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6
Lee Gardens:
a Community
and a Destination
2016
annual report
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
C007445
stock code 00014
C M Y
K
Overview
1
2
Financial
Performance
3
Responsible
Business
Contents
10 Key Facts
10 Our Portfolio, How We Do Things
12 Value Creation
14 Our Assets
16 2016 Performance at a Glance
20 Chairman’s Statement
26 The Marketplace
30 Management’s Discussion and Analysis
30 Strategy and Review of Results
31 Review of Operations
36 Financial Review
39 Treasury Policy
44 Risk Management and Internal Control Report
52 Business of Life
53 Environment
60 Workplace Quality
63 Health and Safety
65 Community Contributions
70 The Stock Exchange of Hong Kong Limited’s
Environmental, Social and Governance
Reporting Guide
73 Corporate Responsibility Reporting
Verification Statement
4
Corporate
Governance
76 Board of Directors
81 Corporate Governance Report
102 Directors’ Report
111 Directors’ Remuneration and Interests Report
121 Audit Committee Report
5
Financial
Statements,
Valuation
and Other
Information
126 Directors’ Responsibility for the Financial Statements
127 Independent Auditor’s Report
131 Financial Statements
190 Five-Year Financial Summary
192 Report of the Valuer
193 Schedule of Principal Properties
194 Shareholding Analysis
195 Shareholder Information
197 Corporate Information
2016 was a challenging year for Hysan. We faced
expected and unexpected social, political and
economic upheavals in Hong Kong and globally.
These challenges were exacerbated by a number of
structural shifts in our different business sectors.
In this edition of our Annual Report, we detail our latest
results and achievements, as well as our current and
anticipated challenges. We explain our approach in
curating our core portfolio at Lee Gardens as a thriving
community and a top-of-mind destination for
our tenants and customers, both local and overseas.
Solid Assets
Develop attractive buildings and
enhance connectivity in our area
Promote green environment
Provide professional and
responsible property management
Maintain well-planned property
enhancement cycles
Sound Financials
Turnover
(2016):
HK$3,535m
(+3.1% YoY)
Recurring
Underlying
Profit (2016):
HK$2,369m
(+3.8% YoY)
Occupancy
(31/12/16):
Retail: 99%
Office: 96%
Residential: 82%
Investment Opportunities
Beyond Our Core Area
Develop for sale project: successful bid
for two Tai Po residential sites partnering
HKR International
Remain well-positioned to seek further high
quality projects aligned to Hysan’s portfolio
strategy in Hong Kong and beyond
Hysan Place
Lee Theatre
Lee Gardens
Discover More @
2
Hysan Annual Report 2016 Where We Are
We have sound financials and a strong team focused on
realising the full potential of our portfolio in the heart of
commercial Hong Kong. We also seek out and capture
investment opportunities beyond our core.
Hysan Place
Lee Theatre
Lee Gardens
Discover More @
Our Team
Continuously deepening and broadening
executive team to provide knowledge,
experience, skills and relationships
Include team members with strong
property experience in Hong Kong,
Mainland China and overseas
3
Mainland Visitors’
Spending
Pattern Changes
Travel and tax policy
developments
Desire to visit and shop beyond
Hong Kong
Buying power fueled
by foreign exchange
considerations
Slower economic growth
Retail Portfolio
Structural Changes
Millennials preferring everything
digital
Our customers and tenants’ focus
on health, wellness and lifestyle
changing retail offerings
Increase in
Occupancy
Costs
Retail tenants feeling
the pressure on rent
Consolidation of number
of shops may lead to
higher vacancy rates
Our
Competitors
Competition shifting focus
onto local customers
Landlords working hard
to retain tenants
4
Hysan Annual Report 2016 Trends
Impacting Us
From the changing shopping habits of Millennials
and Mainland Chinese, to rising competition; from
anticipated office supply increase, to the surge
of technology: our retail and office sectors are
witnessing significant structural changes.
Office Portfolio
Structural Changes
More upcoming Grade A supply
on Hong Kong Island
Trend to use more open plan,
activity-based or co-work space
Technology and changing work
habit leading to lower demand
for space
5
Refresh our hardware
(real estate)
Multi-dimensional
Curation
Enhance our software
(customer service,
technology, marketing
and events)
Encourage interaction and
collaboration amongst all
stakeholders
Maintain our
commitment to the
neighbourhood and
community
Enrich our tenant mix and
partner with the commercial
tenants to create an exceptional
customer experience
6
Hysan Annual Report 2016 Our Recipe for
Curating a Community
and Destination
Lee Gardens has long been a unique community with spacious and
green streets, eclectic shops, and where heritage low-rise mix
seamlessly with state-of-the-art skyscrapers. Those who live,
work, eat and shop here form an emotional attachment to
the area. To ensure it remains a front-of-mind
destination, we strive to innovate and curate
relevant content for the community.
Extend Welcome to
Newer Residents
Increasing group of Mainland Chinese
professionals and families who work
and live in Hong Kong
Lifestyle increasingly indifferentiable
from longer-term residents from all
over the world
They are part of the
multinational Lee Gardens community
Lee Garden Three Credentials
Anticipated completion date in late 2017
Aim for the highest BEAM Plus
environmental standard
Provide indoor jogging track to
promote health and wellness
Present innovative lifestyle offerings
Promote multi-dimensional interaction
involving the landlord, tenants, workers
and the community
7
1
Overview
10
Key Facts
10 Our Portfolio,
How We Do Things
12 Value Creation
14 Our Assets
16
2016 Performance at a Glance
20
Chairman’s Statement
9
OverviewCorporate GovernanceFinancial Statements and ValuationFinancial PerformanceResponsible Business
Key Facts
Our Portfolio
Premium International
• Elegant fashion
• Luxurious offerings
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r
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munity
Upscale Residential Offerings
• Quality service
• International com
Casual Lifestyle
• Stylish consumer goods
• Trendy gear
for fashion and home
Creating Synergies
among the elements of
the Community
Retail + Office + Residential
F
o
•
o
•
C
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s
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Streetfront Shops
• Unique experience
• Metropolitan ambience
• Old HK meets new HK
10
Hysan Annual Report 2016
How We Do Things
VISION
To be the PREMIER property
company which 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
Hysan’s investment portfolio is set
predominantly in Lee Gardens, a unique part of
Hong Kong’s renowned commercial heart in
Causeway Bay. Our ownership concentration
makes us stand out, as it magnifies our ability to
create synergies from different tenants within
our remarkable community.
Within our approximately 4.1 million square feet
of retail, office and residential tenant space,
excluding properties under redevelopment,
we strive to become close partners with our
tenants. By understanding and connecting our
tenants’ and our customers’ needs, we create a
sustainable community.
A key feature of Hysan’s portfolio, which
comprises principally retail and office segments,
is its balanced and diversified nature.
Overall
Investment Properties
(by Gross Floor Area excluding
properties under redevelopment)
Investment Properties
(by Turnover Contribution)
Total Gross Floor Area
4.1 million sq. ft. (approx.)
Turnover
HK$3,535 million
17%
51%
32%
Residential
Office
Retail
8%
36%
56%
Residential
Office
Retail
11
OverviewCorporate GovernanceFinancial Statements and ValuationFinancial PerformanceResponsible Business Increase Yields
through active management
including tenant mix improvement
Turnover
2011-2016 (HK$ million)
3,535
3,430
5-year
CAGR
13.0%
3,224
3,063
2,486
1,922
Financial
Achievements
increase earnings
Recurring Underlying Profit
2011-2016 (HK$ million)
Dividends per Share
provide steady growth
2011-2016 (HK cents)
132
135
CAGR
5-year
11.3%
123
117
2,369
2,283
5-year
CAGR
12.6%
2,163
2,043
95
79
1,622
1,310
2011
2012
2013
2014
2015
2016
2011
2012
2013 2014 2015 2016
2011
2012
2013 2014 2015 2016
Key Facts
Value Creation
Financial Achievements:
• Steady and progressive total return
• Strong Balance Sheet
Retail
O
f
f
i
c
e
Smooth interaction
among our business units
optimises the full
potential of the portfolio
Residential
Asset Enhancement
balance longer-term projects
with those that produce more
immediate returns
Supported by Strong
Underlying Non-Financial
Achievements:
Environment
Minimise our impact on
the environment, and
achieve higher efficiency
at the same time
Employees
Create working
environment for talent
to thrive
Community
Make positive
contributions to
communities where
we operate
Governance
Strong governance is the
heart of long-term
sustainable performance
Hysan Place
Lee Theatre
Lee Gardens
Continue strong focus in Causeway Bay and concurrently seek opportunities beyond our core portfolio
12
Hysan Annual Report 2016 Value Creation
Financial Achievements:
• Steady and progressive total return
• Strong Balance Sheet
Retail
O
f
f
i
c
e
Smooth interaction
among our business units
optimises the full
potential of the portfolio
Increase Yields
through active management
including tenant mix improvement
Turnover
2011-2016 (HK$ million)
3,535
3,430
5-year
CAGR
13.0%
3,224
3,063
2,486
1,922
Financial
Achievements
increase earnings
Recurring Underlying Profit
2011-2016 (HK$ million)
Dividends per Share
provide steady growth
2011-2016 (HK cents)
132
135
5-year
CAGR
11.3%
123
117
2,369
2,283
5-year
CAGR
12.6%
2,163
2,043
95
79
1,622
1,310
2011
2012
2013
2014
2015
2016
2011
2012
2013 2014 2015 2016
2011
2012
2013 2014 2015 2016
Asset Enhancement
balance longer-term projects
with those that produce more
immediate returns
Supported by Strong
Underlying Non-Financial
Achievements:
Environment
Minimise our impact on
the environment, and
achieve higher efficiency
at the same time
Employees
Create working
environment for talent
to thrive
Community
Make positive
contributions to
communities where
we operate
Governance
Strong governance is the
heart of long-term
sustainable performance
Residential
Hysan Place
Lee Theatre
Lee Gardens
Continue strong focus in Causeway Bay and concurrently seek opportunities beyond our core portfolio
13
OverviewCorporate GovernanceFinancial Statements and ValuationFinancial PerformanceResponsible Business Hysan
Place
500 Hennessy Road, Causeway Bay
Completed 2012
Approx. Gross
Floor Area 716,000 ft2
Floors 40 Parking
Number of
Spaces 66
Greenest commercial
building and trendiest
shopping in town
Key Facts
Our Assets
Lee Theatre
Plaza
99 Percival Street, Causeway Bay
Completed 1994 /
Renovation of lower zone 2013
Approx. Gross
Floor Area 314,000 ft2*
Number of
Floors 26
One of Hong Kong’s
best-loved shopping
and dining complexes
Bamboo
Grove
74–86 Kennedy Road, Mid-Levels
Completed 1985 / Renovated 2002
Approx. Gross
Floor Area 691,000 ft2
Units 345 Parking
Number of
Quality international
living in Mid-Levels
Spaces 436
BAMBOO
GROVE
Mid-Levels
Leighton
Centre
One Hysan
Avenue
77 Leighton Road, Causeway Bay
Completed 1977 / Renovated 2011
1 Hysan Avenue, Causeway Bay
Completed 1976 / Renovated 2011
Approx. Gross
Floor Area 430,000 ft2
Floors 28 Parking
Number of
Spaces 321
Popular office
amongst sports
and lifestyle shops
Approx. Gross
Floor Area 169,000 ft2
Number of
Floors 26
Efficient office
and retail building
in prime site
HYSAN PLACE
LEE
GARDEN
ONE
LEE THEATRE
PLAZA
LEIGHTON
CENTRE
ONE HYSAN
AVENUE
LEE
GARDEN
TWO
LEE
GARDEN
FIVE
LEE
GARDEN
THREE
GARDEN
LEE
SIX
Retail
and
Office
Retail
only
Residential
Under
Development
* The approximate Gross Floor Areas of Lee Garden One, Lee Garden Two and
Lee Theatre Plaza are revised upon the completion of renovation projects.
Not to scale
14
HENNESSYROADSOGOCROSSHARBOURTUNNELTimesSquareLEE GARDEN ROADHYSAN AVENUELAN FONG ROADPAK SHA ROADLEIGHTON ROADPERCIVAL STREETCENTRALABERDEENTUNNELNORTHPOINTYUN PINGROADHysan Annual Report 2016 Lee Garden
One
33 Hysan Avenue, Causeway Bay
Completed 1997
Approx. Gross
Floor Area 903,000 ft2*
Floors 53 Parking
Number of
Spaces 200
Home to
international
corporations and
premium brands
BAMBOO
GROVE
Mid-Levels
Lee Garden
Two
Lee Garden
Five
Lee Garden
Six
28 Yun Ping Road, Causeway Bay
Completed 1992 /
Renovation of retail podium 2003
Approx. Gross
Floor Area 620,000 ft2*
Number of
Floors 34 Parking
Spaces 167
Spacious offices plus
renowned children’s
concept floor
18 Hysan Avenue, Causeway Bay
Completed 1989 / Renovated 2009
111 Leighton Road, Causeway Bay
Completed 1988 / Renovated 2004
Approx. Gross
Floor Area 132,000 ft2
Number of
Floors 25
A 25-level office
and retail complex
Approx. Gross
Floor Area 80,000 ft2
Number of
Floors 24
Convenient office
location with retail
shops
Retail
and
Office
Retail
only
Residential
Under
Development
HYSAN PLACE
LEE
GARDEN
ONE
LEE THEATRE
PLAZA
LEIGHTON
CENTRE
ONE HYSAN
AVENUE
LEE
GARDEN
TWO
LEE
GARDEN
FIVE
LEE
GARDEN
THREE
LEE
GARDEN
SIX
Not to scale
Lee Garden
Three
Causeway Bay
To be completed in late 2017
Approx. Gross
Floor Area 467,000 ft2
Number of
Floors 32
Parking
Spaces 200+
Soon-to-be among
the city’s best
known commercial
addresses
15
HENNESSYROADSOGOCROSSHARBOURTUNNELTimesSquareLEE GARDEN ROADHYSAN AVENUELAN FONG ROADPAK SHA ROADLEIGHTON ROADPERCIVAL STREETCENTRALABERDEENTUNNELNORTHPOINTYUN PINGROADOverviewCorporate GovernanceFinancial Statements and ValuationFinancial PerformanceResponsible Business 2016 Performance
at a Glance
Financial Performance
Turnover
HK$3,535m
3.1%
Recurring
Underlying
Profit
HK$2,369m
3.8%
Recurring
Underlying
Earnings
per Share
HK226.29cents
5.3%
(HK$ million)
2,400
(HK cents)
240
9
6
3
2
,
3
8
2
2
,
3
6
1
2
,
3
4
0
2
,
2
2
6
1
,
2,100
1,800
1,500
1,200
900
600
300
0
.
3
8
4
1
2
.
4
3
3
0
2
.
0
1
2
9
1
.
9
2
6
2
2
.
3
8
2
5
1
210
180
150
120
90
60
30
0
2
0
.
3
6
8
4
.
4
6
6
5
.
4
6
4
5
.
9
5
8
6
.
4
5
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
Retail Sector
HK$1,969m 3.5%
(HK$ million)
2,000
2
0
9
1
,
9
6
9
1
,
1
0
8
1
,
8
7
6
1
,
0
5
2
1
,
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
2012
2013
2014
2015
2016
Office Sector
HK$1,292m 3.9%
(HK$ million)
1,400
2
9
2
1
,
3
4
2
1
,
5
8
0
1
,
6
3
1
1
,
8
0
9
Dividends
per Share
HK135cents
2.3%
Property
Value
HK$69,633m
0.3%
(HK cents)
144
2
3
1
5
3
1
3
2
1
7
1
1
5
9
126
108
90
72
54
36
18
0
(HK$ million)
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
5
3
7
8
6
,
0
1
8
9
6
,
3
3
6
9
6
,
2
2
3
5
6
,
2
2
0
0
6
,
0
4
0
,
7
6
2
7
1
,
8
6
0
9
4
,
7
6
6
2
3
,
3
6
3
2
1
,
8
5
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
Cost
Valuation Surplus
1,200
1,000
800
600
400
200
0
2012
2013
2014
2015
2016
Residential Sector
HK$274m 3.9%
(HK$ million)
350
300
250
200
150
100
50
0
8
2
3
0
0
3
7
8
2
5
8
2
4
7
2
2012
2013
2014
2015
2016
16
(HK$)
70
60
50
40
30
20
10
0
(HK$ million)
72,000
64,000
56,000
48,000
40,000
32,000
24,000
16,000
8,000
0
Hysan Annual Report 2016 (HK$ million)
(HK cents)
9
6
3
,
2
3
8
2
,
2
3
6
1
,
2
3
4
0
,
2
3
8
.
4
1
2
4
3
.
3
0
2
0
1
.
2
9
1
9
2
.
6
2
2
Net Asset
Value per
Share
HK$64.56
0.1%
2
0
3
6
.
8
4
4
6
.
6
5
4
6
.
4
5
9
5
.
8
6
4
5
.
(HK$)
70
60
50
40
30
20
10
0
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
Shareholders’
Funds
HK$67,490m
0.1%
0
4
0
7
6
,
2
7
1
8
6
,
0
9
4
7
6
,
6
2
3
3
6
,
3
2
1
8
5
,
(HK$ million)
72,000
64,000
56,000
48,000
40,000
32,000
24,000
16,000
8,000
0
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
Cost
Valuation Surplus
2
2
6
,
1
2,400
2,100
1,800
1,500
1,200
900
600
300
0
(HK cents)
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
(HK$ million)
0
5
2
,
1
2
0
9
,
1
9
6
9
,
1
1
0
8
,
1
8
7
6
,
1
2012
2013
2014
2015
2016
(HK$ million)
1,400
2
9
2
,
1
3
4
2
,
1
5
8
0
,
1
6
3
1
,
1
8
0
9
(HK$ million)
8
2
3
0
0
3
7
8
2
5
8
2
4
7
2
2012
2013
2014
2015
2016
240
210
180
150
120
90
60
30
0
3
8
.
2
5
1
(HK$ million)
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
2012
2013
2014
2015
2016
2
3
1
5
3
1
3
2
1
7
1
1
5
9
5
3
7
,
8
6
0
1
8
,
9
6
3
3
6
,
9
6
2
2
3
,
5
6
2
2
0
,
0
6
Financial
Prudence
Net Interest Coverage (Note 1)
23.5 times
(2015: 19.5 times)
Net Debt to Equity (Note 2)
5.4%
(31 Dec 2015: 3.0%)
Average Cost of Finance
3.8%
(2015: 3.5%)
Average Debt Maturity
4.3 years
(31 Dec 2015: 6.3 years)
Fixed Rate Debt
73.4%
(31 Dec 2015: 94.9%)
Capital Market Issuances
73.4%
(31 Dec 2015: 94.9%)
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
17
OverviewCorporate GovernanceFinancial Statements and ValuationFinancial PerformanceResponsible Business 2016 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 Offices is a finalist
in Hong Kong Green Building
Council and Professional Green
Building Council’s Hong Kong
Green Building Award 2016
• A “Top 80” rated stock in the
Hong Kong Quality Assurance
Agency (HKQAA) Sustainability
Rating and Research 2016
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.
18
Hysan Annual Report 2016 Social
Governance
• Constituent member of
FTSE4Good index
• Founding member of Lee Gardens
Association, an area organisation
to promote Lee Gardens area to
locals and visitors
• Gold Award for Volunteer Service
(Organisation) (in 2016) under the
Steering Committee on Promotion
of Volunteer Service of Social
Welfare Department
• Gold Award (Non-Hang Seng
Index Large Market
Capitalisation Category) in
the Hong Kong Institute of
Certified Public Accountants’
Best Corporate Governance
Awards 2016
• Citation for Environmental,
Social and Governance
Disclosure in The Hong Kong
Management Association’s
2016 HKMA Best Annual
Reports Awards
19
OverviewCorporate GovernanceFinancial Statements and ValuationFinancial PerformanceResponsible Business Chairman’s
Statement
Lee Gardens should be a
front-of-mind destination,
both for locals and visitors.
We strive to innovate and
curate content for our
physical space and venues.
The Bigger Picture
The anticipated continuation of global political and economic instability in 2016, unfortunately, did
materialise. The United States presidential election in November only added further uncertainty to a
year of geopolitical tensions and market volatility.
Hong Kong’s economy was buffeted by external headwinds throughout the year. The export
performance remained weak while tourism, another pillar of Hong Kong’s economy also continued to
lose momentum, with Mainland Chinese visitors showing a significant decline. Local consumer
sentiment, supported by a low interest rate environment and stable employment conditions, began to
show signs of improvement towards the end of the year. Retail sales performance, affected by the
further drop in tourist arrivals, also saw some easing in its year-on-year rate of decline in the last
months of 2016. While luxury goods still attracted fewer buyers, some mid-priced to affordable items
experienced improved sales.
The uncertain global economic climate and the continuing strength of the Dollar have affected
sentiment and confidence. Local retail sales, coupled with changes in Mainland tourist spending
pattern, have been weak for a number of quarters. This is our new normal. We have and will
continue to position ourselves dynamically to capture the opportunities which come from these
structural changes.
Where we are
We start off with sound financials. We have a strong balance sheet. Both our top line Turnover and
our bottom line Recurring Underlying Profit saw growth against the weak economic backdrop in 2016.
Occupancy levels for our main commercial portfolio continued to be strong. We will have more details
on these figures in our “Business Performance” section.
Our assets are sound. We are not distracted by any distressed assets. We have well-planned property
enhancement cycles, balancing longer term projects with those that produce immediate returns.
Among the projects, Lee Garden Three’s development work is expected to complete ahead of
schedule. Lee Garden One’s refurbishment was completed in 2016, with Valentino opening its
flagship store in January 2017.
We have been exploring investment opportunities beyond our core Causeway Bay area. These include
develop for sale projects. Such projects can become a new engine of growth for Hysan. In late 2016,
we launched a successful bid for two residential sites at Tai Po’s upscale Lo Fai Road. We are pleased
to be partnering HKR International on this project, as the company has a recognised track record for
developing quality low density residential projects. We remain well-positioned to seek further high
quality projects aligned to Hysan’s portfolio strategy, both in Hong Kong and beyond, while
maintaining the Lee Gardens portfolio as our core focus.
20
Hysan Annual Report 2016 Complementing our quality portfolio, we understand the need to have a strong team to provide the
necessary knowledge, skills and relationships. Taking into account the macro environment with its
uncertainties and opportunities, I will continue to lead the Hysan team as Executive Chairman. We are
also ensuring our talent bench continues to improve in depth and breadth. Mr. Ricky LUI recently
joined Hysan as our Chief Operating Officer. Ricky has more than 25 years of experience as a senior
executive in the property industry. His extensive operating experience in the field, with a strong focus
on Mainland China and Hong Kong, as well as deep knowledge of a number of overseas markets, will
provide further expertise to help us forge ahead.
Our Challenges
All these positive factors contributed to our robust performance in 2016. We are, however, very much
aware that we are facing a number of challenges throughout our business. Let us, therefore, start with
the structural shift in the retail sector.
We spoke in our interim report about Millennials preferring everything digital. Their online and mobile
way of life is only likely to evolve further away from the traditional shopping mindset. There has also
been a refocusing on life’s priorities, with health, wellness and lifestyle themes being particularly
popular. This change in lifestyle pattern is also influencing our food and beverage offerings. Lighter
and healthier eating and drinking choices, offered in stylish and relaxed informal venues, are
becoming increasingly popular. Among the changes in shopping habits are the well-documented
trends now shown by Mainland Chinese tourists. Although Hysan’s portfolio does not rely heavily on
their patronage, Mainlanders still form a significant group when it comes to spending. A range of
factors has changed their spending pattern in Hong Kong. These include China’s travel and tax policy
changes, an increasing desire for Chinese tourists to visit and shop overseas, buying power fuelled by
foreign exchange considerations, as well as China’s slower economic growth and its well-known
anti-corruption drive.
Hysan also faces more direct competition from other local landlords and their shopping malls. These
retail property owners are shifting their focus towards targeting more local customers instead of
visitors. At the same time, they are also working actively to attract and retain their tenants. We had a
head start in creating a well-balanced retail portfolio and a sought after loyalty programme. Our
competitors are now rapidly catching up.
We are also mindful that some of our retail tenants may be feeling extra pressure as their occupancy
costs increase. Their wish to consolidate could lead to downward pressure on rents and this
consolidation in the number of shops, inevitably, will lead to higher vacancy rates.
Our office portfolio is experiencing its own share of structural changes. Grade A office building supply
on Hong Kong Island is set to increase in the next few years. On the demand side, we see an
increasing trend for open plan and activity-based work spaces. In many cases, companies make use of
co-work space either as temporary or more permanent space solutions. In addition, with office and
personal mobile technology playing an increasingly important part in promoting efficiency and
mobility, the need for fewer headcount, hence lower demand for space, is creating further uncertainty
for our office leasing business.
Our business units’ ability to succeed must be buttressed by effective support functions. Among the
most important are the provision of efficient IT system and automated processes to drive efficiency
and productivity. Using our customer relationship management system and intensifying our
technology to promote social media will help our frontline property management, our leasing team
and our marketing team to better service our loyalty programme, and to target and market to our
existing and new customers.
21
OverviewCorporate GovernanceFinancial Statements and ValuationFinancial PerformanceResponsible Business Chairman’s Statement
Our Recipe to Curate a Community and Destination
Our strong financial position underpinning our sound and diversified property portfolio should place
us in a strong position. However, the challenges and structural changes we face, both in the retail and
office sectors, are real and will be addressed.
Lee Gardens is a community. This is a unique and key differentiation. The district has long been
appreciated by locals as a distinct part of Causeway Bay, and indeed, of Hong Kong, where the
avenue and streets are spacious and green, forming a calming sanctuary from the buzz of busy, fast
moving Causeway Bay. Heritage low rise buildings blend into state-of-the-art high rise buildings.
Those who live, work, eat and shop in Lee Gardens form an emotional attachment to the community.
They have felt and will continue to feel at home at Lee Gardens for generations to come.
Lee Gardens should be a front-of-mind destination, both for locals and visitors. We strive to innovate
and curate content for our physical space and venues. These include refreshing our hardware (real
estate), as well as our software (customer service, technology, marketing and events). These are
further influenced by constantly enriching our portfolio’s trade and tenant mix, together with our
involvement and commitment to our neighbourhood and our community.
The above factors are interrelated. Hysan, our tenants, the wider members of the Lee Gardens
community, regular and casual consumers and office visitors alike are all our stakeholders, and they
all contribute to and benefit from our multi-dimensional curation. By encouraging interaction and
collaboration amongst all parties, Hysan ensures that these stakeholders will help shape Lee Gardens
as a retail, office and residential venue not just for today, but as a sustainable destination for the
long term.
One good example of the interaction involves newer members of the community. Although fewer
tourists from across the border are visiting Hong Kong, there is a growing population of Mainland
Chinese professionals and their families who work and live in Hong Kong. Their working, shopping and
dining habits are increasingly indifferentiable from longer-term Hong Kong residents, both ethnic
Chinese and those from other parts of the world. Through their daily interaction with other
stakeholders in our portfolio, they have become part of our multinational Lee Gardens community.
Lee Garden Three is our new building with an anticipated completion date in late 2017. Following in
the footsteps of our renowned green commercial building Hysan Place, the new structure will aim for
the highest BEAM Plus environmental standard. The partial green roof will help reduce the building’s
heat island effect and improve the area’s microclimate. A garden with flora to attract butterflies will
also be established to enhance the building’s biodiversity. Further green walls will adorn the building’s
exterior. An indoor jogging track will be installed to promote health and wellness among the office
users. With these features, we hope to further contribute both to the community’s environment, as
well as to the well-being of those who work and shop there. A high quality office and retail building is
expected to attract renowned multinational companies as tenants. Again, we are focused on
promoting multi-dimensional interaction involving the landlord, tenants, workers and the community.
Business Performance
The Group’s 2016 turnover was HK$3,535 million, up 3.1% from HK$3,430 million in 2015. At year-
end 2016, our retail portfolio occupancy was 99%. Occupancy of our office portfolio was 96%, and
the residential portfolio was 82%.
Recurring Underlying Profit, our key core leasing business performance indicator, and Underlying
Profit were both HK$2,369 million (both up 3.8% from HK$2,283 million in 2015). These results
22
Hysan Annual Report 2016 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 HK226.29 cents
(2015: HK214.83 cents), up 5.3%.
The Group’s Reported Profit for 2016 was HK$1,218 million (2015: HK$2,903 million), down 58.0%.
This reflected fair value loss of HK$1,187 million (2015: fair value gain of HK$695 million) on the
Group’s investment properties valuation. As at year-end 2016, the external valuation of the Group’s
investment property portfolio decreased by 0.3% to HK$69,633 million (2015: HK$69,810 million).
This reflected the net effect of several factors in play: a worsening retail rental outlook; a sustained
positive office rental outlook; a number of asset enhancement works completed, as well as the
construction costs incurred for the Lee Garden Three project during the year. The capitalisation rates
of each portfolio remained unchanged from those used as at 31 December 2015.
Shareholders’ Funds decreased by 1.0% to HK$67,490 million (2015: HK$68,172 million), principally
reflecting the valuation change of the investment properties.
Our financial position remained strong, with net interest coverage of 23.5 times (2015: 19.5 times)
and net debt to equity ratio of 5.4% (2015: 3.0%).
Capital Management
The Board of Directors is pleased to declare a second interim dividend of HK109 cents per share
(2015: HK107 cents). Together with the first interim dividend of HK26 cents per share (2015: HK25
cents), the total distribution is HK135 cents per share (2015: HK132 cents), representing a year-on-
year increase of 2.3%. The dividend will be payable in cash.
As part of our dynamic capital management, Hysan continued to repurchase its own shares from the
market. 12.59 million (2015: 6.75 million) shares were repurchased during the year.
Outlook
Political and economic volatility in the global environment remain. The anticipated U.S. interest rate
hike and the Chinese economic slowdown are among a number of factors that will keep local
consumer sentiment relatively weak in 2017.
We have laid out our strategy to curate Lee Gardens as a community. We believe this is unique
and will differentiate us from our competitors. Hysan is well-positioned for the challenges ahead.
Appreciation
I would like to take this opportunity to thank our management team and our colleagues for all the
effort they have made throughout a difficult 2016. I would also like to thank our directors for their
support and guidance. My personal thanks go to Mr. Siu Chuen LAU, who stepped down from the roles
of Deputy Chairman and Chief Executive Officer during the year. Siu Chuen’s work as Hysan’s CEO
built a strong platform from which we shall continue to develop Lee Gardens into one of Hong Kong’s
most dynamic retail and office districts.
Irene Yun Lien LEE
Chairman
Hong Kong, 22 February 2017
23
OverviewCorporate GovernanceFinancial Statements and ValuationFinancial PerformanceResponsible Business 2
Financial
Performance
26
The Marketplace
30 Management’s Discussion
and Analysis
30 Strategy and Review of Results
31 Review of Operations
36 Financial Review
39 Treasury Policy
44
Risk Management and
Internal Control Report
25
OverviewCorporate GovernanceFinancial Statements and ValuationFinancial PerformanceResponsible Business
The Marketplace
Hong Kong economy
The Hong Kong economy picked up slightly with a 1.9% growth for the full year. Private
domestic expenditure increased 1.6% supported by favourable employment and earnings.
Investment expenditure declined by 0.5%, dragged by the dampened sentiment during the
first half of the year. Exports of goods rebounded by 1.7% upon the stabilisation of Asia
markets while exports of services declined at 3.0% mainly due to the decelerating trend in
visitor arrivals.
Real Gross Domestic Product*
Year-on-year % change
5
4
3
2
1
0
3.1%
1.7%
2.4%
2.6%
1.9%
2012
2013
2014
2015
2016
* In chained (2014) dollars
Source: Census and Statistics Department (data as of March 2017)
Retail
Retail sales recorded an annual decline of 8.1% as compared to the previous year. During
the year, decelerating sales of luxury products and electronic goods were the key reasons for
the overall decrease. Some categories, including supermarket and food-related items,
remained in positive territory.
A 6.7% drop in Mainland Chinese visitors during the year was one of the core factors in the
overall retail decline, although the rate of decline started to narrow in the second half
of the year.
Categories
2016 growth rate
Key dropping categories
Other consumer durable goods (including
electronic goods and computers)
-26.6%
Jewellery, watches and clocks, valuable gifts
-17.2%
Growing categories
Food and alcoholic drinks
Supermarket
+1.7%
+0.8%
Source: Census and Statistics Department (data as of March 2017)
26
Hysan Annual Report 2016 Hong Kong Total Retail Sales
Total Number of Visitors
HK$ billion
Year-on-year % change
Million
445
9.8%
494
493
475
11.0%
-0.2%
-3.7%
600
500
400
300
200
100
0
437
-8.1%
32
24
16
8
0
-8
-16
70
60
50
40
30
20
10
0
61
22.3%
59
22.3%
77.7%
77.7%
57
24.5%
75.5%
54
25.0%
75.0%
49
28.2%
71.8%
2012
2013
2014
Total Retail Sales
2015
Year-on-year % change
2016
Source: Census and Statistics Department (data as of March 2017)
2012
2013
2014
2015
2016
Number of Other Visitors
Number of Mainland China Visitors
Source: Hong Kong Tourism Board (data as of March 2017)
According to Jones Lang LaSalle, rents for retail premises in prime shopping centres dropped
mildly by 1% due to the downturn of the luxury sector.
Premium Prime Shopping Centre Rental Index (2009 Q4=100)
Index
170
160
150
140
130
120
110
100
90
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2014
2016
2015
2012
2013
Source: Jones Lang LaSalle (data as of March 2017)
27
OverviewCorporate GovernanceFinancial Statements and ValuationFinancial PerformanceResponsible Business The Marketplace
Office
Rents in the Grade “A” office market recorded good growth in general. The primary growth
driver was the demand from Mainland Chinese firms, which offset the downsizing and
relocation of MNC firms. Mainland Chinese companies took up about 40% of new lettings
in Central during the year. However, some sub-markets e.g. Kowloon East, experienced a
decline due to mounting supply pressure.
According to Jones Lang LaSalle, new Grade “A” office supply totaled 1.7 million square feet
in 2016, which was a similar level to the average of the last 10 years (1.9 million square
feet). However, the average net take-up experienced a negative figure of 0.1 million square
feet, which was significantly lower than the average of the last 10 years (1.9 million square
feet).
As at the end of December 2016, Kowloon East witnessed a substantial increase in vacancy
while other sub-markets were generally on par.
Grade “A” Office Vacancy Rate in 2015 and 2016
Grade “A” Office Rental Value
%
15
12
9
6
3
0
10.5%
5.5%
1.7%
1.2%
2.7%
2.2%
2.3%
1.6%
1.6%
1.1%
Central
Causeway Bay/
Wanchai
Tsim Sha Tsui
Hong Kong
East
Kowloon East
HK$ per square foot
140
120
100
80
60
40
20
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2014
2013
2015
2012
2016
2015 year-end
2016 year-end
Central
Causeway Bay/Wanchai
Source: Jones Lang LaSalle (data as of March 2017)
Source: Jones Lang LaSalle (data as of March 2017)
28
Hysan Annual Report 2016 Luxury Residential
Luxury rents were broadly stable despite a lack of traditional demand from MNCs and banks.
There was a shift in tenant profiles as demand from Mainland Chinese who have recently
relocated to Hong Kong increased.
According to Jones Lang LaSalle, the overall change in luxury residential rents stayed flat at
0.2% in 2016 as compared to the previous year.
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
2014
2015
2016
2013
2012
Source: Jones Lang LaSalle (data as of March 2017)
29
OverviewCorporate GovernanceFinancial Statements and ValuationFinancial PerformanceResponsible Business Management’s Discussion
and Analysis
Hysan’s portfolio of retail, office and residential investment properties has a combined gross
floor area of approximately 4.1 million square feet, excluding the site of the forthcoming
Lee Garden Three.
Strategy
The Group maintains our commitment to pursue a steady growth of return for our
shareholders. The Group’s core focus remains in Causeway Bay, our home base for a
number of decades, and where the vast majority of our portfolio is situated. In the
meantime, the Group actively seeks other investment opportunities beyond our core, as
demonstrated by our recent success in a joint-venture bid for two residential sites in Hong
Kong’s Tai Po.
For our existing properties, we strive to enhance their value through refurbishing,
repositioning, redevelopment, and other means of portfolio management. We continue to
build a thriving community for our retail and office tenants, underpinned by sound financial
management and a dedicated team of employees with invaluable expertise across a broad
range of real estate disciplines.
Review of Results
The Group’s turnover in 2016 was HK$3,535 million, an increase of 3.1% from HK$3,430
million in 2015. The increase principally reflected overall positive rental reversion within the
portfolio. Both the retail and office sectors saw rises, while the residential sector experienced
a decline.
The turnover of each sector is shown as below:
Retail sector
Office sector
Residential sector
2016
HK$ million
2015
HK$ million
Change
%
1,969
1,292
274
3,535
1,902
1,243
285
3,430
+3.5
+3.9
-3.9
+3.1
The Group’s Recurring Underlying Profit and its Underlying Profit were both HK$2,369
million, up 3.8% from HK$2,283 million in 2015. These 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 HK226.29
cents (2015: HK214.83 cents), up 5.3%.
Our Reported Profit for 2016 was HK$1,218 million (2015: HK$2,903 million), a 58.0%
decrease from the year before, principally reflecting the fair value loss (2015: fair value
gain) on the Group investment properties valuation recorded this year. This also highlighted
the net effect of several factors in play: a worsening retail rental outlook; a persistently
positive office rental outlook; a number of enhancement works made, as well as the
construction costs incurred for the Lee Garden Three project during the year. The
capitalisation rates of each portfolio remained unchanged from those used as at
31 December 2015.
30
Hysan Annual Report 2016 Recurring Underlying Profit and Underlying Profit
2,369
2,283
Fair value (loss) or gain on investment
properties located in
2016
HK$ million
2015
HK$ million
Change
%
+3.8
– Hong Kong (net of effect of non-controlling
(1,157)
616
n/m
interests’ shares)
– Shanghai*
Reported Profit
* The investment properties are held by an associate of the Group.
n/m: not meaningful
Review of Operations
6
1,218
4
2,903
+50.0
-58.0
As at 31 December 2016, about 83% of the Group’s investment properties by gross floor
area were retail and office properties in Causeway Bay, and the remaining 17% was
represented by 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.
KEY PERFORMANCE INDICATORS
The Group’s turnover growth and occupancy rate are the key measurements used for
assessment of our core leasing business’ performance. The Group’s management also uses
the property expenses ratio (as a percentage of turnover) to assess cost effectiveness.
Key Performance
Indicators
Turnover Growth
Occupancy Rate
Definition
Business Performance
Rental revenue in 2016
vs that in 2015
Retail: +3.5% (2015 vs 2014: +5.6%)
Office: +3.9% (2015 vs 2014: +9.4%)
Residential: -3.9% (2015 vs 2014: -0.7%)
Percentage of total
area leased*/ total
lettable area* of each
portfolio at year end
Retail: 99% (2015: fully-let)
Office: 96% (2015: 99%)
Residential: 82% (2015: 89%)
Property Expenses
Ratio
Property expenses
divided by turnover
Remained at 12.1% in both years of 2016
and 2015
* Source of underlying data: Internal company data
Note: No changes have been made to the source of data or calculation methods used compared to 2015.
31
OverviewCorporate GovernanceFinancial Statements and ValuationFinancial PerformanceResponsible Business
Management’s Discussion and Analysis
RETAIL PORTFOLIO
Turnover
3.5%
Rental reversion
Occupancy
Traffic
Overall estimated
tenant sales
around 5%
99%
around 5%
around 30%
Hysan’s retail portfolio turnover grew 3.5% to HK$1,969 million (2015: HK$1,902 million),
including turnover rent of HK$46 million (2015: HK$71 million).
The portfolio saw positive rental reversion in rental renewals, reviews and new lettings, with
an average increase of around 5%. The portfolio occupancy was 99% as at 31 December
2016 (31 December 2015: fully-let).
Our creative retail experiences, including but not limited to new food and beverage outlets,
as well as innovative in-mall marketing activities, enable the portfolio to maintain an iconic
image as a premier shopping destination with hubs of different price points.
This variety helped our total foot traffic to maintain its growth, and it saw an increase of
around 5%, as compared to the year before. This robust performance was achieved during
a period of decline in the number of overseas visitors to Hong Kong.
The estimated overall tenant sales within the retail portfolio, however, experienced a
double-digit percentage decline. The estimated sales decrease of certain electronic goods
within the portfolio was a main contributor to this relative weakness. Otherwise, the decline
was much milder, and was in fact less severe than the decrease experienced by Hong Kong’s
overall retail sales during the year.
Our trend-setting hub, Hysan Place, saw a footfall growth of around 5%, as compared to
2015. During the year, we added a number of hip and trendy fashion stores, as well as
wellness and sports shops to the tenant mix. These themes also appeared as popular in-mall
events, with “Greatest of All Time” iconic sport stars statues and three-pointer shooting
games attracting basketball fans from all over the city, while “VR 360 Tennis in the Air”
strongly appealed to the racquet and tech-loving crowd. A number of new food and
beverage outlets joined the mall in 2016, including the popular Kikusan, Pizza Maru, Green
Waffle Diner and Pressed Juices.
The premium Lee Gardens hub continued to register foot traffic growth, against a backdrop
of overall decline of visitors in Hong Kong. The footfall increased by more than around 5%
in Lee Garden Two, as compared to the 2015 figure. A number of fashion brands opened at
Lee Gardens hub, including Loro Piana, Theory, Pinko and Marina Rinaldi, while the hub’s
food and beverage offerings remained popular. Two new outlets of affordable international
fare, Passion by Gerard Dubois and Panino Giusto were added to the line-up during the year.
Lee Theatre hub also experienced an increase of around 5% in foot traffic, as compared to
2015. The lower floor flagship stores in Lee Theatre Plaza continued to attract shoppers
throughout the year. The Korean brand Dodam Chicken also helped strengthen the dining
experience for a younger crowd.
32
Hysan Annual Report 2016 While these three hubs do have their special characteristics, we believe our retail portfolio
should be considered in a more holistic manner. We are working to improve the connections
among the different hubs, both in terms of physical linkage and the content provided by the
tenants, and aim to encourage consumers to shop and dine throughout the portfolio.
In recent years we have run a successful Lee Gardens Office Plus tenant membership
programme. In 2016, we upgraded the programme to create a new Lee Gardens Plus and
expanded the membership to include staff of retail tenants, as well as residents of Bamboo
Grove and Lee Gardens Apartments. We launched this offer-and-reward programme into an
application-based one to match the needs of today’s tech-savvy users. Offers are now
redeemed via the mobile app’s QR codes. This initiative is part of our drive to combine
online and offline activities.
We also improved our loyalty programme, Club Avenue. An extra tier was added to the
structure so that we could cater to more regular moderate spenders. We have also enhanced
the Club’s facilities and the training of our staff with an aim to provide service that exceeds
customer expectations.
Retail Lease Expiry Profile (As at 31 December 2016)
%
40
30
20
10
0
33%
26%
23%
17%
2017
2018
2019
2020 and beyond
33
OverviewCorporate GovernanceFinancial Statements and ValuationFinancial PerformanceResponsible Business Management’s Discussion and Analysis
OFFICE PORTFOLIO
Turnover
3.9%
Rental reversion
Occupancy
around 25%
96%
The Group’s office portfolio turnover grew by 3.9% to HK$1,292 million (2015: HK$1,243
million). This reflected positive rental reversion on renewals, reviews and new lettings, with
an average rental increase of around 25%.
The office portfolio occupancy was 96% as at 31 December 2016 (31 December 2015:
99%). Among the available spaces were a number of small units in non-Grade A buildings.
Mainland Chinese banking and financial entities continued to form the backbone of office
space demand in Central and Admiralty. The launch of the Shenzhen-Hong Kong stock
connect scheme in late 2016 complemented the existing Shanghai link, and is likely to help
maintain these entities’ presence and expansion in the market. Companies in other
industries, looking for quality space with up-to-date facilities, good transport links and cost
effectiveness, are placing Causeway Bay and Lee Gardens high on their list of preferences.
In 2016, Uber and AXA were examples of renowned international companies joining the
portfolio. Southwest Securities, an established investment and securities company in the
Greater China region also took up office space, while Prudential Hong Kong expanded its
presence in Lee Gardens.
Our tenant mix saw some minor changes in 2016, with professional and consulting services
now being the sector occupying the most area, followed by insurance, high-end retailers and
banking and finance. These sectors took up 52.2% of our lettable floor area. The well
balanced mix saw no category taking up more than 20% of the total lettable area.
Office Tenant Profile by Area Occupied as at Year-end
19.3%
15.1%
21.5%
14.2%
6.2%
6.6%
13.9%
2016
6.7%
13.3%
9.0%
9.9%
3.2%
5.5%
6.9%
15.6%
2015
12.4%
8.6%
12.1%
Office Lease Expiry Profile (As at 31 December 2016)
Professional and Consulting
Insurance
High-end Retailers
Banking and Finance
Semi-retail
Marketing
Information Technology
Consumer Products
Others
29%
20%
24%
23%
2017
2018
2019
2020 and beyond
%
40
30
20
10
0
34
Hysan Annual Report 2016 RESIDENTIAL PORTFOLIO
Turnover
3.9%
Rental reversion
Occupancy
around 5%
82%
Hysan’s residential portfolio (mainly the units in Bamboo Grove on Kennedy Road), recorded
a 3.9% turnover decline to HK$274 million (2015: HK$285 million). This was largely due to
large scale upgrade and renovations. The portfolio’s occupancy was 82% as at 31
December 2016 (31 December 2015: 89%).
The rental reversion was positive on renewals, review and new lettings, with an average
rental increase of around 5%.
LEE GARDEN THREE PROJECT
The above-ground construction was up to 22/F as of mid-February 2017 and was making
good progress towards its expected completion date in the fourth quarter of 2017.
LEE GARDEN ONE ENHANCEMENT PROJECT
The final phase of the ground floor lobby and higher floors’ retail space enhancement
project was completed in the middle of 2016 as scheduled. Two new food and beverage
outlets were added to enhance our restaurant offerings in the building, while Valentino
opened its new expanded store in January 2017.
35
OverviewCorporate GovernanceFinancial Statements and ValuationFinancial PerformanceResponsible 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 3.4% to HK$428 million (2015: HK$414 million), mainly
due to higher fees to external leasing agents. The property expenses to turnover ratio
remained the same at 12.1% for both years of 2016 and that of 2015.
Administrative expenses dropped by 6.4% to HK$219 million (2015: HK$234 million). This
mainly reflected the reduced payroll related costs due to the resignation of Executive
Directors in both years.
FINANCE COSTS
Finance costs, after capitalisation of HK$14 million (2015: nil) interest expenses and related
borrowing costs which were a part of the construction costs of Lee Garden Three, recorded a
decrease of 12.7% to HK$178 million (2015: HK$204 million). If the capitalised interest
expenses and related borrowing costs were included, the Group’s finance costs in 2016
would have been HK$192 million, a decrease of 5.9% from HK$204 million in 2015. The
decrease was attributable to the lower average debt level in 2016 as compared to 2015
after debt repayments in both years. A HK$500 million bank loan was drawn down in the
first half of 2016 but the related finance costs were capitalised as part of the construction
costs of Lee Garden Three.
36
Hysan Annual Report 2016 The debt repaid in both years were mainly structured on a floating rate basis, which
generally carried lower finance costs as compared with fixed rate debts. As a result, the
Group’s average cost of finance in 2016 was 3.8%, slightly higher than 3.5% reported
for 2015.
Further discussion of the Group’s treasury policy, including debt and interest rate
management, is set out in the “Treasury Policy” section.
REVALUATION OF INVESTMENT PROPERTIES
Fair value loss on investment properties (excluding capital expenditure spent on the Group’s
investment properties) of HK$1,187 million (2015: fair value gain of HK$695 million) was
recognised in the Group’s consolidated income statement for the year. This principally
reflected the net effect of several factors: a worsening retail rental outlook; a sustained
positive office rental outlook; a number of asset enhancement works completed, as well as
the construction costs incurred for the Lee Garden Three project.
As at 31 December 2016, the Group’s investment property portfolio (including property
under redevelopment) was HK$69,633 million, a slight decrease of 0.3% from HK$69,810
million at 31 December 2015. This valuation was carried out by Knight Frank Petty Limited,
an independent professional valuer, on the basis of open market value. The capitalisation
rates of each portfolio remained unchanged from those used as at 31 December 2015.
The following shows the property valuation of each portfolio at year-end.
Retail
Office
Residential
Property under redevelopment (Lee Garden Three)
2016
HK$ million
2015
HK$ million
Change
%
33,082
23,832
7,859
64,773
4,860
69,633
34,230
23,110
7,833
65,173
4,637
69,810
-3.4
+3.1
+0.3
-0.6
+4.8
-0.3
INVESTMENT IN AN ASSOCIATE
The Group’s share of results of an associate decreased by 3.7% to HK$237 million (2015:
HK$246 million). This decline was mainly due to the Renminbi devaluation during the year,
which impacts on the value of the Group’s share (24.7%) in the Shanghai Grand Gateway
project. As at 31 December 2016, 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$6
million (2015: HK$4 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 interest income, amounted to HK$50 million (2015:
HK$54 million). This principally reflected a lower average investment amount after
repayment of matured debts and the use of cash for share repurchases.
37
OverviewCorporate GovernanceFinancial Statements and ValuationFinancial PerformanceResponsible Business Management’s Discussion and Analysis
Cash Flow
Cash flow of the Group during the year is summarised below.
Operating cash inflow
Investments
Financing
Advance to a joint venture company
Interest and taxation
Dividends paid and proceeds on exercise of options
Capital expenditure
Consideration for shares repurchased
Net cash inflow
n/m: not meaningful
2016
HK$ million
2015
HK$ million
3,326
1,331
1,427
(2,036)
(523)
(1,500)
(847)
(395)
783
2,908
1,250
(1,587)
–
(480)
(1,454)
(414)
(215)
8
Change
%
+14.4
+6.5
n/m
n/m
+9.0
+3.2
n/m
+83.7
n/m
The Group’s net operating cash inflow was HK$3,326 million (2015: HK$2,908 million),
HK$418 million higher than in 2015, reflecting the growth in our core leasing business. Net
cash from investments was HK$1,331 million (2015: HK$1,250 million), mainly attributable
to reduction in investments in time deposits and term notes with longer tenors, as compared
to 2015. Net cash from financing was HK$1,427 million (2015: net cash used in financing:
HK$1,587 million), reflecting new bank loans of HK$1,680 million and repayment of a
HK$250 million bank loan during the year. In 2015, net cash used in financing was
HK$1,587 million, principally due to the repayment of HK$850 million bank loans and
HK$732 million medium term notes.
Cash in advance to a joint venture company was for residential sites’ development in Tai Po.
The Group paid dividends of HK$1,394 million (2015: HK$1,330 million), being the 2015
second interim dividend of HK107 cents per share and the 2016 first interim dividend of
HK26 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$847 million (2015: HK$414 million), including the
payment of the construction costs of Lee Garden Three.
SHARE REPURCHASE
As part of Hysan’s capital management strategy, the Group repurchased 12.59 million
(2015: 6.75 million) of its own shares during 2016, which should further enhance
shareholders’ value, at an aggregate consideration of HK$395 million (2015: HK$215
million). The average purchase price per share was HK$31.24 (2015: HK$31.78).
38
Hysan Annual Report 2016 Treasury Policy
MARKET HIGHLIGHTS
2016 was filled with uncertainties and unexpected outcomes that will have a significant
impact on the years to come. The slowdown of China’s economic growth was a major
concern in 2016 and the spillover effect had global repercussions especially in the first half
of the year. Although China met its target growth rate for 2016, uncertainty remains in
2017 as growth deceleration continues and the debt problem persists. Adding to these
concerns are the U.K.’s direction of travel following the referendum vote for “Brexit”, the
upcoming elections in several European Union countries, and the expected shifts in U.S.
economic and trade policy following the election of President Trump.
Although global economic growth continued to be weak in 2016, the U.S. economy showed
signs of improvement. The Federal Reserve raised the federal funds rate in December 2016
and signalled further interest rate hikes to come during 2017. Despite changes in U.S.
monetary policy, the central banks of the Eurozone and Japan have maintained ultra-low
interest rates. Nevertheless, the Hong Kong interest rate outlook will be affected largely by
that of the U.S.
CAPITAL STRUCTURE MANAGEMENT
The 3-month HKD Hibor increased from around 0.4% in 2015 to around 1.0% at the end of
2016. Despite the increase in Hibor, the Hong Kong bank loans market continued to have
ample liquidity as the credit margin of bank loans for companies with investment grade
credit ratings declined moderately in 2016 as compared with 2015.
The outstanding gross debt1 of the Group increased to HK$6,305 million (2015: HK$4,875
million) at year-end 2016, after debt repayment of HK$250 million and new drawdown of
HK$1,680 million for general funding purposes during the year. All the outstanding
borrowings are on an unsecured basis. The Group also arranged a new HK$500 million
committed facility in 2016, which remained undrawn as at year-end 2016.
The Group always strives to lower the borrowing margin, to diversify the funding sources
and to maintain a suitable maturity profile relative to the overall use of funds. Because of
the new bank loans in 2016, debts sourced from the capital market decreased to 73.4%
(2015: 94.9%) at year-end of 2016. The Group continued to maintain long-term
relationships with a number of local and overseas banks in order to diversify the funding
sources. At year-end 2016, 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 2016. 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 2016, the book value of the outstanding debt of the
Group was HK$6,293 million (31 December 2015: HK$4,859 million).
39
OverviewCorporate GovernanceFinancial Statements and ValuationFinancial PerformanceResponsible Business Management’s Discussion and Analysis
The following graph shows the percentages of total outstanding gross debts sourced from
banks and the debt capital markets in the past five years.
Sources of Financing at Year-end
HK$ million
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
54.2%
45.8%
73.5%
26.5%
2012
2013
83.0%
17.0%
2014
94.9%
5.1%
2015
73.4%
26.6%
2016
Bilateral Bank Loans
Capital Market Issuances
The Group also strives to maintain an appropriate debt maturity profile. As at 31 December
2016, the average maturity of the debt portfolio was about 4.3 years (2015: 6.3 years), of
which about HK$1,180 million or 18.7% of the outstanding gross debt will be due in less
than one year. With ample liquidity in the bank loans market, established relationship with
various banks and the investment-grade credit rating, the Group expects to refinance the
maturing loans in 2017 without significant refinancing pressure.
The graph below shows the debt maturity profile of the Group at year-end 2016 and 2015.
Debt Maturity Profile at 2016 and 2015 Year-end
2016
1,180
150
1,365
3,610
6,305
2015
250
1,015
3,610
4,875
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Gross Debt Amount (HK$ million)
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
40
Hysan Annual Report 2016 As part of Hysan’s capital management strategy, the Group completed repurchases of
12.59 million (2015: 6.75 million) shares through the Hong Kong Stock Exchange in 2016,
which would further enhance shareholders’ value. Reflecting the stable recurring cash flows
from our business, the Group maintained investment-grade credit ratings of A3 as rated by
Moody’s and BBB+ as rated by Standard and Poor’s.
The Group’s gearing ratio, as measured by Net Debt to Equity ratio1, increased to 5.4% at
year-end of 2016 (2015: 3.0%), mainly due to a new drawdown in 2016. The Group’s Net
Interest Coverage2 further improved to 23.5 times for 2016 (2015: 19.5 times) as cash
inflow from the business remained strong. The low gearing and strong ability to meet
interest payments reflected the Group’s resilience and capability 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
%
25
20
15
10
5
0
16.8x
6.2%
17.1x
19.5x
15.4x
5.3%
4.2%
2012
2013
2014
Net Debt to Equity
Net Interest Coverage (times)
3.0%
2015
Times
25
20
15
10
5
0
23.5x
5.4%
2016
LIQUIDITY MANAGEMENT
As at 31 December 2016, the Group had cash and bank deposits totalling about HK$2,630
million (2015: HK$2,804 million). 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$1,155 million (2015: HK$1,350
million) in debt securities.
Further liquidity, if needed, is available from the undrawn committed facilities offered by
the Group’s relationship banks. These facilities, amounted to HK$500 million at year-end
2016 (2015: HK$750 million), essentially allowing 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
41
OverviewCorporate GovernanceFinancial Statements and ValuationFinancial PerformanceResponsible 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. Bank loans generally carry lower interest rate as compared
with medium term notes. As a result of less bank loans during 2016, the average cost of
finance increased slightly to 3.8% in 2016 as compared with 3.5% in 2015.
The fixed debt ratio decreased to 73.4% at year-end 2016 from 94.9% at year-end 2015
following new borrowing of HK$1,680 million bank loans during 2016. As the U.S. has
entered the interest rate normalisation cycle, the Group believes that interest rates will rise
in coming few years. We expect the current fixed debt ratio allows the Group to weather the
risk of an interest rate hike cycle.
The diagram below shows the fixed rate debt and floating rate debt portions in the past
five years.
Fixed Rate Debt and Floating Rate Debt Portions
HK$ million
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
32.0%
68.0%
47.0%
53.0%
23.7%
76.3%
5.1%
94.9%
26.6%
73.4%
2012
2013
2014
2015
2016
Fixed rate debt
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
5,899
2.9%
7,540
3.1%
6,457
3.2%
3.5%
4,875
3,588
3,417
3.8%
6,305
3,675
2,817
2,071
2012
2013
2014
2015
2016
%
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)
HK$ million
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
42
Hysan Annual Report 2016 FOREIGN EXCHANGE MANAGEMENT
The Group aims to have minimal mismatches in currency and does not speculate in currency
movements for debt management. 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, a 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$180 million (2015: US$160 million) and
RMB55 million (2015: RMB135 million), of which US$98 million (2015: US$93 million) and
RMB55 million (2015: RMB135 million) were hedged by foreign exchange forward
contracts.
Other foreign exchange exposure mainly relates to investments in the Shanghai project.
These unhedged foreign exchange exposures amounted to the equivalent of HK$3,497
million (2015: HK$3,683 million) or 4.4% (2015: 4.7%) of total assets.
USE OF DERIVATIVES
As at 31 December 2016, 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.
43
OverviewCorporate GovernanceFinancial Statements and ValuationFinancial PerformanceResponsible Business Risk Management and
Internal Control Report
Responsibility
Our Board of Directors has the overall responsibility to ensure that sound and effective risk
management and internal control systems are maintained, while management is
responsible for designing and implementing risk management and internal control systems
to manage risks. Sound and effective systems of risk management and internal control are
designed to identify and manage the risk of failure to achieve business objectives.
Our Risk Management and Internal Control Framework
The Board is responsible for the Group’s risk management and internal control systems and
for reviewing their effectiveness. The Audit Committee supports the Board in monitoring our
risk exposures, the design and operating effectiveness of the underlying risk management,
and the internal control 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 risk management and
internal control systems and action plans to address the weaknesses or to improve the
assessment process;
(ii) regular reviews of the business process and operations reported by Internal Audit,
including action plans to address the identified control weaknesses, as well as status
updates and monitoring the implementation of audit recommendations; and
(iii) regular reports by the external auditor of any control issues identified in the course of
their work and discussion with the external auditor 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 risk management and internal control systems.
The Board considers the work and findings of the Audit Committee in forming its own view
on the effectiveness of the systems.
(Please also see “Audit Committee Report” on page 121 regarding the Committee’s detailed
review work, including the forms of “assurance” received from management, external
auditor, and internal auditor).
44
Hysan Annual Report 2016 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
control systems
• Sets strategic
objectives
• Reviews the
effectiveness of our
risk management
and internal control
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 control systems
• 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 control systems
monitoring risk exposure,
design and operational
effectiveness of the
underlying risk
management and
internal control 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
2016 Review of Risk Management and Internal Control
Effectiveness
In respect of the year ended 31 December 2016, the Board, with confirmation from
management, considered the risk management and internal control systems 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. The
systems are designed to manage rather than eliminate the risk of failure to achieve business
objectives, and can only provide reasonable and not absolute assurance against material
misstatement or loss.
During the review, the Board also considered the resources, qualification/experience of staff
of the Group’s internal control, accounting and financial reporting function, and their
training and budget were adequate.
Hysan’s Risk Management and Internal Control Model and
Continuous Improvement in our Systems
Our risk management and internal control model is based on that set down by the
Committee of Sponsoring Organisations of the U.S. Treadway Commission (“COSO”) for
internal control, and has five components, namely Control Environment; Risk Assessment;
Control Activities; Information and Communication; and Monitoring. In developing our risk
management and internal control model based on the COSO principles, we have taken into
consideration our organisational structure and the nature of our business activities.
45
OverviewCorporate GovernanceFinancial Statements and ValuationFinancial PerformanceResponsible Business Risk Management and Internal Control Report
Since 2012, we have put in place a phased improvement plan and progressed to further
enhance our risk management and internal control systems. 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 risk management and internal control into
our business processes, including into 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 risk management and internal control improvement
plan as well as other strategic initiatives. (e.g. corporate social responsibility strategy and
reporting). All these further our ultimate objective of making our risk management system a
“living” one that is practised on a day-to-day basis by operating units.
• Control Environment – this is very important as it sets the tone for risk management and
internal control in a company. Hysan is a tightly-knit organisation with around 640 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). In 2016, our “whistle-blowing”
system was enhanced by adopting a separate “Whistleblowing Policy”. The whistleblowers
shall raise concerns to a designated independent third party who will report to the Audit
Committee. We aim to build risk awareness and control responsibility into our culture and
regard them as the foundation of our risk management and internal control systems.
• 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 project) as well as functional areas (including
finance, human resources, IT, and legal). We aim to have a “living” 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 top
management) 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.
46
Hysan Annual Report 2016 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 top management have been held, with a view to further enhancing the “participatory”
aspect of the overall risk assessment process.
• 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 enable 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 a relevant control self-assessment questionnaire 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 team. Management has enhanced its update reports to Audit
Committee on movements on major risks and appropriate mitigating measures. There are
three Audit Committee meetings annually, with one meeting substantially devoted to risk
management and internal control system.
47
OverviewCorporate GovernanceFinancial Statements and ValuationFinancial PerformanceResponsible Business Risk Management and Internal Control Report
Further Strengthening of Our Underlying Systems
We have made further progress in strengthening our risk management and internal control
system, highlighted as follows:
Control Environment – enhanced legal and regulatory compliance framework
• Further strengthened the legal and regulatory compliance
framework and strategic foundation for a strong compliance
management between legal department, business units,
Management, Audit Committee and the Board.
Continual review and
refinement of processes
and structures enhance
compliance.
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. The top
management also led further discussions with all department heads.
In the context of a
fast-changing global and
local environment, the
monitoring of “emerging
risks” will be a focus.
Examples include social-political risks, economic risks, cybersecurity
risk etc.
Control Activities – policies and procedures
• Identified and implemented new policy to address the changing
regulatory environment. For example, company guideline and
procedure relating to handle and report data breach is refined and
in place. It sets out clear internal procedures for the proper handling
and reporting of a data breach incident. This signifies the
importance we place on the business practices, which become more
important in light of fast-changing regulatory requirements and
enhanced stakeholder expectations.
• Company policy relating to the competition law is in place. Seminar
has been held across department to educate and raise awareness of
the staff.
Control Activities – Whistleblowing Policy
• Enhanced the “whistle-blowing” system by adopting a separate
Whistleblowing Policy to allow whistleblowers to raise concerns to a
designated independent third party who will report to the Audit
Committee.
Continual review and
refinement of policies
and procedures in light
of the changing external
and internal
environment.
Continual review and
refinement of risk
management and
internal control and
procedures for handling
concerns raised by
whistleblowers.
Monitoring – enhanced “management assurance” to the Audit Committee and
the Board in their respective reviews
• Enhanced management update reports to Audit Committee and the
Board on major risks the Group were facing, with deep dive reports
on selected topics, e.g. risks management on the redevelopment of
Lee Garden Three, safeguards against terrorist attack, etc.
• To further strengthen management’s “assurance” to 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 Audit Committee and the Board.
Facilitation and
enhancement of the
work of the Audit
Committee and the
Board in monitoring our
risk exposure.
48
Hysan Annual Report 2016 Way Forward
Embedding a “living” risk management and internal control systems within the day-to-day
operation of our operating units is a continuous voyage. We are committed to continually
improving our risk management and internal control framework and capabilities of the
Group and shall continue on this path, with enhanced integration of risk management and
internal control into our business processes.
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 2016 Description of risk change
Impact of macro-economic developments on:
1. Office Leasing
2. Retail Leasing
The office rental market on Hong Kong Island benefited from
limited new supply and demand from China financial
institutions. However, due to global economic headwinds, there
was a drop in the overall demand for office spaces across the
market. Also, lower rent in the non-core business areas and the
new supply there has driven cost conscious tenants to move
out of core areas.
The retail market was challenging during 2016 as Hong Kong
retail sales recorded a decline, resulting from a fall in the
number of tourists and a downturn in local sentiment. The weak
retail sales led to reluctance by retail tenants to expand their
retail enterprises, shop numbers or footprints.
3. Residential
Leasing
Reduced demand from expatriates, higher market vacancy and
keen competition continued to exert pressure on the luxury
residential leasing market and higher vacancy at our property.
> For more analysis and mitigating measures,
see “The Marketplace” & “Review of Operations”
4. Projects
Main building work for Lee Garden Three is on schedule towards
its expected completion date in fourth quarter of 2017.
5. Human
Resources
> For more analysis and mitigating measures,
see “Review of Operations”
The service industry in Hong Kong continues to experience
widespread labour shortages. Employers are facing increased
competition for skilled personnel, especially 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” remained broadly the same
49
OverviewCorporate GovernanceFinancial Statements and ValuationFinancial PerformanceResponsible Business 3
Responsible
Business
52
Business of Life
53
Environment
60 Workplace Quality
63 Health and Safety
65
Community Contributions
70
The Stock Exchange of Hong Kong
Limited’s Environmental, Social and
Governance Reporting Guide
73
Corporate Responsibility Reporting
Verification Statement
51
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Business
of Life
Sustainability
Progress
2006 – 2016
Hysan Development’s first Corporate Responsibility Report was published in 2006.
This year’s “Responsible Business” section is the 11th report we have produced
focusing on our social and environmental efforts. We would like to take this
opportunity to highlight how far we have come both in terms of achievements for
our sustainability activities, and for reporting our initiatives and how we have
implemented them.
As a “Business of Life”, Hysan has steadfastly maintained our commitment to providing
sustainable and outstanding returns for our shareholders, while also creating positive and visible
changes for our stakeholders and the communities we serve. Above all, our sustainability
progress would not have been possible without the contributions of our staff members, business
partners and community neighbours. Thank you very much for all your help and we look forward
to working with you all in the years to come.
Awards and Recognitions
Hysan’s sustainability data collection began to take shape in 2005, but it was not until 2008
that we were recognised as one of the outstanding leaders in this increasingly important field
with our inclusion in the internationally renowned FTSE4Good Index. We are proud to report
that we are still a member of the Index in 2016. Since 2010, we have also been a constituent
member of the Hang Seng Corporate Sustainability Index with an “AA” rating. Hysan’s efforts
have also been recognised by MSCI’s Global Sustainability Index both with membership and an
“AA” rating. Recently, the Group was also named one of the “Top 80 assessed stocks in the Hong
Kong Quality Assurance Agency Sustainability Rating and Research”.
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 importance 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. In 2016, we took this one step further and supported the establishment of Lee Gardens
Association, a group with the aim of promoting the Lee Gardens area through various activities
and events. For details about the Association, please see Page 65.
52
Hysan Annual Report 2016 Environment
Environmental Policy
Hysan adopted an Environment, Health and Safety Policy in 2003 and made it public in
2006 as part of our first Corporate Responsibility Report. However, by 2014, there was a
clear need to update the policy and provide more detailed and separate policies for
environmental issues, as well as health and safety matters.
In the 2006 Report’s environmental section, we stated that we aim generally for
improvements in energy efficiency, waste reduction, and good indoor air quality
maintenance.
The present Environmental Policy focuses more specifically on four major areas, namely:
1. carbon reduction efforts
2. waste reduction at source promotions
3. green purchasing enhancement, and
4. stakeholder engagement improvement
Under the Policy, Hysan will:
• Ensure compliance with all applicable environmental and related legislation 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 2016
• Recognition: Lee Garden One Offices qualified as a finalist in the Hong Kong Green
Building Award 2016
• Stakeholder Engagement: increased support for government-led environmental charters;
shared experience at major local environmental events; organised more events and
workshops for tenants and staff
• Energy Accounting System: installed systems at Lee Theatre Plaza and Lee Garden Six
• Waste Management: launched food waste recycling programme at Bamboo Grove
53
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Environment
Energy Efficiency
ENERGY SAVINGS AND REDUCTION OF GREENHOUSE GAS EMISSIONS
ACHIEVEMENTS: 2005 BASELINE AND FROM 2015 TO 2016
Issue
GHG Emissions for
Scope 1 & 2 (a) (b)
Purchased Electricity
Total
(tonnes CO2e)
Total (MWh)
2005
2015
2016
48,421
52,598
39,120
49,502
37,242
47,724*
(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
emissions 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 2016
* The data have been adjusted upwards (based on past consumption pattern) for periods with significant vacancy / during
renovations
- CO2
Hysan achieved its target reduction in overall energy use in 2006 as compared
to the previous year, without compromising service levels.”
Page 9, Corporate Responsibility Report 2006
In our first year of reporting, we may not have been confident enough to provide data for
public consumption. With the benefit of further environmental data collection (which we
began in a comprehensive fashion in 2005), we realised we were heading in the right
direction as far as energy savings were concerned.
Using 2005 as a baseline, it is clear that we reduced energy consumption by more than
9.2% by the end of 2016. Our 2016 GHG emissions and electricity purchased decreased
by 4.8% and 3.6% respectively, as compared to 2015. These reductions were due partly to
the successful implementation of our energy accounting system and other energy
savings initiatives.
ENERGY ACCOUNTING SYSTEM AND OTHER ENERGY SAVINGS INITIATIVES
The second phase of our energy accounting system’s implementation is in progress. In total,
five of our commercial buildings now benefit from the system, which measures and analyses
energy consumption within each building as well as our major buildings as a whole. The
availability of electricity consumption data on a real-time basis has made it much easier for
us to monitor and control system usage. Hysan Place’s retail area air conditioning supply is a
good example. With better monitoring and the enhancing of outdoor air supply control, we
managed to fine-tune the operation schedule to optimise the supply, thus creating
significant savings.
In addition, we continued our energy savings quest through the identification of locations
where more energy efficient products, including energy efficient motors, T5 fluorescent
tubes and LED lights, could be installed.
54
Hysan Annual Report 2016 Environmental Quality
Following recent concerns over airborne diseases and their potential for
causing epidemics, we are redoubling our efforts to improve air quality.”
Page 10, Corporate Responsibility Report 2006
Hysan’s focus on environmental quality was somewhat reactive, stemming mainly from the
H5N1 Bird Flu cases in the early 2000s, and perhaps more acutely, the deadly SARS
epidemic in 2003. A decade later, our building users’ demands, as well as the community’s
expectations in regard to our buildings’ indoor environmental quality, and how these
structures interact with their surroundings, have increased significantly.
GREEN BUILDING RECOGNITION AND CERTIFICATIONS
Lee Garden One’s office section is on course to obtain a BEAM Plus (Existing Buildings)
Platinum Certification after its final assessment was submitted to the certifying body in
November 2016. With Hysan Place also approaching its fifth anniversary, we looked at the
feasibility of obtaining a BEAM Plus (Existing Buildings) certification for this renowned green
commercial building. We then submitted a preliminary assessment towards the end of 2016,
and we expect to receive the preliminary results in the first quarter of 2017.
We are also delighted that Lee Garden One’s office section was a finalist in the Hong Kong
Green Building Council’s and the Professional Green Building Council’s Green Building
Award 2016. We are proud of the fact that this 19-year-old building was honoured in the
Existing Building Facilities Management category, and that our property management
colleagues’ hard work was recognised.
Lee Garden Three, our new commercial building project to be completed in late 2017, is
pursuing the highest level of the BEAM Plus (New Buildings) green standard, as well as U.S.
Green Building Council’s LEED certification.
AIR QUALITY
All our buildings have continued to be recognised by the Hong Kong Government’s Indoor
Air Quality Certification Scheme with “Excellent Class” or “Good Class” certifications.
We are redoubling our efforts to promote the use of electric vehicles to reduce urban
pollution. For our forthcoming Lee Garden Three car park, all of the 200+ parking spaces will
have electric sockets installed for such vehicles’ charging. This initiative further complements
our existing electric sockets in Hysan Place, charging bays in Lee Garden One, Lee Garden
Two and Leighton Centre, as well as the Tesla Motors Superchargers in Lee Garden One
car park.
URBAN MICROCLIMATE AND BIODIVERSITY
Lee Garden Three will debut in late 2017 with a partial green roof, which will help to reduce
the building’s heat island effect and improve the district’s microclimate. In regard to
biodiversity, one part of the new building will see a “Butterfly Garden” with plant species
that attract adult butterflies, other flora that are ideal to host larvae or protect against
predators, as well as a good water source.
Meanwhile, Hysan Place’s rooftop Urban Farm and its Sky Wetland are also contributing to
these causes, while carrying on their green education roles.
55
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Environment
Waste Management, Recycling and Water Consumption
We are committed to re-using and recycling waste, and are actively involving
our commercial and residential tenants in eliminating wastage.”
Page 10, Corporate Responsibility Report 2006
By 2006, Hysan was already active in promoting recycling among its tenants. However the
scale of our work then would be dwarfed by our recycling efforts in 2016. One of our highest
profile activities in 2016 was the launching of our food waste recycling programme in
Bamboo Grove, our residential project. Our new food recycling process aims to reduce the
amount of waste to be disposed of at landfills. More than 30 families in the Mid-Levels
complex joined the programme within the first two months of its unveiling. This initiative
complements the well-run food waste collection service provided in Hysan Place’s food court
and other restaurants in the mall.
In 2016, Hysan’s commercial and residential buildings were awarded another full set of
“Class of Excellence” Wastewi$e labels under the Government’s Hong Kong Green
Organisation Certification Scheme. This compared well with our 2006 efforts, when we
received only three top Wastewi$e labels.
LEE GARDEN THREE PROJECT’S RECYCLING
The foundation works of the Lee Garden Three project was completed in early 2016, and its
super-structure construction commenced in February 2016. In 2016, close to 66% of the
construction waste made during the foundation and ongoing superstructure construction
work, including around 2,900 tonnes of metal and 445 tonnes of timber, were recycled. This
was significantly higher than the original 60% recycling target.
WASTE MANAGEMENT ACHIEVEMENTS (EXCEPT CONSTRUCTION WASTE)
2005 BASELINE AND FROM 2015 TO 2016
Issue
Paper recycled (kg)
Aluminium cans recycled (kg)
Plastic bottles recycled (kg)
Old clothing donation (kg)
Toner/Cartridge recycled (pcs)
Computer and equipment recycled (pcs)
Food waste recycled (kg)
Glass bottles recycled (kg)
2005
2015
2016
741,502
975,329
1,008,651
1,098
1,529
960
206
100
–
–
2,708
3,042
3,895
216
82
29,871
4,215
2,909
3,297
3,448
109
27
26,696
15,100
Hysan has been expanding the type of recyclables we collect. In addition to paper,
aluminium cans, plastic bottles, old clothing, toner/cartridge, computer equipment, glass
bottles and food waste, we added used fluorescent lamps and rechargeable batteries to the
list late in 2016. We have also been registered as a chemical waste producer at Hysan Place
and Lee Garden One due to our used fluorescent lamps collection and recycling.
56
Hysan Annual Report 2016 WATER MANAGEMENT ACHIEVEMENTS 2005 BASELINE, AND
FROM 2015 TO 2016
Issue
2005
2015
2016
Potable water used for properties and
landscaping (m3)
Potable water used for cooling (m3)
Wastewater reused for flushing (m3)
Wastewater discharged from properties and
landscaping (m3)
62,665
–
–
73,231
181,572
18,157
69,079
179,155*
17,916*
56,399
65,908
62,171
* The data have been adjusted upwards (based on past consumption pattern) for periods with significant vacancy / during
renovations
We have made significant effort in cutting down total potable water use in recent years,
and in 2016, we used 2.6% less, as compared to 2015. Our water saving devices, as well as
our staff’s mindset to conserve water, proved to be effective in our day-to-day operations.
This was also aided by record-breaking rainfall in the autumn of 2016, which cut down on
our water use for plant watering. Hong Kong also saw a heat wave during the summer of
2016, but that did not translate into more water usage for the portfolio’s air-conditioning
system, which saw a 1.3% decline, as compared to 2015. The reduction of usage was due
partly to our application of energy savings measures in Hysan Place, thus saving a
significant amount of cooling water.
Green Procurement
We are updating our cleaning contract specifications so that the appropriate
items and practices can be used.”
Page 10, Corporate Responsibility Report 2006
Our green procurement ideas were in their infancy back in 2006, but by the time we
completed Hysan Place in 2012, we had already developed a green mindset through using
local materials for construction. Our new Lee Garden Three project is still on course to use
materials extracted or manufactured locally for 10% of the total materials by value. We
also actively procure and use more green products and services throughout our operations,
including at least 50% of environmentally-friendly cleansing agents for our buildings.
We are also in discussion with a social enterprise to install one or more filtered water
dispensers in our public and office areas with an aim to promote the reduction in disposable
plastic water bottle use.
57
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
Environment
Green Partnerships with Stakeholders
On our stakeholders’ front, we have issued a guideline for tenants on fitting
out their offices. Upon request, we perform indoor air quality measurements
for them.”
Page 10, Corporate Responsibility Report 2006
Hysan has come a long way since 2006 in regard to green partnerships. Our efforts now
focus on contacts with four main groups of stakeholders:
• Government Bureau and Departments
• Tenants, Visitors and the General Public
• Staff Members
• Green Organisations
GOVERNMENT INITIATIVES
In addition to an existing number of energy saving and recycling initiatives that Hysan
supports, the following new charters and schemes were added in 2016:
• Environment Bureau’s Post-COP 21 Green Building Engagement (4% energy savings
target in three years)
• Environment Bureau’s Charter on External Lighting
• Environmental Protection Department’s Rechargeable Batteries Recycling Scheme
• Environmental Protection Department’s Food Waste Source Separation, Collection and
Delivery to Organic Waste Treatment Facilities Phase One (our commitment to join the
programme starting in Q1 2017)
TENANTS, VISITORS AND THE GENERAL PUBLIC
Four years after its unveiling, our Urban Farm on the rooftop of Hysan Place remains a
major green attraction for visitors and tenants alike. The farming sessions were heavily
oversubscribed throughout 2016. For more details, please refer to the “Environmental Issues
and Healthy Living Promotions” section of “Community Contributions” in Page 66. We
continued to support the Redress’ EcoChic Design Award to encourage less apparel
production and reduce wastage through an exhibition at Hysan Place. We also continued to
support Greeners Action’s Lai See Packets recycling programme to promote the reusing of
these lucky packets during Chinese New Year.
As per shoppers’ request, we added three sets of recycling bins in Hysan Place and Leighton
Centre in 2016. Leveraging on the Lee Gardens Office Plus platform, we hosted two green
living workshops for Office Plus members, who are staff of our office tenants, and received
positive feedback from those who took part.
Our Environmental Affairs Manager shared her experiences of green building management
with the general public on several occasions during 2016. She was interviewed by Metro
Radio after Hysan won the World Green Organisation’s Sustainable Business Award. She
also spoke at the Jockey Club CarbonCare Open Innovation Lab’s “Zero Carbon Hong Kong
Inno Day: Sustainable Living 2016”, as well as at Friends of the Earth’s “Achieving Zero
Waste Practices through Urban Farming”.
58
Hysan Annual Report 2016 STAFF ENGAGEMENT
Hysan’s Go Green Committee again took the lead in bringing green issues to the attention
of our own staff members. In addition to the second-hand clothing drive, which was in its
second year of operation, the Committee took 25 colleagues and their family members to
visit Hongkong Electric’s Lamma Power Station to learn about the latest initiatives in power
generation. It also organised an upcycling workshop for one of our “Lunch and Learn”
sessions in 2016.
The Committee helped to launch a series of “Go Green” labels to remind colleagues and
visitors to conserve resources, with the labels being adopted in our Head Office as well as in
all of our buildings’ common areas. Environmental news and tips are now disseminated to
staff members through our intranet’s “Do you know that?” section.
GREEN ORGANISATIONS
Hysan remains a strong partner of a number of green organisations through actual
participation or sponsorships. Among the projects we supported in 2016 were:
• 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 Packets Recycling
• Jockey Club CarbonCare Open Innovation Lab’s “Zero Carbon Hong Kong Inno Day:
Sustainable Living 2016”
• Friends of the Earth’s “Achieving Zero Waste Practices through Urban Farming”
• Hong Kong Environmental Protection Association’s Wood Recycling and Tree
Conservation Scheme
• Hong Kong Green Building Council and Professional Green Building Council’s Green
Building Award 2016
59
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Workplace
Quality
Staff Composition
As at 31 December 2006, Hysan had a total workforce of 492.”
Page 13, Corporate Responsibility Report 2006
As at 31 December 2016, Hysan employed a total of 592 staff, including our Head Office
team and principal operating subsidiaries’ colleagues. All our staff members are located in
Hong Kong.
185 of our staff members, including 44 out of 74 Head Office Managers or above, are
women.
Age Group of Staff
1%
15%
8%
1%
9%
15%
Number of
staff
191
29%
47%
35%
Number of
staff
401
19%
21%
Head Office
Principal Operating Subsidiaries
Age 19 or below
Age 20 – 29
Age 30 – 39
Age 40 – 49
Age 50 – 60
Age over 60
In the past decade, we have built and grown a team of experts who have strong knowledge
of the retail, office and residential fields. We have also created a working environment in
which these employees can make use of their resourcefulness, professionalism, teamwork
and swift action to deliver a unique and satisfying experience to our customers.
Code of Ethics
Our Code of Ethics highlights the main Hysan principles:
• 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. The Code also has in place
a “whistle-blowing system”, as monitored by an independent third-party service provider
directly reporting to the Audit Committee Chairman.
60
Hysan Annual Report 2016 Human Resources Policies
In general, we have built transparent procedures and appropriate checks-and-
balances into our hiring, disciplinary, grievance, and other key human
resources processes, thereby reinforcing our aim to be a fair employer.”
Page 13, Corporate Responsibility Report 2006
Since 2006, we have further refined our Employment and Staff Policy, which 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). The Policy is
complemented by the Code of Ethics as stated in the section above. In 2016, we did not
identify any material non-compliance or breach of legislation related to equal opportunities.
Hong Kong is our home base, and the site of our core operations. 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 2016.
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 2016.
Our management strongly emphasises the need to maintain a clear and constructive
dialogue with staff members on company issues, even though we do not have an official
collective bargaining policy, nor are we a party to a collective bargaining agreement. We
maintain comprehensive written policies on compensation, work hours, staff benefits, staff
training, health and safety, as well as grievance mechanisms. For details on our other
channels of communication, please refer to the “Employee Engagement” section on
Page 62.
Training and Development
The major 2016 training programmes for Head Office and Principal Operating Subsidiaries
colleagues included:
• Project management workshops
• Language training for retail and office staff
• Customer service training for finance staff
• Seminars on latest ordinance changes (e.g. fraud risk management, competition law)
• Enhancement of training curriculum for Principal Operating Subsidiaries colleagues
(including customer service, grooming, and language workshops for frontline staff,
coaching workshops for supervisors)
For 2016, Hysan provided an average of 12.2 hours of training per Head Office staff, and
15.8 hours of training per Principal Operating Subsidiaries’ employee.
Our training efforts paid off in 2016, when Hysan Property Management Limited was
awarded a Customer Service Certificate of Merit by the Hong Kong Retail Management
Association’s Hong Kong Awards for Industries.
61
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Workplace Quality
Attracting and Retaining Talent
The recruitment and staffing process ensures that talents are exhaustingly
identified from both internal and external sources, with the ultimate goal of
giving staff maximum opportunities to grow and develop at Hysan.”
Page 13, Corporate Responsibility Report 2006
We have continued to develop a comprehensive system of attracting and retaining talent.
Our employee turnover figures were 25.4% for our Head Office staff, and 17.1% for our
Principal Operating Subsidiaries’ employees. These figures were higher than the Hong Kong
property sector turnover rate of 16.8% (sourced from a Towers Watson survey), and we are
looking into ways to make improvements in this respect.
We started a Summer Internship Programme in 2016, with an aim to provide a pipeline of
talents for our forthcoming Management Trainee Programme in 2017. It is also to help gain
fresh insights and different business perspectives from students who may suggest
innovative solutions to energise our business. Our two summer interns worked jointly on a
business project during the six-week programme.
The Management Trainee Programme will focus on developing talented university
graduates with high potential to become the future business leaders of Hysan. A
familiarisation programme will be followed by extensive on-the-job experience at
designated business functions.
Employee Engagement
Our U.S.E. idea awards continued to recognise the provision of unique and satisfying
experiences by our staff members to our stakeholders. A total of 14 U.S.E. idea awards and 3
Best U.S.E. idea awards were granted during the year. Project leads were assigned to execute
the winning ideas, and the progress of the projects were shared with all staff on the intranet.
Among the best ideas were ones to upgrade dining experience at Hysan Place’s Kitchen 11,
and to provide future events and activities ideas in outdoor areas.
Separately, the U.S.E. Ambassador programme recognises top U.S.E. behaviours among
frontline staff. A total of 9 U.S.E. Ambassadors and 11 Merit Awards were presented, and
their stories also shared on the intranet.
The Company Day provided another opportunity for senior management members to
exchange views with staff members both on the previous year’s work and the coming year’s
expectations. Around 200 staff members took part in the latest edition of this annual event.
62
Hysan Annual Report 2016 Health and
Safety
Health and Safety Policy
Hysan’s first Environment, Health and Safety Policy was established in 2003 and was made
public in 2006 as part of the first Corporate Responsibility Report. The 2014 revision
separated the health and safety section from the environment section.
The 2006 Report’s health and safety section highlighted our determination to take these
issues very seriously for the sake of our employees, customers and the communities in which
we operate. We also explained our need to consistently review and refine the health and
safety management system, as well as our employees’ safety training. Finally, we
acknowledged the importance of a response plan to deal with possible outbreaks of
contagious diseases.
The present policy focuses on the provision and maintenance of a safe and healthy
environment within Hysan’s portfolio for all staff, tenants and members of the general
public. The Group 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 to 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
As a responsible employer, we take full account of our health and safety
obligations towards our stakeholders. “
Page 11, Corporate Responsibility Report 2006
Within the Group’s structure, the Property Services division takes the lead in the
coordination of health and safety matters, as their members account for around 70% of
our total staff headcount and most have frontline roles. The General Manager of Property
Services chairs our Safety Committee, which oversees the implementation of the Health
and Safety Policy on a day-to-day basis, and regularly reports back to senior management.
Safety procedures are recorded on a Safety Management Plan. One round of third-party
safety audit took place in 2016 for all Hysan buildings. No significant irregularities
were found.
63
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Health and Safety
Our staff members clocked more than 3,360 hours of safety training in 2016.
The nature of our business, mainly in property management, means that our health and
safety risk profile is comparatively low. However, our frontline staff, inevitably, still
experience minor accidents, and there were 26 work injury cases at Hysan in 2016, the
majority of which did not incur more than five sick leave days. There were 1,070.5 lost days
due to work injury, including 790 days brought forward to 2016 from 2013, 2014 and 2015,
as well as 280.5 days from a 2016 case.
Our care for health and safety extends beyond our staff’s physical well-being. Our Employee
Assistance Programme provides counseling services, which are operated by a non-
governmental organisation on our behalf. There was an unfortunate case of a customer’s
death within one of our shopping malls during 2016. Counselors from the Programme gave
invaluable psychological help to ease the concerns of several staff members immediately
after the incident and for a period of time afterwards.
Health and Safety: Our Partners
We also request that our contractors, especially those in the construction
industry dealing with our Hennessy Centre (later renamed Hysan Place)
redevelopment project, provide us with method statements on how they are to
complete their work, including the precautionary means to protect themselves
and others from work-related harm.”
Page 11, Corporate Responsibility Report 2006
In 2016, we demanded even more from our contractors to ensure they observe very high
standards of health and safety requirements similar to our own. During the year, safety
consultants conducted one round of safety audits for the Lee Garden Three development
project. The audit looked into the contractor’s safety management system, with a focus on
plant and equipment, subcontractors’ control, and safety work procedures implementation.
The consultants also made recommendations for further safety enhancements. The audit’s
result was satisfactory. There were three minor work-related injuries at the Lee Garden Three
site in 2016.
64
Hysan Annual Report 2016 Community
Contributions
Supporting the setup of Lee Gardens Association
In Hysan’s first Corporate Responsibility Report, we proudly showcase
“Music in the Green City”, a concert-cum-street carnival presented and
sponsored by Hysan”
Page 14, Corporate Responsibility Report 2006
Back in 2006, Hysan already understood the need to place community work high on the
corporate responsibility agenda. “Music in the Green City” was one of our earliest attempts
to cooperate with Wanchai District Council, as well as with Hong Kong artistic groups to
bring both green and arts/culture messages to the streets of Lee Gardens.
In an effort to encourage the Lee Gardens area stakeholders to join forces and further
enliven the community, Hysan took the lead in establishing an area association by the name
of “Lee Gardens Association” (LGA). LGA’s aim is to create a unified community of
businesses with the purpose of promoting Lee Gardens Area to local Hong Kong consumers
and overseas visitors through events, activities, and generally improving the local
environment. It also provides a platform for its retail/food and beverage services, enabling
members to share views and engage government departments and the local District
Council. LGA’s ultimate wish is to ensure the sustainable growth of the Lee Gardens area.
In the second half of 2016, LGA successfully hosted a number of events and attracted tens
of thousands of visitors to the streets of Hysan Avenue, Pak Sha Road and Lan Fong Road.
Sep
Oct
Nov
Dec
Wellness 360 Fair
played host to more
than 30 vendors and
performing units, which
served thousands of
participants with
wellness products, food
and drinks, as well as
fitness performances
and dances.
Hong Kong Tennis
Open’s Fanzone was held
on Pak Sha Road, in
cooperation with Wanchai
District Council’s
Cultural & Leisure Services
Committee and Hong
Kong Tennis Association.
Visitors enjoyed two
afternoons of live TV
transmission of top
quality tennis matches, as
well as a host of tennis-
themed fun and games.
Art Fun in Causeway Bay’s
Night Parade again mesmerised
tens of thousands of people
lined up on the Lee Gardens
streets. One of Hong Kong’s
most creative giant puppet
parades, and a part of Standard
Chartered Arts in the Park Mardi
Gras, the Night Parade used
William Shakespeare’s A
Midsummer Night’s Dream as
its theme in 2016. Even the
pre-event short plays and media
promotion attracted
considerable public attention.
Wellness 360 Xmas Fair
and Charitable Choice’s
Colour for Charity
Carnival brought much
Christmas cheer to
Hysan Avenue and Pak
Sha Road. LGA co-
presented both of these
family-friendly activities,
which were very
well-received.
65
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
Community Contributions
LGA also played host to a number of history tours of the area, which were co-organised by
Wanchai District Council’s Cultural and Leisure Services Committee, Hong Kong Architecture
Centre, and the Conservancy Association Centre for Heritage. It is hoped that the tours will
help share more information about Causeway Bay and Lee Gardens area’s treasured past
with the public.
Environmental Issues and Healthy Living Promotions
While each party contributed its unique skills to the successful partnership (for
“Music in the Green City”), Hysan provided the leafy venue, as well as the
professional and financial support to make it all happen.”
Page 14, Corporate Responsibility Report 2006
Surrounded by several leafy venues, Hysan Place remained one of Hong Kong’s best known
green commercial buildings, and 10 organisations visited its Urban Farm in 2016. The
rooftop farming programme continued to be oversubscribed. 311 urban farmers
representing 50 companies grew organic vegetables successfully on this most improbable
farm in the heart of Hong Kong’s busiest commercial district.
450 children and their parents took part in our educational Green Wonders programme,
which we operated in coordination with green enterprise, Smiley Planet. We also trialed
Green Birthday Parties for youngsters to celebrate their special day, and we ensured the
parties had an educational twist.
Throughout October, Hysan’s portfolio showcased its connection with one of Causeway
Bay’s most popular sporting events: the Prudential Hong Kong Tennis Open. A top women’s
tennis tournament attracting some of the world’s best known players, it inspired a very
popular VR game in Hysan Place’s atrium. Tennis-themed activities, including the sale of
66
Hysan Annual Report 2016 personalised tennis balls for charity, as well as visits by Caroline Wozniacki and Jelena
Jankovic, put Lee Gardens in the sporting and healthy living spotlight. We are planning to
follow up the sports theme with the sponsorship of another major local sporting event
in 2017.
Our annual “Hysan Healthy Hike and Run” remained a top trail event on the competition
calendar for runners. The 2016 event was well-supported by 1,400 participants, including
dozens of our own colleagues. Their determination to push themselves to the limit was
further highlighted by two teams taking part in Oxfam’s 100km Trailwalker event, including
several colleagues new to the sport.
Arts and Culture Development Promotions
We have offered the free use of venues in our portfolio, and we will
facilitate the posting of publicity materials for non-profit organisations
within our retail malls.”
Page 14, Corporate Responsibility Report 2006
Hysan’s support for community groups through the use of venues for arts and culture
development has expanded significantly since 2006. Several of the arts and culture events
supported by Hysan adopted an environmental theme in 2016. Food Angel’s Canstruction
2016 attracted plenty of attention from mall-goers in the summer, when it promoted the
reduction of food waste through an amazing display of canned food statues. Green Power’s
Butterfly exhibition and the Nature Conservancy public engagement programmes both
twinned green issues with artistic presentations. UNICEF’s 30th Anniversary exhibition used
art pieces to highlight the plight of young refugees and underprivileged children throughout
the world. Finally, Art with the Disabled Hong Kong and Premiere Performances of Hong
Kong graced Hysan Place’s stage with popular musical events.
67
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Community Contributions
Other Venue Support
Below is a list of other community activities that took place at Hysan’s venues in 2016:
Jan
Feb
March
Hong Kong Science and
Technology Parks “Let’s
Shape a Brighter Future
Together” Roadshow
St. James’ Settlement
“Valentines Flower Charity
Sale”
Helping Hand “Cookie
Campaign Launching
Ceremony”
Helping Hand “Cookie Campaign
Charity Sale”
Lok Sin Tong “Charity Candy Sale”
Redress “The Ecochic Design
Award 2015/2016 Exhibition”
May
June
August
Hong Chi Association
“Charity Cookie Sale”
Oxfam Hong Kong “Rice
Charity Sale”
Hong Kong Association of
Banks “Youth Financial
Education Programme
2016 Launch Ceremony”
Habitat for Humanity
“Education and Membership
Recruitment Event”
September
October
November
Senpha “Annual Award
2016” Painting Exhibition
Walk 21 Conference
“Welcome Reception”
Haven of Hope Christian Service
“Charity Cookie Sale”
WWF Hong Kong “Public
Engagement Programme”
Leisure and Cultural
Services Department “The
Hong Kong Women’s Choir
Performance”
Hong Kong Tennis
Association/TVB Press
Conference “Hong Kong
Tennis Open”
Hong Kong Red Cross “Charity
Sale”
Hong Kong PHAB Association
“Raffle Ticket Sale”
Hong Kong Institute of Architects
“Public Lectures”
68
Hysan Annual Report 2016
Our Volunteer Team
Hysan encourages its volunteers team to contribute to the community
whenever possible.”
Page 14, Corporate Responsibility Report 2006
Hysan’s volunteer team is now very well-organised, and our colleagues contributed 780
hours of their time for volunteer service in 2016. Another 241 hours were also recorded as
contributions by their friends and families taking part in Hysan activities. 11 events took
place during the year.
The organisations Hysan partnered included:
• Fair Trade Hong Kong Foundation
• Hong Kong Movie Star Sports Association Charities Limited
• Hong Kong Society for the Protection of Children
• Music Children Foundation
• Oxfam Hong Kong
• SAHK
• St. James’ Settlement
• Young Artists Development Foundation
Hysan was a Gold Award for Volunteer Service winner. The programme was organised
by the Steering Committee on Promotion of Volunteer Service of the Social Welfare
Department.
69
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 do 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”
70
Hysan Annual Report 2016 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 2016, the training ranged from customer service for
non-frontline colleagues to project management workshops
• 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 2016” (covered stakeholder engagement)
71
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
• “Workplace Quality – Code of Ethics”, which covers our
whistle-blowing procedures, how they are implemented
and monitored
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
72
Hysan Annual Report 2016 Corporate Responsibility Reporting
Verification Statement
Third-party Independent Verification
73
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business 4
Corporate
Governance
76
Board of Directors
81
Corporate Governance Report
102 Directors’ Report
111 Directors’ Remuneration
and Interests Report
121 Audit Committee Report
75
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, S)
Irene Yun Lien LEE
Ms. Lee leads the Group in her executive Chairman role. 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 also serves as a director of certain subsidiaries of the Group. She is aged 63.
76
Hysan Annual Report 2016
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 67.
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
PFC Device Inc., 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 Guolian Securities Co., Ltd,
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 an Independent
Non-Executive Director in January 2010. He is aged 67.
Independent Non-Executive
Director (N)
Lawrence Juen-Yee LAU
Professor Lau is currently Ralph and Claire Landau Professor
of Economics at The Chinese University of Hong Kong. He
serves as Chairman of the Board of Directors for The
Chinese University of Hong Kong (Shenzhen) Finance
Institute, aka Shenzhen Finance Institute. 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,
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 72.
Note: (A) Audit Committee
(R) Remuneration Committee
(N) Nomination Committee
(S) Strategy Committee
77
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Board of Directors
Independent Non-Executive
Director (R, N, S, chairing A)
Joseph Chung Yin POON
Non-Executive Director
Siu Chuen LAU
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 was
the former chairman of Hang Seng Index Advisory
Committee, Hang Seng Indexes Company Limited, a former
member of the Board of Inland Revenue of Hong Kong
Special Administrative Region and the Environment and
Conservation Fund Investment Committee, and a former
committee member of the Chinese General Chamber of
Commerce. 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 an Independent Non-Executive
Director in January 2010. He is aged 62.
After serving as the Company’s Deputy Chairman and Chief
Executive Officer for 4 years (May 2012 – August 2016),
Mr. Lau has been re-designated as Non-Executive Director
with effect from the conclusion of the Board meeting of the
Company held on 2 August 2016. Earlier, he has worked as
the acting Head of Finance of the Company in 1999, was
appointed a Non-Executive Director in May 2011 and
Non-Executive Deputy Chairman in March 2012. He has
also worked as a brand manager of French luxury products,
management consultant at McKinsey & Company and
consumer analyst at Morgan Stanley Asia. 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 is aged 58.
Non-Executive Director (S)
Hans Michael JEBSEN
B.B.S.
Non-Executive Director (A)
Anthony Hsien Pin LEE
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 60.
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, a director of Lee Hysan Estate Company,
Limited and a director of Lee Hysan Company Limited
(Lee Hysan Estate Company, Limited, a wholly-owned
subsidiary of Lee Hysan Company Limited, is 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 59.
78
Hysan Annual Report 2016 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, a director of Lee Hysan Estate
Company, Limited and a director of Lee Hysan Company
Limited (Lee Hysan Estate Company, Limited, a wholly-
owned subsidiary of Lee Hysan Company Limited, is 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 63.
Non-Executive Director (R)
Michael Tze Hau LEE
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, a director
of Lee Hysan Estate Company, Limited and a director of Lee
Hysan Company Limited (Lee Hysan Estate Company,
Limited, a wholly-owned subsidiary of Lee Hysan Company
Limited, is 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 55.
Note: (A) Audit Committee
(R) Remuneration Committee
(N) Nomination Committee
(S) Strategy Committee
79
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Director, Retail and Marketing
Kitty Man Wai CHOY
BEcon, MSc, MBA
Ms. Choy is responsible for the Group’s retail portfolio and
marketing strategies, and serves as a director of certain
Hysan’s subsidiaries. She joined the Group in 2000 and
prior to joining Hysan, Ms. Choy held a supervisory position
at a major property development company. She is aged 44.
Director, Office and Residential
Jessica Mo Ching YIP
BSc (Surveying), MBA, MRICS, MHKIS, RPS
Ms. Yip is responsible for managing the office and
residential portfolio of the Group, and serves as a director of
certain Hysan’s subsidiaries. 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. She is aged 40.
Board of Directors
Senior Management
Chief Operating Officer
Ricky Kon Wai LUI
MBA, MCIOB
Mr. Lui joined Hysan as the Group’s Chief Operating Officer
in December 2016. He assists the Chairman in translating
and executing the Group’s strategy and vision into
operational and financial attainment. Mr. Lui also drives the
Group’s business growth, development and investment and
serves as a director of certain Hysan’s subsidiaries. Mr. Lui
has over 25 years of experience as a senior executive in the
property industry globally, covering acquisitions,
development and asset management for residential, office,
retail and large scale mixed use developments in Hong
Kong, mainland China and overseas. He is aged 51.
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, and serves as a director of certain Hysan’s
subsidiaries. He joined the Group in 2008. Mr. Hao
accumulated extensive experience in auditing, financial
management and control while holding senior positions in
multinational corporations. He is aged 51.
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,
and serves as a director of certain Hysan’s subsidiaries.
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. He is aged 51.
Senior management are Executive Directors and the personnels as set out in “Senior Management” section.
80
Hysan Annual Report 2016 Corporate
Governance Report
Meeting and Exceeding Compliance Requirements
Hysan is committed to maintaining high standards of corporate governance and
transparency. Hysan has continued to fully 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”) during the year.
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. This sets out the Board’s responsibility for formulation of strategy and its
monitoring role.
The Board has established formal criteria and requirements* for Non-Executive Director
appointments. All Non-Executive Directors are engaged by formal letters of appointment with a
specific term of 3 years and which address the expected time commitment of the Non-Executive
Directors and other matters.
In order to retain control of key decisions and ensure there is a clear division of responsibilities for
the Board and the running of the Company’s business, the Board has identified a list of “Matters
Reserved for Board Decisions” *. The list covers all major policies and directions of the Group.
Board evaluation: Since 2014, the Board evaluation process has been strengthened and enriched
through completion of evaluation questionnaires. In 2016, the evaluation process was enhanced
through an electronic platform. Directors’ 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.
In 2016, a separate “Whistleblowing Policy” * has been adopted to allow employees and related
parties who deal with the Group (e.g. consultants, contractors and suppliers) to raise concerns
about misconduct, malpractice or irregularities in any matters related to the Group. The
independence is further strengthened by inviting whistleblowers to raise concerns to a designated
independent third party, who then reports to the Audit Committee. Records of whistle blowing are
kept by Internal Audit Department.
The Group has adopted a Code of Ethics* since 2005 which is applicable to all Directors, officers
and employees of the Group. The Code of Ethics follows the guiding principles of “Respect for
People”, “Ethics and Business Integrity” and “Meeting the Group’s Responsibility”. Under the Code
of Ethics, the Directors, officers and employees are encouraged to report any existing or potential
breaches of the Code of Ethics through the procedures set out in the Whistleblowing Policy.
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.
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.
81
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Corporate Governance Report
Exceed Corporate
Governance
Code Provisions
Best Practices in Corporate Governance at Hysan
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
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
behaviour 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) Risk Management and Internal Control 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 the 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 the 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.
In 2016, the Group announced the audited financial results within 2.5 months after the end of
financial year and published the Annual Report on the Group’s website within 3 months after the
end of financial year. The Group sent the Annual Report to shareholders within 10 days after
publication. The AGM notice, Annual Report, and the financial statements were dispatched to the
shareholders more than 30 days prior to the AGM (statutory requirement: 21 days).
To further expedite dissemination of financial information to shareholders and investors, in 2017,
the Group has further shortened the audited financial results announcement timeline to within
2 months after the financial year-end.
The Group continually enhances its communications with shareholders. In December 2016, the
Company held its first shareholders’ visit which provided an opportunity for the shareholders to
gain an insight into the Company’s long established history, sustainability activities (e.g. Rooftop
Urban Farm and Sky Wetland at Hysan Place) and other business areas.
To further increase efficiency of communication, protection of the environment and to save 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 enhance the use of the Group’s corporate website as a means of shareholder
communications.
The Company has also initiated and invited major nominee companies to proactively forward
communication materials to the ultimate beneficial shareholders at the Group’s expense.
* Detailed policies/terms of reference are available on the Company’s website: www.hysan.com.hk.
82
Hysan Annual Report 2016 Our Governance Framework
Hysan operates with a clear and effective governance structure.
The Board is collectively responsible for the long-term success of the Group, and for
its leadership, strategy planning, control and risk management, culture, values,
corporate governance and financial performance.
The Board has established an Audit Committee, Remuneration Committee,
Nomination Committee and Strategy Committee to enable the Board to operate
effectively and ensure a strong governance framework for decision-making. Each
Committee has written terms of reference.
• Audit Committee Report –
pages 121 to 124
• Risk Management and Internal
Control Report – pages 44 to 49
• Directors’ Remuneration and
Interests Report –
pages 111 to 120
• Nomination Committee –
pages 98 to 99
• Strategy Committee – page 99
BOARD
Collectively responsible for long-term success of the Group
Oversees overall governance, financial performance and sustainability development of the Group
Leadership
provides leadership and
direction to the business of
the Group
Strategy Planning
sets strategy and oversees
its implementation
Risk Management and
Internal Control
ensures only acceptable risks
are taken
Culture and Values
focuses on long term
sustainability of business
AUDIT
COMMITTEE
REMUNERATION
COMMITTEE
NOMINATION
COMMITTEE
STRATEGY
COMMITTEE
• Reviews risk management
and internal control
systems
• Monitors internal and
external auditors
• Oversees financial
reporting process
• Sets remuneration policy
for Executive Directors
and senior management
• Determines Executive
Directors’ and senior
management’s
remuneration and
incentives
• Recommends Board
appointments
• Reviews Board structure,
composition and diversity
• Assesses independence
of Independent
Non-Executive Director
• Succession planning for
directors
• Oversees the Group’s
strategic activities
• Aligns corporate
responsibility initiatives
with the corporate
strategy
For effective leadership and management, the Board sets clear governance guidelines,
policies, and procedures and review them periodically, normally 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’s needs. The
following are the key guidelines and components of Hysan’s governance framework.
• 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 Directors
and Employees
• Auditor Services Policy
• Corporate Disclosure Policy
• Whistleblowing Policy
• Board Diversity Policy
They can be reviewed on the Company’s website: www.hysan.com.hk.
83
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Corporate Governance Report
Governance at a Glance
LEADERSHIP
1
THE ROLE OF THE BOARD
• Board of Directors Mandate
• Matters reserved for Board
Decisions
COMPOSITION OF BOARD
• Balance of 4 INEDs and 5 NEDs
• All Directors are appointed with
specific terms and subject to
rotation
DIVISION OF RESPONSIBILITY
• Board of Directors Mandate
• Roles requirements of Non-
Executive Directors
EFFECTIVENESS
2
BALANCE DIVERSITY OF
SKILLS AND EXPERIENCE
INFORMATION &
SUPPORT
• Diversity of Skills and
experience
(see “Balance, Diversity
and Skills” section)
COMMITMENT
• All Directors are devoted
with time commitment
INDEPENDENCE
• Good information flow
between the Board and
the management
• Accesses to independent
professional advice and
company secretary
CONTINUOUS
PROFESSIONAL
DEVELOPMENT
• Meeting of Non-Executive
• Directors attended
Directors without the
Executive Directors or
Board members relating to
the founding Lee family
EVALUATION
• Formal board evaluation
process via an electronic
platform. The Board
discusses the findings in
detail at meeting
(see section on “Board
Evaluation 2016”)
trainings to refresh skills
and knowledge
THE ROLE OF COMPANY
SECRETARY
• Reviews and implements
corporate governance
practices
• Directors have direct
access to the advice and
support of Company
Secretary
• Keep Directors updated on
legislative, regulatory and
governance matters
The Board in 2016
The Board met formally throughout the year with meetings
timed around the financial calendar, as well as frequent and
open conversations and discussions within the Board. During the
year, 4 Board meetings were held, including an off-site meeting
held in an innovation lab followed by a training provided by the
venue host. Full Board members attended a Strategy Committee
meeting with in-depth presentation and discussion of the
Group’s long-term directional strategy. Attendance at Board and
Committee meetings held during 2016 is shown on page 88.
84
Board and Committee
meetings in 2016
B
AC
RC
January
February
March
April
B
AGM
May
B
AC
B
AC
NC
SC
June
July
August
September
October
November December
Hysan Annual Report 2016 3 ACCOUNTABILITY
BOARD COMMITTEES
4
RELATIONS WITH
SHAREHOLDERS
CONSTRUCTIVE USE OF
GENERAL MEETINGS
• Accessible AGM
• Committee Chairmen available at
AGM to answer questions
(in person or via dial-in)
• Notice sent out more than 20
workings days before meeting
(exceeds requirement under
Corporate Governance Code)
DIALOGUE WITH SHAREHOLDERS
• enhance shareholder
communications by electronic
channels
• shareholders’ visit for more
understanding of the Group, its
portfolio, history and sustainability
activities and other business areas
• 3 governance-related Board Committees
have been established
• Board Committees report to the Board
(see “Audit Committee Report”
pages 121 to 124 and “Directors’
Remuneration and Interests Report”
pages 111 to 120)
RISK MANAGEMENT AND
INTERNAL CONTROL
• reviewed and monitored management’s
risk management process and assessed
effectiveness of financial controls, and
other internal controls.
(see “Risk Management and Internal
Control Report” pages 44 to 49 and
“Audit Committee Report”)
FINANCIAL REPORTING
• Independent Auditor’s Report (see
pages 127 to 130)
AUDIT COMMITTEE AND AUDITORS
• Audit Committee Report
(see pages 121 to 124)
• Internal Audit function
• External Auditor appointment
Board and Committee
meetings in 2016
B
AC
RC
B
AGM
May
January
February
March
April
June
July
August
September
October
November December
B
AC
B
AC
NC
SC
Board Meeting
Audit Committee Meeting
B
AC
AGM Annual General Meeting
RC
NC
SC
Remuneration Committee Meeting
Nomination Committee Meeting
Strategy Committee Meeting
see page 84
see page 121
see page 111
see page 98
see page 99
85
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Corporate Governance Report
Special matters
considered by the Board
March
May
Review of reports from:
• Remuneration Committee
• Audit Committee; and review of risk management
and internal control effectiveness
Review and approval of 2015 annual results,
including:
• Preliminary announcement
• Declaration of 2015 2nd interim dividend
• Other key reports
– Corporate Governance Report
– Risk Management and Internal Control 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
Review of I.T. objectives and focus
Review and assess risk appetites and principal risks
(including safeguards against terrorist attack etc.)
Analysis of feedback and discussions of:
• Board and Board Committees’ evaluation
questionnaires
Approval of the Whistleblowing Policy
August
Review of reports from:
• Audit Committee; and review of risk management
and internal control effectiveness
Review and approval of 2016 interim results,
including
• Interim results announcement
• Interim report
• Declaration of 2016 1st interim dividend
Approval of re-designation of a Director
2016 was an active and effective year. The key features at the Hysan Board during 2016 are:
• The Board held 4 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
2016 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 the full Board are issued, covering financial and operational highlights.
• Non-Executive Directors are invited to attend Company events. Such events include the annual
“Company Day” when the management team shares management objectives for the coming
year with all Head Office staff and supervisors of the building offices.
86
Hysan Annual Report 2016 Regular matters
considered by the Board
November
March, May, August and November
Review of reports from:
• Nomination Committee; and review of Board size and
composition, as well as “independence” of Directors and
the Board Diversity Policy
Review and discussions of reports on:
• Operating results and regular updates for the
Group’s core leasing business (Office, Retail and
Residential segments)
• Audit Committee; discussions of risk management and
• Current development and asset enhancement
internal control matters
Approval of the Board Diversity Policy
Review and discussions of 2017 budget
projects’ update (including the redevelopment of
Lee Garden Three)
Review and discussions of:
Financial forecasts
Review of corporate governance matters – annual review of
Matters Reserved for Board Decisions (relating to the 2017
budget and business plan)
Update on:
• Analysts’ feedback
• Legal and regulatory updates
Approval of sale project for two Tai Po residential sites
partnering HKR International Limited
Review and approval of:
Minutes of previous meeting
• Since 2012, the Board has 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.
• To supplement the formal Board meetings and to further strengthen the independence of the
Non-Executive Directors, the Independent Non-Executive Directors and Non-Executive Directors
also held 2 separate discussion sessions during 2016 without the presence of Executive
Directors or Board members relating to the founding Lee family. This enables them to discuss
more freely the evaluation of performance of the Board as well as the Group’s management
• In 2016, the Board evaluation process and efficiency was enhanced via an electronic platform.
Directors’ evaluation is collected on anonymous basis and the evaluation results are
electronically auto-generated and discussed at the Board meeting.
87
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Corporate Governance Report
Attendance at Meetings
The following table shows Directors attendance at Board, Committee and general meetings
held in 2016 :
● Attended
Attended by alternate
Attended by tele-conference
Attended the meetings
(or part of meetings) as invitee
Already resigned from the Board
Directors
BOARD
AUDIT
COMMITTEE
REMUNERATION
COMMITTEE
NOMINATION
COMMITTEE
STRATEGY
COMMITTEE
ANNUAL
GENERAL MEETING
(Total: 4) (Note 1)
(Total: 3)
(Total: 1)
(Total: 1)
(Total: 1)
(Annually)
Meetings Held/Attended
Executive Director
Irene Yun Lien LEE
Independent
Non-Executive Directors
Nicholas Charles ALLEN (Note 2)
Frederick Peter CHURCHOUSE
Philip Yan Hok FAN
Lawrence Juen-Yee LAU (Note 3)
Joseph Chung Yin POON (Note 4)
Non-Executive Directors
Hans Michael JEBSEN (Note 5)
Siu Chuen LAU (Note 6)
Anthony Hsien Pin LEE
Chien LEE
Michael Tze Hau LEE
● ●
●
(Note 7)
●
● ●
● ●
●
●
● ●
● ●
● ●
● ●
● ●
● ●
●
●
●
●
●
●
●
●
●
●
● ● ●
● ● ●
N/A
● ●
N/A
● ● ●
N/A
N/A
N/A
N/A
●
N/A
●
N/A
(Note 7)
N/A
N/A
●
N/A
N/A
●
●
●
N/A
N/A
N/A
●
N/A
●
●
●
●
●
●
●
●
●
●
●
●
●
●
Notes:
1. The August 2016 Board meeting was held through tele-conference due to Typhoon Signal No.8 to discuss and approve the
2016 unaudited interim results.
2. Nicholas Charles ALLEN retired as Independent Non-Executive Director and ceased as the chairman of the Audit Committee,
a member of the Nomination Committee and a member of the Strategy Committee with effect from the conclusion of the
AGM held on 13 May 2016 (the “2016 AGM”).
3. Lawrence Juen-Yee LAU was appointed a member of the Nomination Committee with effect from the conclusion of the 2016
AGM.
4. Joseph Chung Yin POON was appointed the chairman of the Audit Committee with effect from the conclusion of the 2016
AGM, and a member of Strategy Committee with effect from 22 February 2017.
5. Hans Michael JEBSEN was appointed a member of the Strategy Committee with effect from the conclusion of the 2016 AGM.
6. Siu Chuen LAU stepped down from the position as Deputy Chairman and Chief Executive Officer and ceased as a member of
the Strategy Committee. He was also re-designated as Non-Executive Director. All with effect from the conclusion of the
August 2016 Board Meeting.
7. Excused from the session to discuss the executive directors’ own compensation package.
88
Hysan Annual Report 2016
Leadership
FORMAL BOARD MANDATE
The role of the Board is governed by a formal Board of Directors Mandate (details on the
Company’s website: www.hysan.com.hk). It sets out the Board’s stewardship role and shows
how the Board is collectively responsible for strategic planning, risk management and
internal control, setting the Group’s culture and values, capital management, corporate
governance, and Board succession.
Day-to-day management of the Group is delegated to the Executive Directors and the
Executive Committee, subject to formal delegated authority limits and certain matters that
have been reserved for Board approval. These matters are “Matters Reserved for Board
Decisions” (where applicable, with a “materiality” threshold) and are reviewed annually
(details on the Company’s website: www.hysan.com.hk). Executive Committee members
include all Executive Directors, Chief Operating Officer, Chief Financial Officer, and other
members as may be appointed by the Board.
BOARD SIZE, COMPOSITION, AND APPOINTMENTS
As at 31 December 2016, there were 10 Directors on the Board: the Chairman and 9 Non-
Executive Directors (including 4 Independent Non-Executive Directors). Irene Yun Lien LEE is
currently the executive 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.
The Board reviews its size and composition from time to time, and the last review was in
November 2016.
Non-Executive Directors are appointed for a specific term of 3 years, and are subject to
re-election at the first AGM following their appointment. Every Director will be subject to
retirement by rotation at least once every 3 years under the Company’s Articles of
Association. Retiring Directors are eligible for re-election at the AGM at which they retire.
There is no cumulative voting in Director elections. The election of each candidate is
executed through a separate resolution.
Irene Yun Lien LEE, Philip Yan Hok FAN, Hans Michael JEBSEN and Siu Chuen LAU will retire
at the forthcoming AGM to be held on 15 May 2017.
Siu Chuen LAU stepped down from his position as Deputy Chairman and Chief Executive
Officer of the Company and was re-designated as Non-Executive Director with effect from
conclusion of the Board Meeting of the Company held on 2 August 2016 (the “August 2016
Board Meeting”). He 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
Siu Chuen LAU, 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.
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Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Corporate Governance Report
Effectiveness
BALANCE, DIVERSITY AND SKILLS
Hysan continues to promote and support diversity within the Board and the business. We
strongly believe that diversity in all aspects, not just gender, provides the business with a
better collective decision-making capacity, and for better anticipating the risks and
opportunities in building a sustainable business.
Our Non-Executive Directors (including 4 Independent Non-Executive Directors) are of
diverse backgrounds in the areas of economics, finance, business management, professional
practices, and property investment. Biographies of each Director can be found in pages 76
to 79 and are also available on the Company’s website: www.hysan.com.hk.
Percentage of Directors on the Board
%
100
80
60
40
20
0
Female
Execuive
Non-Execuive
60+
Male
Independent
Non-Execuive
50-59
0-3
4-6
7+
Others
Human Resources /
Compensation
Finance
& Accounting
Business
Management
Consumer
& Retail
Financial
Services
& Investment
Governance
& Risk
Management
Gender
Category
Age
Experience on
Hysan Board (Years)
Experience/
Expertise
The Board believes that diversity is vital for Board effectiveness and adopted a separate Board
Diversity Policy in 2016. Under this policy, selection of candidates for Board appointment will be
based on a range of diversity perspectives including gender, age, cultural / educational and
professional background, skills and experience, and the ultimate decision will be based on merit
against objective criteria and contribution that the candidate will bring to the Board. This
philosophy of diversity 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 that is free from discrimination and has policies against discrimination
with regard to gender, age, cultural/educational and professional backgrounds, skills and
experience while promoting diversity in recruitment and promotion.
Board Diversity by Gender
31 December 2016
Gender Diversity of
Key Operational Management*
31 December 2016
10%
50%
50%
90%
Women: 1
Men: 9
Women: 7
Men: 7
* Key operational management is defined as the 14 heads of departments/units of the Group, but does not include the
Executive Director, who also maintains a management/supervisory role for operations.
90
Hysan Annual Report 2016 During 2016, there were 9 Non-Executive Directors drawn from diverse and complementary
backgrounds. They bring valuable experience and insight including but not limited to, the
following areas of experience and expertise, driving the corporate strategy and growth of
the Group:
Experience / Expertise
Director(s)
1. Business Management
Considerable business experience and knowledge through
senior management roles in other major companies.
Philip Yan Hok FAN
Hans Michael JEBSEN
Joseph Chung Yin POON
2. Property Investment
Frederick Peter CHURCHOUSE
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.
Anthony Hsien Pin LEE
Chien LEE
Michael Tze Hau LEE
Joseph Chung Yin POON
Siu Chuen LAU (Note 1)
4. Customer and Retail
Experience as a senior executive in a major retail, customer
products, services or distribution company.
Frederick Peter CHURCHOUSE
Hans Michael JEBSEN
Siu Chuen LAU (Note 1)
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 on
Hong Kong and China.
6. Finance and Accounting
Expertise based on the definition of “Audit Committee
accounting expertise” under the Listing Rules.
Nicholas Charles ALLEN (Note 2)
Joseph Chung Yin POON
7. Governance and Risk Management
Experience in control, governance and risk management
that has been gained through extensive experience on
other public and private companies’ board committees.
8. Human Resources / Compensation
Broad knowledge of the principles and practices relating to
Human Resources and extensive experience in overseeing
Human Resources in other major companies.
Nicholas Charles ALLEN (Note 2)
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
Notes:
1. Siu Chuen LAU was re-designated as Non-Executive Director with effect from the conclusion of the August 2016 Board
Meeting
2. Nicholas Charles ALLEN retired as Independent Non-Executive Director with effect from the conclusion of the 2016 AGM.
(Directors’ full biographies, including relationships among members of the Board, are set
out in pages 76 to 79 and are also available on the Company’s website: www.hysan.com.hk)
91
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Non-Executive Directors
held discussion sessions
without presence of
Executive Directors or
Board members relating
to founding Lee family.
Corporate 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. This is also been safeguarded under Hong Kong Companies Ordinance which
requires a director to disclose the nature and extent to the board of any material interest of
entities connected with him when such entities are involved in any transaction or
arrangement with the company. The Board is reminded half yearly of this requirement
through receiving an explanatory note from the Company.
“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” is not only a regulatory
requirement, but also 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 4 Independent Non-Executive Directors was independent at the
time of review. Independent Non-Executive Directors are identified in our Annual and
Interim Reports and other communications with shareholders.
To strengthen the independence of the Non-Executive Directors and to enable them to
discuss more freely the performance of the Board as well as the Group’s management, the
Non-Executive Directors held 2 discussion sessions during 2016, without the presence of
Executive Directors or Board members relating to the founding Lee family.
Checks and Balances
“Connected
Transactions” with
related persons subject
to full Board decision
Appointment of 4
Independent Non-
Executive Directors with
a diverse background
Clear
“independence”
standards for
individual Directors
Detailed annual
review of
independence of
individual Directors
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 4 Independent
Non-Executive Directors
drawn from a diverse
background, spanning
economics, financial services
and investment, business
management, professional
(accounting), and property
investment.
This is laid down in our
Corporate Governance
Guidelines.
The Nomination
Committee carries out
a detailed review of
Director independence
annually.
92
Hysan Annual Report 2016 Independence Status
Name
Management Independent
Not
Independent
November 2016 Review –
Reason for
Independence Status
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 (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.
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Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Corporate Governance Report
BOARD EVALUATION 2016
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
completion of evaluation questionnaires for the full Board as well as Board Committees. In
2016, the efficiency of evaluation process was further enhanced through an electronic
platform.
The evaluation in 2016 included the (i) Board’s roles (including Director responsibilities,
relationship with the Board Committees); (ii) Board composition (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.
The report on the evaluation was presented and discussed at the Board meeting held in May
2016. The overall conclusion from this year’s evaluation was that the Directors are highly
satisfied with the Board and its Committees operate to a high standard, work well and
effectively.
All responses received had a high average score at or above 4 (“Agree”), according to a scale
of 1 (“Strongly Disagree”) to 5 (“Strongly Agree”). The Directors were highly satisfied with
commitment of the Board and its Committees. The Directors were satisfied with integrity of
financial statements and accounting policies/practices and management reports. The Board
was pleased with the open and constructive environment which enabled everyone to
participate fully in discussions and exchange of opinions.
As with every high performing Board, the Directors continue to look for areas of
improvement. The Board will continue to review its composition, balance of knowledge and
experience. On risk management and internal control aspects, Directors will use a
combination of experience to approach the global and local risks and uncertainties facing
the business. The Chairman will lead the Group going forward with support from the Board
and the management.
Evolution of
Hysan’s Board Evaluation
Prior to 2014
Since 2014
In 2016
Ongoing
The board evaluation has
taken the form of meetings of
the Non-Executive Directors
without the presence of
management.
The board evaluation process
was strengthened and
enriched through completion
of evaluation questionnaires
for the full Board as well as
Board Committees.
The board evaluation
process was enhanced
through an electronic
platform.
The board evaluation
process will be reviewed
from time to time.
94
Hysan Annual Report 2016 BOARD AND MANAGEMENT
The Board and management fully appreciate their respective roles and support the
development and upkeep of a healthy corporate governance culture.
The Board works closely with management in thinking through the Group’s direction and
long-term plans, as well as the various opportunities and associated risks 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 to
the Board and the management.
HOW MANAGEMENT SUPPORTS THE EFFECTIVE WORKINGS OF THE BOARD
Supply of Information
There is good information flow between the Board and the management. The Board
receives detailed quarterly reports and presentations from management in regard to
business performance. Appropriate key performance indicators are used to facilitate
benchmarking and peer group comparison. Monthly reports to the full Board are issued,
covering financial and operational highlights. Financial plans, including budgets and
forecasts, are regularly discussed at Board meetings.
Non-Executive Directors are also invited to attend Company events. Such events include the
annual “Company Day” when the management shares management objectives for the
coming year with the staff. All these measures facilitate the build-up of constructive
relations and dialogue between the Board and the management team, and also
understanding of our people and culture.
Since 2012, the Board has 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 awareness.
Induction, Business Awareness and Development
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.
Continuous professional development and training of Directors help them to keep abreast
of issues facing the Group, and equip them to refresh their skills and knowledge.
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Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Corporate Governance Report
Directors’ continuous professional development in 2016
Directors
Executive Director
Irene Yun Lien LEE
Independent Non-Executive Directors
Nicholas Charles ALLEN
(retired at the conclusion of 2016 AGM)
Frederick Peter CHURCHOUSE
Philip Yan Hok FAN
Lawrence Juen-Yee LAU
Joseph Chung Yin POON
Non-Executive Directors
Hans Michael JEBSEN
Siu Chuen LAU
(re-designated as Non-Executive Director at conclusion of
the August 2016 Board Meeting)
Anthony Hsien Pin LEE
Chien LEE
Michael Tze Hau LEE
Independent Advice
Attending
trainings
organised by
Hysan
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
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
It is recognised that there may be occasions when Directors feel that it is necessary to
obtain independent professional advice for fulfilling their obligations. Such advice may be
obtained at the Company’s expense as stated in our Corporate Governance Guidelines.
96
Hysan Annual Report 2016
Accountability
BOARD COMMITTEES IN 2016
In order to provide effective oversight and leadership and pursuant to its Corporate
Governance Guidelines, the Board has established 3 governance-related Board Committees.
Like the Board, each Committee has access to independent professional advice and counsel
as required, and each is supported by the Company Secretary. These committees report to
the Board. Their terms of reference are available on the Company’s website.
AUDIT COMMITTEE
Composition
There is a majority of Independent Non-Executive Directors.
Chairman
Other members
Joseph Chung Yin POON
(Independent Non-Executive Director)
Frederick Peter CHURCHOUSE
(Independent Non-Executive Director)
Philip Yan Hok FAN
(Independent Non-Executive Director)
Anthony Hsien Pin LEE
(Non-Executive Director)
Meetings Schedule
The Audit Committee held 3 meetings during the year. At the invitation of the Audit
Committee, such meetings were also attended by the Board Chairman and members of
management (including the Chief Executive Officer, the Chief Operating Officer and the
Chief Financial Officer).
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 Whistleblowing
Policy. Pursuant to the Whistleblowing Policy, employees and related third parties who deal
with the Group (eg. consultants, contractors and suppliers) can raise concerns, in confidence
or anonymously, about misconduct, malpractice or irregularities in any matters related to
the Group. 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.
Pre-meeting sessions with
external and internal
auditors held without
management’s presence
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Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Corporate Governance Report
Activities and Report in 2016 and to date
Full details of the activities of the Audit Committee are also set out in the “Audit Committee
Report” on pages 121 to 124. 3 meetings were held during the year. Attendance at Audit
Committee meetings is set out in the table on page 88. In addition to reviewing and
approving annual and interim financial statements, the Committee held a separate meeting
that substantially focused on risk management and internal control.
REMUNERATION COMMITTEE
Composition
There is a majority of Independent Non-Executive Directors.
Chairman
Other members
Philip Yan Hok FAN
(Independent Non-Executive Director)
Michael Tze Hau LEE
(Non-Executive Director)
Joseph Chung Yin POON
(Independent Non-Executive Director)
Meetings Schedule
The Remuneration Committee generally meets at least once every year.
Roles and Authority
Management makes recommendations to the Remuneration Committee on Hysan’s
framework or broad policy for the remuneration of the Executive Directors and senior
management. The Committee then reviews these, and makes recommendations to the
Board. The Remuneration Committee also reviews the fees payable to Non-Executive
Directors and Board Committee members prior to 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 2016 and to date
Full details of the activities of the Remuneration Committee are set out in the “Directors’
Remuneration and Interests Report” on pages 111 to 120. A meeting was held during
the year. Attendance at the Remuneration Committee meeting is set out in the table on
page 88.
NOMINATION COMMITTEE
Composition
Chairman
Other members
Irene Yun Lien LEE
(Chairman)
Philip Yan Hok FAN
(Independent Non-Executive Director)
Lawrence Juen-Yee LAU
(Independent Non-Executive Director)
Chien LEE
(Non-Executive Director)
Joseph Chung Yin POON
(Independent Non-Executive Director)
98
Hysan Annual Report 2016 Meetings Schedule
The Nomination Committee generally meets at least once every year.
Roles and Authority
The Nomination Committee is responsible for nominating candidates, for Board approval,
to fill Board vacancies as and when they arise, evaluating the balance of skills, knowledge
and experience of the Board and reviewing the Board Diversity Policy. 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.
Activities and Report in 2016 and to date
A meeting was held during the year to (i) review the structure, size, and composition of the
Board; (ii) assess the independence of Independent Non-Executive Directors; and (iii) adopt
a Board Diversity Policy. Attendance at the Nomination Committee meeting is set out in the
table on page 88.
STRATEGY COMMITTEE
Composition
Chairman
Other members
Irene Yun Lien LEE
(Chairman)
Philip Yan Hok FAN
(Independent Non-Executive Director)
Hans Michael JEBSEN
(Non-Executive Director)
Chien LEE
(Non-Executive Director)
Joseph Chung Yin POON
(Independent Non-Executive Director)
Meeting Schedule
The Strategy Committee generally meets at least once every year and full Board members
are also invited.
Roles and Authority
Strategy planning is vital for the sustainability of the Company. The Strategy Committee is
responsible for reviewing and making recommendations to the Board on the Group’s
strategy matters.
Activities and Report in 2016 and to date
A meeting was held during the year to discuss business plan, as well as longer-term
directional strategy for the growth of the Group. Such meeting was also attended by full
Board members.
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Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Corporate Governance Report
Relations with Shareholders
Hysan are committed to maintaining an open dialogue with shareholders.
We recognise a good governance framework that protects shareholder rights.
Shareholders’ Visit
• In December 2016, the Company held its first
shareholders’ visit.
• A good opportunity for the management to
communicate with the shareholders. Also, for the
shareholders to gain an insight into the
Company’s long established history, sustainable
activities and other business areas.
Corporate Disclosure Policy
• The Group’s Corporate Disclosure Policy guides
the disclosure of material information to investors,
analysts and media.
• This policy also identifies who may speak on
Hysan’s behalf and outlines the responsibilities for
communications with various stakeholders groups.
• Details are available at the Company’s website:
www.hysan.com.hk.
COMMUNICATION WITH
SHAREHOLDERS
Accountability to Shareholders and
Corporate Reporting
• Annual Report, Interim Report, press releases
and announcements are disclosed in a timely
manner.
• Shareholders enquiries: Investor Relations
function by email to investor@hysan.com.hk.
Information via Internet
• Key corporate governance policies, terms
of reference of Board Committees, Group’s
financial reports, press releases and
announcements are available on the website.
• Shareholders have the option to receive
corporate communications by electronic
means. Hard copies of the Hysan website
information are also available free of charge
upon request to the Company Secretary.
Institutional Shareholders
• Ongoing dialogue and meetings between
Chief Executive Officer, Chief Operating Officer,
Chief Financial Officer, and institutional
investors, fund managers and analysts.
• Regular presentations to or conference calls
with analysts and investors.
• Results announcement presentations to
analysts are disseminated by webcasts.
Constructive Use of AGM
• AGMs as a means of having a dialogue with
private shareholders.
• Individual shareholders can put questions to
the Chairman at the AGM.
• Board Committees Chairmen attend AGMs to
respond to shareholders’ questions.
• Since 2004, a “business review” session has
been included in our AGMs. Topics in last AGM
included: business environment in 2015,
a review of business activities, and the
Company’s outlook for 2016.
100
Hysan Annual Report 2016 Proactively Forward Shareholder
Communication Materials via Nominee
Companies
• Since 2005, we have initiated and invited
major nominee companies to proactively
forward communication materials to
shareholders at our expense.
Electronic Communication
• Since December 2015 shareholders can
receive corporate communications via
electronic means.
SHAREHOLDER
RIGHTS
Voting
• Since 2004, we have 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 explained at 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
• Greater publicity of the Group’s website is
• Pursuant to our Articles of Association and Hong Kong
being made.
Provision of Sufficient and Timely
Information
• 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.
Companies Ordinance, a general meeting of
shareholders can be convened by the Board or a written
request signed by shareholders holding at least 5% of
the total voting rights of all the shareholders (“5%
Shareholder”).
• 5% Shareholder may request for passing resolutions by
way of written resolution.
• Shareholders may put forward proposals for
consideration at a general meeting according to the
Hong Kong Companies Ordinance and the Articles
of Association.
• All of the above requests shall state the general nature
of the business to be dealt with at the meeting, and
deposited at the Company’s registered office (49/F,
Lee Garden One, 33 Hysan Avenue, Hong Kong.
Attention: The Company Secretary).
• There are no limitations imposed by Hong Kong law or
our Articles of Association on the right of non-residents
or foreign persons to hold or vote on the Company’s
shares other than those that would generally apply to
all shareholders.
• No changes have been made to our Articles of
Association during the year.
• Changes to allow Directors to signify agreement to a
director’s written resolution by electronic means will be
proposed at the AGM to be held in May 2017.
101
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business The Directors submit their report together with the audited consolidated financial statements for the year ended 31 December
2016, which were approved by the Board of Directors on 22 February 2017.
PRINCIPAL ACTIVITIES
The principal activities of the Group continued throughout 2016 to be property investment, management, and development.
Details of the Group’s principal subsidiaries, associates and joint ventures as at 31 December 2016 are set out in notes 17 to 19
respectively to the consolidated 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 consolidated financial statements.
RESULTS AND APPROPRIATIONS
The results of the Group for the year ended 31 December 2016 are set out in the consolidated income statement on page 131.
The first interim dividend of HK26 cents per share, amounting to approximately HK$272 million, was paid to shareholders
during the year.
The Board declared a second interim dividend of HK109 cents per share to the shareholders on the register of members on
9 March 2017, absorbing approximately HK$1,139 million. The dividends declared and paid for ordinary shares in respect of
the full year 2016 will absorb approximately HK$1,411 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 – “Risk
Management and Internal Control 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 Auditor’s 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”.
102
Hysan Annual Report 2016Directors’ 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 134 and 135 and note 29 to the consolidated financial statements respectively.
INVESTMENT PROPERTIES
All of the Group’s investment properties were revalued by an independent professional valuer as at 31 December 2016 using
the fair value model. Details of movements during the year in the investment properties of the Group are set out in note 15 to
the consolidated financial statements.
Details of the major investment properties of the Group as at 31 December 2016 are set out in the section under Schedule of
Principal Properties of this Annual Report.
PROPERTY, PLANT AND EQUIPMENT
Details of movements during the year in the property, plant and equipment of the Group and the Company are set out in note
16 to the consolidated financial statements.
SHARE CAPITAL
Details of movements in the share capital of the Company during the year are set out in note 28 to the consolidated financial
statements.
CORPORATE GOVERNANCE
The Company is committed to maintaining a high standard of corporate governance and 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 81 to 101) – 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 111 to 120) – 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 121 and 124) – it sets out the terms of reference, work performed and findings of the
Audit Committee for the year;
(d) “Risk Management and Internal Control Report” (pages 44 to 49) – it sets out the Company’s framework on risk
assessment and internal control (including control environment, control activities and work done during the year); and
(e) “Responsible Business” section (pages 51 to 73) – it sets out the Company’s corporate responsibility policies and practices
reflecting its commitment to maintaining a high standard of corporate governance.
103
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business THE BOARD
The Board is currently chaired by Irene Yun Lien LEE, Chairman. There are 9 other Non-Executive Directors.
Siu Chuen LAU stepped down as Deputy Chairman and Chief Executive Officer and was re-designated as Non-Executive
Director with effect from the conclusion of the August 2016 Board Meeting.
Nicholas Charles ALLEN retired as an Independent Non-Executive Director with effect from the conclusion of the 2016 AGM.
Irene Yun Lien LEE and Trevor Chi-Hsin YANG served as alternate Directors to Anthony Hsien Pin LEE and Hans Michael JEBSEN
respectively throughout the year.
Save as otherwise mentioned, other Directors whose names and biographies appear on pages 76 to 79 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.
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 November 2016. (see
“Corporate Governance Report”)
The names of directors who have served on the boards of the subsidiaries of the Company during the year and upto the date of
this report are available on the Company’s website: www.hysan.com.hk.
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 111 to 120.
104
Directors’ Report continuedHysan Annual Report 2016 SUBSTANTIAL SHAREHOLDERS’ AND OTHER PERSONS’ INTERESTS IN SHARES
As at 31 December 2016, 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 SFO, or as
otherwise notified to the Company, were as follows:
Aggregate long positions in shares and underlying shares of the Company
Name
Lee Hysan Estate Company, Limited
Capacity
Beneficial owner and
interests of
a controlled corporation
Number of
ordinary
shares held
433,130,735
(Note b)
Lee Hysan Company Limited
Interests of controlled
corporations
433,130,735
(Note b)
Silchester International Investors LLP
Investment manager
95,187,000
% of the
total no. of
issued
shares
(Note a)
41.43
41.43
9.11
Notes:
(a) The percentage was compiled based on the total number of shares of the Company in issue as at 31 December 2016 (i.e. 1,045,328,359 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 that is required to be kept under section 336 of the SFO as at 31 December 2016.
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 33 to the consolidated financial
statements.
Some of these transactions also constituted “Continuing Connected Transactions” under the Listing Rules, as identified below.
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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)
(as amended – Note c)
Office units on the
5 years commencing
from 1 September 2013 28th, 30th and
31st Floors and
(Note d)
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
(iii) Treasure Matrix
Limited
(Notes f & g)
28 March 2014
(Lease and Licence
Agreements)
5 years commencing
from 28 March 2014
(Note d)
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
Shop Nos. 308 & 311
on the 3rd Floor
(connected to an
outdoor garden)
Annual consideration
(Note a)
2016: HK$31,966,216
2017: HK$37,212,720
2018: HK$24,808,480
(on pro-rata basis)
(Note j)
2016: HK$24,023,216
(Note j)
2016: HK$6,514,818
2017: HK$7,922,400
2018: HK$7,922,400
2019: HK$1,895,413
(on pro-rata basis)
(Notes h to k)
106
Directors’ Report continuedHysan Annual Report 2016
CONTINUING CONNECTED TRANSACTIONS continued
Leases granted by the Group continued
I.
(b) One Hysan Avenue, Causeway Bay, Hong Kong (“One Hysan Avenue”)
The following lease arrangement was entered into by OHA Property Company Limited, a wholly-owned subsidiary of the
Company and property owner of One Hysan Avenue, as landlord, with Atlas Corporate Management Limited, a wholly-
owned subsidiary of LHE, a substantial shareholder of the Company (holding 41.43% 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)
2016: HK$3,025,344
2017: HK$2,526,440
(on pro-rata basis)
(Notes j & l)
II. Provision of leasing and property management services to a non wholly-owned subsidiary regarding Lee Garden Two
(a) The following management agreements were 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
(1) 28 March 2013
3 years commencing
from 1 April 2013
Whole premises of
Lee Garden Two
Consideration
received during
the year
HK$7,659,068
(Note m)
(2) 22 March 2016
3 years commencing
from 1 April 2016
Whole premises of
Lee Garden Two
HK$22,142,533
(Note n)
(b) The following management agreements were 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
(1) 28 March 2013
3 years commencing
from 1 April 2013
Whole premises of
Lee Garden Two
(2) 22 March 2016
3 years commencing
from 1 April 2016
Whole premises of
Lee Garden Two
Consideration
received during
the year
HK$926,927
(Note m)
HK$2,746,755
(Note n)
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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) On 16 August 2016, a memorandum had been entered into and pursuant to which the rent for the period from 1 September 2016 to 31 August
2018 were reviewed and revised to the then prevailing market rent.
(d) 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.
(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 2016 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 2016. Office
monthly operating charges for One Hysan Avenue were revised with effect from 1 January 2016.
(k) Retail monthly operating charges and promotion levies for Lee Garden Two were revised with effect from 1 January 2017.
(l) Office extra air-conditioning operating charges for One Hysan Avenue were revised with effect from 1 January 2017.
(m) These represent the actual consideration received for the period from 1 January 2016 to 31 March 2016, calculated on the basis of the fee
schedules as prescribed in the respective management agreements.
(n) These represent the actual consideration received for the period from 1 April 2016 to 31 December 2016, 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.
108
Directors’ Report continuedHysan Annual Report 2016 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 106 to 108 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, 31.78% of the aggregate amount of purchases were attributable to the Group’s 5 largest suppliers with the
largest supplier accounting for 15.14% 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 AGMs to repurchase its own ordinary shares not exceeding 10% of the total number of its
issued shares as at the dates of the resolutions being passed. During the year, the Company repurchased its ordinary shares
on the Stock Exchange when they were trading at a significant discount to the Company’s net asset value in order to enhance
shareholder value.
During the year, the Company repurchased an aggregate of 12.59 million ordinary shares for a total consideration of
approximately HK$393 million (excluding relevant trading costs directly attributable to share repurchase) on the Stock
Exchange. The repurchased shares were cancelled during the year. Details of the shares repurchased are as follows:
Month of repurchase
in 2016
Number of shares
repurchased
January
February
March
April
May
June
November
8,560,000
325,000
299,000
304,000
2,180,000
65,000
861,000
12,594,000
Consideration per share
Highest
HK$
31.85
30.60
32.50
31.70
33.60
33.20
34.90
Lowest
HK$
28.95
29.75
32.05
31.30
31.60
32.45
33.55
Aggregate
consideration paid
HK$ million
262
10
10
9
70
2
30
393
Save as disclosed above, neither the Company nor its subsidiaries purchased, sold or redeemed any of the Company’s listed
securities during the year.
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Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
ISSUANCE OF SECURITIES
In October 2016, 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$0.6 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
2017 AGM.
By Order of the Board
Irene Yun Lien LEE
Chairman
Hong Kong, 22 February 2017
110
Directors’ Report continuedHysan Annual Report 2016 COMPENSATION REVIEW
Remuneration Committee
The Board recognises the significance of having in place a transparent and objective process for determining Executive Director
and senior management 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 remuneration of senior management, 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.
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
and senior management 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 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 2016 and option movements during the
year are set out in notes 11 and 34 respectively to the consolidated financial statements.
111
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible BusinessDirectors’ Remuneration andInterests 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$2,501,739 for the year
2016.
2016 Review
The Committee met in March 2016 with all members present to (i) approve 2016 Executive Director compensation packages
and 2015 performance-based bonus; (ii) review the fees for Non-Executive Directors and Board Committee members; and (iii)
refine its terms of reference to extend its responsibility to the determination of compensation at Executive Director-level and
senior management, among other matters.
The executive packages were set at levels to ensure comparability and competitiveness with Hong Kong based companies
competing within a similar talent pool, with particular emphasis on the property industry. Clear performance targets were set.
February 2017 Review
The Committee met in February 2017 to (i) approve 2017 Executive Director compensation package and 2016 performance-
based bonus; (ii) review the fees for Non-Executive Directors and Board Committee members; and (iii) review compensation of
department heads. All members attended the meeting.
112
Directors’ Remuneration and Interests Report continuedHysan Annual Report 2016 COMPENSATION REVIEW continued
Director Fee Levels
Director fees are subject to shareholders’ approval at general meetings. Revision to fees of Non-Executive Directors, Chairman
and member of Audit Committee, and member of Strategy Committee were proposed, and approved, at the AGM held on
13 May 2016. The current fee scale for Non-Executive Directors and Board Committee members are set out below. Executive
Directors will not receive any Director Fee.
Board of Directors
Non-Executive Director
Audit Committee
Chairman
Member
Remuneration Committee
Chairman
Member
Strategy Committee
Chairman
Member
Other Committees
Chairman
Member
Notes:
1.
2.
3.
Approved by shareholders in 2011 AGM.
Approved by shareholders in 2014 AGM.
Approved by shareholders in 2016 AGM.
Per annum
HK$
225,000 (Note 3)
135,000 (Note 3)
70,000 (Note 3)
60,000 (Note 2)
40,000 (Note 1)
30,000
30,000 (Note 3)
30,000
20,000
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).
113
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L2023(i)
L2023(i)
L2023(i)
L2023(i)
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 options, with
full payment for exercise price to be made on exercise of the relevant options.
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 shareholders’
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$1 and is required to be paid within 30 days from the date of grant of options, with
full payment for exercise price to be made on exercise of the relevant options.
Grant and vesting structures
Under the Company’s current policy, grants will be made on a periodic basis. Exercise period is 10 years. Vesting period is 3
years in equal proportions starting from the 1st anniversary and become fully vested on the 3rd anniversary of the grant. Size of
grant will be determined by reference to base salary multiple and job grades. A clear performance criterion will be a key driver.
The Board will review the grant and vesting structures from time to time.
114
Directors’ Remuneration and Interests Report continuedHysan Annual Report 2016 COMPENSATION REVIEW continued
Long-term incentives: Share Option Schemes continued
Movement of share options
During the year, a total of 1,397,000 shares options were granted under the New Scheme. The 2005 Scheme expired on 9 May
2015 and no further option will be granted under the 2005 Scheme.
As at the date of this Annual Report:
(i) 2,360,335 share options granted (including 1,723,323 fully-vested share options) under the 2005 Scheme remained
outstanding, representing approximately 0.23% of the total number of issued shares of the Company;
(ii) 940,000 share options granted (none of which were vested) under the New Scheme remained outstanding, representing
approximately 0.09% of the total number of issued shares of the Company; and
(iii) 105,449,669 shares are issuable under the New Scheme representing approximately 10% of the total number of issued
shares of the Company.
Details of options granted, exercised, cancelled/lapsed and outstanding under the Schemes during the year are as follows:
Name
Date of grant
Exercise
price
HK$
Exercise period
(Note a)
2005 Scheme
Executive Directors
Irene Yun Lien LEE
14.5.2012
33.50
7.3.2013
39.92
10.3.2014
32.84
12.3.2015
36.27
Siu Chuen LAU
(Note d)
14.5.2012
33.50
7.3.2013
39.92
10.3.2014
32.84
12.3.2015
36.27
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
Balance
as at
1.1.2016
261,000
265,000
325,000
300,000
161,334
246,000
302,000
300,000
Changes during the year
Granted
Exercised
Balance
as at
31.12.2016
Cancelled/
lapsed
(Note b)
–
–
–
–
–
–
–
–
(174,000)
(Note c)
–
–
–
–
87,000
–
265,000
–
325,000
–
300,000
(161,334)
(Note c)
–
–
(246,000)
(201,333)
(Note e)
(100,667)
–
(300,000)
–
–
–
–
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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
31.3.2015
34.00
Balance
as at
1.1.2016
17,000
134,000
152,334
172,001
250,335
288,000
396,000
404,000
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
31.3.2016 –
30.3.2025
Granted
Exercised
Balance
as at
31.12.2016
Cancelled/
lapsed
(Note b)
–
11,000
–
128,000
–
126,334
(6,334)
125,000
(14,000)
160,001
(6,000)
(Note g)
(6,000)
(Note g)
(26,000)
(Note h)
(40,667)
(Note i)
(76,334)
(Note j)
–
(12,000)
276,000
(36,666)
(Note k)
(16,333)
(Note l)
(21,334)
338,000
(28,667)
359,000
–
–
–
–
–
–
–
–
3,974,004
–
(744,667)
(729,002) 2,500,335
116
Directors’ Remuneration and Interests Report continuedHysan Annual Report 2016
COMPENSATION REVIEW continued
Long-term incentives: Share Option Schemes continued
Movement of share options continued
Name
Date of grant
Exercise
price
HK$
Exercise period
(Note a)
Balance
as at
1.1.2016
Granted
Exercised
Balance
as at
31.12.2016
Cancelled/
lapsed
(Note b)
Changes during the year
New Scheme
Executive Directors
Irene Yun Lien LEE
9.3.2016
33.15
(Note m)
9.3.2017 –
8.3.2026
–
375,000
–
–
375,000
Siu Chuen LAU
(Note d)
9.3.2016
33.15
(Note m)
9.3.2017 –
8.3.2026
Eligible employees
(Note f)
31.3.2016
33.05
(Note n)
31.3.2017 –
30.3.2026
–
375,000
–
(375,000)
–
–
647,000
–
(37,000)
610,000
– 1,397,000
–
(412,000)
985,000
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 re-designation of an Executive Director and resignations of certain eligible employees.
(c) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$36.35.
(d) Siu Chuen LAU stepped down as Deputy Chairman and Chief Executive Officer and was re-designated as Non-Executive Director with effect from
the conclusion of the August 2016 Board Meeting. All the options granted to Siu Chuen LAU have been lapsed at the date following the
re-designation.
(e) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$36.30.
(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$33.25.
(h) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$34.27.
(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$36.95.
The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$35.88.
(k) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$37.78.
(l)
The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$37.84.
(m) The closing price of the shares of the Company immediately before the date of grant (i.e. as of 8 March 2016) was HK$33.70.
(n) The closing price of the shares of the Company immediately before the date of grant (i.e. as of 30 March 2016) was HK$32.85.
Apart from the above, the Company did not grant any share option under the Schemes to any other persons during the year
that is required to be disclosed under Rule 17.07 of the Listing Rules.
Particulars of the Schemes are set out in note 34 to the consolidated financial statements.
117
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
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:
31.3.2016
9.3.2016
HK$33.050
HK$33.050
0.931%
5 years
27.323%
HK$1.092
HK$6.127
HK$33.150
HK$33.150
1.019%
5 years
27.339%
HK$1.092
HK$6.190
(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).
118
Directors’ Remuneration and Interests Report continuedHysan Annual Report 2016
DIRECTORS’ INTERESTS IN SHARES
As at 31 December 2016, 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
Hans Michael JEBSEN
Irene Yun Lien LEE
Chien LEE
Notes:
Personal
interests
60,984
304,000
800,000
Number of ordinary shares held
Family
interests
Corporate
interests
Other
interests
Total
% of the
total no. of
issued shares
(Note a)
–
–
–
2,473,316
(Note b)
–
2,534,300
0.242
–
–
–
–
304,000
800,000
0.029
0.077
(a) This percentage was compiled based on the total number of shares of the Company in issue (i.e. 1,045,328,359 ordinary shares) as at 31
December 2016.
(b) 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.
Executive Director(s) of the Company have been granted share options under the 2005 Scheme and the New 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, 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 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
of its associated corporations as at 31 December 2016 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.
119
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
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 a 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 (redesignated as Non-Executive Director with effect from conclusion of
the August 2016 Board Meeting), 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, 22 February 2017
120
Directors’ Remuneration and Interests Report continuedHysan Annual Report 2016
The Audit Committee has 4 members (with a majority of Independent Non-Executive Directors). Currently, it is chaired by
Joseph Chung Yin POON (Independent Non-Executive Director, appointed as the Chairman of Audit Committee with effect
from the conclusion of the May 2016 AGM), 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). Nicholas Charles ALLEN ceased to be the Chairman of Audit Committee with effect from the conclusion of the May
2016 AGM.
Under its terms of reference, the Committee oversees the Company’s financial reporting process; it also reviews the
Company’s risk management and internal control 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 internal audit,
accounting and financial reporting functions, 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 7 March, 1 August and 28 November 2016. The meetings in March 2016
and August 2016 held to consider the financial statements for 2015 final results and 2016 interim results respectively. The
meeting held in November reviewed the Group’s risk management and internal control 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 21 February 2017 to consider the financial statements for the year ended 31 December 2016.
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, the Chief Operating 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 2016 were set out in the 2015 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 2016
:
The Committee reviewed and recommended to the Board for approval of the unaudited financial
statements for the first 6 months of 2016, prior to announcement. The Committee received reports
from and met with the external auditor and internal auditor to discuss the scope of their respective
review 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 30 June 2016, and valuation of investment under redevelopment as at
30 June 2016. In particular, there were discussions on residual valuation approach adopted by the
independent professional valuer, Knight Frank Petty Limited, for Lee Garden Three.
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.
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 2016.
121
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible BusinessAudit CommitteeReport FINANCIAL REPORTING continued
•
February 2017 :
The Committee reviewed and discussed with the management and external auditor the audited
financial statements for the year ended 31 December 2016, prior to announcement. 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 2016.
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.
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 2016, together with the Independent Auditor’s Report.
RELATIONSHIP WITH ExTERNAL AUDITOR
•
August 2016
:
The Committee reviewed and considered the terms of engagement of the external auditor in respect
of: 2016 final results (including 2016 annual audit, the related results announcement, and annual
review of continuing connected transactions); and annual update of the Group’s MTN Programme.
•
•
November 2016 :
The Committee reviewed the audit progress report of the external auditor.
February 2017 :
Annual Assessment: The Committee assessed and was satisfied as to the auditor’s qualification,
expertise and services and independence. In particular, it was 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 was also in place by the auditor.
External Auditor’s Services and Fees
Audit Services
Non-audit Services (Note)
Total
2016
HK$ million
2015
HK$ million
2.50
0.94
3.44
2.35
0.87
3.22
Note: “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
reviews of interim financial statements, issue of assurance reports for continuing connected transactions, and
reviews of financial information in connection with the annual updates of the Group’s MTN Programmes in 2016
and 2015 respectively.
The Committee also reviewed and considered the 2017 audit service plan of the external auditor,
and the terms of its engagement in respect of the 2017 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 2017.
122
Audit Committee Report continuedHysan Annual Report 2016
REVIEW OF RISK MANAGEMENT AND INTERNAL CONTROL SYSTEMS
•
:
August and
November
2016
The Committee received from, and discussed with, management (i) an update report on major risks
the Group was facing; (ii) review of IT operation framework; (iii) mapping of legal and regulatory
compliance framework; (iv) risk management presentation on project management of Lee Garden
Three construction; and (v) review on whistleblowing reports.
•
February 2017 :
The Committee considered the reports of the Internal Audit, including status in implementing its
recommendations.
At the November 2016 meeting, the Committee also reviewed the adequacy of resources,
qualifications and experience of staff of the internal audit, accounting and financial reporting
functions, and their training programmes and budget.
The Committee reviewed 2016 annual risk management and internal control systems 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 risk management and
internal control systems (including the adequacy of resources, qualifications and experience of
staff of the Group’s internal audit, accounting and financial reporting functions, and their training
programmes and budget). No significant areas of concern which might affect financial, operational,
compliance controls and risk management functions were identified.
INTERNAL AUDIT
:
August and
•
November 2016,
February 2017
•
November 2016 :
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 2017.
123
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business EVALUATION
The Board and Committee evaluation process which took place during the year concluded that the Committee was effective in
fulfilling its roles in 2016. (For details, please refer to Corporate Governance Report – “Board Evaluation 2016” (page 94)).
Members of the Audit Committee
Joseph Chung Yin POON (Chairman)
Frederick Peter CHURCHOUSE
Philip Yan Hok FAN
Anthony Hsien Pin LEE
Hong Kong, 22 February 2017
124
Audit Committee Report continuedHysan Annual Report 2016 5
Financial Statements,
Valuation and
Other Information
126 Directors’ Responsibility for the
146 Notes to the Consolidated Financial
Financial Statements
Statements
127 Independent Auditor’s Report
181 Financial Risk Management
131 Consolidated Income Statement
190 Five-Year Financial Summary
132 Consolidated Statement
of Comprehensive Income
133 Consolidated Statement
of Financial Position
134 Consolidated Statement
of Changes in Equity
136 Consolidated Statement
of Cash Flows
137 Significant Accounting Policies
192 Report of the Valuer
193 Schedule of Principal Properties
194 Shareholding Analysis
195 Shareholder Information
197 Corporate Information
125
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business The Hong Kong 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.
126
Hysan Annual Report 2016Directors’ Responsibility forthe Financial Statements INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF HYSAN DEVELOPMENT COMPANY LIMITED
(incorporated in Hong Kong with limited liability)
Opinion
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 131 to 189, which comprise the consolidated statement
of financial position as at 31 December 2016, and the consolidated income statement and the consolidated statement of
comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year
then ended, and notes to the consolidated financial statements, including significant accounting policies and financial risk
management.
In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the
Group as at 31 December 2016, and of its consolidated financial performance and its consolidated cash flows for the year then
ended in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified
Public Accountants (“HKICPA”) and have been properly prepared in compliance with the Hong Kong Companies Ordinance.
Basis for Opinion
We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued by the HKICPA. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated
Financial Statements section of our report. We are independent of the Group in accordance with the HKICPA’s Code of Ethics
for Professional Accountants (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
consolidated financial statements of the current period. These matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
127
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible BusinessIndependent Auditor’s Report
Key Audit Matters continued
Valuation of investment properties
We identified the valuation of investment properties as a
key audit matter due to the inherent level of complex and
subjective judgements and estimates required in determining
the fair values.
The Group’s investment property portfolio comprises retail,
office and residential properties mainly located in Causeway
Bay, Hong Kong and is stated at fair value of HK$69,633
million, accounting for approximately 87% of the Group’s
total assets as at 31 December 2016 with a change in fair
value of HK$1,187 million recognised in the consolidated
income statement for the year then ended.
All of the Group’s investment properties are measured using
the fair value model based on a valuation performed by an
independent qualified professional valuer (the “Valuer”). As
disclosed in note 3 of the Notes to the Consolidated Financial
Statements section of the consolidated financial statements,
in determining the fair values of the Group’s investment
properties, the Valuer has applied a market value basis which
involves, inter-alia, certain estimates, including appropriate
capitalisation rates, reversionary income potential and
redevelopment potential of the investment properties in
determining the fair values. As further disclosed in note
15 of the Notes to the Consolidated Financial Statements
section of the consolidated financial statements, the
valuation of investment properties under redevelopment of
HK$4,860 million as at 31 December 2016 is based on the
redevelopment potential of the properties as if they were
completed and are also dependent upon the estimated costs
of redevelopment and allowance of profit required for the
redevelopment.
How our audit addressed the key audit matter
Our procedures in relation to the valuation of investment
properties included:
•
•
•
Evaluating the competence, capabilities, and objectivity
of the Valuer and obtaining an understanding of the
Valuer’s scope of work and their terms of engagement;
Evaluating the appropriateness of the Valuer’s valuation
approaches to assess if they meet the requirements of
the HKFRSs and industry norms;
Challenging the reasonableness of the key assumptions
applied based on available market data and our
knowledge of the property industry in Hong Kong;
• Obtaining the detailed work of the Valuer on selected
investment properties to evaluate the accuracy and
relevance of key data inputs underpinning the valuation,
such as rental income, term of existing leases by
comparing them to the existing leases summary of the
Group or reversionary income potential by comparing
fair market rents estimated by the Valuer against recent
lease renewals and evaluating whether capitalisation
rates adopted are comparable to the market; and
• Assessing the appropriateness of estimated costs to
complete the redevelopment of investment properties
under development by comparing capital expenditure
incurred to date against the redevelopment plan and
evaluating whether the allowance of profit used in the
redevelopment plan is comparable to the market.
Other Information
The directors of the Company are responsible for the other information. The other information comprises the information
included in the annual report, but does not include the consolidated financial statements and our auditor’s report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report
in this regard.
128
Independent Auditor’s Report continuedHysan Annual Report 2016 Responsibilities of Directors and those charged with Governance for the Consolidated Financial Statements
The directors of the Company are responsible for the preparation of the consolidated financial statements that give a true and
fair view in accordance with HKFRSs issued by the HKICPA 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.
In preparing the consolidated financial statements, the directors are responsible for assessing the Group’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes 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. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
As part of an audit in accordance with HKSAs, we exercise professional judgment and maintain professional skepticism
throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations,
or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
•
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt
on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the
date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going
concern.
•
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures,
and whether the consolidated financial statements represent the underlying transactions and events in a manner that
achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within
the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision
and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought
to bear on our independence, and where applicable, related safeguards.
129
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements continued
From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when,
in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in the independent auditor’s report is Wong Wang Hei.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
22 February 2017
130
Independent Auditor’s Report continuedHysan Annual Report 2016 Turnover
Property expenses
Gross profit
Investment income
Administrative expenses
Finance costs
Change in fair value of investment properties
Share of results of an associate
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
2016
HK$ million
2015
HK$ million
4
6
7
8
9
14
3,535
(428)
3,107
50
(219)
(178)
(1,187)
237
1,810
(463)
1,347
1,218
129
1,347
3,430
(414)
3,016
54
(234)
(204)
695
246
3,573
(438)
3,135
2,903
232
3,135
116.35
116.33
273.17
273.12
131
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible BusinessConsolidated Income StatementFor the year ended 31 December 2016
Profit for the year
Other comprehensive 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 expenses for the year (net of tax)
Total comprehensive income for the year
Total comprehensive income attributable to:
Owners of the Company
Non-controlling interests
2016
HK$ million
1,347
2015
HK$ million
3,135
Note
10
–
18
18
78
(236)
(158)
(140)
1,207
1,078
129
1,207
36
9
45
(40)
(240)
(280)
(235)
2,900
2,668
232
2,900
132
Hysan Annual Report 2016Consolidated Statement ofComprehensive IncomeFor the year ended 31 December 2016
Non-current assets
Investment properties
Property, plant and equipment
Investment in an associate
Investment in a joint venture
Loan to a joint venture
Term notes
Other financial assets
Other receivables
Current assets
Loan to a joint venture
Accounts and other receivables
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
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
2016
HK$ million
2015
HK$ million
15
16
18
19
19
20
21
22
19
22
20
21
23
23
24
25
26
26
21
27
28
69,633
720
3,497
145
873
733
13
135
75,749
1,018
196
422
6
2,551
79
4,272
935
339
327
1,180
112
2,893
1,379
77,128
5,113
1
578
751
6,443
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
70,685
71,368
7,673
59,817
67,490
3,195
70,685
7,642
60,530
68,172
3,196
71,368
The consolidated financial statements on pages 131 to 189 were approved and authorised for issue by the Board of Directors on
22 February 2017 and are signed on its behalf by:
Irene Y.L. LEE
Director
Michael T.H. LEE
Director
133
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible BusinessConsolidated Statement ofFinancial PositionAt 31 December 2016
At 1 January 2015
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 27)
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 13)
At 31 December 2015
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 27)
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
Dividends paid during the year (note 13)
At 31 December 2016
Attributable to owners of the Company
Share
capital
HK$ million
7,640
Share
options
reserve
HK$ million
General
reserve
HK$ million
27
100
–
–
–
–
–
–
–
–
–
2
–
–
–
–
–
7,642
–
–
–
–
–
–
–
–
31
–
–
–
–
7,673
–
–
–
–
–
–
–
–
–
(1)
8
(4)
–
–
–
30
–
–
–
–
–
–
–
–
(7)
5
(4)
–
–
24
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100
–
–
–
–
–
–
–
–
–
–
–
–
–
100
Attributable to owners of the Company
Investments
revaluation
reserve
HK$ million
Hedging
reserve
HK$ million
Properties
revaluation
reserve
HK$ million
Translation
reserve
HK$ million
344
514
Retained
profits
HK$ million
58,444
2,903
Total
HK$ million
67,040
2,903
Non-
controlling
interests
HK$ million
3,089
232
Total
HK$ million
70,129
3,135
36
(40)
2,903
232
(240)
(240)
(3)
–
–
–
–
36
–
(32)
–
–
–
–
–
–
–
1
–
–
–
–
–
–
–
–
–
–
–
–
–
1
(26)
–
(39)
(3)
2
–
–
–
–
–
–
–
–
–
–
1
–
–
–
–
–
–
–
–
–
(66)
–
77
78
10
(1)
–
–
–
–
–
–
9
–
–
–
–
–
–
–
–
–
–
22
(4)
–
18
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4
–
–
–
–
–
–
–
–
4
(39)
(3)
2
36
10
(1)
(240)
2,668
1
8
–
–
(215)
(1,330)
68,172
1,218
77
1
–
22
(4)
(236)
1,078
24
5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(39)
(3)
2
36
10
(1)
(240)
2,900
1
8
–
–
(215)
77
1
–
22
24
5
–
(4)
(236)
1,207
(395)
(1,524)
70,685
(236)
(236)
1,218
129
12
371
38
59,271
67,490
(395)
(1,394)
(395)
(1,394)
(130)
3,195
353
274
(215)
32
(1,330)
59,838
1,218
(125)
(1,455)
3,196
129
71,368
1,347
134
Hysan Annual Report 2016Consolidated Statement ofChanges in EquityFor the year ended 31 December 2016
At 1 January 2015
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 27)
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 13)
At 31 December 2015
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 27)
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
Dividends paid during the year (note 13)
At 31 December 2016
Attributable to owners of the Company
Share
capital
7,640
Share
options
reserve
General
reserve
27
100
HK$ million
HK$ million
HK$ million
–
–
–
–
–
–
–
–
–
2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
31
(1)
8
(4)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(7)
5
(4)
–
–
24
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,642
30
100
7,673
100
Attributable to owners of the Company
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
(3)
–
–
–
–
36
–
–
–
36
–
–
–
–
(32)
–
1
–
–
–
–
–
–
–
–
–
–
–
–
–
1
(26)
–
(39)
(3)
2
–
–
–
–
(40)
–
–
–
–
–
–
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
–
77
1
–
–
–
–
78
–
–
–
–
–
–
–
–
–
22
(4)
–
18
–
–
–
–
–
–
–
–
–
–
–
(236)
(236)
–
–
–
–
–
1,218
–
–
–
–
–
–
1,218
–
–
4
(395)
(1,394)
1,218
77
1
–
22
(4)
(236)
1,078
24
5
–
(395)
(1,394)
129
–
–
–
–
–
–
129
–
–
–
–
(130)
1,347
77
1
–
22
(4)
(236)
1,207
24
5
–
(395)
(1,524)
12
371
38
59,271
67,490
3,195
70,685
135
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
Note
2016
HK$ million
2015
HK$ million
Operating activities
Profit before taxation
Adjustments for:
Finance costs
Change in fair value of investment properties
Share of results of an associate
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 in accounts payable and accruals
Increase in rental deposits from tenants
Cash generated from operations
Hong Kong Profits Tax paid
Hong Kong Profits Tax refunded
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
Purchases of term notes
Advances to a joint venture
Additions to time deposits with original maturity over three months
Net cash (used in) 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
New bank loans
Repayment of bank loans
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 in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
23
1,810
178
1,187
(237)
(50)
22
5
2,915
42
342
27
3,326
(412)
5
2,919
66
187
–
414
3,478
(832)
(15)
(227)
(2,036)
(2,521)
(1,486)
(182)
(1)
(2)
(1,394)
(130)
1,680
(250)
–
–
(395)
24
(650)
783
584
1,367
3,573
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
136
Hysan Annual Report 2016Consolidated Statement ofCash FlowsFor the year ended 31 December 2016
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. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
These consolidated financial statements have been prepared in accordance with HKFRSs issued by the HKICPA. In addition,
the consolidated financial statements include applicable disclosures required by the Listing Rules on Stock Exchange and by the
Hong Kong Companies Ordinance.
The principal accounting policies adopted are as follows:
1. BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the
Company 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 attributable to owners of the
Company 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 ASSOCIATE AND JOINT VENTURE
2.
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.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net
assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists
only when decisions about the relevant activities require unanimous consent of parties sharing control.
The results, assets and liabilities of associate or joint venture are incorporated in the consolidated financial statements using
the equity method of accounting. The financial statements of associate or joint venture used for equity accounting purposes
are prepared using uniform accounting policies as those of the Group for like transactions and events in similar circumstances.
Under the equity method, investments in associate or joint venture 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 associate or joint venture. When the Group’s share of losses of an associate or joint venture equals or exceeds its
interest in that associate or joint venture (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
or joint venture.
137
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible BusinessSignificant Accounting PoliciesFor the year ended 31 December 2016 INVESTMENTS IN ASSOCIATE AND JOINT VENTURE continued
2.
The requirements of HKAS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect
to the Group’s investment in associate or joint venture. When necessary, the entire carrying amount of the investment is tested
for impairment in accordance with HKAS 36 Impairment of Assets as a single asset by comparing its recoverable amount
(higher of value in use and fair value less cost of disposal) with its carrying amount, any impairment loss recognised forms part
of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with HKAS 36 to the
extent that the recoverable amount of the investment subsequently increases.
Where a group entity transacts with its associate or joint venture, profits or losses resulting from the transactions with the
associate or joint venture are recognised in the Group’s consolidated financial statements only to the extent of the interests in
the associate or joint venture that are not related to the Group.
INVESTMENT PROPERTIES
3.
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.
4. 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.
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.
138
Significant Accounting Policies continuedFor the year ended 31 December 2016Hysan Annual Report 2016 4. PROPERTY, PLANT AND EQUIPMENT continued
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
5.
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.
6. 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.
(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
Consolidated Financial Statements section.
139
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business 6. FINANCIAL INSTRUMENTS continued
Financial assets continued
(a) Classification of financial assets continued
(ii) Financial assets at FVTPL
Financial assets at FVTPL include derivatives that are not designated and effective as hedging instruments 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.
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 or initial recognition of an investment, 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.
(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.
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.
140
Significant Accounting Policies continuedFor the year ended 31 December 2016Hysan Annual Report 2016 6. FINANCIAL INSTRUMENTS continued
Financial assets continued
(b) Impairment of financial assets continued
The carrying amount of the financial asset is reduced by the impairment loss directly for all categories with the exception of
accounts receivable and loan to a joint venture, 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 and loan
to a joint venture 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.
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.
(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) Financial liabilities at amortised cost
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 7 of the Notes to the Consolidated Financial Statements
section.
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Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business 6. FINANCIAL INSTRUMENTS continued
Financial liabilities and equity instruments continued
(a) Classification and measurement continued
(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 foreign exchange rate risks,
including foreign exchange forward contracts. Further details of derivative financial instruments are disclosed in note 21 of the
Notes to the Consolidated 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.
Hedge accounting
The Group designates certain derivatives as hedging instruments as 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 21 of the Notes to the Consolidated Financial Statements sets out details of the fair values of the derivative instruments
used for hedging purposes.
(a) 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.
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.
142
Significant Accounting Policies continuedFor the year ended 31 December 2016Hysan Annual Report 2016 6. FINANCIAL INSTRUMENTS continued
Hedge accounting continued
(a) Cash flow hedges continued
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.
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.
(b) 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).
7. 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.
8. 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.
9. 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.
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Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business 9. FOREIGN CURRENCIES continued
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.
10. 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.
11. 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.
12. 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 before tax 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 consolidated
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 an
associate, and interests in a joint venture, 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.
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.
144
Significant Accounting Policies continuedFor the year ended 31 December 2016Hysan Annual Report 2016 12. TAxATION continued
(b) Deferred tax continued
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).
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other
comprehensive income or directly in equity, in which case the current and deferred tax are also recognised in other
comprehensive income or directly in equity respectively.
13. 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 its 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.
14. 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.
145
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business 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 consolidated 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 HKFRSs 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 2016. The adoption of these amendments to HKFRSs 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 and amendments to HKFRSs that have been issued but are not yet effective.
HKFRS 9
HKFRS 15
HKFRS 16
Amendments to HKFRS 2
Amendments to HKFRS 4
Amendments to HKFRS 15
Amendments to HKFRS 10 and HKAS 28
Amendments to HKAS 7
Amendments to HKAS 12
Financial Instruments3
Revenue from Contracts with Customers2
Leases4
Classification and Measurement of Share-based Payment Transaction2
Applying HKFRS 9 Financial Instruments with HKFRS 4 Insurance Contracts2
Classifications to HKFRS 15 Revenue from Contracts with Customers2
Sale or Contribution of Assets between an Investor and its Associate or Joint
Venture5
Disclosure Initiatives1
Recognition of Deferred Tax Assets for Unrealised Losses1
1 Effective for annual periods beginning on or after 1 January 2017, 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 1 January 2019, with earlier application permitted.
5 Effective for annual periods beginning on or after a date to be determined.
The Directors of the Company anticipate that the application of these new and amendments to HKFRSs will have no material
impact on the results and financial position of the Group.
146
Hysan Annual Report 2016Notes to the ConsolidatedFinancial StatementsFor the year ended 31 December 2016
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 Group 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$69,633 million (2015:
HK$69,810 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 cross currency swap and foreign exchange derivatives, are carried in the Group’s consolidated
statement of financial position at fair value, as disclosed in note 21 of the Notes to the Consolidated Financial Statements
section. The management of the Group uses its judgment in selecting an appropriate valuation technique for financial
instruments not quoted in an active market. Valuation techniques commonly used by market practitioners are applied. For
derivative financial instruments, assumptions are made based on quoted market rates. Most of the financial instruments are
valued using a discounted cash flow analysis based on assumptions supported, where possible, by observable market prices or
rates. Details of the assumptions used and of the results of sensitivity analyses regarding these assumptions are provided in the
“Financial Risk Management” section.
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
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
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Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business 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 2016
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 an associate
Profit before taxation
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 an associate
Profit before taxation
1,829
140
1,969
(227)
1,742
1,142
150
1,292
(149)
1,143
1,767
135
1,902
(239)
1,663
1,096
147
1,243
(124)
1,119
244
30
274
(52)
222
254
31
285
(51)
234
3,215
320
3,535
(428)
3,107
50
(219)
(178)
(1,187)
237
1,810
3,117
313
3,430
(414)
3,016
54
(234)
(204)
695
246
3,573
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, administrative expenses (including central administrative costs and directors’ salaries), finance costs,
change in fair value of investment properties and share of results of an associate. This is the measure reported to the chief
operating decision maker of the Group for the purpose of resource allocation and performance assessment.
148
Notes to the Consolidated Financial Statements continuedFor the year ended 31 December 2016Hysan Annual Report 2016
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 2016
Segment assets
Investment properties under redevelopment
Investment in an associate
Investment in and loan to a joint venture
Other assets
Consolidated assets
As at 31 December 2015
Segment assets
Investment properties under redevelopment
Investment in an associate
Other assets
Consolidated assets
33,089
23,833
7,859
34,236
23,111
7,834
64,781
4,860
3,497
2,036
4,847
80,021
65,181
4,637
3,683
5,287
78,788
Segment assets represented the investment properties and accounts receivable of each segment without allocation of
investment properties under redevelopment, property, plant and equipment, investment in an associate, investment in and
loan to a joint venture, term notes, other financial assets, other receivables, time deposits, cash and bank balances. This is the
measure reported to the chief operating decision maker 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 associate, which operated in the People’s Republic of China (the “PRC”) with carrying amounts of
HK$3,497 million (2015: HK$3,683 million), all the Group’s assets are located in Hong Kong.
Other segment information
For the year ended 31 December 2016
Additions to non-current assets
Additions to investment properties
under redevelopment
For the year ended 31 December 2015
Additions to non-current assets
Additions to investment properties
under redevelopment
Retail
HK$ million
Office
HK$ million
Residential
HK$ million
Consolidated
HK$ million
325
95
20
99
57
11
440
570
1,010
167
213
380
149
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
INVESTMENT INCOME
6.
The following is an analysis of investment income:
Financial assets measured at amortised cost
Reclassification of net losses from hedging reserve on
financial instruments designated as cash flow hedges
Amortisation of forward element excluded from hedge designation
7. FINANCE COSTS
Finance costs comprise:
Interest on bank loans
Interest on fixed rate notes
Imputed interest on zero coupon notes
Total interest expenses
Other finance costs
Less: amounts capitalised (Note)
Net interest receipts on interest rate swaps
Net exchange losses (gains) on borrowings
Reclassification of net gains from hedging reserve on
financial instruments designated as cash flow hedges
Medium Term Note Programme expenses
2016
HK$ million
2015
HK$ million
49
1
–
50
47
9
(2)
54
2016
HK$ million
2015
HK$ million
7
175
–
182
4
(14)
172
–
2
2
2
178
9
188
1
198
8
–
206
(8)
(2)
6
2
204
Note:
Interest expenses have been capitalised to investment properties under re-development at an average interest rate of 2.61% (2015: nil) per annum.
150
Notes to the Consolidated Financial Statements continuedFor the year ended 31 December 2016Hysan Annual Report 2016
8. TAxATION
Current tax
Hong Kong profits tax
– current year
– (overprovision) underprovision in prior years
Deferred tax (note 27)
2016
HK$ million
2015
HK$ million
400
(1)
399
64
463
382
2
384
54
438
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 an associate
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
(Overprovision) underprovision in prior years
Taxation for the year
2016
HK$ million
1,810
2015
HK$ million
3,573
298
(39)
284
(89)
11
–
(1)
(1)
463
590
(41)
100
(217)
10
(3)
(3)
2
438
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 27).
9. 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$46 million (2015: HK$71 million)
Less:
– Direct operating expenses arising from properties that generated rental income
– Direct operating expenses arising from properties that did not generate rental income
Staff costs, comprising:
– Directors’ emoluments (note 11)
– Share-based payments
– Other staff costs
Share of income tax of an associate (included in share of results of an associate)
2016
HK$ million
2015
HK$ million
3
22
3
21
(3,215)
(3,117)
410
18
403
11
(2,787)
(2,703)
23
3
233
259
101
38
3
239
280
104
151
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
10. OTHER COMPREHENSIVE INCOME
Other comprehensive 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 gains (losses) arising during the year
Reclassification adjustments for net gains (losses) included in profit or loss
Amortisation of forward element excluded from hedge designation
Share of translation reserve of an associate
Other comprehensive expenses for the year (net of tax)
Tax effect relating to other comprehensive income:
2016
HK$ million
2015
HK$ million
–
22
(4)
18
18
77
1
78
–
78
(236)
(158)
(140)
36
10
(1)
9
45
(39)
(3)
(42)
2
(40)
(240)
(280)
(235)
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
11. DIRECTORS’ EMOLUMENTS
Directors’ fees
Other emoluments
Basic salaries, housing and other allowances
Bonus (Notes d & f)
Share-based payments
2016
Before-tax
amount
HK$ million
Tax
expense
HK$ million
Net-of-tax
amount
HK$ million
Before-tax
amount
HK$ million
2015
Tax
expense
HK$ million
Net-of-tax
amount
HK$ million
–
22
78
(236)
(136)
–
(4)
–
–
(4)
–
18
78
(236)
(140)
36
10
(40)
(240)
(234)
–
(1)
–
–
(1)
36
9
(40)
(240)
(235)
2016
HK$ million
2015
HK$ million
2
8
11
2
23
2
13
18
5
38
152
Notes to the Consolidated Financial Statements continuedFor the year ended 31 December 2016Hysan Annual Report 2016
11. DIRECTORS’ EMOLUMENTS continued
The emoluments paid or payable to each of the Directors of the Company for the two years ended 31 December 2016 and
2015, 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 2016
Executive Director (Note a)
Irene Yun Lien LEE
Non-Executive Directors (Note b)
Hans Michael JEBSEN (Note h)
Siu Chuen LAU (Note i)
Anthony Hsien Pin LEE
Chien LEE
Michael Tze Hau LEE
Independent Non-Executive Directors
(Note c)
Nicholas Charles ALLEN (Note j)
Frederick Peter CHURCHOUSE
Philip Yan Hok FAN
Lawrence Juen-Yee LAU (Note k)
Joseph Chung Yin POON (Note l)
For the year ended 31 December 2015
Executive Directors (Note a)
Irene Yun Lien LEE
Siu Chuen LAU
Wendy Wen Yee YUNG (Note m)
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
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
–
5,083
6,443
2,298
18
13,842
232
93
280
260
254
132
280
385
227
359
–
2,969
–
–
–
–
7,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(726)
–
–
–
–
–
–
–
–
–
12
–
–
–
–
–
–
–
–
232
9,348
280
260
254
132
280
385
227
359
2,502
8,052
13,443
1,572
30
25,599
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
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
153
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
11. DIRECTORS’ EMOLUMENTS continued
Notes:
(a) 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.
(b) The Non-Executive Directors’ emoluments shown above were mainly for the services as directors of the Company.
(c) The Independent Non-Executive Directors’ emoluments shown above were mainly for the services as directors of the Company.
(d) Year 2016:
The Remuneration Committee met in March 2016 to approve the 2016 annual fixed base salary and determine the 2015 performance-based
bonus of the Company’s Executive Directors.
The annual cash compensations of Irene Yun Lien LEE, Chairman, and Siu Chuen LAU, then Deputy Chairman and Chief Executive Officer, were
revised to HK$10,257,000 and HK$11,107,980 respectively, based on market benchmark, and the jobholder’s experience, qualification, and
performance. Annual base salaries of Irene Yun Lien LEE and Siu Chuen LAU revised to HK$5,128,500 and HK$5,553,990 (making up 50% of the
total package instead of 60% as in 2015) respectively.
The stated bonus figures of HK$13,443,000 reflected the 2015 performance-based bonus approved by the Committee and paid to Executive
Directors in March 2016. For the year ended 31 December 2016, the bonus figures of HK$10,543,000 represented the 2016 target bonus figures
of HK$9,800,000 pending finalised by the Committee after year-end in February 2017, and included adjustments for 2015 bonus accrued in
2015 (following finalisation of bonus by the Committee in March 2016).
(e)
Last revision of annual Directors’ fees for serving on the Board and certain of its Committees (effective 1 June 2016) were approved by
shareholders at the 2016 AGM. Details are set out in Directors’ Remuneration and Interests Report.
Directors’ fees are calculated on annual basis and paid semi-annually. For Directors not having served the full year on a position, the fees will be
calculated and paid on pro rata basis.
Breakdown of Directors’ fees of each of the Directors of the Company for the year ended 31 December 2016 is set out below:
Board
HK$’000
Audit Remuneration
Committee
HK$’000
Committee
HK$’000
Strategy Nomination
Committee
HK$’000
Committee
HK$’000
2016
Total
HK$’000
2015
Total
HK$’000
Executive Director
Irene Yun Lien LEE
Non-Executive Directors
Hans Michael JEBSEN (Note h)
Siu Chuen LAU (Note i)
Anthony Hsien Pin LEE
Chien LEE
Michael Tze Hau LEE
Independent Non-Executive Directors
Nicholas Charles ALLEN (Note j)
Frederick Peter CHURCHOUSE
Philip Yan Hok FAN
Lawrence Juen-Yee LAU (Note k)
Joseph Chung Yin POON (Note l)
–
214
93
214
214
214
73
214
214
214
214
–
–
–
66
–
–
44
66
65
–
85
–
–
–
–
–
40
–
–
60
–
40
1,878
326
140
–
18
–
–
26
–
8
–
26
–
–
78
–
–
–
–
20
–
7
–
20
13
20
80
–
232
93
280
260
254
132
280
385
227
359
–
200
–
260
240
240
360
260
360
200
260
2,502
2,380
(f)
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).
(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 schemes are set out in note 34 of the Notes to the Consolidated Financial
Statements section.
(h) Hans Michael JEBSEN was appointed a member of the Strategy Committee with effect from the conclusion of the 2016 AGM.
(i)
Siu Chuen LAU stepped down as Deputy Chairman and Chief Executive Officer. He was re-designated as Non-Executive Director and ceased to be
a member of the Strategy Committee with effect from the conclusion of the August 2016 Board Meeting. He will receive from the Company a fee
of HK$225,000 per annum for being a Non-Executive Director of the Company calculated on pro-rata basis.
154
Notes to the Consolidated Financial Statements continuedFor the year ended 31 December 2016Hysan Annual Report 2016
11. DIRECTORS’ EMOLUMENTS continued
Notes: continued
(j) Nicholas Charles ALLEN retired as Independent Non-Executive Director, the chairman of the Audit Committee, a member of the Nomination
Committee and a member of the Strategy Committee with effect from the conclusion of the 2016 AGM.
(k)
(l)
Lawrence Juen-Yee LAU was appointed a member of the Nomination Committee with effect from the conclusion of the 2016 AGM.
Joseph Chung Yin POON was appointed the chairman of the Audit Committee with effect from the conclusion of the 2016 AGM.
(m) Wendy Wen Yee YUNG resigned as Executive Director and Company Secretary with effect from 24 October 2015.
There was no arrangement under which a director waived or agreed to waive any remuneration during both years.
There was no payment to a director as inducement for director to join the Group or compensation for the loss of office as a
director in connection with the management of the affairs of any member of the Group during both years.
Details of material interests of the Directors of the Company in transactions, arrangements or contracts entered into by
subsidiaries of the Company are disclosed in the Directors’ Report.
12. EMPLOYEES’ EMOLUMENTS
Of the five individuals with the highest emoluments in the Group, two (2015: two) were Directors of the Company, details of
whose emoluments are included in note 11 of the Notes to the Consolidated Financial Statements section. The emoluments of
all of the five individuals with the highest emoluments for the years ended 31 December 2016 and 2015 were as follows:
Basic salaries, housing and other allowances
Bonus
Share-based payments (Note)
2016
HK$ million
2015
HK$ million
17
16
2
35
19
15
6
40
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$9,000,001 to HK$9,500,000
HK$13,500,001 to HK$14,000,000
HK$14,000,001 to HK$14,500,000
Number of individuals
2016
2015
1
2
1
1
–
5
2
1
–
1
1
5
Senior management (for the purpose of the Listing Rules) during the year are Executive Directors and other members of senior
management of the Group. Their emoluments are within the following bands.
HK$nil to HK$1,000,000
HK$2,000,001 to HK$3,000,000
HK$3,000,001 to HK$4,000,000
HK$4,000,001 to HK$5,000,000
HK$9,000,001 to HK$10,000,000
HK$13,000,001 to HK$14,000,000
HK$14,000,001 to HK$15,000,000
Number of individuals
2016
2015
1
–
2
2
1
1
–
7
–
1
3
1
–
1
1
7
155
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
13. DIVIDENDS
(a) Dividends recognised as distribution during the year:
2016 first interim dividend paid – HK26 cents per share
2015 first interim dividend paid – HK25 cents per share
2015 second interim dividend paid – HK107 cents per share
2014 second interim dividend paid – HK100 cents per share
(b) Dividends declared after the end of the reporting period:
Second interim dividend (in lieu of a final dividend)
– HK109 cents per share (2015: HK107 cents per share)
2016
HK$ million
2015
HK$ million
272
–
1,122
–
1,394
–
266
–
1,064
1,330
2016
HK$ million
2015
HK$ million
1,139
1,122
The second interim dividend is not recognised as a liability as at 31 December 2016 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 2017.
The declared second interim dividend will be payable in cash.
14. 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
2016
HK$ million
2015
HK$ million
1,218
2,903
Number of shares
2016
2015
1,046,870,824 1,062,690,556
170,710
216,828
1,047,041,534 1,062,907,384
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.
156
Notes to the Consolidated Financial Statements continuedFor the year ended 31 December 2016Hysan Annual Report 2016
14. 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:
2016
2015
Profit
HK$ million
1,218
1,187
(30)
(6)
2,369
2,369
Basic
earnings
per
share
HK cents
116.35
113.39
(2.87)
(0.58)
226.29
226.29
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 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:
(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.
15. INVESTMENT PROPERTIES
Fair Value
At 1 January
Additions
Change in fair value recognised in profit or loss – unrealised
At 31 December
2016
HK$ million
2015
HK$ million
69,810
1,010
(1,187)
69,633
68,735
380
695
69,810
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.
157
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
15. INVESTMENT PROPERTIES continued
Fair value measurements and valuation processes
The fair value of the Group’s investment properties at 31 December 2016 and 2015 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 2015
Additions
Change in fair value recognised in profit or loss
– unrealised
At 31 December 2015
Additions
Change in fair value recognised in profit or loss
– unrealised
Retail
HK$ million
Office
HK$ million
34,209
99
(78)
34,230
325
22,684
57
369
23,110
95
Investment
properties under
redevelopment
HK$ million
Residential
HK$ million
7,822
11
–
7,833
20
4,020
213
404
4,637
570
Total
HK$ million
68,735
380
695
69,810
1,010
(1,473)
627
6
(347)
(1,187)
At 31 December 2016
33,082
23,832
7,859
4,860
69,633
158
Notes to the Consolidated Financial Statements continuedFor the year ended 31 December 2016Hysan Annual Report 2016
15. 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
Retail
Fair value as at
31 December
2016
HK$ million
2015
HK$ million
33,082
34,230
Office
23,832
23,110
Residential
7,859
7,833
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%
(2015: 5.00% –
5.25%)
The higher the
capitalisation
rate, the lower
the fair value.
(ii) Market rent
per month
HK$143 per
square foot
(2015: HK$145
per square foot)
The higher the
market rent,
the higher the
fair value.
Income
capitalisation
approach
(i) Capitalisation
rate
4.25% – 5.00%
(2015: 4.25% –
5.00%)
The higher the
capitalisation
rate, the lower
the fair value.
(ii) Market rent
per month
HK$50
per square foot
(2015: HK$48
per square foot)
The higher the
market rent,
the higher the
fair value.
Income
capitalisation
approach
(i) Capitalisation
rate
3.75%
(2015: 3.75%)
The higher the
capitalisation
rate, the lower
the fair value.
Investment
properties
under
redevelopment
4,860
4,637
Residual method
(ii) Market rent
per month
HK$35
per square foot
(2015: HK$35
per square foot)
The higher the
market rent,
the higher the
fair value.
(i) Capitalisation
rate
4.25% – 5.00%
(2015: 4.25% –
5.00%)
The higher the
capitalisation
rate, the lower
the fair value.
(ii) Market rent
per month
HK$76
per square foot
(2015: HK$80
per square foot)
The higher the
market rent,
the higher the
fair value.
159
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
16. PROPERTY, PLANT AND EQUIPMENT
Leasehold
land and
buildings in
Hong Kong
HK$ million
(Note)
Furniture,
fixtures and
equipment
HK$ million
Computers
HK$ million
Motor
vehicles
HK$ million
Total
HK$ million
COST OR VALUATION
At 1 January 2015
Additions
Disposals
Surplus on revaluation
At 31 December 2015
Additions
Disposals
Surplus on revaluation
At 31 December 2016
Comprising:
At cost
At valuation 2016
ACCUMULATED DEPRECIATION
At 1 January 2015
Provided for the year
Eliminated on disposals
Eliminated on revaluation
At 31 December 2015
Provided for the year
Eliminated on disposals
Eliminated on revaluation
At 31 December 2016
CARRYING AMOUNTS
At 31 December 2016
At 31 December 2015
662
–
–
4
666
–
–
16
682
–
682
682
–
6
–
(6)
–
6
–
(6)
–
682
666
110
4
(1)
–
113
4
(1)
–
116
116
–
116
74
11
(1)
–
84
12
(1)
–
95
21
29
47
2
–
–
49
11
–
–
60
60
–
60
36
4
–
–
40
4
–
–
44
16
9
2
–
–
–
2
–
–
–
2
2
–
2
1
–
–
–
1
–
–
–
1
1
1
821
6
(1)
4
830
15
(1)
16
860
178
682
860
111
21
(1)
(6)
125
22
(1)
(6)
140
720
705
160
Notes to the Consolidated Financial Statements continuedFor the year ended 31 December 2016Hysan Annual Report 2016
16. PROPERTY, PLANT AND EQUIPMENT continued
The above items of property, plant and equipment are depreciated on a straight-line basis over the following terms or 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 2016 and 2015 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.
Fair value as at
31 December
2016
HK$ million
2015
HK$ million
682
666
Description
Leasehold
land and
buildings in
Hong Kong
Valuation
techniques
Unobservable inputs
Income
capitalisation
approach
(i) Capitalisation
rate
Range/
weighted average
of unobservable
inputs
4.25% – 5.25%
(2015: 4.25% –
5.25%)
Relationship of
unobservable
inputs to fair
value
The higher the
capitalisation
rate, the lower
the fair value.
(ii) Market rent
per month
HK$58
per square foot
(2015: HK$57
per square foot)
The higher
the market rent,
the higher the
fair value.
The gains of HK$22 million (2015: HK$10 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$249 million (2015:
HK$255 million) at the end of the reporting period.
Furniture, fixtures and equipment of the Group include assets carried at cost of HK$33 million (2015: HK$30 million) and
accumulated depreciation of HK$27 million (2015: HK$25 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 (2015: HK$2 million).
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Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
17. PARTICULARS OF PRINCIPAL SUBSIDIARIES OF THE COMPANY
The table below lists the principal subsidiaries of the Company at 31 December 2016 and 2015:
Name of subsidiary
Admore Investments Limited
HD Treasury Limited
Hysan (MTN) Limited
Hysan China Holdings Limited
Hysan Corporate Services Limited
Place of
incorporation/
operation
Issued
share capital
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
Hong Kong
HK$2
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
Mariner Bay Limited (Note)
OHA Property Company Limited
Perfect Win Properties Limited
Silver Nicety Company Limited
Barrowgate Limited
Note:
HK$1
HK$1
HK$1
HK$10
HK$2
HK$2
US$1
Hong Kong
Hong Kong
British Virgin Islands
Hong Kong
Hong Kong
Hong Kong
British Virgin Islands/
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Proportion of
ownership interests/
voting rights
held by the Company
directly
indirectly
Principal activities
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100%
100%
100%
100%
100%
100%
100%
100%
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
Investment holding
HK$2
HK$2
HK$20
HK$10,000
100%
–
100%
–
–
100%
– 65.36%
Property investment
Property investment
Property investment
Property investment
The company was incorporated during the year ended 31 December 2016.
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 26 of the Notes to the Consolidated Financial Statements
section, none of the subsidiaries had issued any debt securities at the end of the reporting period.
162
Notes to the Consolidated Financial Statements continuedFor the year ended 31 December 2016Hysan Annual Report 2016
17. PARTICULARS OF PRINCIPAL SUBSIDIARIES OF THE COMPANY continued
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.
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
18. INVESTMENTS IN AN ASSOCIATE
Cost of unlisted investments
Share of post-acquisition profits and other comprehensive income,
net of dividends received
Details of the Group’s associate at 31 December 2016 and 2015 are as follows:
2016
HK$ million
2015
HK$ million
714
10,123
(1,418)
(187)
6,034
3,198
645
379
248
131
130
823
(9)
(375)
439
258
10,236
(1,067)
(199)
6,032
3,196
611
671
439
232
125
438
(13)
(360)
65
2016
HK$ million
2015
HK$ million
2
3,495
3,497
2
3,681
3,683
Place of
incorporation/
establishment
and operation
Hong Kong
Class of
share held/
registered
capital
Effective
interest
held by
the Group
Principal activities
Ordinary share
of HK$5,000,000
26.3%
Investment holding
The PRC
US$165,000,000#
24.7%
Property development
and leasing
The PRC
US$140,000#
23.7%
Property management
Name of associate
Form of
business
structure
Country Link
Enterprises Limited (Note 1)
Private limited
company
Sino-Foreign
equity joint
venture
Sino-Foreign
equity joint
venture
Shanghai Kong Hui
Property Development
Co., Ltd (Note 1)
Shanghai Grand
Gateway Plaza
Property Management
Co., Ltd (Note 1)
# Fully paid-up registered capital
Notes:
(1) Shanghai Kong Hui Property Development Co., Ltd and Shanghai Grand Gateway Plaza Property Management Co., Ltd are non-wholly owned
subsidiaries of Country Link Enterprises Limited, together known as “Country Link”.
(2) Wingrove Investment Pte Ltd, which was an immaterial associate of the Group, dissolved during the year of 2016.
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Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
18. INVESTMENTS IN AN ASSOCIATE continued
The summarised consolidated financial information in respect of the Group’s material associate is set out below. The
summarised consolidated financial information below represents amounts shown in the associate’s consolidated financial
statements prepared in accordance with HKFRSs. The associate is accounted for using the equity method in these consolidated
financial statements.
Country Link
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Turnover
Profit for the year
Other comprehensive expenses for the year
Total comprehensive income for the year
Group’s share of results of an associate for the year
Group’s share of other comprehensive income of an associate for the year
2016
HK$ million
2015
HK$ million
2,241
16,556
(1,052)
(3,613)
1,571
967
(954)
13
237
(236)
2,300
17,604
(1,229)
(3,794)
1,627
1,001
(972)
29
246
(240)
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
2016
HK$ million
14,132
(829)
2015
HK$ million
14,881
(871)
13,303
26.3%
3,500
(3)
3,497
14,010
26.3%
3,686
(3)
3,683
164
Notes to the Consolidated Financial Statements continuedFor the year ended 31 December 2016Hysan Annual Report 2016
19. INVESTMENT IN A JOINT VENTURE AND LOAN TO A JOINT VENTURE
Details of the Group’s investment in and loan to a joint venture are as follow:
Investment in a joint venture
Unlisted shares, at cost
Deemed capital contribution in a joint venture (Note 1)
Loan to a joint venture classified as:
Current assets
Non-current assets (Note 2)
Notes:
2016
HK$ million
–
145
145
1,018
873
1,891
(1) The deemed capital contribution in a joint venture represents the fair value adjustments in relation to the loan to a joint venture at initial
recognition based on the estimated timing on future cash flows.
(2) The loan to a joint venture of the Group is unsecured, interest-free and has no fixed repayment terms. The Directors of the Company are of the
opinion that the Group will not demand repayment from the joint venture for part of the loan with carrying amount of HK$873 million within the
next twelve months from the end of the reporting period and such portion of the loan is therefore classified as non-current assets. The effective
interest rate for imputed interest income is determined based on the cost of fund of the borrower per annum.
Details of the Group’s joint venture at 31 December 2016 are as follows:
Name of joint venture
Place of
incorporation
and operation
Strongbod Limited (Note 1)
British Virgin Islands
Gainwick Limited (Note 1)
Hong Kong
Class of
share held
Ordinary shares
of US$10
Ordinary share
of HK$1
Effective
ownership
interest and
voting rights
held by
the Group
60%
(Note 2)
60%
(Note 2)
Principal activities
Investment holding
Property development
and investment
Notes:
(1) Gainwick Limited is a wholly owned subsidiary of Strongbod Limited, together known as “Strongbod”.
(2) Pursuant to the shareholder’s agreement dated 5 December 2016, entered into by the Group, the joint venture partner and Strongbod, decisions
on all relevant business and operation activities of Strongbod require unanimous board approval from directors of Strongbod appointed by both
the Group and the joint venture partner. Therefore, the Group recognised the investment in Strongbod as a joint venture.
The summarised consolidated financial information in respect of the Group’s material joint venture is set out below. The
summarised consolidated financial information below represents amounts shown in the joint venture’s consolidated financial
statements prepared in accordance with HKFRSs. The joint venture is accounted for using the equity method in these
consolidated financial statements. There was no share of post-acquisition profits and other comprehensive income in current
year.
Strongbod
Non-current assets
Current liabilities
Non-current liabilities
2016
HK$ million
3,393
1,696
1,697
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Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
19. INVESTMENT IN A JOINT VENTURE AND LOAN TO A JOINT VENTURE continued
Reconciliation of the above summarised consolidated financial information to the carrying amount of the interest in the joint
venture that is material to the Group recognised in the consolidated financial statements:
Net assets of the joint venture
Proportion of the Group’s ownership interest in the joint venture
Add: Deemed capital contribution in the joint venture
Carrying amount of the Group’s interest in the joint venture
20. 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
2016
HK$ million
–
60%
–
145
145
2016
HK$ million
2015
HK$ million
817
187
151
1,155
422
733
1,155
729
313
308
1,350
415
935
1,350
As at 31 December 2016, the effective yield of the debt securities ranged from 1.81% to 3.27% (2015: 1.36% to 3.27%) per
annum, payable quarterly, semi-annually or annually, and the securities will mature from January 2017 to July 2019 (2015:
from February 2016 to August 2018). At the end of the reporting period, none of these assets were past due but not impaired.
21. OTHER FINANCIAL ASSETS/LIABILITIES
Current
Non-current
2016
HK$ million
2015
HK$ million
2016
HK$ million
2015
HK$ million
Other financial assets
Derivatives under hedge accounting:
Cash flow hedges
– Forward foreign exchange contracts
– Cross currency swap
Financial assets measured at FVTPL:
Club debenture
Total
Other financial liabilities
Derivatives under hedge accounting:
Cash flow hedges
– Forward foreign exchange contracts
– Cross currency swap
Total
166
6
–
6
–
6
–
–
–
1
–
1
–
1
–
–
–
1
11
12
1
13
1
–
1
6
–
6
1
7
–
71
71
Notes to the Consolidated Financial Statements continuedFor the year ended 31 December 2016Hysan Annual Report 2016
21. 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 swap to manage its foreign currency
exposure. The principal terms of the forward foreign exchange contracts and cross currency swap 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 swap 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 swap
Hedging interest and
principal of USD
fixed rate notes
(Note c)
More than 5 years
Total
2016
2015
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
7.7704
USD
7.8011
7.7922
USD
USD
1.2185
RMB
–
–
1.2185
RMB
28
70
98
55
–
55
221
547
768
67
–
67
7.7519
USD
300 2,326
3,161
–
–
–
6
–
6
11
17
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
7.7519
USD
300
2,326
3,212
(71)
(64)
* Average exchange rate represented the average exchange rate of HKD versus respective currencies weighted by the notional amounts of the
contracts or the swap.
Notes:
(a) The Group used HK$768 million (2015: HK$722 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$67 million (2015: HK$164 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 (2015: HK$2,326 million) cross currency swap to convert USD interest and principal of US$300 million
(2015: US$300 million) fixed rate notes into HKD.
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Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
21. OTHER FINANCIAL ASSETS/LIABILITIES continued
(a) Cash flow hedges continued
(i) Foreign currency risk continued
Hedged items
Carrying amount of
the hedged item
Assets
Liabilities
Cash flow
hedge
reserves
2016
HK$ million
2015
HK$ million
2016
HK$ million
2015
HK$ million
2016
HK$ million
2015
HK$ million
USD term notes
RMB term notes & time deposits
USD fixed rate notes
764
61
–
721
163
–
–
–
2,317
–
–
2,314
1
1
10
2
2
(70)
The hedging ineffectiveness for the years ended 31 December 2016 and 2015 was insignificant.
Change in the value
of the hedging instrument
recognised in other
comprehensive income
Amount
reclassified from the
cash flow hedge reserve
to profit or loss
2016
HK$ million
2015
HK$ million
2016
HK$ million
2015
HK$ million
Line item affected in
profit or loss
because of the
reclassification
Forward foreign exchange contracts
Cross currency swap
(1)
78
5
(44)
(1)
2
(9)
5
Investment income
Finance costs
The forward element of forward contracts has been excluded from the cash flow hedge. For the year ended 31 December 2015,
the Group amortised HK$2 million of forward premium to profit or loss against investment income.
The fair values of forward foreign exchange contracts and cross currency swap are measured using quoted forward exchange
rates and yield curves from quoted interest rates matching maturities of the contracts and swap.
(b) Financial assets measured at FVTPL
Club debenture
Other financial assets of the Group represented investment in unlisted club debenture. The Group’s investment in unlisted club
debenture has been classified as financial assets measured at FVTPL.
22. ACCOUNTS AND OTHER RECEIVABLES
Accounts receivable
Interest receivable
Prepayments in respect of investment properties
Other receivables and prepayments
Total
Analysed for reporting purposes as:
Current assets
Non-current assets
2016
HK$ million
2015
HK$ million
8
50
76
197
331
196
135
331
8
59
121
240
428
201
227
428
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 (2015: HK$8 million) mainly represented rents receipts in arrears,
which were aged less than 90 days.
At the end of the reporting period, none of the accounts receivable were past due but not impaired.
168
Notes to the Consolidated Financial Statements continuedFor the year ended 31 December 2016Hysan Annual Report 2016
23. TIME DEPOSITS/CASH AND BANK BALANCES
Time deposits
Cash and bank balances
Cash and deposits with banks shown in the consolidated statement of financial position
Less: Time deposits with original maturity over three months
Cash and cash equivalents shown in the consolidated statement of cash flows
2016
HK$ million
2015
HK$ million
2,551
79
2,630
(1,263)
1,367
2,743
61
2,804
(2,220)
584
Time deposits, cash and bank balances include bank deposits carrying effective interest rates ranging from 0.15% to 1.78%
(2015: 0.20% to 4.25%) per annum.
24. ACCOUNTS PAYABLE AND ACCRUALS
Accounts payable
Interest payable
Other payables
Compensation received in advance (Note)
2016
HK$ million
2015
HK$ million
149
75
450
261
935
146
73
251
–
470
Note:
The amount represents a one-off early surrender compensation received from a tenant which will be recognised as compensation income upon the
date of fulfilment of all conditions set out in the surrender agreement.
At the end of the reporting period, accounts payable of the Group with carrying amount of HK$103 million (2015: HK$99
million) were aged less than 90 days.
25. AMOUNTS DUE TO NON-CONTROLLING INTERESTS
The amounts due to non-controlling interests are unsecured, interest-free and repayable on demand.
26. BORROWINGS
The analysis of the carrying amounts of borrowings is as follows:
Unsecured bank loans
Fixed rate notes
Current
Non-current
2016
HK$ million
2015
HK$ million
2016
HK$ million
2015
HK$ million
1,180
–
1,180
250
–
250
500
4,613
5,113
–
4,609
4,609
In the current year, the average cost of finance of the Group’s total borrowings calculated based on their contracted interest
rates was 3.7% (2015: 3.6%). To manage the foreign exchange risks, the Group used certain derivative to hedge part of the
borrowings, which resulted in the Group’s average cost of finance to be 3.8% (2015: 3.5%). As at 31 December 2016, the
floating rate debt ratio relative to gross total debt after considering the hedges was 26.6% (2015: 5.1%).
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Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
26. BORROWINGS continued
(a) Unsecured bank loans
The unsecured bank loans of HK$1,680 million (2015: HK$250 million) are guaranteed as to principal and interest by the
Company and are repayable, based on the scheduled repayment dates set out in the respective loan agreement, as follows:
Within 1 year
More than 2 years, but not exceeding 3 years
2016
HK$ million
2015
HK$ million
1,180
500
1,680
250
–
250
All the Group’s unsecured bank loans are variable-rate borrowings with effective interest rates (which were also equal to
contracted interest rates) at 1.44% (2015: 1.03%) per annum at the end of the reporting period. Interest rates of the loans are
normally re-fixed at every one to three months.
(b) Fixed rate notes
Fixed rate notes
2016
HK$ million
4,613
2015
HK$ million
4,609
Details of the Group’s fixed rate notes as at 31 December 2016 and 2015 are as follows:
Principal amount
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$300 million
Contracted
interest rate
per annum
5.38%
3.78%
4.00%
3.70%
3.86%
4.10%
4.00%
3.90%
4.50%
3.50%
Coupon
payment term
annual basis
quarterly basis
annual basis
quarterly basis
quarterly basis
annual basis
quarterly basis
quarterly basis
annual basis
semi-annual basis
Issue date
Maturity date
September 2008
August 2010
September 2010
October 2010
May 2011
December 2011
January 2012
March 2012
March 2012
January 2013
September 2020
August 2020
September 2025
October 2022
May 2018
December 2023
January 2022
March 2019
March 2027
January 2023
All the fixed rate notes were issued by Hysan MTN, a wholly-owned subsidiary of the Company. The notes are guaranteed as to
principal and interest by the Company and bear an effective interest rate equal to their respective contracted interest rate.
As detailed in note 21 of the Notes to the Consolidated Financial Statements section, during the years ended 31 December
2016 and 2015, cross currency swap was used to hedge or manage the foreign exchange rate risks of the Group’s US$ fixed
rate notes.
27. DEFERRED TAxATION
The following are the major deferred tax liabilities recognised by the Group and movements thereon during the current and
prior years:
At 1 January 2015
Charge to profit or loss (note 8)
Charge to other comprehensive income
At 31 December 2015
Charge to profit or loss (note 8)
Charge to other comprehensive income
At 31 December 2016
170
Accelerated tax
depreciation
HK$ million
Revaluation of
properties
HK$ million
Total
HK$ million
560
54
–
614
64
–
678
68
–
1
69
–
4
73
628
54
1
683
64
4
751
Notes to the Consolidated Financial Statements continuedFor the year ended 31 December 2016Hysan Annual Report 2016
27. DEFERRED TAxATION continued
At the end of the reporting period, the Group has unused estimated tax losses of HK$767 million (2015: HK$708 million),
of which HK$422 million (2015: HK$358 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$767 million (2015: HK$708 million) as the utilisation of these estimated tax losses is uncertain. These estimated
tax losses may be carried forward indefinitely.
28. SHARE CAPITAL
Ordinary shares, issued and fully paid:
At 1 January 2015
Issue of shares under share option scheme
Cancellation upon repurchase of own shares (Note)
At 31 December 2015
Issue of shares under share option scheme
Cancellation upon repurchase of own shares (Note)
At 31 December 2016
Note:
Number of shares
Share capital
HK$ million
1,063,871,692
56,000
(6,750,000)
1,057,177,692
744,667
(12,594,000)
1,045,328,359
7,640
2
–
7,642
31
–
7,673
The Company was authorised at its AGMs to repurchase its own ordinary shares not exceeding 10% of the total number of its issued shares as at the
dates of the resolutions being passed. During the years, the Company repurchased its ordinary shares on the Stock Exchange when they were trading at
a significant discount to the Company’s net asset value in order to enhance shareholder value.
During the years of 2016 and 2015, the Company repurchased its own ordinary shares on the Stock Exchange as follows:
Month of
repurchase in 2016
January
February
March
April
May
June
November
Month of
repurchase in 2015
August
September
November
December
Number of shares
repurchased
8,560,000
325,000
299,000
304,000
2,180,000
65,000
861,000
12,594,000
Number of shares
repurchased
1,820,000
1,255,000
221,000
3,454,000
6,750,000
Consideration per share
Highest
HK$
31.85
30.60
32.50
31.70
33.60
33.20
34.90
Lowest
HK$
28.95
29.75
32.05
31.30
31.60
32.45
33.55
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
263
10
10
9
71
2
30
395
Aggregate
consideration
paid
HK$ million
57
40
7
111
215
The above ordinary shares were cancelled upon repurchase. None of the Company’s subsidiaries purchased, sold or redeemed any of the Company’s
listed securities during both years.
171
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
29. 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
Cash and bank balances
Current liabilities
Other payables and accruals
Amounts due to subsidiaries
Taxation payable
Net current assets
Net assets
Capital and reserves
Share capital (note 28)
Reserves
Total equity
2016
HK$ million
2015
HK$ million
3
1,307
1
3,815
5,126
4
10,026
2
10,032
38
2,228
1
2,267
7,765
6
1,441
1
3,785
5,233
5
9,265
2
9,272
55
1,397
–
1,452
7,820
12,891
13,053
7,673
5,218
12,891
7,642
5,411
13,053
The Company’s statement of financial position was approved and authorised for issue by the Board of Directors on 22 February
2017 and are signed on its behalf by:
Irene Y.L. LEE
Director
Michael T.H. LEE
Director
172
Notes to the Consolidated Financial Statements continuedFor the year ended 31 December 2016Hysan Annual Report 2016
29. STATEMENT OF FINANCIAL POSITION AND RESERVES OF THE COMPANY continued
Movement in the Company’s reserve
At 1 January 2015
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 and total comprehensive income for the year
Dividends paid during the year (note 13)
At 31 December 2015
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 and total comprehensive income for the year
Dividends paid during the year (note 13)
At 31 December 2016
Share
options
reserve
HK$ million
General
reserve
HK$ million
(Note)
Retained
profits
HK$ million
Total
HK$ million
27
(1)
8
(4)
–
–
–
30
(7)
5
(4)
–
–
–
24
100
–
–
–
–
–
–
100
–
–
–
–
–
–
100
5,286
–
–
4
(215)
1,536
(1,330)
5,281
–
–
4
(395)
1,598
(1,394)
5,094
5,413
(1)
8
–
(215)
1,536
(1,330)
5,411
(7)
5
–
(395)
1,598
(1,394)
5,218
Note: General reserve was set up from the transfer of retained profits.
The Company’s reserves available for distribution to its owners as at 31 December 2016 amounted to HK$5,194 million
(2015: HK$5,381 million), being its general reserve and retained profits at that date.
30. 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$4 million (2015: HK$7 million).
31. CAPITAL COMMITMENTS
At the end of the reporting period, the Group had the following capital commitments in respect of its investment properties and
property, plant and equipment:
Contracted but not provided for
2016
HK$ million
1,276
2015
HK$ million
396
173
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
32. 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
2016
HK$ million
2015
HK$ million
2,916
4,572
334
7,822
2,721
5,024
812
8,557
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.
33. 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)
Gross rental income
received from
Amount due to
non-controlling interests
2016
HK$ million
2015
HK$ million
2016
HK$ million
2015
HK$ million
3
36
28
1
3
33
30
1
–
94
233
–
–
94
233
–
Notes:
(a) The sum of transactions represents the aggregate gross rental income received from Atlas Corporate Management Limited, a wholly-owned
subsidiary of LHE. LHE holds 41.43% (2015: 40.97%) 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 by Mightyhall Limited, a
wholly-owned subsidiary of Jebsen and Company, 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 of the Company.
174
Notes to the Consolidated Financial Statements continuedFor the year ended 31 December 2016Hysan Annual Report 2016
33. RELATED PARTY TRANSACTIONS AND BALANCES continued
(b) Compensation of key management personnel
The remuneration of Directors and other members of senior management of the Group are as follows:
Directors’ fees, salaries and other short-term employee benefits
Share-based payments
Retirement benefits scheme contributions
2016
HK$ million
2015
HK$ million
39
3
–
42
42
6
–
48
The remuneration of the Directors and key executives is determined by the Remuneration Committee having regard to the
performance of individuals and market trends.
34. SHARE-BASED PAYMENT TRANSACTIONS
(a) Equity-settled 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 options, with
full payment for exercise price to be made on exercise of the relevant options.
The New Scheme
The Company adopted the New Scheme 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.
175
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
34. SHARE-BASED PAYMENT TRANSACTIONS continued
(a) Equity-settled share option scheme continued
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$1 and is required to be paid within 30 days from the date of grant of options, with
full payment for exercise price to be made on exercise of the relevant options.
During the year, a total of 1,397,000 (2015: nil) share options were granted under the New Scheme. The 2005 Scheme expired
on 9 May 2015 and no further option will be granted under the 2005 Scheme.
(b) Grant and vesting structures
Under the Company’s current policy, grants will be made on a periodic basis. For the Schemes, the exercise period is
10 years and vesting period is 3 years in equal proportions starting from the 1st anniversary and become fully vested on
the 3rd anniversary of the grant. Size of grant will be determined by reference to base salary multiple and job grades. A
clear performance criterion will be a key driver. The Board will review the grant and vesting structures from time to time.
176
Notes to the Consolidated Financial Statements continuedFor the year ended 31 December 2016Hysan Annual Report 2016 34. SHARE-BASED PAYMENT TRANSACTIONS continued
(c) Movement of share options
The following table discloses movements of the Company’s share options held by the Directors and eligible employees during
the current year:
Name
2005 Scheme
Executive Directors
Irene Yun Lien LEE
Siu Chuen LAU
(Note d)
Eligible employees
(Note f)
Date
of grant
Exercise
price
HK$
Exercise period
(Note a)
14.5.2012
33.50
7.3.2013
39.92
10.3.2014
32.84
12.3.2015
36.27
14.5.2012
33.50
7.3.2013
39.92
10.3.2014
32.84
12.3.2015
36.27
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
31.3.2015
34.00
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
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
Balance
as at
1.1.2016
261,000
265,000
325,000
300,000
161,334
246,000
302,000
300,000
17,000
134,000
152,334
172,001
250,335
288,000
396,000
404,000
Changes during the year
Granted
Exercised
Balance
as at
31.12.2016
Cancelled/
lapsed
(Note b)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(174,000)
(Note c)
–
–
–
(161,334)
(Note c)
–
(201,333)
(Note e)
–
(6,000)
(Note g)
(6,000)
(Note g)
(26,000)
(Note h)
(40,667)
(Note i)
(76,334)
(Note j)
–
(36,666)
(Note k)
(16,333)
(Note l)
–
–
–
–
–
(246,000)
(100,667)
(300,000)
87,000
265,000
325,000
300,000
–
–
–
–
–
–
–
11,000
128,000
126,334
(6,334) 125,000
(14,000) 160,001
(12,000) 276,000
(21,334) 338,000
(28,667) 359,000
3,974,004
–
(744,667) (729,002) 2,500,335
177
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
34. SHARE-BASED PAYMENT TRANSACTIONS continued
(c) Movement of share options continued
Name
New Scheme
Executive Directors
Irene Yun Lien LEE
Siu Chuen LAU
(Note d)
Eligible employees
(Note f)
Date
of grant
Exercise
price
HK$
Exercise period
(Note a)
Changes during the year
Balance
as at
1.1.2016
Granted
Exercised
Balance
as at
31.12.2016
Cancelled/
lapsed
(Note b)
9.3.2016
9.3.2016
31.3.2016
33.15
(Note m)
33.15
(Note m)
33.05
(Note n)
9.3.2017 –
8.3.2026
9.3.2017 –
8.3.2026
31.3.2017 –
30.3.2026
–
375,000
–
–
375,000
–
375,000
–
(375,000)
–
–
647,000
–
(37,000) 610,000
– 1,397,000
–
(412,000) 985,000
Exercisable at the end of the year
1,826,654
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 re-designation of an executive director and resignations of certain eligible employees.
(c) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$36.35.
(d) Siu Chuen LAU stepped down as Deputy Chairman and Chief Executive Officer and was re-designated as Non-Executive Director with effect from
the conclusion of the August 2016 Board Meeting. All the options granted to Siu Chuen LAU have been lapsed at the date following the
re-designation.
(e) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$36.30.
(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$33.25.
(h) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$34.27.
(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$36.95.
The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$35.88.
(k) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$37.78.
(l)
The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$37.84.
(m) The closing price of the shares of the Company immediately before the date of grant (i.e. as of 8 March 2016) was HK$33.70.
(n) The closing price of the shares of the Company immediately before the date of grant (i.e. as of 30 March 2016) was HK$32.85.
Apart from the above, the Company had not granted any share option under the 2005 Scheme and the New Scheme to any
other persons as required to be disclosed under Rule 17.07 of the Listing Rules in 2016.
178
Notes to the Consolidated Financial Statements continuedFor the year ended 31 December 2016Hysan Annual Report 2016
34. SHARE-BASED PAYMENT TRANSACTIONS continued
(c) Movement of share options continued
The following table discloses movements of the Company’s share options held by the Directors and eligible employees in prior
year:
Changes during the year
Granted
Exercised
Balance
as at
31.12.2015
Cancelled/
lapsed
(Note b)
Name
2005 Scheme
Executive Directors
Irene Yun Lien LEE
Siu Chuen LAU
Wendy Wen Yee YUNG
(Note d)
Eligible employees
(Note f)
Date
of grant
Exercise
price
HK$
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
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
–
–
–
–
–
–
–
–
–
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
179
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
34. SHARE-BASED PAYMENT TRANSACTIONS continued
(c) Movement of share options 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 an executive 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 and the New Scheme to any
other persons as required to be disclosed under Rule 17.07 of the Listing Rules in 2015.
(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$5 million (2015: HK$8 million) in relation to share
options granted by the Company, of which HK$2 million (2015: HK$5 million) related to the Directors (see note 11), 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
31.3.2016
9.3.2016
31.3.2015
12.3.2015
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$33.050
HK$33.050
0.931%
5 years
27.323%
HK$1.092
HK$6.127
HK$33.150
HK$33.150
1.019%
5 years
27.339%
HK$1.092
HK$6.190
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 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.
180
Notes to the Consolidated Financial Statements continuedFor the year ended 31 December 2016Hysan Annual Report 2016
1. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s major financial instruments include loan to a joint venture, cash and bank balances, time deposits, 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 Consolidated
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 loan to a joint venture, rents receivable from tenants, 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, 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 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+
2016
Number of
counterparty
Exposure
HK$ million
2015
Number of
counterparty
Exposure
HK$ million
4
22
19 to 631
9 to 677
5
22
16 to 611
15 to 472
To minimise the credit risk of loan to a joint venture, 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.
181
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible BusinessFinancial Risk ManagementFor the year ended 31 December 2016
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 2016
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 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)
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
(935)
(917)
(327)
(1,680)
(4,613)
(935)
(917)
(327)
(1,707)
(5,659)
(935)
(339)
(327)
(1,192)
(175)
(8,472)
(9,545)
(2,968)
–
(288)
–
(9)
(322)
(619)
–
(274)
–
(506)
(1,312)
(2,092)
–
(16)
–
–
(3,850)
(3,866)
(470)
(890)
(327)
(250)
(4,609)
(6,546)
(470)
(890)
(327)
(251)
(5,833)
(470)
(296)
(327)
(251)
(175)
(7,771)
(1,519)
–
(293)
–
–
(175)
(468)
–
(284)
–
–
(1,501)
(1,785)
–
(17)
–
–
(3,982)
(3,999)
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.
182
Financial Risk Management continuedFor the year ended 31 December 2016Hysan Annual Report 2016
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 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 2016
Derivative settled gross
Forward foreign exchange contracts
Outflow
Inflow
Cross currency swap
Outflow
Inflow
As at 31 December 2015
Derivative settled gross
Forward foreign exchange contracts
Outflow
Inflow
Cross currency swap
Outflow
Inflow
6
11
7
(71)
(824)
834
(281)
288
(326)
328
(217)
218
–
–
(2,857)
2,855
(85)
81
(85)
81
(255)
244
(2,432)
2,449
(884)
886
(466)
466
(169)
171
(249)
249
–
–
(2,942)
2,935
(85)
81
(85)
81
(255)
244
(2,517)
2,529
(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.
As at 31 December 2016, about 26.6% (2015: 5.1%) 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 cash flow interest rate risk as the interest income derived from time deposits and bank balances is subject to interest
rate changes. 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.
183
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 non-derivative financial
instruments that would have affected the profit or loss and equity. A change of +100 and -25 basis points (“bps”) (2015:
+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 (2015: +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 2016
As at 31 December 2015
Increase (decrease) in
profit or loss
Increase (decrease) in
equity
bps
increase
HK$ million
bps
decrease
HK$ million
bps
increase
HK$ million
bps
decrease
HK$ million
14
26
(4)
(7)
(7)
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 swap. During the year ended 31 December 2016, forward contracts were entered to hedge all of the RMB exposure in
view of depreciation of RMB against HKD.
2016
2015
RMB
million
US$
million
Total
equivalent
to
HK$
million
RMB
million
US$
million
–
–
55
55
1
53
126
180
3
409
1,036
1,448
–
80
55
135
1
15
144
160
Total
equivalent
to
HK$
million
3
213
1,181
1,397
–
300
2,317
–
300
2,314
Assets
Cash
Time deposits
Term notes
Liabilities
Fixed rate notes
184
Financial Risk Management continuedFor the year ended 31 December 2016Hysan Annual Report 2016
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 21 of the Notes to the Consolidated 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”)
(2015: 1,000 pips) and 500 pips (2015: 500) were applied to the HKD:RMB and HKD:USD spot and forward rates respectively at
the end of the reporting period.
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 2016
– USD
As at 31 December 2015
– 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
Increase (decrease) in
equity
pips
increase
HK$ million
pips
decrease
HK$ million
pips
increase
HK$ million
pips
decrease
HK$ million
4
3
(4)
(3)
1
2
(1)
(2)
2016
HK$ million
2015
HK$ million
1
18
5,737
5,756
1
7,555
7,556
1
7
4,222
4,230
71
5,656
5,727
185
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 2016
Derivatives under hedge accounting
As at 31 December 2015
Derivatives under hedge accounting
Gross amounts of
recognised
financial assets
HK$ million
18
7
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
–
–
18
7
(b) Net financial assets subject to enforceable master netting arrangements or similar agreements, by counterparty
As at 31 December 2016
Counterparty A
Counterparty B
Total
As at 31 December 2015
Counterparty B
Counterparty C
Counterparty D
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
11
7
18
4
1
2
7
–
–
–
–
–
–
–
Net amount
HK$ million
11
7
18
4
1
2
7
(c) Financial liabilities subject to enforceable master netting arrangements or similar agreements
As at 31 December 2016
Derivatives under hedge accounting
As at 31 December 2015
Derivatives under hedge accounting
Gross amounts of
recognised
financial liabilities
HK$ million
(1)
(71)
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
–
–
(1)
(71)
186
Financial Risk Management continuedFor the year ended 31 December 2016Hysan Annual Report 2016
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 2016
Counterparty D
As at 31 December 2015
Counterparty A
Net amounts of
financial liabilities
presented in the
consolidated
statement of
financial position
HK$ million
(1)
(71)
Financial assets
not set off in the
consolidated
statement of
financial position
HK$ million
–
–
Net amount
HK$ million
(1)
(71)
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 of the Company 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$4,613 million (2015: HK$4,609 million) fixed rate notes as stated in note 26 of the Notes to the Consolidated Financial
Statements section with fair value of HK$4,672 million (2015: HK$4,785 million).
The fair value of HK$2,340 million (2015: HK$2,367 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$2,332 million (2015: HK$2,418 million) of the fixed rate notes is categorised into Level 2 of the fair value
hierarchy, in which the fair value was measured using discounted cash flow methodology based on observable yield curves of
the respective currency taking into account the credit margin of the Group as appropriate.
187
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible Business
4. FAIR VALUE MEASUREMENT continued
(b) Fair value of financial assets and financial liabilities that are measured at fair value on a recurring basis
The following table provides an analysis of financial instruments that are measured at fair value on a recurring basis, grouped
into Levels 1 to 3 based on the degree to which the inputs to the fair value measurements are observable.
•
Level 1: fair value measurements are those derived from quoted prices (unadjusted) in active market for identical assets
and liabilities.
•
Level 2: fair value measurements are those derived from inputs other than quoted prices included with Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
•
Level 3: fair value measurements are those derived from valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable inputs).
Financial assets
Derivatives under hedge accounting
Forward foreign exchange contracts
Cross currency swap
Total
Financial assets at FVTPL
Unlisted club debenture
Total
Financial liabilities
Derivatives under hedge accounting
Forward foreign exchange contracts
Financial assets
Derivatives under hedge accounting
Forward foreign exchange contracts
Financial assets at FVTPL
Unlisted club debenture
Total
Financial liabilities
Derivatives under hedge accounting
Cross currency swap
Level 1
HK$ million
Level 2
HK$ million
Level 3
HK$ million
Total
HK$ million
2016
–
–
–
–
–
–
7
11
18
1
19
1
2015
–
–
–
–
–
–
7
11
18
1
19
1
Level 1
HK$ million
Level 2
HK$ million
Level 3
HK$ million
Total
HK$ million
–
–
–
–
7
1
8
71
–
–
–
–
7
1
8
71
There were no transfers between Levels 1 and 2 for both years.
188
Financial Risk Management continuedFor the year ended 31 December 2016Hysan Annual Report 2016
4. FAIR VALUE MEASUREMENT continued
(c) Valuation techniques and inputs used in fair value measurements categorised within Level 2
Forward foreign exchange contracts and cross currency swap 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.
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
Borrowings
Less: Time deposits
Cash and bank balances
Net debt
Equity attributable to owners of the Company
Net debt to equity
2016
HK$ million
2015
HK$ million
1,680
4,613
6,293
(2,551)
(79)
3,663
250
4,609
4,859
(2,743)
(61)
2,055
67,490
68,172
5.4%
3.0%
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
189
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$)
Year end share price (HK$)
2016
HK$ million
2015
HK$ million
2014
HK$ million
2013
HK$ million
2012
HK$ million
3,535
(428)
3,107
50
–
(219)
(178)
(1,187)
237
1,810
(463)
1,347
(129)
1,218
2,369
2,369
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
1,394
1,139
135.00
1,330
1,122
132.00
1,255
1,064
123.00
1,064
1,010
117.00
1.16
1.16
2.26
2.26
5.4%
23.5x
64.56
3.50
32.05
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
190
Hysan Annual Report 2016Five-Year Financial Summary
At 31 December
Assets and liabilities
Investment properties
Investment in associates
Investment in a joint venture
Loan to a joint venture
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:
2016
HK$ million
2015
HK$ million
2014
HK$ million
2013
HK$ million
2012
HK$ million
69,633
3,497
145
1,891
–
–
2,630
2,225
80,021
(6,293)
(863)
(2,180)
(9,336)
70,685
(3,195)
67,490
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
(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
191
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 2016
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 2016 was in the approximate sum of Hong Kong Dollars Sixty-Nine Billion Six Hundred and
Thirty-Three Million Only (ie HK$69,633 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. The construction costs and professional fees expended have
been taken into account in the valuation.
Yours faithfully
Knight Frank Petty Limited
Hong Kong, 15 February 2017
192
Hysan Annual Report 2016Report 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%
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%
* The above-ground construction is in good progress. 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.
193
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible BusinessSchedule of Principal PropertiesAt 31 December 2016
SHARE CAPITAL
At 31 December 2016
Issued and fully paid-up capital
There was one class of ordinary shares with equal voting rights.
DISTRIBUTION OF SHAREHOLDINGS
(At 31 December 2016, as per register of members of the Company)
HK$
Number of
Ordinary Shares
7,673,427,935.19
1,045,328,359
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)
2,322
823
82
53
2
9
3,291
70.56
25.01
2.49
1.61
0.06
0.27
3,808,934
12,727,297
6,193,001
11,024,515
1,269,043
1,010,305,569
0.36
1.22
0.59
1.06
0.12
96.65
100.00
1,045,328,359
100.00
TYPES OF SHAREHOLDERS
(At 31 December 2016, 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 2016, 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
576,380,647
35,816,977
3.81
37.62
55.14
3.43
1,045,328,359
100.00
ordinary shares held
Number of % of the total no.
of issued shares
(Note)
1,042,747,705
2,249,924
119,085
211,645
1,045,328,359
99.75
0.22
0.01
0.02
100.00
The percentages was compiled based on the total number of shares of the Company in issue (i.e. 1,045,328,359 ordinary shares) as at 31 December
2016.
194
Hysan Annual Report 2016Shareholding 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
2017 interim results to be announced
* subject to change
22 February 2017
7 March 2017
9 March 2017
(on or about) 23 March 2017
12 to 15 May 2017
15 May 2017
4 August 2017*
DIVIDEND
The Board declares the payment of a second interim dividend of HK109 cents per share. The second interim dividend will be
payable in cash to shareholders on the register of members as at Thursday, 9 March 2017.
The register of members will be closed on Thursday, 9 March 2017, for the purpose of determining shareholders’ entitlement
to the second interim dividend, on which date 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 Wednesday, 8 March 2017.
Dividend warrants will be dispatched to shareholders on or about Thursday, 23 March 2017.
The register of members will also be closed from Friday, 12 May 2017 to Monday, 15 May 2017, both dates inclusive, for
the purpose of determining shareholders’ entitlement to attend and vote at the AGM to be held on Monday, 15 May 2017,
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 Thursday, 11 May 2017.
195
Corporate GovernanceFinancial Statements and ValuationFinancial PerformanceOverviewResponsible BusinessShareholder 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 at the Company’s website: 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
196
Shareholder Information continuedHysan Annual Report 2016 BOARD OF DIRECTORS
Irene Yun Lien LEE (Chairman)
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)
Siu Chuen LAU*
Anthony Hsien Pin LEE*
(Irene Yun Lien LEE as his alternate)
Chien LEE*
Michael Tze Hau LEE*
AUDIT COMMITTEE
Joseph Chung Yin POON** (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)
Philip Yan Hok FAN**
Lawrence Juen-Yee LAU**
Joseph Chung Yin POON**
Chien LEE*
* Non-Executive Director
** Independent Non-Executive Director
STRATEGY COMMITTEE
Irene Yun Lien LEE (Chairman)
Philip Yan Hok FAN**
Joseph Chung Yin POON**
Hans Michael JEBSEN B.B.S.*
Chien LEE*
COMPANY SECRETARY
Maggie Ka Ki CHEUNG
REGISTERED OFFICE
49/F. (Reception: 50/F)
Lee Garden One
33 Hysan Avenue
Hong Kong
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
DESIGN: FORMAT LIMITED
www.format.com.hk
197
Corporate Information
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