WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Corporate Information
Board of Directors Registrars Mr. G. W. J. Li (Chairman) Tengis Limited
Mr. S. T. H. Ng (Vice Chairman) 4th Floor, Hutchison House
Mr. J. T. Hung, SBS, JP (Managing Director) 10 Harcourt Road
Mr. K. H. Leung (Finance Director) Central, Hong Kong
Mr. B. M. Chang
Sir S. Y. Chung, JP Registered Office 23rd Floor, Wheelock House Mr. Q. Y. K. Law 20 Pedder Street Ms. D. Y. F. Lee Hong Kong Mr. W. W. Y. Lee Website : www.wheelockcompany.com Mr. T. Y. Ng
Mr. P. Y. C. Tsui Principal Banker Mr. H. S. S. Wong The Hongkong and Shanghai Banking secretary Corporation Limited Mr. W. W. S. Chan, FCIS Auditors PricewaterhouseCoopers
2 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
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FINANCIAL HIGHLIGHTS
Restated 2001 2000 HK$ Million HK$ Million
Results Turnover 3,761.5 4,551.0 Operating profit 132.3 720.1 Group profit attributable to shareholders 516.6 864.4 Earnings per share 25.4¢ 42.6¢ Dividends per share 7.5¢ 7.5¢
Financial Position Total assets 58,415.0 57,300.5 Net debts 15,664.5 16,081.7 Shareholders’ funds 28,260.3 27,242.4 Net assets per share HK$13.92 HK$13.41 Net debts to total assets (excluding cash) 27.4% 28.8%
Group profit/(loss) Earnings attributable to Shareholders’ /(loss) Dividends Distribution Financial Year shareholders funds per share per share cover HK$ Million HK$ Million HK¢ HK¢ Times
1991/1992 976.5 18,522.8 47.7 24.5 1.95 1992/1993 1,468.3 24,100.8 71.6 28.5 2.51 1993/1994 2,204.6 40,638.4 108.3 36.0 3.01 1994/1995 2,306.0 42,332.9 114.3 37.0 3.09 1995/1996 2,459.2 39,170.2 122.0 41.0 2.98 1996/1997 2,535.5 45,820.0 125.5 43.5 2.87
1997/1998 (Restated) (958.0) 39,920.8 (47.3) 28.0 N/A
1998/1999 (Restated) 657.4 27,548.2 32.4 7.5 4.32
1999/2000 (Restated) 864.4 27,242.4 42.6 7.5 5.68 2000/2001 516.6 28,260.3 25.4 7.5 3.39
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Turnover (HK$ Million)
Retailing and trading 1,865.7 Sale of property 1,294.1 Property rental 282.3 Treasury management, investment and others 319.4 Total 3,761.5
Operating Profit before Borrowing Costs and Provision for Properties (HK$ Million)
Retailing and trading 56.8 Sale of property 553.5 Property rental 224.9 Treasury management, investment and others 518.3 Total 1,353.5
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Chairman’s Statement
Gonzaga W. J. Li Chairman
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CHAIRMAN’S STATEMENT
heelock and Company Limited’s GROUP FOCUS W consolidated profit attributable to Wheelock and Company Limited and its shareholders for the year ended 31 March 2001 was subsidiaries/associates are engaged in property
HK$516.6 million, compared to HK$864.4 million development/sales and quality retailing in for the previous year. Hong Kong, China Mainland, Singapore and
Taiwan. Through its substantial associate
Earnings per share were 25.4 cents, Wharf Holdings, Wheelock is also compared to 42.6 cents for the previous year. engaged in core investment businesses
in property, CME (communications,
Wheelock’s investment properties were media and entertainment) and logistics revalued at 31 March 2001, those (container and air cargo terminals). owned by its associates were revalued at the respective year end dates. In accordance with the ECONOMIC REVIEW current established accounting standards, The perceived downturn of the US economy since
Wheelock’s investments in listed securities were the beginning of 2001 has slowed down Hong also stated at market value. On these bases, Kong’s impressive economic recovery. Despite the the consolidated net asset value of the Company strong momentum from last year’s double digit as at 31 March 2001 was HK$13.92 per share, GDP growth and a series of interest rate cuts, the compared to HK$13.41 per share a year earlier. major leading indicators of Hong Kong’s economy
such as GDP growth, unemployment rate,
An interim dividend of 2.5 cents per share was paid deflationary pressure and limited property in January 2001, and the Directors recommend a final transactions all dictate an outlook of caution. The dividend of 5.0 cents per share to be approved at the general view is that until the US economy comes
Annual General Meeting. The total dividend for the off the bottom, there is little likelihood of revived year will be 7.5 cents per share, the same as last year. robust economic activities.
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CHAIRMAN’S STATEMENT
Nevertheless, we remain cautiously optimistic that of China trade and this speaks well for Hong Kong’s the Hong Kong economy should improve within the macro economic prospects. next six to 12 months on the expectation of a US economic recovery and the effect of the interest rate PROPERTY cuts filtering through the real economy. Further, the Despite a slowdown of transaction activities, rental stimulus of China’s impending entry into the WTO sentiments have improved and this augurs well for continues to bring some optimism based rental earnings improvements related to on reports that since July 2000, at least Wheelock’s large investment property one overseas company per week has set portfolio, particularly when all the up a regional office in Hong Kong excessive supply of offices has now been aggregating in more than 3,000 regional largely absorbed. The success of Wharf’s offices in Hong Kong – the highest in Asian cities. Harbour City and Times Square projects offers great
China trade is also estimated to double within the comfort to the Group as a whole, and the passage of five years following its entry into the WTO. Hong time should only bring further improvements. The
Kong has traditionally serviced close to 40 per cent Gateway project within Harbour City is particularly
Main Board Executives
Harry S. S. Wong
Stephen T. H. Ng T. Y. Ng Paul Y. C. Tsui
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CHAIRMAN’S STATEMENT
successful in that all three sectors of retail, offices and GFA MTRC Kowloon Station Two development luxury serviced apartments have leased extremely well. “Sorrento”, and the 2.8-million-square-foot GFA Sham
Tseng project “Bellagio”. Both these developments are
As a major property owner and developer, the making good progress in construction and in time
Wheelock group of companies through Wharf, New should yield high revenue potential. Wharf is also
Asia Realty (“NART”) and Realty Development close to the launching of three attractive projects on
(“RDC”) holds some 7.5 million square The Peak, namely, Mountain Court, feet GFA in developable properties in Chelsea Court and the substantial its portfolio. The Wheelock Group construction at Plantation Road where conducts its own property development returns should be enhanced by the scarce and manages its own properties as well supply in the top-end luxury market. as its subsidiaries as co-investor.
Wheelock has a robust and successful presence in
Wheelock has seen further progress in construction of Singapore through Marco Polo Developments two focus projects, namely, the 2.3-million-square-foot Limited (“MPDL”), a publicly listed Singapore
Quinn Y. K. Law John T. Hung
K. H. Leung Doreen Y. F. Lee
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CHAIRMAN’S STATEMENT
vehicle held through NART. MPDL is a leading Despite difficulties in the economic climate caused luxury residential developer in Singapore and by relatively inactive financial and property markets, recognized to be one of the best managed. It is also Lane Crawford continues to sustain its turnover and one of the largest Hong Kong-owned property positive operating profit. However, the continuing companies in the Island Republic. With the successful deflationary syndrome has imposed restrictions for
Ardmore Park development generating approximately pricing flexibility resulting in margins being put
S$1 billion profit before tax and the under pressure. The company’s efforts current redevelopment of the now in customer-oriented promotion demolished Marco Polo Hotel, MPDL strategies, relationship marketing, and is now cash rich and on the lookout for effective cost rationalization systems good investment opportunities. have brought stability to its operations,
and the Board is pleased to see Lane Crawford
RETAIL maintaining its lead position in the market with a
Wheelock’s retail initiatives are led by the well-known strong and loyal customer base.
Lane Crawford brand which has performed with noticeable improvements in merchandizing and Lane Crawford’s joint venture associate Maison consumer attraction. Acquired last year, Joyce Boutique Mode in Shanghai is now generating reasonable is focusing on consolidating its businesses and profits, and Lane Crawford has opened a store in strengthening its core. These two, with the high-end Shanghai Times Square as a critical step towards supermarket and lifestyle brand of City’Super, bring Greater China retail coverage which will include together a meaningful retail presence of the Wheelock Taipei towards the end of 2001.
Group with a geographical coverage of Hong Kong,
China Mainland, Taiwan and Singapore on a scale that WHARF is unmatched in the region, with a high level of trust The Wharf group’s corporate structure is anchored established with their customers. by property investment with Kowloon Point
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11Times Square, Hong Kong WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
CHAIRMAN’S STATEMENT
representing half of its assets. Other properties take up transport links to all parts of the territory. The
25 per cent. The other core investments are completed Government’s “Dragon” theme Beautification Project by two other principal arms, namely, CME and logistics. along the Tsimshatsui promenade currently
This portfolio offers significant revenue growth and promoted by the Hong Kong Tourism Board will value creation through brands in the coming years. further enhance the value of Harbour City.
PROPERTY The new retail extension underneath the
With the recovery of the Hong Kong’s Gateway II Towers completed in 1998 economy last year, and the absorption has strengthened the prominent position of the previous over-supply, the rental of Harbour City, which enjoys heavy market in commercial space has traffic flow and the presence of high significantly improved and gathering momentum. brand name stores. Substantial asset value has
therefore been added.
Canton Road is substantially revitalized and will be further enhanced with time. Street front major Times Square Hong Kong is another major property deluxe retailers have added greatly to the look of the asset under active management. With a strong brand
Canton Road promenade. Substantial premises recognition, Times Square is one of the top ten tourist improvements are being planned by adding value to attractions nominated by the Hong Kong Tourism
Ocean Terminal and the revamping of The Marco Board. Being a retail focus in the Causeway Bay hub,
Polo Hongkong Hotel arcade, including active it is the most-sought-after exhibition venue for planning to enhance the quality and look of the consumer products in Hong Kong.
Ocean Terminal roof top as well as the praya from
Ocean Terminal to the concourse of the “Star” Ferry. The branding initiatives of China Times Squares are
Kowloon Point dominates Tsimshatsui as the centre underway with Beijing and Shanghai successfully of gravity for commercial and leisure activities with marketed, and Chongqing under construction.
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CHAIRMAN’S STATEMENT
CME than its competitors. On consolidation, a net profit
The year 2000 was a milestone growth year for of HK$20 million was reported for the year,
Wharf’s CME businesses. This division is growing representing a huge improvement of HK$257 strongly despite keen competition arising from what million over the previous year of 1999. is a regulatory-driven business. The tough entry barrier has been overcome and its high operating NEW T&T leverage will offer attractive incremental New T&T has rapidly transformed its core profit margin growth from the increase business from IDD to high value fixed lines of revenue. where entry barriers are higher. In doing
so, New T&T has consolidated its position i-CABLE as the fastest growing and most successful
CABLE TV reported a healthy net profit in the competitor to the former monopoly in fixed telecom second half of the year, at least a year earlier than network services. Where fixed lines represented only expected. The Multimedia division launched a 10 per cent of total revenue in 1998, it grew to 27 per
Broadband Internet access service in March 2000 cent in 1999 and 50 per cent in 2000. and started to report a positive EBITDA before the end of the year. The bundling services to customers 2000 revenue was 25 per cent higher than 1999. By through the “Triple Play” strategy will bring three managing costs at below the 1999 level, New T&T potentially high earnings streams from video, reported an improvement in EBITDA of over data and voice. Delivery of voice service is being HK$200 million, and came close to breaking even successfully tested using the voice-over-IP technology. at the bottom line.
First and early mover advantage has enabled LOGISTICS i-CABLE to roll out service and penetrate the Modern Terminals’ business should significantly market much faster, more successfully and profitably benefit from China’s impending entry into the WTO.
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CHAIRMAN’S STATEMENT
As suggested in my Economic Review, China trade profit and New T&T is on positive EBITDA. The is estimated to double within the five years following retail brands of Lane Crawford, Joyce and City’Super its entry into the WTO, and Hong Kong has are all doing reasonably well within a highly traditionally serviced close to 40 per cent of China competitive market, and this improvement of our retail trade and this will directly improve the potential at platform is encouraging.
Modern Terminals, now a 55 per cent subsidiary of
Wharf with stable growth in earnings. The Group refinanced the majority of its
secured debts by unsecured loan facilities
Container Terminal No. 9 will generate with longer maturity periods and extra capacity from 3.4 million TEUs to substantial reduction in interest charges.
4.5 million TEUs, and the aggregate With the gradual reduction of interest terminals within this company will occupy some rates, borrowing cost could further reduce in the future.
9.5 million square feet of land.
Looking forward, we shall continue to build on the
Modern Terminals is conservatively leveraged and success. Encouraged by the imminence of China’s all financing is non-recourse to the shareholders. This entry into the WTO, we look at the future with a solid financial position will enable Modern Terminals good degree of confidence. to also expand into other areas particularly at the
Western Shenzhen ports in Southern China. On behalf of Shareholders and Directors, I wish
to record my heartfelt thanks to the Group’s
PROSPECTS AND OUTLOOK management and staff for their contribution.
The Wheelock Group will continue to build assets and value, and we have achieved visible improvements.
The completed property projects are now reaping Gonzaga W. J. Li, Chairman returns. Wharf’s investment in i-CABLE is now in Hong Kong, 26 June 2001
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Network Operation Centre, New T&T 15 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
BUSINESS REVIEW
Gateway, Hong Kong 16 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
KEY TO SUCCESS
Being an actively-managed conglomerate with a well- diversified portfolio of
businesses in the areas of property development, property investment, quality retail,
CME(communications, media and entertainment) and logistics, the Wheelock Group has explicitly demonstrated the resilient
character of its operations against the wild fluctuations of the global economy and financial markets in the past 12 months.
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BUSINESS REVIEW – WHEELOCK PROPERTIES
HONG KONG in Homantin will be developed into eight towers
In December 2000, Wheelock Properties consisting of 700 units with a total GFA of 904,200 launched with good market response the square feet. Demolition was completed recently in
Rose Street project, known as The accordance with the work schedule.
Primrose. Out of the 16 completed residential units, over half were sold Bellagio, the Sham Tseng site, is a joint after the launch at over HK$7,000 venture development equally owned by per square foot. Apart from The Wheelock, New Asia Realty, and the
Primrose, the Group also maintained its Wharf group. Approval has been received from the programme of property sales for the remaining Government to increase the total residential area from units in various other developments including 2.5 million to 2.8 million square feet, a 12 per cent
The Astrid, Forest Hill and My Loft. gain arising from the decking over of the canals
adjacent to the site. The number of residential units
During the year under review, the Group took an to be built has accordingly been increased from 2,756 interest of 20 per cent through Realty Development to 3,354. Foundation works for the whole in a joint venture with New World Development, development and pile caps works for Towers 1 to 9
Sino Land, Chinese Estates and Manhattan were completed. Superstructure works are now in
Garments to bid for and successfully secured the progress. Pre-sale for Phases I and II consisting of
King’s Park development. This residential site located 1,704 units is targeted to take place in early 2002.
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BUSINESS REVIEW – WHEELOCK PROPERTIES
Completion of Phases I and II of the development is as China’s entry into the WTO is likely to be able scheduled for 2003. to revive the residential property market in
Hong Kong. Given the Group’s sizable property
Sorrento, the MTRC Kowloon Station portfolio, mainly represented by
Package Two development, is equally its interest in the Sham Tseng site, owned by a five-member consortium the Kowloon Station Package Two comprising Wheelock, New Asia Realty, development and the King’s Park
Realty Development and two Wharf Homantin project, the Group is well- group companies. Superstructure works are now in positioned to take advantage of the gradual recovery progress and that for Phase I covering 1.2 million of the economy in the next several years. square feet GFA commenced in May 2000. Pre-sale for Phase I consisting of 1,272 units is planned to SINGAPORE take place in the second half of 2001. Completion In Singapore, the residential market is expected to of Phase I of the development is now scheduled for stay soft for the rest of 2001. The outlook for office the first quarter of 2003. rental market remains stable with limited supply of
prime office space in the near future. While many
With the falling interest rates leading to rising companies are imposing tighter cost-control disposable income, improving affordability, and measures in anticipation of an economic slowdown, attractive rental yield, a potential catalyst such Marco Polo Developments Limited, the Wheelock
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Wheelock Place, Singapore 20 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
BUSINESS REVIEW – WHEELOCK PROPERTIES
Group’s Singapore property arm, will focus on planning permission for the redevelopment of retaining tenants of good standing and continue to this property to 110,200 square feet GFA was uphold a high standard of maintenance for obtained in February 2000. This redevelopment
Wheelock Place. will only proceed when market
conditions improve.
The topping-out ceremony of Ardmore
Park was held on 5 May 2000 with Plans are underway to redevelop the construction of this luxury the former Marco Polo Hotel into condominium project being ahead of schedule. Out a freehold, luxury high-rise condominium of the total 330 units, 316 have been sold. Staged complex with 467,600 square feet in GFA, known billings representing 85 per cent of the total sale price as “Grange Residences”. Foundation works for the of these units sold have been billed and a substantial new development are progressing according to percentage of those have been collected. The schedule.
Temporary Occupation Permit for the whole development was obtained in May 2001. The office tower, levels 3, 4 and 5 of the Wheelock
Place podium in Singapore are currently 96
The average occupancy level of Ardmore View is per cent let to quality tenants of multinational currently at 97 per cent with duration of leases stature such as Philip Morris, Boeing, Cisco and ranging from 12 to 24 months. Provisional Colgate-Palmolive.
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Shanghai Times Square, Shanghai 22 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
REGIONAL EXPANSION
With its remarkably sizable landbank in Hong Kong, China Mainland and Singapore, the Wheelock Group remains a committed participant in the long-term growth
of the property markets in Asia.
On the retail front, following the opening of the first Lane
Crawford store in China at the new Shanghai Times Square with resounding success in
June 2000, the presence of the brand will be extended to Taipei at the end of 2001,
marking another milestone in its continued expansion.
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BUSINESS REVIEW – RETAIL
LANE CRAWFORD floors. The strategy to attract and retain customer through INTERNATIONAL Privilege Card Frequent Purchase Programme proved to
Despite the economic climate of Hong Kong being be successful in Hong Kong and the China Mainland. difficult and dragged by the weak financial and With its focused commitment and marketing strategies, property markets, Lane Crawford continued to Lane Crawford has maintained a leading position in the report a turnover growth and most significantly a market with a strong and loyal customer base. positive operating profit. However, the prolonged deflationary scenario has With respect to merchandise planning restricted the room for pricing flexibility. and management, the strategy is to
Together with the rising cost associated strengthen the management over with merchandise sourcing and rent, the existing brands as well as to exploit new profit margin has been under pressure. Overall, it quality brands and merchandise which match was an extremely challenging year for retailers as the company’s image and market position. “On consumer spending remained cautious and operating Pedder” has been a successful story established both environment became increasingly competitive. in Hong Kong and Singapore. The fourth On Pedder
boutique in Hong Kong was opened in April 2001.
The company’s persistent performance has been mainly The company will continue to focus on maintaining attributable to its customer-oriented promotion strategies, and extending this brand across the region. relationship marketing efforts, effective cost-control systems and enhancement in productivity of selling In China Mainland, Maison Mode continues its
24 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
BUSINESS REVIEW – RETAIL
leading position in Shanghai by maintaining an upscale opportunities in the region as well as to capitalize the image and balanced brand mix. With the high growth Lane Crawford brands, the Group’s retail arm is better- in disposable income and living standard in gateway positioned to deliver fairly decent growth in the longer cities such as Shanghai, exceptional performance is term through both local and regional expansion. The achieved. Continued promoting effort has been put next upcoming exciting event is the opening of Lane into various VIP programmes, bonus plans and VIP Crawford Taipei targeted at the end of 2001. special promotional activities to stimulate sales while operating expenses and office JOYCE overhead were under strict control The Joyce group had managed to turn resulting in cost savings. around and reported a small profit for the
first time after the Asian financial crisis.
During the year under review, Lane Crawford This was attributable partly to higher turnover achieved
Shanghai located in the Shanghai Times Square and partly to the successful cost rationalization shopping complex started operating with favourable programmes, which led to an improvement in operating feedback received from numerous valuable customers. margin in the 15-month period to 31 March 2001.
The newly-opened store has definitely attracted all The rebuilding and fine-tuning of the group’s business high-end shoppers’ attention in Shanghai. platform continued. During the period, the group
opened its first free-standing Joyce Beauty store, four
With principal objectives to broaden customer base, new Ad Hoc stores and three Hugo Boss outlets. The enlarge market share, and exploit potential business group is also looking for other expansion opportunities.
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Cable TV Tower, Hong Kong 26 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
STEERING AHEAD
Driven by strong recurrent earnings and value creation
opportunities originating from its investment flagship property at Kowloon Point, Wharf
Holdings, Wheelock’s principal associate, is supported by major investments in CME (communications, media and entertainment) and logistics.
This portfolio is set to offer significant revenue growth and value creation through brands in the coming years.
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BUSINESS REVIEW – WHARF HOLDINGS
Wharf is a group driven by strong recurrent earnings importers, exporters and manufacturers, the and value creation opportunities originating from its investment property portfolio benefited largely from investment flagship property at Kowloon Point. an influx of fresh foreign capital and the expansion of
Further supported by other major investments in existing local operators, both eyeing on the soon-to- communications, media and entertainment, and open China domestic market because of the potential logistics businesses, the group is strategically focused WTO agreement. Tower 6 of Gateway II comprising on Hong Kong and China Mainland. 780,000 square feet of office space has
been released to the market. The great
Wharf reported a profit attributable to response received is totally unanticipated shareholders of HK$2,480 million for the by many under the recent lacklustre year ended 31 December 2000. Its profit market conditions. before exceptionals grew by 10 per cent when compared to the 1999 figure. The two towers of Gateway Apartments provide about
500 serviced apartments. More than 50 per cent of
PROPERTY the tenants are multinational corporate tenants and
Prime properties including Harbour City and Times over half of the committed tenancies are for periods
Square which are virtually “freehold” with 999-year of 12 months or more. Comments from the occupants leases, altogether maintained an average occupancy on quality and service have been excellent. of over 90 per cent in year 2000.
Because of limited availability, shops in Harbour City
With typical clientele at Harbour City being mostly are under keen demand. Following the opening of the
China business operators such as trading firms, 14,000-square-foot Louis Vuitton shop at Ocean Centre,
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BUSINESS REVIEW – WHARF HOLDINGS
Gucci has also leased a 9,200-square-foot ground floor of Zou Rong Road and Min Zu Road, the two shop at Canton Road as its flagship store in Kowloon. major pedestrian-only streets in Chongqing.
Since the inception of Wharf’s programmes on COMMUNICATIONS, MEDIA the Mainland’s property investment, capital AND ENTERTAINMENT expenditure has been controlled, with around (“CME”)
HK$3.7 billion being invested so far. Due to visionary investments in brand
The group aims to roll out the position, subscriber base, network successful brand of “Times Square” in and servicing infrastructure and various key cities. Both Beijing Capital content development, together with
Times Square and Shanghai Times management’s dedicated efforts over
Square started operating in 2000 and average the last seven years, Wharf now owns a remarkably occupancy improved consistently from 30 odd per sizable and respectable portfolio of CME cent at the beginning to as high as 70 per cent by businesses in Hong Kong. the year end. The commencement of the
Chongqing Times Square project coincided nicely Following its successful listing at the end of 1999, with the announcement of the Beijing Central i-CABLE started to report a net profit for fiscal year
Government’s “Go West” master plan. This project 2000, one year ahead of market expectations. Having is a mixed development of retail, office and become the first local television operator other than residential with a GFA of 1.6 million square feet, the dominant broadcaster to report a profit in located at the city’s prime shopping area, the Hong Kong’s television history, the company would
Liberation Statue Square, which is at the junction continue with its “Triple Play” strategy in Pay TV,
29 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
BUSINESS REVIEW – WHARF HOLDINGS
Broadband Internet, and Telephony to take advantage considerations, Galaxy is reported to be still searching of its bundling capability whenever possible. for investor funding and was late in meeting the
performance bond obligation under its license.
In 2000, the Pay TV subscriber base grew by 15 per cent to 520,000, representing a 29 per cent penetration Backed by the company’s early mover advantage and of total homes passed. ARPU went up by five per cent its highly recognized brandname, Broadband to HK$250 whereas churn rate remained Internet access subscribers grew from a low at 1.5 per cent per month on average. standing start in late March 2000 to
Being the preferred partner for most over 50,000 before the end of the year. programmers and content providers, the This represented an approximate 25 per company managed to conclude a number cent share of the residential market. of renewals and also brand new carriage agreements Due to the high operating leverage structure, with major players including HBO, Cinemax, CNN, EBITDA breakeven was rapidly achieved within the
AXN and Sun TV. first nine months of operation on an incremental
basis. By year end of 2000, over 900,000 homes in
Although several new licenses were awarded in late about 4,600 buildings throughout Hong Kong,
2000, the company is confident that its first mover Kowloon and the New Territories had been covered. advantage would continue to enable its services to The milestone of 1,000,000 was reached two prevail over the competition. In fact, the competitive months later, doubling the license commitment to environment of the sector has changed drastically in the Government. This represents one of the fastest, the past six months. After the withdrawal of both Star if not the fastest, rollouts of Cable Broadband
TV and HK Network TV due to various commercial services in any major city in the world.
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BUSINESS REVIEW – WHARF HOLDINGS
The company commenced its commercial trial for VoIP interconnect with all three licensed Mainland
(Voice-Over-Internet-Protocol) telephony in December, operators namely China Telecom, China Unicom, and and plans to launch commercial service sometime in China Netcom. Together with its earlier investment
2002 to generate a third major recurring revenue stream. in the submarine cable linking Japan-US and
The company’s distribution infrastructure will make it the alliance with FLAG Telecom and Level-3, one of the only two operators with city-wide coverage. New T&T is now well-positioned to become a
leading international bandwidth and
Being the most competitive and fastest IP backbone player in the market. New growing fixed line operator in Hong Kong, cable landing stations were also
New T&T had quite an eventful year interconnected with New T&T’s fibre during 2000. It accomplished significant network to provide backhaul services. growth in the areas of network coverage, number of customers, number of fixed lines, IDD volume and Apart from the remarkable 38 per cent growth in financial performance, as well as improvement in the total business customers, New T&T also became an company’s position along the value chain. important player in providing service for the e-
commerce market place. At 31 December 2000, the
Having expanded significantly, the company’s number of total installed fixed lines reached 140,000, advanced network now covers almost the entire North representing the second consecutive year with an 80
Shore of Hong Kong Island, Kowloon Peninsula, and per cent plus growth rate. Total IDD volume key data & voice locations in the New Territories. For increased by 140 per cent to over 650 million minutes. the company’s international bandwidth capacity, New By managing various cost items below the 1999 level,
T&T became the first operator in Hong Kong to New T&T reported an impressive improvement in
31 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
BUSINESS REVIEW – WHARF HOLDINGS
EBITDA and came close to breaking even on the In anticipation of the potential opportunities brought
EBIT level. Moreover, contribution from fixed lines, by WTO, the company continued to invest in various as a percentage of the total revenue, had jumped projects in order to solidify its leading position in from 1998’s 10 per cent to end of 2000’s 50 per the sector under the rapidly changing business cent. This underlined the rapid and successful environment. ModernPorts.com, aimed to improve transformation of the company’s business in only the overall operating efficiency of both customers two years from low value IDD to high and Modern Terminals, was introduced value fixed lines, where the entry towards the end of 2000. Phase 2 has barriers are much higher and customers just been launched recently to enhance are much more loyal, but discerning. the number of performable functions
provided by this portal. With its eight
LOGISTICS per cent effective investment in Kaifeng Container
Wharf’s interest in Modern Terminals was raised from Terminals in Western Shenzhen already making a
50.8 per cent to 55.3 per cent in early 2001. Propelled positive contribution to the company’s bottomline, by strong export growth during 2000, South China a new berth which increases handling capacity by throughput grew by 2.2 million TEUs, of which Hong about 400,000 TEUs, became operational in late
Kong’s terminals absorbed 55 per cent and Shenzhen 2000. While continuing with its involvement in the
45 per cent. Modern Terminals handled in total operational management of Shekou Container
3,073,436 TEUs last year, representing an 18.4 per cent Terminal 1, the company obtained in-principle growth against 1999. The company’s growth compared approval in early 2001 from the Central Government favourably with the overall growth in Kwai Chung of in Beijing to hold a 20 per cent interest in Shekou
12.5 per cent and South China of 17.4 per cent. Container Terminal 2.
32 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Disclosure of Further Corporate Information
Set out below is information disclosed pursuant to the Rules Governing the Listing of Securities (the “Listing Rules”) of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”):
(A) COMMENTARY ON ANNUAL RESULTS (I) Review of 2000/2001 Results Group profit attributable to Shareholders for the year under review was HK$516.6 million, a decrease of 40.2 per cent from HK$864.4 million. Earnings per share were 25.4 cents compared to 42.6 cents for the previous year.
The Group’s turnover for the year was HK$3,761.5 million, compared to HK$4,551.0 million for 1999/2000, a decrease of 17.3 per cent, which was principally due to lower property sales revenue recognised by Marco Polo Developments group (“MPDL”) in respect of its sales of Ardmore Park units in Singapore. On retailing and trading side, turnover increased by 34.4 per cent to HK$1,865.7 million resulting from an increase in turnover of Lane Crawford and the acquisition of Joyce Boutique Holdings Limited, a non wholly-owned listed subsidiary, in mid-August 2000.
The Group’s operating profit before borrowing costs decreased by 81.6 per cent to HK$132.3 million from HK$720.1 million achieved in the previous year, mainly as a result of lower contribution derived from MPDL and the increase in provision for impairment in value of properties.
MPDL’s profit was mainly derived from recognition of a proportion of the pre-sale profit of Ardmore Park of which 15 per cent was recognised in 2000/2001 against 25 per cent for the previous year. As at 31 March 2001, stage billings representing 60 per cent of the total sales price of all the units sold have been billed and fully collected. Temporary Occupation Permit for the whole development of Ardmore Park was obtained in May 2001 and to-date stage billings representing 85 per cent of the total sales price of the 316 units sold have been billed and substantially collected.
Despite the difficult retailing environment in Hong Kong, Lane Crawford managed to maintain a satisfactory positive operating profit while the newly acquired Joyce Boutique Holdings Limited turned around from loss and reported a net profit of HK$7.2 million.
Provision for impairment in value of properties of HK$1,221.2 million in 2000/2001 included provision of HK$338.7 million made by Realty Development group (“RDC”) for its residential development project in Tuen Mun, industrial/office development project in Kwai Chung and certain land reserved for development. The remaining provision is mainly related to the development project in Sham Tseng. Provision for 1999/2000 is mainly related to property development projects in China Mainland and certain projects in Hong Kong.
Included in the operating profit for the year is other net income of HK$442.2 million against HK$327.6 million for 1999/2000, mainly due to increase in profits on disposal of certain securities and the write-back of certain other provisions.
33 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Disclosure of Further Corporate Information
Borrowing costs charged to the consolidated profit and loss account for the year were HK$897.7 million, a decrease of 3.8 per cent as compared with HK$933.5 million for 1999/2000.
The share of profits in associates of HK$1,580.4 million decreased by 16.0 per cent from HK$1,882.2 million for 1999/2000, mainly as a result of the decrease in profit contribution from The Wharf (Holdings) Limited (“Wharf”). Wharf reported a profit attributable to shareholders of HK$2,480.0 million for its financial year ended 31 December 2000, compared to HK$3,511.0 million achieved in 1999. Wharf’s profit for 1999 included a non-recurring gain of HK$3,762.0 million arising from the spin off of i-CABLE Communications Limited and provisions made for contingencies from litigation case of HK$1,000.0 million and also for certain properties under development of HK$1,508.0 million.
Taxation charge for 2000/2001 was HK$253.2 million, against HK$467.0 million in 1999/2000. Lower taxation charge was recorded mainly due to decreased sales revenue recognised by MPDL, and included in 1999/2000 taxation was an additional tax provision of HK$157.4 million made by RDC.
The profits shared by minority interests for the year were HK$45.2 million, a decrease of 86.6 per cent from HK$337.4 million in 1999/2000. The decrease was mainly due to decrease in profits of the Group’s non- wholly owned subsidiaries.
(II) Liquidity and Financial Resources a) At 31 March 2001, the ratio of the Group’s net debt to total assets was 27.4 per cent, compared to 28.8 per cent at 31 March 2000. At 31 March 2001, the Group’s net debt amounted to HK$15,664.5 million, made up of HK$16,963.6 million in debts and HK$1,299.1 million in deposits and cash, a decrease of 2.6 per cent as compared with HK$16,081.7 million at 31 March 2000.
The debt maturity profile of the Group at 31 March 2001 is analysed as follows:
2001 2000 HK$ Million HK$ Million Repayable within 1 year 4,564.7 4,806.8 Repayable after 1 year, but within 2 years 7,580.9 5,615.0 Repayable after 2 years, but within 5 years 4,818.0 7,089.9 16,963.6 17,511.7
34 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Disclosure of Further Corporate Information
b) The following assets of the Group have been pledged for securing bank loan facilities:
2001 2000 HK$ Million HK$ Million
Fixed assets 3,859.6 4,176.1 Long-term investments 363.2 1,712.7 Properties under development 6,009.7 10,769.1 10,232.5 16,657.9
c) To minimise exposure on foreign exchange fluctuations, the Group’s borrowings are primarily denominated in Hong Kong dollars except that the borrowings for financing Singapore assets are denominated in Singapore dollars. The Group has no significant exposure to foreign exchange fluctuation.
d) At 31 March 2001, the Group maintained a portfolio of long-term listed investments with market value of HK$3,324.0 million (2000: HK$3,600.9 million) which primarily comprised blue chip securities.
(III) Finance During the financial year, the Group secured and renewed committed banking facilities at lower margins in a total amount of approximately HK$11 billion, of which HK$3.4 billion relates to the refinancing of the MTRC Kowloon Station Package Two development project at favourable terms to replace a previous facility of HK$2.2 billion. In addition, various short-term banking facilities were also secured or renewed. Grace Sign Limited, in which RDC has a 20 per cent interest, has also completed a project finance facility of HK$2.5 billion to finance the development of KIL 11118 King’s Park site.
(IV) Acquisition of Subsidiaries and Associates During the financial year, the Group acquired a controlling interest of 52 per cent in Joyce Boutique Holdings Limited and a 39 per cent interest in City Super Limited. Besides, RDC has participated in a joint venture of which RDC owns 20 per cent to acquire the King’s Park site at HK$2,508.0 million.
(V) Employee The Group had approximately 2,300 employees as at 31 March 2001. Employees are remunerated according to nature of the job and market trend, with built-in merit component incorporated in the annual increment to reward and motivate individual performance. The Group also sponsors external training programmes that are complementary to certain job functions. Total staff costs for the year ended 31 March 2001 was HK$370.1 million.
35 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Disclosure of Further Corporate Information
(B) BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGERS (I) Directors Mr. Gonzaga W. J. Li, Chairman (Age: 72) Mr. Li has been a Director of the Company since 1969. He became Chairman of the Company in 1996. He is also the chairman of The Wharf (Holdings) Limited (“Wharf”), Harbour Centre Development Limited (“HCDL”), i-CABLE Communications Limited (“i-CABLE”), New Asia Realty and Trust Company, Limited (“NART”), Realty Development Corporation Limited (“RDC”) and Marco Polo Developments Limited (“MPDL”) in Singapore and a director of Joyce Boutique Holdings Limited (“Joyce”).
Mr. Stephen T. H. Ng, Vice Chairman (Age: 48) Mr. Ng has been a Director of the Company since 1988. He became Vice Chairman of the Company in 1995. He is also the deputy chairman and managing director of Wharf, the deputy chairman, president and chief executive officer of i-CABLE, the chairman, president and chief executive officer of both Hong Kong Cable Television Limited (“HKC”) and New T&T Hong Kong Limited (“New T&T”). He led the successful bid for and subsequent implementation of Hong Kong’s first cable TV licence. Mr. Ng is also a director of Joyce and he serves as a member of the Hong Kong – United States Business Council.
Mr. John T. Hung, SBS, JP, Managing Director (Age: 62) Mr. Hung was appointed Executive Director of the Company in 1993. He became the Managing Director of the Company in 1995. He is also an executive director of Wharf, the vice chairman of HKC, a director of i-CABLE, Joyce and MPDL. He serves as the Government appointed chairman of the Hong Kong Sports Development Board.
Mr. K. H. Leung, Finance Director (Age: 56) Mr. Leung was appointed the Finance Director of the Company in 1992. He is also a director of Wharf and NART.
Mr. B. M. Chang, Director (Age: 72) Mr. Chang became a Director of the Company in 1969. He is also a director of World-Wide Shipping Agency Limited.
Sir S. Y. Chung, JP, Director (Age: 83) Sir Sze-Yuen Chung became a Director of the Company in 1982. He is also the chairman of The Kowloon Motor Bus Holdings Limited. On 1 July 1997, he was awarded the Grand Bauhinia Medal (“GBM”) of the Government of the Hong Kong Special Administration Region.
Mr. Quinn Y. K. Law, Director (Age: 48) Mr. Law became a Director of the Company in 1992. He is also a director of Wharf.
36 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Disclosure of Further Corporate Information
Ms. Doreen Y. F. Lee, Director (Age: 45) Ms. Lee became a Director of the Company in 1998. She is also a director and the general manager of Harriman Leasing Limited, the managing director of Wharf Estates Management Company Limited, an executive director of Wharf Properties Limited and a director of Harriman Realty Company, Limited.
Mr. William W. Y. Lee, Director (Age: 74) Mr. Lee became a Director of the Company in 1993.
Mr. T. Y. Ng, Director (Age: 53) Mr. Ng became a Director of the Company in 1992. He is also a director of Wharf, HCDL, Joyce, NART, RDC and MPDL.
Mr. Paul Y. C. Tsui, Director (Age: 54) Mr. Tsui became a Director of the Company in 1998. He is also the senior deputy managing director of Wheelock Properties Limited, the senior managing director of Harriman Realty Company, Limited, an executive director of Wharf, a director of HCDL, i-CABLE, Joyce and MPDL, as well as the group financial controller of the Company and Wharf.
Mr. Harry S. S. Wong, Director (Age: 45) Mr. Wong became a Director of the Company in 1998. He is also the managing director of Wharf China Limited.
Note: Mr. William W. Y. Lee is a brother of Mr. Gonzaga W. J. Li.
(II) Senior Managers Various businesses of the Group are respectively under the direct responsibility of the two Directors holding executive offices of the Company as named under (B)(I) above. Only those two Directors are regarded as members of the Group’s senior management.
(C) PENSION SCHEMES The Group operates a number of pension schemes. Set out below are certain particulars regarding the principal pension scheme (the “Scheme”) operated by the Group:
(I) Nature of the Scheme The Scheme is a defined contribution scheme. The assets of the Scheme are held separately by an independently administered fund.
37 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Disclosure of Further Corporate Information
(II) Funding of the Scheme The Scheme is funded by contributions from employees and employers. The employees and employers contribute respectively to the Scheme sums which represent percentages of their salaries as defined under the relevant trust deed. Forfeited employers’ contributions can be used to reduce the existing level of contributions.
(III) Cost of the Scheme The employers’ cost charged to profit and loss account during the year ended 31 March 2001 in respect of the Scheme amounted to HK$11.8 million. During the year, no forfeiture of employers’ contributions was used to reduce current year’s contribution.
NOTE: The total employers’ pension cost in respect of all pension schemes of the Group, including the cost related to the Mandatory Provident Fund which is not operated by the Group, charged to profit and loss account during the year ended 31 March 2001 amounted to HK$18.5 million.
(D) MAJOR CUSTOMERS & SUPPLIERS For the financial year ended 31 March 2001:
a) the aggregate amount of purchases (not including the purchases of items which are of a capital nature) attributable to the Group’s five largest suppliers represented 48 per cent of the Group’s total purchases;
b) the largest supplier accounted for 23 per cent of the Group’s total purchases;
c) none of the Directors of the Company or their associates holds, nor does any shareholder owning (to the knowledge of the Directors) more than 5 per cent of the Company’s equity capital hold, any interests in any of the Group’s five largest suppliers; and
d) the aggregate amount of turnover attributable to the Group’s five largest customers represented less than 30 per cent of the Group’s total turnover.
(E) COMPLIANCE WITH CODE OF BEST PRACTICE The Company has complied throughout the year with the Code of Best Practice as set out in Appendix 14 of the Listing Rules on the Stock Exchange.
38 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Disclosure of Further Corporate Information
(F) CONNECTED/RELATED PARTY TRANSACTIONS During the financial year, the Company and/or its subsidiaries (other than such subsidiaries of the Company as are themselves publicly-listed in Hong Kong or their subsidiaries) did not enter into any transaction which was regarded as connected transaction discloseable by the Company under the Listing Rules. Transactions constituting connected transaction(s) for those publicly-listed subsidiaries, which were not subject to any public disclosure by the Company itself, were duly disclosed by the relevant subsidiaries under the Listing Rules.
Furthermore, with regard to the Related Party Transactions as disclosed under Note 28 to the Accounts on page 77, none of those transactions constitute connected transactions discloseable by the Company under the Listing Rules.
39 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Report of the Directors
The Directors have pleasure in submitting their Report and the Audited Statement of Accounts for the financial year ended 31 March 2001.
PRINCIPAL ACTIVITIES AND TRADING OPERATIONS The principal activity of the Company is investment holding and those of its principal subsidiaries are set out on pages 78 and 79.
An analysis of the principal activities and geographical locations of trading operations of the Company and its subsidiaries during the financial year is set out in Note 2 to the Accounts on page 60.
SUBSIDIARIES Particulars of the Company’s principal subsidiaries at 31 March 2001 are set out on pages 78 and 79.
RESULTS, APPROPRIATIONS AND RESERVES The results of the Group and appropriations of profits for the financial year ended 31 March 2001 are set out in the Consolidated Profit and Loss Account on page 45.
Movements in reserves during the financial year are set out in Note 23 to the Accounts on pages 72 to 74.
DIVIDENDS An interim dividend of 2.5 cents per share was paid on 18 January 2001. The Directors now recommend the payment of a final dividend of 5.0 cents per share in respect of the financial year ended 31 March 2001, payable on 21 September 2001 to Shareholders on record as at 31 August 2001. This recommendation has been incorporated in the Accounts.
SHARE CAPITAL During the year, as a result of exercises by certain grantees of options granted under the Company’s Executive Share Incentive Scheme, the Company allotted and issued a total of 96,000 ordinary shares of HK$0.50 each, of which 56,000 shares were issued at a price of HK$5.50 per share and 40,000 shares at HK$5.20 per share.
FIXED ASSETS Movements in fixed assets during the financial year are set out in Note 12 to the Accounts on pages 66 and 67.
BANK LOANS, OVERDRAFTS AND OTHER BORROWINGS Particulars of all bank loans, overdrafts and/or other borrowings of the Company and of the Group as at 31 March 2001 repayable on demand or within a period not exceeding one year are set out in Note 20 to the Accounts on page 70. Those which would fall due for repayment after a period of one year are set out in Note 24 to the Accounts on page 74.
40 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Report of the Directors
Set out below is information regarding certain borrowings of the Group outstanding as at 31 March 2001 in the form of debt securities issued by a wholly-owned subsidiary of and guaranteed by the Company:
Description of Debt Outstanding Name of Subsidiary/Borrower Securities Issued Principal Amount Lawley International Limited 8.75 per cent unsecured HK$500 Million Guaranteed Notes due December 2001
INTEREST CAPITALISED The amount of interest capitalised by the Group during the financial year is set out in Note 5 to the Accounts on page 61.
DONATIONS The Group made donations during the financial year totalling HK$3.4 million.
DIRECTORS The Directors of the Company during the financial year were Mr. B. M. Chang, Sir S. Y. Chung, Mr. J. T. Hung, Mr. Q. Y. K. Law, Ms. D. Y. F. Lee, Mr. W. W. Y. Lee, Mr. K. H. Leung, Mr. G. W. J. Li, Mr. S. T. H. Ng, Mr. T. Y. Ng, Mr. P. Y. C. Tsui and Mr. H. S. S. Wong.
Ms. D. Y. F. Lee, Mr. P. Y. C. Tsui and Mr. H. S. S. Wong are due to retire from the Board by rotation in accordance with Article 103(A) of the Company’s Articles of Association at the forthcoming Annual General Meeting. Being eligible, they offer themselves for re-election.
With the exception of the Chairman and those Directors holding executive offices of the Company (who are all not subject to retirement by rotation under the provisions of the Company’s Articles of Association) together with Ms. D. Y. F. Lee, Mr. P. Y. C. Tsui and Mr. H. S. S. Wong (who are due to retire from the Board at the forthcoming Annual General Meeting as mentioned above), all the present Directors were respectively re-elected at Annual General Meetings held in the past three years, upon their retirement thereat in accordance with the provisions of the Company’s Articles of Association, to continue to serve on the Board for a further term of approximately three years, until they respectively become due to retire from the Board again by rotation in accordance with Article 103(A) of the Company’s Articles of Association.
None of the Directors has a service contract with the Company or any of its subsidiaries which is not determinable by the employer within one year without payment of compensation.
41 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Report of the Directors
DIRECTORS’ INTERESTS IN SHARES As at 31 March 2001, Directors of the Company had the following beneficial interests in the share capitals of the Company, of an associate of the Company, namely, The Wharf (Holdings) Limited (“Wharf”), and of a subsidiary of the Company, namely, New Asia Realty and Trust Company, Limited (“NART”):
No. of Ordinary Shares Nature of Interest The Company Mr. B. M. Chang 8,629,575 Corporate Interest (See note below) Mr. J. T. Hung 10,000 Personal Interest Mr. G. W. J. Li 1,486,491 Personal Interest Mr. S. T. H. Ng 100,000 Personal Interest Mr. T. Y. Ng 70,000 Personal Interest
Wharf Sir S. Y. Chung 348,238 Personal Interest in 189,427 shares and Corporate Interest in 158,811 shares (See note below) Mr. G. W. J. Li 686,549 Personal Interest Mr. S. T. H. Ng 230,057 Personal Interest Mr. T. Y. Ng 128,016 Personal Interest
NART Sir S. Y. Chung 94,710 Family Interest Mr. G. W. J. Li 2,900 Personal Interest
Note: The shareholdings classified as “Corporate Interest” in which the Directors concerned were taken to be interested as stated above were interests of corporations at respective general meetings of which the relevant Directors were respectively entitled to either exercise (or taken under the Securities (Disclosure of Interests) Ordinance (the “SDI Ordinance”) to be able to exercise) or control the exercise of one-third or more of the voting power in general meetings of such corporations.
42 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Report of the Directors
As at 31 March 2001, Directors of the Company had the following personal interests in options to subscribe for ordinary shares of the Company granted under the Executive Share Incentive Scheme of the Company:
Price per share Consideration Number of Period during which to be paid paid for the ordinary rights exercisable on exercise options Name of Directors shares Date granted (Day/Month/Year) of options granted Mr. J. T. Hung 100,000 7 Oct. 1993 30/9/1997 to 29/9/2003 HK$10.60 HK$1 Mr. S. T. H. Ng 200,000 13 Aug. 1991 13/8/1994 to 12/8/2001 HK$5.20 HK$1 Mr. H. S. S. Wong 250,000 14 Apr. 1992 13/4/1995 to 12/4/2002 HK$5.50 HK$1
Save as disclosed above, as recorded in the register kept by the Company under section 29 of the SDI Ordinance or otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies:
(i) there were no interests held as at 31 March 2001 by any Directors and Chief Executive of the Company in securities of the Company and its associated corporations (within the meaning of the SDI Ordinance), and
(ii) during the financial year, there existed no rights to subscribe for equity or debt securities of the Company which were held by any Directors or Chief Executive of the Company or any of their spouses or children under 18 years of age nor had there been any exercises of any such rights by any of them.
SUBSTANTIAL SHAREHOLDERS’ INTERESTS As at 31 March 2001, Bermuda Trust (Guernsey) Limited was taken under the SDI Ordinance to be interested in 1,241,458,820 shares of the Company, representing 61.13 per cent of its entire issued share capital as at that date. Apart from this, no interest in 10 per cent or more of the nominal value of any class of share capital of the Company was held (or taken under the SDI Ordinance to be held) by any person as at 31 March 2001 according to the record in the register kept by the Company under section 16(1) of the SDI Ordinance.
INTERESTS IN CONTRACTS No contract of significance in relation to the Company’s business to which the Company or any of its subsidiaries was a party and in which a Director had a material interest, whether directly or indirectly, subsisted at the end of the financial year or at any time during the financial year.
MANAGEMENT CONTRACTS No contract for the management and administration of the whole or any substantial part of any business of the Company were entered into or existed during the financial year.
43 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Report of the Directors
ARRANGEMENTS TO PURCHASE SHARES OR DEBENTURES At no time during the financial year was the Company or any of its subsidiaries a party to any arrangements to enable the Directors of the Company to acquire benefits by means of acquisition of shares in or debentures of the Company or any other body corporate, with the exception of the options to subscribe for ordinary shares of the Company previously granted under the Company’s Executive Share Incentive Scheme (the “Scheme”) to, inter alia, certain executives of the Group, some of whom were Directors of the Company during the financial year.
Under the Scheme, shares of the Company are to be issued at such prices, not being less than 90 per cent of the average closing price on the Stock Exchange for the five trading days immediately preceding the date of offer of the options, and the relevant options are exercisable during such periods, not being beyond the expiration of ten years from the date of grant, as determined by the Board of Directors of the Company. During the financial year, no share of the Company was issued to any Director of the Company under the Scheme.
PURCHASE, SALE OR REDEMPTION OF SHARES Neither the Company nor any of its subsidiaries purchased, sold or redeemed any listed securities of the Company during the financial year.
AUDITORS The Accounts now presented have been audited by PricewaterhouseCoopers, Certified Public Accountants, who retire and being eligible, offer themselves for re-appointment. PricewaterhouseCoopers replaced Price Waterhouse in October 1998 following their merger with Coopers & Lybrand.
By Order of the Board Wilson W. S. Chan Secretary
Hong Kong, 26 June 2001
44 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Consolidated Profit and Loss Account for the year ended 31 March 2001
200 1 Restated 2000 Note HK$ Million HK$ Million
Turnover 2 3,761.5 4,551.0 Other net income 3 442.2 327.6
4,203.7 4,878.6 Direct costs and operating expenses (2,201.2) (2,546.7) Selling and marketing expenses (404.9) (379.7) Administrative expenses (244.1) (233.3) Provision for impairment in value of properties (1,221.2) (998.8) Operating profit 4 132.3 720.1 Borrowing costs 5 (897.7) (933.5) Share of profits less losses of associates 1,580.4 1,882.2 Profit before taxation 815.0 1,668.8 Taxation 7 (253.2) (467.0) Profit after taxation 561.8 1,201.8 Minority interests (45.2) (337.4) Group profit attributable to shareholders 8 516.6 864.4 Dividends 9 (152.3) (152.3) Transferred to revenue reserves 364.3 712.1
Earnings per share 10 25.4 cents 42.6 cents
The notes on pages 55 to 79 form part of these accounts.
45 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Consolidated Statement of Recognised Gains and Losses for the year ended 31 March 2001
200 1 Restated 2000 HK$ Million HK$ Million
Company and subsidiaries Surplus on revaluation of non-trading securities 7.4 503.6 Deficit on revaluation of investment properties – (2.2) Provision for other properties written back 36.9 – Exchange difference on translation of financial statements of foreign entities (123.0) 29.5 Others 1.2 10.0 Associates Surplus/(deficit) on revaluation of investment properties 1,009.1 (995.0) Surplus on revaluation of hotel and club properties 56.3 – Provision for impairment of other properties – (540.2) Surplus on revaluation of non-trading securities 50.5 460.6 Others (12.8) 9.1 Net gains/(losses) not recognised in the consolidated profit and loss account 1,025.6 (524.6) Group profit attributable to shareholders 516.6 864.4 Reserves transferred to profit and loss account on disposal of: Non-trading securities (110.4) (16.6) Associates – (145.5) Net provision for non-trading securities 21.7 – Reserves transferred to profit and loss account on disposal of non-trading securities by associates (364.6) 189.6
Total recognised gains 1,088.9 367.3 Reserves arising on consolidation 80.8 313.7
1,169.7 681.0 Cumulative effects of changes in accounting policy to reserves at 31 March 2000 (706.8)
The notes on pages 55 to 79 form part of these accounts.
46 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Consolidated Balance Sheet at 31 March 2001
2001 Restated 2000 Note HK$ Million HK$ Million Non-current assets Fixed assets 12 5,351.5 5,764.9 Associates 14 24,671.9 23,570.9 Long-term investments 15 3,335.5 3,613.1 Deferred debtors 16 57.4 91.0 33,416.3 33,039.9 Current assets Properties under development 17 22,322.9 21,334.1 Properties held for sale 615.8 538.8 Inventories 18 350.0 208.8 Debtors and prepayments 19 410.9 745.4 Bank balances and deposits 1,299.1 1,430.0 Tax recoverable – 3.5 24,998.7 24,260.6 ------Current liabilities Short-term loans and overdrafts 20 4,564.7 4,806.8 Creditors and accruals 21 1,229.2 1,147.6 Deposits from sale of properties 4,503.8 3,505.0 Taxation 32.9 391.5 Proposed final dividend 9 101.5 101.5 10,432.1 9,952.4 ------Net current assets 14,566.6 14,308.2 Total assets less current liabilities 47,982.9 47,348.1 Financed by: Shareholders’ funds Share capital 22 1,015.4 1,015.4 Reserves 23 27,244.9 26,227.0 28,260.3 27,242.4 Minority interests 6,114.0 6,217.6 Non-current liabilities Long-term loans 24 12,398.9 12,704.9 Deferred taxation 25 790.8 734.9 Deferred profits 418.9 448.3 13,608.6 13,888.1 47,982.9 47,348.1
The notes on pages 55 to 79 form part of these accounts.
Gonzaga W.J. Li John T. Hung Chairman Managing Director
47 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Company Balance Sheet at 31 March 2001
2001 2000 Note HK$ Million HK$ Million
Non-current assets Subsidiaries 13 14,707.2 16,398.6 Current assets Debtors and prepayments 0.3 0.3 Bank balances and deposits 0.1 0.1 0.4 0.4 ------Current liabilities Short-term loans and overdrafts 20 3,764.9 1,479.2 Creditors and accruals 18.0 12.8 Proposed final dividend 9 101.5 101.5
3,884.4 1,593.5 ------Net current liabilities (3,884.0) (1,593.1)
Total assets less current liabilities 10,823.2 14,805.5 Financed by: Shareholders’ funds Share capital 22 1,015.4 1,015.4 Reserves 23 3,482.8 3,465.1 4,498.2 4,480.5 Non-current liabilities Long-term loans 24 6,325.0 10,325.0 10,823.2 14,805.5
The notes on pages 55 to 79 form part of these accounts.
Gonzaga W.J. Li John T. Hung Chairman Managing Director
48 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Consolidated Cash Flow Statement for the year ended 31 March 2001
2001 2000 HK$ Million HK$ Million
Net cash inflow/(outflow) from operating activities (Note a) 107.4 (3,240.8) Returns on investments and servicing of finance Interest received 49.2 132.1 Interest paid (1,332.8) (1,257.5) Dividends received from associates 972.4 913.1 Dividends received from investments 135.4 135.7 Dividends paid to shareholders (152.3) (152.3) Dividends paid to minority shareholders (85.5) (75.9) Net cash outflow from returns on investments and servicing of finance (413.6) (304.8) Taxation Hong Kong profits tax paid (7.5) (44.3) Tax Reserve Certificates refunded/(purchased) 60.5 (41.3) Overseas tax paid (4.0) (3.8) Net tax refunded/(paid) 49.0 (89.4) Investing activities Purchase of subsidiaries (Note b) (6.8) – Purchase of shares in existing subsidiaries (11.6) (421.3) Purchase of shares in associates (73.4) (1,460.5) Purchase of non-trading securities (2,250.7) (122.5) Purchase of fixed assets (50.5) (28.8) Disposal of subsidiaries (Note c) – 2,323.4 Proceeds from disposal of associates – 205.7 Proceeds from disposal of non-trading securities 3,083.0 966.2 Proceeds from disposal of unlisted investments 19.3 – Proceeds from disposal of fixed assets 20.5 0.1 (Decrease)/increase in net loans and advances from associates (86.8) 2,432.3 Decrease in short-term bank deposits – 250.0
Net cash inflow from investing activities 643.0 4,144.6 Net cash inflow before financing 385.8 509.6
49 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Consolidated Cash Flow Statement for the year ended 31 March 2001
2001 2000 HK$ Million HK$ Million
Financing (Note d) Issue of ordinary shares 0.5 3.7 Net drawdown of long-term loans 3,822.9 2,803.2 Net repayment of short-term loans (3,351.8) (1,380.4)
Net cash inflow from financing 471.6 1,426.5 Increase in cash and cash equivalents 857.4 1,936.1 Effect of foreign exchange rate changes (68.0) 17.5 Cash and cash equivalents at 1 April 250.3 (1,703.3)
Cash and cash equivalents at 31 March 1,039.7 250.3 Analysis of the balances of cash and cash equivalents at 31 March Bank balances and deposits maturing within three months 1,299.1 1,430.0 Bank loans and overdrafts due within three months (259.4) (1,179.7)
1,039.7 250.3
50 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Consolidated Cash Flow Statement for the year ended 31 March 2001
NOTES TO CONSOLIDATED CASH FLOW STATEMENT a) Reconciliation of profit before taxation to net cash inflow/(outflow) from operating activities 200 1 2000 HK$ Million HK$ Million Profit before taxation 815.0 1,668.8 Share of profits less losses of associates (1,580.4) (1,882.2) Interest income (21.5) (112.2) Interest expense 843.5 869.2 Dividend income from investments (141.2) (139.7) Depreciation 56.2 34.3 Provision for impairment in value of properties 1,221.2 998.8 Net profit on disposal of non-trading securities (231.5) (154.3) Net provision for non-trading securities 16.6 – Net other provision (released)/charged (84.0) 44.4 Deferred profits realised (56.2) (71.8) Profits on sale of unlisted investments (18.6) – Loss on disposal of fixed assets 0.1 14.5 Profit on disposal of subsidiaries – (78.3) Profit on disposal of interest in associates – (108.7) Exchange differences (184.5) 39.5 Decrease in deferred debtors 33.6 51.0 Decrease in other deferred assets – 70.1 Increase in properties under development (1,721.0) (6,053.5) Decrease in properties held for sale 108.1 152.0 Decrease in inventories 30.2 32.5 (Increase)/decrease in debtors and prepayments (50.6) 192.4 Increase in deposits from sale of properties 998.8 1,112.8 Increase in creditors and accruals 73.6 79.6 Net cash inflow/(outflow) from operating activities 107.4 (3,240.8)
51 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Consolidated Cash Flow Statement for the year ended 31 March 2001 b) Purchase of subsidiaries 200 1 2000 HK$ Million HK$ Million Net assets acquired: Fixed assets 96.2 – Current assets 234.1 – Current liabilities (119.2) – Minority interests (200.0) – 11.1 – Reserves arising on consolidation (4.3) – 6.8 – Satisfied by: Cash consideration paid 212.2 – Analysis of the net outflow of cash and cash equivalents in respect of the purchase of subsidiaries: Cash consideration paid 212.2 – Bank balances and deposits acquired (249.4) – Bank loans and overdrafts acquired 44.0 – Net outflow of cash and cash equivalents in respect of the purchase of subsidiaries 6.8 –
52 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Consolidated Cash Flow Statement for the year ended 31 March 2001 c) Disposal of subsidiaries 200 1 2000 HK$ Million HK$ Million Net assets disposal of: Fixed assets – 3,100.0 Deferred debtors – 208.2 Current assets – 351.4 Current liabilities – (336.5) Loan from an associate – (1,108.6) Minority interests – (6.1) Deferred taxation – (9.0) Deferred profits – (15.3)
– 2,184.1 Profit recognised – 78.3 Unrealised profit – 62.6 – 2,325.0
Satisfied by: Cash consideration received – 2,325.0
Analysis of the net inflow of cash and cash equivalents in respect of the disposal of subsidiaries: Cash consideration received – 2,325.0 Bank balances and deposits disposed – (1.6)
Net inflow of cash and cash equivalents in respect of the disposal of subsidiaries – 2,323.4
53 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Consolidated Cash Flow Statement for the year ended 31 March 2001 d) Analysis of changes in financing Share capital Restated and share Long-term Short-term Minority premium loans loans interests HK$ Million HK$ Million HK$ Million HK$ Million Balance at 1 April 1999 2,920.3 12,701.4 2,170.6 6,592.4 Issue of ordinary shares 3.7 –– – Cash inflow/(outflow) related to financing – 2,803.2 (1,380.4) – Dividends paid to minority shareholders –––(75.9) Purchase of minority interests –––(538.3) Disposal of subsidiaries (Note c) –––(6.1) Minority interests’ share of reserves –––221.5 Exchange differences – 37.2 – 24.0 Reclassification – (2,836.9) 2,836.9 –
Balance at 31 March 2000 and 1 April 2000 2,924.0 12,704.9 3,627.1 6,217.6 Issue of ordinary shares 0.5 –– – Cash inflow/(outflow) related to financing – 3,822.9 (3,351.8) – Dividends paid to minority shareholders –––(85.5) Purchase of subsidiaries (Note b) –––200.0 Increase in interest in a subsidiary –––(15.2) Minority interests’ share of reserves –––(100.9) Exchange differences – (98.9) – (102.0) Reclassification – (4,030.0) 4,030.0 –
Balance at 31 March 2001 2,924.5 12,398.9 4,305.3 6,114.0
54 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Notes to the Accounts
PRINCIPAL ACCOUNTING POLICIES 1 a) Statement of compliance These accounts have been prepared in accordance with all applicable Statements of Standard Accounting Practice (“SSAP”) and Interpretations issued by the Hong Kong Society of Accountants, accounting principles generally accepted in Hong Kong and the requirements of the Hong Kong Companies Ordinance. A summary of the principal accounting policies adopted by the Group is set out below.
b) Basis of preparation of accounts The measurement basis used in the preparation of the accounts is historical cost modified by the revaluation of investment properties, certain other properties and investments in securities as explained in the accounting policies set out below.
c) Basis of consolidation (i) The consolidated accounts include the accounts of the Company and all its subsidiaries made up to 31 March each year.
(ii) Results of new subsidiaries are included from the respective dates of acquisition. Results of subsidiaries disposed of during the year are included up to the respective dates of disposal.
(iii) Goodwill/capital reserve arising on consolidation, representing the excess/shortfall of the cost of investments in subsidiaries and associates over the appropriate share of the fair value of the net tangible assets at date of acquisition, is taken to reserves in the year in which it arises. On disposal of a subsidiary or associate, the attributable amount of goodwill/capital reserve is included in calculating the profit or loss on disposal.
d) Investments in subsidiaries A subsidiary is a company in which the Group, directly or indirectly, holds more than half of the issued share capital, or controls more than half of the voting power, or controls the composition of the board of directors.
Investments in subsidiaries in the Company’s balance sheet are stated at cost less any provisions for diminution in value which are other than temporary as determined by the Directors for each subsidiary individually. Any such provisions are recognised as an expense in the Company’s profit and loss account. The results of subsidiaries are accounted for by the Company on the basis of dividends received and receivable.
55 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Notes to the Accounts
e) Associates An associate is a company in which the Group has significant influence, but not control or joint control, over its management, including participation in the financial and operating policy decisions.
An investment in an associate is accounted for in the consolidated accounts under the equity method and is initially recorded at cost and adjusted for goodwill arising on consolidation at the date of acquisition and thereafter for the post-acquisition change in the Group’s share of the associate’s net assets. The consolidated profit and loss account reflects the Group’s share of the post-acquisition results of the associates for the year.
Unrealised profits and losses resulting from transactions between the Group and an associate are eliminated and deferred to the extent of the Group’s interest in the associate until the concerned assets are on-sold to third parties. If there is evidence of an impairment of the assets transferred, the unrealised losses will be recognised immediately in the consolidated profit and loss account.
f) Properties (i) Investment properties Investment properties are defined as properties which are income producing and intended to be held for the long-term, and such properties are included in the balance sheet at their open market value, on the basis of an annual professional valuation, less depreciation where the investment properties are held on leases with unexpired periods of 20 years or less. Changes in the value of investment properties are dealt with as movements in the investment property revaluation reserve. If the total of this reserve is insufficient to cover a deficit on a portfolio basis, the excess of the deficit is charged to the profit and loss account. On disposal of investment properties, the revaluation surplus previously taken to investment property revaluation reserve is included in calculating the profit or loss on disposal.
(ii) Properties under development for sale Properties under development for sale are classified under current assets and are stated at the lower of cost, including capitalised borrowing costs plus attributable profit, and net realisable value. Net realisable value is determined by the Directors, based on prevailing market conditions.
Profit on pre-sale of properties under development for sale is recognised over the course of the development and is calculated each year as a proportion of the total estimated profit to completion, the proportion used being the lower of the proportion of construction costs incurred at the balance sheet date to estimated total construction costs and the proportion of sales proceeds received and receivable at the balance sheet date to total estimated sales proceeds.
Borrowing costs on loans relating to properties under development for sale are capitalised up to the date of practical completion of development.
56 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Notes to the Accounts
(iii) Properties held for sale Properties held for sale are classified under current assets and are stated at the lower of specifically identified cost and net realisable value. Cost of unsold properties is determined by apportionment of the total development costs for that development project, including borrowing costs capitalised, attributable to these properties. Net realisable value is determined by the Directors, based on prevailing market conditions.
(iv) Other properties Other properties are stated at cost or valuation at 31 March 1995 less accumulated depreciation and such provisions for diminution in value considered necessary by the Directors. The Group places reliance on paragraph 72 of SSAP17 which provides exemption from the need to make regular revaluations for those properties stated at valuation at 31 March 1995.
g) Depreciation of fixed assets (i) Investment properties No depreciation is provided in respect of investment properties with an unexpired lease term of more than 20 years. The carrying amount of investment properties with unexpired lease terms of 20 years or less is depreciated on a straight line basis over the remaining term of the leases.
(ii) Properties under or held for development No depreciation is provided on properties under or held for development.
(iii) Other properties Depreciation is provided on the carrying amount of the leasehold land over the unexpired term of the lease. Buildings are depreciated on a straight line basis whereby their carrying amount is written off in equal annual instalments over the shorter of 50 years and the remaining term of the lease.
(iv) Other fixed assets Depreciation is provided on a straight line basis on the cost of other fixed assets at rates determined by the estimated useful lives of the assets of between 3 and 10 years.
h) Investments in securities (i) Non-trading securities are classified as long-term investments and stated in the balance sheet at fair value. Changes in fair value are recognised in the investment revaluation reserve until the security is sold, collected, or otherwise disposed of, or until there is objective evidence that the security is impaired, at which time the relevant cumulative surplus or deficit is transferred from the investment revaluation reserve to the profit and loss account.
Transfers from the investment revaluation reserve to the profit and loss account as a result of impairments are reversed when the circumstances and events that led to the impairment cease to exist and there is persuasive evidence that the new circumstances and events will persist for the foreseeable future.
57 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Notes to the Accounts
Profits or losses on disposal of non-trading securities are determined as the difference between the net disposal proceeds and the carrying amount of the securities and are recognised in the profit and loss account as they arise. On disposal of non-trading securities, the relevant revaluation surplus or deficit previously taken to the investment revaluation reserve is also transferred to the profit and loss account for the year.
(ii) Trading securities are classified under current assets and stated in the balance sheet at fair value. Changes in fair value are recognised in the profit and loss account as they arise.
i) Inventories Inventories comprising goods for resale are stated at the lower of cost, including an element of overheads, where applicable, and net realisable value which is determined by reference to the sales proceeds of items sold in the ordinary course of business after the balance sheet date, or to management estimates based on prevailing market conditions.
Cost is calculated based on the weighted average cost formula and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.
When inventories are sold, their carrying amounts are recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs.
The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.
j) Foreign currencies Foreign currency transactions during the year are translated into Hong Kong dollars at exchange rates ruling at the transaction dates. Monetary foreign currency balances and the accounts of overseas subsidiaries and associates are translated into Hong Kong dollars at the market rates ruling at the balance sheet date. Differences on foreign currency translation are dealt with in the profit and loss account with the exception of those arising on the translation of the accounts of overseas subsidiaries and associates which are dealt with in the capital reserve account.
Gains or losses on outstanding speculative forward contracts computed by reference to the forward rates at the balance sheet date are dealt with in the profit and loss account. No profit or loss is recognised on outstanding non-speculative forward contracts which are used as hedges of firm commitments.
58 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Notes to the Accounts
k) Recognition of revenue (i) Income from sale of goods is recognised when the title of the goods is transferred to the customers.
(ii) Income from management services is recognised upon provision of services.
(iii) Rental receivable from investment properties held for use under operating leases is accounted for on a straight line basis over the respective periods of the leases.
(iv) Dividend and investment income is recognised at the time when the right to receive payment is established.
(v) Income from sale of completed property is recognised upon signing of the sale and purchase agreement and income from pre-sale of property under development is recognised over the course of development (see Note 1 (f)(ii)).
(vi) Interest income is accrued on a time-apportioned basis on the principal outstanding and at the rate applicable.
l) Deferred taxation Deferred taxation is calculated under the liability method in respect of the taxation effect arising from all timing differences which are expected with reasonable probability to crystallise in the foreseeable future.
m) Borrowing costs Borrowing costs are expensed in the profit and loss account in the year in which they are incurred, except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to prepare for its intended use or sale.
n) Operating leases Payment obligations in respect of operating leases on property with fixed rentals are accounted for on a straight line basis over the periods of the respective leases; payment obligations in respect of operating leases on property with rentals which vary with the sales of the Group are charged to the profit and loss account as incurred.
o) Related parties For the purposes of these accounts, a party is considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common significant influence. Related parties may be individuals or entities.
59 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Notes to the Accounts
TURNOVER 2 The principal activities of the Group are retailing and trading, property investment and sale, treasury management, investment holding and rendering of financial and commercial services. Analysis of the Group’s turnover and operating profit by principal activities and geographical locations for the year ended 31 March is as follows:
Operating profit (before borrowing costs Turnover and provision for properties) 2001 2000 2001 2000 HK$ Million HK$ Million HK$ Million HK$ Million
a) Principal activities: Retailing and trading 1,865.7 1,388.3 56.8 61.8 Sale of property 1,294.1 2,428.3 553.5 977.5 Property rental 282.3 321.5 224.9 267.6 Treasury management, investment and others 319.4 412.9 518.3 412.0 3,761.5 4,551.0 1,353.5 1,718.9 b) Geographical locations of operations: Hong Kong 2,329.6 2,123.6 568.3 795.8 Singapore 1,349.5 2,377.9 778.2 914.8 Others 82.4 49.5 7.0 8.3
3,761.5 4,551.0 1,353.5 1,718.9
OTHER NET INCOME 3 200 1 2000 HK$ Million HK$ Million
Net profit on disposal of non-trading securities 231.5 154.3 Net provision for non-trading securities (16.6) – Net other provision released/(charged) 84.0 (44.4) Deferred profits realised 56.2 71.8 Profit on disposal of subsidiaries – 78.3 Profit on disposal of interest in associates – 108.7 Others 87.1 (41.1)
442.2 327.6
Included in the net profit on disposal of non-trading securities is a net surplus, before deduction of minority interests, of HK$144.5 million (2000: HK$28.1 million) transferred from investment revaluation reserves.
60 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Notes to the Accounts
OPERATING PROFIT 4 200 1 2000 HK$ Million HK$ Million Operating profit is arrived at: after charging:– Staff costs 360.1 293.5 Cost of properties sold 765.7 1,549.4 Cost of inventories sold 1,057.7 806.3 Depreciation 56.2 34.3 Auditors’ remuneration 5.0 4.2 Operating lease rentals – Land and building 229.3 123.6 and after crediting:– Rental income from operating leases less outgoings 205.8 243.0 – which includes gross rental income from investment properties 263.4 294.0 Dividend income from listed investments 140.9 139.4 Dividend income from unlisted investments 0.3 0.3
In addition, staff costs of HK$10.0 million (2000: HK$16.3 million) were capitalised in costs of properties under development.
BORROWING COSTS 5 200 1 2000 HK$ Million HK$ Million Interest payable on Bank loans and overdrafts 1,063.8 1,013.6 Other loans repayable within five years 241.8 242.2 Other borrowing costs 102.5 106.0 Less: Amount capitalised * (510.4) (428.3) 897.7 933.5
* Borrowing costs have been capitalised at rates between 4.0% to 7.7% per annum (2000: 4.0% to 7.0%).
61 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Notes to the Accounts
DIRECTORS’ EMOLUMENTS AND FIVE HIGHEST PAID EMPLOYEES 6 a) Directors’ emoluments 200 1 2000 HK$ Million HK$ Million
Fees 0.4 0.4 Basic salaries, housing allowances, other allowances and benefits in kind 3.4 3.2 Deemed profit on share option exercise – – Retirement scheme contributions – – Discretionary bonuses and/or performance – related bonuses 2.9 2.9 Compensation for loss of office – – Inducement for joining the Group – –
6.7 6.5
For the year under review, total emoluments (including any reimbursement) amounting to HK$105,000 (2000: HK$105,000), being wholly in the form of Directors’ fees, were paid or payable to Independent Non-executive Directors of the Company.
The emoluments in respect of the year ended 31 March 2001 of all the Directors of the Company in office during the year were in the following ranges:
200 1 2000 Bands (in HK$) Number Number Not more than $1,000,000 10 11 $1,500,001 – $2,000,000 1 1 $4,500,001 – $5,000,000 1 1 12 13
62 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Notes to the Accounts
b) Five highest paid employees Set out below are analyses of the emoluments (excluding amounts paid or payable by way of commissions on sales generated by the employees concerned) for the year ended 31 March 2001 of four employees (2000: four) of the Group who, not being Directors of the Company, are among the top five highest paid individuals (including persons who held the office of Directors of the Company at any time during the year as well as other employees of the Group) employed by the Group.
(i) Aggregate emoluments 200 1 2000 HK$ Million HK$ Million Basic salaries, housing allowances, other allowances and benefits in kind 8.7 7.5 Deemed profit on share option exercise – 1.4 Pension scheme contributions 0.5 0.3 Discretionary bonuses and/or performance – related bonuses 3.7 4.0 Compensation for loss of office – – Inducement for joining the Group – – 12.9 13.2
(ii) Bandings 200 1 2000 Bands (in HK$) Number Number
$2,000,001 – $2,500,000 1 2 $2,500,001 – $3,000,000 2 – $3,500,001 – $4,000,000 – 1 $4,500,001 – $5,000,000 – 1 $5,000,001 – $5,500,000 1 –
4 4
63 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Notes to the Accounts
TAXATION 7 The provision for Hong Kong profits tax is based on the profit for the year as adjusted for tax purposes at the rate of 16% (2000: 16%). Overseas taxation is calculated at rates of tax applicable in countries in which the Group is assessed for tax. The taxation charge is made up as follows:
200 1 2000 HK$ Million HK$ Million
Company and subsidiaries Hong Kong profits tax for the year 19.3 13.0 Overseas taxation (credit)/charge for the year (2.7) 20.1 Underprovisions in prior years – 157.5 Deferred taxation (Note 25) 93.1 188.8
109.7 379.4 ------Associates Hong Kong profits tax for the year 111.2 116.6 Overseas taxation for the year 16.8 11.9 Underprovisions in prior years 30.0 – Tax refund in prior years – (28.5) Deferred taxation (14.5) (12.4)
143.5 87.6 ------253.2 467.0
GROUP PROFIT ATTRIBUTABLE TO SHAREHOLDERS 8 The group profit attributable to shareholders is dealt with in the accounts of the Company to the extent of HK$169.5 million (2000: HK$168.0 million).
DIVIDENDS 9 200 1 2000 HK$ Million HK$ Million Interim dividend of 2.5 cents (2000: 2.5 cents) per share 50.8 50.8 Proposed final dividend of 5.0 cents (2000: 5.0 cents) per share 101.5 101.5 152.3 152.3
64 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Notes to the Accounts
EARNINGS PER SHARE 10 The calculation of earnings per share is based on earnings for the year of HK$516.6 million (2000: HK$864.4 million) and on the weighted average of 2,030.8 million (2000: 2,030.6 million) ordinary shares in issue during the year.
No figure for diluted earnings per share is shown as the exercise of the subscription rights attached to the share options referred to in Note 22 to the Accounts would not have a diluting effect on the earnings per share.
CHANGE IN ACCOUNTING POLICIES 11 In prior years, pre-operating and pre-maturity expenses of the Group’s associates in relation to cable television and telecommunications operations were deferred and amortised over the respective licence periods and pre-operating expenses in relation to other projects under development were deferred and amortised over a period, not exceeding five years from the dates the projects came into operation. With effect from 1 April 2000, a new accounting policy was adopted to write off all these expenses as they are incurred in accordance with Interpretation 9 issued by the Hong Kong Society of Accountants. The new accounting policy has been adopted retrospectively. In adjusting prior years’ figures, revenue reserves as at 1 April 1999 were restated and decreased by HK$838.2 million representing the Group’s share of unamortised balance of pre-operating and pre-maturity expenses charged to the prior year’s consolidated profit and loss account.
As a result of the adoption of Interpretation 9 and restating the prior years’ results and reserves, the Group’s profit for the year attributable to shareholders has increased by HK$78.5 million (2000: HK$141.4 million) as a result of no amortisation of pre-operating and pre-maturity expenses and the write-off of related expenses incurred during the year and the Group’s net assets at 31 March 2001 have decreased by HK$633.9 million (2000: HK$706.8 million).
65 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Notes to the Accounts
FIXED ASSETS 12 Investment Other Other properties properties fixed assets Total Group HK$ Million HK$ Million HK$ Million HK$ Million
Cost or valuation At 1 April 2000 5,158.6 554.3 202.5 5,915.4 Exchange differences (111.9) – (0.4) (112.3) Additions 14.9 – 35.6 50.5 Acquisition of subsidiaries ––301.7 301.7 Disposals ––(62.0) (62.0) Revaluation deficit (400.5) ––(400.5) Net provision written-back – 29.3 – 29.3
At 31 March 2001 4,661.1 583.6 477.4 5,722.1 ------Accumulated depreciation At 1 April 2000 – 25.6 124.9 150.5 Exchange differences ––(0.2) (0.2) Acquisition of subsidiaries ––205.5 205.5 Charge for the year – 6.3 49.9 56.2 Written back on disposals ––(41.4) (41.4)
At 31 March 2001 – 31.9 338.7 370.6 ------Net Book Value At 31 March 2001 4,661.1 551.7 138.7 5,351.5
At 31 March 2000 5,158.6 528.7 77.6 5,764.9 a) The analysis of cost or valuation of the above assets is as follows: At valuation in 2001 4,661.1 ––4,661.1 At valuation in 1995 less provision – 484.8 – 484.8 At cost less provision – 98.8 477.4 576.2 4,661.1 583.6 477.4 5,722.1
b) Tenure of title to properties: Held in Hong Kong – Long lease 2,587.5 470.3 – 3,057.8 – Medium lease – 98.8 – 98.8 Held outside Hong Kong – Long lease 2,073.6 ––2,073.6 – Medium lease – 14.5 – 14.5
4,661.1 583.6 – 5,244.7
66 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Notes to the Accounts
c) Properties revaluation (i) The Group’s investment properties have been revalued as at 31 March 2001 either by Chesterton Petty Limited, or CB Richard Ellis (Pte) Ltd, independent firms of property consultants, on an open market value basis, after taking into consideration the net income allowing for reversionary potential and the redevelopment potential of the properties where appropriate.
The surplus or deficit arising on revaluation less minority interests is dealt with in investment property reserves.
(ii) Certain other properties were valued at 31 March 1995 by Chesterton Petty Limited, on an open market value basis, after taking into account the development potential of the properties where appropriate.
(iii) Included in other properties are properties amounting to HK$484.8 million which are stated at professional valuations at 31 March 1995 less subsequent provisions for diminution in value.
SUBSIDIARIES 13 Company 200 1 2000 HK$ Million HK$ Million
Unlisted shares, at cost 3,495.0 3,495.0 Amounts due from subsidiaries 11,212.2 12,966.4 Amounts due to subsidiaries – (62.8) 14,707.2 16,398.6
Details of principal subsidiaries at 31 March 2001 are shown on pages 78 and 79.
67 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Notes to the Accounts
ASSOCIATES 14 Group 200 1 Restated 2000 HK$ Million HK$ Million
Share of net assets other than goodwill 28,869.7 27,687.0 Amounts due from associates 576.0 221.6 Loans from associates (Note b) (2,362.8) (2,054.6) Amounts due to associates (Note c) (2,411.0) (2,283.1) 24,671.9 23,570.9
a) Analysis of the cost of investment of the above: Group 200 1 2000 HK$ Million HK$ Million
Shares listed in Hong Kong 11,529.7 11,663.6 Unlisted shares 95.9 255.0
11,625.6 11,918.6 Market value of listed shares 24,991.1 18,376.8
b) Loans from associates are interest bearing at rates as determined with reference to prevailing market rates. Interest expenses in respect of loans from associates for the year ended 31 March 2001 amounted to HK$163.3 million (2000: HK$121.1 million).
c) Amounts due to associates are unsecured and interest free.
d) Extracts of the consolidated profit and loss account and consolidated balance sheet of The Wharf (Holdings) Limited, the significant associate of the Group, are shown on page 83.
e) Details of principal associates at 31 March 2001 are shown on page 79.
68 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Notes to the Accounts
LONG-TERM INVESTMENTS 15 Group 200 1 2000 HK$ Million HK$ Million
Non-trading equity securities, at market value Listed in Hong Kong 2,590.6 2,950.2 Listed outside Hong Kong 733.4 650.7 Unlisted shares 11.5 12.2 3,335.5 3,613.1
DEFERRED DEBTORS 16 Deferred debtors represent receivables due after more than one year.
PROPERTIES UNDER DEVELOPMENT 17 a) The amount of properties under development carried at net realisable value at 31 March 2001 is HK$7,190.6 million (2000: HK$7,717.2 million).
b) The amount of properties under development pledged as security for bank loans is HK$6,009.7 million (2000: HK$10,769.1 million).
INVENTORIES 18 The amount of inventories carried at net realisable value at 31 March 2001 is HK$68.1 million (2000: HK$73.8 million).
DEBTORS AND PREPAYMENTS 19 The Group maintains defined credit policies for the respective businesses and trade debtors are closely monitored in order to control credit risk associated with trade receivables.
Included in debtors and prepayments are trade debtors with an ageing analysis as at 31 March 2001 as follows:
Group 200 1 2000 HK$ Million HK$ Million Current 58.7 103.1 31 – 60 days 5.8 4.4 61 – 90 days 5.0 4.6 Over 90 days 8.2 22.6 77.7 134.7
69 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Notes to the Accounts
SHORT-TERM LOANS AND OVERDRAFTS 20 Group Company 2001 2000 2001 2000 HK$ Million HK$ Million HK$ Million HK$ Million
Bank loans and overdrafts Unsecured 399.5 1,119.7 264.9 279.2 Secured 135.2 339.3 – – Current portion of long-term bank loans Unsecured 3,500.0 1,200.0 3,500.0 1,200.0 Secured 30.0 1,647.8 – – Notes and bonds (Unsecured) Notes (Note a) 500.0 – – – Bonds (Note b) – 500.0 – – 4,564.7 4,806.8 3,764.9 1,479.2
a) The unsecured notes, bearing interest at 8.75 per cent per annum, will mature on 17 December 2001 and have been reclassified under current liabilities at 31 March 2001.
b) The unsecured bonds, bearing interest at 7.25 per cent per annum, matured on 30 November 2000.
CREDITORS AND ACCRUALS 21 Included in creditors and accruals are trade creditors with an ageing analysis as at 31 March 2001 as follows:
Group 200 1 2000 HK$ Million HK$ Million Amounts payable in the next: 0 – 30 days 387.6 374.1 31 – 60 days 152.3 103.1 61 – 90 days 29.5 2.3 Over 90 days 134.1 74.3 703.5 553.8
70 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Notes to the Accounts
SHARE CAPITAL 22 2001 2000 2001 2000 No. of shares No. of shares Million Million HK$ Million HK$ Million
Authorised Ordinary shares of HK$0.50 each Balance at 1 April 2,420.0 2,420.0 1,210.0 1,210.0 Increase in authorised ordinary share capital 380.0 – 190.0 –
Balance at 31 March 2,800.0 2,420.0 1,400.0 1,210.0 Issued and fully paid Balance at 1 April 2,030.8 2,030.2 1,015.4 1,015.1 Exercise of share options granted under the Executive Share Incentive Scheme 0.1 0.6 – 0.3 Balance at 31 March 2,030.9 2,030.8 1,015.4 1,015.4
By a resolution passed at the annual general meeting held on 28 September 2000, the authorised share capital of the Company was increased from HK$1,210.0 million to HK$1,400.0 million by the creation of 380 million new ordinary shares of HK$0.50 each.
As at 31 March 2001, options to subscribe for 1.0 million ordinary shares of the Company at prices ranging from HK$5.20 to HK$10.60 per share granted to a number of executives under the Company’s Executive Share Incentive Scheme were unexercised. These options are exercisable between 13 August 1994 and 29 September 2003 subject to the terms of the grants.
During the year, options were exercised to subscribe for 0.1 million shares of HK$0.50 each at considerations of HK$5.20 and HK$5.50 per share.
71 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Notes to the Accounts
RESERVES 23 Investment Capital property Investment Other Share redemption revaluation revaluation capital Revenue premium reserve reserves reserves reserves reserves Total HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million a) Group Company and subsidiaries Balance at 1 April 2000 1,908.6 19.5 1.9 183.8 246.3 8,159.9 10,520.0 Premium on shares issued 0.5 – ––––0.5 Revaluation surplus –– –7.4 ––7.4 Net provision –– –21.7 ––21.7 Realised on disposal –– –(110.4) ––(110.4) Exchange differences –– ––(123.0) – (123.0) Provision for other properties written back –– ––36.9 – 36.9 Reserves arising on consolidation –– ––4.3 – 4.3 Reclassification –– –(14.8) – (57.9) (72.7) Others –– ––1.2 – 1.2 Deficit for the year absorbed –– –––(100.9) (100.9)
Balance at 31 March 2001 1,909.1 19.5 1.9 87.7 165.7 8,001.1 10,185.0 ------Associates Balance at 1 April 2000 As previously reported ––13,676.6 200.8 (348.5) 2,884.9 16,413.8 Prior period adjustment (Note 11) –– ––(10.0) (696.8) (706.8)
As restated ––13,676.6 200.8 (358.5) 2,188.1 15,707.0 Revaluation surplus ––1,009.1 50.5 ––1,059.6 Revaluation of hotel and club properties –– ––56.3 – 56.3 Realised on disposal –– –(364.6) ––(364.6) Reserves arising on consolidation –– ––76.5 – 76.5 Reclassification ––4.4 14.8 (4.4) 57.9 72.7 Others –– ––(12.8) – (12.8) Profit for the year retained –– –––465.2 465.2 Balance at 31 March 2001 ––14,690.1 (98.5) (242.9) 2,711.2 17,059.9 ------Total reserves at 31 March 2001 1,909.1 19.5 14,692.0 (10.8) (77.2) 10,712.3 27,244.9
72 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Notes to the Accounts
Investment Capital property Investment Other Share redemption revaluation revaluation capital Revenue premium reserve reserves reserves reserves reserves Total HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million Company and subsidiaries Balance at 1 April 1999 1,905.2 19.5 4.1 (303.2) 32.8 8,389.1 10,047.5 Premium on shares issued 3.4 – ––––3.4 Revaluation (deficit)/surplus ––(2.2) 503.6 ––501.4 Realised on disposal –– –(16.6) ––(16.6) Exchange differences –– ––29.5 – 29.5 Reserves arising on consolidation –– ––186.7 – 186.7 Transfers –– ––(12.7) 12.7 – Others –– ––10.0 – 10.0 Deficit for the year absorbed –– –––(241.9) (241.9) Balance at 31 March 2000 1,908.6 19.5 1.9 183.8 246.3 8,159.9 10,520.0 ------Associates Balance at 1 April 1999 As previously reported ––9,259.7 (449.4) 5,599.1 2,076.2 16,485.6 Prior period adjustment (Note 11) –– –––(838.2) (838.2)
As restated ––9,259.7 (449.4) 5,599.1 1,238.0 15,647.4 Revaluation (deficit)/surplus ––(995.0) 460.6 ––(534.4) Provision for impairment of other properties –– ––(540.2) – (540.2) Transfer ––5,506.2 – (5,506.2) –– Reserves arising on consolidation –– ––127.0 – 127.0 Realised on disposal –– –189.6 ––189.6 Disposal of interests in associates ––(94.3) – (51.2) – (145.5) Others –– ––13.0 (3.9) 9.1 Profit for the year retained –– –––954.0 954.0
Balance at 31 March 2000 ––13,676.6 200.8 (358.5) 2,188.1 15,707.0 ------Total reserves at 31 March 2000 1,908.6 19.5 13,678.5 384.6 (112.2) 10,348.0 26,227.0
73 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Notes to the Accounts
Capital Other Share redemption capital Revenue premium reserve reserves reserves Total HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million
b) Company Balance at 1 April 2000 1,908.6 19.5 77.2 1,459.8 3,465.1 Premium on shares issued 0.5 –––0.5 Profit for the year retained –––17.2 17.2 Balance at 31 March 2001 1,909.1 19.5 77.2 1,477.0 3,482.8 Balance at 1 April 1999 1,905.2 19.5 77.2 1,444.1 3,446.0 Premium on shares issued 3.4 –––3.4 Profit for the year retained –––15.7 15.7 Balance at 31 March 2000 1,908.6 19.5 77.2 1,459.8 3,465.1
Reserves of the Company available for distribution to shareholders at 31 March 2001 amounted to HK$1,477.0 million (2000: HK$1,459.8 million).
LONG-TERM LOANS 24 Group Company 2001 2000 2001 2000 HK$ Million HK$ Million HK$ Million HK$ Million
Bank loans (Secured) Repayable after 1 year, but within 2 years 1,255.9 115.0 – – Repayable after 2 years, but within 5 years 718.0 1,764.9 – – 1,973.9 1,879.9 – – ------Bank loans (Unsecured) Repayable after 1 year, but within 2 years 6,325.0 5,000.0 6,325.0 5,000.0 Repayable after 2 years, but within 5 years 4,100.0 5,325.0 – 5,325.0
10,425.0 10,325.0 6,325.0 10,325.0 ------Notes (Unsecured) (Note 20a) – 500.0 – – ------12,398.9 12,704.9 6,325.0 10,325.0
74 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Notes to the Accounts
DEFERRED TAXATION 25 Group 2001 2000 HK$ Million HK$ Million
At 1 April 734.9 562.0 Exchange differences (37.2) 7.5 Transferred from profit and loss account (Note 7) 93.1 188.8 Deferred taxation relating to depreciation allowances – (14.4) Released on disposal of subsidiaries – (9.0)
At 31 March 790.8 734.9 Major components of deferred taxation provided are set out below: Surplus on revaluation of a property on acquisition of subsidiaries 165.5 232.7 Profit on pre-sale of properties 625.3 499.8 Others – 2.4 790.8 734.9
CONTINGENT LIABILITIES 26 At 31 March 2001
a) There were contingent liabilities in respect of guarantees given by the Company on behalf of subsidiaries relating to banking facilities and unsecured notes up to HK$6,172.3 million (2000: HK$3,182.4 million).
b) Guarantees given by the Group in respect of banking facilities available to associates amounted to HK$595.3 million (2000: Nil).
c) The Company together with two non wholly-owned subsidiaries and two associates have jointly and severally guaranteed the performance and observance of the terms by another subsidiary under an agreement for the property development of the MTRC Kowloon Station Package Two.
75 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Notes to the Accounts
COMMITMENTS 27 a) Commitments in respect of property developments and capital expenditures Group 200 1 2000 HK$ Million HK$ Million Contracted but not provided for 4,379.5 2,873.9
Authorised but not contracted for – 5.2
b) Capital commitments in respect of investments in China projects Group 200 1 2000 HK$ Million HK$ Million Contracted but not provided for 1,504.6 1,501.9
c) Lease commitments At 31 March 2001, the Group has future commitments under operating leases to make payments in respect of leasehold properties in the ensuing year as follows:
Group 200 1 2000 HK$ Million HK$ Million Expiring in the first year 2.0 2.8 Expiring in the second to fifth years inclusive 125.8 122.6 127.8 125.4
d) Forward exchange contracts Group 200 1 2000 HK$ Million HK$ Million Forward exchange contracts outstanding 798.2 2,120.5
76 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Notes to the Accounts
RELATED PARTY TRANSACTIONS 28 Except for the transactions noted below, the Group has not been a party to any material related party transactions during the year ended 31 March 2001:
a) Loans and advances in the amount of HK$4,750.8 million (2000: HK$4,332.1 million) were made from certain associates for the Sham Tseng and MTRC Kowloon Station Package Two developments, further details of which are disclosed in Note 14 to the accounts.
b) As disclosed in Note 26(c), the Company together with two non wholly-owned subsidiaries and two associates have jointly and severally guaranteed the performance and observance of the terms by another subsidiary under an agreement for the property development of the MTRC Kowloon Station Package Two.
APPROVAL OF ACCOUNTS 29 The accounts were approved by the Directors on 26 June 2001.
77 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Principal Subsidiaries and Associates at 31 March 2001
Issued & fully Percentage Place of paid up share capital of equity incorporation/ (all being ordinary shares attributable Principal Subsidiaries operation except otherwise stated) to the Group activities
Actbilt Pte Limited Singapore 2 S$1 shares 55 Property Ad Hoc (Hong Kong) Limited Hong Kong 1,000,000 HK$1 shares 52 Retailing Ad Hoc (Taiwan) Limited Hong Kong 10,000 HK$1 shares 52 Retailing Everbilt Developers Pte Ltd Singapore 160,000,000 S$1 shares 55 Property * Glegg Company Limited Hong Kong 2 HK$1 shares 100 Finance Grannis Limited Hong Kong 2 HK$10 shares 54 Property Harriman Designs and Engineering Limited Hong Kong 3 HK$10 shares 74 Finance Harriman Leasing Limited Hong Kong 100,049 HK$10 shares 50 Letting agent 50 non-voting HK$10 shares 100 * Harriman Realty Company, Limited Hong Kong 100,000 HK$10 “A” shares 100 Property management 102,000 HK$0.1 “B” shares 2 Janeworth Company Limited Hong Kong 2 HK$1 shares 54 Property Joyce Beauty (Hong Kong) Limited Hong Kong 10,000 HK$1 shares 52 Retailing Joyce Boutique Holdings Limited Bermuda/ 1,600,000,000 HK$0.1 shares 52 Holding Company International Joyce Boutique Limited Hong Kong 100 HK$100 shares 52 Retailing 5,000 non-voting deferred 52 HK$100 shares Joyce Cafe (Hong Kong) Limited Hong Kong 2 HK$1 shares 52 Restaurant Keevil Company Limited Hong Kong 2 HK$1 shares 54 Property Kennedy Town Service Company Limited Hong Kong 50 HK$100 shares 54 Finance Kowloon Properties Company Limited Hong Kong 10,000 HK$1 shares 61 Property * Lane Crawford International Limited Bermuda/ 2,000,000 HK$0.05 shares 100 Holding company International * Lane Crawford (Hong Kong) Limited Hong Kong 2 HK$10 shares 100 Retailing * Lane Crawford (Singapore) Pte Ltd Singapore 25,000 S$1 shares 100 Retailing * Lawley International Limited British Virgin Islands/ 500 US$1 shares 100 Finance International Marco Polo Developments Limited Singapore 398,853,292 S$1 shares 55 Property Marnav Holdings Limited Hong Kong 1,000,000 HK$1 shares 54 Property MP-Bilt Pte Ltd Singapore 1,000,000 S$1 shares 55 Property New Asia Realty and Trust Company, Limited Hong Kong 2,069,637,125 HK$0.2 shares 74 Holding company * Office Buildings Management Limited Hong Kong 198 HK$100 shares 99 Property management Pizzicato Limited Hong Kong 2 HK$10 shares 54 Property Realty Development Corporation Limited Hong Kong 1,151,389,640 HK$0.2 shares 54 Holding company * Ridge Limited Hong Kong 2 HK$1 shares 100 Property Salisburgh Company Limited Hong Kong 2 HK$1 shares 74 Property
78 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Principal Subsidiaries and Associates at 31 March 2001
Issued & fully Percentage Place of paid up share capital of equity incorporation/ (all being ordinary shares attributable Principal Subsidiaries operation except otherwise stated) to the Group activities
Samover Company Limited Hong Kong 2 HK$1 shares 54 Property Sandsprings Limited Hong Kong 2 HK$10 shares 54 Property Titano Limited Hong Kong 2 HK$1 shares 54 Property Wavatah Company Limited Hong Kong 2 HK$1 shares 54 Property Webhouse Limited Hong Kong 10,000 HK$1 shares 52 Retailing * Wheelock Capital Limited Hong Kong 2 HK$1 shares 100 Investment (held directly) * Wheelock China Limited Hong Kong/China 2 HK$1 shares 100 Holding company (held directly) * Wheelock International Limited British Virgin Islands/ 500 US$1 shares 100 Management services International * Wheelock Pacific Limited Hong Kong 10 HK$100 shares 100 Commercial services (held directly) * Wheelock Properties (China) Limited Hong Kong/China 2 HK$10 shares 100 Property development in China * Wheelock Properties Limited Hong Kong 10,000,000 HK$1 shares 100 Property development (held directly) services * Wheelock Travel Limited Hong Kong 50,000 HK$10 shares 100 Travel agency Zarow Limited Hong Kong 2 HK$10 shares 54 Property
Percentage of share capital (of the class of Percentage Place of shares stated below) of equity incorporation/ held by subsidiary(ies) attributable Principal Associates operation of the Company to the Group activities City Super Limited Hong Kong 39 (ordinary shares) 39 Retailing Dramstar Company Limited Hong Kong 100 (“B” shares) 23 Property Grace Sign Limited Hong Kong 20 (ordinary shares) 11 Property Hamptons Group Limited United Kingdom 33 (ordinary shares) 18 Property agency The Wharf (Holdings) Limited Hong Kong 48 (ordinary shares) 48 Holding company
Notes 1) * The accounts of these companies have been audited by PricewaterhouseCoopers. 2) Unless otherwise stated, the subsidiaries and associates were held indirectly by the Company. 3) The above list gives the principal subsidiaries and associates of the Group which, in the opinion of the Directors, principally affect the profit and assets of the Group. 4) All associates are corporate entities.
79 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Report of the Auditors
TO THE SHAREHOLDERS OF WHEELOCK AND COMPANY LIMITED (Incorporated in Hong Kong with limited liability)
We have audited the accounts on pages 45 to 79 which have been prepared in accordance with accounting principles generally accepted in Hong Kong.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS The Hong Kong Companies Ordinance requires the Directors to prepare accounts which give a true and fair view. In preparing accounts which give a true and fair view it is fundamental that appropriate accounting policies are selected and applied consistently.
It is our responsibility to form an independent opinion, based on our audit, on those accounts and to report our opinion to you.
BASIS OF OPINION We conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong Society of Accountants. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the accounts. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the accounts, and of whether the accounting policies are appropriate to the Company’s and the Group’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the accounts are free from material misstatement. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the accounts. We believe that our audit provides a reasonable basis for our opinion.
OPINION In our opinion the accounts give a true and fair view of the state of affairs of the Company and of the Group as at 31 March 2001 and of the profit and cash flows of the Group for the year then ended and have been properly prepared in accordance with the Hong Kong Companies Ordinance.
PricewaterhouseCoopers Certified Public Accountants Hong Kong, 26 June 2001
80 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Schedule of Principal Properties at 31 March 2001
Approx. gross Lease floor area Attributable Year of Properties held for investment Lot number expiry (sq. ft.) % owned completion Type/usage
Lane Crawford House, IL7 R.P. & 2842 181,500 100 1977 Office & 70 Queen’s Road Central, Central IL45 Sec.A R.P. shop
Wheelock Place, – 2089 464,800 55 1993 Office & 501 Orchard Road, shopping arcade Singapore
Shop C, G/F & 3/F-24/F, ML 99 Sec. A,C, 2854 214,400 54 1984 Office & Shop Wheelock House, R.P. & ML 100 20 Pedder Street, Central Sec.A,B, R.P.
Fitfort, IL 3546 2086 239,700 54 1979 Shopping arcade Basement-3/F, & car parks Healthy Gardens Podium, 560 King’s Road, North Point
Shops & godown spaces, IL 906 Sec. E-M 2882 143,800 54 1960s & 70s Shopping arcade 100-142 Belcher’s Street, & R.P. & godown Kennedy Town
Approx. gross Expected Properties for development Site area floor area Attributable year of Stage of and/or sale Lot number (sq. ft.) (sq. ft.) % owned completion Type/usage completion
Bellagio, Lot No. 266 494,700 2,799,800 74 2004 Residential/ Superstructure Sham Tseng in DD 390 commercial in progress
Sorrento, KIL 11080 184,926 2,263,900 61 2003 Residential Superstructure MTRC Kowloon Station in progress Package Two
Ardmore Park, – 345,120 1,101,000 55 2001 Residential Near completion Ardmore Park Road, Singapore
81 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Schedule of Principal Properties at 31 March 2001
Approx. gross Expected Properties for development Site area floor area Attributable year of Stage of and/or sale Lot number (sq. ft.) (sq. ft.) % owned completion Type/usage completion The Grange Residences, – 167,000 467,600 55 2003 Residential Foundation works 247 Tanglin Road, Singapore in progress
Ardmore View, – 44,100 110,200 55 – Residential Planning 2B Ardmore Park Road, Singapore
Site at 168 Castle Peak Road, TMTL 386 174,226 228,100 54 2003 Residential Superstructure Castle Peak Bay, Tuen Mun in progress
Site at Kwai Hei Street, KCTL 448 25,489 242,100 54 – Industrial/office Foundation works Kwai Chung completed
Site at King’s Park, Ho Man Tin KI L 11118 387,569 904,200 11 – Residential Planning
Various units of World Tech Centre, KTIL 195 R.P. 37,341 76,051 74 – Industrial Completed 95 How Ming Street, Kwun Tong
Various units of My Loft, TMTL 379 40,946 59,800 54 – Godown Completed 9 Hoi Wing Road, Tuen Mun
Various units of Forest Hill, TPTL 115 265,117 38,500 54 – Residential Completed 31 Lo Fai Road, Tai Po
Various units of The Astrid, KIL 11005 61,118 27,800 54 – Residential Completed 180 Argyle Street, Ho Man Tin
Various units of The Primrose NKIL 4932 14,122 21,000 54 – Residential Completed 38 Rose Street, Yau Yat Tsuen
Various units of Bailey Garden, KIL 11022 33,896 11,200 54 – Shop Completed 23 Bailey Street, Hung Hom
Various units of The Regalia, KIL 11001 69,073 10,100 54 – Residential Completed 33 King’s Park Rise, Ho Man Tin
Note: All the above properties are in Hong Kong except otherwise stated.
82 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
The Wharf (Holdings) Limited Extracts from the Published Accounts
THE WHARF (HOLDINGS) LIMITED Accounts for the year ended 31 December 2000 Restated Year ended Year ended 31/12/2000 31/12/1999 Consolidated Profit and Loss Account HK$ Million HK$ Million Group profit attributable to shareholders 2,480 3,217 Prior year adjustment – 294 Restated amount 2,480 3,511 Dividends 1,908 1,881
Restated 31/12/2000 31/12/1999 Consolidated Balance Sheet HK$ Million HK$ Million Fixed assets 77,237 73,362 Associates 4,972 5,197 Long-term investments 1,901 5,258 Deferred debtors 433 506 Deferred items 570 575 Current assets 7, 1 7 9 12,536 Current liabilities (13,905) (10,345)
78,387 87,089 Share capital 2,446 2,446 Reserves 54,158 51,966 Shareholders’ funds 56,604 54,412 Minority interests 4,004 5,368 Long-term loans 16,852 26,339 Other deferred liabilities 449 463 Deferred taxation 478 507
78,387 87,089
83 WHEELOCK AND COMPANY LIMITED Annual Report 2000 / 2001
Five-year Financial Summary
HK$ Million Restated Restated Restated Financial year ended 31 March 1997 1998 1999 2000 2001
Consolidated Profit and Loss Account Turnover (Note a) 5,839.8 7,894.3 7,099.4 4,551.0 3,761.5
Group profit attributable to shareholders 2,535.5 1,449.0 602.4 723.0 516.6 Prior year adjustment (Note b & c) – (2,407.0) 55.0 141.4 –
Restated amount 2,535.5 (958.0) 657.4 864.4 516.6 Dividends (882.2) (567.9) (152.2) (152.3) (152.3)
Transferred to revenue reserves 1,653.3 (1,525.9) 505.2 712.1 364.3 Consolidated Balance Sheet Fixed assets 13,841.5 10,471.5 9,444.3 5,764.9 5,351.5 Associates (Note b & c) 40,187.0 37,245.4 24,392.5 23,570.9 24,671.9 Long-term investments (Note b) 698.0 4,016.0 3,460.0 3,613.1 3,335.5 Deferred debtors 276.3 517.7 420.3 91.0 57.4 Current assets 26,810.0 22,465.8 20,381.4 24,260.6 24,998.7 Current liabilities (16,581.0) (10,097.2) (10,264.5) (9,952.4) (10,432.1) 65,231.8 64,619.2 47,834.0 47,348.1 47,982.9
Share capital 1,012.5 1,013.4 1,015.1 1,015.4 1,015.4 Reserves (Note b & c) 44,807.5 38,907.4 26,533.1 26,227.0 27,244.9
Shareholders’ funds 45,820.0 39,920.8 27,548.2 27,242.4 28,260.3 Minority interests (Note b & c) 9,892.9 7,777.5 6,592.4 6,217.6 6,114.0 Long-term loans 8,571.5 15,960.6 12,701.4 12,704.9 12,398.9 Deferred taxation 486.1 501.4 562.0 734.9 790.8 Deferred profits 461.3 458.9 430.0 448.3 418.9 65,231.8 64,619.2 47,834.0 47,348.1 47,982.9
Note: Pursuant to the adoption of the Statement of Standard Accounting Practice 1 (“SSAP 1”) “Presentation of financial statements”, the Statement of Standard Accounting Practice 24 (“SSAP 24”) “Accounting for investments in securities” and Interpretation 9 “Accounting for Pre-operating costs”, certain figures have been reclassified or restated as set out below: a) Turnover figures for the years ended 31 March 1998 and onwards are presented in accordance with the requirements of SSAP 1. b) These figures for the years 1998 and 1999 have been restated pursuant to the adoption of SSAP 24 as explained in Note 11 to the 2000 Accounts. Figures for the year 1997 have not been restated as it would involve delay and expenses out of proportion to the benefit to shareholders. c) These figures have been restated pursuant to the adoption of Interpretation 9 “Accounting for pre-operating costs” as explained in Note 11 to the accounts for the year under review. Figures for 1999 and prior years have not been restated as it would involve delay and expenses out of proportion to the benefit to shareholders.
84