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A Balanced
Dual-Engine Business
ANNUAL REPORT 2019
stock code 00014
VISION
To be the premier property company 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
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We welcome stakeholders’ feedback on this Report.
Please share your thoughts at hysan@hysan.com.hk
In an effort to reduce consumption of resources due
to printing and distributing hard copies, the Hysan
Sustainability Report has been prepared for
electronic distribution and is available for public
viewing on Hysan Development’s website
(www.hysan.com.hk). Limited copies are printed and
distributed, primarily to our shareholders.
A summary of the Sustainability Report is provided
on pages 98 to 101 of this Annual Report.
Scan QR code to read the
Sustainability Report 2019
2019 was an exceptionally challenging year for
Hong Kong and Hysan, both buffeted by global
headwinds and domestic factors. Through the difficult
times, Hysan delivered swift, positive solutions and
support to manage the impact on our tenants and
community. We believe our balanced dual-engine
portfolio with the synergies generated by the two main
segments, Office and Retail, helped Hysan remain resilient
to the unexpected disruptions and impacts.
Looking ahead, we will maintain our close working
relationships and foster new partnerships with existing
and potential stakeholders to navigate through the
turbulence. As a strong reputable property investor,
developer and manager, we have the foundation to
continue our growth.
CONTENTS
1 OVERVIEW
Page 8
2 BUSINESS
PERFORMANCE
Page 22
3 CORPORATE
GOVERNANCE
Page 38
4 FINANCIAL STATEMENTS,
VALUATION AND OTHER
INFORMATION
Page 109
Synergies from a
Balanced Dual-Engine
Portfolio
E
R
TA I
L
F
O
F
I C
E
Broadened customer base supports dynamic growth of
DIVERSE RETAIL OFFERINGS
2
Hysan Annual Report 2019 Hysan’s balanced dual-engine business has provided a stable
platform for the company. The office portfolio accounted for
around the same turnover as the retail portfolio in 2019.
The demand from an increasingly discerning office clientele
continues to drive a more diverse retail offering. The combination
of a balanced portfolio with synergies generated by the two
main segments will continue to inspire and power our business.
Beyond having an optimal tenant mix in buildings,
Hysan’s Lee Gardens is a vibrant community of pe o p l
n
e a
s ...
d a c tiv iti e
E
R
TA I
L
F
O
F
I C
E
Wide range of lifestyle experiences attracts
DISCERNING OFFICE TENANTS
3
A Vibrant Community
The geographical advantage and historical nature of
Lee Gardens create an ideal backdrop for our dual-engine
model. Over the years, Hysan actively carried out asset
enhancements, re-developments, neighbourhood curation
and tenant mix changes, as well as community events and
activities. Lee Gardens is now a premier destination for all
ages and all walks of life.
4
Hysan Annual Report 2019 Community
Highlights in 2019
Hysan unveiled Bizhouse, a concept that combines living and
working in a regenerated low-rise building. We also started
Hysan’s Art Programme to promote local artists. We launched
Urban Sky which transformed an under-used space into a popular
performing venue.
Strong promotions through general shoppers’ campaigns and
events continued to help our tenants attract more customers.
Within the office portfolio, flex space has added diversity to
our business platform, further sharpening our retail and
service offerings.
5
Business Technology
Applications
We are gaining greater insights into our visitors’ demographics
and traffic patterns through our area-wide Wifi and IoT. We use
data analytics and AI to inform our strategy in the world of digital
economy. The growth in the number of our social media followers
and our interaction with them help us better understand and
predict their preferences.
Technology also enhances our daily operations directly. We are
consolidating our two loyalty programmes into a single operating
platform to improve efficiency and user-friendliness. In addition,
we unveiled our Electronic Gift Coupon system in 2019.
LEE
GARDENS
6
Hysan Annual Report 2019 Strengthening
Sustainability
Long term sustainable thinking comes naturally
to us, a company with strong roots in Causeway
Bay. Our Board has established a Sustainability
Committee to oversee environmental, social and
governance issues. We are in a good position to
further integrate sustainability initiatives with
clear targets into our strategic plans.
LEE
GARDENS
7
10
Key Facts
10 Our Portfolio
11 Value Creation
12 Our Assets
14
2019 Performance at a
Glance
18
Chairman’s Statement
OVERVIEW1
9
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance Key Facts
OUR PORTFOLIO
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 and
drives synergies amongst our tenants and a vibrant
community.
Within our approximately 4.5 million square feet of
retail, office and residential tenant space, we strive to
become partners with our tenants. By understanding
and connecting our tenants’ and our customers’
needs, we create a sustainable ecosystem.
10
Hysan Annual Report 2019 VALUE CREATION
Financial Achievements:
• Steady and progressive total return
• Strong Balance Sheet
Active Management
including tenant mix improvement
increases yields, while Asset
Enhancement brings more immediate
as well as longer term gains to
generate value in the company
Turnover
2014-2019 (HK$ million)
3,988
3,890
3,535 3,548
3,430
3,224
2014
2015
2016 2017 2018 2019
Financial
Achievements
increase earnings
Recurring Underlying
Profit
2014-2019 (HK$ million)
2,587
2,536
2,283 2,369 2,349
2,163
Dividends per Share
provide steady growth
2014-2019 (HK cents)
144
144
135
137
132
123
2014
2015
2016 2017 2018 2019
2014
2015
2016
2017
2018
2019
Supported by Strong Underlying
Non-Financial Achievements:
Environment
Minimize our impact on the
environment, and achieve
higher efficiency at the
same time
Community
Make positive contributions
to communities where we
operate
Employees
Create working
environment for talent to
thrive
Governance
Strong governance is the
heart of long-term
sustainable performance
LEE
GARDENS
11
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance KEY FACTS
OUR ASSETS
Investment Properties by
Gross Floor Area
Investment Properties by
Turnover Contribution
Total Gross
Floor Area
4.5 million sq. ft. (approx.)
Turnover
HK$3,988 million
30%
15%
55%
46%
46%
8%
Residential
Retail
Office
Residential
Retail
Office
HYSAN
PLACE
Bamboo
Grove
LEE
GARDEN
ONE
LEE
GARDEN
TWO
LEE
GARDEN
FIVE
LEE
GARDEN
THREE
GARDEN
LEE
SIX
Hysan Place Completed 2012
Greenest commercial building and trendiest
shopping centre in town
Approx. Gross
Floor Area
716,000 ft2
Number of Floors
40
Office
63%
Parking Spaces
66
Retail
37%
Lee Theatre Plaza
One of Hong Kong’s best-loved shopping and dining complexes
Completed 1994 /
Lower zone renovated 2013
Approx. Gross
Floor Area
Retail
314,000 ft2
100%
Number of Floors
26
12
LEE
THEATRE
PLAZA
$
LEIGHTON
CENTRE
ONE
HYSAN
AVENUE
Leighton Centre
Popular office complex amongst sports and lifestyle shops
Completed 1977 /
Renovated 2011
Approx. Gross
Floor Area
430,000 ft2
Number of Floors
28
Office
75%
Parking Spaces
321
Retail
25%
Lee Garden RoadHysan AvenueLeighton RoadSharp Street EastLan Fong RoadPak Sha RoadYun Ping RoadPercival StreetHysan Annual Report 2019 Lee Garden One Completed 1997
Home to international corporations and premium brands
Approx. Gross
Floor Area
Office
903,000 ft2
Number of Floors
53
78%
Parking Spaces
200
Retail
22%
Bamboo Grove
Quality international living in Mid-Levels
Completed 1985 /
Renovated 2019
Approx. Gross
Number of
Floor Area
Units
691,000 ft2 345
Parking
Spaces
436
HYSAN
PLACE
Bamboo
Grove
LEE
GARDEN
ONE
LEE
GARDEN
TWO
LEE
GARDEN
FIVE
LEE
GARDEN
THREE
LEE
GARDEN
SIX
LEE
THEATRE
PLAZA
LEIGHTON
CENTRE
ONE
HYSAN
AVENUE
Lee Garden Two
Spacious offices and home to children’s concept floors
Completed 1992 /
Retail podium renovated 2019
Approx. Gross
Floor Area
Office
621,000 ft2
Number of Floors
34
75%
Parking Spaces
167
Retail
25%
Lee Garden Three Completed 2017
Newest commercial address in Lee Gardens
Approx. Gross
Floor Area
Office
467,000 ft2
Number of Floors
32
83%
Parking Spaces
201
Lee Garden Five
An office and retail complex at one of
Hong Kong’s most prestigious commercial areas
Completed 1989 /
Renovated 2009
Approx. Gross
Floor Area
Office
132,000 ft2
88%
Number of Floors
25
Retail
17%
Retail
12%
One Hysan Avenue
Efficient office and retail building in prime site
Completed 1976 /
Renovated 2011
Approx. Gross
Floor Area
Office
169,000 ft2
77%
Number of Floors
26
Retail
23%
Lee Garden Six
Convenient office and retail location
Completed 1988 /
Renovated 2004
Approx. Gross
Floor Area
Office
80,000 ft2
91%
Number of Floors
24
Retail
9%
13
Lee Garden RoadHysan AvenueLeighton RoadSharp Street EastLan Fong RoadPak Sha RoadYun Ping RoadPercival StreetOverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance 2019 Performance at a Glance
FINANCIAL PERFORMANCE
Turnover
HK$3,988m
2.5%
0
9
8
3
,
8
8
9
3
,
0
3
4
3
,
5
3
5
3
,
8
4
5
3
,
Recurring
Underlying
Earnings
per Share
HK247cents
2.1%
6
2
2
5
2
2
5
1
2
2
4
2
7
4
2
0
1
8
9
6
,
3
3
6
,
9
6
0
7
4
,
2
7
2
4
4
,
7
7
6
1
1
,
9
7
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
Cost
Valuation Surplus
Recurring
Underlying
Profit
HK$2,587m
2.0%
Dividends
per Share
HK144cents
3
8
2
2
,
9
6
3
2
,
9
4
3
2
,
6
3
5
2
,
7
8
5
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9
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5
6
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7
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1
3
4
,
4
7
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
14
Hysan Annual Report 2019 Property
Value
HK$79,116m
2.2%
0
9
8
,
3
8
8
9
,
3
0
3
4
,
3
5
3
5
,
3
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1
9
7
,
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
Cost
Valuation Surplus
Net Asset
Value per
Share
HK$74.39
4.6%
3
8
2
,
2
9
6
3
,
2
9
4
3
,
2
6
3
5
,
2
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6
5
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6
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.
.
9
3
4
7
2
1
1
7
.
FINANCIAL PRUDENCE
Net Interest Coverage (Note 1)
17.0 times
(2018: 18.1 times)
Net Debt to Equity (Note 2)
4.1%
(31 Dec 2018: 4.7%)
Effective Interest Rate
3.4%
(2018: 3.4%)
Average Debt Maturity
6.6 years
(31 Dec 2018: 3.9 years)
Fixed Rate Debt
84.0%
(31 Dec 2018: 75.5%)
Capital Market Issuances
84.0%
(31 Dec 2018: 75.5%)
2
7
1
8
6
,
0
5
6
7
7
,
1
3
4
4
7
,
0
9
4
7
6
,
3
5
9
9
6
,
Credit Ratings
Moody’s: A3
Fitch: A-
Standard and Poor’s: BBB+
2016
2015
2017
2018
2019
15
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
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 cash equivalents divided by shareholders’ funds
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance 2019 Performance at a Glance
ENVIRONMENTAL, SOCIAL
AND GOVERNANCE RECOGNITIONS
• “AA” Rating: Hang Seng Corporate
Sustainability Index
• “A” Rating: MSCI ESG Ratings assessment
• Constituent member: FTSE4Good Index Series
• Gold level under the United States Green
Building Council’s LEED (Core and Shell) and
Final Platinum rating under BEAM Plus
(New Buildings) for Lee Garden Three
• Silver Award for Volunteer Service
(Organization) under the Steering Committee
on Promotion of Volunteer Service of
Hong Kong Social Welfare Department
L
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A
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16
Hysan Annual Report 2019 • Silver Award (Traditional Annual Report in Real
Estate Development/SVC: Various & Multi-Use)
in MerComm, Inc.’s 2019 International ARC
Awards
• Best Annual Report (Mid Cap) in the
Hong Kong Investor Relations Association’s
Investors Relations Awards 2019
• Gold Award (Non-Hang Seng Index –
Large Market Capitalization Category) in the
Hong Kong Institute of Certified Public
Accountants’ Best Corporate Governance
Awards 2019
• Honourable Mention in the Hong Kong
Management Association’s 2019
Best Annual Reports Awards
L
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The use by Hysan Development Company Limited of any MSCI ESG Research
LLC or its affiliates (“MSCI”) data, and the use of MSCI logos, trademarks,
service marks or index names herein, do not constitute a sponsorship,
endorsement, recommendation, or promotion of Hysan Development Company
Limited by MSCI. MSCI services and data are the property of MSCI or its
information providers, and are provided ‘as-is’ and without warranty. MSCI
names and logos are trademarks or service marks of MSCI.
17
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance Chairman’s Statement
Hysan saw a 2.5% increase in its 2019 turnover and a 2.0% improvement in its
Recurring Underlying Profit. A robust first half helped ease the impact of a
negative second half. Rental reversions for our office, retail and residential
portfolios remained healthy, while occupancies were satisfactory.
Impact from Different Fronts
Global uncertainties together with continued U.S.-China tensions were among the
external factors negatively affecting Hong Kong’s general economic well-being in
2019. On the domestic front, social unrest throughout the second half of the year
had an immediate adverse impact on the economy and parts of Hysan’s
business. The sharp drop in spending by a drastically reduced number of visitors
to Hong Kong was further exacerbated by a fall in local consumption arising from
intermittent closure of shops and restaurants brought on by the social unrest.
The retail sector, particularly cosmetics and certain popular brands favoured by
mainland visitors, as well as the catering sector, were much adversely affected by
the turmoil. Hong Kong’s retail sales saw a full year decline of 11% as compared
to 2018. Estimated sales of Hysan’s retail tenants mirrored those of Hong Kong,
sharply decreasing from July onwards.
18
Hysan Annual Report 2019 Managing the Crisis
Through these difficult times, Hysan’s management team stepped up its efforts
to provide a safe and secure environment for the Company’s staff, tenants and
shoppers. The team delivered swift, proactive solutions and support to manage
the impact on our retail and office tenants. The relationship built over the years
through Hysan’s community-building efforts were clearly evident as all
stakeholders worked together during the crisis.
Synergies from a Balanced Portfolio
Hysan’s balanced dual-engine business has provided a stable platform for the
Company. The retail business, which by its nature is more volatile, is anchored by
a more stable office portfolio. Hysan’s office portfolio accounted for the same
turnover, around 46%, as the retail portfolio.
Many brands, and in particular premium brands, are likely to consider
consolidation after years of expansion. Lee Gardens’ ability to attract and retain
brands is a testament to our area curation and strong partnerships with our
tenants. Apart from our premium brands, Lee Gardens has a portfolio of retail,
services and food and beverage outlets offering a range of price points for locals,
tourists and different age groups. The diverse range of services, shops and
restaurants form the backbone of our vibrant business community. The
completion of Lee Garden Three saw local and multinational companies,
including global financial institutions, recognize the area’s rich offerings set in a
vibrant neighbourhood, with the added convenience of Causeway Bay which is a
major transport hub. The demand from an increasingly discerning office clientele
will continue to drive a broader and more diverse retail offering. This positive and
self-sustaining cycle of supply and demand will continue to inspire and power our
business. The combination of a balanced portfolio with the synergies generated
by the two main segments should help Hysan remain more resilient to
unexpected disruptions and impacts.
Flex Space in Lee Gardens
Flex space or co-work have added youth and cultural diversity to our business
platform, further sharpening our retail and service offerings. Although the
co-working industry is facing inevitable consolidation and only those with proven
business models are expected to survive, we believe this type of business model
will remain a major part of the office ecosystem. Causeway Bay, and more
specifically Lee Gardens remains an ideal venue for corporate clients and
entrepreneurs who require convenience and vibrancy in their work environment in
addition to general operational flexibility.
19
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance CHAirmAN’S STATEmENT
A Vibrant Community
Lee Gardens is located in the middle of Hong Kong Island’s commercial foothills
and houses an eclectic mix of low-rise and modern tower blocks. This
geographical advantage and its historical nature complement the dual-engine
model. The residents, shoppers, workers and businesses form the basis of a
community that has grown significantly since Lee Hysan bought the hill, now
Lee Gardens, close to a hundred years ago. Over the years, the Company actively
carried out asset enhancements, re-developments, neighbourhood curation, and
tenant mix changes, as well as community events and activities. Lee Gardens is
now a premier destination for all ages and all walks of life, including locals, new
Hong Kong migrants, as well as tourists.
At the end of 2019, Hysan unveiled Bizhouse, a concept that combines living and
working in a regenerated low-rise building situated in a neighbourhood buzzing
with character. Other changes, many in cooperation with nearby landlords and
the Lee Gardens Association, have transformed the area’s streets into a unique,
dynamic and stylish community of old Hong Kong mixed with the latest trends
that reflect the needs and interests of today.
Those who come to Lee Gardens to work, play and shop help bring the
community to life. Most of our regulars are our long-standing loyalty club
members. We are in the process of consolidating our two loyalty programmes into
a single platform. This move will ensure that all operations, including a new
mobile app, points systems for rewards, and club member communications, will
be digital, hence more streamlined and user-friendly. We also look forward to
unveiling new facilities for VIP-level club members in Q1 2020.
Throughout 2019, and especially in the second half of the year, we focused our
efforts on supporting general shoppers’ campaigns by launching strong
promotions to help our tenants attract more customers. One of our target groups
is children and their parents. A children’s academy with a curriculum of life skills
classes is in the pipeline. The aim of such an initiative is to form a long-term
relationship and connection with youngsters and their families.
20
Hysan Annual Report 2019 Strengthening Sustainability
Hysan’s roots in Causeway Bay can be traced back almost 100 years. Long-term
sustainable thinking comes naturally to us. Our stakeholders’ demand for
sustainability in the community has grown significantly in recent years. Over the
past decade, the Group has taken the lead in the construction and operation of
green buildings. Our Board has decided to establish a Sustainability Committee to
oversee environmental, social and governance issues, supported by the
management’s Sustainability Executive Committee and Task Force. We are in a
good position to further integrate sustainability initiatives with clear and
measurable targets into our medium- to long-term plans.
Dividends
The Board of Directors is pleased to declare a second interim dividend of
HK117 cents per share (2018: HK117 cents). Together with the first interim
dividend of HK27 cents per share (2018: HK27 cents), the total distribution is
HK144 cents per share (2018: HK144 cents). The dividend will be payable in cash.
Appreciation and Outlook
2019 was an exceptionally challenging year and I would like to give my heartfelt
thanks to the management team, as well as our front-line colleagues, for their
hard work and dedication. I would also like to thank my fellow board members for
their support and advice. My special thanks to Professor Lau Lawrence Juen-Yee,
who is stepping down from the Board as an independent non-executive Director
upon the conclusion of our annual general meeting in May 2020. I am grateful
for his wise counsel and diligent work and for all his contribution to the Board.
Hong Kong’s economic outlook in 2020 is clouded by the global headwinds and
domestic factors, including the outbreak of COVID-19. Hysan will maintain close
working relationships with our tenants and continue our engagement with the
local community to navigate through the turbulent times. The Group will also
continue to explore opportunities within our core area and beyond.
Lee Irene Yun-Lien
Chairman
Hong Kong, 20 February 2020
21
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance 24 Management’s Discussion
and Analysis
24 Strategy and Review of Results
25 Review of Operations
29 Financial Review
32 Treasury Policy
PERFORMANCE2
BUSINESS
23
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance Management’s Discussion
and Analysis
STRATEGY
Hysan’s mission clearly states that the Group strives to provide its stakeholders with
sustainable and outstanding returns from its property portfolio, which is located
predominantly in Hong Kong’s premier commercial district of Causeway Bay.
The Lee Gardens area of Causeway Bay is Hysan’s home base and will remain the
Group’s focus. Hysan is also active in seeking other investment opportunities beyond
its core geographical area.
Hysan enhances its portfolio’s value through asset improvement, repositioning and
redevelopment. Due to the nature of its portfolio, Hysan also actively curates the content
of the Lee Gardens community for the benefit of the tenants, customers and other
stakeholders.
REVIEW OF RESULTS
Turnover
Recurring Underlying Profit
Underlying Profit
Reported Profit
2019
HK$ million
2018
HK$ million
3,988
2,587
2,587
4,845
3,890
2,536
2,536
6,033
Change
+2.5%
+2.0%
+2.0%
-19.7%
The Group’s turnover in 2019 was HK$3,988 million, an increase of 2.5% from HK$3,890
million in 2018. These results were mainly attributable to a good performance in the first
half of the year partially offset by the impact of strong economic headwinds in the second
half of the year.
Recurring Underlying Profit, our key leasing business performance indicator, and Underlying
Profit, were both HK$2,587 million in 2019 (both up 2.0% from HK$2,536 million in 2018),
reflecting positive rental reversion from our portfolio. Basic earnings per share based on
Recurring Underlying Profit was HK247 cents (2018: HK242 cents), up 2.1%.
The Group’s Reported Profit for 2019 was HK$4,845 million (2018: HK$6,033 million).
This included a fair value gain on the Group’s investment properties’ valuation of
HK$792 million (2018: HK$3,532 million) and the share of fair value gain of investment
properties on our investment in associates of HK$1,528 million (2018: HK$96 million).
These fair value gains reflected the rental outlook after taking into consideration (i) the
completion of asset enhancement projects and (ii) economic outlook.
As at 31 December 2019, the valuation of the Group’s investment property portfolio in
Hong Kong increased by 2.2% to HK$79,116 million (2018: HK$77,442 million). The
capitalization rates used in valuing each portfolio remained unchanged from those used as
at 31 December 2018.
24
Hysan Annual Report 2019 REVIEW OF OPERATIONS
Hysan’s property portfolio is comprised of three sectors: retail, office and residential. The
total floor area of the entire portfolio is approximately 4.5 million square feet. Around 55%
of the Group’s investment portfolio by gross floor area were office properties, while around
30% were retail properties as at 31 December 2019. These properties are located in
Lee Gardens, Causeway Bay. Approximately 15% were residential properties, mainly
represented by Bamboo Grove in Mid-Levels.
The turnover of each sector is shown as below:
Office sector
Retail sector
Residential sector
2019
HK$ million
2018
HK$ million
1,833
1,836
319
3,988
1,688
1,923
279
3,890
Change
+8.6%
-4.5%
+14.3%
+2.5%
Contribution to Turnover
2019
46%
46%
8%
2018
43%
50%
7%
100%
100%
The office sector now contributes around the same amount to the overall portfolio turnover
as the retail sector. Office contribution grew significantly in 2018 after the completion of
Lee Garden Three, a predominantly office building. The office sector achieved healthy
positive rental reversion in 2019.
Key Performance Indicators
The Group’s turnover growth and occupancy rate are the key measurements used for
assessment of our core leasing business performance. Cost effectiveness is assessed by the
Group’s management using the property expenses ratio (as a percentage of turnover).
Business Performance
Key Performance Indicators
Definition
Portfolio
2019
2018
Turnover Growth
Rental revenue in current
year vs that in last year
Occupancy Rate
Property Expenses Ratio
Percentage of total lettable
area leased / total lettable
area of each portfolio at
year end
Property expenses divided
by turnover
Office
Retail
Residential
Office
Retail
Residential
+8.6%
-4.5%
+14.3%
98%
96%
87%
+24.2%
-0.1%
+5.7%
97%
98%
88%
N/A
13.4%
13.4%
Note: No changes have been made to the source data or calculation methods used when compared to 2018.
25
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance MAnAgeMent’s Discussion AnD AnAlysis
Office Portfolio
The Group’s office portfolio turnover rose 8.6% to HK$1,833 million (2018: HK$1,688
million), including turnover rent of HK$7 million (2018: nil). The office portfolio’s occupancy
was 98% as at 31 December 2019 (31 December 2018: 97%).
This performance reflected overall positive rental reversion on renewals, rent review, new
lettings, and full-year contributions from Lee Garden Three.
Office Lease Expiry Profile by Area Occupied
(As at 31 December 2019)
26%
28%
22%
22%
2020
2021
2022
2023 and beyond
With the addition of Lee Garden Three, Banking and Finance has become the largest tenant
sector, accounting for almost 25% of area occupied within the office portfolio. Although
Professional and Consulting remained the second largest tenant sector in area used,
Co-work/flex spaces overtook Insurance as the third largest sector during the year. Shared
workspace as a flexible option, both for major corporations and also for entrepreneurial
entities, is more necessary than ever during times of economic uncertainty and modern
shared economy. We believe that we have allocated the right amount of space for this
sector, attracting millennial users whose lifestyle needs will continue to help refine our retail
tenant mix. Being familiar with the full range of facilities and services in the Lee Gardens
community, these flex space users also rate our office space highly when they come to
consider a larger and more permanent office space.
Office Tenant Profile by Area Occupied as at Year-end
14.4%
24.1%
15.1%
24.1%
Banking and Finance
Professional and Consulting
Co-work
Insurance
Semi-Retail
2.1%
5.9%
4.7%
6.9%
2018
Information Technology
16.5%
High-end Retailers
7.4%
10.9%
6.4%
Marketing
Consumer Products
Others
2019
16.0%
9.7%
10.0%
2.6%
3.5%
3.7%
7.1%
8.9%
26
Hysan Annual Report 2019 Retail Portfolio
The Group’s retail portfolio turnover decreased by 4.5% to HK$1,836 million
(2018: HK$1,923 million), including turnover rent contribution of HK$66 million
(2018: HK$81 million). The portfolio’s occupancy was 96%, as at 31 December 2019
(31 December 2018: 98%).
In the second half of 2019, shopping mall operations in Hong Kong were intermittently
disrupted by various social events. The estimated drop in Hysan’s overall tenant sales year-
on-year was on par with the decline of Hong Kong’s overall retail sales. Hysan’s overall
rental reversion in renewals, rent review and new lettings remained positive in 2019.
Retail Lease Expiry Profile by Area Occupied
(As at 31 December 2019)
25%
25%
25%
21%
2020
2021
2022
2023 and beyond
During the year, as a result of continual tenant mix curation, 35 new brands were added and
27 shops were refreshed with a new design. This reflected our efforts to tackle the structural
changes in the retail sector.
Residential Portfolio
The residential portfolio comprises mainly units in Kennedy Road’s Bamboo Grove. The
sector saw an increase of 14.3% in turnover to HK$319 million (2018: HK$279 million). The
occupancy of the sector was at 87% as at 31 December 2019 (31 December 2018: 88%).
A range of Bamboo Grove units were renovated, including penthouses, which were all well
received by the market. Lobby renovations were completed in 2019, further enhancing the
buildings’ desirability. Lift modernization works were also ongoing.
The rental reversion was overall positive in renewals, rent review and new lettings in
this sector.
Tai Po Luxury Residential Project
The major design of Tai Po Residential Development including the architecture, structure,
building services, and typical interior design has been completed. Landscape and clubhouse
design are making good progress. Foundation and basement works are largely completed,
and superstructure works have started recently. Construction work is expected to complete
in 2021, subject to government approval.
27
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance MAnAgeMent’s Discussion AnD AnAlysis
Loyalty Clubs and Marketing Events
Our loyalty club, Lee Gardens Plus, has changed its name to Lee Gardens Club, in
anticipation of an integration with our VIP club, Club Avenue, into a single operating
platform in 2020. There will be points-earning features for members of all levels. In
conjunction with the forthcoming integration, a new Lee Gardens Club app was launched in
October 2019. We also unveiled the Electronic Gift Coupon (EGC) system, which essentially
replaced old-fashioned paper coupons. More than 20,000 transactions were conducted
using EGCs, providing a successful multiplier effect for our retail tenants.
More than 160 marketing events were conducted in collaboration with tenants in 2019,
representing around a 25% growth from the year before. A number of these events were
unique, being either the Hong Kong-leg of global events, or first-time-in-Hong Kong shows
or pop-ups. The themes ranged from digital “retailtainment” to health and lifestyle and
festive offerings.
Business Technology Applications
In addition to the Lee Gardens Club app and the EGC launch, our social media activities also
gained traction, with double and triple digit percentage growth in our WeChat and
Instagram followers respectively. This combination of customer relationship channels
helped us learn more about our customers’ individual preferences, hobbies and interests.
Our area-wide Wifi and IoT also provided a picture of the demographics of our visitors, as
well as the traffic patterns of their visits. We are devoting more resources and efforts to gain
greater insight into these trends so that we can improve foresight and planning for our
operations. In 2020, we plan to further use data analytics and AI, as well as other platforms,
to strengthen our understanding of the world of digital economy. Our ultimate business
technology aims are to improve operational efficiency, make data-driven decisions, and
create value, with strong consideration given to data privacy.
Community Activities
Hysan continues to play a significant role in the development of the Causeway Bay
community in general, and the Lee Gardens community in particular. Our model focuses on
curating a community that is authentic, sustainable, engaging, and technologically-minded.
Arts and culture, health and wellness, families and children, as well as living and working are
among our major themes.
Although some of the higher profile area-wide events in 2019 had to be cancelled or
postponed due to safety and traffic concerns caused by social conflicts, Hysan still
supported Lee Gardens Association in hosting several major street events during the year,
entertaining tens of thousands with games and performances. The brand new Urban Sky
also became a popular venue for arts and culture events at Hysan Place. Hysan’s Art
Programme, curated by our management trainees who are mentored by our project and
design teams, made its debut with artwork adorning Hysan Place and Lee Garden One.
Towards the end of the year, Bizhouse at Pak Sha Road unveiled the concept of combined
living and working in comfortable Causeway Bay spaces. For details about these and other
community activities and projects supported by Hysan in 2019, please refer to our
Sustainability Report.
28
Hysan Annual Report 2019 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).
The Group’s operating costs to turnover ratio increased from 19.3% in 2018 to 20.2% in
2019, largely reflecting the full operation of Lee Garden Three during the year.
Finance Costs
Finance costs increased to HK$313 million, compared to HK$222 million in 2018, mainly
due to additional borrowings during the year. The effective interest rate for the year was
3.4%, which is the same as 2018.
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
As at 31 December 2019, the Group’s investment real estate portfolio was valued at
HK$79,116 million, an increase of 2.2% from HK$77,442 million as at 31 December 2018.
This valuation was carried out by Knight Frank, an independent professional valuer, on the
basis of open market value. The capitalization rates used in valuing each portfolio remained
unchanged from those used as at 31 December 2018.
Fair value gain on investment properties (excluding capital expenditure spent on the
Group’s investment properties) of HK$792 million (2018: HK$3,532 million) was recognized
in the Group’s consolidated statement of profit or loss for the year. This reflected the rental
outlook after the completion of a number of asset enhancement works, but taking into
account Hong Kong’s economic uncertainties.
The following shows the property valuation of each portfolio at year-end.
Office
Retail
Residential
2019
HK$ million
2018
HK$ million
35,498
35,059
8,559
79,116
34,159
35,102
8,181
77,442
Change
+3.9%
-0.1%
+4.6%
+2.2%
29
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance MAnAgeMent’s Discussion AnD AnAlysis
Investments in Associates and a Joint Venture
The Group’s investments in associates mainly represent its interest in Shanghai Grand
Gateway, a retail, office and residential complex, in Shanghai, China. The share of results of
associates increased significantly to HK$1,733 million (2018: HK$288 million), mainly due
to the Group’s share of the revaluation gain (net of deferred tax) amounting to HK$1,528
million (2018: HK$96 million). The properties at Shanghai Grand Gateway were revalued at
fair value by an independent professional valuer for both the years ended 31 December
2018 and 2019.
The Group’s investment in a joint venture represents interests in a Tai Po residential project.
The increase in carrying value represents costs incurred by the project in 2019.
Bank Deposits and 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.
Excluding recognition of imputed interest income on an interest-free loan to a joint venture
company for a residential site development in Tai Po of HK$30 million (2018: HK$29
million), like-for-like interest income increased by 153.1% to HK$124 million (2018: HK$49
million). This increase mainly reflected higher bank deposit balances.
The Group also extended its investments beyond its core geographical area and businesses.
As at 31 December 2019, these investments totalled HK$601 million (2018: HK$294
million) expanding our reach to other areas in Asia with a view to generating new sources of
income and capital.
Cash Flow
Cash flow of the Group during the year is summarized below. Cash includes liquid cash and
bank deposits with less than 3 months’ tenor.
Cash generated from operations
Net advance to a joint venture company
Net borrowing
Bank deposits and other investments
Interest and taxation
Dividends paid and proceeds on
exercise of options
Considerations for share repurchases
Capital expenditure
Net cash inflow
n/m: not meaningful
2019
HK$ million
2018
HK$ million
3,300
–
6,287
(5,065)
(316)
(1,630)
(92)
(956)
1,528
3,224
(56)
46
211
(636)
(1,551)
–
(1,203)
35
Change
+2.4%
n/m
n/m
n/m
-50.3%
+5.1%
n/m
-20.5%
n/m
30
Hysan Annual Report 2019 The Group’s net cash generated from operations was HK$3,300 million (2018: HK$3,224
million), HK$76 million higher than that in 2018, reflecting the stable cash flow from our
core leasing business.
Net advance to a joint venture company in 2018 amounted to HK$56 million was related to
the residential site development in Tai Po.
Net borrowings amounted to HK$6,287 million, reflecting net borrowings of fixed rate
notes and bank loans totalling of HK$6,290 million, as well as repayment to the
non-controlling interest of a subsidiary during the year. In 2018, net borrowings were
HK$46 million for the year.
Cash used in bank deposits and other investments was HK$5,065 million (2018: cash from
bank deposits and other investments: HK$211 million), mainly attributable to additional
deposits with a longer tenor.
The Group paid dividends of HK$1,507 million (2018: HK$1,444 million), being the 2018
second interim dividend of HK117 cents per share (2018: HK111 cents) and the 2019 first
interim dividend of HK27 cents per share (2018: HK27 cents).
During the year, the Group repurchased 3 million of its own shares which would further
enhance shareholders’ value with an aggregate consideration of HK$92 million.
Capital Expenditure and Management
The Group is committed to enhancing the asset value of our investment property portfolio
through selective asset enhancement and redevelopment. The Group has also established a
portfolio-wide whole-life cycle maintenance programme as part of our ongoing strategy to
pro-actively implement preventive maintenance activities. Total cash outlay of capital
expenditure during the year was HK$956 million (2018: HK$1,203 million), including
payment of the construction costs of Lee Garden Three.
31
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance MAnAgeMent’s Discussion AnD AnAlysis
TREASURY POLICY
Market Highlights
The global economy in 2019 was impacted by the U.S.-China trade tensions. The Hong
Kong stock market followed global market trends and performed well in the first half of the
year. However, as social conflicts became increasingly frequent from mid-June onwards, the
Hong Kong stock market fell around 20% from its peak in April, reaching a trough in mid-
August. The market remained volatile for the rest of the year.
In view of the relatively low inflation rate and in order to sustain the expansion of economic
activity, the U.S. Federal Reserve cut the federal fund rate three times, amounting to a total
of 75bps for the whole of 2019. The U.S. Federal Reserve believes that its policy is currently
in a “good place” and likely to remain the same as long as current conditions persist. The
“dot plot” shows little chance of a rate cut or increase in 2020.
The Hong Kong Dollar (“HKD”) HIBOR rose sharply in the first half of 2019 and remained
relatively high in the second half due to mega IPOs and the HKD HIBOR rising above United
States Dollar (“USD”) LIBOR. The 3-month HKD HIBOR decreased from 2.3% at the end of
2018 to around 1.5% at the end of February 2019, and then climbed to around 2.6% at
the beginning of July, remaining high for the rest of the year. Despite the increase in the
HKD HIBOR, the Hong Kong bank loans market continued to have ample liquidity. The credit
margin of bank loans for companies with investment grade credit ratings slightly increased.
With uncertainties both in the macro and domestic environment, the Hong Kong economy
declined notably in 2019. Private consumption and fixed investment in Hong Kong shrank
from 2018 levels, while exports were also markedly down. With the continued uncertainty in
the global financial markets and its impact on the economy, it is important for the Group to
maintain our policy of prudent financial management.
Capital Structure Management
To ensure a healthy financial position and a suitable capital structure servicing its financing
needs and sustainable growth, the Group always strives to diversify its funding sources, and
to maintain an appropriate debt maturity profile relative to the overall use of funds. The
Group also aims to maintain adequate liquidity, keep a low borrowing margin relative to
market conditions, and adopt suitable hedging and forex management strategies.
32
Hysan Annual Report 2019 Funding Source
During the year, the Group issued new medium term notes of HK$2,200 million and US$500
million, and repaid HK$300 million maturing note. The Group also drew down US$60 million
bank loan. The Group’s outstanding gross debt1 was HK$12,615 million (2018: HK$6,326
million) at year-end 2019. All the outstanding borrowings are on an unsecured basis.
As at 31 December 2019, the proportion of debts sourced from the capital market increased
to 84% (2018: 75%). The Group continued to maintain long-term relationships with a
number of local and overseas banks in order to diversify funding sources. At the end of
2019, thirteen local and overseas banks provided bilateral banking facilities to the Group as
funding alternatives.
The following graph shows the percentages of total outstanding gross debts sourced from
banks and the debt capital markets in the past five years.
Sources of Financing at Year-end (HK$ milion)
4,875
5%
95%
6,305
27%
73%
6,175
25%
75%
2015
Capital Market Issuances
2016
2017
Bilateral Bank Loans
6,326
25%
75%
2018
12,615
16%
84%
2019
The Group strives to maintain an appropriate debt maturity profile to match with the nature
of our assets and operations. As at 31 December 2019, the average maturity of debt
portfolio was about 6.6 years (2018: 3.9 years), of which about HK$565 million or 4.5% of
the outstanding gross debt will be due in 2020. Given our strong cash balance, debt
repayment will not result in significant immediate refinancing pressure.
1. The gross debt represents the contractual principal payment obligations as at 31 December 2019. 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 2019, the book value of the outstanding
debt of the Group was HK$12,529 million (31 December 2018: HK$6,322 million).
33
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance MAnAgeMent’s Discussion AnD AnAlysis
Maturity Profile
The graph below shows the debt maturity profile of the Group as at 31 December 2019
and 2018.
Debt Maturity Profile at 2019 and 2018 Year-end
2019
12,615
565 250
1,331
3,230
467
6,772
2018
300
565
250
1,331
3,230
6,326
650
0
2,000
4,000
6,000
8,000
10,000
12,000
Gross Debt Amount (HK$ 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 three years
Maturing in more than three years but not exceeding four years
Maturing in more than four years but not exceeding five years
Maturing in more than five years
Gearing ratio and net interest coverage
The Group’s gearing ratio, as measured by Net Debt to Equity ratio1, decreased slightly from
4.7% at the end of 2018 to 4.1% at the end of 2019, because of the increase in equity
attributable to owners of the Company from HK$74 billion at the end of 2018 to HK$78
billion at the end of 2019 driven by the increase in fair value of investment properties. The
Group’s Net Interest Coverage2 decreased to 17.0 times for 2019 (2018: 18.1 times) due to
the increase in the total debt level. The low gearing and strong ability to meet interest
payments reflected the Group’s resilience and capability to raise further debt for new
investments and projects, if necessary.
The graph below shows the level of leverage and our ability to meet interest payment
obligations over the past five years.
Net Debt to Equity Rato and Net Interest Coverage at Year-end
19.5x
20.5x
17.1x
18.1x
17.0x
3.0%
2015
5.4%
2016
Net Debt to Equity Ratio
5.0%
4.7%
4.1%
2017
Net Interest Coverage (times)
2018
2019
1. Net Debt to Equity ratio is defined as borrowings less time deposits, cash and cash equivalents divided by shareholders’ funds.
2. Net Interest Coverage is defined as gross profit less administrative expense before depreciation divided by net interest
expense.
34
Hysan Annual Report 2019 Credit Rating
The Group aims at maintaining investment-grade credit ratings to ensure a stable and lower
cost of financing, and to reflect our prudent financial management strategy. During the
year, the Group maintained its credit ratings, reflecting the Group’s strong financial position.
Moody’s
Fitch
Standard and Poor’s
2019
A3
A-
BBB+
2018
A3
A-
BBB+
Liquidity Management
As at 31 December 2019, the Group had cash and bank deposits totalling about HK$9,332
million (2018: HK$2,817 million). In order to preserve liquidity and enhance interest yields,
the Group invested HK$172 million (2018: HK$227 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$3,250 million at the end of
2019 (2018: HK$950 million), essentially allowing the Group to obtain additional liquidity as
the need arises.
35
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance MAnAgeMent’s Discussion AnD AnAlysis
Interest Rate Management
The fixed rate debt ratio increased to 84% at the end 2019 from 75% at the end of 2018.
As the interest rate movements become more uncertain, we believe the current fixed rate
debt ratio will enable us to manage the impact from interest rate fluctuations.
The diagram below shows the fixed rate debt and floating rate debt portions in the past
five years.
Debt Level and Effective Interest Rate
3.5%
3.6%
3.3%
3.4%
12,615
3.4%
16.0%
4,875
5.1%
2,071
94.9%
6,305
26.6%
6,176
25.1%
6,326
24.5%
3,675
3,514
3,510
3,279
73.4%
74.9%
75.5%
84.0%
2015
2016
2017
2018
2019
Fixed rate debt
Year-end Gross Debt
Year-end Net Debt (Gross debt less time deposits, cash and cash equivalents)
Effective Interest Rate
36
Hysan Annual Report 2019 Foreign Exchange Management
The Group aims to achieve minimal currency exposure and does not speculate in currency
movements for asset and liability management. All of the Group’s borrowings were
denominated in HKD with the exception of certain fixed rate notes and a bank loan
denominated in USD.
For the US$300 million fixed rate notes issued in January 2013 and US$500 million
fixed rate notes issued in September 2019, hedges were entered to effectively convert the
borrowings into HKD. A USD bank loan had also been drawn down as a natural hedge
against the Group’s outstanding foreign currency balances in cash, time deposits,
debt securities and other financial investments amounting to US$136 million
(2018: US$88 million).
Other foreign exchange exposure mainly relates to investment in the Shanghai project.
These unhedged foreign exchange exposures amounted to the equivalent to HK$5,199
million (2018: HK$3,715 million) or 5.4% (2018: 4.3%) of total assets.
Use of Derivatives
As at 31 December 2019, outstanding derivatives were all related to the hedging of foreign
exchange exposures. Strict internal guidelines have been established to ensure derivatives
are used to manage volatilities or to adjust the appropriate risk profile of the Group’s
treasury assets and liabilities.
Counterparty Credit Risk
All the deposits are placed with banks with strong credit ratings and the counterparty risk is
controlled via prescribed limits and is monitored on a regular basis.
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.
37
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance 40
Corporate Governance Report
40 Our People
46 Beyond Corporate Governance Compliance
48 Our Governance Framework
50 Governance at a Glance
74
Audit and Risk Management Committee Report
78
Remuneration Committee Report
86 Nomination Committee Report
89
Sustainability Committee Report
91
Risk Management and Internal Control Report
98
Sustainability Report 2019 – Summary
102 Directors’ Report
CORPORATE
GOVERNANCE
3
39
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview
Corporate Governance Report
OUR PEOPLE
Board of Directors
The Board is responsible for the stewardship of the Company, overseeing its
conduct and affairs to create sustainable value for the benefit of its shareholders.
Executive Director
Lee Irene Yun-Lien
Chairman of the Board
N
Board appointment Ms. Lee was
appointed as 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 66.
Competencies and experience
Ms. Lee leads the Group in her
executive Chairman role. Ms. Lee is an
independent non-executive director of
HSBC Holdings plc, The Hongkong and
Shanghai Banking Corporation
Limited and Hang Seng Bank Limited.
She is a Member of the Exchange
Fund Advisory Committee of the Hong
Kong Monetary Authority. 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, and
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 the
Australian Stock Exchange), a non-
executive director of ING Bank
(Australia) Limited, QBE Insurance
Group Limited and The Myer Family
Company Pty Limited, an independent
non-executive director of Noble Group
Limited (listed on Singapore Exchange
Limited), CLP Holdings Limited and
Cathay Pacific Airways 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. Lee Anthony Hsien
Pin (Non-Executive Director) and his
alternate on the Board.
Qualifications 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.
Committee Ms. Lee is the Chairman
of the Nomination Committee.
40
Hysan Annual Report 2019 Non-Executive Directors
Churchouse
Frederick Peter
Independent
Non-Executive Director
A
Board appointment Mr. Churchouse
was appointed as an Independent
Non-Executive Director in December
2012 and is aged 70.
Competencies and experience
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 Group
Holdings Limited. 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.
Qualifications Mr. Churchouse
gained a Bachelor of Arts degree and
a Master of Social Sciences degree
from the University of Waikato in New
Zealand.
Committee Mr. Churchouse is a
member of the Audit and Risk
Management Committee.
Fan Yan Hok Philip
Independent
Non-Executive Director
A
R
N
S
Board appointment Mr. Fan was
appointed as an Independent Non-
Executive Director in January 2010. He
is aged 70.
Competencies and experience
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. He was previously an
independent non-executive director of
Guolian Securities Co., Ltd. and an
independent director of Goodman
Group.
Qualifications 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
the Massachusetts Institute of
Technology.
Committees Mr. Fan is the Chairman
of the Remuneration Committee, a
member of the Audit and Risk
Management Committee, the
Nomination Committee and
Sustainability Committee.
A
Audit and Risk
Management
Committee
R
Remuneration
Committee
N
Nomination
Committee
S
Sustainability
Committee
Committee
Chairman
41
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview
CoRpoRate GoveRnanCe RepoRt
Non-Executive Directors (continued)
Lau Lawrence
Juen-Yee
Independent
Non-Executive Director
N
Poon Chung Yin
Joseph
Independent
Non-Executive Director
A
R
N
42
Board appointment Professor Lau was
appointed as an Independent Non-Executive
Director in December 2014. He is aged 75.
Competencies and experience 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,
Semiconductor Manufacturing International
Corporation (“SMIC”) and Far EasTone
Telecommunications Co., Ltd. (listed on the
Taiwan Stock Exchange). Professor Lau 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.
From June 2011 to December 2014,
Professor Lau was a non-executive director
of SMIC. Professor Lau is a member of the
Currency Board Sub-committee of the
Exchange Fund Advisory Committee of the
Hong Kong Monetary Authority, Vice-
Chairman of Our Hong Kong Foundation, a
member and Chairman of the Prize
Recommendation Committee, LUI Che Woo
Prize Company and a member of the Hong
Kong Trade Development Council (HKTDC)
Belt and Road and Greater Bay Area
Committee. 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 and served as a
member of the 11th and 12th National
Committee of the Chinese People’s Political
Consultative Conference and a Vice-
Chairman of its Economics Sub-committee.
Qualifications 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.
Committee Professor Lau is a member of
the Nomination Committee.
Board appointment Mr. Poon was appointed
as an Independent Non-Executive Director in
January 2010. He is aged 65.
Competencies and experience Mr. Poon is
an independent non-executive director of AAC
Technologies Holdings Inc., a non-executive
director of Tai Chong Cheang Group, a
member of Advising Committee of Asia Pacific
Institute for Strategy and a board advisor of
Clean Air Network. He was formerly the group
managing director and deputy chief executive
officer of Tai Chong Cheang Group, managing
director and deputy chief executive of Hang
Seng Bank Limited and held senior
management posts in HSBC Group and a
number of internationally 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.
Qualifications 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.
Committees Mr. Poon is the Chairman of
the Audit and Risk Management
Committee, a member of the Remuneration
Committee and the Nomination
Committee.
Hysan Annual Report 2019
Wong Ching
Ying Belinda
Independent
Non-Executive Director
S
Jebsen Hans
Michael B.B.S.
Non-Executive
Director
S
Board appointment Ms. Wong was
appointed as an Independent Non-
Executive Director in December 2018 and is
aged 48.
Competencies and experience Ms. Wong
is currently the chairman and chief
executive officer of Starbucks China. Ms.
Wong joined Starbucks Coffee Company in
2000 and held leadership positions across a
variety of business units and geographies,
including marketing director for the Asia
Pacific region of Starbucks Coffee,
managing director of Starbucks Singapore
and general manager of Starbucks Hong
Kong. Prior to joining Starbucks group in
2000, Ms. Wong was the marketing
manager of McDonald’s China
Development Company. She is also an
independent non-executive director of
Television Broadcasts Limited and has
extensive experience in retail, food and
beverage, people, brand development and
growth strategy across the Greater China
and Asia Pacific regions. She serves as a
member on the Faculty Advisory Board for
the University of British Columbia’s Sauder
School of Business.
Qualifications Ms. Wong holds a Bachelor
of Commerce degree with a major in
finance from the University of British
Columbia in Canada.
Committee Ms. Wong is a member of the
Sustainability Committee.
Board appointment Mr. Jebsen was
appointed as a Non-Executive Director in
1994 and is aged 63.
Competencies and experience 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. Mr. Jebsen
currently holds a number of public offices,
namely, chairman of the Asian Cultural
Council Hong Kong, chairman of the
Advisory Council of the Business School of
The Hong Kong University of Science and
Technology, a trustee of World Wide Fund
for Nature Hong Kong and a member of
Board of Trustees of Asia Society Hong
Kong Center, Hong Kong-Europe Business
Council of the Hong Kong Trade
Development Council as well as Advisory
Board of the Hong Kong Red Cross. Since
2015, he has also been a member of the
Operations Review Committee of the
Independent Commission Against
Corruption. Mr. Jebsen was awarded the
Bronze Bauhinia Star by the Government of
the Hong Kong Special Administrative
Region in 2001, made a Knight of the
Dannebrog by receiving the Silver Cross of
the Order of Dannebrog by H. M. The Queen
of Denmark in 2006, was awarded the Merit
Cross of the Order of the Merit of the
Federal Republic of Germany in 2009,
received the title “Hofjægermester” by H. M.
The Queen of Denmark in January 2011 and
was awarded the Knight of 1st Class of the
Order of Dannebrog, Denmark in 2014.
Qualifications Mr. Jebsen was awarded
Doctor of Business Administration honoris
causa of The Hong Kong University of
Science and Technology in 2015.
Committee Mr. Jebsen is the Chairman of
the Sustainability Committee.
A
Audit and Risk
Management
Committee
R
Remuneration
Committee
N
Nomination
Committee
S
Sustainability
Committee
Committee
Chairman
43
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview
CoRpoRate GoveRnanCe RepoRt
Non-Executive Directors (continued)
Lee Anthony
Hsien Pin
Non-Executive Director
A
Board appointment Mr. Lee was
appointed as a Non-Executive Director in
1994 and is aged 62.
Competencies and experience 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 and a
member of the Board of Trustees of
Princeton University. Mr. Lee is a member of
the founding Lee family and a director of
Lee Hysan Company Limited, a substantial
shareholder of the Company. He is the
brother of Ms. Lee Irene Yun-Lien,
Chairman.
Qualifications 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.
Committee Mr. Lee is a member of the
Audit and Risk Management Committee.
Lee Chien
Non-Executive Director
Board appointment Mr. Lee was appointed
as a Non-Executive Director in 1988 and is
aged 66.
College and a Trustee Emeritus of Stanford
University. He is also a director of Stanford
Health Care and CUHK Medical Centre.
Competencies and experience Mr. Lee is a
private investor and a non-executive director
of Swire Pacific Limited and a number of
private companies. He is a member of the
founding Lee family and a director of Lee
Hysan Company Limited, a substantial
shareholder of the Company. Mr. Lee is a
Council member of The Chinese University
of Hong Kong and St. Paul’s Co-educational
Qualifications 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.
Committee Mr. Lee is a member of the
Nomination Committee.
N
Lee Tze Hau
Michael
Non-Executive Director
Board appointment Mr. Lee joined the
Board in January 2010, having previously
served as a Director from 1990 to 2007. He
is aged 58.
Competencies and experience 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 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 Trinity Limited,
and an independent non-executive director
and chairman of OTC Clearing Hong Kong
Limited. Mr. Lee was also a member of the
Main Board and Growth Enterprise Market
Listing Committees of The Stock Exchange
of Hong Kong Limited. Mr. Lee is a member
of the founding Lee family and a director of
Lee Hysan Company Limited, a substantial
shareholder of the Company.
Qualifications Mr. Lee received his
Bachelor of Arts Degree from Bowdoin
College and his Master of Business
Administration Degree from Boston
University.
Committee Mr. Lee is a member of the
Remuneration Committee.
A
Audit and Risk
Management
Committee
R
Remuneration
Committee
N
Nomination
Committee
S
Sustainability
Committee
Committee
Chairman
R
44
Hysan Annual Report 2019 Senior Management
Lui Kon Wai Ricky MBA, MCIOB
Chief Operating Officer
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 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 54.
Hao Shu Yan Roger BBA (Hons), CPA, ACA, ACCA
Chief Financial Officer
Mr. Hao is responsible for the Group’s financial control, treasury and information
technology functions, and serves as a director of certain Hysan 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 54.
Choy Man Wai Kitty BEcon, MSc, MBA
Director, Retail
Ms. Choy is responsible for the Group’s retail portfolio and asset management
strategies, and serves as a director of certain Hysan 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 47.
Lam Tze Pon Tiffany B.Soc.Sc. (Information Management)
Director, Marketing and Customer Experience
Ms. Lam is responsible for formulation of the Group’s marketing strategies, leads
marketing and customer experience operations, and serves as a director of certain
Hysan subsidiaries. She joined the Group in January 2018. Prior to joining the Group,
Ms. Lam accumulated extensive experience in retail and brand management in the
premium luxury sector and the hospitality industry while holding senior positions in
international retail corporations. She is aged 48.
Yip Mo Ching Jessica BSc (Surveying), MBA, MRICS, MHKIS, RPS
Director, Office and Residential
Ms. Yip is responsible for managing the office and residential portfolio of the Group,
and serves as a director of certain Hysan subsidiaries. Prior to joining the Group in
2012, Ms. Yip fulfilled various roles in international consultancies, occupiers and
developers. She has extensive experience in the real estate industry. She is aged 43.
45
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview CoRpoRate GoveRnanCe RepoRt
BEYOND CORPORATE GOVERNANCE
COMPLIANCE
Hysan embraces strong governance as
the foundation for delivering its
strategic objective of achieving
consistent and sustainable
performance. During the year of 2019,
Hysan continued to comply fully with
the requirements of the 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”) of The Stock Exchange of
Hong Kong Limited (the “Stock
Exchange”). Furthermore, Hysan
remained committed to the
Environmental, Social and Governance
Reporting Guide as set out in
Appendix 27 of the Listing Rules.
The following are among the major
areas in which Hysan’s corporate
governance practices exceed the
Corporate Governance Code.
Exceed Corporate
Governance Code
Provisions
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
Best Practices in Corporate Governance at Hysan
Formal Corporate Governance Guidelines* formulated since
2004 and further enhanced in 2018
Formal Board of Directors Mandate* and a detailed List of
Matters Reserved for the Board Decisions* provide a clear
division of roles established between the Board and
management. Further enhanced in 2019
Formal criteria and requirements* established for Non-
Executive Director appointments with expected time
commitment, which was further enhanced in 2019. We issue
formal appointment letters for Non-Executive Directors
Board evaluation of its own performance and that of its
committees by completion of questionnaires through an
electronic platform. Directors’ feedback was analysed and
discussed in meetings
Code of Ethics* applicable to all staff and Directors since
2005 and enriched in 2019 to invite joint venture partners,
contractors and suppliers to demonstrate their commitment
by adhering to the Code of Ethics and human rights policy
in 2020
A separate Whistleblowing Policy* since 2016 and further
enhanced in 2019; an independent third party is engaged as
the whistleblowing channel, which directly reports to the
Audit and Risk Management Committee
Corporate Disclosure Policy* since 2013 and further enhanced
in 2019. A Disclosure Committee conducts regular
assessments of inside information, and guides and promotes
timely and accurately disseminated disclosure of inside
information and stakeholder communications
Auditor Services Policy* for the engagement of auditors.
Further enhanced in 2018 and 2019
Fraud handling policy and procedures to control and aid in
the detection and prevention of fraud
Publication of separate Corporate Governance Report, Audit
and Risk Management Committee Report, Remuneration
Committee Report, Nomination Committee Report,
Sustainability Committee Report and Risk Management and
Internal Control Report
46
Hysan Annual Report 2019 Exceed Corporate
Governance Code
Provisions
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
Best Practices in Corporate Governance at Hysan
More than 20 business days’ notice for the AGMs, which
include a detailed business review
All voting at AGMs conducted by poll since 2004
Early announcement of audited financial results within 2
months and publication of Annual Report within 3 months
after the financial year-end
Continuous enhancement of shareholder communications,
including introduction of shareholders’ visits since 2016
Adopted 10% limit of and a discount of not more than 10%
on the share issue price to issue additional shares under
general mandate since 2018 AGM
Arrangements have been made since December 2015 to
ascertain shareholders’ preferences as to the means of
receiving corporate communications, with the aim of
protecting the environment and enhancing the use of the
Group’s corporate website as a platform for shareholder
communications
Proactive invitation to major nominee companies by Hysan
to forward communication materials to the ultimate
beneficial shareholders at the Group’s expense
Confirmation from senior management to the Audit and Risk
Management Committee as verification compliance
Additional assurance from Internal Audit on the review of
continuing connected transactions
Code for Securities Dealing by Directors and Employees
enhanced with dealing clearance flowchart and illustrations
in 2019
Onboarding Guideline for Directors*
* Detailed policies/terms of reference are available on the Company’s website:
www.hysan.com.hk/governance.
The Hysan Sustainability Report
is made available for public
viewing on Hysan’s website:
www.hysan.com.hk. Limited
copies are printed and
distributed, primarily to our
shareholders. A summary of the
Sustainability Report 2019 is
provided on pages 98 to 101 of
this Annual Report.
47
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview CoRpoRate GoveRnanCe RepoRt
OUR GOVERNANCE FRAMEWORK
System of Governance
Hysan operates within a clear and effective governance
structure.
The Board is responsible for ensuring the effectiveness of
the Group’s system of governance. Through the strong
governance system, effective decision-making, good
procedures and strong internal reporting are embedded into
the business processes, which is aligned to the Group’s
strategy. The purpose of the robust system of governance is
to ensure the oversight of the business and affairs of the
Group, which helps drive success and long-term value
creation for our shareholders.
The system of governance comprises 3 key elements:
the corporate governance framework, risk management
framework and internal control framework.
Corporate Governance Framework
The corporate governance system provides a framework
which supports the realization of its business strategy and
long-term success. It provides effective and efficient
decision-making by the Board and Board Committees. The
framework ensures that both Directors and employees act
within a robust chain of delegated authorities and powers.
This safeguards compliance with applicable laws and
regulations.
The Board regularly assesses and enhances its governance
framework, practices and principles according to
developments in regulatory regimes and international best
practices, as well as the Company’s needs.
The following are Hysan’s key governance-related
guidelines:
• Corporate
Governance
Guidelines
• Onboarding
Guideline for
Directors
• Board of
Directors
Mandate
• List of Matters
Reserved for the
Board Decisions
• Shareholders
• Nomination
Communication
Policy
Policy
• Corporate
Disclosure
Policy
• Whistleblowing
Policy
• Procedures for
Shareholders to
Convene General
Meetings/Put
Forward Proposals
Hysan’s Key
Governance-related
Guidelines
• Terms of Reference
of various corporate
governance-related
Board Committees
• Code of Ethics for
Directors and
Employees
• Diversity
Policy
• Auditor
Services
Policy
• Roles and
Requirements of
Non-Executive
Directors
Detailed policies/terms of reference are available on the Company’s website:
www.hysan.com.hk/governance.
48
Hysan Annual Report 2019 Risk Management Framework
The risk management framework provides a system which
risk management and control are embedded. The Board has
the overall responsibility of maintaining an effective risk
management system. The Group has adopted a consistent
approach throughout the years to identify, measure,
manage, monitor and report risks.
The risk management system is underpinned by the “Three
Lines of Defence” model:
First line of defence: activities undertaken to
ensure that risks are identified and controlled to
bring them within appetite.
Second line of defence: independent review and
challenge of the first line activities, providing
assurance that controls are properly designed and
operating effectively.
Third line of defence: the Group’s internal audit is
responsible for evaluating the effectiveness of our
risk management, control and governance processes.
For details, please refer to Risk Management and Internal
Control Report on pages 91 to 97.
Internal Control Framework
The Group’s internal control system comprises 2 main areas:
1
Delegated
authority
framework
Authority is delegated from the Board to the Executive
Committee through the List of Matters Reserved for the
Board Decisions. The management for the daily operation
of the Group is assumed by the Executive Committee,
supported by several management level committees. Each
senior management and other department heads of the
Group is responsible for ensuring a similar process of
delegation is in place with his or her department or area
of responsibilities.
2
Regulatory
compliance
framework
The Group’s compliance policy sets out the control process
to early identify and record compliance/non-compliance in
order to prevent and/or mitigate the risks of liability and
material loss arising from the failure to comply with the
regulatory requirements. This effectively monitors the
compliance of each business units of the Group, prioritize
each case identified, with comprehensive reporting and
follow up. For details, please refer to the section headed
“Hysan’s Regulatory Compliance Framework” in Risk
Management and Internal Control Report on page 95.
“Directors actively engage in discussions
regarding various aspects of corporate
strategy involving potential expansion of
activities, different geographies and
different asset classes.”
Directors’ comments received in Board Evaluation 2019.
49
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview CoRpoRate GoveRnanCe RepoRt
GOVERNANCE AT A GLANCE
Leadership
BOARD GOVERNANCE
BOARD COMPOSITION
CORPORATE STRATEGY
• Governance structure (see
• 5 INEDs and 4 NEDs
• Set strategy
“Our Governance Framework”
section on pages 48 to 49)
• Onboarding Guideline for
Directors
• All Directors are appointed with a
specific term of 3 years and are
subject to rotation
• Diverse skills, knowledge and
• Board of Directors Mandate
experience
• Oversee overall governance,
financial performance and
sustainable development of the
Group (see “Governance at a
Glance” section on pages
50 to 51)
• List of Matters Reserved for the
Board Decisions
• Roles and Requirements of
Non-Executive Directors
Effectiveness
EVALUATION
DIVERSITY
• Formal board evaluation process
• Diversity Policy
via an electronic platform,
covering the Board’s
effectiveness and processes. The
Board discusses the findings in
detail at its meetings (see “Board
Evaluation 2019” section on
pages 58 to 59)
INFORMATION & SUPPORT
• Good information flow between
the Board and the management
• Access to independent
professional advice and the
Company Secretary
• Management are invited to
attend Board/Committee
meetings to present and answer
questions to facilitate the
decision-making process
• Diversity of skills and expertise
(see “Balance, Diversity and Skills”
section on pages 59 to 61)
COMMITMENT
• All Directors are committed to
devoting sufficient time and
attention to the Company’s
affairs (see “Board Size,
Composition and Appointments”
section on page 62)
INDEPENDENCE
• Meetings of Non-Executive
Directors without the Executive
Director or Board members
related to the founding Lee
family
• Meetings of Chairman and
Independent Non-Executive
Directors
CONTINUOUS PROFESSIONAL
DEVELOPMENT
• Directors receive various trainings
and development programmes to
refresh their skills and knowledge
and to keep up to date with current
developments
THE ROLE OF THE COMPANY
SECRETARY
• Review and implement corporate
governance practices
• Provide advice and support to
Directors
• Keep Directors updated on
legislative, regulatory and
governance matters
1
2
50
Hysan Annual Report 2019 3
Accountability
BOARD COMMITTEES
MANAGEMENT PROCESS
• 4 governance-related Board
• Day-to-day management by
Committees have been
established
• Board Committees report to the
Board (see “Audit and Risk
Management Committee Report”
on pages 74 to 77,
“Remuneration Committee
Report” on pages 78 to 85,
“Nomination Committee Report”
on pages 86 to 88 and
“Sustainability Committee
Report” on pages 89 to 90)
Executive Committee
• Governance framework includes a
number of executive and advisory
groups (see “Leadership” section
on pages 52 to 53)
RISK MANAGEMENT AND
INTERNAL CONTROL
• Regularly review and monitor risk
management process
• Robust assessment of principal
risks and effectiveness of internal
controls
• “Risk Management and Internal
Control Report” (see pages
91 to 97)
FINANCIAL REPORT AND
AUDITORS
• “Independent Auditor’s Report”
(see pages 111 to 114)
• Internal Audit function
• External Auditor independence
and appointment
SUSTAINABILITY
• Well established sustainability
framework
• “Sustainability Committee
Report” (see pages 89 to 90)
• Sustainability Executive
Committee and Sustainability
Task Force as a robust support
• Separate sustainability report
since 2006
4
Engagement
CONSTRUCTIVE USE OF
GENERAL MEETINGS
• Accessible AGM
DIALOGUE WITH
SHAREHOLDERS
• Enhance shareholder
COMMUNICATION
CHANNELS WITH
STAKEHOLDERS
• Committee Chairmen available at
AGM to answer questions (in
person or via dial-in)
• Notice is sent out more than 20
business days before each
meeting (this exceeds the
requirement under the Corporate
Governance Code)
communication by electronic
channels
• Teleconferences and webcasts
for analysts and media briefings
• Organize shareholders’ visits for
understanding the Group, its
portfolio, history, sustainability
activities and other business
areas
• Updates on shareholders’ visits
provided to the Board
• Investment community
communications including
roadshows
• Publication of financial reports,
announcements, circulars and
press releases
• Company’s website
51
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview CoRpoRate GoveRnanCe RepoRt
1
Leadership
Board
The Board is collectively responsible for the long-term
success of the Group. With due regard to the views of
shareholders and other stakeholders (including its
customers, communities, employees and partners), it
provides leadership and direction to the Group by setting
strategy and overseeing its implementation; oversees the
control and risk management; provides insights on the
Group’s culture and values; and is responsible for
corporate governance and the financial performance of
the Group. The Board is governed by a formal Board of
Directors Mandate (see the Company’s website at
www.hysan.com.hk/governance for details).
To retain control of key decisions and ensure there is a
clear division of responsibilities between the Board and
the management for the daily operation of the Group,
the Board has identified certain “reserved matters” that
only the Board can approve. Other matters,
responsibilities and authorities have been effectively
delegated as described. The List of Matters Reserved
for the Board Decisions can be found at the Company’s
website at www.hysan.com.hk/governance.
Board Committees
The Board has an Audit and Risk Management
Committee, Remuneration Committee, Nomination
Committee and Sustainability Committee. The
Committees enable the Board to operate effectively and
ensure a strong governance framework for decision-
making.
The Audit Committee was renamed Audit and Risk
Management Committee in February 2019 to reflect and
emphasize its important role of assessing and making
recommendations on the Group’s risk appetite, profile
and tolerance. Secondly, reflecting the strong
commitment to the Group’s sustainability development,
the Board established a Sustainability Committee with
effect from 1 January 2020. Lastly, the Board resolved to
assume the role of the Strategy Committee and incorporate
the Company’s strategy discussions as an integral part of
the Board meetings. Accordingly, the Strategy Committee
was discontinued and assumed by the Board with effect
from 1 January 2019. This initiative further facilitates and
enables the full Board to actively involve and participate in
setting and reviewing longer-term directional strategy for
the growth of the Group.
The terms of reference of each committee can be found at
the Company’s website at www.hysan.com.hk/governance.
Executive Committee and
Management Committees
Day-to-day management of the Group is delegated to the
Executive Committee. The Board retains control of the key
decisions and certain “reserved matters” that will be
reviewed annually. Executive Committee members include
the Executive Director(s), the Chief Operating Officer, the
Chief Financial Officer, and other members as may be
appointed by the Board from time to time.
Hysan’s strong governance framework requires a number of
executive and advisory groups, which include amongst
others, 3 governance-related management-level
committees, namely the Risk Management Committee, the
Sustainability Executive Committee and the Disclosure
Committee. The Sustainability Executive Committee was
renamed in 2020 from the Sustainability Committee to
support the newly established Sustainability Committee of
the Board. To enhance the Group’s strategy and overall
capabilities to address new business trends and next
generational shifts, the Board has appointed Li Xinzhe
Jennifer as an Advisor to the Board and a Next Generation
Innovation Panel to advise the Board accordingly.
“Management’s regular presentations
of strategy matters, potential expansion,
budgetary impacts are very well put
together and very comprehensive.”
Directors’ comments received in Board Evaluation 2019.
52
Hysan Annual Report 2019 Leadership Structure
THE BOARD
Leadership
Strategy Planning
Provides leadership and
direction for the business of
the Group
Sets strategy and oversees its
implementation
Risk Management and
Internal Control
Ensures only acceptable risks
are taken
Culture and Values
Focuses on the long-term
sustainability of the business
BOARD COMMITTEES
AUDIT AND RISK
MANAGEMENT
COMMITTEE
REMUNERATION
COMMITTEE
NOMINATION
COMMITTEE
SUSTAINABILITY
COMMITTEE
• Reviews risk management
and internal control
systems
• Oversees financial reporting
• Assesses and makes
recommendations on the
Group’s risk appetite,
profile and tolerance
• Sets remuneration policy
for Executive Director(s)
and senior management
• Determines Executive
Director(s)’ and senior
management’s
remuneration and
incentives
• Recommends Board
• Reviews the Group’s
appointments
• Reviews Board structure,
composition and diversity
• Assesses independence of
INED
• Oversees succession
planning
corporate responsibility and
sustainability development
and policies
• Assesses the Group’s
sustainability development
and risks
EXECUTIVE COMMITTEE
• Operates daily business of the Group under the Board’s delegation. It is comprised of Executive Director(s), Chief Operating
Officer, Chief Financial Officer and other senior management of the Group as delegated from time to time
• Assists the Board and the Company in managing the business, operational and financial performance of the Group
MANAGEMENT COMMITTEES
RISK MANAGEMENT
COMMITTEE
SUSTAINABILITY EXECUTIVE
COMMITTEE
DISCLOSURE
COMMITTEE
• Senior management’s forum for
reviewing and discussion of risks,
controls, and mitigating measures
• Sets targets and objectives and
• Considers issues relating to disclosure
monitors progress
• Forms and delivers strategy-level
management of all sustainability
projects
of inside information
• Ensures disclosure requirements are
met
• Ensures appropriate records are
maintained
Advisor to the Board
• Invited to advise the Board since 2018
• Provides advice and guidance on the Group’s overall
capabilities and strategic directions
• Helps the Company to capitalize on opportunities arising
from fast-changing customer/tenant behaviour
Next Generation Innovation Panel
• Invited to advise the Board in 2019
• Enhances the Group’s overall capabilities to address the
trends, key innovations and generational shifts that may
influence and disrupt the Company’s operations and
development
• Members of the Panel are young international entrepreneurs
and accomplished next generation leaders
53
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview Directions
• Discussed the Group’s strategies and emphasized
the continuity of the Company’s vision and mission,
focusing on the impact of global and Hong Kong
changes and developments, and how the Group’s
business model may be affected
• Reviewed the Group’s position and all the challenges
the Group will be facing, the Company’s culture, the
impact of technology, changes in consumer
behaviour as well as the resources and skills the
business may require in future
• Discussed business plans and opportunities, as well
as long-term directional strategy for the growth of
the Group
• Considered and approved the Group’s investment
strategy
Link to strategic objectives:
Risk Management and Internal Controls
• Reviewed the Group’s risk appetite and assessed
external and internal risk level movements, imminent
risks and mitigating actions
• Reviewed the effectiveness of Hysan’s risk
management and internal control systems
• Discussed crisis management
• Reviewed and approved an enhanced Whistleblowing
Policy
• Met with the Company’s valuers regularly during the
year to discuss the portfolio valuation
Link to strategic objectives:
CoRpoRate GoveRnanCe RepoRt
Board Activities
during 2019
This shows the key areas of Board activities
during the year to support our strategies.
Strategic Objectives
Deliver sustainable
long-term shareholder
value
Maximize returns from
the investment portfolio
Maximize development
performance
Ensure a high level of
stakeholder and
customer satisfaction
Attract, develop, retain
and motivate high
performance individuals
Be a best-in-class
counterparty to our
partners and suppliers
Continually improve
sustainability
performance
54
Hysan Annual Report 2019 Accountability
• Discussed the outcome of the Board evaluation
and effectiveness review, and agreed
improvement opportunities
• The Chairmen of the Audit and Risk
Management, Remuneration, Nomination and
Sustainability Committees updated the Board
on the proceedings of their meetings, including
the key discussion points and any areas of
concern
• Establishment of Sustainability Committee at
Board level to emphasize the Board’s
commitment to drive the Group’s sustainability
development
• Reviewed key corporate governance related
reports
Link to strategic objectives:
Governance and Legal Matters
• Reviewed, enhanced and approved various
policies
− “Onboarding Guideline for Directors”
− “Corporate Disclosure Policy”
People and Leadership
• Reviewed the Board structure, size, composition and
diversity, as well as the “independence” of Directors
• Enhanced Terms of Reference of Audit and Risk
Management Committee, Remuneration Committee
and Nomination Committee
• Adopted Terms of Reference of Sustainability
Committee
• Reviewed and evaluated the fees of Directors
• Reviewed the development of people and
compensation for the senior management
• Considered the composition of the Next Generation
Innovation Panel to enhance capabilities and support
the strategic directions of the Board
Link to strategic objectives:
Financial, Operational and Business
Performance
• Considered the financial performance of the
business and approved the annual budget
• Reviewed the interim and annual results, approved
the interim and annual reports
• Reviewed and approved the funding and treasury
investment plan
− “Code of Securities Dealing by Directors”
• Reviewed and discussed financial forecasts and
− “Board of Directors Mandate”
− “Roles and Requirements of Non-Executive
analyst feedback
• Declared dividends
• Reviewed operating results and regular updates for
the Group’s core business (Office, Retail, Residential
and Property Development segments)
• Considered the half-year and full year valuation of
the Group’s portfolio by the external valuer
Link to strategic objectives:
Directors”
− “Code of Ethics”
− “Shareholders Communication Policy”
− “Auditor Services Policy”
• Reviewed corporate structure
• Reviewed the recent developments in corporate
governance and received and considered key
legal and regulatory updates
• Reviewed the List of Matters Reserved for the
Board Decisions
Link to strategic objectives:
55
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview CoRpoRate GoveRnanCe RepoRt
Meetings
The Board meets regularly. Members are given full and
timely access to meeting materials. Each Board meeting
follows a carefully tailored agenda prepared by the
Company Secretary and agreed in advance by the Board/
Committee Chairman. The draft agenda is generally
circulated to all Board members 3 weeks before the
intended date of meeting. Board members are advised to
inform the Board Chairman/Committee Chairman/
Company Secretary if they wish to include any matters in
the agenda of the meeting. There is an annual cycle of
topics to be considered, including business, financial as well
as legal and governance updates. Each Committee provides
a summary of business discussed to the Board. To facilitate
the meeting proceedings, an executive summary for the
Board and Committee meetings in 2019
agenda item is given to the Board members to allow them
to grasp the key information quickly.
Senior employees below Board level are invited to present
to the Board on operational topics during the year. Non-
Executive Directors have direct and open access to
employees below Board level.
Our Board meetings are generally followed by a luncheon
hosted by the Board Chairman. This is typically attended by
the Directors and employees from different departments
and management trainees, which promotes a high level of
involvement and engagement with employees at different
levels of the business.
B
A
R
B
R
AGM
A
B
A
R
B
A
N
January
February
March
April
May
June
July
August
September
October
November
December
B
A
R
N
AGM
Board Meeting
Audit and Risk Management Committee Meeting
Remuneration Committee Meeting
Nomination Committee Meeting
Annual General Meeting
How the Board and Committees spent their time in 2019
28%
27%
50%
19%
26%
Financial Performance
Monitoring (including
quarterly financial
reporting)
Business Performance
Monitoring (including report
from all business and
supporting units)
Strategy and Direction
(including discussion on
matters relating to the Group’s
values and strategic direction)
Risk Management &
Governance (including risk
management and internal
control reporting, and
compliance)
56
Hysan Annual Report 2019 Attendance at Meetings
The following table shows Directors’ attendance at the meetings:
Attended
Attended by tele-conference
Attended by alternate
Attended the meetings
(or part of meetings) as invitee
Directors
Executive Director
Lee Irene Yun-Lien
Independent
Non-Executive Directors
Churchouse Frederick Peter
Fan Yan Hok Philip
Lau Lawrence Juen-Yee
Poon Chung Yin Joseph
Wong Ching Ying Belinda
Non-Executive Directors
Jebsen Hans Michael
Lee Anthony Hsien Pin
Lee Chien
Lee Tze Hau Michael
Meetings Held / Attended
Board
Meeting
Audit and Risk
Management
Committee
Meeting
Remuneration
Committee
Meeting
Nomination
Committee
Meeting
Annual
General
Meeting
(Total: 4)
(Notes 1, 3&4)
(Total: 4)
(Notes 5&6)
(Total: 3)
(Total: 1)
(Annually)
(Notes 5&7)
(Note 2)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Notes:
1. In November 2019, a dedicated half-day session was held during the Board meeting to discuss the Group’s business plans
and long-term directional strategy.
2. Excused from the session to discuss the Executive Director’s own compensation package.
3. Included a meeting of Non-Executive Directors without the Executive Director or Board members related to the founding Lee
family.
4. Included a meeting of Chairman and Independent Non-Executive Directors.
5. Representatives of the external auditor participated in the Audit and Risk Management Committee meetings held in
February, August and November 2019 and the AGM.
6. Representatives of the external valuer participated in the Audit and Risk Management Committee meetings held in February,
August and November 2019.
7. Jebsen Hans Michael was unable to attend the 2019 AGM due to other overseas commitments. Yang Chi Hsin Trevor as his
alternate attended the 2019 AGM to take shareholders’ questions.
57
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview
CoRpoRate GoveRnanCe RepoRt
2
Effectiveness
Board Evaluation 2019
This year’s review of the Board’s effectiveness was
conducted internally and was led by the Chairman with
the support of the Company Secretary. The review
examined the performance and effectiveness of the
Board, and the respective committees, namely, the Audit
and Risk Management Committee, the Remuneration
Committee, and the Nomination Committee. The
evaluation required each Director to complete
anonymously a questionnaire that sought inputs on
Annual Evaluation Process
matters such as the Board’s performance, its dynamics and
processes, its composition and diversity, monitoring and risk
management as well as the logistics of Board meetings. The
survey, being anonymous, encouraged the Directors to
share suggestions, to provide comments and to raise any
concerns. As a high-performing Board, the Board recognizes
that it is important to continually assess and improve the
effectiveness and performance of the Board and
Board Committees.
Self-Evaluation
e-Questionnaire
The Board and Board Committees
conduct self-evaluation questionnaires
annually, responding to questions
surrounding performance and
effectiveness.
Director Self-Assessment
Directors provide ongoing, real-time
feedback to peers and management,
in addition to the annual self-
assessment process.
Ongoing
The Board and Board Committees
regularly review any follow up actions.
Board
Evaluation
Process
Feedback
A summary of the evaluation
results is provided to the Board
and Board Committees.
Action Plan
The Board and Board Committees
consider and discuss on the
constructive insights and action plans
in light of the evaluation process, as
appropriate.
Discussion and Evaluation
The Board and Board Committees
discuss the feedback in February
Board meeting.
58
Hysan Annual Report 2019 The Chairman, supported by the Company Secretary,
collated the e-questionnaire responses into a detailed
report. The report was prepared based on the collective
comments from all the Directors, and responses of members
from the Audit and Risk Management Committee, the
Remuneration Committee, and the Nomination Committee.
The questionnaire received a 100% response rate. The
2019 Board Evaluation Report was submitted to,
considered, and discussed by the Board, and constructive
feedback was received.
Parameters
We have structured our 2019 evaluation based on the
Directors’ views on the following 5 parameters affecting the
effectiveness and performance of the Board. The
evaluation consisted of a quantitative part on ratings and a
qualitative part based on the Directors’ written responses.
The evaluation examined 5 different aspects of the Board,
the role, the composition, the meetings and processes, the
Board in action and the training.
1. Role investigates the role of directors and the function
of roles;
2. Composition discusses the size, structure, balance of
knowledge and experience and skills of the Directors;
3. Meetings and Processes seeks feedback on the
respective schedule, the quality of agendas, meeting
papers and minutes, satisfaction with the integrity of
financial statements & accounts, policies, operation &
compliance controls, internal controls, environmental
social governance (ESG) & risk management processes;
4. The Board in Action looks into performance
effectiveness, supply of and access to information,
strategy appropriateness, level of remuneration; and
5. Training investigates the quality of training and seeks
inputs on areas of interest for future training events.
Conclusions from this year’s Board
evaluation
The conclusion of this year’s Board evaluation was that the
Board and its Committees continued to operate to a high
standard and worked effectively. The results overall ranged
from positive to very positive, and there were no material
issues to report. All Board members were keen to use this
evaluation process as a timely opportunity to identify ways
to improve performance.
Directors favourably perceived their board leadership as
highly effective. The Board has a good culture of having
open and constructive dialogues. Board meetings are
productive, participative and effectively engage Board
members with management in formulating corporate
strategies and tackling operational changes. The Board
and its Committees receive materials in a timely manner
and Directors have access to information, support and
advice from the Company Secretary and the
management team throughout the year. The Board was
satisfied with the Board papers and presentations, which
were well organized, comprehensive, focused and
delivered in a timely manner.
Directors were also satisfied in terms of diversity in skills
and experience. Directors supported and welcomed the
establishment of a Sustainability Committee at Board
level, which can oversee sustainability and enhance
Hysan’s performance in this key area.
The Directors agreed that the ongoing social issues in
Hong Kong, macro challenges, business/market
downturns and cyber security would be the major risks
and concerns facing the Board in the coming years.
Independent Advice
Should the Directors feel that they require independent
professional advice in order to fulfil their obligations as
Board members, this advice may be obtained at the
Company’s expense as stated in our Corporate
Governance Guidelines.
Balance, Diversity and Skills
Hysan recognizes the importance of diversity among its
Board members, which not only contributes to the
effectiveness of the Board but also to the success of the
Group’s business.
We strive to maintain a well-rounded and diverse Board.
Our Non-Executive Directors (including 5 Independent
Non-Executive Directors) have diverse backgrounds in
areas such as economics, finance, business management,
professional practices, and property investment.
Biographies of the Directors can be found on pages 40 to
44 as well as on the Company’s website at
www.hysan.com.hk/about-us.
59
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview CoRpoRate GoveRnanCe RepoRt
Recognizing the value of diversity to the Company, the
Board adopted a separate Board Diversity Policy in 2016,
which was strengthened and enhanced as the Diversity
Policy applying to the Group in 2018. The Board remains
committed to ensure that the selection of candidates for
Board appointments is based on a range of diverse
perspectives, including gender, age, cultural/educational
and professional background, skills, knowledge and
experience. Decisions with regard to Board appointments
are based on merit balanced against the contributions that
a prospective candidate will bring to the Board. The Board
adopted a separate Nomination Policy to emphasize our
commitment to a transparent nomination process.
The Board is also committed to strengthening diversity
across the Group. Similar considerations are used when
recruiting and selecting key management and other
personnel across the Group’s operations. For details
on our hiring practices, please refer to our Sustainability
Report 2019.
During the year, the Nomination Committee undertook a
comprehensive review of the skills and experience of the
Board, and the required expertise to guide the Company
forward given the challenges facing the Group.
Our 9 Non-Executive Directors are from diverse and
complementary backgrounds. The valuable experience and
expertise they bring to our business are critical for the
long-term growth of the Group:
Skills/
Experience
Strategy
Summary
Combined
Experience in defining strategic objectives, assessing
business plans and driving execution in large and
complex organizations.
Risk
Management
Experience in anticipating and identifying key risks
to the organization and monitoring the effectiveness
of risk management frameworks and controls.
Financial
Services and
Investment
Experience in the financial services industry or
experience in overseeing financial transactions and
investment management.
Financial
Acumen
Understanding the financial drivers of the business,
and experience in implementing or overseeing
financial accounting, reporting and internal controls.
Customer and
Retail
Experience as a senior executive in a major retail,
customer products, services or distribution company.
Governance
Experience in and commitment to adhere to
exceptional corporate governance standards.
People and
Culture
Experience in monitoring a company’s culture,
overseeing people management and succession
planning, and setting remuneration frameworks.
International
and China
Experience in international and mainland China
economics and relations.
Property
Investment
Experience as a senior executive in a major company
in property investment, development or facilities
management, or related industry or insights into real
estate investment opportunities.
● Extensive
● Moderate
60
Hysan Annual Report 2019 The
Board
10
Gender
Category
Woman
Man
Executive
Non-Executive
Independent Non-Executive
Age
Board Tenure (Years)
40–49
50–59
60+
0–3
4–6
7+
Other Public Companies Directorship(s) (Number of Companies)
1–3
4–6
Senior
Management 5
Gender
Age
Woman
Man
40–49
50–59
(Directors and Senior Managements’ full biographies, including relationships
among members of the Board, are set out in pages 40 to 45 and are also
available on the Company’s website: www.hysan.com.hk/about-us)
61
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview CoRpoRate GoveRnanCe RepoRt
Board Size, Composition and
Appointments
The Board reviews its structure, size, composition and
diversity from time to time; the last review was conducted
in November 2019. Through the annual evaluation process,
the Board members were able to ensure that they
contributed to the Board and performed their
responsibilities in a highly efficient manner and that they
have spent sufficient time in doing so. The Board was
satisfied that the Directors had a strong commitment to the
Company and positively contributed to the Board through
their participation in the Company’s affairs and the Board’s
discussions and decisions, as reflected in their high
attendance record on the Board and Committee meetings
during the year. To ensure that our Directors have spent
sufficient time on the affairs of the Company, the Directors
disclose to the Company once a year the details of their
other offices held in Hong Kong or overseas listed public
companies and other significant commitments, as well as
an indication of the time involved in those positions. In
addition, the Directors usually inform the Company
promptly whenever there are changes regarding their
other positions.
As at 31 December 2019, there were 10 Directors on the
Board: the Chairman and 9 Non-Executive Directors
(including 5 Independent Non-Executive Directors).
Lee Irene Yun-Lien 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.
Non-Executive Directors are engaged by formal letters of
appointment with a specific term of 3 years, and with a
commitment to Hysan that they will be able to allocate
sufficient time and attention to meeting the high
expectations placed upon them. They 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.
Fan Yan Hok Philip and Poon Chung Yin Joseph have served
as Independent Non-Executive Directors for more than 9
years. Fan Yan Hok Philip will also retire at the forthcoming
AGM to be held on 13 May 2020 by rotation and Poon
Chung Yin Joseph will remain on the Board for a further
year. The Board highly values Fan Yan Hok Philip’s and
Poon Chung Yin Joseph’s experience and wisdom; they
continue to provide positive and significant contributions
and guidance to the Company’s strategies and business
development, offering independent judgment from their
areas of expertise and experience in governance, risk
management, finance as well as people and culture, all of
which are relevant to the Group’s business. The Board and
the Nomination Committee were of the view that both Fan
Yan Hok Philip and Poon Chung Yin Joseph have
demonstrated consistently that they maintain a healthy
level of professional skepticism whenever appropriate, and
they have not been reserved in asking proving questions
and challenging executive management’s views and
recommendations. There was no evidence to suggest that
their tenure has had any impact on their independence.
Lee Irene Yun-Lien, Fan Yan Hok Philip, Lee Tze Hau Michael
and Lau Lawrence Juen-Yee will retire at the forthcoming
AGM to be held on 13 May 2020. Lee Irene Yun-Lien, Fan
Yan Hok Philip and Lee Tze Hau Michael will offer
themselves for re-election. Lau Lawrence Juen-Yee will not
stand for re-election at the AGM. He will retire as an
Independent Non-Executive Director and a member of the
Nomination Committee after the conclusion of the AGM.
Details with respect to the candidates standing for re-
election as Directors are set out in the AGM circular to
shareholders. None of these Directors 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).
“Communication amongst Board members
is robust. Regular and complete updates
provided by Company Secretary.”
Directors’ comments received in Board Evaluation 2019.
62
Hysan Annual Report 2019 Independence of Directors
Hysan is a listed company with a major shareholder family.
The Board remains committed to maintaining
independence.
• Hysan’s conflicts of interest policy applies to all Directors
and employees and are contained in its Code of Ethics in
compliance with the Hong Kong Companies Ordinance. It
aims to avoid conflicts of interest or perception of
conflicts of interest. The Board has delegated authority to
the Nomination Committee to review the conflicts or
potential conflicts of interest and determine any
mitigating actions deemed appropriate. Board members
are reminded twice a year of this requirement through an
explanatory note from the Company Secretary.
• Non-Executive Directors hold separate discussion sessions
every year, without the presence of Executive Director(s)
or Board members related to the founding Lee family.
There were 2 such separate discussions in 2019.
• Any dealings with persons and entities regarded as
“connected transactions” with the Group under the
Listing Rules are subject to the approval of the full
Board, as described in the List of Matters Reserved
for the Board Decisions. “Exempted transactions” as
defined by the Listing Rules’ disclosure requirements
must also be reported to the full Board after
management approval.
• The Company has clear Corporate Governance
Guidelines, in which Directors are considered to be
independent only if they are free from any business or
other relationship that may interfere with the exercise
of their independent judgment.
During the reporting year, the Nomination Committee
carried out a detailed review of the Directors’
independence and was satisfied that each of the 5
Independent Non-Executive Directors was independent at
the time of review.
Checks and Balances
“Connected Transactions” with
related persons subject to full
Board decision
This is covered in our List of Matters
Reserved for the Board Decisions. The
relevant requirements are more stringent
than those under the Listing Rules.
5 Independent Non-Executive Directors
have been drawn from diverse
backgrounds, including economics, finance,
business management, professional
practices and property investment.
Appointment of 5
Independent Non-
Executive Directors with
diverse backgrounds
Clear “independence”
standards for individual
Directors
These are laid down in our
Corporate Governance
Guidelines.
The Nomination Committee
carries out a detailed annual
review of Director’s independence.
Detailed annual review of
independence of
individual Directors
63
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview CoRpoRate GoveRnanCe RepoRt
Independence Status
Name
Management Independent
Not
Independent
November 2019 Review –
Reason for Independence Status
Churchouse Frederick Peter
Fan Yan Hok Philip
Jebsen Hans Michael
Lau Lawrence Juen-Yee
Lee Anthony Hsien Pin
Lee Chien
Lee Irene Yun-Lien
✓
Lee Tze Hau Michael
Poon Chung Yin Joseph
Wong Ching Ying Belinda
✓
✓
✓
✓
✓
✓
✓
✓
✓
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 (Notes 1, 2 & 5)
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 (Notes 3 to 5)
Notes:
1. Lau Lawrence Juen-Yee’s spouse is a partner with KPMG China and the Managing Partner in Hong Kong. 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. Lau Lawrence
Juen-Yee has agreed not to participate in any resolutions involving KPMG group. Since operational matters (office/retail leasing) are unlikely to be
considered at Board level, any conflict of interest is regarded as unlikely to occur in practice.
2. Lau Lawrence Juen-Yee will retire at the forthcoming AGM to be held on 13 May 2020, and he will not stand for re-election at the AGM. Lau
Lawrence Juen-Yee will retire as an Independent Non-Executive Director and a member of the Nomination Committee after the conclusion of the
AGM in May.
3. Wong Ching Ying Belinda is also a director of certain entities of Starbucks Coffee Company. Shanghai Starbucks Coffee Enterprises Co., Ltd., a
wholly-owned subsidiary of Starbucks Corporation (listed on NASDAQ), is one of the tenants of a commercial complex located in Shanghai, the
People’s Republic of China owned by an associate of the Company. The revenue or profit derived from those leases, indirectly as share of results of
an associate, is immaterial (less than 1% of the Company’s turnover or equity attributable to owners of the Company or total assets of the
Company for the year ended 31 December 2019) to the Group. During her term as Independent Non-Executive Director of the Company, Wong
Ching Ying Belinda will abstain from voting on any Board resolution in relation to any business dealings with the Starbucks group. Wong Ching
Ying Belinda has agreed not to participate in any resolutions involving the Starbucks group. Since operational matters (office/retail leasing) are
unlikely to be considered at Board level, any conflict of interest is regarded as unlikely to occur in practice.
4. Wong Ching Ying Belinda holds a cross-directorship with Lee Anthony Hsien Pin since they both serve on the boards of the Company and Television
Broadcasts Limited. However, given that Wong Ching Ying Belinda plays a non-executive role and does not hold any shares in the 2 companies, the
Company considered that such cross-directorship would not undermine the independence of Wong Ching Ying Belinda with respect to her
directorship at the Company.
5. The Board and its Nomination Committee had assessed the independence of Lau Lawrence Juen-Yee and Wong Ching Ying Belinda in light of the
circumstances, including (i) their respective backgrounds, experiences, achievements, as well as characters; (ii) the nature of the Company’s
relationship with KPMG and the Starbucks group and Mrs. Lau’s and Wong Ching Ying Belinda’s roles as well as mitigating actions as described
above; and concluded that their independence would not be affected. It was decided that potential conflicts, which are minimal, could be
managed and that the benefits of their appointment outweighed any risk of conflict. In addition, the mitigation principles and actions are
adequate and appropriate to deal with any such issues.
64
Hysan Annual Report 2019 Professional Development,
Support and Training
The Company ensures that Directors keep their skills and
knowledge up to date to allow them to fulfil their roles on
the Board and Board Committees. The Company arranges
periodic specific knowledge development sessions.
During the year of 2019, the knowledge development
sessions included a sharing session on the future of office
space presented by a leading global professional services
firm that specializes in real estate and investment
management, a deep-dive presentation by our Next
Generation Innovation Panelist on how the family firms
perform compared to non-family firms on environmental,
social and governance (ESG) dimensions, and a portfolio
visit to our new F&B tenant followed by a luncheon with the
management trainees to know the new blood. Directors
have expressed the view that the trainings have been
stimulating and very relevant. Directors have also indicated
that there were adequate training opportunities during the
year. Directors are required to provide their training details
to the Company once a year.
During the year of 2019, member of the senior
management and the Company Secretary have access to a
variety of training activities, including attending seminars,
workshops and conferences relevant to their business and
duties. They have received sufficient training both internally
by Hysan and externally to equip them to fulfil their roles to
support the Company.
In addition, on a regular basis, Directors receive updated
reports facilitating greater awareness and understanding of
the Group’s business and the compliance regulatory
updates. Information on training opportunities and
seminars is also circulated to Directors.
New Director’s onboarding is the process of integrating a
new Director with the Company and its business,
governance and the Board and Board Committee dynamics.
During the year, the Board adopted an Onboarding
Guideline for Directors. When newly-appointed Directors
join the Group, they would receive a properly tailored
induction programme that would give them an
understanding of the Group, its business and operations
(including the major risks it faces) having regard to the
Director’s unique background, experience and skills. The
induction programme would include an introduction session
with the Company Secretary, individual meetings with the
Board Chairman, Committee Chairmen, and senior
management, portfolio visits, and meetings with the
Company’s external advisers. Individual briefings would be
arranged on topics such as Directors’ responsibilities and an
overview of the Group’s business.
The
priorities of
our
induction
programme
Providing an overview of
• the Group’s business and challenges
• the Group’s strategies and key risks
being encountered
• the Group’s corporate and
organization structure
• the Board’s culture, governance and
dynamics
• the legal and regulatory obligations of
a Director
Getting to know the Board
and Senior Management
• access to the Board Chairman,
Committee Chairmen and senior
management
• access to external advisers
(for knowledge and insight)
65
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview CoRpoRate GoveRnanCe RepoRt
Directors’ continuous professional development in 2019
Directors
Executive Director
Lee Irene Yun-Lien
Independent
Non-Executive Directors
Churchouse Frederick Peter
Fan Yan Hok Philip
Lau Lawrence Juen-Yee
Poon Chung Yin Joseph
Wong Ching Ying Belinda
Non-Executive Directors
Jebsen Hans Michael
Lee Anthony Hsien Pin
Lee Chien
Lee Tze Hau Michael
Attending
trainings
organized by
Hysan
Attending expert briefings /
seminars / conferences /
site visits relevant
to the Company’s business
Perusing legal, regulatory,
industry and directors’ duties
related updates prepared by
Hysan quarterly
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
Ongoing training and development sessions for Hysan’s management are also designed to strengthen
their expertise and enrich aspiring leaders. Throughout the year, various seminars on real estate,
regulatory obligations, compliance requirements and best practices and procedures were provided to
the senior management and certain subsidiaries’ directors. We also engaged a legal adviser to conduct
a corporate disclosure drill for operating staff. During the year, the Company Secretary undertook
appropriate professional training to update relevant skills and knowledge.
Hysan has a management trainee programme launched since 2017 to cultivate our future leaders,
with the aim of developing our talent pipeline to meet our long-term business needs. More
management trainees were recruited in 2019 to continue the pipeline.
Employee training is also an integral part of our control measures. During the year, Hysan launched
various mobile learning courses, covering topics on dawn raids, competition law, connected
transactions, intellectual properties rights and inside information, all of which offer learning
opportunities for every member of staff anytime and anywhere.
66
Hysan Annual Report 2019 3
Accountability
Board Committees in 2019
The Board has 4 Board Committees that provide effective
oversight and leadership in accordance with the Group’s
Corporate Governance Guidelines, namely the Audit and
Risk Management Committee, the Remuneration
Committee, the Nomination Committee and the
Sustainability Committee. Each Committee has access to
independent professional advice and counsel as and when
required, and each is supported by the Company Secretary.
All of the Board Committees report to the Board.
The highlights of the Audit and Risk Management
Committee, the Remuneration Committee, the Nomination
Committee and the Sustainability Committee are set out in
the respective reports of the Committees. Terms of
reference and membership of all Board Committees are
disclosed on the websites of the Company and the Stock
Exchange. They are also available upon request to the
Company Secretary.
Full details of the Committees’ activities during the year are
set out in their respective reports:
• “Audit and Risk Management Committee Report” on
pages 74 to 77;
• “Remuneration Committee Report” on pages 78 to 85;
• “Nomination Committee Report” on pages 86 to 88; and
• “Sustainability Committee Report” on pages 89 to 90.
Directors’ Commitment
The Directors have spent sufficient time on the affairs of
the Company. The Directors have given certain
confirmations and made disclosures about their other
commitments. Directors have disclosed to the Company
annually the number, identity and nature of other offices
held in Hong Kong or overseas listed public companies and
organizations and other significant commitments, together
with an indication of the time involved. By disclosing their
other commitments, it is assessed and confirmed that they
have given sufficient time and attention to the affairs of
the Company.
Management Process
The Board is regularly kept up-to-date on key events and
business outlook of the Group, as well as the Group’s
financial and transactions entered through monthly
financial reports. The reports give adequate transparency of
the Company’s operation to the Board.
Our Board and Committees meetings have regularly invited
the senior management to make presentation and to
answer questions that the Board and the Committee
members may have. Our Board and Committees meetings
are typically with the attendance of the senior management
(Chief Operating Officer, Chief Financial Officer, Director of
Office and Residential, Director of Retail, Director of
Marketing and Customer Experience, General Counsel and
Company Secretary, Head of Corporate Communications,
Head of Human Resources and Administration). The Board
Meetings are generally followed by a board luncheon hosted
by the Chairman. Employees from different departments
and management trainees are invited to join the board
luncheon. This provides a good opportunity for Directors to
engage the employees in an informal setting and to
understand the culture of the Group.
Risk Management and Internal
Control
The Board has the overall responsibility of maintaining an
effective risk management and internal control system. The
Audit and Risk Management Committee supports the Board
to review the process by which risks are identified,
prioritized, managed and mitigated. The risk registers are
compiled both from top down, which identify macro-
economic risks, as well as bottom-up, the results of greater
consultation with all the functions within the Group.
Full details of the risk management and internal control
activities during the year are set out in:
• “Risk Management and Internal Control Report” on pages
91 to 97.
67
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview CoRpoRate GoveRnanCe RepoRt
Financial Report and Auditors
The Board supported by the Audit and Risk Management
Committee monitors the integrity of the Group’s reporting
process and financial management. It scrutinizes the full
and half-yearly financial statements, and reviews in detail
the work of the external auditor and external valuer and any
financial judgement and estimates made by the
management.
The Group maintains its own internal audit function. In
addition to the external audit support, internal audit team
has carried out during the year internal audits on leasing
business, accounting and financial reporting practice,
corporate communication process etc. The internal audit
team also provides assurance to the Audit and Risk
Management Committee on the adequacy and
effectiveness of the related internal control procedures.
Sustainability
The Board established a Sustainability Committee with
effect from 1 January 2020 demonstrates our commitment
to our stakeholders that Hysan is taking its corporate
responsibility and sustainable development to the next
level. The Sustainability Committee, supported by the
Sustainability Executive Committee at the management
level, will provide long-term direction and supervise
sustainability-related matters, and it will also review and
monitor management’s execution of the sustainability
projects.
Full details of Hysan’s sustainability development and
activities during the year are set out in :
• “Sustainability Report 2019” on Hysan’s website:
www.hysan.com.hk; and
• A summary of the Sustainability Report 2019 on pages
98 to 101.
4
Engagement
Engaging our Investors
Hysan is committed to maintaining an open
and constructive dialogue with our shareholders
and to providing them with the information
they require to make sound investment
decisions.
We maintain a comprehensive investor relations
timetable for institutional investors, private
shareholders and other investors. This aims to
help our existing and potential investors
understand our business, strategy and
performance, and just as importantly, provides
the opportunity to receive valuable feedback
from them.
Private Shareholders
All private shareholders are encouraged to give
feedback to and communicate with the
Directors through the Company Secretary. They
are also able to meet the Directors and Senior
Management at our AGM every May.
They are invited to join the shareholders’ visits
to the Company’s portfolio every year. The
visits include a briefing on the Company’s
history, sustainable activities and other business
areas, followed by a walking tour in the Lee
Gardens area arranged by the Group. The
shareholders’ visits are constructive
opportunities for the management to
communicate with shareholders.
“All Board members, to me, have devoted due
attention and efforts to help the Company shape its
strategy and tackle operational challenges. The
different perspectives offered by different directors
are something to be treasured and sustained.”
Directors’ comments received in Board Evaluation 2019.
68
Hysan Annual Report 2019 AGM 2019
We held our AGM at Hong Kong Convention and
Exhibition Centre and around 300 private shareholders
attended. Our AGM provided all shareholders with an
opportunity to understand the business performance of
the Company. The Company gave a general business
update before the statutory session, and Shareholders
were also shown a short video with a portfolio update
of the Company.
The results of the voting at all general meetings are
published at the Company’s website :
www.hysan.com.hk.
Results Announcement
The senior management presented the annual and
interim results through press conferences, webcasts, the
Company’s website, and face-to-face meetings to
communicate with shareholders, investors and analysts.
The regular and proactive communication enhanced
the understanding of the Company’s latest business
development, financial performance, strategy, and
competitive edges of the Company.
Institutional Investors
Our investor relations team held non-deal specific
meetings with institutional investors and analysts after
the half-year and full year results.
Banks
Regular dialogue is maintained with our key relationship
banks, including regular meetings with our treasury
team led by the Chief Financial Officer.
Calendar of our main
investor relations events
2019
1st
Quarter
• Annual results announcement
− Press conferences
− Analyst briefings (live audio
webcasts are also available)
• Post-results roadshows in Hong Kong
2 nd
Quarter
• Annual General Meeting
• Investor conferences in Hong Kong
• Property Tours
3 rd
Quarter
• Interim results announcement
− Press conferences
− Analyst briefings (live audio
webcasts are also available)
• Post-results roadshows in Hong Kong
• Investor conferences in Hong Kong
4 th
Quarter
• Shareholders’ Visits
• Property Tours
69
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview Dynamic
engagement with
Shareholders
Provision of
Sufficient and
Timely Information
Constructive
Use of AGM
Corporate
Disclosure
Policy
Shareholders’ Rights
under Articles of
Association and Hong
Accountability to
CoRpoRate GoveRnanCe RepoRt
Shareholders and
Corporate Reporting
Dynamic
Accountability to
Engagement at a Glance
engagement with
Shareholders and
Accountability to
Shareholders
Corporate Reporting
Shareholders and
Corporate Reporting
Dynamic
engagement with
Shareholders
Accountability to
Shareholders and
Corporate Reporting
Accountability to
Shareholders and
Corporate Reporting
Accountability to
Shareholders and
Corporate Reporting
Accountability to
Shareholders and
Information
Corporate Reporting
online
Accountability to
Shareholders and
Corporate Reporting
Information
online
• Annual Report, Interim Report,
Electronic
Communication
Information
press releases and announcements
online
are disclosed in a timely manner.
Provision of
Sufficient and
Dynamic
Timely Information
engagement with
Shareholders
Dynamic
Provision of
engagement with
Sufficient and
Shareholders
Timely Information
Dynamic
Dynamic engagement
Dynamic
engagement with
with Shareholders
engagement with
Electronic
Shareholders
Shareholders
• Ongoing dialogue and meetings
Communication
between Chief Operating Officer,
Chief Financial Officer, and
institutional investors, fund
managers and analysts.
Voting
Voting
Electronic
• Regular presentations or
Communication
conference calls are made to
analysts and investors.
• Shareholder enquiries can be
Information
Information
made via the Investor Relations
function by email to
online
online
investor@hysan.com.hk.
Electronic
Communication
Information
online
Information
online
• Results announcement
Electronic
Voting
Voting
presentations to analysts are also
Communication
disseminated by webcasts.
Shareholders’
Electronic
Electronic
Communication
Communication
Communication
Policy
Voting
Shareholders’
Communication
Policy
Shareholders’
Communication
Electronic Communication
Policy
Information Online
• Key corporate governance policies,
terms of reference of Board
Committees, Group’s financial
reports, press releases and
announcements are available on
the Company’s website.
Shareholders’
• Since December 2015,
Shareholders’
Communication
Communication
Policy
Policy
shareholders can choose to receive
corporate communications via
electronic means.
Shareholders’
Shareholders’
Communication
• Greater use of the Group’s website
Communication
is being arranged for our
Policy
Policy
corporate communications.
• 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.
70
Shareholders
Communication Policy
• The Shareholders Communication
Policy recognizes our commitment
to provide our shareholders and
the investment community with
ready, equal and timely access to
balanced and understandable
information about the Company.
Corporate
Disclosure
Policy
Shareholders’ Rights
Kong Law
under Articles of
Corporate
Association and Hong
Disclosure
Kong Law
Policy
Shareholders’ Rights
under Articles of
Association and Hong
Shareholders’ Rights
Shareholders’ Rights
Kong Law
under Articles of
under Articles of
Association and Hong
Association and Hong
Shareholders’ Rights
Shareholders’ Rights
Corporate
Kong Law
Disclosure
Kong Law
under Articles of
under Articles of
Shareholders’
Policy
Association and Hong
Association and Hong
Communication via
Kong Law
Kong Law
Nominee Companies
Shareholders’
Communication via
Nominee Companies
Dividend
Policy
Shareholders’
Communication via
Nominee Companies
Dividend
Policy
Shareholders’
Communication via
Nominee Companies
Corporate
Disclosure
Constructive
Policy
Use of AGM
Constructive
Use of AGM
Provision of
Sufficient and
Timely Information
Constructive
Use of AGM
Constructive
Use of AGM
Provision of
Sufficient and
Timely Information
Provision of
Sufficient and
Timely Information
Provision of
Sufficient and
Timely Information
Constructive
Use of AGM
Shareholders
’ Visits
Corporate
Disclosure
Policy
Corporate
Disclosure
Policy
Constructive
Use of AGM
Shareholders’
Communication via
Nominee Companies
Shareholders
’ Visits
Provision of Sufficient and
Shareholders
Timely Information
’ Visits
Voting
• The AGM notice, Annual Report,
and financial statements are
dispatched to shareholders more
than 30 days prior to the AGM,
Shareholders
exceeding the statutory
’ Visits
requirement of 21 days.
Shareholders
’ Visits
Shareholders’
Communication via
Nominee Companies
Shareholders’
Communication via
Nominee Companies
Voting
Shareholders
Shareholders
• Comprehensive information is sent
’ Visits
on each resolution to be proposed.
’ Visits
Dividend
Policy
Voting
Dividend
Policy
Dividend
Policy
Dividend
Policy
Dividend
Policy
• Since 2004, we have conducted all
voting at AGMs by poll.
• The poll is conducted by the
Company’s Registrar and
scrutinized by the Group’s auditors.
• Procedures for conducting the 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.
Hysan Annual Report 2019 Accountability to
Dynamic
Shareholders and
engagement with
Accountability to
Corporate Reporting
Dynamic
Shareholders
Shareholders and
Corporate Reporting
Accountability to
engagement with
Shareholders and
Shareholders
Corporate Reporting
Dynamic
Accountability to
Dynamic
Shareholders and
engagement with
Corporate Reporting
Accountability to
Shareholders
Dynamic
Shareholders and
Information
Corporate Reporting
online
engagement with
Electronic
Shareholders
Communication
Information
online
Accountability to
Electronic
Information
Communication
Dynamic
online
Voting
Electronic
Shareholders and
engagement with
Corporate Reporting
Shareholders
Provision of
Sufficient and
Timely Information
Constructive
Use of AGM
Provision of
Sufficient and
engagement with
Timely Information
Shareholders
Constructive
Provision of
Use of AGM
Sufficient and
Timely Information
Corporate
Constructive
Disclosure
Use of AGM
Policy
Corporate
Disclosure
Policy
Shareholders’ Rights
under Articles of
Shareholders’ Rights
Association and Hong
Corporate
under Articles of
Kong Law
Disclosure
Association and Hong
Policy
Kong Law
Shareholders’ Rights
under Articles of
Association and Hong
Kong Law
Provision of
Sufficient and
Timely Information
Provision of
Sufficient and
Timely Information
Voting
Constructive
Use of AGM
Constructive
Use of AGM
Shareholders
Constructive Use of AGM
’ Visits
• AGMs act as a means of
Communication
Provision of
Sufficient and
Timely Information
Shareholders
Voting
’ Visits
conducting a dialogue with private
shareholders.
Shareholders
’ Visits
Constructive
Use of AGM
• Individual shareholders can put
questions to the Chairman at
the AGM.
Shareholders’
Communication via
Corporate
Nominee Companies
Disclosure
Policy
Shareholders’ Rights
under Articles of
Association and Hong
Shareholders’ Rights
Kong Law
under Articles of
Association and Hong
Kong Law
Corporate
Disclosure
Corporate Disclosure
Policy
Corporate
Policy
Disclosure
Shareholders’
• The Group’s Corporate Disclosure
Policy
Communication via
Policy provides guidance on the
disclosure of material information
Nominee Companies
Shareholders’
to investors, analysts and media.
Shareholders’ Rights
Communication via
under Articles of
Nominee Companies
Association and Hong
Kong Law
spokespersons and clearly outlines
the responsibilities for
communication with each
stakeholder group.
• This policy identifies the
Shareholders’ Rights
under Articles of
Association and Hong
Kong Law
• A general meeting of
Information
Electronic
Voting
online
Information
Shareholders’
Communication
Communication
Electronic
online
Shareholders’
Policy
Communication
Communication
Policy
Voting
Shareholders’
Communication
Policy
Information
Electronic
Voting
online
Communication
Shareholders’
Communication
Policy
Shareholders’
Communication
Policy
Shareholders’
Communication
Policy
• Board Committees Chairmen
attend AGMs to respond to
Shareholders
shareholders’ questions.
’ Visits
auditor participate at AGMs.
• Senior Management and external
Shareholders
’ Visits
• Since 2004, a business review
session has been included in our
AGMs. Topics at the last AGM
included: the business
environment in 2018, a review of
business activities, and the
Company’s outlook for 2019.
Shareholders
’ Visits
• Details are available at the
Shareholders’
Company’s website:
Dividend
Communication via
www.hysan.com.hk/governance.
Policy
Nominee Companies
Shareholders’
Communication via
Dividend
Nominee Companies
Policy
Dividend
Policy
Shareholders’
Communication via
Shareholders’
Communication via
Nominee Companies
Dividend
Nominee Companies
Policy
• Since 2005, we have invited major
Dividend
nominee companies to forward
Policy
communication materials to
shareholders at our expense.
Dividend
Policy
Dividend Policy
• Hysan’s longstanding policy is to
provide stable ordinary dividends
to shareholders.
• The dividend payment will be
based on the Group’s financial
performance, future capital
requirements, general economic
and business conditions, etc.
Shareholders’ Visits
• The shareholders’ visits are
opportunities every year for the
management to communicate
with shareholders, who gain
insights into the Company’s
history, sustainable activities and
other business areas.
• An overwhelming response has
been received since the visits were
launched in 2016.
• Shareholders and accompanying
guests were overall satisfied with
the visits, and were actively
engaged in knowing the latest
development of Hysan and the
Lee Gardens area.
shareholders can be convened by
the Board or with a written
request signed by shareholders
holding at least 5% of the total
voting rights of all the
shareholders (“5% Shareholder”).
• A 5% Shareholder may request
to have resolutions passed by way
of written resolution.
• Shareholders may put forward
proposals for consideration at a
general meeting.
• All 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
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.
• Details of Procedures for
Shareholders to Convene General
Meetings/Put Forward Proposals
are available on the Company’s
website.
• No changes have been made to
our Articles of Association during
the year.
71
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview CoRpoRate GoveRnanCe RepoRt
Directors’ Interests in Shares
As at 31 December 2019, the interests and short positions of the Directors in the shares, underlying
shares or debentures of the Company and its associated corporations (within the meaning of Part XV of
the Securities and Futures Ordinance (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
Jebsen Hans Michael
Lee Chien
Lee Irene Yun-Lien
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
0.243
800,000
354,000
0.077
0.034
Personal
interests
60,984
800,000
354,000
Notes:
(a) This percentage was compiled based on the total number of issued shares of the Company (i.e. 1,043,820,891 ordinary shares) as at
31 December 2019.
(b) Such shares were held through a corporation in which Jebsen Hans Michael 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 Company’s share
option schemes adopted on 10 May 2005 (the “2005 Scheme”) and 15 May 2015 (the “New Scheme”)
(details are set out in the section headed “Long-term incentives: Share Option Schemes” below). These
constitute interests in underlying shares of equity derivatives of the Company under the SFO.
Aggregate long positions in shares of associated corporations
Listed below is a Director’s interest in the shares of Barrowgate Limited (“Barrowgate”), a 65.36%
subsidiary of the Company:
Name
Jebsen Hans Michael
Number of ordinary shares held
Corporate
interests
1,000
Other
interests
–
Total
1,000
% of the total
no. of issued
shares
10
(Note)
Note:
Jebsen and Company Limited (“Jebsen and Company”) held a 10% interest in the total number of issued shares in Barrowgate through a
wholly-owned subsidiary. Jebsen Hans Michael was deemed to be interested in the shares of Barrowgate by virtue of being a controlling
shareholder of Jebsen and Company.
Apart from the above, no other interest or short position in the shares, underlying shares or debentures
of the Company or any associated corporations as at 31 December 2019 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.
72
Hysan Annual Report 2019 Compliance with the Model Code for Securities Transactions by Directors of
Listed Issuers
The Company has adopted the Model Code set out in Appendix 10 of 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 had interests, directly or indirectly, in contracts with the Group. These
contracts constituted 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) Lee Irene Yun-Lien, Lee Anthony Hsien Pin, Lee Chien and Lee Tze Hau Michael 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) Jebsen Hans Michael and his alternate, Yang Chi Hsin Trevor, hold directorships 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. Jebsen Hans Michael is
also a substantial shareholder of the companies.
Jebsen Hans Michael 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) Lee Chien is an independent non-executive director of Swire Pacific Limited whose business includes,
inter alia, property investment and trading in Hong Kong, the People’s Republic of China and the
United States of America.
The Company’s management team is separate and independent from that of the companies identified
above. In addition, save and except Lee Irene Yun-Lien, 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 and Risk Management 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
Lee Irene Yun-Lien
Chairman
Hong Kong, 20 February 2020
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Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview
audit and Risk Management
Committee Report
Dear Shareholders,
We are pleased to present the Committee’s report,
which provides an overview of the works
undertaken by the Committee during the year. The
Committee continues to play a key role to assist
the Board in reviewing the risk management and
internal control systems, monitoring internal and
external auditors and overseeing the financial
reporting process, as part of the overall strategy-
setting of the Group. In February 2019, the
Committee was renamed the “Audit and Risk
Management Committee” from the “Audit
Committee” to reflect and emphasize its ongoing
role of evaluating, overseeing and monitoring the
Group’s risk appetite, profile and tolerance. In
February 2019, the terms of reference were at the
same time updated to embrace the Committee’s
key objectives on risk management.
Audit and Risk Management Committee activities and
agenda time during the year
Composition
Majority are Independent Non-Executive
Directors
Committee Members
Poon Chung Yin Joseph* (Chairman)
Churchouse Frederick Peter*
Fan Yan Hok Philip*
Lee Anthony Hsien Pin
* Independent Non-Executive Director
Highlights in 2019
• Engaged an external professional and
evaluated the Group’s cyber risk
• Reviewed the Group’s privacy compliance
updates
• Reviewed the Corporate Disclosure Policy and
framework
• Reviewed the Group’s risk appetite framework
• Reviewed the Group’s crisis management
protocol
• Reviewed the Group’s corporate structure to
address new business operations and risk
management
• Reviewed internal control process on share
dealing and share repurchase
Others (including
compliance, corporate
governance and deep
dive topics)
External Audit
10%
20%
26%
Risk Management
and Internal Control
Systems
44%
Financial Reporting
Key responsibilities
• Oversee the integrity of the Group’s financial
management and reporting processes
• Review the major risks identified and monitor
the effectiveness of risk management and
internal control systems
• Review the risk management and internal
control framework
• Oversee the relationship with the external
auditor and provision of non-audit services
74
Hysan Annual Report 2019
• Review the effectiveness of the Company’s internal audit
function.
• Oversee the Company’s relationship with the external
auditor.
• Report to the Board on its findings after each Audit and
Risk Management Committee meeting.
Activities
Details on the meeting held in February 2019 were set out
in the 2018 Annual Report.
From March 2019 to February 2020, the Audit and Risk
Management Committee held 4 meetings to:
Financial Reporting
• Review and discuss with management and the external
auditor, as well as recommend to the Board to approve,
the unaudited financial statements for the first 6 months
ended 30 June 2019; the audited financial statements for
the year ended 31 December 2019; and the Independent
Auditor’s Report for the year ended 31 December 2019,
prior to their publication based on the external auditor’s
review work and the following:
– Discuss with the external auditor and internal auditor
the scope of their respective review and findings.
– Discuss with management significant parameters and
judgments affecting the Group’s financial statements,
including valuation of investment properties as at
30 June 2019 and 31 December 2019 by the
independent professional valuer, Knight Frank Petty
Limited.
– Review with both management and the external auditor
the Key Audit Matters included in the Independent
Auditor’s Report for the year ended 31 December 2019.
Meetings Schedule
Starting from 2019, the Audit and Risk Management
Committee has held an additional meeting (making a total
of 4 meetings during the year) to address dynamic risks and
enhance the risk management oversight function. By the
invitation of the Audit and Risk Management Committee,
the Board Chairman and members of management
(including the Chief Operating Officer and the Chief
Financial Officer), internal auditor, external auditor and
external valuer (as appropriate) attend the meetings to
present and answer relevant questions and to facilitate the
Committee’s decision-making process. Pre-meeting sessions
with external and internal auditors are held without
management’s presence.
Roles and Authorities
• Oversee the Group’s financial management and reporting
processes and monitor the works carried out by the
external auditor. In this process, 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. Formal statements of Directors’ Responsibility for
the Financial Statements are contained in “Financial
Statements, Valuation and Other Information” of this
Annual Report.
• Review the Company’s risk management and internal
control systems.
• Review reports on major risks the Group is facing.
• Review the adequacy of resources, qualifications and
experience of staff of the Group’s internal audit,
accounting and financial reporting functions, as well as
their training programmes and budget.
• Review the Group’s Whistleblowing Policy with an
extended application coverage and enhanced reporting
procedures. Under this policy, employees and related third
parties who deal with the Group (e.g. consultants,
contractors, suppliers, agents and customers) can raise
concerns, in confidence or anonymously, about
misconduct, malpractice or irregularities in any matters
related to the Group. The Audit and Risk Management
Committee ensures that the concerns raised are
investigated and followed up as appropriate.
75
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview audit and Risk ManaGeMent CoMMittee RepoRt
Review of Risk Management and Internal
Control Systems
• Evaluate the Group’s enterprise-wide cyber risks. An
independent team of Deloitte Touche Tohmatsu was
engaged as part of our digital new service pre-launch due
diligence. Following the assessment and evaluation of the
Group’s enterprise-wide cyber security management, the
Group adopted the IT Outsourcing Management Policy
and Procedure, and the Cloud Services Policy and
Procedure, and conducted an intrusion test on its IT
systems to strengthen cyber security management. A Key
Risk Indicator framework is also in place to incorporate
cyber risk assessment into our daily operations.
• Review the Group’s privacy compliance updates.
• Review the Corporate Disclosure Policy and framework.
• Review the Group’s risk appetite framework, and identify
the key corporate risks, including overall business
environment, operational risks, ESG risks and compliance,
etc., with the tone being set by senior management.
Consider the key imminent risks and risk registers
presented by the management.
• Review the Group’s crisis management protocol
managing the impact of social unrest in 2019.
• Review and assess the Group’s corporate structure in
relation to new business operations and risk
management, and respond to new regulatory
requirements.
• Review internal control measures on share dealing and
share repurchase, and enhance the Code for Securities
Dealing by Directors and employees.
• Review the company-wide corporate disclosure training
programme as one of the internal control measures to
raise awareness and provide guidance to employees
when making proper and timely decisions on disclosure.
• Review the property market trends of the retail, office and
residential sectors presented by an independent
professional valuer, Knight Frank Petty Limited.
• Endorse the enhanced Code of Ethics, which extends to
joint ventures, contractors and suppliers working for the
Company whom are encouraged to follow this Code
of Ethics.
• Review the adequacy of resources, qualifications and
experience of staff of the internal audit, accounting and
financial reporting functions, and their training
programmes and budget.
• Review the adequacy of resources for ESG performance
and reporting.
• Review the whistleblowing reports. No material issues
were raised during the year.
• Review the legal and regulatory updates/trends that may
affect the Group and their implications.
• Review 2019 annual risk management and internal
control systems based on:
– reports of the Internal Audit on the review of the
Company’s continuing connected transactions for the
year ended 31 December 2019, as well as the
adequacy and effectiveness of the related internal
control procedures
– regular reports by management of major risks, risk level
movement and mitigating actions, and special reports
on selected major risk items detailed above
– regular reports of the Internal Audit, including status of
implementation of its recommendations
– certification and confirmation of controls’ effectiveness
by management, covering financial, operational and
compliance controls, ESG compliance, internal audit,
risk management and internal 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 in respect of the
Group’s financial reporting cycle during the course of
its audit.
The Audit and Risk Management Committee was
satisfied as to the adequacy and 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
accounting, financial reporting and internal audit
functions, their training programmes and budget as well
as the adequacy of resources for ESG performance and
reporting). No significant areas of concern that might
affect financial, operational and compliance controls, ESG
compliance, internal audit, risk management and internal
controls functions were identified.
76
Hysan Annual Report 2019 Internal Audit
• Review the internal audit plan, any matters identified as a
result of internal audits, and management responses to
audit reports issued during the year; as well as the
progress made in implementing improvement actions.
• During 2019, the internal audit plan included reviews of
leasing business, accounting and financial reporting
practice, and corporate communications process, etc. No
significant issues were raised during the review.
• Consider and approve the scope of work to be undertaken
by the Internal Audit function in 2020. During 2020, it is
expected that the internal audit plan will include reviews
of leasing business, marketing, information technology
management practice, etc.
Members’ attendance records are disclosed in the table on
page 57.
Evaluation
The Board and Committee evaluation process, which took
place during the year, concluded that the Audit and Risk
Management Committee was effective in fulfilling its roles
in 2019. For details, please refer to Corporate Governance
Report – “Board Evaluation 2019” (from pages 58 to 59).
Members of the Audit and Risk Management Committee
Poon Chung Yin Joseph (Chairman)
Churchouse Frederick Peter
Fan Yan Hok Philip
Lee Anthony Hsien Pin
Hong Kong, 20 February 2020
External Auditor
• Review and consider the terms of engagement of the
external auditor in respect of the 2019 final results
(including 2019 annual audit, the related results
announcement, and annual review of continuing
connected transactions) and the annual update of the
Group’s MTN Programme.
• Review the audit progress report of the external auditor.
• Annually assess and declare satisfaction with the auditor’s
qualifications, expertise and services, including
independence. This is performed through review of the
management’s detailed assessment of the independence,
quality of service, level of remuneration and annual
confirmation of auditor’s independence issued by the
external auditor.
In particular, the assessment was satisfied that the
auditor’s independence and objectivity have not been
impaired by reason of the provision of non-audit services.
All services were pre-approved by the Audit and Risk
Management Committee. Appropriate policies and
procedures have been established to identify audit and
non-audit services as well as prohibited non-audit services
that impair the independence of the auditor. Deloitte
Touche Tohmatsu confirmed its independence with
regard to the non-audit services provided. A rotation
arrangement for the lead audit partner was also
established and implemented by the auditor. The lead
audit partner is required to comply with professional
ethics and independence policies and requirements
applicable to the work performed.
External Auditor’s Services and Fees
Audit Services
Non-audit Services (Note)
Total
2019
HK$ million
2018
HK$ million
2.9
2.5
5.4
2.9
1.5
4.4
Note:
“Non-audit services” include review and consultancy services, agreed-upon-
procedures reports, statutory compliance, regulatory or government procedures
required to comply with financial, accounting or regulatory report matters.
• Review and consider the 2020 audit service plan of the
external auditor, and the terms of its engagement in
respect of the 2020 interim results review.
• Recommend to the Board that the shareholders be asked
to re-appoint Deloitte Touche Tohmatsu as the Group’s
external auditor for 2020.
77
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview Remuneration Committee Report
Dear Shareholders,
Majority are Independent Non-Executive Directors
Composition
We are pleased to present our 2019’s
Remuneration Committee Report. The primary
roles of the Remuneration Committee are
advising the Board on formulating the
remuneration policy for Directors and senior
management, determining remuneration and
incentives packages for Directors and senior
management, and ensuring that the Directors and
senior management have remuneration
commensurate with their qualifications and
competencies.
Remuneration Committee activities and agenda time
during the year
70%
8%
10%
12%
Review of
Compensation
Structure and
Long-term
Incentive Scheme
Review of
Compensation of
Senior Management
Determination of
Compensation
for the Executive
Director(s)
Review of
Remuneration of
Non-Executive
Directors and
Board Committee
Members
Committee members
Fan Yan Hok Philip* (Chairman)
Lee Tze Hau Michael
Poon Chung Yin Joseph*
* Independent Non-Executive Director
Highlights in 2019
• Considered remuneration for Directors and senior
management
• Considered the compensation structure and
long-term incentive scheme
• Reviewed the Terms of Reference
Key responsibilities
• Review Hysan’s framework and general policies
for the remuneration of Executive Director(s) and
senior management
• Review the remuneration packages of Executive
Director(s), Non-Executive Director(s) and senior
management
• Review share incentive plans
78
Hysan Annual Report 2019
Meetings Schedule
The Remuneration Committee generally meets at least once
every year. 2019 was an active year for the Remuneration
Committee, which held 3 meetings during the year. The
Executive Director(s) and management may be invited to
Remuneration Committee meetings to present and/or
answer relevant questions in order to facilitate the decision-
making process. No Director is involved in deciding his/her
own remuneration.
Roles and Authorities
• Review Hysan’s framework and general policies for the
remuneration of Executive Director(s) and members of
senior management, as recommended by management,
and make recommendations to the Board.
• Review and determine the remuneration of Executive
Director(s) and senior management.
• Review the fees payable to Non-Executive Directors and
Board Committee members prior to shareholders’
approval at the AGM.
Activities
During the year of 2019, the Remuneration Committee held
3 meetings to:
• Approve the 2019 Executive Director’s compensation
package and the 2018 performance-based bonus.
• Review the fees for Non-Executive Directors and Board
Committee members based on the recommendations of
an independent global consultancy company specializing
in human resources and compensation.
• Review and determine compensation of senior
management.
• Review and consider the long-term incentive scheme and
proposals based on the recommendations of an
independent global consultancy company specializing in
human resources and compensation.
• Review the terms of reference of the Remuneration
Committee.
In January 2020, the Remuneration Committee also held a
meeting to:
• Review new share incentive plans, changes to key terms of
pension plans, and key terms of new compensation and
benefits plans that have material financial, reputational,
and strategic impact.
• Approve the 2020 Executive Director‘s compensation
package and the 2019 performance-based bonus.
• Review the fees for Non-Executive Directors and Board
Committee members.
• Review and determine compensation of senior
management.
• Review and consider the long-term incentive scheme.
Members’ attendance records are disclosed in the table on
page 57.
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Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview ReMuneRation CoMMittee RepoRt
Executive Director(s)’ and Senior
Management’s Remuneration
Policy
The Group’s remuneration policy aims to provide a fair
market remuneration to attract, retain and motivate high
quality Executive Director(s), senior management and
employees. At the same time, awards must be aligned with
shareholders’ interests. From December 2018 and continue
in 2019, the Group engaged an independent global
consultancy company specializing in human resources and
compensation to conduct an overall review of the Group’s
compensation structure for Executive Director(s), Non-
Executive Directors and Board Committee members, with
the objective of introducing refinements to better support
the Group’s strategic objectives (“Independent
Compensation Review”). The Remuneration Committee
considered the Independent Compensation Review in depth
at the meeting held in January 2019.
In May 2019, the Remuneration Committee instructed the
said independent global consultancy company specializing
in human resources and compensation to conduct an
overall review of the Group’s long-term incentive scheme
and review comparable market schemes. In September
2019, the Remuneration Committee invited the said
independent consultant to present and answer questions
from the members of Remuneration Committee.
The following principles have been established:
• Remuneration packages and structure to reflect a fair
system of rewards for all participants, with the emphasis
on performance, comprising the following components:
Components
Determining Factors
Fixed
compensation
Base salary
and allowances
Variable
compensation
Performance
bonus
• Market trend – pay increments in general and in real
estate industry
• Market benchmark – relevant role and job scope
• Company’s performance
• Individual performance and contribution – achieved
against annual financial and operational targets
(Turnover, Expense Ratio, EPS, Portfolio Year End
Occupancy, key strategic initiatives achievement, etc.)
• Company’s performance
• Individual performance and contribution – achieved
against annual financial and operational targets
(Turnover, Expense Ratio, EPS, Portfolio Year End
Occupancy, key strategic initiatives achievement, etc.)
• Actual pay out ranges from 0–200% of the target
bonus (which is set as a % of annual base salary)
Fixed and variable
compensation
Base salary
and benefits
Short-term
Performance-based
component (bonus)
Share options
• Company’s performance
• Individual performance and potential, and the long-
term contribution to Company
• Grant level is based on a prescribed grant multiple of
annual base salary
Long-term
Long-term incentives
(share options)
80
Hysan Annual Report 2019 • Remuneration packages to be set at levels to ensure
comparability and competitiveness with Hong Kong-
based companies competing for a similar talent pool,
with special emphasis on the real estate industry.
Independent professional advice is to be sought where
appropriate.
• The Remuneration Committee to determine the overall
amount of each component of remuneration, taking into
account both quantitative and qualitative assessment of
performance and achievement of financial and
operational key performance targets that align with the
Group’s long-term strategy.
• Remuneration policy and practice to be as transparent
as possible.
• Share option grantees to 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
to be taken into account.
• The remuneration policy for Executive Director(s) and
senior management to be reviewed regularly,
independent of executive management.
• In January 2020, the Remuneration Committee also held
a meeting to consider the annual base salary of Lee Irene
Yun-Lien and concluded that her 2020 annual fixed base
salary is HK$8,000,000.
Details of Directors’ (including individual Executive
Director(s)) and Senior Management’s emoluments for the
year of 2019 and option movements for Executive
Director(s) during the year are set out in notes 11, 12 and
37, respectively, to the consolidated financial statements.
Non-Executive Directors’
Remuneration Policy
The Independent Compensation Review also included
consideration and review of the Group’s compensation
structure for Non-Executive Directors and Board
Committee members.
Key elements of our Non-Executive Directors’ remuneration
policy include the following:
• Remuneration to be set at an appropriate level to attract
and retain first class non-executive talents.
• Remuneration of Non-Executive Directors (subject to
shareholders’ approval) to be set by the Board and should
be proportional to their commitment and contribution to
the Company.
• Remuneration practice to be consistent with recognized
best practice standards for Non-Executive Directors’
remuneration.
• Remuneration to be in the form of cash fees, payable
semi-annually.
• Non-Executive Directors not to receive share options from
the Company.
For the year of 2019, Non-Executive Directors had received
no other compensation from the Group except for the fees
disclosed below. None of the Non-Executive Directors had
received any pension benefits from the Company, nor did
they participate in any bonus or incentive schemes.
Non-Executive Directors (including Independent Non-
Executive Directors) received fees totalling HK$3,106,000
for the year of 2019.
Director Fee Levels
Director fees are subject to shareholders’ approval at
general meetings. The Remuneration Committee in 2019
considered the recommendations of the Independent
Compensation Review, and the level of responsibility,
experience and abilities required of the Directors, level of
care and amount of time required, as well as the fees
offered for similar positions in companies requiring the
same talents. Revision to fees of Non-Executive Directors
and Chairman and member of the Audit and Risk
Management Committee, the Remuneration Committee
and the Nomination Committee were proposed, and
approved, at the AGM held on 16 May 2019.
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Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview ReMuneRation CoMMittee RepoRt
In January 2020, the Remuneration Committee decided
that the fees of the Directors shall remain unchanged. It
also considered that the newly established Sustainability
Committee has an important role to support the Board in
overseeing the Group’s corporate social responsibility and
sustainability strategy. It was proposed to the Board for
consideration and the Board approved that the
Sustainability Committee Chairman and members be
remunerated with appropriate chairmanship and
membership fees.
The current fees for Non-Executive Directors and Board
Committee members and the fees for 2020 are set out
below. Executive Director(s) will not receive any
director fee(s).
2019 Fee
Per annum
HK$
2020 Fee
Per annum
HK$
Board of Directors
Non-Executive Director
280,000 (Note 2) Unchanged
Audit and Risk
Management
Committee
Chairman
Member
Remuneration
Committee
Chairman
Member
Nomination Committee
Chairman
Member
Sustainability
Committee (Note 1)
Chairman
Member
180,000 (Note 2) Unchanged
108,000 (Note 2) Unchanged
75,000 (Note 2) Unchanged
45,000 (Note 2) Unchanged
50,000 (Note 2) Unchanged
30,000 (Note 2) Unchanged
N/A
N/A
50,000
30,000
Notes:
1. Sustainability Committee has been established with effect from 1 January 2020.
2. Approved by shareholders in the 2019 AGM and took effect on 1 June 2019.
Human Resources Practices
The Group aims to attract, retain and develop high calibre
individuals committed to attaining our objectives. The total
number of employees as at 31 December 2019 was 514.
The Group’s human resources practices are aligned with our
corporate objectives in order to maximize shareholder value
and achieve growth. Details of our human resources
programmes, training and development are set out in the
“Sustainability Report 2019”.
Long-term incentives: Share
Option Schemes
The Company may grant options under executive share
option schemes as adopted from time to time. The purpose
of the schemes is to strengthen the connection between
individual staff and shareholders’ interests. The power to
grant options to Executive Director(s) is vested in the
Remuneration Committee and endorsement by all
Independent Non-Executive Directors is required under the
Listing Rules. The Chairman or the Chief Executive Officer
may make grants to management staff below the Executive
Director level.
The 2005 Share Option Scheme (the “2005
Scheme”)
The Company adopted the 2005 Scheme at its AGM held
on 10 May 2005 (the “2005 AGM”), which had 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 to ordinary
shares of the Company may be granted to employees of
the Company or any wholly-owned subsidiaries (including
Executive Director(s)) 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 the
maximum number of shares permissible under the Listing
Rules, being 10% of the total number of shares in issue as
at the date of the 2005 AGM (being 104,996,365 shares).
The maximum entitlement of each participant under the
2005 Scheme must not, during any 12-month period,
exceed the maximum number of shares permissible under
the Listing Rules (which is 1% of the total number of shares
in issue as at the date of the 2005 AGM, 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 for 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 the exercise price to be made
on exercise of the relevant options.
82
Hysan Annual Report 2019 Grant and vesting structures
Under the Company’s current policy, grants are to be made
on a periodic basis. The exercise period is 10 years. The
vesting period is 3 years in equal proportions starting from
the 1st anniversary and shares will become fully vested on
the 3rd anniversary of the grant. The size of the grant will
be determined with reference to a base salary multiple and
job performance grades. The Board reviews the grant and
vesting structures from time to time.
Movement of share options
During the year, a total of 1,286,200 shares options were
granted under the New Scheme. The 2005 Scheme had
expired on 9 May 2015 and no further option has been
granted under the 2005 Scheme.
As at the date of this Annual Report:
• share options exercisable into a total of 1,322,667
ordinary shares of the Company granted and fully-vested
under the 2005 Scheme remained outstanding,
representing approximately 0.13% of the total number
of issued shares of the Company;
• share options exercisable into a total of 3,170,067
ordinary shares of the Company granted (including
fully-vested share options exercisable into 1,134,392
ordinary shares of the Company) under the New Scheme
remained outstanding, representing approximately
0.30% of the total number of issued shares of the
Company; and
• 102,853,005 shares are issuable under the New Scheme,
representing approximately 9.86% of the total number
of issued shares of the Company.
The 2015 Share Option Scheme (the “New
Scheme”)
The Company adopted the New Scheme (together with the
2005 Scheme, both are referred to as the “Schemes”) at its
AGM held on 15 May 2015 (the “2015 AGM”), 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 to ordinary
shares of the Company may be granted to employees of
the Company or any subsidiaries (including Executive
Director(s)) 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 the maximum number of shares
permissible under the Listing Rules, currently being 10% of
the total number of shares in issue as at the date of the
2015 AGM (being 106,389,669 shares). Under the Listing
Rules, a listed issuer may seek approval by its shareholders
in a general meeting for “refreshing” the 10% limit under
the New Scheme. The limit on the total number of shares
that 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 the maximum number of shares permissible under the
Listing Rules). No options may be granted if such a grant
would result in such 30% limit or maximum permissible
limit being exceeded.
The maximum entitlement of each participant under the
New Scheme must not, during any 12-month period, exceed
the maximum number of shares permissible under the
Listing Rules (which is 1% of the total number of shares in
issue as at the date of the 2015 AGM, 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 for each grant of option is HK$1 and is
required to be paid within 30 days from the date of grant of
options, with full payment for the exercise price to be made
on exercise of the relevant options.
83
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview ReMuneRation CoMMittee RepoRt
Details of options granted, exercised, cancelled/lapsed and outstanding under the Schemes during the year are as follows:
Date of
grant
Exercise
price
HK$
Exercise period
(Note a)
Balance
as at
1.1.2019
Granted
Exercised
Cancelled/
lapsed
(Note b)
Balance
as at
31.12.2019
Changes during the year
Name
2005 Scheme
Executive Director
Lee Irene Yun-Lien
14.5.2012
7.3.2013
10.3.2014
12.3.2015
31.3.2010
31.3.2011
30.3.2012
28.3.2013
31.3.2014
31.3.2015
33.50
39.92
32.84
36.27
22.45
32.00
31.61
39.20
33.75
34.00
14.5.2013 – 13.5.2022
87,000
7.3.2014 – 6.3.2023
265,000
10.3.2015 – 9.3.2024
325,000
12.3.2016 – 11.3.2025
300,000
31.3.2011 – 30.3.2020
50,000
31.3.2012 – 30.3.2021
32,000
30.3.2013 – 29.3.2022
70,000
28.3.2014 – 27.3.2023
85,000
31.3.2015 – 30.3.2024
46,000
31.3.2016 – 30.3.2025
62,667
1,322,667
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
87,000
265,000
325,000
300,000
50,000
32,0000
70,000
85,000
46,000
62,667
1,322,667
Date of
grant
Exercise
price
HK$
Exercise period
(Note a)
Balance
as at
1.1.2019
Granted
Exercised
Cancelled/
lapsed
(Note b)
Balance
as at
31.12.2019
Changes during the year
Eligible employees
(Note c)
Name
New Scheme
Executive Director
Lee Irene Yun-Lien
9.3.2016
23.2.2017
1.3.2018
22.2.2019
33.15
36.25
44.60
42.40
(Note d)
9.3.2017 – 8.3.2026
375,000
23.2.2018 – 22.2.2027
300,000
1.3.2019 – 29.2.2028
373,200
–
–
–
22.2.2020 – 21.2.2029
–
494,200
Eligible employees
(Note c)
31.3.2016
33.05
31.3.2017 – 30.3.2026
174,000
31.3.2017
29.3.2018
29.3.2019
35.33
41.50
42.05
(Note f)
31.3.2018 – 30.3.2027
248,667
29.3.2019 – 28.3.2028
513,000
29.3.2020 – 28.3.2029
–
792,000
–
–
–
–
(49,000)
(Note e)
–
–
–
–
–
375,000
300,000
373,200
494,200
125,000
–
–
–
(4,000)
244,667
(17,000)
496,000
(30,000)
762,000
–
–
–
1,983,867 1,286,200
(49,000)
(51,000)
3,170,067
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 the resignations of certain eligible employees.
(c) Eligible employees are those working under employment contracts that are regarded as “continuous contracts” for the purposes of the Employment Ordinance.
(d) The closing price of the shares of the Company immediately before the date of grant (i.e. as of 21 February 2019) was HK$41.75.
(e) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was HK$41.31.
(f) The closing price of the shares of the Company immediately before the date of grant (i.e. as of 28 March 2019) was HK$41.90.
Apart from the above, the Company has not granted 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 37 to the consolidated financial statements.
84
Hysan Annual Report 2019 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 statement of profit or loss over the 3-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
29.3.2019
22.2.2019
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
HK$42.050
HK$42.050
1.406%
5 years
17.689%
HK$1.342
HK$4.460
HK$42.400
HK$42.400
1.552%
5 years
17.710%
HK$1.342
HK$4.750
Notes:
(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 over the past 5 years
immediately before the date of grant.
(d) Expected dividend per annum: being the approximate average annual cash dividend over the past 5 financial years.
Members of the Remuneration Committee
Fan Yan Hok Philip (Chairman)
Lee Tze Hau Michael
Poon Chung Yin Joseph
Hong Kong, 20 February 2020
85
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview nomination Committee Report
Dear Shareholders,
Majority are Independent Non-Executive Directors
Composition
We are pleased to present our 2019’s Nomination
Committee Report. The primary roles of the
Nomination Committee are to review the Board
structure, composition and diversity, and to
recommend Board appointments. The roles of the
Non-Executive Directors continue to evolve in line
with growing demands and the fast-changing
business environment. The Board is constantly
looking ahead to ensure that our Non-Executive
Directors have the required skills and experience to
drive the highest performance.
Nomination Committee activities and agenda time
during the year
Committee members
Lee Irene Yun-Lien (Chairman)
Fan Yan Hok Philip*
Lau Lawrence Juen-Yee*
Lee Chien
Poon Chung Yin Joseph*
* Independent Non-Executive Director
Highlights in 2019
• Considered the re-appointment and
independence of Directors
• Adopted the Onboarding Guideline for Directors
• Reviewed the Board of Directors Mandate and
the Roles and Requirements of Non-Executive
Directors
• Reviewed the Terms of Reference
Corporate
Governance
Assessment of
Independence of
Directors
Nomination of
Directors
29%
14%
14%
43%
Review of Board
and Board
Committees’
Structure, Size,
Composition and
Diversity
Key responsibilities
• Review the structure, size, composition and
diversity of the Board and make
recommendations to the Board
• Assess independence of the Independent
Non-Executive Directors
86
Hysan Annual Report 2019
Meeting Schedule
The Nomination Committee generally meets at least once
every year.
• Generally oversee the succession planning of the Board.
• Review the time commitment and the efforts required
from Directors to discharge their responsibilities.
Roles and Authorities
• Review and make recommendations on the structure, size,
composition and diversity of the Board to complement
the Company’s corporate strategies.
• Review the Diversity Policy.
• Review the independence of Directors pursuant to the
Listing Rules’ requirements.
• Review the training and continuous professional
development of the Directors.
• Consider the nomination of Directors after careful
consideration of the attributes and values required to
support the effective functioning of the Board in
accordance with the Company’s Nomination Policy. In
addition, to take into account diversity aspects (including
but not limited to gender, age, cultural/educational and
professional background, skills, knowledge and
experience), with due regard for the benefits of diversity,
as set out under the Diversity Policy.
Director
Recruitment
Process
1
A wide and diverse range
of candidates with
different skills and
business backgrounds that
would be attributable to
the business needs are
identified
2
Nomination
Committee Chairman
meets with shortlisted
candidates
3
Nomination Committee
assesses the suitability
of the candidates based
on a range of criteria
4
All Directors are given the
opportunity to meet with
the preferred candidate
5
Nomination Committee
makes a recommendation
to the Board
87
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview noMination CoMMittee RepoRt
Activities
During the year of 2019, the Nomination Committee held a
meeting to:
questions and challenging executive management’s
views and recommendations. There was no evidence to
suggest that their tenure has had any impact on their
independence.
Board Composition
• Review the Board’s structure, size, composition and
diversity, and monitor the progress made towards
enriching the skills and experience of Board members
while improving diversity within the Board. The
Nomination Committee was satisfied that, with the
establishment of the Sustainability Committee at
Board level on 1 January 2020, the current composition
and size of the Board remained appropriate for the time
being. These matters shall continue to be kept under
regular review.
• Continue with the appointment of Li Xinzhe Jennifer as
an advisor to the Board, to continue to enrich the Board’s
skills and diversity.
• The recent Board performance evaluation concluded that
the Board has operated very well. The Nomination
Committee was satisfied that all Directors were strongly
committed to the Company and had contributed to the
Board through their participation in the Company’s
affairs and discussions at the Board and Board
Committees’ meetings during the year, as reflected in
their high attendance recorded in the table on page 57.
• Review the contribution of the Directors who are due to
retire and are subject to re-appointment at the
forthcoming AGM with the support of the Board.
• Review the training of the Directors and senior
management.
Independence of Non-Executive Directors
• Assess the independence, effectiveness and commitment
of each of the Company’s Independent Non-Executive
Directors.
• Consider that 2 Directors, Fan Yan Hok Philip and
Poon Chung Yin Joseph, have served as Independent
Non-Executive Directors for more than 9 years. Fan Yan
Hok Philip will also retire at the forthcoming AGM to be
held on 13 May 2020 by rotation and Poon Chung Yin
Joseph will remain on the Board for a further year. The
Nomination Committee was of the view that both Fan
Yan Hok Philip and Poon Chung Yin Joseph have
demonstrated consistently that they maintain a healthy
level of professional skepticism whenever appropriate,
and they have not been reserved in asking proving
• The Nomination Committee was satisfied that
notwithstanding the length of service of such Directors, as
well as their number and nature of office(s) held in other
public companies and their other commitments, they
remained highly committed to the Company, are
independent and impartial, and continue to be in a
position to discharge their duties and responsibilities in
the coming year.
Review of Policy and Guidelines
• Adopt the Onboarding Guideline for Directors to establish
a robust onboarding process to help new Directors to
engage with fellow Directors and management
• Enhance our Board of Directors Mandate and the Roles
and Requirements of Non-Executive Directors so that
they align with the latest developments and ensure good
corporate governance
• Review its terms of reference taking into account the
corporate governance roles of the Nomination
Committee. In February 2019, the terms of reference
were updated to address key objectives.
Sustainability Committee and Next
Generation Innovation Panel
• Consider the establishment and composition of the
Sustainability Committee at Board level, which oversees
the Group’s sustainability development and strategies,
governance and reporting with effect from
1 January 2020.
• Consider the nature and composition of the Next
Generation Innovation Panel, which improves capabilities
and supports the strategic direction-making of the Board.
Members of the Nomination Committee
Lee Irene Yun-Lien (Chairman)
Fan Yan Hok Philip
Lau Lawrence Juen-Yee
Lee Chien
Poon Chung Yin Joseph
Hong Kong, 20 February 2020
88
Hysan Annual Report 2019 sustainability Committee Report
Dear Shareholders,
The Board is constantly looking ahead to
ensure that our Company is aligned with
the latest international sustainability and
ESG best practices, which led to the
establishment of the Sustainability
Committee on 1 January 2020.
The primary roles of the Sustainability
Committee are to review and oversee the
Group’s corporate responsibility and
sustainability development and policies.
The Committee is tasked with overseeing
the overall corporate responsibility and
sustainability vision and action plans for
the Group while bringing any related issues
to the attention of the Board. It also
assesses and makes recommendations on
matters concerning the Group’s
sustainability opportunities and risks.
Composition
Majority are Independent Non-Executive Directors
Committee members
Jebsen Hans Michael b.b.s. (Chairman)
Fan Yan Hok Philip*
Wong Ching Ying Belinda*
* Independent Non-Executive Director
Highlights in 2020
• Sustainability Committee was established on 1 January
2020
• Reviewed and endorsed Hysan’s sustainability strategy
Key responsibilities
• Review Hysan’s sustainability roadmap and making
recommendations to the Board
Meeting Schedule
The Sustainability Committee generally meets at least once
every year.
Roles and Authorities
• Review, endorse and report to the Board the Group’s
corporate responsibility and sustainability plans,
strategies, priorities, policies, practices and frameworks.
• Review and evaluate the adequacy and effectiveness of
the actions taken by the Group based on its corporate
responsibility and sustainability plans, strategies, priorities,
policies and frameworks, and recommend improvements.
• Review and report to the Board on sustainability risks and
opportunities.
• Monitor and review existing and/or emerging issues,
trends and investments related to corporate responsibility
and the sustainability of the Group.
• Monitor and review the Group’s corporate responsibility
and sustainability policies and practices to ensure they
remain relevant and compliant with legal and regulatory
requirements (including, but not limited to, the relevant
Hong Kong Stock Exchange Environmental, Social,
Governance Reporting Guide and the Listing Rules).
• Review and provide recommendations to the Board for
approval of the annual corporate responsibility/
sustainability report and relevant disclosures in the
Company’s annual report.
89
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview
sustainability CoMMittee RepoRt
Hysan’s Sustainability Governance Structure
Board-level Sustainability Committee
(effective from 1 January 2020)
Provides long-term direction and
supervises sustainability matters
Management-level Sustainability Executive Committee (Note)
reporting to the Chairman
Forms and delivers strategy-level
management of all sustainability
projects
Sustainability Task Force
Executes sustainability projects
Corporate
Communications
Human Resources
and Administration
Internal
Audit
Legal and
Company
Secretary
Office
and Residential
Property
Management and
Technical Services
Finance
Information
Technology
Investment and
Development
Marketing
Projects
Retail
Note:
In 2020, the management-level sustainability committee was renamed as the Sustainability Executive Committee to
support the newly established Sustainability Committee of the Board. The management-level Sustainability Executive
Committee consists of all department heads of the Company and is chaired by the Chief Operating Officer.
Activities
In February 2020, the Sustainability Committee held a meeting to:
Review Hysan’s Sustainability Strategy
• Discuss and review Hysan’s sustainability strategy. The Sustainability Committee
considered the action plan and identified potential risks and challenges related
thereto, benchmarking international standards and industry peers.
Discuss ESG Overview and Direction
• Hysan has consistently engaged with the community in which it operates since the
community is core to the Group’s heritage. The Committee reviews the
engagement strategy on a regular basis in order to prepare for the future.
Members of the Sustainability Committee
Jebsen Hans Michael b.b.s. (Chairman)
Fan Yan Hok Philip
Wong Ching Ying Belinda
Hong Kong, 20 February 2020
90
Hysan Annual Report 2019 Risk Management and internal
Control Report
Responsibility
Responsibility for risk management is shared among the Board of Directors and
the management of the Group. The Board has the overall responsibility of
reviewing and maintaining sound and effective risk management and internal
control systems. Management’s role is to design and implement these systems,
and report to the Board and the Audit and Risk Management Committee on the
risks identified and how they are managed. This process is essential for the Group
to achieve its business objectives.
Our Risk Management and Internal Control
Framework
The Audit and Risk Management Committee supports the Board in monitoring
our risk exposures, as well as the design and operating effectiveness of the
underlying risk management and internal control systems. Acting on behalf of the
Board, the Committee oversees the following process on a consistent basis:
i. Reviewing the principal business risks and control measures in order to
mitigate, transfer or avoid such risks; the strengths and weaknesses of the
overall risk management and internal control systems; and action plans to
address the weaknesses or improve the assessment process;
ii. Reviewing 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. Reporting by the external and internal auditors of any control issues identified
in the course of their work, and discussing with the external and internal
auditors the scope of their respective review and findings.
The Audit and Risk Management Committee reports its findings to the Board,
which then considers these findings in order to form its own view of the
effectiveness of the Group’s risk management and internal control systems.
Please also see the “Audit and Risk Management Committee Report” from pages
74 to 77 regarding the Audit and Risk Management Committee’s detailed review
work, including the forms of assurance received from management, the external
auditor and internal auditor.
91
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview Risk Management and internal
Control Report
Risk ManaGeMent and inteRnal ContRol RepoRt
Hysan’s Top-Down/Bottom-Up Risk Management Framework
THE BOARD
• 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 the
risk management
culture
AUDIT AND RISK MANAGEMENT COMMITTEE
• Supports the Board in monitoring risk exposure, design and operational effectiveness
of the underlying risk management and internal control systems
Overseeing, identifying, assessing, and mitigating
risks at corporate level
“Top-down”
“Bottom-up”
Overseeing, identifying, assessing, and mitigating risks
at business unit level and across functional areas
MANAGEMENT LEVEL –
RISK MANAGEMENT COMMITTEE
INTERNAL AUDIT
• Designs, implements, and monitors risk
• Provides the Audit and Risk Management
management and internal control systems
• Assesses our risks and mitigating measures
Company-wide
Committee with independent assurance on
the effectiveness of our risk management
and internal control systems
OPERATIONAL LEVEL
• Identifies, assesses and mitigates
risks across the business
• Implements risk management and internal
control practices across business operations
and functional areas
2019 Review of Risk
Management and Internal
Control Effectiveness
In respect of the year ended 31 December 2019, the Board,
with confirmation from Chief Operating Officer, Chief
Financial Officer, Head of Internal Audit as well as General
Counsel and Company Secretary, considered the risk
management and internal control systems to be effective
and adequate. No significant areas of concern that may
affect the financial, operational and compliance controls,
ESG compliance, internal audit, risk management and
internal control functions of the Group were identified. The
risk management and internal control systems are designed
to manage rather than to eliminate the risks of failure to
achieve business objectives, and can only provide
reasonable, not absolute, assurance against material
misstatement or loss.
During the review, the Board also considered the resources,
qualifications/experience of staff of the Group’s internal
audit, accounting, financial reporting and business support
functions and found their training and budgets to be
adequate.
Our Risk Management and
Internal Control Model
Our risk management and internal control model is based
on that of the Committee of Sponsoring Organizations of
the Treadway Commission (“COSO”) in the U.S. for internal
control, but with due consideration given to our
organizational structure and business nature.
Our model has 5 components. How the model fits into our
operational and control environment is described as follows:
92
Hysan Annual Report 2019 • Control Environment – this sets the tone for risk
• Control Activities and Information and
management and internal control. As Hysan is a tightly-knit
organization, the actions of management and its
commitment to effective governance are transparent to all.
We have a strong tradition of good corporate governance
and we are committed to maintaining a high standard of
integrity, openness, probity and accountability. A formal
Code of Ethics is communicated to all staff (including new
recruits). We have maintained a separate Whistleblowing
Policy since 2016, under which whistle blowers can raise
concerns, in confidence, through an independent third
party who then reports to the Audit and Risk Management
Committee. We are committed to building risk awareness
and control responsibility into our corporate culture, which
thereby forms the foundation of our risk management and
internal control systems.
• Risk Assessment – we continue to improve our risk
management process and the quality of information
generated, while maintaining a simple and practical
approach. Instead of establishing a separate risk
management department, we seek to embed risk
management into all our operations (retail, office,
residential, property management & technical services,
projects, marketing and investment & development) and
functional areas (including finance, human resources &
administration, IT, legal & secretarial and corporate
communications).
On an annual basis, department heads review and update
their risk registers, providing assurances that controls are
appropriately embedded and operating effectively.
At management level, the Risk Management Committee,
comprising Executive Director(s), Chief Operating Officer,
Chief Financial Officer, Financial Controller, General
Counsel and Company Secretary, as well as Head of
Internal Audit, sets relevant policies and regularly monitors
potential weaknesses and action items. This Committee is
also responsible for identifying and assessing risks of a
more macro and strategic nature, including emerging risks.
This bottom-up approach, in which operating unit heads
identify operational risks, together with top-down
stewardship, ensures a comprehensive assessment of the
Group’s major risks. Discussion sessions with all
department heads further enhance the participatory and
interactive aspects of the overall risk assessment and risk
challenge process.
Communicating – our core property leasing and
management business involves well-established business
processes. Control activities have traditionally been built
on supervisor reviews, segregation of duties, and well
defined control points, both physical and digital. These
control policies have been formalized as written policies
and procedures, with defined limits of delegated authority
and segregated duties and controls.
The annual budgeting and planning process, one of our
key control activities, takes into consideration all risk
factors as well as the latest economic and social trends. All
operating units, in preparing their respective plans, are
required to identify material risks that may have an
impact on the achievement of their business objectives.
Action items to mitigate identified risks are required to be
developed for implementation. Variance analyses are
regularly performed and reported to management and
the Board, which help to identify deficiencies for timely
remedial actions to be taken.
Another significant control activity is the monitoring of
major project expenditures, as they are a particularly
capital-intensive aspect of our property business. For each
project, a detailed analysis of expected risks and returns is
submitted to the operating unit heads, Chief Operating
Officer, Chief Financial Officer, Executive Director(s) and
the Board for approval as appropriate. Criteria used to
assess business and financial feasibility are generally
based on net present value, payback period, and internal
rate of return from projected cash flow as well as on
sensitivity analysis.
Management also conducts an annual internal control
self-assessment. All department/unit heads must
complete a relevant control self-assessment questionnaire
and confirm with management that appropriate internal
control policies and procedures have been established and
properly complied with.
• Monitoring Activities – the Board and the Audit and Risk
Management Committee oversee the control process,
with the assistance from our Internal Audit team.
Management provides update reports to the Audit and
Risk Management Committee on major risks and
appropriate mitigating measures. In 2019, the Audit and
Risk Management Committee held 4 meetings (2018: 3
meetings) to address the dynamic risks and enhance the
risk management oversight function. Each meeting has a
dedicated discussion regarding risk management, internal
control systems and recent development.
93
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview Risk ManaGeMent and inteRnal ContRol RepoRt
Strengthening our Underlying
Systems
Since 2012, we have adopted a COSO-based framework
and transformed a process-based risk management
framework into a risk-based one. The risk-based approach
ensures our ability to analyse risks and respond to
opportunities as we pursue our strategic objectives,
including sustainability.
Management reporting to the Audit and Risk Management
Committee has been continuously enhanced, including
regular and special reports on imminent risk topics. We have
also integrated risk management and internal control into
our business processes, including annual budgeting and
planning as well as major project management.
Ultimately, our objective is to make risk management a
“living” process that is practised on a day-to-day basis by
operating units, incorporating up-to-date and fit for
purpose market best practice.
Hysan’s “Three Lines of Defence” Model
Clear responsibilities and robust controls are vital to help
manage risks. Since 2017, we have reinforced our risk
governance structure by adopting a “Three Lines of
Defence” model to address how specific duties related to
risk and control should be assigned and coordinated within
the Group. This has reinforced Hysan’s risk management
capabilities and compliance culture across all divisions
and functions.
Board/Audit and Risk Management Committee
Risk Management Committee and Senior Management
1st
Line of Defence
2nd
Line of Defence
3rd
Line of Defence
• Management Controls
• Financial Control
• Public Communication
• Internal Audit
• Internal Control Measures
• System of Risk
• Compliance
Management and
Internal Control
• HR Capability
• Information Security
• Sustainability
Risk Owners/Managers
Risk Control and Compliance
Risk assurance
Business units and
supporting units
Control functions
Internal Audit
E
x
t
e
r
n
a
l
a
u
d
i
t
R
e
g
u
a
t
o
r
l
The model aims to reinforce Hysan’s risk management capabilities and compliance culture throughout the Group.
The responsibilities of each of the defence lines are as follows:
Business units and
Supporting units
Corporate monitoring and
control functions
Group internal audit
• Ultimately accountable for all
• Responsible for the Group’s policy framework
• Responsible for providing
risks and controls in all business
processes
and independent risk assessment
independent and objective
assurance on the effectiveness
of risk management, internal
controls and governance
processes
94
Hysan Annual Report 2019
Hysan’s Regulatory Compliance Framework
The Board, supported by the Audit and Risk Management Committee, shall have
overall regulatory compliance authority in all matters. We have a regulatory
compliance framework in place, which is fundamental to our commitment to
achieving a high standard of internal control and governance.
Monitor
• Semi-annual compliance reported to the Audit and
Risk Management Committee and the Board.
• Quarterly legal and regulatory update to the Audit
and Risk Management Committee and the Board.
• Corporate governance policies regularly reviewed by
the Board.
Identify
• Each business unit and supporting unit
confirms compliance semi-annually
(including compliance with laws
affecting its operation).
• Compliance/Non-compliance is properly
identified and recorded.
Board
Audit and Risk
Management
Committee
Regulatory
Compliance
Framework
Business
Units and
Supporting
Units
Management-Level Risk
Management Committee
Respond
• Advise business units and
supporting units on appropriate
legal steps/actions.
• Assist the units to initiate and
follow up on the required action.
• Report to the management-level
Risk Management Committee.
Prioritize
• Prioritize for immediate
action, corporate
governance/policy
planning,
comprehensive
reporting and follow up.
Assess
• Review and assess the
impact. Seek external
legal advice, where
necessary.
• Report to the
management-level Risk
Management
Committee.
95
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview Risk ManaGeMent and inteRnal ContRol RepoRt
Our Past Efforts to Enhance the Internal Control Environment and
Activities
In addition, the following are examples of the improvements we have made over the past few years to
strengthen our risk management and internal control systems:
Control Environment –
policy of compliance
• Updated corporate governance policies including Whistleblowing Policy,
Code of Ethics, Onboarding Guideline for Directors, Board of Directors
Mandate, Roles and Requirements of Non-Executive Directors, Corporate
Disclosure Policy, Shareholders Communication Policy, Code for
Securities Dealing by Directors and employees in 2019, and human
rights policy in 2020.
— Ongoing review/
refinement of processes
and structures to enhance
compliance.
Risk Assessment –
enhanced monitoring of
“emerging risks”
• Strengthened the monitoring of material risks and “emerging risks”, i.e.
new or evolving risks with potential significant impact, such as socio-
political, economic or cyber security risks.
• The management-level Risk Management Committee plays a key role in
identifying and tracking these risks, with top management leading
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.
Control Activities –
e-compliance system
Control Activities –
internal controls and
policies
• The half-yearly compliance reporting was carried out electronically
— Continual review and
in July and December 2019.
• The legal compliance and connected transactions reporting systems
were combined into one. This facilitates timely reporting, good record
tracking and improves efficiency.
refinement of internal risk
management and
reporting procedures to
ensure prompt and timely
response and escalation.
• Legal & Secretarial Department carried out a Corporate Disclosure Drill
— Continual review and
with an external professional in November 2019. Working level
employees from Finance Department (Financial Reporting Team and
Treasury Team), Investment & Development Department, Corporate
Communications Department, Legal & Secretarial Department all
attended an interactive drill with case studies.
• Regular trainings and education provided across the Group during the
year by Legal & Secretarial Department and external professional
advisors, including commercial contract negotiation as well as rental
recovery solutions to support daily operations.
• General Counsel and Company Secretary worked with Human Resources
Department to launch a group wide awareness education programme in
May 2019. Key modules have been uploaded to Hysan’s mobile learning
platform, including inside information, intellectual properties rights,
competition law, connected transactions and dawn raids. New staff are
requested to complete the modules within a prescribed period.
refinement of policies and
procedures, keeping risk
management and internal
controls in line with
fast-changing external
and internal business
environments, are
essential.
Monitoring Activities –
enhanced “management
assurance” to the Audit
and Risk Management
Committee and the Board
• Enhanced management update reports to the Audit and Risk
Management Committee and to the Board on major risks, including
deep-dive reports on topics such as enterprise-wide cyber security
updates and assessments, privacy compliance updates and analysis of
corporate structure in relation to new business and risk management.
• To strengthen management’s “assurance” to the Audit and Risk
Management Committee and the Board, self-assessment questionnaires
were distributed to all departments. Department heads were required to
review and certify the effectiveness of their departmental controls,
including the identification of any control issues. This initiative backs up
management’s certification to the Audit and Risk Management
Committee and the Board.
— Facilitate and enhance
the work of the Audit and
Risk Management
Committee and the Board
in monitoring our risk
exposure.
96
Hysan Annual Report 2019 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 level
changes
during 2019 Description of risk change
• Retail industry hit by ongoing social unrest.
• Uncertainties arising from China-U.S. trade
tensions.
Our mitigating measures
• Proactive measures taken to ease tenants’ business
pressures.
• Focus on portfolio curation as well as prudent and
sound financial management to ensure Hysan’s
business resilience.
• Decentralization from Central continued to
• Diverse and flexible leasing efforts as well as
benefit office space in Causeway Bay.
However, signs of a slow down were clear.
• Net take-up of Grade A office space in Hong
maintaining a diversified tenant mix ensure a more
resilient tenant portfolio.
• Offer tailored solutions to increase marketability of
Kong dropped 62% year-on-year.
• Co-working continued to disrupt the
office units.
• Embrace co-working trend by collaborating with
traditional office leasing business. Expected
consolidation may disturb the market.
leading and strong co-working brands.
• Mutual empowerment with our Retail portfolio
• Retail spending in Hong Kong declined
sharply amid the ongoing social unrest
coupled with uncertainties from global
economies.
• Causeway Bay is one of the major areas
affected by social unrest.
• Brands consolidating their outlets for cost
savings.
• Peer competition has intensified.
• Uncertainties in the economy affect demand
for luxury residential units from expatriates
as well as affordable rent levels due to their
tighter budget.
• Diverse and flexible leasing effort as well as active
curation of tenant mix to ensure a more resilient
and sustainable tenant portfolio.
• Short-term support to ease tenants’ business
pressure and reinforce long-term business
partnership.
• Use mobile and business technology to drive
loyalty programme as well as shopping experiences
to distinguish our offerings.
• Focus on marketing efforts to target relevant
existing and potential new shoppers.
• Area rejuvenation of Lee Gardens to enrich shopper
experience.
• Continue to invest in renovation of residential units
and common areas to attract new tenants and
improve rentals.
• Recent signs of the cooling of the property
• Ensure the sites are carefully and professionally
market, as well as the looming “vacancy tax”,
may affect future profitability.
developed to capture the target market.
• Approach the market at the right moment.
• Sensible tender price mitigates pressure on profit.
• The service industry continues to face labour
• Improved working environment, benefits and an
shortages.
• We are facing competition for skilled
personnel for our frontline operations as well
as for management to support our growth
strategy.
emphasis on well-being will help recruit new blood
and retain talented people more effectively.
• Enhance staff productivity with technology
enablement and process automation.
• With fast developments in business
• Regular cyber security review and upgrade to
technology, Hysan continues to leverage
technology to improve our offering to
shoppers and tenants, as well as to enhance
our operations and management.
• Disturbances to business due to cyber security
risks can be significant and costly to rectify.
• Increasing attention from investors and the
general public in assessing public companies.
• New requirements on compliance.
mitigate the risks.
• Engage external professionals to conduct a cyber
security audit and a deep-dive review.
• Ongoing monitoring of key risk indicators.
• Professional independent consultant conducted an
overall review of the Group’s sustainability and
climate change performance.
• The Group executed the sustainable development
principles and attained targets set.
• Sustainability Committee at Board level was
established in 2020.
Risk area
Overall
business
environment
Office sector
Retail sector
Residential
sector
Tai Po
Residential
Development
Project
Human
Resources
Cyber
Security
ESG
compliance
Notes:
where “inherent risks” (i.e. before taking into
consideration mitigating activities) have increased
where “inherent risks”
have decreased
where “inherent risks” have
remained broadly the same
97
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview sustainability Report 2019 – summary
This section provides a summary of Hysan’s sustainability strategy overview and
accomplishments. The reporting period is from 1 January 2019 to 31 December
2019, unless otherwise specified. During this period, Hysan continued to comply fully
with the requirements of the provisions contained in the Environmental, Social and
Governance Reporting Guide, Appendix 27 to the Rules Governing the Listing of
Securities on The Stock Exchange of Hong Kong Limited.
Since Hysan published its first corporate responsibility/sustainability report back in
2006, the global and local communities in which it plays a part have changed quite
significantly. The establishment of a Board-level Sustainability Committee at the start
of 2020 demonstrates to our stakeholders that Hysan is taking its corporate
responsibility and sustainable development to the next level. The Committee will
provide long-term direction and supervise sustainability-related matters, and it will
also review and monitor management’s execution of the sustainability projects.
In 2019, Hysan’s Sustainability Executive Committee engaged an independent
consultant specialized in advising sustainable business to conduct an overall review of
Hysan’s sustainability arrangement and performance, which included an extensive
stakeholder engagement exercise. It yielded a range of material environmental, social
and governance recommendations that aligned well with a number of Sustainability
Development Goals (“SDG”) as set by the United Nations General Assembly in 2015.
The recommendations will be turned into specific, measurable and time bound goals
for Hysan in 2020 and beyond.
Hysan takes pride in being not only a business of owning and managing properties,
but a Business of Life. A Business of Life creates a sustainable community where
people can live, work and enjoy for generations to come. Indeed, the “Life” within our
Business of Life mindset has become the core of our strategic sustainable
development principles, which Hysan follows in all its daily management and
operational activities.
E
E
G
A
R
D
Taking Sustainable Development
to the Next Level
SUSTAINABILITY REPORT 2019
stock code 00014
98
Hysan Annual Report 2019 Sustainable Development Principles of “Life”
Leap
into smart and
eco-business
Smart use of natural
resources and
technology for reducing
the environmental
impacts of Hysan’s
daily operations
Integrate
with our
communities
Integrate of community
needs into our core
business operations and
partnerships, provide
support to community
projects, and develop
sustainable partnership
with our tenants
Foster
partnership
with our
people
Build a diverse and
inclusive workforce,
treat our people fairly
and help them realize
their full potential
Establish
strong
corporate
governance
Build a strong
governance structure,
maintain an ethical
workplace and
promote green finance
99
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview these 3
0.8 pt
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S
S
Environment
LEE
GARDENS
sustainability RepoRt 2019 – suMMaRy
Governance
Leap
into smart and
eco-business
Energy
Conservation and
Renewables
• In progress to adopt ISO 50001
Energy Management System
• In progress to implement building
analytics technology for energy
performance enhancement
• Installed solar and/or LED
lighting at Bamboo Grove and
Lee Garden Three
LEE GARDENS
Transformation of
Spaces and Public
Facilities
these 3
0.8 pt
Well#
these 3
0.8 pt
Environment
Governance
Social
LEE
GARDENS
dark blue 0.6pt
blue 0.8pt
100
LEE
GARDENS
Sustainability
Achievements in
2019
With a strong sustainability
governance structure and
continuous learning from industry
norms and indices, Hysan regularly
sets and reviews targets and
effective measures across all its
major business units in accordance
with the principles of Life.
Hysan supports the United
Nations SDGs and has identified
9 out of 17 SDGs that best align
with Hysan’s operations and
sustainability objectives.
Social
Social
L
E
L
L
E
L
E
E
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G
G
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A
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blue 0.8pt
LEE
GARDENS
S
dark blue 0.6pt
L
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G
A
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D
E
N
S
Hysan
Environment
LEE
GARDENS
Integrate
with our
communities
• Created an artistic and cultural space
LEE
GARDENS
for the public, Urban Sky
• Commenced opening of a unique living
and working space, Bizhouse
• Launched new mobile app for queries,
navigation and parking
• Kick-started an art programme: local
artists were invited to help revitalize
the common areas of our buildings
Well#
Governance
dark blue 0.6pt
LEE GARDENS
blue 0.8pt
Hysan
Human Resources
Policies
Foster
partnership
with our people
LEE GARDENS
• Enhanced communication and
employee engagement channels.
• Enhanced employee benefits and
compensation
• Upgraded work schedule for frontline
supervisors from 6 to 5.5 days per week
Well#
Establish
strong corporate
governance
Hysan
Hysan Annual Report 2019 L
E
E
these 3
0.8 pt
these 3
0.8 pt
these 3
0.8 pt
Environment
LEE
GARDENS
Environment
LEE
GARDENS
Environment
LEE
GARDENS
Governance
Social
Social
Governance
Governance
Social
Water
Conservation
• Installed rainwater harvesting
system at Lee Garden One and
Bamboo Grove for irrigation and/or
cleaning
• Replaced 100% of existing faucets
of the renovation project at retail
floors of Lee Garden Two with
water efficient type
Environment
LEE
GARDENS
Environment
LEE
GARDENS
Waste Minimization
and Diversion
these 3
0.8 pt
• Saved 74,981 single-use plastic bottles
through the installation of water refill
stations
• Engaged 38 of our food and beverage
tenants in “Be Straw Free Campaign”
• Supported local non-governmental
organization EcoDrive on a “Go Green
2.0 x Enough Plastic Campaign”
• Installed reverse vending machine
at Hysan Place to promote plastic
bottle recycling
Well#
these 3
0.8 pt
Green Building
Recognition and
Certifications
• Obtained Gold level under the United
States Green Building Council’s LEED
(Core and Shell) and Final Platinum
rating under BEAM Plus (New Buildings)
for Lee Garden Three
Well#
these 3
0.8 pt
these 3
0.8 pt
these 3
0.8 pt
Governance
LEE GARDENS
Social
Governance
Social
Environment
Environment
LEE
GARDENS
LEE
GARDENS
LEE GARDENS
LEE
GARDENS
Volunteering
LEE
GARDENS
Governance
Social
Social
Governance
LEE
GARDENS
Governance
• Organized a total of 15 charity
activities with cumulated volunteer
service hours of 812
Environment
LEE
GARDENS
Social
Engaging Our Stakeholders
and Surrounding
Communities
• Organized and supported 77 community
engagement events with over 36,000
participants
• Held 131 environmental education and
outreach workshops under Green Wonders
and Urban Farm
• Partnered with 14 NGOs and provided
venue and media support
these 3
0.8 pt
these 3
0.8 pt
LEE GARDENS
Well#
Social
LEE
GARDENS
Social
Governance
Governance
LEE
GARDENS
Social
Governance
LEE GARDENS
dark blue 0.6pt
dark blue 0.6pt
blue 0.8pt
blue 0.8pt
dark blue 0.6pt
dark blue 0.6pt
blue 0.8pt
blue 0.8pt
LEE GARDENS
dark blue 0.6pt
Well#
blue 0.8pt
Well#
Hysan
Employee
Wellness
LEE
GARDENS
Environment
Environment
LEE GARDENS
LEE
GARDENS
LEE
GARDENS
Environment
• Secured cumulative participation of over
740 colleagues in our employee wellness
and recreation programme
• Turned Properties Services Division’s
Lee Garden Two workplace into a flex
office space
LEE GARDENS
LEE GARDENS
LEE
GARDENS
Hysan
LEE
GARDENS
LEE
GARDENS
Hysan
dark blue 0.6pt
LEE GARDENS
LEE GARDENS
blue 0.8pt
blue 0.8pt
dark blue 0.6pt
dark blue 0.6pt
blue 0.8pt
LEE GARDENS
Corporate
Governance
• Established the Board-level
Sustainability Committee
• Updated 10 group-wide corporate
governance related policies and
procedures
Well#
Well#
• Added 5 new e-courses covering
compliance to the Hysan mobile
learning platform
• Organized a Corporate Disclosure Drill
for key responsible departments
regarding corporate disclosure
Hysan
responsibilities
Hysan
LEE
GARDENS
LEE
GARDENS
LEE
GARDENS
dark blue 0.6pt
dark blue 0.6pt
blue 0.8pt
blue 0.8pt
dark blue 0.6pt
blue 0.8pt
Hysan
Hysan
Hysan
Hysan
Talent Attraction
and Retention
Hysan
• Upgraded mobile learning app with
over 115 learning modules
• Acquired new intakes for Management
Trainee Programme and Apprenticeship
Scheme
Well#
• Designed a brand new Young Leaders
Well#
Development Programme for
employees with strong potential
Health and
Safety
• Obtained “Excellent Class” or “Good
Class” of Indoor Air Quality (“IAQ”)
Certification for 100%of public area in
our retail and office buildings
Well#
• Achieved a significant increase in
per-employee training hours from
11.05 to 20.39 (Head Office) and from
20.10 to 25.40 (Principal Operating
Subsidiaries)
Risk Management
and Internal Control
Green
Finance
• Assessed and reviewed the risk
registers across business operations
and functional areas
• Ensured continuous compliance by
conducting half-yearly reporting with
all departments
Well#
• Distributed internal control
effectiveness questionnaires to all
departments to review and certify the
Hysan
effectiveness of their departmental
controls
• Issued a total of HK$1,550 million
green bonds through private
placements under the existing
Medium-Term-Note Programme
101
G
A
R
D
E
N
S
these 3
0.8 pt
L
E
E
G
A
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E
N
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L
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S
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview The Directors submitted their report together with the audited consolidated financial statements for the year ended 31
December 2019, which were approved by the Board of Directors on 20 February 2020.
PRINCIPAL ACTIVITIES
The principal activities of the Group continued throughout 2019 to be property investment, management, and development.
Details of the Group’s principal subsidiaries, associates and a joint venture as at 31 December 2019 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 the 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 2019 are set out in the consolidated statement of profit or loss on
page 115.
The first interim dividend of HK27 cents per share, amounting to approximately HK$283 million, was paid to shareholders
during the year.
The Board declared a second interim dividend of HK117 cents per share to the shareholders on the register of members on 6
March 2020, totalling approximately HK$1,221 million. The dividends declared and paid for ordinary shares in respect of the
full year 2019 will total approximately HK$1,504 million, and the balance of the profit will be retained.
BUSINESS REVIEW AND PERFORMANCE
A fair review of the business of the Group 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 relating to 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 Group’s business – “Management’s Discussion and Analysis”;
(b) The Group’s risk management framework, the principal risks the Group is facing and the controls in place – “Risk
Management and Internal Control Report”;
(c) Particulars of important events affecting the Group that have occurred since the end of the financial year 2019 –
“Chairman’s Statement”, “Management’s Discussion and Analysis” and “Notes to the Consolidated Financial Statements”;
(d) Future development of the Group’s business – “Key Facts” and “Chairman’s Statement”;
(e) Analysis using financial key performance indicators – “Management’s Discussion and Analysis”;
(f) Discussion of the Group’s environmental policies and performance – “Sustainability Report 2019 – Summary”;
(g) Discussion of the Group’s compliance with the relevant laws and regulations that have a significant impact on the Group
– “Corporate Governance Report”, “Sustainability Report 2019 – Summary” and “Independent Auditor’s Report”; and
(h) An account of the Group’s key relationships with its employees, customers, suppliers and others that have a significant
impact on the Group and on which the Group’s success depends – “Directors’ Report” and “Sustainability Report 2019 –
Summary”.
A detailed discussion of the Group’s environmental policies and performance, its compliance with the relevant laws and
regulations that have a significant impact on the Group, and its key relationships with stakeholders, is contained in the separate
Sustainability Report 2019, which is available on the Company’s website: www.hysan.com.hk.
These discussions form part of this Directors’ Report.
102
Hysan Annual Report 2019Directors’ 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 118 and 119 and note 30 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 2019, 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 2019 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 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 29 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 to 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 40 to 73) – this gives detailed information on the Company’s compliance with the
Corporate Governance Code and the relevant laws and regulations, its adoption of local and international best practices,
Directors’ service contracts, and Directors’ interests in shares, contracts and competing business;
(b) “Audit and Risk Management Committee Report” (pages 74 to 77) – this sets out the terms of reference, work performed
and findings of the Audit and Risk Management Committee for the year;
(c) “Remuneration Committee Report” (pages 78 to 85) – this gives detailed information on Directors’ remuneration and
interests (including information on Directors’ compensation);
(d) “Nomination Committee Report” (pages 86 to 88) – this sets out the terms of reference, work performed and findings of
the Nomination Committee for the year;
(e) “Sustainability Committee Report” (pages 89 to 90) – this sets out the terms of reference, work performed and findings of
the Sustainability Committee; and
(f) “Risk Management and Internal Control Report” (pages 91 to 97) – this sets out the Company’s framework for risk
assessment and internal control (including control environment, control activities and work completed during the year).
Further information on the Company’s sustainability policies and practices is contained in the separate Sustainability Report
2019, which is available on the Company’s website: www.hysan.com.hk.
103
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance THE BOARD
The Board is currently chaired by Lee Irene Yun-Lien, Chairman. There are 9 other Non-Executive Directors.
Lee Irene Yun-Lien and Yang Chi Hsin Trevor served as alternate Directors to Lee Anthony Hsien Pin and Jebsen Hans Michael,
respectively, throughout the year.
Save as otherwise mentioned above, other Directors whose names and biographies appear on pages 40 to 44 have been
Directors of the Company throughout the year and up to the date of this report.
According to Article 97 of the Company’s current Articles of Association (“Articles”), a Director appointed either to fill a casual
vacancy or as an addition to the Board shall hold office only until the next following Annual General Meeting (“AGM”).
Under Article 114 of the Company’s Articles, 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, of those 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 re-election at the forthcoming AGM are set out in the related circular to shareholders.
The Company received from each Independent Non-Executive Director an annual confirmation of his or her independence with
regard to 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 Directors’ independence in a meeting held in November 2019. (See
“Corporate Governance Report” and “Nomination Committee Report”.)
The names of Directors who have served on the boards of the subsidiaries of the Company during the year and up to 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 “Corporate Governance Report” on pages 40 to 73.
SUBSTANTIAL SHAREHOLDERS’ AND OTHER PERSONS’ INTERESTS IN SHARES
As at 31 December 2019, 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
Capacity
Number of
ordinary
shares held
Lee Hysan Company Limited
Beneficial owner
433,130,735
Silchester International Investors LLP
Investment manager
83,647,000
First Eagle Investment Management, LLC
Investment manager
52,460,214
% of the
total no. of
issued shares
(Note)
41.49
8.01
5.03
Note:
The percentage was compiled based on the total number of issued shares of the Company as at 31 December 2019 (i.e. 1,043,820,891 ordinary
shares).
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 2019.
104
Hysan Annual Report 2019DIRECTORS’ REPORT continued
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 and that were negotiated on
normal commercial terms and on an arm’s length basis. Further details are set out in note 35 to the consolidated financial
statements.
Some of these transactions also constituted “Continuing Connected Transactions” under the Listing Rules, as identified below.
CONTINUING CONNECTED TRANSACTIONS
Certain transactions entered into by the Group constituted continuing connected transactions that were subject to the
notification and announcement requirements but exempt from the circular and shareholders’ approval requirements under
Rule 14A.76(2) of the Listing Rules during the year (the “Transactions”). Details of the Transactions required to be disclosed are
set out as follows:
I. Lease granted by the Group
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 the property owner of Lee Garden Two, as landlord, with the following connected person:
Connected person
Date of agreement
Term
Premises
Annual consideration (Note a)
Jebsen and
22 June 2018
Company Limited
(Note b)
(Lease, Carpark
Licence Agreements
and Licence
Agreements)
(Note c)
3 years commencing
from 1 September
2018
Office units on the 28th,
30th and 31st Floors,
4 carparking spaces and
2 portions of spaces
near the carparking
spaces
2019: HK$38,703,964
2020: HK$38,665,356
2021: HK$25,776,904
(on pro-rata basis)
(Note d)
II. Provision of leasing and property management services to a non wholly-owned subsidiary regarding Lee Garden
Two
(a) The following management agreement was entered into by Hysan Leasing Company Limited, a wholly-owned subsidiary
of the Company, with Barrowgate for the provision of leasing marketing and lease administration services in respect of Lee
Garden Two:
Connected person
Date of agreement
Term
Premises
Barrowgate Limited
(i) 22 March 2016
3 years commencing
from 1 April 2016
Whole premises of
Lee Garden Two
(ii) 20 March 2019
3 years commencing
from 1 April 2019
Whole premises of
Lee Garden Two
Consideration received
during the year
HK$9,072,656
(Note e)
HK$21,589,050
(Note f)
(b) The following management agreement was entered into by Hysan Property Management Limited (“HPML”), 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
Term
Premises
Barrowgate Limited
(i) 22 March 2016
3 years commencing
from 1 April 2016
Whole premises of
Lee Garden Two
(ii) 20 March 2019
3 years commencing
from 1 April 2019
Whole premises of
Lee Garden Two
Consideration received
during the year
HK$1,090,898
(Note e)
HK$3,272,692
(Note f)
105
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
CONTINUING CONNECTED TRANSACTIONS continued
Notes:
(a) The annual considerations were based on prevailing rates of rental, operating charges and licence fees for each of the relevant financial years as
provided in the relevant agreements. The rental, operating charges and licence fees (as the case may be) are payable monthly in advance.
(b) Jebsen and Company Limited (“Jebsen and Company”) is a beneficial substantial shareholder of Barrowgate and has an equity interest of 10% in
Barrowgate. Jebsen Hans Michael, Non-Executive Director of the Company, is a controlling shareholder of Jebsen and Company.
(c) As the aggregated annual consideration under the lease and various licence agreements entered into with Jebsen and Company exceeds the
applicable de minimis threshold under the Listing Rules, they constituted continuing connected transactions of the Company, being subject to
announcement requirements but exempted from independent shareholders’ approval requirements.
(d) Office monthly operating charges for Lee Garden Two were revised with effect from 1 January 2019 and further revised with effect from 1
September 2019.
(e) These represent the actual consideration received for the period from 1 January 2019 to 31 March 2019, calculated on the basis of the fee
schedules as prescribed in the respective management agreements.
(f) These represent the actual consideration received for the period from 1 April 2019 to 31 December 2019, 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 within the Group,
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 insofar as they are
applicable.
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 on pages 105 to 106 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.
The Company’s Internal Audit has reviewed the Transactions and the related internal control procedures, and concluded that
the internal control procedures are adequate and effective. 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.
CONNECTED TRANSACTION
The following transaction entered into by the Group constituted a connected transaction. Details of the transaction are set out
as follows:
Lease granted by the Group
Lee Garden Two, 28 Yun Ping Road, Hong Kong
The following lease was entered into by HPML, a wholly-owned subsidiary of the Company, with the following connected
person:
Connected person
Date of agreement
Term
Premises
Barrowgate Limited
16 August 2019
(Lease)
(Note b)
3 years commencing
from 17 August
2019
Room 601 on the 6th Floor
Annual consideration
(Note a)
2019: HK$2,056,066
(on pro-rata basis)
2020: HK$5,502,564
2021: HK$5,502,564
2022: HK$3,446,498
(on pro-rata basis)
106
Hysan Annual Report 2019DIRECTORS’ REPORT continued
CONNECTED TRANSACTION continued
Lee Garden Two, 28 Yun Ping Road, Hong Kong continued
Notes:
(a) The annual considerations were based on prevailing rates of rental and operating charges for each of the relevant financial years as provided in
the relevant agreement. The rental and operating charges are payable monthly in advance.
(b) On an individual company level basis, HPML (being a lessee) recognized a right-of-use asset and a lease liability in its financial statements in
accordance with HKFRS 16 “Leases” at the commencement date and Barrowgate (being a lessor) recognized the lease payments from the lease
as lease income. From the perspective of HPML, the lease constituted a one-off connected transaction (i.e. an acquisition of right-of-use asset)
under Rule 14A.24(1). As the applicable percentage ratios calculated based on the value of the right-of-use asset recognized by HPML under the
lease fall below the applicable de minimis threshold under the Listing Rules, the lease constituted an exempted connected transaction of the
Company.
DIRECTORS’ INTEREST IN CONTRACTS OF SIGNIFICANCE
The lease, carpark licence agreements and licence agreements between Jebsen and Company and Barrowgate are considered
a contract of significance under paragraph 15 of Appendix 16 to the Listing Rules due to the annual consideration having a
percentage ratio of 0.97% from the calculation of the revenue test (the percentage ratios for assets ratio and consideration
ratio are 0.04% and 0.12% respectively). Details of the transaction are set out under (I) of “Continuing Connected
Transactions”.
MAJOR CUSTOMERS AND SUPPLIERS
During the year, 26.85% of the aggregate amount of purchases was attributable to the Group’s 5 largest suppliers, with the
largest supplier accounting for 9.59% 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 shares) had any interest in the Group’s 5 largest suppliers.
PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES
The Company was authorized at its annual general meetings 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 3,000,000 ordinary shares for a total consideration of
approximately HK$92 million on the Stock Exchange. Out of 3,000,000 ordinary shares repurchased during 2019, 2,730,000
shares were cancelled during the year ended 31 December 2019 while the remaining 270,000 ordinary shares were cancelled in
February 2020. Details of the shares repurchased are as follows:
Month of repurchase in 2019
August
September
October
November
December
Number of
ordinary shares
repurchased
50,000
250,000
1,550,000
400,000
750,000
3,000,000
Consideration per share
Highest
HK$
33.80
31.70
31.10
31.15
31.00
Lowest
HK$
31.75
30.65
28.70
30.70
28.95
Aggregate
consideration
paid
HK$ million
2
8
47
12
23
92
Save as disclosed above, neither the Company nor its subsidiaries purchased, sold or redeemed any of the Company’s listed
securities during the year.
107
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
ISSUANCE OF SECURITIES
During the year ended 31 December 2019, 49,000 shares were issued by the Company as a result of the exercise of share
options granted under the share option schemes of the Company. For further details, please refer to the paragraphs headed
“Movement of share options” in the Remuneration Committee Report.
During the year, we have issued several Fixed Rate Notes for general corporate purposes under the US$1.5 billion Medium
Term Note Programme (“MTN Programme”), which was subsequently extended to US$2.5 billion in October 2019. These Fixed
Rate Notes are unconditionally and irrevocably guaranteed by the Company. The list of these Fixed Rate Notes issued during
the year is as below:
1. HK$300 million 3.33% Fixed Rate Note due in January 2026
2. HK$500 million 3.64% Fixed Rate Note due in March 2034
3. HK$500 million 3.10% Fixed Rate Note due in April 2029
4. HK$250 million 3.05% Fixed Rate Note due in June 2029
5. HK$400 million 2.90% Fixed Rate Note due in July 2031
6. HK$250 million 2.81% Fixed Rate Note due in August 2034
7. US$500 million 2.82% Fixed Rate Notes due in September 2029
The issuer under the MTN Programme is Hysan (MTN) Limited, a company incorporated in the British Virgin Islands and a
direct wholly-owned subsidiary of the Company. For further details of the above mentioned Fixed Rate Notes, please refer to
note 27 to the consolidated financial statements. Save as disclosed above, the Group has not issued any debentures during the
year.
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$0.1 million to charitable and non-profit-making organizations.
PERMITTED INDEMNITY PROVISION
Pursuant to the Articles, every Director shall be entitled to be indemnified out of the assets of the Company against all losses or
liabilities incurred by him or her in the execution of the duties of his or her office or in relation thereto. The Directors and
Officers Liability Insurance (“D&O Insurance”) taken out by the Company throughout the year provides adequate cover for
such indemnities to all the Directors of the Company and its subsidiaries. The relevant provisions in the Articles and the D&O
Insurance were in force during the financial year ended 31 December 2019 and as of the date of this report.
AUDITOR
A resolution for the re-appointment of Deloitte Touche Tohmatsu as auditor of the Company is to be proposed at the 2020
AGM.
By Order of the Board
Lee Irene Yun-Lien
Chairman
Hong Kong, 20 February 2020
108
Hysan Annual Report 2019DIRECTORS’ REPORT continued 110 Directors’ Responsibility for the
121 Significant Accounting Policies
Financial Statements
111 Independent Auditor’s Report
132 Notes to the Consolidated
Financial Statements
115 Consolidated Statement of
171 Financial Risk Management
Profit or Loss
116 Consolidated Statement
of Comprehensive Income
117 Consolidated Statement
of Financial Position
118 Consolidated Statement
of Changes in Equity
120 Consolidated Statement
of Cash Flows
181 Five-Year Financial Summary
183 Report of the Valuer
184 Schedule of Principal Properties
185 Shareholding Analysis
186 Shareholder Information
188 Corporate Information
1094
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness PerformanceFINANCIAL STATEMENTS,VALUATION AND OTHER INFORMATION The Companies Ordinance requires the Directors to prepare financial statements for each financial year which give a true and
fair view of the state of affairs of the Company and of the Group as at the end of the financial year and of their respective
profit or loss for the year then ended. In preparing the financial statements, the Directors are required to:
(a) select suitable accounting policies and apply them on a consistent basis, making judgments and estimates that are
prudent, fair and reasonable;
(b) state the reasons for any significant departure from accounting standards; and
(c) prepare the financial statements on the going concern basis, unless it is not appropriate to presume that the Company and
the Group will continue in business for the foreseeable future.
The Directors are responsible for keeping proper accounting records, for safeguarding the assets of the Company and of the
Group and for taking reasonable steps for the prevention and detection of fraud and other irregularities.
110
Hysan Annual Report 2019Directors’ Responsibility for the 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 115 to 180, which comprise the consolidated statement of
financial position as at 31 December 2019, and the consolidated statement of profit or loss 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 2019, 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 judgement, 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.
111
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness PerformanceIndependent 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 subjective
judgements and estimates required in determining the fair
values.
The Group’s investment property portfolio comprise retail,
office and residential properties mainly located in
Causeway Bay, Hong Kong and is stated at fair value of
HK$79,116 million, accounting for approximately 82% of
the Group’s total assets as at 31 December 2019 with a
fair value gain of HK$792 million recognized in the
consolidated statement of profit or loss 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 and reversionary income potential of the investment
properties in determining the fair values.
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; and
• 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.
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 consolidated 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.
112
Hysan Annual Report 2019INDEPENDENT AUDITOR’S REPORT continued 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 judgement 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.
113
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements continued
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.
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 Lee Wing Cheong, Wilfred.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
20 February 2020
114
Hysan Annual Report 2019INDEPENDENT AUDITOR’S REPORT continued Notes
2019
HK$ million
2018
HK$ million
Turnover
Property expenses
Gross profit
Investment income
Other gains and losses
Administrative expenses
Finance costs
Change in fair value of investment properties
Share of results of associates
Profit before taxation
Taxation
Profit for the year
Profit for the year attributable to:
Owners of the Company
Non-controlling interests
4
6
7
8
9
Earnings per share (expressed in HK cents)
14
Basic
Diluted
3,988
(536)
3,452
154
10
(269)
(313)
792
1,733
5,559
(473)
5,086
4,845
241
5,086
463
463
3,890
(523)
3,367
78
(16)
(227)
(222)
3,532
288
6,800
(481)
6,319
6,033
286
6,319
577
576
115
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness PerformanceConsolidated Statement of Profit or LossFor the year ended 31 December 2019
Profit for the year
Other comprehensive (expenses) income
Item that will not be reclassified subsequently to profit or loss:
Gain on revaluation of properties held for own use (net of tax)
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
2019
HK$ million
5,086
2018
HK$ million
6,319
Note
10
21
29
(84)
(55)
(34)
5,052
4,811
241
5,052
47
(5)
(172)
(177)
(130)
6,189
5,903
286
6,189
116
Hysan Annual Report 2019Consolidated Statement of Comprehensive IncomeFor the year ended 31 December 2019
Non-current assets
Investment properties
Property, plant and equipment
Investments in associates
Loans to associates
Investment in a joint venture
Loans to a joint venture
Other financial investments
Debt securities
Other financial assets
Other receivables
Current assets
Accounts and other receivables
Debt securities
Time deposits
Cash and cash equivalents
Current liabilities
Accounts payable and accruals
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
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
2019
HK$ million
2018
HK$ million
15
16
18
18
19
19
20
21
22
23
23
21
24
24
25
26
27
27
22
28
29
79,116
776
5,189
11
143
1,090
601
172
8
291
87,397
314
–
5,735
3,597
9,646
934
316
220
565
416
2,451
7,195
94,592
11,964
46
685
925
13,620
80,972
7,720
69,930
77,650
3,322
80,972
77,442
747
3,708
11
145
1,062
294
–
1
386
83,796
203
227
748
2,069
3,247
873
331
223
300
108
1,835
1,412
85,208
6,022
26
669
854
7,571
77,637
7,718
66,713
74,431
3,206
77,637
The consolidated financial statements on pages 115 to 180 were approved and authorized for issue by the Board of Directors
on 20 February 2020 and are signed on its behalf by:
Lee Irene Y.L.
Director
Lee T.H. Michael
Director
117
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness PerformanceConsolidated Statement of Financial PositionAs at 31 December 2019
As at 1 January 2019
Profit for the year
Net losses arising from hedging instruments
Reclassification of net losses to profit or loss
Gain on revaluation of properties held for own use
Deferred taxation arising on revaluation of properties
held for own use (note 28)
Share of translation reserve of an associate
Total comprehensive income (expenses) for the year
Issue of shares under share option schemes
Recognition of equity-settled share-based payments
Repurchase of own shares
Forfeiture of unclaimed dividends
Dividends paid during the year (note 13)
As at 31 December 2019
As at 1 January 2018
Profit for the year
Net gains arising from hedging instruments
Reclassification of net gains to profit or loss
Gain on revaluation of properties held for own use
Deferred taxation arising on revaluation of properties
held for own use (note 28)
Share of translation reserve of an associate
Total comprehensive (expenses) income for the year
Issue of shares under share option schemes
Recognition of equity-settled share-based payments
Forfeiture of share options
Dividends paid during the year (note 13)
As at 31 December 2018
Attributable to owners of the Company
Share
capital
HK$ million
7,718
Share
options
reserve
HK$ million
General
reserve
HK$ million
19
96
–
–
–
–
–
–
–
2
–
–
–
–
7,720
7,692
–
–
–
–
–
–
–
26
–
–
–
7,718
–
–
–
–
–
–
–
–
4
–
–
–
23
21
–
–
–
–
–
–
–
(5)
4
(1)
–
19
–
–
–
–
–
–
–
–
–
–
–
–
96
96
–
–
–
–
–
–
–
–
–
–
–
96
Attributable to owners of the Company
Investments
revaluation
reserve
HK$ million
Hedging
reserve
HK$ million
Properties
revaluation
reserve
HK$ million
Translation
reserve
HK$ million
106
Retained
profits
HK$ million
66,083
4,845
Total
HK$ million
74,431
4,845
Non-
controlling
interests
HK$ million
3,206
241
Total
HK$ million
77,637
5,086
1
–
–
–
–
–
–
–
–
–
–
–
–
1
1
–
–
–
–
–
–
–
–
–
–
–
1
(48)
(14)
43
29
(19)
(43)
(7)
(5)
–
–
–
–
–
–
–
–
–
–
2
–
–
–
–
–
–
–
456
–
–
–
25
(4)
–
21
–
–
–
–
–
–
–
–
–
–
–
–
56
(9)
–
47
(1,507)
(1,507)
(125)
(1,632)
477
409
22
278
4,845
4,811
241
5,052
(84)
(84)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(92)
69,330
61,493
6,033
–
–
–
–
–
–
–
1
–
–
–
–
–
–
–
1
(14)
43
25
(4)
(84)
2
4
1
(92)
77,650
69,947
6,033
2
(7)
56
(9)
(172)
5,903
21
4
–
(1,444)
74,431
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,322
3,048
286
(14)
43
25
(4)
(84)
2
4
1
(92)
80,972
72,995
6,319
2
(7)
56
(9)
(172)
6,189
21
4
–
(1,572)
77,637
(172)
(172)
6,033
286
(48)
456
106
(1,444)
66,083
(128)
3,206
118
Hysan Annual Report 2019Consolidated Statement of Changes in EquityFor the year ended 31 December 2019
As at 1 January 2019
Profit for the year
Net losses arising from hedging instruments
Reclassification of net losses to profit or loss
Gain on revaluation of properties held for own use
Deferred taxation arising on revaluation of properties
held for own use (note 28)
Share of translation reserve of an associate
Total comprehensive income (expenses) for the year
Issue of shares under share option schemes
Recognition of equity-settled share-based payments
Repurchase of own shares
Forfeiture of unclaimed dividends
Dividends paid during the year (note 13)
As at 31 December 2019
As at 1 January 2018
Profit for the year
Net gains arising from hedging instruments
Reclassification of net gains to profit or loss
Gain on revaluation of properties held for own use
Deferred taxation arising on revaluation of properties
held for own use (note 28)
Share of translation reserve of an associate
Total comprehensive (expenses) income for the year
Issue of shares under share option schemes
Recognition of equity-settled share-based payments
Forfeiture of share options
Dividends paid during the year (note 13)
Attributable to owners of the Company
Share
capital
7,718
Share
options
reserve
19
General
reserve
HK$ million
96
HK$ million
HK$ million
7,720
7,692
23
21
96
96
–
–
–
–
–
–
–
2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
26
–
–
–
–
–
–
–
–
4
–
–
–
–
–
–
–
–
–
–
(5)
(1)
4
–
19
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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
1
–
–
–
–
–
–
–
–
–
–
–
–
1
1
–
–
–
–
–
–
–
–
–
–
–
1
(48)
–
(14)
43
–
–
–
29
–
–
–
–
–
(19)
(43)
–
2
(7)
–
–
–
(5)
–
–
–
–
456
–
–
–
25
(4)
–
21
–
–
–
–
–
477
409
–
–
–
56
(9)
–
47
–
–
–
–
106
66,083
74,431
3,206
77,637
–
–
–
–
–
(84)
(84)
–
–
–
–
–
22
278
–
–
–
–
–
(172)
(172)
–
–
–
–
4,845
–
–
–
–
–
4,845
–
–
(92)
1
(1,507)
69,330
61,493
6,033
–
–
–
–
–
6,033
–
–
1
(1,444)
4,845
(14)
43
25
(4)
(84)
4,811
2
4
(92)
1
(1,507)
77,650
69,947
6,033
2
(7)
56
(9)
(172)
5,903
21
4
–
(1,444)
241
–
–
–
–
–
241
–
–
–
–
(125)
3,322
3,048
286
–
–
–
–
–
286
–
–
–
(128)
5,086
(14)
43
25
(4)
(84)
5,052
2
4
(92)
1
(1,632)
80,972
72,995
6,319
2
(7)
56
(9)
(172)
6,189
21
4
–
(1,572)
(48)
456
106
66,083
74,431
3,206
77,637
As at 31 December 2018
7,718
96
119
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
Notes
2019
HK$ million
2018
HK$ million
5,559
(154)
(7)
22
4
313
(792)
(1,733)
3,212
(61)
148
1
3,300
(98)
–
3,202
(939)
(17)
–
166
–
(295)
227
(172)
86
(5,739)
748
(5,935)
(304)
470
6,120
(300)
(3)
2
(92)
(1,507)
(125)
4,261
1,528
2,069
3,597
6,800
(78)
16
17
4
222
(3,532)
(288)
3,161
(102)
60
105
3,224
(475)
2
2,751
(1,239)
(26)
(1)
184
(56)
(290)
500
–
58
(1,722)
1,602
(990)
(221)
–
300
(150)
(104)
21
–
(1,444)
(128)
(1,726)
35
2,034
2,069
31
31
31
31
24
Operating activities
Profit before taxation
Adjustments for:
Net interest income
Other gains and losses
Depreciation of property, plant and equipment
Share-based payment expenses
Finance costs
Change in fair value of investment properties
Share of results of associates
Operating cash flows before movements in working capital
Increase in accounts and other receivables
Increase in accounts payable and accruals
Increase in deposits from tenants
Cash generated from operations
Hong Kong Profits Tax paid
Hong Kong Profits Tax refunded
Net cash from operating activities
Investing activities
Payments in respect of investment properties
Purchases of property, plant and equipment
Advance to associates
Dividends received from an associate
Advance to a joint venture
Payment in respect of other financial investments
Proceeds upon maturity of debt securities
Purchases of debt securities
Interest received
Additions to time deposits with original maturity
over three months
Proceeds upon maturity of time deposits with original
maturity over three months
Net cash used in investing activities
Financing activities
Payment of finance costs
New bank loans
Issuance of fixed rate notes
Repayment of fixed rate note
Repayment to non-controlling interests of a subsidiary
Proceeds on exercise of share options
Payment on repurchase of own shares
Dividends paid
Dividends paid to non-controlling interests of
a subsidiary
Net cash from (used in) financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents as at 1 January
Cash and cash equivalents as at 31 December
120
Hysan Annual Report 2019Consolidated Statement of Cash FlowsFor the year ended 31 December 2019
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 Hong Kong Financial Reporting Standards
(“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and the Hong Kong Companies
Ordinance (“CO”). In addition, the consolidated financial statements include applicable disclosures required by the Rules
Governing the Listing of Securities (“Listing Rules”) on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).
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 statement of profit or loss 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 in line
with the Group’s accounting policies.
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.
Profit or loss and each item of other comprehensive income are attributable to the owners of the Company and to the non-
controlling interests. Total comprehensive income of a subsidiary is 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.
2. INVESTMENTS IN ASSOCIATES AND A JOINT VENTURE
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 recognized 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 recognized
only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of that associate
or joint venture.
121
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness PerformanceSignificant Accounting PoliciesFor the year ended 31 December 2019 2. INVESTMENTS IN ASSOCIATES AND A JOINT VENTURE continued
The Group assesses whether there is an objective evidence that the interest in an associate or a joint venture may be impaired.
When any objective evidence exists, 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 recognized is not allocated to any asset that forms part of
the carrying amount of the investment. Any reversal of that impairment loss is recognized 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 recognized 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.
3. INVESTMENT PROPERTIES
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, adjusted to exclude any prepaid
or accrued operating lease income, if necessary. 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.
Construction costs incurred for investment properties under redevelopment are capitalized 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 recognized in profit or loss in the period in which they arise.
An investment property is derecognized 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 derecognized.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are tangible assets that are held for use in the production or supply of goods or services, or for
administrative purposes. Property plant and equipment are stated in the consolidated statement of financial position at cost or
fair value less subsequent accumulated depreciation and accumulated impairment losses, if any.
For ownership interests of properties which includes both leasehold land and building elements, the leasehold land and building
elements are allocated in proportion to the relative fair values unless such allocation cannot be made reliably, in which case, the
entire properties are classified as property, plant and equipment.
Any revaluation increase arising from revaluation of properties is recognized 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
recognized 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 recognized 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.
If a property 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 recognized in other
comprehensive income and accumulated in properties revaluation reserve. On the subsequent sale or retirement of the
property, the relevant revaluation reserve will be transferred directly to retained profits.
Depreciation is recognized 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.
122
Hysan Annual Report 2019SIGNIFICANT ACCOUNTING POLICIES continuedFor the year ended 31 December 2019 4. PROPERTY, PLANT AND EQUIPMENT continued
An item of property, plant and equipment is derecognized 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
recognized in profit or loss.
5. IMPAIRMENT OF NON-FINANCIAL ASSETS
At the end of the reporting period, the Group reviews the carrying amounts of its property, plant and equipment 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 recognized as an expense immediately in profit or loss.
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 recognized for the asset in prior years. A reversal of an impairment loss is recognized
immediately in profit or loss, except for certain properties which are 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 recognized in the consolidated 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 except for accounts receivables arising from contract with customers which are initially measured in accordance
with HKFRS 15. 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 recognized immediately in
profit or loss.
Financial assets
All recognized financial assets are subsequently measured in their entirety at either amortized 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 amortized 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.
Financial assets that meet the following conditions are subsequently measured at fair value through other comprehensive
income (“FVTOCI”):
• the financial asset is held within a business model whose objective is achieved by both selling and collecting contractual
cash flows; and
• the contractual terms 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 FVTPL, except that at the date of initial application of HKFRS 9
“Financial Instruments” or at the date of initial recognition of a financial asset, the Group may irrevocably elect to present
subsequent changes in fair value of an equity investment in other comprehensive income if that equity investment is neither
held for trading nor contingent consideration recognized by an acquirer in a business combination to which HKFRS 3 “Business
Combinations” applies.
123
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance 6. FINANCIAL INSTRUMENTS continued
Financial assets continued
(a) Classification of financial assets continued
(i) Amortized cost and effective interest method
The effective interest method is a method of calculating the amortized 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 recognized on an effective interest basis for debt instruments measured subsequently at amortized cost and
is included in the investment income as disclosed in note 6 of the Notes to the Consolidated Financial Statements section.
(ii) Financial assets at FVTPL
Financial assets at FVTPL include derivatives that are not designated and effective as hedging instruments, club debentures
and fund investment.
Investments in equity instruments are classified as FVTPL, unless the Group designates such investment that is not held for
trading as at FVTOCI.
Debt instruments that do not meet the amortized cost criteria (see (a) above) are measured at FVTPL. In addition, debt
instruments that meet the amortized cost criteria may be designated as at FVTPL. A debt instruments 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 amortized cost to FVTPL when the business model is changed such that the amortized
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 recognized in profit or loss. The net gain or loss recognized 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 “Financial Instruments”.
The net gain or loss recognized in profit or loss excludes any dividend earned on the financial asset and is included in the “other
gains and losses” line item.
(iii) Equity instruments designated as at FVTOCI
Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses arising from
changes in fair value recognized in other comprehensive income and accumulated in the investments revaluation reserve and
are not subject to impairment assessment. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the
equity investments, and will be transferred to retained profits.
Dividends from these investments in equity instruments are recognized in profit or loss when the Group’s right to receive the
dividends is established, unless the dividends clearly represent a recovery of part of the cost of the investment.
124
Hysan Annual Report 2019SIGNIFICANT ACCOUNTING POLICIES continuedFor the year ended 31 December 2019 6. FINANCIAL INSTRUMENTS continued
Financial assets continued
(b) Impairment of financial assets
The Group performs impairment assessment under Expected Credit Losses (“ECL”) model on financial assets (including loans to
associates and a joint venture, debt securities, derivative financial instruments, accounts and other receivables, time deposits
and cash and cash equivalents) and financial guarantee contracts which are subject to impairment under HKFRS 9. The
amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition.
Lifetime ECL represents the ECL that will result from default events over the expected life of the relevant instrument. In
contrast, 12-month ECL (“12m ECL”) represents the portion of lifetime ECL that is expected to result from default events that
are possible within 12 months after the reporting date. Assessment is done based on both quantitative and qualitative
information combined with current conditions and forward-looking analysis.
The Group recognises lifetime ECL for accounts receivables. For all other instruments, the Group measures the loss allowance
equal to 12m ECL, unless when there has been a significant increase in credit risk since initial recognition, the Group recognises
lifetime ECL. The assessment of whether lifetime ECL should be recognized is based on significant increases in the likelihood or
risk of a default occurring since initial recognition. The ECL on the financial assets and the financial guarantee contracts are
assessed individually for debtors with significant balances.
(c) Measurement and recognition of ECL
The measurement of ECL is a function of probability of default, loss given default (i.e. the magnitude of the loss if there is a
default) and the exposure at default. The assessment of the probability of default and loss given default is based on historical
data adjusted by forward-looking information.
Generally, the ECL is estimated as the difference between all contractual cash flows that are due to the Group in accordance
with the contract and all the cash flows that the Group expects to receive, discounted at the discount rate determined at initial
recognition. For a lease receivable, the cash flows used for determining the ECL is consistent with the cash flows used in
measuring the lease receivable in accordance with HKFRS 16 (since 1 January 2019) or HKAS 17 “Leases” (prior to 1 January
2019).
For a financial guarantee contract, the Group is required to make payments only in the event of a default by the debtor in
accordance with the terms of the instrument that is guaranteed. Accordingly, the expected loss is the present value of the
expected payment to reimburse the holder for a credit loss that it incurs less any amounts that the Group expects to receive
from the holder, the debtor or any other party.
Interest income is calculated based on the gross carrying amount of the financial assets unless the financial asset is credit
impaired, in which case interest income is calculated based on amortized cost of the financial asset.
The Group recognises an impairment gain or loss in profit or loss for all financial instruments by adjusting their carrying
amounts, with the exception of account receivables, debt securities and loans to a joint venture where the corresponding
adjustment is recognized through a loss allowance account.
For financial guarantee contracts, the loss allowances are recognized at the higher of the amount of the loss allowance
determined in accordance with HKFRS 9; and the amount initially recognized less, where appropriate, cumulative amount of
income recognized over the guarantee period.
125
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance 6. FINANCIAL INSTRUMENTS continued
Financial assets continued
(d) Derecognition of financial assets
Financial assets are derecognized 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 recognized 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 amortized 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 amortized 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 recognized 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 recognized
directly in profit or loss in the period in which they arise.
(iii) Financial liabilities at amortized cost
Financial liabilities (including accounts payable and accruals, amounts due to non-controlling interests, deposits from tenants
and borrowings) are subsequently measured at amortized cost, using the effective interest method. Interest expense that is not
capitalized 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.
(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 recognized
in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.
126
Hysan Annual Report 2019SIGNIFICANT ACCOUNTING POLICIES continuedFor the year ended 31 December 2019 6. FINANCIAL INSTRUMENTS continued
Financial liabilities and equity instruments continued
(a) Classification and measurement continued
(v) Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a
loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument.
Financial guarantee contract is measured initially at their fair values. It is subsequently measured at the higher of:
• the amount of the loss allowance determined in accordance with HKFRS 9; and
• the amount initially recognized less, where appropriate, cumulative amortisation recognized over the guarantee period.
(b) Derecognition of financial liabilities
Financial liabilities are derecognized when the obligation specified in the relevant contract is discharged, cancelled or expires.
The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is
recognized 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 and cross currency swaps. Further details of derivative financial instruments are
disclosed in note 22 of the Notes to the Consolidated Financial Statements section.
Derivatives are initially recognized at fair value at the date a derivative contract is entered and are subsequently remeasured to
their fair values at the end of the reporting period. The resulting gain or loss is recognized 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 for cash flow hedges.
At the inception of the hedging relationship, the Group documents the relationship between the hedging instrument and the
hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions.
Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument
that is used in a hedging relationship is effective in offsetting changes in fair values or cash flows of the hedged item
attributable to the hedged risk, which is when the hedging relationships meets all of the following hedge effectiveness
requirements:
• there is an economic relationship between the hedged item and the hedging instrument;
• the effect of credit risk does not dominate the value changes that result from that economic relationship; and
• the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the
Group actually hedges and the quantity of the hedging instrument that the entity actually uses to hedge that quantity of
hedged item.
If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge ratio but the risk
management objective for that designated hedging relationship remains the same, the Group adjusts the hedge ratio of the
hedging relationship (i.e. rebalances the hedge) so that it meets the qualifying criteria again.
Note 22 of the Notes to the Consolidated Financial Statements section sets out details of the fair values of the derivative
instruments used for hedging purposes.
127
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance 6. FINANCIAL INSTRUMENTS continued
Hedge accounting continued
(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
recognized in other comprehensive income and accumulated in hedging reserve. The gain or loss relating to the ineffective
portion is recognized immediately in profit or loss, and is included in other gains and losses.
Amounts previously recognized in other comprehensive income and accumulated in hedging reserve are reclassified to profit or
loss in the periods when the hedged item is recognized in profit or loss, in the same line of the consolidated statement of profit
or loss as the recognized 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 recognized when the forecast transaction is ultimately recognized in profit or loss.
(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
The Group recognises revenue from the following major sources:
• Leasing of investment properties
• Provision of property management services
The Group’s accounting policies for rental income are included under “Leases” and accounting policies for revenue from
property management services are as below:
Revenue is measured at the fair value of the consideration received or receivable.
The Group recognises revenue when (or as) a performance obligation is satisfied i.e. when “control” of the goods or services
underlying the particular performance obligation is transferred to the customer.
A performance obligation represents goods and services (or a bundle of goods or services) that are distinct or a series of distinct
goods or services that are substantially the same.
Control is transferred over time and revenue is recognized over time by reference to the progress towards complete satisfaction
of the relevant performance obligation if one of the following criteria is met:
• the customer simultaneously receives and consumes the benefits provided by the Group’s performance as the Group
performs;
• the Group’s performance creates or enhances an asset that the customer controls as the Group performs; or
• the Group’s performance does not create an asset with an alternative use to the Group and the Group has an enforceable
right to payment for performance completed to date.
Otherwise, revenue is recognized at a point in time when the customer obtains control of the distinct goods or service.
Revenue from provision of property management services is recognized over time.
128
Hysan Annual Report 2019SIGNIFICANT ACCOUNTING POLICIES continuedFor the year ended 31 December 2019 8. LEASES
Definition of a lease (upon application of HKFRS 16 in accordance with transition in note 2 of the Notes to the
Consolidated Financial Statements section)
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in
exchange for consideration.
For contracts entered into or modified or arising from business combinations on or after the date of initial application, the
Group assesses whether a contract is or contains a lease based on the definition under HKFRS 16 at inception, modification
date or acquisition date, as appropriate. Such contract will not be reassessed unless the terms and conditions of the contract
are subsequently changed.
The Group as lessor
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards incidental
to ownership of an underlying asset to the lessee. All other leases are classified as operating leases.
Upon application of HKFRS 16 in accordance with transition in note 2 of the Notes to the Consolidated Financial
Statements section
Rental income from operating leases is recognized in profit or loss on a straight-line basis over the term of the relevant lease.
Rentals received with reference to turnover of tenants are recognized as income when they arise.
Allocation of consideration to components of a contract
When a contract includes both lease and non-lease components, the Group applies HKFRS 15 to allocate consideration in a
contract to lease and non-lease components. Non-lease components are separated from lease component on the basis of their
relative stand-alone selling prices.
Refundable rental deposits
Refundable rental deposits received are accounted under HKFRS 9 and initially measured at fair value. Adjustments to fair
value at initial recognition are considered as additional lease payments from lessees. Such adjustments are recognized if the
amount is considered material.
Lease modification
The Group accounts for a modification to an operating lease as a new lease from the effective date of the modification,
considering any prepaid or accrued lease payments relating to the original lease as part of the lease payments for the new
lease.
Prior to the application of HKFRS 16
Rental income from operating leases is recognized in profit or loss on a straight-line basis over the term of the relevant lease.
Rentals received with reference to turnover of tenants are recognized when earned.
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 recognized
in profit or loss in the period in which they arise.
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 recognized in other comprehensive income and
accumulated in translation reserve.
129
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance 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 recognized in profit or loss in the period in which they are incurred.
11. RETIREMENT BENEFIT COSTS
Payments to the Mandatory Provident Fund Scheme are charged as an expense when employees have rendered service
entitling them to the contributions.
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 taxation as reported
in the consolidated statement of profit or loss 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 recognized 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 recognized for all taxable temporary differences and deferred tax assets are generally recognized to the extent that it
is probable that taxable profits will be available against which deductible temporary differences can be utilized. Such assets
and liabilities are not recognized 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 recognized 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 recognized 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 realized, based on tax rate (and tax laws) that have been enacted or substantively enacted by the end of
the reporting period.
130
Hysan Annual Report 2019SIGNIFICANT ACCOUNTING POLICIES continuedFor the year ended 31 December 2019 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 is 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 recognized in profit or loss, except when they relate to items that are recognized in other
comprehensive income or directly in equity, in which case the current and deferred tax are also recognized 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 recognized in profit or loss, with a
corresponding adjustment to share options reserve.
At the time when the share options are exercised, the amount previously recognized in share options reserve will be transferred
to share capital. When the share options are forfeited after the vesting date or are still not exercised at the expiry date, the
amount previously recognized 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 “Share-based
Payment”, leasing transactions that are accounted for in accordance with HKFRS 16 (since 1 January 2019) or HKAS 17 (before
1 January 2019), and measurements that have some similarities to fair value but are not fair value, such as value in use in
HKAS 36 “Impairment of Assets”.
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.
131
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance 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 address of the registered office and principal place of business of the Company is
49/F., Lee Garden One, 33 Hysan Avenue, Hong Kong.
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 AMENDMENTS TO HONG KONG FINANCIAL REPORTING STANDARDS
(“HKFRSs”)
New and amendments to HKFRSs that are mandatorily effective for the current year
In the current year, the Group has applied all of the new and 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 2019. Except as described below, the application of these new and amendments to HKFRSs had no
material effect on the results and financial position of the Group for the current and/or prior accounting years.
HKFRS 16 “Leases”
The Group has applied HKFRS 16 for the first time in the current year. HKFRS 16 superseded HKAS 17, and the related
interpretations. However, assessments of whether a contract, which existed prior to 1 January 2019, contains a lease in
accordance with HKAS 17 and Hong Kong (IFRIC) - Interpretation 4 have been maintained. No reassessment of the related
lease contracts has been made.
Lessor accounting under HKFRS 16 is substantially unchanged from HKAS 17. The Group, as a lessor, is thus not required to
make any adjustment on transition for leases but account for these leases in accordance with HKFRS 16 from the date of initial
application and comparative information has not been restated. However, the application of HKFRS 16 resulted the changes in
accounting policies as described in the “Significant Accounting Policies” section.
Effective from 1 January 2019, lease payments received from lessees relating to the revised lease term after modification are
recognized as income on straight-line basis over the extended lease term.
The application of HKFRS 16 has had no material impact on the Group’s consolidated statement of profit or loss for the year
ended 31 December 2019 and the consolidated statement of financial position as at 31 December 2019 and at the date of
initial recognition.
New and amendments to HKFRSs in issue but not yet effective
The Group has not early applied the following new and amendments to HKFRSs that have been issued but are not yet effective.
HKFRS 17
Amendments to HKFRS 3
Amendments to HKFRS 10 and HKAS 28
Insurance Contracts1
Definition of a Business2
Sale or Contribution of Assets between an Investor and its Associate or
Amendments to HKAS 1 and HKAS 8
Amendments to HKFRS 9,
HKAS 39 and HKFRS 7
Joint Venture3
Definition of Material4
Interest Rate Benchmark Reform4
1 Effective for annual periods beginning on or after 1 January 2021
2 Effective for business combinations and asset acquisitions for which the acquisition date is on or after
the beginning of the first annual period
beginning on or after 1 January 2020
3 Effective for annual periods beginning on or after a date to be determined
4 Effective for annual periods beginning on or after 1 January 2020
132
Hysan Annual Report 2019Notes to the Consolidated Financial StatementsFor the year ended 31 December 2019 2. APPLICATION OF NEW AND AMENDMENTS TO HONG KONG FINANCIAL REPORTING STANDARDS
(“HKFRSs”) continued
New and amendments to HKFRSs in issue but not yet effective continued
In addition to the above new and amendments to HKFRSs, a revised Conceptual Framework for Financial Reporting was issued
in 2018. Its consequential amendments, the Amendments to References to the Conceptual Framework in HKFRS Standards,
will be effective for annual periods beginning on or after 1 January 2020.
The Group anticipated that the application of all these new or revised standards to HKFRSs will result in changes in certain
accounting policies and may affect the presentation and disclosures in the consolidated financial statements but is not
expected to have material impact on the Group’s financial position and financial performance.
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 recognized
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$79,116 million (2018:
HK$77,442 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 taking into account a market participant’s ability to generate economic
benefits by using the asset in its highest and best use.
In relying on the valuation, management has exercised their judgement and is satisfied that the method of valuation is
reflective of the current market conditions.
4. TURNOVER
Turnover represents gross rental income from leasing of investment properties and management fee income from provision of
property management services 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.
Contracts for property management services have various contractual periods for which the Group bills fixed amount for each
month of service period. Substantially all of the revenue from provision of property management services is recognized at the
amount to which the Group has right to invoice which reflect the progress towards complete satisfaction of performance
obligations satisfied over time. The categories for disaggregation of revenue from provision of property management services
recognized over time in Hong Kong are consistent with the segment disclosure under note 5 of the Notes to the Consolidated
Financial Statements section.
133
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance 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
Property development segment – development and sale of properties
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
Property
development
HK$ million
Consolidated
HK$ million
For the year ended 31 December 2019
Turnover
Leasing of investment properties
Provision of property management services
Segment revenue
Property expenses
Segment profit
Investment income
Other gains and losses
Administrative expenses
Finance costs
Change in fair value of investment properties
Share of results of associates
Profit before taxation
For the year ended 31 December 2018
Turnover
Leasing of investment properties
Provision of property management services
Segment revenue
Property expenses
Segment profit
Investment income
Other gains and losses
Administrative expenses
Finance costs
Change in fair value of investment properties
Share of results of associates
Profit before taxation
1,662
174
1,836
(297)
1,539
1,607
226
1,833
(177)
1,656
287
32
319
(62)
257
1,764
159
1,923
(275)
1,648
1,492
196
1,688
(190)
1,498
251
28
279
(58)
221
–
–
–
–
–
–
–
–
–
–
3,556
432
3,988
(536)
3,452
154
10
(269)
(313)
792
1,733
5,559
3,507
383
3,890
(523)
3,367
78
(16)
(227)
(222)
3,532
288
6,800
134
Hysan Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2019
5. SEGMENT INFORMATION continued
Segment turnover and results continued
All of the segment turnover reported above is from external customers.
The accounting policies of the operating and reportable segments are the same as the Group’s accounting policies described in
the “Significant Accounting Policies” section. Segment profit represents the profit earned by each segment without allocation
of investment income, other gains and losses, administrative expenses (including central administrative costs and directors’
emoluments), finance costs, change in fair value of investment properties and share of results of associates. This is the measure
reported to the chief operating decision maker of the Group for the purpose of resource allocation and performance
assessment.
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
Property
development
HK$ million
Consolidated
HK$ million
As at 31 December 2019
Segment assets
Investments in and loans to associates
Other financial investments
Other assets
Consolidated assets
As at 31 December 2018
Segment assets
Investments in and loans to associates
Other financial investment
Other assets
Consolidated assets
35,080
35,499
8,561
1,233
35,112
34,160
8,185
1,207
80,373
5,200
601
10,869
97,043
78,664
3,719
294
4,366
87,043
Segment assets represented the investment properties and accounts receivable of each segment and investment in and loans
to a joint venture under property development segment without allocation of property, plant and equipment, investments in
and loans to associates, other financial investments, debt securities, other financial assets, other receivables, time deposits and
cash and cash equivalents. 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 liabilities are monitored on a group basis.
Other than the investment in an associate and certain other financial investments, which operate in the People’s Republic of
China (the “PRC”) and other major cities in Asia, with carrying amounts of HK$5,800 million (2018: HK$3,715 million), all the
Group’s assets are located in Hong Kong.
135
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
5. SEGMENT INFORMATION continued
Other segment information
For the year ended 31 December 2019
Retail
HK$ million
Office
HK$ million
Residential
HK$ million
Property
development
HK$ million
Consolidated
HK$ million
Additions to non-current assets
808
43
For the year ended 31 December 2018
Additions to non-current assets
1,133
202
40
28
–
–
891
1,363
6. INVESTMENT INCOME
The following is an analysis of investment income:
Interest income
Imputed interest income on interest-free loan to a joint venture
Reclassification of net gains from hedging reserve on financial
instruments designated as cash flow hedges
7. FINANCE COSTS
Finance costs comprise:
Interest on unsecured bank loans
Interest on unsecured fixed rate notes
Total interest expenses
Other finance costs
Net exchange (gains) losses on borrowings
Reclassification of net losses (gains) from hedging reserve on financial
instruments designated as cash flow hedges
Medium Term Note Programme expenses
2019
HK$ million
2018
HK$ million
121
30
3
154
44
29
5
78
2019
HK$ million
2018
HK$ million
43
254
297
13
310
(46)
46
3
313
33
173
206
11
217
4
(2)
3
222
136
Hysan Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2019
8. TAXATION
Current tax
Hong Kong Profits Tax
– current year
– overprovision in prior years
Deferred tax (note 28)
2019
HK$ million
2018
HK$ million
406
–
406
67
473
425
(2)
423
58
481
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 statement of profit or loss as
follows:
Profit before taxation
Tax at Hong Kong Profits Tax rate of 16.5%
Tax effect of share of results of associates
Tax effect of expenses not deductible for tax purposes
Tax effect of income not taxable for tax purposes
Tax effect of estimated tax losses not recognized
Recognition of previously unrecognized tax losses
Overprovision in prior years
Taxation for the year
2019
HK$ million
5,559
2018
HK$ million
6,800
917
(286)
122
(276)
2
(6)
–
473
1,122
(48)
40
(634)
11
(8)
(2)
481
In addition to the amount charged to the consolidated statement of profit or loss, deferred tax relating to the revaluation of
the Group’s properties held for own use has been charged directly to properties valuation reserve (see note 28 of the Notes to
the Consolidated Financial Statements section).
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 rentals received with
reference to turnover of tenants of HK$73 million (2018: HK$81 million)
Less:
– Direct operating expenses arising from properties that generated rental income
– Direct operating expenses arising from properties that did not generate rental income
Staff costs (including directors’ emoluments)
Share of income tax of associates (included in share of results of associates)
2019
HK$ million
2018
HK$ million
3
22
3
17
(3,556)
(3,507)
527
9
498
25
(3,020)
(2,984)
285
627
245
122
137
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
10. OTHER COMPREHENSIVE (EXPENSES) INCOME
Other comprehensive (expenses) income comprises:
Items that will not be reclassified subsequently to profit or loss:
Revaluation of properties held for own use:
Gain on revaluation of properties held for own use
Deferred taxation arising on revaluation
Items that may be reclassified subsequently to profit or loss:
Derivatives designated as cash flow hedges:
Net (losses) gains arising during the year
Reclassification of net losses (gains) to profit or loss
Share of translation reserve of an associate
Other comprehensive expenses for the year (net of tax)
Tax effect relating to other comprehensive (expenses) income:
2019
HK$ million
2018
HK$ million
25
(4)
21
(14)
43
29
(84)
(55)
(34)
56
(9)
47
2
(7)
(5)
(172)
(177)
(130)
Gain 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
2019
Before-tax
amount
HK$ million
Tax
expense
HK$ million
Net-of-tax
amount
HK$ million
Before-tax
amount
HK$ million
2018
Tax
expense
HK$ million
Net-of-tax
amount
HK$ million
25
29
(84)
(30)
(4)
–
–
(4)
21
29
(84)
(34)
56
(5)
(172)
(121)
(9)
–
–
(9)
47
(5)
(172)
(130)
2019
HK$ million
2018
HK$ million
3
8
15
2
28
3
8
14
2
27
138
Hysan Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2019
11. DIRECTORS’ EMOLUMENTS continued
The emoluments paid or payable to each of the Directors of the Company for the two years ended 31 December 2019 and
2018, 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 2019
Executive Director (Note a)
Lee Irene Yun-Lien
Non-Executive Directors (Note b)
Jebsen Hans Michael
Lee Anthony Hsien Pin
Lee Chien
Lee Tze Hau Michael
Independent Non-Executive Directors
(Note c)
Churchouse Frederick Peter
Fan Yan Hok Philip
Lau Lawrence Juen-Yee
Poon Chung Yin Joseph
Wong Ching Ying Belinda
For the year ended 31 December 2018
Executive Director (Note a)
Lee Irene Yun-Lien
Non-Executive Directors (Note b)
Jebsen Hans Michael
Lee Anthony Hsien Pin
Lee Chien
Lee Tze Hau Michael
Independent Non-Executive Directors
(Note c)
Churchouse Frederick Peter
Fan Yan Hok Philip
Lau Lawrence Juen-Yee
Poon Chung Yin Joseph
Wong Ching Ying Belinda (Note h)
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
–
7,929
15,000
2,037
18
24,984
268
360
293
311
360
455
293
498
268
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
268
360
293
311
360
455
293
498
268
3,106
7,929
15,000
2,037
18
28,090
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
–
7,694
14,616
1,762
18
24,090
270
310
290
280
310
420
260
465
10
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
270
310
290
280
310
420
260
465
10
2,615
7,694
14,616
1,762
18
26,705
139
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
11. DIRECTORS’ EMOLUMENTS continued
Notes:
(a) The Executive Director’s emoluments shown above were 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 for the services as Directors of the Company.
(c) The Independent Non-Executive Directors’ emoluments shown above were for the services as Directors of the Company.
(d) Year 2019:
The Remuneration Committee met in January 2019 to approve the 2019 annual fixed base salary and determine the 2018 performance-based
bonus of the Company’s Executive Director.
The annual cash compensations of Lee Irene Yun-Lien, Chairman, was revised to HK$16,000,000 based on market benchmark, and the
jobholder’s experience, qualification, and performance. Annual base salary of Lee Irene Yun-Lien was at HK$8,000,000 (making up 50% of the
total package).
For the year ended 31 December 2019, the bonus of HK$15,000,000 represented the 2019 bonus approved by the Committee in January 2020.
(e) Last revision of annual Directors’ fees for serving on the Board (effective 1 June 2019) were approved by shareholders at the 2019 AGM. Details
are set out in Remuneration Committee Report.
Directors’ fees are calculated on annual basis and paid semi-annually. For Directors not having served the full year on a position, the fees will be
calculated and paid on pro rata basis.
Breakdown of Directors’ fees of each of the Directors of the Company for the year ended 31 December 2019 is set out below:
Executive Director
Lee Irene Yun-Lien
Non-Executive Directors
Jebsen Hans Michael
Lee Anthony Hsien Pin
Lee Chien
Lee Tze Hau Michael
Independent Non-Executive Directors
Churchouse Frederick Peter
Fan Yan Hok Philip
Lau Lawrence Juen-Yee
Poon Chung Yin Joseph
Wong Ching Ying Belinda
(Note h)
Audit and Risk
Management
Committee
(Note i)
HK$’000
Board
HK$’000
Remuneration
Committee
Nomination
Committee
2019
Total
2018
Total
HK$’000
HK$’000
HK$’000
HK$’000
–
268
268
268
268
268
268
268
268
268
2,412
–
–
92
–
–
92
92
–
162
–
438
–
–
–
–
43
–
70
–
43
–
–
–
–
25
–
–
25
25
25
–
–
268
360
293
311
360
455
293
498
268
156
100
3,106
–
270
310
290
280
310
420
260
465
10
2,615
(f) Year 2018:
The Remuneration Committee met in February 2018 to approve the 2018 annual fixed base salary and the annual special fee and determine the
2017 performance-based bonus of the Company’s Executive Director.
The annual cash compensations of Lee Irene Yun-Lien, Chairman, remained at HK$15,386,000 based on market benchmark, and the jobholder’s
experience, qualification, and performance. Annual base salary of Lee Irene Yun-Lien remained unchanged at HK$5,130,000 and annual special
fee in recognition of extra responsibilities she assumed was HK$2,564,000 (making up 50% of the total package).
For the year ended 31 December 2018, the bonus of HK$14,616,000 represented the 2018 bonus approved by the Committee in January 2019.
(g) Share-based payments are the fair values of share options granted to Executive Director, which are determined at the date of grant and expensed
over the vesting period (except where options are forfeited before vesting), regardless of whether the Executive Director exercises the share
options or not during the year. Details of the share option schemes are set out in note 37 of the Notes to the Consolidated Financial Statements
section.
(h) Wong Ching Ying Belinda was appointed as an Independent Non-Executive Director with effect from 18 December 2018.
(i) The Audit Committee was renamed as “Audit and Risk Management Committee” with effect from 21 February 2019.
140
Hysan Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2019
11. DIRECTORS’ EMOLUMENTS continued
There was no arrangement under which a Director waived or agreed to waive any remuneration during both years.
There was no payment to a Director as inducement for Director to join the Group or compensation for the loss of office as a
Director in connection with the management of the affairs of any member of the Group during both years.
Details of material interests of the Directors of the Company in transactions, arrangements or contracts entered into by
subsidiaries of the Company are disclosed in the Directors’ Report.
12. EMPLOYEES’ EMOLUMENTS
Of the five individuals with the highest emoluments in the Group, one (2018: one) was Director of the Company, details of
whose emoluments are included in note 11 of the Notes to the Consolidated Financial Statements section. The emoluments of
all of the five individuals with the highest emoluments for the years ended 31 December 2019 and 2018 were as follows:
Basic salaries, housing and other allowances
Bonus
Share-based payments (Note)
Note:
2019
HK$ million
2018
HK$ million
21
21
4
46
21
20
3
44
Share-based payments are the fair values of share options granted to Executive Director 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 Director or eligible
employees exercise the share options or not during the year.
Their emoluments are within the following bands:
HK$4,000,001 to HK$4,500,000
HK$4,500,001 to HK$5,000,000
HK$6,500,001 to HK$7,000,000
HK$7,000,001 to HK$7,500,000
HK$24,000,001 to HK$24,500,000
HK$24,500,001 to HK$25,000,000
Number of individuals
2019
2018
1
2
–
1
–
1
5
1
2
1
–
1
–
5
Senior management (for the purpose of the Rules Governing the Listing of Securities on the Stock Exchange (the “Listing
Rules”)) during the year are Executive Director and other members of senior management of the Group. Their emoluments are
within the following bands.
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$6,000,001 to HK$7,000,000
HK$7,000,001 to HK$8,000,000
HK$24,000,001 to HK$25,000,000
HK$25,000,001 to HK$26,000,000
Number of individuals
2019
2018
–
1
3
–
1
–
1
6
1
1
3
1
–
1
–
7
141
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
13. DIVIDENDS
(a) Dividends recognized as distribution during the year:
2019 first interim dividend paid – HK27 cents per share
2018 first interim dividend paid – HK27 cents per share
2018 second interim dividend paid – HK117 cents per share
2017 second interim dividend paid – HK111 cents per share
(b) Dividends declared after the end of the reporting period:
Second interim dividend (in lieu of a final dividend)
– HK117 cents per share (2018: HK117 cents per share)
2019
HK$ million
2018
HK$ million
283
–
1,224
–
1,507
–
283
–
1,161
1,444
2019
HK$ million
2018
HK$ million
1,221
1,224
The second interim dividend is not recognized as a liability as at 31 December 2019 because it has been declared after the end
of the reporting period. It 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
2019
HK$ million
2018
HK$ million
4,845
6,033
Number of shares
2019
2018
1,046,186,877 1,046,189,778
157,908
501,942
1,046,344,785 1,046,691,720
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.
142
Hysan Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2019
14. EARNINGS PER SHARE continued
(b) Adjusted basic and diluted earnings per share
For the purpose of assessing the performance of the Group’s principal activities, 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 and diluted earnings per
share as follows:
For the year ended 31 December 2019
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
Imputed interest income on interest-free loan to a joint venture
Other gains and losses
Underlying Profit
Recurring Underlying Profit
For the year ended 31 December 2018
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
Imputed interest income on interest-free loan to a joint venture
Other gains and losses
Underlying Profit
Recurring Underlying Profit
Notes:
Profit
HK$ million
4,845
(792)
102
(1,528)
(30)
(10)
2,587
2,587
Profit
HK$ million
6,033
(3,532)
144
(96)
(29)
16
2,536
2,536
Basic
earnings
per share
HK cents
Diluted
earnings
per share
HK cents
463
(76)
10
(146)
(3)
(1)
247
247
463
(76)
10
(146)
(3)
(1)
247
247
Basic
earnings
per share
HK cents
Diluted
earnings
per share
HK cents
577
(338)
14
(9)
(3)
1
242
242
576
(337)
14
(9)
(3)
1
242
242
(a) Recurring Underlying Profit is arrived at by excluding from Underlying Profit items that are non-recurring in nature. As there were no such
adjustments in both 2019 and 2018, the Recurring Underlying Profit was the same as the Underlying Profit.
(b) The denominators used in calculating the adjusted earnings per share are the same as those detailed above for basic and diluted earnings per
share.
143
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
15. INVESTMENT PROPERTIES
Fair Value
At 1 January
Additions
Net transfer (to) from property, plant and equipment
Change in fair value recognized in profit or loss – unrealized
As at 31 December
2019
HK$ million
2018
HK$ million
77,442
891
(9)
792
79,116
72,470
1,363
77
3,532
77,442
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.
Fair value measurements and valuation processes
The fair value of the Group’s investment properties as at 31 December 2019 and 2018 and as at the date of transfer to/from
property, plant and equipment from/to investment properties 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 potential but without allowances for any expenses or taxation which may be incurred in effecting a
sale, and where appropriate, cross reference by sale comparables. There has been no change to the valuation technique during
the year for completed properties.
All of the fair value measurements of the Group’s investment properties were categorized into Level 3 of the fair value
hierarchy. Details of fair value hierarchy are set out as below.
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.
As at 1 January 2018
Additions
Net transfer from property, plant and equipment
Change in fair value recognized in profit or loss
– unrealized
As at 31 December 2018
Additions
Net transfer to property, plant and equipment
Change in fair value recognized in profit or loss
– unrealized
As at 31 December 2019
Retail
HK$ million
33,188
1,133
77
704
35,102
808
–
(851)
35,059
Office
HK$ million
31,325
202
–
2,632
34,159
43
(9)
1,305
35,498
Residential
HK$ million
7,957
28
–
196
8,181
40
–
338
8,559
Total
HK$ million
72,470
1,363
77
3,532
77,442
891
(9)
792
79,116
144
Hysan Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2019
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 value for investment properties by
operating and reportable segment and unobservable inputs used in the valuation models.
Description
Fair value as
at 31 December
2019
HK$ million
2018
HK$ million
Retail
35,059
35,102
Office
35,498
34,159
Residential
8,559
8,181
Valuation
techniques
Unobservable
inputs
Range/weighted
average of
unobservable
inputs
Income
capitalisation
approach
Income
capitalisation
approach
Income
capitalisation
approach
(i) Capitalisation rate
5.00% – 5.25%
(2018: 5.00% – 5.25%)
(ii) Prevailing market
rent per month
HK$132 per square foot
(2018: HK$134 per square
foot)
(i) Capitalisation rate
(ii) Prevailing market
rent per month
4.25% – 5.00%
(2018: 4.25% – 5.00%)
HK$60 per square foot
(2018: HK$58 per square
foot)
(i) Capitalisation rate
3.75% (2018: 3.75%)
(ii) Prevailing market
rent per month
HK$38 per square foot
(2018: HK$37 per square
foot)
The higher the capitalisation rate, the lower the fair value.
Prevailing market rent is estimated based on independent valuer’s view of recent lettings, within the subject properties and
other comparable properties. It does not always equal to the committed rent by tenants. The higher the prevailing market rent,
the higher the fair value.
145
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
16. PROPERTY, PLANT AND EQUIPMENT
Leasehold land
and buildings in
Hong Kong
HK$ million
(Note)
Furniture,
fixtures and
equipment
HK$ million
Computers
HK$ million
Motor vehicles
HK$ million
Total
HK$ million
COST OR VALUATION
As at 1 January 2018
Additions
Disposals
Net transfer to investment properties
Surplus on revaluation
As at 31 December 2018
Additions
Net transfer from investment properties
Surplus on revaluation
As at 31 December 2019
Comprising:
At cost
At valuation
ACCUMULATED DEPRECIATION
As at 1 January 2018
Provided for the year
Eliminated on disposals
Eliminated on revaluation
As at 31 December 2018
Provided for the year
Eliminated on revaluation
As at 31 December 2019
CARRYING AMOUNTS
As at 31 December 2019
As at 31 December 2018
722
–
–
(77)
51
696
–
9
20
725
–
725
725
–
5
–
(5)
–
5
(5)
–
725
696
99
17
–
–
–
116
7
–
–
123
123
–
123
92
5
–
–
97
7
–
104
19
19
70
16
–
–
–
86
10
–
–
96
96
–
96
49
7
–
–
56
10
–
66
30
30
2
1
(1)
–
–
2
–
–
–
2
2
–
2
1
–
(1)
–
–
–
–
–
2
2
893
34
(1)
(77)
51
900
17
9
20
946
221
725
946
142
17
(1)
(5)
153
22
(5)
170
776
747
146
Hysan Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2019
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 in Hong Kong
Furniture, fixtures and equipment
Computers
Motor vehicles
Note:
Fair value measurements and valuation processes
Over the term of the lease or 40 years
20%
20%
25%
The fair value of the Group’s leasehold land and buildings in Hong Kong as at 31 December 2019 and 2018 and as at the date of transfer to/from
investment properties from/to property, plant and equipment 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 but without allowance
of any expenses or taxation which may be incurred in effecting a sale, and where appropriate, cross reference by sale comparables. 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 categorized into Level 3 of the fair value hierarchy.
Details of fair value hierarchy are set out as below.
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 value for leasehold land and buildings in Hong Kong and
unobservable inputs used in the valuation models.
Fair value as
at 31 December
2019
HK$ million
725
2018
HK$ million
696
Description
Leasehold land
and buildings
in Hong Kong
Valuation
techniques
Unobservable
inputs
Range/weighted
average of
unobservable
inputs
Income
capitalisation
approach
(i) Capitalisation
rate
4.25% – 4.75%
(2018: 4.25% – 5.25%)
(ii) Prevailing market
rent per month
HK$72 per square foot
(2018: HK$68 per
square foot)
The higher the capitalisation rate, the lower the fair value.
Prevailing market rent is estimated based on independent values view of recent lettings, within the subject properties and other comparable properties.
It does not always equal to the committed rent by tenants. The higher the prevailing market rent, the higher the fair value.
The gain of HK$25 million (2018: HK$56 million) arising on revaluation has been recognized in other comprehensive income and accumulated in
properties revaluation reserve.
Had the Group’s leasehold land and buildings in Hong Kong been measured at historical cost less subsequent accumulated depreciation, their carrying
amounts would have been HK$171 million (2018: HK$161 million) at the end of the reporting period.
Furniture, fixtures and equipment of the Group include assets carried at cost of HK$53 million (2018: HK$47 million) and accumulated depreciation of
HK$37 million (2018: HK$32 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$5 million (2018: HK$3 million). There has been no disposal during both years ended 31 December 2019 and 2018.
147
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
17. PARTICULARS OF PRINCIPAL SUBSIDIARIES OF THE COMPANY
The table below lists the principal subsidiaries of the Company as at 31 December 2019 and 2018:
Name of subsidiary
Admore Investments Limited
Alpha Ace Limited
Bamboo Grove Recreational
Services Limited
Barrowgate Limited
Earn Extra Investments Limited
HD Investment Limited
HD Treasury Limited
Hysan Corporate Services Limited
Hysan Leasing Company Limited
Hysan (MTN) Limited
Hysan Marketing Services Limited
Hysan IT Services Company
Limited
Place of
incorporation/
operation
Hong Kong
Hong Kong
Hong Kong
Issued
share
capital
HK$2
HK$1
HK$2
Hong Kong
Hong Kong
British Virgin Islands
Hong Kong
Hong Kong
HK$10,000
HK$1
HK$1
HK$2
HK$2
Hong Kong
British Virgin Islands/
Hong Kong
Hong Kong
Hong Kong
HK$2
US$1
HK$1
HK$1
HK$2
Hysan Property Management
Hong Kong
Limited
Hysan Treasury Limited
Kwong Hup Holding Limited
Kwong Wan Realty Limited
Lee Theatre Realty Limited
Leighton Property Company
Limited
Minsal Limited
Main Rise Development Limited
Mariner Bay Limited
Mondsee Limited
OHA Property Company Limited
Perfect Win Properties Limited
Silver Nicety Company Limited
Hong Kong
British Virgin Islands
Hong Kong
Hong Kong
Hong Kong
HK$2
HK$1
HK$1,000
HK$10
HK$2
Hong Kong
Hong Kong
British Virgin Islands/
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
HK$2
HK$2
US$1
HK$2
HK$2
HK$2
HK$20
Proportion of
ownership interests/
voting rights held by
the Company
directly
100%
–
–
–
–
–
100%
100%
100%
100%
–
–
100%
100%
100%
100%
–
–
100%
–
–
100%
–
–
–
indirectly
–
100%
100%
65.36%
100%
100%
–
–
–
–
Principal activities
Investment holding
Property development
Resident club
management
Property investment
Property investment
Investment holding
Treasury operation
Provision of corporate
services
Leasing administration
Treasury operation
100%
100%
General business
Information technology
–
Property management
–
–
–
100%
100%
–
100%
100%
–
100%
100%
100%
Treasury operation
Investment holding
Property investment
Property investment
Property investment
Property investment
Investment holding
Investment holding
Property investment
Property investment
Property investment
Property investment
The Directors of the Company 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 Company. Other than
unsecured fixed rate notes issued by Hysan (MTN) Limited (“Hysan MTN”) as disclosed in note 27 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.
148
Hysan Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2019
17. PARTICULARS OF PRINCIPAL SUBSIDIARIES OF THE COMPANY continued
The summarized financial information in respect of the Group’s subsidiary that has material non-controlling interests is set out
below. The summarized 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 owners 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) inflows from investing activities
Cash outflows from financing activities
Net cash (outflows) inflows
2019
HK$ million
392
10,232
(834)
(200)
6,268
3,322
575
696
455
241
125
455
(161)
(370)
(76)
2018
HK$ million
347
9,886
(785)
(193)
6,049
3,206
584
825
539
286
128
347
380
(670)
57
149
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
18. INVESTMENTS IN ASSOCIATES AND LOANS TO ASSOCIATES
Cost of unlisted investments
Share of post-acquisition profits and other comprehensive income,
net of dividends received
Loans to associates classified as:
Non-current assets
2019
HK$ million
2018
HK$ million
2
5,187
5,189
2
3,706
3,708
11
11
The balances of loans to associates are unsecured, interest-free and have no fixed repayment terms. The Directors of the
Company are of the opinion that the Group will not demand repayment from the associates within the next twelve months
from the end of the reporting period and the loans are therefore classified as non-current assets.
The Directors of the Company are of the opinion that a complete list of all associates will be of excessive length and the Group
summarises details of the Group’s material associate as at 31 December 2019 and 2018 as follows:
Name of associate
Form of
business
structure
Country Link Enterprises
Limited (Note)
Private limited
company
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
Sino-Foreign
equity joint
venture
Sino-Foreign
equity joint
venture
Shanghai Kong Hui
Property Development
Co., Ltd. (Note)
Shanghai Grand
Gateway Plaza
Property Management
Co., Ltd. (Note)
# Fully paid-up registered capital
Note:
The PRC
US$165,000,000#
24.7% Property development
and leasing
The PRC
US$140,000#
23.7% Property management
Shanghai Kong Hui Property Development Co., Ltd. and Shanghai Grand Gateway Plaza Property Management Co., Ltd. are non-wholly owned
subsidiaries of Country Link Enterprises Limited, together known as “Country Link”.
150
Hysan Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2019
18. INVESTMENTS IN ASSOCIATES AND LOANS TO ASSOCIATES continued
The summarized consolidated financial information in respect of the Group’s material associate is set out below. The
summarized consolidated financial information below represents amounts shown in the associate’s consolidated financial
statements prepared in accordance with HKFRSs. All of the Group’s associates are accounted for using the equity method in
the Group’s consolidated financial statements.
Country Link
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Turnover
Profit for the year
Other comprehensive expense for the year
Total comprehensive income for the year
Group’s share of results of the associate for the year
Group’s share of other comprehensive expense of the associate for the year
Dividends received from the associate during the year
2019
HK$ million
1,795
26,461
(1,009)
(6,211)
1,399
7,016
(339)
6,677
1,734
(84)
166
2018
HK$ million
1,953
18,292
(1,001)
(4,214)
1,397
1,195
(699)
496
294
(172)
184
Reconciliation of the above summarized consolidated financial information to the carrying amount of the interest in the
associate that is material to the Group recognized 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
2019
HK$ million
2018
HK$ million
21,036
(1,249)
19,787
26.3%
5,204
(5)
5,199
15,030
(887)
14,143
26.3%
3,720
(5)
3,715
151
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
19. INVESTMENT IN A JOINT VENTURE AND LOANS TO A JOINT VENTURE
Details of the Group’s investment in and loans to a joint venture are as follows:
Investment in a joint venture
Unlisted shares, at cost
Deemed capital contribution in a joint venture (Note a)
Loans to a joint venture classified as:
Non-current assets (Note b)
Notes:
2019
HK$ million
2018
HK$ million
–
143
143
–
145
145
1,090
1,062
(a) 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.
(b) The loans to a joint venture are unsecured and have no fixed repayment terms. As at 31 December 2019, except for the loans to a joint venture
with aggregate carrying amounts of HK$120 million (2018: HK$120 million) which are carrying variable rates ranging from 2.94% to 4.71%
(2018: 2.73% to 4.24%) per annum, the remaining loan to a joint venture of the Group is interest-free. The Directors of the Company are of the
opinion that the Group will not demand repayment of the loans from the joint venture within the next twelve months from the end of the
reporting period and the loans are therefore classified as non-current assets. The effective interest rate for imputed interest income on the
interest-free portion is determined based on the cost of fund of the borrower per annum.
Details of the Group’s joint venture as at 31 December 2019 and 2018 are as follows:
Name of joint venture
Place of
incorporation
and operation
Strongbod Limited (Note a)
British Virgin Islands
Effective
ownership
interest and
voting rights
held by the Group
60%
(Note b)
Class of share held
Ordinary shares of
US$10
Principal activities
Investment holding
Gainwick Limited (Note a)
Hong Kong
Ordinary share of HK$1
60%
(Note b)
Property development
and investment
Notes:
(a) Gainwick Limited is a wholly owned subsidiary of Strongbod Limited, together known as “Strongbod”.
(b) Pursuant to the shareholder’s agreement dated 5 December 2016, entered into by the Group, the joint venture partner and Strongbod, decisions
on all relevant business and operation activities of Strongbod require unanimous board approval from directors of Strongbod appointed by the
Group and those appointed by the joint venture partner. Therefore, the Group recognized the investment in Strongbod as a joint venture.
The summarized consolidated financial information in respect of the Group’s material joint venture is set out below. The
summarized consolidated financial information below represents amounts shown in the joint venture’s consolidated financial
statements prepared in accordance with HKFRSs. The joint venture is accounted for using the equity method in the Group’s
consolidated financial statements. There was no material share of post-acquisition profits and other comprehensive income in
both years.
Strongbod
Current assets
Current liabilities
Non-current liabilities
152
2019
HK$ million
2018
HK$ million
3,896
(41)
(3,855)
3,618
(17)
(3,601)
Hysan Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2019
19. INVESTMENT IN A JOINT VENTURE AND LOANS TO A JOINT VENTURE continued
Reconciliation of the above summarized consolidated financial information to the carrying amount of the interest in the joint
venture that is material to the Group recognized in the consolidated financial statements:
Net assets of the joint venture
Proportion of the Group’s ownership interest in the joint venture
Group’s share of net assets of the joint venture
Add: Deemed capital contribution in the joint venture
Carrying amount of the Group’s interest in the joint venture
20. OTHER FINANCIAL INVESTMENTS
Investment designated as at FVTOCI
– Investment in equity security listed overseas (Note a)
Investment at FVTPL
– Unlisted investment in a fund investment (Note b)
2019
HK$ million
2018
HK$ million
–
60%
–
143
143
–
60%
–
145
145
2019
HK$ million
2018
HK$ million
235
366
601
–
294
294
Notes:
(a) The investment is designated as at FVTOCI because the directors of the Company believe that the Group’s strategy of holding the investment is
expected to be held for long-term strategic purpose.
(b) The balance represents the Group’s interest in a fund investment as limited partner. The fund investment engages in property investment in Hong
Kong and overseas projects. The fund investment is classified as fair value through profit or loss (“FVTPL”).
21. DEBT SECURITIES
Debt securities, at amortized cost:
– listed in Hong Kong
– listed overseas
Total
Analysed for reporting purposes as:
Current assets
Non-current assets
2019
HK$ million
2018
HK$ million
172
–
172
–
172
172
196
31
227
227
–
227
As at 31 December 2019, the effective yield of the debt securities ranged from 3.35% to 4.85% (2018: 1.81% to 2.09%) per
annum, payable quarterly, semi-annually or annually, and the securities will mature from February 2022 to July 2022 (2018:
from January 2019 to July 2019). At the end of the reporting period, none of these assets were past due.
Details of the impairment assessment of debt securities are set out in the Financial Risk Management section.
153
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
22. OTHER FINANCIAL ASSETS/LIABILITIES
Other financial assets
Financial assets measured at FVTPL:
Club debenture
Derivatives under hedge accounting:
Cash flow hedges
– Cross currency swap
Total
Other financial liabilities
Derivatives under hedge accounting:
Cash flow hedges
– Cross currency swaps
Total
Non-current
2019
HK$ million
2018
HK$ million
1
7
8
46
46
1
–
1
26
26
(a) Cash flow hedges
Foreign currency risk
During the year, the Group used cross currency swaps (2018: 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 swaps
have been negotiated to match the major terms of the respective designated hedged items and the management considers
that the hedges are highly effective.
The table below is prepared based on the maturity dates of respective contracts. The major terms of these outstanding forward
foreign exchange contracts and cross currency swaps at the end of the reporting period are as follows:
Hedging instruments
Forward foreign exchange
contracts
Sell US dollars (“USD”) (Note a)
Within 1 year
Cross currency swaps
Hedging of USD fixed rate
notes (Note b)
More than 1 year but Not
exceeding 5 years
More than 5 years
Total
2019
2018
Average
exchange
rate*
Foreign
currency
Notional amount
million
HK$
million
Fair
value
HK$
million
Average
exchange
rate*
Foreign
currency
Notional amount
million
HK$
million
Fair
value
HK$
million
–
–
–
–
–
7.7996
USD
28
218
–
7.7519
7.8449
USD
USD
300
500
2,326
3,922
6,248
7
(46)
(39)
7.7519
–
USD
–
300
–
2,326
–
2,544
(26)
–
(26)
* Average exchange rate represented the average exchange rate of HKD versus respective currencies weighted by the notional amounts of the
contracts or the swaps.
Notes:
(a) In 2018, the Group used HK$218 million forward foreign exchange contracts to hedge the foreign exchange rate risk of part of the principal
amount of debt securities denominated in USD at their respective maturity dates.
(b) The Group used HK$6,248 million (2018: HK$2,326 million) cross currency swaps to convert USD interest and principal of US$800 million (2018:
US$300 million) fixed rate notes into HKD.
154
Hysan Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2019
22. OTHER FINANCIAL ASSETS/LIABILITIES continued
(a) Cash flow hedges continued
Foreign currency risk continued
Hedged items
Carrying amount of the hedged item
Cash flow hedge reserves
Assets
Liabilities
2019
HK$ million
2018
HK$ million
2019
HK$ million
2018
HK$ million
2019
HK$ million
2018
HK$ million
USD debt securities
USD fixed rate notes
–
–
218
–
–
6,203
–
2,344
–
(19)
2
(50)
The hedging ineffectiveness for the years ended 31 December 2019 and 2018 was insignificant.
Change in the value
of the hedging instrument
recognized in other
comprehensive income
Amount
reclassified from the
cash flow hedge reserve
to profit or loss
2019
HK$ million
2018
HK$ million
2019
HK$ million
2018
HK$ million
Line item affected in
profit or loss
because of the
reclassification
Forward foreign exchange contracts
Cross currency swaps
1
(15)
1
1
(3)
46
(5)
(2)
Investment income
Finance costs
The fair values of forward foreign exchange contracts and cross currency swaps are measured using quoted forward exchange
rates and yield curves from quoted interest rates matching maturities of the contracts and swaps.
(b) Financial assets measured at FVTPL
Club debenture
Amount represented investment in unlisted club debenture. The Group’s investment in unlisted club debenture has been
classified as financial assets measured at FVTPL.
23. ACCOUNTS AND OTHER RECEIVABLES
Accounts receivable
Interest receivable
Prepayments in respect of investment properties
Other receivables and prepayments
Total
Analysed for reporting purposes as:
Current assets
Non-current assets
2019
HK$ million
2018
HK$ million
24
105
124
352
605
314
291
605
15
46
228
300
589
203
386
589
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$24 million (2018: HK$15 million) mainly represented rents receipts in
arrears, which were aged less than 90 days.
At the end of the reporting period, HK$10 million (2018: HK$5 million) of the accounts receivable were past due but not
impaired as the accounts receivables are generally fully covered by the deposits from corresponding tenants. The deposits from
tenants safeguards the Group’s rights and interests in the properties in the event of tenant’s default and delinquency.
155
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
24. TIME DEPOSITS/CASH AND CASH EQUIVALENTS
Time deposits, cash and bank balances include bank deposits carrying effective interest rates ranging from 0.10% to 3.10%
(2018: 0.20% to 3.40%) per annum.
As at 31 December 2019 and 2018, the Group performed impairment assessment on time deposits and bank balances and
concluded that the probability of default of the counterparty banks are insignificant and accordingly, no allowance for credit
losses is provided.
25. ACCOUNTS PAYABLE AND ACCRUALS
Accounts payable
Interest payable
Other payables
2019
HK$ million
2018
HK$ million
319
131
484
934
257
74
542
873
At the end of the reporting period, accounts payable of the Group with carrying amount of HK$220 million (2018: HK$175
million) were aged less than 90 days.
26. AMOUNTS DUE TO NON-CONTROLLING INTERESTS
The amounts due to non-controlling interests are unsecured, interest-free and repayable on demand.
27. BORROWINGS
The maturity profile based on the scheduled repayment dates set out in the respective borrowings agreement was as follow:
Non-current unsecured bank loans
Within 1 year
More than 1 year, but not exceeding 2 years
More than 2 years, but not exceeding 5 years
Less: Amount due within 1 year included under current liabilities
Non-current unsecured fixed rate notes
Within 1 year
More than 1 year, but not exceeding 2 years
More than 2 years, but not exceeding 5 years
More than 5 years
Less: Amount due within 1 year included under current liabilities
Total current borrowings
Total non-current borrowings
Total borrowings
2019
HK$ million
2018
HK$ million
–
248
1,753
2,001
–
2,001
565
–
3,265
6,698
10,528
(565)
9,963
565
11,964
12,529
–
–
1,532
1,532
–
1,532
300
565
3,277
648
4,790
(300)
4,490
300
6,022
6,322
All the bank loans are guaranteed as to principal and interest and are carrying variable-rate. Interest rates of the loans are
normally re-fixed at every one to three months. The effective interest rates (which were also equal to contracted interest rates)
were 2.70% (2018: 3.09%) per annum at the end of the reporting period.
156
Hysan Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2019
27. BORROWINGS continued
All the unsecured 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. The contract rates per annum (before cross-currency swaps) at the end of the reporting period were as follows:
Unsecured fixed rate notes
2.81 – 5.38
2.82 – 3.50
3.66 – 5.38
2019
HK$
%
US$
%
2018
HK$
%
US$
%
3.50
As detailed in note 22 of the Notes to the Consolidated Financial Statements section, during the years ended 31 December
2019 and 2018, cross currency swaps were used to hedge or manage the foreign exchange rate risks of the Group’s USD fixed
rate notes.
28. DEFERRED TAXATION
The following are the major deferred tax liabilities (assets) recognized by the Group and movements thereon during the current
and prior years:
As at 1 January 2018
Charge (credit) to profit or loss (note 8)
Charge to other comprehensive income
As at 31 December 2018
Charge (credit) to profit or loss (note 8)
Charge to other comprehensive income
As at 31 December 2019
Accelerated tax
depreciation
HK$ million
Revaluation of
properties
HK$ million
Tax losses
HK$ million
Total
HK$ million
804
97
–
901
55
–
956
79
(1)
9
87
(1)
4
90
(96)
(38)
–
(134)
13
–
(121)
787
58
9
854
67
4
925
At the end of the reporting period, the Group has unused estimated tax losses of HK$1,361 million (2018: HK$1,437 million)
available for offset against future profits. A deferred tax asset has been recognized in respect of HK$735 million (2018:
HK$815 million) of such losses. No deferred tax asset has been recognized in respect of the remaining HK$626 million (2018:
HK$622 million) due to the unpredictability of future profit streams and the tax losses may be carried forward indefinitely.
157
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
29. SHARE CAPITAL
Ordinary shares, issued and fully paid:
As at 1 January 2018
Issue of shares under share option schemes
As at 31 December 2018
Issue of shares under share option schemes
Cancellation upon repurchase of own shares (Note)
As at 31 December 2019
Number of shares
Share capital
HK$ million
1,045,824,891
677,000
1,046,501,891
49,000
(2,730,000)
7,692
26
7,718
2
–
1,043,820,891
7,720
During the year of 2019, the Company repurchased its own ordinary shares on the Stock Exchange as follows:
Month of repurchase in 2019
August
September
October
November
December
Note:
Number of
ordinary shares
repurchased
(Note)
50,000
250,000
1,550,000
400,000
750,000
3,000,000
Consideration per share
Highest
HK$
33.80
31.70
31.10
31.15
31.00
Lowest
HK$
31.75
30.65
28.70
30.70
28.95
Aggregate
consideration paid
HK$ million
2
8
47
12
23
92
The Company was authorized at its annual general meetings 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. In 2019, 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. Out of 3,000,000 ordinary shares
repurchased during 2019, 2,730,000 ordinary shares were cancelled during the year ended 31 December 2019, while the remaining 270,000 ordinary
shares were cancelled in February 2020.
158
Hysan Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2019
30. STATEMENT OF FINANCIAL POSITION AND RESERVES OF THE COMPANY
Non-current assets
Property, plant and equipment
Investments in subsidiaries
Other financial assets
Amounts due from subsidiaries
Current assets
Other receivables
Amounts due from subsidiaries
Cash and cash equivalents
Current liabilities
Other payables and accruals
Amounts due to subsidiaries
Net current assets
Net assets
Capital and reserves
Share capital (note 29)
Reserves
Total equity
2019
HK$ million
2018
HK$ million
–
1,634
1
2,869
4,504
8
10,747
22
10,777
79
1,949
2,028
8,749
–
1,696
1
4,152
5,849
4
10,131
1
10,136
64
2,753
2,817
7,319
13,253
13,168
7,720
5,533
13,253
7,718
5,450
13,168
The Company’s statement of financial position was approved and authorized for issue by the Board of Directors on
20 February 2020 and are signed on its behalf by:
Lee Irene Y.L.
Director
Lee T.H. Michael
Director
159
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
30. STATEMENT OF FINANCIAL POSITION AND RESERVES OF THE COMPANY continued
Movement in the Company’s reserve
As at 1 January 2018
Issue of shares under share option schemes
Recognition of equity-settled share-based payments
Forfeiture of share option
Profit and total comprehensive income for the year
Dividends paid during the year (note 13)
As at 31 December 2018
Recognition of equity-settled share-based payments
Repurchase of own shares
Profit and total comprehensive income for the year
Forfeiture of unclaimed dividends
Dividends paid during the year (note 13)
As at 31 December 2019
Notes:
Share options
reserve
HK$ million
General reserve
HK$ million
(Note a)
Retained profits
HK$ million
Total
HK$ million
21
(5)
4
(1)
–
–
19
4
–
–
–
–
23
100
–
–
–
–
–
100
–
–
–
–
–
100
5,216
–
–
1
1,558
(1,444)
5,331
–
(92)
1,677
1
(1,507)
5,410
5,337
(5)
4
–
1,558
(1,444)
5,450
4
(92)
1,677
1
(1,507)
5,533
(a) General reserve was set up from the transfer of retained profits.
(b) The Directors of the Company considered that the application of the new and amendments to HKFRSs that are effective for the Company’s
financial year beginning on 1 January 2019 have no material impact on the Company’s results and financial position.
The Company’s reserves available for distribution to its owners as at 31 December 2019 amounted to HK$5,510 million (2018:
HK$5,431 million), being its general reserve and retained profits at that date.
31. RECONCILIATION OF ASSETS/LIABILITIES RELATING TO FINANCING ACTIVITIES
Net debt (Note a)
Other financial liabilities (Note b)
Interest payable
Amounts due to non-controlling interests
2019
HK$ million
2018
HK$ million
(3,197)
(46)
(131)
(220)
(3,594)
(3,505)
(26)
(74)
(223)
(3,828)
160
Hysan Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2019
31. RECONCILIATION OF ASSETS/LIABILITIES RELATING TO FINANCING ACTIVITIES continued
The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash
changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in
the Group’s consolidated statement of cash flows from financing activities.
As at 1 January 2018
Cash flows, net
Other non-cash changes:
Foreign exchange adjustments
Fair value adjustments
Interest expenses
Others
Cash flows, net
Other non-cash changes:
Foreign exchange adjustments
Fair value adjustments
Interest expenses
Cash and
cash
equivalents
HK$
million
2,034
35
Time
deposits
HK$
million
628
120
Other
financial
assets/
liabilities
HK$
million
Fixed
rate
notes
HK$
million
Amounts
due to non-
controlling
interests
HK$
million
Interest
payable
HK$
million
Bank
loans
HK$
million
Total
HK$
million
(30)
–
(1,550)
–
(4,635)
(148)
–
–
–
–
–
–
–
–
5
1
(2)
–
–
–
(6)
24
(5)
–
(2)
–
(74)
212
–
–
(212)
–
(74)
1,528
4,987
–
(470)
(5,777)
247
–
–
–
–
–
–
(46)
29
(3)
(46)
3
–
(2)
43
–
(4)
(2,001)
(10,528)
–
–
(304)
(131)
(327)
104
(3,954)
323
–
–
–
–
–
1
(222)
24
(223)
(3,828)
3
–
–
–
518
–
29
(313)
(220)
(3,594)
As at 31 December 2018
2,069
748
(26)
(1,532)
(4,790)
As at 31 December 2019
3,597
5,735
Notes:
(a) Net debt represents borrowings less time deposits, cash and cash equivalent as disclosed under note 5 of the Financial Risk Management section.
(b) Other financial assets/liabilities represent the hedging instrument that was used to hedge against the foreign exchange rate risk arising from
financing activities.
32. RETIREMENT BENEFITS PLANS
With effect from 1 December 2000, the Group set up an Enhanced Mandatory Provident Fund Scheme (the “Enhanced MPF
Scheme”), a defined contribution scheme, for all qualifying employees. The Enhanced MPF Scheme is registered with the
Mandatory Provident Fund Schemes Authority under Section 124(1) of the Mandatory Provident Fund Schemes (General)
Regulation.
Pursuant to the rules of the Enhanced MPF Scheme, the Group’s contributions to the plan are based on fixed percentages of
members’ salaries, ranging from 5% of MPF relevant income to 15% of basic salary. Members’ mandatory contributions are
fixed at 5% of MPF relevant income, in compliance with MPF legislation.
Total contributions made by the Group during the year amounted to HK$10 million (2018: HK$9 million).
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OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
33. COMMITMENTS
At the end of the reporting period, the Group had the following capital commitments in respect of its investment properties,
property, plant and equipment and subscription to a fund investment as limited partner:
(a) Capital commitment:
Contracted but not provided for investment properties and
property, plant and equipment
(b) Other commitment:
Subscription to a fund investment as limited partner
2019
HK$ million
2018
HK$ million
207
14
655
74
34. LEASE COMMITMENTS
At the end of the reporting period, the Group as lessor had contracted with tenants for the following undiscounted lease
payments receivable over the non-cancellable periods:
Within one year
In the second year
In the third year
In the fourth year
In the fifth year
Over five years
The Group had contracted with lessees for the following future minimum lease payments
Within one year
In the second year to fifth year inclusive
Over five years
2019
HK$ million
3,315
2,390
1,459
799
586
1,517
10,066
2018
HK$ million
3,180
4,960
857
8,997
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 rentals received with reference
to turnover of tenants.
At the end of the reporting period, the Group as lessee had no commitment under non-cancellable operating lease.
162
Hysan Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2019
35. RELATED PARTY TRANSACTIONS AND BALANCES
(a) Transactions and balances with related parties
During the year, the Group has transaction with related party including imputed interest income on interest-free loan to a joint
venture as disclosed under note 6 of the Notes to the Consolidated Financial Statements sections. At the end of the reporting
period, the Group has several balances with related parties including loans to associates and loans to a joint venture as
disclosed under note 18 and note 19 of the Notes to the Consolidated Financial Statements section. The Group has also
granted guarantees to banks for facilities granted to a joint venture as disclosed under note 36 of the Notes to the
Consolidated Financial Statements section.
In addition, the Group has the following transactions with other related parties during the year and has the following balances
with them at the end of the reporting period:
Related companies controlled by the Directors of the
Company (Note a (i) & (ii))
Non-controlling shareholder of a subsidiary
(Note b (i) & (ii))
Notes:
Gross rental income
received from
Year ended 31 December
Amount due to
non-controlling interests
At 31 December
2019
HK$ million
2018
HK$ million
2019
HK$ million
2018
HK$ million
42
14
41
30
63
157
64
159
(a)
(i) The sum of transactions represents the aggregate gross rental income received from related companies where the Directors of the Company
have controlling interests over these related companies.
(ii) The balance represents outstanding loan advanced to a non-wholly owned subsidiary of the Company, Barrowgate Limited (“Barrowgate”),
by Jebsen Capital Limited, a wholly owned subsidiary of Jebsen and Company, of which Jebsen Hans Michael 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.
(b)
(i) The transaction represents the gross rental income received from Hang Seng Bank Limited (“Hang Seng”), the intermediate holding
company of Imenson Limited (“Imenson”), and The Hongkong and Shanghai Banking Corporation Limited, the holding company of Hang
Seng. 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.
(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
2019
HK$ million
2018
HK$ million
48
4
1
53
48
3
1
52
The remuneration of the Directors and key executives is determined by the Remuneration Committee having regard to the
performance of individuals and market trends.
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OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
36. CONTINGENT LIABILITY
At the end of the reporting period, the Group had contingent liabilities as follows:
Guarantees given to banks in respect of:
Banking facilities of a joint venture attributable to the Group
– Utilized
– Unutilized
2019
HK$ million
2018
HK$ million
1,147
1,853
3,000
999
2,001
3,000
In 2017, the Group issued corporate financial guarantees to banks in respect of banking facilities granted to a joint venture.
The fair value of the financial guarantee contracts at its initial recognition is insignificant.
Other than the financial guarantees as disclosed above, several funding undertakings have also been provided by the Group to
the extent not having been financed by drawdown made under the relevant banking facilities of the joint venture in relation to
the completion of the underlying project of the joint venture.
Details of the impairment assessment of financial guarantees are set out in the Financial Risk Management section.
37. 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 Director) 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.
164
Hysan Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2019
37. SHARE-BASED PAYMENT TRANSACTIONS continued
(a) Equity-settled share option scheme continued
The New Scheme
The Company adopted the New Scheme (together with the 2005 Scheme are referred to as the “Schemes”) at its AGM held on
15 May 2015, which has a term of 10 years and will expire on 14 May 2025. Terms of the New Scheme are substantially the
same as those under the 2005 Scheme.
The purpose of the New Scheme is to provide an incentive for employees of the Company and its subsidiaries to work with
commitment towards enhancing the value of the Company and its shares for the benefit of its shareholders.
Under the New Scheme, options to subscribe for ordinary shares of the Company may be granted to employees of the
Company or any subsidiaries (including Executive Director) 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 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$1 and is required to be paid within 30 days from the date of grant of options, with
full payment for exercise price to be made on exercise of the relevant options.
During the year, a total of 1,286,200 (2018: 956,200) share options were granted under the New Scheme. The 2005 Scheme
expired on 9 May 2015 and no further option will be granted under the 2005 Scheme.
(b) Grant and vesting structures
Under the Company’s current policy, grants will be made on a periodic basis. For the Schemes, the exercise period is 10 years
and vesting period is 3 years in equal proportions starting from the 1st anniversary and become fully vested on the 3rd
anniversary of the grant. Size of grant will be determined by reference to base salary multiple and job grades. A clear
performance criterion will be a key driver. The Board will review the grant and vesting structures from time to time.
165
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance 37. SHARE-BASED PAYMENT TRANSACTIONS continued
(c) Movement of share options
The following table discloses movements of the Company’s share options held by the Director and eligible employees during
the current year:
Date of grant
Exercise price
HK$
Exercise period
(Note a)
Balance as at
1.1.2019
Granted
Exercised
Cancelled/
lapsed
(Note b)
Balance as at
31.12.2019
Changes during the year
33.50
39.92
32.84
36.27
22.45
32.00
31.61
39.20
33.75
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
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
87,000
265,000
325,000
300,000
50,000
32,000
70,000
85,000
46,000
62,667
1,322,667
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
87,000
265,000
325,000
300,000
50,000
32,000
70,000
85,000
46,000
62,667
– 1,322,667
Name
2005 Scheme
Executive Director
Lee Irene Yun-Lien
14.5.2012
7.3.2013
10.3.2014
12.3.2015
Eligible employees
31.3.2010
(Note c)
31.3.2011
30.3.2012
28.3.2013
31.3.2014
31.3.2015
166
Hysan Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2019
37. SHARE-BASED PAYMENT TRANSACTIONS continued
(c) Movement of share options continued
Date of grant
Exercise price
HK$
Exercise period
(Note a)
Balance as at
1.1.2019
Granted
Exercised
Cancelled/
lapsed
(Note b)
Balance as at
31.12.2019
Changes during the year
Name
New Scheme
Executive Director
Lee Irene Yun-Lien
9.3.2016
23.2.2017
1.3.2018
22.2.2019
Eligible employees
31.3.2016
(Note c)
31.3.2017
29.3.2018
29.3.2019
Exercisable at the end of the year
Notes:
33.15
36.25
44.60
42.40
(Note d)
33.05
35.33
41.50
42.05
(Note f)
9.3.2017 –
8.3.2026
23.2.2018 –
22.2.2027
1.3.2019 –
29.2.2028
22.2.2020 –
21.2.2029
31.3.2017 –
30.3.2026
31.3.2018 –
30.3.2027
29.3.2019 –
28.3.2028
29.3.2020 –
28.3.2029
375,000
300,000
373,200
–
–
–
–
494,200
174,000
248,667
513,000
–
–
–
–
792,000
–
–
–
–
(49,000)
(Note e)
–
–
–
–
–
–
375,000
300,000
373,200
494,200
125,000
(4,000)
244,667
–
–
(17,000)
496,000
(30,000)
762,000
1,983,867 1,286,200
(49,000)
(51,000) 3,170,067
2,457,059
(a) All options granted have a vesting period of 3 years in equal proportions starting from the 1st anniversary and become fully vested on the 3rd
anniversary of the grant. In this table, “exercise period” begins with the 1st anniversary of the grant date.
(b) The options lapsed during the year upon resignations of certain eligible employees.
(c) Eligible employees are working under employment contracts that are regarded as “continuous contracts” for the purposes of the Employment
Ordinance.
(d) The closing price of the shares of the Company immediately before the date of grant (i.e. as of 21 February 2019) was HK$41.75.
(e) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$41.31.
(f) The closing price of the shares of the Company immediately before the date of grant (i.e. as of 28 March 2019) was HK$41.90.
In respect of the share options exercised during the year ended 31 December 2019, the weighted average share price at the
dates of exercise was HK$41.02.
Apart from the above, the Company had not granted any share option under the Schemes to any other person as required to
be disclosed under Rule 17.07 of the Listing Rules in 2019.
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OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
37. SHARE-BASED PAYMENT TRANSACTIONS continued
(c) Movement of share options continued
The following table discloses movements of the Company’s share options held by the Director and eligible employees in prior
year:
Name
Date of grant
Exercise price
HK$
Exercise period
(Note a)
Changes during the year
Balance as at
1.1.2018
Granted
Exercised
Cancelled/
lapsed
(Note b)
Balance as at
31.12.2018
2005 Scheme
Executive Director
Lee Irene Yun-Lien
14.5.2012
7.3.2013
10.3.2014
12.3.2015
Eligible employees
31.3.2009
(Note c)
31.3.2010
31.3.2011
30.3.2012
28.3.2013
31.3.2014
31.3.2015
33.50
39.92
32.84
36.27
13.30
22.45
32.00
31.61
39.20
33.75
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
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
87,000
265,000
325,000
300,000
59,000
70,334
54,000
105,334
153,000
154,000
204,667
1,777,335
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(59,000)
(Note d)
(20,334)
(Note e)
(22,000)
(Note f)
(35,334)
(Note g)
(51,000)
(Note h)
(108,000)
(Note i)
(138,333)
(Note j)
–
–
–
–
–
–
–
–
87,000
265,000
325,000
300,000
–
50,000
32,000
70,000
(17,000)
85,000
–
46,000
(3,667)
62,667
(434,001)
(20,667) 1,322,667
168
Hysan Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2019
37. SHARE-BASED PAYMENT TRANSACTIONS continued
(c) Movement of share options continued
Name
Date of grant
Exercise price
HK$
Exercise period
(Note a)
Changes during the year
Balance as at
1.1.2018
Granted
Exercised
Cancelled/
lapsed
(Note b)
Balance as at
31.12.2018
New Scheme
Executive Director
Lee Irene Yun-Lien
9.3.2016
33.15
23.2.2017
36.25
1.3.2018
44.60
(Note k)
Eligible employees
31.3.2016
33.05
(Note c)
31.3.2017
35.33
29.3.2018
41.50
(Note n)
Exercisable at the end of the year
Notes:
9.3.2017 –
8.3.2026
23.2.2018 –
22.2.2027
1.3.2019 –
29.2.2028
31.3.2017 –
30.3.2026
31.3.2018 –
30.3.2027
29.3.2019 –
28.3.2028
375,000
300,000
–
–
–
373,200
–
–
–
–
–
–
375,000
300,000
373,200
377,668
409,000
–
–
–
583,000
(158,333)
(Note l)
(84,666)
(Note m)
–
(45,335)
174,000
(75,667)
248,667
(70,000)
513,000
1,461,668
956,200
(242,999)
(191,002) 1,983,867
1,791,662
(a) All options granted have a vesting period of 3 years in equal proportions starting from the 1st anniversary and become fully vested on the 3rd
anniversary of the grant. In this table, “exercise period” begins with the 1st anniversary of the grant date.
(b) The options lapsed during the year upon resignations of certain eligible employees.
(c) Eligible employees are working under employment contracts that are regarded as “continuous contracts” for the purposes of the Employment
Ordinance.
(d) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$39.25.
(e) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$45.36.
(f) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$44.55.
(g) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$43.56.
(h) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$43.88.
(i) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$43.99.
(j) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$42.85.
(k) The closing price of the shares of the Company immediately before the date of grant (i.e. as of 28 February 2018) was HK$45.35.
(l) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$42.52.
(m) The weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was
HK$42.33.
(n) The closing price of the shares of the Company immediately before the date of grant (i.e. as of 28 March 2018) was HK$40.75.
In respect of the share options exercised during the year ended 31 December 2018, the weighted average share price at the
dates of exercise was HK$42.55.
Apart from the above, the Company had not granted any share option under the Schemes to any other person as required to
be disclosed under Rule 17.07 of the Listing Rules in 2018.
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OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
37. SHARE-BASED PAYMENT TRANSACTIONS continued
(d) Fair values of share options
The Group has applied HKFRS 2 to account for its share options granted. 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 recognized the share option expenses of HK$4
million (2018: HK$4 million) in relation to share options granted by the Company, of which HK$2 million (2018: HK$2 million)
related to the Director (see note 11), with a corresponding adjustment recognized 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
29.3.2019
22.2.2019
29.3.2018
1.3.2018
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$42.050
HK$42.050
1.406%
5 years
17.689%
HK$1.342
HK$4.460
HK$42.400
HK$42.400
1.552%
5 years
17.710%
HK$1.342
HK$4.750
HK$41.500
HK$41.500
1.802%
5 years
17.923%
HK$1.288
HK$4.900
HK$43.700
HK$44.600
1.741%
5 years
17.534%
HK$1.288
HK$4.760
(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 over the past 5 years immediately
before the date of grant.
(d) Expected dividend per annum: being the approximate average annual cash dividend over the past 5 financial years.
170
Hysan Annual Report 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2019
1. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s major financial instruments include loans to associates, loans to a joint venture, other financial investments, debt
securities, accounts and other receivables, time deposits, cash and cash equivalents, accounts payable and 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 sections. 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 and impairment assessment
The credit risk of the Group is primarily attributable to loans to associates, loans to a joint venture, accounts and other
receivables, derivative financial instruments, debt securities, 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 recognized financial assets as stated in the consolidated statement of
financial position.
The Group reviewed and assessed the Group’s existing financial assets and financial guarantee contract for impairment using
reasonable, supportable and forward-looking information that is available without undue cost or effort in accordance with
HKFRS 9. For the purpose of internal credit risk management, the Group uses financial information (such as historical
settlement records, past due records, deposits held or other credit enhancement) to assess whether credit risk has increased
significantly since initial recognition.
The Group’s internal credit risk grading assessment comprises the following categories:
Internal credit rating
Description
Accounts receivables
Other financial assets
Performing
The counterparty has a low credit risk of
Lifetime Expected Credit
12-month ECL
default and does not have any
past-due amounts
Losses (“ECL”)
– not credit-impaired
– not credit-impaired
Non-performing
There have been significant increases in
credit risk since initial recognition
through information developed internally
or external resources
Write-off
There is evidence indicating that the debtor is
in severe financial difficulty and the Group
has no realistic prospect of recovery
Lifetime ECL
Lifetime ECL
– not credit-impaired
– not credit-impaired
Amount is written off
Amount is written off
Loans to associates and a joint venture
The Group regularly monitors the business performance of the associates and joint venture. The Group’s credit risk in these
balances are mitigated through the value of the assets held by these entities and the power to participate or jointly control the
relevant activities of these entities. As at 31 December 2019, these loans with gross carrying amount of HK$1,107 million
(2018: HK$1,077 million) are considered to be performing and were assessed individually based on 12-month ECL.
Accounts and other receivables
Credit checks on tenants 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 expected credit losses of each individual debt, after taking into consideration
the deposits from tenants, at the end of each reporting period. As at 31 December 2019, accounts and other receivables with
gross carrying amount of HK$605 million (2018: HK$589 million) are considered to be performing and were assessed
individually based on the respective lifetime ECL and 12-month ECL.
171
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness PerformanceFinancial Risk ManagementFor the year ended 31 December 2019
1. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES continued
(a) Credit risk and impairment assessment continued
Derivative financial instruments, debt securities, time deposits and bank balances
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 bank balances, time deposits
and debt securities); (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 Group only deals with financial institutions and invests in debt securities issued by issuers that have strong credit ratings to
mitigate counterparty risk. As at 31 December 2019, derivative financial instruments, debt securities, time deposits and bank
balances with gross carrying amount of HK$9,512 million (2018: HK$3,045 million) were assessed individually based on
12-month ECL and considered to be performing as all financial institutions that the Group dealt with and debt securities
invested in had credit ratings A or above as rated by international credit rating agencies. In order to limit exposure to each
financial institution and debt securities issuers, an exposure limit was set with each counterparty according to their external
credit rating with regular review by management.
Other than concentration of credit risk on loans to associates and a joint venture, the Group does not have any other significant
concentration of credit risk.
No credit loss is provided for except for loans to a joint venture and debt securities. A reconciliation of loss allowances
recognized is presented below.
As at 1 January 2018
Net impairment loss under ECL model
As at 31 December 2018
Net impairment loss under ECL model
As at 31 December 2019
Loss allowance for
Loans to
a joint venture
HK$ million
Debt securities
HK$ million
5
(1)
4
2
6
1
–
1
3
4
The maximum exposure to credit risk is represented by the carrying amount of each financial asset at amortized cost in the
consolidated statement of financial position after deducting any impairment allowance. Besides, the Group is also exposed to
credit risk arising from the corporate financial guarantees which will cause a financial loss to the Group if the guarantee is
called out.
In respect of the financial guarantee contract, the credit risk exposures of the Group is assessed under 12-month ECL and
concluded that the loss given default of the counter party, a joint venture, is insignificant and accordingly, no allowance of
credit loss is provided. Details of the Group’s credit risk maximum exposure are set out in note 36 of the Notes to the
Consolidated Financial Statements section.
172
Hysan Annual Report 2019FINANCIAL RISK MANAGEMENT continuedFor the year ended 31 December 2019
1. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES continued
(b) Liquidity risk
The Group closely monitors its 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 its non-derivative financial liabilities based on
the agreed repayment terms. Maturity of the Group’s financial guarantee contract is presented separately. 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.
Total
contractual
undiscounted
cash flow
HK$ million
Within
1 year or
on demand
HK$ million
Carrying
amount
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 2019
Non-derivative financial liabilities
Accounts payable and accruals
Deposits from tenants
Amounts due to non-controlling interests
Unsecured bank loans
Unsecured fixed rate notes
As at 31 December 2018
Non-derivative financial liabilities
Accounts payable and accruals
Deposits from tenants
Amounts due to non-controlling interests
Unsecured bank loans
Unsecured fixed rate notes
Note:
(934)
(1,001)
(220)
(2,001)
(10,528)
(934)
(1,001)
(220)
(2,223)
(13,049)
(934)
(316)
(220)
(66)
(910)
(14,684)
(17,427)
(2,446)
(873)
(1,000)
(223)
(1,532)
(4,790)
(8,418)
(873)
(1,000)
(223)
(1,732)
(5,569)
(9,397)
(873)
(331)
(223)
(48)
(472)
(1,947)
–
(277)
–
(315)
(324)
(916)
–
(216)
–
(48)
(731)
(995)
–
(389)
–
(1,842)
(4,053)
(6,284)
–
(439)
–
(1,636)
(3,651)
(5,726)
–
(19)
–
–
(7,762)
(7,781)
–
(14)
–
–
(715)
(729)
In addition to the items as set out in the above liquidity risk table, the maximum amount the Group could be required to settle under a financial
guarantee provided by the Group in respect of banking facilities granted to a joint venture is HK$3,000 million as at 31 December 2019 and 2018, if
such amount is claimed by the counterparty to the guarantee at any time within the guaranteed period. Based on expectations at the end of the
reporting period, the Directors of the Company consider that it is more likely than not that no amount will be payable by the Group under such financial
guarantee arrangement.
173
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
1. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES continued
(b) Liquidity risk continued
The following table details the Group’s remaining contractual maturity for its derivative financial instruments. The table has
been drawn up based on the undiscounted gross inflows (outflows) on those derivatives that require gross settlement. When
the amount payable or receivable is not fixed, the amount disclosed has been determined by reference to the prevailing market
rate at the end of the reporting period. For cash flows denominated in currency other than HKD, the prevailing foreign
exchange rates at the end of the reporting period are used to convert the cash flows into HKD.
Total
contractual
undiscounted
cash flow
HK$ million
Within
1 year or
on demand
HK$ million
Carrying
amount
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 2019
Derivative settled gross
Cross currency swaps
Outflow
Inflow
As at 31 December 2018
Derivative settled gross
Forward foreign exchange contracts
Outflow
Inflow
Cross currency swaps
Outflow
Inflow
(46)
–
(26)
(7,575)
7,611
(193)
191
(193)
192
(2,755)
2,787
(4,434)
4,441
(219)
218
(2,687)
2,720
(219)
218
(85)
82
–
–
–
–
(85)
82
(2,517)
2,556
–
–
–
–
(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. The Group is exposed to fair
value interest rate risk in relation to fixed rate debt securities (see note 21 of the Notes to Consolidated Financial Statements
section).
As at 31 December 2019, about 16.0% (2018: 24.5%) 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.
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”) (2018: +100
and -25 basis points) was applied to the HKD and US dollars (“USD”) yield curves at the end of the reporting period. The applied
change of bps represented management’s assessment of the reasonably possible change in interest rates based on the current
market conditions.
174
Hysan Annual Report 2019FINANCIAL RISK MANAGEMENT continuedFor the year ended 31 December 2019
1. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES continued
(c) Interest rate risk continued
Sensitivity analysis continued
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 2019
As at 31 December 2018
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
(17)
(14)
4
4
4
7
(1)
(2)
(d) Currency risk
The Group aims to minimize 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 may 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 and
management fee 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 USD. The Group’s unsecured fixed rate notes are
hedged by cross currency swaps.
2019
2018
Assets
Cash
Time deposits
Debt securities
Other financial investments
Liabilities
Bank loan
Unsecured fixed rate notes
Total
equivalent
to
HK$
million
15
274
172
601
1,062
464
6,198
6,662
US$
million
2
35
22
77
136
60
800
860
Total equivalent
to
HK$
million
US$
million
–
21
29
38
88
–
300
300
3
161
227
294
685
–
2,344
2,344
Other than concentration of currency risk of the above items denominated in USD (2018: USD), the Group has no other
significant currency risk.
The Group has entered into appropriate hedging instruments, mentioned in note 22 of the Notes to the 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.
175
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
1. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES continued
(d) Currency risk continued
Sensitivity analysis
The sensitivity analysis below has been determined assuming that a change in exchange rate had occurred at the end of the
reporting period and 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 other comprehensive income. Change of 500 percentage
in points (“pips”) (2018: 500 pips) was applied to the HKD: USD (2018: HKD: USD) spot and forward rates 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 2019
USD
As at 31 December 2018
USD
Increase (decrease) in
profit or loss
Increase (decrease)
in other comprehensive income
pips
increase
HK$ million
pips
decrease
HK$ million
pips
increase
HK$ million
pips
decrease
HK$ million
4
3
(4)
(3)
4
1
(4)
(1)
(e) Other price risk
The Group is exposed to other price risk through its investment in equity security measured at fair value through other
comprehensive income (“FVTOCI”) and fund investment measured at fair value through profit or loss (“FVTPL”). The Group has
appointed a special team to monitor the price risk and will consider hedging the risk exposure should the need arise.
Sensitivity analysis
No sensitivity analyses on other price risk are presented since the exposure resulted from the expected changes in fair value of
both investments at the reporting date is considered insignificant.
2. CATEGORIES OF FINANCIAL INSTRUMENTS
Financial assets
FVTPL
FVTOCI
Derivative instrument under hedge accounting
Amortized cost (including cash and cash equivalents)
Financial liabilities
Derivative instruments under hedge accounting
Amortized cost
2019
HK$ million
2018
HK$ million
367
235
7
10,757
11,366
46
14,684
14,730
295
–
–
4,203
4,498
26
7,418
7,444
176
Hysan Annual Report 2019FINANCIAL RISK MANAGEMENT continuedFor the year ended 31 December 2019
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 recognized 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 2019
Derivatives under hedge accounting
As at 31 December 2018
Derivatives under hedge accounting
Gross amounts of
recognized
financial
assets
HK$ million
Gross amounts of
recognized financial
liabilities
set off in the
consolidated
statement of
financial position
HK$ million
Net amounts
of financial
assets presented
in the
consolidated
statement of
financial position
HK$ million
7
–
–
–
7
–
(b) Net financial assets subject to enforceable master netting arrangements or similar agreements, by counterparty
As at 31 December 2019
Counterparty A
As at 31 December 2018
Counterparty A
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
7
–
(7)
–
Net amount
HK$ million
–
–
(c) Financial liabilities subject to enforceable master netting arrangements or similar agreements
As at 31 December 2019
Derivatives under hedge accounting
As at 31 December 2018
Derivatives under hedge accounting
Gross amounts of
recognized 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
Gross amounts of
recognized financial
liabilities
HK$ million
(46)
(26)
–
–
(46)
(26)
177
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
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 2019
Counterparty A
Counterparty B
Counterparty C
Counterparty D
As at 31 December 2018
Counterparty A
Net amounts of
financial liabilities
presented in the
consolidated
statement of
financial position
HK$ million
Financial assets
not set off in the
consolidated
statement of
financial position
HK$ million
(19)
(5)
(12)
(10)
(46)
(26)
7
–
–
–
7
–
Net amount
HK$ million
(12)
(5)
(12)
(10)
(39)
(26)
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 amortized 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
amortized cost in the consolidated financial statements approximate their fair values, except for the carrying amount of
HK$10,528 million (2018: HK$4,790 million) unsecured fixed rate notes as stated in note 27 of the Notes to the Consolidated
Financial Statements section with fair value of HK$9,096 million (2018: HK$4,824 million).
The fair value of HK$4,649 million (2018: HK$2,348 million) of the unsecured fixed rate notes is categorized 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$4,447 million (2018: HK$2,476 million) of the unsecured fixed rate notes is categorized into Level 2 of the
fair value hierarchy, in which the fair value was measured using discounted cash flow methodology based on observable yield
curves of the respective currency taking into account the credit margin of the Group as appropriate.
178
Hysan Annual Report 2019FINANCIAL RISK MANAGEMENT continuedFor the year ended 31 December 2019
4. FAIR VALUE MEASUREMENT continued
(b) Fair value of financial assets and financial liabilities that are measured at fair value on a recurring basis
The following table provides an analysis of financial instruments that are measured at fair value on a recurring basis, grouped
into Levels 1 to 3 based on the degree to which the inputs to the fair value measurements are observable.
• Level 1: fair value measurements are those derived from quoted prices (unadjusted) in active market for identical assets and
liabilities.
• Level 2: fair value measurements are those derived from inputs other than quoted prices included with Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3: fair value measurements are those derived from valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable inputs).
Financial assets
Financial assets at FVTPL
Unlisted club debenture
Fund investment
Financial asset at FVTOCI
Listed investment in equity security
Derivative under hedge accounting
Cross currency swap
Total
Financial liabilities
Derivatives under hedge accounting
Cross currency swaps
Financial assets
Financial assets at FVTPL
Unlisted club debenture
Fund investment
Total
Financial liability
Derivative under hedge accounting
Cross currency swap
Level 1
HK$ million
Level 2
HK$ million
Level 3
HK$ million
Total
HK$ million
2019
–
–
235
–
235
–
366
–
–
366
1
–
–
7
8
2019
1
366
235
7
609
Level 1
HK$ million
Level 2
HK$ million
Level 3
HK$ million
Total
HK$ million
–
46
2018
–
46
Level 1
HK$ million
Level 2
HK$ million
Level 3
HK$ million
Total
HK$ million
–
–
–
–
1
–
1
–
294
294
1
294
295
26
–
26
179
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
4. FAIR VALUE MEASUREMENT continued
(c) Reconciliation of Level 3 fair value measurement of financial asset
As at 1 January 2018
Transfer into Level 3
Addition
Loss recognized in profit or loss
As at 31 December 2018
Addition
Gain recognized in profit or loss
As at 31 December 2019
Fund
investment
HK$ million
–
162
149
(17)
294
60
12
366
There were no transfers between these three levels during the year.
The unrealized fair value gain of HK$12 million (2018: unrealized fair value loss of HK$17 million) relating to fund investment
at fair value through profits or loss is included in other gains and losses.
(d) Valuation techniques and inputs used in fair value measurements
Cross currency swaps are measured using discounted cash flow methodology based on observable spot and forward exchange
rates as well as the yield curves of the respective currencies taking into account the credit risk of the counterparties and of the
Group as appropriate.
Fund investment is measured with reference to the fair value of underlying assets and liabilities held under the fund as at the
end of the reporting period.
(e) Valuation process of Level 3 fair value measurements of financial assets
At the end of the reporting period, the management of the Group obtains from the fund manager the valuation techniques
and inputs for Level 3 fair value measurements in relation to the fund investment and its underlying assets and liabilities.
Where there is a material change in the fair value of the fund investment, the causes of the fluctuations will be reported to the
Directors of the Company.
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 cash equivalents.
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
Unsecured fixed rate notes
Borrowings
Less: Time deposits
Cash and cash equivalents
Net debt
Equity attributable to owners of the Company
Net debt to equity
2019
HK$ million
2018
HK$ million
2,001
10,528
12,529
(5,735)
(3,597)
3,197
77,650
4.1%
1,532
4,790
6,322
(748)
(2,069)
3,505
74,431
4.7%
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
180
Hysan Annual Report 2019FINANCIAL RISK MANAGEMENT continuedFor the year ended 31 December 2019
For the year ended 31 December
Results
Turnover
Property expenses
Gross profit
Other income
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 declared
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$)
Year-end share price (HK$)
2019
HK$ million
(Note 1)
2018
HK$ million
(Note 2)
2017
HK$ million
2016
HK$ million
2015
HK$ million
3,988
(536)
3,452
–
154
10
(269)
(313)
792
1,733
5,559
(473)
5,086
(241)
4,845
2,587
2,587
1,507
1,221
144
4.63
4.63
2.47
2.47
4.1%
17.0x
74.39
3.06
30.55
3,890
(523)
3,367
–
78
(16)
(227)
(222)
3,532
288
6,800
(481)
6,319
(286)
6,033
2,536
2,536
1,444
1,224
144
5.77
5.76
2.42
2.42
4.7%
18.1x
71.12
3.35
37.25
3,548
(449)
3,099
261
69
–
(247)
(158)
853
220
4,097
(484)
3,613
23
3,636
2,491
2,349
1,411
1,161
137
3.48
3.48
2.38
2.25
5.0%
17.1x
66.89
3.37
41.45
3,535
(428)
3,107
–
50
–
(219)
(178)
(1,187)
237
1,810
(463)
1,347
(129)
1,218
2,369
2,369
1,394
1,139
135
1.16
1.16
2.26
2.26
5.4%
20.5x
64.56
3.50
32.05
3,430
(414)
3,016
–
54
–
(234)
(204)
695
246
3,573
(438)
3,135
(232)
2,903
2,283
2,283
1,330
1,122
132
2.73
2.73
2.15
2.15
3.0%
19.5x
64.48
1.94
31.75
181
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness PerformanceFive-Year Financial Summary
As at 31 December
Assets and liabilities
Investment properties
Investments in associates
Loans to associates
Investment in a joint venture
Loans to a joint venture
Other financial investments
Time deposits, cash and cash equivalents
Other assets
Total assets
Borrowings
Taxation
Other liabilities
Total liabilities
Net assets
Non-controlling interests
Shareholders’ funds
Definitions:
(1) Underlying profit for the year:
2019
HK$ million
(Note 1)
2018
HK$ million
(Note 2)
2017
HK$ million
2016
HK$ million
2015
HK$ million
79,116
5,189
11
143
1,090
601
9,332
1,561
97,043
(12,529)
(1,341)
(2,201)
(16,071)
80,972
(3,322)
77,650
77,442
3,708
11
145
1,062
294
2,817
1,564
87,043
(6,322)
(962)
(2,122)
(9,406)
77,637
(3,206)
74,431
72,470
3,779
10
147
982
21
2,662
2,049
82,120
(6,185)
(945)
(1,989)
(9,119)
73,001
(3,048)
69,953
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
arrived at by excluding from profit attributable to owners of the Company unrealized fair value changes on investment properties and items not
generated from the Group’s core property investment business
(2) Recurring underlying profit for the year:
performance indicator of the Group’s core property investment business and is arrived at by excluding from underlying profit for the year items
that are non-recurring in nature
(3) Net debt to equity:
borrowings less time deposits, cash and cash equivalents 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 as at year end
(6) Net debt per share:
borrowings less time deposits, cash and cash equivalents divided by number of issued shares at year end
Notes:
1.
2.
In 2019, the Group has applied HKFRS 16. Accordingly, certain comparative information for the years ended 31 December 2015, 2016, 2017 and
2018 may not be comparable to the year ended 31 December 2019 as such comparative information was prepared under HKAS 17.
In 2018, the Group has applied the remaining sections of HKFRS 9. Accordingly, certain comparative information for the years ended 31
December 2015, 2016 and 2017 may not be comparable to the years ended 31 December 2018 and 2019 as such comparative information was
prepared under HKAS 39.
182
Hysan Annual Report 2019FIVE-YEAR FINANCIAL SUMMARY continued
To the Board of Directors
Hysan Development Company Limited
Dear Sirs,
Annual Revaluation of Investment Properties as at 31 December 2019
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 2019 was in the approximate sum of Hong Kong Dollars Seventy-Nine Billion One Hundred and
Sixteen Million Only (ie HK$79, 116 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 but without allowances for any expenses or taxation
which may be incurred in effecting a sale, and where appropriate, cross reference by sales comparables.
Yours faithfully
Knight Frank Petty Limited
Hong Kong, 12 February 2020
183
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness PerformanceReport of the Valuer INVESTMENT PROPERTIES
Address
1. Bamboo Grove
Lot No.
I.L. 8624
Use
Category
of the Lease
Percentage
held by
the Group
Residential Medium term lease
100%
Sec. FF of I.L. 29 and
the R.P. of Marine Lot 365
Commercial
Long lease
100%
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
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
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%
Commercial
Long lease
65.36%
Commercial
Long lease
100%
Sec. N of I.L. 457 and Sec. LL of I.L. 29
Commercial
Long lease
100%
Sec. KK of I.L. 29
Commercial
Long lease
100%
I.L. 1452, the R.P. of I.L. 472 and 476
Commercial
Long lease
100%
Sec. B, C and the R.P. of I.L. 1451
Commercial
Long lease
100%
The R.P. of Sec. GG of I.L. 29
Commercial
Long lease
100%
74-86 Kennedy Road
Mid-Levels
Hong Kong
2. Hysan Place
500 Hennessy Road
Causeway Bay
Hong Kong
3.
4.
5.
6.
7.
8.
9.
Lee Garden One
33 Hysan Avenue
Causeway Bay
Hong Kong
Lee Garden Two
28 Yun Ping Road
Causeway Bay
Hong Kong
Lee Garden Three
1 Sunning Road
Causeway Bay
Hong Kong
Lee Garden Five
18 Hysan Avenue
Causeway Bay
Hong Kong
Lee Garden Six
111 Leighton Road
Causeway Bay
Hong Kong
Lee Theatre Plaza
99 Percival Street
Causeway Bay
Hong Kong
Leighton Centre
77 Leighton Road
Causeway Bay
Hong Kong
10. One Hysan Avenue
1 Hysan Avenue
Causeway Bay
Hong Kong
184
Hysan Annual Report 2019Schedule of Principal PropertiesAs at 31 December 2019
SHARE CAPITAL
As at 31 December 2019
Issued and fully paid-up capital
There was one class of ordinary shares with equal voting rights.
DISTRIBUTION OF SHAREHOLDINGS
(As at 31 December 2019, as per register of members of the Company)
HK$
Number of
Ordinary Shares
7,720,110,519
1,043,820,891
Size of registered shareholdings
5,000 or below
5,001 – 50,000
50,001 – 100,000
100,001 – 500,000
500,001 – 1,000,000
Above 1,000,000
Total
Number of
shareholders
% of
shareholders
Number of
ordinary shares
% of the total no.
of issued shares
(Note)
2,261
752
67
42
2
6
3,130
72.24
24.03
2.14
1.34
0.06
0.19
3,578,302
11,626,859
5,010,419
8,651,487
1,131,041
1,013,822,783
100
1,043,820,891
0.34
1.11
0.48
0.83
0.11
97.13
100
TYPES OF SHAREHOLDERS
(As at 31 December 2019, as per register of members of the Company)
Type of shareholders
Lee Hysan Company Limited
Other corporate shareholders
Individual shareholders
Total
LOCATION OF SHAREHOLDERS
(As at 31 December 2019, as per register of members of the Company)
Location of shareholders
Hong Kong
United States and Canada
United Kingdom
Others
Total
Note:
Number of
ordinary shares held
% of the total no.
of issued shares
(Note)
433,130,735
582,680,259
28,009,897
1,043,820,891
41.49
55.82
2.69
100
Number of
ordinary shares held
% of the total no.
of issued shares
(Note)
1,041,689,353
1,898,751
17,085
215,702
1,043,820,891
99.796
0.181
0.002
0.021
100
The percentages was compiled based on the total number of issued shares of the Company as at 31 December 2019 (i.e. 1,043,820,891 ordinary
shares).
185
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness PerformanceShareholding 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
20 February 2020
4 March 2020
6 March 2020
Dispatch of second interim dividend warrants
(on or about) 20 March 2020
Closure of register of members for Annual General Meeting
Annual General Meeting
2020 interim results to be announced
* subject to change
DIVIDEND
8 to 13 May 2020
13 May 2020
10 August 2020*
The Board declares the payment of a second interim dividend of HK117 cents per share. The second interim dividend will be
payable in cash to shareholders on the register of members as at Friday, 6 March 2020.
The register of members will be closed on Friday, 6 March 2020, 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 Thursday, 5 March 2020.
Dividend warrants will be dispatched to shareholders on or about Friday, 20 March 2020.
The register of members will also be closed from Friday, 8 May 2020 to Wednesday, 13 May 2020, both dates inclusive, for the
purpose of determining shareholders’ entitlement to attend and vote at the Annual General Meeting to be held on 13 May
2020, during which period no transfer of shares will be registered. In order to qualify for attending and voting at the Annual
General Meeting, 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, 7 May 2020.
186
Hysan Annual Report 2019Shareholder Information
SHAREHOLDER SERVICES
For enquiries about share transfer and registration, please contact the Company’s Registrar, Tricor Standard Limited:
Tricor Standard Limited
Level 54, Hopewell Centre
183 Queen’s Road East
Hong Kong
Telephone: (852) 2980 1333
Facsimile: (852) 2861 1465
Holders of the Company’s ordinary shares should notify the Registrar promptly of any change of their address.
The Annual Report is printed in English and Chinese language and is available on our website at www.hysan.com.hk.
Shareholders may at any time choose to receive the Annual Report in printed form in either the English or Chinese language or
both or by electronic means. Shareholders who have chosen to receive the Annual Report using electronic means and who for
any reason have difficulty in receiving or gaining access to the Annual Report will promptly upon request be sent a printed copy
free of charge.
Shareholders may at any time change their choice of the language or means of receipt of the Annual Report by notice in
writing to the Company’s Registrar at the address above. The Change Request Form may be downloaded from the Company’s
website at www.hysan.com.hk.
INVESTOR RELATIONS
For enquiries relating to investor relations, please email to investor@hysan.com.hk or write to the Company at:
Investor Relations
Hysan Development Company Limited
49/F. (Reception: 50/F.), Lee Garden One
33 Hysan Avenue
Hong Kong
Telephone: (852) 2895 5777
Facsimile: (852) 2577 5153
187
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance BOARD OF DIRECTORS
Lee Irene Yun-Lien (Chairman)
Churchouse Frederick Peter**
Fan Yan Hok Philip**
Lau Lawrence Juen-Yee**
Poon Chung Yin Joseph**
Wong Ching Ying Belinda**
Jebsen Hans Michael B.B.S.*
(Yang Chi Hsin Trevor as his alternate)
Lee Anthony Hsien Pin*
(Lee Irene Yun-Lien as his alternate)
Lee Chien*
Lee Tze Hau Michael*
AUDIT AND RISK MANAGEMENT COMMITTEE
Poon Chung Yin Joseph**(Chairman)
Churchouse Frederick Peter**
Fan Yan Hok Philip**
Lee Anthony Hsien Pin*
REMUNERATION COMMITTEE
Fan Yan Hok Philip** (Chairman)
Poon Chung Yin Joseph**
Lee Tze Hau Michael*
NOMINATION COMMITTEE
Lee Irene Yun-Lien (Chairman)
Fan Yan Hok Philip**
Lau Lawrence Juen-Yee**
Poon Chung Yin Joseph**
Lee Chien*
* Non-Executive Director
** Independent Non-Executive Director
SUSTAINABILITY COMMITTEE
Jebsen Hans Michael B.B.S.* (Chairman)
Fan Yan Hok Philip**
Wong Ching Ying Belinda**
COMPANY SECRETARY
Cheung Ka Ki Maggie
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 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
Ticker Symbol for ADR Code: HYSNY
CUSIP reference number: 449162304
AUDITOR
Deloitte Touche Tohmatsu
188
Hysan Annual Report 2019Corporate Information .
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ANNUAL REPORT 2019
Hysan Development Company Limited
49/F Lee Garden One, 33 Hysan Avenue, Hong Kong
T 852 2895 5777 F 852 2577 5153
www.hysan.com.hk
C M Y
K
stock code 00014