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Hysan Development Company Limited
50/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
Resilient.
Responsive.
Resourceful.
ANNUAL
REPORT
2020
VISION
To be the premier
property company in
its market of choice.
MISSION
VALUES
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.
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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 75 to 77 of this Annual Report.
Scan QR code to read the
Sustainability Report 2020
CONTENTS
1 Overview
2 Key Facts
2 Our Portfolio
3 Value Creation
4 Our Assets
6 2020 Performance at a Glance
10 A Conversation with Our Chairman
2 Business Performance
14 Management’s Discussion
and Analysis
14 Strategy and Review of Results
15 Review of Operations
21 Financial Review
24 Treasury Policy
3 Corporate Governance
28 Corporate Governance Report
4 Financial Statements,
Valuation and
Other Information
85 Directors’ Responsibility for
the Financial Statements
86 Independent Auditor’s Report
89 Financial Statements
145 Financial Risk Management
156 Five-Year Financial Summary
158 Report of the Valuer
159 Schedule of Principal Properties
161 Shareholding Analysis
162 Shareholder Information
164 Corporate Information
28 Corporate Governance Highlights
29 Our Leadership Team
35 Our Governance Structure,
Our Governance System and
Our Corporate Governance Framework
52 Our Risk Management and Internal
Control Framework
54 Risk Management and Internal Control
Report
61 Audit and Risk Management Committee
Report
65 Remuneration Committee Report
71 Nomination Committee Report
73 Sustainability Committee Report
75 Sustainability Report 2020 – Summary
78 Directors’ Report
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.
2
Hysan Annual Report 2020 VALUE CREATION
Financial Achievements:
• Steady and progressive total return
• Strong Balance Sheet
Active Management
Curate balanced office and retail
portfolio with a diversified group
of tenants; long-term partnerships
with our tenants served us well in
challenging times
Turnover
2016-2020 (HK$ million)
3,988
3,890
3,710
3,535 3,548
Financial
Achievements
Maintain resilience and strength
in the face of adversity
Recurring Underlying
Profit
2016-2020 (HK$ million)
2,587
2,536
2,369 2,349
2,398
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
Dividends per Share
Provide steady return
2016-2020 (HK cents)
144
144
144
135
137
2016
2017
2018
2019
2020
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
3
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance KEy FActS
OUR ASSETS
Hysan Place
Greenest commercial building and trendiest
shopping centre in town
Completed 2012
Approx. Gross
Floor Area
716,000 ft2
Number of
Floors
40
Parking
Spaces
66
HYSAN
PLACE
Lee Theatre Plaza
One of Hong Kong’s best-loved
shopping and dining complexes
Completed 1994 |
Lower zone renovated 2013
Approx. Gross
Floor Area
314,000 ft2
Number of
Floors
26
Leighton Centre
Popular office complex
amongst sports and
lifestyle shops
Completed 1977 |
Renovated 2011
Approx. Gross
Number of
Floor Area
Floors
430,000 ft2 28
Parking Spaces
321
LEE
THEATRE
PLAZA
ONE
HYSAN
AVENUE
LEE
GARDEN
ONE
LEE
GARDEN
TWO
LEE
GARDEN
FIVE
LEIGHTON
CENTRE
LEE
GARDEN
THREE
GARDEN
LEE
SIX
Kennedy Road
Bamboo Grove
Quality international living in Mid-Levels
Completed 1985 | Renovated 2019
BAMBOO
GROVE
Approx. Gross
Floor Area
691,000 ft2
Number of
Units
345
Parking
Spaces
436
4
Lee Garden RoadHysan AvenueLeighton RoadSharp Street EastLan Fong RoadPak Sha RoadKai Chiu RoadYun Ping RoadPercival StreetHysan Annual Report 2020 Lee Garden One
Home to international corporations and
premium brands
Completed 1997
Approx. Gross
Floor Area
903,000 ft2
Number of
Floors
53
Parking
Spaces
200
HYSAN
PLACE
LEE
THEATRE
PLAZA
ONE
HYSAN
AVENUE
LEE
GARDEN
ONE
Lee Garden Two
Spacious offices and home to children’s
concept floors
Completed 1992 | Retail podium renovated 2019
Approx. Gross
Floor Area
621,000 ft2
Number of
Floors
34
Parking
Spaces
167
LEE
GARDEN
TWO
LEE
GARDEN
FIVE
Lee Garden Three
Newest commercial address in Lee Gardens
Completed 2017
Approx. Gross
Floor Area
467,000 ft2
Number of
Floors
32
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
LEIGHTON
CENTRE
LEE
GARDEN
THREE
LEE
GARDEN
SIX
Approx. Gross
Floor Area
132,000 ft2
Number of
Floors
25
One Hysan Avenue
Efficient office and retail building in prime site
Lee Garden Six
Convenient office and retail location
Completed 1976 | Renovated 2011
Completed 1988 | Renovated 2004
Approx. Gross
Floor Area
169,000 ft2
Number of
Floors
26
Approx. Gross
Floor Area
80,000 ft2
Number of
Floors
24
5
Lee Garden RoadHysan AvenueLeighton RoadSharp Street EastLan Fong RoadPak Sha RoadKai Chiu RoadYun Ping RoadPercival StreetOverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance 2020 Performance at a Glance
FINANCIAL PERFORMANCE
Turnover
HK$3,710m
7.0%
Dividends
per Share
HK144 cents
0
9
8
3
,
8
8
9
3
,
0
1
7
3
,
5
3
5
3
,
8
4
5
3
,
5
3
1
7
3
1
4
4
1
4
4
1
4
4
1
2
4
4
,
7
7
6
1
1
,
9
7
3
9
9
,
4
7
3
3
6
9
6
,
0
7
4
,
2
7
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
Cost
Valuation Surplus
Recurring
Underlying
Profit
HK$2,398m
7.3%
Net Asset
Value
per Share
HK$70.87
4.7%
9
6
3
2
,
9
4
3
2
,
6
3
5
2
,
7
8
5
2
,
8
9
3
2
,
.
9
3
4
7
2
1
1
7
.
7
8
0
7
.
.
6
5
4
6
.
9
8
6
6
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
6
Hysan Annual Report 2020 Property
Value
HK$74,993m
5.2%
0
9
8
,
3
8
8
9
,
3
0
1
7
,
3
5
3
5
,
3
8
4
5
,
3
5
3
1
7
3
1
4
4
1
4
4
1
4
4
1
2
4
4
7
7
,
6
1
1
9
7
,
3
9
9
4
7
,
3
3
6
9
6
,
0
7
4
2
7
,
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
Cost
Valuation Surplus
9
6
3
,
2
9
4
3
,
2
6
3
5
,
2
7
8
5
,
2
8
9
3
,
2
9
3
.
4
7
2
1
.
1
7
7
8
0
7
.
6
5
.
4
6
9
8
.
6
6
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
Financial Prudence
Net Interest Coverage (Note 1)
9.8 times
(2019: 17.0 times)
Net Debt to Equity (Note 2)
Net Cash
(31 Dec 2019: 3.9%)
Effective Interest Rate
3.0%
(2019: 3.4%)
Average Debt Maturity
6.8 years
(31 Dec 2019: 6.6 years)
Fixed Rate Debt
88%
(31 Dec 2019: 84%)
Capital Market Issuances
88%
(31 Dec 2019: 84%)
Credit Ratings
Moody’s: A3
Fitch: A-
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
7
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance 2020 Performance at a Glance
ENVIRONMENTAL, SOCIAL
AND GOVERNANCE RECOGNITIONS
• “Three-star” rating and “Green Star” designation:
Global Real Estate Sustainability Benchmark (“GRESB”)
• “AA” Rating: Hang Seng Corporate Sustainability Index
• “A” Rating: MSCI ESG Ratings assessment
• Constituent member: FTSE4Good Index Series
• Gold Award in Fair Trade Hong Kong’s
Fair Trade Award 2020
• Silver Award (Sustainability Report) and Honours Award
(Annual Report) in MerComm, Inc’s 2020 International
ARC Awards
• Honourable Mention in the Hong Kong Management
Association’s 2020 Best Annual Reports Awards
F a ir T r ade Award
2020/21
Gold
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.
8
Hysan Annual Report 2020 • Best IR Company, Best Annual Report, Best ESG-E,
Best ESG-S, Best ESG-G (Mid Cap) in the Hong Kong
Investor Relations Association’s Investor Relations
Awards 2020
• Winner of Construction and Real Estate In-House
Team of the Year and Finalist of Compliance and Risk
Management In-House Team of the Year in 2020 ALB
Hong Kong Law Awards by Thomson Reuters
• Platinum Award (Non-Hang Seng Index – Medium
Market Capitalization Category) in the Hong Kong
Institute of Certified Public Accountants’ Best
Corporate Governance Awards 2020
• Most Innovative Deal – Deal of the Year (Real Estate)
in The Asset’s Triple A Sustainable Capital Markets
Regional Awards 2020
S I A N AWA
R
D
S
T A
E
S
S
A
R
E
G
I
ONAL A W A
2
0
2
0
S
D
R
9
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
A conversation with Our chairman
Ms. Irene Lee
2020 was a difficult
year for businesses
globally. What affected
Hong Kong the most?
2020 was a most difficult
year, for Hong Kong and for the rest
of the world. As we enter the spring of
2021, we still have little clarity on our
future.
We have had warnings of the arrival of
the “new normal” leading to structural
changes in the office and retail sectors
over the past few years. Our new world
reflects a changing of the guard –
the next few waves of youth are replacing
our baby boomer generation. The shorter-
term shocks of the trade war, COVID-19
and social unrest have just accelerated
the pace of change.
10
Hysan Annual Report 2020 Hysan’s roots are in Causeway Bay,
Hong Kong. We are fortunate to have a premium
collection of real estate mixed with traditional old
Hong Kong walkups, concentrated in one of the busiest
and most iconic destinations in the city for locals and
visitors alike. Having a balanced retail and office
portfolio with a diversified group of tenants has given us
balance and stability. We are committed to a progressive
and sustainable growth model. We also believe in long-
term partnerships with our tenants and with our
community. This has served us well during difficult times.
How has Hysan
managed to
be so resilient
during these
difficult times?
How did Hysan
respond to the
structural
changes in the
office and retail
sectors, magnified
by the events of
2020?
In relation to the office sector, flexibility
and optionality are increasingly key to users. This requirement
was triggered some years before the recent crisis, as the
younger workforce demands a different work environment.
They want flexibility, mobility, access to off-site work, work-life
balance and freedom, while employers focus on costs as well
as choosing an office with attributes to attract and retain
staff. Technology is the enabler and is improving efficiency
and productivity.
As for the retail sector, consumption demand has also
changed. The younger generation has different aspirations
and is happier to pay for experiences than for material goods.
While Hong Kong has seen a slower adoption of online
commerce, momentum is gathering and purchases are
increasingly made online. Dining, lifestyle and home
improvement purchases are all popular. Hysan’s challenge is
to ensure that our area is the destination of choice. While we
would like our visitors to spend money at our shops and dine in
our diverse and interesting selection of restaurants, just as
importantly we need them to form an emotional loyalty and a
life-long and multi-generational habit of visiting Lee Gardens
as their preferred destination.
11
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance A cONVErSAtION wIth OUr chAIrMAN
How will Hysan
use technology to
stay relevant
whilst staying true
to its roots?
Technology is a way of life and Generations
X, Y and Z have adopted it. We fully embrace this
way of life and have moved quickly to build new
infrastructure that allows us to embrace the new
way of doing things. Three years ago, we rolled out
area-wide video speed WiFi to increase connectivity
in the Lee Gardens area, in and out of malls. In
addition to the convenience this provides our
visitors, data collected and securely protected with
high privacy standard has enabled us to decide on
tenant curation and, importantly, gives us insights
into the how, when and what, in relation to our
shoppers’ preferences.
We have increasingly built digital and robotics
capabilities, with the aim of improving analytics,
efficiency, productivity for our company and
removing pain points for our tenants and their
clients. We are building a strong mobile digital
offering that includes touchless carparks, e-coupons
and rewards, e-shop functions, enhanced customer
relationship management systems, and traffic and
pollution measurement, among others.
12
Hysan Annual Report 2020 We are fortunate to have critical mass
in Causeway Bay. We will continue to
invest, strengthen and grow our core business in our
home district, while blending ESG, arts and culture,
and health and wellness into our portfolio. With a
strong balance sheet and a unique Lee Gardens
community model, we have the capacity to pursue
opportunities outside of Hong Kong.
How will Hysan
continue to
evolve in the
coming decade?
The outlook for 2021 is far from
clear. A great deal depends on COVID-19 coming
under control, not just in Hong Kong but also around
the world. Here at Hysan, our balanced portfolio and
financial strength provide a strong foundation for
long-term growth. For now, we will do our best to
look after and motivate our staff, inject new ideas,
create community projects, and protect and enhance
our assets. The world economy will continue to have
ample liquidity, providing stimulus in a low interest
rate environment, and governments around the
world will focus on restarting economies.
Hong Kong is no different. We need to contain
COVID-19, re-start our economy and improve
livelihood.
What is your
outlook for Hong
Kong’s 2021?
13
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance Management’s Discussion
and Analysis
STRATEGY
In line with our clearly stated mission, Hysan strives to provide stakeholders with strong and
sustainable returns from our property portfolio, which is predominantly located in Hong
Kong’s premier commercial district of Causeway Bay. We will continue to maintain a strategic
focus on the Lee Gardens area of Causeway Bay, our primary base, while actively seeking
other investment opportunities beyond our core geographical footprint.
Hysan enhances portfolio value through asset improvement, repositioning and
redevelopment. Given the nature of our portfolio, the Group also actively curates the content
of the Lee Gardens community for the benefit of tenants, customers and other stakeholders.
REVIEW OF RESULTS
The Group’s turnover in 2020 was HK$3,710 million, down 7.0% from HK$3,988 million in
2019 with the impact of COVID-19 affecting all our three business sectors. Against this
backdrop, as at 31 December 2020, the occupancy rates of our office portfolio and retail
portfolio were 95% and 96% respectively. The residential portfolio’s occupancy rate
was 74%.
Both Recurring Underlying Profit (our key leasing business performance indicator) and
Underlying Profit declined by 7.3% to HK$2,398 million (2019: HK$2,587 million).
The Group recorded a Reported Loss of HK$2,547 million in 2020 as compared with a
Reported Profit of HK$4,845 million in 2019, mainly due to fair value changes of investment
properties of the Group and its associates between two years. More details regarding the fair
value change are presented in the section “Financial Review – Revaluation of Investment
Properties” and “Financial Review – Investments in Associates and a Joint Venture”.
Shareholders’ fund was HK$73,680 million as at 31 December 2020 (2019 : HK$77,650
million). The reconciliation of Recurring Underlying Profit, Underlying Profit and Reported
(Loss) Profit is as follows:
Reported (loss) profit
Change in fair value of investment properties
Share of change in fair value of investment properties
(net of deferred taxation) of associates
Effect of other non-controlling interests’ shares
Imputed interest income on interest-free loan to a joint venture
Other gains and losses
Profit attributable to perpetual capital securities holders
2020
HK$ million
2019
HK$ million
(2,547)
4,903
12
(223)
(30)
(5)
288
4,845
(792)
(1,528)
102
(30)
(10)
–
Recurring Underlying Profit/Underlying Profit
2,398
2,587
14
Hysan Annual Report 2020
Taking advantage of a low interest rate environment with ample market liquidity, the Group
secured new funding from diversified sources including the issuance of perpetual securities
and medium-term notes and drawdown of bank loans. The new funding strengthened our
balance sheet and provides a solid foundation for the Group to pursue potential investment
opportunities and strategic growth initiatives.
REVIEW OF OPERATIONS
Hysan’s investment property portfolio comprises three sectors – office, retail and residential –
covering a total floor area of approximately 4.5 million square feet. As at 31 December
2020, office properties made up around 55% of the Group’s investment portfolio by gross
floor area, with retail properties accounting for around 30%. These properties are located in
Lee Gardens, Causeway Bay. Approximately 15% of the Group’s portfolio consists of
residential properties, which are mainly units in Bamboo Grove, Mid-Levels.
The turnover of each sector is shown as below:
Sector
Office
Retail
Residential
2020
HK$ million
2019
HK$ million
1,814
1,600
296
3,710
1,833
1,836
319
3,988
Change
-1.0%
-12.9%
-7.2%
-7.0%
While COVID-19 took its toll and led to a turnover decrease of 12.9% of our retail
sector, our office sector was relatively more resilient and reported a turnover decline of
1.0%. Turnover of the residential sector dropped by 7.2% mainly due to limited
expatriate demands.
Key Performance Indicators
The Group’s turnover growth and occupancy rate are the key measurements used for the
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
Sector
2020
2019
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
-1.0%
-12.9%
-7.2%
95%
96%
74%
+8.6%
-4.5%
+14.3%
98%
96%
87%
N/A
13.2%
13.4%
Note: No changes have been made to the source data or calculation methods used when compared to 2019.
15
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance MANAGEMENt’S DIScUSSION AND ANALySIS
Office
Turnover of the Group’s office portfolio experienced a decline of 1.0% to
HK$1,814 million (2019: HK$1,833 million), including turnover rent of
HK$7 million (2019: HK$7 million).
COVID-19 adversely affected Hong Kong’s office rental market during the
period under review, with negative net absorption standing at over
2.7 million square feet at the end of 2020. Amid the uncertainties brought
about by COVID-19, demand on office space from “new economy” firms
remained relatively resilient.
The overall rental reversion rate on renewals, rent review and new letting,
while remaining positive, was narrowing as compared to that of 2019.
The portfolio recorded an occupancy rate of 95% as at 31 December 2020
(31 December 2019: 98%).
Office Lease Expiry Profile by Area Occupied
(As at 31 December 2020)
29%
24%
23%
19%
2021
2022
2023
2024 and beyond
The office tenants profile remained stable with Banking and Finance,
Professional and Consulting and Co-work accounting for approximately
50% of our occupied floor area while the IT sector’s proportion of our
office portfolio increased from 7% to 9% in 2020.
Office Tenant Profile by Area Occupied as at Year-end
1.8%
2.2%
3.8%
8.3%
16.1%
24.6%
2020
14.8%
2.6%
3.5%
3.7%
8.9%
14.4%
24.1%
2019
16.0%
9.0%
7.1%
9.2%
10.2%
9.7%
10.0%
Banking and Finance
Semi-Retail
Professional and Consulting
High-end Retailers
Co-work
Insurance
IT
Marketing
Consumer Products
Others
16
“We continue to see a wide
variety of companies in Hong
Kong accelerating their hybrid
workplace approach as a result
of the pandemic. Two of IWG’s
locations are with Hysan in
Lee Garden Three and Hysan
Place at Causeway Bay, where
we have seen a vast pick up on
demand. IWG launched
Signature at Hysan Place in
August 2020 and its addition
enabled us to continue
supporting companies in
rethinking their real estate
strategies through flexible
workspace.
Hysan is a forward thinking
developer with great buildings
and amenities. Our partnership
has strengthened during 2020
by working together to add
quality flexible workspace
which is now an essential
amenity to companies.”
Paul MacAndrew
Country Manager, HK & Singapore
IWG plc
Hysan Annual Report 2020 Retail
Turnover of the Group’s retail portfolio decreased by 12.9% to HK$1,600 million (2019:
HK$1,836 million), including turnover rent contribution of HK$44 million (2019: HK$66
million). The occupancy rate was 96% as at 31 December 2020 (31 December 2019: 96%).
Recurring waves of the COVID-19 pandemic caused significant disruption to Hong Kong’s
retail sector throughout 2020 with retailers that traditionally benefit from overseas and
mainland visitors suffered the most. Multi-faceted support ranging from rental assistance to
marketing initiatives was provided to our tenants. The overall rental reversion rate on
renewals, rent review and new letting was negative in 2020.
Retail Lease Expiry Profile by Area Occupied
(As at 31 December 2020)
32%
30%
18%
16%
2021
2022
2023
2024 and beyond
“Hysan truly views tenants as their business partners. Upon the
outbreak of COVID-19 in Hong Kong, we received a call from
their leasing team to understand more about our difficulties.
At that point, we did not realise the extent of the challenges
F&B operators would have to face in 2020, with limitations on
the opening hours and the number of customers within the
restaurants. Throughout the year, Hysan worked closely with
us to ensure a safe environment for our customers. Their
enhanced cleaning and sanitizing measures at the mall clearly
benefitted us in building customer confidence and traffic.
Hysan also offered rental assistance to us and their marketing
programmes like e-coupons further gave us a helping hand in
securing more business.
The Hysan team demonstrated their professionalism right from
the start at the handing over of the shop space and we saw this
shine even further during the virus-hit year. We are more than
happy to remain Hysan’s partner in the foreseeable future.”
Kent Wong
Chairman, Taste • Gourmet Group
(operating Nabe Urawa at Hysan Place)
17
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance MANAGEMENt’S DIScUSSION AND ANALySIS
Marketing Initiatives and Loyalty Programmes
In our marketing activities during 2020,
we made effective use of digital technology
in order to respond swiftly to changes in the
retail model caused by COVID-19 as well as
to meet new-generation customer
expectations. Following the success of the
“Power Up” campaign in the first half of the
year, we launched further e-Shop and e-Gift
initiatives. Together, these activities helped
us to leverage our online marketing efforts
in order to increase offline spending and
expand sales channels for our retail tenants.
Throughout the year, we continued to
collaborate closely with tenants and third
parties to host popular themed promotional
events and campaigns. In addition, the new
Club Avenue lounge at Lee Garden One has
become a favoured shopping-break
destination among our VIPs for its blend of
luxury and convenience.
“Throughout COVID, many people avoid going out and I have
been one of them. Fortunately, I live only 10 minutes away
from Lee Gardens which has ample anti-virus measures.
They make me feel safe shopping around the portfolio.
With the sales people from my favourite brands plus the
Lee Gardens App tempting me with attractive offers, as well
as great outdoor restaurants for lunch or tea with friends,
there is no reason why I should not come to shop and relieve
my boredom!
I recently joined an international
brand’s launch event at the
Club Avenue Lounge and really
appreciated the effort made to
keep the guests safe. Members
still enjoyed the latest shopping
information via a mini show and
had plenty of personal space
during fitting to try on items.
It was a smart way to cope with
COVID and the thoughtful details
ensure I will continue to frequent
Lee Gardens as a shopping and
leisure destination.”
Nancy Chan
Member
Lee Gardens Club Avenue
18
Hysan Annual Report 2020 Residential
The residential portfolio mainly comprises units in Bamboo Grove, an apartment complex
on Kennedy Road in the Mid-Levels. The sector experienced a 7.2% drop in turnover to
HK$296 million during the year (2019: HK$319 million). Occupancy stood at 74% as at
31 December 2020 (31 December 2019: 87%).
In 2020, Hong Kong’s high-end residential rental market was negatively impacted by
COVID-related travel restrictions and a sharp decline in incoming expatriate workers.
Hysan’s residential portfolio was similarly affected. During this challenging period, we
enhanced our services and completed Bamboo Grove’s lift modernization programme.
Overall rental reversion in this sector was flat with regard to renewals, rent review and
new lettings.
Property Development – Tai Po Luxury Residential
Project
Good progress was made on the construction of this project, with a targeted completion
date by the end of 2021 or early 2022. A sales strategy is also being developed, based on
a target sales launch by the end of 2021 or early 2022.
19
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance MANAGEMENt’S DIScUSSION AND ANALySIS
Applying Business Technology
In 2020, we adopted further innovations in business technology to
enhance our services for shoppers and guests. These included
improvements in our customer relationship management system,
the roll-out of touchless parking, and optimization of e-coupon
features. We also expect to launch an enhanced e-Shop this year.
Behind the scenes, we have enriched our big data lake in order to
equip ourselves better for making data-driven decisions and also
strengthened data security and privacy controls. In addition,
workflow digitalization, robotic process automation and e-billing
have further increased efficiency in our office operations and
facilitated mobile office practices.
Sustainability and Community
Activities
Health, wellness and safety remained the top priority throughout
2020 as COVID-19 continued to affect the community. Hysan
responded quickly with infection-preventing hardware and other
measures from the first months of the pandemic, which included
stepping up our intensive cleaning and disinfection regime
whenever cases were discovered on-site. We also maintained clear
communication with tenants and customers and provided regular
updates to our stakeholders. Throughout the year we remained
vigilant, constantly upgrading our hygienic and preventive methods
in order to avert new virus outbreaks.
Changes in venue and social distancing regulations made it difficult
to host community activities during the year. Nevertheless, Hysan
managed to launch the Xplore children’s academy, which provides
a range of inspiring offline and online classes while complying with
social distancing rules and stringent precautionary measures. We
also supported the disCONNECT exhibition and unveiled massive
wall murals, both of which received great acclaim. Our GreenFest
event, which promotes sustainability among the younger
generation, achieved strong international exposure by moving to
an online platform.
“2020 was a year of challenges,
but our evolution from
Information Technology to
Business Technology has equipped
us well to adapt to changes. In the
past year, apart from enhancing
the digital infrastructure, we
launched a host of client-facing
tech-based solutions which were
well-received by the users. As a
member of our tightly-knit
Business Technology team, I look
forward to helping Hysan become
more efficient and productive,
and improving the portfolio for
everyone to better enjoy.”
Dorothy Yeung
Senior Manager, Business Technology
Hysan Development
20
Hysan Annual Report 2020 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 comprising
payroll related costs of management and head office staff).
The Group’s operating costs to turnover ratio was 20.4% (2019: 20.2%).
Finance Costs
Finance costs increased to HK$546 million, as compared with HK$313 million in 2019, as the Group
secured new funding for potential investment opportunities and strengthened its balance sheet.
The Group raised approximately HK$7 billion from new issuance via its MTN programme in 2020,
taking advantage of ample market liquidity and a low interest rate environment. During 2020,
finance costs related to such funding exercises amounted to HK$313 million (2019: HK$83 million).
The effective interest rate for the year was 3.0%, as compared with 3.4% in 2019.
During the year, the Group also issued subordinated perpetual capital securities of US$850 million
at 4.10% distribution rate and senior perpetual capital securities of US$500 million at 4.85%
distribution rate. Proceeds from the issuances were treated as equity in the Consolidated
Statement of Financial Position while the distributions were treated as equity distribution in the
Consolidated Statement of Changes in Equity.
Further explanation of the Group’s treasury activities and policy, including debt and interest rate
management, is set out in the “Treasury Policy” section.
Revaluation of Investment Properties
As at 31 December 2020, the Group’s investment real estate portfolio was valued at HK$74,993
million, a decrease of 5.2% from the HK$79,116 million recorded at the prior year-end. The
valuation was carried out by Knight Frank Petty Limited, an independent professional valuer, on the
basis of market value.
A fair value loss on investment properties (excluding capital expenditure spent on the Group’s
investment properties) of HK$4,903 million (2019: fair value gain of HK$792 million) was
recognized in the Group’s consolidated statement of profit or loss for the year. The loss mainly
reflects the expansion in capitalization rates in light of heightened market risk in a challenged retail
sector, coupled with an office sector weakened by global economic uncertainty.
The following shows the property valuation of each portfolio at year-end.
Office
Retail
Residential
2020
HK$ million
2019
HK$ million
34,593
31,670
8,730
74,993
35,498
35,059
8,559
79,116
Change
-2.5%
-9.7%
+2.0%
-5.2%
21
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance MANAGEMENt’S DIScUSSION AND ANALySIS
Investments in Associates and a Joint Venture
The Group’s investments in associates are primarily represented by its interest in Grand
Gateway Shanghai, a retail, office and residential complex in Shanghai, China. The share of
results of associates decreased to HK$225 million (2019: HK$1,733 million), mainly due to
the Group’s share of the revaluation loss (net of deferred tax) amounting to HK$12 million
(2019: revaluation gain of HK$1,528 million). The properties at Grand Gateway Shanghai
were revalued at fair value by an independent professional valuer for both years ended
31 December 2019 and 2020.
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 2020.
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 imputed interest income recognized on an interest-free loan of HK$30 million
(2019: HK$30 million) to a joint venture company for a residential site development in
Tai Po, like-for-like interest income increased by 95.2% to HK$242 million (2019: HK$124
million), as the result of higher bank deposit balances during the year.
The Group also extended its investments beyond its core geographical and business focuses.
As at 31 December 2020, these investments totalled HK$789 million (2019: HK$601
million), expanding our reach to Mainland China and other Asian regions with the aim of
cultivating new sources of income and capital.
Cash Flow
Cash flow of the Group during the year is summarized below. Cash includes liquid cash and
bank deposits with less than 3 months’ tenor.
Cash generated from operations
Net advance to a joint venture company
Net borrowing
Issuance of perpetual capital securities,
net of distribution and transaction costs
Bank deposits and other investments
Interest and taxation
Dividends paid
Considerations for share repurchases
Capital expenditure
Net cash inflow
n/m: not meaningful
2020
HK$ million
2019
HK$ million
2,758
(18)
6,458
10,314
(5,110)
(980)
(1,621)
(96)
(913)
10,792
3,300
–
6,287
–
(5,065)
(316)
(1,630)
(92)
(956)
1,528
Change
-16.4%
n/m
+2.7%
n/m
+0.9%
n/m
-0.6%
+4.3%
-4.5%
n/m
22
Hysan Annual Report 2020 The Group’s cash generated from operations was HK$2,758 million (2019: HK$3,300
million), HK$542 million lower than that in 2019, reflecting lower Recurring Underlying
Profit from our core leasing business.
A net advance to a joint venture company in 2020, related to the residential site
development in Tai Po, amounted to HK$18 million.
Net borrowings amounted to HK$6,458 million, reflecting issuance of fixed rate notes and
bank loans drawdown totalling HK$6,461 million. In 2019, total net borrowings were
HK$6,287 million.
During the year, the Group through a wholly owned subsidiary of the Company (the “Issuer”)
issued US$850 million (equivalent to approximately HK$6,604 million) 4.10% subordinated
perpetual capital securities, which are unconditionally and irrevocably guaranteed by the
Company. Further, the Issuer issued US$500 million (equivalent to approximately HK$3,875
million) 4.85% senior perpetual capital securities, which are unconditionally and irrevocably
guaranteed by the Company. The proceeds of the capital securities are for general
corporate purposes and the capital securities are listed on Hong Kong Stock Exchange.
In 2020, the issuance of perpetual capital securities netting of distribution and transaction
costs amounted to HK$10,314 million.
Cash placed in bank deposits and other investments was HK$5,110 million (2019: HK$5,065
million), which was mainly attributable to additional deposits with a longer tenor.
The Group paid dividends of HK$1,502 million (2019: HK$1,507 million), via a 2019 second
interim dividend of HK117 cents per share (2019: HK117 cents) and a 2020 first interim
dividend of HK27 cents per share (2019: HK27 cents).
During the year, the Group repurchased 3.9 million of its own shares as part of the capital
management programme for an aggregate consideration of approximately HK$96 million.
Capital Expenditure and Management
The Group is committed to enhancing the asset value of its investment property portfolio
through selective asset enhancement and redevelopment. The Group has also established a
portfolio-wide whole-life cycle maintenance programme as part of our ongoing strategy to
proactively implement preventive maintenance activities. Total capital expenditure during
the year was HK$913 million (2019: HK$956 million).
23
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance MANAGEMENt’S DIScUSSION AND ANALySIS
TREASURY POLICY
Market Highlights
The U.S. Federal Reserve has kept the federal funds rate unchanged at 0 to 0.25 per cent since
March 2020. The HKD HIBOR dropped steadily during the first eight months of 2020 before
stabilizing for the remainder of the year, where it remained flat despite the effects of year-end
impact and large-scale IPOs in the third and fourth quarters. The 3-month HIBOR rate closed at
0.35% at year-end, having dropped throughout the year. USD LIBOR dropped from 1.9% to
0.24% during 2020.
The path of economic recovery will depend largely on the course of the virus. Given the
pandemic’s impact on the economy and the continued uncertainty in global financial markets,
it is important for the Group to maintain its policy of prudent financial and capital management.
Capital Structure Management
To ensure a healthy financial position and a capital structure suitable for servicing its financing
needs and sustainable growth, the Group always strives to diversify its funding sources, retain an
appropriate debt maturity profile relative to the overall use of funds, maintain adequate
liquidity, keep a low borrowing margin relative to market conditions, and adopt suitable hedging
and forex management strategies.
Funding Sources
During the year, the Group diversified its funding sources by issuing perpetual securities of
US$1,350 million, new medium-term notes of HK$1,900 million and US$625 million, as well as
drawing down HK$600 million bank loans. The Group repaid HK$565 million of maturing notes
and HK$250 million of bank loans in 2020. The Group’s outstanding gross debt was HK$19,204
million (2019: HK$12,615 million) at year-end 2020. All outstanding debts and securities are on
an unsecured basis.
As at 31 December 2020, the proportion of debts sourced from capital markets increased to 88%
(2019: 84%). The Group continued to maintain long-term relationships with a number of local and
overseas banks in order to diversify its funding sources. At year-end 2020, nineteen local and
overseas banks provided bilateral banking facilities to the Group as funding alternatives.
The following graph shows the percentages of total outstanding gross debts sourced from banks
and debt capital markets in the past five years.
Sources of Financing at Year-end (HK$ milion)
6,305
27%
73%
6,175
25%
75%
6,326
25%
75%
2016
Capital Market Issuances
2017
2018
Bilateral Bank Loans
24
19,204
12%
88%
2020
12,615
16%
84%
2019
Hysan Annual Report 2020 19,204
The Group strives to maintain an appropriate debt maturity profile to match the nature of
our assets and operations. As at 31 December 2020, the average maturity of our debt
portfolio was about 6.8 years (2019: 6.6 years), of which no debt will be due in 2021.
Maturity Profile
The graph below shows the debt maturity profile of the Group as at 31 December 2019 and
2020.
Debt Maturity Profile at 2019 and 2020 Year-end
Gross Debt Amount (HK$ million)
2020
1,331
3,230
565
2,000
2019
565
250
1,331
3,230
467
6,772
12,078
12,615
Not exceeding one year
Between 1-2 years
Between 2-3 years
Between 3-4 years
Between 4-5 years
More than five years
Gearing ratio and net interest coverage
The Group’s gearing ratio, as measured by Net Debt to Equity ratio1, was 3.9% at year-end
2019. It is improved at year-end 2020 with a net cash position. The Group issued US$1,350
million of perpetual securities to strengthen our equity base and fortify our financial
position in 2020. As a result, total cash and bank deposits now exceed total Gross Debts.
The Group’s Net Interest Coverage2 decreased to 9.8 times for 2020 (2019: 17.0 times) due
to the increase in the total debt level.
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
20.5x
17.1x
18.1x
17.0x
5.2%
4.8%
4.5%
3.9%
9.8x
2016
2017
2018
2019
Note
2020
Net Debt to Equity Ratio
Net Interest Coverage (times)
Note: Net cash position at year-end 2020
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 expenses before depreciation divided by net interest
expenses.
25
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance MANAGEMENt’S DIScUSSION AND ANALySIS
Credit Rating
The Group seeks to maintain investment-grade credit ratings in order to ensure stable and
lower costs of financing, reflecting our prudent financial and capital management strategy.
During the year, the Group maintained its credit ratings, reflecting the Group’s strong
financial position.
Moody’s
Fitch
2020
A3
A-
2019
A3
A-
Liquidity Management
As at 31 December 2020, the Group had cash and bank deposits totalling approximately
HK$24,935 million (2019: HK$9,332 million). In order to preserve liquidity and enhance
interest yields, the Group invested HK$454 million (2019: HK$172 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$5,450 million as at the end
of 2020 (2019: HK$3,250 million), allowing the Group to obtain additional liquidity as the
need arises.
Interest Rate Management
The fixed rate debt ratio increased to 88% at the end 2020 from 84% at the end of 2019.
As interest rate movements become more uncertain, we are confident that the current fixed
rate debt ratio will enable the Group to manage the impact from interest rate fluctuations.
The diagram below shows the fixed rate and floating rate portions of the Group’s debt over
the past five years.
Debt Level and Effective Interest Rate
3.6%
3.3%
3.4%
3.4%
19,204
12.3%
3.0%
12,615
16.0%
6,305
26.6%
73.4%
3,675
6,176
25.1%
74.9%
3,514
6,326
24.5%
75.5%
3,510
3,279
84.0%
87.7%
2016
2017
2018
2019
Note
2020
Fixed rate debt
Year-end Gross Debt
Year-end Net Debt (Gross debt less time deposits, cash and cash equivalents)
Effective Interest Rate
Note: Net cash position at year-end 2020
26
Hysan Annual Report 2020 Foreign Exchange Management
The Group aims to achieve minimal currency exposure and does not speculate in currency
movements for asset and liability management purposes. 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.
All USD fixed rate notes were hedged using cross-currency swaps that effectively convert the
borrowings into HKD. A USD bank loan has 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, which amounted to US$203 million (2019:
US$136 million).
Other foreign exchange exposure mainly relates to the Group’s investment in the Shanghai
project. These unhedged foreign exchange exposures amounted to the equivalent of
HK$5,585 million (2019: HK$5,199 million) or 5.1% (2019: 5.4%) of total assets.
Use of Derivatives
As at 31 December 2020, all of the Group’s outstanding derivatives were related to the
hedging of foreign exchange exposures. Strict internal guidelines have been established to
ensure derivatives are solely used to manage volatilities or to make appropriate adjustment
to the risk profile of the Group’s treasury assets and liabilities.
Counterparty Credit Risk
All of the Group’s deposits are placed with banks with strong credit ratings, and
counterparty risk is controlled via prescribed limits and monitored on a regular basis.
Before entering into any hedging transaction, the Group ensures that counterparties possess
strong investment-grade ratings so as 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.
27
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance corporate Governance report
CORPORATE GOVERNANCE HIGHLIGHTS
Hysan embraces good corporate governance as one of
our core values, and as the foundation of achieving
consistent and sustainable performance. We are
committed to achieving best practice in all aspects of
corporate governance, going above and beyond
regulatory compliance under the Rules Governing the
Listing of Securities (the “Listing Rules”) of The Stock
Exchange of Hong Kong Limited (the “Stock Exchange”).
In 2020, 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 Listing Rules. Furthermore, Hysan
remained committed to the Environmental, Social and
Governance Reporting Guide as set out in Appendix 27 of
the Listing Rules.
This section outlines the highlights and major areas in which
Hysan’s corporate governance practices have exceeded the
Corporate Governance Code, both in 2020 and over the
past five years.
Hysan’s Corporate Governance Achievements (Beyond Compliance)
Sustainability Committee established on 1 January 2020
Terms of Reference for Audit and Risk Management
Committee, Nomination Committee, Remuneration
Committee, Sustainability Committee, and Executive
Committee updated in 2021
Established green finance framework* in 2018. Issuance of
first Green Bond in 2019
New Anti-Fraud Policy* adopted in 2021, with supporting
fraud handling policy and procedures to control and aid in
the detection and prevention of fraud
A formal Board of Directors Mandate* and a detailed List
of Matters Reserved for the Board Decision* provide for a
clear division of roles between the Board and management
Formal Corporate Governance Guidelines* formulated in
2004 and further reviewed in 2021
Corporate Disclosure Policy* formulated in 2013 and
further enhanced in 2019. Hysan’s Disclosure Committee
conducts regular assessments of inside information, and
guides and promotes the timely and accurately
disseminated disclosure of inside information and
stakeholder communications
New Tax Governance Policy* adopted in 2021, with
supporting tax compliance policy and procedures in place
Formal Code for Securities Dealing by Directors and
Employees, including clearance and approval procedures
New Human Rights Policy* adopted in 2020, as well as a
Code of Ethics* applicable to all staff and Directors, joint
venture partners, contractors and suppliers
Board independence: four INEDs out of nine Directors,
exceeding the Listing Rules requirement
Effective and detailed digital Board evaluation of its own
performance and that of its committees. Directors’
feedback was analysed and discussed in meetings
Comprehensive Onboarding Guideline for Directors*
Individual reports for each Board Committee
Appointment of directors through formal letters of
appointment. Formal criteria and requirements*
established for Non-Executive Director appointments,
including expected time commitment
A separate Whistleblowing Policy* established in 2016. An
independent third party is engaged as the whistleblowing
channel, which directly reports to the Audit and Risk
Management Committee
* Detailed policies and terms of reference are available on the Company’s website:
www.hysan.com.hk/governance.
More than 20 business days’ notice for AGMs
Early announcement of audited financial results within
two months and publication of Annual Report within three
months after the financial year-end
Adopted limits on the issuance of additional shares under
general mandate from 2018 onwards: namely, such
issuance shall not exceed 10% of the total number of the
Company’s issued shares, and the discount for any shares
to be issued shall not exceed 10%
Proactive invitation to major nominee companies by
Hysan to forward communication materials to the
ultimate beneficial shareholders at the Group’s expense
Auditor Services Policy* for the engagement of auditors
Confirmation from senior management to the Audit and
Risk Management Committee regarding verification
compliance. Additional assurance from Internal Audit
regarding the review of continuing connected transactions
28
Hysan Annual Report 2020 OUR LEADERSHIP TEAM
Board of Directors
The Board is the governing body of our Group, and assumes the responsibility of
overseeing the corporate governance of our Group.
Executive Director
N
Lee Irene Yun-Lien
Chairman of the Board
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 67.
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.
Committees Ms. Lee is the Chairman of
the Nomination Committee.
A
Audit and Risk
Management
Committee
R
Remuneration
Committee
N
Nomination
Committee
S
Sustainability
Committee
Committee
Chairman
29
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview cOrPOrAtE GOVErNANcE rEPOrt
Non-Executive Directors
A
N
A
R
N
S
Churchouse Frederick Peter
Independent Non-Executive Director
Board Appointment Mr. Churchouse
was appointed as an Independent
Non-Executive Director in December 2012
and is aged 71.
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 was 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,
Fan Yan Hok Philip
Independent Non-Executive Director
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.
Committees Mr. Churchouse is a member
of the Audit and Risk Management
Committee and the Nomination
Committee.
Board Appointment Mr. Fan was
appointed as an Independent
Non-Executive Director in January 2010.
He is aged 71.
Competencies and Experience Mr. Fan is
an independent non-executive director of
China Everbright Environment Group
Limited, First Pacific Company Limited,
China Aircraft Leasing Group Holdings
Limited and PFC Device Inc. He was
previously 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, and a
member of the Audit and Risk Management
Committee, the Nomination Committee
and the Sustainability Committee.
A
Audit and Risk
Management
Committee
R
Remuneration
Committee
N
Nomination
Committee
S
Sustainability
Committee
Committee
Chairman
30
Hysan Annual Report 2020 A
R
N
S
Poon Chung Yin Joseph
Independent Non-Executive Director
Board Appointment Mr. Poon was
appointed as an Independent Non-Executive
Director in January 2010. He is aged 66.
Competencies and Experience Mr. Poon
is 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 an independent
non-executive director of AAC Technologies
Holdings Inc., 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,
and a member of the Remuneration
Committee and the Nomination Committee.
Wong Ching Ying Belinda
Independent Non-Executive Director
Board Appointment Ms. Wong was
appointed as an Independent Non-Executive
Director in December 2018 and is aged 49.
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
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.
Committees Ms. Wong is a member of the
Sustainability Committee.
31
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview cOrPOrAtE GOVErNANcE rEPOrt
Non-Executive Directors (continued)
Jebsen Hans Michael b.b.s.
Non-Executive Director
Board Appointment Mr. Jebsen was
appointed as a Non-Executive Director in
1994 and is aged 64.
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
Lee Anthony Hsien Pin
Non-Executive Director
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.
Committees Mr. Jebsen is the Chairman of
the Sustainability Committee.
Board Appointment Mr. Lee was
appointed as a Non-Executive Director in
1994 and is aged 63.
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.
Committees Mr. Lee is a member of the
Audit and Risk Management Committee.
A
Audit and Risk
Management
Committee
R
Remuneration
Committee
N
Nomination
Committee
S
Sustainability
Committee
Committee
Chairman
S
A
32
Hysan Annual Report 2020 N
R
Lee Chien
Non-Executive Director
Board Appointment Mr. Lee was
appointed as a Non-Executive Director in
1988 and is aged 67.
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 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 College and a
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.
Committees Mr. Lee is a member of the
Nomination Committee.
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 59.
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 the
deputy chairman of the Board of Stewards
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.
Committees Mr. Lee is a member of the
Remuneration Committee.
33
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview cOrPOrAtE GOVErNANcE rEPOrt
Senior Management
Lui Kon Wai Ricky
MBA, MCIOB
Chief Operating Officer
Choy Man Wai Kitty
BEcon, MSc, MBA
Director, Retail
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 achievement. 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 global property industry, covering
acquisitions, development and asset management for
residential, office, retail and large-scale mixed use
developments in Hong Kong, the Mainland and overseas.
He is aged 55.
Ms. Choy is responsible for the Group’s retail portfolio and
asset management strategies, as well as serving 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 48.
Lam Tze Pon Tiffany
B.Soc.Sc. (Information Management)
Director, Marketing and
Customer Experience
Hao Shu Yan Roger
BBA (Hons), CPA, ACA, ACCA
Chief Financial Officer
Mr. Hao is responsible for the Group’s financial control and
treasury functions, and serves as a director of certain
Hysan subsidiaries. He joined the Group in 2008. Mr. Hao
has accumulated extensive experience in auditing,
financial management and control while holding senior
positions in multinational corporations. He is aged 55.
Ms. Lam is responsible for the formulation of the Group’s
marketing strategies, leads the Group’s 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 has 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 49.
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 44.
34
Hysan Annual Report 2020 OUR GOVERNANCE
STRUCTURE
guidelines, including, but not limited to, the following key
policies and guidelines. All Directors and employees are
expected to follow our corporate governance policies and
guidelines.
The Board is responsible for the stewardship of the Group
and ensuring the effectiveness and adequacy of the Group’s
corporate governance system. A strong corporate
governance system allows the Group to enhance business
efficacy with precision, in order to successfully achieve its
intended results while also supporting Hysan’s strategic
objective of optimizing consistent long-term financial
returns for its shareholders.
• Corporate Governance Guidelines
• Onboarding Guideline for Directors
• Board of Directors Mandate
• Roles and Requirements of Non-Executive Directors
• List of Matters Reserved for the Board Decision
• Terms of Reference of each Board Committee
The Board is the governing body of our Group, and assumes
the responsibility of shaping business goals and strategies in
the best interests of the Group. In carrying out its duties, the
Board may, within defined limits and authority, delegate
tasks to its Board Committees.
• Diversity Policy
• Nomination Policy
• Auditor Services Policy
Our Board has four Board Committees, namely:
• Audit and Risk Management Committee
• Remuneration Committee
• Nomination Committee
• Sustainability Committee
The Executive Committee and different Management
Committees at group level are empowered to implement
and execute the Group’s business goals and strategies as
determined and led by the Board.
Details are set out under the “Leadership” section on
page 36.
OUR GOVERNANCE
SYSTEM
Hysan operates within a clear and effective corporate
governance system.
The Corporate Governance Guidelines (last updated in
January 2021) is the main code governing the Board’s
commitment to high standards of corporate governance
and its roles and responsibilities in supervising the
management of the business and affairs of the Group.
Our corporate governance system comprises, inter alia:
• Corporate Governance Framework
• Risk Management and Internal Control Framework
At Hysan, we recognize the importance of achieving good
corporate governance from top to bottom: not only at the
Board level, but also throughout the whole Hysan Group.
Our corporate governance procedures and practices are
embedded in a wide range of corporate policies and
• Code of Ethics for Directors and Employees
• Corporate Disclosure Policy
• Anti-Fraud Policy
• Whistleblowing Policy
• Procedures for Shareholders to Convene General
Meetings/Put Forward Proposals
• Shareholders Communication Policy
• Tax Governance Policy
• Human Rights Policy
Detailed policies and terms of reference are available on the
Company’s website: www.hysan.com.hk/governance.
OUR CORPORATE
GOVERNANCE
FRAMEWORK
Our Corporate Governance Framework is carefully and
regularly assessed and tailored in accordance with
developments in regulatory regimes, international best
practices, and the Company’s needs.
This framework is the centrepiece of our Corporate
Governance System. It aims to ensure that both Directors
and employees act within a robust chain of delegated
authority and powers, in accordance with our corporate
governance principles.
1 Leadership
3 Accountability
2 Effectiveness
4 Engagement
35
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview Corporate GovernanCe report
1 Leadership
Our Group’s business operation and affairs are effectively
managed and carried out through a chain of delegation
within defined limits.
Leadership at a glance
THE BOARD
Leadership
Provides leadership and
direction for the business of
the Group
Strategy Planning
Sets strategy and oversees its
implementation
Risk Management and
Internal Control
Ensures only acceptable risks
are taken
Culture and Values
Focuses on 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 INEDs
corporate
responsibility,
sustainability
development and
related policies
• Oversees succession
• Assesses the Group’s
planning
sustainability
development and risks
• Operates the day-to-day 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 members 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
EXECUTIVE COMMITTEE
MANAGEMENT COMMITTEES
RISK MANAGEMENT COMMITTEE
SUSTAINABILITY EXECUTIVE COMMITTEE
DISCLOSURE COMMITTEE
• Serves as the senior management
forum for reviewing and discussing
risks, controls, and mitigating
measures
• Reports and co-ordinates environmental,
• Considers issues relating to
community and charitable activities
• Assists the Company in overseeing the
disclosure of inside information
• Ensures disclosure requirements
sustainability and governance of the Group
are met
• Sets targets and objectives and monitors
• Ensures appropriate records are
progress
maintained
Advisor To The Board
• Invited to advise the Board since 2018
• Provides advice and guidance on the Group’s overall
capabilities and strategic direction
• Helps the Company to capitalize on opportunities
arising from fast-changing customer/tenant
behaviour
Next Generation Innovation Panel
• Invited to advise the Board since 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
36
Hysan Annual Report 2020 • “Nomination Committee Report” on pages 71 to 72
• “Sustainability Committee Report” on pages 73 to 74
The Terms of Reference for each Committee have been
updated in 2021.
Executive Committee and
Management Committees
The Executive Committee is entrusted with the task of
implementing and executing business goals and strategies
as determined by the Board. The Board retains control of
key decisions and certain reserved matters specified in the
List of Matters Reserved for the Board Decision, which is
reviewed annually.
The 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. The Terms of Reference for the
Executive Committee was updated in 2021.
Hysan’s strong governance framework requires a number of
executive and advisory groups. These include, among others,
three governance-related management level committees:
• the Risk Management Committee;
• the Sustainability Executive Committee; and
• the Disclosure Committee.
To enhance the Group’s strategy and overall capabilities in
addressing new business trends and emerging generational
shifts, the Board has appointed Li Xinzhe Jennifer as an
Advisor to the Board, as well as establishing a Next
Generation Innovation Panel to advise the Board
accordingly.
Board
All Directors are recruited through formal letters of
appointment which set out clearly the terms and conditions
of their appointments. Directors serve for a term of three
years and are subject to rotation.
Main roles and responsibilities of the Board:
• Setting business goals and strategies in the best interests
of the Group and overseeing their implementation;
• Providing insights on the Group’s culture and values;
• Determining the risk appetite and evaluating the risks that
the Group is willing to take;
• Overseeing and ensuring the adequacy and effectiveness
of the Group’s internal controls and risk management
system; and
• Responsible for the corporate governance and financial
performance of the Group.
The Board is governed by a formal Board of Directors
Mandate.
To retain control of key decisions and ensure that 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.
Details set out in the List of Matters Reserved for the
Board Decision.
Board Committees
The Board has four Board Committees, namely the Audit
and Risk Management Committee, Remuneration
Committee, Nomination Committee and Sustainability
Committee.
All Committee meetings are conducted prior to the full
Board meetings to ensure that all vital matters are reported
to the Board, and considered thoroughly and decided by the
full Board in timely manner.
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.
“
Monthly financial updates
are good, timely, concise,
and easily intelligible.
Full details of the Committees’ activities during the year are
set out in their respective reports:
Directors’ comments received in
Board Evaluation 2020.
• “Audit and Risk Management Committee Report” on
pages 61 to 64
• “Remuneration Committee Report” on pages 65 to 70
”
37
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview cOrPOrAtE GOVErNANcE rEPOrt
2 Effectiveness
Board effectiveness stems from achieving the right
composition, size, diversity, commitment, and
independence. This can be attained through a proper
nomination process, ongoing reviews, and a board
evaluation process.
Board Size
As at 31 December 2020, there were nine Directors on the
Board: the Chairman and eight Non-Executive Directors
(including four Independent Non-Executive Directors).
Lee Irene Yun-Lien is currently the Board Chairman.
She leads the Board, particularly regarding the long-term
strategic development of the Group and matters that drive
shareholder value.
Lau Lawrence Juen-Yee retired at the conclusion of the AGM
held on 13 May 2020.
Fan Yan Hok Philip and Poon Chung Yin Joseph have served
as Independent Non-Executive Directors for more than nine
years. Fan Yan Hok Philip has been re-elected at the 2020
AGM, while Poon Chung Yin Joseph will retire by rotation at
the forthcoming AGM to be held on 21 May 2021. 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
The Board and Senior Management Composition
to the Company’s strategies and business development,
offering independent judgment from their areas of
expertise and experience in governance, risk management,
finance, people and culture, and technology, all of which are
relevant to the Group’s business. The Board and the
Nomination Committee are of the view that both Fan Yan
Hok Philip and Poon Chung Yin Joseph have consistently
demonstrated a healthy level of professional scepticism
whenever appropriate, and have not held back from asking
probing questions and challenging executive management’s
views and recommendations. There is no evidence to
suggest that their tenure has had any impact on their
independence.
Churchouse Frederick Peter, Poon Chung Yin Joseph and Lee
Chien will retire at the forthcoming AGM to be held on
21 May 2021. Churchouse Frederick Peter, Poon Chung Yin
Joseph and Lee Chien will offer themselves for re-election.
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 one year without
payment of compensation (other than statutory
compensation).
The Board, through the Nomination Committee, has
determined that the Board size of nine Directors is adequate
and effective in terms of carrying out its duties and
responsibilities, and recommends the re-election of the
retiring Directors.
The
Board 9
Senior
Management 5
Gender
Category
Other Public Company
Directorship(s)
(Number of Companies)
Gender
Woman
Man
Executive
Non-Executive
0–3
4–6
Woman
Man
Independent Non-Executive
Age
Board Tenure (Years)
Age
40–49
50–59
60+
0–3
7+
40–49
50–59
(Directors’ full biographies, including relationships among members of the Board and Senior Management’s full biographies, are set out in pages 29 to 34, and are also
available on the Company’s website: www.hysan.com.hk/about/leadership)
38
Hysan Annual Report 2020 Board Diversity
Hysan recognizes the importance of diversity among its
Board members, and has adopted the Diversity Policy (last
updated in January 2021), which requires the Nomination
Committee to annually review the following and report to
the Board:
• the structure, size and composition of the Board; and
• the diversity of background, skills, and experience
(including, but not limited to, gender, age, cultural and
educational background, ethnicity, professional
experience, skills, knowledge and length of service) of
the Board.
Our Board currently has two women Directors out of nine
Directors, and is committed to improving gender diversity as
and when suitable candidates are identified.
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.
Our eight 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
Summary
Combined
Strategy
Risk
Management
Experience in defining strategic objectives, assessing business
plans and driving execution in large and complex organizations.
Experience in anticipating and identifying key risks to an
organization and monitoring the effectiveness of risk management
frameworks and controls.
Environmental,
Social and
Governance
Experience in and commitment to adhere to exceptional corporate
governance standards, environmental management and social
responsibility initiatives.
Financial
Services and
Investment
Financial
Acumen
Experience in the financial services industry or experience in
overseeing financial transactions and investment management.
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.
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 the field of
property investment, development or facilities management, or
related industry experience or insights into real estate investment
opportunities.
Technology
Experience in the digital and technology business or in monitoring
technology related projects.
● Extensive
● Moderate
39
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview
cOrPOrAtE GOVErNANcE rEPOrt
Board Commitment
Board effectiveness is attained through significant
commitment and contribution from each Director.
To ensure that our Directors have spent sufficient time
engaged in 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.
The Board and the Board Committees meet regularly each
year. Board and Board Committee members are given full
and timely access to meeting agendas and materials before
the meetings to allow them to read materials thoroughly.
During the meetings, the Senior Management and other
department heads are invited to present to the Board on
operational topics during the year and to engage in open
discussions with the Board.
During the year, efficient hybrid (physical and virtual) Board
and Board Committee meetings took place using effective
technology and a digital board portal, after giving due
weight and consideration to the health and safety of Board
members and employees within the context of the
COVID-19 pandemic situation. Such effective technology
connections continue to promote a high level of
involvement and engagement with employees at different
levels of the business.
Meeting Process
In 2020, the Directors participated extensively in the
Company’s affairs and the Board’s discussions and
decisions, as reflected in their high attendance record in
Board and Board Committee meetings during the year. The
Independent Non-Executive Directors held a separate board
session with the Board Chairman to discuss Board and
relevant matters.
Board/
Committee
members to
inform if they
wish to include
any matters in
the agenda
Meeting
materials and
documents
circulated one
week before
meetings
Draft agenda
circulated to
Board/Committee
members three
weeks before
meetings
Meetings attended by
• Board/Committee members
• Company Secretary
• Senior Management and
department heads
Regular gathering hosted
by the Board Chairman
attended by
• Directors
• Employees from different
departments
Board and Board Committee meetings in 2020
B
ARC
SC
RC
B
ARC
AGM
B
ARC
B
ARC
NC
SC
January
February
March
April
May
June
July
August
September October November December
B
ARC
Board Meeting
Audit and Risk Management Committee Meeting
RC
NC
Remuneration Committee Meeting
Nomination Committee Meeting
SC
AGM
Sustainability Committee Meeting
Annual General Meeting
40
Hysan Annual Report 2020 Directors’ Attendance at Meetings and
Training in 2020
The following table shows Directors’ attendance at
meetings and training:
Directors
Lee Irene Yun-Lien
Churchouse Frederick Peter
Fan Yan Hok Philip
Poon Chung Yin Joseph
Wong Ching Ying Belinda
Jebsen Hans Michael
Lee Anthony Hsien Pin
Lee Chien
Lee Tze Hau Michael
Lau Lawrence Juen-Yee
B
(Total: 5)
ARC
(Total: 4)
RC
(Total: 1)
NC
(Total: 1)
SC
(Total: 2)
AGM
(Annually)
Training
(Note 5)
(Note 1)
(Note 1)
(Note 1)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(Note 2)
(Note 3)
– – –
(Note 4)
Attended
Attended by alternate
Attended by tele/video conference
Apologies
Notes:
1. Lee Irene Yun-Lien was invited to present updates and/or answer relevant questions in order to facilitate the decision-making process. She was expressly excused from the
session in Remuneration Committee when the Executive Director’s own compensation package was discussed.
2. Jebsen Hans Michael attended the May Board Meeting and 2020 AGM through his alternate. He was unable to attend the August Board Meeting due to other
commitments.
3. Lee Tze Hau Michael was unable to attend the February Board Meeting due to other commitments.
4. Lau Lawrence Juen-Yee retired at the conclusion of 2020 AGM.
5. This includes (i) trainings organized by Hysan; (ii) expert briefings / seminars / conferences / site visits relevant to the Company’s business; and (iii) reading legal,
regulatory, industry and directors’ duties related updates prepared by Hysan on a quarterly basis.
Continuous Professional
Development
In addition to regular Board and Board Committee
meetings, the Directors attended various knowledge
development sessions during the year to keep abreast of
industry trends, knowledge and skills.
In 2020, the knowledge development sessions included a
deep-dive presentation by our Next Generation Innovation
Panel titled “What Will the Future of Luxury Look Like?”, a
co-project with the Group’s retail and marketing teams that
profiled the future of retail; a directors’ forum on the topic
of “Challenges and Opportunities for China” by guest
speaker Professor Lau Lawrence Juen-Yee, who holds the
titles of Ralph and Claire Landau Professor of Economics at
The Chinese University of Hong Kong and Kwoh-Ting Li
Professor in Economic Development, Emeritus, at Stanford
University; and a portfolio visit to our prestigious loyalty
programme Club Avenue’s new lounge and customer
experience. All Directors also received various legal and
regulatory updates and have access to a comprehensive
online board portal containing memoranda on Directors’
Duties and Responsibilities and anti-corruption training
materials. Directors have expressed the view that the
training sessions have been stimulating and highly relevant,
and that there were adequate training opportunities during
the year. Directors are required to provide details of training
undertaken to the Company once a year.
In 2020, members of the senior management and the
Company Secretary have had access to a variety of training
activities, including attending seminars, workshops and
conferences and receiving regulatory updates relevant to
their business and duties. They have received sufficient
internal and external training to equip them to fulfil their
roles in supporting the Company.
41
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview
cOrPOrAtE GOVErNANcE rEPOrt
Board Independence
Hysan’s Board has always maintained its independence. As
at 31 December 2020, four out of our nine Directors were
Independent Non-Executive Directors (exceeding the Listing
Rules requirement).
Criteria of
independence
Regularly Reviewed and
Maintained Independence
• Clearly set out in our
Corporate Governance
Guidelines
• Must be free from any
business or other
relationship that may
interfere with the exercise of
their independent judgment
• Separate discussions amongst Non-Executive Directors, without the presence
of Executive Director(s) or Board members related to the founding Lee family
• Full disclosure of cross-directorships or other business relationships that may
interfere with Directors’ independence, which are disclosed in Annual Reports
• Full Board approval of connected transactions (as described clearly in the List
of Matters Reserved for the Board Decision), with exempted transactions
required to be reported to the full Board after obtaining management
approval
• Review by the Nomination Committee of potential conflicts of interest, and
recommendation on appropriate actions to take
During the reporting year, the Nomination Committee
carried out a detailed review of the Directors’ independence
and was satisfied that each of the four Independent Non-
Executive Directors was independent at the time of review.
Independence Status
Name
Management
Independent
Not
Independent
November 2020 Review –
Reason for Independence Status
Churchouse Frederick Peter
Fan Yan Hok Philip
Poon Chung Yin Joseph
Wong Ching Ying Belinda
Jebsen Hans Michael
Lee Anthony Hsien Pin
Lee Chien
Lee Irene Yun-Lien
Lee Tze Hau Michael
No business or other relationships with the
Group or management that will affect
independence
Notes:
1. Wong Ching Ying Belinda is also a director of certain entities of Starbucks Coffee Company. Shanghai Starbucks Coffee Enterprise Co., Ltd., a wholly-owned subsidiary of
Starbucks Corporation (listed on NASDAQ), is one of the tenants of a commercial complex located in Shanghai, People’s Republic of China, which is owned by an associate
of the Company. The revenue or profit derived from those leases indirectly as the 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 2020) 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.
2. 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 two companies, the Company considers that such a
cross-directorship would not undermine the independence of Wong Ching Ying Belinda with respect to her directorship at the Company.
3. The Board and the Nomination Committee have assessed the independence of Wong Ching Ying Belinda in light of the circumstances, including (i) her background,
experiences, achievements and character, and (ii) the nature of the Company’s relationship with the Starbucks group and Wong Ching Ying Belinda’s roles, as well as the
mitigating actions as described above, and concluded that her independence would not be affected. It was decided that potential conflicts, which are minimal, could be
managed and that the benefits of her appointment outweighed any risk of conflict. In addition, the mitigation principles and actions are adequate and appropriate to
deal with any such issues.
42
Hysan Annual Report 2020 Nomination Process
A proper and detailed nomination process ensures the
appointment of talented Directors suitable for the best
interests of the Group.
Hysan has a unique Nomination Policy governing
nomination practices and procedures. The Nomination
Committee considers a variety of factors in assessing the
suitability of a proposed candidate, including:
• Reputation for integrity;
• Accomplishment, experience and reputation in the real
estate industry and other relevant sectors;
• Commitment in respect of sufficient time, interest and
attention to the Company’s business, including devoting
adequate time for preparation and participation in
meetings, trainings and other Board or Company
associated activities;
• Diversity in all aspects, including, but not limited to,
gender, age, cultural and educational background,
ethnicity, professional experience, skills, knowledge and
length of service;
• Ability to assist and support management and make
significant contributions to the Company’s success;
• Compliance with the criteria of independence as
prescribed under Rule 3.13 of the Listing Rules for the
appointment of an independent non-executive director;
and
• Any other relevant factors as may be determined by the
Committee or the Board from time to time.
In considering the appointment of any proposed candidate
to the Board, the Committee shall undertake adequate due
diligence in respect of the individual, evaluate the candidate
using the same criteria regardless of the source of the
candidacy, and make recommendations for the Board’s
consideration and approval.
In considering the re-appointment of any existing
member(s) of the Board, the Committee shall review the
overall contribution to the Company of the retiring director
as well as the selection criteria set out in this policy. The
Committee will then make recommendations to the Board
for its consideration, with the Board determining whether to
recommend the proposed candidates for re-election at a
general meeting.
The priorities
of our induction
programme
Providing an overview of:
• the Group’s business and challenges
• the Group’s strategies and key risks
faced
• the Group’s corporate and
organizational structure
• the Board’s culture, governance and
dynamics
• the legal and regulatory obligations
of a Director
Getting to know the Board and
Senior Management
• meeting with the Board Chairman,
Committee Chairmen and Senior
Management
• introduction session with the Company
Secretary and training with external
advisers
“
Considering 2020 being
an abnormal year, the
Board has managed
good communication with
effective technology.
Directors’ comments received in
Board Evaluation 2020.
”
43
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview cOrPOrAtE GOVErNANcE rEPOrt
In order to ensure that the Directors are committed to
allocating sufficient time and attention to the affairs of
the Group, Directors are engaged by formal letters of
appointment with a specific term of three years and are
subject to rotation under the Company’s Articles
of Association.
The Directors 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 three 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 Directors’ elections. The election
of each Director is executed through a separate resolution.
The Board has adopted a comprehensive Onboarding
Guideline for Directors, which sets out a properly tailored
induction programme that gives new Directors an
understanding of the Group, its businesses and operations
(including the major risks it faces), with due regard to the
Director’s unique background, experience and skills.
The induction programme includes 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 are
arranged on topics such as Directors’ responsibilities and
an overview of the Group’s business.
Ongoing review by Nomination
Committee
The Nomination Committee reviews the Board’s structure,
size, composition, commitment, independence and diversity
from time to time. The last review was conducted in
November 2020.
The Nomination Committee undertook a comprehensive
review, considering the gender, age, tenure, cultural/
educational and professional background, skills, knowledge
and experience of each Director, as well as the structure,
composition, size, commitment and independence of
the Board.
The Nomination Committee was of the view that the
existing Board was satisfactory and effective in terms of its
size, structure, composition, commitment, independence
and diversity. The Committee concluded that, in order to
support board succession planning and long-term growth,
the boardroom of the future will require expertise in
technology and digital media, finance and accounting, risk
management and environmental, social and governance
(ESG). Gender diversity should also be taken into account in
succession planning.
Board Evaluation
In addition to the ongoing review by the Nomination
Committee, each Director plays a role in evaluating the
Board’s performance in order to ensure the effectiveness of
the Board.
Board evaluation is an ongoing and continuing process.
Each Director reviews the Board’s performance, as well as
the performance of the Board Committees, through
various means.
Annual
Questionnaires
The Board and Board
Committees conduct
self-evaluation
questionnaires annually,
responding to questions
surrounding performance
and effectiveness.
Director
Ongoing
Assessment
Directors provide
ongoing, real-time
feedback, in addition
to the annual
questionnaires.
Action Plan
The Board and
Board Committees
consider and
discuss constructive
insights and action
plans in light of the
evaluation process,
as appropriate.
Board
Evaluation
Process
Feedback
A summary of the
evaluation results is
provided to the Board
and Board Committees.
Each Board and Board Committee member is required to
annually submit an anonymous online questionnaire on
relevant 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 questionnaire, being anonymous,
encourages Directors to share suggestions, provide
comments and raise any concerns.
“
Open, inclusive, confident
to debate and share views.
Directors’ comments received in
Board Evaluation 2020.
”
44
Hysan Annual Report 2020 2020 Questionnaire Report
The Chairman, supported by the Company Secretary,
collated the e-Questionnaire responses into a detailed
Questionnaire Report. The Questionnaire Report was
prepared based on the collective comments from all
Directors and Board Committee members. The
questionnaires received a 100% response rate. The 2020
Questionnaire Report was submitted to, considered, and
discussed by the Board, and constructive feedback was
received.
Parameters
We have structured our 2020 questionnaire based on the
Directors’ views regarding five parameters, given below,
which relate to the effectiveness and performance of the
Board. The evaluation consisted of a quantitative element
based on ratings and a qualitative element based on
Directors’ written responses.
The questionnaire examines five different aspects of the
Board: leadership, composition, meetings and processes,
“the Board in action”, and training.
Framework of the Questionnaire
1
2
3
Leadership investigates the role of Directors and
the function of roles
Composition discusses Board size and structure,
and the balance of knowledge, experience and
skills of the Directors
Meetings and Processes seeks feedback on the
respective meeting schedules of the Board and its
Committees; the quality of agendas, meeting
papers and minutes; satisfaction with the integrity
of financial statements and accounts, policies,
operation and compliance controls, internal
controls, ESG and risk management processes
Conclusions from this year’s
questionnaire
This year’s questionnaire concluded that the Board and its
Committees continued to operate to a high standard and
worked effectively. The overall results 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. All Board members actively and
constructively contributed to discharging the roles and
responsibilities of the Board. Open and constructive
dialogue and debate were widely cited as one of the
positive achievements of the Board. The Directors were
pleased with the establishment of the Sustainability
Committee at Board level, as it is expected that a focus on
ESG matters will continue to increase globally.
Directors were also satisfied in terms of the diversity of skills
and experience. Directors with different skills and experience
may need to be recruited to help the Company progress its
diversity agenda with confidence. The Directors agreed that
the major concerns facing the Board in the coming years will
include the ongoing impact of COVID-19 and related
necessary public health measures; the innovation of retail/
office models required to meet the disruption caused by
COVID-19, social issues in Hong Kong, macro challenges
and business or market downturns; geographical and
business diversification, and a focus on ESG efforts.
Presentations, materials and papers were well organized,
comprehensive, focused and delivered by management in a
timely manner. Board and Committee meetings were
productive, participative and efficiently utilized to discuss
relevant issues and set strategic directions for the Group.
The Directors were given direct access to senior
management, the Company Secretary, and professional
advice (when necessary) to facilitate full understanding of
the Group’s business affairs. Monthly reports and updates
provided balanced and easily comprehensible assessments
between Board meetings.
4
Decision Making and Accountability –
The Board in Action looks into performance
effectiveness, supply of and access to information,
strategy appropriateness, and levels of
remuneration
Effectiveness Conclusion
Through a proper nomination process, coupled with ongoing
reviews by the Nomination Committee and the board
evaluation process, Board effectiveness has been ensured
and maintained at all times.
5
Training investigates the quality of training and
seeks input on areas of interest for future training
events
45
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview cOrPOrAtE GOVErNANcE rEPOrt
3 Accountability
Our corporate governance framework provides clear lines of
accountability. Decisions can only be made by the Board,
together with the Terms of References of our Board
Committees, under the List of Matters Reserved for the
Board Decision. The management of the daily operation
of the Group and other decisions are delegated to the
Executive Committee with clear authority, supported by
various Management Committees. Each management of
the Group is responsible for ensuring a similar process of
delegation is in place with his or her department or area of
responsibilities. 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 to facilitate the decision making process.
Board Accountability
The Board and the Board Committees are held accountable
and responsible to the shareholders and the stakeholders by
various means:
• All Directors are appointed by formal letters of
appointment which set out clearly the terms and
conditions of their appointments
• All Directors are subject to rotation, and the appointments
of retiring Directors are approved by the shareholders at
AGMs
• All Directors are required to make full and frank disclosure
of their cross-directorships and other commitments, which
are stated in Annual Reports
• All Directors are required to make full and frank disclosure
of their connected persons and transactions. Significant
connected transactions are approved by the shareholders
in accordance with the Listing Rules
• All Directors are required to act within the defined and
clear authority and powers set out by the Group’s
corporate policies and guidelines, including, but not
limited to, the Code of Ethics, Board of Directors Mandate,
List of Matters Reserved for the Board Decision, and the
Terms of Reference of each Board Committee
• Non-Executive Directors are additionally subject to the
“Roles and Requirements of Non-Executive Directors”
policy
46
• All Directors are subject to ongoing review by the
Nomination Committee as well as evaluation by other
Board members
• All Directors are subject to the Anti-Fraud Policy and
Whistleblowing Policy, which allows an individual to report
any irregularity directly to an independent third party
• All Directors are required to review Annual Reports,
Interim Reports, announcements and circulars for
publication in a timely manner, and in accordance with
the Companies Ordinance and the Listing Rules
• Our financial statements are verified and audited by an
independent third party auditor
Executive Member Accountability
The Executive Committee, Management Committees, and
Senior Management members (collectively the “Executive
Members”) are held accountable and responsible to the
Board by various means:
• Executive Members are required to make full and frank
disclosure of their other commitments
• Executive Members are required to make full and frank
disclosure of their connected persons and transactions,
which may require full Board approval
• Executive Members are required to report and send timely
updates to the Board on the key events and business
outlook of the Group, and submit monthly financial
reports to the Board that give adequate transparency of
the Company’s operation to the Board
• Executive Members are required to attend Board and
Board Committee meetings to answer questions for their
relevant session(s) that the Board and Board Committee
members may have
• Executive Members are subject to the Code for Securities
Dealing by Restricted Employees, which governs dealings
in securities, as Executive Members are deemed to
potentially have access to inside information. Each
Executive Member is required to annually declare that
throughout the relevant year they have complied with the
Code. Following a specific enquiry by the Company, each
Executive Member has made such declaration for the year
ended 31 December 2020
Hysan Annual Report 2020 Board Activities during 2020
An outline of the key areas of Board activities in carrying out its
roles and responsibilities during the year is provided below.
Strategy
Leadership
• Discussed the Group’s strategic
• Reviewed the Board structure, size,
Environmental, Social
and Governance
objectives and focused on how to
respond and build the resilience of
the businesses under the new
normal
composition, diversity, commitment,
as well as the independence of
Directors
• Reviewed, enhanced and
approved key corporate related
reports and policies, including:
• Reviewed and evaluated the fees of
− Anti-Fraud Policy
• Discussed business strategy and
Directors
opportunities for the diversification
and sustainable growth of the
Group
• Reviewed the challenges the Group
will be facing, the impact of
technology, changes in consumer
behaviour and the resources and
skills the business may require in
future
• Considered and approved the
Group’s investment strategy
• Reviewed compensation for the
senior management
• Considered people development and
plans to retain and motivate high
performance individuals
• Considered the composition of the
Next Generation Innovation Panel
and advisor to amplify capabilities
from time to time
− Tax Governance Policy
− Diversity Policy
− Nomination Policy
• Reviewed Terms of References of
Committees
• Establishment of Sustainability
Committee at Board level to
emphasize the Board’s
commitment to drive the Group’s
sustainability development
Financial, Operational
and Business
Performance
• Considered the financial
performance of the business and
approved the annual budget and
treasury policy
• Reviewed the interim and annual
results, approved the interim and
annual reports
• Reviewed and discussed financial
forecasts and capital structure
management
• Reviewed operating results and
regular updates for the Group’s
core business (Office, Retail,
Residential and Property
Development segments)
Risk Management and
Internal Controls
Commitment and
Accountability
• Reviewed the Group’s risk appetite
and assessed external and internal
risk level movements and mitigating
actions
• Discussed the outcome of the
Board evaluation and
effectiveness review, and agreed
improvement opportunities
• Reviewed the effectiveness of
Hysan’s risk management and
internal control systems
• Met with the Company’s valuers
regularly during the year to discuss
the portfolio valuation
• Reviewed the major risks the Group
is facing relating to COVID-19
pandemic
• The Chairmen of all Committees
updated the Board on the
proceedings of their meetings,
including the key discussion points
and any areas of concern
• Reviewed key corporate
governance related reports
47
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview cOrPOrAtE GOVErNANcE rEPOrt
Directors’ Interests in Shares
As at 31 December 2020, 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
0.244
–
–
970,000
444,000
0.093
0.043
Personal
interests
60,984
970,000
444,000
Notes:
(a) The percentages were compiled based on the total number of issued shares of the Company (i.e. 1,039,700,891 ordinary shares) as at 31 December 2020.
(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 Directors 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
“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% owned 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 2020
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.
48
Hysan Annual Report 2020 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) 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 Mainland 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 Mainland and Hong Kong.
(ii) 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
Mainland and the United States of America.
The Company’s management team is separate and
independent from that of the companies identified above.
In addition, the relevant Directors have non-executive roles
and are not involved in the Company’s day-to-day
operations and management.
For the reasons stated above, 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.
“At a time when we were feeling the
most vulnerable and isolated from the
world, disCONNECT served almost as
an antidote, giving us an opportunity
to reach out and reconnect to the world
again through the arts. We are grateful
for Hysan’s and the Lee Gardens
Association’s support, providing us with
two unique venues in Causeway Bay,
the beating heart of Hong Kong. The
Pak Sha Road’s heritage building and
Urban Sky on 9/F Hysan Place served as
two very different backdrops for
exhibiting the artwork, providing
visitors two distinctly different ways of
experiencing the work, which further
amplified the exhibition and hopefully
helped to re-ignite people’s passion
for art.”
Maria Wong and Jason Dembski
Managing Director and Co-founder
HK Walls
49
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview
cOrPOrAtE GOVErNANcE rEPOrt
4 Engagement
Hysan is committed to carefully evaluating the impact of
our operations on our stakeholders, including our
shareholders, employees and investors, as well as our wider
community.
Hysan has adopted the Corporate Disclosure Policy, which
provides guidance on the disclosure of material information
to investors, analysts and media. This policy identifies
spokespersons and clearly outlines the responsibilities for
communication with each stakeholder group. Details are
available on the Company’s website: www.hysan.com.hk/
governance.
Shareholders’ Engagement
Hysan aims to maintain open and constructive dialogue
with our shareholders and to provide them with the
information they require to make sound investment
decisions.
We have adopted the Shareholders Communication Policy,
which governs our framework for providing shareholders
with ready, equal and timely access to balanced and easily
comprehensible information about the Company.
In accordance with the Shareholders Communication Policy
and our Company’s Articles of Association:
• We have published key corporate governance policies, the
terms of reference of Board Committees, and the Group’s
financial reports, press releases and announcements on
the Company’s website;
• We have published annual reports, interim reports and
announcements in a timely manner on the Stock
Exchange of Hong Kong and on the Company’s website;
• The senior management has presented the annual and
interim results through press conferences, webcasts, the
Company’s website, and face-to-face meetings in order to
communicate with shareholders, investors and analysts;
• Since December 2015, shareholders can choose to receive
corporate communications via electronic means, with
hard copies also available free of charge upon request to
the Company Secretary;
• We have arranged annual shareholders’ visits since 2016,
receiving an overwhelming response each year. The
shareholders’ visits include a briefing on the Company’s
history, sustainable activities and other business areas,
followed by a walking tour of the Lee Gardens area
arranged by the Group. The shareholders’ visits are
50
constructive opportunities for the management to
communicate with shareholders. Due to the COVID-19
pandemic, our shareholders’ visits were postponed in
2020 until further notice, after giving due weight and
consideration to the health and safety of shareholders;
• Since 2005, we have invited major nominee companies to
forward communication materials to shareholders at our
expense;
• Shareholders are given opportunities to meet the
Directors and Senior Management and to raise questions
at our AGMs every May. Details are set out in AGM section
below;
• Shareholders may put forward proposals for consideration
at a general meeting. A general meeting of shareholders
can also 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”). The Group’s Procedures for Shareholders to
Convene General Meetings / Put Forward Proposals are
available on the Company’s website;
• All shareholders are welcome at all times to give feedback
to and communicate with the Directors through 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;
• All shareholders are entitled to receive dividends
according to our Dividend Policy. The dividend payment
shall be based on the Group’s financial performance,
future capital requirements, and general economic and
business conditions, etc; and
• No changes have been made to our Articles of Association
during the year.
AGM
Our AGMs are held around the month of May each year.
They act as a means of communication with our
shareholders and an opportunity for shareholders to
understand the business performance of the Company.
Our AGMs are an important annual event for the Group and
are attended by our Directors, Senior Management, and our
independent auditor.
Hysan Annual Report 2020 In order to ensure that our shareholders have sufficient time
to consider the AGM notices, annual reports and financial
statements, the said documents are dispatched to the
shareholders more than 30 days prior to the AGMs,
exceeding the statutory requirement of 21 days.
Comprehensive information is also given on each resolution
to be proposed.
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 AGMs prior to the
taking of the poll. Poll results are announced and posted on
the websites of both the Stock Exchange and the Company
at www.hysan.com.hk.
We held our 2020 AGM at Hong Kong Convention and
Exhibition Centre on 13 May 2020. Key matters resolved at
the 2020 AGM include:
• Receipt of the Statement of Accounts for the year ended
31 December 2019 and the Reports of the Directors and
Auditor thereon
• Re-election of Lee Irene Yun-Lien as Director
• Re-election of Fan Yan Hok Philip as Director
• Re-election of Lee Tze Hau Michael as Director
• Re-appointment of Deloitte Touche Tohmatsu as Auditor
• Granting of a general mandate to allot, issue and deal
with additional shares in the Company (not exceeding
10% of the number of its issued shares, and the discount
for any shares to be issued shall not exceed 10%)
• Granting of a general mandate to repurchase shares in
the Company (not exceeding 10% of the number of its
issued shares)
We successfully held our 2020 AGM despite the COVID-19
pandemic in Hong Kong. In order to ensure the health and
safety of all attendees, as well as to comply with
government regulatory requirements, we took stringent and
sufficient precautionary measures, including, but not limited
to:
• Splitting attendees into separate small groups to sit in the
main room or in separate rooms with video and audio link
facilities;
• Compulsory wearing of face masks by attendees.
Prior to the 2020 AGM, we made an announcement on the
Stock Exchange regarding the aforementioned
precautionary measures. In addition, shareholders were
reminded in the announcement to appoint the Chairman of
the AGM as their proxy to vote on the resolutions.
In light of the uncertain development of the current
COVID-19 situation, shareholders are encouraged to
appoint the Chairman of the 2021 AGM as their proxy to
vote on the resolutions, instead of attending the meeting in
person. To ensure the safety of the shareholders attending
the meeting, we will implement additional precautionary
measures at the 2021 AGM in accordance with prevailing
guidelines published by the Government and/or regulatory
authorities. Details of the measures will be announced as
appropriate.
Investor Relations
Hysan is committed to maintaining open and constructive
dialogue via effective two-way communication with our
stakeholders, including equity and fixed-income investors,
analysts and credit rating agencies.
In light of the rapidly changing environment, we aim to
provide regular updates on Hysan’s operating and financial
performance. Amid the COVID-19 pandemic, we arranged
virtual meetings and conference calls on regular basis with
institutional investors and held live webcasts for our post-
results briefings, hosted by our senior management.
Calendar of our main investor relations events
2020 1st Half
• Property Tour
• Annual results announcement
– Press conference
– Analysts briefing (live webcasts are also available)
• Post-results roadshows in Hong Kong
• Annual General Meeting
• Investor conferences in Hong Kong
2020 2nd Half
• Interim results announcement
• Special seating arrangements to allow for appropriate
– Press conference
social distancing;
• No distribution of beverages and souvenirs, to control
human traffic;
• Body temperature screening and submission of health
declarations by attendees prior to entry; and
– Analysts briefing (live webcasts are also available)
• Post-results roadshows in Hong Kong
51
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview cOrPOrAtE GOVErNANcE rEPOrt
Employee Engagement
At Hysan, talent engagement and development are part of
our core values.
Full details of risk management and internal control
activities during the year are set out in the “Risk
Management and Internal Control Report” on pages 54
to 60.
Hysan nurtures a work environment that encourages open
dialogue and supports employees to unleash their potential
and fulfil their career aspirations. Each year, employees and
their supervisors discuss and agree goals and expectations.
Employees are provided with ongoing feedback throughout
the year to ensure that they are on track, with a final review
being conducted at the end of the performance year.
Hysan has proactively developed our talent pipeline through
our management trainee programme, launched in 2017, as
well as our Apprenticeship Scheme, in order to meet our
long-term business needs.
In 2020, Hysan leveraged its e-learning platform to provide
diverse and rich learning content to employees, covering
topics such as leadership skills, team collaboration, data
protection, connected transactions, anti-competition law,
tenancy laws, etc. To engage employees, we have also
deployed various communication strategies to keep staff
abreast of the Company’s news and development.
Full details are included in the Sustainability Report.
OUR RISK MANAGEMENT
AND INTERNAL
CONTROL FRAMEWORK
The Board has the overall responsibility of determining the
Group’s risk appetite and reviewing and maintaining an
effective risk management system.
The Audit and Risk Management Committee supported
the Board to review the process by which risks are identified,
prioritized, managed and mitigated in accordance with
the Group’s risk appetite. Each business or deal entails risks
of a different nature, but the Group aims to only undertake
and mitigate reasonable risks that are in line with our
long-term and strategic goals and targets. Our risk
management system is designed and tailored carefully to
manage and mitigate the risks, and to afford reasonable
assurance against material misstatement or loss. Everyone
within the Group has a role to play in the risk management
system, which is underpinned by the “Three Lines of
Defence” model.
The Board has the overall responsibility of maintaining an
effective and robust internal control and compliance
system.
Operation Control
The Group has numerous and comprehensive corporate
policies and guidelines that detail our practices and
procedures in carrying out our business affairs.
Our business affairs are operated through a chain of
delegation, from the Board to the Executive Committee
through the List of Matters Reserved for the Board Decision,
and from the Executive Committee to the responsible
business units.
Each department head takes charge of ensuring that their
business unit has fully complied with the corporate policies
and guidelines in its day-to-day operations.
For any matter involving potentially sensitive or inside
information, the business units are required to escalate the
matter to the Disclosure Committee. The Disclosure
Committee promotes consistent disclosure practices aiming
at timely, accurate, complete, and widely disseminated
disclosure of inside information about the Group to the
market in accordance with applicable laws and regulatory
requirements, and the Corporate Disclosure Policy.
The Disclosure Committee conducts meeting(s) in order to
assess the materiality and nature of the information, and
advises the Board promptly whether such information
constitutes inside information. All discussions are recorded
in the formal meeting minutes of the Disclosure Committee.
Compliance Framework
Each business unit is required to report any irregularity or
non-compliance immediately to the compliance team. Our
Group’s compliance policy sets out the control process for
the early identification and recording of non-compliance in
order to prevent and/or mitigate the risks of liability and
material loss.
In addition, each business unit must submit a full
compliance report twice a year, which is reported to the
Audit and Risk Management Committee.
52
Hysan Annual Report 2020 • “Sustainability Committee Report” on pages 73 to 74.
• A summary of the Sustainability Report on pages 75 to
77.
During its first year, the Sustainability Committee made a
significant impact on Hysan’s sustainability journey. The
Committee stimulated stronger commitment and greater
collaboration from business units to work towards shared
sustainable development goals, ESG-related risk
management and climate change matters, in line with our
“LIFE” strategy. Hysan gained further recognition from
major ESG benchmarks and indices. Our sustainability-linked
derivative hedging solution launched in October 2020,
featuring Asia’s longest ESG KPI commitment duration, was
awarded “Most Innovative Deal” in the “Deal of the Year
– Real Estate” category of the Triple A Sustainable Capital
Markets Regional Awards 2020, organized by The Asset.
The Sustainability Report has been prepared for electronic
distribution in an effort to reduce consumption of resources
due to printing and distributing hard copies, and is available
for public viewing on Hysan’s website (www.hysan.com.hk).
Limited copies are printed and distributed primarily to our
shareholders.
By Order of the Board
Lee Irene Yun-Lien
Chairman
Hong Kong, 25 February 2021
These means effectively monitor the compliance of each
business unit of the Group, prioritize each case identified,
and ensure comprehensive reporting and follow up.
All matters relating to the Group’s internal controls are
collectively reviewed by the Board, through the support of
the Audit and Risk Management Committee and the
Internal Audit function.
Internal Audit reviews the Group’s practices and procedures
for conducting business affairs, including leasing business,
accounting and financial reporting, corporate
communication processes, etc., from time to time, in order
to ensure that our business affairs are conducted in full
compliance with our corporate policies and guidelines.
Internal Audit also examines and suggests areas of
improvement for our corporate policies and guidelines.
Our compliance team issues quarterly legal and regulatory
updates to the Board, and reviews our corporate policies
and guidelines from time to time to ensure compliance with
the latest legal and regulatory developments as well as
suggestions from Internal Audit.
The Group’s reporting process and financial management
is part of our internal controls. 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, as well as any financial
judgements and estimates made by the management.
Full details of the risk management and internal control
activities during the year are set out in the “Risk
Management and Internal Control Report” on pages 54
to 60.
Sustainability Framework
The Board established the Sustainability Committee with
effect from 1 January 2020, with the aim of enhancing our
corporate responsibility, sustainable development and
environmental management regarding climate change.
The Sustainability Committee, supported by the
Sustainability Executive Committee at the management
level, provides long-term direction and supervises
sustainability-related matters.
Full details of Hysan’s sustainability development and
activities during the year are set out in:
• The “Sustainability Report 2020” on Hysan’s website:
www.hysan.com.hk.
53
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview 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. The 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 as well as the
control measures used 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 such 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 receiving status
updates and monitoring the implementation of audit
recommendations; and
iii. Reviewing reports 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.
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 risk
management culture
AUDIT AND RISK MANAGEMENT COMMITTEE
• Supports the Board in monitoring risk exposure and the 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 management and
• Provides the Audit and Risk Management
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
• Identifies, assesses and mitigates risks across the business
• Implements risk management and internal control
practices across business operations and functional areas
OPERATIONAL LEVEL
54
Hysan Annual Report 2020 2020 Review of Risk Management
and Internal Control Effectiveness
In respect of the year ended 31 December 2020, the Board,
with confirmation from the Chief Operating Officer, Chief
Financial Officer and Head of Internal Audit, as well as the
General Counsel and Company Secretary, considered the
Group’s 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 five components. The following section
describes how the model fits into our operational and
control environment:
• Control Environment – We have a strong tradition of
good corporate governance and 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. In
January 2021, we also adopted a separate Anti-Fraud
Policy to further promote an ethical culture and
emphasize our “zero tolerance” attitude to fraud. During
the year, no material related issues were raised.
In September 2020, a Risk Management Guideline was
developed. This was shared with all risk owners of the
Group in order to refresh our corporate risk management
approach and communicate the new enhancements
made to our risk management process.
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. 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,
business technology, legal & secretarial and corporate
communications).
Department heads review and update their risk registers
on an annual basis, 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 the 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, combines with top-down
stewardship to ensure 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.
• Control Activities – our operation and business involves
well-established business processes. Control activities have
traditionally been built on supervisor reviews, segregation
of duties, and well-defined physical and digital control
points. 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.
55
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview rISK MANAGEMENt AND INtErNAL cONtrOL rEPOrt
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 helps to identify deficiencies for which
timely remedial actions can be taken.
Another significant control activity is the monitoring of
major project expenditures, as these 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, the payback period and the
internal rate of return from projected cash flow, as well as
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
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 2020, the Audit and Risk
Management Committee held four meetings (2019: four
meetings) to address dynamic risks and enhance the risk
management oversight function. Each meeting includes a
dedicated discussion of risk management, internal control
systems and recent developments.
Risk Management Process
The Group has a robust process to review and communicate
risks across its risk governance levels. This consists of (i) an
ongoing process integrated into day-to-day operations, in
which risk owners dynamically evaluate and report emerging
risks they encounter to the Risk Management Committee;
and (ii) a periodic risk assessment process through which key
risks identified by management are assessed systematically
on a regular basis.
Ongoing Risk
Monitoring Process
Regular Risk
Assessment Process
Risk owners and the Risk
Management Committee
promptly assess and take
action in response to new or
emerging risks. This is a
continuous and interactive
process that includes
communication and
consultation with stakeholders.
• New risk confronted/
anticipated
• Immediate risk review
• Assess Risk
• Assess mitigation actions
• Notify parties
• Brainstorm and
communicate
• Enforcing actions
Risk Assessment
• Review and highlight key risks across dimensions in
business units
• Analyze risks through detailed consideration of
likelihood, impact and velocity (by using the
established risk criteria)
Risk Treatment
• Decide how to treat risks, based on the approaches of
Terminate, Transfer, Treat and Take (or a combination
of them where applicable)
Residual Risk and Risk Tolerance Level
• Collate the residual risk status (after risk treatment)
with the risk tolerance level for each key risk
• Determine any further actions needed to close any risk
gap
Risk Reporting
• Translate risk registers into a risk radar
• Effectively summarize and reflect the prioritized key
risks of the Group
56
Hysan Annual Report 2020 Hysan’s “Three Lines of Defence”
Model
Clear responsibilities and robust controls are vital to help
managing 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 the Group’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
• Internal Audit
• Internal Control Measures
• System of Risk
Management and
Internal Control
• HR Capability
Communication
• Compliance
• 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 the Group’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 risks and controls in all
business processes
• Responsible for the Group’s policy framework
• Responsible for providing
and independent risk assessment
independent and objective
assurance on the
effectiveness of risk
management, internal
controls and governance
processes
“
Good diversity, high
engagement in meetings
and well prepared
meeting materials.
Directors’ comments received in
Board Evaluation 2020.
”
57
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview
rISK MANAGEMENt AND INtErNAL cONtrOL rEPOrt
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 2020
Risk area
Continuing
epidemic of
COVID-19
Overall
business
environment
Office sector
Retail sector
Residential
sector
Tai Po
Residential
Development
Project
Human
Resources
58
Description of risk change
Our mitigating measures
• The proliferation and
• Hygiene standards and disinfection procedures
continuance of the COVID-19
pandemic in Hong Kong since
early 2020 has affected the local
retail and property leasing
markets.
reinforced in our properties.
• Close dialogue maintained with tenants.
• A communication protocol developed with tenants
for notifying infection cases.
• The continuing COVID-19
• Proactive measures taken to ease tenants’ business
pandemic is slowing down the
development of global and local
economies.
• Uncertainties remain from
China-U.S. trade tensions.
pressures.
• Focus on portfolio curation as well as prudent and
sound financial management to ensure Hysan’s
business resilience.
• Slowdown in demand due to
unclear economic recovery
prospects.
• Diverse and flexible leasing efforts as well as
maintaining a diversified tenant mix to ensure
a more resilient tenant portfolio.
• Net take-up of Grade A office
• Offer tailored solutions to increase marketability of
space in Hong Kong dropped in
2020.
• Co-working and work-from-home
models continued to disrupt the
traditional office leasing
business.
office units.
• Embrace the co-working trend by collaborating with
leading and strong co-working brands.
• Aim for mutual empowerment with our
Retail portfolio.
• Retail spending in Hong Kong
declined sharply amid the
continuing COVID-19 pandemic
and reduced tourist arrivals.
• Brands consolidated their outlets
to save costs.
• 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 tenant’s business
pressure and reinforce long-term business
partnership.
• Peer competition intensified.
• Use mobile and business technology to drive loyalty
• Uncertainties in the economy
affected demand for luxury
residential units as well as
affordable rent levels due to
customers’ tighter budget.
• Recent signs of stability in the
residential property market.
programme as well as shopping experiences to
distinguish our offerings.
• Focus on marketing efforts to target relevant
existing and potential new shoppers.
• Flexible leasing efforts to meet customer needs.
• Continue to invest in the renovation of residential
units and common areas to attract new tenants and
improve rents.
• Ensure the sites are carefully and professionally
developed to capture the target market.
• Approach the market at the right moment.
• Sensible tender price mitigates pressure on profit.
• The service industry continues
• Improve working environment and benefits
to face labour shortages.
• We are facing competition for
skilled personnel for our frontline
operations as well as for
management positions to
support our growth strategy.
with an emphasis on wellbeing, to help recruit new
employees and retain talented people
more effectively.
• Enhance staff productivity with technology and
process automation.
• Grow and develop talent via Mobile Learning, Hysan
Forum and our Leadership Programme.
• Strengthen our employer brand.
Hysan Annual Report 2020 Risk level
changes
during 2020
Risk area
Cyber security
ESG
Compliance
Environmental
Management
regarding
Climate
Change
Customer
Data
Protection and
Privacy
Protection
Anti-Fraud
and Anti-
corruption
Description of risk change
Our mitigating measures
• Given rapid developments in
business 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.
• Regular cyber security reviews and upgrades to
mitigate risks.
• Engage external professional(s) to conduct a cyber
security and data protection audit.
• Put in place cyber security policies and procedures,
as well as insurance for cyber risk.
• Information about security risk and protection
guidelines are available to all staff.
• No material cyber security breach has occurred in
the last three years. Ongoing monitoring of key
risk indicators.
• Increasing attention from
• Engage professional independent consultant(s) to
investors and the general public
in assessing public companies
on ESG performance.
• New requirements on
compliance.
conduct an overall review of the Group’s
sustainability and climate change performance.
• Execute the Group’s sustainable development
principles and attain the targets set.
• Established a Sustainability Committee at Board
• Climate change impacts the
operations and management
of buildings in our portfolio
Level in 2020.
• Apply new technologies to reduce carbon footprint.
• Regularly update contingency plan.
• Monitor emissions from existing buildings and new
development projects.
• Put in place ISO 14001 Environmental Management
System, ISO 50001 Energy Management System
and building analytics systems for daily operational
risk management.
• Invest in renewable energy.
• Apply new technologies to mitigate operational risk.
• Assess and enhance indoor air quality for pandemic
situation.
• Given rapid developments in
• Continuously build a holistic approach to managing
business technology, personal
data might be collected
inappropriately through digital
platforms and other channels.
and protecting data and privacy through the
implementation of a variety of processes, roles and
controls.
• Conduct comprehensive privacy compliance review.
• Adopt stringent privacy policies and procedures,
with strict compliance by all employees and service
providers.
• No material customer data loss cases and customer
privacy breaches reported in the last three years.
• External service providers and
• Adopted an Anti-Fraud Policy as a framework,
third parties are often engaged
to provide business and
technological solutions.
• Hysan continues to plan for
business diversification across
the Group.
supported by comprehensive anti-fraud procedures
and guidelines.
• Put in place and regularly review our Code of Ethics
and Whistleblowing Policy.
• Established an independent whistleblowing channel.
• Potential fraud risks identified across the Group
and no material related cases reported in the last
three years.
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
59
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview rISK MANAGEMENt AND INtErNAL cONtrOL rEPOrt
Our Efforts to Enhance the
Internal Control Environment and
Activities in 2020
In addition to the actions described above, the following
section outlines examples of improvements we have made
to strengthen our risk management and internal control
systems:
Control
Environment –
policy of
compliance
• Introduced a Tax Governance Policy, Anti-Fraud Policy and Human Rights Policy in
2020 and 2021. Updated corporate governance policies including Diversity Policy,
Nomination Policy, Corporate Governance Guidelines and the Terms of Reference of
various Board Committees, as well as the management Executive Committee, in 2021.
— Ongoing review and
refinement of processes
and structures to enhance
compliance.
Control
Environment –
risk management
guideline
• Developed a Risk Management Guideline to state the risk management process, new
elements introduced for risk identification, risk evaluation and risk reporting. The
new elements include new dimensions of risk categories and risk sources, revised
definitions for assessing risk impacts, risk radar reporting, revised risk registers and
the ongoing risk monitoring process, etc.
— Providing a consistent and
systematic approach of
risk management across
the Group at all levels.
Risk Assessment –
enhanced
monitoring of
emerging risks
Risk Assessment –
enhanced risk
analysis
• Strengthened the monitoring of material risks and emerging risks, i.e. new or
— In the context of a fast-
evolving risks with potential significant impact, such as socio-political, economic,
epidemic, cyber security and privacy or social media risks.
• The Risk Management Committee plays a key role in identifying and tracking such
risks, with top management leading discussions with all department heads.
changing global and local
environment, the
monitoring of emerging
risks will be a focus.
• Refined the risk register with new definitions of risk velocity, risk treatment and risk
tolerance.
• Considered the new dimensions of ‘Regulatory/Legal/Compliance’,
‘Human Resources’ and ‘Physical Environment’ in assessing risk impact.
— Continual review and
refinement of the risk
management process to
ensure that all major risks
are properly identified,
evaluated, reported and
monitored.
— Continual review and
refinement of policies and
procedures to support the
essential task of keeping
risk management and
internal controls aligned
with fast-changing external
and internal business
environments.
— Facilitating and enhancing
the work of the Audit
and Risk Management
Committee and the Board
in monitoring our
risk exposure.
Control
Activities –
internal
controls
and policies
• The Group carried out a Corporate Disclosure Drill with an external professional in
October 2020. Staff from the Finance Department (Financial Reporting Team and
Treasury Team), Investment & Development Department, Corporate
Communications Department and Legal & Secretarial Department all attended an
interactive drill with case studies. Regular training and education provided across the
Group during the year .
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 the Board on major risks, including reports on topics such as the
Group’s enterprise risk management framework, digital technology projects, data
privacy review and business operations, and “deep-dive” report on impact of
COVID-19.
• 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.
Monitoring
Activities –
risk radar
Monitoring
Activities –
enhanced
ESG governance
• Introduced the use of a risk radar to effectively visualize and contextualize all of the
— Use of a risk radar to
key risks of the Group.
• Established the Sustainability Committee at the Board level in 2020, to oversee the
Group’s corporate responsibility, sustainability development and related policies,
supported by the management-level Sustainability Executive Committee and the
Sustainability Task Force with regular updates.
• Put in place a sustainability policy, which applies to all properties and business units.
enhance effectiveness and
efficiency in risk reporting.
— Facilitating and enhancing
the work of the
Sustainability Committee
and the Board
in sustainability
development.
The Risk Management Committee
Hong Kong, 25 February 2021
60
Hysan Annual Report 2020 Audit and risk Management
committee report
Dear Shareholders,
We are pleased to present the Audit and Risk
Management Committee’s report for 2020,
which provides an overview of the work
undertaken by the Committee during the year.
In 2020, the Committee continued to focus on
reviewing the Group’s risk management and
internal control systems, monitoring internal
and external auditors and overseeing the
financial reporting process. The most
significant topics considered by the Committee
during the year included rigorous assessment of
the Group’s enhanced risk management and
internal control systems, major risks relating to
digital technology projects and the impact of
COVID-19.
Audit and Risk Management Committee activities and
agenda time during the year
Highlights in 2020 and 2021
• Assessed the Group’s risk management and internal
control (including its new enhanced three-dimensional
risk management framework) and refined the risk
management model in order to identify, assess and
monitor emerging risks
• Reviewed major risks relating to digital technology
projects and the business impact of COVID-19
• Reviewed the Tax Governance Policy
• Reviewed a separate Anti-Fraud Policy
• Updated the Terms of Reference
Key responsibilities
• Oversee the integrity of the Group’s financial
management and reporting processes and the
preparation of financial statements
• Review the risk management and internal control
framework
• Review the effectiveness and adequacy of the risk
management and internal control systems
• Review the major identified risks
• Assess and determine the risk appetite of the Group
26%
19%
Financial
Reporting
• Oversee the Internal Audit
Others (including
compliance,
corporate
governance and
deep-dive topics)
External Audit
15%
40%
Risk Management
and Internal
Control Systems
Composition
The majority of the Committee is comprised of 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
• Oversee the relationship with the external auditor and the
provision of non-audit services
Meeting Schedule
The Audit and Risk Management Committee held four
meetings during the year, with one of those meetings
specifically focused on addressing dynamic risks and
enhancing the risk management oversight function. The
Board Chairman and management members (including the
Chief Operating Officer and Chief Financial Officer), internal
auditor, external auditor and external valuer (as
appropriate) attend the meetings by invitation to present
updates and answer relevant questions, and thus facilitate
the Committee’s decision-making process. Pre-meeting
sessions with external and internal auditors are held without
the management’s presence at least twice a year.
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Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview AUDIt AND rISK MANAGEMENt cOMMIttEE rEPOrt
Roles and Authorities
• Oversee the Group’s financial management and reporting
processes and monitor the work carried out by the
external auditor. Within this process, the management is
responsible for the preparation of the Group’s financial
statements, including the selection of suitable accounting
policies, while 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 this regard. Formal statements of Directors’
Responsibility for the Financial Statements are contained
in “Financial Statements, Valuation and Other
Information” section of this Annual Report.
• Review the Company’s risk management and internal
control systems.
• Review reports on major risks faced by the Group.
• Review adequacy of resources and staff qualifications and
experience in the Group’s internal audit, accounting and
financial reporting functions, as well as their training
programmes and budget.
• Review the Group’s Whistleblowing Policy. 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.
• Review the Anti-Fraud Policy. This is a separate policy to
further promote an ethical culture and emphasize our
“zero tolerance” attitude to fraud.
• 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 of the meeting held in February 2020 were set out in
the 2019 Annual Report.
From March 2020 to February 2021, the Audit and Risk
Management Committee held four meetings to:
The Audit and Risk Management Committee
Over the Past 12 Months
May 2020
meeting
Report from Internal Audit
3-year Internal Audit Plan
“Deep-dive” topic
Legal and regulatory update
August
2020
meeting
Interim results
Property valuations
External auditor report
Risk management review
Report from Internal Audit
Legal and regulatory update
November
2020
meeting
External audit progress report
Report from Internal Audit
Risk management review
Annual review of adequacy of resources
Corporate governance policies and
Committee terms of reference
Legal and regulatory update
February
2021
meeting
Annual results
Property valuations
Annual review of risk management and
internal control effectiveness
Effectiveness and independence of external
auditor
External audit completion report
External audit plan for 2021
Annual review of continuing connected
transactions
Legal and regulatory update
62
Hysan Annual Report 2020 Financial Reporting
• Review and discuss with management and the external
auditor, and recommend for approval to the Board, the
unaudited financial statements for the first six months
ended 30 June 2020; the audited financial statements for
the year ended 31 December 2020; and the Independent
Auditor’s Report for the year ended 31 December 2020,
prior to their publication. The Committee’s review and
recommendations were based on the external auditor’s
review work, as well as the following:
− Discussions with the external auditor and internal
auditor regarding the scope of their respective reviews
and findings.
− Discussions with management regarding significant
parameters and judgments affecting the Group’s
financial statements, including the valuation of
investment properties as at 30 June 2020 and
31 December 2020 by the independent professional
valuer, Knight Frank Petty Limited.
− A joint review with both management and the external
auditor of the Key Audit Matters included in the
Independent Auditor’s Report for the year ended
31 December 2020.
Review of Risk Management and
Internal Control Systems
• Review Internal Audit findings on the following areas,
with no significant issues raised during the reviews:
− Enterprise risk management framework: the
introduction of a refined risk management model and
an enhanced three-dimensional risk management
framework that takes into account “risk velocity” for
future risk prioritization and proposes new key risk
indicators
− Digital technology projects: pre-implementation review
on various initiatives, including digital marketing
activities and operational systems development to
enhance IT governance
− Data privacy review
− Leasing business
• Consider a “deep-dive” exploration into the risks relating
to COVID-19 on our business and mitigating actions.
• Evaluate the financial aspects of the Group’s strategy
implementation.
• Consider and evaluate an in-depth assessment on
enhancing indoor air quality for pandemic situation in
February 2021.
• Consider the Group’s key corporate risks, including the
overall business environment, operational risks, ESG risks
and compliance, etc., with the overall approach being set
by senior management.
• Consider the key imminent risks and risk registers
presented by the management.
• Review the methodology used by the Group’s
independent professional valuer, Knight Frank Petty
Limited, in the valuation of its investment properties, and
discuss the capitalization rate and property market
outlook.
• Review adequacy of resources and staff qualifications and
experience in the Group’s internal audit, accounting and
financial reporting functions, as well as their training
programmes and budget.
• Review all legal and regulatory updates and trends that
may affect the Group, and their implications.
• Review the Tax Governance Policy, which sets out the
approach to tax strategy and policies across the Group.
• Review the Group’s separate Anti-Fraud Policy to further
promote an ethical culture and enhance the detection
and prevention of fraud.
• Review the annual risk management and internal control
systems performance for 2020, based on:
− Reports from Internal Audit on the review of the
Company’s continuing connected transactions for the
year ended 31 December 2020, as well as the adequacy
and effectiveness of the related internal control
procedures.
− Regular reports by management regarding major risks,
movements in risk levels and mitigating actions, as well
as special reports on select major risk items (as detailed
above).
− Regular reports from Internal Audit, including the
implementation status 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 control, as well as 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
adequacy of resources and staff qualifications and
63
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview AUDIt AND rISK MANAGEMENt cOMMIttEE rEPOrt
experience in the Group’s accounting, financial reporting
and internal audit functions, as well as their training
programmes and budget). No significant areas of concern
that might affect financial, operational and compliance
controls, ESG compliance, internal audit, risk management
or internal control were identified.
• Review and consider the 2021 audit service plan of the
external auditor, and the terms of its engagement in
respect of the 2021 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 2021.
External Auditor
• Review and consider the terms of engagement of the
external auditor in respect of the Group’s 2020 final
results (including the 2020 annual audit, the related
results announcement, and the annual review of
continuing connected transactions) and the annual
update regarding its MTN Programme.
• Review the audit progress report of the external auditor.
• Carry out the annual assessment of the auditor’s
qualifications, expertise, services and independence, and
declared its satisfaction with the same. The assessment
was performed by reviewing the management’s detailed
assessment of the external auditor’s independence,
service quality and remuneration level, as well as the
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 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 might 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
Internal Audit
• Review the internal audit plan regarding the key risks
and business strategy of the Group; all matters identified
as the result of internal audits; management responses to
audit reports issued during the year, and the progress
made in implementing improvement actions.
• Consider and approve the three-year audit plan
undertaken by the Internal Audit function. During 2021,
it is expected that the internal audit plan will include
reviews of the Group’s leasing business, marketing,
investment and development, etc.
Members’ attendance records are disclosed in the table on
page 41.
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 2020. For details, please refer to Corporate Governance
Report – “Board Evaluation” (page 44).
Members of the Audit and Risk Management Committee
Poon Chung Yin Joseph (Chairman)
Churchouse Frederick Peter
Fan Yan Hok Philip
Lee Anthony Hsien Pin
2020
HK$ million
2019
HK$ million
Hong Kong, 25 February 2021
Audit Services
Non-audit Services (Note)
Total
2.6
3.8
6.4
2.9
2.5
5.4
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.
64
Hysan Annual Report 2020 remuneration committee report
Dear Shareholders,
We are pleased to present the Remuneration
Committee Report for 2020. The primary roles
of the Remuneration Committee are to advise
the Board on formulating the remuneration
policy for Directors and senior management, to
determine remuneration and incentives
packages for Directors and senior
management, and to ensure that the
remuneration packages are commensurate
with the qualifications and competencies of the
Directors and senior management and are
appropriate to the best interests of the
Company and its shareholders.
Remuneration Committee activities and agenda time
during the year
18%
18%
37%
27%
Review and
consider of
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
Composition
The majority of the Committee is comprised of Independent
Non-Executive Directors
Committee members
Fan Yan Hok Philip* (Chairman)
Lee Tze Hau Michael
Poon Chung Yin Joseph*
* Independent Non-Executive Director
Highlights in 2020 and 2021
Key responsibilities
• Review the Company’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 Directors and senior
management
• Review share incentive plans
Meeting Schedule
The Remuneration Committee generally meets at least once
a year. The Executive Director(s) and management may be
invited to Remuneration Committee meetings to present
updates and/or answer relevant questions in order to
facilitate the decision-making process. No Director is
involved in deciding his own remuneration.
Roles and Authorities
• Review the Company’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.
• Review new share incentive plans, changes to the key
terms of pension plans, and the key terms of any new
compensation and benefits plans that have a material
financial, reputational and strategic impact.
Activities
In 2020, the Remuneration Committee held one meeting to:
• Approve the Executive Director’s 2020 compensation
package and 2019 performance-based bonus.
• Review the fees for Non-Executive Directors and Board
Committee members.
• Review and determine the compensation of senior
management.
• Considered remuneration for Directors and senior
• Review and consider the long-term incentive scheme.
management
• Considered the compensation structure and long-term
incentive scheme
• Reviewed the Terms of Reference
In January 2021, the Remuneration Committee also held a
meeting to:
• Approve the Executive Director‘s 2021 compensation
package and 2020 performance-based bonus.
65
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview rEMUNErAtION cOMMIttEE rEPOrt
• Review the fees for Non-Executive Directors and Board
• Remuneration packages shall be set at levels that ensure
Committee members.
• Review and determine the compensation of senior
management.
• Review and consider the long-term incentive scheme.
• Review the terms of reference of the Remuneration
Committee.
Members’ attendance records are disclosed in the table on
page 41.
Executive Director and Senior
Management Remuneration Policy
The Group’s remuneration policy aims to provide a fair
market level of 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.
The following principles have been established:
• Remuneration packages and structure shall reflect a fair
reward system for all participants with an emphasis on
performance, comprising the following components:
Components
Determining Factors
Fixed compensation
Base salary
and
allowances
• Market trends: pay increments in line with
general and real estate industry norms
• Market benchmarks relevant to role and job
scope
• Company performance
• Individual performance and contribution,
measured against annual financial and
operational targets (turnover, expense ratio,
earnings per share (“EPS”), portfolio year-
end occupancy, achievement of key
strategic initiatives, etc.)
Variable compensation
Performance
bonus
• Company performance
• Individual performance and contribution,
measured against annual financial and
operational targets (turnover, expense ratio,
EPS, portfolio year-end occupancy,
achievement of key strategic initiatives, etc.)
• Actual bonus payout ranges from 0–200%
of target bonus, which is set as a percentage
of annual base salary
Share options • Company performance
• Individual performance and potential, as
well as long-term contribution to the
Company
• Level of share options granted is based on a
prescribed grant multiple of annual base
salary
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 shall determine the overall
amount of each component of remuneration, taking into
account both quantitative and qualitative assessments of
performance, as well as the achievement of financial and
operational key performance targets that align with the
Group’s long-term strategy.
• Remuneration policy and practice shall be as transparent
as possible.
• Share option grantees shall develop significant personal
shareholdings through executive share option schemes in
order to align their interests with those of shareholders.
• Pay and employment conditions elsewhere in the Group
shall be taken into account.
• The remuneration policy for Executive Director(s) and
senior management shall be reviewed regularly,
independent of executive management.
In January 2021, the Remuneration Committee held a
meeting to consider the annual base salary of Lee Irene
Yun-Lien and concluded that her 2021 annual fixed base
salary shall be HK$8,000,000.
Details of Directors’ (including individual Executive
Director(s)) and senior management’s emoluments for
2020, as well as changes in share options for Executive
Director(s) during the year, are set out in notes 11, 12 and
37, respectively, to the consolidated financial statements.
Non-Executive Director
Remuneration Policy
Key elements of our Non-Executive Directors’ remuneration
policy include the following:
• Remuneration shall be set at an appropriate level to
attract and retain first-class non-executive talent.
• Remuneration of Non-Executive Directors (subject to
shareholders’ approval) shall be set by the Board and
should be proportional to their commitment and
contribution to the Company.
• Remuneration practice shall be consistent with recognized
best practice standards for Non-Executive Directors’
remuneration.
66
Hysan Annual Report 2020 • Remuneration shall be in the form of cash fees, payable
semi-annually.
• Non-Executive Directors shall not receive share options
from the Company.
In 2020, Non-Executive Directors received no other
compensation from the Group except for the fees disclosed
below. None of the Non-Executive Directors 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$3,241,000
during 2020.
Director Fee Levels
Director fees are subject to shareholders’ approval at
general meetings. In January 2021, the Remuneration
Committee duly considered a number of factors, including
the level of responsibility, experience and abilities required
of the Directors, the level of care and amount of time
required, as well as the fees offered for similar positions in
companies requiring the same talents, and agreed that the
fees of the Non-Executive Directors shall remain at the same
level.
The current fees for Non-Executive Directors and Board
Committee members are set out below. Executive
Director(s) do not receive any director fee(s).
Per annum
HK$
Board of Directors
Non-Executive Director
280,000
(Note 1)
Audit and Risk Management
Committee
Chairman
Member
Remuneration Committee
Chairman
Member
Nomination Committee
Chairman
Member
Sustainability Committee
Chairman
Member
180,000
108,000
(Note 1)
(Note 1)
75,000
45,000
(Note 1)
(Note 1)
50,000
30,000
(Note 1)
(Note 1)
50,000
30,000
(Note 2)
(Note 2)
Notes:
1. Approved by shareholders in the 2019 AGM and took effect on 1 June 2019.
2. Approved by the Board and took effect on 1 January 2020.
Human Resources Practices
The Group aims to attract, retain and develop high-calibre
individuals who are committed to attaining our objectives.
The total number of employees as at 31 December 2020
was 489 (2019: 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 2020”.
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).
67
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview rEMUNErAtION cOMMIttEE rEPOrt
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 five
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.
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 five
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.
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.
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 three 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 1,602,000 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 1,272,667
ordinary shares of the Company granted and fully-vested
under the 2005 Scheme remained outstanding,
representing approximately 0.12% of the total number of
issued shares of the Company;
• share options exercisable into a total of 4,744,067
ordinary shares of the Company granted (including
fully-vested share options exercisable into 2,036,853
ordinary shares of the Company) under the New Scheme
remained outstanding, representing approximately
0.46% of the total number of issued shares of the
Company; and
• 101,279,005 shares are issuable under the New Scheme,
representing approximately 9.74% of the total number of
issued shares of the Company.
68
Hysan Annual Report 2020 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
1.1.2020
Granted
Exercised
Cancelled/
lapsed
(Note b)
Balance
as at
31.12.2020
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
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(50,000)
(Note d)
–
–
–
–
–
(50,000)
–
–
–
–
–
–
–
–
–
–
–
87,000
265,000
325,000
300,000
–
32,000
70,000
85,000
46,000
62,667
1,272,667
Date of
Grant
Exercise
price
HK$
Exercise period
(Note a)
Balance
as at
1.1.2020
Granted
Exercised
Cancelled/
lapsed
(Note b)
Balance
as at
31.12.2020
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
21.2.2020
33.15
36.25
44.60
42.40
29.73
(Note e)
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
–
–
–
–
21.2.2021 – 20.2.2030
–
650,000
Eligible employees
(Note c)
31.3.2016
33.05
31.3.2017 – 30.3.2026
125,000
31.3.2017
29.3.2018
29.3.2019
31.3.2020
35.33
41.50
42.05
25.20
(Note f)
31.3.2018 – 30.3.2027
244,667
29.3.2019 – 28.3.2028
496,000
29.3.2020 – 28.3.2029
762,000
31.3.2021 – 30.3.2030
–
952,000
3,170,067 1,602,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
375,000
300,000
373,200
494,200
650,000
125,000
244,667
(2,000)
494,000
(4,000)
758,000
–
952,000
(6,000) 4,766,067
Notes:
(a) All options granted have a vesting period of three 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 weighted average closing price of the shares of the Company immediately before the date on which the options were exercised was HK$28.40.
(e) The closing price of the shares of the Company immediately before the date of grant (i.e. as of 20 February 2020) was HK$29.55.
(f) The closing price of the shares of the Company immediately before the date of grant (i.e. as of 30 March 2020) was HK$23.85.
69
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview rEMUNErAtION cOMMIttEE rEPOrt
Apart from the above, the Company has not granted any
share options under the Schemes to any other persons
during the year that are 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.
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 the Black-Scholes option pricing
model (the “Model”). The Model is one of the commonly
used models to estimate the fair value of an option. The
variables and assumptions used in computing the fair value
of the share options are based on the management’s best
estimate. The value of an option varies with different
variables of a number of subjective assumptions. Any
change in the variables so adopted may materially affect
the estimation of the fair value of an option.
The inputs into the Model were as follows:
Date of grant
Closing share price at the date of grant
Exercise price
Risk free rate (Note a)
Expected life of option (Note b)
Expected volatility (Note c)
Expected dividend per annum (Note d)
Estimated fair values per share option
31.3.2020
21.2.2020
HK$25.200
HK$25.200
0.528%
5 years
18.518%
HK$1.384
HK$2.060
HK$29.250
HK$29.730
1.172%
5 years
18.013%
HK$1.384
HK$2.520
Notes:
(a) Risk free rate: 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: the period of five 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: the approximate historical volatility of the closing prices of the shares of the Company over the past five years
immediately before the date of grant.
(d) Expected dividend per annum: the approximate average annual cash dividend over the past five financial years.
Members of the Remuneration Committee
Fan Yan Hok Philip (Chairman)
Lee Tze Hau Michael
Poon Chung Yin Joseph
Hong Kong, 25 February 2021
70
Hysan Annual Report 2020 Nomination committee report
Dear Shareholders,
We are pleased to present the Nomination
Committee Report for 2020. The primary roles
of the Nomination Committee are to review
the Board’s structure, composition and
diversity, and to recommend Board
appointments. The roles of the Non-Executive
Directors continue to evolve in line with the
growing demands and the fast-changing
business environment. The Board is constantly
looking ahead to ensure that our Non-
Executive Directors have the skills and
experience required to drive the highest
standards of performance. During 2020,
Lau Lawrence Juen-Yee retired from the Board
and the Committee. We would like to thank
him for his contribution during his tenure. We
would also like to welcome Churchouse
Frederick Peter to the Committee.
Nomination Committee activities and agenda time
during the year
Highlights in 2020
• Considered the re-appointment and independence of
Directors
• Reviewed the Diversity Policy and the Nomination Policy
• Reviewed the Terms of Reference
Key responsibilities
• Review the structure, size and composition of the Board
• Review the skills, knowledge, experience and diversity of
each Director
• Assess the independence of the Independent Non-
Executive Directors
• Make recommendations to the Board on the appointment
of Directors
• Review the dedication of time and expertise of each
Director, while taking into account other material
commitments of Directors
• Oversee succession planning for the Board
Meeting Schedule
The Nomination Committee generally meets at least once a
year.
Review of Board
and Board
Committees’
Structure, Size,
Composition
and Diversity
Roles and Authorities
• Review and make recommendations on the structure, size,
composition and diversity of the Board with a view to
complementing the Company’s corporate strategies.
50%
Corporate
Governance
10%
Assessment of
Independence of
Directors
20%
Nomination of
Directors
20%
Composition
The majority of the Committee is comprised of Independent
Non-Executive Directors
Committee members
Lee Irene Yun-Lien (Chairman)
Churchouse Frederick Peter*
Fan Yan Hok Philip*
Lee Chien
Poon Chung Yin Joseph*
* Independent Non-Executive Director
• Review the Diversity Policy.
• Review the independence of Directors pursuant to the
Listing Rules’ requirements.
• Generally oversee the succession planning of the Board.
• Review the time commitment and effort required of
Directors to discharge their responsibilities.
• Review the training and continuous professional
development of the Directors.
• Recommend the nomination of Directors after careful
consideration of the attributes and values required in
accordance with the Company’s Nomination Policy,
while also taking into account diversity aspects (including,
but not limited to, gender, age, cultural and educational
background, ethnicity, professional experience, skills,
knowledge and length of service) with due regard to the
benefits of diversity, as set out under the Diversity Policy.
71
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview NOMINAtION cOMMIttEE rEPOrt
Director Recruitment Process
1
A wide and diverse range
of candidates with
different skills and business
backgrounds appropriate
to the Group’s business
needs are identified
2
Nomination Committee
Chairman meets with
shortlisted candidates
3
4
5
Nomination Committee
assesses the suitability of
the candidates based on
a range of criteria
All Directors are given the
opportunity to meet with
the preferred candidate
Nomination Committee
makes a recommendation
to the Board
Activities
During 2020, the Committee held one meeting to:
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 Board
diversity in line with the Company’s strategy. 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.
• Recommend the re-appointment of Directors to the Board.
• Consider the fact that two Directors, Fan Yan Hok Philip
and Poon Chung Yin Joseph, have served as Independent
Non-Executive Directors for more than nine years. Fan
Yan Hok Philip was re-elected at the 2020 AGM and will
remain on the Board for a further year, while Poon Chung
Yin Joseph will retire by rotation at the forthcoming AGM
to be held on 21 May 2021. The Nomination Committee
was of the view that both Fan Yan Hok Philip and Poon
Chung Yin Joseph have consistently demonstrated a
healthy level of professional scepticism whenever
appropriate, and have not held back from asking probing
questions and challenging the executive management’s
views and recommendations. There is no evidence to
suggest that their tenure has had any impact on their
independence. The Nomination Committee was thus
satisfied that, notwithstanding the length of service of
such Directors, as well as the number and nature of
office(s) they 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 Policies and Guidelines
• Review our Diversity Policy and Nomination Policy
(available on the Company’s website) to enhance the
diverse perspectives of Directors and strengthen the
nomination process.
• Continue with the appointment of Li Xinzhe Jennifer as an
advisor to the Board, in order to continue to enrich the
Board’s skills and diversity.
• Review its terms of reference in order to strengthen the
board assessment process for the appointment of
Directors.
• Receive and review the latest Board performance
evaluation, which concluded that the Board has operated
very well. The Nomination Committee was satisfied that all
Directors were 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 rates of attendance, recorded in the table on page 41.
• Review the contributions of those 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.
72
Next Generation Innovation Panel
• Consider the nature and composition of the Next
Generation Innovation Panel, which improves the Board’s
capabilities and supports its strategic decision-making.
Members of the Nomination Committee
Lee Irene Yun-Lien (Chairman)
Churchouse Frederick Peter
Fan Yan Hok Philip
Lee Chien
Poon Chung Yin Joseph
Hong Kong, 25 February 2021
Hysan Annual Report 2020 Sustainability committee report
Dear Shareholders,
We are pleased to present the Sustainability
Committee Report for 2020. The primary roles
of the Sustainability Committee are to review
and oversee the Group’s corporate
responsibility, sustainability development and
related policies. The Committee is tasked with
overseeing the Group’s overall vision and action
plans for corporate responsibility and
sustainability, 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.
Committee activities and agenda time
during the year
Sustainability
Governance
25%
Sustainability
Strategy and
Progress
ESG Reporting
20%
55%
Composition
The majority of the Committee is comprised of 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 and 2021
• Reviewed and endorsed the Group’s sustainability
strategy
• Reviewed sustainability progress on a quarterly basis
• Enhanced the Terms of Reference
• Reviewed the Sustainability Report
Key responsibilities
• Review the Group’s sustainability roadmap and make
recommendations to the Board
Meeting Schedule
The Sustainability Committee generally meets at least once
a year. Two meetings were held during 2020, in order to
increase its focus on sustainability matters.
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 and
Governance Reporting Guide and the Listing Rules).
• Review and provide recommendations to the Board for
approval of the annual corporate responsibility and
sustainability report and relevant disclosures in the
Company’s annual report.
73
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview SUStAINAbILIty cOMMIttEE rEPOrt
Activities
Details of the meeting held in February 2020 were set out in
the 2019 Annual Report.
From March 2020 to February 2021, the Sustainability
Committee held two meetings to:
The Sustainability Committee Over the Past 12
Months
Discuss ESG Overview and Direction
• Review the Group’s engagement strategy on a regular
basis in order to prepare for the future. Hysan has
consistently engaged with the community in which it
operates, since the community is core to the Group’s
heritage.
• Review the identified ESG-related sustainability efforts.
• Identify long-term and short-term sustainability targets
and review their progress.
May
Quarterly
Update
August
Quarterly
Update
November
2020
meeting
February
2021
meeting
Sustainability Progress Update – Q1 2020
Sustainability Progress Update – Q2 2020
Sustainability Progress Update – Q3 2020
Annual review of adequacy of resources of
ESG functions
Annual review of ESG risks
Committee terms of reference
Sustainability Governance
• Review reports on the major ESG risks faced by the Group,
including risks relating to the COVID-19 pandemic, ESG
compliance, environmental management regarding
climate change and corresponding mitigation measures.
Details are set out in the Risk Management and Internal
Control Report.
• Review the framework for sustainability governance and
confirm its satisfaction with the adequacy of resources for
ESG performance and reporting.
Sustainability Progress Update – Q4 2020
• Review its terms of reference to enhance the sustainability
Sustainability Report
governance structure.
More details are set out in the Sustainability Report 2020.
Review the Group’s Sustainability
Strategy
• Discuss and review the Group’s sustainability strategy.
The Sustainability Committee considered the action plan
and identified potential risks and challenges related
thereto, as benchmarked against international standards
and industry peers.
• Identify material ESG-related issues following on from the
stakeholder engagement and materiality assessment
conducted by an independent ESG consultant in 2019.
Members of the Sustainability Committee
Jebsen Hans Michael b.b.s. (Chairman)
Fan Yan Hok Philip
Wong Ching Ying Belinda
Hong Kong, 25 February 2021
74
Hysan Annual Report 2020 Sustainability report 2020 – Summary
This section provides a summary of Hysan’s sustainability strategy overview and 2020 highlights. The
reporting period is from 1 January 2020 to 31 December 2020, 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.
In 2020, COVID-19 was a severe test of our ability to maintain a safe and enjoyable community for everyone
who makes use of our buildings and services. Hysan’s team was successful in providing a secure environment
for our tenants, customers and visitors. We began with comprehensive preventive measures and clear
communications, followed by swift handling of any potentially infectious situation.
During these challenging times, Hysan’s sustainability efforts brought positivity and hope to the tenants of
our properties and members of the surrounding community. With guidance from the Board-level Sustainability
Committee, the management team initiated and maintained a wide range of new and existing sustainability
projects, with environmental, social and governance objectives that align with a number of the Sustainability
Development Goals (“SDGs”) adopted by the United Nations General Assembly in 2015. Our efforts have
been recognized by some of the world’s top sustainability indices and rating agencies.
CLIMATE RESILIENCE
We are committed to reducing our carbon emissions. As part
of Hysan’s decarbonisation journey, we aim to lower the carbon
intensity of our daily operations by investing in renewable energy
and green buildings, increasing system efficiency, optimizing the
way we use our resources, and exploring innovative solutions to
further minimize the impact of our business operations. In terms
of transitional risks, our Sustainability Executive Committee
examines the climate risks and opportunities arising from our
operations, closely observes potential policy changes and market
shifts, and reports to the Board-level Committee to ensure
relevant climate risks are integrated into our risk management
process. In terms of physical risks, we have procedures in place
to handle different types of climate disruption such as flooding,
heavy rainstorms, and other extreme weather conditions.
Environmental
Management System
Hysan’s Environmental Policy focuses on measuring and
reporting carbon reduction efforts, promoting waste reduction at
source, enhancing green purchasing and improving stakeholder
engagement. We obtained ISO 14001 Environmental
Management System certification for our head office in order
to align our corporate environmental management efforts
with international standards, and to strengthen our measures
for monitoring, reviewing and minimizing the environmental
impact of our operations. We also developed a Sustainable
Office Guide for our colleagues. The Guide presents simple
steps and tips, as well as resources and training related to green
office management. We aim to nourish a green office culture
and promote greater awareness among employees.
75
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview SUStAINAbILIty rEPOrt 2020 – SUMMAry
OUR SUSTAINABILITY STRATEGY
Hysan takes pride in being not only a business that owns and manages properties, but also a Business of Life. The “LIFE”
within our Business of Life mindset has become the foundation of our strategic sustainable development principles. We
regularly review our strategy and business operations, and continue to support and align our efforts with nine United
Nations Sustainable Development Goals (“SDGs”). Our Sustainable Development Principles are:
L EAP INTO SMART
AND ECO-BUSINESS
I NTEGRATE WITH
OUR COMMUNITIES
Smart use of natural resources and technology for reducing
the environmental impacts of Hysan’s daily operations.
Integrate community needs into our core business operations
and partnerships, provide support to community projects,
and develop sustainable partnerships with our tenants
TARGETS
2020 PROGRESS
$
$
Average 20%
reduction in energy
purchased by 2024
(baseline: 2005)
20% reduction
$
in carbon intensity
by 2024
(baseline: 2005)
On track
$
On track
$
$
$
2020 HIGHLIGHTS
$
Kick-started our renewable energy project
and began installing solar panel systems across
our portfolio, starting with the rooftop of
Hysan Place
$
$
Digitalised shoppers experience through
$
the Lee Gardens App, issuing over 415,000
paperless e-coupons, transforming
Lee Gardens into a digitally savvy district
$
TARGET
>30,000
beneficiaries
(yearly)
2020 PROGRESS
>50,000
beneficiaries
2020 HIGHLIGHTS
Swiftly implemented and continually
strengthened measures in response to COVID-19
for the safety of our employees, tenants,
community members and shoppers
Engaged over 50,000 stakeholders both
locally and internationally through 18 major
physical and virtual engagement events, as well
as partnerships with non-governmental
organizations
Held exhibitions and activities on the themes of
cultural heritage, local fashion talent, mural art
and the post-pandemic “new normal”
$
$
$
$
76
Hysan Annual Report 2020
FOSTER PARTNERSHIP
WITH OUR PEOPLE
E STABLISH STRONG
CORPORATE GOVERNANCE
Build a diverse and inclusive workforce, treat our people
fairly and help them realize their full potential
Build a strong governance structure, maintain an ethical
workplace and promote green finance
TARGET
2020 PROGRESS
TARGETS
2020 PROGRESS
20% increase in
average annual
hours dedicated to
employee health
and wellness
166% increase
with additional
330 hours invested
in health and
wellness programme
comparing with 2019
2020 HIGHLIGHTS
Introduced a three-month weight management
programme in addition to several office health
and wellness activities, engaged cumulative
participation of over 1,150 colleagues
Provided a total of 2,137 training hours on
safety and health related topics
Launched Learner Reward Scheme and added
100+ online learning modules on our Mobile
Learning Platform to support and stimulate
employees’ continuous development
Disclose and
maintain/improve
our performance in
major sustainability
benchmarks and
indices, reflecting
the latest ESG
requirements and
expectations from
investors
Strengthen our position
in sustainable and
green finance through
both innovative and
traditional financial
instruments
Rated “three stars” in
the GRESB assessment,
“AA” in the Hang Seng
Corporate Sustainability
Index and, “A” in
MSCI ESG Ratings, and
remained a constituent
member of the
FTSE4Good Index Series
Launched the first
sustainability-linked
derivative hedging
solution among
Hong Kong real
estate companies in
October 2020
2020 HIGHLIGHTS
Established Board-level Sustainability Committee
integrated material ESG-related risks in the
Group’s risk assessment process
Enhanced over 10 corporate policies and
statements to address business developments
and legal updates, and to capture best practices
Please refer to our standalone Sustainability Report for further details of the Group’s sustainable development
efforts and progress.
77
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Corporate GovernanceFinancial Statements and ValuationBusiness PerformanceOverview The Directors submitted their report together with the audited consolidated financial statements for the year ended
31 December 2020, which were approved by the Board of Directors on 25 February 2021.
PRINCIPAL ACTIVITIES
The principal activities of the Group continued throughout 2020 to be property investment, management, and development.
Details of the Group’s principal subsidiaries, associates and a joint venture as at 31 December 2020 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 2020 are set out in the consolidated statement of profit or loss on
page 89.
The first interim dividend of HK27 cents per share, amounting to approximately HK$281 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
12 March 2021, totalling approximately HK$1,216 million. The dividends declared and paid for ordinary shares in respect of the
full year 2020 will total approximately HK$1,497 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 2020 –
“A Conversation with Our Chairman” (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 “A Conversation with Our Chairman” (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 2020 – 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 2020 - 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 2020 –
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 2020, which is available on the Company’s website: www.hysan.com.hk.
These discussions form part of this Directors’ Report.
78
Hysan Annual Report 2020Directors’ 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 92 and 93 and note 31 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 2020 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 2020 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 30 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 Group’s corporate governance practices is set out in the following separate reports:
(a) “Corporate Governance Report” (pages 28 to 53) – this gives detailed information on the Group’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) “Risk Management and Internal Control Report” (pages 54 to 60) – this sets out the Group’s framework for risk assessment
and internal control (including control environment, control activities and work completed during the year).
(c) “Audit and Risk Management Committee Report” (pages 61 and 64) – this sets out the terms of reference, work performed
and findings of the Audit and Risk Management Committee for the year;
(d) “Remuneration Committee Report” (pages 65 to 70) – this gives detailed information on Directors’ remuneration and
interests (including information on Directors’ compensation);
(e) “Nomination Committee Report” (pages 71 and 72) – this sets out the terms of reference, work performed and findings of
the Nomination Committee for the year; and
(f) “Sustainability Committee Report” (pages 73 and 74) – this sets out the terms of reference, work performed and findings
of the Sustainability Committee.
Further information on the Group’s sustainability policies and practices is contained in the separate Sustainability Report 2020,
which is available on the Company’s website: www.hysan.com.hk.
79
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance THE BOARD
The Board is currently chaired by Lee Irene Yun-Lien, Chairman. There are 8 other Non-Executive Directors.
Lau Lawrence Juen-Yee retired as an Independent Non-Executive Director with effect from the conclusion of the 2020 Annual
General Meeting of the Company on 13 May 2020.
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 29 to 33 have been
Directors of the Company throughout the year and up to the date of this report.
Under Article 114 of the Company’s Articles of Association (“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 Annual General Meeting (“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 Director independence in a meeting held in November 2020
(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 28 to 53.
SUBSTANTIAL SHAREHOLDERS’ AND OTHER PERSONS’ INTERESTS IN SHARES
As at 31 December 2020, 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)
41.66
8.05
5.05
Note:
The percentages were compiled based on the total number of issued shares of the Company as at 31 December 2020 (i.e. 1,039,700,891 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 2020.
80
Hysan Annual Report 2020Directors’ 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 36 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. Leases 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
2020: HK$38,665,356
2021: HK$25,776,904
(on pro-rata basis)
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
20 March 2019
3 years commencing
from 1 April 2019
Whole premises of Lee
Garden Two
Consideration received
during the year
HK$24,421,639
(Note d)
(b) The following management agreement was entered into by Hysan Property Management Limited, a wholly-owned
subsidiary of the Company, with Barrowgate for the provision of property management services to Lee Garden Two:
Connected person
Date of agreement
Term
Premises
Barrowgate Limited
20 March 2019
3 years commencing
from 1 April 2019
Whole premises of Lee
Garden Two
Consideration received
during the year
HK$4,509,024
(Note d)
81
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) These represent the actual consideration received for the year ended 31 December 2020, 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 81 to 82 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.
DIRECTORS’ INTEREST IN CONTRACTS OF SIGNIFICANCE
The lease, carpark licence agreements and licence agreements between Jebsen and Company and Barrowgate are considered
contracts of significance under paragraph 15 of Appendix 16 to the Listing Rules due to the annual consideration having a
percentage ratio of 1.04% from the calculation of the revenue test (the percentage ratios for assets ratio and consideration
ratio are 0.04% and 0.13% respectively). Details of the transactions are set out under (I) of “Continuing Connected
Transactions”.
MAJOR CUSTOMERS AND SUPPLIERS
During the year, 32.57% of the aggregate amount of purchases was attributable to the Group’s 5 largest suppliers, with the
largest supplier accounting for 8.83% 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.
82
Hysan Annual Report 2020Directors’ Report continued PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES
The Company was authorized at its AGMs to repurchase its own ordinary shares not exceeding 10% of the total number of its
issued shares as at the dates of the resolutions being passed. During the year, the Company repurchased its ordinary shares on
the Stock Exchange when they were trading at a significant discount to the Company’s net asset value in order to enhance
shareholder value.
During the year, the Company repurchased an aggregate of 3,900,000 ordinary shares for a total consideration of
approximately HK$96 million on the Stock Exchange. The repurchased shares were cancelled during the year. Details of the
shares repurchased are as follows:
Month of repurchase in 2020
March
October
Number of
ordinary shares
repurchased
1,700,000
2,200,000
3,900,000
Consideration per share
Highest
HK$
25.40
25.30
Lowest
HK$
21.65
23.95
Aggregate
consideration
paid
HK$ million
41
55
96
Save as disclosed above, neither the Company nor its subsidiaries purchased, sold or redeemed any of the Company’s listed
securities during the year.
ISSUANCE OF SECURITIES
During the year ended 31 December 2020, 50,000 shares were issued by the Company as a result of the exercise of share
options granted under the 2005 Share Option Scheme of the Company. For further details, please refer to the paragraphs
headed “Movement of share options” in the Remuneration Committee Report.
During the year, Hysan (MTN) Limited, a company incorporated in the British Virgin Islands and a direct wholly-owned
subsidiary of the Company, has issued several Fixed Rate Notes for general corporate purposes under the US$2.5 billion
Medium Term Note Programme (“MTN Programme”), which was subsequently extended to US$4 billion in October 2020.
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$500 million 2.73% Fixed Rate Note due in February 2027
2. HK$1,000 million 2.10% Fixed Rate Note due in March 2025
3. HK$400 million 2.85% Fixed Rate Note due in April 2035
4. US$400 million 2.875% Fixed Rate Note due in June 2027
5. US$225 million 3.55% Fixed Rate Note due in June 2035
During the year, Elect Global Investments Limited, a company incorporated in the British Virgin Islands and a direct wholly-
owned subsidiary of the Company, has issued the following Perpetual Capital Securities for general corporate purposes, which
are unconditionally and irrevocably guaranteed by the Company:
1. US$850 million 4.10% subordinated guaranteed perpetual capital securities were issued at a price of 100% of the
principal amount; and
2. US$500 million in aggregate principal amount of 4.85% senior guaranteed perpetual capital securities, among which
US$300 million were issued at a price of 100% of the principal amount and US$200 million were issued at a price of
101.625% of the principal amount.
For further details of the above mentioned Fixed Rate Notes and Perpetual Capital Securities, please refer to notes 27 and 29
to the consolidated financial statements. Save as disclosed above, the Group has not issued any debentures during the year.
83
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
PUBLIC FLOAT
Based on the information that is publicly available to the Company and within the knowledge of the Directors, the Company
has maintained the prescribed amount of public float during the year and up to the date of this report as required under the
Listing Rules.
DONATIONS
During the year, the Group made donations of approximately HK$1 million to charitable and non-profit-making 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 2020 and as of the date of approval 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 2021
AGM.
By Order of the Board
Lee Irene Yun-Lien
Chairman
Hong Kong, 25 February 2021
84
Hysan Annual Report 2020Directors’ Report continued 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.
85
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness PerformanceDirectors’ 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 89 to 155, which comprise the consolidated statement of
financial position as at 31 December 2020, 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 2020, 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.
86
Hysan Annual Report 2020Independent 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 comprises retail,
office and residential properties mainly located in Causeway
Bay, Hong Kong and is stated at fair value of HK$74,993
million, accounting for approximately 68% of the Group’s
total assets as at 31 December 2020 with a fair value loss of
HK$4,903 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 capitalization 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 capitalization 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.
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.
87
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance 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.
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, actions taken to eliminate threats or safeguards applied.
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
25 February 2021
88
Hysan Annual Report 2020INDEPENDENT AUDITOR’S REPORT continued Notes
2020
HK$ million
2019
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
(Loss) profit before taxation
Taxation
(Loss) profit for the year
(Loss) profit for the year attributable to:
Owners of the Company
Perpetual capital securities holders
Other non-controlling interests
4
6
7
8
9
(Loss) earnings per share (expressed in HK cents)
14
Basic
Diluted
3,710
(490)
3,220
272
5
(268)
(546)
(4,903)
225
(1,995)
(353)
(2,348)
(2,547)
288
(89)
(2,348)
(244)
(244)
3,988
(536)
3,452
154
10
(269)
(313)
792
1,733
5,559
(473)
5,086
4,845
–
241
5,086
463
463
89
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness PerformanceConsolidated Statement of Profit or LossFor the year ended 31 December 2020
(Loss) profit for the year
Other comprehensive (expenses) income
Items that will not be reclassified subsequently to profit or loss:
(Loss) gain on revaluation of properties held for own use (net of tax)
Change in fair value of equity instruments at fair value through other
comprehensive income (“FVTOCI”)
Items that may be reclassified subsequently to profit or loss:
Net adjustments to hedging reserve
Share of translation reserve of an associate
Other comprehensive income (expenses) for the year (net of tax)
Total comprehensive (expenses) income for the year
Total comprehensive (expenses) income attributable to:
Owners of the Company
Perpetual capital securities holders
Other non-controlling interests
2020
HK$ million
(2,348)
2019
HK$ million
5,086
Note
10
(1)
5
4
(122)
341
219
223
21
–
21
29
(84)
(55)
(34)
(2,125)
5,052
(2,324)
288
(89)
(2,125)
4,811
–
241
5,052
90
Hysan Annual Report 2020Consolidated Statement of Comprehensive IncomeFor the year ended 31 December 2020
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
Deferred tax asset
Other financial assets
Other receivables
Current assets
Accounts and other receivables
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 tax liabilities
Net assets
Capital and reserves
Share capital
Reserves
Equity attributable to owners of the Company
Perpetual capital securities
Other non-controlling interests
Total equity
Notes
2020
HK$ million
2019
HK$ million
15
16
18
18
19
19
20
21
28
22
23
23
24
24
25
26
27
27
22
28
30
29
74,993
834
5,577
11
125
1,153
789
454
55
1
361
84,353
467
10,546
14,389
25,402
931
377
217
–
27
1,552
23,850
108,203
18,970
183
597
1,004
20,754
87,449
7,722
65,958
73,680
10,657
3,112
87,449
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
The consolidated financial statements on pages 89 to 155 were approved and authorized for issue by the Board of Directors on
25 February 2021 and are signed on its behalf by:
Lee Irene Y.L.
Director
Lee T.H. Michael
Director
91
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness PerformanceConsolidated Statement of Financial PositionAs at 31 December 2020
Attributable to owners of the Company
Share
options
reserve
HK$ million
General
reserve
HK$ million
Investments
revaluation
reserve
HK$ million
As at 1 January 2020
Loss for the year
Net losses arising from hedging instruments
Reclassification of net losses to profit or loss
Loss on revaluation of properties held for own use
Change in fair value of equity investment at FVTOCI
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
Repurchase of own shares
Forfeiture of unclaimed dividend
Dividends paid during the year (note 13)
Distribution to perpetual capital securities holders (note 29)
Issue of perpetual capital securities (note 29)
Transaction costs in relation to the issuance of
perpetual capital securities
As at 31 December 2020
As at 1 January 2019 (audited)
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)
Share
capital
HK$ million
7,720
–
–
–
–
–
–
–
2
–
–
–
–
–
–
–
7,722
7,718
–
–
–
–
–
–
–
2
–
–
–
–
23
96
–
–
–
–
–
–
–
–
4
–
–
–
–
–
–
27
19
–
–
–
–
–
–
–
–
4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
96
96
–
–
–
–
–
–
–
–
–
–
–
–
As at 31 December 2019
7,720
23
96
92
1
–
–
–
–
5
–
5
–
–
–
–
–
–
–
–
6
1
–
–
–
–
–
–
–
–
–
–
–
–
1
Attributable to owners of the Company
Hedging
reserve
HK$ million
Properties
revaluation
reserve
HK$ million
Translation
reserve
HK$ million
(19)
477
22
Retained
profits
HK$ million
69,330
(2,547)
Perpetual
capital
securities
HK$ million
288
Other non-
controlling
interests
HK$ million
3,322
(89)
(150)
28
(122)
(141)
(48)
(14)
43
29
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1)
(1)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
25
(4)
–
21
–
–
–
–
–
476
456
341
341
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(84)
(84)
(2,547)
(2,324)
288
(89)
(2,125)
(96)
(96)
(1,502)
(1,502)
(121)
(135)
10,504
(55)
(55)
363
65,131
73,680
10,657
3,112
87,449
106
66,083
4,845
74,431
4,845
3,206
241
77,637
5,086
Total
HK$ million
77,650
(2,547)
(150)
28
(1)
5
341
2
4
1
–
–
(14)
43
25
(4)
(84)
2
4
1
(92)
(1,507)
77,650
–
–
–
–
–
–
–
1
–
–
–
–
–
–
–
–
–
1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
HK$ million
80,972
(2,348)
(150)
28
(1)
5
341
2
4
1
(96)
(1,623)
(135)
10,504
(55)
(14)
43
25
(4)
(84)
2
4
1
(92)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,845
4,811
241
5,052
(19)
477
22
(92)
(1,507)
69,330
(125)
3,322
(1,632)
80,972
Hysan Annual Report 2020Consolidated Statement of Changes in EquityFor the year ended 31 December 2020
Attributable to owners of the Company
Share
capital
7,720
Share
options
reserve
23
General
reserve
HK$ million
96
Investments
revaluation
reserve
HK$ million
HK$ million
HK$ million
As at 1 January 2020
Loss for the year
Net losses arising from hedging instruments
Reclassification of net losses to profit or loss
Loss on revaluation of properties held for own use
Change in fair value of equity investment at FVTOCI
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
Repurchase of own shares
Forfeiture of unclaimed dividend
Dividends paid during the year (note 13)
Distribution to perpetual capital securities holders (note 29)
Issue of perpetual capital securities (note 29)
Transaction costs in relation to the issuance of
perpetual capital securities
As at 31 December 2020
As at 1 January 2019 (audited)
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
–
–
–
–
–
–
–
2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2
–
–
–
–
7,722
7,718
–
–
–
–
–
–
–
–
4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4
–
–
–
27
19
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
96
96
1
–
–
–
–
5
–
5
–
–
–
–
–
–
–
–
6
1
–
–
–
–
–
–
–
–
–
–
–
–
1
Hedging
reserve
HK$ million
(19)
–
(150)
28
–
–
–
(122)
–
–
–
–
–
–
–
–
(141)
(48)
–
(14)
43
–
–
–
29
–
–
–
–
–
Properties
revaluation
reserve
HK$ million
477
–
–
–
(1)
–
–
(1)
–
–
–
–
–
–
–
–
476
456
–
–
–
25
(4)
–
21
–
–
–
–
–
Attributable to owners of the Company
Translation
reserve
HK$ million
Retained
profits
HK$ million
Total
HK$ million
Perpetual
capital
securities
HK$ million
Other non-
controlling
interests
HK$ million
Total
HK$ million
22
–
–
–
–
–
341
341
–
–
–
–
–
–
–
–
69,330
77,650
(2,547)
–
–
–
–
–
(2,547)
–
–
(96)
1
(1,502)
–
–
(2,547)
(150)
28
(1)
5
341
(2,324)
2
4
(96)
1
(1,502)
–
–
–
288
–
–
–
–
–
288
–
–
–
–
–
(135)
10,504
3,322
80,972
(89)
–
–
–
–
–
(89)
–
–
–
–
(121)
–
–
(2,348)
(150)
28
(1)
5
341
(2,125)
2
4
(96)
1
(1,623)
(135)
10,504
(55)
(55)
–
–
(55)
363
65,131
73,680
10,657
3,112
87,449
106
66,083
74,431
–
–
–
–
–
(84)
(84)
–
–
–
–
–
4,845
–
–
–
–
–
4,845
–
–
(92)
1
(1,507)
4,845
(14)
43
25
(4)
(84)
4,811
2
4
(92)
1
(1,507)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,206
77,637
241
–
–
–
–
–
241
–
–
–
–
(125)
5,086
(14)
43
25
(4)
(84)
5,052
2
4
(92)
1
(1,632)
3,322
80,972
93
7,720
23
96
(19)
477
22
69,330
77,650
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
Operating activities
(Loss) 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
(Decrease) increase in accounts payable and accruals
(Decrease) increase in deposits from tenants
Cash generated from operations
Hong Kong Profits Tax paid
Net cash from operating activities
Investing activities
Payments in respect of investment properties
Purchases of property, plant and equipment
Dividends received from an associate
Advance to a joint venture
Payment in respect of other financial investments
Return of capital in respect of other financial investment
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
Repayment of bank loans
Issuance of perpetual capital securities, net of transaction costs
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
Distribution paid to perpetual capital securities holders
Dividends paid to other non-controlling interests
Net cash from 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
Notes
2020
HK$ million
2019
HK$ million
(1,995)
5,559
(272)
10
24
4
546
4,903
(225)
2,995
(200)
(10)
(27)
2,758
(718)
2,040
(892)
(21)
177
(18)
(267)
81
–
(286)
248
(32,559)
27,744
(5,793)
(510)
600
(250)
10,449
6,676
(565)
(3)
2
(96)
(1,502)
(135)
(121)
14,545
10,792
3,597
14,389
(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
32
32
32
32
32
24
94
Hysan Annual Report 2020Consolidated Statement of Cash FlowsFor the year ended 31 December 2020
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”). For the purpose of preparation of the consolidated financial statements, information is considered material if
such information is reasonably expected to influence decisions made by primary users. 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 (including perpetual capital securities holders and non-controlling interests in a subsidiary) 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 to the
non-controlling interests even if this results in the non-controlling interests having a deficit balance.
95
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness PerformanceSignificant Accounting PoliciesFor the year ended 31 December 2020 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 recognize 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.
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.
96
Hysan Annual Report 2020SIGNIFICANT ACCOUNTING POLICIES continuedFor the year ended 31 December 2020 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.
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.
97
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance 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 recognition, 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.
(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.
98
Hysan Annual Report 2020SIGNIFICANT ACCOUNTING POLICIES continuedFor the year ended 31 December 2020 6. FINANCIAL INSTRUMENTS continued
Financial assets continued
(a) Classification of financial assets continued
(ii) Financial assets at FVTPL continued
Debt instruments that do not meet the amortized cost criteria for being measured at amortized cost or FVTOCI or designated
as FVTOCI (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 recognizing 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 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.
(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, 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 recognizes 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 recognizes
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.
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OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance 6. FINANCIAL INSTRUMENTS continued
Financial assets continued
(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.
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 recognizes an impairment gain or loss in profit or loss for all financial instruments by adjusting their carrying
amounts, with the exception of accounts 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.
(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 an equity instruments designated at 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 an equity instruments designated 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.
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Hysan Annual Report 2020SIGNIFICANT ACCOUNTING POLICIES continuedFor the year ended 31 December 2020 6. FINANCIAL INSTRUMENTS continued
Financial liabilities and equity instruments continued
(a) Classification and measurement continued
(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.
Perpetual capital securities, which includes no contractual obligation for the Group to deliver cash or other financial assets to
the holders is classified as equity instrument and is initially recorded at the proceeds received.
(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 have
expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and
payable is recognized in profit or loss.
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OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance 6. FINANCIAL INSTRUMENTS continued
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.
(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).
102
Hysan Annual Report 2020SIGNIFICANT ACCOUNTING POLICIES continuedFor the year ended 31 December 2020 7. REVENUE RECOGNITION
The Group recognizes 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 recognizes 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.
8. LEASES
Definition of a lease
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 on or after the date of initial application or arising from business combinations, 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.
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.
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OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance 8. LEASES continued
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.
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.
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.
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 (loss) 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.
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Hysan Annual Report 2020SIGNIFICANT ACCOUNTING POLICIES continuedFor the year ended 31 December 2020 12. TAXATION continued
(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 utilize 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.
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.
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OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance 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, 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.
The 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).
106
Hysan Annual Report 2020SIGNIFICANT ACCOUNTING POLICIES continuedFor the year ended 31 December 2020 1. GENERAL
The Company is a public listed company incorporated in Hong Kong and its shares are listed on The Stock Exchange of Hong
Kong Limited (the “Stock Exchange”). The addresses of the registered office and principal place of business of the Company are
disclosed in the “Shareholder Information” section of the annual report.
The principal activities of the Company and its subsidiaries (collectively referred to as the “Group”) are property investment,
management and development.
These consolidated financial statements are presented in Hong Kong dollars (“HKD”), which is the same as the functional
currency of the Company.
2. APPLICATION OF NEW AND 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 the Amendments to References to the Conceptual Framework in HKFRS Standards
and the following amendments to HKFRSs issued by the HKICPA, for the first time, which are mandatorily effective for the
annual period beginning on or after 1 January 2020 for the preparation of the Group’s consolidated financial statements:
Amendments to HKFRS 3
Amendments to HKAS 1 and HKAS 8
Amendments to HKFRS 9, HKAS 39 and HKFRS 7
Definition of a Business
Definition of Material
Interest Rate Benchmark Reform
The application of the Amendments to References to the Conceptual Framework in HKFRS Standards and the amendments to
HKFRSs had no material effect on the results and financial position of the Group for the current and/or prior accounting years.
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 16
Amendments to HKFRS 3
Amendments to HKFRS 10 and HKAS 28
Insurance Contracts and the related Amendments5
Covid-19-Related Rent Concession2
Reference to the Conceptual Framework4
Sale or Contribution of Assets between an Investor and its Associate or
Amendments to HKFRS 9, HKAS 39 and
Interest Rate Benchmark Reform – Phase 21
Joint Venture3
HKFRS 7, HKFRS 4 and HKFRS 16
Amendments to HKAS 1
Amendments to HKAS 16
Amendments to HKAS 37
Amendments to HKFRSs
Classification of Liabilities as Current or Non-current and related
amendments to Hong Kong Interpretation 5 (2020)5
Property, Plant and Equipment- Proceeds before Intended Use 4
Onerous Contract – Cost of Fulfilling a contract4
Annual Improvements to HKFRSs 2018-20204
1 Effective for annual periods beginning on or after 1 January 2021
2 Effective for annual periods beginning on or after 1 June 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 2022
5 Effective for annual periods beginning on or after 1 January 2023
The Group anticipated that the application of all these new and amendments to HKFRSs had no material impact on the
Group’s financial position and financial performance.
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OverviewCorporate GovernanceFinancial Statements and ValuationBusiness PerformanceNotes to the Consolidated Financial StatementsFor the year ended 31 December 2020 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$74,993 million (2019:
HK$79,116 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
capitalization 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 or by selling it to another market participant that would use the asset in
its highest and best use.
In relying on the valuation, management has exercised their judgement and is satisfied that the method of valuation is
reflective of the current market conditions at the end of the reporting period.
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.
108
Hysan Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2020 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 2020
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
Loss before taxation
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
1,431
169
1,600
(247)
1,353
1,598
216
1,814
(187)
1,627
266
30
296
(56)
240
1,662
174
1,836
(297)
1,539
1,607
226
1,833
(177)
1,656
287
32
319
(62)
257
–
–
–
–
–
–
–
–
–
–
3,295
415
3,710
(490)
3,220
272
5
(268)
(546)
(4,903)
225
(1,995)
3,556
432
3,988
(536)
3,452
154
10
(269)
(313)
792
1,733
5,559
109
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
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 2020
Segment assets
Investments in and loans to associates
Other financial investments
Other assets
Consolidated assets
As at 31 December 2019
Segment assets
Investments in and loans to associates
Other financial investments
Other assets
Consolidated assets
31,727
34,602
8,731
1,278
35,080
35,499
8,561
1,233
76,338
5,588
789
27,040
109,755
80,373
5,200
601
10,869
97,043
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 mainland China (the
“PRC”) and other major cities in Asia, with carrying amounts of HK$6,374 million (2019: HK$5,800 million), all the Group’s
assets are located in Hong Kong.
110
Hysan Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2020
5. SEGMENT INFORMATION continued
Other segment information
For the year ended 31 December 2020
Additions to non-current assets
For the year ended 31 December 2019
Additions to non-current assets
6.
INVESTMENT INCOME
The following is an analysis of investment income:
Retail
HK$ million
Office
HK$ million
Residential
HK$ million
Property
development
HK$ million
Consolidated
HK$ million
730
808
66
43
46
40
–
–
842
891
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 on borrowings
Reclassification of net losses from hedging reserve
on financial instruments designated as cash flow hedges
Medium Term Note Programme expenses
2020
HK$ million
2019
HK$ million
242
30
–
272
121
30
3
154
2020
HK$ million
2019
HK$ million
41
463
504
39
543
(28)
28
3
546
43
254
297
13
310
(46)
46
3
313
111
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
8. TAXATION
Current tax
Hong Kong Profits Tax
– current year
Deferred tax (note 28)
2020
HK$ million
2019
HK$ million
329
24
353
406
67
473
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 (loss) profit before taxation per the consolidated statement of profit or loss
as follows:
(Loss) 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
Taxation for the year
2020
HK$ million
(1,995)
2019
HK$ million
5,559
(329)
(37)
836
(122)
7
(2)
353
917
(286)
122
(276)
2
(6)
473
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.
(LOSS) PROFIT FOR THE YEAR
(Loss) 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$51 million (2019: HK$73 million)
Less:
– Direct operating expenses arising from leasing of investment properties
Staff costs (including directors’ emoluments)
Share of income tax of associates (included in share of results of associates)
2020
HK$ million
2019
HK$ million
3
24
(3,295)
166
(3,129)
282
92
3
22
(3,556)
214
(3,342)
285
627
112
Hysan Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2020
10. OTHER COMPREHENSIVE INCOME (EXPENSES)
Other comprehensive income (expenses) comprises:
Items that will not be reclassified subsequently to profit or loss:
Revaluation of properties held for own use:
(Loss) gain on revaluation of properties held for own use
Deferred taxation arising on revaluation
Change in fair value of equity instruments at fair value
through other comprehensive income (“FVTOCI”)
Items that may be reclassified subsequently to profit or loss:
Derivatives designated as cash flow hedges:
Net losses arising during the year
Reclassification of net losses to profit or loss
Share of translation reserve of an associate
Other comprehensive income (expenses) for the year (net of tax)
Tax effect relating to other comprehensive income (expenses):
2020
HK$ million
2019
HK$ million
(1)
–
5
4
(150)
28
(122)
341
219
223
25
(4)
–
21
(14)
43
29
(84)
(55)
(34)
Gain on revaluation of properties
held for own use
Change in fair value of equity instruments
at FVTOCI
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
Before-tax
amount
HK$ million
2020
Tax
expense
HK$ million
Net-of-tax
amount
HK$ million
Before-tax
amount
HK$ million
2019
Tax
expense
HK$ million
Net-of-tax
amount
HK$ million
(1)
5
(122)
341
223
–
–
–
–
–
(1)
5
(122)
341
223
25
–
29
(84)
(30)
(4)
–
–
–
(4)
21
–
29
(84)
(34)
2020
HK$ million
2019
HK$ million
3
8
14
2
27
3
8
15
2
28
113
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
11. DIRECTORS’ EMOLUMENTS continued
The emoluments paid or payable to each of the Directors of the Company for the two years ended 31 December 2020 and
2019, 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 2020
Executive Director (Note a)
Lee Irene Yun-Lien
Non-Executive Directors (Note b)
Jebsen Hans Michael (Note h)
Lee Anthony Hsien Pin
Lee Chien
Lee Tze Hau Michael
Independent Non-Executive Directors
(Note c)
Churchouse Frederick Peter (Note i)
Fan Yan Hok Philip (Note h)
Lau Lawrence Juen-Yee (Note j)
Poon Chung Yin Joseph
Wong Ching Ying Belinda (Note h)
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
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
–
8,002
14,000
1,809
18
23,829
330
388
310
325
407
523
113
535
310
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
330
388
310
325
407
523
113
535
310
3,241
8,002
14,000
1,809
18
27,070
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
–
7,929
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
114
Hysan Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2020
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) The annual cash remuneration of Lee Irene Yun-Lien, Chairman, is comprised of (i) fixed base salary; and (ii) variable performance bonus which is
determined by reference to the Company’s performance as well as individual performance and contribution, to be measured against annual
financial and operational targets.
For the year ended 31 December 2020, the base salary of HK$8,000,000 and the performance bonus of HK$14,000,000 were approved by the
Remuneration Committee in January 2020 and January 2021 respectively.
(e) Last revision of annual Directors’ fees for serving on the Board (effective 1 June 2019) were approved by shareholders at the 2019 AGM. Fees of
chairman and members of the Sustainability Committee (effective 1 January 2020) were approved by the Board in February 2020. Details are set
out in Remuneration Committee Report.
Directors’ fees are calculated on an annual basis and paid semi-annually. For Directors not having served the full year on a position, the fees will
be calculated and paid on a pro rata basis.
Breakdown of Directors’ fees of each of the Directors of the Company for the year ended 31 December 2020 is set out below:
Executive Director
Lee Irene Yun-Lien
Non-Executive Directors
Jebsen Hans Michael
Lee Anthony Hsien Pin
Lee Chien
Lee Tze Hau Michael
Independent Non-Executive
Directors
Churchouse Frederick Peter
Fan Yan Hok Philip
Lau Lawrence Juen-Yee (Note j)
Poon Chung Yin Joseph
Wong Ching Ying Belinda
Audit and
Risk
Management
Committee
HK$’000
Board
HK$’000
Remuneration
Committee
HK$’000
Nomination
Committee
HK$’000
Sustainability
Committee
HK$’000
2020
Total
HK$’000
2019
Total
HK$’000
–
280
280
280
280
280
280
102
280
280
2,342
–
–
108
–
–
108
108
–
180
–
504
–
–
–
–
45
–
75
–
45
–
–
–
–
30
–
19
30
11
30
–
–
50
–
–
–
–
30
–
–
30
–
330
388
310
325
407
523
113
535
310
–
268
360
293
311
360
455
293
498
268
165
120
110
3,241
3,106
(f) The annual cash remuneration of Lee Irene Yun-Lien, Chairman, is comprised of (i) fixed base salary; and (ii) variable performance bonus which is
determined by reference to the Company’s performance as well as individual performance and contribution, to be measured against annual
financial and operational targets.
For the year ended 31 December 2019, the base salary of HK$8,000,000 and the performance bonus of HK$15,000,000 were approved by the
Remuneration Committee in January 2019 and January 2020 respectively.
(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) The Sustainability Committee has been established with effect from 1 January 2020. Jebsen Hans Michael was appointed as the Chairman of the
Committee. Fan Yan Hok Philip and Wong Ching Ying Belinda were appointed as members of the Committee.
(i) Churchouse Frederick Peter was appointed as a member of the Nomination Committee with effect from the conclusion of 2020 AGM.
(j)
Lau Lawrence Juen-Yee retired as an Independent Non-Executive Director and a member of the Nomination Committee with effect from the
conclusion of 2020 AGM.
115
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
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 (2019: one) was a 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 2020 and 2019 were as follows:
Basic salaries, housing and other allowances
Bonus
Share-based payments (Note)
Note:
2020
HK$ million
2019
HK$ million
22
20
3
45
21
21
4
46
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$23,500,001 to HK$24,000,000
HK$24,500,001 to HK$25,000,000
Number of individuals
2020
2019
2
1
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.
Number of individuals
2020
2019
1
3
1
–
1
–
6
1
3
–
1
–
1
6
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$23,000,001 to HK$24,000,000
HK$24,000,001 to HK$25,000,000
116
Hysan Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2020
13. DIVIDENDS
(a) Dividends recognized as distribution during the year:
2020 first interim dividend paid – HK27 cents per share
2019 first interim dividend paid – HK27 cents per share
2019 second interim dividend paid – HK117 cents per share
2018 second interim dividend paid – HK117 cents per share
(b) Dividends declared after the end of the reporting period:
Second interim dividend (in lieu of a final dividend)
– HK117 cents per share (2019: HK117 cents per share)
2020
HK$ million
2019
HK$ million
281
–
1,221
–
1,502
–
283
–
1,224
1,507
2020
HK$ million
2019
HK$ million
1,216
1,221
The second interim dividend is not recognized as a liability as at 31 December 2020 because it has been declared after the end
of the reporting period. It will be payable in cash.
14. (LOSS) EARNINGS PER SHARE
The calculation of the basic and diluted (loss) earnings per share attributable to the owners of the Company is based on the
following data:
(Loss) earnings for the purposes of basic and diluted (loss) earnings per share:
(Loss) profit for the year attributable to owners of the Company
Weighted average number of ordinary shares for the purpose of
basic (loss) 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 (loss) earnings per share
(Loss) earnings
2020
HK$ million
2019
HK$ million
(2,547)
4,845
Number of shares
2020
2019
1,041,797,236 1,046,186,877
–
157,908
1,041,797,236 1,046,344,785
The computation of diluted (loss) earnings per share does not assume the exercise of all (2019: certain) of the Company’s
outstanding share options as the exercise prices of those options were higher than the average market price for shares.
117
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
15. INVESTMENT PROPERTIES
Fair Value
At 1 January
Additions
Net transfer to property, plant and equipment
Change in fair value recognized in profit or loss – unrealized
As at 31 December
2020
HK$ million
2019
HK$ million
79,116
842
(62)
(4,903)
74,993
77,442
891
(9)
792
79,116
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 2020 and 2019 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 capitalization 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.
The change in fair value recognized in profit or loss during the year mainly reflects the expansion of capitalization rates taken
into account of the increasing market risk on the negative retail sector, coupled with a weakened office sector considering the
global economic uncertainties.
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 2019
Additions
Net transfer to property, plant and equipment
Change in fair value recognized in profit or loss
– unrealized
As at 31 December 2019
Additions
Net transfer to property, plant and equipment
Change in fair value recognized in profit or loss
– unrealized
As at 31 December 2020
Retail
HK$ million
35,102
808
–
(851)
35,059
730
–
(4,119)
31,670
Office
HK$ million
Residential
HK$ million
Total
HK$ million
34,159
43
(9)
1,305
35,498
66
(62)
(909)
34,593
8,181
40
–
338
8,559
46
–
125
8,730
77,442
891
(9)
792
79,116
842
(62)
(4,903)
74,993
118
Hysan Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2020
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
2020
HK$ million
2019
HK$ million
Retail
31,670
35,059
Office
34,593
35,498
Residential
8,730
8,559
Valuation
techniques
Unobservable
inputs
Range/weighted
average of
unobservable
inputs
Income
capitalization
approach
(i) Capitalization rate
(ii) Prevailing market
rent per month
5.25% – 5.50%
(2019: 5.00% –5.25%)
HK$125 per square foot
(2019: HK$132 per square
foot)
Income
capitalization
approach
(i) Capitalization rate
(ii) Prevailing market
rent per month
4.25% – 5.00%
(2019: 4.25% – 5.00%)
HK$59 per square foot
(2019: HK$60 per square
foot)
Income
capitalization
approach
(i) Capitalization rate
3.75% (2019: 3.75%)
(ii) Prevailing market
rent per month
HK$39 per square foot
(2019: HK$38 per square
foot)
The higher the capitalization rate, the lower the fair value.
Prevailing market rent is estimated based on independent valuer’s view of recent lettings, within the subject properties and
other comparable properties. It does not always equal to the committed rent by tenants. The higher the prevailing market rent,
the higher the fair value.
119
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
16. PROPERTY, PLANT AND EQUIPMENT
Leasehold
land and
buildings in
Hong Kong
HK$ 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 2019
Additions
Net transfer from investment properties
Surplus on revaluation
As at 31 December 2019
Additions
Net transfer from investment properties
Deficit on revaluation
As at 31 December 2020
Comprising:
At cost
At valuation
ACCUMULATED DEPRECIATION
As at 1 January 2019
Provided for the year
Eliminated on revaluation
As at 31 December 2019
Provided for the year
Eliminated on revaluation
As at 31 December 2020
CARRYING AMOUNTS
As at 31 December 2020
As at 31 December 2019
696
–
9
20
725
–
62
(6)
781
–
781
781
–
5
(5)
–
5
(5)
–
781
725
116
7
–
–
123
3
–
–
126
126
–
126
97
7
–
104
7
–
111
15
19
86
10
–
–
96
18
–
–
114
114
–
114
56
10
–
66
12
–
78
36
30
2
–
–
–
2
–
–
–
2
2
–
2
–
–
–
–
–
–
–
2
2
900
17
9
20
946
21
62
(6)
1,023
242
781
1,023
153
22
(5)
170
24
(5)
189
834
776
120
Hysan Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2020
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 2020 and 2019 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 capitalization 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
Valuation
techniques
Unobservable
inputs
Range/weighted
average of
unobservable
inputs
Description
Leasehold land
and buildings in
Hong Kong
2020
HK$ million
781
2019
HK$ million
725
Income capitalization
approach
(i) Capitalization
rate
4.25% – 4.75%
(2019: 4.25% – 4.75%)
(ii) Prevailing market rent
per month
HK$69 per square foot
(2019: HK$72 per
square foot)
The higher the capitalization 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 loss of HK$1 million (2019: gain of HK$25 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$275 million (2019: HK$171 million) at the end of the reporting period.
Furniture, fixtures and equipment of the Group include assets carried at cost of HK$55 million (2019: HK$53 million) and accumulated depreciation of
HK$42 million (2019: HK$37 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 (2019: HK$5 million). There has been no disposal during both years ended 31 December 2020 and 2019.
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OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
17. PARTICULARS OF PRINCIPAL SUBSIDIARIES OF THE COMPANY
The table below lists the principal subsidiaries of the Company:
Name of subsidiary
Admore Investments Limited
Alpha Ace Limited
Bamboo Grove Recreational
Services Limited
Barrowgate Limited
Earn Extra Investments Limited
Elect Global 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
Hong Kong
Hong Kong
British Virgin Islands/
Hong Kong
British Virgin Islands
Hong Kong
Hong Kong
Hong Kong
British Virgin Islands/
Hong Kong
Hong Kong
Hong Kong
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
Hong Kong
Hong Kong
British Virgin Islands/
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Issued
share capital
HK$2
HK$1
HK$2
HK$10,000
HK$1
US$1
HK$1
HK$2
HK$2
HK$2
US$1
HK$1
HK$1
HK$2
HK$2
HK$1
HK$1,000
HK$10
HK$2
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%
–
–
100%
–
–
–
indirectly
–
100%
100%
65.36%
100%
–
100%
–
–
–
–
100%
100%
Principal activities
Investment holding
Property development
Resident club management
Property investment
Property investment
Treasury operation
Investment holding
Treasury operation
Provision of corporate services
Leasing administration
Treasury operation
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.
The Group’s subsidiaries that have material non-controlling interests includes Barrowgate Limited and Elect Global Investments
Limited (“Elect Global”). Elect Global’s issued ordinary shares are fully held by the Group. As disclosed in note 29 of the Notes to
Consolidated Financial Statement section, Elect Global issued perpetual capital securities which are classified as equity to
parties outside the Group. The amount of such non-controlling interests of Elect Global has been disclosed in consolidated
statement of changes in equity as perpetual capital securities.
122
Hysan Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2020
17. PARTICULARS OF PRINCIPAL SUBSIDIARIES OF THE COMPANY continued
The summarized financial information in respect of Barrowgate Limited 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
(Loss) profit and total comprehensive (expense) income for the year
(Loss) profit and total comprehensive (expense) income attributable to
owners of the Company
(Loss) profit and total comprehensive (expense) income attributable to
the non-controlling interests
Dividends paid to non-controlling interests
Net cash inflows from operating activities
Net cash inflows (outflows) from investing activities
Cash outflows from financing activities
Net cash inflows (outflows)
2020
HK$ million
310
9,688
(811)
(203)
5,872
3,112
552
(256)
(167)
(89)
121
324
158
(360)
122
2019
HK$ million
392
10,232
(834)
(200)
6,268
3,322
575
696
455
241
125
455
(161)
(370)
(76)
123
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
2020
HK$ million
2019
HK$ million
2
5,575
5,577
2
5,187
5,189
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
summarizes details of the Group’s material associate as at 31 December 2020 and 2019 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$140,000#
23.7% Property management
Shanghai Kong Hui Property Development Co., Ltd. and Shanghai Grand Gateway Plaza Property Management Co., Ltd. are non-wholly owned
subsidiaries of Country Link Enterprises Limited, together known as “Country Link”.
124
Hysan Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2020
18. INVESTMENTS IN ASSOCIATES AND LOANS TO ASSOCIATES continued
The summarized consolidated financial information in respect of the Group’s material associate is set out below. The
summarized consolidated financial information below represents amounts shown in the associate’s consolidated financial
statements prepared in accordance with HKFRSs. All of the Group’s associates are accounted for using the equity method in
the Group’s consolidated financial statements.
Country Link
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Turnover
Profit for the year
Other comprehensive income (expense) for the year
Total comprehensive income for the year
Group’s share of results of the associate for the year
Group’s share of other comprehensive income (expense) of the associate for the year
Dividends received from the associate during the year
2020
HK$ million
2019
HK$ million
2,111
28,400
(1,306)
(6,620)
1,525
884
1,377
2,261
218
341
177
1,795
26,461
(1,009)
(6,211)
1,399
7,016
(339)
6,677
1,734
(84)
166
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
2020
HK$ million
2019
HK$ million
22,585
(1,342)
21,243
26.3%
5,587
(2)
5,585
21,036
(1,249)
19,787
26.3%
5,204
(5)
5,199
125
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:
2020
HK$ million
2019
HK$ million
–
125
125
–
143
143
1,153
1,090
(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 2020, except for the loans to a joint venture
with aggregate carrying amounts of HK$120 million (2019: HK$120 million) which are carrying variable rates ranging from 2.11% to 4.71%
(2019: 2.94% to 4.71%) 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 2020 and 2019 are as follows:
Name of joint venture
Place of incorporation
and operation
Strongbod Limited (Note a)
British Virgin Islands
Class of share held
Ordinary shares of
US$10
Effective
ownership
interest and
voting rights
held by the Group
Principal activities
60% (Note b)
Investment holding
Gainwick Limited (Note a)
Hong Kong
Ordinary share of HK$1
60% (Note b)
Property development
and investment
Notes:
(a) Gainwick Limited is a wholly owned subsidiary of Strongbod Limited, together known as “Strongbod”.
(b) Pursuant to the shareholder’s agreement dated 5 December 2016, entered into by the Group, the joint venture partner and Strongbod, decisions
on all relevant business and operation activities of Strongbod require unanimous board approval from directors of Strongbod appointed by the
Group and those appointed by the joint venture partner. Therefore, the Group recognized the investment in Strongbod as a joint venture.
The summarized consolidated financial information in respect of the Group’s material joint venture is set out below. The
summarized consolidated financial information below represents amounts shown in the joint venture’s consolidated financial
statements prepared in accordance with HKFRSs. The joint venture is accounted for using the equity method in the Group’s
consolidated financial statements. There was no material share of post-acquisition profits and other comprehensive income in
both years.
Strongbod
Current assets
Current liabilities
Non-current liabilities
126
2020
HK$ million
2019
HK$ million
4,609
(217)
(4,392)
3,896
(41)
(3,855)
Hysan Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2020
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 in unlisted equity security (Note b)
Investment at FVTPL
– Unlisted investment in a fund investment (Note c)
2020
HK$ million
2019
HK$ million
–
60%
–
125
125
–
60%
–
143
143
2020
HK$ million
2019
HK$ million
200
297
292
789
235
–
366
601
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 equity security and 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.
(c) 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 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
2020
HK$ million
2019
HK$ million
338
116
454
–
454
454
172
–
172
–
172
172
As at 31 December 2020, the effective yield of the debt securities ranged from 2.44% to 4.85% (2019: 3.35% to 4.85%) per
annum, payable quarterly, semi-annually or annually, and the securities will mature from February 2022 to June 2025 (2019:
from February 2022 to July 2022). 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.
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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
2020
HK$ million
2019
HK$ million
1
–
1
183
183
1
7
8
46
46
(a) Cash flow hedges
Foreign currency risk
During the year, the Group used cross currency swaps to manage its foreign currency exposure. The principal terms of the 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 cross
currency swaps at the end of the reporting period are as follows:
Hedging instruments
Cross currency swaps
Hedging of USD fixed rate
notes (Note)
More than 1 year but not
exceeding 5 years
More than 5 years
Total
2020
2019
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
7.7519
7.8477
USD
USD
300
1,125
2,326
8,829
11,155
(8)
(175)
(183)
7.7519
7.8449
USD
USD
300
500
2,326
3,922
6,248
7
(46)
(39)
* Average exchange rate represented the average exchange rate of HKD versus respective currencies weighted by the notional amounts of the
contracts or the swaps.
Note:
The Group used HK$11,155 million (2019: HK$6,248 million) cross currency swaps to convert USD interest and principal of US$1,425 million (2019:
US$800 million) fixed rate notes into HKD.
128
Hysan Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2020
22. OTHER FINANCIAL ASSETS/LIABILITIES continued
(a) Cash flow hedges continued
Foreign currency risk continued
Hedged items
Carrying amount of the hedged item
Cash flow hedge reserves
Assets
Liabilities
2020
HK$ million
2019
HK$ million
2020
HK$ million
2019
HK$ million
2020
HK$ million
2019
HK$ million
USD fixed rate notes
–
–
10,974
6,203
(141)
(19)
The hedging ineffectiveness for the years ended 31 December 2020 and 2019 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
2020
HK$ million
2019
HK$ million
2020
HK$ million
2019
HK$ million
Line item affected in
profit or loss
because of the
reclassification
Forward foreign exchange contracts
Cross currency swaps
–
(150)
1
(15)
–
28
(3)
46
Investment income
Finance costs
The fair values of 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
2020
HK$ million
2019
HK$ million
67
109
149
503
828
467
361
828
24
105
124
352
605
314
291
605
The following is an ageing analysis of accounts receivable (net of allowance for credit losses) at the end of the reporting period.
Accounts receivable mainly includes rents from leasing of investment properties, which are normally received in advance.
Less than 30 days
31-90 days
Over 90 days
2020
HK$ million
2019
HK$ million
34
23
10
67
14
10
–
24
129
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 0.08% to 2.73%
(2019: 0.10% to 3.10%) per annum.
As at 31 December 2020 and 2019, 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
2020
HK$ million
2019
HK$ million
277
161
493
931
319
131
484
934
At the end of the reporting period, accounts payable of the Group with carrying amount of HK$160 million (2019: HK$220
million) were aged less than 90 days.
26. AMOUNTS DUE TO NON-CONTROLLING INTERESTS
The amounts due to non-controlling interests are unsecured, interest-free and repayable on demand.
27. BORROWINGS
The maturity profile based on the scheduled repayment dates set out in the respective borrowings agreement was as follow:
Unsecured bank loans:
Within 1 year
More than 1 year, but not exceeding 2 years
More than 2 years, but not exceeding 5 years
Less: Amount due within 1 year included under current liabilities
Unsecured fixed rate notes:
Within 1 year
More than 1 year, but not exceeding 2 years
More than 2 years, but not exceeding 5 years
More than 5 years
Less: Amount due within 1 year included under current liabilities
Total current borrowings
Total non-current borrowings
Total borrowings
2020
HK$ million
2019
HK$ million
–
797
1,556
2,353
–
2,353
–
527
3,716
12,374
16,617
–
16,617
–
18,970
18,970
–
248
1,753
2,001
–
2,001
565
–
3,265
6,698
10,528
(565)
9,963
565
11,964
12,529
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 1.40% (2019: 2.70%) per annum at the end of the reporting period.
130
Hysan Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2020
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:
2020
HK$
%
US$
%
2019
HK$
%
US$
%
Unsecured fixed rate notes
2.10 – 4.50
2.82 – 3.55
2.81 – 5.38
2.82 – 3.50
As detailed in note 22 of the Notes to the Consolidated Financial Statements section, during the years ended 31 December
2020 and 2019, cross currency swaps were used to hedge or manage the foreign exchange rate risks of the Group’s USD fixed
rate notes.
28. DEFERRED TAX ASSET/LIABILITIES
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 2019
Charge (credit) to profit or loss (note 8)
Charge to other comprehensive income
As at 31 December 2019
Charge (credit) to profit or loss (note 8)
As at 31 December 2020
Accelerated tax
depreciation
HK$ million
Revaluation of
properties
HK$ million
Tax losses
HK$ million
Total
HK$ million
901
55
–
956
72
1,028
87
(1)
4
90
–
90
(134)
13
–
(121)
(48)
(169)
854
67
4
925
24
949
At the end of the reporting period, the Group has unused estimated tax losses of HK$1,730 million (2019: HK$1,361 million)
available for offset against future profits. A deferred tax asset has been recognized in respect of HK$1,025 million (2019:
HK$735 million) of such losses. No deferred tax asset has been recognized in respect of the remaining HK$705 million (2019:
HK$626 million) due to the unpredictability of future profit streams and the tax losses may be carried forward indefinitely.
29. PERPETUAL CAPITAL SECURITIES
During the year, the Group through a wholly owned subsidiary of the Company (the “Issuer”) issued US$850 million (equivalent
to approximately HK$6,604 million) 4.10% subordinated perpetual capital securities (the “Subordinated Securities”), which are
unconditionally and irrevocably guaranteed by the Company. Further, the Issuer issued US$500 million (equivalent to
approximately HK$3,875 million) 4.85% senior perpetual capital securities (the “Senior Securities”), which are unconditionally
and irrevocably guaranteed by the Company. The proceeds of the capital securities are for general corporate purpose and the
capital securities are listed on Hong Kong Stock Exchange.
Distribution on the Subordinated Securities and Senior Securities (collectively the “Securities”) are payable semi-annually
in-arrear each year and can be deferred at the sole discretion of the Issuer, if the Issuer and the Company do not declare or pay
dividends or repurchase, redeem, cancel, reduce or otherwise acquire any securities of lower or equal rank. The Securities have
no fixed maturity and are redeemable at the Issuer’s option on or after 3 June 2025 and 25 August 2023 respectively, at their
principal amounts together with any distribution accrued to such date.
The Securities are classified as equity and initially recognized at the amount of proceeds received in the consolidated financial
statements of the Group.
131
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
30. SHARE CAPITAL
Ordinary shares, issued and fully paid:
As at 1 January 2019
Issue of shares under share option schemes
Cancellation upon repurchase of own shares (Note)
As at 31 December 2019
Issue of shares under share option schemes
Cancellation upon repurchase of own shares (Note)
As at 31 December 2020
Number of shares
Share capital
HK$ million
1,046,501,891
49,000
(2,730,000)
1,043,820,891
50,000
(4,170,000)
7,718
2
–
7,720
2
–
1,039,700,891
7,722
During the year of 2020, the Company repurchased its own ordinary shares on the Stock Exchange as follows:
Month of repurchase in 2020
March
October
Number of
ordinary shares
repurchased
(Note)
1,700,000
2,200,000
3,900,000
Consideration per share
Highest
HK$
25.40
25.30
Lowest
HK$
21.65
23.95
Aggregate
consideration paid
HK$ million
41
55
96
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 2020 and 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 3,900,000 and
3,000,000 ordinary shares repurchased in 2020 and 2019, 3,900,000 and 2,730,000 ordinary shares were cancelled during the year ended 31
December 2020 and 2019 respectively. The remaining 270,000 ordinary shares repurchased in 2019 were cancelled in February 2020.
132
Hysan Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2020
31. 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 30)
Reserves
Total equity
2020
HK$ million
2019
HK$ million
–
1,845
1
3,692
5,538
17
10,463
1
10,481
72
2,564
2,636
7,845
–
1,634
1
2,869
4,504
8
10,747
22
10,777
79
1,949
2,028
8,749
13,383
13,253
7,722
5,661
13,383
7,720
5,533
13,253
The Company’s statement of financial position was approved and authorized for issue by the Board of Directors on
25 February 2021 and are signed on its behalf by:
Lee Irene Y.L.
Director
Lee T.H. Michael
Director
133
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
31. STATEMENT OF FINANCIAL POSITION AND RESERVES OF THE COMPANY continued
Movement in the Company’s reserve
As at 1 January 2019
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
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 2020
Share options
reserve
HK$ million
19
4
–
–
–
–
23
4
–
–
–
–
27
General reserve
HK$ million
(Note)
100
–
–
–
–
–
100
–
–
–
–
–
100
Retained profits
HK$ million
Total
HK$ million
5,331
–
(92)
1,677
1
(1,507)
5,410
–
(96)
1,721
1
(1,502)
5,534
5,450
4
(92)
1,677
1
(1,507)
5,533
4
(96)
1,721
1
(1,502)
5,661
Note: General reserve was set up from the transfer of retained profits.
The Company’s reserves available for distribution to its owners as at 31 December 2020 amounted to HK$5,634 million (2019:
HK$5,510 million), being its general reserve and retained profits at that date.
32. RECONCILIATION OF ASSETS/LIABILITIES RELATING TO FINANCING ACTIVITIES
Net debt (Note a)
Other financial liabilities (Note b)
Interest payable
Amounts due to non-controlling interests
2020
HK$ million
2019
HK$ million
5,965
(183)
(161)
(217)
5,404
(3,197)
(46)
(131)
(220)
(3,594)
134
Hysan Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2020
32. 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.
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
As at 1 January 2019
Cash flows, net
Other non-cash changes:
Foreign exchange adjustments
Fair value adjustments
Interest expenses
Cash and
cash
equivalents
HK$
million
2,069
1,528
–
–
–
Time
deposits
HK$
million
748
4,987
–
–
–
As at 31 December 2019
3,597
5,735
(26)
(1,532)
(4,790)
–
(470)
(5,777)
(46)
29
(3)
(46)
3
–
(2)
43
–
(4)
(2,001)
(10,528)
(74)
247
–
–
(304)
(131)
Cash flows, net
Other non-cash changes:
Foreign exchange adjustments
Fair value adjustments
Interest expenses
10,792
4,811
–
(350)
(6,100)
493
–
–
–
–
–
–
(26)
(105)
(6)
2
–
(4)
24
–
(13)
–
–
(523)
(161)
As at 31 December 2020
14,389
10,546
(183)
(2,353)
(16,617)
(223)
(3,828)
3
–
–
–
518
–
29
(313)
(220)
(3,594)
3
–
–
–
9,649
–
(105)
(546)
(217)
5,404
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.
33. 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 (2019: HK$10 million).
135
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
34. COMMITMENTS
At the end of the reporting period, the Group had the following capital commitments in respect of its investment properties,
property, plant and equipment and subscription to a fund investment as limited partner:
(a) Capital commitment:
Contracted but not provided for investment properties and
property, plant and equipment
(b) Other commitment:
Subscription to a fund investment as limited partner
2020
HK$ million
2019
HK$ million
157
85
207
14
35. 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
2020
HK$ million
2019
HK$ million
2,867
1,874
1,026
610
427
1,019
7,823
3,315
2,390
1,459
799
586
1,517
10,066
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.
136
Hysan Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2020
36. 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 1(b) of the Financial risk
management objectives and policies 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
2020
HK$ million
2019
HK$ million
2020
HK$ million
2019
HK$ million
42
5
42
14
62
154
63
157
(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 Limited, of which Jebsen Hans Michael is a director and a
controlling shareholder, as a shareholder 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 sum of transactions represents the aggregate 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 a shareholder 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
2020
HK$ million
2019
HK$ million
48
3
1
52
48
4
1
53
The remuneration of the Directors and key executives is determined by the Remuneration Committee having regard to the
performance of individuals and market trends.
137
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
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.
138
Hysan Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2020 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$1 and is required to be paid within 30 days from the date of grant of options, with
full payment for exercise price to be made on exercise of the relevant options.
During the year, a total of 1,602,000 (2019: 1,286,200) share options were granted under the New Scheme. The 2005 Scheme
expired on 9 May 2015 and no further option will be granted under the 2005 Scheme.
(b) Grant and vesting structures
Under the Company’s current policy, grants will be made on a periodic basis. For the Schemes, the exercise period is 10 years
and vesting period is 3 years in equal proportions starting from the 1st anniversary and become fully vested on the 3rd
anniversary of the grant. Size of grant will be determined by reference to base salary multiple and job grades. A clear
performance criterion will be a key driver. The Board will review the grant and vesting structures from time to time.
139
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance 37. SHARE-BASED PAYMENT TRANSACTIONS continued
(c) Movement of share options
The following table discloses movements of the Company’s share options held by the Director and eligible employees during
the current year:
Date of grant
Exercise price
HK$
Exercise period
(Note a)
Balance as at
1.1.2020
Granted
Exercised
Cancelled/
lapsed
(Note b)
Balance as at
31.12.2020
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
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(50,000)
(Note d)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
87,000
265,000
325,000
300,000
–
32,000
70,000
85,000
46,000
62,667
(50,000)
– 1,272,667
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
140
Hysan Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2020
37. SHARE-BASED PAYMENT TRANSACTIONS continued
(c) Movement of share options continued
Changes during the year
Date of grant
Exercise price
HK$
Exercise period
(Note a)
Balance as at
1.1.2020
Granted
Exercised
Cancelled/
lapsed
(Note b)
Balance as at
31.12.2020
Name
New Scheme
Executive Director
Lee Irene Yun-Lien
9.3.2016
23.2.2017
1.3.2018
22.2.2019
21.2.2020
33.15
36.25
44.60
42.40
29.73
(Note e)
33.05
35.33
41.50
42.05
25.20
(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
21.2.2021 –
20.2.2030
31.3.2017 –
30.3.2026
31.3.2018 –
30.3.2027
29.3.2019 –
28.3.2028
29.3.2020 –
28.3.2029
31.3.2021 –
30.3.2030
375,000
300,000
373,200
494,200
–
–
–
–
–
650,000
125,000
244,667
496,000
762,000
–
–
–
–
–
952,000
3,170,067 1,602,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
375,000
300,000
373,200
494,200
650,000
125,000
244,667
(2,000)
494,000
(4,000)
758,000
–
952,000
(6,000) 4,766,067
3,312,853
Eligible employees
31.3.2016
(Note c)
31.3.2017
29.3.2018
29.3.2019
31.3.2020
Exercisable at the end of the year
Notes:
(a) All options granted have a vesting period of 3 years in equal proportions starting from the 1st anniversary and become fully vested on the 3rd
anniversary of the grant. In this table, “exercise period” begins with the 1st anniversary of the grant date.
(b) The options lapsed during the year upon resignations of certain eligible employees.
(c) Eligible employees are those 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$28.40.
(e) The closing price of the shares of the Company immediately before the date of grant (i.e. as of 20 February 2020) was HK$29.55.
(f) The closing price of the shares of the Company immediately before the date of grant (i.e. as of 30 March 2020) was HK$23.85.
In respect of the share options exercised during the year ended 31 December 2020, the weighted average share price at the
date of exercise was HK$28.35.
Apart from the above, the Company had not granted any share option under the Schemes to any other person as required to
be disclosed under Rule 17.07 of the Listing Rules in 2020.
141
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
37. SHARE-BASED PAYMENT TRANSACTIONS continued
(c) Movement of share options continued
The following table discloses movements of the Company’s share options held by the Director and eligible employees in prior
year:
Name
Date of grant
Exercise price
HK$
Exercise period
(Note a)
Changes during the year
Balance as at
1.1.2019
Granted
Exercised
Cancelled/
lapsed
(Note b)
Balance as at
31.12.2019
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
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
142
Hysan Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2020
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
1.1.2019
Granted
Exercised
Cancelled/
lapsed
(Note b)
Balance as at
31.12.2019
New Scheme
Executive Director
Lee Irene Yun-Lien
9.3.2016
33.15
23.2.2017
36.25
1.3.2018
44.60
22.2.2019
42.40
(Note d)
Eligible employees
31.3.2016
33.05
(Note c)
31.3.2017
35.33
29.3.2018
41.50
29.3.2019
42.05
(Note f)
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
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 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.
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.
143
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 (2019: HK$4 million) in relation to share options granted by the Company, of which HK$2 million (2019: HK$2 million)
related to the Director (see note 11 of the Notes to Consolidated Financial Statements section), 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
31.3.2020
21.2.2020
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
Notes:
HK$25.200
HK$25.200
0.528%
5 years
18.518%
HK$1.384
HK$2.060
HK$29.250
HK$29.730
1.172%
5 years
18.013%
HK$1.384
HK$2.520
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
(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 five 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 five years immediately
before the date of grant.
(d) Expected dividend per annum: being the approximate average annual cash dividend over the past five financial years.
144
Hysan Annual Report 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedFor the year ended 31 December 2020
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
Lifetime Expected
12-month ECL
risk of default or does not
have any past-due amounts
Credit Losses (“ECL”)
– not credit-impaired
– not credit-impaired
Non-performing
There have been significant
Lifetime ECL –
Lifetime ECL
Write-off
increases in credit risk since
initial recognition through
information developed
internally or external
resources
There is evidence indicating
that the debtor is in severe
financial difficulty and the
Group has no realistic
prospect of recovery
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 2020, these loans with gross carrying amount of HK$1,170 million
(2019: HK$1,107 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 2020, accounts and other receivables with
gross carrying amount of HK$828 million (2019: HK$605 million) are considered to be performing and were assessed
individually based on the respective lifetime ECL and 12-month ECL.
145
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness PerformanceFinancial Risk ManagementFor the year ended 31 December 2020
1. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES continued
(a) Credit risk and impairment assessment continued
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 2020, debt securities, time deposits and bank balances with gross carrying
amount of HK$25,389 million (2019: HK$9,504 million) were assessed individually based on 12-month ECL and considered to
be performing as all financial institutions that the Group dealt with. Time deposits, bank balances and debt securities invested
in had credit ratings A or above as rated by international credit rating agencies. In order to limit exposure to each financial
institution and debt securities issuers, an exposure limit was set with each counterparty according to their external credit rating
with regular review by management.
Other than concentration of credit risk on loans to associates and a joint venture, the Group does not have any other significant
concentration of credit risk.
No credit loss is provided for except for loans to a joint venture and debt securities. A reconciliation of loss allowances
recognized is presented below.
As at 1 January 2019
Net impairment loss under ECL model
As at 31 December 2019
Net impairment loss under ECL model
As at 31 December 2020
Loss allowance for
Loans to
a joint venture
HK$ million
Debt securities
HK$ million
4
2
6
–
6
1
3
4
7
11
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 1(b) of the Financial risk
management objectives and policies section.
146
Hysan Annual Report 2020FINANCIAL RISK MANAGEMENT continuedFor the year ended 31 December 2020
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 2020
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 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
Note:
(931)
(974)
(217)
(2,353)
(16,617)
(931)
(974)
(217)
(2,428)
(20,673)
(931)
(377)
(217)
(22)
(521)
(21,092)
(25,223)
(2,068)
–
(290)
–
(817)
(1,042)
(2,149)
–
(260)
–
(1,589)
(5,478)
–
(47)
–
–
(13,632)
(7,327)
(13,679)
(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)
–
(277)
–
(315)
(324)
(916)
–
(389)
–
(1,842)
(4,053)
(6,284)
–
(19)
–
–
(7,762)
(7,781)
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$3,000 million as at 31 December 2020 and 2019,
if such amount is claimed by the counterparty to the guarantee at any time within the guaranteed period. Based on expectations at the end of the
reporting period, the Directors of the Company consider that it is more likely than not that no amount will be payable by the Group under such financial
guarantee arrangement.
147
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
1. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES continued
(b) Liquidity risk continued
The following table details the Group’s remaining contractual maturity for its derivative financial instruments. The table has
been drawn up based on the undiscounted gross inflows (outflows) on those derivatives that require gross settlement. When
the amount payable or receivable is not fixed, the amount disclosed has been determined by reference to the prevailing market
rate at the end of the reporting period. For cash flows denominated in currency other than HKD, the prevailing foreign
exchange rates at the end of the reporting period are used to convert the cash flows into HKD.
Total
contractual
undiscounted
cash flow
HK$ 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 2020
Derivative settled gross
Cross currency swaps
Outflow
Inflow
As at 31 December 2019
Derivative settled gross
Cross currency swaps
Outflow
Inflow
(183)
(46)
(13,848)
13,712
(351)
342
(351)
342
(3,147)
3,147
(9,999)
9,881
(7,575)
7,611
(193)
191
(193)
192
(2,755)
2,787
(4,434)
4,441
(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 2020, about 12.0% (2019: 16.0%) 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”) (2019: +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.
148
Hysan Annual Report 2020FINANCIAL RISK MANAGEMENT continuedFor the year ended 31 December 2020
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 2020
As at 31 December 2019
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
(16)
(17)
4
4
18
4
(3)
(1)
(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.
2020
2019
Assets
Cash
Time deposits
Debt securities
Other financial investments
Liabilities
Bank loan
Unsecured fixed rate notes
Total
equivalent
to
HK$
million
96
230
454
789
1,569
463
10,971
11,434
US$
million
12
30
59
102
203
60
1,425
1,485
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
Other than concentration of currency risk of the above items denominated in USD (2019: 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.
149
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”) (2019: 500 pips) was applied to the HKD: USD (2019: 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 2020
USD
As at 31 December 2019
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
7
4
(7)
(4)
83
4
(83)
(4)
(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
2020
HK$ million
2019
HK$ million
293
497
–
26,731
27,521
183
21,092
21,275
367
235
7
10,757
11,366
46
14,684
14,730
150
Hysan Annual Report 2020FINANCIAL RISK MANAGEMENT continuedFor the year ended 31 December 2020
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
Gross amounts of
recognized financial
liabilities
set off in the
consolidated
statement of
financial position
HK$ million
Gross amounts of
recognized
financial
assets
HK$ million
Net amounts
of financial
assets presented
in the
consolidated
statement of
financial position
HK$ million
As at 31 December 2020
Derivatives under hedge accounting
As at 31 December 2019
Derivatives under hedge accounting
–
7
–
–
–
7
(b) Net financial assets subject to enforceable master netting arrangements or similar agreements, by counterparty
As at 31 December 2020
Counterparty A
As at 31 December 2019
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 2020
Derivatives under hedge accounting
As at 31 December 2019
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
–
–
(183)
(46)
Gross amounts of
recognized financial
liabilities
HK$ million
(183)
(46)
151
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 2020
Counterparty A
Counterparty B
Counterparty C
Counterparty D
Counterparty E
As at 31 December 2019
Counterparty A
Counterparty B
Counterparty C
Counterparty D
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
(32)
(36)
(36)
(66)
(13)
(183)
(19)
(5)
(12)
(10)
(46)
–
–
–
–
–
–
7
–
–
–
7
Net amount
HK$ million
(32)
(36)
(36)
(66)
(13)
(183)
(12)
(5)
(12)
(10)
(39)
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$16,617 million (2019: HK$10,528 million) unsecured fixed rate notes as stated in note 27 of the Notes to the Consolidated
Financial Statements section with fair value of HK$17,432 million (2019: HK$9,096 million).
The fair value of HK$11,476 million (2019: HK$4,649 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$5,956 million (2019: HK$4,447 million) of the unsecured fixed rate notes is categorized into Level 2 of the
fair value hierarchy, in which the fair value was measured using discounted cash flow methodology based on observable yield
curves of the respective currency taking into account the credit margin of the Group as appropriate.
152
Hysan Annual Report 2020FINANCIAL RISK MANAGEMENT continuedFor the year ended 31 December 2020
4. FAIR VALUE MEASUREMENT continued
(b) Fair value of financial assets and financial liabilities that are measured at fair value on a recurring basis
The following table provides an analysis of financial instruments that are measured at fair value on a recurring basis, grouped
into Levels 1 to 3 based on the degree to which the inputs to the fair value measurements are observable.
Financial assets
Financial assets at FVTPL
Unlisted club debenture
Fund investment
Financial asset at FVTOCI
Listed investment in equity security
Unlisted investment in equity security
Total
Financial liabilities
Derivatives under hedge accounting
Cross currency swaps
Financial assets
Financial assets at FVTPL
Unlisted club debenture
Fund investment
Financial asset at FVTOCI
Listed investment in equity security
Derivative under hedge accounting
Cross currency swap
Total
Financial liability
Derivative under hedge accounting
Cross currency swap
Level 1
HK$ million
Level 2
HK$ million
Level 3
HK$ million
Total
HK$ million
2020
–
–
200
–
200
–
292
–
297
589
1
–
–
–
1
2020
1
292
200
297
790
Level 1
HK$ million
Level 2
HK$ million
Level 3
HK$ million
Total
HK$ million
–
183
–
183
Level 1
HK$ million
Level 2
HK$ million
Level 3
HK$ million
Total
HK$ million
2019
–
–
235
–
235
1
–
–
7
8
–
366
–
–
366
1
366
235
7
609
–
46
–
46
153
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 2019
Addition
Loss recognized in profit or loss
As at 31 December 2019
Addition
Return of capital
Loss recognized in profit or loss
Profit recognized in other comprehensive income
As at 31 December 2020
Fund investment
HK$ million
Unlisted
investment in
equity security
HK$ million
294
60
12
366
10
(81)
(3)
–
292
–
–
–
–
257
–
–
40
297
There were no transfers between these three levels during the year.
The unrealized fair value loss of HK$3 million (2019: unrealized fair value gain of HK$12 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.
Financial assets grouped in Level 3 are measured with reference to underlying assets and liabilities as at the end of the
reporting period and other valuation techniques including discounted cash flows or market approach, taking into account
different multiples such as price per earnings multiples of comparable listed companies, where relevant. If there is lack of
marketability, a discount is applied in determining the fair value.
(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 the valuation techniques and inputs for Level 3 fair
value measurements in relation to the fund investment and its underlying assets and liabilities. The Group engages
independent qualified professional valuer to perform the valuation for investment in equity security. Where there is a material
change in the fair value of the financial assets grouped in Level 3, analysis will be performed and the causes of the fluctuations
will be reported to the Directors of the Company.
154
Hysan Annual Report 2020FINANCIAL RISK MANAGEMENT continuedFor the year ended 31 December 2020
5. CAPITAL RISK MANAGEMENT
The Group manages its capital to ensure that the Group will be able to continue as a going concern while maximizing 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, perpetual capital securities or debt, the repurchase of shares and the redemption of existing
perpetual capital securities or 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 (cash) debt
Total equity
Net debt to equity
2020
HK$ million
2019
HK$ million
2,353
16,617
18,970
(10,546)
(14,389)
(5,965)
87,449
N/A
2,001
10,528
12,529
(5,735)
(3,597)
3,197
80,972
3.9%
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
155
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
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
(Loss) profit before taxation
Taxation
(Loss) profit for the year
Perpetual capital securities holders
Other non-controlling interests
(Loss) 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)
(Loss) earnings per share (HK$), based on:
(Loss) profit for the year
– basic
– diluted
Performance indicators
Net debt to equity
Net interest coverage (times)
Net asset value per share (HK$)
Net (cash) debt per share (HK$)
Year-end share price (HK$)
2020
HK$ million
2019
HK$ million
(Note a)
2018
HK$ million
(Note b)
2017
HK$ million
2016
HK$ million
3,710
(490)
3,220
–
272
5
(268)
(546)
(4,903)
225
(1,995)
(353)
(2,348)
(288)
89
(2,547)
2,398
2,398
1,502
1,216
144
(2.44)
(2.44)
N/A
9.8x
70.87
(5.74)
28.40
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
3.9%
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
4.5%
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
4.8%
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
5.2%
20.5x
64.56
3.50
32.05
156
Hysan Annual Report 2020Five-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
Perpetual capital securities
Other non-controlling interests
Shareholders’ funds
Definitions:
(1) Underlying profit for the year:
2020
HK$ million
2019
HK$ million
(Note a)
2018
HK$ million
(Note b)
2017
HK$ million
2016
HK$ million
74,993
5,577
11
125
1,153
789
24,935
2,172
109,755
(18,970)
(1,031)
(2,305)
(22,306)
87,449
(10,657)
(3,112)
73,680
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
a non-HKFRS measure, is arrived at by adding (i) Reported (Loss) Profit excluding unrealized fair value change of investment properties and items
not generated from the Group’s core property investment business; and (ii) Profit attributable to holders of perpetual capital securities.
(2) Recurring underlying profit for the year:
a non-HKFRS measure, is a performance indicator of the Group’s core property investment business and is arrived at by excluding from Underlying
Profit items that are non-recurring in nature
(3) Net debt to equity:
borrowings less time deposits, cash and cash equivalents divided by total equity
(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:
a.
b.
In 2019, the Group has applied HKFRS 16. Accordingly, certain comparative information for the years ended 31 December 2016, 2017 and 2018
may not be comparable to the year ended 31 December 2019 as such comparative information was prepared under HKAS 17. Accounting policies
resulting from application of HKFRS 16 are disclosed in the “Significant Accounting Policies” Section.
In 2018, the Group has applied the remaining sections of HKFRS 9. Accordingly, certain comparative information for the years ended 31
December 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. Accounting policies resulting from application of HKFRS 9 are disclosed in the “Significant Accounting Policies” Section.
157
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance
To the Board of Directors
Hysan Development Company Limited
Dear Sirs,
Annual Revaluation of Investment Properties as at 31 December 2020
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 2020 was in the approximate sum of Hong Kong Dollars Seventy-Four Billion Nine Hundred and
Ninety Three Million (Hong Kong Dollars 74,993 million).
The completed investment properties have been valued individually on market value basis and have been assessed on the basis
of capitalization of the net and potential income. We have also cross-checked the values by market comparables.
Yours faithfully
Knight Frank Petty Limited
Hong Kong, 17 February 2021
158
Hysan Annual Report 2020Report 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%
74-86 Kennedy Road
Mid-Levels
Hong Kong
2. Hysan Place
500 Hennessy Road
Causeway Bay
Hong Kong
3.
4.
5.
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
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%
159
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness PerformanceSchedule of Principal PropertiesAs at 31 December 2020
INVESTMENT PROPERTIES continued
Address
Lot No.
Use
Category
of the Lease
Percentage
held by
the Group
6.
7.
8.
9.
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
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%
160
Hysan Annual Report 2020SCHEDULE OF PRINCIPAL PROPERTIES continuedAs at 31 December 2020
SHARE CAPITAL
As at 31 December 2020
Issued and fully paid-up capital
There was one class of ordinary shares with equal voting rights.
DISTRIBUTION OF SHAREHOLDINGS
(At 31 December 2020, as per register of members of the Company)
HK$
Number of
Ordinary Shares
7,721,662,909
1,039,700,891
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)
2,214
731
63
41
2
6
3,057
72.42
23.91
2.06
1.34
0.07
0.20
3,476,125
11,332,263
4,640,443
8,425,487
1,131,041
1,010,695,532
100
1,039,700,891
0.33
1.09
0.45
0.81
0.11
97.21
100
TYPES OF SHAREHOLDERS
(At 31 December 2020, as per register of members of the Company)
Type of shareholders
Lee Hysan Company Limited
Other corporate shareholders
Individual shareholders
Total
LOCATION OF SHAREHOLDERS
(At 31 December 2020, 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
579,179,454
27,390,702
1,039,700,891
41.66
55.71
2.63
100
Number of
ordinary shares held
% of the total no.
of issued shares
(Note)
1,037,569,353
1,898,751
17,085
215,702
1,039,700,891
99.795
0.183
0.002
0.020
100
The percentages were compiled based on the total number of issued shares of the Company as at 31 December 2020 (i.e. 1,039,700,891 ordinary
shares).
161
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
25 February 2021
10 March 2021
12 March 2021
Dispatch of second interim dividend warrants
(on or about) 26 March 2021
Closure of register of members for Annual General Meeting
Annual General Meeting
2021 interim results to be announced
* subject to change
DIVIDEND
17 to 21 May 2021
21 May 2021
11 August 2021*
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, 12 March 2021.
The register of members will be closed on Friday, 12 March 2021, 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, 11 March 2021.
Dividend warrants will be dispatched to shareholders on or about Friday, 26 March 2021.
The register of members will also be closed from Monday, 17 May 2021 to Friday, 21 May 2021, both dates inclusive, for the
purpose of determining shareholders’ entitlement to attend and vote at the Annual General Meeting to be held on Friday,
21 May 2021, 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 Friday, 14 May 2021.
162
Hysan Annual Report 2020Shareholder 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 or the Company’s Registrar, or by email to hysan14-ecom@hk.tricorglobal.com or
cosec@hysan.com.hk. 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
50/F Lee Garden One
33 Hysan Avenue
Hong Kong
Telephone: (852) 2895 5777
Facsimile: (852) 2577 5153
163
OverviewCorporate GovernanceFinancial Statements and ValuationBusiness Performance BOARD OF DIRECTORS
Lee Irene Yun-Lien (Chairman)
Churchouse Frederick Peter**
Fan Yan Hok Philip**
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)
Churchouse Frederick Peter**
Fan Yan Hok Philip**
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
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
Certified Public Accountants and
Registered Public Interest Entity Auditors
35/F, One Pacific Place
88 Queensway
Hong Kong
164
Hysan Annual Report 2020Corporate Information
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stock code 00014
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Hysan Development Company Limited
50/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
Resilient.
Responsive.
Resourceful.
ANNUAL
REPORT
2020