WHEELOCK AND COMPANY LIMITED Interim Report 2001/02

• Unaudited Group profit of HK$460.8 million, an increase of 0.1% over last year.

• With a well-diversified business portfolio, the Group demonstrated the resilient nature of its operations.

• Wharf’s core office portfolio over 90% occupied, with retail at over 98% and serviced apartments over 85%. Tower 6 of Gateway II under active leasing.

• Sorrento (Phase I), the MTRC Station Package Two development on , launched with favourable response.

• Pre-sale for two other developments – and Palm Cove – targeted for first half of 2002.

• i-CABLE’s strong earnings momentum continuing on the back of strong turnover growth.

• Modern Terminals’ throughput growth outperformed industry average.

• Group well-positioned to benefit from China’s entry into the WTO.

GROUP RESULTS

The unaudited Group profit attributable to Shareholders for the six months ended

30 September 2001 amounted to HK$460.8 million, compared to HK$460.5 million achieved in the same period last year. Earnings per share were 22.7 cents (2000 – 22.7 cents).

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INTERIM DIVIDEND a total of more than 4% drop in

The Board has declared an interim the average mortgage rate this year.

dividend in respect of the half-year Together with the Government’s shift

period ended 30 September 2001 of 2.5 towards a much more pro-market

cents (2000 – 2.5 cents) per share, stance, ’s residential

payable on Thursday, 31 January 2002 property market now appears to be

to Shareholders on record as at stabilized.

11 January 2002.

On the macro front, most western

BUSINESS REVIEW countries have come closer together

With a well-diversified portfolio of to work on possible solutions or

businesses in the areas of property precautionary actions in arresting any

development, property investment, further world-wide recessionary slump,

quality retail, CME (communications, as a result of the “911” tragedy in the

media and entertainment) and logistics, United States. Moreover, this particular

most of which have a substantial incident has also prompted central

recurrent earnings base, the Wheelock banks around the world to relax their

Group has explicitly demonstrated the monetary policy further. Given that the

resilient character of its operations long-term fundamentals of Hong Kong

under the prevailing volatile market have not changed, being strategically

conditions. located at the doorstep of China which

is widely anticipated to be the market

Rising sales transactions for primary with the highest growth potential in the

residential units recorded recently in coming decade, economic activities here

Hong Kong are indicative signs of will pick up at some stage following

interest rate cuts taking effect after the conclusion of the WTO deal.

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PROPERTY Corporation, and two Wharf group’s

During the period under review, the companies. The initial batch out of the

Group continued its sales of various total 1,272 units under Phase I has property projects, including mainly The just been launched with extremely

Primrose, The Astrid, Forest Hill and favourable response. Construction

My Loft. works have been progressing according

to schedule. Completion of Phase I is

Bellagio, the Sham Tseng site, is a joint expected by the end of 2002. venture development equally owned by the Company, New Asia Realty and The residential development on Castle

Wharf. The lease modification for the Peak Road known as Palm Cove will enlarged CDA site has recently been have a total of 228,000 square feet finalized with the Government. in GFA providing 260 units.

Construction works for all four phases Superstructure works are in progress have been progressing according to and pre-sale is targeted to take place in schedule. Pre-sale for initial phases the first half of 2002. covering 1,704 units is targeted to take place during the first half of 2002. The King’s Park development is owned

Completion of these phases of the by a five-member consortium development is scheduled for 2003. comprising Realty Development

Corporation, New World Development,

Sorrento, the MTRC Kowloon Station Sino Land, Chinese Estates and

Package Two development, is equally Manhattan Garments. This residential owned by a five-member consortium site located in Homantin will be comprising the Company, New developed into eight towers consisting

Asia Realty, Realty Development of 700 units with a total GFA of

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904,200 square feet. Demolition works This redevelopment will proceed when

have completed and the tendering for market conditions improve in

foundation works is now in progress. Singapore.

In Singapore, the physical hand-over of The office tower as well as podium

units to purchasers marked the levels 3, 4 and 5 of the Wheelock Place

successful completion of the Ardmore in Singapore are currently 93 per cent

Park project undertaken by Marco Polo let to quality multinational tenants.

Developments Limited, a subsidiary of

the Company. Following the grant of The former Marco Polo Hotel

the Temporary Occupation Permit in Singapore site is now being redeveloped

May 2001, the Certificate of Statutory into a freehold, luxury high-rise

Completion was also obtained on condominium complex with 467,600

18 October 2001. To-date stage billings square feet in GFA, known as “Grange

representing 98 per cent of the total Residences”. Foundation works have

sale price of all units sold have been now completed and other construction

billed and 85 per cent of those have works have been progressing according

been collected. to schedule. Completion is expected by

the second half of 2003.

The average occupancy of Ardmore

View is currently 96 per cent with RETAIL

duration of leases ranging from 12 to In the first half of this financial year,

24 months. Provisional planning the weak economy and consumer

permission for the redevelopment of sentiments had put pressure on the

this property to 110,200 square feet Group’s retail business. In spite of the

GFA was obtained in February 2000. positive turnover growth, the need to

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offer deeper discounts to stimulate sales renovation in August and re-opened a has caused Lane Crawford to suffer a month later with its retail area doubled decline in operating margin. To restore and a Joyce Beauty outlet appended. the position, tighter cost control and One Hugo shop was added in Causeway merchandizing control programmes Bay and two Boss concession counters have been implemented. were also opened in Times Square Lane

Crawford and Central Lane Crawford.

The fourth On Pedder boutique in

Hong Kong opened in April 2001 has WHARF achieved a satisfactory result. The The Group’s principal associate Wharf company will continue to focus on Holdings recorded an unaudited profit maintaining and extending this brand of HK$1,145 million for the half-year across the region. period ended 30 June 2001. Driven by

stable recurrent earnings and value

Joyce Boutique’s turnover showed a creation opportunities originating from significant drop during the period under its flagship investment property at review due mainly to the closure of four Kowloon Point, Wharf has successfully

Armani Shops in January 2001. built up significant presence in all three

Sluggish sales and deeper promotional core business areas of property, CME discounts were again the main reasons and logistics. for a narrowing profit margin. The company’s cost rationalization exercise Bucking the trend of the lacklustre continued. market conditions, the occupancy rate

of Harbour City office excluding Tower

In terms of expansionary movements, 6 of Gateway II had improved steadily

Joyce at Pacific Place was closed for to over 90 per cent in the first six

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months of this year. By securing high of Causeway Bay. During the first

quality tenants such as Japan six months, Times Square office

Airlines, Singapore Telecom and maintained a 92 per cent occupancy

GlaxoSmithKline at the newly launched while the retail portion remained

Tower 6, Harbour City office has virtually full at more than 98 per cent.

explicitly demonstrated its exceptional

ability in attracting multinationals in Nelson Court on Waterloo Road was

addition to trading houses. Apart from launched during early 2001. The pre-

the office portion, other segments sale was extremely well received to an

also did fairly well. Persistently high extent that majority of the units were

average occupancy at 98 per cent has sold within hours. Following the

shown that shops in Harbour City successful completion of various

are under keen demand. With its development projects including Galaxia,

outstanding quality and services, Cove and Nelson Court which

Gateway Apartments achieved an totalled 1.1 million square feet, Wharf

occupancy rate of 85 per cent at the made a move in July to buy over

end of June. Extensive studies are being Wheelock’s 15.6 per cent interest in the

carried out for Ocean Terminal’s Yau Tong Consortium in order to

renovation plan as well as the building replenish its land reserve.

plan for the approved Ferris wheel.

Despite a slow-down in the global

Being a widely accepted successful case economy as well as intense competition

in the Hong Kong retail property during the first six months, the three

sector, Times Square continues its role Marco Polo Hotels in Hong Kong

as the centre of gravity for both business managed to maintain an overall

and leisure activities within the district occupancy of over 84 per cent.

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After achieving a net profit of HK$20 from 25 per cent to 33 per cent. million in year 2000, i-CABLE’s strong PCCW-HKT and the company are now earnings momentum was carried widely accepted to be the two clear forward into this year. The company leaders in this particular business reported HK$76.5 million in net segment. earnings for the six months ended June

2001 on the back of strong turnover During the first six months of this year, growth, especially from its Internet and Wharf New T&T continued its rapid

Multimedia business, and operating and successful transformation into a leverage. high-value fixed-line business. While

installed fixed-lines increased from

Despite the adverse economic 140,000 to over 180,000 in six months, conditions and rampant piracy, Pay TV revenues generated by this segment subscribers grew by 11 per cent from a almost doubled to HK$260 million, year ago to 537,000. As piracy proved representing 56 per cent of the total to be the root cause of the rising churn revenue. since the beginning of this year, the company has placed this issue under By securing contracts to build a new top priority and initiated various IP-based wide area network for the anti-piracy measures to tackle the Central Clearing and Settlement System problem head-on. (“CCASS”) under the HKSCC and a

high performance community network

By doubling its Broadband subscribers for the Securities and Futures to over 100,000 in the first six months Commission, Wharf New T&T’s high of this year, the company’s share of the recognition given by the business residential Broadband market improved community in Hong Kong, especially

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the finance sector, was explicitly throughput volumes before CT9 comes

illustrated. In order to further enhance on stream in the second half of 2003.

the company’s profile, it has recently

been renamed as Wharf New T&T Modern Terminals’ involvement in the

from its former name of New T&T. construction of container terminal

business in Southern China continues

Modern Terminals handled altogether to gain momentum. The investment in

1.53 million TEUs during the first half Kaifeng Container Terminals is

of this year. This figure represents a now contributing positively. While

growth of 13 per cent over the same continuing to manage the Shekou

period last year and compares Container Terminal 1 operation, the

favourably with the industry average. construction of Shekou Container

Terminal 2 has begun.

Despite some initial delays, the

Container Terminal 9 development is OUTLOOK

now progressing satisfactorily. Additional A combination of the downward trend

investments are being made in capacity of global interest rates, together with

enhancement to accommodate an the local banking deregulation process,

additional 400,000 TEUs in existing Hong Kong interest rates are at an all

terminals to cope with the rising time low. Most property end-users

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would find it much more affordable to around. Occupancy in Orchard Road buy than to rent, and investors would has however been firmly supported by attempt to look for better alternative the relatively tight supply situation in investments than bank deposits at that area. This would benefit the extreme low yield. With its sizeable Group’s investment property, Wheelock landbank, mainly represented by its Place, with its strategic location along

74 per cent effective interest in Orchard Road.

Bellagio, 61 per cent effective interest in Sorrento and 11 per cent effective The Group is well-positioned to benefit interest in the King’s Park Homantin from China’s entry into the WTO. project, the Group is well-placed to While rising business and trading take advantage of the gradual recovery activities between the Greater China of the economy once more positive region and the rest of the world will factors have returned to restore definitely have positive impacts on the confidence of consumers and office demand and throughput cargo investors. flow in Hong Kong, the China

domestic market will offer great

It is anticipated that the current weak opportunities for all the three core office and retail rental markets in businesses under the group in terms of

Singapore will take some time to turn long term future growth.

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