governance Guidelines provide that the roles of Chairman and Chief
Executive Offi cer are separate and distinct. Sir David AKERS-JONES serves as the Independent
non-executive Chairman. Gerry Lui Fai YIM was appointed Chief Executive Offi cer effective March 2010.
Hysan Annual Report 2009 51
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CORPOR ATE GOVERNA NCE REPORT
BEST PRACTICES IN CORPORATE GOVERNANCE IN PLACE AT HYSAN
EXCEEDED
CODE
PROVISIONS
The Board fi rst established a formal Corporate Governance Policy* in 2004.
Board independence from management and any major shareholder group - Sir David AKERS-JONES
currently serves as Independent non-executive Chairman. Prior to that, he was designated Senior
Independent non-executive Director (Independent non-executive Deputy Chairman). The Company has
adopted a written position description of his roles.
The Board has established formal mandates and responsibilities* for itself, with a clear division of roles
with management.
The Board has established formal criteria and requirements* for non-executive Director appointments.
Newly appointed Non-executive Directors are given formal letters of appointment.
Board evaluation: The Chairman and Non-executive Directors meet at regularly scheduled sessions
without the presence of management.
Over one-third of the Board is represented by Independent non-executive Directors.
All Corporate Governance Committees (Audit, Emoluments Review and Nomination) have at least a
majority of Independent non-executive Directors. Terms of Reference* of each Corporate Governance
Committee provide for in-camera meetings without management presence to further encourage objective
and independent discussions and assessment.
The Group has a written Code of Ethics* applicable to all staff and Directors. Monitoring of the “whistle
blowing” mechanism is performed by an external independent third party provider to further enhance
independence. Such service provider reports directly to the Audit Committee.
The Group has established a Code for Securities Dealing applicable to those employees likely to have
access to unpublished price-sensitive information.
The Group has established a Corporate Disclosure Policy* to guide its stakeholder communications and
the determination of price sensitive information in order to ensure consistent and timely disclosure and
fulfi llment of the Group’s continuous disclosure obligations.
The Group has established an Auditor’s Services Policy* to identify areas of confl icts and prohibit the
engagement of auditors in such areas to ensure objectivity and independence.
The Group has demonstrated its commitment to transparency in shareholder reporting by publishing a
separate Corporate Governance Report since 2001. It also publishes the following reports:
(i) Audit Committee Report;
(ii) Directors’ Remuneration and Interests Report; and
(iii) Internal Controls and Risk Management Report.
The Group has a formal Corporate Responsibility Policy and publishes a separate annual Corporate
Responsibility Report.
Since 2004, the Group has operated a new form of annual general meeting (“AGM”) that goes beyond
discharging statutory business by including a detailed business review. All voting at AGMs have been
conducted by poll since 2004.
The Group has initiated and funded a programme inviting major nominee companies to proactively
forward communication materials to the ultimate benefi cial shareholders at the Group’s expense.
In 2009, the Group published its annual results within 70 days, well within the required time period of
four months from the end of accounting period.
The Group continually enhances the use of its corporate website as a means of communication with
shareholders. Principal corporate governance policies, guidelines, and terms of reference of the related
committees are posted.
* Detailed policies/terms of reference are available on the Company’s website: www.hysan.com.hk.
52 Hysan Annual Report 2009
1. Our Corporate Governance Practices – Governance Model and
Framework
Governance Model
Hysan’s governance model is based on an effective combination of family ownership and professional
management. Our founding shareholder family remains a major shareholder today. We take the view
that this element of family ownership can enable managers to take a long-term view in decision-
making, balancing the need to produce short-term results or earnings targets. In general, family
owners also have a more direct interest in the outcome of decisions made.
This family ownership model is combined with a commitment to apply the principle of meritocracy
in human resources management across the Group. Recruitment of professional management staff
from outside the controlling shareholder base ensures that a wide net is cast for talent. Gerry Lui
Fai YIM, Executive Director, was appointed Chief Executive Offi cer effective March 2010. Appropriate
checks-and-balances are also built into our governance structure. These include the presence of an
Independent non-executive Chairman and the establishment of appropriate Board Committees. The
roles and responsibilities of the Board, Independent non-executive Chairman, non-executive Directors,
and Board Committees are clearly delineated.
Authority
Delegation through:
• clear policies and
procedures
• monitoring
Shareholders
Board
Management
Accountability
Assurance through
checks-and-balances:
• monitoring
• reporting
Governance Framework
There are many guidelines, policies, and procedures that support the governance framework at
Hysan. The following constitute key components of Hysan’s governance framework. They are posted
on the Company’s website: www.hysan.com.hk:
• Corporate Governance Guidelines
• Board of Directors Mandate
• Roles Requirements of Non-executive Directors
• Terms of Reference of various corporate governance-related Board Committees
• Code of Ethics for employees
• Auditor Services Policy
• Corporate Disclosure Policy
The Board reviews its corporate governance practices annually.
Hysan Annual Report 2009 53
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2. Our Corporate Governance Practices – The Board
Board Leadership
The principle of Board independence from management and any major shareholder group is clearly
established in our Corporate Governance Guidelines.
These guidelines provide for the roles of Chairman and Chief Executive Offi cer to be separate
and distinct. Peter Ting Chang LEE served as the Chairman until 17 October 2009. Sir David
AKERS-JONES served as Acting Chairman from 18 October 2009 until he was appointed Independent
non-executive Chairman on 11 January 2010. Gerry Lui Fai YIM was appointed Chief Executive Offi cer
effective March 2010.
Non-executive Directors play a key role in protecting shareholders’ interests. They bring an external
dimension to the Board, whilst complementing the skills and experience of the executive Directors,
through their range of knowledge, experience and insight from other sectors.
The principal roles of the Independent non-executive Chairman and Non-executive Directors are set
out below:
INDEPENDENT NON-EXECUTIVE CHAIRMAN
• Provide leadership to ensure that the Board works as a cohesive team;
• Chair Board meetings, including requiring appropriate briefi ng materials to be delivered in a timely
fashion, stimulating constructive debate, providing adequate time for the discussion of issues,
facilitating consensus, encouraging full participation by individual directors and ensuring that
clarity regarding decisions is reached and duly recorded;
• Ensure that appropriate procedures are in place to allow the Board to work effectively and
effi ciently and to function independently;
• Maintain an effective and constructive relationship between the Board, management of the
Company, and shareholders generally;
• Establish the agenda for Board meetings in consultation with the other directors of the Board;
• Chair general meetings of the Company;
• Ensure that the Board and its committees have the necessary resources to support their work;
• Ensure compliance with the corporate governance policies of the Board;
• Ensure that the Company maintains a culture of integrity and other corporate governance values;
and
• Be a respected ambassador for the Company generally.
NON-EXECUTIVE DIRECTORS
Non-executive Directors have four key roles in addition to those applicable to all Directors:
• Strategy – constructively challenge, and thereby help develop proposals on strategy
• Performance – scrutinise performance of management in meeting agreed upon goals
and objectives
• Risk – satisfy themselves about the integrity of fi nancial information and the robustness of
controls and systems of risk management
• People – determine appropriate levels of remuneration for Executive Directors and undertake in
succession planning
For details, please refer to the Company’s Corporate Governance Compliance Report at the Company’s website:
www.hysan.com.hk
54 Hysan Annual Report 2009
Skills, Balance and Independence
The Board continually reviews its composition and is actively engaged in succession planning issues
with respect to both executive and non-executive roles.
Our non-executive Directors are drawn from diverse and complementary backgrounds.
(Directors’ full biographies are set out on pages 46 to 48 and are also available on the Company’s
website: www.hysan.com.hk).
The Board has established “independence” standards as contained in the Corporate Governance
Guidelines. It considers “independence” to be a matter of judgment and conscience. A Director is
considered to be Independent only where he or she is free from any business or other relationship
that might interfere with the exercise of his or her independent judgment.
The Board makes a determination concerning the “independence” of a Director each year at the
time the Board approves Director nominees for inclusion in the AGM circular. If a Director joins the
Board mid-year, the Board makes a determination on the new Director’s independence at that time.
Independent non-executive Directors are identifi ed in our Annual and Interim Reports and other
communications with shareholders.
The Board carried out a detailed review of
director independence in March 2010. It
concluded that each of the 6 Independent
non-executive Directors is independent and will
continually monitor and review whether there are
relationships or circumstances which are likely to
affect (or could appear to affect) independence.
Best Corporate Governance
Disclosure Gold Award 2001
Organised by the Hong Kong
Society of Accountants
The judges commended
Hysan on the extent and
e
quality of disclosures in the
annual report, despite it
being a relatively smaller
and less complex business
with a family background
– that such disclosures
are a positive model of
a developing corporate
governance culture.
Hysan Annual Report 2009 55
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INDEPENDENCE STATUS
Name
Management
Independent
Not
Independent
March 2010 Review-
Reason for Independence Status
Peter Ting Chang LEE
(up to 17 October 2009)
Sir David AKERS-JONES
Nicholas Charles ALLEN
Tom BEHRENS-SORENSEN
(up to 18 May 2009)
Philip Yan Hok FAN
Fa-kuang HU
Hans Michael JEBSEN
Anthony Hsien Pin LEE
Chien LEE
Michael Tze Hau LEE
Joseph Chung Yin POON
(Note)
Dr. Deanna Ruth Tak Yung
RUDGARD
Ricky Tin For TSANG
(up to 29 September 2009)
Dr. Geoffrey Meou-tsen YEH
Gerry Lui Fai YIM
Wendy Wen Yee YUNG
No business or other
relationships with the Group
or management
No business or other
relationships with the Group
or management
No business or other
relationships with the Group
or management
No business or other
relationships with the Group
or management
No business or other
relationships with the Group
or management
No business or other
relationships with the Group
or management
No business or other
relationships with the Group
or management
Note: Mr. Poon was formerly the managing director and deputy chief executive of Hang Seng Bank Limited (“Hang Seng”).
Hang Seng is a connected person of the Company under the Listing Rules by virtue of its benefi cial equity interest (24.64%)
in a non-wholly owned subsidiary which holds the property of Lee Gardens Two. However, Hang Seng does not have a
controlling interest in nor does it participate in the day-to-day operation of the relevant company and is connected to the
Company only at the subsidiary level, and Mr. Poon’s functions at Hang Seng did not involve him playing any direct role in
Hang Seng’s participation as a minority shareholder in the relevant company.
56 Hysan Annual Report 2009
The Board and Management
The roles of the Board and of management are
separate and distinct. The Board’s responsibility
is, fi rstly, to formulate strategy and, secondly,
to monitor and control operating and fi nancial
performance in pursuit of the Group’s strategic
objectives. On the other hand, the responsibility
for the day-to-day management of the Group’s
business activities and the implementation of the
Group’s policies remain vested in management.
The Board and management fully appreciate
their respective roles and are supportive of the
development of a healthy corporate governance
culture.
The roles of the Board are governed by
a formal Board of Directors Mandate
(Details are available on the Company’s website:
www.hysan.com.hk) which sets out the key
responsibilities of the Board in fulfi lling its
stewardship roles.
Directors of The Year Awards 2004,
in the Listed Company (Main Board
Index)
– Hang Seng Composite Index)
Boards category
Organised by The Hong Kong
Institute of Directors
“The Board of Hysan is well
structured and composed of
d
a diversity of backgrounds and
ith
skills. It is forward thinking with
f
the fi rm belief of the concept of
responsible business.”
“Hysan’s strong commitment to
shareholder value is supported by
by
strategy, solid results and drive for
for
i h
consistent long-term returns, with a clear
separation of public shareholders’ interests
from family interests.”
l
- Judges’ Report
A detailed list of Matters Reserved for Board Decisions sets out the key matters that are to
be retained for the decision of the full Board. These matters include: the extension of Group
activities into new business areas; annual budgets; preliminary announcements of interim and fi nal
results; dividends; material banking facilities; material acquisitions and disposals; and connected
transactions.
Where applicable, “materiality” thresholds are set at appropriate levels to ensure proper control while
allowing for smooth day-to-day operations to be carried out by management. These thresholds are
set out in a schedule that is subject to review periodically, at least once a year. It was last formally
reviewed by the Board in March 2010.
6 Board meetings were held in 2009. Each meeting was structured to allow for open discussion.
The Board regularly receives presentations, including from non-Board management members, on
signifi cant issues or new opportunities for the Group. This facilitates the build-up of constructive
relations and dialogue between the Board and the management team.
Hysan Annual Report 2009 57
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Details of Directors’ Board attendance records are as follow:
DIRECTORS
ATTENDANCE/
TOTAL BOARD MEETINGS
Executive
Peter Ting Chang LEE (until 17 October 2009)
Ricky Tin For TSANG (resigned on 29 September 2009)
Wendy Wen Yee YUNG
Independent Non-executive
Sir David AKERS-JONES
Nicholas Charles ALLEN (appointed on 17 November 2009)
Tom BEHRENS-SORENSEN (resigned on 18 May 2009)
Fa-kuang HU
Dr. Geoffrey Meou-tsen YEH
Non-executive
Hans Michael JEBSEN
Anthony Hsien Pin LEE
Chien LEE
Dr. Deanna Ruth Tak Yung RUDGARD
3/3
3/3
6/6
6/6
1/1
1/1
3/6
5/6
5/6
(2 by alternate)
6/6
(1 by telephone conference)
5/6
6/6
(1 by alternate)
Director Appointments and Re-election
Requirements
There is a formal, rigorous and transparent procedure for the appointment of new Directors to the
Board. The Board established the Nomination Committee and delegated to it the responsibility
of recommending candidates to the full Board for consideration. The Board and the Nomination
Committee review the skill sets of the Director candidates in light of the composition of the Board
as a whole to provide for the best mix of skills and experience to guide the Company. There are
formalised role requirements for Non-executive Directors (as set out above) who have four additional
key roles in addition to those requirements applicable to all Directors (Details are available on the
Company’s website: www.hysan.com.hk).
During 2009 and to date, the full Board approved the appointments of (i) the four new non-executive
Directors; and (ii) Gerry Lui Fai YIM as Executive Director and subsequently, Chief Executive Offi cer.
Term
Non-executive Directors are appointed for a term of 3 years. Non-executive Directors are required
to submit their candidacy for re-election at the fi rst AGM following their appointment. The Group’s
Articles of Association contain provisions regarding the rotation of Directors so that every Director
will be subject to retirement by rotation at least once every 3 years. Retiring Directors are subject to
re-election at the AGM at which he retires. There is no cumulative voting in Director elections. The
election of each candidate is done through a separate resolution. Details of the Directors standing
for re-election at the forthcoming AGM are set out in the accompanying Circular to Shareholders.
58 Hysan Annual Report 2009
Evaluation
Hysan evaluates the performance of the Company and members of management at meetings
between the Chairman and Non-executive Directors without the presence of management.
Supply of Information
Supply and Access to Information
The Board receives detailed quarterly reports from management in respect of their areas of
responsibility. Appropriate key performance indicators are used to facilitate benchmarking and peer
group comparison. Financial plans, including budgets and forecasts, are regularly discussed at Board
meetings. The Board recognizes the signifi cance of providing timely and relevant information to
non-executive Directors so as to enable them to
discharge their duties effectively. Directors are
also kept updated of any material developments
from time to time through notifi cations and
circulars detailing the relevant background and
explanatory information. Directors also have
access to non-Director members of management
and staff where appropriate. Collectively, these
processes ensure that the Board receives the
answers and information it needs to fulfi ll its
obligations.
Organised by the Hong Kong
Institute of Certifi ed Public
Accountants
Best Corporate Governance Disclosure
Awards 2009: Non-Hang Seng Index (Large
Market Capitalisation) Category
- Gold Award
Independent Advice
The Board recognises that there may be
occasions when one or more Directors feel that
it is necessary to obtain independent legal and/
or fi nancial advice for the purposes of fulfi lling
their obligations. Such advice may be obtained
at the Company’s expense and there is an
agreed upon procedure to enable Directors to
obtain such advice, as stated in our Corporate
Governance Guidelines.
“Hysan’s annual report
2008 gave readers a clear
sense that the company
had established a good
corporate governance
culture, demonstrating
a successful combination
of family ownership and
professional management.”
- Judges’ Report
Induction and Update
Upon their appointment, Directors are advised on the legal and other duties and obligations they
have as directors of a listed company. Newly appointed Directors receive a comprehensive induction
package designed to provide a general understanding of the Group, its businesses, the operations
of the Board and the main issues it faces, as well as an overview of the additional responsibilities of
non-executive Directors. Discussion sessions with key members of management will also be held.
Through the course of their directorship, Directors are updated on any developments or changes
affecting the Company and their obligations to it by way of notifi cations circulated to them from time
to time where appropriate.
Hysan Annual Report 2009 59
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3. Our Corporate Governance Practices – Board Committees
In order to provide effective oversight and leadership and pursuant to its Corporate Governance
Guidelines, the Board has established 3 governance-related Board Committees. Like the Board, each
Committee has access to independent advice and counsel as required and each is supported by the
Company Secretary. The terms of reference of these Committees are available on the Company’s
website.
Audit Committee
Composition and Meetings Schedule
The Audit Committee is currently comprised of Nicholas Charles ALLEN (Chairman), Chien LEE and
Dr. Geoffrey Meou-tsen YEH, with an overall majority of Independent non-executive Directors. Prior
to the appointment of Nicholas Charles ALLEN, Sir David AKERS-JONES served as Chairman until
November 2009. All members have experience in reviewing or analysing audited fi nancial statements
of public companies or major organizations. Nicholas Charles ALLEN (Chairman) is a Fellow of the
Institute of Chartered Accountants in England and Wales and a member of the Hong Kong Institute
of Certifi ed Public Accountants. He has extensive experience in auditing and accounting, which he
developed while working with the “Big Four” international fi rms. The Audit Committee meets no less
than twice a year. At the invitation of the Audit Committee, meetings are also attended by members
of management, including the Head of Finance Department.
Roles and Authority
Hysan believes a clear appreciation of the separate roles of management, the external auditors and
Audit Committee members is crucial to the effective functioning of an audit committee. Management of
Hysan is responsible for selecting appropriate accounting policies and the preparation of the fi nancial
statements. The external auditors are responsible for auditing and attesting to the Group’s fi nancial
statements and evaluating the Group’s system of internal controls, to the extent that they consider
necessary to support their audit report. The Audit Committee, as the delegate of the full Board, is
responsible for overseeing the entire process.
Each year, the AGM
provides an opportunity
for face-to-face
communication with
shareholders.
60 Hysan Annual Report 2009
The Audit Committee also has the responsibility of reviewing the Group’s “whistle-blowing” procedures
allowing employees to raise concerns, in confi dence or anonymously, about possible breaches of the
Group’s Code of Ethics and to ensure that these arrangements allow proportionate and independent
investigation of such matters and appropriate follow up action.
Activities and Report in 2009 and to date
Full details of the activities of the Audit Committee are set out on pages 79 and 80 of the “Audit
Committee Report”. 2 Audit Committee meetings were held in 2009. Sir David AKERS-JONES
attended all the meetings while Chien LEE attended one and Tom BEHRENS-SORENSEN also
attended one before his resignation.
Emoluments Review Committee
Composition and Meetings Schedule
The Group established an Emoluments Review Committee in 1987 to review executive Director
compensation. The current Emoluments Review Committee is chaired by Sir David AKERS-JONES,
Independent non-executive Chairman, with Fa-kuang HU and Dr. Geoffrey Meou-tsen YEH (both
Independent non-executive Directors) completing the Committee’s membership. The Emoluments
Review Committee generally meets at least once every year.
Roles and Authority
Management makes recommendations to the Committee on Hysan’s framework for, and cost of,
the remuneration of executive Directors and the Committee then reviews these recommendations.
The Committee also reviews the remuneration of the Chairman prior to such remuneration being
submitted for approval at the AGM. No Director or any of his or her associates is involved in deciding
his or her own remuneration.
Activities and Report in 2009 and to date
Full details of the activities of the Emoluments Review Committee are set out on pages 71 to 78
of the “Directors’ Remuneration and Interests Report”. The Committee held one meeting in March
2009 attended by Sir David AKERS-JONES and Dr. Geoffrey Meou-tsen YEH to consider Executive
Director compensation.
Nomination Committee
Composition and Meetings Schedule
The Board established a Nomination Committee in 2005. Peter Ting Chang LEE was Chairman of
the Committee until October 2009. The Nomination Committee is currently chaired by Sir David
AKERS-JONES, Independent non-executive Chairman, and its other member is Dr. Geoffrey Meou-tsen
YEH. The Nomination Committee meets when it is considered necessary.
Roles and Authority
The Nomination Committee is responsible for nominating candidates, for Board approval, to fi ll Board
vacancies as and when they arise and for evaluating the balance of skills, knowledge and experience
of the Board. It is clearly set out in the terms of reference of the Committee that the Chairman of
the Board shall not chair the Committee when it is dealing with the matter of succession of the
chairmanship.
Activities and Report in 2009
The Committee made a recommendation to the Board for the appointment of Gerry Lui Fai YIM as
new Executive Director.
Hysan Annual Report 2009 61
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4. Our Corporate Governance Practices – Shareholders
The Board and management fully recognise the signifi cance and importance of having a governance
framework that protects shareholder rights and their exercise of the same. At the same time, we aim
to continually improve our communications with shareholders and to obtain their feedback.
Communication with Shareholders
Accountability to Shareholders and Corporate Reporting
Disciplined measurement of our performance is an important aspect of our strategy to achieve
long-term success. Recognising that we are accountable to our stakeholders, reporting fi nancial and
non-fi nancial results in a transparent fashion is critical. A number of formal communication channels
are used to account to shareholders for the performance of the Group. These include the Annual
Report and Accounts, Interim Report and Accounts and press releases/announcements.
Hysan’s corporate website provides an additional channel for shareholders and other interested
parties to access information about the Group. The Group’s key corporate governance policies and
supporting documents, including the terms of reference of the various Board Committees, as well as
the Group’s fi nancial reports, press releases and announcements are available on the website. Since
2006, shareholders have been given the option of electing to receive corporate communications by
electronic means. We continue to review how to better utilise the Company’s website for the purposes
of timely disclosure and to enhance transparency.
Institutional Shareholders
We are committed to maintaining a continuing open dialogue with institutional investors, fund
managers and analysts as a means of developing their understanding of our strategy, operations,
management and plans, and enabling them to raise any issues they may have. The Company has an
ongoing programme of dialogue and meetings between executive Directors and institutional investors,
fund managers and analysts. At these meetings, a wide range of relevant issues, including strategy,
performance, management and governance, are discussed within the constraints of information
already made public.
Constructive Use of AGM
The Board is equally interested in the concerns of private shareholders. The Company Secretary,
on behalf of the Board, oversees communication with these investors. The Board recognises the
signifi cance of the constructive use of AGMs as a means to enter into a dialogue with private
shareholders based on the mutual understanding of objectives. Individual shareholders can put
questions to the Chairman at the AGM. The Chairmen of the various Board Committees, as provided
under their respective terms of references, attend AGMs to respond to any shareholder questions on
the activities of the Committees.
Since 2004, to enable shareholders to gain a better understanding of our business activities, we
have included a “business review” session to our AGMs, in addition to the statutory part of the
meeting. Topics covered at the last AGM included: Year 2008 business environment, business
activities review and outlook. The Company values the contributions of its shareholders during the
question and answer session following the statutory part of the meeting.
62 Hysan Annual Report 2009
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Regular media briefi ngs
is a component of the
Group’s communication
programme to enhance
transparency for
the Group.
Corporate Disclosure Policy
We recognise the signifi cance of consistent disclosure practices aimed at accurate, timely and
broadly disseminated disclosure of material information about Hysan. The Group’s Corporate
Disclosure Policy provides guidance for coordinating the disclosure of material information to
investors, analysts and media as well as our processes for results announcements. This policy also
identifi es who may speak on Hysan’s behalf, and outlines the responsibilities for communications
with various stakeholders groups. (Details of the Corporate Disclosure Policy is available at the
Company’s website: www.hysan.com.hk).
Shareholder Rights
Self-funded Programme to Proactively Forward Shareholder Communication Materials via
Nominee Companies
Shareholders must be furnished with suffi cient and timely information concerning the Company
and any material developments. There is currently no requirement in Hong Kong providing for
mandatory forwarding of shareholder communication materials by nominee companies to benefi cial
shareholders. Since 2005, we have initiated and funded a programme inviting major nominee
companies to proactively forward communication materials to shareholders at our expense. Coverage
of the programme has more than doubled since its inception.
Hysan Annual Report 2009 63
CORPOR ATE GOVERNA NCE REPORT
Provision of Suffi cient and Timely Information
We recognise the signifi cance of providing information to shareholders to enable them to make an
informed assessment in voting. Copies of the Annual Report and fi nancial statements and related
papers were dispatched to shareholders over 30 days prior to the AGM (statutory requirement: 21
days). Comprehensive information on each resolution to be proposed was also provided.
Voting
We recognise shareholders’ right in exercising control proportionate to their equity ownership and
we support the principle of voting by poll. Since 2004, the Company has conducted all voting at AGM
by poll. The poll is conducted by the Company’s Registrars and scrutinised by the Group’s auditors.
Procedures for conducting a poll are included in the Circular to Shareholders accompanying the
Notice of AGM and are again explained to the general meeting prior to the taking of the poll. Poll
results are announced and posted on the websites of both the Stock Exchange and the Company.
Relevant Provisions in Articles of Association and Hong Kong Law
Under the Articles of Association of the Company and Hong Kong Companies Ordinance,
shareholders holding not less than 5% of the paid up capital of the Company may convene an
extraordinary general meeting by requisition stating the objects of the meeting, and deposit the
signed requisition at the Company’s registered offi ce.
Hong Kong Companies Ordinance also provides for shareholder approval of decisions concerning
fundamental corporate changes, including amendments to the Articles of Association, and
extraordinary transactions, including the transfer of all or a substantial part of a company’s assets.
There are no limitations imposed by Hong Kong law or the Articles of Association on the right of non-
residents or foreign persons to hold or vote on the Company’s shares other than those limitations
that would generally apply to all shareholders.
64 Hysan Annual Report 2009
DIRECTORS’ REPORT
The Directors submit their report together with the audited financial statements for the year ended 31 December 2009, which
were approved by the Board of Directors (the “Board”) on 10 March 2010.
Principal Activities
The principal activities of the Group continued throughout 2009 to be property investment, management and development.
Details of the Group’s principal subsidiaries and associates as at 31 December 2009 are set out in notes 19 and 20
respectively to the financial statements.
The turnover and results of the Group are principally derived from leasing of investment properties located in Hong Kong. The
Group’s turnover and results by reportable segment are set out in note 5. A detailed review of the development of the business
of the Group during the year, and likely future developments, is set out in Chairman’s Statement and Management’s Discussion
and Analysis of this Annual Report.
Results and Appropriations
The results of the Group for the year ended 31 December 2009 are set out in the consolidated income statement on page 84.
An interim dividend of HK14 cents per share, amounting to approximately HK$147 million, was paid to shareholders during the
year.
The Board recommends the payment of a final dividend of HK54 cents per share with a scrip alternative to the shareholders
on the register of members on 11 May 2010, absorbing approximately HK$567 million. The dividends proposed and paid for
ordinary shares in respect of the full year 2009 will absorb approximately HK$714 million, 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 the consolidated statement of changes
in equity on pages 88 and 89 and note 33 to the financial statements respectively.
Investment Properties
All of the Group’s investment properties were revalued by an independent professional valuer as at 31 December 2009 using
the fair value model. Details of movements during the year in the investment properties of the Group are set out in note 16 to
the financial statements.
Details of the major investment properties of the Group as at 31 December 2009 are set out in the section under Schedule of
Principal Properties of this 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 17
to the financial statements.
Share Capital
Details of movements in the share capital of the Company during the year are set out in note 32 to the financial statements.
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DIRECTORS’ REPORT continued
Corporate Governance
The Company is committed to maintaining a high standard of corporate governance and, save as otherwise stated and explained
in the Corporate Governance Report, meets the requirements of the code provisions of the Code on Corporate Governance
Practice (the “Corporate Governance Code”) as set out in Appendix 14 of the Rules Governing the Listing of Securities (the
“Listing Rules”) on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).
Further information on the Company’s corporate governance practices is set out in the following separate reports:
(a) “Corporate Governance Report” (pages 50 to 64) – it gives detailed information on the Company’s compliance with the
Corporate Governance Code, and adoption of local and international best practices;
(b) “Directors’ Remuneration and Interests Report” (pages 71 to 78) – it gives detailed information of Directors’ remuneration
and interests (including information on Director’s compensation, service contracts, Directors’ interests in shares; contracts
and competing business);
(c) “Audit Committee Report” (pages 79 and 80) – it sets out the terms of reference, work performed and findings of the Audit
Committee for the year;
(d) “Internal Controls and Risk Management Report” (pages 39 to 41) – it sets out the Company’s framework on internal
controls and risks assessment including control environment, control activities, work done during the year and further steps
to be done; and
(e) “Corporate Responsibility Report” – it sets out the Company’s corporate responsibility policies and practices reflecting its
commitment to maintaining a high standard of corporate governance.
The Board
The Board is currently chaired by Sir David AKERS-JONES, Independent non-executive Chairman and has 2 executive Directors,
Gerry Lui Fai YIM (Executive Director and appointed Chief Executive Officer effective 10 March 2010) and Wendy Wen Yee YUNG
(Executive Director and Company Secretary) and 10 other Non-executive Directors.
Peter Ting Chang LEE was Chairman during the year until 17 October 2009. Sir David AKERS-JONES acted as Acting Chairman
from 18 October 2009, and was appointed as Independent non-executive Chairman effective 11 January 2010.
Nicholas Charles ALLEN was appointed Independent non-executive Director and chairman of Audit Committee effective 17
November 2009 and Gerry Lui Fai YIM was appointed Executive Director effective 1 December 2009.
Philip Yan Hok FAN and Joseph Chung Yin POON were appointed Independent non-executive Directors and Michael Tze Hau LEE
was appointed as Non-executive Director, all effective 11 January 2010.
Tom BEHRENS-SORENSEN resigned as Independent non-executive Director and a member of Audit Committee effective May
2009 and Dr. Geoffrey Meou-tsen YEH was appointed a member of Audit Committee in his stead. Ricky Tin For TSANG resigned
as Executive Director, Finance effective 29 September 2009.
Save as otherwise mentioned, other Directors whose names and biographies appear on pages 46 to 48 have been Directors of
the Company during the year.
Raymond Liang-ming HU and Kam Wing LI served as alternate Directors throughout the year. V-nee YEH resigned as alternate
Director to Dr. Geoffrey Meou-tsen YEH effective 20 January 2009 and Timothy John SMITH ceased to be an alternate Director
upon resignation of Tom BEHRENS-SORENSEN in accordance with Article 98(a) of the Company’s Articles of Association.
According to Article 97 of the Company’s current Articles of Association, a Director appointed either to fill a casual vacancy or as
an addition to the Board shall hold office only until the next following annual general meeting.
Under Article 114 of the Company’s current Articles of Association, one-third (or such other number as may be required under
applicable legislation) of the Directors; and where the applicable number is not an integral number, to be rounded upwards, who
have been longest in office shall retire from office by rotation. A retiring Director is eligible for re-election.
Particulars of Directors seeking for re-election at the forthcoming annual general meeting are set out in the accompanying
circular to shareholders.
The Company has received from each Independent non-executive Director an annual confirmation of his independence as
regard each of the factors referred to in Rule 3.13 (1) to (8) of the Listing Rules and the Company considered all of them to be
independent.
66 Hysan Annual Report 2009
Directors’ Interests in Shares
Details of the interests and short positions of the Directors in the shares, underlying shares or debentures of the Company and
its associated corporations are set out in Directors’ Remuneration and Interests Report on pages 71 to 78.
Substantial Shareholders’ and Other Persons’ Interests in Shares
As at 31 December 2009, the interests or short positions of substantial shareholders and other persons of the Company, in
the shares and underlying shares of the Company as recorded in the register required to be kept under section 336 of the
Securities and Futures Ordinance (“SFO”), or as otherwise notified to the Company, were as follows:
Aggregate long positions in shares and underlying shares of the Company
Name
Capacity
Lee Hysan Estate Company, Limited
Beneficial owner and
interests of
controlled corporations
Number of
ordinary
shares held
433,130,735
(Note b)
Lee Hysan Company Limited
Interests of controlled
corporations
433,130,735
(Note b)
% of the
issued
share
capital
(Note a)
41.23
41.23
Silchester International Investors Limited
Investment manager
105,230,000
10.02
Silchester International Investors
International Value Equity Trust
Notes:
Beneficial owner
53,187,000
(Note c)
5.06
(a) The percentage has been compiled based on the total number of shares of the Company in issue as at 31 December 2009
(i.e. 1,050,608,090 ordinary shares).
(b) These interests represent the same block of shares of the Company. 270,118,724 shares were held by Lee Hysan Estate Company,
Limited (“LHE”) and 163,012,011 shares were held by certain subsidiaries of LHE. LHE is a wholly-owned subsidiary of Lee Hysan
Company Limited.
(c) According to notification received by the Company, this shareholding interest is part of the block of shareholding held by Silchester
International Investors Limited.
Apart from the above, no other interest or short position in the shares or underlying shares of the Company was recorded in the
register required to be kept under section 336 of the SFO as at 31 December 2009.
Related Party Transactions
The Group entered into certain transactions with parties regarded as “Related Parties” under applicable accounting principles.
These mainly relate to contracts entered into by the Group 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 38 to the financial statements.
Some of these transactions also constitute “Continuing Connected Transactions” under the Listing Rules, as identified below.
Hysan Annual Report 2009 67
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DIRECTORS’ REPORT continued
Continuing Connected Transactions
Certain transactions entered into by the Group constituted continuing connected transactions (the “Transactions”) under Rule
14A.34 of the Listing Rules during the year. Details of the Transactions required to be disclosed are set out as follows:
Lease granted by the Group
I.
(a) Lee Gardens Two, 28 Yun Ping Road, Hong Kong (“Lee Gardens Two”)
The following lease arrangements were entered into by Barrowgate Limited (“Barrowgate”), a 65.36% subsidiary of the Company
and property owner of Lee Gardens Two, as landlord with the following connected persons:
Connected person
Date of agreement
Terms
Premises
Annual consideration
(Note a)
29 June 2007
3 years commencing from
1 September 2007
Office units on the
28th, 30th and
31st Floors
2009: HK$20,692,488
2010: HK$13,794,992
(on pro-rata basis)
(i)
Jebsen and
Company
Limited
(Note b)
(ii) Hang Seng
Bank Limited
(Note b)
15 October 2007
(Note c)
72 months commencing
from 15 October 2007
(for Shops 2-10 on the
Lower Ground Floor)
68 months commencing
from 15 February 2008
(for Shop G13A on the
Ground Floor and Shops
11-12 on the Lower
Ground Floor)
(Note d)
3 years commencing from
15 May 2008
3 years commencing from
1 June 2007
Shop G13A on the
Ground Floor and
Shops 2-10 and
11-12 on the
Lower Ground
Floor
2009: HK$12,526,488
2010: HK$9,994,740
(on pro-rata basis upto
14 October 2010)
(Notes e and f)
1 carparking space
Room 1401C on the 2009: HK$2,049,156
2010: HK$2,011,356
14th Floor
(on pro-rata basis
for the Carpark
Licence Agreement)
2011: HK$736,132
(on pro-rata basis
for the Lease)
(iii) Pearl Investments 23 May 2008
(HK) Limited
(Note g)
(Lease)
18 May 2007
(Carpark Licence
Agreement and a
supplemental
letter dated
5 June 2007)
(b) One Hysan Avenue, Causeway Bay, Hong Kong (“One Hysan Avenue”)
The following lease arrangement was entered into by OHA Property Company Limited, a wholly-owned subsidiary of the Company
and property owner of One Hysan Avenue, with Atlas Corporate Management Limited, a wholly-owned subsidiary of LHE, a
substantial shareholder of the Company (holding 41.23% interest). Details of the lease are set out below:
Connected person
Date of agreement
Terms
Premises
Atlas Corporate
Management
Limited
14 November 2008
3 years commencing from Whole of
1 November 2008
21st Floor
Annual consideration
(Note a)
2009: HK$2,505,684
2010: HK$2,505,684
2011: HK$2,088,070
(on pro-rata basis)
68 Hysan Annual Report 2009
Continuing Connected Transactions continued
II. Provision of leasing and property management services to a non wholly-owned subsidiary regarding Lee Gardens Two
The following management agreements were entered into by Hysan Leasing Company Limited (“Hysan Leasing”) and Hysan
Property Management Limited, both being wholly-owned subsidiaries of the Company, with Barrowgate for the provision of
services to Lee Gardens Two, including (i) leasing, marketing and lease administration services; and (ii) property management
services:
Connected person
Date of agreement
Terms
Premises
Consideration
Barrowgate Limited
3 years commencing from Whole premises of
Lee Gardens Two
25 February 2004
and 2 Supplemental 1 April 2004 (renewed
Appointment Letters for further 3 years)
of 19 July 2004 and
7 February 2007
HK$17,659,770 (i)
and
HK$2,524,872 (ii)
(Note h)
Notes:
(a) The annual considerations are based on current rates of rental, operating charges, (for retail premises) promotional levies and (for
carparking spaces) licence fees for each of the relevant financial years. The rental, operating charges, promotional levies and licence fees
(as the case may be) are payable monthly in advance.
(b)
Jebsen and Company Limited (“Jebsen and Company”) and Hang Seng Bank Limited (“Hang Seng”) are beneficial substantial shareholders
of Barrowgate having equity interest of 10% and 24.64% respectively in Barrowgate.
(c) Barrowgate and Hang Seng entered into an agreement for lease dated 15 October 2007. A formal lease agreement and a supplemental
deed in respect of the premises mentioned under I(a)(ii) above were entered on 15 February 2008 and 13 May 2008 respectively.
(d) The term of the lease mentioned under I(a)(ii) above exceeds 3 years and, according to Listing Rules requirement, an independent financial
adviser to the Board was engaged and it formed the view that the term of this lease with duration longer than 3 years was required and it
was normal business practice for leases of this type to be of such duration.
(e) The monthly promotional levy was revised with effect from 1 January 2010 while the rental and operating charge remained unchanged.
(f)
The rent for the period from 15 October 2010 to 14 October 2013 will be reviewed at the then prevailing market rent and to be agreed by
Barrowgate and Hang Seng.
(g) Pearl Investments (HK) Limited is a connected person by virtue of its being an associate of Chien LEE, Non-executive Director of the
Company.
(h) These represent the actual considerations for the year ended 31 December 2009, calculated on the basis of the fee schedules as
prescribed in the respective management agreements.
All the Transactions were entered in the ordinary and usual course of business of the respective companies after due
negotiations on an arm’s length basis with reference to the prevailing market conditions.
Announcements were published regarding the Transactions in accordance with the Listing Rules. The Stock Exchange has
granted a waiver for the Transactions referred to in section II above by virtue of Rule 14A.42 from strict compliance with the
requirements of Rules 14A.35, 14A.45 to 14A.47 of the Listing Rules on condition that details of the Transactions be included
in the Company’s subsequent published annual report for financial years in which the relevant Transactions are subsisting. The
Company confirms that it has complied with the disclosure requirements in accordance with Chapter 14A of the Listing Rules in
so far as they are applicable.
Pursuant to Rule 14A.38 of the Listing Rules, the Board engaged the auditor of the Company to perform certain agreed upon
procedures in respect of the Transactions of the Group to assist the Directors to evaluate whether the Transactions:
1. have received the approval from the Board;
2. were in accordance with the pricing policies of the Company where the Transactions involve provision of goods or services
by the Company;
3. have been entered into in accordance with the agreement governing such Transactions; and
4. have not exceeded the cap stated in the relevant announcements.
Hysan Annual Report 2009 69
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DIRECTORS’ REPORT continued
Continuing Connected Transactions continued
The auditor has reported the factual findings on these procedures to the Board that the samples the auditor selected for the
Transactions were in agreement in respect of items 1, 3 & 4 above and that according to the samples the auditor selected, in
respect of item 2, the rent charged to the connected persons were either the same or fell within the range of rentals offered
to independent third parties. All Independent non-executive Directors of the Company have reviewed the Transactions and the
report of the auditor and confirmed that the respective contracts and terms of the Transactions are:
1.
in the ordinary and usual course of business of the Company;
2. on normal commercial terms; and
3.
in accordance with the relevant agreement governing them on terms that are fair and reasonable and in the commercial
interests of the Group as a whole.
Interest in Contracts of Significance
Certain Transactions are considered contracts of significance under paragraph 15 of Appendix 16 of the Listing Rules, namely:
(i)
(ii)
the lease arrangement between Barrowgate and Jebsen and Company, due to the annual consideration of the lease
having a percentage ratio of 1.23% from the calculation of the revenue test (the percentage ratios for assets ratio and
consideration ratio are 0.05% and 0.09% respectively); and
the management agreement between Barrowgate and Hysan Leasing, due to the annual consideration of the management
agreement having a percentage ratio of 1.05% from the calculation of the revenue test (the percentage ratios for assets
ratio and consideration ratio are 0.04% and 0.08% respectively).
Details of the above Transactions are set out under I(a)(i) and II of “Continuing Connected Transactions”.
Major Customers and Suppliers
During the year, both the aggregate amount of purchases attributable to the Group’s 5 largest suppliers and the aggregate
amount of turnover attributable to the Group’s 5 largest customers were less than 30% of total purchases and turnover of the
Group respectively.
Purchase, Sale or Redemption of the Company’s Listed Securities
During the year, neither the Company nor its subsidiaries purchased, sold or redeemed any of the Company’s listed securities.
Public Float
Based on the information that is publicly available to the Company and within the knowledge of the Directors, the Company has
maintained the prescribed amount of public float during the year and up to the date of this report as required under the Listing
Rules.
Donations
During the year, the Group made donations of approximately HK$1 million to charitable and non-profit-making organisations.
Auditor
A resolution for the re-appointment of Messrs. Deloitte Touche Tohmatsu as auditor of the Company is to be proposed at the
2010 AGM.
On behalf of the Board
Sir David AKERS-JONES
Independent non-executive Chairman
Hong Kong, 10 March 2010
70 Hysan Annual Report 2009
DIRECTORS’ REMUNERATION AND INTERESTS REPORT
Director Compensation
Emoluments Review Committee
The Board recognises the significance of having in place a transparent and objective process for determining executive Director
compensation, particularly in light of the fact that the Company’s founding family is a major shareholder. The Emoluments
Review Committee, first established in 1987, reviews and determines the remuneration of executive Directors as well as
recommending for shareholder approval fee payable to the Chairman.
The Committee is currently chaired by Sir David AKERS-JONES, Independent non-executive Chairman. Its other members are
Fa-kuang HU and Dr. Geoffrey Meou-tsen YEH. It has 100% Independent non-executive Director membership.
Management makes recommendations to the Committee on the Company’s framework for, and cost of, executive Director
remuneration and the Committee then reviews these recommendations. Independent professional advice will be sought where
appropriate. On matters other than those concerning him, the Chairman or Chief Executive Officer may be invited to Committee
meetings. No Director is involved in deciding his own remuneration.
Remuneration Policy
The Group’s remuneration policy aims to provide a fair market remuneration in a form and value to attract, retain and motivate
high quality staff. At the same time, such awards must be aligned with shareholder interests.
The following principles had been established:
• Remuneration package will consist of several components: (i) fixed part (base salary and benefits); (ii) performance-based
(bonus); (iii) long-term incentives (executive share options). The structure will reflect a fair system of reward for all the
participants, emphasizing performance.
• Remuneration packages are set at levels to ensure comparability and competitiveness with Hong Kong-based companies
competing within a similar talent pool, with particular emphasis on the property industry. Independent professional advice
will be sought to supplement internal resources where appropriate.
•
The Committee will determine the overall amount of each component of remuneration, taking into account both quantitative
and qualitative assessment of performance.
• Remuneration policy and practice will be as transparent as possible.
•
•
Executive Directors will develop a significant personal shareholding pursuant to the executive share options in order to
align their interests with those of shareholders.
Pay and employment conditions elsewhere in the Group will be taken into account, especially in setting annual salary
increases.
•
The remuneration policy for executive Directors will be reviewed regularly, independently of executive management.
2009 Review
The Committee met in March 2009 to review executive Director compensation packages. The meeting was attended by Sir
David AKERS–JONES and Dr. Geoffrey Meou-tsen YEH. It approved their proposal to freeze their base salary in light of the overall
marco-economic environment. The Committee also considered and approved the compensation packages for a new executive
Director in September 2009.
March 2010 Review
The most recent meeting of the Committee was held in March 2010 with all members being present to review 2010 Executive
Director compensation packages, including determining the compensation of the new Chief Executive Officer. Such packages
were set at levels to ensure comparability and competitiveness with Hong Kong-based companies competing within a similar
talent pool, with particular emphasis on the property industry. Changes in roles and responsibilities were also taken into
consideration. Independent professional advice was sought. The proportion of performance-based compensation for Executive
Directors has been increased generally following this review. Clear performance targets will be set. Full details are set out on
pages 11 and 15 of the accompanying Circular to Shareholders under information for the relevant Executive Director.
Details of Directors’ (including individual executive Directors) emoluments for year 2009 and options movement during the year
are set out in notes 12 and 39 respectively to the financial statements.
Hysan Annual Report 2009 71
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DIRECTORS’ REMUNER ATION A ND INTERESTS REPORT continued
Director Compensation continued
Non-executive Director emoluments
Key elements of our Non-executive Director remuneration policy include:
• Remuneration should be sufficient to attract and retain first class non-executive talent.
• Remuneration of Non-executive Directors is (subject to shareholder approval) set by the Board and should be proportional
to their contribution towards the interests of the Company.
• Remuneration practice should be consistent with recognised best practice standards for Non-executive Directors’
remuneration.
• Remuneration should be in the form of cash fees, payable annually.
• Non-executive Directors do not receive share options from the Company.
Non-executive Directors received no other compensation from the Group except for the fees disclosed below. None of the
Non-executive Directors receives any pension benefits from the Company, nor do they participate in any bonus or incentive
schemes.
Non-executive Directors (including the Independent non-executive Directors) received fees totalling HK$1,053,479 and the
Independent non-executive Chairman received a total annual fee of HK$228,767 for 2009 (Please refer to note 12 to the
financial statements).
Director Fees
Director fees are subject to shareholder approval at general meeting. Taking into consideration the level of responsibility,
experience and abilities required of the Directors, and fees offered for similar positions in companies competing for the same
talent, the fee structure of Directors (approved at annual general meeting (the “AGM”) held on 10 May 2005) during the year is
as follows:
Board of Directors
Chairman
Deputy Chairman
Director
Audit Committee
Chairman
Member
Other Committees
Chairman
Member
Per annum
HK$
140,000
120,000
100,000
60,000
30,000
30,000
20,000
March 2010 Review
The Committee met in March 2010 to consider and recommend for shareholder approval changes in fee payable to the new
Independent non-executive Chairman. Taking into consideration fees paid by benchmarked Hong Kong-listed companies, a fee
of HK$400,000 per annum (effective 1 June 2010) will be proposed at the AGM to be held in May 2010. The new level of
remuneration, subject to shareholder approval, reflects comparable market information, roles and responsibilities of the new
Chairman.
The Committee also recommended to the Board, which in turn approved the payment of a special fee of HK$300,000 to
Sir David AKERS-JONES in recognition of the special roles and responsibilities he assumed from October 2009 to March 2010
prior to the appointment of the Chief Executive Officer.
72 Hysan Annual Report 2009
Director Compensation continued
Long-term incentives: Share Option Schemes
The Company has granted options under 2 executive share option schemes. The purpose of both schemes was to strengthen
the link between individual staff and shareholder interests. The power of grant to executive Directors is vested in the
Emoluments Review Committee and endorsed by all Independent non-executive Directors as required under the Rules Governing
the Listing of Securities (the “Listing Rules”) on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). The
Chairman or the Managing Director may make grants to management staff below executive Director level.
Key terms of the share option schemes of the Company are summarised as follows:
The 1995 Share Option Scheme (the “1995 Scheme”)
The 1995 Scheme was approved by shareholders on 28 April 1995 and had a term of 10 years. It expired on 28 April 2005. All
outstanding options granted under the 1995 Scheme will continue to be valid and exercisable in accordance with the provisions
of the 1995 Scheme.
As at 31 December 2009, shares issuable under options granted under the 1995 scheme was 96,000 representing less than
0.01% of the issued share capital of the Company.
The maximum entitlement of each participant is substantially below the limit set out under the scheme rules (being 25% of the
maximum number of shares in respect of which options may at any time be granted under the 1995 Scheme). For the options
granted under the 1995 Scheme currently outstanding, the basis for determining the exercise price is the highest of (i) the
closing price of the shares as stated in the Stock Exchange’s daily quotations sheet on the date of grant; (ii) the average of the
closing prices of the shares as stated in the Stock Exchange’s daily quotations sheets for the 5 business days immediately
preceding the date of grant; and (iii) the nominal value of the shares. Consideration on each grant of option was HK$1 and was
paid within 30 days from the date of grant of option, with full payment for exercise price to be made on exercise of the relevant
option.
The 2005 Share Option Scheme (the “2005 Scheme”)
The Company adopted the 2005 Scheme at its AGM held on 10 May 2005, which has a term of 10 years and will be expiring on
9 May 2015 (together with the 1995 Scheme are referred to as the “Schemes”).
The maximum number of shares in respect of which options may be granted under the 2005 Scheme and any other share
option scheme of the Company shall not exceed such number of shares as required under the Listing Rules, currently being
10% of the shares in issue as at 10 May 2005, the date of the AGM approving the 2005 Scheme (being 104,996,365 shares).
Under the Listing Rules, a listed issuer may seek approval by its shareholders in general meeting for “refreshing” the 10% limit
under the scheme. The limit on the number of shares which may be issued upon exercise of all outstanding options granted and
yet to be exercised under the 2005 Scheme and any other share option scheme of the Company must not exceed 30% of the
shares in issue from time to time (or such number of shares as required under the Listing Rules). No options may be granted if
such grant will result in this 30% limit being exceeded.
The maximum entitlement of each participant under the 2005 Scheme must not during any 12-month period exceed such
number of shares as required under the Listing Rules (which is 1% of the total shares in issue as at the date of shareholder
approval, being 10,499,636 shares). The exercise price shall be at least the highest of (i) the closing price of the shares as
stated in the Stock Exchange’s daily quotations sheet on the date of grant; (ii) the average of the closing prices of the shares as
stated in the Stock Exchange’s daily quotations sheets for the 5 business days immediately preceding the date of grant; and (iii)
the nominal value of the shares. Consideration on each grant of option is HK$1 and is required to be paid within 30 days from
the date of grant of option, with full payment for exercise price to be made on exercise of the relevant option.
Grant and vesting structures
Under the Company’s current policy, grants will be made on a periodic basis. Vesting period is 3 years in equal proportions. Size
of grant will be determined by reference to base salary multiple and job grades. A clear performance criterion will be a key driver.
The Board will review the grant and vesting structures from time to time.
Movement of share options
During the year, a total of 1,740,000 shares options were granted under the 2005 Scheme.
As at 31 December 2009, an aggregate of 2,647,000 shares are issuable for options granted under the Schemes, representing
approximately 0.25% of the issued share capital of the Company.
As at the date of this Report, 98,018,765 shares are issuable under the Schemes representing 9.33% of the issued share
capital.
Hysan Annual Report 2009 73
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Director Compensation continued
Long-term incentives: Share Option Schemes continued
Movement of share options continued
Details of options granted, exercised, cancelled/lapsed and outstanding under the Schemes during the year are as follows:
Exercise
price
HK$
Exercisable
period
(Note a)
Balance
as at
1.1.2009
Granted
Exercised
Cancelled/
Balance
as at
lapsed 31.12.2009
(Note b)
Changes during the year
Name
Date of grant
1995 Scheme
Executive Directors
Wendy Wen Yee YUNG 30.3.2005
15.850 30.3.2005 –
29.3.2015
Ricky Tin For TSANG
(Note c)
30.3.2005
15.850 30.3.2005 –
29.3.2015
96,000
80,000
Eligible employees
(Note e)
2005 Scheme
Executive Directors
Peter Ting Chang LEE
(Note f)
30.3.2005
15.850 30.3.2005 –
13,000
29.3.2015
6.3.2007
21.380
6.3.2007 –
16.4.2010
235,000
13.3.2008
21.450 13.3.2008 –
260,000
16.4.2010
–
–
–
–
–
11.3.2009
11.760 11.3.2009 –
(Note g)
16.4.2010
Gerry Lui Fai YIM
(Note h)
1.12.2009
22.800 1.12.2009 –
(Note i) 30.11.2019
–
500,000
–
218,000
Wendy Wen Yee YUNG 26.6.2006
20.110 26.6.2006 –
110,000
25.6.2016
30.3.2007
21.250 30.3.2007 –
95,000
29.3.2017
31.3.2008
21.960 31.3.2008 –
100,000
30.3.2018
–
–
–
11.3.2009
11.760 11.3.2009 –
(Note g)
10.3.2019
–
300,000
–
–
96,000
(80,000)
(Note d)
–
–
(13,000)
–
–
–
–
–
–
–
–
–
–
–
235,000
–
260,000
–
500,000
–
218,000
–
110,000
–
95,000
–
100,000
–
300,000
Ricky Tin For TSANG
(Note c)
30.3.2006
22.000 30.3.2006 –
120,000
29.3.2016
30.3.2007
21.250 30.3.2007 –
95,000
29.3.2017
31.3.2008
21.960 31.3.2008 –
100,000
30.3.2018
–
–
–
–
(120,000)
–
(95,000)
–
(100,000)
11.3.2009
11.760 11.3.2009 –
(Note g)
10.3.2019
–
250,000
–
(250,000)
–
–
–
–
74 Hysan Annual Report 2009
Director Compensation continued
Long-term incentives: Share Option Schemes continued
Movement of share options continued
Name
Date of grant
Exercise
price
HK$
Exercisable
period
(Note a)
Balance
as at
1.1.2009
Granted
Exercised
Cancelled/
Balance
as at
lapsed 31.12.2009
(Note b)
Changes during the year
2005 Scheme continued
Eligible employees
(Note e)
30.3.2006
22.000 30.3.2006 –
29.3.2016
67,000
6.3.2007
21.380
6.3.2007 –
30.6.2009
108,000
30.3.2007
21.250 30.3.2007 –
29.3.2017
73,000
31.3.2008
21.960 31.3.2008 –
30.3.2018
164,000
2.5.2008
23.900
9.9.2008
21.300
2.5.2008 –
1.5.2018
9.9.2008 –
8.9.2018
95,000
85,000
2.10.2008
20.106 2.10.2008 –
85,000
1.10.2018
–
–
–
–
–
–
–
–
(44,000)
23,000
–
(108,000)
–
–
(42,000)
31,000
–
(76,000)
88,000
–
–
95,000
–
(85,000)
–
–
–
85,000
31.3.2009
13.300 31.3.2009 –
(Note j)
30.3.2019
– 472,000
–
(61,000) 411,000
1,981,000 1,740,000
(80,000)
(994,000) 2,647,000
Notes:
(a) Save otherwise stated, all options granted have a vesting period of 3 years in equal proportions.
(b) The options lapsed during the year upon resignations or retirement of certain Director and eligible employees.
(c) Ricky Tin For TSANG resigned as Executive Director, Finance on 29 September 2009.
(d) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$19.240.
(e) Eligible employees are working under employment contracts that are regarded as “continuous contracts” for the purposes of the
Employment Ordinance.
(f)
Peter Ting Chang LEE passed away on 17 October 2009. The legal personal representative(s) of Peter Ting Chang LEE will be entitled to
exercise the outstanding options until 16 April 2010.
(g) The closing price of the shares of the Company immediately before the date of grant (i.e. as of 10 March 2009) was HK$11.180.
(h) Gerry Lui Fai YIM was appointed Executive Director on 1 December 2009.
(i)
(j)
The closing price of the shares of the Company immediately before the date of grant (i.e. as of 30 November 2009) was HK$22.250.
The closing price of the shares of the Company immediately before the date of grant (i.e. as of 30 March 2009) was HK$12.900.
Apart from the above, the Company had not granted any share option under the Schemes to any other persons as required to
be disclosed under Rule 17.07 of the Listing Rules.
Particulars of the Schemes are set out in note 39 to the financial statements.
Hysan Annual Report 2009 75
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DIRECTORS’ REMUNER ATION A ND INTERESTS REPORT continued
Director Compensation continued
Long-term incentives: Share Option Schemes continued
Value of share options
Pursuant to Rule 17.08 of the Listing Rules, the value of the share options granted during the year is as follows to be expensed
through the Group’s income statement over the three-year vesting period of the options.
The fair values of share options granted by the Company were determined by using Black-Scholes option pricing model
(the “Model”). The Model is one of the commonly used models to estimate the fair value of an option. The variables and
assumptions used in computing the fair value of the share options are based on the management’s best estimate. The value
of an option varies with different variables of a number of subjective assumptions. Any change in the variables so adopted may
materially affect the estimation of the fair value of an option. The inputs into the Model were as follows:
Date of grant
1.12.2009
31.3.2009
11.3.2009
Closing share price at the date of grant
Exercise price
Risk free rate (Note a)
Expected life of option (Note b)
Expected volatility (Note c)
Expected dividend per annum (Note d)
Estimated fair values per share option
Notes:
HK$22.800
HK$22.800
2.16%
10 years
35.09%
HK$0.526
HK$8.560
HK$13.100
HK$13.300
1.94%
10 years
47.74%
HK$0.526
HK$4.299
HK$11.760
HK$11.760
1.97%
10 years
48.24%
HK$0.526
HK$3.671
(a) Risk free rate: being the approximate yields of 10-year Exchange Fund Notes traded on the date of grant, matching the expected life of
each option.
(b) Expected life of option: being the period of 10 years commencing on the date of grant, based on management’s best estimates for the
effects of non-transferability, exercise restriction and behavioural consideration.
(c) Expected volatility: being the approximate historical volatility of closing prices of the shares of the Company in the past one year
immediately before the date of grant, except for the options granted on or after 1 December 2009 which the management considered that
it was more appropriate that the expected volatility should be the approximate historical volatility of closing prices of the shares of the
Company in the past 10 years immediately before the date of grant in order to match the expected life of the options of 10 years.
(d) Expected dividend per annum: being the approximate average annual cash dividend for the past five financial years.
Service Contracts
No Director proposed for re-election at the forthcoming AGM has a service contract with the Company or any of its subsidiaries
that is not determinable by the Group within 1 year without payment of compensation (other than statutory compensation).
76 Hysan Annual Report 2009
Directors’ Interests in Shares
As at 31 December 2009, the interests and short positions of the Directors in the shares, underlying shares or debentures of
the Company and its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (“SFO”))
as recorded in the register required to be kept under section 352 of the SFO; or as otherwise notified to the Company and the
Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”), are
set out below:
Aggregate long positions in shares and underlying shares of the Company
Number of ordinary shares held
Personal
Interests
Family
Interests
Corporate
Interests
Other
Interests
Total
% of the issued
share capital
(Note a)
Name
Fa-kuang HU
–
Hans Michael JEBSEN
60,000
Chien LEE
800,000
Deanna Ruth Tak Yung RUDGARD
1,871,600
Geoffrey Meou-tsen YEH
Wendy Wen Yee YUNG
Notes:
277,016
28,000
–
–
–
–
–
–
200,000
(Note b)
2,433,371
(Note c)
–
–
–
–
–
200,000
0.019
–
2,493,371
0.237
–
–
–
–
800,000
1,871,600
277,016
28,000
0.076
0.178
0.026
0.003
(a) This percentage has been compiled based on the total number of shares of the Company in issue (i.e. 1,050,608,090 ordinary shares)
as at 31 December 2009.
(b) Such shares were held by a company which was wholly-owned by Fa-kuang HU and he was deemed to have a beneficial interest in all these
shares.
(c) Such shares were held through a corporation in which Hans Michael JEBSEN was a member entitled to exercise not less than one-third of
the voting power at general meeting.
Certain executive Directors of the Company have been granted share options under the Schemes (details are set out in the
section headed “Long-term incentives: Share Option Schemes” above). These constitute interests in underlying shares of equity
derivatives of the Company under the SFO.
Aggregate long positions in shares of associated corporations
Listed below is a Director’s interest in the shares of Barrowgate Limited (“Barrowgate”), a 65.36% subsidiary of the Company:
Name
Hans Michael JEBSEN
Note:
Number of ordinary shares held
Corporate
interests
Other
interests
% of the issued
share capital
Total
1,000
–
1,000
10
(Note)
Jebsen and Company Limited (“Jebsen and Company”) held a 10% interest in the issued share capital in Barrowgate through a wholly-owned
subsidiary. Hans Michael JEBSEN was deemed to be interested in the shares of Barrowgate by virtue of being a controlling shareholder of
Jebsen and Company.
Apart from the above, no other interest or short position in the shares, underlying shares or debentures of the Company or any
associated corporations as at 31 December 2009 were recorded in the register required to be kept under Section 352 of the
SFO; or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.
Compliance of the Model Code for Securities Transactions by Directors of Listed Issuers
The Company has adopted the Model Code set out in Appendix 10 to the Listing Rules as its own code of conduct regarding
Director’s securities transactions. All Directors have confirmed, following specific enquiry by the Company, that they have
complied with the required standards set out in the Model Code throughout the year.
Hysan Annual Report 2009 77
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DIRECTORS’ REMUNER ATION A ND INTERESTS REPORT continued
Directors’ Interests in Contracts
During the year, certain Directors have interests, directly or indirectly, in contracts with the Group. These contracts constitute
Related Party Transactions, Connected Transactions or Contracts of Significance under applicable accounting or regulatory rules
(details are disclosed in the Directors’ Report).
Directors’ Interests in Competing Business
The Group is engaged principally in the property investment, development and management of high quality investment properties
in Hong Kong. The following Directors (excluding Independent non-executive Directors) are considered to have interests in other
activities (the “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:
(i) Anthony Hsien Pin LEE, Chien LEE, Michael Tze Hau LEE and Dr. Deanna Ruth Tak Yung RUDGARD are members of the
founding Lee family whose range of general investment activities include property investments in Hong Kong and overseas.
In light of the size and dominance of the portfolio of the Group, such disclosed Deemed Competing Business is considered
immaterial.
(ii) Hans Michael JEBSEN and his alternate, Kam Wing LI, hold the offices of directors in each of Jebsen and Company
and Jebsen China Services Limited and some of their subsidiaries, of which their business activities include, inter alia,
investment holding and property investment in both the People’s Republic of China and Hong Kong. Mr. Jebsen is also a
substantial shareholder of the companies.
Mr. Jebsen is an independent non-executive director of The Wharf (Holdings) Limited whose business includes, inter alia,
property investment, development and management in both the People’s Republic of China and Hong Kong.
(iii) Chien LEE is an independent non-executive director of Swire Pacific Limited whose business includes, inter alia, property
investment and trading in Hong Kong, the People’s Republic of China and the United States of America.
The Company’s management team is separate and independent from that of the companies identified above. In addition, the
relevant Directors have non-executive roles and are not involved in the Company’s day-to-day operations and management.
For the reasons stated above, 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.
By Order of the Board
Wendy W.Y. YUNG
Executive Director and Company Secretary
Hong Kong, 10 March 2010
78 Hysan Annual Report 2009
AUDIT COMMITTEE REPORT
The Audit Committee has 3 members (with a majority of Independent non-executive Directors). Currently, it is chaired by Nicholas
Charles ALLEN, Independent non-executive Director and the other members are Dr. Geoffrey Meou-tsen YEH, Independent
non-executive Director and Chien LEE, Non-executive Director.
Under its terms of reference, the Committee oversees the Company’s financial reporting process; it also reviews the Company’s
internal controls and risk management systems and its relationship with external auditor. Effective from 1 January 2009,
the Committee’s terms of reference was revised in light of the changes to the Listing Rules. The Committee also has the
responsibility to review the adequacy of resources, qualifications and experience of staff of the Group’s accounting and financial
reporting function, and their training programmes and budget. The Committee presents a report to the Board on its findings
after each Committee meeting.
The Committee held 2 meetings during the year, on 9 March and 10 August 2009. The meeting held in March 2009 was
attended by Sir David AKERS-JONES and Tom BEHRENS-SORENSEN whilst the meeting held in August 2009 was attended by
Sir David AKERS-JONES and Chien LEE to consider the financial statements for the 2008 annual report and 2009 interim report
respectively. The Committee last met on 9 March 2010 to consider the financial statements for the year ended 31 December
2009.
Details on the meeting held in March 2009 were set out in the 2008 Annual Report. Significant matters, as reviewed and
discussed in the other meetings, include the following:
Financial Reporting
In the process of financial reporting, management is responsible for the preparation of Group financial statements including
the selection of suitable accounting policies. The external auditor is responsible for auditing and attesting to Group financial
statements and evaluating the Group’s system of internal controls in such regard. The Committee oversees the respective work
of management and the external auditor to endorse the processes and safeguards employed by them.
•
August 2009
:
• March 2010
:
The Committee reviewed and recommended to the Board for approval the unaudited financial
statements for the first 6 months of 2009, prior to public announcement and filing. The Committee
received reports from and met with the external auditor to discuss the scope of their review and
findings. The Committee had discussions with management on significant judgments affecting
Group’s financial statements.
The Committee reviewed and discussed with management and external auditor the 2009 financial
statements included in the 2009 Annual Report, prior to public announcement and filing. The
Committee received reports from and met with external auditor and internal auditor to discuss
the general scope of their respective work and findings. The Committee had discussions with
management with regard to significant judgments affecting the Group financial statements. Based
on these review and discussions, and the report of the external auditor, the Audit Committee
recommended to the Board approval of the financial statements for the year ended 31 December
2009, with the Independent Auditor’s Report thereon.
Review of Internal Controls and Risk Management Systems
•
August 2009
:
The Committee considered the report of internal audit, including status in implementing
recommendations on previous audits and was satisfied.
• March 2010
:
For 2009 annual internal controls review, the Committee considered reports from and upon
receiving confirmation of management and internal audit, was satisfied as to the effectiveness of
the Company’s internal controls system (including the adequacy of resources, qualifications and
experience of staff of the Group’s accounting and financial reporting function, and their training
programmes and budget). There were no matters of material concerns relating to financial,
operational, or compliance controls.
Hysan Annual Report 2009 79
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AUDIT COMMITTEE REPORT continued
Relationship with External Auditor
•
August 2009
:
The Committee reviewed and considered the terms of engagement of the external auditor in respect
of the 2009 annual audit and the related results announcement and annual confirmation.
• March 2010
:
The Committee assessed the auditor’s independence and objectivity. Factors considered include the
arrangement for lead audit partner rotation, and the provision of non-audit services by the auditor.
The Committee recommended to the Board that the shareholders be asked to re-appoint Deloitte
Touche Tohmatsu as the Group’s external auditor for 2010.
The Committee also reviewed and considered the terms of engagement of the external auditor in
respect of the 2010 interim results review.
For the year ended 31 December 2009, external auditor received a total fee of HK$2,054,000 (audit
services: HK$1,810,000 and non-audit services: HK$244,000).
Members of the Audit Committee
Nicholas Charles ALLEN (Chairman)
Chien Lee
Dr. Geoffrey Meou-tsen YEH
Hong Kong, 10 March 2010
80 Hysan Annual Report 2009
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4
FINANCIAL STATEMENTS
AND VALUATION
82 Directors’ Responsibilities for the Financial Statements
83
Independent Auditor’s Report
84 Consolidated Income Statement
85 Consolidated Statement of Comprehensive Income
86 Consolidated Statement of Financial Position
87 Statement of Financial Position
88 Consolidated Statement of Changes in Equity
90 Consolidated Statement of Cash Flows
92 Signifi cant Accounting Policies
100 Notes to the Financial Statements
142 Financial Risk Management
151 Five-Year Financial Summary
153 Report of the Valuer
154 Schedule of Principal Properties
156 Shareholding Analysis
Hysan Annual Report 2009 81
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.
82 Hysan Annual Report 2009
INDEPENDENT AUDITOR’S REPORT
To the Members of Hysan Development Company Limited
(incorporated in Hong Kong with limited liability)
We have audited the financial statements of Hysan Development Company Limited (the “Company”) and its subsidiaries
(collectively referred to as the “Group”) set out on pages 84 to 150, which comprise the consolidated and Company’s
statements of financial position as at 31 December 2009, and the consolidated income statement, the consolidated statement
of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year
then ended, and a summary of significant accounting policies and other explanatory notes.
Directors’ responsibility for the financial statements
The directors of the Company are responsible for the preparation and the true and fair presentation of these financial
statements in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public
Accountants and the Hong Kong Companies Ordinance. This responsibility includes designing, implementing and maintaining
internal control relevant to the preparation and the true and fair presentation of the financial statements that are free from
material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making
accounting estimates that are reasonable in the circumstances.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audit and to report our opinion solely to
you, as a body, in accordance with section 141 of the Hong Kong Companies Ordinance and for no other purpose. We do not
assume responsibility towards or accept liability to any other person for the contents of this report. We conducted our audit in
accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as
to whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material
misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and true and fair presentation of the financial statements in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements give a true and fair view of the state of affairs of the Company and of the Group as at
31 December 2009 and of the Group’s profit and cash flows for the year then ended in accordance with Hong Kong Financial
Reporting Standards and have been properly prepared in accordance with the Hong Kong Companies Ordinance.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
10 March 2010
Hysan Annual Report 2009 83
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W
S
T
R
A
T
E
G
Y
I
N
A
C
T
O
N
I
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
A
N
D
V
A
L
U
A
T
O
N
I
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2009
Turnover
Property expenses
Gross profit
Investment income
Other gains and losses
Administrative expenses
Finance costs
Change in fair value of investment properties
Share of results of associates
Profit before taxation
Taxation
Profit for the year
Profit for the year attributable to:
Owners of the Company
Minority interests
Earnings per share (expressed in HK cents)
Basic
Diluted
Notes
2009
HK$ million
2008
HK$ million
4
6
7
8
9
10
15
1,680
(235)
1,445
38
(3)
(133)
(131)
1,249
768
3,233
(396)
2,837
2,716
121
2,837
1,638
(217)
1,421
63
146
(134)
(155)
(212)
590
1,719
(1)
1,718
1,594
124
1,718
259.60
259.50
153.37
153.36
84 Hysan Annual Report 2009
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
For the year ended 31 December 2009
Profit for the year
Other comprehensive income:
Fair value gains (losses) on available-for-sale investments
Fair value gains (losses) on cash flow hedges
Gain on revaluation of properties held for own use
Share of translation reserve of an associate
Other comprehensive income (expense) for the year (net of tax)
Total comprehensive income for the year
Total comprehensive income attributable to:
Owners of the Company
Minority interests
2009
HK$ million
2008
HK$ million
2,837
1,718
Note
11
37
5
1
(1)
42
2,879
2,758
121
2,879
(1,351)
(28)
3
155
(1,221)
497
373
124
497
Hysan Annual Report 2009 85
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E
R
V
I
E
W
S
T
R
A
T
E
G
Y
I
N
A
C
T
O
N
I
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
A
N
D
V
A
L
U
A
T
O
N
I
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 December 2009
Non-current assets
Investment properties
Property, plant and equipment
Prepaid lease payments
Investments in associates
Available-for-sale investments
Other financial assets
Other receivables
Current assets
Accounts receivable and other receivables
Amount due from an associate
Other financial assets
Short-term investments
Time deposits
Cash and bank balances
Current liabilities
Accounts payable and accruals
Rental deposits from tenants
Amounts due to minority shareholders
Borrowings
Taxation payable
Net current assets
Total assets less current liabilities
Non-current liabilities
Borrowings
Other financial liabilities
Rental deposits from tenants
Deferred taxation
Net assets
Capital and reserves
Share capital
Reserves
Equity attributable to owners of the Company
Minority interests
Total equity
Notes
2009
HK$ million
2008
HK$ million
16
17
18
20
21
22
23
25
22
26
27
27
28
29
30
30
22
31
32
37,363
81
121
2,517
1,002
177
31
41,292
83
369
120
–
1,945
39
2,556
314
127
327
400
45
1,213
1,343
35,850
80
123
1,750
1,022
242
29
39,096
94
590
41
700
964
51
2,440
320
158
327
550
351
1,706
734
42,635
39,830
3,491
36
273
3,881
7,681
3,201
41
230
3,648
7,120
34,954
32,710
5,253
28,415
33,668
1,286
34,954
5,206
26,263
31,469
1,241
32,710
The consolidated financial statements on pages 84 to 150 were approved and authorised for issue by the Board of Directors on
10 March 2010 and are signed on its behalf by:
David AKERS-JONES
Director
Gerry L.F. YIM
Director
86 Hysan Annual Report 2009
STATEMENT OF FINANCIAL POSITION
At 31 December 2009
Non-current assets
Property, plant and equipment
Investments in subsidiaries
Available-for-sale investments
Other receivables
Current assets
Other receivables
Amounts due from subsidiaries
Time deposits
Cash and bank balances
Current liabilities
Other payable and accruals
Amounts due to subsidiaries
Taxation payable
Net current assets
Net assets
Capital and reserves
Share capital
Reserves
Total equity
Notes
2009
HK$ million
2008
HK$ million
17
19
21
24
27
27
24
32
33
8
–
2
–
10
4
12,743
566
8
13,321
34
192
3
229
13,092
13,102
5,253
7,849
5
–
2
1
8
3
12,869
100
41
13,013
31
59
40
130
12,883
12,891
5,206
7,685
13,102
12,891
The financial statements on pages 84 to 150 were approved and authorised for issue by the Board of Directors on 10 March
2010 and are signed on its behalf by:
David AKERS-JONES
Director
Gerry L.F. YIM
Director
Hysan Annual Report 2009 87
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W
S
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R
A
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E
G
Y
I
N
A
C
T
O
N
I
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
A
N
D
V
A
L
U
A
T
O
N
I
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2009
Attributable to owners of the Company
Share
capital
HK$ million
Share
premium
HK$ million
Share
options
reserve
HK$ million
Capital
redemption
reserve
HK$ million
At 1 January 2008
5,187
1,541
Profit for the year
Change in fair value of available-for-sale investments
Transfer to profit and loss on disposal of available-for-sale investments
Change in fair value of derivatives designated as cash flow hedge
Transfer to profit and loss for cash flow hedges
Gain on revaluation of properties held for own use
Deferred taxation arising on revaluation of properties held for own use
Share of reserve of an associate
Total comprehensive income (expense) for the year
Issue of shares pursuant to scrip dividend schemes
Issue of shares under share option schemes
Recognition of equity-settled share-based payments
Forfeiture of share options
Dividends paid during the year (note 14)
–
–
–
–
–
–
–
–
–
18
1
–
–
–
–
–
–
–
–
–
–
–
–
63
2
–
–
–
At 31 December 2008
5,206
1,606
Profit for the year
Change in fair value of available-for-sale investments
Transfer to profit and loss on disposal of available-for-sale investments
Change in fair value of derivatives designated as cash flow hedge
Transfer to profit and loss for cash flow hedges
Gain on revaluation of properties held for own use
Share of reserve of an associate
Total comprehensive income (expense) for the year
Issue of shares pursuant to scrip dividend schemes
Issue of shares under share option schemes
Recognition of equity-settled share-based payments
Forfeiture of share options
Dividends paid during the year (note 14)
–
–
–
–
–
–
–
–
47
–
–
–
–
–
–
–
–
–
–
–
–
96
1
–
–
–
At 31 December 2009
5,253
1,703
6
–
–
–
–
–
–
–
–
–
–
(1)
5
(1)
–
9
–
–
–
–
–
–
–
–
–
–
6
(5)
–
10
276
–
–
–
–
–
–
–
–
–
–
–
–
–
–
276
–
–
–
–
–
–
–
–
–
–
–
–
–
276
88 Hysan Annual Report 2009
Attributable to owners of the Company
General
reserve
HK$ million
Investments
revaluation
reserve
HK$ million
Hedging
reserve
HK$ million
Properties
revaluation
reserve
HK$ million
Translation
reserve
HK$ million
Retained
profits
HK$ million
Total
HK$ million
Minority
interests
HK$ million
Total
HK$ million
100
2,123
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,165)
(186)
–
–
–
–
–
(1,351)
–
–
–
–
–
100
772
–
–
–
–
–
–
–
–
–
–
–
–
–
–
40
(3)
–
–
–
–
37
–
–
–
–
–
1
–
–
–
(31)
3
–
–
–
(28)
–
–
–
–
–
(27)
–
–
–
(12)
17
–
–
5
–
–
–
–
–
9
–
–
–
–
–
4
(1)
–
3
–
–
–
–
–
(1)
22,410
31,652
1,196
32,848
–
–
–
–
–
–
–
155
155
–
–
–
–
–
1,594
–
–
–
–
–
–
–
1,594
–
–
–
1
(644)
1,594
(1,165)
(186)
(31)
3
4
(1)
155
373
81
2
5
–
(644)
124
–
–
–
–
–
–
–
124
–
–
–
–
(79)
1,718
(1,165)
(186)
(31)
3
4
(1)
155
497
81
2
5
–
(723)
12
154
23,361
31,469
1,241
32,710
–
–
–
–
–
1
–
1
–
–
–
–
–
–
–
–
–
–
–
(1)
(1)
–
–
–
–
–
2,716
–
–
–
–
–
–
2,716
–
–
–
5
(709)
2,716
40
(3)
(12)
17
1
(1)
2,758
143
1
6
–
(709)
121
–
–
–
–
–
–
121
–
–
–
–
(76)
2,837
40
(3)
(12)
17
1
(1)
2,879
143
1
6
–
(785)
100
809
(22)
13
153
25,373
33,668
1,286
34,954
Hysan Annual Report 2009 89
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I
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W
S
T
R
A
T
E
G
Y
I
N
A
C
T
O
N
I
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
A
N
D
V
A
L
U
A
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O
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I
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2009
2009
HK$ million
2008
HK$ million
3,233
1,719
3
131
(1,249)
(768)
(27)
(11)
6
1
6
1,325
(2)
–
14
–
12
1,349
(469)
–
880
8
27
44
40
221
(242)
(8)
(112)
(1,551)
(1,573)
(146)
155
212
(590)
(48)
(15)
6
–
5
1,298
(17)
(56)
23
65
49
1,362
(189)
6
1,179
12
48
272
78
6
(345)
(5)
–
–
66
Operating activities
Profit before taxation
Adjustments for:
Other gains and losses
Finance costs
Change in fair value of investment properties
Share of results of associates
Dividend income
Interest income
Depreciation of property, plant and equipment
Amortisation of prepaid lease payments
Share-based payment expenses
Operating cash flows before movements in working capital
Increase in accounts receivable and other receivables
Increase in held-for-trading investments
Increase in accounts payable and accruals
Decrease in equity derivatives
Increase in rental deposits from tenants
Cash generated from operations
Hong Kong profits tax paid
Hong Kong profits tax refund
Net cash from operating activities
Investing activities
Interest received
Dividends received from available-for-sale investments
Proceeds on disposal of available-for-sale investments
Proceeds upon maturity of principal-protected deposits
Repayment from associates
Payments in respect of investment properties
Purchases of property, plant and equipment
Additions to principal-protected deposits
Increase in time deposits with original maturity over three months
Net cash (used in) from investing activities
90 Hysan Annual Report 2009
Note
2009
HK$ million
2008
HK$ million
Financing activities
Interest paid
Bank charges
Medium Term Note Programme expenses
Payment for front-end fees
Payment for hedging expenses
Dividends paid
Dividends paid to minority shareholders of a subsidiary
Repayment of bank loans
Repayment of floating rate notes
New bank loans
Issue of fixed rate notes
Issue of floating rate notes
Proceeds on exercise of share options
Net cash used in financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
27
(119)
(4)
(1)
(1)
(2)
(566)
(76)
(70)
(550)
599
–
200
1
(589)
(1,282)
1,715
433
(125)
(8)
(1)
(4)
(2)
(562)
(79)
–
–
200
565
–
2
(14)
1,231
484
1,715
Hysan Annual Report 2009 91
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E
G
Y
I
N
A
C
T
O
N
I
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
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A
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M
E
N
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S
A
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A
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SIGNIFICANT ACCOUNTING POLICIES
For the year ended 31 December 2009
These financial statements have been prepared on the historical cost basis except for certain properties and financial
instruments, which are measured at revalued amounts or fair values, as explained in the accounting policies set out below.
These financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards issued by the
Hong Kong Institute of Certified Public Accountants and the Hong Kong Companies Ordinance. In addition, these financial
statements include applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of
Hong Kong Limited. The principal accounting policies adopted are as follows:
1. Basis of Consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the
Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies
of an entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the
effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line
with those used by other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Minority interests in the net assets of consolidated subsidiaries are presented separately from the Group’s equity therein.
Minority interests in the net assets consist of the amount of those interests at the date of the original business combination
and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of
the minority’s interest in the subsidiary’s equity are allocated against the interests of the Group except to the extent that the
minority has a binding obligation and is able to make an additional investment to cover the losses.
2. Investments in Subsidiaries
Investments in subsidiaries are included in the Company’s statement of financial position 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.
3. Investments in Associates
An associate is an entity over which the Group or the Company has significant influence and that is neither a subsidiary nor an
interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the
investee but is not control or joint control over those policies.
The results, assets and liabilities of associates are incorporated in the consolidated financial statements using the equity
method of accounting. Under the equity method, investments in associates are carried in the consolidated statement of
financial position at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the associates,
less any identified impairment loss. When the Group’s share of losses of an associate equals or exceeds its interest in that
associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate),
the Group discontinues recognising its share of further losses. An additional share of losses is provided for and a liability is
recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of that
associate.
Where a group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group’s
interest in the relevant associate.
4. Investment Properties
Investment properties are properties held to earn rental and/or for capital appreciation.
On initial recognition, investment properties are measured at cost, including any directly attributable expenditure. Subsequent
to initial recognition, investment properties are measured at their fair values using the fair value model. Gains or losses
arising from changes in the fair value of investment properties are included in profit or loss for the period in which they arise.
If an investment property becomes an item of property, plant and equipment because its use has changed as evidenced by
commencement of owner-occupation, the property’s deemed cost for subsequent accounting is its fair value at the date of
change in use.
92 Hysan Annual Report 2009
4. Investment Properties continued
Construction costs incurred for investment properties under construction are capitalised as part of the carrying amount of the
investment properties under construction. Investment properties under construction are measured at fair value at the end of
the reporting period. Any difference between the fair value of the investment properties under construction and their carrying
amount is recognised in profit or loss in the period in which they arise.
An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use or
no future economic benefits are expected from its disposals. Any gain or loss arising on derecognition of the asset (calculated
as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated
income statement in the year in which the item is derecognised.
5. Property, Plant and Equipment
Property, plant and equipment are stated at cost or fair value less subsequent accumulated depreciation and accumulated
impairment losses.
Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in
the consolidated statement of financial position at their revalued amounts, being the fair values at the date of revaluation less
any subsequent accumulated depreciation and any subsequent accumulated 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 end of the reporting period.
Any revaluation increase arising on revaluation of land and buildings is recognised in other comprehensive income and
accumulated in the properties revaluation reserve, except to the extent that it reverses a revaluation decrease of the same
asset previously recognised in profit or loss, in which case the increase is credited to profit or loss to the extent of the decrease
previously charged. A decrease in net carrying amount arising on revaluation of an asset is recognised in profit or loss to the
extent that it exceeds the balance, if any, on the properties 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 retained profits.
Depreciation is provided to write off the cost or fair value of items of property, plant and equipment over their estimated useful
lives and after taking into account of their estimated residual value, using the straight-line method.
If an item of property, plant and equipment and the relevant leasehold land becomes an investment property because its use
has changed as evidenced by end of owner-occupation, any difference between the carrying amount and the fair value of that
item at the date of transfer is recognised in other comprehensive income and accumulated in property revaluation reserve. On
the subsequent sale or retirement of the asset, the relevant revaluation reserve will be transferred directly to retained profits.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to
arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference
between the net disposal proceeds and the carrying amount of the item) is included in profit or loss in the period in which the
item is derecognised.
6. Prepaid Lease Payments
The land and buildings elements of a lease of land and buildings are considered separately for the purpose of lease
classification. To the extent that the allocation of the lease payments between the land and buildings elements can be made
reliably, the leasehold interests in land are classified as prepaid lease payments, which are carried at cost less subsequent
accumulated amortisation and accumulated impairment losses, and is amortised to the consolidated income statement on a
straight-line basis over the terms of relevant land leases except for those that are classified and accounted for as investment
properties under the fair value model and those transferred from investment properties to property, plant and equipment.
7. Impairment of Non-Financial Assets
At the end of each reporting period, the Group and the Company review the carrying amounts of their 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. An
impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which
case the impairment loss is treated as a revaluation decrease.
Hysan Annual Report 2009 93
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G
Y
I
N
A
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O
N
I
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
A
N
D
V
A
L
U
A
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O
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I
SIGNIFICA NT ACCOUNTING POLICIES continued
For the year ended 31 December 2009
7. Impairment of Non-Financial Assets continued
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 immediately in profit or loss, unless the relevant asset is carried at revalued amount, in which case the reversal of
the impairment loss is treated as a revaluation increase.
8. Financial Instruments
Financial assets and financial liabilities are recognised in the statement of financial position when a group entity becomes
a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair
value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other
than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value
of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the
acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or
loss.
(a) Financial assets
The Group’s financial assets are classified into one of the four categories, including (i) financial assets at fair value through
profit or loss (“FVTPL”), (ii) loans and receivables, (iii) held-to-maturity investments and (iv) available-for-sale financial assets.
The Company’s financial assets are classified into (i) loans and receivables and (ii) available-for-sale financial assets. The
classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way
purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established
by regulation or convention in the marketplace. The accounting policies adopted in respect of each category of financial assets
are set out below.
(i) Financial assets at FVTPL
Financial assets are classified as at FVTPL where the financial asset is either held for trading or it is designated as at FVTPL.
A financial asset is classified as held for trading if it has been acquired principally for the purpose of selling in the near future or
it is a derivative that is not designated and effective as a hedging instrument.
A financial asset other than the one held for trading may be designated as at FVTPL upon initial recognition if it contains one or
more embedded derivatives and HKAS 39 permits the entire combined contract (asset or liability) to be designated as at FVTPL.
Financial assets at FVTPL are measured at fair value, with changes in fair value arising from remeasurement recognised directly
in profit or loss in the period in which they arise. The net gain or loss recognised in profit or loss includes any dividend or
interest earned on the financial asset.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. At the end of each reporting period subsequent to initial recognition, loans and receivables (including accounts
receivable and other receivables, amounts due from subsidiaries, amount due from an associate, time deposits and bank
balances) are carried at amortised cost using the effective interest method, less any identified impairment losses (see
accounting policy on impairment of financial assets below).
(iii) Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that
the Group’s management has the positive intention and ability to hold to maturity. The Group designated listed debt securities,
which are denominated in Hong Kong dollars and US dollars (see note 26 of the notes to the financial statements section), as
held-to-maturity investments. At the end of each reporting period subsequent to initial recognition, held-to-maturity investments
are measured at amortised cost using the effective interest method, less any identified impairment losses (see accounting
policy on impairment of financial assets below).
94 Hysan Annual Report 2009
8. Financial Instruments continued
(a) Financial assets continued
(iv) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated as such or not classified as financial assets
at FVTPL, loans and receivables or held-to-maturity investments. The Group and the Company designated investments in equity
securities and club debentures (if any) as available-for-sale financial assets. At the end of each reporting period subsequent to
initial recognition, available-for-sale financial assets (including certain equity securities investments and club debentures) are
measured at fair value. Changes in fair value are recognised in equity in the investments revaluation reserve until the financial
asset is disposed of or is determined to be impaired, at which time, the cumulative gain or loss previously recognised in equity
is removed from equity and recognised in profit or loss (see accounting policy on impairment of financial assets below).
For available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot
be reliably measured, they are measured at cost less any identified impairment losses at the end of each reporting period
subsequent to initial recognition (see accounting policy on impairment of financial assets below).
(v) Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest
income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts
(including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums
or discounts) through the expected life of the financial asset or, where appropriate, a shorter period to the net carrying amount
on initial recognition.
Interest income is recognised on an effective interest basis for debt instruments, other than those financial assets classified as
at FVTPL, of which interest income is included in net gains or losses.
(vi) Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period.
Financial assets are impaired when there is objective evidence that, as a result of one or more events that occurred after the
initial recognition of the financial asset, the estimated future cash flows of the financial assets have been impacted.
For an available-for-sale equity investment, a significant or prolonged decline in the fair value of that investment below its cost is
considered to be objective evidence of impairment.
For all other financial assets, objective evidence of impairment could include:
•
•
•
significant financial difficulty of the issuer or counterparty; or
default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial re-organisation.
For certain categories of financial asset, such as accounts receivable, assets that are assessed not to be impaired individually
are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables
could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the
portfolio past the average credit period, observable changes in national or local economic conditions that correlate with default
on receivables.
For financial assets carried at amortised cost, an impairment loss is recognised in profit or loss when there is objective
evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount and the present
value of the estimated future cash flows discounted at the original effective interest rate.
For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s
carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a
similar financial asset. Such impairment loss will not be reversed in subsequent periods.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception
of accounts receivable and amounts due from subsidiaries and an associate, where the carrying amount is reduced through the
use of an allowance account (if any). Changes in the carrying amount of the allowance account are recognised in profit or loss.
When an account receivable or an amount due from a subsidiary or an associate is considered uncollectible, it is written off
against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.
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SIGNIFICA NT ACCOUNTING POLICIES continued
For the year ended 31 December 2009
8. Financial Instruments continued
(a) Financial assets continued
(vi) Impairment of financial assets continued
For financial assets measured at amortised cost, if, in a subsequent period, the amount of impairment loss decreases and the
decrease can be related objectively to an event occurring after the impairment losses was recognised, the previously recognised
impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date of impairment
is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.
Impairment losses on available-for-sale equity investments will not be reversed in profit or loss in subsequent periods. Any
increase in fair value subsequent to impairment loss is recognised directly in other comprehensive income and accumulated
in investment revaluation reserve. For available-for-sale debt investments, impairment losses are subsequently reversed if
an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the
impairment loss.
(vii) Derecognition of financial assets
Financial assets are derecognised when the rights to receive cash flows from the assets expire or, the financial assets
are transferred and the Group or the Company has transferred substantially all the risks and rewards of ownership of the
financial assets. On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the
consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income
is recognised in profit or loss.
(b) Financial liabilities and equity
Financial liabilities and equity instruments issued by a group entity are classified according to the substance of the contractual
arrangements entered into and the definitions of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual interest in the assets of the Group or the Company after
deducting all of its liabilities. The Group’s financial liabilities are generally classified into (i) financial liabilities at FVTPL and (ii)
other financial liabilities. The Company’s financial liabilities are generally classified into other financial liabilities. The accounting
policies adopted in respect of financial liabilities and equity instruments are set out below.
(i) Financial liabilities at FVTPL
Financial liabilities at FVTPL, that are classified as held for trading, comprise derivatives that are not designated and effective as
hedging instruments.
Financial liabilities at FVTPL are measured at fair value, with changes in fair value arising on remeasurement recognised directly
in profit or loss in the period in which they arise. The net gain or loss recognised in profit or loss includes any interest paid on
the financial liabilities.
(ii) Other financial liabilities
Other financial liabilities (including accounts payable and accruals, other payable, amounts due to subsidiaries, amounts due to
minority shareholders and borrowings) are subsequently measured at amortised cost, using the effective interest method.
(iii) Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
Consideration paid to repurchase the Company’s own equity instruments are deducted from equity. No gain or loss is recognised
in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.
(iv) Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments
through the expected life of the financial liability, or, where appropriate, a shorter period.
Interest expense is recognised on an effective interest basis for financial liabilities, other than those financial liabilities
classified as at FVTPL, of which the interest expense is included in net gains or losses.
96 Hysan Annual Report 2009
8. Financial Instruments continued
(b) Financial liabilities and equity continued
(v) Derecognition of financial liabilities
Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires.
The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is
recognised in profit or loss.
(c) Derivative financial instruments and hedging
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently
remeasured to their fair values at the end of each reporting period. The resulting gain or loss is recognised in profit or loss
immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the
recognition in profit or loss depends on the nature of the hedge relationship.
(d) Embedded derivatives
Derivatives embedded in non-derivative host contracts are treated as separate derivatives when their risks and characteristics
are not closely related to those of the host contracts and the host contracts are not measured at fair value with changes in fair
value recognised in profit or loss.
(e) Hedge accounting
The Group designates certain derivatives as hedging instruments as either fair value hedge or cash flow hedge.
At the inception of the hedging relationship, the Group documents the relationship between the hedging instrument and
the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions.
Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument that
is used in a hedging relationship is highly effective in offsetting changes in fair values or cash flows of the hedged item.
(i) Fair value hedges
Changes in the fair values of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss
immediately, together with any changes in the fair values of the hedged items that are attributable to the hedged risk. The
adjustment to the carrying amount of the hedged item for which the effective interest is used is amortised to profit or loss when
the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged. The adjustment is
based on a recalculated effective interest rate at the date the amortisation begins.
Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold,
terminated, or exercised, or no longer qualifies for hedge accounting.
(ii) Cash flow hedges
The effective portion of changes in the fair values of derivatives that are designated and qualify as cash flow hedges are
recognised in other comprehensive income (hedging reserve). The gain or loss relating to the ineffective portion is recognised
immediately in profit or loss as other gains or losses.
Amounts previously recognised in other comprehensive income and accumulated in equity (hedging reserve) are reclassified to
profit or loss in the periods when the hedged item is recognised in profit or loss.
Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold,
terminated, or exercised, or no longer qualifies for hedge accounting. Any cumulative gain or loss accumulated in equity at
that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a
forecast transaction is no longer expected to occur, the cumulative gain or loss accumulated in equity is recognised immediately
in profit or loss.
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SIGNIFICA NT ACCOUNTING POLICIES continued
For the year ended 31 December 2009
9. Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable.
Rental income is recognised on a straight-line basis over the term of the relevant lease.
Management fee income and security service income are recognised when services are rendered.
Dividend income from investments including financial assets at FVTPL is recognised when the shareholders’ right to receive
payments has been established.
Interest income from a financial asset excluding financial assets at FVTPL is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future
cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.
10. Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as operating leases.
(a) The Group as lessor
Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of the relevant lease.
Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased
asset and recognised as an expense on a straight-line basis over the lease term.
(b) The Company as lessee
Operating lease payments, including the leasehold interests in land, are recognised as an expense on a straight-line basis over
the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are recognised
as a reduction of rental expense over the lease term on a straight-line basis.
11. Foreign Currencies
In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency
of that entity (foreign currencies) are recorded in its functional currency (i.e. the currency of the primary economic environment
in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At the end of each reporting
period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary
items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in
profit or loss in the period in which they arise, except for exchange differences arising on a monetary item that forms part of the
Group’s net investment in a foreign operation, in which case, such exchange differences are recognised in other comprehensive
income and accumulated in equity and will be reclassified from equity to profit or loss on disposal of the foreign operation.
For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s foreign operations
are translated into the presentation currency of the Group (i.e. Hong Kong dollars) at the rate of exchange prevailing at the
end of the reporting period, and their income and expenses are translated at the average exchange rates for the year, unless
exchange rates fluctuate significantly during the period, in which case, the exchange rates prevailing at the dates of transactions
are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity (the
translation reserve).
12. Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that
necessarily take a substantial period of time to get ready for their intended use or sale are added to the cost of those assets
until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary
investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible
for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
98 Hysan Annual Report 2009
13. Retirement Benefit Costs
Payments to the Mandatory Provident Fund Scheme are charged as an expense when employees have rendered service entitling
them to the contributions.
14. Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
(a) Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated
income statement because it excludes items of income or expense that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Group’s or the Company’s liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the end of the reporting period.
(b) Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally
recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities
are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and
associates, except where the Group or the Company is able to control the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary
differences associated with such investments and interests are only recognised to the extent that is probable that there will be
sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reserve in
the forseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is
no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset
realised, based on tax rate (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in
which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax is recognised in profit or loss, except when it relates to items that are recognised in other comprehensive income
or directly in equity, in which case the deferred tax is also recognised in other comprehensive income or directly in equity
respectively.
15. Equity-Settled Share-Based Payment Transactions
Share options granted to employees
The fair value of services received determined by reference to the fair value of share options granted at the grant date is
expensed on a straight-line basis over the vesting period, with a corresponding increase in equity (share options reserve).
At the end of each reporting period, the Group and the Company revise their estimates of the number of options that are
expected to ultimately vest. The impact of the revision of the estimates during the vesting period, if any, is recognised in profit or
loss, with a corresponding adjustment to share options reserve.
At the time when the share options are exercised, the amount previously recognised in share options reserve will be transferred
to share premium. When the share options are forfeited after the vesting date or are still not exercised at the expiry date, the
amount previously recognised in share options reserve will be transferred to retained profits.
Hysan Annual Report 2009 99
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NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2009
1. General
The Company is a public listed company incorporated in Hong Kong and its shares are listed on The Stock Exchange of Hong
Kong Limited (the “Stock Exchange”). The addresses of the registered office and principal place of business of the Company
are disclosed in the “Shareholder Information” section of the annual report.
The principal activities of the Company and its subsidiaries (collectively referred to as the “Group”) are property investment,
management and development.
These financial statements are presented in Hong Kong dollars, which is the same as the functional currency of the Company.
2. Application of New and Revised Hong Kong Financial Reporting Standards
(“HKFRSs”)
In the current year, the Group and the Company had applied a number of new and revised Standards, Amendments to Standards
and Interpretations (“new and revised HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).
Except as described below, the adoption of these new and revised HKFRSs had no material effect on the financial statements
of the Group or the Company for the current and/or prior accounting years. Accordingly, no prior year adjustment has been
required.
HKAS 1 (Revised 2007) – Presentation of Financial Statements
HKAS 1 (Revised 2007) has introduced terminology changes (including revised titles for the financial statements) and changes
in the format and content of the financial statements.
HKFRS 8 – Operating Segments
HKFRS 8 is a disclosure Standard that has resulted in a disclosure of the Group’s reportable segments (see note 5).
Amendments to HKFRS 7 – Financial Instruments: Disclosures
The amendments to HKFRS 7 expand the disclosures required in relation to fair value measurements in respect of financial
instruments which are measured at fair value. The amendments also amend the disclosures required in relation to liquidity risk.
The Group has not provided comparative information for the expanded disclosures in accordance with the transitional provision
set out in the amendments.
The Group and the Company have not early applied the following new and revised Standards, Amendments to Standards or
Interpretations that have been issued but are not yet effective.
HKFRSs (Amendments)
HKFRSs (Amendments)
HKAS 24 (Revised)
HKAS 27 (Revised)
HKAS 32 (Amendment)
HKAS 39 (Amendment)
HKFRS 1 (Amendment)
HKFRS 1 (Amendment)
HKFRS 2 (Amendment)
HKFRS 3 (Revised)
HKFRS 9
HK(IFRIC) – Int 14 (Amendment)
HK(IFRIC) – Int 17
HK(IFRIC) – Int 19
Amendments to HKFRS 5 as part of Improvements to HKFRSs 20081
Improvements to HKFRSs 20092
Related Party Disclosures3
Consolidated and Separate Financial Statements1
Classification of Rights Issues4
Eligible Hedged Items1
Additional Exemptions for First-time Adopters5
Limited Exemption from Comparative HKFRS 7 Disclosure for First-time Adopters6
Group Cash-settled Share-based Payment Transactions5
Business Combinations1
Financial Instruments7
Prepayments of a Minimum Funding Requirement3
Distribution of Non-cash Assets to Owners1
Extinguishing Financial Liabilities with Equity Instruments6
1 Effective for annual periods beginning on or after 1 July 2009.
2 Amendments that are effective for annual periods beginning on or after 1 July 2009 or 1 January 2010, as appropriate.
3 Effective for annual periods beginning on or after 1 January 2011.
4 Effective for annual periods beginning on or after 1 February 2010.
5 Effective for annual periods beginning on or after 1 January 2010.
6 Effective for annual periods beginning on or after 1 July 2010.
7 Effective for annual periods beginning on or after 1 January 2013.
100 Hysan Annual Report 2009
2. Application of New and Revised Hong Kong Financial Reporting Standards
(“HKFRSs”) continued
HKFRS 9 “Financial Instruments” introduces new requirements for the classification and measurement of financial assets
and will be effective from 1 January 2013, with earlier application permitted. The Standard requires all recognised financial
assets that are within the scope of HKAS 39 “Financial Instruments: Recognition and Measurement” to be measured at either
amortised cost or fair value. Specially, debt investments that (i) are held within a business model whose objective is to collect
the contractual cash flows and (ii) have contractual cash flows that are solely payments of principal and interest on the principal
outstanding are generally measured at amortised cost. All other debt investments and equity investments are measured at fair
value. The application of HKFRS 9 will affect the classification and measurement of the Group’s financial assets.
In addition, as part of “Improvements to HKFRSs 2009”, HKAS 17 “Leases” has been amended in relation to the classification
of leasehold land. The amendments will be effective from 1 January 2010, with earlier application permitted. Before the
amendments to HKAS 17, leases were required to classify leasehold land as operating leases and presented as prepaid lease
payments in the consolidated statement of financial position. The amendments have removed such a requirement. Instead,
the amendments require the classification of leasehold land to be based on the general principles set out in HKAS 17, that are
based on the extent to which risks and rewards incidental to ownership of a leased asset lie with the lessor or the lessee. The
application of the amendments to HKAS 17 will affect the classification and measurement of the Group’s leasehold land.
The Directors of the Company anticipate that the application of the other new and revised Standards, Amendments to Standards
or Interpretations will have no material impact on the financial statements of the Group or the Company.
3. Key Sources of Estimation Uncertainty
In the application of the Group’s accounting policies, which are described in the “Significant Accounting Policies” section, the
management of the Company is required to make estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future
periods if the revision affects both current and future periods.
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the
reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year.
Fair value of investment properties
At the end of the reporting period, the Group’s investment properties are stated at fair value of HK$37,363 million (2008:
HK$35,850 million) based on the valuation performed by an independent qualified professional valuer. In determining the fair
value, the valuers have based on market value basis which involves, inter-alia, certain estimates, including comparable market
transactions, appropriate capitalisation rates and reversionary income potential and redevelopment potential. In relying on the
valuation, management has exercised its judgment and is satisfied that the method of valuation is reflective of the current
market conditions.
Fair value of financial instruments
Financial instruments, such as interest rate swaps, cross currency swaps and foreign exchange derivatives, are carried in
the statement of financial position at fair value, as disclosed in note 22. The management of the Group uses its judgment in
selecting an appropriate valuation technique for financial instruments not quoted in an active market. Valuation techniques
commonly used by market practitioners are applied. For derivative financial instruments, assumptions are made based on
quoted market rates. Most of the financial instruments are valued using a discounted cash flow analysis based on assumptions
supported, where possible, by observable market prices or rates. Details of the assumptions used and of the results of
sensitivity analyses regarding these assumptions are provided in the “Financial Risk Management” section.
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NOTES TO THE FINA NCI A L STATEMENTS continued
For the year ended 31 December 2009
4. Turnover
Turnover represents gross rental income from investment properties and management fee income for the year.
The Group’s principal activities are property investment, management and development and its turnover and results are
principally derived from investment properties located in Hong Kong.
5. Segment Information
The Group has adopted HKFRS 8 “Operating Segments” with effect from 1 January 2009. HKFRS 8 is a disclosure Standard
that requires operating segments to be identified on the basis of internal reports about components of the Group that are
regularly reviewed by the chief operating decision maker for the purpose of allocating resources to segments and assessing
their performance. In contrast, the predecessor Standard (HKAS 14 “Segment Reporting”) required an entity to identify two sets
of segment (business and geographical) using a risks and returns approach.
In the past, the Group’s turnover and results are principally derived from investment properties located in Hong Kong, no
business or geographical segment is therefore presented. However, information reported to the Group’s management for the
purpose of resource allocation and assessment of performance is specifically focused on the type of usage of space (e.g.
commercial, residential) within the Group’s properties portfolio as each type of usage has different tenant base and requires
different marketing strategies. As such, the application of HKFRS 8 has resulted in a disclosure of the Group’s reportable
segments as follows:
Office segment – leasing of high quality office space and related facilities
Retail segment – leasing of space and related facilities to a variety of retail and leisure operators
Residential segment – leasing of luxury residential properties and related facilities
102 Hysan Annual Report 2009
5. Segment Information continued
Segment turnover and results
The following is an analysis of the Group’s turnover and results by reportable segment.
Office
HK$ million
Retail
HK$ million
Residential
HK$ million
Consolidated
HK$ million
For the year ended 31 December 2009
Turnover
Gross rental income from investment properties
Management fee income
Property expenses
Segment profits
Investment income
Other gains and losses
Administrative expenses
Finance costs
Change in fair value of investment properties
Share of results of associates
Profit before taxation
For the year ended 31 December 2008
Turnover
Gross rental income from investment properties
Management fee income
Property expenses
Segment profits
Investment income
Other gains and losses
Administrative expenses
Finance costs
Change in fair value of investment properties
Share of results of associates
Profit before taxation
635
112
747
(109)
638
603
117
720
(101)
619
584
64
648
(73)
575
563
63
626
(71)
555
257
28
285
(53)
232
264
28
292
(45)
247
1,476
204
1,680
(235)
1,445
38
(3)
(133)
(131)
1,249
768
3,233
1,430
208
1,638
(217)
1,421
63
146
(134)
(155)
(212)
590
1,719
All of the segment turnover reported above is from external customers.
The accounting policies of the reporting segments are the same as the Group’s accounting policies described in the “Significant
Accounting Policies” section. Segment profit represents the profit earned by each segment without allocation of investment
income, central administration costs and directors’ salaries, other gains and losses, finance costs, change in fair value of
investment properties and share of results of associates. This is the measure reported to the Group’s management for the
purpose of resource allocation and performance assessment.
Hysan Annual Report 2009 103
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E
R
V
I
E
W
S
T
R
A
T
E
G
Y
I
N
A
C
T
O
N
I
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
A
N
D
V
A
L
U
A
T
O
N
I
NOTES TO THE FINA NCI A L STATEMENTS continued
For the year ended 31 December 2009
5. Segment Information continued
Segment assets and liabilities
The following is an analysis of the Group’s assets by reportable segment.
As at 31 December 2009
Segment assets
Investment properties under redevelopment
Investments in associates
Other assets
Consolidated assets
As at 31 December 2008
Segment assets
Investment properties under redevelopment
Investments in associates
Other assets
Consolidated assets
Office
HK$ million
Retail
HK$ million
Residential
HK$ million
Consolidated
HK$ million
14,100
10,580
7,051
13,602
10,156
6,832
31,731
5,640
2,517
3,960
43,848
30,590
5,270
1,750
3,926
41,536
Segment assets represented the fair value of investment properties and accounts receivable of each segment without allocation
of property, plant and equipment, prepaid lease payments, investments in associates, amount due from an associate, financial
instruments and other receivables. This is the measure reported to the Group’s management for the purpose of monitoring
segment performances and allocating resources between segments. The investment properties are included in segment assets
at their fair values whilst the change in fair value of investment properties is not included in segment profits. No segment
liabilities analysis is presented as the Group’s management monitored and managed all the liabilities on a group basis.
Other than the investments in associates, which operated in the People’s Republic of China (the “PRC”) and Singapore with
carrying amounts of HK$2,514 million and HK$3 million respectively, all the Group’s assets are located in Hong Kong.
Other segment information
Office
HK$ million
Retail
HK$ million
Residential
HK$ million
Consolidated
HK$ million
For the year ended 31 December 2009
Additions to non-current assets
Additions to investment properties under redevelopment
33
42
2
For the year ended 31 December 2008
Additions to non-current assets
Additions to investment properties under redevelopment
39
201
8
77
184
261
248
107
355
104 Hysan Annual Report 2009
6. Investment Income
Investment income comprises:
Dividends from
– listed investments
– unlisted investments
Interest income
2009
HK$ million
2008
HK$ million
27
–
11
38
47
1
15
63
Investment income earned on financial assets not designated as at fair value through profit or loss (“FVTPL”), is as follows:
Loans and receivables (including time deposits and bank balances)
Available-for-sale equity investments
2009
HK$ million
2008
HK$ million
11
27
38
15
48
63
Investment income recognised in respect of financial assets designated as at FVTPL is disclosed in note 7.
7. Other Gains and Losses
Other gains and losses comprise:
Change in fair value of financial assets designated as at FVTPL
Change in fair value of financial assets or financial liabilities classified as held for trading
Cumulative gain reclassified from equity on disposal of investments classified as
available-for-sale
(Losses) gains on hedging instruments under fair value hedge
Gains (losses) on adjustment for hedged items under fair value hedge
Amortisation of fair value gain adjusted to hedged items under fair value hedge
in prior years
2009
HK$ million
2008
HK$ million
3
(8)
3
(52)
59
(8)
(3)
–
(52)
186
124
(112)
–
146
Hysan Annual Report 2009 105
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I
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W
S
T
R
A
T
E
G
Y
I
N
A
C
T
O
N
I
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
A
N
D
V
A
L
U
A
T
O
N
I
NOTES TO THE FINA NCI A L STATEMENTS continued
For the year ended 31 December 2009
8. Finance Costs
Finance costs comprise:
Interest on bank loans and overdrafts wholly repayable within five years
Interest on floating rate notes wholly repayable within five years
Interest on fixed rate notes wholly repayable within five years
Interest on fixed rate notes not wholly repayable within five years
Imputed interest on zero coupon notes not wholly repayable within five years
Total interest expenses
Less: Amounts capitalised
Net interest receipts on interest rate swap and cross currency swaps
Fair value losses reclassified from equity on financial instruments designated as
cash flow hedges
Medium Term Note Programme expenses
Other finance costs
9. Taxation
Current tax
Hong Kong profits tax
– current year
– underprovision in prior years
– prior years’ tax provision (Note)
Deferred tax (note 31)
Change in fair value of investment properties
Other temporary differences
Attributable to change in tax rate
2009
HK$ million
2008
HK$ million
16
5
99
30
12
162
(1)
161
(57)
17
1
9
131
27
17
99
11
12
166
–
166
(29)
3
1
14
155
2009
HK$ million
2008
HK$ million
161
2
–
163
207
26
–
233
396
166
26
72
264
(28)
(12)
(223)
(263)
1
On 26 June 2008, the Hong Kong Legislative Council passed the Revenue Bill 2008 which reduced corporate profits tax rate
from 17.5% to 16.5% effective from the year of assessment 2008/2009. Therefore, Hong Kong Profits Tax is calculated at
16.5% of the estimated assessable profit for both years.
106 Hysan Annual Report 2009
9. Taxation continued
The taxation for the year can be reconciled to the profit before taxation per the consolidated income statement as follows:
Profit before taxation
Tax at Hong Kong profits tax rate of 16.5%
Tax effect of share of results of associates
Tax effect of expenses not deductible for tax purposes
Tax effect of income not taxable for tax purposes
Tax effect of estimated tax losses not recognised
Tax effect of deductible temporary differences not recognised
Reversal of previously recognised taxable temporary differences
Reversal of deductible temporary differences previously not recognised
Utilisation of estimated tax losses previously not recognised
Effect of change in tax rate
Underprovision in prior years
Prior years’ tax provision
Taxation for the year
2009
HK$ million
2008
HK$ million
3,233
1,719
533
(127)
3
(8)
2
3
(9)
(2)
(1)
–
2
–
396
284
(97)
11
(51)
21
6
(24)
–
(24)
(223)
26
72
1
In addition to the amount charged to the consolidated income statement, deferred tax relating to the revaluation of the Group’s
buildings held for own use has been charged directly to equity (see note 31).
Note:
As disclosed in the annual reports published in previous years, the Group had been in dispute for a considerable period of time with the Hong
Kong Inland Revenue Department (the “IRD”) on interest deductions made in years of assessment dating back to 1995/1996. Taking into
consideration professional advice and recent developments, the Group entered into a settlement with the IRD. Total claim amount of HK$450
million, which was fully provided at 31 December 2008, was settled during the year by cash payment of HK$268 million and tax reserve
certificates of HK$182 million already purchased in prior years.
10. Profit for the Year
Profit for the year has been arrived at after charging (crediting):
Auditor’s remuneration
Amortisation of prepaid lease payments
Depreciation of property, plant and equipment
Gross rental income from investment properties
Less:
– Direct operating expenses arising from properties that generated rental income
– Direct operating expenses arising from properties that did not generate rental income
Staff costs, comprising:
– Directors’ emoluments (note 12)
– Share-based payments
– Other staff costs
Share of income tax of an associate (included in share of results of associates)
2009
HK$ million
2008
HK$ million
2
1
6
2
–
6
(1,476)
(1,430)
231
4
214
3
(1,241)
(1,213)
17
2
135
154
286
17
2
126
145
181
Hysan Annual Report 2009 107
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I
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W
S
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R
A
T
E
G
Y
I
N
A
C
T
O
N
I
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
A
N
D
V
A
L
U
A
T
O
N
I
NOTES TO THE FINA NCI A L STATEMENTS continued
For the year ended 31 December 2009
11. Other Comprehensive Income
Other comprehensive income comprises:
Available-for-sale investments
– Gains (losses) arising during the year
– Reclassification adjustments for the cumulative gain
included in profit or loss upon disposal
Cash flow hedges
– Losses arising during the year
– Reclassification adjustments for losses included in profit or loss
Gain on revaluation of properties held for own use
Share of translation reserve of an associate
Other comprehensive income (expense)
Income tax relating to components of other comprehensive income (see below)
Other comprehensive income (expense) for the year (net of tax)
Tax effect relating to other comprehensive income:
2009
HK$ million
2008
HK$ million
40
(3)
37
(12)
17
5
1
(1)
42
–
42
(1,165)
(186)
(1,351)
(31)
3
(28)
4
155
(1,220)
(1)
(1,221)
2009
2008
Before-tax
amount
Net-of-tax
amount
HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million
Before-tax
amount
Net-of-tax
amount
Tax
expense
Tax
expense
37
5
1
(1)
42
–
–
–
–
–
37
5
1
(1)
(1,351)
(28)
4
155
42
(1,220)
–
–
(1)
–
(1)
(1,351)
(28)
3
155
(1,221)
2009
HK$ million
2008
HK$ million
1
9
3
4
–
17
1
10
3
3
–
17
Fair value gains (losses) on
available-for-sale investments
Fair value gains (losses) on cash flow hedges
Gain on revaluation of properties held for own use
Share of translation reserve of an associate
12. Directors’ Emoluments
Directors’ fees
Other emoluments
Basic salaries, housing and other allowances
Bonus
Share-based payments (note 39)
Retirement benefits scheme contributions
108 Hysan Annual Report 2009
12. Directors’ Emoluments continued
The emoluments paid or payable to each of the Directors of the Company for the two years ended 31 December 2009,
calculated with reference to their employment as Directors of the Company, are set out below:
Basic salaries,
housing
and other
allowances
HK$’000
(Note b)
Directors’
fees
HK$’000
(Note a)
Share-based
Retirement
benefits
scheme
payments contributions
HK$’000
HK$’000
(Note c)
Bonus
HK$’000
(Note b)
Total
HK$’000
For the year ended 31 December 2009
Executive Directors
Peter Ting Chang LEE (Note d)
Wendy Wen Yee YUNG
Gerry Lui Fai YIM (Note e)
Ricky Tin For TSANG (Note f)
Non-executive Directors
Hans Michael JEBSEN
Anthony Hsien Pin LEE
Chien LEE
Dr. Deanna Ruth Tak Yung RUDGARD
Independent non-executive Directors
Sir David AKERS-JONES (Note g)
Fa-kuang HU
Dr. Geoffrey Meou-tsen YEH (Note h)
Nicholas Charles ALLEN (Note i)
Tom BEHRENS-SORENSEN (Note h)
For the year ended 31 December 2008
Executive Directors
Peter Ting Chang LEE
Wendy Wen Yee YUNG (Note j)
Ricky Tin For TSANG (Note j)
Pauline Wah Ling YU WONG (Note k)
Non-executive Directors
Hans Michael JEBSEN
Anthony Hsien Pin LEE
Chien LEE
Dr. Deanna Ruth Tak Yung RUDGARD
Independent non-executive Directors
Sir David AKERS-JONES
Fa-kuang HU
Dr. Geoffrey Meou-tsen YEH
Tom BEHRENS-SORENSEN
151
100
8
74
120
130
130
100
229
120
156
20
49
3,583
2,711
322
2,167
1,467
742
–
318
1,825
984
95
657
242
131
–
9
7,268
4,668
425
3,225
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
120
130
130
100
229
120
156
20
49
1,387
8,783
2,527
3,561
382
16,640
190
75
75
37
120
130
130
100
230
120
140
130
4,454
2,085
2,085
1,040
1,457
526
526
608
1,395
656
638
96
12
9
9
104
7,508
3,351
3,333
1,885
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
120
130
130
100
230
120
140
130
1,477
9,664
3,117
2,785
134
17,177
Hysan Annual Report 2009 109
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I
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W
S
T
R
A
T
E
G
Y
I
N
A
C
T
O
N
I
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
A
N
D
V
A
L
U
A
T
O
N
I
NOTES TO THE FINA NCI A L STATEMENTS continued
For the year ended 31 December 2009
12. Directors’ Emoluments continued
Notes:
(a) Breakdown of Directors’ fees of each of the Directors of the Company for the year ended 31 December 2009 is set out below:
Emoluments
Investment Nomination
Review
Board Committee Committee Committee Committee
HK$’000
HK$’000
HK$’000
HK$’000
Audit
HK$’000
Executive Directors
Peter Ting Chang LEE (Note d)
Wendy Wen Yee YUNG
Gerry Lui Fai YIM (Note e)
Ricky Tin For TSANG (Note f)
Pauline Wah Ling YU WONG (Note k)
Non-executive Directors
Hans Michael JEBSEN
Anthony Hsien Pin LEE
Chien LEE
Dr. Deanna Ruth Tak Yung RUDGARD
Independent non-executive Directors
Sir David AKERS-JONES (Note g)
Fa-kuang HU
Dr. Geoffrey Meou-tsen YEH (Note h)
Nicholas Charles ALLEN (Note i)
Tom BEHRENS-SORENSEN (Note h)
(b) Year 2009:
111
100
8
74
–
100
100
100
100
124
100
100
12
38
–
–
–
–
–
–
–
30
–
53
–
16
8
11
1,067
118
–
–
–
–
–
–
–
–
–
30
20
20
–
–
70
16
–
–
–
–
20
30
–
–
–
–
–
–
–
66
24
–
–
–
–
–
–
–
–
22
–
20
–
–
66
2009
Total
HK$’000
2008
Total
HK$’000
151
100
8
74
–
120
130
130
100
229
120
156
20
49
190
75
–
75
37
120
130
130
100
230
120
140
–
130
1,387
1,477
In March 2009, the Emoluments Review Committee reviewed the 2009 fixed base salary of the Company’s executive Directors and
determined their 2008 performance-based bonus. It approved their proposal to freeze their fixed base salary for 2009. The stated bonus
figures show the 2008 performance-based bonus approved by the Committee and paid to Executive Directors, namely HK$1,466,750 for
Peter Ting Chang LEE, HK$742,256 for Wendy Wen Yee YUNG and HK$318,110 for Ricky Tin For TSANG respectively, with reference to
their employment as Directors of the Company.
Year 2008:
In March 2008, the Emoluments Review Committee reviewed the 2008 fixed base salary of the Company’s executive Directors and
determined their 2007 performance-based bonus. It was decided to make an increment on their base salary as from April 2008. The
stated bonus figure includes adjustment for 2007 bonus accrued in 2007 accounts (following finalisation of bonus by the Emoluments
Review Committee in March 2008), and 2008 target bonus figures pending finalisation by the Emoluments Review Committee after year-
end in March 2009.
(c) Share-based payments are the fair values of share options granted to Directors, which are determined at the date of grant and expensed
over the vesting period, regardless of whether the Directors exercise the share options or not during the year.
(d) Peter Ting Chang LEE passed away on 17 October 2009.
(e) Gerry Lui Fai YIM was appointed as Executive Director on 1 December 2009.
(f) Ricky Tin For TSANG resigned as Executive Director, Finance on 29 September 2009.
(g) Sir David AKERS-JONES was appointed as Acting Chairman and Chairman of Nomination Committee on 18 October 2009. He stepped
down from the Audit Committee on 17 November 2009 upon the appointment of Nicholas Charles ALLEN.
(h) Tom BEHRENS-SORENSEN resigned as Independent non-executive Director and a member of the Audit Committee on 18 May 2009, and
Dr. Geoffrey Meou-tsen YEH was appointed a member of the Audit Committee in his stead on 18 June 2009.
(i) Nicholas Charles ALLEN was appointed as Independent non-executive Director and Chairman of the Audit Committee on 17 November
2009.
(j) Wendy Wen Yee YUNG and Ricky Tin For TSANG were appointed as Executive Directors on 1 April 2008. The figures stated refer to their
respective emoluments received or receivable as Executive Directors.
(k) Pauline Wah Ling YU WONG retired from the Board of the Company by rotation as from the conclusion of 2008 Annual General Meeting
held on 14 May 2008. She remained as Senior Advisor to the Company until 31 December 2008 when she retired from the Company. The
figure stated refers to her emoluments received as Executive Director.
110 Hysan Annual Report 2009
13. Employees’ Emoluments
Of the five individuals with the highest emoluments in the Group, three (2008: four) were Directors of the Company, details of
whose emoluments are included in note 12 above. The emoluments of all of the five individuals with the highest emoluments
for the year ended 31 December 2009 and 2008 were as follows:
Basic salaries, housing and other allowances
Bonus
Incentive paid on joining
Share-based payments (Note)
2009
HK$ million
2008
HK$ million
14
4
–
4
22
15
4
4
3
26
Note:
Share-based payments are the fair values of share options granted to Directors and eligible employees, which are determined at the date of
grant and expensed over the vesting period, regardless of whether the Directors or eligible employees exercise the share options or not during
the year.
Their emoluments are within the following bands:
HK$2,500,001 to HK$3,000,000
HK$3,000,001 to HK$3,500,000
HK$4,000,001 to HK$4,500,000
HK$4,500,001 to HK$5,000,000
HK$5,000,001 to HK$5,500,000
HK$7,000,001 to HK$7,500,000
HK$7,500,001 to HK$8,000,000
14. Dividends
(a) Dividends recognised as distribution during the year:
2009 interim dividend paid – HK14 cents per share
2008 interim dividend paid – HK14 cents per share
2008 final dividend paid – HK54 cents per share
2007 final dividend paid – HK48 cents per share
Number of individuals
2009
2008
1
2
–
1
–
1
–
5
–
–
2
–
2
–
1
5
2009
HK$ million
2008
HK$ million
147
–
562
–
709
–
146
–
498
644
Scrip dividend alternatives were offered to the shareholders in respect of the above dividends. These alternatives were accepted
by the shareholders as follows:
2009 interim dividend (2008 interim dividend):
– Cash payment
– Share alternative
2008 final dividend (2007 final dividend):
– Cash payment
– Share alternative
2009
HK$ million
2008
HK$ million
132
15
434
128
709
135
11
428
70
644
Hysan Annual Report 2009 111
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I
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W
S
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R
A
T
E
G
Y
I
N
A
C
T
O
N
I
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
A
N
D
V
A
L
U
A
T
O
N
I
NOTES TO THE FINA NCI A L STATEMENTS continued
For the year ended 31 December 2009
14. Dividends continued
(b) Dividends proposed after the end of the reporting period:
2009
HK$ million
2008
HK$ million
Final dividend proposed – HK54 cents per share (2008: HK54 cents per share)
567
562
The 2009 final dividend of HK54 cents per share (2008: HK54 cents per share) has been proposed by the Directors on 10
March 2010 and is subject to approval by the shareholders at the forthcoming annual general meeting. Such dividend is not
recognised as a liability as at 31 December 2009.
The proposed 2009 final dividend will be payable in cash with a scrip dividend alternative.
15. Earnings per Share
(a) Basic and diluted earnings per share
The calculation of the basic and diluted earnings per share attributable to the owners of the Company is based on the following
data:
Earnings for the purposes of basic and diluted earnings per share:
Profit for the year attributable to owners of the Company
Weighted average number of ordinary shares
for the purpose of basic earnings per share
Effect of dilutive potential ordinary shares:
Share options issued by the Company
Weighted average number of ordinary shares
for the purpose of diluted earnings per share
Earnings
2009
HK$ million
2008
HK$ million
2,716
1,594
Number of shares
2009
2008
1,046,243,250 1,039,339,066
384,981
73,471
1,046,628,231 1,039,412,537
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 of those options are higher than the average market price for shares for both 2009 and 2008.
112 Hysan Annual Report 2009
15. Earnings per Share continued
(b) Adjusted basic earnings per share
For the purpose of assessing the performance of the Group’s principal activities (i.e. leasing of investment properties), the
management is of the view that the profit for the year attributable to the owners of the Company should be adjusted in the
calculation of basic earnings per share as follows:
Profit for the year attributable to owners of the Company
Change in fair value of investment properties
Effect of deferred taxation on change in
fair value of investment properties
Effect of minority interests’ shares
Share of change in fair value of investment
properties (net of deferred taxation) of an associate
Underlying profit attributable to owners of the Company
Net realised gain on disposal of available-for-sale
investments
Prior years’ tax provision
Gain on disposal of investment properties of
an associate
2009
2008
Profit
HK$ million
Basic
earnings
per
share
HK cents
2,716
(1,249)
259.60
(119.38)
207
45
19.78
4.30
Profit
HK$ million
1,594
212
(236)
43
Basic
earnings
per
share
HK cents
153.37
20.40
(22.71)
4.14
(606)
(57.92)
(412)
(39.64)
1,113
106.38
1,201
115.56
(3)
–
–
(0.29)
–
(166)
72
(15.97)
6.93
–
(41)
(3.95)
Recurring underlying profit
1,110
106.09
1,066
102.57
The denominators used are the same as those detailed above for basic earnings per share.
Hysan Annual Report 2009 113
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O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
A
N
D
V
A
L
U
A
T
O
N
I
NOTES TO THE FINA NCI A L STATEMENTS continued
For the year ended 31 December 2009
16. Investment Properties
Fair value
At 1 January
Additions
Transfer from property, plant and equipment and prepaid lease payments
Transfer to property, plant and equipment
Net change in fair value recognised in profit or loss
At 31 December
The carrying amount of investment properties shown above comprises:
Land in Hong Kong:
– Medium-term lease
– Long lease
The Group
2009
HK$ million
2008
HK$ million
35,850
261
3
–
1,249
35,711
355
–
(4)
(212)
37,363
35,850
The Group
2009
HK$ million
2008
HK$ million
6,400
30,963
37,363
6,240
29,610
35,850
The fair values of the Group’s investment properties at 31 December 2009 and 2008 have been arrived at on the basis of a
valuation carried out on that date by Knight Frank Petty Limited, an independent qualified professional valuer not connected
with the Group. Knight Frank Petty Limited has appropriate qualifications and recent experiences in the valuation of similar
properties in the relevant locations. The Group’s investment properties have been valued individually, on market value basis,
which conforms to Hong Kong Institute of Surveyors Valuation Standards on Properties. The valuation was mainly arrived at by
reference to comparable market transactions for similar properties and on the basis of capitalisation of net income with due
allowance for the reversionary income and redevelopment potential.
All of the Group’s property interests held under operating leases to earn rentals or for capital appreciation purposes are
measured using the fair value model and are classified and accounted for as investment properties.
114 Hysan Annual Report 2009
17. Property, Plant and Equipment
Leasehold land
and buildings
in Hong Kong
HK$ million
Furniture,
fixtures and
equipment
HK$ million
Computers
HK$ million
Motor
vehicles
HK$ million
Total
HK$ million
The Group
Cost or valuation
At 1 January 2008
Additions
Transfer from investment properties
Disposals
Surplus on revaluation
At 31 December 2008
Additions
Transfer to investment properties
At 31 December 2009
Comprising:
At cost
At valuation 2009
Accumulated depreciation
At 1 January 2008
Provided for the year
Eliminated on disposals
Eliminated on revaluation
At 31 December 2008
Provided for the year
Eliminated on revaluation
At 31 December 2009
Carrying amounts
At 31 December 2009
At 31 December 2008
62
–
4
–
2
68
–
(2)
66
–
66
66
–
2
–
(2)
–
1
(1)
–
66
68
53
3
–
–
–
56
3
–
59
59
–
59
46
2
–
–
48
3
–
51
8
8
21
1
–
–
–
22
5
–
27
27
–
27
17
2
–
–
19
2
–
21
6
3
1
1
–
(1)
–
1
–
–
1
1
–
1
1
–
(1)
–
–
–
–
–
1
1
137
5
4
(1)
2
147
8
(2)
153
87
66
153
64
6
(1)
(2)
67
6
(1)
72
81
80
Hysan Annual Report 2009 115
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V
E
R
V
I
E
W
S
T
R
A
T
E
G
Y
I
N
A
C
T
O
N
I
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
A
N
D
V
A
L
U
A
T
O
N
I
NOTES TO THE FINA NCI A L STATEMENTS continued
For the year ended 31 December 2009
17. Property, Plant and Equipment continued
Furniture,
fixtures and
equipment
HK$ million
Computers
HK$ million
Motor
vehicles
HK$ million
Total
HK$ million
The Company
Cost
At 1 January 2008
Additions
Disposals
At 31 December 2008
Additions
At 31 December 2009
Accumulated depreciation
At 1 January 2008
Provided for the year
Eliminated on disposals
At 31 December 2008
Provided for the year
At 31 December 2009
Carrying amounts
At 31 December 2009
At 31 December 2008
22
–
–
22
1
23
21
–
–
21
–
21
2
1
20
1
–
21
4
25
16
2
–
18
2
20
5
3
1
1
(1)
1
–
1
1
–
(1)
–
–
–
1
1
43
2
(1)
44
5
49
38
2
(1)
39
2
41
8
5
The above items of property, plant and equipment are depreciated on a straight-line basis at the following rates per annum:
Leasehold land and buildings
Furniture, fixtures and equipment
Computers
Motor vehicles
Over the shorter of the term of the lease or 40 years
20%
20%
25%
The Group’s leasehold land and buildings were revalued at 31 December 2009 by Knight Frank Petty Limited, an independent
qualified professional valuer, on market value basis, by reference to comparable market transactions for similar properties and
on the basis of capitalisation of net income with due allowance for the reversionary income. The gain of HK$1 million (2008:
HK$4 million) arising on revaluation have been recognised in other comprehensive income and accumulated in equity.
Had the Group’s buildings been measured on a historical cost basis, their carrying amounts would have been HK$49 million
(2008: HK$53 million) at the end of the reporting period.
Furniture, fixtures and equipment of the Group include assets carried at cost of HK$22 million (2008: HK$20 million) and
accumulated depreciation of HK$19 million (2008: HK$18 million) in respect of assets held for leasing out under operating
leases. Depreciation charges in respect of those assets for the year amounted to HK$1 million (2008: HK$1 million).
There is no property, plant and equipment of the Company held for renting out under operating leases for the year or at the end
of the reporting period.
116 Hysan Annual Report 2009
18. Prepaid Lease Payments
At 1 January
Transfer to investment properties
Amortised for the year
At 31 December
The Group
2009
HK$ million
2008
HK$ million
123
(1)
(1)
121
123
–
–
123
The Group’s prepaid lease payments represent leasehold land in Hong Kong held under long lease, and are amortised on a
straight-line basis over the terms of leases.
19. Investments in Subsidiaries
The Company’s investments in subsidiaries are the interest in unlisted shares stated at cost.
The table below lists the principal subsidiaries of the Group at 31 December 2009 and 2008:
Place of
incorporation/
operation
Issued
share capital
Proportion of
nominal value of
issued share capital
held by the Company
indirectly
directly
Name of subsidiary
Admore Investments Limited
Golden Capital Investment Limited
HD Treasury Limited
Hysan (MTN) Limited
Hysan China Holdings Limited
Hysan Leasing Company Limited
Hysan Property Management Limited
Hysan Treasury 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
Earn Extra Investments Limited
Gearup Investments Limited
HD Investment Limited
Kochi Investments Limited
HK$2
HK$2
HK$2
US$1
Hong Kong
Hong Kong
Hong Kong
British Virgin Islands/
Hong Kong
British Virgin Islands
HK$1
Hong Kong
HK$2
Hong Kong
HK$2
Hong Kong
HK$2
British Virgin Islands
HK$1
Hong Kong
HK$1,000
Hong Kong
HK$2
HK$2
Hong Kong
Hong Kong HK$300,000
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
British Virgin Islands
British Virgin Islands
HK$2
HK$2
HK$2
HK$1
HK$1
HK$1
HK$1
Lee Theatre Realty Limited
Leighton Property Company Limited
Hong Kong
Hong Kong
HK$10
HK$2
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100%
100%
100%
100%
100%
100%
100%
Principal activities
Investment holding
Investment holding
Treasury operation
Treasury operation
Investment holding
Leasing administration
Property management
Treasury operation
Investment holding
Property investment
Property investment
Property investment
Provision of
security services
Investment holding
Property investment
Resident club
management
Property investment
Property development
Investment holding
Capital market
investment
Property investment
Property investment
Hysan Annual Report 2009 117
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I
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W
S
T
R
A
T
E
G
Y
I
N
A
C
T
O
N
I
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
A
N
D
V
A
L
U
A
T
O
N
I
NOTES TO THE FINA NCI A L STATEMENTS continued
For the year ended 31 December 2009
19. Investments in Subsidiaries continued
Name of subsidiary
Main Rise Development Limited
OHA Property Company Limited
Perfect Win Properties Limited
Silver Nicety Company Limited
Barrowgate Limited
Place of
incorporation/
operation
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Issued
share capital
HK$2
HK$2
HK$2
HK$20
HK$10,000
Proportion of
nominal value of
issued share capital
held by the Company
indirectly
directly
100%
–
100%
–
100%
–
–
100%
– 65.36%
Principal activities
Investment holding
Property investment
Property investment
Property investment
Property investment
The Directors are of the opinion that a complete list of all subsidiaries and their particulars will be of excessive length and
therefore the above table contains only those subsidiaries which materially contribute to the net income of the Group or hold a
material portion of the assets or liabilities or otherwise are operating subsidiaries of the Group. Other than floating rate notes,
fixed rate notes and zero coupon notes issued by Hysan (MTN) Limited as disclosed in note 30, none of the subsidiaries had
issued any debt securities at the end of the reporting period.
20. Investments in Associates
Cost of unlisted investments
Share of post-acquisition profits and
other comprehensive income,
net of dividends received
Loan to an associate
Less: Loss allocated in excess of cost of investments
The Group
2009
HK$ million
2008
HK$ million
The Company
2009
HK$ million
2008
HK$ million
3
3
2,511
2,514
109
(106)
3
1,744
1,747
106
(103)
3
2,517
1,750
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Loan to an associate of HK$109 million (2008: HK$106 million) is unsecured and interest-free. In the opinion of the Directors,
the loan is considered as part of the Group’s net investment in the associate and, accordingly, the loan is included in the
amount of investments in associates.
118 Hysan Annual Report 2009
20. Investments in Associates continued
Details of the Group’s associates at 31 December 2009 and 2008 are as follows:
Name of associate
Form of
business structure
Place of
registration
and operation
Class of
share held/
registered
capital
Effective
interest
held by
the Group
Principal activities
Country Link
Enterprises Limited
Private limited
company
Shanghai Kong Hui
Property Development
Co., Ltd
Shanghai Grand
Gateway Plaza
Property Management
Co., Ltd
Sino-Foreign equity
joint venture
Sino-Foreign equity
joint venture
Hong Kong
Ordinary share
26.3%*
Investment holding
The PRC
US$165,000,000#
24.7%*
Property development
and leasing
The PRC
US$140,000#
23.7%* Property management
Wingrove Investment
Pte Ltd
Private company
limited by shares
Singapore
Ordinary share
25.0%*
Property development
and investment, and
being inactive in both
2009 and 2008
*
#
Indirectly held
Registered capital
The summarised financial information in respect of the Group’s associates based on the unaudited management accounts for
the year ended 31 December 2009 and 2008 is as follows:
Total assets
Total liabilities
Net assets
Group’s share of net assets of associates
Turnover
Profit for the year
Group’s share of results of associates for the year
2009
HK$ million
2008
HK$ million
14,973
(5,122)
11,968
(5,182)
9,851
2,408
1,085
2,939
768
6,786
1,644
952
2,240
590
Hysan Annual Report 2009 119
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I
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W
S
T
R
A
T
E
G
Y
I
N
A
C
T
O
N
I
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
A
N
D
V
A
L
U
A
T
O
N
I
NOTES TO THE FINA NCI A L STATEMENTS continued
For the year ended 31 December 2009
21. Available-For-Sale Investments
Available-for-sales investments comprise:
Listed investments:
– Equity securities listed in Hong Kong, at fair value
Unlisted investments:
– Overseas equity securities, at cost
Less: Impairment loss recognised
– Club debentures, at fair value
The Group
2009
HK$ million
2008
HK$ million
The Company
2009
HK$ million
2008
HK$ million
997
982
58
(55)
3
2
93
(55)
38
2
1,002
1,022
–
–
–
–
2
2
–
–
–
–
2
2
The overseas equity securities represent the Group’s investments in unlisted equity securities issued by private entities
incorporated in Singapore. These private entities are engaged in property investment and development activities in Singapore.
They are measured at cost less any identified impairment loss at the end of each reporting period because the range of
reasonable fair value estimates is so significant that the management is of the opinion that their fair values cannot be
measured reliably.
In the current year, one of the private entities incorporated in Singapore was dissolved. The carrying amount of the unlisted
equity security issued by the entity was HK$35 million before dissolution, which approximated the Group’s share of the net
assets of the investee upon its dissoluation. The Group received an advance of HK$35 million from this investee in prior years
and was included in other payables. The payable owed to the investee by the Group was settled by the distribution which the
Group entitled at the time of dissolution of the investee, which constituted a non-cash transaction. There is no gain or loss
resulted from the dissolution of the unlisted equity investment.
120 Hysan Annual Report 2009
22. Other Financial Assets/Liabilities
The Group
Current
Non-current
2009
HK$ million
2008
HK$ million
2009
HK$ million
2008
HK$ million
Other financial assets
Derivatives under hedge accounting:
Cash flow hedges
– Forward foreign exchange contracts
– Cross currency swaps
– Interest rate swaps
– Basis swaps
Fair value hedges
– Interest rate swaps
– Cross currency swaps
Other derivatives classified as held for
trading (not under hedge accounting):
– Cross currency swaps
Financial assets designated as at FVTPL:
– Principal-protected deposits
Total
Other financial liabilities
Derivatives under hedge accounting:
Cash flow hedges
– Interest rate swaps
Other derivatives classified as held for
trading (not under hedge accounting):
– Net basis swaps
Total
–
–
–
1
1
–
2
–
118
120
–
–
–
1
–
–
–
–
–
1
–
40
41
–
–
–
1
2
1
–
29
–
33
62
82
177
27
9
36
1
2
–
–
71
83
157
–
85
242
31
10
41
(a) Cash flow hedges
(i) Foreign currency risk
During the year, the Group designated forward foreign exchange contracts and cross currency swaps as cash flow hedges to
manage its foreign currency exposure. The principal terms of the forward foreign exchange contracts and cross currency swaps
have been negotiated to match the major terms of the respective designated hedged items and the management considered
that the hedges are highly effective.
Hysan Annual Report 2009 121
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W
S
T
R
A
T
E
G
Y
I
N
A
C
T
O
N
I
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
A
N
D
V
A
L
U
A
T
O
N
I
NOTES TO THE FINA NCI A L STATEMENTS continued
For the year ended 31 December 2009
22. Other Financial Assets/Liabilities continued
(a) Cash flow hedges continued
(i) Foreign currency risk continued
The table below is prepared based on the maturity dates of respective contracts. The major terms of these forward foreign
exchange contracts and cross currency swaps are as follows:
2009
2008
The Group
Average
exchange
rate*
Notional amount
US$ million
HK$ million
Fair
value
HK$ million
Average
exchange
rate*
Notional amount
US$ million
HK$ million
Fair
value
HK$ million
Forward foreign
exchange contracts
Buy USD (Note a)
Within 1 year
More than 1 year but
not exceeding 5 years
Sell USD (Note b)
Within 1 year
More than 1 year but
not exceeding 5 years
Cross currency swaps
Hedging interest and
principal of USD
bank loans (Note c)
More than 1 year but
not exceeding 5 years
Total
7.6366
7.6137
5
6
7.6231
11
7.7479
7.7254
7.7450
27
4
31
35
49
84
209
31
240
7.7753
51
93
399
723
–
1
1
–
–
–
2
3
7.4738
7.6231
7.5794
–
–
–
5
11
16
–
–
–
34
84
118
–
–
–
7.8000
26
42
200
318
1
1
2
–
–
–
2
4
*
Average exchange rate represented the average HKD:USD exchange rate weighted by the notional amounts of the contracts or the swaps.
Notes:
(a) The Group designated HK$84 million (2008: HK$118 million) forward foreign exchange contracts as cash flow hedges to hedge the
foreign exchange rate risk in relation to the semi-annual coupon payment of US$65 million out of the US$182 million fixed rate notes.
(b) The Group designated HK$240 million (2008: nil) forward foreign exchange contracts as cash flow hedges to hedge the foreign exchange
rate risk of almost all the principal amount of time deposits and principal-protected deposits denominated in USD at their respective
maturity dates.
(c) The Group used HK$399 million (2008: HK$200 million) cross currency swaps to convert USD interest and principal of US$51 million
(2008: US$26 million) bank loans into HKD.
As at 31 December 2009, fair value gains of HK$4 million (2008: HK$4 million) from the forward foreign exchange contracts
and cross currency swaps have been recognised in other comprehensive income and accumulated in equity, and are expected
to be released to the consolidated income statements at various dates when the hedged items are recognised in profit or loss.
During the year, gains of HK$2 million (2008: HK$3 million) on forward foreign exchange contracts and cross currency swaps
were reclassified from equity to profit or loss as finance costs.
The fair values of forward foreign exchange contracts and cross currency swaps are measured using quoted forward exchange
rates and yield curves from quoted interest rates matching maturities of the contracts and swaps.
122 Hysan Annual Report 2009
Interest rate risk
22. Other Financial Assets/Liabilities continued
(a) Cash flow hedges continued
(ii)
During the year, the Group used interest rate swaps and basis swaps to hedge its interest rate risk exposure. The terms of the
swaps have been negotiated to match the major terms of the respective hedged underlying items so that the management
considered that the interest rate swaps and basis swaps are highly effective hedging instruments.
The table below is prepared based on the maturity dates of respective contracts. The major terms of these interest rate swaps
and basis swaps are as follows:
2009
2008
The Group
Average
interest
rate*
Notional amount
US$ million
HK$ million
Fair
value
HK$ million
Average
interest
rate*
Notional amount
US$ million
HK$ million
Fair
value
HK$ million
Interest rate swaps
Hedging interest of
HKD bank loans
(Note a)
More than 1 year but
not exceeding 5 years
More than 5 years
Hedging floating-
interest–rate
payments
of financial
instruments (Note b)
Within 1 year
More than 1 year but
not exceeding 5 years
Basis swaps
Hedging interest of
HKD bank loans
(Note c)
Within 1 year
Hedging interest of
USD bank loans
(Note d)
Within 1 year
Total
3.12%
3.65%
3.32%
2.96%
3.39%
3.25%
n/a
n/a
n/a
n/a
n/a
n/a
325
200
525
200
400
600
(12)
1
3.12%
–
(11)
3.12%
–
–
(15)
3.38%
(15)
3.38%
n/a
n/a
n/a
n/a
n/a
n/a
325
–
325
–
400
400
0.48%
n/a
325
–
–
n/a
–
0.29%
51
399
1,849
1
(25)
–
–
–
725
(15)
–
(15)
–
(16)
(16)
–
–
(31)
*
For interest rate swaps, the average interest rate represented the average fixed interest rate paid by the Group against receipts of 3-month
Hong Kong Interbank Offered Rate (“HIBOR”) or 6-month HIBOR weighted by the notional amounts of the swaps. For basis swaps, the
average interest rate represented the average spread (weighted by the notional amounts of the swaps) that was added to 1-month HIBOR
or 1-month London-Interbank Offered Rate (“LIBOR”) received by the Group against 3-month HIBOR or 3-month LIBOR paid by the Group.
n/a – not applicable
Hysan Annual Report 2009 123
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I
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W
S
T
R
A
T
E
G
Y
I
N
A
C
T
O
N
I
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
A
N
D
V
A
L
U
A
T
O
N
I
NOTES TO THE FINA NCI A L STATEMENTS continued
For the year ended 31 December 2009
22. Other Financial Assets/Liabilities continued
(a) Cash flow hedges continued
(ii)
Notes:
Interest rate risk continued
(a) The Group entered into HK$525 million (2008: HK$325 million) interest rate swaps to manage its exposure to interest rate changes
of the monthly or quarterly interest payments of HKD bank loans. HK$200 million of the swaps will be effective in 2012 for hedging
forecasted transactions of borrowings at that time.
(b) The Group used HK$600 million (2008: HK$400 million) interest rate swaps to hedge the interest rate risk in relation to the semi-annual
or quarterly floating-interest-rate payments of certain financial instruments.
(c) The Group used HK$325 million (2008: nil) basis swaps to combine with interest rate swaps mentioned in note (a) to hedge the interest
rate changes of the monthly or quarterly interest payments of HK$325 million bank loans.
(d) The Group used HK$399 million (2008: nil) basis swaps to combine with cross currency swaps mentioned in note (c) of “foreign currency
risk” to hedge the interest rate changes of the monthly or quarterly interest payments of US$51 million bank loans.
As at 31 December 2009, net fair value losses of HK$26 million (2008: HK$31 million) from the interest rate swaps and
basis swaps under cash flow hedges have been recognised in other comprehensive income and accumulated in equity, and are
expected to be released to the consolidated income statement at various dates during the lives of the swaps when the hedged
interest expenses are recognised and impacts profit or loss.
During the year, losses of HK$19 million (2008: HK$6 million) on interest rate swaps and basis swaps were reclassified from
equity to profit or loss as finance costs.
The fair values of interest rate swaps and basis swaps are measured at the present value of future cash flows estimated and
discounted based on the applicable yield curves derived from quoted interest rates.
(b) Fair value hedges
The Group uses interest rate swaps to minimise its exposure to fair value changes of its HKD fixed rate notes and zero-
coupon notes by swapping the notes from fixed rates to floating rates. The major terms of the interest rate swaps match the
corresponding notes and the management considered that the swaps are highly effective hedging instruments.
The table below is prepared based on the maturity dates of respective contracts. The major terms of these interest rate swaps
are as follows:
2009
2008
The Group
Average
interest/
exchange
rate*
Notional amount
US$ million
HK$ million
Fair
value
HK$ million
Average
interest/
exchange
rate*
Notional amount
US$ million
HK$ million
Fair
value
HK$ million
Interest rate swaps
(Note a)
Within 1 year
More than 1 year but
not exceeding 5 years
More than 5 years
Cross currency
swaps (Note b)
More than 1 year but
not exceeding 5 years
1.17%
n/a
200
1.42%
4.32%
3.32%
n/a
n/a
n/a
–
–
65
551
816
–
816
1
–
29
30
–
30
–
n/a
–
–
4.32%
4.32%
n/a
n/a
n/a
–
539
539
7.7998
117
913
1,452
–
–
71
71
83
154
*
The average interest rate represented the average fixed interest rate (weighted by the notional amounts of the interest rate swaps)
received by the Group against payments of 3-month HIBOR. The average exchange rate represented the average HKD:USD exchange rate
weighted by the notional amounts of the cross currency swaps.
n/a – not applicable
124 Hysan Annual Report 2009
22. Other Financial Assets/Liabilities continued
(b) Fair value hedges continued
Notes:
(a) The Group designated HK$816 million (2008: HK$539 million) fixed-to-floating interest rate swaps to hedge interest rate risk related
to part of the coupon payments of the HK$565 million (2008: HK$300 million) fixed rate notes. The Group also used a fixed-to-floating
interest rate swap to hedge the zero coupon notes with nominal amount of HK$430 million by converting a fixed rate of 5.19% per annum
to HIBOR plus 0.69% per annum.
(b)
In 2008, the Group designated HK$913 million cross currency swaps as fair value hedges to manage the interest rate and foreign
exchange risks by converting the 7% USD coupon payments into 6-month HIBOR plus 1.93% per annum in average in relation to US$117
million of the US$182 million fixed rate notes. The Group will also receive US$117 million (equivalent to HK$913 million) at maturity under
the swaps. In 2009, the management decided to revoke the hedging relationship and the hedge accounting is discontinued prospectively.
The cross currency swaps, accordingly, are accounted for as derivatives not under hedge accounting.
As a result of the hedge accounting, the carrying amount of the fixed rate notes as at 31 December 2009 was adjusted by a net
gain of approximately HK$1 million (2008: net loss of HK$22 million) while the carrying amount of the zero coupon notes as at
31 December 2009 was adjusted by losses of approximately HK$7 million (2008: HK$36 million). The changes in fair values of
the notes for the hedged risk were included in profit or loss at the same time that the changes in fair value of the swaps were
included in profit or loss.
The fair values of interest rate swaps and cross currency swaps are measured at the present value of future cash flows
estimated and discounted based on the applicable yield curves derived from quoted interest rates and quoted foreign exchange
rates.
(c) Financial assets designated as at FVTPL
The Group entered into certain contracts of structured deposits with certain financial institutions. The structured deposits are
principal-protected at the maturity dates and contain embedded derivatives which are not closely related to the host contracts.
The interest rates of such deposits vary in relation to the relative movements of the underlying, such as foreign exchange rates
and HKD swap rates. The entire combined contracts have been designated as financial assets at FVTPL on initial recognition.
The notional amount and the maturity period of the principal-protected deposits are as follows:
Within 1 year
More than 1 year but
not exceeding 5 years
The Group
2009
Notional
amount
HK$ million
Fair
value
HK$ million
Notional
amount
HK$ million
Fair
value
HK$ million
2008
111
81
192
118
82
200
40
80
120
40
85
125
Hysan Annual Report 2009 125
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S
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R
A
T
E
G
Y
I
N
A
C
T
O
N
I
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
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S
A
N
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A
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NOTES TO THE FINA NCI A L STATEMENTS continued
For the year ended 31 December 2009
22. Other Financial Assets/Liabilities continued
(d) Other derivatives classified as held for trading (not under hedge accounting)
At the end of the reporting period, the Group had certain derivatives classified as held for trading and not under hedge
accounting. The table below is prepared based on the maturity dates of respective contracts. The major terms of these
derivatives are as follows:
2009
2008
The Group
Average
interest/
exchange
rate*
Notional amount
US$ million
HK$ million
Fair
value
HK$ million
Average
interest/
exchange
rate*
Notional amount
US$ million
HK$ million
Fair
value
HK$ million
Net basis swaps
(Note a)
More than 1 year but
not exceeding 5 years
Cross currency
swaps (Note b)
More than 1 year but
not exceeding 5 years
Interest rate swap
(Note c)
More than 1 year but
not exceeding 5 years
Forward foreign
exchange contracts
Sell USD (Note d)
Within 1 year
Buy USD (Note e)
Within 1 year
7.8000
65
507
(9)
7.8000
65
507
(10)
7.7998
117
913
62
–
–
1.49%
n/a
65
–
–
n/a
–
–
–
–
–
–
–
–
–
–
7.7491
27
209
7.7480
5
39
–
–
–
–
*
For net basis swaps, cross currency swaps and forward foreign exchange contracts, the average exchange rate represented the average
HKD:USD exchange rate weighted by their notional amounts. For interest rate swap, the average interest rate represented the fixed
interest rate received by the Group against payment of 3-month HIBOR.
Notes:
(a) The Group entered into net basis swaps to minimise the foreign currency exposure in relation to the principal payment of the US$65
million of the US$182 million fixed rate notes at maturity.
(b) As mentioned in note (b) of “fair value hedges” section, the management decided to revoke the hedging relationship on HK$913 million
cross currency swaps in 2009 and reclassified the swaps as derivatives not under hedge accounting. The swaps continued to be used to
manage the interest rate and foreign exchange risks of US$117 million of the US$182 million fixed rate notes.
(c) The Group used HK$65 million fixed-to-floating interest rate swap to manage the interest rate risk in relation to the quarterly interest
payment of part of the Group’s borrowings.
(d) As at 31 December 2008. the Group used HK$209 million forward foreign exchange contracts to manage the foreign currency exposures
of the Group’s listed debt securities denominated in USD.
(e) As at 31 December 2008, the Group used HK$39 million forward foreign exchange contracts to manage the foreign currency exposures in
relation to the potential investments denominated in USD.
n/a – not applicable
126 Hysan Annual Report 2009
23. Accounts Receivable
Rents from leasing of investment properties are normally received in advance. At the end of the reporting period, accounts
receivable of the Group with carrying amount of HK$8 million (2008: HK$10 million) mainly represented rents receipts in
arrears, which were aged less than 90 days.
24. Amounts due from/to Subsidiaries
The amounts due from/to subsidiaries are unsecured, interest-free and repayable on demand.
25. Amount due from an Associate
The amount due from an associate is unsecured, interest-free and repayable on demand.
26. Short-Term Investments
Held-to-maturity debt securities maturing within one year, at amortised cost
Debt securities listed in Hong Kong
Debt securities listed in overseas
Market value of held-to-maturity debt securities
Debt securities listed in Hong Kong
Debt securities listed in overseas
The Group
2009
HK$ million
2008
HK$ million
–
–
–
–
–
–
491
209
700
491
209
700
At 31 December 2008, the effective yield of the debt securities ranged from -1.34% to 0.06% per annum. All the investments in
listed debt securities matured during the year.
27. Time Deposits/Cash and Bank Balances
Time deposits
Cash and bank balances
Cash and deposits with banks shown in the consolidated
statement of financial position
Less: Time deposits with original maturity over three months
Add: Held-to-maturity debt securities maturing within three months
Cash and cash equivalents shown in the consolidated
statement of cash flows
The Group
2009
HK$ million
2008
HK$ million
1,945
39
964
51
1,984
1,015
(1,551)
–
–
700
433
1,715
Included in the Company’s time deposits as at 31 December 2009, HK$455 million (2008: nil) were time deposits with original
maturity over three months. The bank balances and remaining time deposits of the Company were with original maturity of three
months or less.
Time deposits, cash and bank balances comprise cash and bank deposits carrying effective interest rates ranging from
0.0001% to 1.17% (2008: 0.01% to 1.54%) per annum.
Hysan Annual Report 2009 127
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Y
I
N
A
C
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O
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I
G
O
V
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A
N
C
E
F
I
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A
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NOTES TO THE FINA NCI A L STATEMENTS continued
For the year ended 31 December 2009
28. Accounts Payable
At the end of the reporting period, accounts payable of the Group with carrying amount of HK$139 million (2008: HK$90
million) were aged less than 90 days.
29. Amounts due to Minority Shareholders
The amounts due to minority shareholders are unsecured, interest-free and repayable on demand.
30. Borrowings
The analysis of the carrying amounts of borrowings is as follows:
Unsecured bank loans
Floating rate notes
Fixed rate notes
Zero coupon notes
The Group
Current
Non-current
2009
HK$ million
2008
HK$ million
2009
HK$ million
2008
HK$ million
400
–
–
–
400
–
550
–
–
550
1,049
200
1,980
262
3,491
920
–
2,003
278
3,201
In the current year, the average finance cost of the Group’s total borrowings calculated based on their contracted interest rates
was 4.2% (2008: 5.2%). To manage the interest rate and foreign exchange risks, the Group used certain derivatives to hedge
part of the borrowings, which resulted in a reduction of the Group’s average finance cost to 3.1% (2008: 4.4%). At 31 December
2009, the floating rate debt ratio was 64.9% (2008: 59.5%).
(a) Unsecured bank loans
The unsecured bank loans of HK$1,449 million (2008: HK$920 million) are guaranteed as to principal and interest by the
Company and are repayable as follows:
Within 1 year
More than 1 year, but not exceeding 2 years
More than 2 years, but not exceeding 5 years
The Group
2009
HK$ million
2008
HK$ million
400
650
399
1,449
–
70
850
920
All the Group’s unsecured bank loans were variable-rate borrowings with effective interest rates (which were also equal to
contracted interest rates) ranging from 0.35% to 1.48% (2008: 0.79% to 5.11%) per annum at the end of the reporting period.
Interest rates of the loans are normally re-fixed at every one to six months.
As disclosed in note 22(a), cross currency swaps and interest rate swaps were designated as cash flow hedges to hedge the
foreign exchange and interest rate risks of part of the Group’s unsecured bank loans at the end of the reporting period.
(b) Floating rate notes
In the current year, HK$550 million five-year floating rate notes matured and HK$200 million five-year floating rate notes were
newly issued by Hysan (MTN) Limited, a wholly-owned subsidiary of the Company. The notes are guaranteed as to principal and
interest by the Company, bear effective interest rates (which are equal to contracted interest rates) of 1.19% per annum at the
end of reporting period and are repayable in full in 2014.
Both HK$200 million and HK$550 million five-year floating rate notes were not hedged by any derivative as at 31 December
2009 and 31 December 2008 respectively.
128 Hysan Annual Report 2009
30. Borrowings continued
(c) Fixed rate notes
Fixed rate notes – principal amount
Add: Net (gain) loss attributable to hedged risks
The Group
2009
HK$ million
2008
HK$ million
1,981
(1)
1,980
1,981
22
2,003
Details of the Group’s fixed rate notes at 31 December 2009 and 2008 are as follows:
Principal amount
US$182 million*
HK$300 million
HK$100 million
HK$165 million
Contracted
interest rate
per annum
7.00%
5.25%
5.10%
5.38%
Coupon
payment term
semi-annual basis
quarterly basis
annual basis
annual basis
Issue date
Maturity date
February 2002
August 2008
August 2008
September 2008
February 2012
August 2015
August 2015
September 2020
*
In February 2002, US$200 million 10-year fixed rate notes were issued by Hysan (MTN) Limited. In 2006, a total nominal amount of
US$18 million was repurchased and cancelled. The outstanding nominal amount of the notes at the end of the reporting period was
US$182 million.
All the fixed rate notes were issued by Hysan (MTN) Limited. The notes are guaranteed as to principal and interest by the
Company and bear an effective interest rate equal to their respective contracted interest rate.
As detailed in note 22, forward foreign exchange contracts, interest rate swaps, cross currency swaps and net basis swaps were
used to hedge or manage the foreign exchange and interest rate risks of the Group’s fixed rate notes at the end of the reporting
period.
At 31 December 2009, the net gain of HK$1 million represented (i) the change in fair value attributable to the hedged interest
rate risk of the HK$565 million fixed rate notes under fair value hedge and (ii) the unamortised fair value gain adjusted to the
US$117 million fixed rate notes upon the discontinuation of hedge accounting over the cross currency swaps (see note 22(b)
for details).
At 31 December 2008, the net loss of HK$22 million represented changes in fair value attributable to (i) the hedged interest
rate and foreign exchange rate risks of the US$117 million fixed rate notes under fair value hedge and (ii) the hedged interest
rate risk of the HK$300 million fixed rate notes under fair value hedge.
(d) Zero coupon notes
Zero coupon notes
Add: Net loss attributable to hedged risk
The Group
2009
HK$ million
2008
HK$ million
255
7
262
242
36
278
In February 2005, 15-year zero coupon notes of nominal amount of HK$430 million were issued at an issue price of around
46.37% of the nominal amount by Hysan (MTN) Limited. The notes are guaranteed as to nominal amount by the Company, bear
an effective yield (which is equal to contracted yield) at the rate of 5.19% per annum and are repayable at par in February 2020.
Hysan (MTN) Limited has the option to redeem the notes on 7 February 2015 at a price of about 77.4% of the nominal amount.
The Group has entered into an interest rate swap to hedge against the interest rate risk of the zero coupon notes under fair
value hedge (see note 22(b) for details).
The net loss of approximately HK$7 million (2008: HK$36 million) represented changes in fair value attributable to the hedged
interest rate risk of the zero coupon notes under fair value hedge.
Hysan Annual Report 2009 129
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T
R
A
T
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Y
I
N
A
C
T
O
N
I
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
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S
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NOTES TO THE FINA NCI A L STATEMENTS continued
For the year ended 31 December 2009
31. Deferred taxation
The following are the major deferred tax liabilities (assets) recognised by the Group and movements thereon during the current
and prior years:
The Group
At 1 January 2008
Charge (credit) to profit or loss (note 9)
Charge to equity for the year
Effect of change in tax rate
At 31 December 2008
Charge to profit or loss (note 9)
At 31 December 2009
Accelerated tax
depreciation
HK$ million
Revaluation of
properties
HK$ million
Tax losses
HK$ million
Total
HK$ million
264
1
–
(15)
250
16
266
3,647
(28)
1
(208)
3,412
207
3,619
(1)
(13)
–
–
(14)
10
(4)
3,910
(40)
1
(223)
3,648
233
3,881
At the end of the reporting period, the Group has unused estimated tax losses of HK$534 million (2008: HK$593 million), of
which HK$252 million (2008: HK$250 million) has not been agreed by IRD, available for offset against future profits. A deferred
tax asset has been recognised in respect of HK$24 million (2008: HK$85 million) of such losses. No deferred tax asset has
been recognised in respect of the remaining estimated tax losses of HK$510 million (2008: HK$508 million) as the utilisation
of these estimated tax losses is uncertain. These estimated tax losses may be carried forward indefinitely.
At the end of the reporting period, the Group has deductible temporary differences of HK$55 million (2008: HK$49 million)
arisen from the revaluation of properties. No deferred tax asset has been recognised in relation to such deductible temporary
differences as it is not probable that taxable profit will be available against which the deductible temporary differences can be
utilised.
The Company does not have any unused tax loss at the end of the reporting period.
32. Share Capital
Ordinary shares of HK$5 each
Authorised:
At 1 January and 31 December
Issued and fully paid:
At 1 January
Issue of shares pursuant to
scrip dividend schemes
Exercise of share options
Number of shares
2009
2008
Share capital
2009
HK$ million
2008
HK$ million
1,450,000,000 1,450,000,000
7,250
7,250
1,041,114,578 1,037,469,756
5,206
5,187
9,413,512
80,000
3,528,155
116,667
47
–
18
1
At 31 December
1,050,608,090 1,041,114,578
5,253
5,206
130 Hysan Annual Report 2009
32. Share Capital continued
(a) Issue of shares pursuant to scrip dividend schemes
For the year ended 31 December 2009
On 9 June 2009 and 22 September 2009 respectively, the Company issued and allotted a total of 8,672,003 shares and
741,509 shares of HK$5 each in the Company at HK$14.852 and HK$19.204 to the shareholders who elected to receive
shares in the Company in lieu of cash for the 2008 final and 2009 interim dividends pursuant to the scrip dividend schemes
announced by the Company on 18 May 2009 and 27 August 2009. These shares rank pari passu in all respects with other
shares in issue.
For the year ended 31 December 2008
On 18 June 2008 and 12 September 2008 respectively, the Company issued and allotted a total of 3,031,113 shares and
497,042 shares of HK$5 each in the Company at HK$23.10 and HK$21.59 to the shareholders who elected to receive
shares in the Company in lieu of cash for the 2007 final and 2008 interim dividends pursuant to the scrip dividend schemes
announced by the Company on 14 May 2008 and 21 August 2008. These shares rank pari passu in all respects with other
shares in issue.
(b) Issue of shares under share option schemes
For the year ended 31 December 2009
During the year ended 31 December 2009, options to subscribe for a total of 80,000 shares were exercised at the exercise
prices of HK$15.85 per share. These shares rank pari passu in all respects with other shares in issue. Details of options
outstanding and movements during the year are set out in note 39.
For the year ended 31 December 2008
During the year ended 31 December 2008, options to subscribe for a total of 114,667 shares and 2,000 shares were
exercised at the exercise prices of HK$15.85 and HK$21.25 per share respectively. These shares rank pari passu in all
respects with other shares in issue. Details of options outstanding and movements during the year are set out in note 39.
Hysan Annual Report 2009 131
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E
G
Y
I
N
A
C
T
O
N
I
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
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S
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A
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NOTES TO THE FINA NCI A L STATEMENTS continued
For the year ended 31 December 2009
33. Reserves of the Company
The Company’s reserves available for distribution to its owners as at 31 December 2009 amounted to HK$5,860 million (2008:
HK$5,794 million), being its general reserve and retained profits at that date.
Share
premium
HK$ million
Share
options
reserve
HK$ million
Capital
redemption
reserve
HK$ million
General
reserve
HK$ million
(Note)
Retained
profits
HK$ million
Total
HK$ million
At 1 January 2008
Issue of shares pursuant to
scrip dividend schemes
Issue of shares under
share option schemes
Recognition of equity-settled
share-based payments
Forfeiture of share options
Profit for the year
Dividends paid during
the year (note 14)
At 31 December 2008
Issue of shares pursuant to
scrip dividend schemes
Issue of shares under
share option schemes
Recognition of equity-settled
share-based payments
Forfeiture of share options
Profit for the year
Dividends paid during the year (note 14)
1,541
63
2
–
–
–
–
1,606
96
1
–
–
–
–
At 31 December 2009
1,703
Note: General reserve was set up from the transfer of retained profits.
6
–
(1)
5
(1)
–
–
9
–
–
6
(5)
–
–
10
276
100
5,576
7,499
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
761
63
1
5
–
761
(644)
(644)
276
100
5,694
7,685
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5
770
(709)
96
1
6
–
770
(709)
276
100
5,760
7,849
34. Retirement Benefits Plans
With effect from 1 December 2000, the Group set up an enhanced Mandatory Provident Fund 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$6 million (2008: HK$5 million). Forfeited contributions
for the year amounted to HK$1 million (2008: HK$3 million) were refunded to the Group.
132 Hysan Annual Report 2009
35. Contingent Liabilities
At the end of the reporting period, there were contingent liabilities in respect of the following:
Corporate guarantee to note holders
– for issue of floating rate notes
– for issue of fixed rate notes
– for issue of zero coupon notes
Guarantees to banks for providing
financing facilities to subsidiaries
The Group
2009
HK$ million
2008
HK$ million
The Company
2009
HK$ million
2008
HK$ million
–
–
–
–
–
–
–
–
–
–
200
1,985
430
2,615
550
1,985
430
2,965
1,449
920
36. Capital Commitments
At the end of the reporting period, the Group and the Company had the following capital commitments in respect of its
investment properties:
Authorised but not contracted for
Contracted but not provided for
The Group
2009
HK$ million
2008
HK$ million
The Company
2009
HK$ million
2008
HK$ million
432
1,768
2,068
123
6
–
–
–
37. Lease Commitments
(a) The Group as lessor
At the end of the reporting period, the Group had contracted with tenants for the following future minimum lease payments:
Within one year
In the second to fifth year inclusive
Over five years
The Group
2009
HK$ million
2008
HK$ million
1,252
1,293
49
2,594
1,266
1,349
–
2,615
Operating lease payments represent rentals receivable by the Group from leasing of its investment properties. Typically, leases
are negotiated and rentals are fixed for lease term of one to three years. Certain leases include contingent rentals calculated
with reference to turnover of the tenants.
Hysan Annual Report 2009 133
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W
S
T
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A
T
E
G
Y
I
N
A
C
T
O
N
I
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
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S
T
A
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M
E
N
T
S
A
N
D
V
A
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I
NOTES TO THE FINA NCI A L STATEMENTS continued
For the year ended 31 December 2009
37. Lease Commitments continued
(b) The Company as lessee
At the end of the reporting period, 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 Company
2009
HK$ million
2008
HK$ million
20
27
47
8
3
11
Operating lease payments represent rentals payable by the Company to its subsidiaries for its office premises which are
negotiated and rentals are fixed for three years.
At the end of the reporting period, the Group had no commitment under non-cancellable operating lease.
38. Related Party Transactions and Balances
(a) Transactions and balances with related parties
The Group has the following transactions with related parties during the year and has the following balances with them at the
end of the reporting period:
The Group
Substantial shareholder
Directors
2009
HK$ million
2008
HK$ million
2009
HK$ million
2008
HK$ million
Gross rental income received from (Note a)
Amount due to a minority shareholder (Note b)
3
–
2
–
25
94
24
94
Notes:
(a) The sum of transactions with substantial shareholder represented the aggregate gross rental income received from Atlas Corporate
Management Limited, a wholly-owned subsidiary of Lee Hysan Estate Company, Limited, which holds 41.23% beneficial interest in the
Company.
The sum of transactions with Directors represented the aggregate gross rental income received under various leases respectively with
Directors of approximately HK$964,000 (2008: HK$882,000), and companies controlled by Directors or their associates in aggregate of
approximately HK$23,706,000 (2008: HK$23,337,000).
(b) The sum represents outstanding loan advanced to a non wholly-owned subsidiary of the Group, Barrowgate Limited (“Barrowgate”)
by Mightyhall Limited, a wholly-owned subsidiary of Jebsen and Company Limited, of which Hans Michael JEBSEN is a director and
shareholder, as shareholders loan in proportion to its shareholding in Barrowgate for general funding purpose. The amount is unsecured,
interest-free and repayable on demand.
The Company has the following balances with its subsidiaries at the end of the reporting period:
Amounts due from subsidiaries
Less: Allowances on amounts due therefrom
Amounts due to subsidiaries
Details of amounts due from/to subsidiaries are disclosed in note 24 to the financial statements.
The Company
2009
HK$ million
2008
HK$ million
12,991
(248)
13,368
(499)
12,743
12,869
192
59
134 Hysan Annual Report 2009
38. Related Party Transactions and Balances continued
(b) Compensation of key management personnel
The remuneration of Directors and other members of key management of the Group and the Company during the year were as
follows:
Salaries and other short-term employee benefits
Share-based payments
Retirement benefits scheme contributions
2009
HK$ million
2008
HK$ million
20
4
1
25
26
4
1
31
The remuneration of the Directors and key executives is determined by the Emoluments Review Committee and Chief Executive
Officer respectively having regard to the performance of individuals and market trends.
39. Share-Based Payment Transactions
(a) Equity-settled share option schemes
The 1995 Share Option Scheme (the “1995 Scheme”)
The 1995 Scheme was approved by shareholders on 28 April 1995 and had a term of 10 years. It expired on 28 April 2005. All
outstanding options granted under the 1995 Scheme will continue to be valid and exercisable in accordance with the provisions
of the 1995 Scheme.
The purpose of the 1995 Scheme was to strengthen the links between individual staff and shareholder interests.
Under the 1995 Scheme, options may be granted to employees of the Company or any of its wholly-owned subsidiaries selected
by the Board at its discretion to subscribe for ordinary shares of the Company.
The maximum number of shares in respect of which options may be granted under the 1995 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 and any other share option scheme) from time to time. The maximum number of shares issued under the scheme
and other scheme will not exceed 10% of the issued share capital of the Company from time to time (excluding shares issued
pursuant to the scheme and any other share option scheme).
The maximum entitlement of each participant is substantially below the limit set out under the scheme rules (being 25% of the
maximum number of shares in respect of which options may at any time be granted under the 1995 Scheme). For the options
granted under the 1995 Scheme currently outstanding, the basis for determining the exercise price is the highest of (i) the
closing price of the shares as stated in the Stock Exchange’s daily quotations sheet on the date of grant; (ii) the average of the
closing prices of the shares as stated in the Stock Exchange’s daily quotations sheets for the five business days immediately
preceding the date of grant; and (iii) the nominal value of the shares. Consideration on each grant of option was HK$1 and was
paid within 30 days from the date of grant of option, with full payment for exercise price to be made on exercise of the relevant
option.
The 2005 Share Option Scheme (the “2005 Scheme”)
The Company adopted the 2005 Scheme at its Annual General Meeting (“AGM”) held on 10 May 2005, which has a term of 10
years and will be expiring on 9 May 2015 (together with the 1995 Scheme are referred to as the “Schemes”).
The purpose of the 2005 Scheme is to provide an incentive for employees of the Company and its wholly-owned subsidiaries to
work with commitment towards enhancing the value of the Company and its shares for the benefit of its shareholders.
Under the 2005 Scheme, options may be granted to employees of the Company or any wholly-owned subsidiaries (including
executive Directors) and such other persons as the Board may consider appropriate from time to time, on the basis of their
contribution to the development and growth of the Company and its subsidiaries, to subscribe for ordinary shares of the
Company.
Hysan Annual Report 2009 135
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NOTES TO THE FINA NCI A L STATEMENTS continued
For the year ended 31 December 2009
39. Share-Based Payment Transactions continued
(a) Equity-settled share option schemes continued
The 2005 Share Option Scheme (the “2005 Scheme”) continued
The maximum number of shares in respect of which options may be granted under the 2005 Scheme and any other share
option scheme of the Company shall not exceed such number of shares as required under the Rules Governing the Listing of
Securities on the Stock Exchange (the “Listing Rules”), currently being 10% of the shares in issue as at 10 May 2005, the
date of the AGM approving the 2005 Scheme (being 104,996,365 shares). Under the Listing Rules, a listed issuer may seek
approval by its shareholders in general meeting for “refreshing” the 10% limit under the scheme. The limit on the number of
shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the 2005 Scheme
and any other share option scheme of the Company must not exceed 30% of the shares in issue from time to time (or such
number of shares as required under the Listing Rules). No options may be granted if such grant will result in this 30% limit
being exceeded.
The maximum entitlement of each participant under the 2005 Scheme must not during any 12-month period exceed such
number of shares as required under the Listing Rules (which is 1% of the total shares in issue as at the date of shareholders’
approval, being 10,499,636). The exercise price shall be at least the highest of (i) the closing price of the shares as stated in
the Stock Exchange’s daily quotations sheet on the date of grant; (ii) the average of the closing prices of the shares as stated
in the Stock Exchange’s daily quotations sheets for the five business days immediately preceding the date of grant; and (iii) the
nominal value of the shares. Consideration on each grant of option is HK$1 and is required to be paid within 30 days from the
date of grant of option, with full payment for exercise price to be made on exercise of the relevant option.
(b) Grant and vesting structures
Under the Company’s current policy, grants will be made on a periodic basis. Vesting period is 3 years in equal proportion. Size
of grant will be determined by reference to base salary multiple and job grades. A clear performance criterion will be a key driver.
The Board will review the grant and vesting structures from time to time.
136 Hysan Annual Report 2009
39. Share-Based Payment Transactions continued
(c) Movement of share options
The following table discloses movements of the Company’s share options held by the Directors and eligible employees during
the current year:
Name
Date of grant
Exercise
price
HK$
Exercisable
period
(Note a)
Balance
as at
1.1.2009
Granted
Exercised
Cancelled/
Balance
as at
lapsed 31.12.2009
(Note b)
Changes during the year
30.3.2005
15.850
30.3.2005
15.850
30.3.2005
15.850
30.3.2005 –
29.3.2015
30.3.2005 –
29.3.2015
30.3.2005 –
29.3.2015
96,000
80,000
13,000
1995 Scheme
Executive Directors
Wendy Wen Yee YUNG
Ricky Tin For TSANG
(Note c)
Eligible employees
(Note e)
2005 Scheme
Executive Directors
Peter Ting Chang LEE
(Note f)
Gerry Lui Fai YIM
(Note h)
6.3.2007
21.380
13.3.2008
21.450
11.3.2009
1.12.2009
11.760
(Note g)
22.800
(Note i)
Wendy Wen Yee YUNG
26.6.2006
20.110
Ricky Tin For TSANG
(Note c)
30.3.2007
21.250
31.3.2008
21.960
11.3.2009
11.760
(Note g)
30.3.2006
22.000
30.3.2007
21.250
31.3.2008
21.960
11.3.2009
11.760
(Note g)
–
–
–
–
–
–
–
96,000
(80,000)
(Note d)
–
–
(13,000)
–
–
–
–
–
–
–
–
–
–
– 235,000
– 260,000
– 500,000
– 218,000
– 110,000
–
95,000
– 100,000
– 300,000
235,000
260,000
– 500,000
– 218,000
110,000
95,000
100,000
–
–
–
– 300,000
120,000
95,000
100,000
–
–
–
–
(120,000)
–
(95,000)
–
(100,000)
– 250,000
–
(250,000)
–
–
–
–
Hysan Annual Report 2009 137
6.3.2007 –
16.4.2010
13.3.2008 –
16.4.2010
11.3.2009 –
16.4.2010
1.12.2009 –
30.11.2019
26.6.2006 –
25.6.2016
30.3.2007 –
29.3.2017
31.3.2008 –
30.3.2018
11.3.2009 –
10.3.2019
30.3.2006 –
29.3.2016
30.3.2007 –
29.3.2017
31.3.2008 –
30.3.2018
11.3.2009 –
10.3.2019
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NOTES TO THE FINA NCI A L STATEMENTS continued
For the year ended 31 December 2009
39. Share-Based Payment Transactions continued
(c) Movement of share options continued
Name
Date of grant
Exercise
price
HK$
Exercisable
period
(Note a)
2005 Scheme continued
Eligible employees
(Note e)
30.3.2006
22.000
6.3.2007
21.380
30.3.2007
21.250
31.3.2008
21.960
2.5.2008
23.900
9.9.2008
21.300
2.10.2008
20.106
31.3.2009
13.300
(Note j)
30.3.2006 –
29.3.2016
6.3.2007 –
30.6.2009
30.3.2007 –
29.3.2017
31.3.2008 –
30.3.2018
2.5.2008 –
1.5.2018
9.9.2008 –
8.9.2018
2.10.2008 –
1.10.2018
31.3.2009 –
30.3.2019
Balance
as at
1.1.2009
67,000
108,000
73,000
164,000
95,000
85,000
85,000
Changes during the year
Granted
Exercised
Cancelled/
Balance
as at
lapsed 31.12.2009
(Note b)
–
–
–
–
–
–
–
–
(44,000)
23,000
–
(108,000)
–
–
(42,000)
31,000
–
(76,000)
88,000
–
–
95,000
–
(85,000)
–
–
–
85,000
– 472,000
–
(61,000) 411,000
1,981,000 1,740,000
(80,000)
(994,000) 2,647,000
Notes:
(a) Save otherwise stated, all options granted have a vesting period of 3 years in equal proportions.
(b) The options lapsed during the year upon resignations or retirement of certain Directors and eligible employees.
(c) Ricky Tin For TSANG resigned as Executive Director, Finance on 29 September 2009.
(d) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$19.240.
(e) Eligible employees are working under employment contracts that are regarded as “continuous contracts” for the purposes of the
Employment Ordinance.
(f)
Peter Ting Chang LEE passed away on 17 October 2009. The legal personal representative(s) of Peter Ting Chang LEE will be entitled to
exercise the outstanding options until 16 April 2010.
(g) The closing price of the shares of the Company immediately before the date of grant (i.e. as of 10 March 2009) was HK$11.180.
(h) Gerry Lui Fai YIM was appointed as Executive Director on 1 December 2009.
(i)
(j)
The closing price of the shares of the Company immediately before the date of grant (i.e. as of 30 November 2009) was HK$22.250.
The closing price of the shares of the Company immediately before the date of grant (i.e. as of 30 March 2009) was HK$12.900.
138 Hysan Annual Report 2009
39. Share-Based Payment Transactions continued
(c) Movement of share options continued
The following table discloses movements of the Company’s share options held by the Directors and eligible employees in prior
year:
Name
Date of grant
Exercise
price
HK$
Exercisable
period
(Note a)
Balance
as at
1.1.2008
Granted
Exercised
Cancelled/
Balance
as at
lapsed 31.12.2008
(Note b)
Changes during the year
1995 Scheme
Executive Directors
Ricky Tin For TSANG
(Note c)
Wendy Wen Yee YUNG
(Note c)
Eligible employees
(Note e)
2005 Scheme
Executive Directors
Peter Ting Chang LEE
Ricky Tin For TSANG
(Note c)
Wendy Wen Yee YUNG
(Note c)
Pauline Wah Ling YU
WONG (Note i)
30.3.2005
15.850
30.3.2005
15.850
30.3.2005
15.850
30.3.2005 –
29.3.2015
30.3.2005 –
29.3.2015
30.3.2005 –
29.3.2015
120,000
96,000
87,667
6.3.2007
21.380
13.3.2008
21.450
(Note g)
30.3.2006
22.000
30.3.2007
21.250
31.3.2008
21.960
(Note h)
26.6.2006
20.110
30.3.2007
21.250
31.3.2008
21.960
(Note h)
6.3.2007
21.380
6.3.2007 –
5.3.2017
13.3.2008 –
12.3.2018
30.3.2006 –
29.3.2016
30.3.2007 –
29.3.2017
31.3.2008 –
30.3.2018
26.6.2006 –
25.6.2016
30.3.2007 –
29.3.2017
31.3.2008 –
30.3.2018
6.3.2007 –
30.6.2009
235,000
– 260,000
120,000
95,000
–
–
– 100,000
110,000
95,000
–
–
– 100,000
108,000
–
–
–
–
–
(40,000)
(Note d)
–
80,000
–
–
96,000
(74,667)
(Note f)
–
13,000
–
–
–
–
–
–
–
–
–
– 235,000
– 260,000
– 120,000
–
95,000
– 100,000
– 110,000
–
95,000
– 100,000
– 108,000
Hysan Annual Report 2009 139
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NOTES TO THE FINA NCI A L STATEMENTS continued
For the year ended 31 December 2009
39. Share-Based Payment Transactions continued
(c) Movement of share options continued
Name
Date of grant
Exercise
price
HK$
Exercisable
period
(Note a)
2005 Scheme continued
Eligible employees
(Note e)
30.3.2006
22.000
30.3.2007
21.250
31.3.2008
2.5.2008
9.9.2008
2.10.2008
21.960
(Note h)
23.900
(Note k)
21.300
(Note l)
20.106
(Note m)
30.3.2006 –
29.3.2016
30.3.2007 –
29.3.2017
31.3.2008 –
30.3.2018
2.5.2008 –
1.5.2018
9.9.2008 –
8.9.2018
2.10.2008 –
1.10.2018
Balance
as at
1.1.2008
99,000
132,000
Changes during the year
Granted
Exercised
Cancelled/
Balance
as at
lapsed 31.12.2008
(Note b)
–
–
–
(32,000)
67,000
(2,000)
(Note j)
(57,000)
73,000
– 178,000
–
(14,000) 164,000
–
95,000
–
85,000
–
85,000
–
–
–
–
95,000
–
85,000
–
85,000
1,297,667 903,000
(116,667) (103,000) 1,981,000
Notes:
(a) Save otherwise stated, all options granted have a vesting period of 3 years in equal proportions.
(b) The options lapsed during the year upon resignations of certain eligible employees.
(c) Ricky Tin For TSANG and Wendy Wen Yee YUNG were appointed as Executive Directors on 1 April 2008.
(d) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$22.700.
(e) Eligible employees are working under employment contracts that are regarded as “continuous contracts” for the purposes of the
Employment Ordinance.
(f)
The weighted average closing price of the shares of the Company immediately before the dates on which the options were exercised was
HK$22.337.
(g) The closing price of the shares of the Company immediately before the date of grant (i.e. as of 12 March 2008) was HK$22.100.
(h) The closing price of the shares of the Company immediately before the date of grant (i.e. as of 28 March 2008) was HK$21.950.
(i)
(j)
Pauline Wah Ling YU WONG retired from the Board of the Company by rotation as from the conclusion of 2008 Annual General Meeting
held on 14 May 2008. She remained as Senior Advisor to the Company until 31 December 2008 when she retired from the Company and
her outstanding options remain exercisable until 30 June 2009.
The weighted average closing price of the shares of the Company immediately before the dates on which the options were exercised was
HK$22.950.
(k) The closing price of the shares of the Company immediately before the date of grant (i.e. as of 30 April 2008) was HK$22.600.
(l)
The closing price of the shares of the Company immediately before the date of grant (i.e. as of 8 September 2008) was HK$21.300.
(m) The closing price of the shares of the Company immediately before the date of grant (i.e. as of 30 September 2008) was HK$19.980.
140 Hysan Annual Report 2009
39. Share-Based Payment Transactions continued
(d) Fair values of share options
The Group has applied HKFRS 2 “Share-based Payments” to account for its share options granted after 7 November 2002 and
vested after 1 January 2005. In accordance with HKFRS 2, fair value of share options granted to employees determined at
the date of grant is expensed over the vesting period, with a corresponding adjustment to the Group’s share options reserve.
In the current year, the Group recognised the share option expenses of HK$6 million (2008: HK$5 million) in relation to share
options granted by the Company, of which HK$4 million (2008: HK$3 million) related to the Directors (see note 12), with a
corresponding adjustment recognised in the Group’s share options reserve.
The fair values of share options granted by the Company were determined by using Black-Scholes option pricing model
(the “Model”). The Model is one of the commonly used models to estimate the fair value of an option. The variables and
assumptions used in computing the fair value of the share options are based on the management’s best estimate. The value
of an option varies with different variables of a number of subjective assumptions. Any change in the variables so adopted may
materially affect the estimation of the fair value of an option. The inputs into the Model were as follows:
Date of grant
1.12.2009
31.3.2009
11.3.2009
2.10.2008
9.9.2008
2.5.2008
31.3.2008
13.3.2008
Closing share
price at the
date of grant
HK$22.800 HK$13.100 HK$11.760 HK$19.160 HK$21.300 HK$23.900 HK$21.800 HK$21.450
Exercise price
HK$22.800 HK$13.300 HK$11.760 HK$20.106 HK$21.300 HK$23.900 HK$21.960 HK$21.450
2.16%
1.94%
1.97%
2.94%
2.83%
2.67%
2.61%
2.49%
10 years
10 years
10 years
10 years
10 years
10 years
10 years
10 years
35.09%
47.74%
48.24%
38.86%
38.19%
35.51%
34.25%
33.03%
HK$0.526 HK$0.526 HK$0.526 HK$0.463 HK$0.463 HK$0.463 HK$0.463 HK$0.463
HK$8.560 HK$4.299 HK$3.671 HK$6.940 HK$8.130 HK$8.990 HK$7.390 HK$6.970
Risk free rate
(Note a)
Expected life of
option (Note b)
Expected volatility
(Note c)
Expected dividend
per annum
(Note d)
Estimated fair
value per
share option
Notes:
(a) Risk free rate: being the approximate yields of 10-year Exchange Fund Notes traded on the date of grant, matching the expected life of
each option.
(b) Expected life of option: being the period of 10 years commencing on the date of grant, based on management’s best estimates for the
effects of non-transferability, exercise restriction and behavioural consideration.
(c) Expected volatility: being the approximate historical volatility of closing prices of the shares of the Company in the past one year
immediately before the date of grant, except for the options granted on or after 1 December 2009 which the management considered that
it was more appropriate that the expected volatility should be the approximate historical volatility of closing prices of the shares of the
Company in the past 10 years immediately before the date of grant in order to match the expected life of the options of 10 years.
(d) Expected dividend per annum: being the approximate average annual cash dividend for the past five financial years.
Hysan Annual Report 2009 141
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FINANCIAL RISK MANAGEMENT
For the year ended 31 December 2009
1. Financial Risk Management Objectives and Policies
The Group’s major financial instruments include cash and bank balances, time deposits, held-to-maturity investments, amount
due from an associate, accounts receivable, other receivables, available-for-sale financial assets, accounts payable, accruals,
rental deposits from tenants, amounts due to minority shareholders, borrowings and derivative financial instruments. The
Company’s major financial instruments include cash and bank balances, time deposits, other receivables, amounts due from/
to subsidiaries, other payable and accruals. Details of these financial instruments are disclosed in respective notes to the
financial statements. The risks associated with these financial instruments and the policies on how to mitigate these risks are
set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on
a timely and effective manner.
(a) Credit risk
The credit risk of the Group and the Company are primarily attributable to rents receivable from tenants, amounts due from
subsidiaries, amount due from an associate, principal-protected deposits, derivative financial instruments, held-to-maturity
investments, time deposits and bank balances. The Group’s and the Company’s maximum exposure to credit risk which will
cause a financial loss to the Group and the Company due to failure to discharge an obligation by the counterparties and
financial guarantees issued by the Company is arising from:
(i)
(ii)
the carrying amount of the respective recognised financial assets as stated in the consolidated and Company’s statement
of financial position; and
the amount of contingent liabilities in relation to financial guarantee issued by the Company as disclosed in note 35 of the
notes to the financial statements section.
For rents receivable from tenants, credit checks are part of the normal leasing process and stringent monitoring procedures are
in place to deal with overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at the
end of each reporting period to ensure that adequate impairment losses are made for irrecoverable amounts.
For derivative financial instruments, principal-protected deposits, time deposits and bank balances, the Group and the Company
only deals with financial institutions that have strong credit ratings to mitigate counterparty risk. In order to limit exposure
to each financial institution, exposure limit was set with each financial institution according to their credit rating with regular
review by management. The Group’s listed debt securities investments are issued by Hong Kong Monetary Authority or national
government with high sovereign credit rating.
Credit exposure to financial institutions are monitored and reported regularly to the management. The table below provides
a high level summary to management about the Group’s exposure to each financial institution based on the amount of time
deposits and the net positive value of financial assets and liabilities (including derivatives and principal-protected deposits) as
at 31 December 2009.
Category of
financial institutions
Credit rating of AA- or above
or note issuing banks
Credit rating A- to A+
2009
Number of
counterparty
Exposure
HK$ million
2008
Number of
counterparty
Exposure
HK$ million
5
7
79 to 389
4 to 288
6
7
40 to 201
30 to 100
To minimise the credit risk of amounts due from subsidiaries and an associate, the management of the Group and the Company
review the recoverable amount of each individual balance at the end of each reporting period to ensure adequate impairment
losses are made for irrecoverable amounts. Other than concentration of credit risk on amount due from an associate, the Group
and the Company have no significant concentration of credit risk, with exposure spread over a number of counterparties and
tenants.
142 Hysan Annual Report 2009
1. Financial Risk Management Objectives and Policies continued
(b) Liquidity risk
The Group and the Company closely monitors their liquidity requirements and the sufficiency of cash and available banking
facilities so as to ensure that the payment obligations are met.
The following table details the remaining contractual maturity of the Group and the Company for their non-derivative financial
liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date
on which the Group and the Company is required to pay. The table includes both interest and principal cash flows. The interest
payments are computed using contractual rates or, if floating, based on the prevailing market rate at the end of the reporting
period. For cash flows denominated in currency other than Hong Kong dollars, the prevailing foreign exchange rates at the end
of the reporting period are used to convert the cash flows into Hong Kong dollars.
Total
contractual
Carrying undiscounted
cash flow
amount
Within
1 year or
on demand
More than
5 years
HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million
More than
1 year
but not
exceeding
2 years
More than
2 years
but not
exceeding
5 years
The Group
As at 31 December 2009
Non-derivative financial liabilities
Accounts payable and accruals
Rental deposits from tenants
Amounts due to minority shareholders
Unsecured bank loans
Floating rate notes
Fixed rate notes
Zero coupon notes
As at 31 December 2008
Non-derivative financial liabilities
Accounts payable and accruals
Rental deposits from tenants
Amounts due to minority shareholders
Unsecured bank loans
Floating rate notes
Fixed rate notes
Zero coupon notes
(314)
(400)
(327)
(1,449)
(200)
(1,980)
(262)
(314)
(400)
(327)
(1,476)
(211)
(2,442)
(430)
(314)
(127)
(327)
(410)
(2)
(129)
–
–
(122)
–
(656)
(2)
(128)
–
–
(126)
–
(410)
(207)
(1,550)
–
–
(25)
–
–
–
(635)
(430)
(4,932)
(5,600)
(1,309)
(908)
(2,293)
(1,090)
(320)
(388)
(327)
(920)
(550)
(2,003)
(278)
(320)
(388)
(327)
(970)
(557)
(2,570)
(430)
(320)
(158)
(327)
(21)
(557)
(128)
–
–
(88)
–
(85)
–
(129)
–
–
(132)
–
(864)
–
(1,648)
–
–
(10)
–
–
–
(665)
(430)
(4,786)
(5,562)
(1,511)
(302)
(2,644)
(1,105)
Hysan Annual Report 2009 143
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R
V
I
E
W
S
T
R
A
T
E
G
Y
I
N
A
C
T
O
N
I
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
A
N
D
V
A
L
U
A
T
O
N
I
FINA NCI A L RISK M A NAGEMENT continued
For the year ended 31 December 2009
1. Financial Risk Management Objectives and Policies continued
(b) Liquidity risk continued
Total
contractual
Carrying undiscounted
cash flow
amount
Within
1 year or
on demand
More than
5 years
HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million
More than
1 year
but not
exceeding
2 years
More than
2 years
but not
exceeding
5 years
The Company
As at 31 December 2009
Non-derivative financial liabilities
Other payable and accruals
Amounts due to subsidiaries
As at 31 December 2008
Non-derivative financial liabilities
Other payable and accruals
Amounts due to subsidiaries
(34)
(192)
(34)
(192)
(34)
(192)
(226)
(226)
(226)
(31)
(59)
(90)
(31)
(59)
(90)
(31)
(59)
(90)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
The following table details the Group’s remaining contractual maturity for its derivative financial instruments. The table has
been drawn up based on the undiscounted net cash inflows (outflows) on the derivative instruments that settle on a net basis
and undiscounted gross inflows (outflows) on those derivatives that require gross settlement. When the amount payable or
receivable is not fixed, the amount disclosed has been determined by the prevailing market rate at the end of the reporting
period. For cash flows denominated in currency other than Hong Kong dollars, the prevailing foreign exchange rates at the end
of the reporting period are used to convert the cash flows into Hong Kong dollars.
Total
contractual
Carrying undiscounted
cash flow
amount
Within
1 year or
on demand
More than
5 years
HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million
More than
1 year
but not
exceeding
2 years
More than
2 years
but not
exceeding
5 years
The Group
As at 31 December 2009
Derivative settled net
Interest rate swaps and basis swaps
Derivative settled gross
Forward foreign exchange contracts
Outflow
Inflow
Cross currency and net basis swaps
Outflow
Inflow
144 Hysan Annual Report 2009
5
1
55
118
3
2
16
97
(324)
326
(244)
245
(66)
66
(14)
15
(1,891)
1,991
(27)
69
(26)
69
(1,838)
1,853
–
–
–
–
1. Financial Risk Management Objectives and Policies continued
(b) Liquidity risk continued
Total
contractual
Carrying undiscounted
cash flow
amount
Within
1 year or
on demand
More than
5 years
HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million
More than
1 year
but not
exceeding
2 years
More than
2 years
but not
exceeding
5 years
As at 31 December 2008
Derivative settled net
Interest rate swaps
Derivative settled gross
Forward foreign exchange contracts
Outflow
Inflow
Cross currency and net basis swaps
Outflow
Inflow
40
139
5
4
28
102
2
75
(366)
368
(282)
283
(35)
35
(49)
50
(1,758)
1,856
(43)
70
(36)
68
(1,679)
1,718
–
–
–
–
At the end of the reporting period, the Company has no derivative financial instruments.
(c) Interest rate risk
The Group manages its interest rate exposure by assessing the potential impact on the Group’s financial position arising from
any interest rate movements based on interest rate level and outlook. The management will review the proportion of borrowings
in fixed rates and floating rates and ensure that they are within an appropriate range. Accordingly, the Group entered into (i)
interest rate swaps to hedge the interest rate risk of the Group’s floating rate borrowings including bank loans and floating rate
notes; and (ii) cross currency swaps and interest rate swaps to hedge the interest rate risk of certain amounts of the Group’s
fixed rate notes. The Group reviews the continuing effectiveness of hedging instruments at least at the end of each reporting
period and until the hedging instrument expires or is terminated or the hedge no longer meets the criteria for hedge accounting.
The Group mainly used comparison of change in fair value of the hedging instruments and the hedged items attributable to the
hedged risk for assessing the hedging effectiveness.
As at 31 December 2009, about 64.9% (2008: 59.5%) of the Group’s gross debts were effectively on a floating rate basis.
The ratio could be adjusted according to views about changes in the interest rate trend going forward. In addition, the Group
is exposed to (i) cash flow interest rate risk as the interest income derived from time deposits and bank balances is subject
to interest rate changes; and (ii) fair value interest rate risk in relation to its held-to-maturity investments in fixed-rate debt
securities. Other than the concentration of interest rate risk related to the movements in HIBOR, the Group has no significant
concentration of interest rate risk.
Sensitivity analysis
The sensitivity analysis below has been determined assuming that the change in interest rates had occurred at the end of
the reporting period and had been applied to both derivative and non-derivative financial instruments that would have affected
the profit or loss and equity. A change of +100 and -5 basis points (“bps”) (2008: +50 and -50 bps) was applied to the yield
curves at the end of the reporting period. The applied change of bps represented management’s assessment of the reasonably
possible change in interest rates based on the current market conditions. The increase in positive change reflected potential
interest rate increase in 2010 and the decrease in negative change is due to the low level of prevailing market interest rates at
the end of the reporting period.
In management’s opinion, the sensitivity analysis is unrepresentative of the interest rate risk as the year end exposure does not
reflect the exposure during the year.
Hysan Annual Report 2009 145
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W
S
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R
A
T
E
G
Y
I
N
A
C
T
O
N
I
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
A
N
D
V
A
L
U
A
T
O
N
I
FINA NCI A L RISK M A NAGEMENT continued
For the year ended 31 December 2009
1. Financial Risk Management Objectives and Policies continued
(c) Interest rate risk continued
The Group
Increase (decrease) in
profit or loss
100 bps
increase
HK$ million
5 bps
decrease
HK$ million
Increase (decrease) in
equity
100 bps
increase
HK$ million
5 bps
decrease
HK$ million
As at 31 December 2009
(24)
1
29
(2)
50 bps
increase
HK$ million
50 bps
decrease
HK$ million
50 bps
increase
HK$ million
50 bps
decrease
HK$ million
As at 31 December 2008
(1)
2
11
(12)
(d) Currency risk
The Group aims to minimise its currency risk and does not speculate in currency movements. The majority of the Group’s assets
are located and all rental income are derived in Hong Kong, and denominated in Hong Kong dollars. At the end of the reporting
period, the Group has the following monetary assets and monetary liabilities denominated in USD.
Assets
Time deposits
Principal-protected deposits
Listed debt securities
Liabilities
Unsecured bank loans
Fixed rate notes
2009
2008
US$ million
HK$ million
US$ million
HK$ million
The Group
23
8
–
31
51
182
233
178
62
–
240
399
1,394
1,793
–
–
27
27
26
182
208
–
–
209
209
200
1,403
1,603
At the end of the reporting period, all of the Company’s assets and liabilities were denominated in Hong Kong dollars with the
exception of US$15 million (2008: nil) time deposits.
Other than concentration of currency risk of the above items denominated in USD, the Group and the Company have no other
significant currency risk.
The Group has entered into appropriate hedging instruments, mentioned in note 22 of the notes to the financial statements
section, to hedge against the potential currency risk of the above items. The Group reviews the continuing effectiveness of
hedging instruments at least at the end of each reporting period and until the hedging instrument expires or is terminated or
the hedge no longer meets the criteria for hedge accounting.
146 Hysan Annual Report 2009
1. Financial Risk Management Objectives and Policies continued
(d) Currency risk continued
Sensitivity analysis
The sensitivity analysis below has been determined assuming that a change in exchange rate had occurred at the end of the
reporting period and had been applied to both derivative and non-derivative financial instruments that would have affected the
profit or loss and equity. A change of 500 bps (2008: 650 bps) was applied to the HKD:USD spot and forward rates at the end
of the reporting period. The applied change of bps represented management’s assessment of the reasonably possible change
in foreign exchange rates.
The Group
Increase (decrease) in
profit or loss
500 bps
increase
HK$ million
500 bps
decrease
HK$ million
Increase (decrease) in
equity
500 bps
increase
HK$ million
500 bps
decrease
HK$ million
As at 31 December 2009
1
(1)
–
–
650 bps
increase
HK$ million
650 bps
decrease
HK$ million
650 bps
increase
HK$ million
650 bps
decrease
HK$ million
As at 31 December 2008
(2)
–
3
–
(e) Equity price risk
The Group is exposed to equity price risks in relation to its available-for-sale investments in listed securities which are measured
at fair value at the end of each reporting period with reference to the listed share price. The management will monitor the price
movements and take appropriate actions when it is required.
Sensitivity analysis
The sensitivity analysis below has been determined assuming that a change in the corresponding equity prices had occurred
at the end of the reporting period and had been applied to the investments that would have affected the equity. A change of
25% (2008: 25%) in stock prices was applied at the end of the reporting period. The applied change of percentage represented
management’s assessment of the reasonably possible change in stock prices.
As at 31 December 2009
As at 31 December 2008
The Group
Increase (decrease) in
equity
25%
increase
HK$ million
25%
decrease
HK$ million
249
(249)
25%
increase
HK$ million
25%
decrease
HK$ million
246
(246)
Hysan Annual Report 2009 147
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I
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W
S
T
R
A
T
E
G
Y
I
N
A
C
T
O
N
I
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
A
N
D
V
A
L
U
A
T
O
N
I
FINA NCI A L RISK M A NAGEMENT continued
For the year ended 31 December 2009
2. Categories of Financial Instruments
The Group
The Company
2009
HK$ million
2008
HK$ million
2009
HK$ million
2008
HK$ million
Financial assets
Fair value through profit or loss (“FVTPL”)
– designated as at FVTPL
– held for trading
Derivative instruments under hedge accounting
Available-for-sale financial assets
Held-to-maturity investments
Loans and receivables (including
cash and cash equivalents)
Financial liabilities
Fair value through profit or loss
– held for trading
Derivative instruments under hedge accounting
Amortised cost
200
62
35
1,002
–
2,467
3,766
9
27
4,532
4,568
125
–
158
1,022
700
1,728
3,733
10
31
4,398
4,439
–
–
–
2
–
–
–
–
2
–
13,321
13,323
13,014
13,016
–
–
226
226
–
–
90
90
3. Fair Value
The fair value of financial assets and financial liabilities are determined as follows:
•
•
•
the fair value of listed investments traded in active liquid markets are determined with reference to the published price
quotations;
the fair value of financial assets and financial liabilities (excluding derivative instruments) are determined in accordance
with generally accepted pricing models based on discounted cash flow analysis using prices from observable current
market transactions; and
the fair value of derivative instruments are based on quoted prices from independent financial institutions or calculated
using discounted cash flow analysis based on the applicable yield curve derived from quoted interest rates and based on
the quoted spot and forward foreign exchange rates.
The Directors consider that the carrying amounts of financial assets and financial liabilities measured at amortised costs in the
consolidated and the Company’s financial statements approximate their fair values, except for the carrying amount of HK$1,980
million (2008: HK$2,003 million) fixed rate notes as stated in note 30 to the financial statements with fair value of HK$2,128
million (2008: HK$2,117 million).
148 Hysan Annual Report 2009
3. Fair Value continued
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair
value, grouped into Levels 1 and 2 based on the degree to which the fair value is observable.
•
•
Level 1: fair value measurements are those derived from quoted prices (unadjusted) in active market for identical assets.
Level 2: fair value measurements are those derived from inputs other than quoted prices included with Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 1
HK$ million
2009
Level 2
HK$ million
Total
HK$ million
Financial assets
Derivatives under hedging
accounting
Forward foreign exchange contracts
Cross currency swaps
Interest rate swaps
Basis swaps
Other derivatives classified as
held for trading (not under
hedge accounting)
Cross currency swaps
Financial assets at FVTPL
Principal-protected deposits
Available-for-sale financial assets
Listed equity securities
Unlisted club debentures
Financial liabilities
Derivatives under hedging
accounting
Interest rate swaps
Other derivatives classified as
held for trading (not under
hedge accounting)
Net basis swaps
There were no transfers between Levels 1 and 2 in the current year.
–
–
–
–
–
–
997
–
997
–
–
–
1
2
31
1
62
200
–
2
1
2
31
1
62
200
997
2
299
1,296
27
27
9
36
9
36
Hysan Annual Report 2009 149
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I
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W
S
T
R
A
T
E
G
Y
I
N
A
C
T
O
N
I
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
A
N
D
V
A
L
U
A
T
O
N
I
FINA NCI A L RISK M A NAGEMENT continued
For the year ended 31 December 2009
4. Capital Risk Management
The Group manages its capital to ensure that the Group will be able to continue as a going concern while maximising the return
to stakeholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from
prior year.
The Group monitors its capital structure on the basis of a net debt to adjusted capital ratio. For this purpose, the Group defines
net debt as borrowings as shown in the consolidated statement of financial position less short-term investments, time deposits,
cash and bank balances. Adjusted capital comprises all components of equity attributable to owners of the Company, adjusted
by cumulative deferred tax provided on fair value gain on the investment and owner-occupied properties.
The management reviews the Group’s net debt to adjusted capital ratio regularly and adjust the ratio through the payment of
dividends, the issue of new share or debt, the repurchase of shares and the redemption of existing debt.
The net debt to adjusted capital ratio at the year end was as follows:
Unsecured bank loans
Floating rate notes
Fixed rate notes
Zero coupon notes
Borrowings
Less: Held-to-maturity debt securities
Time deposits
Cash and bank balances
Net debt
Equity attributable to owners of the Company
Add: Group’s share of cumulative deferred tax
on properties revaluation
Adjusted capital
Net debt to adjusted capital
The Group
2009
HK$ million
2008
HK$ million
1,449
200
1,980
262
3,891
–
(1,945)
(39)
1,907
920
550
2,003
278
3,751
(700)
(964)
(51)
2,036
33,668
31,469
3,389
3,191
37,057
34,660
5.1%
5.9%
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
150 Hysan Annual Report 2009
FIVE-YEAR FINANCIAL SUMMARY
For the year ended 31 December 2009
Results
Turnover
Property expenses
Gross profit
Investment income
Other gains and losses
Administrative expenses
Finance costs
Change in fair value of investment properties
Share of results of associates
Profit before taxation
Taxation
Profit for the year
Minority interests
Profit attributable to owners of the Company
Underlying profit for the year
Recurring underlying profit for the year
Dividends
Dividends paid
Dividends proposed
Dividends per share (HK cents)
Earnings per share (HK$), based on:
Profit for the year
– basic
– diluted
Underlying profit for the year – basic
Recurring underlying profit for the year – basic
Performance indicators
Net debt to equity
Net interest coverage (times)
Net assets value per share (HK$)
Adjusted net assets value per share (HK$)
Net debt per share (HK$)
Year end share price (HK$)
2009
HK$ million
2008
HK$ million
2007
HK$ million
2006
HK$ million
2005
HK$ million
1,680
(235)
1,445
38
(3)
(133)
(131)
1,249
768
3,233
(396)
2,837
(121)
2,716
1,113
1,110
709
567
68.00
2.60
2.60
1.06
1.06
5.1%
11.7x
32.05
35.27
1.82
22.05
1,638
(217)
1,421
63
146
(134)
(155)
(212)
590
1,719
(1)
1,718
(124)
1,594
1,201
1,066
644
562
68.00
1.53
1.53
1.16
1.03
5.9%
10.2x
30.23
33.29
1.96
12.52
1,368
(208)
1,160
98
302
(106)
(175)
3,131
452
4,862
(745)
4,117
(168)
3,949
1,158
950
549
498
60.00
3.75
3.75
1.10
0.90
6.8%
7.8x
30.51
33.81
2.29
22.25
1,268
(240)
1,028
147
201
(111)
(163)
2,576
120
3,798
(558)
3,240
(141)
3,099
1,012
755
474
422
50.00
2.94
2.94
0.96
0.72
7.9%
6.9x
26.37
29.12
2.31
20.35
1,250
(237)
1,013
38
(25)
(103)
(214)
4,226
241
5,176
(856)
4,320
(199)
4,121
1,005
641
420
369
45.00
3.92
3.92
0.96
0.61
10.7%
4.6x
23.42
25.76
2.75
19.20
Hysan Annual Report 2009 151
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I
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W
S
T
R
A
T
E
G
Y
I
N
A
C
T
O
N
I
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
A
N
D
V
A
L
U
A
T
O
N
I
FI VE-YEA R FINA NCI A L SU MM A RY continued
For the year ended 31 December 2009
Assets and liabilities
Investment properties
Interests in associates
Available-for-sale investments
Time deposit, cash and bank balances
Other assets
Total assets
Borrowings
Taxation
Other liabilities
Total liabilities
Net assets
Minority interests
Shareholders’ funds
2009
HK$ million
2008
HK$ million
2007
HK$ million
2006
HK$ million
2005
HK$ million
37,363
2,886
1,002
1,984
613
35,850
2,340
1,022
1,015
1,309
35,711
1,601
2,479
484
615
32,473
1,272
1,745
385
378
29,815
1,147
1,256
1,402
371
43,848
41,536
40,890
36,253
33,991
(3,891)
(3,926)
(1,077)
(3,751)
(3,999)
(1,076)
(2,861)
(4,180)
(1,001)
(2,821)
(3,574)
(950)
(4,301)
(3,077)
(960)
(8,894)
(8,826)
(8,042)
(7,345)
(8,338)
34,954
(1,286)
32,710
(1,241)
32,848
(1,196)
28,908
(1,080)
25,653
(986)
33,668
31,469
31,652
27,828
24,667
Adjusted shareholders’ funds
37,057
34,660
35,072
30,729
27,134
Definitions:
(1) Underlying profit for the year: profit adjusted for group’s share of unrealised fair value changes on investment properties net of deferred
tax
(2) Recurring underlying profit for the year: underlying profit adjusted for aggregate of realised gain or loss on disposal of investment
properties and available-for-sale investments, impairment, reversal, recovery and tax provisions for prior year(s)
(3) Net debt to equity: borrowings less short-term investments, time deposits, cash and bank balances divided by adjusted shareholders’
funds
(4) Net interest coverage: gross profit less administrative expenses before depreciation divided by net interest expenses
(5) Net assets value/Adjusted net assets value per share: shareholders’ funds/adjusted shareholders’ funds divided by number of issued
shares at year end
(6) Net debt per share: borrowings less short-term investments, time deposits, cash and bank balances divided by number of issued shares
at year end
(7) Adjusted shareholders’ funds: shareholders’ funds adjusted for cumulative deferred tax provided for fair value changes on properties
152 Hysan Annual Report 2009
REPORT OF THE VALUER
To the Board of Directors
Hysan Development Company Limited
Dear Sirs,
Annual Revaluation of Investment Properties as at 31 December 2009
In accordance with your appointment of Knight Frank Petty 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 market value of the investment
properties as at 31 December 2009 was in the approximate sum of Hong Kong Dollars Thirty Seven Billion Three Hundred Sixty
Three Million Only (i.e. HK$37,363 million).
The investment properties have been valued individually, on market value basis, by reference to comparable market transactions
and on the basis of capitalisation of the net income with due allowance for the reversionary income and redevelopment
potential, without allowances for any expenses or taxation which may be incurred in effecting a sale.
Yours faithfully,
Knight Frank Petty Limited
Hong Kong, 8 February 2010
Hysan Annual Report 2009 153
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SCHEDULE OF PRINCIPAL PROPERTIES
As at 31 December 2009
Investment Properties
Address
Lot No.
1. The Lee Gardens
33 Hysan Avenue
Causeway Bay
Hong Kong
Sec. DD of I.L. 29, Sec. L of I.L. 457,
Sec. MM of I.L. 29,
the R.P. of Sec. L of I.L. 29,
and the R.P. of I.L. 457
Use
Category
of the Lease
Percentage
held by
the Group
Commercial
Long lease
100%
2. Bamboo Grove
I.L. 8624
Residential
Medium term
100%
74-86 Kennedy Road
Mid-Levels
Hong Kong
3. Lee Gardens Two
28 Yun Ping Road
Causeway Bay
Hong Kong
4. Leighton Centre
77 Leighton Road
Causeway Bay
Hong Kong
5. Lee Theatre Plaza
99 Percival Street
Causeway Bay
Hong Kong
6. Sunning Plaza
10 Hysan Avenue
Causeway Bay
Hong Kong
7. Sunning Court
8 Hoi Ping Road
Causeway Bay
Hong Kong
8. One Hysan Avenue
1 Hysan Avenue
Causeway Bay
Hong Kong
lease
Commercial
Long lease
65.36%
Sec. G of I.L. 29,
Sec. A, O, F and H of I.L. 457,
the R.P. of Sec. C, D, E and G of I.L. 457,
Subsec. 1 of Sec. C, D, E and G of I.L. 457,
Subsec. 2 of Sec. E of I.L. 457 and
Subsec. 1, 2, 3 and
the R.P. of Sec. C of I.L. 461
Sec. B, C and the R.P. of I.L. 1451
Commercial
Long lease
100%
I.L. 1452, the R.P. of I.L. 472 and 476
Commercial
Long lease
100%
The R.P. of Subsec. 1 of Sec. J of I.L. 29,
Subsec. 2 of Sec. J of I.L. 29
and the R.P. of Sec. J of I.L. 29
The R.P. of Subsec. 1 of Sec. J of I.L. 29,
Subsec. 2 of Sec. J of I.L. 29
and the R.P. of Sec. J of I.L. 29
Commercial
Long lease
100%
Residential
Long lease
100%
The R.P. of Sec. GG of I.L. 29
Commercial
Long lease
100%
9. AIA Plaza
Sec. N of I.L. 457 and Sec. LL of I.L. 29
Commercial
Long lease
100%
18 Hysan Avenue
Causeway Bay
Hong Kong
154 Hysan Annual Report 2009
Address
Lot No.
Use
Category
of the Lease
Percentage
held by
the Group
10. 111 Leighton Road
111 Leighton Road
Causeway Bay
Hong Kong
11. 500 Hennessy Road *
Causeway Bay
Hong Kong
Sec. KK of I.L. 29
Commercial
Long lease
100%
Sec. FF of I.L. 29 and
the R.P. of Marine Lot 365
Commercial
Long lease
100%
*
The property (the site of the former Hennessy Centre) is currently under redevelopment. The site has a registered site area of
approximately 47,738 square feet. Demolition work was completed in April 2009. All excavation and foundation works for tower portion
were completed in March 2010 as scheduled. Construction of the superstructure commenced in February 2010. The redevelopment has a
projected gross floor area of around 710,000 square feet and is expected to be completed in 2011.
Hysan Annual Report 2009 155
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SHAREHOLDING ANALYSIS
Share Capital
As at 31 December 2009
Number of
ordinary shares
HK$
Nominal Value
HK$
Authorised share capital
Issued and fully paid-up capital
7,250,000,000 1,450,000,000
5,253,040,450 1,050,608,090
5
5
There was one class of ordinary shares of HK$5 each with equal voting rights.
Distribution of Shareholdings
(As at 31 December 2009, as per register of members of the Company)
Size of registered
shareholdings
5,000 or below
5,001 – 50,000
50,001 – 100,000
100,001 – 500,000
500,001 – 1,000,000
Above 1,000,000
Total
Number of
shareholders
% of
shareholders
Number of
ordinary shares
% of the issued
share capital
(Note)
2,540
975
95
57
3
20
3,690
4,645,297
68.84
15,023,355
26.42
6,956,431
2.57
12,170,052
1.55
0.08
1,969,391
0.54 1,009,843,564
0.44
1.43
0.66
1.16
0.19
96.12
100.00 1,050,608,090
100.00
Types of Shareholders
(As at 31 December 2009, as per register of members of the Company)
Type of shareholders
Number of
ordinary shares held
% of the issued
share capital
(Note)
Lee Hysan Company Limited, Lee Hysan Estate Company, Limited and their subsidiaries
Other corporate shareholders
Individual shareholders
433,130,735
570,267,707
47,209,648
41.23
54.28
4.49
Total
1,050,608,090
100.00
Location of Shareholders
(As at 31 December 2009, as per register of members of the Company)
Location of shareholders
Hong Kong
United States and Canada
United Kingdom
Singapore
Others
Total
Note:
Number of
ordinary shares held
% of the issued
share capital
(Note)
1,044,900,913
4,301,635
1,133,471
64,516
207,555
99.45
0.41
0.11
0.01
0.02
1,050,608,090
100.00
The percentages have been compiled based on the total number of shares of the Company in issue as at 31 December 2009
(i.e. 1,050,608,090 ordinary shares).
156 Hysan Annual Report 2009
SHAREHOLDER INFORMATION
Financial Calendar
Full year results announced
Ex-dividend date for final dividend
Closure of register of members
Annual General Meeting
Record date for final dividend
Dispatch of scrip dividend circular and election form
Dispatch of final dividend warrants/definitive share certificates
2010 interim results to be announced
* subject to change
Dividend
The Board recommends the payment of a final dividend of
HK54 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, 11 May 2010. 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
Thursday, 13 May 2010. 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 Friday, 28 May 2010.
Definitive share certificates in respect of the scrip dividend
and cheques (for those shareholders who do not elect for
scrip dividend) will be dispatched to shareholders on or
about Thursday, 3 June 2010.
The register of members will be closed from Friday,
7 May 2010 to Tuesday, 11 May 2010, both dates inclusive,
for the purpose of determining shareholders’ entitlements
to attend and vote at the Annual General Meeting to be
held on 11 May 2010 and the proposed final dividend,
during which period no transfer of shares will be registered.
In order to qualify for attending and voting at the Annual
General Meeting and the proposed final dividend, all transfer
documents accompanied by the relevant share certificates
must be lodged with the Company’s Registrars not later than
4:00 p.m. on Thursday, 6 May 2010.
Share Listing
Hysan’s shares are listed on The Stock Exchange of Hong
Kong Limited. It has a sponsored American Depositary
Receipts (ADR) Programme in the New York market.
Stock Code
The Stock Exchange of Hong Kong Limited: 00014
Bloomberg: 14HK
Reuters: 0014.HK
Ticket Symbol for ADR Code: HYSNY
CUSIP reference number: 449162304
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10 March 2010
5 May 2010
7 to 11 May 2010
11 May 2010
11 May 2010
(on or about) 13 May 2010
(on or about) 3 June 2010
10 August 2010 *
Shareholder Services
For enquiries about share transfer and registration, please
contact the Company’s Registrars:
Tricor Standard Limited
26/F., Tesbury Centre,
28 Queen’s Road East,
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.
The Annual Report is printed in English and Chinese language
and is available on our website at www.hysan.com.hk.
Shareholders may at any time choose to receive the Annual
Report in printed form in either the English or Chinese
language or both or by electronic means. Shareholders who
have chosen to receive the Annual Report using electronic
means and who for any reason have difficulty in receiving
or gaining access to the Annual Report will promptly upon
request be sent a printed copy free of charge.
Shareholders may at any time change their choice of the
language or means of receipt of the Annual Report by notice
in writing to the Company’s Registrars at the address above.
The Change Request Form may be downloaded from the
Company’s website at www.hysan.com.hk.
Investor Relations
For enquiries relating to investor relations, please email to
investor@hysan.com.hk or write to the Company at:
Investor Relations
Hysan Development Company Limited
49/F., The Lee Gardens, 33 Hysan Avenue
Hong Kong
Telephone: (852) 2895 5777
Facsimile: (852) 2577 5153
Our Website
Press releases and other information of the Group can be
found at our internet website: www.hysan.com.hk.
With a solid foundation,
Hysan has mapped out
a clear strategic focus for
building today while creating
a platform for tomorrow.
Annual Report 2009
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Hysan Development Company Limited
49/F The Lee Gardens
33 Hysan Avenue, Hong Kong
T 852 2895 5777 F 852 2577 5153
www.hysan.com.hk
STOCK CODE 00014
Hennessy Centre redevelopment