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Hysan Development Company Limited
49/F Lee Garden One, 33 Hysan Avenue, Hong Kong
T 852 2895 5777 F 852 2577 5153
www.hysan.com.hk
C M Y
K
varnish
CHANGES
stock code 00014
2015
annual report
Contents
1
Overview
18 Key Facts
18 Where We Are, How We Do Things, How We
Translate Our Values into Our Daily Work
2
Financial
Performance
3
Responsible
Business
20 Value Creation
22 A Balanced Portfolio
24 The Hysan Community
26 2015 Performance at a Glance
30 Chairman’s Statement
36 The Marketplace
40 Management’s Discussion and Analysis
40 Strategy and Review of Results
41 Review of Operations
46 Financial Review
49 Treasury Policy
54 Internal Controls and Risk Management Report
62 Business of Life
63 Environment
70 Workplace Quality
73 Health and Safety
75 Community Contributions
80 The Stock Exchange of Hong Kong Limited’s
Environmental, Social and Governance
Reporting Guide
83 Corporate Responsibility Reporting
Verification Statement
4
5
Corporate
Governance
86 Board of Directors
91 Corporate Governance Report
112 Directors’ Report
121 Directors’ Remuneration and Interests Report
130 Audit Committee Report
Financial
Statements,
Valuation and
Other
Information
135 Directors’ Responsibility for the Financial Statements
136 Independent Auditor’s Report
137 Financial Statements
200 Five-Year Financial Summary
202 Report of the Valuer
203 Schedule of Principal Properties
205 Shareholding Analysis
206 Shareholder Information
208 Corporate Information
Read more on our website
www.hysan.com.hk
2015 was a challenging year in economic and
financial terms, both globally and locally in
Hong Kong. In this Annual Report, we highlight
how Hysan created unique and delightful
experiences for our stakeholders through creativity,
resourcefulness, professionalism, strong teamwork
and swift action, as we responded to both
expected and unexpected business changes.
RETAIL
2
Hysan Annual Report 2015 RE TAIL
around
25%
around
10%
average
rental reversion
increase in estimated
tenant sales
100%
occupancy
Hysan’s strategy of diversification and pivoting the retail
portfolio towards the mid-to-affordable market pays off in
a generally weaker retail environment.
3
RETAIL
4
Hysan Annual Report 2015 RE TAIL
20+
renowned brands’
flagship stores within
our retail portfolio
O2O
successful online
promotions for
offline sales
Building upon a stable base that caters to a wider group
of consumers, we strive to provide a unique and satisfying
experience to our shoppers.
5
6
Hysan Annual Report 2015 PLACEMAKING
around
5%
increase in overall
foot traffic
achieved against a
weaker retail climate
each of the
3 hubs
saw growth in
shoppers’ numbers
Whether they are vigorous yoga sessions in the Sky Garden, glamourous
baubles for the holidays or delightful junior cooking classes, our placemaking
experiences and features attract those from near and far.
7
8
Hysan Annual Report 2015 FOOD AND BE VE RAGE
62
7
food and beverage
establishments
including
Michelin-starred or
recommended
gourmet eateries
5
celebrated international
restaurants make Lee
Gardens their first home
in Hong Kong
around
10%
increase in estimated
food and beverage
tenant sales
Our food and beverage offering covers a range of price
points, and attracts casual, chic or business diners, as well as
family gatherings.
9
10
Hysan Annual Report 2015 OF FICE
around
30%
average
rental reversion
99%
occupancy
Our office portfolio benefits from significant demand and
limited supply of premium office space in Hong Kong, but
we also actively reconfigure and upgrade our buildings
through asset enhancement programmes.
11
12
Hysan Annual Report 2015 OF FICE
Lee Gardens Offices =
work-life balance+
cost effectiveness
since 2013
18 quality office tenants have
moved to Lee Gardens
from Central and Admiralty
now
25
technology, media and
telecom companies reside in
inspirational Lee Gardens
With commuting convenience, good workplace facilities and an abundance of
nearby shops and restaurants, Lee Gardens Offices offers a peerless work-life
balance environment, in addition to the portfolio’s cost effectiveness.
13
14
Hysan Annual Report 2015 SUSTAI NABI LITY
Lee Garden One is the
1st
Hong Kong commercial
building with a provisional
BEAM Plus (Existing Building)
Platinum certification for its
office portion
kg
975,000+
paper and
3,000+
plastic bottles
recycled
kg
1,300+
hours
of volunteer service
performed
As a “Business of Life”, we endeavour to create positive and
sustainable changes in the lives of our stakeholders and the
communities we serve.
15
1
18
Key Facts
18 Where We Are,
How We Do Things,
How We Translate Our Values
into Our Daily Work
20 Value Creation
22 A Balanced Portfolio
24 The Hysan Community
26
2015 Performance at a Glance
30
Chairman’s Statement
16
Hysan Annual Report 2015
Overview
17
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Key Facts
Where We Are
Hysan owns an investment property portfolio which is set
predominantly in the heart of Hong Kong’s vibrant Causeway Bay,
and is clustered in hubs. Our ownership concentration, which
intensifies our ability to extract synergies from the tenant mix,
makes our high quality retail, office and residential collection
truly exceptional.
While the approximately 4.1 million square feet of rental space,
excluding properties under redevelopment, has essentially
remained the same in size in the past decade, our revenue has
nearly tripled.
How We Translate Our Values
into Our Daily Work
– Unique and Satisfying
Experience (U.S.E.)
A delighting experience
exceeding customer
expectations that enchants
him/her
18
Internal
Customers
Employees and
Departments
U . S . E .
Resourcefulness
Professionalism
Hysan Annual Report 2015 How We Do Things
VISION
To be the PREMIER property
company that is superior to its peers
in its market of choice.
MISSION
Provide our stakeholders with
sustainable and outstanding
returns from a property portfolio
which is strategically planned and
managed by passionate,
responsible and forward-looking
professionals.
VALUES
Leadership
Excellence
Empowerment
Good Citizenship
Accountability
Respect
Driving / Driven
Entrepreneurship
Networking
Sustainability
U . S . E .
External
Customers
Shoppers and
Tenants
Teamwork
Swift Action
19
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business (Hysan vs Hang Seng Index)
Key Facts
Value Creation
Retail
Office
(with area branding)
Increase Yields
through active
management
including tenant mix
improvement
Turnover
2010-2015 (HK$ million)
3,430
3,224
3,063
5-year
CAGR
14.2%
2,486
1,922
1,764
2010
2011
2012 2013 2014 2015
Asset Enhancement
balance longer-term projects with those that produce
more immediate returns
Residential
Hysan Place
Lee Theatre Plaza
Lee Garden Two
2010
2011
2012 2013 2014 2015
t
n
e
m
e
c
n
a
h
n
E
r
e
t
f
A
t
n
e
m
e
c
n
a
h
n
E
e
r
o
f
e
B
Share Price Growth
increase long term value
Risk Adjusted Total Return
– Steady and Measured
Growth
Cumulative Total Returns for
Hysan versus Hang Seng Index
Financial
Achievements
increase earnings and
enhance net asset value
Recurring Underlying Profit
2010-2015 (HK$ million)
5-year
CAGR
14.7%
2,283
2,163
2,043
1,622
1,310
1,148
Index
250
200
150
100
50
0
+66.2%
+46.6%
%
200
150
100
50
0
-50
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Hysan
HSI
Index (3 January 2006=100)
Source: Bloomberg
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Hysan
HSI
Source: Bloomberg
Dividends per Share
provide steady growth
Net Asset Value per Share
2005-2015 (HK cents)
2010-2015 (HK$)
5-year
CAGR
10.8%
63.02 64.48
59.54
54.68
46.00
38.61
95
79
74
68
68
60
50
45
10-year
CAGR
11.4%
132
123
117
2010
2011
2012 2013 2014 2015
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Supported by Strong
Underlying Non-Financial
Achievements:
Environment
Minimise our activities’ impact on the environment,
and achieve higher efficiency at the same time
Employees
Maintain good working
environment to unleash potential
Community
Make positive contributions to
communities where we operate
Governance
Strong governance is the heart of
long-term sustainable performance
Continue strong focus in Causeway Bay and concurrently seek opportunities beyond our core portfolio
20
Hysan Annual Report 2015
(Hysan vs Hang Seng Index)
Value Creation
Retail
Office
(with area branding)
Increase Yields
through active
management
including tenant mix
improvement
Turnover
2010-2015 (HK$ million)
5-year
CAGR
14.2%
3,430
3,224
3,063
2,486
1,922
1,764
2010
2011
2012 2013 2014 2015
Asset Enhancement
balance longer-term projects with those that produce
more immediate returns
Financial
Achievements
increase earnings and
enhance net asset value
Recurring Underlying Profit
2010-2015 (HK$ million)
5-year
CAGR
14.7%
2,283
2,163
2,043
1,622
1,310
1,148
Residential
Hysan Place
Lee Theatre Plaza
Lee Garden Two
2010
2011
2012 2013 2014 2015
Net Asset Value per Share
2010-2015 (HK$)
5-year
CAGR
10.8%
63.02 64.48
59.54
54.68
46.00
38.61
Risk Adjusted Total Return
– Steady and Measured
Growth
Cumulative Total Returns for
Hysan versus Hang Seng Index
%
200
150
100
50
0
-50
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Hysan
HSI
Source: Bloomberg
Share Price Growth
increase long term value
Index
250
200
150
100
50
0
+66.2%
+46.6%
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Hysan
HSI
Index (3 January 2006=100)
Source: Bloomberg
Dividends per Share
provide steady growth
2005-2015 (HK cents)
10-year
CAGR
11.4%
132
123
117
95
79
74
68
68
60
50
45
2010
2011
2012 2013 2014 2015
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Supported by Strong
Underlying Non-Financial
Achievements:
Environment
Employees
Minimise our activities’ impact on the environment,
Maintain good working
and achieve higher efficiency at the same time
environment to unleash potential
Community
Make positive contributions to
communities where we operate
Governance
Strong governance is the heart of
long-term sustainable performance
Continue strong focus in Causeway Bay and concurrently seek opportunities beyond our core portfolio
21
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Key Facts
A Balanced Portfolio
A key feature of Hysan’s portfolio,
comprising principally retail and office
segments, is its balanced nature.
Our retail portfolio houses
international renowned and popular
local brands of different price points
and style. The office portfolio is also
home to a variety of multinational as
well as Hong Kong-based companies.
Overall
Investment Properties
(by Gross Floor Area excluding
properties under redevelopment)
Total Gross Floor Area
4.1 million sq. ft. (approx.)
17%
51%
32%
Residential
Office
Retail
Investment Properties
(by Turnover Contribution)
8%
36%
56%
Turnover
HK$3,430 million
Residential
Office
Retail
22
Hysan Annual Report 2015 A Diversified and Distinct
Retail Portfolio
Each of the three retail hubs is
approximately one-third of the total
portfolio’s area. Hysan Place places
an emphasis on trendiness and
houses a number of brand name
flagship stores. Lee Gardens hub is
well known for high-end brands
and its luxury premium setting.
Lee Theatre hub projects a healthy
and sporty lifestyle image, and
showcases some of the city’s best
known food and beverage outlets.
An Office Portfolio for
Different Businesses
The top four industries in our
office portfolio are insurance,
professional and consulting,
high-end retailers and banking
and finance. They represent
54% of our office lettable floor
area, but no category takes up
more than 20% of the total
lettable area.
Hysan Place
Lee Theatre
Retail Hub
35%
36%
29%
Lee Gardens
Retail Hub
Insurance
Professional
and Consulting
High-end
Retailers
Banking and
Finance
Semi-retail
Marketing
Information
Technology
Consumer
Products
Others
21.5%
15.6%
3.2%
5.5%
6.9%
14.2%
12.4%
8.6%
12.1%
21.5%
Others
15.6%
Insurance
8.6%
Semi-retail
12.1%
Banking and
Finance
6.9%
Marketing
5.5%
Information
Technology
3.2%
Consumer
Products
14.2%
Professional
and Consulting
12.4%
High- end Retailers
23
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Key Facts
The Hysan Community
A unique work, lifestyle and
shopping destination
Retail
and
Office
Retail
only
Residential
Under
Development
Lee Theatre
Retail Hub
Hysan
Place
Lee Gardens
Retail Hub
BAMBOO
GROVE
Mid-Levels
HYSAN PLACE
LEE THEATRE
PLAZA
LEIGHTON
CENTRE
ONE HYSAN
AVENUE
LEE
GARDEN
ONE
LEE
GARDEN
TWO
LEE
GARDEN
FIVE
LEE
GARDEN
THREE
LEE
GARDEN
SIX
Not to scale
24
Greenest commercial
building and
trendiest shopping
in town
HYSAN
PLACE
500 Hennessy Road, Causeway Bay
Completed 2012
Approx. Gross
Floor Area 716,000 ft2
Floors 40 Parking
Number of
Spaces 66
RETAIL
• Owns, markets and manages
approximately 1.3 million gross
square feet of prime retail space
• Our retail portfolio consists of three
geographically separate hubs of
retailers at different price points.
Under the
combines street-front shops with
shopping malls of different
characteristics, and is complemented
by a vibrant low-rise neighbourhood
brand, it
OffICE
• Owns, markets and manages
approximately 2.1 million gross
square feet of premium office space
• Our office portfolio is positioned as a
credible alternative to Central and
Admiralty, providing a perfect
destination for companies that care
about both work-life balance and
cost effectiveness
RESIDENTIAL
• Bamboo Grove in Hong Kong’s
Mid-Levels has a total area of
approximately 0.7 million gross
square feet
• It offers a quality international living
experience with top class facilities,
personalised service and easy access
to work, school and play
Hysan Annual Report 2015HENNESSYROADSOGOCROSSHARBOURTUNNELTimesSquareLEE GARDEN ROADHYSAN AVENUELAN FONG ROADPAK SHA ROADLEIGHTON ROADPERCIVAL STREETCENTRALABERDEENTUNNELNORTHPOINTYUN PING ROAD Home to
international
corporations and
premium brands
Spacious offices plus
renowned children’s
concept floor
A 25-level office
and retail complex
LEE GARDEN
ONE
33 Hysan Avenue, Causeway Bay
Completed 1997
Approx. Gross
Floor Area 900,000 ft2
Parking
Number of
Spaces 200
Floors 53
LEE GARDEN
TWO
28 Yun Ping Road, Causeway Bay
Completed 1992 /
Renovation of retail podium 2003
Approx. Gross
Floor Area 627,000 ft2
Parking
Number of
Spaces 167
Floors 34
LEE GARDEN
FIVE
18 Hysan Avenue, Causeway Bay
Completed 1989 / Renovated 2009
Approx. Gross
Floor Area 132,000 ft2
Number of
Floors 25
Convenient office
location with retail
shops
Popular offices
and sporty
lifestyle shops
Iconic office and
retail building in
prime site
LEE GARDEN
SIX
LEIGHTON
CENTRE
ONE HYSAN
AVENUE
111 Leighton Road, Causeway Bay
Completed 1988 / Renovated 2004
77 Leighton Road, Causeway Bay
Completed 1977 / Renovated 2011
1 Hysan Avenue, Causeway Bay
Completed 1976 / Renovated 2011
Approx. Gross
Floor Area 80,000 ft2
Number of
Floors 24
Approx. Gross
Floor Area 430,000 ft2
Number of
Parking
Floors 28
Spaces 321
Approx. Gross
Floor Area 169,000 ft2
Number of
Floors 26
One of Hong Kong’s
best-loved shopping/
dining complexes
Soon-to-be among
the city’s best
known commercial
addresses
Quality international
living in Mid-Levels
LEE THEATRE
PLAZA
99 Percival Street, Causeway Bay
Completed 1994 /
Renovation of lower zone 2013
Approx. Gross
Floor Area 317,000 ft2
Number of
Floors 26
LEE GARDEN
THREE
Causeway Bay
To be completed in late 2017
BAMBOO
GROVE
74–86 Kennedy Road, Mid-Levels
Completed 1985 / Renovated 2002
Approx. Gross
Floor Area 691,000 ft2
Number of
Units 345
Parking
Spaces 436
25
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business 2015 Performance
at a Glance
financial Performance
Turnover
HK$3,430m
6.4%
Recurring
Underlying
Profit
HK$2,283m
5.5%
Retail Sector
HK$1,902m 5.6%
(HK$ million)
2,000
2
0
9
1
,
1
0
8
1
,
8
7
6
1
,
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
0
5
2
1
,
9
8
7
Recurring Underlying Profit
HK$2,283m 5.5%
(HK$ million)
2,400
3
8
2
2
,
3
6
1
2
,
3
4
0
2
,
5
3
7
,
8
6
0
1
8
,
9
6
2
2
3
,
5
6
2
2
0
,
0
6
2
2
6
0 1
1
3
1
,
,
2,100
1,800
1,500
1,200
900
600
300
0
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
Cost
Valuation Surplus
Office Sector
HK$1,243m 9.4%
(HK$ million)
1,400
Recurring Underlying Earnings per Share
HK214.83 cents 5.7%
(HK cents)
240
3
4
2
1
,
5
8
0
1
,
6
3
1
1
,
8
0
9
0
2
8
1,200
1,000
800
600
400
200
0
.
3
8
4
1
2
.
4
3
3
0
2
.
0
1
2
9
1
210
180
150
120
90
60
30
0
.
3
8
2
5
1
.
2
9
3
2
1
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
Residential Sector
HK$285m 0.7%
(HK$ million)
350
8
2
3
3
1
3
0
0
3
7
8
2
5
8
2
300
250
200
150
100
50
0
Dividends per Share
HK132 cents 7.3%
(HK cents)
144
2
3
1
3
2
1
7
1
1
5
9
9
7
126
108
90
72
54
36
18
0
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
26
(HK$ million)
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
(HK$ million)
72,000
64,000
56,000
48,000
40,000
32,000
24,000
16,000
8,000
0
(HK$)
70
60
50
40
30
20
10
0
9
6
9
,
9
4
3
5
7
,
8
4
0
0
.
6
4
0
4
0
,
7
6
2
7
1
,
8
6
6
2
3
,
3
6
3
2
1
,
8
5
2
0
.
3
6
8
4
.
4
6
4
5
.
9
5
8
6
.
4
5
Hysan Annual Report 2015
Net Asset
Value per
Share
HK$64.48
2.3%
Property Value
HK$69,810m 1.6%
5
3
7
8
6
,
0
1
8
9
6
,
2
2
3
5
6
,
2
2
0
0
6
,
(HK$ million)
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
9
6
9
9
4
,
2011
2012
2013
2014
2015
Cost
Valuation Surplus
Shareholders’ Funds
HK$68,172m 1.7%
0
4
0
7
6
,
2
7
1
8
6
,
6
2
3
3
6
,
3
2
1
8
5
,
(HK$ million)
72,000
64,000
56,000
48,000
40,000
32,000
24,000
16,000
8,000
0
3
5
7
8
4
,
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
Net Asset Value per Share
HK$64.48 2.3%
2
0
3
6
.
8
4
4
6
.
4
5
9
5
.
8
6
4
5
.
(HK$)
70
60
50
40
30
20
10
0
0
0
6
4
.
(HK$ million)
(HK$ million)
2
0
9
,
1
1
0
8
,
1
8
7
6
,
1
0
5
2
,
1
9
8
7
3
8
2
,
2
3
6
1
,
2
3
4
0
,
2
2
2
6
0 1
,
1
3
,
1
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
(HK$ million)
1,400
(HK cents)
3
4
2
,
1
5
8
0
,
1
6
3
1
,
1
8
0
9
0
2
8
3
8
.
4
1
2
4
3
.
3
0
2
0
1
.
2
9
1
3
8
.
2
5
1
2
9
.
3
2
1
(HK$ million)
(HK cents)
8
2
3
3
1
3
0
0
3
7
8
2
5
8
2
2
3
1
3
2
1
7
1
1
5
9
9
7
2,400
2,100
1,800
1,500
1,200
900
600
300
0
240
210
180
150
120
90
60
30
0
144
126
108
90
72
54
36
18
0
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
1,200
1,000
800
600
400
200
0
350
300
250
200
150
100
50
0
financial
Prudence
Net Interest Coverage (Note 1)
19.5 times
(2014: 17.1 times)
Net Debt to Equity (Note 2)
3.0%
(31 Dec 2014: 4.2%)
Average Cost of Finance
3.5%
(2014: 3.2%)
Average Debt Maturity
6.3 years
(31 Dec 2014: 5.6 years)
Fixed Rate Debt
94.9%
(31 Dec 2014: 76.3%)
Capital Market Issuances
94.9%
(31 Dec 2014: 83.0%)
Credit Ratings
Moody’s: A3
Standard and Poor’s: BBB+
Notes:
1 Net Interest Coverage is defined as gross profit less
administrative expenses before depreciation divided by
net interest expenses
2 Net Debt to Equity is defined as borrowings less time deposits,
cash and bank balances divided by shareholders’ funds
27
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business 2015 Performance
at a Glance
Non-financial Performance
Environment
“AA”
• MSCI Global Sustainability
Indexes: ‘AA’ rating and
‘top 5 industry leaders’ in the
sub-category of “opportunities
in green building”
“AA”
• Hang Seng Corporate
Sustainability Index: ‘AA’
rating
• Lee Garden One is the first Hong
Kong commercial building with a
provisional BEAM Plus (Existing
Building) Platinum certification for
its office portion
• Winner of World Green
Organisation’s first Sustainable
Business Award
• Best Practice Management Award
in Green Development
The inclusion of Hysan Development Company Limited in any MSCI index, and the use of
MSCI logos, trademarks, service marks or index names herein, do not constitute a
sponsorship, endorsement or promotion of Hysan Development Company Limited by MSCI
or any of its affiliates. The MSCI indexes are the exclusive property of MSCI. MSCI and the
MSCI index names and logos are trademarks or service marks of MSCI or its affiliates.
28
Hysan Annual Report 2015
Social
Governance
• Constituent member of
• Gold Award (Non-Hang Seng
Index Large Market
Capitalisation Category) in
the Hong Kong Institute of
Certified Public Accountants’
Best Corporate Governance
Disclosure Awards 2015
• Honourable Mention in The
Hong Kong Management
Association’s 2015 HKMA
Best Annual Reports Awards
FTSE4Good index and STOXX®
Global ESG Leaders indices
• Finalist of The Hong Kong Council
of Social Service’s Outstanding
Partnership Award (through
Exploration of Hope programme)
• Best Practice Management Award
in Corporate Social Enterprise
• Gold Award for Volunteer Service
(Organisation) (in 2015) under the
Steering Committee on Promotion
of Volunteer Service of Social
Welfare Department
Member 2015/2016
29
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Chairman’s
Statement
We are confident that Hysan is
uniquely placed to capture
opportunities as Hong Kong
benefits from the continuing
development of China.
Overview
We anticipated a challenging 2015 but the year turned out to be far more volatile and
difficult than expected. Crashing oil prices and a noticeably slowing Chinese economy
together with alarming worldwide geopolitical issues were only some of the dark clouds that
gathered. In a local context, the decline in retail sales, especially in the luxury sector,
gathered pace. Although largely expected in a climate of adjustment, there were a number
of structural changes that affected spending patterns and shopper mix.
The softer retail market was helped by a stronger commercial office market which was in
turn aided by tight supply and demands from Chinese financial institutions. Overall, 2015
was a tale of two halves. In the second half, China’s slowing economic growth, the
depreciation of the Yuan and weaker and volatile equity markets had an immediate and
direct impact on Hong Kong.
We enter 2016 with a continued commitment to build on our already well diversified, unique
and well curated portfolio. Our balance sheet strength and our dynamic capital
management will place us in a strong position to face the headwinds of the coming year.
Just as importantly, they will enable us to seek opportunities to make Hysan an even
stronger company.
Business Performance
The Group’s 2015 turnover was HK$3,430 million, up 6.4% from HK$3,224 million in 2014.
At year-end 2015, our retail portfolio was fully-let. Occupancy of our office portfolio was
99%, while that of the residential portfolio was 89%.
Recurring Underlying Profit, our key core leasing business performance indicator, and
Underlying Profit, were both HK$2,283 million (both up 5.5% from HK$2,163 million in
2014). These performances primarily reflected the continued improvement in gross profit
generated from our retail and office leasing activities. Basic earnings per share based on
Recurring Underlying Profit was HK214.83 cents (2014: HK203.34 cents), up 5.7%.
Our Reported Profit for 2015 was HK$2,903 million (2014: HK$4,902 million), down 40.8%.
This reflected a smaller fair value gain on the Group’s investment properties valuation
recorded this year. At year-end 2015, the external valuation of the Group’s investment
property portfolio increased by 1.6% to HK$69,810 million (2014: HK$68,735 million). This
in part reflected the more efficient design for Lee Garden Three, finalised in Q4 2015, as
30
Hysan Annual Report 2015 compared to the earlier valuation based on more generic assumptions. The higher external
valuation also reflected improved rental rates for the Group’s office investment property
portfolio. Shareholders’ Fund increased by 1.7% to HK$68,172 million (2014: HK$67,040
million).
Our financial position remains strong, with net interest coverage of 19.5 times (2014: 17.1
times) and net debt to equity ratio of 3.0% (2014: 4.2%).
Capital Management
The Board of Directors (the “Board”) is pleased to declare a second interim dividend of
HK107 cents per share (2014: HK100 cents). Together with the first interim dividend of
HK25 cents per share (2014: HK23 cents), the total distribution is HK132 cents per share
(2014: HK123 cents), representing a year-on-year increase of 7.3%. The dividend will be
payable in cash.
Hysan announced its first share repurchase since 2007 in August 2015, as part of our
commitment to dynamic capital management. 6.75 million shares were repurchased during
the year. Such repurchases should further enhance shareholders’ value, which will include
the associated improvement in net asset value and earnings per share. We will closely
monitor the market and may continue our share repurchase during 2016.
Resilience and Flexibility
The challenging socio-political and global economic and financial conditions in 2015 will
continue into 2016 and create even greater uncertainty. This will be reflected in lower
consumer confidence, as reflected in dollars spent, and also in the frequency of visits and
consumer numbers.
The Yuan, while lower compared to the US dollar and against the pegged Hong Kong dollar,
is still strong compared to most other currencies. Increasingly sophisticated Chinese tourists
are more interested in visiting and spending their relatively strong Yuan in Europe and other
Asian destinations such as Japan.
Luxury retail had a challenging 2015. Hysan witnessed slower sales in this sector. Since we
anticipated that the market would normalise after strong growth during the past decade,
we committed to a strategy of diversification by pivoting our portfolio towards the
mid-to-affordable market and we leveraged on our leading position in children’s offerings
and in sport and lifestyle products.
Hysan continues to build on and fine-tune the clear positioning of our three hubs. Each hub
represents approximately one-third of our portfolio in size. Our well balanced and diversified
portfolio forms the platform for our retail strategy and will position Hysan well to meet the
challenges ahead.
Building upon a base that caters for a wider group of consumers, we have also maintained
our commitment to provide a unique and satisfying experience to our tenants, shoppers and
other visitors. For us, it is simply not enough to meet our customers’ expectations. We strive
to give experiences that delight and surprise our stakeholders’ expectations through
creativity, resourcefulness, professionalism, strong teamwork and the swift action of
everyone in the Hysan team.
31
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Chairman’s Statement
Our strategy “to exceed expectations” began with the enhancement of diversity in our retail
tenant mix. In recent years, we have built a retail portfolio anchored by more than 20
flagship stores covering a range of products and price points. By adding a significant
number of health and leisure brands and their products targeting different segments of
customers, both Hysan Place and the Lee Theatre hub have developed a more “sporty” look
and feel that appeals to those members of our society, both young and young-at-heart, who
focus on health and work-life balance.
Food and beverage (F&B) is an increasingly vital and integral part of retailing. Hysan
ensures a flow of new concepts which appeal to consumers’ increasing sophistication and
demands for all things original and exciting. Our F&B offering covers a range of price points
which attracts casual, chic, professional and business diners as well as family gatherings.
There are seven Michelin-starred or -recommended F&B outlets in the Hysan portfolio. Our
reputation as a “foodie haven” enhances our profile as a leisure venue that goes beyond
shopping.
We continued to devote significant resources to stage unique promotional activities and
programmes to increase foot traffic. Against a generally weak retail environment, the
annual foot traffic for the Hysan portfolio increased by around 5% in 2015 as compared to
2014. We differentiated from other shopping malls, which also significantly stepped up their
promotional activities, by working closely with our tenants to create targeted promotions to
support their marketing strategies.
Finally, we have further enhanced our customer service on all fronts. We clearly understand
that a commercial property owner’s attention should not end with its tenants, but also focus
on those who frequent its shops. As part of our drive to create positive customer
experiences, our initiatives have included continuous refinement of the Club Avenue V.I.P.
service, new events for our ever-popular Kids’ Zone programmes, and a new and enhanced
training setup for our front-line property management personnel.
Our clustering in the prime commercial district of Causeway Bay is a unique advantage. This
geographic concentration in one area powers and magnifies the effects of our diverse
tenant mix, our varied F&B offering, our significant number of flagship stores, our popular
promotional activities and our consistent and renowned customer service. We intend to
maintain a holistic approach to our portfolio in order to deliver a brand with a quality and
experience which is unique to
.
In 2015, our office portfolio continued to benefit from the significant demand for premium
office space by financial and related industries in Hong Kong. Whereas Mainland Chinese
securities and financial companies continued to take up the available limited supply of
space in the core central districts, other industries have looked towards Causeway Bay in
general, and Lee Gardens in particular, as a strong alternative to core central areas because
of our excellent facilities, amenities and transport ties.
A recent survey conducted by Hong Kong’s Community Business reiterated that commuting
convenience, good workplace facilities and the availability of nearby shops, restaurants and
entertainment are local workers’ most important criteria in achieving work-life balance. We
take pride in the fact that our office portfolio offers all these attractions in abundance.
Moreover, Lee Gardens Offices maintains a significant edge in cost effectiveness as
compared to other core areas like Central and Admiralty.
32
Hysan Annual Report 2015 The Lee Garden Three redevelopment is progressing well and is on schedule to be completed
in late 2017, slightly earlier than the original estimated date of 2018. A major feature of
this project is the addition of around 200 parking spaces. These will further channel
shoppers with cars into our portfolio, and will significantly alleviate the parking issues
experienced in Causeway Bay.
On the environmental and community fronts, Lee Garden One’s office portion was a proud
recipient of a provisional BEAM Plus Platinum Certification for existing buildings, Hong
Kong’s first commercial building’s offices to be on the way to achieving this significant
green building standard. We are also delighted to report that our RE:SHARE A WISH Xmas
Baubles upcycling programme raised more than HK$1.1 million for Save the Children
through the sales of limited-edition designer baubles made from recycled water bottles.
Outlook
As the world’s most visited city, we are confident that Hong Kong will remain relevant and
vital, in its own right and as a part of an increasingly outward looking China. 2016 will see
continued adjustments, particularly in the high end retail sector, while volatility in the
currency and equity markets and a slower China growth will contribute to a challenging year.
Hysan prides itself on a deep understanding of and commitment to Hong Kong, especially
the commercial heart of Causeway Bay. It is important to recognise the resilience that our
diversified and balanced portfolio and our balance sheet strength provide. We are confident
that Hysan is uniquely placed to capture opportunities as Hong Kong benefits from the
continuing development of China. We anticipate our Group will deliver another year of
steady performance.
Appreciation
On behalf of the Board, I would like to thank our management team and colleagues for all
their commitment and hard work in 2015. I would also like to thank my fellow directors for
their advice throughout the year. My special thanks to Mr. Nicholas Charles ALLEN, who is
stepping down from the Board upon the conclusion of our annual general meeting in May.
Nick joined Hysan as an Independent non-executive Director back in November 2009. I am
grateful for his wise counsel and diligent work as Chairman of the Audit Committee. I would
also like to thank Ms. Wendy Wen Yee YUNG, our Executive Director from April 2008 until
October 2015, for all her contributions to Hysan, and wish her every success in her future
endeavours.
Irene Yun Lien LEE
Chairman
Hong Kong, 8 March 2016
33
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business 2
36
The Marketplace
40 Management’s Discussion
and Analysis
40 Strategy and Review of Results
41 Review of Operations
46 Financial Review
49 Treasury Policy
54
Internal Controls and
Risk Management Report
34
Hysan Annual Report 2015
Financial
Performance
35
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business The Marketplace
Hong Kong economy
The Hong Kong economy recorded growth of 2.4% for the full year. Private consumption
increased 4.8% under broadly favorable job and income conditions, although a slower pace
was recorded in the second half of the year. Investment expenditure experienced a decline
of 2.2%, dragged lower by public sector activities. Exports of goods declined by 1.7% and
exports of services by 0.6% mainly due to Mainland China’s subdued economic
performance, as well as weakness in other advanced markets.
Real Gross Domestic Product*
Year-on-year % change
4.8%
6
5
4
3
2
1
0
3.1%
2.6%
2.4%
1.7%
2011
2012
* In chained (2013) dollars
2013
2014
2015
Source: Census and Statistics Department (data as of March 2016)
Retail
Retail sales recorded an annual decline of 3.7% as compared to the previous year. During
the year, sales of discretionary products, including luxury and clothing, experienced a
notable drop. Some non-discretionary categories, including supermarket and food-related
items, recorded growth. In addition, strong sales of electronic goods and computers were
recorded for the first three quarters of the year. However, these positive factors were unable
to compensate for the drop.
A 3% decline in the number of Mainland China visitors during the year was one of the core
reasons for the decline in retail sales. In addition, the price corrections in the residential
property and stock market that occurred since third quarter of the year also affected local
spending sentiment.
Retail categories that recorded year-on-year growth included i) other consumer durable
goods (up 16.3%, which included electronic goods and computers), ii) food, alcoholic drinks
and tobacco (up 5.9%), iii) supermarket (up 1.3%). By contrast, sales of jewelry, watches
and clocks and valuable gifts recorded a significant decline (down 15.6%) while sales of
clothing, footwear and allied products also dropped (down 6.7%).
36
Hysan Annual Report 2015 Categories
2015 growth rate
Mainly non-discretionary
products and consumer
electronics
Other consumer durable goods (including
electronic goods and computers)
+ 16.3%
Food, alcoholic drinks and tobacco
Supermarket
+ 5.9%
+ 1.3%
Discretionary products
Jewelry, watches and clocks, valuable gifts
- 15.6%
Clothing, footwear and allied products
- 6.7%
Source: Census and Statistics Department (data as of March 2016)
Hong Kong Total Retail Sales
Total Number of Visitors
HK$ billion
Year-on-year % change
Million
500
450
400
350
300
250
200
150
100
50
0
494
493
475
445
406
24.9%
11.0%
9.8%
2011
2012
Total Retail Sales
2013
2014
Year-on-year % change
-0.2%
-3.7%
2015
Source: Census and Statistics Department (data as of March 2016)
36
32
28
24
20
16
12
8
4
0
-4
70
60
50
40
30
20
10
0
61
22.3%
77.7%
59
22.3%
77.7%
54
25.0%
75.0%
49
28.2%
71.8%
42
37.0%
63.0%
2011
2012
2013
2014
2015
Number of Other Visitors
Number of Mainland China Visitors
Source: Hong Kong Tourism Board (data as of March 2016)
According to Jones Lang LaSalle, rents for retail premises in prime shopping centres grew
mildly at around 1 percent for the whole year in an environment of declining retail sales,
largely due to the limited supply pipeline (only one major prime retail development totaling
around 65,455 square feet was completed in 2015). However, the rental trend started to
flatten out in the fourth quarter, reflecting worsening local sentiment.
Premium Prime Shopping Centre Rental Index (2009 Q4=100)
Index
160
150
140
130
120
110
100
90
80
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2013
2015
2012
2014
2011
Source: Jones Lang LaSalle (data as of March 2016)
37
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business The Marketplace
Office
Despite weaknesses in the global economy, the Grade “A” office market recorded good
growth. This strong rental performance was a result of robust demand from China firms that
offset the downsizing of many MNC firms. China companies accounted for 37% of new
lettings in Central during the year. In particular, the leasing market was very active in the
second quarter on the back of a buoyant stock market.
According to Jones Lang LaSalle, although new Grade “A” office supply totaled 1.8 million
square feet in 2015, which reached a similar level to the average supply of the last 10 years
(1.9 million square feet), the average net take-up of 2.9 million square feet in 2015 was far
higher than the average of the last 10 years (1.9 million square feet).
As at the end of December 2015, almost all districts (except Tsim Sha Tsui) recorded a
decline in the vacancy rate due to improving demand. As a result, all Grade “A” office sub-
markets witnessed rental growth. Recording annual growth of 13.3%, Central outperformed
other districts namely Tsim Sha Tsui (7.2%), Causeway Bay / Wanchai (7.1%), Kowloon
East (2.6%) and Hong Kong East (2.5%).
Grade “A” Office Vacancy Rate in 2014 and 2015
Grade “A” Office Rental Value
%
10
8
6
4
2
0
6.4%
5.5%
3.7%
2.7%
2.2%
1.2%
1.6%
1.1%
1.3%1.1%
Central
Causeway Bay/
Wanchai
Tsim Sha Tsui Hong Kong
Kowloon East
East
HK$ per square foot
110
100
90
80
70
60
50
40
30
20
10
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2013
2012
2014
2011
2015
2014 year-end
2015 year-end
Central
Causeway Bay/Wanchai
Source: Jones Lang LaSalle (data as of March 2016)
Source: Jones Lang LaSalle (data as of March 2016)
38
Hysan Annual Report 2015 Luxury Residential
Luxury residential rents bottomed out last year and began to pick up in 2015. The typical
tenant profile has shifted and there were fewer traditional western expatriates and more
Asians, including Mainland and Hong Kong returnees.
During the year, flats in the lower-end market remained the most active. However, the
top-end segment continued to suffer from a limited pool of high-budget tenants due to a
thinning in the ranks of senior executives in the financial sector.
According to Jones Lang LaSalle, overall luxury residential rents increased 3.4% in 2015 as
compared to a decline of 4.1% in 2014.
Luxury Residential Rental Index (2009 Q4=100)
Index
130
125
120
115
110
105
100
95
90
85
80
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2013
2012
2015
2014
2011
Source: Jones Lang LaSalle (data as of March 2016)
39
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Management’s Discussion
and Analysis
Hysan’s aggregate gross floor area was approximately 4.1 million square feet of retail, office
and residential investment properties in Hong Kong, excluding the site of the forthcoming
Lee Garden Three currently under redevelopment.
Strategy
The Group aims at providing our shareholders with a steady growth of total return over a
reasonable investment holding period. The Group maintains a near term focus in Causeway
Bay, our historic home base, and begins to seek investment and development opportunities
beyond our core portfolio for longer term growth.
We adopt a differentiating strategy to create and add value to our existing properties through
redevelopment, enhancement and active portfolio management. In addition to building a
strong tenant mix, we leverage on our distinctive physical environment to establish a unique
commercial community of three retail hubs and an office portfolio with diversity and value
points, while responding to our customers’ changing tastes and addressing their concerns for
the environment and work-life balance.
In our pursuit of new investment opportunities for future long-term growth, we adopt stringent
financial discipline and we shall continue to place emphasis on our ability to add value.
Review of Results
The Group’s turnover in 2015 was HK$3,430 million, an increase of 6.4% from HK$3,224
million in 2014. The rise principally reflected higher average occupancy during the year and
positive rental reversion. Both the retail and office sectors were up, while the residential sector
declined slightly.
The turnover of each sector is shown as below:
Retail sector
Office sector
Residential sector
2015
HK$ million
2014
HK$ million
Change
%
1,902
1,243
285
3,430
1,801
1,136
287
3,224
+5.6
+9.4
-0.7
+6.4
The Group’s Recurring Underlying Profit and its Underlying Profit were both HK$2,283 million,
up 5.5% from HK$2,163 million in 2014. The performance of these two profit indicators
primarily reflected the continued improvement in gross profit generated from our retail and
office leasing activities. Basic earnings per share based on Recurring Underlying Profit were
HK214.83 cents (2014: HK203.34 cents), up 5.7%.
Our Reported Profit for 2015 was HK$2,903 million (2014: HK$4,902 million), a 40.8%
decrease from the year before, principally reflecting a smaller fair value gain on the Group’s
investment properties valuation recorded this year.
Recurring Underlying Profit and Underlying Profit
Fair value change on investment properties located in
– Hong Kong
– Shanghai*
Reported Profit
* The investment properties are held by an associate of the Group.
2015
HK$ million
2014
HK$ million
2,283
2,163
616
4
2,903
2,732
7
4,902
Change
%
+5.5
-77.5
-42.9
-40.8
40
Hysan Annual Report 2015 Review of Operations
As at 31 December 2015, about 83% of the Group’s investment properties by gross floor
area were retail and office properties in Causeway Bay, and the remaining 17% represented
residential properties in the Mid-Levels.
In terms of turnover contributions by the different business portfolios, about 56% was
attributable to retail, 36% to office and 8% to residential properties.
8%
36%
56%
Retail: HK$1,902 million
Office: HK$1,243 million
Residential: HK$285 million
Key PeRfoRmanCe IndICatoRs
While many factors contribute 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 the property
expenses ratio (as a percentage of turnover) to assess cost effectiveness.
Key Performance
Indicators
Turnover Growth
Occupancy Rate
definition
Business Performance (vs 2014)
Rental revenue in 2015
vs that in 2014
Retail: +5.6% (vs +7.3%)
Office: +9.4% (vs +4.7%)
Residential: -0.7% (vs -4.3%)
Percentage of total area
leased*/
total lettable area* of
each portfolio
Retail: fully-let (2014: fully-let)
Office: 99% (2014: 98%)
Residential: 89% due to ongoing renovation
of one of the blocks (2014: 97%)
Property Expenses
Ratio
Property expenses
divided by turnover
12.1% in 2015 (2014: 12.5%) as a result of
the healthy turnover growth
*Source of underlying data: Internal company data
Note: No changes have been made to the source of data or calculation methods used compared to 2014.
41
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Management’s Discussion and Analysis
RetaIl PoRtfolIo
Turnover
5.6%
Rental reversion
around 25%
Occupancy
fully-let
Foot traffic
around 5%
Overall estimated
tenant sales
around 10%
Hysan’s retail portfolio turnover grew 5.6% to HK$1,902 million (2014: HK$1,801 million),
including turnover rent of HK$71 million (2014: HK$93 million). The lower turnover rent
reflects the Group’s strategy of increasing the base rent over the past few years, as a
response to our anticipation of the retail sales growth normalisation.
The portfolio reported positive rental reversion in rental renewals, reviews and new lettings,
with average increase of around 25%. The portfolio was fully-let as at 31 December 2015
(31 December 2014: fully-let).
The entire portfolio’s total foot traffic increased by around 5%, when compared to the year
before. This was achieved against a fall in overseas visitors coming to Hong Kong in 2015
when compared to 2014. In particular, the foot traffic for the Lee Theatre hub improved by
around 10% as consumers are seen to gravitate towards trendy and good quality low-to-
mid-price items, such as those from Uniqlo, Cotton On, Aland and Muji, as well as our
improved food and beverage offerings.
The estimated overall tenant sales increase within Hysan’s retail portfolio was around 10%
in 2015, outperforming Hong Kong’s overall retail sales which showed a 3.7% decline.
Among the three hubs, Hysan Place achieved around 20% in estimated tenant sales growth.
The tenant mix was refined throughout the year with the addition of 32 new tenants, many
providing themed unisex sports and leisure offerings, like Columbia, Nike and The North
Face. These offerings were complemented by unique activities and events created to meet
local consumers’ demand for healthier lifestyles. lululemon athletica, for example, opened
its largest Hong Kong store and provided yoga activities on a regular basis in Hysan Place’s
Sky Garden. Our original “Living – Lee Gardens” and “Green Wonders” events also helped to
consolidate the hub’s reputation as a healthy living destination. Other major placemaking
events like Avengers 2 and Wooderful Life drew the attention of traditional and social
media, which translated into exceptional mall traffic during these exhibitions. Other
significant changes and additions included DFS T-Galleria’s new lower-priced beauty hall
concept at the basement floor, as well as LINE’s first ever Hong Kong outlet. Kyo Hayashiya,
a 262-year-old Japanese tea shop, also opened its first outlet outside of Japan in Hysan
Place.
42
Hysan Annual Report 2015 Lee Gardens hub, with its premium positioning, saw a drop in estimated tenant sales. These
figures were impacted by the slowdown in tourist spending, the depressed consumer
sentiment due to local stock market volatility, as well as the life cycle and distribution
strategies of certain brands. This hub’s food and beverage offerings, including three Michelin
Guide-starred or -recommended restaurants, continued to be very popular and saw a strong
double-digit percentage growth in tenant sales.
Lee Theatre hub saw a healthy percentage growth of around 5% in estimated tenant sales.
Both the Lee Theatre Plaza lower floor anchor stores and the upper floor food and beverage
outlets performed well. Putien, Sorabol and Wu Kong are among Lee Theatre Plaza’s top
restaurants and are recommended by the Michelin Guide. The sports and lifestyle stores in
Leighton Centre also saw good tenant sales growth. adidas Originals, Asics and Onitsuka
Tiger were among the 2015 additions, while Fila and Haglöfs joined the ground floor street
front at the turn of the year.
We strive to strengthen the links among the Group, our tenants and their customers. In 2015,
we partnered with a premium brand on an online to offline project whereby a number of
world-wide exclusive items were to be reserved online in the Club Avenue app and picked up
in store in Lee Gardens. The results were very encouraging and several more brands decided
to participate in similar programmes. We will continue to work closely with our tenants and
find new ways to provide unique and delighting shopping experiences for our shoppers.
Retail Lease Expiry Profile (As at 31 December 2015)
%
40
30
20
10
0
31%
23%
24%
22%
2016
2017
2018
2019 and beyond
43
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Management’s Discussion and Analysis
offICe PoRtfolIo
Turnover
9.4%
Rental reversion
around 30%
Occupancy
99%
The Group’s office portfolio turnover grew by 9.4% to HK$1,243 million (2014: HK$1,136
million). This reflected positive rental reversion on renewals, reviews and new lettings, with
an average rental increase of around 30%.
The portfolio’s occupancy was 99% as at 31 December 2015 (31 December 2014: 98%).
Office space vacancy remained tight throughout Hong Kong in 2015, even though leasing
activities experienced some moderation towards the end of the year. One factor influencing
generally strong demand was the establishment or expansion of local and mainland
securities and financial companies riding on the launch of the Shanghai-Hong Kong stock
connect scheme, and on anticipation of the commencement of its Shenzhen-Hong Kong
counterpart. Although these companies would consider the core Central district as their first
choice, quality companies in other industries look towards Causeway Bay in general, and
Lee Gardens in particular, as a highly convenient office venue. They recognised Hysan’s
office portfolio as a genuine alternative to Central and Admiralty, since we offer a variety of
retail and leisure outlets in the area, as well as being an exceptional transport hub. In addition,
Lee Gardens Offices maintains an edge in cost effectiveness when compared to other core
areas. In 2015, Commerzbank, Bank of Communications and Akamai Technologies were
among the major corporations which joined Hysan’s office portfolio as tenants.
The portfolio maintained a balanced tenant mix, with the top four industries being
insurance, professional and consulting, high-end retailers and banking and finance. These
industries represent 54% of our office lettable floor area, and no category took up more
than 20% of the total lettable area.
Office Tenant Profile by Area Occupied as at Year-end
21.5%
15.6%
21.6%
15.7%
Professional and Consulting
Insurance
High-end Retailers
Banking and Finance
Semi-retail
Marketing
Information Technology
Consumer Products
Others
3.2%
5.5%
6.9%
2015
14.2%
12.4%
4.7%
5.1%
5.9%
2014
14.2%
12.5%
8.6%
12.1%
9.0%
11.3%
Office Lease Expiry Profile (As at 31 December 2015)
36%
25%
21%
17%
2016
2017
2018
2019 and beyond
%
40
30
20
10
0
44
Hysan Annual Report 2015 ResIdentIal PoRtfolIo
Turnover
0.7%
Rental reversion
around 5%
Occupancy
89%
The Group’s residential portfolio (Bamboo Grove on Kennedy Road) saw a small turnover
drop of 0.7% to HK$285 million (2014: HK$287 million). This was attributable to renovation
work being carried out in one of the blocks with a number of units vacated in the second
half of the year. The portfolio’s occupancy was 89% at 31 December 2015 (31 December
2014: 97%).
However, there was positive rental reversion on renewals, reviews and new lettings at
Bamboo Grove, with an average rental increase of around 5%, due to an improvement in
demand for quality executive rentals.
As the renovation project progresses, Bamboo Grove will continue to improve its services
and facilities to ensure the provision of a superior international living experience for its
tenants.
lee GaRden tHRee PRojeCt
Piling, excavation and foundation works of this project was completed in the first quarter of
2016 for the commencement of the basement and superstructure construction. The project
is on schedule for its anticipated completion in late 2017, slightly ahead of its original
estimation of early 2018.
lee GaRden one enHanCement PRojeCt
The Lee Garden One ground floor lobby and higher floors retail space enhancement project
is making good progress. The first phase construction work, revamping the ground floor
lobby and adding three elevators, was completed in July 2015 as scheduled. The second
phase construction work for new shop space commenced in the third quarter of 2015.
The entire project is scheduled to be completed in the middle of 2016.
Lee Garden One Offices was awarded the first provisional BEAM Plus Platinum Certificate for
an existing commercial building in Hong Kong.
45
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Management’s Discussion and Analysis
Financial Review
A review of the Group’s results and operations is featured in the preceding sections. This
section deals with other significant financial matters.
oPeRatInG Costs
The Group’s operating costs are generally classified as property expenses (direct costs and
front-line staff wages and benefits) and administrative expenses (indirect costs largely
representing payroll related costs of management and head office staff).
Property expenses increased by 2.5% to HK$414 million (2014: HK$404 million), mainly
due to higher marketing expenses to enhance shopping attractions. Coupled with an
increase in rental income, the property expenses to turnover ratio improved slightly from
12.5% to 12.1% as compared to 2014.
Administrative expenses rose by 9.3% to HK$234 million (2014: HK$214 million). This
reflected human resources upskilling and the filling of previously vacant positions, as well as
salary increment.
fInanCe Costs
Finance costs reduced by 10.5% to HK$204 million (2014: HK$228 million) in 2015. The
decrease was attributable to the lower average debt level in 2015 as compared to 2014
after repayment of HK$1,582 million debts. Among these debts, HK$1,482 million of the
borrowings were on a floating rate basis, which generally carried lower effective interest cost
compared with fixed rate debts. As a result, the Group’s average cost of finance in 2015 was
3.5%, slightly higher than 3.2% reported for 2014.
Further discussion of the Group’s treasury policy, including debt and interest rate
management, is set out in the “Treasury Policy” section.
46
Hysan Annual Report 2015 RevalUatIon of Investment PRoPeRtIes
The Group’s investment property portfolio was valued at 31 December 2015 by Knight
Frank Petty Limited, an independent professional valuer, on the basis of open market value.
The amount of this valuation was HK$69,810 million, an increase of 1.6% from HK$68,735
million at 31 December 2014.
The valuation at year-end 2015, when excluding property under redevelopment, principally
reflected improved rental rates for the Group’s office investment property portfolio. The
increase in valuation of property under redevelopment was mainly due to the more efficient
design, finalised in Q4 2015, as compared to the earlier valuation based on more generic
assumptions. The capitalisation rates of each portfolio remained unchanged from those
used as at 31 December 2014.
The following shows the property valuation of each portfolio at year-end.
Retail
Office
Residential
Properties under redevelopment*
2015
HK$ million
2014
HK$ million
Change
%
34,334
23,110
7,729
65,173
4,637
69,810
34,313
22,684
7,718
64,715
4,020
68,735
+0.1
+1.9
+0.1
+0.7
+15.3
+1.6
* Properties under redevelopment is valued at site value plus construction costs expended up to date.
Fair value gain on investment properties (excluding capital expenditure spent on the
Group’s investment properties) of HK$695 million (2014: HK$2,940 million) was recognised
in the Group’s consolidated income statement for the year.
Investments In assoCIates
The Group’s share of results of associates decreased by 2.4% to HK$246 million (2014:
HK$252 million), due to a smaller revaluation gain of the Shanghai Grand Gateway project,
of which the Group owns 24.7%, as compared to last year. As at 31 December 2015,
properties at Shanghai Grand Gateway had 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$4 million (2014: HK$7 million).
otHeR Investments
In addition to placing surplus funds as time deposits in banks with strong credit ratings, the
Group also invested in investment grade debt securities. This helped to preserve the Group’s
liquidity and to enhance interest yields.
Investment income, comprising mainly of interest income, amounted to HK$54 million
(2014: HK$68 million). This principally reflected lower average investment amount as
matured debt was repaid without refinancing, and lower average interest yield as Renminbi
investments (which carried a higher yield) was reduced, as compared to 2014. As at
31 December 2015, all RMB investments open positions have been hedged.
Further discussion of the Group’s foreign exchange management is set out in the “Treasury
Policy” section.
47
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Management’s Discussion and Analysis
CasH flow
Cash flow of the Group during the year is summarised below.
Operating cash inflow
Investments
Financing
Interest and taxation
Dividends paid and proceeds on exercise of
options
Capital expenditure
Consideration for shares repurchased
net cash inflow (outflow)
* n/m – not meaningful
2015
HK$ million
2014
HK$ million
Change
%
2,908
1,250
(1,587)
(480)
(1,454)
(414)
(215)
8
2,712
750
(1,114)
(439)
(1,363)
(591)
–
(45)
+7.2
+66.7
+42.5
+9.3
+6.7
-29.9
n/m
n/m
The Group’s net operating cash inflow was HK$2,908 million (2014: HK$2,712 million),
HK$196 million higher than in 2014, reflecting the growth in our core leasing business. Net
cash from investments was HK$1,250 million (2014: HK$750 million), mainly attributable to
reduction in investments in time deposits with longer tenors, as compared to 2014.
Net cash used in financing was HK$1,587 million (2014: HK$1,114 million). This principally
reflected the repayment of HK$850 million bank loans and HK$732 million medium term
notes during the year. The Group paid dividends of HK$1,330 million (2014: HK$1,255
million), being the 2014 second interim dividend of HK100 cents per share and the 2015
first interim dividend of HK25 cents per share.
CaPItal exPendItURe and manaGement
The Group is committed to enhancing the asset value of its investment property portfolio
through selective asset enhancement and redevelopment. The Group has also 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 during the year was HK$414 million (2014: HK$591 million).
sHaRe RePURCHase
As part of Hysan’s capital management strategy, the Group repurchased 6.75 million of its
own shares during 2015, which should further enhance shareholders’ value, at an aggregate
consideration of HK$215 million (2014: nil). The average purchase price per share was
HK$31.78.
48
Hysan Annual Report 2015 Treasury Policy
maRKet HIGHlIGHts
2015 was characterised by the divergent economic performances of the major countries. On
one hand, with steady economic growth in the U.S., the Fed decided to increase the federal
funds rate in December. On the other hand, other economies like the Euro zone and Japan
are experiencing economic slowdown and even sliding into recession. Central banks in these
countries, hoping to boost growth, decided to provide further liquidity and even introduced
negative interest rates.
China is also facing economic slowdown with GDP growth in 2015 below 7%. This
slowdown had significant spill-over effects on the rest of the world, in particular on the
equity and commodity markets. It also had major impacts on the retail markets in Hong
Kong as tourist numbers from the PRC and their spending continued to fall. Investors are
expecting China to adopt measures to further provide liquidity to the market to spur growth
in 2016.
CaPItal stRUCtURe manaGement
Despite the interest rate tightening in the U.S., the banking system of Hong Kong continued
to benefit from abundant liquidity, with 3-month Hibor remaining low in the range of
0.37% to 0.42% throughout the year. In regard to the Hong Kong bank loans market, the
credit margin for companies with credit rating of investment grade saw a modest decline.
With ample cash and bank deposits on hand, equivalent to HK$2,804 million at year-end of
2015 (2014: HK$3,640 million), the Group did not arrange any new financing in the year.
On the contrary, the Group repaid HK$850 million bank loans and HK$732 million of
medium term notes during the year upon their maturities. As a result, the outstanding gross
debt1 of the Group was HK$4,875 million (2014: HK$6,457 million) at year-end of 2015, a
decrease of HK$1,582 million compared with 2014. All the outstanding borrowings are on
an unsecured basis.
The Group always strives to lower borrowing margin, to diversify funding sources and to
maintain a suitable maturity profile relative to the overall use of funds. Because of the
repayment of bank loans in 2015, debts sourced from capital markets increased to 94.9%
(2014: 83.0%) at year-end of 2015. The Group continued to maintain long-term
relationships with a number of local and overseas banks in order to diversify its funding
sources. At year-end of 2015, seven local and overseas banks provided bilateral banking
facilities to the Group as funding alternatives.
1 The gross debt represents the contractual principal payment obligations at 31 December 2015. However, in accordance with
the Group’s accounting policies, the debt is measured at amortised costs, using the effective interest method. As disclosed in
the consolidated statement of financial position as at 31 December 2015, the book value of the outstanding debt of the
Group was HK$4,859 million (31 December 2014: HK$6,447 million).
49
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Management’s Discussion and Analysis
The following graph shows the percentages of total outstanding gross debts sourced from
banks and the debt capital markets in the past five years.
Sources of Financing at Year-end
HK$ million
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
56.9%
54.2%
43.1%
45.8%
2011
Bilateral Bank Loans
2012
73.5%
26.5%
2013
Capital Market Issuances
83.0%
17.0%
2014
94.9%
5.1%
2015
The Group also strives to maintain an appropriate maturity profile. As at 31 December
2015, the average maturity of the debt portfolio was about 6.3 years (2014: 5.6 years), of
which about HK$250 million or 5.1% of the outstanding gross debt will be due in less than
one year. Given that the Group had cash and bank deposits of HK$2,804 million, the Group
is able to meet the debt repayment in 2016 without much refinancing pressure.
The graph below shows the debt maturity profile of the Group at 2015 and 2014 year-end.
Debt Maturity Profile at 2015 and 2014 Year-end
2015
250 1,015
3,610
2014
1,581
250 450
4,176
0
1,000
2,000
3,000
4,000
5,000
6,000
8,000
Gross Debt Amount (HK$ million)
7,000
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
50
Hysan Annual Report 20156,4574,875 As part of Hysan’s capital management strategy, the Group completed repurchases of 6.75
million shares through the Hong Kong Stock Exchange in 2015, which would further
enhance shareholders’ value. Despite the share repurchase, the Group’s gearing ratio, as
measured by Net Debt to Equity ratio1, dropped from 4.2% at year-end of 2014 to 3.0% at
year-end of 2015 as cash inflow from business further strengthened.
The Group’s Net Interest Coverage2 also improved to 19.5 times for 2015 (2014: 17.1
times) due to continuous increase in revenue across our portfolio and lower debt level. The
low gearing and strong ability to meet interest payments reflected the Group’s strong ability
to raise further debt if there is any need.
The graph below shows the level of leverage and our ability to meet interest payment
obligations in the past five years.
Net Debt to Equity and Net Interest Coverage at Year-end
16.8x
6.2%
15.4x
5.3%
12.3x
7.6%
%
20
16
12
8
4
0
19.5x
Times
20
17.1x
16
12
8
4
0
4.2%
3.0%
2011
Net Debt to Equity
2012
2013
2014
2015
Net Interest Coverage (times)
lIqUIdIty manaGement
Recurring cash flows from our business continued to remain steady and strong. Accordingly,
the Group maintained investment-grade credit ratings of A3 as rated by Moody’s and BBB+
as rated by Standard and Poor’s.
As at 31 December 2015, the Group had cash and bank deposits totalling about HK$2,804
million (2014: HK$3,640 million). The decrease of deposits was mainly due to debt
repayment. All the deposits are placed with banks with strong credit ratings and the
counterparty risk is monitored on a regular basis. In order to preserve liquidity and enhance
interest yields, the Group invested HK$1,350 million (2014: HK$1,205 million) in debt
securities. In 2014, the Group also invested HK$80 million in principal-protected
investments.
Further liquidity, if needed, is available from the undrawn committed facilities offered by
the Group’s relationship banks. These facilities, which amounted to HK$750 million at
year-end 2015 (2014: HK$1,200 million), essentially allow the Group to obtain additional
liquidity as the need arises.
1 Net Debt to Equity is defined as borrowings less time deposits, cash and bank balances divided by shareholders’ funds
2 Net Interest Coverage is defined as gross profit less administrative expense before depreciation divided by net interest
expenses
51
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Management’s Discussion and Analysis
InteRest Rate manaGement
Appropriate hedging strategies, if necessary, are adopted to manage exposure to projected
movements in the interest rate. As a result of repayment of floating rate debts that
generally carried lower effective interest cost compared with fixed rate debts, the average
cost of finance increased to 3.5% in 2015 compared to 3.2% in 2014. The fixed rate debt
ratio also increased to 94.9% at year-end of 2015 from 76.3% at year-end of 2014.
As the U.S. has entered an interest rate normalisation cycle, the Group believes that interest
rates will rise in coming few years. We expect the higher proportion of fixed rate debts will
reduce the overall interest rate exposures.
The diagram below shows the fixed rate debt and floating rate debt portions in the past five
years.
Fixed Rate Debt and Floating Rate Debt Portions
HK$ million
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
54.8%
47.0%
45.2%
53.0%
32.0%
68.0%
23.7%
76.3%
5.1%
94.9%
2011
Fixed rate debt
2012
2013
2014
2015
Floating rate debt
The diagram below shows the Group’s debt levels and average cost of finance in the past
five years.
Debt Levels and Average Costs of Finance
HK$ million
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
6,610
3.0%
3,649
7,540
3.1%
6,457
3.2%
3.5%
4,875
5,899
2.9%
3,588
3,417
2,817
2,071
2011
2012
2013
2014
2015
%
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Year-end Gross Debt
Year-end Net Debt
(Gross debt less time deposits,
cash and bank balances)
Average Cost of Finance
(Total finance costs before capitalisation
divided by average gross debt)
52
Hysan Annual Report 2015 foReIGn exCHanGe manaGement
The Group aims to have minimal mismatches in currency and does not speculate in currency
movements for debt management. On the funding side, with the exception US$300 million
fixed rate notes, which have been hedged by an appropriate hedging instrument, all of the
Group’s borrowings were denominated in Hong Kong dollars. For the US$300 million fixed
rate notes issued in January 2013, hedge was entered to effectively convert the borrowing
into Hong Kong dollars.
On the investment side, the Group’s outstanding foreign currency balances in cash, time
deposits and debt securities amounted to US$160 million and RMB135 million, of which
US$93 million and RMB135 million were hedged by foreign exchange forward contracts. As
at 31 December 2015, all RMB investments open positions have been hedged as the Group
expected greater volatility of the currency following its depreciation in August 2015 after
the refinement of its rate fixing mechanism.
Other foreign exchange exposure mainly relates to investments in the Shanghai project.
These unhedged foreign exchange exposures amounted to the equivalent of HK$3,683
million (2014: HK$4,154 million) or 4.7% (2014: 5.3%) of total assets.
Use of deRIvatIves
As at 31 December 2015, outstanding derivatives were mainly related to the hedging of
foreign exchange exposures. Strict internal guidelines have been established to ensure
derivatives are used to manage volatilities or adjust the appropriate risk profile 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 basically reflects the credit quality of the counterparty.
53
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Internal Controls and
Risk Management Report
Responsibility
Our Board of Directors (the “Board”) has the overall responsibility to ensure that sound and
effective internal controls are maintained, while management is responsible to design and
implement an internal controls system to manage risks. A sound and effective system of internal
controls is designed to identify and manage the risk of failure to achieve business objectives.
Our Risk Management Framework
The Board is responsible for the Group’s internal controls system and for reviewing its
effectiveness. The Audit Committee supports the Board in monitoring our risk exposures, the
design and operating effectiveness of the underlying risk management and internal controls
systems. The Audit Committee, acting on behalf of the Board, oversees the following process:
(i) regular reviews of the principal business risks, and control measures to mitigate, reduce or
transfer such risks; the strengths and weaknesses of the overall internal controls system and
action plans to address the weaknesses or to improve the assessment process;
(ii) regular reviews of the business process and operations reported by the Internal Audit
Department, including action plans to address the identified control weaknesses and status
update and monitor in implementing its recommendations; and
(iii) regular reports by the external auditors of any control issues identified in the course of their
work and the discussion with the external auditors of the scope of their respective review and
findings.
The Audit Committee will then report to the Board after due review of the effectiveness of the
Group’s system of internal controls.
The Board considers the works and findings of the Audit Committee in forming its own view on
the effectiveness of the system.
(Please also see “Audit Committee Report” on page 130 regarding the Committee’s detailed
review work, including the forms of “assurance” received from management, external auditor,
and internal auditor).
Hysan Risk management framework
The Board
“Top-down”
Overseeing,
identification,
assessment and
mitigation of risk
at corporate level
• Has overall
responsibility for
the Group’s risk
management
and internal
controls system
• Sets strategic
objectives
• Reviews the
effectiveness of our
risk management
and internal
controls systems
• Monitors the
nature and
extent of risk
exposure for our
major risks
• Provides direction
on the
importance of risk
management and
risk management
culture
Management
Audit Committee
Internal Audit
• Designs, implements,
and monitors risk
management and
internal controls system
• Assesses our risks and
mitigating measures
Company-wide
• Supports the Board in
• Supports the Audit
Committee in reviewing
the effectiveness of our
risk management and
internal controls system
monitoring risk
exposure, design and
operating effectiveness
of the underlying risk
management and
internal controls systems
Operational Level
• Risk identification, assessment
• Risk management process and internal
and mitigation performed across
the business
controls practised across business
operations and functional areas
“Bottom-up”
Identification,
assessment and
mitigation of risk
at business unit
level and across
functional areas
54
Hysan Annual Report 2015 2015 Review of Internal Controls Effectiveness
In respect of the year ended 31 December 2015, the Board considered the internal controls
system effective and adequate. No significant areas of concern that may affect the
financial, operational, compliance controls, and risk management functions of the Group
have been identified.
During the review, the Board also considered the resources, qualification/experience of staff
of the Group’s accounting and financial reporting function, and their training and budget
were adequate.
Hysan’s Internal Controls Model and Continuous
Improvement in our System
Our internal controls model is based on that set down by the Committee of Sponsoring
Organisations of the U.S. Treadway Commission (“COSO”) for internal controls, and has five
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.
Since 2012, we have put in place a phased improvement plan and progressed to further
enhance our internal controls and risk management system. The initial phase of the plan
focused on adopting a more risk-based (instead of process-based) approach to risk
identification and assessment. This approach enriches our ability to analyse risks and
respond to opportunities as we pursue our strategic objectives. Management reporting to
the Audit Committee has also been enhanced, including the presentation of special reports
on selected risk topics.
In the current phase, we aim to further integrate internal controls and risk management into
our business processes, including in annual budgeting and planning. The COSO framework
has been revised, effective December 2013. Instead of treating this as a framework-update
exercise, a holistic approach has been adopted, taking into consideration the Company’s
circumstances, including its ongoing internal controls and risk management improvement
plan as well as other strategic initiatives. (e.g. corporate social responsibility strategy and
reporting). All these further our ultimate objective to make our risk management system a
“live” one that is practised on a day-to-day basis by operating units.
55
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Internal Controls and Risk Management Report
• 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 690 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 sound 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.
• Risk assessment – we continue to drive improvements to our risk management process
and the quality of risk information generated, while at the same time maintaining a
simple and practical approach. Instead of setting up a separate risk management
department, we seek to have risk management features embedded within our operations
(leasing, property management, and projects) as well as functional areas (including
finance, human resources, IT, and legal). We aim to have a “live” risk management system
that is practised on a day-to-day basis by our operating units.
On an annual basis, department heads review and update their risk registers, providing
assurances that controls are both embedded and effective within the business.
Management also forms a risk management committee (headed by the Chief Executive
Officer) which sets the relevant policies and monitors potential weaknesses and action
items regularly. It is also responsible for identifying and assessing risks of a more macro
and strategic nature, including emerging risks.
This “top-down” approach is complemented by the “bottom-up” aspects and the
involvement of operating unit heads in identifying operational risks. These together
determine the Group’s major risks. Discussion sessions with all department heads led by
the Chief Executive Officer have been held, with a view to further enhancing the
“participatory” aspect of the overall risk assessment process.
56
Hysan Annual Report 2015 • Control activities; Information and Communicating – our core property leasing and
management business involves well-established business processes. Control activities have
traditionally been built on top-level reviews, segregation of duties; and physical controls.
Over the past few years, we have been formalising and documenting the control processes
in policies and procedures. Written policies and procedures with defined limits of
delegated authority are in place, which facilitate effective segregation of duties and
controls. A greater use of automation (information processing) is also being implemented.
The annual budgeting and planning process is one of our key control activities, which has
been refined to take into consideration risk factors. All operating units prepare their
respective operating plans pursuant to corporate objectives for consideration. In this
process, they are required to identify material risks that may impact the achievement of
their business objectives. Action items to mitigate the identified risks are developed for
implementation as well as for finalising the budget and business objectives. An annual
budget with financial targets, as approved by the Board, provides the foundation for the
allocation of resources. Variance analyses are regularly performed, and reported to
management and the Board. These help identify deficiencies and enables timely remedial
actions to be taken.
Capital expenditures monitoring is also significant given the capital-intensive nature of
our property business. Depending on strategic importance, cost / benefit and the size of
the projects, detailed analysis of expected risks and returns is submitted to operating unit
heads, Chief Financial Officer, Executive Directors or the Board for consideration and
approval. The criteria for assessment of financial feasibility are generally based on net
present value, payback period and internal rate of return from projected cash flow.
Management conducts an internal control self-assessment annually. All departments/
units heads have to complete relevant control self-assessment questionnaires and confirm
to the management that appropriate internal control policies and procedures have been
established and properly complied with.
• monitoring activities – the Board and Audit Committee oversee the process, assisted by
our Internal Audit Department. Management has enhanced its update reports to Audit
Committee on movements on major risks and appropriate mitigating measures. There are
3 Audit Committee meetings annually, with one meeting substantially devoted to internal
controls and risk management systems.
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Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Internal Controls and Risk Management Report
Further Strengthening of Our Underlying Systems
We have made further progress in strengthening our internal control and risk management
systems, highlighted as follows:
Risk assessment – enhanced monitoring of “emerging risks”
• Further strengthened the monitoring of material risks and
“emerging risks” (i.e. risks that are new or evolving, which have
potentially significant impact even though the likelihood of their
happening may not be certain). Management’s risk management
committee takes a key role in identifying and tracking these risks.
CEO also led further discussions with all department heads.
Examples include political / socio risks, economic risks, etc.
In the context of a
fast-changing global
and local
environment, the
monitoring of
“emerging risks” will
be a focus.
Control activities – policies and procedures
• Identified and implemented new policy to address the changing
regulatory environment. For instance, company policy relating to
the new competition law is in place. Seminars and workshops have
been held across the departments to educate and raise awareness
of the staff. This ensures that a more holistic approach is taken. It
also signifies the importance we place on the business practices,
which become more important in light of fast-changing regulatory
requirements and heightened stakeholder expectations.
Continual review and
refinement of
policies and
procedures in light of
the changing
external and internal
environment.
Control activities – corporate disclosure policy
• Reviewed and refined the corporate disclosure policy to guide its
stakeholder communications and the determination of inside
information in order to ensure consistent and timely disclosure.
Continual review and
refinement of
internal controls and
procedures for the
handling and
dissemination of
inside information.
monitoring – enhanced “management assurance” to the audit Committee and
the Board in their respective reviews
• Enhanced management update reports to the Audit Committee
and the Board on major risks the Group were facing, with special
reports on selected topics, e.g. risk to retail business.
• To further strengthen management’s “assurance” to the Audit
Committee and the Board, control self-assessment questionnaires
were rolled out across all departments. Department heads were
required to certify their departmental controls effectiveness
including identifying any control issues. This in turn backs up
management’s certification to the Audit Committee and the Board.
Facilitation and
enhancement of the
work of the Audit
Committee and the
Board in monitoring
our risk exposure.
Way Forward
Achieving a “live” risk management system on a day-to-day basis by our operating units is a
continuous voyage. We are committed to continually improving our risk management
framework and capabilities of the Group and shall continue on this path, with enhanced
integration of internal controls and risk management into our business processes.
58
Hysan Annual Report 2015 Our Risk Profile
Our approach for managing risk is underpinned by our understanding of our current risk
exposures, and how our risks are changing over time. The following illustrates the nature of
our major risks. Further analysis of our strategies is set out in other sections of the Annual
Report as indicated below:
Risk
Risk change
during 2015 description of risk change
Impact of macro-economic
developments on:
1. Office
2. Retail
3. Residential
4. Projects
5. Marketing
6. Human Resources
The office rental market rebounds during the year
with a significant drop in overall office market
vacancy. There is a strong demand of office
spaces in the office market from mainland China
financial institutions during the year due to their
expansion plans.
The retail market suffers from the fall in number of
tourists and the strength of the Hong Kong dollar,
which led to a negative growth in the Hong Kong
retail sales. As a result, retail tenants are more
reluctant to expand their retail enterprises,
including shop numbers or the footprints.
New supply remains tight in the residential
segment. Although the number of expatriates is
falling, there are more local movers which help to
sustain the vacancy of our property at a low level.
For more analysis and mitigating measures,
see “The Marketplace” and “Review of Operations”
Asset enhancement works at Lee Garden One
office lobby have commenced. Excavation and
other foundation works for Lee Garden Three have
commenced. Both projects are on schedule for
their completion in 2016 and late 2017
respectively.
For more analysis and mitigating measures,
see “Review of Operations”
The fall in number of tourists together with the
weak retail market lead landlords to invest and
inject more resources to marketing. The increased
contest between landlords may affect the
effectiveness of our marketing programs.
For more analysis and mitigating measures,
see “Review of Operations”
Service industry in Hong Kong continues to
experience widespread labour shortage. Employers
are facing increased competition for skilled
personnel, especially the experienced front-line
staff, to support the Group’s growth strategy.
For more analysis and mitigating measures,
see “Responsible Business” section – “Workplace Quality”
Note:
where “inherent risks” (i.e. before taking into consideration mitigating activities) increased
where “inherent risks” decreased
where “inherent risks” remain broadly the same
59
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
3
62
Business of Life
63
Environment
70 Workplace Quality
73
Health and Safety
75
Community Contributions
80
The Stock Exchange of Hong Kong Limited’s
Environmental, Social and Governance
Reporting Guide
83
Corporate Responsibility Reporting
Verification Statement
60
Hysan Annual Report 2015 Responsible
Business
61
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Business
of Life
As a “Business of Life”, Hysan continues to provide sustainable and outstanding returns for
our shareholders, while also creating visible and positive changes to our stakeholders and
the communities we serve.
Awards and Recognitions
We are a constituent member of some of the top international sustainability indices,
including FTSE4Good Index, Hang Seng Corporate Sustainability Index (with an “AA”
rating), MSCI Global Sustainability Index (with an “AA” rating and named among the “top 5
industry leaders” in the sub-category of “opportunities in green building”) and STOXX®
Global ESG Leaders Indices.
In 2015, we won Best Practice Management’s awards in Corporate Social Enterprise and in
Green Development. We were also recognised by the World Green Organisation as a winner
of its first Sustainable Business Award. On the community front, we were again awarded the
10 Years Plus Caring Company logo by the Hong Kong Council of Social Service, and became
a finalist in the same organisation’s Outstanding Partnership Award through our Exploration
for Hope programme.
Corporate Responsibility Policy
Maintain HigHest etHical standards
• We aim to maintain the highest ethical standards in the conduct of our business. We are
committed to maintaining the highest standards of corporate governance
Focus on HealtH and saFety
• Health and safety issues are of fundamental concern to us
MiniMise environMental iMpact
• We aim to minimise the impact of our activities on the environment
contribute to coMMunities
• We make positive contributions to the communities in which we operate
respect our staFF
• We treat our staff with fairness and respect, and maintain a working environment to
realise their full potential
encourage partners to set HigH standards
• We encourage our suppliers and contractors to embrace high standards similar to our own
Policy Implementation
We strive to integrate our contribution to society into our core business operations and
partnerships, and to provide expertise, manpower, venues and financial support to
community projects.
62
Hysan Annual Report 2015 Environment
Environmental Policy
Hysan’s Environmental Policy focuses on measuring and reporting our carbon reduction
efforts, promoting waste reduction at source, enhancing green purchasing and improving
stakeholder engagement. Hysan will:
• Ensure compliance with all applicable environmental and related legislations and
encourage staff, business partners and other stakeholders to meet their environmental
obligations
• Identify environmental impacts associated with our operations, and set targets to
continually improve our environmental performance
• Improve energy efficiencies by adopting best practicable designs and technologies
without compromising service
• Measure and report our GHG emissions, and actively encourage our stakeholders to
reduce their carbon footprint
• Minimise waste generation whenever practical in daily operations through source
reduction and recycling
• Embrace green purchasing practices and adopt best practicable technologies to conserve
natural resources where applicable
• Provide good indoor environmental quality in our buildings to ensure that all the work/
living environments are healthy
• Provide regular environmental training to employees and continue to raise their
awareness on the issues
Highlights of 2015
• Benchmarking exercise: Lee Garden One became the first commercial building in Hong
Kong to obtain an Existing Building Provisional Platinum certification from BEAM Plus for
its offices
• Stakeholder engagement: including our support for a range of government-led
environmental charters; organisation of environmental workshops for staff and tenants;
provision and promotion of green facilities like waste separation bins and bicycle racks for
tenants
• Energy Accounting System: installation of energy accounting systems at Hysan Place, Lee
Garden One and Lee Garden Two
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Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Environment
Energy Efficiency
energy savings and reduction oF greenHouse gas eMissions
acHieveMents: 2005 baseline and FroM 2014 to 2015
issue
2005
2014
2015
GHG Emissions for
Scope 1 & 2 (a) (b)
Total
(tonnes CO2e)
48,421
38,515
39,120
Purchased Electricity
Total (MWh)
52,598
49,353
49,502
(a) According to Guidelines to account for Report on Greenhouse Gas Emissions and Removals for Buildings in Hong Kong
(2010 Edition) issued by Electrical and Mechanical Services Department and Environmental Protection Department,
Scope 1 (Direct emission and removals e.g. diesel, refrigerant) and Scope 2 (energy indirect emissions e.g. electricity and
Towngas) are included
(b) The emission associated with the electricity purchased based on emission factors provided by Hongkong Electric in 2015
Using 2005 as a baseline, we have made a reduction of more than 19% by the end of
2015. The electricity purchased was also reduced by around 6% as compared to 2005. Our
2015 GHG emissions rose slightly by 1.6% and electricity purchased increased by 0.3%
when compared to 2014. These were due to more air-conditioning use, partly attributable to
climatic factors, and partly to improved office occupancy. It should also be noted that the
revision of the emission factor as provided by Hongkong Electric may have adversely
impacted our emissions data.
otHer energy savings initiatives
To enhance the monitoring of Hysan’s electrical and mechanical services, we commenced
the first phase of our energy accounting system in Hysan Place, Lee Garden One and Lee
Garden Two, while the second phase for four other buildings will be implemented in 2016.
This system measures and analyses energy consumption within each building, thereby
providing a more comprehensive picture of energy usage.
We completed the installation of a heat pump in Hysan Place, which uses waste heat from a
cooling system to generate hot water for the building’s dish-washing facilities. Another
ongoing energy saving project is to identify more locations within the portfolio to install T5
florescent tubes and LED lights.
64
Hysan Annual Report 2015
Environmental Quality
green building certiFications
Improving the environmental performance of the existing building stock is very important,
as new construction only replaces or adds a few percent per year to the world’s and
Hong Kong’s existing stock of buildings. We are, therefore, proud that our Lee Garden One
has become the first commercial building in Hong Kong to obtain BEAM Plus (Existing
Buildings) provisional certification at the highest Platinum level for its office section.
We are also pursuing three different green building standards for our Lee Garden Three,
which is under redevelopment, including U.S. Green Building Council’s LEED, Hong Kong
based BEAM Plus, and the China Green Building Label.
air Quality
All our buildings maintained their “Excellent Class” or “Good Class” standards in the
Hong Kong Government’s Indoor Air Quality Certification Scheme.
With regards to our promotion of the use of electric vehicles, we added more electric vehicle
charging bays in Lee Garden One’s, Lee Garden Two’s and Leighton Centre’s car parks in
2015 in addition to the Tesla Motors Superchargers installed in 2014.
urban MicrocliMate and biodiversity
Lee Garden One’s green roof for its retail podium was completed in 2015, with the aim of
reducing the building’s heat island effect and helping to improve the area’s microclimate.
The roof also enhances our portfolio’s biodiversity by allowing more living organisms to
grow in the urban landscape. We are exploring more locations within our portfolio for
similar planting projects.
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Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Environment
Waste Management, Recycling and Water Consumption
While we continued to collect food waste for off-site recycling from Hysan Place’s food court,
and provide food waste collection service to other restaurants in the mall, we are looking for
ways to launch such recycling on-site. In the meantime, we plan to acquire a food waste
composter for Bamboo Grove to test how best to manage food recycling.
Our other recycling efforts continued to gain traction, and in 2015, Hysan was awarded another
full set of “Class of Excellence” Wastewi$e labels for all our portfolio buildings, under the
Government’s Hong Kong Awards for Environmental Excellence Scheme. Lee Garden One was
also honoured as one of the “Top 3 organisations which achieved cumulatively the most number
of goals in Wastewi$e Certificate in 2014.”
lee garden tHree project’s recycling
The demolition of Lee Garden Three project’s original basement was completed in 2015. Close
to 80% of the demolition waste, including around 3,600 tonnes of concrete, and 450 tonnes of
metal, were recycled, which was significantly more than the original 60% recycling target.
This complemented the more than 60% of waste recycled from the superstructure demolition
in 2014.
Waste ManageMent acHieveMents (except construction Waste)
2005 baseline, and FroM 2014 to 2015
issue
2005
2014
2015
Paper recycled (kg)(a)
741,502
936,873
975,329
Aluminium cans recycled (kg)(a)
Plastic bottles recycled (kg)(a)
Old clothing donation (kg)
Toner/Cartridge recycled (pcs)
Computer and equipment recycled (pcs)
Food waste recycled (kg)
Glass bottle recycled (kg)(b)
(a) Data record period from September 2014 - August 2015
(b) Data record period from October 2015 - December 2015
1,098
1,529
960
206
100
–
–
2,382
2,704
3,500
309
77
2,708
3,042
3,895
216
82
33,231
29,871
–
4,215
66
Hysan Annual Report 2015 We began glass bottles recycling towards the end of 2015 and achieved commendable
results, while improvements in other areas of recycling were also observed in general. The
decline in food waste recycled could well be due to the success of the year before when we
heavily promoted the cut down on food waste.
Water ManageMent acHieveMents 2005 baseline, and
FroM 2014 to 2015
issue
2005
2014
2015
Potable water used for properties and
landscaping (m3)
Potable water used for cooling (m3)
Wastewater reused for flushing (m3)
62,665
78,706
73,231
–
–
167,748
181,572
16,775
18,157
Wastewater discharged from properties and
landscaping (m3)
56,399
70,836
65,908
We reduced our potable water used for properties and landscaping by 7.0% as compared to
2014. This was due to the installation of more water saving devices, as well as more rainfall
which reduced our water consumption for plant watering. However, the use of extra air-
conditioning due to higher occupancy and climatic reasons meant that the water used for
our air-conditioning system increased by 8.2% as compared to the year before.
Green Procurement
While we are still on target towards using materials extracted or manufactured locally for
10% of the total materials by value in our Lee Garden Three project, we are actively making
use of more green products or services in our everyday operations. These range from using
Forest Stewardship Council (FSC) certified office printing paper and name cards throughout
our offices, to the use of green cleaning products in our major buildings.
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Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Environment
Green Partnerships with Stakeholders
governMent initiatives
Hysan has joined the following government environmental initiatives to promote green causes:
• Environment Bureau’s Charter on External Lighting (All commercial buildings in our portfolio
except Lee Theatre Plaza to strive to reduce light nuisance and energy wastage)
• Environment Bureau’s Energy Saving Charter (All buildings in our portfolio except Lee
Theatre Plaza to control indoor common area temperature)
• Environmental Protection Department’s Carbon Reduction Charter (to report GHG emissions
data regularly)
• Environmental Protection Department’s Glass Bottle Recycling Programme “Clink, Drink then
Recycle” (Lee Garden One, Lee Garden Two, Lee Theatre Plaza and Hysan Place to recycle
glass bottles)
• Environmental Protection Department’s Waste Check Charter (Shopping malls of
Lee Garden One and Hysan Place to promote waste reduction through recycling)
visitors and tenants
While our farming programme at Hysan Place’s Urban Farm continued to bring in new tenant
members to enjoy organic farming on the building’s rooftop, we took the green message to a
new audience. Young shopping mall visitors joined our “Green Wonders” programme to learn
about Hysan Place’s green features. An Open Day and a raw food lunch event continued to
showcase the green theme. We further hosted Redress’ EcoChic Design Award Five Year
Anniversary Exhibition to promote the reduction of apparel production wastage. For more
details, please refer to the “Community Contributions” section.
We actively engaged our food and beverage tenants to participate in food waste collection
and reduction activities, and we also joined Greeners Action’s Lai See Packets recycling
programme to donate used gift packets for reuse during 2015’s Chinese New Year. We also
organised an environmental workshop for one of our office tenants to further promote
sustainability messages.
68
Hysan Annual Report 2015 During the year, Hysan provided ten sets of waste separation bins to those office tenants
who expressed interest in separating waste for recycling.
Finally, we further promoted the use of our bicycle racks which are available for rental in
Hysan Place to all office tenants throughout our portfolio. This is part of our initiative to
promote “cycling to work”, which can help reduce vehicular usage and provide opportunities
for exercise.
staFF engageMent
Hysan’s Go Green Committee has been successful in setting up environmental issues-related
activities for colleagues. In 2015, it organised a number of green procurement-related
briefings for Technical Services staff, with a focus on sustainable flooring materials.
It also conducted two upcycling workshops on eco-enzyme production and glass painting,
which were well attended. The Committee spearheaded a second-hand clothing collection
programme together with the Corporate Communications Department. Towards the end of
the year, it also provided two Urban Farm and Sky Wetland visit sessions to further enhance
staff interest in sustainability matters. In addition to completing its “Do you know that?”
intranet programme on environmental news, the Committee plans to produce quarterly
environmental newsletters in 2016. As the Committee is now taking on a range of
programmes, it has expanded from an original core of six members to eleven.
green organisations
Hysan supports a range of green organisations through staff participation and sponsorships.
We also maintain our dialogue with other green groups in order to partner with them in the
future. Among the projects we supported in 2015 were:
• Hong Kong Green Building Council’s World GBC Congress in Hong Kong
• World Wide Fund for Nature’s Earth Hour
• Business Environment Council’s BEC EnviroSeries Conference
• Green Sense’s No Air Con Night
• Greeners Action’s Lai See Packet Recycling
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Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Workplace
Quality
Staff Composition
As at 31 December 2015, we employed a total of 638 staff, including our Head Office team
and principal operating subsidiaries’ colleagues. All our staff members are located in
Hong Kong.
199 of our staff members, including 40 out of the 75 Head Office Managers or above,
are females.
Age Group of Staff
1%
13%
11%
5%
18%
Number of
staff
203
32%
43%
34%
Number of
staff
435
20%
23%
Head Office
Principal Operating Subsidiaries
Age 20 – 29
Age 30 – 39
Age 40 – 49
Age 50 – 60
Age over 60
70
Hysan Annual Report 2015 Code of Ethics
Our Code of Ethics highlights three main guiding principles for Hysan:
• Respect for people
• Ethics and business integrity
• Meeting our responsibilities
The Code applies to Directors, officers and employees of the Group, and is clearly
communicated to all, including new staff members. It covers a range of topics, including data
privacy, protection of copyright, anti-bribery and anti-fraud, and has in place a “whistle-
blowing system”, which is monitored by an independent third party service provider with
direct reporting to the Audit Committee Chairman.
For details of the
Code of Ethtics
Human Resources Policies
Our Employment and Staff Policy deals with recruitment, employee movement, salary
adjustments and promotions, separation of employment, and equal opportunities (non-
discrimination against gender, marital status, disability, age, race, family status, sexual
orientation, nationality and religion). Our Code of Ethics also has a key focus on anti-
discrimination. In 2015, we did not identify any material non-compliance or breach of
legislation related to equal opportunities.
As we are based in Hong Kong and have our core operations in the city, we believe we do not
operate in an environment that carries high risks for child labour or forced labour. We did not
identify any breach in the said areas in 2015.
We respect the right of association, and ensure our employees enjoy the freedom to join
trade unions. We did not identify any material breach of any right to exercise freedom of
association and freedom to join trade unions in our core operations in 2015.
While Hysan does not have a collective bargaining policy nor is a party to a collective
bargaining agreement, our management places a strong emphasis on maintaining a clear
and constructive dialogue on company issues. This commitment includes written policies on
compensation, work hours, staff benefits, staff training, health and safety, as well as
grievance mechanisms, including a “whistle-blowing” system as mentioned in the “Code of
Ethics” section. Other channels of communications are highlighted in the “Employee
Engagement” section.
Training and Development
Among the significant training programmes for Head Office and Principal Operating
Subsidiaries colleagues were:
• Finance workshops for non-financial staff (e.g. financial statement analysis, understanding
finance policies and procedures)
• Language training for marketing, office and retail staff
• English business writing workshops
• Project management workshops
• Seminars on the latest ordinance changes (e.g. competition law, data protection
awareness)
• A structured training curriculum for Principal Operating Subsidiaries colleagues (including
grooming workshops for frontline staff and change management seminars for supervisors)
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Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Workplace Quality
For 2015, Hysan provided an average of 14.4 hours of training per Head Office staff, and
20.5 hours of training per Principal Operating Subsidiaries employee.
Our emphasis on training was reflected in our apprentice Tsang Chiu Yin winning one of
Hong Kong’s “Most Improved Trainees Award” from the Government’s Youth Employment
and Training Programme.
Attracting and Retaining Talent
Our employee turnover figures have further improved, with 11.3% for our Head Office staff,
and 17.0% for the Principal Operating Subsidiaries. These figures were lower than the
20.1% Hong Kong property sector turnover rate (sourced from a Towers Watson survey).
We strongly believe in recognising staff members’ work through their performances and
contribution. A performance appraisal system thus forms the core of our staff reward
system. This system has allowed us to bring in and retain passionate professionals to take
the Group to the next level.
Employee Engagement
We are committed to providing a unique and satisfying experience (“U.S.E.”) to our
stakeholders. One key element of our employee engagement effort in 2015 was to further
reinforce this mindset among our staff. A Cultural Transformation Committee was set up
and a total of 15 change management workshops were conducted to promote the U.S.E.
culture and provided opportunities for managers and staff members to exchange views. A
U.S.E. award recognition programme was also launched to recognise top U.S.E. behaviours
among staff members. A total of 16 U.S.E. awards and eight Outstanding U.S.E. awards
were presented, and all success stories were shared on the staff intranet.
Our Company Day also took on a new “town hall meeting” format. Within an informal
setting, senior management members took a range of questions from staff members and
provided insightful answers about their work in 2015 and their views for the year ahead.
This complemented earlier sessions conducted after annual and interim results’
announcements.
72
Hysan Annual Report 2015 Health and
Safety
Health and Safety Policy
Hysan is committed to providing and maintaining a safe and healthy environment within its
portfolio for all staff, tenants and members of the general public. Hysan will:
• Ensure health and safety standards are given prime consideration in the operation and
management of our properties, for which a Safety Management Plan to ensure regulatory
compliance has been developed
• Ensure employees at every level are committed to, and accountable for, the delivery of
the safety initiatives contained in this Plan, with a view to maintaining a vigorous and
injury-free culture
• Provide employees with appropriate induction and external/internal training, as well as
protective equipment in accordance with established procedures
• Encourage staff to engage actively in the Plan and to exceed and improve upon the
safety measures that have been set
• Mandate our contractors, who are equally responsible for establishing their own
organisational structure, work processes, supervision and training, to avoid or minimise
risks to health and safety, particularly in the services which they provide us
• Conduct regular reviews on the Health and Safety Policy so that it reflects changes in the
products, services and activities of the Company
• Raise further awareness through the use of third-party health and safety experts to
conduct regular safety audits
Health and Safety in Action
Our building management team colleagues work on the frontline and therefore encounter
the majority of our health and safety issues. Our Safety Committee, as chaired by our
General Manager of Property Services, oversees the implementation of the Health and
Safety Policy by our frontline colleagues and reports back to senior management. A detailed
Safety Management Plan is developed from the Policy to provide clear safety procedures.
This Plan received a comprehensive review and update in 2015.
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Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Health and Safety
Another round of third-party safety audits took place in 2015 for all buildings within Hysan’s
portfolio. No significant irregularities were found.
We further promoted safety training for our staff members, and in 2015 clocked more than
4,900 training hours, significantly more than the 1,900 hours recorded in 2014. We are also
pleased to report that our Safety Committee secretary Edmond Cheng won the Silver Award
(managerial level) at the “Seventh Hong Kong Outstanding Employees In Occupational
Safety and Health Award”.
There were 21 work injury cases at Hysan in 2015, the majority of which did not incur more
than five sick leave days. There were 1222 lost days due to work injury, including 730 days
brought forward to 2015 from 2013 and 2014 (two cases each of 365 days), as well as 272
days from two particular 2015 cases.
We maintained our Employee Assistance Programme of counseling services, which is
operated by a non-governmental organisation on our behalf. This service provides help to
resolve work or personal issues faced by employees.
Health and Safety: Our Partners
Hysan actively encourages our business partners to aim for high standards in health and
safety. In 2015, our safety consultant for the Lee Garden Three redevelopment project
conducted two rounds of safety audits. The objectives of the audits were to review the
contractor’s safety management system of the various phases of the project, in particular
those in relation to plant and equipment, subcontractor control and the implementation of
safe working procedures. The consultancy also made recommendations for further
enhancements to the system to promote the highest standards of safety. Both audits’
results were satisfactory. There was one minor work-related injury at the Lee Garden Three
site in 2015.
74
Hysan Annual Report 2015 Community
Contributions
Hysan’s longstanding involvement in community work has again been recognised by the
Hong Kong Council of Social Services with a 10 Years Plus Caring Company label. To ensure
the effectiveness of its community support, the Group is focusing its promotional work in
three main areas: environmental issues, healthy living, as well as local arts and culture
development. Beyond these, we also provide venue support for other worthy causes, and our
volunteer team continues to provide help to those in need.
Environmental Issues and Healthy Living Promotions
Hysan Place played host to two new green education activities in 2015. “Green Wonders”
targeted four to eight year old youngsters. More than 700 of them were treated to tours of
the building’s environmental features, with the Urban Farm and the Sky Wetland being the
two main stops. Separately, the Urban Farm held its first ever Open Day in October,
attracting more than 600 visitors, with many treated to a “Farm to Table” lunch, whereby
uncooked and unprocessed gourmet “raw food” was served to highlight the need to
eat healthily.
In addition, 19 organisations, ranging from overseas educational institutions to local
government departments as well as green groups, visited Hysan’s Urban Farm in 2015.
Urban farmers representing 36 companies also tended their crops on Hysan Place’s rooftop.
The health theme was represented by the “Living – Lee Gardens” programme in October
which attracted close to 10,000 visitors to either run or cycle at our specially-designed
installations. The programme followed our annual “Hysan Healthy Hike and Run”, in which a
record-breaking 1,500 entries participated from all over the world. Among the entrants were
more than three dozen Hysan colleagues, and eight of them also formed two teams to
compete in Oxfam’s 100km Trailwalker event.
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Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Community Contributions
Arts and Culture Development Promotions
Our support for local arts and culture took on various forms in 2015. In May, Hysan Place
hosted Redress’ EcoChic Design Award Five Year Anniversary Exhibition, which promoted
quality apparel design as well as sustainable fashion. Food Angel’s Paint Can Feed
exhibition showcased talented youngsters’ artwork on food cans to highlight hunger and
poverty issues. Arts with the Disabled Association also presented a successful mini-concert
and a book launch at Hysan Place in November.
The highest profile 2015 artistic performance event was the Standard Chartered Hong Kong
X Lee Gardens The Colour of Music Night Parade. Directed by Hong Kong Youth Arts
Foundation, the glamourous event included works from the U.K.’s Lantern Company as well
as top Hong Kong artistic talents. Thousands lined the Causeway Bay streets to enjoy the
parade of huge glittering puppets and performances by local youngsters.
76
Hysan Annual Report 2015 Other Venue Support
Below is a list of other community activities which took place at Hysan’s venues in 2015:
Hysan place
Jan
Society for Community
Organisation
“Our Treasure”
Photo Exhibition
Helping Hand
Cookie Campaign
Launching
Ceremony and
Charity Sale
May
Leisure and Cultural
Services Department
Saxophone
Performance
Aug
Radio Television
Hong Kong
The History of
Hong Kong
Exhibition
Oct
Hong Kong Breast
Cancer Foundation
Breast Health
Education
Exhibition
Plan International
“Because I am a Girl”
Campaign Event
Nov
Hong Kong Youth Arts
Foundation
“The Colour of Music”
Art Workshop and
Music Performances
lee theatre
plaza
Feb
St. James’ Settlement
Valentines Flower
Charity Sale
Helping Hand
July
World Vision
Helping Hand
Cookie Charity Sale
Child Sponsorship
Programme
Nov
Haven of Hope
Christian Service
Cookie Charity
Sale
Preserve Planet Earth Committee
under Rotary Club District 3450
Sustainable Seafood
Educational Event
other
community
engagements
Aug
Society for Community Organisation
Underprivileged Children’s Visit
to Hysan Place’s “Wooderful
Life” Event
Aug – Dec
Wanchai District Council
and HK Sharing
Book Donation and
Exchange Programme
Sep
Redress
Keep Caring Clothing
Drive
77
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
Community Contributions
Exploration for Hope
Our summer ethnic minority youngsters study-and-career programme again served more
than 100 school children in 2015. “Exploration for Hope” remained Hong Kong’s only ethnic
minority youth social enterprise competition. The winner of this year’s competition is now
testing its own project, which organises festive events for minority groups, in a real life
setting with the help of our partner, Hong Kong Christian Service. We would like to thank
Hong Kong Christian Service and our other partner, the Hong Kong University of Science and
Technology Business School, for their strong support throughout this programme’s
development. “Exploration for Hope” was a finalist in the Hong Kong Council of Social
Service’s Outstanding Partnership Award.
Our Volunteer Team
Hysan’s colleagues clocked 1,336 hours of volunteer service in 2015. Their friends and
family members added another 323 hours to the tally. The team organised 13 events during
the year, including tutorial classes for underprivileged children, backstage work assisting a
drama group formed by disabled actors, and visiting an elderly dementia centre.
78
Hysan Annual Report 2015 The organisations Hysan partnered included:
• Changing Young Lives Foundation
• Helping Hand
• Hong Chi Association
• Hong Kong Movie Star Sports Association Charities Ltd.
• The Hong Kong Society for the Protection of Children
• Jockey Club Centre for Positive Ageing
• The Nonsensemakers
• Oxfam Hong Kong
• SAHK
• St. James’ Settlement
• Wofoo Social Enterprises
Hysan was again given the Gold Award for Volunteer Service under the Steering Committee
on Promotion of Volunteer Service of the Social Welfare Department. Among our staff, one
family collected a Silver Award while another took Bronze. Three more individuals received
Bronze Awards, and four Hysan staff members were recognised as long-term contributors.
79
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business The Stock Exchange of Hong Kong Limited’s
Environmental, Social and Governance Reporting Guide
a. environMental
a1 emissions
Reference in “Responsible Business” Section
• Information on policies; and compliance with relevant laws
and regulations that have a significant impact on the issuer
relating to air and greenhouse gas emissions, discharges into
water and land, generation of hazardous and non-hazardous
wastes
• “Environment – Environmental Policy”
• “Environment – Energy Efficiency”
• “Environment – Waste Management, Recycling and Water
Consumption”
• Not aware of any material non-compliance
• KPI A1.1 Types of emissions and respective emissions data
• “Environment – Energy Efficiency”
• “Environment – Waste Management, Recycling and Water
Consumption”
• KPI A1.2 Greenhouse gas emissions in total and intensity
• “Environment – Energy Efficiency”
• KPI A1.3 Total hazardous waste produced and intensity
• We believe our business does not generate a material
amount of hazardous waste.
• KPI A1.4 Total non-hazardous waste produced and intensity
• KPI A1.5 Description of measures to mitigate emissions and
results achieved
• “Environment – Energy Efficiency”
• “Environment – Waste Management, Recycling and Water
Consumption”
• KPI A1.6 Description of how hazardous and non-hazardous
• “Environment – Waste Management, Recycling and Water
wastes are handled, reduction initiatives and results achieved
Consumption”
a2 use of resources
• Policies on efficient use of resources like energy, water and
• “Environment – Environmental Policy”
other raw materials
• KPI A2.1 Direct and/or indirect energy consumption by type
• “Environment – Energy Efficiency”
in total and intensity
• KPI A2.2 Water consumption in total and intensity
• “Environment – Waste Management, Recycling and Water
Consumption”
• KPI A2.3 Description of energy use efficiency initiatives and
• “Environment – Energy Efficiency”
results achieved
• KPI A2.4 Description of whether there is any issue in sourcing
water that is fit for purpose, water efficiency initiatives and
results achieved
• “Environment – Waste Management, Recycling and Water
Consumption”
• KPI A2.5 Total packaging material used for finished products
• Not applicable
a3 the environment and natural resources
• Policies on minimising the issuer’s significant impact on the
• “Environment – Environmental Policy”
environment and natural resources
• KPI A3.1 Description of the significant impacts of activities
on the environment and natural resources and actions taken
to manage them
• “Environment – Energy Efficiency”
• “Environment – Waste Management, Recycling and Water
Consumption”
80
Hysan Annual Report 2015 b. social
Reference in “Responsible Business” Section
employment and labour practices
b1 employment
• Information on policies; and compliance with relevant laws
and regulations that have a significant impact on the issuer
relating to compensation and dismissal, recruitment and
promotion, working hours, rest periods, equal opportunity,
diversity, anti-discrimination, and other benefits and welfare
• “Workplace Quality – Human Resources Policies”
• Not aware of any material non-compliance
• KPI B1.1 Total workforce by gender, employment type, age
• “Workplace Quality – Staff Composition”
group and geographical region
• KPI B1.2 Employee turnover rate by gender, age group and
• “Workplace Quality – Staff Composition”
geographical region
b2 Health and safety
• Information on policies; and compliance with relevant laws
and regulations that have a significant impact on the issuer
relating to providing a safe working environment and
protecting employees from occupational hazards
• “Health and Safety – Health and Safety Policy”
• Not aware of any material non-compliance
• KPI B2.1 Number and rate of work-related fatalities
• No fatality
• KPI B2.2 Lost days due to work injury
• “Health and Safety – Health and Safety in Action”
• KPI B2.3 Description of occupational health and safety
measures adopted, how they are implemented and
monitored
b3 development and training
• “Health and Safety – Health and Safety in Action”
• Policies on improving employees’ knowledge and skills for
discharging duties at work.
Description of training activities
• “Workplace Quality – Training and Development”
• For 2015, the training ranged from financial workshops to
seminars on latest ordinance changes
• KPI B3.1 The percentage of employees trained by gender
• “Workplace Quality – Training and Development”
and employee category
• KPI B3.2 Average training hours completed per employee by
• “Workplace Quality – Training and Development”
gender and employee category
b4 labour standards
• Information on policies; and compliance with relevant laws
and regulations that have a significant impact on the issuer
relating to preventing child or forced labour
• “Workplace Quality – Human Resources Policies”
• We believe our property investment and management
business (primarily in Hong Kong) has a very low risk profile
on use of forced or child labour. We are not aware of any
material non-compliance with applicable provisions. We are
against the use of forced or child labour.
• KPI B4.1 Description of measures to review employment
• Not applicable
practices to avoid child and forced labour
• KPI B4.2 Description of steps taken to eliminate such
• Not applicable
practices when discovered
operating practices
b5 supply chain management
• Policies on managing environmental and social risks of the
• “Health and Safety – Health and Safety Policy”;
supply chain
“Health and Safety – Health and Safety: Our Partners”
• “Environment – Environmental Policy”; “Environment
– Highlights of 2015” (covered stakeholder engagement)
81
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business The Stock Exchange of Hong Kong Limited’s
Environmental, Social and Governance Reporting Guide
b. social
Reference in “Responsible Business” Section
• KPI B5.1 Number of suppliers by geographical region
• “Environment – Green Procurement”
(With regards to the development of Lee Garden Three, we
plan to use materials extracted and manufactured locally for
around 10% of total materials value.)
• KPI B5.2 Description of practices relating to engaging
suppliers, number of suppliers where the practices are being
implemented, and how they are implemented and monitored
• “Health and Safety – Health and Safety: Our Partners”
• “Environment – Green Procurement”
b6 product responsibility
• Information on policies and compliance with relevant laws
and regulations that have a significant impact on the issuer
relating to health and safety, advertising, labelling and
privacy matters relating to products and services provided
and methods of redress
• “Health and Safety – Health and Safety Policy”
• “Workplace Quality – Code of Ethics”, which covers data
privacy
• Not aware of any material non-compliance
• KPI B6.1 Percentage of total products sold or shipped subject
• Not applicable
to recalls for safety and health reasons
• KPI B6.2 Number of products and service related complaints
• Our “Service Scan” highlights customer complaint and
received and how they are dealt with
request handling. For each service, the service levels are
stated, each with an accompanying KPI and monitoring
methodology.
• KPI B6.3 Description of practices relating to observing and
• “Workplace Quality – Code of Ethics”, which covers protection
protecting intellectual property rights
of copyrights
• KPI B6.4 Description of quality assurance process and recall
procedures
• “Service Scan” details standard service levels and their related
KPIs and methods of measurement. It is used regularly to
measure tenants’ satisfaction levels for service
improvements.
• KPI B6.5 Description of consumer data protection and
• “Workplace Quality – Code of Ethics”
privacy policies, how they are implemented and monitored
b7 anti-corruption
• Information on policies; and compliance with relevant laws
and regulations that have a significant impact on the issuer
relating to bribery, extortion, fraud and money laundering
• “Workplace Quality – Code of Ethics”, which covers anti-
bribery
• Not aware of any material non-compliance
• KPI B7.1 Number of concluded legal cases regarding corrupt
practices brought against the issuer or its employees during
the reporting period and the outcomes of the cases
• No such cases
• KPI B7.2 Description of preventive measures and whistle-
blowing procedures, how they are implemented and
monitored
• “Workplace Quality – Code of Ethics”, which covers our
whistle-blowing
community
b8 community investment
• Policies on community engagement to understand the
• “Corporate Responsibility Policy”
community’s needs where the issuer operates and to ensure
its activities takes into consideration of communities’ interests
• KPI B8.1 Focus areas of contribution
• “Corporate Responsibility Policy”
• “Community Contributions”
• KPI B8.2 Resources contributed
• “Community Contributions”
“Comply or explain” provisions
Recommended disclosures
82
Hysan Annual Report 2015 Corporate Responsibility Reporting
Verification Statement
Third-party Independent Verification
83
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business 4
86
Board of Directors
91
Corporate Governance Report
112 Directors’ Report
121 Directors’ Remuneration
and Interests Report
130 Audit Committee Report
84
Hysan Annual Report 2015 Corporate
Governance
85
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Board of
Directors
Hysan believes that embracing strong governance is the foundation
to delivering on its strategic objective of consistent and sustainable
performance over the long term. At the heart of Hysan’s governance
structure is an effective Board that is committed to upholding strong
governance principles and to reinforcing Hysan’s long-established
and deeply engrained corporate governance tradition and culture of
accountability, transparency and integrity.
THE BOARD
MANAGEMENT
Audit Committee
(A)
Remuneration Committee
(R)
Nomination Committee
(N)
Strategy Committee
(S)
Chairman (chairing N and S)
Irene Yun Lien LEE
Ms. Lee is an independent non-executive director of Cathay Pacific Airways Limited, CLP
Holdings Limited, HSBC Holdings plc, The Hongkong and Shanghai Banking Corporation
Limited, Hang Seng Bank Limited and Noble Group Limited (listed on Singapore Exchange
Limited). She has held senior positions in investment banking and fund management in a
number of renowned international financial institutions. Previously, Ms. Lee was an
executive director of Citicorp Investment Bank Limited in New York, London and Sydney;
head of corporate finance at Commonwealth Bank of Australia and chief executive officer
of Sealcorp Holdings Limited, both based in Sydney. She was also the non-executive
chairman of Keybridge Capital Limited (listed on Australian Stock Exchange), a non-
executive director of ING Bank (Australia) Limited, QBE Insurance Group Limited, and The
Myer Family Company Pty Limited; and a member of the Advisory Council of JP Morgan
Australia. Ms. Lee was formerly a member of the Australian Government Takeovers Panel.
She is a member of the founding Lee family, sister of Mr. Anthony Hsien Pin LEE (Non-
Executive Director) and his alternate on the Board. Ms. Lee holds a Bachelor of Arts Degree
from Smith College, United States of America, and is a Barrister-at-Law in England and
Wales and a member of the Honourable Society of Gray’s Inn, United Kingdom. She was
appointed a Non-Executive Director in March 2011, Non-Executive Chairman in May 2011,
and Executive Chairman in March 2012. She is aged 62.
86
Hysan Annual Report 2015
Deputy Chairman and
Chief Executive Officer (S)
Siu Chuen LAU
Mr. Lau was the acting Head of Finance of Hysan Group in
1999. He has also worked as a management consultant at
McKinsey & Company, a consumer analyst at Morgan
Stanley Asia, and a brand manager of French luxury
products. He subsequently co-founded and became a
Responsible Officer of a SFC licensed investment advisory
firm. Mr. Lau is a member of the founding Lee family and
an alternate director of Lee Hysan Company Limited, a
substantial shareholder of the Company. Mr. Lau holds a
Bachelor of Social Sciences Degree in Management and
Economics from The University of Hong Kong, and a Master
of Business Administration Degree from INSEAD, France. He
was appointed a Non-Executive Director in May 2011,
Non-Executive Deputy Chairman in March 2012, Deputy
Chairman and Chief Executive Officer in May 2012. He is
aged 57.
Independent Non-Executive
Director (A)
Frederick Peter
CHURCHOUSE
Mr. Churchouse has been involved in Asian securities and
property investment markets for more than 30 years.
Currently, he is a private investor including having his own
private family office company, Portwood Company Ltd. He is
an independent non-executive director of Longfor Properties
Co. Ltd. He is also the publisher and author of “The
Churchouse Letter”. In 2004, Mr. Churchouse set up an Asian
investment fund under LIM Advisors. He acted as a director
of LIM Advisors and as Responsible Officer until the end of
2009. Prior to this, Mr. Churchouse worked at Morgan
Stanley as a managing director and advisory director from
early 1988. He acted in a variety of roles including head of
regional research, regional strategist and head of regional
property research. He was also a board member of
Macquarie Retail Management (Asia) Limited. Mr.
Churchouse gained a Bachelor of Arts degree and a Master
of Social Sciences degree from the University of Waikato in
New Zealand. He was appointed an Independent Non-
Executive Director in December 2012 and is aged 66.
Independent Non-Executive
Director (N, S, chairing A)
Nicholas Charles ALLEN
Mr. Allen is an independent non-executive director of CLP
Holdings Limited, Lenovo Group Limited, VinaLand Limited,
Texon International Group Limited and Link Asset
Management Limited (Link) (as manager of Link Real Estate
Investment Trust). He was also appointed as the chairman
of the board of Link effective from 1 April 2016. He has
extensive experience in accounting and auditing and was a
partner of PricewaterhouseCoopers from 1988 until his
retirement in June 2007. 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 Certified Public
Accountants. He was appointed an Independent Non-
Executive Director in November 2009 and is aged 60.
Independent Non-Executive
Director (A, N, S, chairing R)
Philip Yan Hok FAN
Mr. Fan is an independent non-executive director of China
Everbright International Limited, First Pacific Company
Limited, China Aircraft Leasing Group Holdings Limited,
and Guolian Securities Co., Ltd., and an independent
director of Goodman Group. He is a member of the Asia
Advisory Committee of AustralianSuper Pty Ltd (a pension
fund in Australia). He was previously an independent non-
executive director of HKC (Holdings) Limited, and an
independent director of Suntech Power Holdings Co., Ltd.
(under official liquidation) and Zhuhai Zhongfu Enterprise
Co. Ltd. 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 66.
Note: (A) Audit Committee
(R) Remuneration Committee
(N) Nomination Committee
(S) Strategy Committee
87
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Board of Directors
Independent Non-Executive
Director
Lawrence Juen-Yee LAU
Independent Non-Executive
Director (R, N)
Joseph Chung Yin POON
Professor Lau is currently Ralph and Claire Landau Professor
of Economics at The Chinese University of Hong Kong. He is
also an independent non-executive director of AIA Group
Limited, CNOOC Limited and Far EasTone
Telecommunications Co., Ltd. (listed on the Taiwan Stock
Exchange).
Professor Lau received his B.S. degree (with Great
Distinction) in Physics from Stanford University and his M.A.
and Ph.D. degrees in Economics from the University of
California at Berkeley. He joined the faculty of the
Department of Economics at Stanford University in 1966,
and had a long and distinguished career there. Upon his
retirement in 2006, he became Kwoh-Ting Li Professor in
Economic Development, Emeritus, at Stanford University.
From 2004 to 2010, Professor Lau served as Vice-Chancellor
(President) of The Chinese University of Hong Kong. From
September 2010 to September 2014, he served as
Chairman of CIC International (Hong Kong) Co., Limited, a
subsidiary of China Investment Corporation. Professor Lau
was also a non-executive director of Semiconductor
Manufacturing International Corporation.
Professor Lau is a member of the 12th National Committee
of the Chinese People’s Political Consultative Conference
and a Vice-Chairman of its Economics Sub-committee. He
also serves as a member of the Exchange Fund Advisory
Committee of the Hong Kong Monetary Authority and
Chairman of its Governance Sub-committee and member of
its Currency Board Sub-committee and Investment Sub-
committee, Vice-Chairman of Our Hong Kong Foundation
and a member and Chairman of the Prize Recommendation
Committee, LUI Che Woo Prize Company. He was
appointed a Justice of the Peace in July 2007 and awarded
the Gold Bauhinia Star in 2011 by the Government of the
Hong Kong Special Administrative Region. He was
appointed an Independent Non-Executive Director in
December 2014. He is aged 71.
Mr. Poon is group managing director and deputy chief
executive officer of a private company and an independent
non-executive director of AAC 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 financial institutions. Mr. Poon is 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, and a former member of the Board of Inland
Revenue of Hong Kong Special Administrative Region and
the Environment and Conservation Fund Investment
Committee. Mr. Poon holds a Bachelor of Commerce degree
from the University of Western Australia, is a member of
Chartered Accountants Australia and New Zealand, and the
Hong Kong Institute of Certified Public Accountants.
Mr. Poon is also a Fellow of the Hong Kong Institute of
Directors. He was appointed Independent Non-Executive
Director in January 2010. He is aged 61.
Non-Executive Director
Hans Michael JEBSEN
B.B.S.
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 59.
88
Hysan Annual Report 2015 Non-Executive Director (A)
Anthony Hsien Pin LEE
Non-Executive Director (R)
Michael Tze Hau LEE
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
films. He is also a non-executive director of Television
Broadcasts 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 is
the brother of Ms. Irene Yun Lien LEE, Chairman. Mr. Lee
received a Bachelor of Arts Degree from Princeton
University and a Master of Business Administration
Degree from The Chinese University of Hong Kong. He
was appointed a Non-Executive Director in 1994 and is
aged 58.
Mr. Lee is currently a director of Oxer Limited, a private
investment company. He is also an independent non-
executive director of Chen Hsong Holdings Limited, Trinity
Limited; and a Steward of The Hong Kong Jockey Club.
He was previously an independent non-executive director
of Hong Kong Exchanges and Clearing Limited and an
independent non-executive director and chairman of OTC
Clearing Hong Kong Limited. Mr. Lee was also 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 54.
Non-Executive Director (N, S)
Chien LEE
Mr. Lee is a private investor and a non-executive director
of Swire Pacific Limited and a number of private
companies. He was previously an independent non-
executive director of Television Broadcasts Limited. 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 62.
Senior Management are Executive Directors of the Company.
89
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Board of Directors
Our Team Members
Chief Financial Officer
Roger Shu Yan HAO
BBA (Hons), CPA, ACA, ACCA
Mr. Hao is responsible for the Group’s financial control,
treasury, information technology, legal and secretarial
functions. He joined the Group in 2008. Mr. Hao
accumulated extensive experience in auditing, financial
management and control while holding senior positions in
multinational corporations.
Director, Projects
Sunny Wing Chung CHAN
BEng (Hons), CEng, MCIBSE, MHKIE, LEEDTM AP, BEAM Pro
Mr. Chan is responsible for the Group’s development and
project management function in regard to major property
investments as well as significant refurbishment projects.
He joined the Group in 2008. Mr. Chan accumulated
extensive experience in developing, designing and
managing high-quality and sustainable building projects
while holding senior positions in property development
corporations.
Director, Retail
Kitty Man Wai CHOY
BEcon, MSc, MBA
Ms. Choy is responsible for the Group’s retail portfolio.
She joined the Group in 2000 and prior to joining Hysan,
Ms. Choy held a supervisory position at a major property
development company.
General Manager, Property Services
Lawrence Wai Leung LAU
MSc (Eng), CEng, MCIBSE, MHKIE, RPE (BS), BEAM Pro
Mr. Lau is responsible for managing the operations of
Property Management and Technical Services Department
and drives the environmental initiatives for the Group. He
joined the Group in 2010. Mr. Lau accumulated extensive
experience in facilities and project management while
holding senior positions in premier property and
international hotel management companies.
Director, Office
Jessica Mo Ching YIP
BSc (Surveying), MBA, MRICS, MHKIS, RPS
Ms. Yip is responsible for managing the office portfolio of
the Group. Prior to joining the Group in 2012, Ms. Yip
fulfilled various roles in international consultancies,
occupiers and developers. She had extensive experience in
the real estate industry.
90
Hysan Annual Report 2015 Corporate
Governance Report
Meeting and Exceeding Compliance Requirements
Hysan is committed to maintaining high standards of corporate governance and
transparency throughout our business activities. Hysan has continued to comply with
requirements of the Code Provisions contained in the Corporate Governance Code (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”), with the only exception being that its Remuneration Committee (established
since 1987) has the responsibility of determining compensation at Executive Director-level
only. While the Remuneration Committee does not determine staff compensation below
Executive Director-level, its terms of reference have been expanded to cover the review of
key terms of those new compensation and benefits plans of the Group with a material
financial, reputational and strategic impact. The Board is of the view that, in light of the
current organisational structure and the nature of Hysan’s business activities, this
arrangement is appropriate. Nevertheless, the Board will continue to review this
arrangement in light of the evolving needs of the Group.
The following are the major areas in which Hysan’s system of corporate governance
practices exceeds the Corporate Governance Code.
Exceed Corporate
Governance
Code Provisions
Best Practices in Corporate Governance at Hysan
✓
✓
✓
✓
✓
✓
The Board has established formal Corporate Governance Guidelines* since 2004.
The Board has established formal mandates and responsibilities*, with a clear division of roles with
management. The Board’s responsibilities in the formulation of strategy, in addition to its
monitoring function, are expressly provided for.
The Board has established formal criteria and requirements* for Non-Executive Director
appointments. Newly appointed Non-Executive Directors are given formal letters of appointment,
which address the expected time commitment of the Non-Executive Director and other matters.
The Board has a detailed list of Matters Reserved for Board Decisions* that are retained for the
decision of the full Board. The list of Matters Reserved for Board Decisions covers all major policies
and directions of the Group.
Board evaluation: For the past few years, this has taken the form of meetings of the Non-
Executive Directors without the presence of management. Since 2014, the board evaluation
process has been strengthened and enriched through an evaluation questionnaire. Directors’
written feedback was analysed and discussed at the May Board meeting. Our Corporate
Governance Guidelines have been refined in the light of this to show the Board’s commitment.
The Group has a written Code of Ethics* applicable to all staff and Directors. The Group has
“whistle-blowing” procedures to encourage employees to raise concerns about possible breaches
of the Group’s Code of Ethics. Monitoring of the “whistle blowing” mechanism is performed by an
external independent third party service provider to further enhance independence. Such service
provider reports directly to the Audit Committee.
The Group has established a Corporate Disclosure Policy* to guide its stakeholder communications
and the determination of inside information. This ensures consistent and timely disclosure and
fulfilment of the Group’s continuous disclosure obligations.
91
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Exceed Corporate
Governance
Code Provisions
Best Practices in Corporate Governance at Hysan
✓
✓
✓
✓
✓
✓
✓
✓
✓
The Group has established an Auditor Services Policy* to set parameters for the engagement of
the auditors. It also identifies areas of conflict, and prohibits the engagement of auditors in case
of conflict to ensure independence.
The Group has established a fraud handling policy and procedure to control and aid in the
detection and prevention of fraud against the Group. This promotes consistent organisational
behavior by providing guidelines and assigning responsibility for the controls and investigations.
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 Corporate Responsibility
Report. It has early-adopted the environmental, social and governance reporting guidelines under
the Listing Rules. An “integrated” approach has been adopted since 2014 Annual Report, to
provide a more holistic view of the Group’s financial as well as non-financial performance.
The Group serves more than 20 clear business days’ notice for Annual General Meeting (“AGM”).
Since 2004, the Group has operated a new form of AGM that goes beyond discharging statutory
business by including a detailed business review. All voting at AGMs has been conducted by poll
since 2004.
The Group publishes the terms of reference and membership of all its corporate governance
related Board Committees on the websites of the Group and the Stock Exchange.
The Group announces the financial results within 2.5 months after the end of financial year and
publishes the Annual Report on the Group’s website within 3 months after the end of financial
year. The Group sends the Annual Report to shareholders within 10 days after publication. The
AGM notice, Annual Report, and the financial statements are dispatched to the shareholders more
than 30 days prior to the AGM (statutory requirement: 21 days).
The Group continually enhances its communications with shareholders. It has initiated and invited
major nominee companies to proactively forward communication materials to the ultimate
beneficial shareholders at the Group’s expense. To further increase efficiency of communication,
protecting the environment and saving costs for the Company, arrangements have been made
since December 2015 to ascertain the shareholders’ preference as to the means of receiving
corporate communications. The aim is to continually enhancing the use of the Group’s corporate
website as a means of shareholder communications.
* Detailed policies/terms of reference are available on the Company’s website: www.hysan.com.hk.
92
Hysan Annual Report 2015Corporate Governance Report Our Governance Framework
Hysan operates with a clear and effective governance structure.
THE BOARD
Leadership; Strategy Planning; Risk Management
Audit Committee
• Reviews internal controls
and risk management
systems
• Monitors internal and
external auditors
• Oversees financial
reporting process
Remuneration Committee
• Sets remuneration policy
for Executive Directors
• Determines Executive
Directors’ remuneration
and incentives
Nomination Committee
• Recommends Board
appointments
• Reviews Board structure
and composition
• Assesses independence of
Independent Non-
Executive Director
• Succession planning for
directors
Strategy Committee
• Oversees the Group’s
strategy activities
• Aligns corporate
responsibility initiatives
with the corporate
strategy
Further information
Directors’ Remuneration and
Interests Report – pages 121
to 129
Nomination Committee –
page 109
Strategy Committee –
page 107
Audit Committee Report –
pages 130 to 133
Internal Controls and Risk
Management Report –
pages 54 to 59
Hysan’s governance framework serves as a guide for the Board and management in the
performance and fulfilment of their respective obligations to Hysan and its stakeholders.
The key components of Hysan’s governance framework, including the guidelines, policies,
and procedures (as listed below), ensures (i) the existence of a capable and qualified Board
with diverse backgrounds and skills; (ii) the establishment of appropriate roles for the Board
and various committees; and (iii) a collaborative and constructive relationship between the
Board and management.
The following constitutes 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
• Matters Reserved for Board Decisions
• Terms of Reference of the various corporate governance related Board Committees
• Code of Ethics for Employees
• Auditor Services Policy
• Corporate Disclosure Policy
The Board reviews these guidelines, policies, and procedures periodically, typically on an
annual basis. The Board also regularly assesses and enhances its governance framework,
practices and principles in light of regulatory regimes, international best practices, as well as
Company needs.
93
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business What the Board has done throughout 2015:
driving continuous improvement
Throughout the year, 6 Board meetings were held, including a strategy meeting with
in-depth presentation and discussion of the Group’s strategy and planning. The Board leads
the Company and provides long-term strategic guidance, managing its risks and delivering
its objectives in regard to the following themes. The Board is also supported by the work of
various Board committees. 2015 was an active year for the Board.
1
LEADERSHIP
• Board effectiveness: continued
to adopt a formal board
evaluation process. The Board
thoroughly considered the
responses to the evaluation
questionnaire. (see section on
“Board Evaluation”)
2
STRATEGIC PLANNING
• core business: received and
discussed regular updates for the
Group’s core leasing portfolios to
meet short-term objectives.
• strategic plan: received and
discussed updates on longer-term
directional strategy for further
growth.
• re-development and asset
enhancement projects: received
and discussed regular updates.
• talent management: Board
committees received, evaluated
and reported back to the Board –
these actions are important for the
long-term success of the Group.
• curate tenant mix and area
branding: strengthened Lee
Gardens area branding and
marketing and shopping
experience.
FORMAL BOARD
MANDATE:
BOARD ROLES
• Strategic Planning
• Internal Controls and
Risk Management
• Culture and Values
• Capital Management
• Corporate Governance
• Board Succession
3
RISK MANAGEMENT
• financial control: assessed
effectiveness of financial
controls, and other internal
controls. (see sections on
“Internal Controls and Risk
Management Report” and
“Audit Committee Report”)
• risk control: Audit Committee
reviewed and monitored
management’s risk
management process.
• regulatory environment
control: legal and regulatory
update is a regular agenda item
for each Board meeting.
4
RELATIONS WITH
SHAREHOLDERS
• reporting: investor relations
reporting (describing investor
and analyst opinions) is a
regular agenda item for each
board meeting.
• enhance communication:
enhanced shareholder
communications by further
exploiting the electronic
channels.
94
Hysan Annual Report 2015Corporate Governance Report Board Calendar 2015
The overall calendar of meetings of the Board and its Committees for 2015 is shown below:
Board
Further
report
Page 94
Audit Committee
Page 130
Remuneration
Committee
Nomination
Committee
AGM
Page 121
Page 109
Jan
Feb
Mar
Apr May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
✓
✓
✓
✓
✓
✓
✓
✓
✓✓
(Note 1)
✓
✓
Note:
1 In December 2015, a Board meeting was held to discuss 2016 budget and a separate Strategy Meeting (attended by full
Board members) was held to discuss business plan, as well as longer-term directional strategy for growth.
2015 was an active and effective year. The work the Board for 2015 are:
Month
March
May
August
Special matters considered by the Board
Review of reports from:
• Remuneration Committee
• Audit Committee; and review of internal controls and risk management
effectiveness
Review and approval of 2014 annual results, including:
• Preliminary announcement
• Declaration of 2014 2nd interim dividend
• Other key reports
• Corporate Governance Report
• Internal Controls and Risk Management Report
• Audit Committee Report
• Directors’ Remuneration and Interests Report
• Directors’ Report
Approval of proposals to be submitted to the AGM
Annual review of corporate governance matters
Analysis of feedback and discussions of:
• Board and Board Committees’ evaluation questionnaires
Review of reports from:
• Audit Committee; and review of internal controls and risk management
effectiveness
Review and approval of 2015 interim results, including
• Interim results announcement
• Interim report
• Declaration of 2015 1st interim dividend
October
Appointment of new Company Secretary to fill a casual vacancy
95
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Month
Special items considered by the Board
December
Review of reports from:
• Nomination Committee; and review of Board size and composition, as
well as “independence” of Directors
• Audit Committee; and deep-dive discussion of internal controls and risk
management matters
Review and discussions of 2016 budget
Review of corporate governance matters – annual review of Matters
Reserved for the Board Decisions (relating to the 2016 budget and
business plan)
December
(Note: A separate
Strategy Meeting
was held)
Review and discussions of :
• Group’s strategic activities
• Update on the longer-term directional strategy
Month
Regular matters considered by the Board
March, May,
August and
December
Review and discussions of reports on:
• Operating results and regular updates for the Group’s core leasing
business (Office, Retail and Residential segments)
• Current development and asset enhancement projects’ update
(including the redevelopment of Lee Garden Three)
Review and discussions of:
Financial forecasts
Update on:
• Analysts’ feedback
• Legal and regulatory issues
Review and approval of:
Minutes of previous meeting
96
Hysan Annual Report 2015Corporate Governance Report Meeting attendance by Directors in 2015
The attendance of Directors at the meetings of the Board and its Committees is shown below:
● Attended
■ Excused from the meeting as the
Attended by alternate
Attended by tele-conference
Attended the meetings (or part of
meetings) as invitee
agenda was to consider matter relating
to her resignation and appointment of
new Company Secretary
Already resigned from the Board
Meetings Held/Attended
Board
(Total: 6)
(Note 1)
Audit
Committee
(Total: 3)
Remuneration
Committee
(Total: 1)
Nomination
Committee
(Total: 1)
Annual
General
Meeting
(Annually)
● ● ●
● ●
● ● ● ● ● ●
● ● ● ■
● ● ●
● ● ●
● ● ●
● ●
● ● ●
● ●
● ●
● ●
● ●
● ●
● ●
● ● ●
● ● ●
● ● ●
● ●
● ●
● ●
● ●
● ● ●
● ●
● ● ●
N/A
N/A
N/A
● ● ●
N/A
N/A
(Note 3)
(Note 3)
N/A
N/A
N/A
●
N/A
●
N/A
N/A
N/A
●
●
N/A
●
N/A
●
N/A
●
N/A
N/A
●
N/A
●
●
●
●
●
●
●
●
●
●
●
●
Directors
Executive Directors
Irene Yun Lien LEE
Siu Chuen LAU
Wendy Wen Yee YUNG (Note 2)
Independent Non-Executive Directors
Nicholas Charles ALLEN
Frederick Peter CHURCHOUSE
Philip Yan Hok FAN
Lawrence Juen-Yee LAU
Joseph Chung Yin POON
Non-Executive Directors
Hans Michael JEBSEN
Anthony Hsien Pin LEE
Chien LEE
Michael Tze Hau LEE
Notes:
1. In December 2015, a Board meeting was held to discuss 2016 budget and a separate Strategy Meeting (attended by full Board
members) was held to discuss business plan, as well as longer-term directional strategy for growth.
2. Wendy Wen Yee YUNG resigned as Executive Director and Company Secretary with effect from 24 October 2015.
3. Excused from the session to discuss the Executive Directors’ own compensation package.
Board Leadership
FORMAL BOARD MANDATE
The role of the Board is governed by a formal Board of Directors Mandate (details are also
available on the Company’s website: www.hysan.com.hk), which sets out the key responsibilities
of the Board in fulfilling its stewardship roles. These are strategic planning, internal controls and
risk management, culture and values, capital management, corporate governance, and Board
succession.
Day-to-day management of the Group is delegated to the Executive Directors, subject to formal
delegated authority limits and certain matters that have been reserved for the Board approval. 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, which covers all major policies and directions of the
Company. These matters include: long-term objectives and strategies; the extension of Group
activities into new business areas; capital management framework and policy; treasury policies;
annual budgets, annual funding plan and annual treasury investment plan; material
acquisitions/disposals of fixed assets; connected transactions; preliminary announcements of
interim and final results; the declaration of dividends; internal controls; Board membership;
Corporate Governance matters; and major prosecution, defense or settlement of litigation.
97
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
Where applicable, “materiality” thresholds for the key matters 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 subject to review regularly, and at least once a year.
(These documents are available on the Company’s website: www.hysan.com.hk)
REFRESHING THE BOARD – BOARD SIZE, COMPOSITION, AND APPOINTMENTS
There are currently 11 Directors on the Board: the Chairman, Deputy Chairman and Chief
Executive Officer and 9 Non-Executive Directors (including 5 Independent Non-Executive
Directors). The roles 9 of the Chairman and the Chief Executive Officer are currently
separate. Irene Yun Lien LEE is currently the Board Chairman. In addition to her role in
leading the Board, she advises, supports and coaches the management team, particularly
regarding the long-term strategic development of the Group and management matters that
drive shareholder value. Siu Chuen LAU, as Deputy Chairman and Chief Executive Officer,
deputises and supports the Chairman in her Board leadership role, he also oversees the
overall operations and performance of the Group.
The Board will review its size and composition from time to time. We are committed to
continuing Board renewal to ensure that the Board is both compliant and appropriately
refreshed and that it always has the necessary diversity of skills and attributes required to
oversee and govern in the ever-changing operating environment. Our Non-Executive
Directors (including 5 Independent Non-Executive Directors) are of diverse backgrounds in
the areas of economics, finance, general management, professional practices, and the
property industry. The Board last reviewed its size and composition in December 2015.
Further description of the backgrounds of the Non-Executive Directors is set out in the
section “Board Effectiveness – Balance, Diversity and Skills” below.
Non-Executive Directors are appointed for a term of 3 years, and are required to submit
their candidacy for re-election at the first AGM following their appointment. Under the
Company’s Articles of Association, every Director will be subject to retirement by rotation at
least once every 3 years. Retiring Directors are eligible for 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.
At the AGM to be held on 13 May 2016, Nicholas Charles ALLEN, Frederick Peter
CHURCHOUSE, Anthony Hsien Pin LEE and Chien LEE will retire at the forthcoming AGM.
Nicholas Charles ALLEN has informed the Board that he will not offer himself for re-election
and accordingly will retire as Director after the conclusion of the forthcoming AGM. Save for
Nicholas Charles ALLEN, the other retiring Directors, being eligible, offer themselves for
re-election. Details with respect to the candidates standing for election as Directors are set
out in the AGM circular to shareholders.
98
Hysan Annual Report 2015Corporate Governance Report Board Effectiveness
BALANCE, DIVERSITY AND SKILLS
We continue to recognise that a balance of experiences, competencies, expertise, diversity
and skills on the Board is the key foundation for introducing different perspectives into
Board discussions and for better anticipating the risks and opportunities in building a long-
term sustainable business. Our Board ensures the continued effective overseeing of, and
informed decision making with respect to, issues affecting Hysan.
Balance of Non-Executive Directors
Balance of Non-Executive Directors
and Executive Directors
and Executive Directors
31 December 2015
31 December 2015
Length of Tenure of
Length of Tenure of
Non-Executive Directors
Non-Executive Directors
31 December 2015
31 December 2015
4
4
2
2
5
5
Non-Executive Directors
Non-Executive Directors
Independent Non-Executive Directors
Independent Non-Executive Directors
Executive Directors
Executive Directors
4
4
5
5
0 – 5 years
0 – 5 years
(being the 5 Independent
Non-Executive Directors)
(being the 5 Independent
Non-Executive Directors)
6 years and above
(being the 4 Non-Executive Directors)
6 years and above
(being the 4 Non-Executive Directors)
The Board believes that diversity is vital for Board effectiveness. This philosophy extends
from the Board level to the key operational management throughout the Group. The
Company has taken, and continues to take steps to promote diversity, including gender
diversity, at operational management levels. The Company respects a working environment
which is free of discrimination and has policies against discrimination with regard to gender
while promoting diversity in recruitment and promotion.
Board Diversity by Gender
Board Diversity by Gender
31 December 2015
31 December 2015
9%
9%
Gender Diversity of
Gender Diversity of
Key Operational Management*
Key Operational Management*
31 December 2015
31 December 2015
91%
91%
Women: 1
Women: 1
Men: 10
Men: 10
53%
53%
47%
47%
Women: 8
Women: 8
Men: 9
Men: 9
* Key operational management is defined as the 17 heads of departments / units of the Group, but does not include Executive
Directors, who also maintain a management / supervisory role for operations.
99
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business During 2015, there were 9 Non-Executive Directors drawn from diverse and complementary
backgrounds. They bring valuable experience and insight in the following areas of
experience and expertise, driving the corporate strategy and growth of the Group:
Experience / Expertise
1. General Management
Broad business experience through a senior level position in another major company.
2. Property Industry
Experience as a senior executive in another major company in property investment,
development or facilities management; or related industry.
3. Financial Services and Investment
Experience in the financial services industry or experience in overseeing financial
transactions and investment management.
4. Marketing
Experience as a senior executive in a major retail, customer products, services or
distribution company.
Name of Directors
Philip Yan Hok FAN
Joseph Chung Yin POON
Frederick Peter CHURCHOUSE
Anthony Hsien Pin LEE
Chien LEE
Michael Tze Hau LEE
Joseph Chung Yin POON
Hans Michael JEBSEN
5. Macro-environment affecting the Group
Lawrence Juen-Yee LAU
Expertise in the economic, political or social environment affecting the Group and its
operations, with a focus in Hong Kong and China.
6.
“Audit Committee” Accounting Expertise
Expertise based on the definition of “Audit Committee accounting expertise” under the
Listing Rules.
Nicholas Charles ALLEN
Joseph Chung Yin POON
7. Risk Management
An understanding of the Board’s role in overseeing of risk management principles and
practices, including an understanding of current risk management principles and
practices, which may have been gained through current or previous experience on
another public company board committee that oversees risk management; role at
another public company as “chief risk officer” or risk management executive; and role at
another public company as chief executive officer or chief financial officer.
8. Human Resources / Compensation
An understanding of the principles and practices relating to Human Resources and / or
actual “hands-on” experience in managing or overseeing Human Resources in another
major company, including experience in: compensation plan design and administration;
leadership development / talent management; succession planning; and compensation
decision-making, including risk-related aspects of compensation.
Nicholas Charles ALLEN
Philip Yan Hok FAN
Lawrence Juen-Yee LAU
Chien LEE
Michael Tze Hau LEE
Joseph Chung Yin POON
Philip Yan Hok FAN
Joseph Chung Yin POON
(Directors’ full biographies, including relationships among members of the Board, are set out in pages 86 to 89 and
are also available on the Company’s website: www.hysan.com.hk)
100
Hysan Annual Report 2015Corporate Governance Report INDEPENDENCE
As a listed company with the presence of a major shareholder family, the Board has put in
place appropriate policies and processes to avoid conflicts of interest or perception of the
same.
“Connected transactions” with persons and entities regarded as connected with the Group
under the Listing Rules are subject to the approval of the full Board, as provided under the
List of Matters Reserved for Board Decisions. In addition, “exempted transactions” that
are exempt from the Listing Rules’ disclosure requirements are also subject to reporting to
the full Board after management approval, with full particulars of key terms and conditions
as well as justification.
The Board has established “independence” standards for individual Directors in our
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 Nomination Committee carried out a detailed review of director independence. It
concluded that each of the 5 Independent Non-Executive Directors was independent as at
that time. Independent Non-Executive Directors are identified in our Annual and Interim
Reports and other communications with shareholders. The Board will continually monitor
and review whether there are relationships or circumstances that are likely to affect (or
could appear to affect) independence.
“Connected Transactions”
with related persons subject
to full Board decision
Appointment of 5
independent Directors with
a diverse background
This is expressly provided in our List of
Matters Reserved for Board Decisions. The
relevant requirements are more stringent
than those under the Listing Rules.
We have 5 Independent Non-Executive
Directors drawn from a diverse background,
spanning economics, financial services and
investment, general management, professional
(accounting), and property industry.
INDEPENDENCE
Checks and Balances
Clear “independence”
standards for individual
Directors
This is laid down in our Corporate
Governance Guidelines.
Detailed annual review of
independence of individual
Directors
The Nomination Committee carries out a
detailed review of Director independence
annually.
101
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Independence Status
Name
Management
Independent
Not
Independent
December 2015 Review –
Reason for Independence Status
Nicholas Charles ALLEN
Frederick Peter
CHURCHOUSE
Philip Yan Hok FAN
Hans Michael JEBSEN
Siu Chuen LAU
Lawrence Juen-Yee LAU
Anthony Hsien Pin LEE
Chien LEE
Irene Yun Lien LEE
Michael Tze Hau LEE
Joseph Chung Yin POON
✓
✓
✓
✓
✓
✓
✓
No business or other relationships with
the Group or management that will
affect independence
No business or other relationships with
the Group or management that will
affect independence
No business or other relationships with
the Group or management that will
affect independence
No business or other relationships with
the Group or management that will
affect independence (Note 1)
No business or other relationships with
the Group or management that will
affect independence
✓
✓
✓
✓
Note:
1 Professor Lau’s spouse is Partner in-charge, Tax, Hong Kong, at KPMG China, and a board member of KPMG China. KPMG is a
tenant of the Group and provides taxation services principally as tax representative of the Company and certain subsidiaries,
which are routine services in nature. Mrs. Lau has not been involved in any business negotiations with the Group, or in the
provision of any services, and will refrain from doing so. The Board and its Nomination Committee had assessed the
independence of Professor Lau in light of the circumstances, including (i) Professor Lau’s background, experience,
achievements, as well as character; (ii) the nature of the Company’s relationship with KPMG and Mrs. Lau’s roles as described
above; and concluded that his independence would not be affected.
102
Hysan Annual Report 2015Corporate Governance Report BOARD EVALUATION
Traditionally, Hysan evaluates the performance of the Board and members of management
at meetings between the Chairman and Non-Executive Directors without the presence of
management.
Since 2014, the board evaluation process was strengthened and enriched through an
evaluation questionnaire for the full Board as well as Board Committees. Directors were
asked to assess the effectiveness of the Board by providing a mixture of quantitative and
narrative responses. Our Corporate Governance Guidelines were refined in March 2014 to
show the Board’s commitment. The outcomes of the evaluation were thoroughly analysed
and discussed at the Board meeting held in May 2015.
Areas covered and evaluated in the questionnaire included the (i) Board’s roles (including
Director responsibilities, relationship with the Board Committees); (ii) Board compositions
(size; balance of knowledge, experience and skills; independence); (iii) Board meetings and
processes (including satisfaction with integrity of financial statements and accounting
policies; risk management process); Board in actions (including strengths and weaknesses);
and (iv) training.
Out of a total of 29 questions in the questionnaire, all responses received had a high score at
or above 4 (“Agree”), according to a scale of 1 (“Strongly Disagree”) to 5 (“Strongly Agree”).
Items that received the highest score (with an average of over 70% indicated a scoring of
“Strongly Agree”) were: (i) satisfaction with integrity of financial statements and accounting
policies/practices; (ii) clarity in providing for the roles of the Board as well as individual
director responsibilities; and (iii) provision of appropriate level of involvement in reviewing
strategic aims and plans. The outcomes signified that the Directors were highly satisfied with
the effectiveness of the Board in addressing and discharging its responsibilities.
Valuable feedbacks received include the need to continually review the Board’s size, balance
of knowledge, experience, and suggestions to obtain expertise in potential new areas of
business. On internal controls and risk management aspects, as Hong Kong’s business and
social environment is becoming more challenging and volatile, a more robust process is
encouraged to identify the principal risks and uncertainties and to evaluate the way in which
these are controlled, mitigated, monitored and managed. These feedbacks, well received by
management, are being incorporated in the continuous improvement of the Board’s
programmes and processes.
To further strengthen the independence of the Non-Executive Directors and to enable them
to discuss more freely the evaluation of performance of the Board as well as the Group’s
management, the Non-Executive Directors also held 2 discussion sessions during 2015
without the presence of Executive Directors or Board members relating to the founding Lee
family.
103
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business How The Board Works Together
BOARD AND MANAGEMENT
The Board and management fully appreciate their respective roles and are supportive of the
development and maintenance of a healthy corporate governance culture.
The Board relies on management for the day-to-day operation of the business. It monitors
what management is doing, and holds it accountable for the performance of the Company
as measured against established targets. In terms of strategy formulation, the Board works
closely with management in thinking through the Group’s direction and long-term plans, as
well as the various opportunities and risks associated therewith and that are facing the
Group generally.
The Non-Executive Directors provide independent challenge and review, bringing a wide
range of experiences, specific expertise, and fresh objective perspectives. As members of the
various Board committees, they also undertake detailed governance work with a particular
focus as noted under the respective terms of reference of the various Board committees.
Summary of key features at Hysan Board during 2015
• The Board held 6 meetings. Hysan’s Directors have a strong commitment to the Company,
which was reflected in the high attendance record at the Board and its Committee meetings.
• All Directors are entitled to seek independent professional advice regarding their duties at
the Company’s expense.
• Directors’ and Officers’ liability insurance has been arranged. The terms and extent covering
2015 was reviewed and renewed.
• Declarations of interest are recorded and records are accessible by each director.
• Financial plans, including budgets and forecasts, are regularly discussed at Board meetings.
Monthly reports to Non-Executive Directors are issued, covering financial and operating
highlights.
• Non-Executive Directors are invited to attend Company events. Such events included the
annual “Company Day” when the management team shared management objectives for
the coming year with all Head Office staff and supervisors of the building offices.
• Since 2012, the Board moved to electronic Board papers via iPad – an initiative to reduce
the use of printed paper across our business and to enhance effective and timely
communication. This electronic platform allows the Directors to access information and
meeting records relevant to the execution of their duties readily.
• To supplement the formal Board meetings and to further strengthen the independence of
the Non-Executive Directors and to enable them to discuss more freely the evaluation of
performance of the Board as well as the Group’s management, the Independent Non-
Executive Directors and Non-Executive Directors also held 2 separate discussion sessions
during 2015 without the presence of Executive Directors or Board members relating to the
founding Lee family.
104
Hysan Annual Report 2015Corporate Governance Report HOW MANAGEMENT SUPPORTS THE EFFECTIVE WORKINGS OF THE BOARD
Supply of Information
Management recognises the significance of providing timely and relevant information to
Non-Executive Directors so as to enable them to discharge their duties effectively.
The Board receives detailed quarterly reports from members of 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. Monthly reports to Non-Executive Directors are
issued, covering financial and operational highlights.
The interaction of Non-Executive Directors with non-Director members of the management
team has been strengthened. In addition to receiving presentations from non-Board
management members at Board meetings, Non-Executive Directors are also invited to
attend Company events. Such events included the annual “Company Day” when the
management team shared management objectives for the coming year with all Head Office
staff and supervisors of the building offices. All these measures facilitate the build-up of
constructive relations and dialogue between the Board and the management team, as well
as offering first-hand experience of our people and culture.
Directors are also kept updated of any material developments from time to time through
notifications and circulars detailing relevant background and explanatory information. As
described above, 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 fulfil its obligations.
Since 2012, the Board moved to electronic Board papers via iPad – a contribution, albeit
small, towards supporting our objective of reducing the use of printed paper across our
business in light of sustainability. This measure also clearly demonstrates the Board’s
willingness to embrace new technology and further enhance the effectiveness of
communications.
105
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Induction, Business Awareness and Development
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 briefing designed to provide a general understanding of the
Group, its businesses and operations (including the major risks it faces), and an overview of
the additional responsibilities of Non-Executive Directors.
Through the course of their directorship, Directors are updated on any developments or
changes affecting the Company and their obligations to it at regular Board meetings.
In order to ensure that Directors continue to further their understanding of the issues facing
the Group, management further strengthened the Directors’ continuous professional
development plan during the year, ranging from local infrastructure development to
overview of global economy. The following is a summary of professional development
participated by Directors during the year. In addition to the activities organised by us,
Directors also participated in other forms of training organised by third parties with
appropriate emphasis on the roles, functions and duties of the Directors.
Directors’ continuous professional development in 2015
Directors
Executive Directors
Irene Yun Lien LEE
Siu Chuen LAU
Wendy Wen Yee YUNG
(resigned effective 24 October 2015)
Independent Non-Executive Directors
Nicholas Charles ALLEN
Frederick Peter CHURCHOUSE
Philip Yan Hok FAN
Lawrence Juen-Yee LAU
Joseph Chung Yin POON
Non-Executive Directors
Hans Michael JEBSEN
Anthony Hsien Pin LEE
Chien LEE
Michael Tze Hau LEE
Attending expert
briefings /seminars /
conferences organised by
third parties relating to
the business or directors’
duties
Perusing legal
and regulatory
updates
prepared by
Hysan quarterly
Attending
trainings
organised by
Hysan
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
106
Hysan Annual Report 2015Corporate Governance Report
Board Process and Administration Procedures
Board discussions are held in a collaborative atmosphere of mutual respect and open
discussions allow for questions, and constructive challenge where appropriate. In light of
this, we aim to continually enhance the Board process. Improvement areas identified and
implemented have included convening an additional meeting since 2014 for discussion of
Group strategy matters, and allowing more time for discussions at each Board meeting.
Independent Advice
It is recognised that there may be occasions when one or more Directors feel that it is
necessary to obtain independent legal and / or financial advice for the purposes of fulfilling
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.
Board Committees in 2015
In order to provide effective overseeing and leadership and pursuant to its Corporate
Governance Guidelines, the Board has established 3 governance-related Board Committees
as detailed below. Like the Board, each Committee has access to independent advice and
counsel as required and each is supported by the Company Secretary. These committees
report to the Board. The terms of reference of these Committees are available on the
Company’s website. It was an active year for the Audit Committee and the Remuneration
Committee in particular, as detailed below.
Strategic planning is an important function of the Board. An additional Board meeting has
been scheduled since 2014 and for discussion of strategic matters. The Board also has a
Strategy Committee to support it in this regard. It is currently chaired by Irene Yun Lien LEE,
Board Chairman, and its other members are Siu Chuen LAU (Deputy Chairman and Chief
Executive Officer), Nicholas Charles ALLEN (Independent Non-Executive Director), Philip Yan
Hok FAN (Independent Non-Executive Director) and Chien LEE (Non-Executive Director).
AUDIT COMMITTEE
Composition and Meetings Schedule
The Audit Committee is currently chaired by Nicholas Charles ALLEN (Independent Non-
Executive Director), and its other members are Frederick Peter CHURCHOUSE (Independent
Non-Executive Director), Philip Yan Hok FAN (Independent Non-Executive Director) and
Anthony Hsien Pin LEE (Non-Executive Director). There is a majority of Independent
Non-Executive Directors. Nicholas Charles ALLEN (Committee Chairman) is a Fellow of
the Institute of Chartered Accountants in England and Wales and is a member of the
Hong Kong Institute of Certified Public Accountants. He has extensive experience in auditing
and accounting, which he developed while working with a “Big Four” international firm. The
Audit Committee held 3 meetings during the year. At the invitation of the Audit Committee,
such meetings are also attended by the Board Chairman and members of management
(including the Chief Executive Officer and the Chief Financial Officer).
Pre-meeting sessions
with external and
internal auditors held
without management’s
presence
107
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
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 financial statements. Formal statements of Directors’
Responsibility for the Financial Statements are contained in “Financial Statements,
Valuation and Other Information” of this Annual Report. The external auditors are
responsible for auditing and attesting to the Group’s financial 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 is responsible for overseeing the
entire process.
The Audit Committee also has the responsibility of reviewing the Group’s “whistle-blowing”
procedures. The “whistle-blowing” procedures allow employees to raise concerns, in
confidence or anonymously, about possible breaches of the Group’s Code of Ethics. The
Audit Committee ensures that these arrangements allow proportionate and independent
investigation of possible breaches and related matters and there is appropriate follow
up action.
Activities and Report in 2015 and to date
Full details of the activities of the Audit Committee are also set out in the “Audit Committee
Report” on pages 130 to 133. 3 meetings were held during the year. Attendance at Audit
Committee meetings is set out in the table on page 97. In addition to reviewing and
approving annual and interim financial statements, the Committee held a separate meeting
that substantially focused on internal controls and risk management.
REMUNERATION COMMITTEE
Composition and Meetings Schedule
The Group established the Remuneration Committee in 1987 to review the compensation
of Executive Directors. The current Remuneration Committee is chaired by Philip Yan Hok
FAN (Independent Non-Executive Director). The other members of the Remuneration
Committee are Michael Tze Hau LEE (Non-Executive Director) and Joseph Chung Yin POON
(Independent Non-Executive Director). It currently has a majority of Independent Non-
Executive Directors. The Remuneration Committee generally meets at least once every year.
Roles and Authority
Management makes recommendations to the Remuneration Committee on Hysan’s
framework for, and cost of, Executive Director remuneration. The Committee then reviews
these, and makes recommendations to the Board. The Remuneration Committee also
reviews the fee payable to Non-Executive Directors prior to its being submitted for approval
at the AGM. In addition, it also reviews new share option plans, changes to key terms of
pension plans, and key terms of new compensation and benefits plans with material
financial, reputational, and strategic impact. No Director is involved in deciding his or her
own remuneration.
Activities and Report in 2015 and to date
Full details of the activities of the Remuneration Committee are set out in the “Directors’
Remuneration and Interests Report” on pages 121 to 129. A meeting was held during the
year. Attendance at the Remuneration Committee meeting is set out in the table on
page 97.
108
Hysan Annual Report 2015Corporate Governance Report NOMINATION COMMITTEE
Composition and Meetings Schedule
The Board established a Nomination Committee in 2005. The Nomination Committee is
currently chaired by Irene Yun Lien LEE, Chairman of the Board and has a majority of
Independent Non-Executive Directors. The other members of the Nomination Committee during
the year were Nicholas Charles ALLEN (Independent Non-Executive Director), Philip Yan Hok FAN
(Independent Non-Executive Director), Chien LEE (Non-Executive Director), and Joseph Chung
Yin POON (Independent Non-Executive Director).
Roles and Authority
The Nomination Committee is responsible for nominating candidates, with Board approval, to
fill Board vacancies as and when they arise, and for evaluating the balance of skills, knowledge
and experience of the Board. The Committee also reviews the independence of Directors
pursuant to the Listing Rules requirements. The terms of reference of the Nomination
Committee clearly set out that the Chairman of the Board shall not chair the Nomination
Committee when it is dealing with the matter of succession of the chairmanship.
A meeting was held during the year to (i) review the structure, size, and composition of the
Board; and (ii) assess the independence of Independent Non-Executive Directors. Attendance at
the Nomination Committee meeting is set out in the table on page 97.
Shareholders
The Board and management fully recognise the significance 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, the reporting of
financial and non-financial 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.
Shareholders may raise enquiries to the Board by contacting the Group’s Investors
Relations function.
Information via Internet
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
and the Group’s financial reports, press releases and announcements, are available on the
website. Shareholders are 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.
We recognise that not all shareholders and stakeholders have ready access to the internet. For
those who do not, hard copies of the Hysan website information are available free of charge
upon request to the Company Secretary.
109
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business 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 plan, and of enabling them to raise any issues they may have.
The Company has an ongoing programme of dialogue and meetings between Chief
Executive Officer, Chief Financial Officer, 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. There are regular presentations to or conference calls with
analysts and investors, also at the time of announcement of results. Results announcement
presentations to analysts are also disseminated to a broader audience by way of webcasts.
Investor relations reports describing investor and analyst opinions are provided regularly to
the Board.
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 significance 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 those
Committees.
Since 2004, to enable shareholders to gain a better understanding of our business activities,
we have included a “business review” session in our AGMs, in addition to the statutory part
of the meeting. Topics covered at the last AGM included the business environment in 2014,
a review of business activities, and the Company’s outlook for 2015. The Company values
the contributions of its shareholders during the question and answer session following the
statutory part of the meeting.
Corporate Disclosure Policy
We recognise the significance 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 identifies who may speak on Hysan’s behalf, and outlines
the responsibilities for communications with various stakeholders groups. It has been
updated in light of the new “inside information” disclosure regime under the Securities and
Futures Ordinance, effective January 2013. (Details of the Corporate Disclosure Policy are
available at the Company’s website: www.hysan.com.hk)
SHAREHOLDER RIGHTS
Proactively Forward Shareholder Communication Materials via
Nominee Companies
Shareholders must be furnished with sufficient and timely information concerning the
Company and any material developments. There is currently no requirement in Hong Kong
providing for mandatory forwarding of shareholder communications materials by nominee
companies to beneficial shareholders. Since 2005, we have initiated and invited major
110
Hysan Annual Report 2015Corporate Governance Report nominee companies to proactively forward communication materials to shareholders at our
expense. To further increase efficiency of communication, protecting the environment and
saving costs for the Company, arrangements have been made since December 2015 to
ascertain the shareholders’ preference as to the means of receiving corporate communications.
The aim is to continually enhancing the use of the Group’s corporate website as a means of
shareholder communications. Greater publicity of the Group’s website is being made.
Provision of Sufficient and Timely Information
We recognise the significance of providing information to shareholders to enable them to make
an informed assessment for the purposes of voting on each of the items put before shareholders
at the AGM. The AGM notice, Annual Report, and financial statements are dispatched to
shareholders more than 30 days prior to the AGM (statutory requirement:
21 days). Comprehensive information on each resolution to be proposed is also provided.
Voting
We recognise shareholders’ rights 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 its AGMs by poll. The poll is conducted by the Company’s Registrar 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 current Articles of Association of the Company and Hong Kong Companies Ordinance,
shareholders holding not less than 5% of the total voting rights of shareholders of the Company
(“5% Shareholder”) may convene a general meeting by written request signed by a 5%
Shareholder stating the objectives of the meeting, and deposit the signed request at the
Company’s registered office (49/F, Lee Garden One, 33 Hysan Avenue,
Hong Kong. Attention: The Company Secretary). Any 5% Shareholder may also request for
passing of resolutions by way of written resolutions. Any shareholders holding not less than
2.5% of the total voting rights of shareholders of the Company (or 50 or more shareholders
entitled to vote) may request for the circulation of resolutions to be moved at AGM; and
circulation of statements regarding resolutions proposed at general meetings. The specified
documents should be deposited at the Company’s registered address as detailed above.
Hong Kong Companies Ordinance also provides for shareholder approval of decisions concerning
fundamental corporate changes, including amendments to the Articles of Association. The
Ordinance also provides for disinterested shareholder approval (excluding those shareholders
related to the relevant directors) for certain transactions with directors as well as their connected
entities, and ratification of director misconduct.
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.
No changes have been made to the Company’s Articles of Association during the year.
111
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business The Directors submit their report together with the audited financial statements for the year ended 31 December 2015, which
were approved by the Board of Directors (the “Board”) on 8 March 2016.
PRINCIPAL ACTIVITIES
The principal activities of the Group continued throughout 2015 to be property investment, management, and development.
Details of the Group’s principal subsidiaries and associates as at 31 December 2015 are set out in notes 18 and 19 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 operating segment are set out in note 5 to the financial statements.
RESULTS AND APPROPRIATIONS
The results of the Group for the year ended 31 December 2015 are set out in the consolidated income statement on page 137.
The first interim dividend of HK25 cents per share, amounting to approximately HK$266 million, was paid to shareholders
during the year.
The Board declared a second interim dividend of HK107 cents per share to the shareholders on the register of members on 23
March 2016, absorbing approximately HK$1,122 million. The dividends declared and paid for ordinary shares in respect of the
full year 2015 will absorb approximately HK$1,388 million, the balance of the profit will be retained.
BUSINESS REVIEW AND PERFORMANCE
A fair review of the business of the Company and a discussion and analysis of the Group’s performance during the year, the
material factors underlying its results and financial position and material attributable factors of the development and likely
future developments of the Group’s business, are provided throughout this Annual Report, particularly in the following separate
sections:
(a) Review of the Company’s business – “Management’s Discussion and Analysis”;
(b) The Company’s risk management framework, the principal risks the Company is facing and the controls in place –
“Internal Controls and Risk Management Report”;
(c) Future development in the Company’s business – “Key Facts” and “Chairman’s Statement”;
(d) Analysis using financial key performance indicators – “Management’s Discussion and Analysis”;
(e) Discussion on the Company’s environmental policies and performance – “Responsible Business”;
(f) Discussion on the Company’s compliance with the relevant laws and regulations – “Corporate Governance Report”,
“Independent Auditors’ Report” and “The Stock Exchange of Hong Kong Limited’s Environmental, Social and Governance
Reporting Guide”; and
(g) An account of the Company’s key relationships with its employees, customers and suppliers and others – “Responsible
Business” and “Directors’ Report”.
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 140 and 141 and note 30 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 2015 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 2015 are set out in the section under Schedule of
Principal Properties of this Annual Report.
112
Hysan Annual Report 2015Directors’ 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 29 to the financial statements.
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 Corporate Governance
Code as set out in Appendix 14 of the Listing Rules.
Further information on the Company’s corporate governance practices is set out in the following separate reports:
(a) “Corporate Governance Report” (pages 91 to 111) – 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 121 to 129) – it gives detailed information on Directors’
remuneration and interests (including information on Directors’ compensation, service contracts, Directors’ interests in
shares, contracts and competing business);
(c) “Audit Committee Report” (pages 130 and 133) – 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 54 to 59) – it sets out the Company’s framework on internal
controls and risks assessment (including control environment, control activities and work done during the year); and
(e) “Responsible Business” section (pages 60 to 83) – 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 Irene Yun Lien LEE, Chairman, with Siu Chuen LAU as Deputy Chairman and Chief Executive
Officer. There are 9 other Non-Executive Directors.
Wendy Wen Yee YUNG resigned as Executive Director and Company Secretary, effective 24 October 2015.
Trevor Chi-Hsin YANG was appointed alternate Director to Hans Michael JEBSEN in place of Kam Wing LI, effective 29 April
2015.
Irene Yun Lien LEE served as alternate Director to Anthony Hsien Pin LEE throughout the year.
Save as otherwise mentioned, other Directors whose names and biographies appear on pages 86 to 89 have been Directors of
the Company throughout the year.
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 at each AGM. A retiring Director is eligible for re-election.
Particulars of Directors seeking for re-election at the forthcoming AGM are set out in the related circular to shareholders.
113
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business THE BOARD continued
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. The Nomination Committee also reviewed director independence in a meeting held in December 2015. (see
“Corporate Governance Report”)
The directors of subsidiary undertakings included in the annual consolidated financial statements of the Company (other than
those listed above) during the year and until the date of this Annual Report were:
– Almighty Power Limited
– Bemascot Limited
– Bongrow Profit Limited
– Capcept Limited
– Carol Planet Limited
– Chater Inc.
– Comet Bright Limited
– Delightful Investment Limited
– Eastern Sky Limited
– Eunice Cheuk Yee LEUNG (appointed effective 1 March 2016)
– Fairweather (Nominees) Limited
– Fairwind Nominees Limited
– Hans Helmuth HENNIG
– Hing Nin HO (resigned effective 1 March 2016)
–
Justinian (Nominees) Limited
– Kitty Man Wai CHOY
–
Kommand Limited (resigned effective 10 December 2015 and liquidated on 11 December 2015)
– Mourant International Limited
– Nathan Inc.
– New Rise Limited
– Oakwise Limited
– Ocore Limited
– Olivier Jean Claude Erich ELZER
– Plenty Treasure Limited
– Po Wah HUEN
– Roger Shu Yan HAO
– Rose Wai Mun LEE
– Tai On LO
– Wellington Inc.
– Yama Limited
114
Hysan Annual Report 2015Directors’ Report continued 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 121 to 129.
SUBSTANTIAL SHAREHOLDERS’ AND OTHER PERSONS’ INTERESTS IN SHARES
As at 31 December 2015, 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
a controlled corporation
Number of
ordinary
shares held
433,130,735
(Note b)
% of the
total no. of
issued
shares
(Note a)
40.97
Lee Hysan Company Limited
Interests of controlled
corporations
433,130,735
(Note b)
40.97
Silchester International Investors LLP
Investment manager
95,187,000
9.00
Notes:
(a) The percentage was compiled based on the total number of shares of the Company in issue as at 31 December 2015 (i.e. 1,057,177,692 ordinary
shares).
(b) These interests represented the same block of shares of the Company. 393,321,734 shares were held by Lee Hysan Estate Company, Limited
(“LHE”) and 39,809,001 shares were held by a subsidiary of LHE. LHE is a wholly-owned subsidiary of Lee Hysan Company Limited.
Apart from the above, no other interest or short position in the shares or underlying shares of the Company were recorded in
the register which is required to be kept under section 336 of the SFO as at 31 December 2015.
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 35 to the financial statements.
Some of these transactions also constituted “Continuing Connected Transactions” under the Listing Rules, as identified below.
115
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
CONTINUING CONNECTED TRANSACTIONS
Certain transactions entered into by the Group constituted continuing connected transactions (the “Transactions”) under Rule
14A.76(2) of the Listing Rules during the year. Details of the Transactions required to be disclosed are set out as follows:
Leases granted by the Group
I.
(a) Lee Garden Two, 28 Yun Ping Road, Hong Kong (“Lee Garden Two”)
The following lease arrangements were entered into by Barrowgate Limited (“Barrowgate”), a 65.36% subsidiary of the
Company and property owner of Lee Garden Two, as landlord, with the following connected persons:
Connected person
Date of agreement
Terms
Premises
(i)
Jebsen and
Company
Limited
(Note b)
28 March 2013
(Lease and Carpark
Licence Agreement)
Office units on the
5 years commencing
from 1 September 2013 28th, 30th and
31st Floors and
(Note c)
3 carparking
spaces
(ii) Hang Seng
Bank
Limited
(Note b)
16 August 2013
(Lease and Licence
Agreement)
(as amended – Note e) 15 October 2013
2 years, 4 months
and 15 days
commencing from
Shop G13A on the
Ground Floor and
Shops 2-10 and
11-12 on the Lower
Ground Floor and
certain areas on
the Lower Ground
Floor and Ground
Floor
Annual consideration
(Note a)
2015: HK$29,115,636
2016: HK$29,342,964
2017: HK$29,342,964
2018: HK$19,561,976
(on pro-rata basis)
(Notes d & j)
2015: HK$26,756,100
2016: HK$24,023,216
(Note j)
(iii) Treasure Matrix
Limited
(Notes f & g)
28 March 2014
(Lease and Licence
Agreements)
5 years commencing
from 28 March 2014
(Note c)
Shop Nos. 308 & 311 2015: HK$7,379,816
2016: HK$7,866,000
on the 3rd Floor
2017: HK$7,866,000
(connected to an
2018: HK$7,866,000
outdoor garden)
2019: HK$1,881,919
(on pro-rata basis)
(Notes h to j)
116
Hysan Annual Report 2015Directors’ Report continued
CONTINUING CONNECTED TRANSACTIONS continued
I.
(b) One Hysan Avenue, Causeway Bay, Hong Kong (“One Hysan Avenue”)
Leases granted by the Group continued
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, as landlord, with Atlas Corporate Management Limited, a wholly-
owned subsidiary of LHE, a substantial shareholder of the Company (holding 40.97% interest). Details of the lease are set
out below:
Connected person
Date of agreement
Terms
Premises
Atlas Corporate
Management Limited
21 August 2014
3 years commencing
from 1 November 2014
Whole of 21st Floor
Annual consideration
(Note a)
2015: HK$3,007,068
2016: HK$3,025,344
2017: HK$2,521,120
(on pro-rata basis)
(Note j)
II. Provision of leasing and property management services to a non wholly-owned subsidiary regarding Lee Garden Two
(a) The following management agreement was entered into by Hysan Leasing Company Limited, a wholly-owned subsidiary
of the Company, with Barrowgate for the provision of leasing marketing and lease administration services to Lee Garden
Two:
Connected person
Date of agreement
Terms
Premises
Barrowgate Limited
(Note g)
28 March 2013
3 years commencing
from 1 April 2013
Whole premises of
Lee Garden Two
Consideration
received during
the year
HK$22,295,236
(Note k)
(b) The following management agreement was entered into by Hysan Property Management Limited, a wholly-owned
subsidiary of the Company, with Barrowgate for the provision of property management services to Lee Garden Two:
Connected person
Date of agreement
Terms
Premises
Barrowgate Limited
(Note g)
28 March 2013
3 years commencing
from 1 April 2013
Whole premises of
Lee Garden Two
Consideration
received during
the year
HK$3,144,847
(Note k)
117
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
CONTINUING CONNECTED TRANSACTIONS continued
Notes:
(a) The annual considerations are based on current rates of rental (including estimated turnover rent, where applicable), operating charges, (for retail
premises) promotion levies and (for carparking spaces) licence fees for each of the relevant financial years as provided in the relevant agreements.
The rental, operating charges, promotion 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 are beneficial substantial shareholders of Barrowgate
and having equity interest of 10% and 24.64% respectively in Barrowgate. Hans Michael JEBSEN, Non-Executive Director of the Company, is a
controlling shareholder of Jebsen and Company.
(c) The term of the agreements mentioned under I(a)(i) and I(a)(iii) above exceeds 3 years. According to Listing Rules requirement, an independent
financial adviser to the Board was engaged in each case. It formed the view, in each case, that the term with duration longer than 3 years was
required and it was normal business practice for leases of this type to be of such duration.
(d) The rent for the period from 1 September 2016 to 31 August 2018 will be reviewed at the then prevailing market rent and to be agreed by
Barrowgate and Jebsen and Company.
(e) On 1 December 2014, a partial surrender agreement had been entered into and pursuant to which the lease for Shop G13A on the Ground Floor
at Lee Garden Two had been early surrendered effective 31 October 2015. On 15 December 2014, a new lease and licence agreement had been
entered into and pursuant to which the remaining spaces had been renewed for a further term of 3 years commencing from 1 March 2016 to
28 February 2019. As the annual consideration under the renewed lease and licence agreement falls below the applicable de minimis threshold
under the Listing Rules, it constitutes an exempted continuing connected transaction of the Company.
(f)
Treasure Matrix Limited (“Treasure Matrix”) is a non wholly-owned subsidiary of the Company.
(g) Under this transaction, Barrowgate was considered a connected person of the Company under the Listing Rules by virtue of its being a non
wholly-owned subsidiary of the Company and also having a substantial shareholder which is an associate of Hans Michael JEBSEN, Non-Executive
Director of the Company.
(h) Annual consideration for 2015 included actual turnover rent received for the year under review.
(i)
The rent for the period from 28 March 2017 to 27 March 2019 will be reviewed at the then prevailing market rent and to be agreed by
Barrowgate and Treasure Matrix.
(j) Office and retail monthly operating charges and carpark licence fee for Lee Garden Two were revised with effect from 1 January 2015 and further
revised on 1 January 2016. Office monthly operating charges for One Hysan Avenue were revised with effect from 1 January 2015 and further
revised on 1 January 2016.
(k) These represent the actual consideration received for the year ended 31 December 2015, 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 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.
118
Hysan Annual Report 2015Directors’ Report continued CONTINUING CONNECTED TRANSACTIONS continued
Pursuant to Rule 14A.56 of the Listing Rules, the Company’s auditor was engaged to report on the Group’s continuing
connected transactions in accordance with Hong Kong Standard on Assurance Engagements 3000 (Revised) “Assurance
Engagements Other Than Audits or Reviews of Historical Financial Information” and with reference to Practice Note 740
“Auditor’s Letter on Continuing Connected Transactions under the Hong Kong Listing Rules” issued by the Hong Kong Institute
of Certified Public Accountants. The auditor has issued its unqualified letter containing its findings and conclusions in respect
of the continuing connected transactions disclosed by the Group in pages 116 to 118 of the Annual Report in accordance with
Rule 14A.56 of the Listing Rules. A copy of the auditor’s letter has been provided by the Company to the Stock Exchange.
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 Group;
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 interests of
the Company’s shareholders as a whole.
INTEREST IN CONTRACTS OF SIGNIFICANCE
No agreement is considered a contract of significance under paragraph 15 of Appendix 16 of the Listing Rules.
MAJOR CUSTOMERS AND SUPPLIERS
During the year, 31.81% of the aggregate amount of purchases were attributable to the Group’s 5 largest suppliers with the
largest supplier accounting for 14.67% of the Group’s total purchases. The aggregate amount of turnover attributable to the
Group’s 5 largest customers was less than 30% (being the Listing Rule disclosure threshold) of total turnover of the Group.
None of the Directors, their close associates or any shareholder (which to the knowledge of the Directors owns more than 5%
of the Company’s issued share capital) had any interest in the Group’s 5 largest suppliers.
PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES
The Company was authorised at its AGM held on 15 May 2015 to repurchase its own ordinary shares not exceeding 10% of
the total number of its issued shares as at the date of passing the resolution. During the year, the Company repurchased its
ordinary shares on the Stock Exchange when they were significantly trading at a discount in order to enhance shareholder
value.
During the year, the Company repurchased an aggregate of 6,750,000 ordinary shares for a total consideration of
HK$214,516,600 on the Stock Exchange. The repurchased shares were cancelled during the year. Details of the shares
repurchased are as follows:
Month of repurchase
in 2015
Number of shares
repurchased
August
September
November
December
1,820,000
1,255,000
221,000
3,454,000
6,750,000
Consideration per share
Highest
HK$
31.70
31.85
32.50
32.70
Lowest
HK$
30.30
30.70
31.80
31.45
Aggregate
consideration paid
HK$
56,945,500
39,256,500
7,164,850
111,149,750
214,516,600
Save as disclosed above, neither the Company nor its subsidiaries purchased, sold or redeemed any of the Company’s listed
securities during the year.
119
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
ISSUANCE OF SECURITIES
In October 2015, Hysan (MTN) Limited, a wholly-owned subsidiary of the Company, established the US$1.5 billion Medium
Term Note Programme (“MTN Programme”), which was listed on the Stock Exchange. Notes issued under the MTN Programme
are unconditionally and irrevocably guaranteed by the Company. No notes have been issued under the MTN Programme for
the year under review.
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$0.5 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
2016 AGM.
By Order of the Board
Irene Yun Lien LEE
Chairman
Hong Kong, 8 March 2016
120
Hysan Annual Report 2015Directors’ Report continued COMPENSATION REVIEW
Remuneration Committee
The Board recognises the significance of having in place a transparent and objective process for determining Executive Director
compensation. The Remuneration Committee (first established in 1987) reviews and determines the remuneration of Executive
Directors as well as recommends fees payable to Non-Executive Directors for shareholders’ approval. Its terms of reference
have been expanded to cover review of share option plans, changes to key terms of service pension plans, and key terms of new
compensation and benefits plan with material financial, reputational, and strategic impact.
The Remuneration Committee currently comprises of 3 members (with a majority of Independent Non-Executive Directors). It
is chaired by Philip Yan Hok FAN (Independent Non-Executive Director) and the other members are Joseph Chung Yin POON
(Independent Non-Executive Director) and Michael Tze Hau LEE (Non-Executive Director).
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. Fees payable to other Non-Executive Directors are
reviewed from time to time. Independent professional advice will be sought where appropriate. On matters other than those
concerning them, the Chairman and Chief Executive Officer may be invited to the Committee meetings. No Director is involved
in deciding his own remuneration.
Executive Director 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 the shareholders’ interests.
The following principles have been established:
•
•
•
•
•
•
•
Remuneration package will consist of several components: (i) fixed part (base salary and benefits); (ii) performance-based
(bonus); and (iii) long-term incentives (executive share options). The structure will reflect a fair system of reward for all the
participants, emphasising 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 significant personal shareholdings 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.
The remuneration policy for Executive Directors will be reviewed regularly, independently of executive management.
Details of Director (including individual Executive Director) emoluments for the year 2015 and option movements during the
year are set out in notes 12 and 36 respectively to the financial statements.
121
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible BusinessDirectors’ Remuneration and Interests Report COMPENSATION REVIEW continued
Non-Executive Director Remuneration Policy
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 shareholders’ approval) set by the Board and should be
proportional to their contribution towards the interests of the Company.
Remuneration practice should be consistent with the recognised best practice standards for Non-Executive Director
remuneration.
•
Remuneration should be in the form of cash fees, payable semi-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$2,380,000 for the year
2015.
2015 Review
The Committee met in March 2015 with all members present to (i) approve the 2015 annual fixed base salary and determine
the 2014 performance-based bonus of the Executive Directors; (ii) review the fees for Non-Executive Directors and Board
Committee members; and (iii) approve a new share option scheme of the Group.
The executive packages were set at levels to ensure comparability and competitiveness with Hong Kong based companies
competing within a similar talent pool, with particular emphasis on the property industry. Clear performance targets were set.
March 2016 Review
The Committee met in March 2016 to (i) approve the 2016 Executive Director compensation packages and the 2015
performance-based bonus; and (ii) review the fees for Non-Executive Directors and Board Committee members. All members
attended the meeting.
122
Hysan Annual Report 2015Directors’ Remuneration and Interests Report continued COMPENSATION REVIEW continued
Director Fee Levels
Director fees are subject to shareholders’ approval at general meetings. Taking into consideration the level of responsibility,
experience, abilities required of the Directors, level of care and amount of time needed to be spent, and fees offered for similar
positions in companies requiring the same talent, it is proposed for shareholder consideration and approval revising Director
fees for Non-Executive Directors and Board Committee members. The current fee scale for Non-Executive Directors and Board
Committee members and the proposed fees are set out below. Executive Directors will not receive any director fee.
Board of Directors
Non-Executive Director
Audit Committee
Chairman
Member
Remuneration Committee
Chairman
Member
Strategy Committee
Chairman
Member
Other Committees
Chairman
Member
Notes:
1.
2.
Approved by shareholders in 2011 AGM.
Approved by shareholders in 2014 AGM.
Current
per annum
HK$
Proposed Fee
Per annum
HK$
200,000 (Note 1)
225,000
120,000 (Note 2)
60,000 (Note 1)
135,000
70,000
60,000 (Note 2) no change
40,000 (Note 1) no change
30,000
20,000
30,000
20,000
no change
30,000
no change
no change
Long-term incentives: Share Option Schemes
The Company can grant options under the executive share option schemes as adopted from time to time. The purpose of
the schemes was to strengthen the link between individual staff and shareholders’ interests. The power of grant to Executive
Directors is vested in the Remuneration Committee and endorsed by all Independent Non-Executive Directors as required under
the Listing Rules. The Chairman or the Chief Executive Officer 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 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 expired on 9 May
2015. All outstanding options granted under the 2005 Scheme will continue to be valid and exercisable in accordance with the
provisions of the 2005 Scheme. No further option will be granted under the 2005 Scheme.
Under the 2005 Scheme, options to subscribe for ordinary shares of the Company 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.
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, 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).
123
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
COMPENSATION REVIEW continued
Long-term incentives: Share Option Schemes continued
The 2005 Share Option Scheme (the “2005 Scheme”) continued
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 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; and (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.
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.
The 2015 Share Option Scheme (the “New Scheme”)
The Company adopted the New Scheme (together with the 2005 Scheme are referred to as the “Schemes”) at its AGM held on
15 May 2015, which has a term of 10 years and will expire on 14 May 2025. Terms of the New Scheme are substantially the
same as those under the 2005 Scheme.
Under the New Scheme, options to subscribe for ordinary shares of the Company may be granted to employees of the
Company or any 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.
The maximum number of shares in respect of which options may be granted under the New Scheme and any other share
option schemes of the Company shall not in aggregate exceed such number of shares as required under the Listing Rules,
currently being 10% of the shares in issue as at 15 May 2015, the date of the AGM approving the New Scheme (being
106,389,669 shares). Under the Listing Rules, a listed issuer may seek approval by its shareholders in general meeting for
“refreshing” the 10% limit under the New 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 New Scheme and any other share option schemes 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 New 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 10,638,966 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; and (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.
Consideration on each grant of option is HK$1 and is required to be paid within 30 days from the date of grant of options, with
full payment for exercise price to be made on exercise of the relevant options.
Grant and vesting structures
Under the Company’s current policy, grants will be made on a periodic basis. Exercise period is 10 years. Vesting period is 3
years in equal proportions starting from the 1st anniversary and become fully vested on the 3rd anniversary of the grant. Size of
grant will be determined by reference to base salary multiple and job grades. A clear performance criterion will be a key driver.
The Board will review the grant and vesting structures from time to time.
124
Hysan Annual Report 2015Directors’ Remuneration and Interests Report continued COMPENSATION REVIEW continued
Long-term incentives: Share Option Schemes continued
Movement of share options
During the year, a total of 1,066,500 shares options were granted under the 2005 Scheme, and no share option was granted
under the New Scheme.
As at the date of this Annual Report:
(i) 3,965,670 options granted (including 2,016,658 fully-vested shares options) under the 2005 Scheme are remained
outstanding, representing approximately 0.38% of the total number of issued shares of the Company; and
(ii) 106,389,669 shares are issuable under the New Scheme representing approximately 10% of the total number of issued
shares of the Company.
Details of options granted, exercised, cancelled/lapsed and outstanding under the 2005 Scheme during the year are as follows:
Changes during the year
Granted
Exercised
Balance
as at
31.12.2015
Cancelled/
lapsed
(Note b)
Name
Date of grant
Exercise
price
HK$
Exercise period
(Note a)
Executive Directors
Irene Yun Lien LEE
14.5.2012
33.50
7.3.2013
39.92
10.3.2014
32.84
14.5.2013 –
13.5.2022
7.3.2014 –
6.3.2023
10.3.2015 –
9.3.2024
Balance
as at
1.1.2015
261,000
265,000
325,000
–
–
–
12.3.2015
36.27
(Note c)
12.3.2016 –
11.3.2025
–
300,000
Siu Chuen LAU
14.5.2012
33.50
7.3.2013
39.92
10.3.2014
32.84
14.5.2013 –
13.5.2022
7.3.2014 –
6.3.2023
10.3.2015 –
9.3.2024
161,334
246,000
302,000
–
–
–
12.3.2015
36.27
(Note c)
12.3.2016 –
11.3.2025
–
300,000
–
–
–
–
–
–
–
–
–
261,000
–
265,000
–
325,000
–
300,000
–
161,334
–
246,000
–
302,000
–
300,000
Wendy Wen Yee YUNG 10.3.2011
(Note d)
35.71
10.3.2012 –
9.3.2021
103,000
9.3.2012
33.79
7.3.2013
39.92
9.3.2013 –
8.3.2022
7.3.2014 –
6.3.2023
113,000
106,700
10.3.2014
32.84
10.3.2015 –
9.3.2024
95,000
–
–
–
–
–
(103,000)
–
(113,000)
–
(106,700)
(31,000)
(Note e)
(64,000)
12.3.2015
36.27
(Note c)
12.3.2016 –
11.3.2025
–
49,500
–
(49,500)
–
–
–
–
–
125
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
COMPENSATION REVIEW continued
Long-term incentives: Share Option Schemes continued
Movement of share options continued
Changes during the year
Name
Date of grant
Exercise
price
HK$
Eligible employees
(Note f)
31.3.2008
21.96
31.3.2009
13.30
31.3.2010
22.45
31.3.2011
32.00
30.3.2012
31.61
28.3.2013
39.20
31.3.2014
33.75
Balance
as at
1.1.2015
17,000
134,000
154,334
181,001
262,335
298,000
411,000
Exercise period
(Note a)
31.3.2009 –
30.3.2018
31.3.2010 –
30.3.2019
31.3.2011 –
30.3.2020
31.3.2012 –
30.3.2021
30.3.2013 –
29.3.2022
28.3.2014 –
27.3.2023
31.3.2015 –
30.3.2024
Granted
Exercised
Balance
as at
31.12.2015
Cancelled/
lapsed
(Note b)
–
17,000
–
134,000
–
152,334
–
172,001
–
250,335
–
–
(2,000)
(Note g)
(9,000)
(Note h)
(12,000)
(Note i)
–
(10,000)
288,000
(2,000)
(Note j)
(13,000)
396,000
–
–
–
–
–
–
–
31.3.2015
34.00
(Note k)
31.3.2016 –
30.3.2025
–
417,000
–
(13,000)
404,000
3,435,704 1,066,500
(56,000)
(472,200) 3,974,004
Notes:
(a) All options granted have a vesting period of 3 years in equal proportions starting from the 1st anniversary and become fully vested on the 3rd
anniversary of the grant. In this table, “exercise period” begins with the 1st anniversary of the grant date.
(b) The options lapsed during the year upon resignation of a Director and certain eligible employees.
(c) The closing price of the shares of the Company immediately before the date of grant (i.e. as of 11 March 2015) was HK$36.15.
(d) Wendy Wen Yee YUNG resigned as Executive Director and Company Secretary of the Company with effect from 24 October 2015.
(e) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$34.60.
(f)
Eligible employees are working under employment contracts that are regarded as “continuous contracts” for the purposes of the Employment
Ordinance.
(g) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$35.65.
(h) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$36.13.
(i)
(j)
The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$35.50.
The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$34.55.
(k) The closing price of the shares of the Company immediately before the date of grant (i.e. as of 30 March 2015) was HK$33.65.
Apart from the above, the Company did not grant any share option under the Schemes to any other persons which are required
to be disclosed under Rule 17.07 of the Listing Rules.
Particulars of the Schemes are set out in note 36 to the financial statements.
126
Hysan Annual Report 2015Directors’ Remuneration and Interests Report continued
COMPENSATION REVIEW 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 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
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:
31.3.2015
12.3.2015
HK$34.000
HK$34.000
1.096%
5 years
29.947%
HK$0.976
HK$7.304
HK$34.800
HK$36.270
1.241%
5 years
29.810%
HK$0.976
HK$7.061
(a) Risk free rate: being the approximate yields of 5-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 5 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 5 years immediately
before the date of grant.
(d) Expected dividend per annum: being the approximate average annual cash dividend for the past 5 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).
127
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business DIRECTORS’ INTERESTS IN SHARES
As at 31 December 2015, 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 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
Name
Nicholas Charles ALLEN
Hans Michael JEBSEN
Siu Chuen LAU
Irene Yun Lien LEE
Chien LEE
Notes:
Number of ordinary shares held
Personal
interests
Family
interests
Corporate
interests
Other
interests
Total
% of the
total no. of
issued shares
(Note a)
–
60,984
80,666
130,000
800,000
–
–
–
–
–
–
20,000
(Note b)
20,000
0.002
2,473,316
(Note c)
330,115
(Note d)
–
–
–
2,534,300
0.240
–
–
–
410,781
0.039
130,000
800,000
0.012
0.076
(a) This percentage was compiled based on the total number of shares of the Company in issue (i.e. 1,057,177,692 ordinary shares) as at 31
December 2015.
(b) Such shares were held jointly by Nicholas Charles ALLEN and his wife.
(c)
Such shares were held through a corporation in which Hans Michael JEBSEN was a member entitled to exercise no less than one-third of the
voting power at general meeting.
(d) Such shares were held through a corporation in which Siu Chuen LAU and his wife were members and each entitled to exercise no less than one-
third of the voting power at general meeting.
Certain Executive Directors of the Company have been granted share options under the 2005 Scheme (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
1,000
Other
interests
–
Total
1,000
% of the
total no. of
issued shares
10
(Note)
Jebsen and Company Limited (“Jebsen and Company”) held a 10% interest in the total number of issued shares 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 2015 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.
128
Hysan Annual Report 2015Directors’ Remuneration and Interests Report continued
DIRECTORS’ INTERESTS IN SHARES continued
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.
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, in accordance with Listing
Rules disclosure requirements) 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)
Irene Yun Lien LEE, Siu Chuen LAU, Anthony Hsien Pin LEE, Chien LEE and Michael Tze Hau LEE 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, Trevor Chi-Hsin YANG, hold the offices of directors in Jebsen and Company.
Business activities of some of its subsidiaries 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,
save and except Irene Yun Lien LEE and Siu Chuen LAU, 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.
The Board also has a process in place to regularly review and resolve situations where a Director may have a conflict of interest.
By Order of the Board
Irene Yun Lien LEE
Chairman
Hong Kong, 8 March 2016
129
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
The Audit Committee has 4 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 Frederick Peter CHURCHOUSE
(Independent Non-Executive Director), Philip Yan Hok FAN (Independent Non-Executive Director) and Anthony Hsien Pin 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. 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 reports to the Board on its findings
after each Committee meeting.
The Committee held 3 meetings during the year, on 6 March, 3 August and 1 December 2015. The meetings in March
2015 and August 2015 were held to consider the financial statements for the 2014 annual report and 2015 interim report
respectively. An additional meeting was held in December to review the Group’s internal controls and risk management
systems, report on major risks which the Group was facing and miscellaneous issues not relating to the approval of financial
statements and results announcements. The Committee last met on 7 March 2016 to consider the financial statements for the
year ended 31 December 2015.
At the invitation of the Audit Committee, meetings are also attended by the Chairman and other members of the management
(including the Chief Executive Officer and the Chief Financial Officer). Pre-meeting sessions with external and internal auditors
are held without management’s presence.
Details on the meeting held in March 2015 were set out in the 2014 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 the Group’s financial statements
including the selection of suitable accounting policies. The external auditor is responsible for auditing and attesting to the
Group’s 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 2015
:
The Committee reviewed and recommended to the Board for approval of the unaudited financial
statements for the first 6 months of 2015, prior to public announcement and filing. The Committee
received reports from and met with the external auditor and internal auditor to discuss the scope of
their respective review and findings.
L2055
(d)
Board Committees
130
Hysan Annual Report 2015Audit Committee Report • March 2016
:
Judgmental issues considered: The Committee had discussions with management on significant
judgments affecting the Group’s financial statements. These included valuation of investment
properties as at 30 June 2015, and valuation of investment in an associate with principal assets in
Shanghai, China as at 30 June 2015. In particular, there were discussions on the cap rate model
adopted by the independent professional valuer, Knight Frank Petty Limited, for the Group’s property
portfolio, and impact of various factors on the cap rate.
The Group’s independent professional valuer was also present at the meeting to answer the
Committee’s questions.
For valuation of investment properties, the Committee also noted that the external auditor had
performed various procedures before relying on the valuation prepared by the Group’s independent
professional valuer. As regards valuation of investment in associates, the Committee also noted
that the external auditors had obtained management accounts of the relevant associate for the
6 months ended 30 June 2015 and valuation reports for the investment properties held by such
associate. The Committee noted that the external auditor had performed additional procedures
which concluded that the Group’s investments in associates had been properly accounted for in the
Group’s relevant financial statements.
Based on such review and discussions, and the external auditor’s review work, the Audit Committee
recommended to the Board for approval of the financial statements for the first 6 months ended 30
June 2015.
The Committee reviewed and discussed with the management and external auditor the financial
statements for the year ended 31 December 2015, prior to public announcement and filing. The
Committee received reports from and met with the external auditor and internal auditor and
discussed the general scope of their respective work and findings.
Judgmental issues considered: The Committee had discussions with management on significant
judgments affecting the Group’s financial statements. These included valuation of investment
properties as at 31 December 2015, and valuation of investment in an associate with principal assets
in Shanghai, China as at 31 December 2015.
The Group’s independent professional valuer, Knight Frank Petty Limited, was also present at the
meeting to answer the Committee’s questions.
For valuation of investment properties, the Committee also noted that the external auditor had
performed various procedures before relying on the valuation prepared by the Group’s independent
professional valuer. As regards valuation of investment in associates, the Committee also noted
that external auditors had obtained management accounts of the relevant associate for the year
ended 31 December 2015, valuation reports for the investment properties held by such associate,
and the latest available audited financial statements of such associate. The Committee further
noted that the external auditors had performed additional procedures which concluded that the
Group’s investments in associates had been properly accounted for in the Group’s relevant financial
statements.
Based on these review and discussions, and the report of the external auditor, the Audit Committee
recommended to the Board for approval of the financial statements for the year ended 31
December 2015, together with the Independent Auditor’s Report.
131
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
RELATIONSHIP WITH ExTERNAL AUDITOR
• August 2015
:
The Committee reviewed and considered the terms of engagement of the external auditor in respect
of: 2015 final results (including 2015 annual audit, the related results announcement, and annual
review of continuing connected transactions); and annual update of the Group’s MTN programme.
• December 2015 :
The Committee reviewed the audit progress report of the external auditor.
• March 2016
:
Annual Assessment: The Committee assessed and is satisfied as to the auditor’s qualification,
expertise and services and independence. In particular, it is satisfied that the auditor’s independence
and objectivity has not been impaired by reason of the provision of non-audit services. An
arrangement for lead audit partner rotation is also in place by the auditor. For the year ended 31
December 2015, external auditor received a total fee of HK$3,217,000 (audit services: HK$2,345,000
and non-audit services: HK$872,000). “Non-audit services” referred to agreed-upon-procedure reports
or statutory compliance, regulatory or government procedures required to comply with financial,
accounting or regulatory report matters. Specifically, these included 2015 review of interim financial
statements, issue of assurance report for continuing connected transactions, and review of financial
information in connection with the annual update of the Group’s Medium-Term Notes programme.
The Committee also reviewed and considered the 2016 audit service plan of the external auditor,
and the terms of its engagement in respect of the 2016 interim results review.
The Committee recommended to the Board that the shareholders be asked to re-appoint Deloitte
Touche Tohmatsu as the Group’s external auditor for 2016.
REVIEW OF INTERNAL CONTROLS AND RISK MANAGEMENT SYSTEMS
• August and
:
December
2015
The Committee received from, and discussed with, management (i) an update report on major
risks the Group was facing; (ii) (for December meeting) a report on selected major risk the
Group was facing, being risk to retail business; and (iii) a report on process and practices of property
services and property development to continuously improve our efficiency and effectiveness in
provision of property services.
The Committee considered the reports of the Internal Audit, including status in implementing its
recommendations.
At the December 2015 meeting, the Committee also reviewed the adequacy of resources,
qualifications and experience of staff of the accounting and financial reporting function, and their
training programmes and budget.
• March 2016
:
The Committee reviewed 2015 annual internal controls based on:
•
•
•
•
regular reports by management of major risks, and special reports on selected major risk items
regular reports of the Internal Audit, including status in implementing its recommendations
certification of controls effectiveness by management, covering financial, operational, and
compliance controls, noting the adoption of a control self-assessment questionnaire across the
operating departments
confirmation from the external auditor that it had not identified any control weaknesses during
the course of its audit
The Committee 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). No
significant areas of concern which might affect financial, operational, compliance controls and risk
management functions were identified.
132
Hysan Annual Report 2015Audit Committee Report continued
INTERNAL AUDIT
• August and
:
December 2015,
March 2016
• December 2015 :
The Committee reviewed the management responses to audit reports issued during the year; and
progress made in implementing improvement actions.
The Committee considered and approved the scope of work to be undertaken by the Internal Audit
function in 2016.
EVALUATION
The Board and Committee evaluation process which took place during the year concluded that the Committee was effective in
fulfilling its roles in 2015. (For details, please refer to Corporate Governance Report – “Board Evaluation” (page 103)).
Members of the Audit Committee
Nicholas Charles ALLEN (Chairman)
Frederick Peter CHURCHOUSE
Philip Yan Hok FAN
Anthony Hsien Pin LEE
Hong Kong, 8 March 2016
133
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
5
Financial Statements,
Valuation and
Other Information
135 Directors’ Responsibility for the
143 Significant Accounting Policies
Financial Statements
136
Independent Auditor’s Report
137 Consolidated Income Statement
138 Consolidated Statement
of Comprehensive Income
139 Consolidated Statement
of Financial Position
140 Consolidated Statement
of Changes in Equity
142 Consolidated Statement
of Cash Flows
153 Notes to the Financial Statements
191 Financial Risk Management
200 Five-Year Financial Summary
202 Report of the Valuer
203 Schedule of Principal Properties
205 Shareholding Analysis
206 Shareholder Information
208 Corporate Information
134
Hysan Annual Report 2015 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.
135
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible BusinessDirectors’ Responsibility for the Financial Statements TO THE MEMBERS OF HYSAN DEVELOPMENT COMPANY LIMITED
(incorporated in Hong Kong with limited liability)
We have audited the consolidated financial statements of Hysan Development Company Limited (the “Company”) and
its subsidiaries (collectively referred to as the “Group”) set out on pages 137 to 199, which comprise the consolidated and
Company’s statements of financial position as at 31 December 2015, and the consolidated income statement, 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 information.
Directors’ Responsibility for the Consolidated Financial Statements
The directors of the Company are responsible for the preparation of consolidated financial statements that give a true and
fair view in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public
Accountants and the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to
enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or
error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to report our
opinion solely to you, as a body, in accordance with section 405 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 about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks
of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity’s preparation of consolidated financial statements
that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on 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 consolidated 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 consolidated financial statements give a true and fair view of the financial position of the Group as at
31 December 2015, and of its financial performance and cash flows for the year then ended in accordance with Hong Kong
Financial Reporting Standards and have been properly prepared in compliance with the Hong Kong Companies Ordinance.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
8 March 2016
136
Hysan Annual Report 2015Independent Auditor’s Report 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
Non-controlling interests
Earnings per share (expressed in HK cents)
Basic
Diluted
Notes
2015
HK$ million
2014
HK$ million
4
6
7
8
9
10
15
3,430
(414)
3,016
54
–
(234)
(204)
695
246
3,573
(438)
3,135
2,903
232
3,135
3,224
(404)
2,820
68
(2)
(214)
(228)
2,940
252
5,636
(386)
5,250
4,902
348
5,250
273.17
273.12
460.82
460.69
137
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible BusinessConsolidated Income StatementFor the year ended 31 December 2015
Profit for the year
Other comprehensive (expense) income
Items that will not be reclassified subsequently to profit or loss:
Fair value change of equity investments
Gains on revaluation of properties held for own use
Items that may be reclassified subsequently to profit or loss:
Net adjustments to hedging reserve
Share of translation reserve of an associate
Other comprehensive (expense) income for the year (net of tax)
Total comprehensive income for the year
Total comprehensive income attributable to:
Owners of the Company
Non-controlling interests
2015
HK$ million
3,135
2014
HK$ million
5,250
Note
11
36
9
45
(40)
(240)
(280)
(235)
–
16
16
51
(16)
35
51
2,900
5,301
2,668
232
2,900
4,953
348
5,301
138
Hysan Annual Report 2015Consolidated Statement of Comprehensive IncomeFor the year ended 31 December 2015
Non-current assets
Investment properties
Property, plant and equipment
Investments in associates
Term notes
Other financial assets
Other receivables
Current assets
Accounts and other receivables
Principal-protected investments
Term notes
Other financial assets
Time deposits
Cash and bank balances
Current liabilities
Accounts payable and accruals
Rental deposits from tenants
Amounts due to non-controlling interests
Borrowings
Other financial liabilities
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
Non-controlling interests
Total equity
Notes
2015
HK$ million
2014
HK$ million
16
17
19
21
22
23
23
20
21
22
24
24
25
26
27
22
27
22
28
29
69,810
705
3,683
935
7
227
75,367
201
–
415
1
2,743
61
3,421
470
296
327
250
–
120
1,463
1,958
77,325
4,609
71
594
683
5,957
68,735
710
4,154
720
3
226
74,548
255
80
485
15
3,534
106
4,475
481
306
327
1,589
2
104
2,809
1,666
76,214
4,858
30
569
628
6,085
71,368
70,129
7,642
60,530
68,172
3,196
71,368
7,640
59,400
67,040
3,089
70,129
The consolidated financial statements on pages 137 to 199 were approved and authorised for issue by the Board of Directors
on 8 March 2016 and are signed on its behalf by:
Irene Y.L. LEE
Director
S. C. LAU
Director
139
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible BusinessConsolidated Statement of Financial PositionAt 31 December 2015
Attributable to owners of the Company
General
reserve
Investments
revaluation
reserve
Hedging
reserve
Properties
revaluation
reserve
Translation
reserve
Retained
profits
Total
HK$ million
HK$ million
HK$ million
HK$ million
HK$ million
HK$ million
HK$ million
100
(3)
328
530
54,796
63,326
4,902
4,902
Non-
controlling
interests
HK$ million
2,855
348
Total
HK$ million
66,181
5,250
100
(3)
344
514
58,444
67,040
(1,255)
(1,255)
(114)
(1,369)
2,903
2,903
3,089
232
70,129
3,135
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(77)
–
95
(51)
51
(26)
–
(39)
(3)
7
–
–
–
–
–
–
–
–
2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
36
–
(32)
–
–
–
–
19
(3)
–
16
–
–
–
–
–
–
–
–
–
–
–
9
–
–
–
–
–
–
10
(1)
(16)
(16)
4,902
4,953
348
5,301
–
–
–
–
–
–
–
–
–
1
–
–
–
–
–
–
–
–
–
4
95
(51)
7
19
(3)
(16)
–
6
10
–
(39)
(3)
2
36
10
(1)
(240)
1
8
–
–
(215)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
95
(51)
7
19
(3)
(16)
–
6
10
–
(39)
(3)
2
36
10
(1)
(240)
2,900
1
8
–
–
(215)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
36
(40)
2,903
2,668
232
(240)
(240)
100
(66)
353
274
59,838
68,172
3,196
71,368
(215)
32
(1,330)
(1,330)
(125)
(1,455)
At 1 January 2014
Profit for the year
Net gains arising from hedging instruments
Reclassification adjustments for net gains included in profit or loss
Amortisation of forward element excluded from hedge designation
Gain on revaluation of properties held for own use
Deferred taxation arising on revaluation of properties
held for own use (note 28)
Share of translation reserve of an associate
Total comprehensive income (expenses) for the year
Transfer upon abolition of par value under the new Hong Kong
Companies Ordinance (note 29(a))
Issue of shares under share option schemes on or after
3 March 2014
Recognition of equity-settled share-based payments
Forfeiture of share options
Dividends paid during the year (note 14)
At 31 December 2014
Profit for the year
Net losses arising from hedging instruments
Reclassification adjustments for net losses included in profit or loss
Amortisation of forward element excluded from hedge designation
Fair value change of equity investments
Gain on revaluation of properties held for own use
Deferred taxation arising on revaluation of properties
held for own use (note 28)
Share of translation reserve of an associate
Total comprehensive income (expenses) for the year
Issue of shares under share option schemes
Recognition of equity-settled share-based payments
Forfeiture of share options
Cancellation upon repurchase of own shares
Transfer to retained profits upon derecognition of equity investments
Dividends paid during the year (note 14)
Attributable to owners of the Company
Share
capital
HK$ million
Share
premium
HK$ million
Share
options
reserve
HK$ million
Capital
redemption
reserve
HK$ million
5,318
2,038
20
276
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,314
(2,038)
8
–
–
–
7,640
–
–
–
–
–
–
–
–
–
2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2)
10
(1)
–
27
–
–
–
–
–
–
–
–
–
(1)
8
(4)
–
–
–
30
–
–
–
–
–
–
–
–
(276)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
At 31 December 2015
7,642
140
Hysan Annual Report 2015Consolidated Statement of Changes in EquityFor the year ended 31 December 2015
At 1 January 2014
Profit for the year
Net gains arising from hedging instruments
Reclassification adjustments for net gains included in profit or loss
Amortisation of forward element excluded from hedge designation
Gain on revaluation of properties held for own use
Deferred taxation arising on revaluation of properties
held for own use (note 28)
Share of translation reserve of an associate
Total comprehensive income (expenses) for the year
Transfer upon abolition of par value under the new Hong Kong
Companies Ordinance (note 29(a))
Issue of shares under share option schemes on or after
3 March 2014
Recognition of equity-settled share-based payments
Forfeiture of share options
Dividends paid during the year (note 14)
At 31 December 2014
Profit for the year
Net losses arising from hedging instruments
Reclassification adjustments for net losses included in profit or loss
Amortisation of forward element excluded from hedge designation
Fair value change of equity investments
Gain on revaluation of properties held for own use
Deferred taxation arising on revaluation of properties
held for own use (note 28)
Share of translation reserve of an associate
Total comprehensive income (expenses) for the year
Issue of shares under share option schemes
Recognition of equity-settled share-based payments
Forfeiture of share options
Cancellation upon repurchase of own shares
Transfer to retained profits upon derecognition of equity investments
Dividends paid during the year (note 14)
At 31 December 2015
7,642
Attributable to owners of the Company
Share
capital
HK$ million
Share
premium
HK$ million
Share
options
reserve
Capital
redemption
reserve
HK$ million
HK$ million
5,318
2,038
20
276
2,314
(2,038)
(276)
7,640
–
–
–
–
–
–
–
–
8
–
–
–
–
–
–
–
–
–
–
–
–
2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2)
10
(1)
–
27
(1)
8
(4)
–
–
–
30
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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
Non-
controlling
interests
HK$ million
Total
HK$ million
100
(3)
–
–
–
–
–
–
–
–
–
–
–
–
–
100
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100
–
–
–
–
–
–
–
–
–
–
–
–
–
(3)
–
–
–
–
36
–
–
–
36
–
–
–
–
(32)
–
1
(77)
–
95
(51)
7
–
–
–
51
–
–
–
–
–
(26)
–
(39)
(3)
2
–
–
–
–
(40)
–
–
–
–
–
–
328
530
54,796
63,326
2,855
66,181
–
–
–
–
19
(3)
–
16
–
–
–
–
–
–
–
–
–
–
–
(16)
(16)
–
–
–
–
–
4,902
–
–
–
–
–
–
4,902
95
(51)
7
19
(3)
(16)
348
–
–
–
–
–
–
5,250
95
(51)
7
19
(3)
(16)
4,902
4,953
348
5,301
–
–
–
–
–
–
1
(1,255)
6
10
–
(1,255)
–
–
–
(114)
6
10
–
(1,369)
344
514
58,444
67,040
3,089
70,129
–
–
–
–
–
10
(1)
–
9
–
–
–
–
–
–
–
–
–
–
–
–
–
(240)
(240)
–
–
–
–
–
–
2,903
–
–
–
–
–
–
–
2,903
–
–
4
(215)
32
(1,330)
2,903
(39)
(3)
2
36
10
(1)
(240)
2,668
1
8
–
(215)
–
(1,330)
232
–
–
–
–
–
–
–
232
–
–
–
–
–
(125)
3,135
(39)
(3)
2
36
10
(1)
(240)
2,900
1
8
–
(215)
–
(1,455)
(66)
353
274
59,838
68,172
3,196
71,368
141
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
Notes
2015
HK$ million
2014
HK$ million
3,573
5,636
–
204
(695)
(246)
(54)
21
8
2,811
69
13
15
2,908
(382)
14
2,540
86
477
80
491
5,358
(408)
(6)
–
(642)
–
(4,514)
922
(198)
(3)
(2)
(1,330)
(125)
(850)
–
(400)
(332)
(215)
1
(3,454)
8
576
584
2
228
(2,940)
(252)
(68)
17
10
2,633
32
(28)
75
2,712
(323)
6
2,395
71
263
140
574
5,483
(335)
(24)
(64)
(601)
(232)
(5,045)
230
(193)
(12)
(2)
(1,255)
(114)
(900)
(200)
–
–
–
6
(2,670)
(45)
621
576
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
Net interest income
Depreciation of property, plant and equipment
Share-based payment expenses
Operating cash flows before movements in working capital
Decrease in accounts and other receivables
Increase (decrease) in accounts payable and accruals
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 an associate
Proceeds upon maturity of principal-protected investments
Proceeds upon maturity of term notes
Proceeds upon maturity of time deposits with original maturity over three months
Payments in respect of investment properties
Purchases of property, plant and equipment
Purchase of principal-protected investment
Purchases of term notes
Acquisition of an investment property through a subsidiary
Additions to time deposits with original maturity over three months
31
Net cash from investing activities
Financing activities
Interest paid
Payment of other finance costs
Medium Term Note Programme expenses
Dividends paid
Dividends paid to non-controlling interests of a subsidiary
Repayment of bank loans
Repayment of floating rate notes
Repayment of fixed rate notes
Redemption of zero coupon notes
Consideration paid for repurchase of shares
Proceeds on exercise of share options
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
24
142
Hysan Annual Report 2015Consolidated Statement of Cash FlowsFor the year ended 31 December 2015
These consolidated 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 consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards
issued by the Hong Kong Institute of Certified Public Accountants. In addition, the consolidated financial statements include
applicable disclosures required by the Listing Rules and by the Hong Kong Companies Ordinance (“CO”).
The provisions of the new CO (Cap.622) regarding preparation of accounts and directors’ reports and audits became effective
for the Company for the financial year ended 31 December 2015. Further, the disclosure requirements set out in the Listing
Rules regarding annual accounts have been amended with reference to the new CO and to streamline with HKFRSs. Accordingly
the presentation and disclosure of information in the consolidated financial statements for the financial year ended 31
December 2015 have been changed to comply with these new requirements. Comparative information in respect of the
financial year ended 31 December 2014 are presented or disclosed in the consolidated financial statements based on the new
requirements. Information previously required to be disclosed under the predecessor CO or Listing Rules but not under the new
CO or amended Listing Rules are not disclosed in these consolidated financial statements. The principal accounting policies
adopted are as follows:
1. BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the financial statements of entities controlled by the Company and its
subsidiaries. Control is achieved when the Company:
•
•
•
has power over the investee;
is exposed, or has rights, to variable returns from its involvement with the investee; and
has the ability to use its power to affect its returns.
The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or
more of the three elements of control listed above.
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses
control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included
in the consolidated income statement from the date the Group gains control until the date when the Group ceases to control
the subsidiary.
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 in full on consolidation.
Non-controlling interests in subsidiaries are presented separately from the Group’s equity therein.
Total comprehensive income and expenses of a subsidiary are attributed to the owners of the Company and to the non-
controlling interests even if this results in the non-controlling interests having a deficit balance.
INVESTMENTS IN SUBSIDIARIES
2.
Investments in subsidiaries are included in the Company’s statement of financial position at cost (including deemed capital
contribution) 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.
143
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible BusinessSignificant Accounting PoliciesFor the year ended 31 December 2015 INVESTMENTS IN ASSOCIATES
3.
An associate is an entity over which the Group 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. The financial statements of associates used for equity accounting purposes are prepared using uniform
accounting policies as those of the Group for like transaction and events in similar circumstances. Under the equity method,
investments in associates are initially recognised in the consolidated statement of financial position at cost and adjusted
thereafter to recognise the Group’s share of the profit or loss and other comprehensive income of the associates. 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. Additional losses are 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 its associates, profits or losses resulting from the transactions with the associates are
recognised in the Group’s consolidated financial statements only to the extent of the interests in the associates that are not
related to the Group.
INVESTMENT PROPERTIES
4.
Investment properties are properties held to earn rental and/or for capital appreciation including properties under
redevelopment for such proposes.
Investment properties are initially 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.
Construction costs incurred for investment properties under redevelopment are capitalised as part of the carrying amount of
the investment properties under redevelopment. Investment properties under redevelopment are measured at fair value at the
end of the reporting period. Any difference between the fair value of the investment properties under redevelopment 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 disposal. 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 profit or loss in the
period in which the item is derecognised.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment including land and buildings held for use in the production or supply of goods or services,
or for administrative purposes are stated at cost or fair value less subsequent accumulated depreciation and accumulated
impairment losses.
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 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 corresponding revaluation surplus is transferred to retained profits.
144
Significant Accounting Policies continuedFor the year ended 31 December 2015Hysan Annual Report 2015 5. PROPERTY, PLANT AND EQUIPMENT continued
Depreciation is recognised so as to write off the cost or fair value of items of property, plant and equipment less their estimated
residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and
depreciation method are reviewed at the end of the reporting period, with the effect of any changes in estimate accounted for
on a prospective basis.
If an item of property, plant and equipment 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 properties 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 the disposal or retirement of an item of property, plant and
equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised
in profit or loss.
IMPAIRMENT OF NON-FINANCIAL ASSETS
6.
At the end of the reporting period, the Group reviews the carrying amounts of their assets to determine whether there is any
indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent of the 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 as an expense 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.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised
as income immediately 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.
7. 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 (“FVTPL”)) 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 FVTPL are recognised immediately in profit or loss.
Financial assets
All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on
the classification of the financial assets.
(a) Classification of financial assets
Debt instruments and hybrid contracts that meet the following conditions are subsequently measured at amortised cost less
impairment loss (except for debt investments that are designated as at FVTPL on initial recognition):
•
•
the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
All other financial assets are subsequently measured at fair value.
145
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business 7. FINANCIAL INSTRUMENTS continued
Financial assets continued
(a) Classification of financial assets continued
(i) Amortised cost and effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument 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 and points 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 debt instrument, 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 measured subsequently at amortised cost.
Interest income is recognised in profit or loss and is included in the investment income as disclosed in note 6 of the Notes to the
Financial Statements section.
(ii) Financial assets at FVTPL
Financial assets at FVTPL comprise derivatives that are not designated and effective as hedging instruments, principal-
protected investments and club debentures.
Investments in equity instruments are classified as FVTPL, unless the Group designates such investment that is not held for
trading as at fair value through other comprehensive income (“FVTOCI”) on initial recognition (see (a)(iii) below).
Debt instruments that do not meet the amortised cost criteria (see (a) above) are measured at FVTPL. In addition, debt
instruments that meet the amortised cost criteria but are designated as at FVTPL are measured at FVTPL. A debt instrument
may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement
or recognition inconsistency that would arise from measuring assets or liabilities or recognising the gains and losses on them on
different bases.
Debt instruments are reclassified from amortised cost to FVTPL when the business model is changed such that the amortised
cost criteria are no longer met. Reclassification of debt instruments that are designated as at FVTPL on initial recognition is not
allowed.
Financial assets at FVTPL are measured at fair value at the end of the reporting period, with any gains or losses arising on
remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss is included in other gains and losses
as disclosed in note 7 of the Notes to the Financial Statements section. Fair value is determined in the manner described in note
4 of the Financial Risk Management section.
The Group has not designated any debt instrument as at FVTPL or reclassified any debt instruments to or from FVTPL since the
application of the 2010 version of the Hong Kong Financial Reporting Standard (“HKFRS”) 9.
Interest income on debt instruments at FVTPL is included in the other gains or losses described above.
(iii) Financial assets at FVTOCI
On date of initial application of HKFRS 9, the Group can make an irrevocable election (on an instrument-by-instrument basis)
to designate investments in equity instruments as at FVTOCI. Designation at FVTOCI is not permitted if the equity investment
is held for trading. A financial asset is held for trading if it has been acquired principally for the purpose of selling it in the near
term or it is a derivative that is not designated and effective as a hedging instrument.
Investments in equity instruments at FVTOCI are initially measured at fair value plus transaction costs. Subsequently, they are
measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income and
accumulated in the investments revaluation reserve.
The Group has designated all investments in equity instruments (listed or unlisted) that are not held for trading as at FVTOCI
since the application of HKFRS 9.
146
Significant Accounting Policies continuedFor the year ended 31 December 2015Hysan Annual Report 2015 7. FINANCIAL INSTRUMENTS continued
Financial assets continued
(b) Impairment of financial assets
Financial assets subsequently measured at amortised cost are assessed for indicators of impairment at the end of the reporting
period. These financial assets are impaired when there is objective evidence that, as a result of one or more events that occurred
after their initial recognition, the estimated future cash flows have been affected.
Objective evidence of impairment could include:
•
•
•
•
significant financial difficulty of the issuer or counterparty; or
breach of contract, such as default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or
the disappearance of an active market for that financial asset because of financial difficulties.
For certain categories, 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, observable changes in national or local economic conditions that correlate
with default on receivables.
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.
The carrying amount of the financial asset is reduced by the impairment loss directly for all categories with the exception of
accounts receivable and amounts due from subsidiaries, where the carrying amount is reduced through the use of an allowance
account. 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 is considered uncollectible, it is written off against the allowance account. Subsequent
recoveries of amounts previously written off are credited to profit or loss.
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.
(c) Derecognition of financial assets
Financial assets are derecognised when the contractual rights to receive cash flows from the assets expire or, the financial
assets are transferred and the Group has transferred substantially all the risks and rewards of ownership of the financial assets.
On derecognition of a financial asset, except for a financial asset that is classified as FVTOCI, the difference between the
asset’s carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.
On derecognition of a financial asset that is classified as at FVTOCI, the cumulative gain or loss previously accumulated in the
investments revaluation reserve is not reclassified to profit or loss, but is transferred to retained profits.
147
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business 7. FINANCIAL INSTRUMENTS continued
Financial liabilities and equity instruments
(a) Classification and measurement
Financial liabilities and equity instruments issued by a group entity are classified as financial liabilities or equity instruments
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 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 subsequently measured at amortised cost. The accounting policies adopted in respect of financial liabilities and equity
instruments are set out below.
(i) 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
(including all fees and points 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 liability, or, where appropriate, a shorter period to the
net carrying amount on initial recognition.
Interest expense is recognised on an effective interest basis for financial liabilities, other than those financial liabilities at FVTPL,
of which the interest expense is included in other gains or losses as disclosed in note 7 of the Notes to the Financial Statements
section.
(ii) Financial liabilities at FVTPL
Financial liabilities at FVTPL, representing those 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.
(iii) Other financial liabilities subsequently measured at amortised cost
Other financial liabilities (including accounts payable and accruals, amounts due to non-controlling interests and borrowings)
are subsequently measured at amortised cost, using the effective interest method. Interest expense that is not capitalised as
part of costs of an asset is included in finance costs as disclosed in note 8 of the Notes to the Financial Statements section.
(iv) 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 is 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.
(b) 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.
Derivative financial instruments and hedging
The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign
exchange rate risks, including foreign exchange forward contracts and interest rate swaps. Further details of derivative financial
instruments are disclosed in note 22 of the Notes to the Financial Statements section.
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 the 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.
148
Significant Accounting Policies continuedFor the year ended 31 December 2015Hysan Annual Report 2015 7. FINANCIAL INSTRUMENTS continued
Embedded derivatives
Derivatives embedded in non-derivative host contracts that are not financial assets within the scope of HKFRS 9 (e.g. financial
liabilities) 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 FVTPL. Derivatives embedded in hybrid contracts that contain financial
asset hosts within the scope of HKFRS 9 are not separated. The entire hybrid contracts are classified and subsequently
measured as either amortised cost or FVTPL as appropriate.
Hedge accounting
The Group designates certain derivatives as hedging instruments as either fair value hedges or cash flow hedges.
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 effective in offsetting changes in fair values or cash flows of the hedged item
attributable to the hedged risk, which is when the hedging relationships meets all of the following hedge effectiveness
requirements:
•
•
•
there is an economic relationship between the hedged item and the hedging instrument;
the effect of credit risk does not dominate the value changes that result from that economic relationship; and
the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the
Group actually hedges and the quantity of the hedging instrument that the entity actually uses to hedge that quantity of
hedged item.
If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge ratio but the risk
management objective for that designated hedging relationship remains the same, the Group adjusts the hedge ratio of the
hedging relationship (i.e. rebalances the hedge) so that it meets the qualifying criteria again.
Note 22 of the Notes to the Financial Statements sets out details of the fair values of the derivative instruments used for
hedging purposes.
(a) 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 method 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.
(b) 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 and accumulated in hedging reserve. The gain or loss relating to the ineffective
portion is recognised immediately in profit or loss, and is included in other gains or losses as disclosed in note 7 of the Notes to
the Financial Statements section.
Amounts previously recognised in other comprehensive income and accumulated in hedging reserve are reclassified to profit or
loss in the periods when the hedged item is recognised in profit or loss, in the same line of the consolidated income statement
as the recognised hedged item.
Upon discontinuation of the hedging relationship of a cash flow hedge, any cumulative gain or loss accumulated in hedging
reserve at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss.
When the Group separates the spot element of a forward contract and designates only the change in the fair value of the
spot element as hedging instrument, the change in fair value of the spot element that is determined to be an effective hedge
is recognised in other comprehensive income in hedging reserve and the ineffective portion is recognised in profit or loss. The
amount that has been accumulated in hedging reserve is reclassified to profit or loss as a reclassification adjustment in the
same period during which the relevant hedged items affect profit or loss.
149
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business 7. FINANCIAL INSTRUMENTS continued
Hedge accounting continued
(b) Cash flow hedges continued
If the forward elements of a forward contract have the character of a cost for obtaining protection against a risk over a
particular period of time, the change in fair value of the forward element is recognised in other comprehensive income in
hedging reserve to the extent it relates to the hedged item. The value of the aligned forward element that exists at the date of
designation of the forward contract is amortised from hedging reserve to profit or loss on a rational basis over the period during
which the hedge adjustment for the forward contract could affect profit or loss. At the end of reporting period, the amortisation
amount is reclassified from hedging reserve to profit or loss as a reclassification adjustment.
(c) Discontinuation of hedges
The Group discontinues hedge accounting prospectively only when the hedging relationship (or a part of a hedging
relationship) ceases to meet the qualifying criteria (after taking into account any rebalancing of the hedging relationship, if
applicable). This includes instances when the hedging instrument expires or is sold, terminated or exercised. Discontinuing
hedge accounting can either affect a hedging relationship in its entirety or only a part of it (in which case hedge accounting
continues for the remainder of the hedging relationship).
8. 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. Turnover rent is recognised when
earned.
Management fee income and security service income are recognised when services are rendered.
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and
the amount of revenue can be measured reliably. 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.
9. 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.
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.
150
Significant Accounting Policies continuedFor the year ended 31 December 2015Hysan Annual Report 2015 10. 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
the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date.
Exchange differences arising on the settlement of monetary items, and on the retranslation 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 translation reserve and will be reclassified from translation reserve 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
translation reserve.
11. 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.
12. RETIREMENT BENEFIT COSTS
Payments to the Enhanced Mandatory Provident Fund Scheme are charged as an expense when employees have rendered
service entitling them to the contributions.
13. 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 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 generally 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 the initial recognition of 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 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 it is probable that there will
be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse
in the foreseeable future.
151
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business 13. TAxATION continued
(b) Deferred tax continued
The carrying amount of deferred tax assets is reviewed at the end of the 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 assets and liabilities are measured at the tax rates that are expected to apply in the period when the liability is
settled or the asset is 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. For the purposes of measuring deferred tax for investment properties that are measured using the fair value model
in accordance with HKAS 40 “Investment Property”, such properties’ value are presumed to be recovered through sale. Such
a presumption is rebutted when the investment property is depreciable and is held within a business model of the Group
whose business objective is to consume substantially all of the economic benefits embodied in the investment property over
time, rather than through sale. If the presumption is rebutted, deferred tax for such investment properties are measured in
accordance with the above general principles set out in HKAS 12 “Income Taxes” (i.e. based on the expected manner as to how
the properties will be recovered).
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.
14. EQUITY-SETTLED SHARE-BASED PAYMENTS 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 share options reserve.
At the end of the reporting period, the Group revises 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 capital (to share premium prior to new CO became effective on 3 March 2014). 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.
15. FAIR VALUE MEASUREMENT
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless of whether that price is directly observable or estimated using another
valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of
the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the
measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such
a basis, except for share-based payment transactions that are within the scope of HKFRS 2, leasing transactions that are within
the scope of HKAS 17, and measurements that have some similarities to fair value but are not fair value, such as value in use in
HKAS 36.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic
benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in
its highest and best use.
152
Significant Accounting Policies continuedFor the year ended 31 December 2015Hysan Annual Report 2015 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 (“HKD”), 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 has applied all of the Amendments to Standards issued by the Hong Kong Institute of Certified
Public Accountants (“HKICPA”) that are relevant to its operations and effective for the Group’s financial year beginning on 1
January 2015. The adoption of these Amendments to Standards had no material effect on the results and financial position of
the Group for the current and/or prior accounting years.
The Group has not early applied the following new Standards and Amendments to Standards that have been issued but are not
yet effective.
HKFRS 9
HKFRS 15
Amendments to HKFRSs
Amendments to HKFRS 10 and HKAS 28
Amendments to HKFRS 10, HKFRS 12 and HKAS 28
Amendments to HKFRS 11
Amendments to HKAS 1
Amendments to HKAS 16 and HKAS 38
Amendments to HKAS 16 and HKAS 41
Financial Instruments3
Revenue from Contracts with Customers2
Annual Improvements to HKFRSs 2012-2014 Cycle1
Sale or Contribution of Assets between an Investor and its Associate
or Joint Venture4
Investment Entities: Applying the Consolidation Exception1
Accounting for Acquisitions of Interests in Joint Operations1
Disclosure Initiative1
Clarification of Acceptable Methods of Depreciation and Amortisation1
Agriculture: Bearer Plants1
1 Effective for annual periods beginning on or after 1 January 2016, with earlier application permitted.
2 Effective for annual periods beginning on or after 1 January 2018, with earlier application permitted.
3 Effective for annual periods beginning on or after 1 January 2018, except for the 2010 version of HKFRS 9 and the new requirements for hedge
accounting issued in 2013, which the Group early adopted.
4 Effective for annual periods beginning on or after a date to be determined.
Amendments to HKAS 1 Disclosure Initiative
The amendments to Hong Kong Accounting Standard (“HKAS”) 1 “Presentation of Financial Statements” give some guidance
on how to apply the concept of materiality in practice.
The amendments to HKAS 1 are effective for annual periods beginning on or after 1 January 2016. The directors of the
Company do not anticipate that the application of these amendments to HKAS 1 will have a material impact on the amounts
recognised or the presentation and disclosure in the Group’s consolidated financial statements.
Other than as described above, the Directors of the Company anticipate that the application of these new Standards and
Amendments to Standards will have no material impact on the results and financial position of the Group.
153
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible BusinessNotes to the Financial StatementsFor the year ended 31 December 2015
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$69,810 million (2014:
HK$68,735 million) based on the valuation performed by an independent qualified professional valuer. In determining the
fair value, the valuer has applied a market value basis which involves, inter-alia, certain estimates, including appropriate
capitalisation rates and reversionary income potential and redevelopment potential taking into account a market participant’s
ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant
that would use the asset in its highest and best use.
In relying on the valuation, management has exercised their 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 principal-protected investments, interest rate swaps, cross currency swaps and foreign exchange
derivatives, are carried in the Group’s consolidated statement of financial position at fair value, as disclosed in note 22 of the
Notes to the Financial Statements section. The management of the Company 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.
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
Based on the internal reports about components of the Group that are regularly reviewed by the chief operating decision
maker (i.e. Chief Executive Officer of the Group) in order to allocate resources to segments and to assess their performance, the
Group’s operating and reportable segments are as follows:
Retail segment – leasing of space and related facilities to a variety of retail and leisure operators
Office segment – leasing of high quality office space and related facilities
Residential segment – leasing of luxury residential properties and related facilities
154
Notes to the Financial Statements continuedFor the year ended 31 December 2015Hysan Annual Report 2015 5. SEGMENT INFORMATION continued
Segment turnover and results
The following is an analysis of the Group’s turnover and results by operating and reportable segment.
Retail
HK$ million
Office
HK$ million
Residential
HK$ million
Consolidated
HK$ million
For the year ended 31 December 2015
Turnover
Gross rental income from investment properties
Management fee income
Segment revenue
Property expenses
Segment profit
Investment income
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 2014
Turnover
Gross rental income from investment properties
Management fee income
Segment revenue
Property expenses
Segment 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
1,767
135
1,902
(239)
1,663
1,096
147
1,243
(124)
1,119
1,674
127
1,801
(226)
1,575
1,002
134
1,136
(118)
1,018
254
31
285
(51)
234
257
30
287
(60)
227
3,117
313
3,430
(414)
3,016
54
(234)
(204)
695
246
3,573
2,933
291
3,224
(404)
2,820
68
(2)
(214)
(228)
2,940
252
5,636
All of the segment turnover reported above is from external customers.
The accounting policies of the operating and reportable 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, other gains and losses, administrative expenses (including central administrative costs and directors’
salaries), finance costs, change in fair value of investment properties and share of results of associates. This is the measure
reported to the Chief Executive Officer of the Group for the purpose of resource allocation and performance assessment.
155
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
5. SEGMENT INFORMATION continued
Segment assets
The following is an analysis of the Group’s assets by operating and reportable segment.
Retail
HK$ million
Office
HK$ million
Residential
HK$ million
Consolidated
HK$ million
As at 31 December 2015
Segment assets
Investment properties under redevelopment
Investments in associates
Other assets
Consolidated assets
As at 31 December 2014
Segment assets
Investment properties under redevelopment
Investments in associates
Other assets
Consolidated assets
34,340
23,111
7,730
34,315
22,685
7,718
65,181
4,637
3,683
5,287
78,788
64,718
4,020
4,154
6,131
79,023
Segment assets represented the investment properties and accounts receivable of each segment without allocation of
investment properties under redevelopment, property, plant and equipment, investments in associates, principal-protected
investments, term notes, other financial assets, other receivables, time deposits, cash and bank balances. This is the measure
reported to the Chief Executive Officer of the Group 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 profit. No segment liabilities analysis is presented as the Group’s
management monitors and manages all the liabilities on a group basis.
Other than the investments in associates, which operated in the People’s Republic of China (the “PRC”) with carrying amounts
of HK$3,683 million (2014: HK$4,154 million), all the Group’s assets are located in Hong Kong.
Other segment information
For the year ended 31 December 2015
Additions to non-current assets
Additions to investment properties
under redevelopment
For the year ended 31 December 2014
Additions to non-current assets
Additions to investment properties
under redevelopment
Retail
HK$ million
Office
HK$ million
Residential
HK$ million
Consolidated
HK$ million
99
57
11
315
68
4
167
213
380
387
166
553
156
Notes to the Financial Statements continuedFor the year ended 31 December 2015Hysan Annual Report 2015
INVESTMENT INCOME
6.
The following is an analysis of investment income:
Financial assets measured at amortised cost
Reclassification of net gains from hedging reserve on
financial instruments designated as cash flow hedges
Amortisation of forward element excluded from hedge designation
2015
HK$ million
2014
HK$ million
47
9
(2)
54
61
14
(7)
68
Fair value gains and losses and interest income on financial assets classified as at fair value through profit or loss (“FVTPL”) are
disclosed in note 7 of the Notes to the Financial Statements section.
7. OTHER GAINS AND LOSSES
Other gains and losses comprise:
Change in fair value of financial assets or financial liabilities classified as at FVTPL
Losses on hedging instruments under fair value hedge
Gains on adjustment for hedged items under fair value hedge
8. FINANCE COSTS
Finance costs comprise:
Interest on bank loans
Interest on floating rate notes
Interest on fixed rate notes
Imputed interest on zero coupon notes
Total interest expenses
Other finance costs
Net interest receipts on interest rate swaps
Net exchange (gains) losses on borrowings
Reclassification of net losses (gains) from hedging reserve on
financial instruments designated as cash flow hedges
Medium Term Note Programme expenses
2015
HK$ million
2014
HK$ million
–
(8)
8
–
(2)
(22)
22
(2)
2015
HK$ million
2014
HK$ million
9
–
188
1
198
8
206
(8)
(2)
6
2
204
20
2
195
17
234
8
242
(25)
46
(37)
2
228
157
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
9. TAxATION
Current tax
Hong Kong profits tax
– current year
– underprovision (overprovision) in prior years
Deferred tax (note 28)
2015
HK$ million
2014
HK$ million
382
2
384
54
438
323
(3)
320
66
386
Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profit for both years.
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
Reversal of previously recognised taxable temporary differences
Utilisation of estimated tax losses previously not recognised
Underprovision (overprovision) in prior years
Taxation for the year
2015
HK$ million
3,573
2014
HK$ million
5,636
590
(41)
100
(217)
10
(3)
(3)
2
438
930
(42)
31
(551)
21
–
–
(3)
386
In addition to the amount charged to the consolidated income statement, deferred tax relating to the revaluation of the
Group’s properties held for own use has been charged directly to properties valuation reserve (see note 28).
10. PROFIT FOR THE YEAR
Profit for the year has been arrived at after charging (crediting):
Auditor’s remuneration
Depreciation of property, plant and equipment
Gross rental income from investment properties
including contingent rentals of HK$71 million (2014: HK$93 million)
Less:
– Direct operating expenses arising from properties that generated rental income
– Direct operating expenses arising from properties that did not generate rental income
Staff costs, comprising:
– Directors’ emoluments (note 12)
– Share-based payments
– Other staff costs
Share of income tax of an associate (included in share of results of associates)
2015
HK$ million
2014
HK$ million
3
21
3
17
(3,117)
(2,933)
403
11
399
5
(2,703)
(2,529)
38
3
239
280
104
35
4
224
263
106
158
Notes to the Financial Statements continuedFor the year ended 31 December 2015Hysan Annual Report 2015
11. OTHER COMPREHENSIVE INCOME
Other comprehensive (expense) income comprises:
Items that will not be reclassified subsequently to profit or loss:
Fair value change of equity investments
Revaluation of properties held for own use:
Gains on revaluation of properties held for own use
Deferred taxation arising on revaluation
Items that may be reclassified subsequently to profit or loss:
Derivatives designated as cash flow hedges:
Net (losses) gains arising during the year
Reclassification adjustments for net gains included in profit or loss
Amortisation of forward element excluded from hedge designation
Share of translation reserve of an associate
Other comprehensive (expense) income for the year (net of tax)
Tax effect relating to other comprehensive income:
2015
HK$ million
2014
HK$ million
36
10
(1)
9
45
(39)
(3)
(42)
2
(40)
(240)
(280)
(235)
–
19
(3)
16
16
95
(51)
44
7
51
(16)
35
51
Fair value change of equity investments
Gains on revaluation of properties
held for own use
Net adjustments to hedging reserve
Share of translation reserve
of an associate
12. DIRECTORS’ EMOLUMENTS
Directors’ fees
Other emoluments
Basic salaries, housing and other allowances
Bonus (Notes d & f)
Share-based payments
Retirement benefits scheme contributions
Before-tax
amount
HK$ million
2015
Tax
expense
HK$ million
Net-of-tax
amount
HK$ million
Before-tax
amount
HK$ million
2014
Tax
expense
HK$ million
Net-of-tax
amount
HK$ million
36
10
(40)
(240)
(234)
–
(1)
–
–
(1)
36
9
(40)
(240)
(235)
–
19
51
(16)
54
–
(3)
–
–
(3)
–
16
51
(16)
51
2015
HK$ million
2014
HK$ million
2
13
18
5
–
38
2
13
13
6
1
35
159
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
12. DIRECTORS’ EMOLUMENTS continued
The emoluments paid or payable to each of the Directors of the Company for the two years ended 31 December 2015 and
2014, calculated with reference to their employment as Directors of the Company or for provision of other services to the
Company and the Group, are set out below:
For the year ended 31 December 2015
Executive Directors (Note a)
Irene Yun Lien LEE
Siu Chuen LAU
Wendy Wen Yee YUNG (Note h)
Non-Executive Directors (Note b)
Hans Michael JEBSEN
Anthony Hsien Pin LEE
Chien LEE
Michael Tze Hau LEE
Independent Non-Executive Directors
(Note c)
Nicholas Charles ALLEN
Frederick Peter CHURCHOUSE
Philip Yan Hok FAN
Lawrence Juen-Yee LAU
Joseph Chung Yin POON
For the year ended 31 December 2014
Executive Directors (Note a)
Irene Yun Lien LEE
Siu Chuen LAU
Wendy Wen Yee YUNG
Non-Executive Directors (Note b)
Hans Michael JEBSEN
Anthony Hsien Pin LEE
Chien LEE
Michael Tze Hau LEE
Independent Non-Executive Directors
(Note c)
Nicholas Charles ALLEN
Frederick Peter CHURCHOUSE (Note i)
Philip Yan Hok FAN
Lawrence Juen-Yee LAU (Note j)
Joseph Chung Yin POON
Basic salaries,
housing
and other
allowances
HK$’000
(Note d)
Directors’
fees
HK$’000
(Note e)
Bonus
HK$’000
(Note d)
Share-based
payments
HK$’000
(Note g)
Retirement
benefits
scheme
contributions
HK$’000
Total
HK$’000
–
–
–
200
260
240
240
360
260
360
200
260
4,931
5,340
2,451
6,246
6,500
1,392
2,471
2,372
(342)
18
18
229
13,666
14,230
3,730
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
200
260
240
240
360
260
360
200
260
2,380
12,722
14,138
4,501
265
34,006
Basic salaries,
housing
and other
allowances
HK$’000
(Note f)
Directors’
fees
HK$’000
(Note e)
Bonus
HK$’000
(Note f)
Share-based
payments
HK$’000
(Note g)
Retirement
benefits
scheme
contributions
HK$’000
Total
HK$’000
–
–
–
200
260
240
240
352
206
356
11
260
4,931
5,340
3,042
6,082
5,176
1,474
2,819
2,618
992
17
17
281
13,849
13,151
5,789
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
200
260
240
240
352
206
356
11
260
2,125
13,313
12,732
6,429
315
34,914
160
Notes to the Financial Statements continuedFor the year ended 31 December 2015Hysan Annual Report 2015
12. DIRECTORS’ EMOLUMENTS continued
Notes:
a.
b.
c.
d.
The Executive Directors’ emoluments shown above were mainly for the services in connection with the management of the affairs of the
Company and the Group.
The Non-Executive Directors’ emoluments shown above were mainly for the services as directors of the Company.
The Independent Non-Executive Directors’ emoluments shown above were mainly for the services as directors of the Company.
Year 2015:
The Remuneration Committee met in March 2015 to approve the 2015 annual fixed base salary and determine the 2014 performance-based
bonus of the Company’s Executive Directors. Annual fixed base salary of all Executive Directors remained the same for 2015.
The stated bonus figures of HK$14,138,000 reflected the 2014 performance-based bonus approved by the Committee and paid to Executive
Directors in March 2015. For the year ended 31 December 2015, the bonus figures of HK$18,353,000 represented the 2015 target bonus figures
of HK$12,700,000 pending finalised by the Committee after year-end in March 2016, and included adjustments for 2014 bonus accrued in 2014
(following finalisation of bonus by the Committee in March 2015).
e.
Directors’ fees scales for Board and Board Committees were approved by shareholders at the AGM held on 9 May 2011. Revision to fees of
chairmen of Audit Committee and Remuneration Committee (effective 1 June 2014) were approved by shareholders at the AGM held on 13 May
2014. Details are set out in Directors’ Remuneration and Interests Report.
Director’s fees are calculated on annual basis and paid semi-annually. For Directors not having served the full year on a position, the fees will be
calculated and paid on pro rata basis.
Breakdown of Directors’ fees of each of the Directors of the Company for the year ended 31 December 2015 is set out below:
Executive Directors
Irene Yun Lien LEE
Siu Chuen LAU
Wendy Wen Yee YUNG
Non-Executive Directors
Hans Michael JEBSEN
Anthony Hsien Pin LEE
Chien LEE
Michael Tze Hau LEE
Independent Non-Executive Directors
Nicholas Charles ALLEN
Frederick Peter CHURCHOUSE
Philip Yan Hok FAN
Lawrence Juen-Yee LAU
Joseph Chung Yin POON
Board
HK$’000
Audit Remuneration
Committee
HK$’000
Committee
HK$’000
Strategy Nomination
Committee
HK$’000
Committee
HK$’000
2015
Total
HK$’000
2014
Total
HK$’000
–
–
–
200
200
200
200
200
200
200
200
200
1,800
–
–
–
–
60
–
–
120
60
60
–
–
300
–
–
–
–
–
–
40
–
–
60
–
40
140
–
–
–
–
–
20
–
20
–
20
–
–
60
–
–
–
–
–
20
–
20
–
20
–
20
80
–
–
–
200
260
240
240
360
260
360
200
260
–
–
–
200
260
240
240
352
206
356
11
260
2,380
2,125
f.
Year 2014:
The Remuneration Committee met in March 2014 to approve the 2014 annual fixed base salary and determine the 2013 performance-based
bonus of the Company’s Executive Directors. The annual cash compensation of Siu Chuen LAU, Deputy Chairman and Chief Executive Officer,
was revised to HK$8,900,667, based on market benchmark, and the jobholder’s experience, qualification, and performance. His annual base
salary remained unchanged at HK$5,340,400 (making up 60% of the total package instead of 65% as in 2013). Annual fixed base salary of all
Executive Directors remained the same for 2014.
The stated bonus figures of HK$12,732,000 reflected the 2013 performance-based bonus approved by the Committee and paid to Executive
Directors in March 2014. For the year ended 31 December 2014, the bonus figures of HK$13,417,000 reflected 2014 target bonus figures of
HK$8,485,000 pending finalised by the Committee after year-end in March 2015, and included adjustments for 2013 bonus accrued in 2013
(following finalisation of bonus by the Committee in March 2014).
g.
Share-based payments are the fair values of share options granted to Executive Directors, which are determined at the date of grant and
expensed over the vesting period (except where options are forfeited before vesting), regardless of whether the Executive Directors exercise the
share options or not during the year. Details of the share option scheme are set out in note 36 of the Notes to the Financial Statements section.
h. Wendy Wen Yee YUNG resigned as Executive Director and Company Secretary effective 24 October 2015.
i.
j.
Frederick Peter CHURCHOUSE was appointed a member of Audit Committee effective 25 November 2014.
Lawrence Juen-Yee LAU was appointed Independent Non-Executive Director effective 12 December 2014.
161
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
12. DIRECTORS’ EMOLUMENTS continued
There was no arrangement under which a director waived or agreed to waive any remuneration during both years.
There was no payment to a director as inducement for director to join the Group or compensation for the loss of office as a
director in connection with the management of the affairs of any member of the Group during both years.
Details of material interests of the Directors of the Company in transactions, arrangements or contracts entered into by
subsidiaries of the Company are disclosed in the Directors’ Report.
13. EMPLOYEES’ EMOLUMENTS
Of the five individuals with the highest emoluments in the Group, two (2014: three) were Directors of the Company, details of
whose emoluments are included in note 12 of the Notes to the Financial Statements section. The emoluments of all of the five
individuals with the highest emoluments for the years ended 31 December 2015 and 2014 were as follows:
Basic salaries, housing and other allowances
Bonus
Share-based payments (Note)
2015
HK$ million
2014
HK$ million
19
15
6
40
19
15
7
41
Note:
Share-based payments are the fair values of share options granted to Executive Directors and eligible employees, which are determined at the date of
grant and expensed over the vesting period (except where options are forfeited before vesting), regardless of whether the Executive Directors or eligible
employees exercise the share options or not during the year.
Their emoluments are within the following bands:
HK$3,500,001 to HK$4,000,000
HK$4,000,001 to HK$4,500,000
HK$5,500,001 to HK$6,000,000
HK$13,000,001 to HK$13,500,000
HK$13,500,001 to HK$14,000,000
HK$14,000,001 to HK$14,500,000
Number of individuals
2015
2014
2
1
–
–
1
1
5
2
–
1
1
1
–
5
Senior management (for the purpose of the Listing Rules) during the year are Executive Directors. Their emoluments are within
the following bands.
Number of individuals
2015
2014
1
–
–
1
1
3
–
1
1
1
–
3
HK$4,000,001 to HK$4,500,000
HK$5,500,001 to HK$6,000,000
HK$13,000,001 to HK$13,500,000
HK$13,500,001 to HK$14,000,000
HK$14,000,001 to HK$14,500,000
162
Notes to the Financial Statements continuedFor the year ended 31 December 2015Hysan Annual Report 2015
14. DIVIDENDS
(a) Dividends recognised as distribution during the year:
2015 first interim dividend paid – HK25 cents per share
2014 first interim dividend paid – HK23 cents per share
2014 second interim dividend paid – HK100 cents per share
2013 second interim dividend paid – HK95 cents per share
(b) Dividends declared after the end of the reporting period:
Second interim dividend (in lieu of a final dividend)
– HK107 cents per share (2014: HK100 cents per share)
2015
HK$ million
2014
HK$ million
266
–
1,064
–
1,330
–
245
–
1,010
1,255
2015
HK$ million
2014
HK$ million
1,122
1,064
The second interim dividend is not recognised as a liability as at 31 December 2015 because it has been declared after the end
of the reporting period. Such dividend will be accounted for as an appropriation of the retained profits in the year ending 31
December 2016.
The declared second interim dividend will be payable in cash.
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
2015
HK$ million
2014
HK$ million
2,903
4,902
Number of shares
2015
2014
1,062,690,556 1,063,758,157
216,828
298,254
1,062,907,384 1,064,056,411
In both years, 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.
163
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
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 non-controlling interests’ shares
Share of change in fair value of investment properties
(net of deferred taxation) of an associate
Underlying Profit
Recurring Underlying Profit
Notes:
2015
2014
Profit
HK$ million
2,903
(695)
79
(4)
2,283
2,283
Basic
earnings
per
share
HK cents
273.17
(65.40)
7.43
(0.37)
214.83
214.83
Profit
HK$ million
4,902
(2,940)
208
(7)
2,163
2,163
Basic
earnings
per
share
HK cents
460.82
(276.38)
19.55
(0.65)
203.34
203.34
(1) Recurring Underlying Profit is arrived at by excluding from Underlying Profit items that are non-recurring in nature (such as gains or losses on
disposal of long-term assets). As there were no such adjustments in both years, the Recurring Underlying Profit is the same as the Underlying
Profit.
(2) The denominators used in calculating the adjusted earnings per share are the same as those detailed above for basic earnings per share.
16. INVESTMENT PROPERTIES
Fair Value
At 1 January
Additions
Transfer to property, plant and equipment
Change in fair value recognised in profit or loss – unrealised
At 31 December
2015
HK$ million
2014
HK$ million
68,735
380
–
695
69,810
65,322
553
(80)
2,940
68,735
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.
164
Notes to the Financial Statements continuedFor the year ended 31 December 2015Hysan Annual Report 2015
16. INVESTMENT PROPERTIES continued
Fair value measurements and valuation processes
The fair value of the Group’s investment properties at 31 December 2015 and 2014 has been arrived at on the basis of a
valuation carried out on those dates by Knight Frank Petty Limited, an independent qualified professional valuer not connected
with the Group. The Group’s investment properties have been valued individually, on market value basis, which conforms
to The Hong Kong Institute of Surveyors Valuation Standards. In estimating the fair value of the investment properties, the
management of the Group has considered the highest and best use of the investment properties.
The value of the completed investment properties is derived from the basis of capitalisation of net income with due allowance
for the reversionary income and redevelopment potential, where appropriate.
For investment properties under redevelopment, residual method of valuation was adopted. The value is based on the
redevelopment potential of the properties as if they were completed in accordance with the existing redevelopment proposal at
the date of valuation. The value has also taken into consideration all costs of redevelopment and allowance of profit required
for the redevelopment, which duly reflected the risks associated with the redevelopment.
There has been no change to the valuation technique during the year for completed properties and investment properties
under redevelopment.
All of the fair value measurements of the Group’s investment properties were categorised into Level 3 of the fair value
hierarchy. Details of fair value hierarchy are set out in note 4 of the Financial Risk Management section.
There were no transfers into or out of Level 3 during the year.
At the end of the reporting period, the management of the Group works with Knight Frank Petty Limited to establish and
determine the appropriate valuation techniques and inputs for Level 3 fair value measurements. Where there is a material
change in the fair value of the assets, the causes of the fluctuations will be reported to the Directors of the Company.
Fair value measurements using significant unobservable inputs (Level 3)
The following table shows a reconciliation from the beginning balances to the ending balances for fair value measurements of
the Group’s investment properties by operating and reportable segment.
At 1 January 2014
Additions
Transfer to property, plant and equipment
Transfer to investment properties under
redevelopment
Change in fair value recognised in profit or loss
– unrealised
At 31 December 2014
Additions
Change in fair value recognised in profit or loss
– unrealised
At 31 December 2015
Retail
HK$ million
Office
HK$ million
32,651
315
(80)
24,200
68
–
Investment
properties under
redevelopment
HK$ million
Residential
HK$ million
8,471
4
–
–
166
–
Total
HK$ million
65,322
553
(80)
(417)
(2,251)
(755)
3,423
–
1,844
34,313
99
667
22,684
57
(2)
7,718
11
(78)
369
–
34,334
23,110
7,729
431
4,020
213
404
4,637
2,940
68,735
380
695
69,810
165
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
16. INVESTMENT PROPERTIES continued
Information about fair value measurements using significant unobservable inputs (Level 3)
The following table shows the valuation techniques used in the determination of fair values for investment properties by
operating and reportable segment and unobservable inputs used in the valuation models.
Description
Fair value as at
31 December
2015
2014
Retail
34,334
34,313
HK$ million
Valuation
techniques
Unobservable
inputs
Range/
weighted average
of unobservable
inputs
Relationship of
unobservable
inputs to fair
value
Income
capitalisation
approach
(i) Capitalisation
rate
5.00% – 5.25%
(2014: 5.00% –
5.25%)
The higher the
capitalisation
rate, the lower
the fair value.
(ii) Market rent
per month
HK$145
per square foot
(2014: HK$141
per square foot)
The higher
the market rent,
the higher the
fair value.
Office
23,110
22,684
Income
capitalisation
approach
(i) Capitalisation
rate
4.25% – 5.00%
(2014: 4.25% –
5.00%)
The higher the
capitalisation
rate, the lower
the fair value.
(ii) Market rent
per month
HK$48
per square foot
(2014: HK$47
per square foot)
The higher
the market rent,
the higher the
fair value.
Residential
7,729
7,718
Income
capitalisation
approach
(i) Capitalisation
rate
3.75%
(2014: 3.75%)
The higher the
capitalisation
rate, the lower
the fair value.
(ii) Market rent
per month
Investment
properties
under
redevelopment
4,637
4,020
Residual
method
(i) Capitalisation
rate
(ii) Market rent
per month
HK$35
per square foot
(2014: HK$35
per square foot)
The higher
the market rent,
the higher the
fair value.
4.25 % – 5.00%
(2014: 4.25% –
5.00%)
The higher the
capitalisation
rate, the lower
the fair value.
HK$80
per square foot
(2014: HK$100
per square foot)
The higher
the market rent,
the higher the
fair value.
166
Notes to the Financial Statements continuedFor the year ended 31 December 2015Hysan Annual Report 2015
17. PROPERTY, PLANT AND EQUIPMENT
Leasehold
land and
buildings in
Hong Kong
HK$ million
(Note)
Furniture,
fixtures and
equipment
HK$ million
Computers
HK$ million
Motor
vehicles
HK$ million
Total
HK$ million
COST OR VALUATION
At 1 January 2014
Additions
Disposals
Transfer from investment properties
Surplus on revaluation
At 31 December 2014
Additions
Disposals
Surplus on revaluation
At 31 December 2015
Comprising:
At cost
At valuation 2015
ACCUMULATED DEPRECIATION
At 1 January 2014
Provided for the year
Eliminated on disposals
Eliminated on revaluation
At 31 December 2014
Provided for the year
Eliminated on disposals
Eliminated on revaluation
At 31 December 2015
CARRYING AMOUNTS
At 31 December 2015
At 31 December 2014
567
–
–
80
15
662
–
–
4
666
–
666
666
–
4
–
(4)
–
6
–
(6)
–
666
662
94
20
(4)
–
–
110
4
(1)
–
113
113
–
113
69
9
(4)
–
74
11
(1)
–
84
29
36
43
4
–
–
–
47
2
–
–
49
49
–
49
33
3
–
–
36
4
–
–
40
9
11
2
–
–
–
–
2
–
–
–
2
2
–
2
–
1
–
–
1
–
–
–
1
1
1
706
24
(4)
80
15
821
6
(1)
4
830
164
666
830
102
17
(4)
(4)
111
21
(1)
(6)
125
705
710
167
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
17. PROPERTY, PLANT AND EQUIPMENT continued
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 term of the lease or 40 years
20%
20%
25%
Note:
Fair value measurements and valuation processes
The fair value of the Group’s leasehold land and buildings in Hong Kong at 31 December 2015 and 2014 has been arrived at
on the basis of a valuation carried out on those dates by Knight Frank Petty Limited, an independent qualified professional
valuer not connected with the Group. The Group’s leasehold land and buildings in Hong Kong have been valued individually,
on market value basis, which conforms to The Hong Kong Institute of Surveyors Valuation Standards. In estimating the fair
value of the properties, the management of the Group has considered the highest and best use of the properties. The value was
derived from the basis of capitalisation of net income with due allowance for the reversionary income potential. There has been
no change to the valuation technique during the year.
All of the fair value measurements of the Group’s leasehold land and buildings in Hong Kong were categorised into Level 3 of
the fair value hierarchy. Details of fair value hierarchy are set out in note 4 of the Financial Risk Management section.
There were no transfers into or out of Level 3 during the year.
At the end of the reporting period, the management of the Group works with Knight Frank Petty Limited to establish and
determine the appropriate valuation techniques and inputs for Level 3 fair value measurements. Where there is a material
change in the fair value of the assets, the causes of the fluctuations will be reported to the Directors of the Company.
Information about fair value measurements using significant unobservable inputs (Level 3)
The following table shows the valuation techniques used in the determination of fair values for the Group’s leasehold land and
buildings in Hong Kong and unobservable inputs used in the valuation models.
Description
Leasehold
land and
buildings in
Hong Kong
Fair value as at
31 December
2015
HK$ million
666
2014
662
Valuation
techniques
Unobservable
inputs
Range/
weighted average
of unobservable
inputs
Relationship of
unobservable
inputs to fair
value
Income
capitalisation
approach
(i) Capitalisation
rate
4.25% – 5.25%
(2014: 4.25% –
5.25%)
The higher the
capitalisation
rate, the lower
the fair value.
(ii) Market rent
per month
HK$57
per square foot
(2014: HK$57
per square foot)
The higher
the market rent,
the higher the
fair value.
The gains of HK$10 million (2014: HK$19 million) arising on revaluation have been recognised in other comprehensive income
and accumulated in properties revaluation reserve.
Had the Group’s land and buildings been measured on a historical cost basis, their carrying amounts would have been HK$255
million (2014: HK$261 million) at the end of the reporting period.
Furniture, fixtures and equipment of the Group include assets carried at cost of HK$30 million (2014: HK$29 million) and
accumulated depreciation of HK$25 million (2014: HK$23 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$2 million (2014: HK$2 million).
168
Notes to the Financial Statements continuedFor the year ended 31 December 2015Hysan Annual Report 2015
18. PARTICULARS OF PRINCIPAL SUBSIDIARIES OF THE COMPANY
The table below lists the principal subsidiaries of the Company at 31 December 2015 and 2014:
Place of
incorporation/
operation
Issued
share capital
Proportion of
ownership interests/
voting rights
held by the Company
indirectly
directly
Name of subsidiary
Admore Investments Limited
HD Treasury Limited
Hysan (MTN) Limited
Hysan China Holdings Limited
Hysan Corporate Services Limited
Hong Kong
Hong Kong
British Virgin Islands/
Hong Kong
British Virgin Islands
Hong Kong
HK$2
HK$2
US$1
HK$1
HK$2
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
Hong Kong
Hong Kong
Hong Kong
British Virgin Islands
Hong Kong
Hong Kong
Hong Kong
Hong Kong
HK$2
HK$2
HK$2
HK$1
HK$1,000
HK$2
HK$2
HK$300,000
Bamboo Grove Recreational
Services Limited
Earn Extra Investments Limited
Alpha Ace Limited
HD Investment Limited
Lee Theatre Realty Limited
Leighton Property Company
Limited
Main Rise Development Limited
OHA Property Company Limited
Perfect Win Properties Limited
Silver Nicety Company Limited
Barrowgate Limited
Hong Kong
HK$2
Hong Kong
Hong Kong
British Virgin Islands
Hong Kong
Hong Kong
HK$1
HK$1
HK$1
HK$10
HK$2
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
HK$2
HK$2
HK$2
HK$20
HK$10,000
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100%
100%
100%
100%
100%
100%
100%
–
100%
–
100%
–
–
100%
– 65.36%
Principal activities
Investment holding
Treasury operation
Treasury operation
Investment holding
Provision of corporate
services
Leasing administration
Property management
Treasury operation
Investment holding
Property investment
Property investment
Property investment
Provision of security
services
Resident club
management
Property investment
Property development
Investment holding
Property investment
Property investment
Investment holding
Property investment
Property investment
Property investment
Property investment
The Directors are of the opinion that a complete list of all subsidiaries and their particulars will be of excessive length and
therefore the above table contains only those subsidiaries which materially 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 fixed rate notes
issued by Hysan (MTN) Limited (“Hysan MTN”) as disclosed in note 27 of the Notes to the Financial Statements section, none
of the subsidiaries had issued any debt securities at the end of the reporting period.
The summarised financial information in respect of the Group’s subsidiary that has material non-controlling interests is set out
below. The summarised financial information below represents amounts before intragroup eliminations.
169
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
18. PARTICULARS OF PRINCIPAL SUBSIDIARIES OF THE COMPANY continued
Barrowgate Limited
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity attributable to owners of the Company
Non-controlling interests
Turnover
Profit and total comprehensive income for the year
Profit and total comprehensive income attributable to owner of the Company
Profit and total comprehensive income attributable to the non-controlling interests
Dividends paid to non-controlling interests
Net cash inflows from operating activities
Net cash outflows from investing activities
Cash outflows from financing activities
Net cash inflows
19. INVESTMENTS IN ASSOCIATES
Cost of unlisted investments
Share of post-acquisition profits and other comprehensive income,
net of dividends received
2015
HK$ million
2014
HK$ million
258
10,236
(1,067)
(199)
6,032
3,196
611
671
439
232
125
438
(13)
(360)
65
188
10,007
(1,063)
(215)
5,828
3,089
567
1,004
656
348
114
419
(28)
(330)
61
2015
HK$ million
2014
HK$ million
2
3,681
3,683
2
4,152
4,154
Details of the Group’s associates at 31 December 2015 and 2014 are as follows:
Name of associate
Country Link
Enterprises Limited (Note)
Shanghai Kong Hui
Property Development
Co., Ltd (Note)
Shanghai Grand
Gateway Plaza
Property Management
Co., Ltd (Note)
Wingrove Investment
Pte Ltd^
Form of
business
structure
Private limited
company
Sino-Foreign
equity joint
venture
Sino-Foreign
equity joint
venture
Private
company
limited
by shares
Place of
incorporation/
establishment
and operation
Hong Kong
The PRC
Class of
share held/
registered
capital
Effective
interest
held by
the Group
Principal activities
Ordinary share
of HK$5,000,000
US$165,000,000#
26.3%*
Investment holding
24.7%*
Property development
and leasing
The PRC
US$140,000#
23.7%* Property management
Singapore
Ordinary share
of S$1,000,000
25.0%*
Inactive
Indirectly held
Fully paid-up registered capital
The company is under liquidation as at 31 December 2015 and 2014. This associate is not material to the Group during both years or as at the
end of the reporting period.
*
#
^
Note:
Shanghai Kong Hui Property Development Co., Ltd and Shanghai Grand Gateway Plaza Property Management Co., Ltd are non-wholly owned
subsidiaries of Country Link Enterprises Limited, together known as “Country Link”.
170
Notes to the Financial Statements continuedFor the year ended 31 December 2015Hysan Annual Report 2015
19. INVESTMENTS IN ASSOCIATES continued
The summarised consolidated financial information in respect of the Group’s material associate is set out below. The
summarised consolidated financial information below represents amounts shown in the associate’s consolidated financial
statements prepared in accordance with HKFRSs. The associate is accounted for using the equity method in these consolidated
financial statements.
Country Link
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Turnover
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Group’s share of results of associates for the year
Group’s share of other comprehensive income of associates for the year
2015
HK$ million
2014
HK$ million
2,300
17,604
(1,229)
(3,794)
1,627
1,001
(972)
29
246
(240)
3,171
18,639
(957)
(4,048)
1,595
1,022
(63)
959
252
(16)
Reconciliation of the above summarised consolidated financial information to the carrying amount of the interest in the
associate that is material to the Group recognised in the consolidated financial statements:
Net assets of the associate
Non-controlling interests of the associate
Net assets of the associate after deducting
non-controlling interests of the associate
Proportion of the Group’s ownership interest in the associate
Group’s share of net assets of the associate
Others
Carrying amount of the Group’s interest in the associate
2015
HK$ million
2014
HK$ million
14,881
(871)
14,010
26.3%
3,686
(3)
3,683
16,805
(1,005)
15,800
26.3%
4,157
(3)
4,154
20. PRINCIPAL-PROTECTED INVESTMENTS
The carrying amounts of principal-protected investments based on the maturity dates of respective contracts are analysed as
follows:
Within 1 year
2015
HK$ million
2014
HK$ million
–
80
As at 31 December 2014, the Group entered into certain contract of structured investments with certain financial institution.
The structured investments are principal-protected at the maturity dates and contain embedded derivatives. The interest rates
of such investments vary in relation to the relative movements of the underlying variables, such as foreign exchange rates and
interest rates. The entire combined contracts have been classified as financial assets at FVTPL.
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Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
20. PRINCIPAL-PROTECTED INVESTMENTS continued
The notional amount and the maturity period of the principal-protected investments are as follows:
Within 1 year
21. TERM NOTES
Term notes, at amortised cost, comprise:
– Debt securities listed in Hong Kong
– Debt securities listed in overseas
– Unlisted debt securities
Total
Analysed for reporting purposes as:
Current assets
Non-current assets
2015
Notional
amount
HK$ million
Fair
value
HK$ million
–
–
2014
Notional
amount
HK$ million
80
Fair
value
HK$ million
80
2015
HK$ million
2014
HK$ million
729
313
308
1,350
415
935
1,350
213
197
795
1,205
485
720
1,205
As at 31 December 2015, the effective yield of the debt securities ranged from 1.36% to 3.27% (2014: 1.20% to 3.27%) per
annum, payable quarterly, semi-annually or annually, and the securities will mature from February 2016 to August 2018 (2014:
from January 2015 to October 2017). At the end of the reporting period, none of these assets were past due but not impaired.
22. OTHER FINANCIAL ASSETS/LIABILITIES
Current
Non-current
2015
HK$ million
2014
HK$ million
2015
HK$ million
2014
HK$ million
Other financial assets
Derivatives under hedge accounting:
Cash flow hedges
– Forward foreign exchange contracts
Fair value hedges
– Interest rate swaps
Financial assets measured at FVTPL:
Club debentures
Total
Other financial liabilities
Derivatives under hedge accounting:
Cash flow hedges
– Forward foreign exchange contracts
– Cross currency swaps
– Interest rate swaps
Total
172
1
–
1
–
1
–
–
–
–
7
8
15
–
15
1
–
1
2
6
–
6
1
7
–
71
–
71
1
–
1
2
3
–
30
–
30
Notes to the Financial Statements continuedFor the year ended 31 December 2015Hysan Annual Report 2015
22. OTHER FINANCIAL ASSETS/LIABILITIES continued
(a) Cash flow hedges
(i) Foreign currency risk
During the year, the Group used forward foreign exchange contracts and cross currency swaps 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 considers that the hedges are highly
effective.
The table below is prepared based on the maturity dates of respective contracts. The major terms of these outstanding forward
foreign exchange contracts and cross currency swaps at the end of the reporting period are as follows:
Hedging instruments
Forward foreign
exchange contracts
Sell US dollars (“USD”)
(Note a)
Within 1 year
More than 1 year but
not exceeding 5 years
Sell Renminbi (“RMB”)
(Note b)
Within 1 year
More than 1 year but
not exceeding 5 years
Cross currency swaps
Hedging interest and
principal of USD
fixed rate notes
(Note c)
More than 5 years
Total
2015
2014
Average
exchange
Foreign
rate* currency
Fair
value
HK$
million million million
Notional amount
HK$
Average
exchange
Foreign
rate* currency
Notional amount
HK$
million
million
Fair
value
HK$
million
7.7609
USD
7.7657
7.7633
USD
USD
48
45
93
369
353
722
1.1660
RMB
83
97
1.2185
1.1869
RMB
RMB
55
138
67
164
1
2
3
–
4
4
7.7520
USD
7.7612
7.7598
USD
USD
10
56
66
77
434
511
1.2484
RMB
610
762
1.2185
1.2459
RMB
RMB
55
665
67
829
–
–
–
6
1
7
7.7519
USD
300 2,326
3,212
(71)
(64)
7.7519
USD
300
2,326
3,666
(30)
(23)
*
Average exchange rate represented the average exchange rate of HKD versus respective currencies weighted by the notional amounts of the
contracts or the swaps.
Notes:
(a) The Group used HK$722 million (2014: HK$511 million) forward foreign exchange contracts to hedge the foreign exchange rate risk of part of
the principal amount of term notes denominated in USD at their respective maturity dates.
(b) The Group used HK$164 million (2014: HK$829 million) forward foreign exchange contracts to hedge the foreign exchange rate risk of part of
the principal amount of term notes and time deposits denominated in RMB at their respective maturity dates. The forward element of forward
contracts has been excluded from the cash flow hedge.
(c) The Group used HK$2,326 million (2014: HK$2,326 million) cross currency swap to convert USD interest and principal of US$300 million (2014:
US$300 million) fixed rate notes into HKD.
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Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
22. OTHER FINANCIAL ASSETS/LIABILITIES continued
(a) Cash flow hedges continued
(i) Foreign currency risk continued
Hedged items
Carrying amount of
the hedged item
Assets
Liabilities
Cash flow
hedge reserves
2015
HK$ million
2014
HK$ million
2015
HK$ million
2014
HK$ million
2015
HK$ million
2014
HK$ million
USD term notes
RMB term notes & time deposits
USD fixed rate notes
721
163
–
511
830
–
–
–
2,314
–
–
2,314
2
2
(70)
–
6
(31)
The hedging ineffectiveness for the years ended 31 December 2015 and 2014 was insignificant.
Change in the value
of the hedging instrument
recognised in other
comprehensive income
2015
HK$ million
2014
HK$ million
Amount
reclassified from the
cash flow hedge reserve
to profit or loss
2015
HK$ million
2014
HK$ million
Line item affected in
profit or loss
because of the
reclassification
Forward foreign exchange contracts
Cross currency swaps
5
(44)
12
84
(9)
5
(14)
(47)
Investment income
Finance costs
The forward element of forward contracts has been excluded from the cash flow hedge. During the year, the Group amortised
HK$2 million (2014: HK$7 million) of forward premium to profit or loss against investment income.
The fair values of forward foreign exchange contracts and cross currency swaps are measured using quoted forward exchange
rates and yield curves from quoted interest rates matching maturities of the contracts and swaps.
(ii) Interest rate risk
During the year, the Group used interest rate swaps to hedge its interest rate risk exposure. The terms of the swaps have been
negotiated to match the major terms of the respective hedged underlying items so that the management considers that the
interest rate swaps are highly effective hedging instruments.
The table below is prepared based on the maturity dates of respective contracts. The major terms of these outstanding interest
rate swaps at the end of the reporting period are as follows:
Hedging instruments
Interest rate swaps
Hedging interest of
HKD bank loans (Note)
Within 1 year
2015
2014
Average
interest
rate*
Notional
amount
HK$ million
Fair
value
HK$ million
Average
interest
rate*
Notional
amount
HK$ million
Fair
value
HK$ million
–
–
–
3.65%
200
(1)
*
Average interest rate represented the average fixed interest rate paid by the Group against receipts of 3-month HIBOR or 6-month HIBOR
weighted by the notional amounts of the swaps.
Note:
As at 31 December 2014, the Group used HK$200 million interest rate swaps to manage its exposure to interest rate changes of the quarterly interest
payments of HKD bank loans. The HKD bank loans were repaid and the swap matured in February 2015.
174
Notes to the Financial Statements continuedFor the year ended 31 December 2015Hysan Annual Report 2015
22. OTHER FINANCIAL ASSETS/LIABILITIES continued
(a) Cash flow hedges continued
(ii) Interest rate risk continued
Hedged items
HKD bank loans
Carrying amount of
the hedged item
Liabilities
2015
HK$ million
–
2014
HK$ million
200
Cash flow
hedge reserves
2015
HK$ million
2014
HK$ million
–
(1)
The hedging ineffectiveness for the years ended 31 December 2015 and 2014 was insignificant.
Change in the value
of the hedging instruments
recognised in other
comprehensive income
2015
HK$ million
2014
HK$ million
Amount
reclassified from the
cash flow hedge reserve
to profit or loss
2015
HK$ million
2014
HK$ million
Line item affected in
profit or loss
because of the
reclassification
Interest rate swaps
–
(1)
1
10
Finance costs
The fair values of interest rate 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 used 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 considers 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 outstanding interest
rate swaps at the end of the reporting period are as follows:
Hedging instruments
Interest rate swaps (Note)
2015
2014
Average
interest
rate*
Notional
amount
HK$ million
Fair
value
HK$ million
Average
interest
rate*
Notional
amount
HK$ million
Fair
value
HK$ million
Within 1 year
–
–
–
4.34%
624
8
*
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.
Note:
As at 31 December 2014, the Group designated HK$300 million fixed-to-floating interest rate swaps to hedge interest rate risk related to part of the
coupon payments of the HK$300 million fixed rate notes. The HK$300 million fixed rate notes and the interest rate swap matured in August 2015.
The Group also designated a fixed-to-floating interest rate swap with notional amount of HK$324 million as at 31 December 2014 to hedge the
zero coupon notes with notional amount of HK$430 million by converting a fixed rate of 5.19% per annum to HIBOR plus 0.69% per annum. As at
9 February 2015, the zero coupon notes and the respective fixed-to-floating interest rate swap were redeemed or terminated by the Group and the
counterparty respectively.
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Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
22. OTHER FINANCIAL ASSETS/LIABILITIES continued
(b) Fair value hedges continued
Hedged items
HKD fixed rate notes
Zero coupon notes
Carrying amount of
the hedged item
Liabilities
Accumulated amount
of fair value hedge
adjustments on the hedged
item included in the carrying
amount of the hedged item
2015
HK$ million
2014
HK$ million
2015
HK$ million
2014
HK$ million
–
–
306
332
–
–
7
1
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 are measured at the present value of future cash flows estimated and discounted based
on the applicable yield curves derived from quoted interest rates.
(c) Financial assets measured at FVTPL
Club debentures
Other financial assets of the Group represented investments in unlisted club debentures. The Group’s investments in unlisted
club debentures have been classified as financial assets measured at FVTPL.
23. ACCOUNTS AND OTHER RECEIVABLES
Accounts receivable
Interest receivable
Prepayments in respect of investment properties
Other receivables and prepayments
Total
Analysed for reporting purposes as:
Current assets
Non-current assets
2015
HK$ million
2014
HK$ million
8
59
121
240
428
201
227
428
3
93
71
314
481
255
226
481
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 (2014: HK$3 million) mainly represented rents receipts in arrears,
which were aged less than 90 days.
At the end of the reporting period, none of the accounts receivable were past due but not impaired.
24. TIME DEPOSITS/CASH AND BANK BALANCES
Time deposits
Cash and bank balances
Cash and deposits with banks shown in the consolidated statement of financial position
Less: Time deposits with original maturity over three months
Cash and cash equivalents shown in the consolidated statement of cash flows
2015
HK$ million
2014
HK$ million
2,743
61
2,804
(2,220)
584
3,534
106
3,640
(3,064)
576
Time deposits, cash and bank balances include bank deposits carrying effective interest rates ranging from 0.20% to 4.25%
(2014: 0.10% to 4.65%) per annum.
176
Notes to the Financial Statements continuedFor the year ended 31 December 2015Hysan Annual Report 2015
25. ACCOUNTS PAYABLE AND ACCRUALS
Accounts payable
Interest payable
Other payables
2015
HK$ million
2014
HK$ million
222
73
175
470
173
83
225
481
At the end of the reporting period, accounts payable of the Group with carrying amount of HK$176 million (2014: HK$173
million) were aged less than 90 days.
26. AMOUNTS DUE TO NON-CONTROLLING INTERESTS
The amounts due to non-controlling interests are unsecured, interest-free and repayable on demand.
27. BORROWINGS
The analysis of the carrying amounts of borrowings is as follows:
Unsecured bank loans
Fixed rate notes
Zero coupon notes
Current
Non-current
2015
HK$ million
2014
HK$ million
2015
HK$ million
2014
HK$ million
250
–
–
250
850
407
332
1,589
–
4,609
–
4,609
250
4,608
–
4,858
In the current year, the average cost of finance of the Group’s total borrowings calculated based on their contracted interest
rates was 3.6% (2014: 3.5%). 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 cost of finance to 3.5% (2014: 3.2%). As
at 31 December 2015, the floating rate debt ratio relative to gross total debt after considering the hedges was 5.1% (2014:
23.7%).
(a) Unsecured bank loans
The unsecured bank loans of HK$250 million (2014: HK$1,100 million) are guaranteed as to principal and interest by the
Company and are repayable, based on the scheduled repayment dates set out in the respective loan agreement, as follows:
Within 1 year
More than 1 year, but not exceeding 2 years
2015
HK$ million
2014
HK$ million
250
–
250
850
250
1,100
All the Group’s unsecured bank loans are variable-rate borrowings with effective interest rates (which were also equal to
contracted interest rates) at 1.03% (2014: ranging from 0.68% to 1.15%) per annum at the end of the reporting period.
Interest rates of the loans are normally re-fixed at every one to three months.
As disclosed in note 22(a) of the Notes to the Financial Statements section, during the years ended 31 December 2015 and
2014, 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.
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Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
27. BORROWINGS continued
(b) Fixed rate notes
Fixed rate notes – principal amount
Add: Net losses attributable to hedged risks
2015
HK$ million
2014
HK$ million
4,609
–
4,609
5,008
7
5,015
Details of the Group’s fixed rate notes as at 31 December 2015 and 2014 are as follows:
Principal amount
HK$300 million
HK$100 million
HK$165 million
HK$400 million
HK$200 million
HK$200 million
HK$150 million
HK$404 million
HK$331 million
HK$300 million
HK$150 million
US$300 million
Contracted
interest rate
per annum
5.25%
5.10%
5.38%
3.78%
4.00%
3.70%
3.86%
4.10%
4.00%
3.90%
4.50%
3.50%
Coupon
payment term
quarterly basis
annual basis
annual basis
quarterly basis
annual basis
quarterly basis
quarterly basis
annual basis
quarterly basis
quarterly basis
annual basis
semi-annual basis
Issue date
Maturity date
August 2008
August 2008
September 2008
August 2010
September 2010
October 2010
May 2011
December 2011
January 2012
March 2012
March 2012
January 2013
August 2015
August 2015
September 2020
August 2020
September 2025
October 2022
May 2018
December 2023
January 2022
March 2019
March 2027
January 2023
All the fixed rate notes were issued by Hysan MTN, a wholly-owned subsidiary of the Company. 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 of the Notes to the Financial Statements section, during the years ended 31 December 2015 and 2014,
interest rate swaps and cross currency swaps were used to hedge or manage the foreign exchange and interest rate risks of the
Group’s fixed rate notes.
As at 31 December 2014, the net cumulative losses of HK$7 million represented the change in fair value attributable to the
hedged interest rate risk of the HK$300 million fixed rate notes under fair value hedge.
178
Notes to the Financial Statements continuedFor the year ended 31 December 2015Hysan Annual Report 2015
27. BORROWINGS continued
(c) Zero coupon notes
Zero coupon notes
Add: Loss attributable to hedged risk
2015
HK$ million
2014
HK$ million
–
–
–
331
1
332
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. 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 repayable at par in February 2020.
Hysan MTN exercised the option to redeem the zero coupon notes on 9 February 2015 at a price of about 77.4% of the
nominal amount.
The Group used 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 counterparty exercised the option to terminate the interest rate swap on 9 February 2015.
As at 31 December 2014, the cumulative losses of HK$1 million represented changes in fair value attributable to the hedged
interest rate risk of the zero coupon notes under fair value hedge.
28. DEFERRED TAxATION
The following are the major deferred tax liabilities (assets) recognised by the Group and movements thereon during the current
and prior years:
At 1 January 2014
Charge to profit or loss (note 9)
Charge to other comprehensive income
At 31 December 2014
Charge to profit or loss (note 9)
Charge to other comprehensive income
At 31 December 2015
Accelerated tax
depreciation
HK$ million
Revaluation of
properties
HK$ million
Tax
losses
HK$ million
Total
HK$ million
518
42
–
560
54
–
614
65
–
3
68
–
1
69
(24)
24
–
–
–
–
–
559
66
3
628
54
1
683
At the end of the reporting period, the Group has unused estimated tax losses of HK$718 million (2014: HK$674 million), of
which HK$232 million (2014: HK$273 million) has not been agreed by the Hong Kong Inland Revenue Department, available
for offset against future profits. No deferred tax asset has been recognised in respect of the estimated tax losses of HK$718
million (2014: HK$674 million) as the utilisation of these estimated tax losses is uncertain. These estimated tax losses may be
carried forward indefinitely.
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Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
29. SHARE CAPITAL
Authorised:
At 1 January 2014
Ordinary shares of HK$5 each
At 31 December 2014 and 2015 (Note a)
Ordinary shares, issued and fully paid:
At 1 January 2014
Transfer from share premium and capital redemption reserve
upon abolition of par value (Note a)
Issue of shares under share option scheme prior to 3 March 2014 (Note b)
Issue of shares under share option scheme on or after 3 March 2014
At 31 December 2014
Issue of shares under share option scheme
Cancellation upon repurchase of own shares (Note c)
At 31 December 2015
Notes:
(a) Abolition of par value under the new CO
Number of shares
Share capital
HK$ million
1,450,000,000
–
1,063,633,043
–
3,999
234,650
1,063,871,692
56,000
(6,750,000)
1,057,177,692
7,250
–
5,318
2,314
–
8
7,640
2
–
7,642
The new CO came into effect on 3 March 2014, which abolishes the concepts of nominal (par) value, share premium and authorised share capital
for all shares of Hong Kong incorporated companies. As such, in accordance with the transitional provisions set out in section 37 of Schedule 11 to
the said Ordinance, the existing share premium and capital redemption reserve as of 3 March 2014 became part of the Company’s share capital.
There is no impact on the number of shares in issue or the relative entitlement of any of the shareholders as a result of this transition.
(b)
Issue of shares under share option schemes prior to 3 March 2014
Prior to 3 March 2014, options to subscribe for shares of the Company were exercised at various exercise prices and credited to share capital and
share premium account in accordance with the predecessor CO (Cap.32). These shares rank pari passu in all respects with other shares in issue.
Details of options outstanding and movements during the prior year are set out in note 36 of the Notes to the Financial Statements section.
(c) Cancellation upon repurchase of own shares
The Company was authorised at its AGM held on 15 May 2015 to repurchase its own ordinary shares not exceeding 10% of the total number of
its issued shares as at the date of passing the resolution. During the year, the Company repurchased its ordinary shares on the Stock Exchange
when they were trading at a significant discount in order to enhance shareholder value.
During the year, the Company repurchased its own ordinary shares on the Stock Exchange as follows:
Month of
repurchase in 2015
August
September
November
December
Number of shares
repurchased
1,820,000
1,255,000
221,000
3,454,000
6,750,000
Consideration per share
Highest
HK$
31.70
31.85
32.50
32.70
Lowest
HK$
30.30
30.70
31.80
31.45
Aggregate
consideration
paid
HK$ million
57
40
7
111
215
The above ordinary shares were cancelled upon repurchase during the year. None of the Company’s subsidiaries purchased, sold or redeemed any
of the Company’s listed securities during the year.
180
Notes to the Financial Statements continuedFor the year ended 31 December 2015Hysan Annual Report 2015
30. STATEMENT OF FINANCIAL POSITION AND RESERVES OF THE COMPANY
Non-current assets
Property, plant and equipment
Investments in subsidiaries
Other financial assets
Amounts due from subsidiaries
Current assets
Other receivables
Amounts due from subsidiaries
Tax recoverables
Cash and bank balances
Current liabilities
Other payables and accruals
Amounts due to subsidiaries
Net current assets
Total assets less current liabilities
Non-current liability
Deferred taxation
Net assets
Capital and reserves
Share capital (note 29)
Reserves
Total equity
2015
HK$ million
2014
HK$ million
6
1,441
1
3,785
5,233
5
9,265
–
2
9,272
55
1,397
1,452
7,820
11
1,422
2
3,514
4,949
2
9,194
2
1
9,199
43
1,051
1,094
8,105
13,053
13,054
–
1
13,053
13,053
7,642
5,411
13,053
7,640
5,413
13,053
The Company’s statement of financial position was approved and authorised for issue by the Board of Directors on 8 March
2016 and are signed on its behalf by:
Irene Y.L. LEE
Director
S. C. LAU
Director
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Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
30. STATEMENT OF FINANCIAL POSITION AND RESERVES OF THE COMPANY continued
Movement in the Company’s reserve
Share
premium
HK$ million
Share
options
reserve
HK$ million
Capital
redemption
reserve
HK$ million
At 1 January 2014
Transfer upon abolition of par value
under the new CO (Note b)
Issue of shares under share option
schemes on or after 3 March 2014
Recognition of equity-settled
share-based payments
Forfeiture of share option
Profit for the year
Dividends paid during the year (note 14)
At 31 December 2014
Issue of shares under share option schemes
Recognition of equity-settled
share-based payments
Forfeiture of share option
Cancellation upon repurchase of own shares
Profit for the year
Dividends paid during the year (note 14)
At 31 December 2015
2,038
(2,038)
–
–
–
–
–
–
–
–
–
–
–
–
–
Notes:
(a) General reserve was set up from the transfer of retained profits.
20
–
(2)
10
(1)
–
–
27
(1)
8
(4)
–
–
–
30
276
(276)
–
–
–
–
–
–
–
–
–
–
–
–
–
General
reserve
HK$ million
(Note a)
Retained
profits
HK$ million
Total
HK$ million
100
5,365
7,799
–
–
–
–
–
–
100
–
–
–
–
–
–
100
–
–
–
1
1,175
(1,255)
5,286
–
–
4
(215)
1,536
(1,330)
5,281
(2,314)
(2)
10
–
1,175
(1,255)
5,413
(1)
8
–
(215)
1,536
(1,330)
5,411
(b) The Company has no authorised share capital and its shares have no par value from the commencement date of the new CO (i.e. 3 March 2014).
The Company’s reserves available for distribution to its owners as at 31 December 2015 amounted to HK$5,381 million (2014:
HK$5,386 million), being its general reserve and retained profits at that date.
31. ACQUISITION OF A SUBSIDIARY
During the year ended 31 December 2014, the Group acquired 100% interest in Max Strength Limited (“Max Strength”) from
an independent third party, for a cash consideration of HK$229 million. The major asset of Max Strength is an investment
property situated in Hong Kong. The Directors of the Company were of the opinion that the subsidiary acquired did not
constitute a business as defined in HKFRS 3, therefore, the acquisition had been accounted for as acquisition of an asset rather
than a business combination. Acquisition-related costs amounting to HK$3 million were capitalised as part of the carrying
amount of the investment property.
32. 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$7 million (2014: HK$9 million).
182
Notes to the Financial Statements continuedFor the year ended 31 December 2015Hysan Annual Report 2015
33. CAPITAL COMMITMENTS
At the end of the reporting period, the Group had the following capital commitments in respect of its investment properties and
property, plant and equipment:
Contracted but not provided for
2015
HK$ million
396
2014
HK$ million
561
34. LEASE COMMITMENTS
At the end of the reporting period, the Group as lessor had contracted with tenants for the following future minimum lease
payments:
Within one year
In the second to fifth year inclusive
Over five years
2015
HK$ million
2014
HK$ million
2,721
5,024
812
8,557
2,664
4,891
1,309
8,864
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.
At the end of the reporting period, the Group as lessee had no commitment under non-cancellable operating lease.
35. 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:
Related company controlled by a shareholder (Note a)
Related companies controlled by Directors
(Note b (i) & (ii))
Non-controlling shareholder of a subsidiary
(Note c (i) & (ii))
Director (Note d)
Notes:
Gross rental income
received from
Amount due to
non-controlling interests
2015
HK$ million
2014
HK$ million
2015
HK$ million
2014
HK$ million
3
33
30
1
3
39
31
–
–
94
233
–
–
94
233
–
(a) The sum of transactions represents the aggregate gross rental income received from Atlas Corporate Management Limited, a wholly-owned
subsidiary of Lee Hysan Estate Company, Limited (“LHE”). LHE holds 40.97% (2014: 40.71%) beneficial interest and has significant influence
over the Company.
(b)
(i)
The sum of transactions represents the aggregate gross rental income received from related companies where the directors have controlling
interests over these related companies.
(ii) The balance 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 a
controlling 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.
(c)
(i)
The transaction represents the gross rental income received from Hang Seng Bank Limited, the intermediate holding company of Imenson
Limited (“Imenson”). Imenson is a non-controlling shareholder with significant influence over Barrowgate.
(ii) The balance represents outstanding loan advanced to Barrowgate by Imenson, as shareholders’ loan in proportion to its shareholding in
Barrowgate for general funding purpose. The amount is unsecured, interest-free and repayable on demand.
(d) The transaction represents the gross rental income received from a director.
183
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
35. RELATED PARTY TRANSACTIONS AND BALANCES continued
(b) Compensation of key management personnel
The remuneration of key management personnel of the Group (being Directors) are disclosed in note 12 of the Notes to the
Financial Statements section.
The remuneration of the Directors and key executives is determined by the Remuneration Committee and Chief Executive
Officer respectively having regard to the performance of individuals and market trends.
36. SHARE-BASED PAYMENT TRANSACTIONS
(a) Equity-settled share option scheme
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 expired on 9 May
2015. All outstanding options granted under the 2005 Scheme will continue to be valid and exercisable in accordance with the
provisions of the 2005 Scheme.
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 to subscribe for ordinary shares of the Company 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.
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).
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; and (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.
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.
The 2015 Share Option Scheme (the “New Scheme”)
The Company adopted the New Scheme (together with the 2005 Scheme are referred to as the “Schemes”) at its AGM held on
15 May 2015, which has a term of 10 years and will expire on 14 May 2025. Terms of the New Scheme are substantially the
same as those under the 2005 Scheme.
The purpose of the New Scheme is to provide an incentive for employees of the Company and its subsidiaries to work with
commitment towards enhancing the value of the Company and its shares for the benefit of its shareholders.
Under the New Scheme, options to subscribe for ordinary shares of the Company may be granted to employees of the
Company or any 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.
184
Notes to the Financial Statements continuedFor the year ended 31 December 2015Hysan Annual Report 2015 36. SHARE-BASED PAYMENT TRANSACTIONS continued
(a) Equity-settled share option scheme continued
The 2015 Share Option Scheme (the “New Scheme”) continued
The maximum number of shares in respect of which options may be granted under the New Scheme and any other share option
schemes of the Company shall not in aggregate exceed such number of shares as required under the Listing Rules, currently
being 10% of the shares in issue as at 15 May 2015, the date of the AGM approving the New Scheme (being 106,389,669
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 New Scheme and any other share option schemes 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 New 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 10,638,966 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; and (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.
Consideration on each grant of option is HK$1 and is required to be paid within 30 days from the date of grant of options, with
full payment for exercise price to be made on exercise of the relevant options.
As at 31 December 2015, no share option was granted under the New Scheme.
(b) Grant and vesting structures
Under the Company’s current policy, grants will be made on a periodic basis. For the Schemes, the exercise period is 10
years and vesting period is 3 years in equal proportions starting from the 1st anniversary and become fully vested on the
3rd anniversary of the grant. Size of grant will be determined by reference to base salary multiple and job grades. A clear
performance criterion will be a key driver. The Board will review the grant and vesting structures from time to time.
185
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business 36. SHARE-BASED PAYMENT TRANSACTIONS continued
(c) Movement of share options under the 2005 Scheme
The following table discloses movements of the Company’s share options held by the Directors and eligible employees during
the current year:
Changes during the year
Name
Executive Directors
Irene Yun Lien LEE
Siu Chuen LAU
Wendy Wen Yee YUNG
(Note d)
Eligible employees
(Note f)
Date
of grant
Exercise
price
HK$
Exercise period
(Note a)
14.5.2012
33.50
7.3.2013
39.92
10.3.2014
32.84
12.3.2015
14.5.2012
36.27
(Note c)
33.50
7.3.2013
39.92
10.3.2014
32.84
12.3.2015
10.3.2011
36.27
(Note c)
35.71
9.3.2012
33.79
7.3.2013
39.92
10.3.2014
32.84
12.3.2015
31.3.2008
36.27
(Note c)
21.96
31.3.2009
13.30
31.3.2010
22.45
31.3.2011
32.00
30.3.2012
31.61
28.3.2013
39.20
31.3.2014
33.75
31.3.2015
34.00
(Note k)
14.5.2013 –
13.5.2022
7.3.2014 –
6.3.2023
10.3.2015 –
9.3.2024
12.3.2016 –
11.3.2025
14.5.2013 –
13.5.2022
7.3.2014 –
6.3.2023
10.3.2015 –
9.3.2024
12.3.2016 –
11.3.2025
10.3.2012 –
9.3.2021
9.3.2013 –
8.3.2022
7.3.2014 –
6.3.2023
10.3.2015 –
9.3.2024
12.3.2016 –
11.3.2025
31.3.2009 –
30.3.2018
31.3.2010 –
30.3.2019
31.3.2011 –
30.3.2020
31.3.2012 –
30.3.2021
30.3.2013 –
29.3.2022
28.3.2014 –
27.3.2023
31.3.2015 –
30.3.2024
31.3.2016 –
30.3.2025
Granted Exercised
Cancelled/
Balance
as at
lapsed 31.12.2015
Balance
as at
1.1.2015
261,000
265,000
325,000
–
–
–
–
300,000
161,334
246,000
302,000
–
–
–
–
300,000
103,000
113,000
106,700
95,000
–
–
–
–
–
49,500
17,000
134,000
154,334
181,001
262,335
298,000
411,000
–
–
–
–
–
–
–
–
417,000
(Note b)
–
261,000
–
–
–
265,000
325,000
300,000
–
161,334
–
–
–
246,000
302,000
300,000
(103,000)
(113,000)
(106,700)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(31,000)
(Note e)
–
(64,000)
(49,500)
–
–
(2,000)
(Note g)
(9,000)
(Note h)
(12,000)
(Note i)
–
(2,000)
(Note j)
–
–
–
–
–
–
17,000
134,000
152,334
172,001
250,335
(10,000) 288,000
(13,000) 396,000
(13,000) 404,000
Exercisable at the end of the year
2,021,658
3,435,704 1,066,500
(56,000) (472,200) 3,974,004
186
Notes to the Financial Statements continuedFor the year ended 31 December 2015Hysan Annual Report 2015
36. SHARE-BASED PAYMENT TRANSACTIONS continued
(c) Movement of share options under the 2005 Scheme continued
Notes:
(a) All options granted have a vesting period of 3 years in equal proportions starting from the 1st anniversary and become fully vested on the 3rd
anniversary of the grant. In this table, “exercise period” begins with the 1st anniversary of the grant date.
(b) The options lapsed during the year upon resignations of a director and certain eligible employees.
(c) The closing price of the shares of the Company immediately before the date of grant (i.e. as of 11 March 2015) was HK$36.15.
(d) Wendy Wen Yee YUNG resigned as Executive Director and Company Secretary effective 24 October 2015.
(e) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$34.60.
(f)
Eligible employees are working under employment contracts that are regarded as “continuous contracts” for the purposes of the Employment
Ordinance.
(g) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$35.65.
(h) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$36.13.
(i)
(j)
The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$35.50.
The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$34.55.
(k) The closing price of the shares of the Company immediately before the date of grant (i.e. as of 30 March 2015) was HK$33.65.
Apart from the above, the Company had not granted any share option under the 2005 Scheme to any other persons as
required to be disclosed under Rule 17.07 of the Listing Rules.
187
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business 36. SHARE-BASED PAYMENT TRANSACTIONS continued
(c) Movement of share options under the 2005 Scheme continued
The following table discloses movements of the Company’s share options held by the Directors and eligible employees in prior
year:
Changes during the year
Date
of grant
Exercise
price
HK$
Exercise period
(Note a)
Granted Exercised
Cancelled/
Balance
as at
lapsed 31.12.2014
Name
Executive Directors
Irene Yun Lien LEE
Siu Chuen LAU
14.5.2012
33.50
7.3.2013
39.92
10.3.2014
14.5.2012
32.84
(Note c)
33.50
7.3.2013
39.92
10.3.2014
Wendy Wen Yee YUNG
10.3.2011
32.84
(Note c)
35.71
Eligible employees
(Note d)
9.3.2012
33.79
7.3.2013
39.92
10.3.2014
31.3.2008
32.84
(Note c)
21.96
31.3.2009
13.30
31.3.2010
22.45
31.3.2011
32.00
30.3.2012
31.61
28.3.2013
39.20
31.3.2014
33.75
(Note i)
Balance
as at
1.1.2014
261,000
265,000
–
–
–
325,000
161,334
246,000
–
–
–
302,000
103,000
113,000
106,700
–
–
–
–
95,000
17,000
164,000
251,334
246,001
336,335
362,000
–
–
–
–
–
–
(Note b)
–
261,000
–
265,000
–
–
325,000
161,334
–
246,000
–
–
–
–
–
–
–
–
302,000
103,000
113,000
106,700
95,000
17,000
134,000
154,334
(1,334) 181,001
(26,017) 262,335
(64,000) 298,000
–
–
–
–
–
–
–
–
–
–
–
(30,000)
(Note e)
(97,000)
(Note f)
(63,666)
(Note g)
(47,983)
(Note h)
–
–
465,000
–
(54,000) 411,000
2,632,704 1,187,000
(238,649) (145,351) 3,435,704
14.5.2013 –
13.5.2022
7.3.2014 –
6.3.2023
10.3.2015 –
9.3.2024
14.5.2013 –
13.5.2022
7.3.2014 –
6.3.2023
10.3.2015 –
9.3.2024
10.3.2012 –
9.3.2021
9.3.2013 –
8.3.2022
7.3.2014 –
6.3.2023
10.3.2015 –
9.3.2024
31.3.2009 –
30.3.2018
31.3.2010 –
30.3.2019
31.3.2011 –
30.3.2020
31.3.2012 –
30.3.2021
30.3.2013 –
29.3.2022
28.3.2014 –
27.3.2023
31.3.2015 –
30.3.2024
Exercisable at the end of the year
1,392,884
188
Notes to the Financial Statements continuedFor the year ended 31 December 2015Hysan Annual Report 2015
36. SHARE-BASED PAYMENT TRANSACTIONS continued
(c) Movement of share options under the 2005 Scheme continued
Notes:
(a) All options granted have a vesting period of 3 years in equal proportions starting from the 1st anniversary and become fully vested on the 3rd
anniversary of the grant. In this table, “exercise period” begins with the 1st anniversary of the grant date.
(b) The options lapsed during the year upon resignations of certain eligible employees.
(c) The closing price of the shares of the Company immediately before the date of grant (i.e. as of 7 March 2014) was HK$32.95.
(d) Eligible employees are working under employment contracts that are regarded as “continuous contracts” for the purposes of the Employment
Ordinance.
(e) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$34.35.
(f)
The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$34.95.
(g) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$36.04.
(h) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$36.07.
(i)
The closing price of the shares of the Company immediately before the date of grant (i.e. as of 28 March 2014) was HK$33.30.
Apart from the above, the Company had not granted any share option under the 2005 Scheme to any other persons as
required to be disclosed under Rule 17.07 of the Listing Rules.
189
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business 36. 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$8 million (2014: HK$10 million) in relation to share
options granted by the Company, of which HK$5 million (2014: HK$6 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
31.3.2015
12.3.2015
31.3.2014
10.3.2014
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$34.000
HK$34.000
1.096%
5 years
29.947%
HK$0.976
HK$7.304
HK$34.800
HK$36.270
1.241%
5 years
29.810%
HK$0.976
HK$7.061
HK$33.750
HK$33.750
1.529%
5 years
33.517%
HK$0.866
HK$8.422
HK$32.200
HK$32.840
1.328%
5 years
33.509%
HK$0.866
HK$7.712
(a) Risk free rate: being the approximate yields of 5-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 5 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 appropriate historical volatility of closing prices of the shares of the Company in the past 5 years immediately
before the date of grant.
(d) Expected dividend per annum: being the approximate average annual cash dividend for the past 5 financial years.
190
Notes to the Financial Statements continuedFor the year ended 31 December 2015Hysan Annual Report 2015
1. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s major financial instruments include cash and bank balances, time deposits, principal-protected investments, term
notes, accounts receivable, other receivables, accounts payable, accruals, amounts due to non-controlling interests, borrowings
and derivative financial instruments. 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 is primarily attributable to rents receivable from tenants, principal-protected investments, derivative
financial instruments, term notes, time deposits and bank balances. The Group’s maximum exposure to credit risk which will
cause a financial loss to the Group due to failure to discharge an obligation by the counterparties is arising from the carrying
amount of the respective recognised financial assets as stated in the consolidated statements of financial position.
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 the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts.
For derivative financial instruments, principal-protected investments, term notes, time deposits and bank balances, the Group
only deals with financial institutions and invest in debt securities issued by issuers that have strong credit ratings to mitigate
counterparty risk. In order to limit exposure to each financial institution and debt securities issuer, an exposure limit was set
with each counterparty according to their credit rating with regular review by management.
Credit exposure to financial institutions and debt securities issuers are monitored and reported regularly to the management.
The exposure to each counterparty comprised (i) investment value of financial assets (including time deposits, principal-
protected investments and term notes); (ii) net positive value of derivative financial instruments and; (iii) potential exposures to
derivatives which are based on the remaining term and the notional amount of the derivative financial instruments. The table
below provides a high level summary of the Group’s exposure to each counterparty at the end of the reporting period.
Category of counterparty
Credit rating of AA- or above
or note issuing banks
Credit rating BBB- to A+
2015
Number of
counterparty
Exposure
HK$ million
2014
Number of
counterparty
Exposure
HK$ million
5
22
16 to 611
15 to 472
6
21
17 to 728
13 to 485
To minimise the credit risk of amounts due from subsidiaries, the management reviews the recoverable amount of each
individual balance at the end of the reporting period to ensure adequate impairment losses are made for irrecoverable
amounts. The Group has no significant concentration of credit risk, with exposure spread over a number of counterparties and
tenants.
191
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible BusinessFinancial Risk ManagementFor the year ended 31 December 2015
1. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES continued
(b) Liquidity risk
The Group 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 for their non-derivative financial liabilities based on
the agreed repayment terms. The table has been drawn up based on the undiscounted cash flows of financial liabilities based
on the earliest date on which the Group 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 (“HKD”), the prevailing foreign exchange rates at
the end of the reporting period are used to convert the cash flows into HKD.
As at 31 December 2015
Non-derivative financial liabilities
Accounts payable and accruals
Rental deposits from tenants
Amounts due to non-controlling interests
Unsecured bank loans (Note)
Fixed rate notes (Note)
As at 31 December 2014
Non-derivative financial liabilities
Accounts payable and accruals
Rental deposits from tenants
Amounts due to non-controlling interests
Unsecured bank loans (Note)
Fixed rate notes (Note)
Zero coupon notes (Note)
Total
contractual
Carrying undiscounted
cash flow
amount
HK$ million
HK$ million
Within
1 year or
on demand
HK$ million
More than
1 year
but not
exceeding
2 years
HK$ million
More than
2 years
but not
exceeding
5 years
HK$ million
More than
5 years
HK$ million
(470)
(890)
(327)
(250)
(4,609)
(470)
(890)
(327)
(251)
(5,833)
(470)
(296)
(327)
(251)
(175)
(6,546)
(7,771)
(1,519)
–
(293)
–
–
(175)
(468)
–
(284)
–
–
(1,501)
–
(17)
–
–
(3,982)
(1,785)
(3,999)
(481)
(875)
(327)
(1,100)
(5,015)
(332)
(8,130)
(481)
(875)
(327)
(1,112)
(6,426)
(333)
(481)
(306)
(327)
(861)
(592)
(333)
(9,554)
(2,900)
–
(237)
–
(251)
(175)
–
(663)
–
(310)
–
–
(957)
–
–
(22)
–
–
(4,702)
–
(1,267)
(4,724)
Note:
These amounts also represent the maximum amounts the Company could be required to settle under the arrangement for the full guaranteed
amounts if these amounts are claimed by the counterparties to the guarantee. Based on expectations at the end of the reporting period, the Company
considers that it is not likely that amount will be payable under the arrangement.
192
Financial Risk Management continuedFor the year ended 31 December 2015Hysan Annual Report 2015
1. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES continued
(b) Liquidity risk continued
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 financial 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 HKD, the prevailing foreign exchange rates at the end of
the reporting period are used to convert the cash flows into HKD.
Total
contractual
Carrying undiscounted
cash flow
amount
HK$ million
HK$ million
Within
1 year or
on demand
HK$ million
More than
1 year
but not
exceeding
2 years
HK$ million
More than
2 years
but not
exceeding
5 years
HK$ million
More than
5 years
HK$ million
As at 31 December 2015
Derivative settled gross
Forward foreign exchange contracts
Outflow
Inflow
Cross currency swaps
Outflow
Inflow
As at 31 December 2014
Derivative settled net
Interest rate swaps
Derivative settled gross
Forward foreign exchange contracts
Outflow
Inflow
Cross currency swaps
Outflow
Inflow
7
(71)
7
7
(30)
(884)
886
(466)
466
(169)
171
(249)
249
–
–
(2,942)
2,935
(85)
81
(85)
81
(255)
244
(2,517)
2,529
15
15
–
–
(1,341)
1,340
(839)
839
(369)
369
(133)
132
–
–
–
(3,027)
3,019
(85)
81
(85)
82
(255)
244
(2,602)
2,612
(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 used
(i) interest rate swaps to hedge the interest rate risk of the Group’s floating rate bank loans; and (ii) 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 the 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 2015, about 5.1% (2014: 23.7%) of the Group’s gross debts was 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 fixed-rate debt securities. Other than the concentration
of interest rate risk related to the movements in Hong Kong Interbank Offered Rate, the Group has no significant concentration
of interest rate risk.
193
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
1. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES continued
(c) Interest rate risk continued
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 all other variables were held constant. Such change has 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 -25 basis points
(“bps”) (2014: +100 and -25 bps) was applied to the HKD and US dollars (“USD”) yield curves at the end of the reporting
period. For the RMB yield curve, a change of +125 and -125 bps (2014: +125 and -125 bps) was applied. The applied change
of bps represented management’s assessment of the reasonably possible change in interest rates based on the current market
conditions.
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.
As at 31 December 2015
As at 31 December 2014
Increase (decrease) in
profit or loss
bps
increase
HK$ million
bps
decrease
HK$ million
Increase (decrease) in
equity
bps
increase
HK$ million
bps
decrease
HK$ million
26
23
(7)
(12)
4
2
(1)
–
(d) Currency risk
The Group aims to minimise its currency risk and does not speculate in currency movements for debt management. To cover
foreign exchange exposures arising from debts, the Group’s foreign currency denominated monetary liabilities must be hedged
back to HKD unless the liabilities are naturally hedged by the underlying asset in the same foreign currency. In managing the
Group’s monetary assets, the Group limits the aggregate net foreign currency exposures to a certain threshold. Exposures
exceeding that threshold will be hedged back to HKD. The majority of the Group’s assets are located and all rental income are
derived in Hong Kong, and denominated in HKD. At the end of the reporting period, the Group has the following monetary
assets and monetary liabilities denominated in Renminbi (“RMB”) and USD. The Group’s fixed rate notes are hedged by cross
currency swaps. During the year ended 31 December 2015, forward contracts were entered to hedge all of the RMB exposure in
view of depreciation of RMB against HKD.
2015
2014
RMB
million
US$
million
Total
equivalent
to
HK$
million
RMB
million
US$
million
–
80
55
135
1
15
144
160
3
213
1,181
1,397
–
565
235
800
1
6
87
94
Total
equivalent
to
HK$
million
5
753
966
1,724
–
300
2,314
–
300
2,314
Assets
Cash
Time deposits
Term notes
Liabilities
Fixed rate notes
194
Financial Risk Management continuedFor the year ended 31 December 2015Hysan Annual Report 2015
1. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES continued
(d) Currency risk continued
At the end of the reporting period, all of the Group’s assets and liabilities were denominated in HKD.
Other than concentration of currency risk of the above items denominated in RMB and USD, the Group has 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 part of the potential currency risk of the above items. The Group reviews the continuing effectiveness
of hedging instruments at least at the end of the reporting period and until the hedging instrument expires or is terminated or
the hedge no longer meets the criteria for hedge accounting.
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 all other variable were held constant. Such change has been applied to both derivative and non-derivative
financial instruments that would have affected the profit or loss and equity. Change of 1,000 percentage in points (“pips”)
(2014: 500 pips) and 500 pips (2014: 500) were applied to the HKD:RMB and HKD:USD spot and forward rates respectively at
the end of the reporting period. A greater change is adopted in view of a greater change of the RMB exchange rate occurred in
2015.
In management’s opinion, the sensitivity analysis is unrepresentative of the currency risk as the year end exposure does not
reflect the exposure during the year.
As at 31 December 2015
– USD
As at 31 December 2014
– RMB
– USD
2. CATEGORIES OF FINANCIAL INSTRUMENTS
Financial assets
Fair value through profit or loss (“FVTPL”)
– financial assets measured at FVTPL
Derivative instruments under hedge accounting
Amortised cost (including cash and cash equivalents)
Financial liabilities
Derivative instruments under hedge accounting
Amortised cost
Increase (decrease) in
profit or loss
pips
increase
HK$ million
pips
decrease
HK$ million
Increase (decrease) in
equity
pips
increase
HK$ million
pips
decrease
HK$ million
3
7
1
(3)
(7)
(1)
2
–
2
(2)
–
(2)
2015
HK$ million
2014
HK$ million
1
7
4,222
4,230
71
5,656
5,727
82
16
4,944
5,042
32
7,255
7,287
195
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
3. FINANCIAL ASSETS AND FINANCIAL LIABILITIES SUBJECT TO ENFORCEABLE MASTER NETTING
ARRANGEMENTS OR SIMILAR AGREEMENTS
The Group has entered certain derivative transactions that are covered by the International Swaps and Derivatives Association
Master Agreements (“ISDA Agreements”) signed with various banks. These derivative instruments are not offset in the
consolidated statement of financial position as the ISDA Agreements are in place with a right of set off only in the event of
default, insolvency or bankruptcy so that the Group currently has no legally enforceable right to set off the recognised amounts.
Other than derivatives transactions mentioned above, the Group has no other financial assets and financial liabilities which are
offset in the Group’s consolidated statement of financial statements or are subject to similar netting arrangements.
(a) Financial assets subject to enforceable master netting arrangements or similar agreements
As at 31 December 2015
Derivatives under hedge accounting
As at 31 December 2014
Derivatives under hedge accounting
Gross amounts of
recognised
financial assets
HK$ million
7
16
Gross amounts of
recognised financial
liabilities set off in
the consolidated
statement of
financial position
HK$ million
Net amounts of
financial assets
presented in the
consolidated
statement of
financial position
HK$ million
–
–
7
16
(b) Net financial assets subject to enforceable master netting arrangements or similar agreements, by counterparty
As at 31 December 2015
Counterparty C
Counterparty D
Counterparty F
Total
As at 31 December 2014
Counterparty A
Counterparty B
Counterparty D
Counterparty F
Total
Net amounts of
financial assets
presented in the
consolidated statement
of financial position
HK$ million
Financial liabilities
not set off in the
consolidated
statement of
financial position
HK$ million
Net amount
HK$ million
1
2
4
7
8
1
2
5
16
–
–
–
–
(8)
–
(1)
–
(9)
1
2
4
7
–
1
1
5
7
(c) Financial liabilities subject to enforceable master netting arrangements or similar agreements
Gross amounts of
recognised
financial liabilities
HK$ million
(71)
(32)
Gross amounts of
recognised financial
assets set off in
the consolidated
statement of
financial position
HK$ million
Net amounts of
financial liabilities
presented in the
consolidated
statement of
financial position
HK$ million
–
–
(71)
(32)
As at 31 December 2015
Derivatives under hedge accounting
As at 31 December 2014
Derivatives under hedge accounting
196
Financial Risk Management continuedFor the year ended 31 December 2015Hysan Annual Report 2015
3. FINANCIAL ASSETS AND FINANCIAL LIABILITIES SUBJECT TO ENFORCEABLE MASTER NETTING
ARRANGEMENTS OR SIMILAR AGREEMENTS continued
(d) Net financial liabilities subject to enforceable master netting arrangements and similar agreements, by
counterparty
As at 31 December 2015
Counterparty A
As at 31 December 2014
Counterparty A
Counterparty D
Counterparty E
Total
Net amounts of
financial liabilities
presented in the
consolidated
statement of
financial position
HK$ million
Financial assets
not set off in the
consolidated
statement of
financial position
HK$ million
(71)
(30)
(1)
(1)
(32)
–
8
1
–
9
Net amount
HK$ million
(71)
(22)
–
(1)
(23)
4. FAIR VALUE MEASUREMENT
(a) Fair value of financial assets and financial liabilities that are not measured at fair value on a recurring basis (but
fair value disclosures are required)
The fair values of financial assets and financial liabilities measured at amortised cost are determined in accordance with
generally accepted pricing models based on discounted cash flow methodology taking into account the market interest rate
and credit risk of the counterparties and of the Group as appropriate.
The Directors consider that the carrying amounts of financial assets and financial liabilities measured at amortised cost in the
consolidated financial statements approximate their fair values, except for the carrying amount of HK$4,609 million (2014:
HK$5,015 million) fixed rate notes as stated in note 27 of the Notes to the Financial Statements section with fair value of
HK$4,785 million (2014: HK$5,110 million).
The fair value of HK$2,367 million (2014: HK$2,317 million) of the fixed rate notes is categorised into Level 1 of the fair value
hierarchy, in which the fair value was derived from quoted prices in an active market translated at the spot foreign exchange
rate of the respective currency at year end.
The fair value of HK$2,418 million (2014: HK$2,793 million) of the fixed rate notes is categorised into Level 2 of the fair value
hierarchy, in which the fair value was measured using discounted cash flow methodology based on observable yield curves of
the respective currency taking into account the credit margin of the Group as appropriate.
197
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
4. FAIR VALUE MEASUREMENT continued
(b) Fair value of financial assets and financial liabilities that are measured at fair value on a recurring basis
The following table provides an analysis of financial instruments that are measured at fair value on a recurring basis, grouped
into Levels 1 to 3 based on the degree to which the inputs to the fair value measurements are observable.
•
Level 1: fair value measurements are those derived from quoted prices (unadjusted) in active market for identical assets
and liabilities.
•
Level 2: fair value measurements are those derived from inputs other than quoted prices included with Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
•
Level 3: fair value measurements are those derived from valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable inputs).
Financial assets
Derivatives under hedge accounting
Forward foreign exchange contracts
Financial assets at FVTPL
Unlisted club debentures
Total
Financial liabilities
Derivatives under hedge accounting
Cross currency swaps
Financial assets
Derivatives under hedge accounting
Forward foreign exchange contracts
Interest rate swaps
Financial assets at FVTPL
Principal-protected investments
Unlisted club debentures
Total
Financial liabilities
Derivatives under hedge accounting
Forward foreign exchange contracts
Cross currency swaps
Interest rate swaps
Total
Level 1
HK$ million
Level 2
HK$ million
Level 3
HK$ million
Total
HK$ million
2015
–
–
–
–
7
1
8
71
2014
–
–
–
–
7
1
8
71
Level 1
HK$ million
Level 2
HK$ million
Level 3
HK$ million
Total
HK$ million
–
–
–
–
–
–
–
–
–
8
8
80
2
98
1
30
1
32
–
–
–
–
–
–
–
–
–
8
8
80
2
98
1
30
1
32
There were no transfers between Levels 1 and 2 for both years.
198
Financial Risk Management continuedFor the year ended 31 December 2015Hysan Annual Report 2015
4. FAIR VALUE MEASUREMENT continued
(c) Valuation techniques and inputs used in fair value measurements categorised within Level 2
•
Interest rate swaps are measured using discounted cash flow methodology based on observable yield curves of the
respective currencies taking into account the credit risk of the counterparties and of the Group as appropriate.
•
•
Forward foreign exchange contracts and cross currency swaps are measured using discounted cash flow methodology
based on observable spot and forward exchange rates as well as the yield curves of the respective currencies taking into
account the credit risk of the counterparties and of the Group as appropriate.
Principal-protected investments are measured using discounted cash flow methodology based on the observable yield
curves of the respective currencies, as well as variable returns linked to certain forward exchange rates, forward prices of
certain commodities and relevant indices with foreign exchange rates and commodities prices as underlying and taking
into account the credit risk of the counterparties.
5. 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 equity ratio. For this purpose, the Group defines net debt
as borrowings as shown in the consolidated statement of financial position less time deposits, cash and bank balances.
The management reviews the Group’s net debt to equity ratio regularly and adjusts 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 equity ratio at the year end was as follows:
Unsecured bank loans
Fixed rate notes
Zero coupon notes
Borrowings
Less: Time deposits
Cash and bank balances
Net debt
Equity attributable to owners of the Company
Net debt to equity
2015
HK$ million
2014
HK$ million
250
4,609
–
4,859
(2,743)
(61)
2,055
1,100
5,015
332
6,447
(3,534)
(106)
2,807
68,172
67,040
3.0%
4.2%
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
199
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
For the year ended 31 December
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
Non-controlling 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$), based on:
Profit for the year
– basic
– diluted
Underlying profit for the year – basic
Recurring underlying profit for the year – basic
Performance indicators
Net debt to equity
Net interest coverage (times)
Net asset value per share (HK$)
Net debt per share (HK$)
Year end share price (HK$)
2015
HK$ million
2014
HK$ million
2013
HK$ million
2012
HK$ million
2011
HK$ million
3,430
(414)
3,016
54
–
(234)
(204)
695
246
3,573
(438)
3,135
(232)
2,903
2,283
2,283
3,224
(404)
2,820
68
(2)
(214)
(228)
2,940
252
5,636
(386)
5,250
(348)
4,902
2,163
2,163
3,063
(405)
2,658
76
1
(208)
(242)
4,575
309
7,169
(372)
6,797
(639)
6,158
2,043
2,043
1,330
1,122
132.00
1,255
1,064
123.00
1,064
1,010
117.00
2.73
2.73
2.15
2.15
3.0%
19.5x
64.48
1.94
31.75
4.61
4.61
2.03
2.03
4.2%
17.1x
63.02
2.64
34.65
5.79
5.79
1.92
1.92
5.3%
15.4x
59.54
3.18
33.40
2,486
(423)
2,063
55
18
(187)
(156)
8,533
334
10,660
(289)
10,371
(416)
9,955
1,622
1,622
859
829
95.00
9.38
9.38
1.53
1.53
6.2%
16.8x
54.68
3.41
37.25
1,922
(262)
1,660
90
(34)
(173)
(122)
7,532
254
9,207
(217)
8,990
(445)
8,545
1,310
1,310
791
678
79.00
8.08
8.08
1.24
1.24
7.6%
12.3x
46.00
3.49
25.50
200
Hysan Annual Report 2015Five-Year Financial Summary
At 31 December
Assets and liabilities
Investment properties
Interests in associates
Equity investments
Tax recoverable
Time deposits, cash and bank balances
Other assets
Total assets
Borrowings
Taxation
Other liabilities
Total liabilities
Net assets
Non-controlling interests
Shareholders’ funds
Definitions:
2015
HK$ million
2014
HK$ million
2013
HK$ million
2012
HK$ million
2011
HK$ million
69,810
3,683
–
–
2,804
2,491
78,788
(4,859)
(803)
(1,758)
(7,420)
71,368
(3,196)
68,172
68,735
4,154
–
–
3,640
2,494
79,023
(6,447)
(732)
(1,715)
(8,894)
70,129
(3,089)
67,040
65,322
4,181
–
–
4,123
2,468
76,094
(7,504)
(660)
(1,749)
(9,913)
66,181
(2,855)
63,326
60,022
3,759
1
2
2,311
2,328
68,423
(5,941)
(511)
(1,524)
(7,976)
60,447
(2,324)
58,123
49,969
3,423
989
–
2,961
2,026
59,368
(6,663)
(433)
(1,528)
(8,624)
50,744
(1,991)
48,753
(1) Underlying profit for the year: profit adjusted for group’s share of unrealised fair value changes on investment properties
(2) Recurring underlying profit for the year: underlying profit adjusted for items that are non-recurring in nature (such as gains or losses on disposal of
long-term assets)
(3) Net debt to equity: borrowings less time deposits, cash and bank balances divided by shareholders’ funds
(4) Net interest coverage: gross profit less administrative expenses before depreciation divided by net interest expenses
(5) Net asset value per share: shareholders’ funds divided by number of issued shares at year end
(6) Net debt per share: borrowings less time deposits, cash and bank balances divided by number of issued shares at year end
201
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
To the Board of Directors
Hysan Development Company Limited
Dear Sirs,
Annual Revaluation of Investment Properties as at 31 December 2015
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 2015 was in the approximate sum of Hong Kong Dollars Sixty Nine Billion Eight Hundred and Ten
Million Only (i.e. HK$69,810 million).
The completed investment properties have been valued individually, on market value basis, on the basis of capitalisation of the
net income with due allowance for the reversionary income potential, without allowances for any expenses or taxation which
may be incurred in effecting a sale and cross reference by sales comparables, where appropriate.
For the investment properties under redevelopment, residual method of valuation has been adopted. The valuation was
mainly arrived at by reference to sales or rental evidences as available on the market to determine the value of the proposed
redevelopment as if it were completed in accordance with the redevelopment proposal provided by the Company as at the date
of valuation. All costs of the redevelopment, namely cost of construction, cost of finance, professional fees and allowance of
profit required for the redevelopment were then deducted from the completion value of the proposed redevelopment to derive
the market value of the properties as at the date of valuation.
Yours faithfully,
Knight Frank Petty Limited
Hong Kong, 17 February 2016
202
Hysan Annual Report 2015Report of the Valuer INVESTMENT PROPERTIES
Address
Lot No.
1. Lee Garden One
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 lease
100%
74-86 Kennedy Road
Mid-Levels
Hong Kong
3. Lee Garden Two
28 Yun Ping Road
Causeway Bay
Hong Kong
4. Leighton Centre
77 Leighton Road
Causeway Bay
Hong Kong
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%
5. Lee Theatre Plaza
I.L. 1452, the R.P. of I.L. 472 and 476
Commercial
Long lease
100%
99 Percival Street
Causeway Bay
Hong Kong
6. Lee Garden Three
4-14 Hoi Ping Road
10 Hysan Avenue and
1-11 Sunning Road
Causeway Bay
Hong Kong*
7. One Hysan Avenue
1 Hysan Avenue
Causeway Bay
Hong Kong
8. Lee Garden Five
18 Hysan Avenue
Causeway Bay
Hong Kong
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%
The R.P. of Sec. GG of I.L. 29
Commercial
Long lease
100%
Sec. N of I.L. 457 and Sec. LL of I.L. 29
Commercial
Long lease
100%
203
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible BusinessSchedule of Principal PropertiesAt 31 December 2015
INVESTMENT PROPERTIES continued
Address
Lot No.
Use
Category
of the Lease
Percentage
held by
the Group
9. Lee Garden Six
Sec. KK of I.L. 29
Commercial
Long lease
100%
111 Leighton Road
Causeway Bay
Hong Kong
10. Hysan Place
500 Hennessy Road
Causeway Bay
Hong Kong
Sec. FF of I.L. 29 and
the R.P. of Marine Lot 365
Commercial
Long lease
100%
*
Lateral support, demolition of existing basement, excavation and foundation works would be completed in February 2016. The redevelopment
site has an overall registered site area of approximately 31,000 square feet. The new development has a projected gross floor area of
approximately 467,000 square feet and is targeted for completion in late 2017.
204
Schedule of Principal Properties continuedAt 31 December 2015Hysan Annual Report 2015
SHARE CAPITAL
At 31 December 2015
Issued and fully paid-up capital
There was one class of ordinary shares with equal voting rights.
DISTRIBUTION OF SHAREHOLDINGS
(At 31 December 2015, as per register of members of the Company)
HK$
Number of
Ordinary Shares
7,642,373,633.27
1,057,177,692
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
ordinary shares
Number of % of the total no.
of issued shares
(Note)
2,315
836
81
55
3
9
3,299
70.17
25.34
2.46
1.67
0.09
0.27
3,894,253
13,125,019
6,162,664
11,038,393
1,874,206
1,021,083,157
0.37
1.24
0.58
1.04
0.18
96.59
100.00
1,057,177,692
100.00
TYPES OF SHAREHOLDERS
(At 31 December 2015, as per register of members of the Company)
Type of shareholders
Atlas Corporate Management Limited
Lee Hysan Estate Company, Limited
Other corporate shareholders
Individual shareholders
Total
LOCATION OF SHAREHOLDERS
(At 31 December 2015, as per register of members of the Company)
Location of shareholders
Hong Kong
United States and Canada
United Kingdom
Others
Total
Note:
ordinary shares held
Number of % of the total no.
of issued shares
(Note)
39,809,001
393,321,734
587,230,367
36,816,590
3.77
37.20
55.55
3.48
1,057,177,692
100.00
ordinary shares held
Number of % of the total no.
of issued shares
(Note)
1,054,579,313
2,249,924
122,178
226,277
1,057,177,692
99.76
0.21
0.01
0.02
100.00
The percentages have been compiled based on the total number of shares of the Company in issue as at 31 December 2015
(i.e. 1,057,177,692 ordinary shares).
205
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible BusinessShareholding Analysis
FINANCIAL CALENDAR
Full year results announced
Ex-dividend date for second interim dividend
Closure of register of members and record date for second interim dividend
Dispatch of second interim dividend warrants
Closure of register of members for AGM
AGM
2016 interim results to be announced
* subject to change
8 March 2016
21 March 2016
23 March 2016
(on or about) 6 April 2016
12 to 13 May 2016
13 May 2016
2 August 2016*
DIVIDEND
The Board declares the payment of a second interim dividend of HK107 cents per share. The second interim dividend will be
payable in cash to shareholders on the register of members as at Wednesday, 23 March 2016.
The register of members will be closed on Wednesday, 23 March 2016, for the purpose of determining shareholders’
entitlement to the second interim dividend, during which period no transfer of shares will be registered. In order to qualify for
the second interim dividend, all transfer documents accompanied by the relevant share certificates must be lodged with the
Company's Registrar not later than 4:00 p.m. on Tuesday, 22 March 2016.
Dividend warrants will be dispatched to shareholders on or about Wednesday, 6 April 2016.
The register of members will also be closed from Thursday, 12 May 2016 to Friday, 13 May 2016, both dates inclusive, for the
purpose of determining shareholders’ entitlement to attend and vote at the AGM to be held on 13 May 2016, during which
period no transfer of shares will be registered. In order to qualify for attending and voting at the AGM, all transfer documents
accompanied by the relevant share certificates must be lodged with the Company's Registrar not later than 4:00 p.m. on
Wednesday, 11 May 2016.
206
Hysan Annual Report 2015Shareholder Information SHAREHOLDER SERVICES
For enquiries about share transfer and registration, please contact the Company’s Registrar, Tricor Standard Limited:
Tricor Standard Limited
Level 22, Hopewell Centre
183 Queen’s Road East
Hong Kong
Telephone: (852) 2980 1768
Facsimile: (852) 2861 1465
Holders of the Company’s ordinary shares should notify the Registrar 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 Registrar 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. (Reception: 50/F.), Lee Garden One
33 Hysan Avenue
Hong Kong
Telephone: (852) 2895 5777
Facsimile: (852) 2577 5153
207
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business BOARD OF DIRECTORS
Irene Yun Lien LEE (Chairman)
Siu Chuen LAU
(Deputy Chairman and Chief Executive Officer)
Nicholas Charles ALLEN **
Frederick Peter CHURCHOUSE**
Philip Yan Hok FAN**
Lawrence Juen-Yee LAU**
Joseph Chung Yin POON**
Hans Michael JEBSEN B.B.S.*
(Trevor Chi-Hsin YANG as his alternate)
Anthony Hsien Pin LEE*
(Irene Yun Lien LEE as his alternate)
Chien LEE*
Michael Tze Hau LEE*
STRATEGY COMMITTEE
Irene Yun Lien LEE (Chairman)
Siu Chuen LAU
Nicholas Charles ALLEN**
Philip Yan Hok FAN**
Chien LEE*
COMPANY SECRETARY
Maggie Ka Ki CHEUNG
REGISTERED OFFICE
49/F. (Reception: 50/F)
Lee Garden One
33 Hysan Avenue
Hong Kong
AUDIT COMMITTEE
Nicholas Charles ALLEN** (Chairman)
Frederick Peter CHURCHOUSE**
Philip Yan Hok FAN**
Anthony Hsien Pin LEE*
REMUNERATION COMMITTEE
Philip Yan Hok FAN** (Chairman)
Joseph Chung Yin POON**
Michael Tze Hau LEE*
NOMINATION COMMITTEE
Irene Yun Lien LEE (Chairman)
Nicholas Charles ALLEN**
Philip Yan Hok FAN**
Joseph Chung Yin POON**
Chien LEE*
* Non-Executive Director
** Independent Non-Executive Director
OUR WEBSITE
Press releases and other information of the Group can be
found at our internet website: www.hysan.com.hk.
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
AUDITOR
Deloitte Touche Tohmatsu
Certified Public Accountants
208
Hysan Annual Report 2015Corporate Information
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Hysan Development Company Limited
49/F Lee Garden One, 33 Hysan Avenue, Hong Kong
T 852 2895 5777 F 852 2577 5153
www.hysan.com.hk
C M Y
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varnish
CHANGES
stock code 00014
2015
annual report