CONTENTS

1 FINANCIAL HIGHLIGHTS

2 CORPORATE AND SHAREHOLDERS’ INFORMATION

3 CORPORATE STRUCTURE

4 CHAIRMAN’S STATEMENT

14 REVIEW OF OPERATIONS

66 FINANCIAL REVIEW

70 GROUP FINANCIAL SUMMARY With a focus on maintaining its leading position in the present challenging business environment, 71 DIRECTORS’ REPORT the Group will continue to develop premium products and provide quality 79 DIRECTORS AND ORGANIZATION service, making its properties customers’ first 89 REPORT OF THE AUDITORS choice. To further enhance competitiveness, the Group will work to strengthen its brand name 90 FINANCIAL STATEMENTS and control costs, but without compromising on quality.

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Cover photos: 4 1. To build ideal homes for customers is always the Group’s aim. 2. , Tseung Kwan O 1 5 3. , Ma Wan 4. International Finance Centre, Central 6 5. III, Shatin 6. SUNeVision 7 7. Motor Bus FINANCIAL HIGHLIGHTS 1

For the year ended 30th June 2001 2000 Change (%)

Turnover (HK$ million) 17,701 25,826 -31

Profit attributable to shareholders (HK$ million) including one-off gain1 8,330 10,822 -23 excluding one-off gain1 8,330 8,134 +2

Earnings per share (HK$) including one-off gain1 3.47 4.51 -23 excluding one-off gain1 3.47 3.39 +2

Dividends per share (HK$) 1.55 1.75 -11

Shareholders’ funds per share (HK$) 52.48 50.36 +4

Gross rental income (HK$ million) 5,392 5,292 +2

Net rental income (HK$ million) 4,073 4,059 –

Net debt to shareholders’ funds ratio (%) 15.8 14.9 +0.92

Land bank (million square feet) 54.1 52.1 +4

1One-off gain arising from the spin-off of SUNeVision in March 2000 2 Change in percentage point

Turnover Earnings and Net Asset Value Dividends per Share per Share*

HK$ million HK$ HK$ 30,000 6 5.93 60 28,425 56.38 52.48 25,826 50.36 25,000 23,404 5 50 47.55 22,890 4.51 44.40

20,000 4 3.87 40 17,701 3.47 3.04 15,000 3 30 2.35

10,000 2 1.75 20 1.55 1.55 1.20 5,000 1 10

1997 1998 1999 2000 2001 1997 1998 1999 2000 2001 1997 1998 1999 2000 2001

Earnings per share * Except for completed investment Dividends per share properties, hotels and marketable (excluding special cash bonus) securities which are stated at market value, all assets are at historical cost.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 CORPORATE AND SHAREHOLDERS’ INFORMATION 2

DIRECTORS COMPANY SECRETARY PRINCIPAL BANKERS Kwok Ping-sheung, Walter Lai Ho-kai, Ernest The Hongkong & Shanghai Banking Chairman & Chief Executive Corporation Limited # Lee Shau-kee Bank of China Vice Chairman REGISTERED OFFICE Kwok Ping-kwong, Thomas 45th Floor, Sun Hung Kai Centre Hang Seng Bank Limited Vice Chairman & Managing Director 30 Harbour Road, Wanchai Sumitomo Mitsui Banking Corporation Kwok Ping-luen, Raymond Standard Chartered Bank Vice Chairman & Managing Director Telephone: (852) 2827 8111 * Chung Sze-yuen Facsimile: (852) 2827 2862 The Bank of Tokyo – Mitsubishi, Ltd Web site: www.shkp.com.hk *Woo Po-shing Mizuho Financial Group E-mail: [email protected] * Fung Kwok-king, Victor The Sanwa Bank Limited * Kwan Cheuk-yin, William Industrial and Commercial Bank AUDITORS # Lo Chiu-chun, Clement of China Deloitte Touche Tohmatsu # Law King-wan BNP Paribas Chan Kai-ming REGISTRARS Chan Kui-yuen, Thomas SOLICITORS Central Registration Hong Kong Limited Woo, Kwan, Lee & Lo Kwong Chun Rooms 1712-6, Hopewell Centre Johnson, Stokes & Master Wong Yick-kam, Michael 183 Queen’s Road East Winston Chu & Company Wong Chik-wing, Mike Hong Kong

# Non-Executive Director * Independent Non-Executive Director

SHAREHOLDERS’ CALENDAR

Register of Shareholders Close of Register (both days inclusive) 22nd November 2001 – 29th November 2001 Annual General Meeting 29th November 2001 Dividends Interim (per share) HK$0.55 Paid on 12th April 2001 Proposed final (per share) HK$1.00 Payable on 3rd December 2001

LISTING INFORMATION

Stock Code 16 American Depositary Receipt CUSIP number 86676H302 Tr ading symbol SUHJY Ordinary share to ADR ratio 1:1 Listing Level One (OTC) Depositary bank Citibank, N. A. ADR Department, 20th Floor, 111 Wall Street, New York, N.Y.10043 To ll-free telephone number 1-877-CITI-ADR (1-877-248-4237)

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 CORPORATE STRUCTURE 3

As at 30th June 2001 Sun Hung Kai Properties*

Hong Kong Mainland China

Property Property Property Information Transportation, Property Development Investment Related Technology & Infrastructure Development & Businesses Te lecoms & Logistics Investment

KMB* River Trade SUNeVision* 26.6 million sq.ft. 19.3 million sq.ft. Hotels 34% Terminal 0.6 million sq.ft. • • 84.3% • under development completed Franchised Bus 33% under development investment properties

SmarTone* RoadShow* Container Terminal 9 22 million sq.ft. of 8.2 million sq.ft. Construction 1.8 million sq.ft. • • 28.2% 27.1% 28.5% • agricultural land under development completed (site area) investment properties

Mid-Stream Property Route 3 CPS Operation Management 50% To ll Road 50%

Wilson Group 100% Financial Transport Logistics Services Infrastructure Management

Airport Freight Waste Insurance Forwarding Centre Management 100%

Business Aviation Centre 35%

* Listed in Hong Kong

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 CHAIRMAN’S STATEMENT 4

I am pleased to present my report to the shareholders:

RESULTS

The Group’s profit after taxation and minority interests for the year ended 30th June 2001 was HK$8,330 million, compared with last year’s profit of HK$10,822 million. Earnings per share for the year was HK$3.47, compared with HK$4.51 for the corresponding period last year. A one-off gain of HK$2,688 million arising from the spin-off of SUNeVision Holdings Limited was included in last year’s results. Excluding that gain, profit for the year under review shows a year-on-year growth of 2.4 per cent.

DIVIDENDS

The Directors have recommended the payment of a final dividend of HK$1.00 per share for the year ended 30th June 2001. Together with the interim dividend of HK$0.55 per share, the total dividend for the year is HK$1.55 per share, compared with HK$1.75 per share for the previous year.

REVIEW

Sales During the year ended 30th June 2001, total property sales generated by the Group, both as principal and agent, amounted to HK$19,641 million, an increase of 102 per cent over the previous year. Major projects sold during the period included in Happy Valley, in Tseung Kwan O, The Parcville in , in Kowloon, The Belcher’s Phase 2 in western Mid-Levels and Phase 3 in Tsing Yi.

The Leighton Hill in Happy Valley received an overwhelming response from the market on its launch in November 2000.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 CHAIRMAN’S STATEMENT 5

During the year under review, the Group completed the following 11 projects, with an attributable gross floor area of about 4.1 million square feet:

Group’s Attributable Project Location Usage Interest Gross Floor Area % square feet Royal Peninsula 3 Hung Lai Road, Kowloon Residential 50 739,000 Oscar by the Sea Phase 1 Tseung Kwan O Town Lot 51 Residential Joint venture 447,000 Le Sommet 28 Fortress Hill Road, North Point Residential 100 390,000 Villa Premiere 99 Fung Cheung Road, Yuen Long Residential 100 217,000 Villa Esplanada Phase 3 8 Nga Ying Chau Street, Tsing Yi Residential 22.5 193,000 Ocean Shores Phase 1 88 O King Road, Tseung Kwan O Residential/ Shopping Centre 49 672,000 Chelsea Heights Phase 2 1 Shek Pai Tau Path, Tuen Mun Residential/ Shopping Centre 100 667,000 The Belcher’s Phase 1 89 Pok Fu Lam Road, western Mid-Levels Residential/ Shopping Centre 29 386,000 Grand Villa 401 Chatham Road, Hung Hom Residential/Shops 100 30,000 Shouson Place 16E Shouson Hill Road, Island South Shopping Centre 100 17,000 MEGA-iAdvantage 399 Chai Wan Road Data Centre 84.3 293,000 To t a l 4,051,000

More than 85 per cent of the residential units completed during the year have been sold. The shopping centres in Chelsea Heights, The Belcher’s and Ocean Shores, as well as Shouson Place and MEGA-iAdvantage, are being retained as long-term investments.

Land Bank During the year, the Group added a total of 5.3 million square feet of attributable gross floor area to its land bank through various means including public auction and tender:

Group’s Attributable Attributable Project Usage Interest Site Area Gross Floor Area % square feet square feet Airport Railway Kowloon Station Office/Shopping Centre/Residential/ Development Packages 5, 6 & 7 Serviced Apartment/ Hotel Joint venture 790,000 4,698,000 Kowloon Inland Lot 11145, Farm Road Residential/Shopping Centre 100 30,000 268,000 New Kowloon Marine Lot 3, Lai Chi Kok Residential/Shopping Centre 34 43,000 376,000 To t a l 863,000 5,342,000

The Group currently owns a land bank of 54.1 million square feet in Hong Kong, in terms of attributable gross floor area. It consists of 19.3 million square feet of completed investment properties and 34.8 million square feet of properties under development. The Group also owns 22 million square feet of agricultural land in the , primarily along existing or planned railway lines, the majority of which is in the process of land use conversion.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 CHAIRMAN’S STATEMENT 6

Property Development Transaction volume in Hong Kong’s residential market was affected by the recent terrorist attacks in the United States, after a modest improvement in the first eight months of 2001. Market sentiment has been weak, affected by the economic slowdown, rising unemployment rate and the significant decline in the Hong Kong stock market in the past two months. However, recent positive Government measures for the housing market and eight consecutive interest rate cuts totalling 3.5 per cent this year have helped to strengthen market fundamentals. Oscar by the Sea in Tseung Kwan O offers home buyers a wide range of unit sizes. Affordability for home buyers is now the most favourable in the last 13 years, with residential prices currently at early 1992 levels. In addition, attractive financing packages offered by banks, the lowest mortgage rates on record and a significant increase in the number of Government-subsidized housing loans have underpinned market demand. Higher rental yields relative to mortgage interest rates have resulted in more people opting to buy flats instead of renting accommodation. It is expected that as confidence in the economy improves, the demand for housing will increase accordingly.

The Group’s strategy is to increase the completion of residential units for sale over time in order to meet market demand, with a focus on developing large-scale, premium-quality projects with comprehensive facilities. It will continue to offer home buyers a wide range of flat sizes, with an emphasis on small-to-medium units. To meet the objective of raising production volume and enhancing value for shareholders, the Group will add to its land bank through various means when appropriate. Conversion of agricultural land into the Group’s development land bank is continuing.

The Group’s aim has always been to build ideal homes for its customers. As home buyers have become more selective, the Group is raising standards even higher in order to enhance its brand name for quality and strengthen its market-leading position. A variety of measures adopted during the year will allow the Group to surpass its achievements in areas such as project quality, customer care and management service. Reinforcement of the Group’s brand name and stringent controls over construction costs should help to improve project returns.

In the coming financial year, the Group expects to complete 4.6 million square feet of gross floor area in attributable terms:

Attributable gross floor area in million square feet Residential Shopping Centre Office Total For sale 4.5 – * 4.5 For investment – * 0.1 0.1 To tal 4.5 * 0.1 4.6

* less than 0.1 million square feet

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 CHAIRMAN’S STATEMENT 7

Property Investment The Group’s property investment portfolio generally performed well during the year, although leasing demand for commercial properties has softened since early 2001. Overall occupancy of investment properties owned by the Group remained high at 95 per cent. Gross rental income during the year under review, including the Group’s share of jointly controlled entities, increased by 3.7 per cent over the previous year to HK$5,877 million.

To bolster recurrent income, the Group is actively developing a number of new, superior-quality investment property projects. At the same time, it will also review its rental portfolio constantly, with the intention of disposing of some non-core properties to maintain an optimal investment portfolio.

Following the success of One International Finance Centre (IFC), which is fully let, construction of Two IFC is under way. It consists of a 1.95 million square-foot, state-of-the-art office building, 500,000 square feet of prime shopping space, a 1.1 million square-foot six-star hotel complex and 140,000 square feet of landscaped garden. IFC is strategically located on the Central waterfront, right above the Airport Railway Hong Kong Station, with spectacular views of Victoria Harbour. The hotel complex will include one 400-room tower and another 600-room tower for long- staying guests, and it will be managed by Four Seasons Hotels and Resorts, a leading international luxury hotel operator. This will be the first Four Seasons-branded property in Hong Kong. With its ultra-modern office towers designed with interactive technology, IFC will serve as a truly international business and financial hub. The office tower in Two IFC will be completed by the end of 2003, and the shopping centre is expected to open in the first half of 2003. The entire IFC complex will be completed in phases by 2004. The Group has a 47.5 per cent interest in the project.

Kowloon Station Development Packages Top: Walter Kwok, the 5, 6 and 7 are situated right above Kowloon Group’s Chairman (fifth left) and Raymond Kwok, Vice Station on the Airport Express Railway, at Chairman (third left) at the IFC–Four Seasons Hotel the heart of the future commercial and superstructure cultural hub of Hong Kong. With 4.7 million commencement ceremony. square feet attributable to the Group, the Left: Airport Railway Kowloon Station entire project comprises office, hotel, Development Packages 5, 6 residential and serviced apartments, as well and 7 will have top-quality offices, residential and as retail space. Foundation work has already serviced apartments, hotel begun, and the whole project is scheduled and shopping centre. for completion in phases between 2005

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 CHAIRMAN’S STATEMENT 8

and 2007. Airport Railway Kowloon Station Development Packages 3, 5 and 6 will provide a total of two million square feet of residential property available for pre-sale in about two years’ time.

Given its prime location in the centre of Kowloon East, Millennium City has become one of the major commercial developments in Hong Kong. With the success of Phases 1 and 2, which are both fully let, Phase 3 is under construction, with occupation scheduled for the second half of 2002.

With Hong Kong serving as an international hub for business, finance, trade and tourism, and China’s entry to the WTO, the demand for top-quality office space is expected to remain solid. At the same time, the Group is taking various steps to enhance rental values in its shopping centres. In addition to regular renovations and refurbishment, promotional programmes are also staged in the shopping centres, particularly during weekends and public holidays, to boost pedestrian flows and consumer spending.

Information Technology and Telecommunications SUNeVision SUNeVision’s business has been progressing well since the listing in March 2000. The company generated total revenue of approximately HK$198 million during the financial year ended 30th June 2001, and achieved a positive gross margin in the second quarter of 2001. This performance primarily reflects a growth in revenue from the Internet infrastructure business and the company’s success in carefully controlling costs in a tough operating environment. Leasing of iAdvantage’s data centres in Hong Kong has been satisfactory, and other business units have made steady progress during the year.

The company is reviewing its business strategy and will focus on operations with growth potential. At the same time, it will prudently manage its balance sheet and tightly control operating costs and capital expenditure. SUNeVision has cash and marketable bonds totalling HK$1,870 million. With the full support of its parent company and commitment of its experienced management, SUNeVision will become more competitive by operating more efficiently and cost-effectively, and it is well positioned to pursue new investment opportunities when appropriate.

SmarTone The telecommunications market remained highly competitive, and SmarTone reported a loss for the year, mainly due to the start-up investment required for its broadband business and other provisions. SmarTone expanded its customer base to 980,000 during the year, laying the foundation for future growth. Mr. Douglas Li rejoined the company as CEO in July 2001, and he will lead SmarTone forward in its commitment to offering superior service to its customers. Through effective execution, the company will deliver a total service offering, achieving operational efficiencies and controlling costs. SmarTone Macau was launched in August 2001, offering a high-quality network and superior customer service.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 CHAIRMAN’S STATEMENT 9

SmarTone was provisionally awarded a 3G licence in Hong Kong in September 2001 at the reserve price of five per cent royalty rate. This will allow the company to provide its customers with wireless broadband and personalized services, with multi-media contents. SmarTone conducted the first successful 3G trial in the greater China region in 1999, giving it a head start in the industry.

With its leading market position, solid customer base and strong cash reserves of HK$3,478 million, the company will be able to leverage its strengths in any opportunities for consolidation that may arise. The Group is confident in SmarTone’s future growth and prospects, and is committed to holding the company as a long-term strategic investment.

Transportation and Infrastructure Kowloon Motor Bus Kowloon Motor Bus (KMB) had a good year in 2000, with net profit increasing 15.7 per cent. Operating efficiency continued to show improvement, and there were increases in new bus routes and passenger volume. The company aims to maintain its market-leading position by providing a high standard of user-friendly bus services, ensuring total customer satisfaction. The relocation of KMB’s Lai Chi Kok bus depot to the West Kowloon reclamation will further enhance the efficiency and reliability of the fleet. The new depot will be purpose-built to provide advanced support service for KMB’s modern fleet, and it is scheduled for completion by the end of 2001. KMB will continue to look for ways to diversify business in the bus transportation industry in Hong Kong and on the Mainland.

RoadShow Holdings Limited, a 73.3 per cent owned subsidiary of KMB, is a leading out-of-home media sales company in Hong Kong. The company provides multi-media on-board services to a captive transit vehicle audience base. It also engages in transit network media sales and merchandizing. RoadShow was listed on the main board of the Hong Kong Stock Exchange on 28th June 2001, raising net proceeds of HK$534 million.

Other Infrastructure Business Route 3 (Country Park Section) performed well this year. The toll for the Tai Lam Tunnel was increased in April 2001, and traffic volume remained satisfactory despite slower economic growth. It is expected that the development of new towns in the northwest New Territories and increasing trade between the Mainland and Hong Kong will result in growing RoadShow was listed on the main board of the Hong Kong Stock Exchange traffic on the toll road. on 28th June 2001, raising net proceeds of HK$534 million.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 CHAIRMAN’S STATEMENT 10

The volume of cargo handled at the River Trade Terminal has been expanding since it commenced operation, and the Airport Freight Forwarding Centre continued to operate smoothly.

Through its 28.5 per cent interest in Asia Container Terminals Limited, the Group is participating in the development of two berths in Container Terminal 9. The project financing is already in place. Completion is scheduled in phases during 2003 and 2004.

All of the Group’s infrastructure projects are in Hong Kong, and will provide quality cash flows and recurrent income over the long term.

Hotel Business With increased incoming tourists, overall occupancy in Hong Kong’s hotel sector remained at relatively high levels during the year. Performance of the Group’s three hotels was encouraging. The average occupancy rate for the hotels not only registered a high of 85 per cent, room rates also increased during the year.

The Group is now developing six-star hotel facilities at both Hong Kong and Kowloon stations on the Airport Express Railway. With Hong Kong being a regional hub for tourists, the Government’s initiatives to boost tourism, an anticipated increase in business travellers amid China’s entry to the WTO and Beijing’s successful bid to host the Olympic Games in 2008, the Group’s hotel portfolio is well positioned to take full advantage of forthcoming business opportunities.

Mainland China Business With robust economic growth on the Mainland, performance of the Group’s property investment portfolio in Beijing and Shanghai was satisfactory during the year. Sun Dong An Plaza in Beijing recorded 95 per cent overall occupancy, and Central Plaza in Shanghai was 93 per cent let.

China will continue to offer enormous business and investment opportunities to local and overseas investors, particularly after its entry to the WTO. With the success of ongoing housing reform in China, the Group will take advantage of the opportunities presented by investing selectively in the China property market in Beijing, Shanghai, Guangzhou and Shenzhen.

Performance of the Group’s property investments in Mainland China was satisfactory during the year. Sun Dong An Plaza in Beijing was 95 per cent let.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 CHAIRMAN’S STATEMENT 11

Corporate Finance The Group’s financial position remains strong, with low gearing and high interest coverage. Its net debt to shareholders’ funds ratio as at 30th June 2001 was 15.8 per cent, and it has abundant undrawn banking facilities on a committed basis to finance future business expansion. All the Group’s credit facilities are unsecured. Exposure to foreign currency risk is negligible, given that the vast majority of its borrowings are denominated in Hong Kong dollars.

In line with the Group’s policy of lengthening its loan maturity profile, it successfully arranged two seven-year syndicated loans with a number of leading local and international banks in 2001. The market response was overwhelming, and an aggregate HK$15,300 million revolving credit and term loan facility was established to refinance short-term debt and for use as general working capital. The Group also broadened its funding base through issues of fixed and floating rate notes under its EMTN programme amounting to HK$2,150 million since July 2000, with tenors ranging from three to eight years.

During the year, the Group’s credit rating outlook from Moody’s was upgraded from stable to positive, in line with that of the Hong Kong Government’s sovereign ceiling. The Group will adhere to its conservative financial management policies by maintaining low gearing and high liquidity.

Customer Service Customer care is a top priority for the Group, and it is constantly looking for new ways to improve the quality of its products and services. The Group’s Service Excellence Programme provides extensive and ongoing training to front-line staff in order to raise the quality of customer service.

The Group’s property management subsidiaries Hong Yip and Kai Shing consistently receive accolades for their management service, and the companies won over 30 awards from a variety of organizations during the year. Both companies continue to extend the use of information technology in property management and building services, monitoring facilities via the Internet. They are also environmentally conscious, encouraging recycling and conservation to reduce the amount of waste produced by the properties they manage.

Membership in the SHKP Club continues to grow, and it now exceeds 140,000. The Club offers members complete service and a wide range of leisure and property-related activities. Building on the success of initiatives such as the Show Flat Preview Loyalty Scheme, the Club introduced various new benefits and services for members during the year, including a Buyer Reward Programme. The Club will continue to attract new members and promote two-way communication with the public The Group strives to increase staff consciousness of the importance of through various means. quality, to reinforce its status as a premium-quality developer.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 CHAIRMAN’S STATEMENT 12

PROSPECTS

China continues to show impressive growth, with ongoing economic reforms. Its anticipated accession to the WTO will add further momentum to its economic progress. Beijing’s successful bid to host the Olympic Games will not only translate into greater economic expansion during the run-up to 2008, it will also strengthen both domestic and international confidence in China. All these favourable developments on the Mainland should benefit Hong Kong’s economy and property market over time, as the territory serves as a gateway to China.

The September attack in the United States has undoubtedly shocked global financial markets and the world economy, but the negative impact is likely to be short term. Given persistently low interest rates and continued growth on the Mainland, Hong Kong is well equipped to deal with the current challenges.

Despite challenging economic conditions, home buyers’ confidence should improve following the suspension of HOS sales until June of next year and the current review of the institutional framework for public housing. These factors, along with the desire to own property, very favourable affordability for home buyers and relaxed mortgage financing, are expected to bolster the demand for residential property. New supply in the pre-sale market is likely to remain steady next year, and there is a high likelihood that it will fall in the medium term. In light of all these, the residential market should become active once the shock of recent events in America subsides.

The Group has witnessed various major economic ups and downs over the past few decades, and each of these downturns invariably brought the Group considerable investment opportunities. With its experienced management team and strong financial position, the Group believes that the current residential market will provide opportunities for business expansion and long-term growth. We are confident that the Group will be an even stronger property company with the advent of a recovery in the market.

The Group will continue efforts to strengthen its property business in Hong Kong. It will build more residential developments for sale in the next few years to meet expected demand. It will also develop a number of landmark investment properties to increase recurrent income. Concurrently, the Group will dispose of some non-core investment properties in order to maintain an optimal mix in its rental portfolio and improve the return on assets.

With a focus on maintaining its leading position in The Group will build more premium-quality residential the present challenging business environment, the developments, including Park Central in Tseung Kwan O, for sale in the next few years to meet the expected demand. Group will continue to develop premium products

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 CHAIRMAN’S STATEMENT 13

and provide quality service, making its properties customers’ first choice. To further enhance competitiveness, the Group will take steps to strengthen its brand name and control costs, but without compromising on quality. The aim is to increase returns and enhance shareholder value.

Given the promising outlook for China’s economy, the Group is actively seeking business opportunities in the Mainland property market to take advantage of growing prospects in that sector over the long term. The Group will bring its strong brand name and successful Hong Kong experience to Mainland China, and it is confident that it will further develop the market there.

Proceeds from upcoming pre-sales and substantial recurrent rental income will further enhance the Group’s cash flow. The Group will continue to launch new projects for pre-sale according to schedule, and major projects to be marketed in the next nine months include Park Central in Tseung Kwan O, Villa by the Park in Yuen Long, 71 Mount Kellett Road on the Peak and Park Island on Ma Wan.

Approximately 75 per cent of the residential properties to be completed in the coming financial year have been pre- sold, and barring unforeseen circumstances, the Group’s results for the coming year will show satisfactory growth.

APPRECIATION

Sir Sze-yuen Chung was appointed as an Independent Non-Executive Director of the Company in March this year. His broad experience and knowledge of business and public affairs will benefit the Group’s future business development.

Independent Non-Executive Director Dr. Ho Tim retired from the board in March this year after more than 28 years of service. Throughout this time, he has made a considerable contribution to the Group’s growth, and on behalf of the board, I would like to thank Dr. Ho for his valuable efforts and dedication.

Executive Director Mr. Law King-wan will soon retire after over 30 years of service, staying on as a Non-Executive Director. I wish to thank Mr. Law for his substantial contribution to the Group’s development, and for his commitment and loyalty.

I would also like to take this opportunity to express my gratitude to my fellow directors for their guidance, and to all the staff for their dedication and hard work.

Kwok Ping-sheung, Walter Chairman & Chief Executive

Hong Kong, 27th September 2001

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS

Club house at Oscar by the Sea, Tseung Kwan O

16 LAND BANK

18 PROPERTY DEVELOPMENT

30 PROPERTY INVESTMENT

40 PROPERTY RELATED BUSINESSES

44 INFORMATION T ECHNOLOGY AND TELECOMMUNICATIONS 46 TRANSPORTATION, 58 CUSTOMER SERVICE INFRASTRUCTURE AND LOGISTICS

51 OTHER INVESTMENT HOLDINGS 62 ENVIRONMENTAL PROTECTION AND PROMOTION

52 MAINLAND CHINA BUSINESS 63 STAFF RELATIONS AND T RAINING

56 CORPORATE FINANCE 64 THE GROUP AND THE COMMUNITY

57 INVESTOR RELATIONS REVIEW OF OPERATIONS LAND BANK 16

The Group has a land bank of 54.1 million square feet, in terms of attributable Land Bank in Hong Kong Attributable gross floor area gross floor area, following the addition of three prime sites during the year under review. Details of the new sites are given in the Chairman’s Statement million square feet on page 5. 60 54.1 52.1 50.9 50.6 50.6 50 The Group’s land bank is well diversified both in terms of usage and location.

40 About 49 per cent of the projects are on and in Kowloon, while the remaining 51 per cent are spread throughout various new towns 30 in the New Territories. In addition, the Group has 22 million square feet of 20 agricultural land, in terms of site area, primarily located along existing or planned railway lines in the New Territories. The majority of this is in the 10 process of land use conversion, principally for residential development.

1997 1998 1999 2000 2001

Composition of Land Bank in Hong Kong Attributable gross floor area: 54.1 million square feet

15% 68% 40% 30% Office Residential Shopping Centre Office

8% Industrial/Office 5% Shopping Centre BY USAGE BY USAGE 5% Hotel 20% 4% Industrial/ Hotel 5% Office Residential

64% 36% Properties Under 54.1 million Completed Investment Development square feet Properties 34.8 million sq.ft. 19.3 million sq.ft.

53% 47% New 35% 27% New Territories Kowloon Kowloon Territories

BY LOCATION 12% 26% BY LOCATION Hong Kong Hong Kong Island Island

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS Land Bank 17

The Group has 34.8 million square feet of properties The current land bank is sufficient for development under development. Of this, 26.6 million square feet needs over the next five years. In line with its strategy will be for sale, while the remaining 8.2 million square to increase the production volume of residential projects feet will be added to the Group’s completed investment for sale over time, the Group will take advantage of the property portfolio, which now stands at 19.3 million current downturn to replenish its land bank as square feet. appropriate. The Group’s land bank in Mainland China is described on page 54. About 68 per cent of the properties under development is residential, mostly large-scale estates with small to The Group’s land bank in Hong Kong, in attributable medium sized units for sale. The Group will continue gross floor area, is analyzed by status, usage and location to develop commercial and residential properties of as follows: premium quality, employing the most up-to-date technology in facilities and management. The Group’s recognized brand name and commitment to excellence add to the value of its developments in the current competitive market.

Status and Usage Attributable gross floor area in million square feet Shopping Industrial/ Residential Centre Office Hotel Office* To t a l Development for sale 23.7 – 0.2 – 2.7 26.6 Development for investment – 1.7 4.9 1.6 – 8.2 Completed investment properties 1.0 7.7 5.8 0.9 3.9 19.3 To tal 24.7 9.4 10.9 2.5 6.6 54.1

* Industrial/office properties include data centres, godowns and industrial properties.

Status and Location Attributable gross floor area in million square feet Hong Kong New Island Kowloon Territories Total Development for sale 2.7 6.3 17.6 26.6 Development for investment 1.5 6.0 0.7 8.2 Completed investment properties 5.0 5.2 9.1 19.3 To tal 9.2 17.5 27.4 54.1

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 Royal Peninsula, Kowloon

The Group’s aim has always been to build ideal homes for its customers, and it is raising standards even higher in order to enhance its brand name for quality and strengthen its market-leading position. PROPERTY DEVELOPMENT REVIEW OF OPERATIONS PROPERTY DEVELOPMENT 20

PROPERTY SALES

Properties sold by the Group during the year ended 30th June 2001, as principal and agent, amounted to HK$19,641 million, an increase of 102 per cent from the previous year. This figure includes the Group’s 49 per cent interest in Ocean Shores Phase 2 in Tseung Kwan O, 50 per cent interest in Royal Peninsula in Kowloon and 29 per cent interest in The Belcher’s in western Mid-Levels.

PROJECTS COMPLETED IN FY2000/01

In the year ended 30th June 2001, the Group completed 11 projects with an aggregate attributable gross floor area of 4.1 million square feet. Projects completed during the year are listed in the Chairman’s Statement on page 5.

Projects to be Completed in FY2001/02

Location Tseung Kwan O Town Lot 51 Both The Belcher’s in western Mid-Levels Inland Lot 8882, Happy Valley (top) and Ocean Shores in Tseung Kwan O, received high acclaim from owners for Lot 506 their superb quality. Tseung Kwan O Town Lot 55 Sha Tin Town Lot 394 89 Pok Fu Lam Road, western Mid-Levels Shaukeiwan Inland Lot 843, Aldrich Bay 71 Mount Kellett Road, the Peak 1-7 Lion Rock Road, Kowloon Airport Railway Station Development, Tung Chung Town Lot 3 Phase 1 54-58 Kwai Cheong Road, Kwai Chung 7-9 Minden Avenue, Kowloon Total for FY2001/02

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS Property Development 21

Over 85 per cent of the residential properties PROJECTS TO BE COMPLETED IN completed during the year have been sold, while the FY2001/02 shopping centres at Chelsea Heights in Tuen Mun, The The Group expects to complete 12 projects in the Belcher’s in western Mid-Levels, Ocean Shores in Tseung coming financial year, with an aggregate attributable Kwan O and Shouson Place in Island South have been gross floor area of 4.6 million square feet. kept for long-term rental. The MEGA-iAdvantage data centre in Chai Wan is also being retained as an investment.

Projects Completed in FY2000/01 Attributable gross floor area in million square feet Shopping Data Residential Centre Centre Total For sale 3.6 – – 3.6 For investment – 0.2 0.3 0.5 To t a l 3 . 6 0.2 0.3 4.1

Projects to be Completed in FY2001/02 Attributable gross floor area in million square feet Shopping Residential Centre Office Total For sale 4.5 – * 4.5 For investment – * 0.1 0.1 To t a l 4 . 5 * 0.1 4.6

* Less than 0.1 million square feet

Attributable gross floor area in square feet Shopping Project Name Group’s Interest (%) Residential Centre Office Total Oscar by the Sea Phase 2 Joint venture 1,004,000 – – 1,004,000 The Leighton Hill 100 898,000 – – 898,000 The Parcville 66.67 664,000 – – 664,000 Ocean Shores Phase 2 49 574,000 – – 574,000 Prima Villa 100 511,000 – – 511,000 The Belcher’s Phase 2 29 386,000 – – 386,000 Les Saisons 30 222,000 – – 222,000 – 100 14,000 – – 14,000 – 100 22,700 2,900 – 25,600

–20177,000 5,500 – 182,500 – 100 – – 80,000 80,000 – 100 – – 29,000 29,000 4,472,700 8,400 109,000 4,590,100

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS Property Development 22

Projects to be Completed in FY2002/03

Location Ma Wan Development Tseung Kwan O Town Lots 57 & 66 Tseung Kwan O Town Lot 55 Tuen Mun Town Lot 374 , Yuen Long 1 Ho Man Tin Hill Road, Kowloon 1 & 3 Po Shan Road, Mid-Levels Airport Railway Tung Chung Station Development, Tung Chung Town Lot 3 Phase 2 Airport Railway Hong Kong Station Development Phase 2

370 Kwun Tong Road Total for FY2002/03

Major Projects to be Completed from FY2003/04 to FY2005/06

Location Ma Wan Development – Park Island (remaining phases) Yuen Long Town Lot 503 Tsuen Wan Town Lots 77 & 89 Airport Railway Olympic Station Development Package 3 Airport Railway Kowloon Station Development Package 3 To Fung Shan Phases 2, 3 & 4, Shatin Kwu Tung Phases 2 & 3, Sheung Shui Tuen Mun Town Lot 399 , Yuen Long Yunnan Lane, Yau Ma Tei Ap Lei Chau Inland Lot 129 Yuen Long Town Lot 504 Top: 90 per cent of units in Villa by the Park in Yuen Long New Kowloon Inland Lot 6275, Cheung Sha Wan enjoy green views. Ap Lei Chau Inland Lot 128 Bottom: The at Two International Finance New Kowloon Marine Lot 3, Lai Chi Kok Centre in Central is scheduled to open in the first half New Kowloon Inland Lot 6328, Cheung Sha Wan of 2003. Kowloon Inland Lot 11145, Farm Road Airport Railway Kowloon Station Development Packages 5, 6 & 7 Airport Railway Hong Kong Station Development Phase 2 – Two International Finance Centre (remaining portion) 418 Kwun Tong Road – Millennium City Phase 5 392 Kwun Tong Road – Millennium City Phase 6 To t a l

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS Property Development 23

Attributable gross floor area in square feet Shopping Project Name Group’s Interest (%) Residential Centre Office Total Park Island Phase 1 Joint venture 1,698,000 86,100 – 1,784,100 Park Central 57.52/25 1,397,500 195,500 – 1,593,000 Ocean Shores Phase 3 49 716,000 10,500 – 726,500 –25306,500 5,500 – 312,000 Villa by the Park 100 439,500 – – 439,500 – Joint venture 158,000 – – 158,000 –6072,000 – – 72,000

–2060,500 – – 60,500 Two International Finance Centre (initial portion) 47.5 – 242,000 309,000 551,000 Millennium City Phase 3 70 – – 108,000 108,000 4,848,000 539,600 417,000 5,804,600

Attributable gross floor area in square feet Shopping Group’s Interest (%) Residential Centre Office Hotel Total Joint venture 1,966,000 – – – 1,966,000 100 1,180,000 – – – 1,180,000 100 1,113,000 – – – 1,113,000 Joint venture 1,110,000 – – – 1,110,000 Joint venture 1,076,000 – – – 1,076,000 100 744,000 – – – 744,000 100 603,500 – – – 603,500 100 375,000 – – – 375,000 100 383,000 – – – 383,000 Joint venture 312,000 – – – 312,000 35 316,000 – – – 316,000 100 1,454,000 249,000 – – 1,703,000 50 648,000 65,000 – – 713,000 100 454,000 16,000 – – 470,000 34 358,000 18,000 – – 376,000 35.44 541,000 21,000 – – 562,000 100 223,000 45,000 – – 268,000 Joint venture 1,009,000 171,000 2,495,000 1,023,000 4,698,000

47.5 – – 618,000 523,000 1,141,000 100 – 573,000 710,000 – 1,283,000 100 – – 360,000 – 360,000 13,865,500 1,158,000 4,183,000 1,546,000 20,752,500

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS Property Development 24

Major Properties Under Development

ffice

ffice otel •Residential•Shopping• CentreO • Industrial/O• H 1 Oscar by the Sea Phase 2 • 2 Ocean Shores Phases 2 & 3 • • 3 Park Central • • 4 Prima Villa • 5 To Fung Shan Phases 2, 3 & 4 • 6 Kwu Tung • 7 Shek Wu Wai • 8 Ngau Tam Mei • 9 The Parcville • 10 Yuen Long Town Lot 503 • 11 Yuen Long Town Lot 504 • • 13 12 Villa by the Park • 13 Tuen Mun Town Lot 399 • 14 Tuen Mun Town Lot 374 • • 15 Airport Railway Tung Chung Station Development • • • 14 16 Park Island • • 17 Tsuen Wan Town Lots 77 & 89 • 18 New Kowloon Marine Lot 3 • • 19 New Kowloon Inland Lot 6328 • • 20 New Kowloon Inland Lot 6275 • • 21 Airport Railway Olympic Station Development Package 3 • 22 1 Ho Man Tin Hill Road • 23 Kowloon Inland Lot 11145, Farm Road • • 24 Yunnan Lane, Yau Ma Tei • 25 Airport Railway Kowloon Station Development Package 3 • 26 Airport Railway Kowloon Station Development Packages 5, 6 & 7 • • • • 27 The Belcher’s Phase 2 • 28 The Leighton Hill • 15 29 Les Saisons • 30 Ap Lei Chau Inland Lot 128 • • 31 Ap Lei Chau Inland Lot 129 • LANTAU ISLAND 32 Tw o International Finance Centre • • • 33 Millennium City Phase 5 • • 34 Millennium City Phases 3 & 6 • 35 20-22 Siu Lek Yuen Road • 36 12-23 Wang Wo Tsai Street • 37 51-53 Kwai Cheong Road • 38 77 Wing Hong Street • 39 50 Wong Chuk Hang Road • Existing Under Construction Planned (completion by 2008) Railways Railways Railways Major Highways Major Highways Major Highways

Railway Interchange

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 SHENZHEN

6

7

8

9 12 11 10

West Rail (completion in 2003)

NEW TERRITORIES Ma On Shan Rail 4 5 (completion in 2004) 35

36 17 37

KOWLOON 16

38 18 19 20 22 21 23 24 25 34 33 3 26 2 1

Tseung Kwan O 32 29 Extension (completion in 2002) 27

28 HONG KONG ISLAND

39

30 31

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS Property Development 26

MAJOR PROJECTS UNDER Oscar by the Sea

DEVELOPMENT Tseung Kwan O Town Lot 51 (Joint venture)

Ocean Shores The property has a site area of 182,500 square feet,

Tseung Kwan O Town Lot 55 (49% owned) with 424 first phase units completed during the year. The second phase will provide over 1,500 small to This development, covering an area of 540,000 square medium sized units, with total gross floor area exceeding feet, has over 5,000 units with a total gross floor area of one million square feet. It is scheduled for completion four million square feet. The 1,920 units in the first in the first half of 2002 and about 80 per cent of the phase were completed during the year. The second units have already been sold. phase has 1,536 units, which were launched for sale in March this year to a satisfactory response. Another The Leighton Hill 2,200 units will be built in Phase 3, which is now under Inland Lot 8882, Happy Valley (100% owned) construction for completion in financial year 2003. The Leighton Hill is one of the largest luxury developments on Hong Kong Island in the past decade. Just a few minutes’ walk from the Causeway Bay MTR station, it offers convenient access to all districts. Featuring the finest materials and excellent architecture, The Leighton Hill sets the standard for luxury in the new millennium. Over 540 units with a gross floor area of 898,000 square feet are being built on this 464,000 square-foot site. The project was put up for sale in November 2000 to an overwhelming response, and all units were sold within a few weeks. Construction will finish by mid 2002.

Above: Ocean Shores is one of the largest residential estates in Tseung Kwan O and features comprehensive facilities. Left: With the finest materials and architecture, The Leighton Hill in Happy Valley epitomizes luxury property in the millennium.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS Property Development 27

Park Island

Ma Wan Development (Joint venture)

Park Island has a total gross floor area of over 3.7 million square feet, offering over 5,000 units in a wide range of sizes and types on a 1.4 million square-foot site. With a large theme park next door, the residential development on Ma Wan is designed as a modern and pollution-free living environment. The first phase of the project, with a gross floor area of about 1.7 million square feet, will be finished in the third quarter of 2002, and the whole project will be completed by phases in three to four years’ time.

Park Central

Tseung Kwan O Town Lots 57 & 66 (57.52% & 25% owned)

These two sites, with a combined area of 360,000 square feet, will be jointly developed as a large-scale project containing a total gross floor area of 2.9 million square feet, including over 4,000 small to medium sized units and a 360,000 square-foot shopping mall. The project is conveniently located next to Tseung Kwan O Station on the new MTR extension scheduled for completion by late 2002. The first batch of units will be marketed soon, and the whole development will be completed in 2003.

Top: Residents of Park Island on Ma Wan will live in a modern, pollution-free environment. Bottom: Park Central is adjacent to Tseung Kwan O Station on the new MTR extension for residents’ total convenience.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS Property Development 28

Tw o International Finance Centre has a site area of 172,000 square feet. It will be

Airport Railway Hong Kong Station Development Phase 2 developed into over one million square feet of luxury (47.5% owned) residential property with about 1,000 units in a wide range of sizes. Completion is scheduled for 2004. Occupying a 430,000 square-foot site, International Finance Centre is the largest commercial development Airport Railway Kowloon Station in the Central core. Phase 2 consists of almost two Development Packages 5, 6 and 7 million square feet of offices, 500,000 square feet of shopping mall and 1.1 million square feet of hotel space. (Joint venture) The intelligent office tower will be completed by the The Group won the tender for this landmark project in end of 2003. This state-of-the-art office building features September 2000. With a site area of approximately an interactive technological design and facilities to meet 790,000 square feet, the development consists of 2.5 the needs of modern businesses. The development’s million square feet of top-quality offices, one million shopping mall is scheduled to open in the first half of square feet of residential and serviced apartments, 2003. The hotel complex, to be managed by the another million square feet of hotel space and 900,000 renowned Four Seasons Hotels and Resorts, will be square feet of shopping centre. Of the total 5.4 million completed in 2004. square feet, 4.7 million square feet is attributable to the Group. Situated above Kowloon Station on the Airport Railway and at the heart of a key future commercial Airport Railway Kowloon Station and cultural district of Hong Kong, the project will feature Development Package 3 the most modern design and intelligent facilities. (Joint venture) Foundation work for the project has begun, and Situated above Kowloon Station on the Airport Railway, construction will be finished in phases between 2005 in an area now being transformed into a major and 2007. commercial, cultural and transportation hub, the project

International Finance Centre is the largest commercial development in the Central core.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS Property Development 29

Millennium City Phase 5 Airport Railway Olympic Station

418 Kwun Tong Road (100% owned) Development Package 3

This property is the single largest phase of Millennium (Joint venture) City in Kowloon East, which has become one of the Over one million square feet of residential property major commercial hubs in Hong Kong. Combined with will be developed on this 185,000 square-foot site next the adjoining site at 418A Kwun Tong Road, Phase 5 to Olympic Station. The Group plans to build about now covers 107,000 square feet. The development 1,500 small to medium sized units. has a gross floor area of about 1.3 million square feet including a regional shopping mall of 600,000 square feet. Foundation work is now under way and construction will be completed by 2004.

Yuen Long Town Lot 503

(100% owned)

This development has a total gross floor area of 1.2 million square feet on a 236,000 square-foot site. It is conveniently located in Yuen Long town centre, just a few minutes’ walk from a future West Rail station scheduled to open in late 2003. The Group plans to build about 2,000 small to medium sized units with Airport Railway Olympic Station Development Package 3 completion scheduled for 2004. will provide about 1,500 small to medium sized units.

Tsuen Wan Town Lots 77 & 89 (100% owned)

The Group plans to develop about 1,700 serviced apartments with a total gross floor area of 1.1 million square feet on this 112,000 square-foot site. Details of the project are being finalized.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 Multi-media showcase for International Finance Centre, Central

The Group will continue to develop premium commercial properties incorporating the latest technology and sophisticated facilities to meet the needs of tenants. PROPERTY INVESTMENT REVIEW OF OPERATIONS PROPERTY INVESTMENT 32

The Group witnessed an active start to leasing in the second half of 2000, but the overall leasing market slowed since the beginning of 2001. This is attributed primarily to the softening of the US economy, which resulted in lower economic growth in Hong Kong and hence a slow leasing market. Despite this, the Group’s rental portfolio maintained a satisfactory level of performance. Average occupancy of the Group’s investment properties in Hong Kong remained high at 95 per cent.

Excluding contributions from jointly controlled entities, gross rental income for the year under review rose marginally by 1.9 per cent to HK$5,392 million, while net rental income remained steady at HK$4,073 million. If the Group’s share of rental income from jointly controlled entities was included, total gross rental income would have increased by 3.7 per cent to HK$5,877 million for the year. Net rental income rose a modest 1.7 per cent to HK$4,401 million.

Gross Rental Income* Gross Rental Income by Sector*

HK$ million 53% Shopping 5,857 5,877 25% 6,000 5,801 5,670 Centre Office 5,130 5,000

4,000

3,000

2,000 9% 5% Car Park 1,000 Industrial/ 8% Office Residential

1997 1998 1999 2000 2001

* Including contributions from jointly controlled entities

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS Property Investment 33

Given a slowing Hong Kong economy amid the COMPLETED INVESTMENT American economic downturn and recent terrorist PROPERTIES attack in the US, the retail rental market is likely to remain Shopping Centres challenging in the coming year. The demand for office leasing is also expected to remain soft in the short term. The Group’s shopping centre network extends over Over the medium to longer term, the demand for top the whole territory, and remains the largest in Hong quality office space is expected to increase as a result Kong with an attributable gross floor area of 7.7 million of China’s imminent entry to the WTO and Hong Kong square feet. The majority of these malls are located in being an international finance and business centre. new towns, occupied by a carefully-planned mix of retailers, providing daily necessities to the nearby

The Group adds value to its investment portfolio by residents and are thus more resilient to the economic incorporating the latest technology and modern facilities slowdown. With their prime and convenient locations, in its properties and regular renovations. In addition, occupancy rates are consistently high and rents largely the Group constantly reviews its mix of investment remain steady in the face of economic fluctuations. properties with a view to divesting some non-core properties while developing quality new rental Occupancy of the Group’s major retail rental properties properties in order to provide a solid base for long- remained high at 96 per cent. The Group’s flagship term growth. The Group expects rental income to mall, New Town Plaza in Shatin, was fully occupied. The remain at a satisfactory level in the coming year. Group’s other prominent shopping centres such as East Point City in Tseung Kwan O, in

The Group’s current investment portfolio in Hong Kong, Mongkok, in Kwai Chung and Tai Po Mega including its attributable share of jointly controlled Mall were also virtually fully leased. entities, is as follows:

Status and Usage Attributable gross floor area in million square feet Shopping Industrial/ Residential Centre Office Hotel Office Total Completed 1.0 7.7 5.8 0.9 3.9 19.3 Under Development – 1.7 4.9 1.6 – 8.2 To tal 1.0 9.4 10.7 2.5 3.9 27.5

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS Property Investment 34

The Group continued to renovate and improve the Offices layouts and designs of its shopping malls during the year. The Group’s investment portfolio includes 5.8 million New themes were also introduced to the shopping square feet of prime office space. Despite a softer office centres. To highlight some, a lush ‘garden feel’ was added rental market, the Group’s office portfolio is 96 per to New Town Plaza III, while Yuen Long Plaza recently cent let. To highlight some, One International Finance took on a colourful subtropical flavour. Centre in Central and Millennium City Phases 1 and 2 in Kowloon East are fully let, and in To meet changing customer demands, the Group Shatin and Metroplaza in Kwai Chung are virtually full. continues to review the tenant profile in its shopping centres to ensure a good mix. Furthermore, the Group To match the requirements of increasingly demanding will continue to organize innovative promotions in its office tenants, the Group will continue to incorporate malls to keep pedestrian flows high. the latest technology and sophisticated facilities in its projects.

Residential The Group holds a total of one million square feet of residential properties for investment, a substantial proportion of which are luxury developments with comprehensive club house facilities such as Dynasty Court and Hillsborough Court in Mid-Levels and Pacific View in Island South. These properties are almost fully let, contributing satisfactory rental income to the Group.

Car Parks The Group currently owns 24,000 parking bays, and rental income from these amounted to HK$497 million during the year, up 4.5 per cent from the previous year. Car parks attached to commercial complexes will continue to be built so as to enhance the value of the

New Town Plaza III in Shatin completed Group’s investment property portfolio. renovations during the year.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS Property Investment 35

Other Properties The majority of the investment properties under The Group owns 30 cinemas in its various shopping development are landmark projects, including Two centres, which help to attract visitors and bring business International Finance Centre in Central, the Airport to tenants. A number of industrial and godown Railway Kowloon Station Development Packages 5, 6 properties including data centres, are also kept for rent, and 7 and Millennium City in Kowloon East. Details and the Group is actively exploring opportunities to of these projects are included in the Property convert some of these sites to other uses such as offices. Development section on pages 28 and 29.

Major investment properties under INVESTMENT PROPERTIES UNDER development include: DEVELOPMENT Shopping Centres In order to achieve an optimal mix in its investment •Two International Finance Centre property portfolio, the Group intends to dispose of • Shopping centre at Park Central some non-core properties while adding quality new • Millennium City Phase 5 (418 Kwun Tong Road) rental properties. In keeping with this aim, some 8.2 • Shopping centre in Airport Railway Kowloon Station million square feet of new investment properties in Development Packages 5, 6 and 7 attributable terms is under development. Offices Among the investment properties under development, • Millennium City Phase 3 (370 Kwun Tong Road) retail space will account for 1.7 million square feet, which •Two International Finance Centre will be spread across the territory, while another 1.6 • Millennium City Phase 5 (418 Kwun Tong Road) million square feet is designated for the development • Millennium City Phase 6 (392 Kwun Tong Road) of top quality hotels and suites. Grade-A offices will • Offices in Airport Railway Kowloon Station account for 4.9 million square feet of the Group’s new Development Packages 5, 6 and 7 investment properties.

Millennium City Phase 3 in Kowloon East will be ready for occupation in the second half of 2002.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS Property Investment 36

Major Completed Investment Properties

Name Location Hong Kong Island Sun Hung Kai Centre 30 Harbour Road, Wanchai World Trade Centre 280 Gloucester Road, Causeway Bay One International Finance Centre 1 Harbour View Street, Central Harbour Centre 25 Harbour Road, Wanchai Central Plaza 18 Harbour Road, Wanchai Dynasty Court (Blocks 2 & 3) 23 Old Peak Road Pacific View (Blocks 2 & 3) 38 Tai Tam Road Hillsborough Court (Block 4) 18 Old Peak Road Kowloon Grand Century Place 193 Prince Edward Road West, Mongkok Millennium City Phase 1* 388 Kwun Tong Road Millennium City Phase 2 378 Kwun Tong Road The Sun Arcade 28 Canton Road, Tsim Sha Tsui Royal Plaza Hotel 193 Prince Edward Road West, Mongkok Royal Garden Hotel 69 Mody Road, Tsim Sha Tsui Kerry Hung Kai Godown 3 Fat Tseung Street, Cheung Sha Wan New Tech Plaza 34 Tai Yau Street, San Po Kong APEC Plaza 49 Hoi Yuen Road, Kwun Tong Peninsula Tower 538 Castle Peak Road, Cheung Sha Wan Hing Wah Centre 82-84 To Kwa Wan Road New Territories New Town Plaza I 18 Street, Shatin 9 On Pong Road, Tai Po 5-21 Pak Tin Par Street, Tsuen Wan East Point City Shopping Centre 8 Chung Wa Road, Plaza III 2-8 Shatin Centre Street, Shatin Sun Yuen Long Centre Shopping Centre 8 Long Yat Road, Yuen Long Yuen Long Plaza Shopping Arcade 249-251 Castle Peak Road, Yuen Long Uptown Plaza Shopping Arcade 9 Nam Wan Road, Tai Po Top: is one of the busiest commercial complexes in Sheung Shui. Metroplaza Tower I & Shopping Centre 223 Hing Fong Road, Kwai Chung Bottom: The office space at Metroplaza in Grand Central Plaza 138 Shatin Rural Committee Road, Shatin Kwai Chung is virtually full. Landmark North 39 Lung Sum Avenue, Sheung Shui Grand City Plaza 1-17 Sai Lau Kok Road, Tsuen Wan Tung Chung Town Lot 2 Royal Park Hotel 8 Pak Hok Ting Street, Shatin Sunhing Hungkai Godown 8 Wong Chuk Yeung Street, Shatin Advanced Technology Centre 2 Choi Fat Street, Sheung Shui * Including the attributable share in areas held by SUNeVision, in which the Group has an 84.3 per cent interest.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS Property Investment 37

Attributable gross floor area in square feet Lease Group’s Shopping Industrial/ Expiry Interest (%) Residential Centre Office Hotel Office Total

2127 100 – 53,400 850,600 – – 904,000 2842 100 – 162,000 350,000 – – 512,000 2047 47.5 – 62,000 373,000 – – 435,000 2128 33.3 – 20,500 80,000 – – 100,500 2047 50 – – 700,000 – – 700,000 2886 100 341,000 – – – – 341,000 2047 100 316,700 – – – – 316,700 2884 100 159,500 – – – – 159,500

2047 100 – 725,000 475,000 – – 1,200,000 2047 100 – 27,000 890,000 – – 917,000 2047 50 – – 133,000 – – 133,000 2047 100 – 204,800 – – – 204,800 2047 100 – – – 400,000 – 400,000 2127 100 – – – 295,000 – 295,000 2047 50 – – – – 285,000 285,000 2047 100 – – – – 268,800 268,800 2047 100 – – – – 240,000 240,000 2047 100 – – – – 202,000 202,000 2099 100 – – – – 182,700 182,700

2047 100 – 1,300,000 – – – 1,300,000 2047 100 – 588,800 – – – 588,800 2047 100 – 583,000 – – – 583,000 2047 100 – 415,000 – – – 415,000 2047 100 – 350,000 – – – 350,000 2047 87.5 – 245,000 – – – 245,000 2047 100 – 145,000 – – – 145,000 2047 100 – 120,000 – – – 120,000 2047 100 – 600,000 569,000 – – 1,169,000 2047 100 – 236,000 505,000 – – 741,000 2047 100 – 181,500 375,500 – – 557,000 2047 100 – 35,100 137,200 – – 172,300 2047 20 – 99,000 32,000 – – 131,000 2047 100 – – – 258,000 – 258,000 2047 100 – – – – 500,000 500,000 2047 100 – – – – 142,000 142,000

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS Property Investment 38

Major Completed Investment Properties

entre ffice

ffice otel •Residential•Shopping• C O • Industrial/O• H 1 Dynasty Court • 2 Hillsborough Court • 3 63 Deep Water Bay Road • 4 51 & 55 Deep Water Bay Road • 5 Pacific View • 6 New Town Plaza/New Town Tower • • 7 Grand Central Plaza • • 8 Uptown Plaza • 9 Tai Po Mega Mall • 10 Landmark North • • 11 Sun Yuen Long Centre • 12 Yuen Long Plaza • 13 Chelsea Heights • 13 14 Tsuen Wan Plaza • 15 Grand City Plaza • • 16 Metroplaza • • 17 New Kowloon Plaza • 18 Grand Century Place • • 19 Hollywood Plaza • • 20 The Sun Arcade • 21 East Point City • 22 World Trade Centre • • 23 Sun Hung Kai Centre • • 24 Harbour Centre • • 25 One International Finance Centre • • 26 Chi Fu Landmark • 27 New Jade Shopping Arcade • 28 Citygate • • 29 Central Plaza • 28 30 Millennium City Phases 1 & 2 • • 31 APEC Plaza • 32 Infotech Centre • LANTAU ISLAND 33 Hing Wah Centre • 34 New Tech Plaza • 35 Advanced Technology Centre • 36 Peninsula Tower • 37 Kerry Hung Kai Godown • 38 Sunhing Hungkai Godown (Shatin) • 39 Royal Garden Hotel • 40 Royal Plaza Hotel • 41 Royal Park Hotel • Existing Under Construction Planned (completion by 2008) Railways Railways Railways Major Highways Major Highways Major Highways

Railway Interchange SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 SHENZHEN

35 10

9

12 11 8

West Rail (completion in 2003)

38 NEW TERRITORIES Ma On Shan Rail (completion in 2004) 7 41 6 15 14

16

KOWLOON

36 37 40 17 33 18 34 19 32 30 31 21

20 39

Tseung Kwan O 25 22 Extension (completion in 2002) 23 29 24

1 HONG KONG 2 ISLAND 27 26

5

3 4

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS PROPERTY RELATED BUSINESSES 40

HOTELS

For the year under review, the performance of the Group’s three hotels was satisfactory. Occupancy of the hotels remained high and room rates increased satisfactorily.

Guest room renovations at the Royal Garden Hotel in Tsim Sha Tsui continued on schedule and within budget throughout 2000 and 2001, and a new lobby bar ‘Martini’ opened in June 2000 to wide acclaim. New banquet rooms also opened in the same month and have generated satisfactory business. The hotel finished the year with an average occupancy of 86 per cent; an increase of four percentage points over last year. The average room rate also rose 13 per cent during the year. The latest renovations scheduled for completion by the end of 2001 should further enhance the quality and image of the hotel.

During the year under review, the Royal Park Hotel in Shatin achieved an average occupancy of 84 per cent, with a slight growth in both average room rate and revenue. Situated along the railway, the hotel benefited from the rapid growth of China’s economy last year. The continuous development of Shatin should continue to underpin the hotel’s business.

The Royal Plaza Hotel in Mongkok recorded an eight per cent growth in average room rate and an average occupancy of 85 per cent for the period under review. To cope with travellers’ demands, the hotel introduced several new amenities including a solarium and massage centre. The Royal Plaza Hotel will meet the challenging year ahead with a flexible strategy.

Renovations at the Royal Garden Hotel further enhanced its image.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS Property Related Businesses 41

The Group is developing six-star hotel facilities above both the Hong Kong and Kowloon stations on the Airport Railway. The hotel complex in International Finance Centre over Hong Kong Station includes 400 first-class hotel rooms and 600 suites for long-term guests, to be managed by Four Seasons Hotels and Resorts. This will be the first Four Seasons-branded hotel in Hong Kong upon its completion in 2004. The Group’s Kowloon Station development will include one million square feet of premium-quality hotel and suite spaces.

With China’s impending entry to the WTO, Beijing’s successful bid for the 2008 Olympic Games and recent Government initiatives to boost tourism, the Group is confident in the long-term prospects for its hotel operations. The hotel complex in International Finance Centre will be the first Four Seasons-branded hotel in Hong Kong. CONSTRUCTION

The construction division completed a total of 6.5 million The division continues to make improvements in quality, customer service, training, safety, methods of square feet of gross floor area in the year. Major projects include Le Sommet, Chelsea Heights Phase 2, Oscar by construction and the application of information the Sea Phase 1 and two joint venture projects, namely technology, all of which contribute to higher efficiency and better products. Royal Peninsula and The Belcher’s Phase 1. Construction turnover for the year doubled to HK$6,500 million, of which HK$1,600 million was derived from joint venture To further improve its competitive edge, the division has undertaken an organizational reform to streamline companies. processes, encourage new ideas, enhance accountability

Major projects in progress, including those being and better control costs. constructed by joint venture companies, are Park Island, The Parcville, The Leighton Hill, Oscar by the Sea Phase 2, Park Central, Prima Villa, Villa by the Park, Ap Lei Chau Inland Lot 128, Ocean Shores Phases 2 and 3, Two International Finance Centre, The Belcher’s Phase 2 and Tuen Mun Town Lot 374.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS Property Related Businesses 42

The following subsidiaries and associate companies PROPERTY MANAGEMENT provide complementary services in fire prevention The Group’s two property management subsidiaries, systems, electrical installations, machinery leasing and Hong Yip Service Company Limited and Kai concrete supply: Shing Management Services Limited, aim to provide the finest service to residents. With highly- Everlight Engineering Company Limited and trained professional staff and the latest technology, the two other subsidiaries install and service electrical and companies are fully committed to excellence in all that fire prevention systems. Total turnover for the year was they do. During the year, they won over 30 awards HK$425 million. from a variety of organizations including the Hong Kong Housing Authority. Aegis Engineering Company Limited is in plant and machinery leasing. Turnover for the year amounted Together, Hong Yip and Kai Shing now manage 118 to HK$75 million. million square feet of residential premises, 17 million square feet of commercial space and 29 million square Glorious Concrete (HK) Limited is an associate feet of industrial space. Their core businesses are company and one of the significant ready-mixed property management, sales and leasing, cleaning and concrete suppliers in Hong Kong. Its results for the year security service and club management. were satisfactory.

Hong Yip showed substantial growth last year. The number of housing units under its management increased from 80,000 to 99,000, a rise of 24 per cent, and the total area managed increased from 70 to 83 million square feet, representing an 18 per cent growth. In addition to managing the Group’s properties, Hong Yip is an agent for various outside owners’ corporations, and it manages a number of Government developments.

To cope with this growth, Hong Yip has put great effort into training, particularly in customer service. The results have been significant, and Hong Yip won an Award for Excellence in Training 2001 with merit from the Hong Kong Management Association.

Top: Hong Yip has been named Best Property Management Agent by the Hong Kong Housing Authority for eight consecutive years. Left: Super-eManagement enhances operational efficiency in property management.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS Property Related Businesses 43

With its management and technical professionals, Hong Kai Shing continues to win industry awards. In the year Yip has helped owners’ corporations to carry out major under review it won the 2000 Hong Kong Eco-Business renovations, enhancing the value of older buildings under Grand Award (Green Property Management) presented management. The company also focuses on adding value by the Environmental Protection Department and for residents with initiatives like Privilege Home Services, awards from the Hong Kong Housing Authority and providing hotel-style service. the Occupational Safety and Health Council.

This year, as in the last eight, Hong Yip won the Best FINANCIAL SERVICES Property Management Agent Award. It also got several Best HOS Estates awards and a number of The financial services division is made up of Hung Kai environmentally-friendly management awards, all from Finance Company Limited, Honour Securities the Hong Kong Housing Authority. Hong Yip also won Company Limited, Honour Futures Limited and a 2000 HKRMA Certificate of Merit in Customer Service Honour Finance Company Limited. Principal from the Hong Kong Retail Management Association services include home mortgages, share margin financing, and several merit awards from the Environmental stock and futures broking, consumer loans and deposit- Protection Department. In December 2000, the taking. company received ISO 9001: 2000 quality certification and OHSAS 18001 certification for occupational safety A reduction in trading on the Hong Kong Stock management. Exchange has affected the stock and futures broking business while the mortgage market has also become Kai Shing is using information technology to improve increasingly competitive. Despite the challenging property management. After initiating the use of Palm environment, the division maintained a profitable Pilots in building management, Kai Shing introduced the position during the year. first web-enabled property management system – Super-eManagement – in May 2001. The system covers INSURANCE all aspects of property management service and greatly Sun Hung Kai Properties Insurance Limited enhances operational efficiency and communications recorded a business turnover of HK$198 million for between the company and its customers. the year. Despite a difficult operating environment and unfavourable results in the liability insurance business, Kai Shing pays close attention to monitoring and training pre-tax profit rose to HK$45 million compared to staff. In November 2000, Kai Shing opened its Super- HK$15 million for the previous financial year. The eManagement Centre in Landmark North. The centre company provides quality products and services to its provides 24-hour security surveillance of all properties clients. It also transacts insurance products through its managed by Kai Shing and also includes facilities for web site. The company has a credit rating of ‘A-minus’ professional training. by both Standard & Poor’s and A.M. Best reflecting its sound financial performance and management systems.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS INFORMATION TECHNOLOGY AND TELECOMMUNICATIONS 44

INFORMATION TECHNOLOGY

The year under review was a challenging one for SUNeVision Holdings Limited. Despite the generally unfavourable global and local business climate, particularly in the technology sector, SUNeVision maintained its position as a leading Internet infrastructure and enabling solutions provider in Asia. The company was able to report healthy double-digit growth for each quarter during the year, largely due to a prudent management approach to ensuring cost efficiency and high productivity. Revenue for the year under review was HK$198 million, an increase of 194 per cent compared with the previous year.

The year was also notable in that gross margins turned positive in the second quarter of 2001 for the first time since the company’s IPO in March 2000. Operating expenditures have continued to fall as a result of tight cost controls. Losses for the year under review were HK$171 million, largely due to heavy startup costs and one-off charges. The company is financially strong with net cash and marketable bonds of HK$1,870 million.

In February 2001, the 350,000 square-foot MEGA-iAdvantage in Chai Wan officially began operations, providing first class co-location facilities to telecom and other operators. With the recent closure of a major client in Hong Kong, iAdvantage has already made efforts to lease the space vacated by that company, and has had some initial success in retaining some of its former clients. Leasing at the other data centres was satisfactory. In addition, iAdvantage further strengthened its competitive position in the industry by forming strategic alliances with leading international solution providers. SUNeVision’s Super e-Technology, Super e-Network, Super-Office, MEGA-iAdvantage in Chai Wan commenced SuperHome, SuperStreets, Red-Dots and venture capital unit made steady operation in February 2001. progress throughout the year.

Looking forward, SUNeVision will continue to manage its operating and capital expenditures tightly while seeking to improve operating efficiencies. The company recognizes the need to review its business operations on an ongoing basis to ensure that it has a sustainable business model over the longer term. The information technology shakeout is by no means over, and the company will continue to face challenges in the near term. However, the Group is confident in the long-term prospects for SUNeVision and the industry. Sound business sense on the part of an excellent management team will continue to shape strategy at SUNeVision. The Group owned about 84.3 per cent of SUNeVision as at 30th June 2001.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS Information Technology and Telecommunications 45

TELECOMMUNICATIONS Following the successful acquisition of a licence to operate a GSM network in Macau in October 2000, SmarTone Telecommunications Holdings SmarTone rapidly built up its network and launched its Limited continued to compete in a challenging market service in August 2001. A flagship store was opened in environment during the year, as the company set out the central shopping area of Macau, providing a one- to build a critical mass of customers and further stop service to Macau’s residents, as well as SmarTone’s strengthen its position in the market. SmarTone Hong Kong customers visiting Macau. broadened its customer base to 980,000, representing an increase of 13 per cent as compared to 867,000 in SmarTone participated in the 3G auction that took place June 2000. The company’s loss attributable to in September 2001 and was provisionally awarded a shareholders for the year ended 30th June 2001 was 3G licence in Hong Kong. This enhances SmarTone’s HK$284 million, representing a decrease in loss of 22 position as a major wireless player in Hong Kong. The per cent as compared to the previous year. company foresees that 3G has attractive business potential and it is committed to providing the people As the highly competitive mobile communications of Hong Kong a world class 3G mobile broadband market continues to evolve in the new millennium, multimedia service. SmarTone firmly believes that 3G SmarTone appointed Douglas Li as CEO in July 2001. will take the company to a new level of success, as Mr. Li was SmarTone’s founding CEO at its inception in creating long-term value for its customers and 1992 and served until 1996. Mr. Li will lead SmarTone shareholders. forward in its commitment to offering superior service to its customers, and to realize its long-term vision of SmarTone enjoys a strong balance sheet and is well being a leading wireless player in Hong Kong. positioned to take advantage of opportunities that may arise. The Group remains confident in the long-term During the period under review, SmarTone launched a prospects for SmarTone and is fully supportive of its number of consumer-oriented services, providing its vision. The Group will continue to hold its stake in customers with mobile applications that combine broad SmarTone, 28.2 per cent as at 30th June 2001, as a appeal and user convenience. In November 2000, long-term strategic investment. SmarTone teamed up with Standard Chartered Bank to launch mobile banking services and it further extended the service to a broader customer base by partnering with HSBC and Hang Seng Bank. In February 2001, SmarTone launched a mobile betting service which offers a comprehensive range of bets with an easy-to-use application so customers can place bets any time, anywhere.

In August 2001, SmarTone also introduced its General Packet Radio Service (2.5G), allowing customers to SmarTone’s position enjoy mobile data service with data speeds reaching strengthened further during the year, with its over 50kbps. customer base growing to 980,000.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS TRANSPORTATION, INFRASTRUCTURE AND LOGISTICS 46

FRANCHISED BUS OPERATION

The Kowloon Motor Bus Holdings Limited (KMB), in which the Group has a 34 per cent interest, is publicly listed in Hong Kong. Its main business is to provide franchised bus services covering Kowloon and the New Territories. The company reported a net profit of HK$855 million for the year ended 31st December 2000, an increase of 15.7 per cent compared to the previous year. For the six months ended 30th June 2001, the company reported a net profit of HK$885 million, 143 per cent higher than last year. The strong results were due to continued growth of its core KMB had a good year in 2000, with net profit business, and a deemed profit arising from the spin-off of a subsidiary, increasing 15.7 per cent. amounting to HK$320 million. During the year, KMB continued to upgrade its fleet and install environmental protection facilities. The company also put emphasis on developing co-operative arrangements with other transport operators to provide more flexible services and wider coverage. The company aims to maintain its market-leading position in the franchised bus business in Hong Kong while seeking business diversification opportunities in the bus transportation industry in Hong Kong and Mainland China. RoadShow Holdings Limited, a 73.3 per cent subsidiary of the company, was successfully listed on The Hong Kong Stock Exchange in June 2001 raising HK$534 million. RoadShow is engaged in on-board multi- media, transit network media sales and merchandizing.

The Group’s transportation, infrastructure and logistics businesses in Hong Kong

Route 3 River Trade (Country Park Section) Terminal

Container Terminal (Under construction) Waste Transfer Business Station Aviation Centre Landfill Mid-stream Operation Airport Freight Forwarding Centre

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS Transportation, Infrastructure and Logistics 47

TOLL ROAD

The Route 3 (Country Park Section) Company Limited built and now operates the north-south road link between Yuen Long and Ting Kau. The company is 50 per cent owned by the Group. The 10.1-kilometre route consists of the 3.8-kilometre Tai Lam Tunnel and the 6.3-kilometre Yuen Long Approach Road.

Since it opened to the public in May 1998, Route 3 (CPS) has provided a quick and direct link between the northern New Territories and major urban areas, as well as the new airport. This has helped alleviate traffic congestion along the Tuen Mun and Tolo highways and improved cross-border traffic by offering the most efficient route for goods vehicles travelling from the border to the container terminals in Kwai Chung. The toll from the Tai Lam Tunnel was increased in April 2001 while traffic volume remained stable. Toll revenue from Top: Toll revenue from Route 3 (CPS) has been increasing since it began Route 3 (CPS) has been increasing since it began operations and the toll road is already generating positive operations in 1998. cash flows. Left: Wilson Parking is the largest parking operator in Hong Kong. TRANSPORT INFRASTRUCTURE MANAGEMENT The Wilson Group, through its wholly-owned subsidiaries, Wilson Parking (Hong Kong) Limited and The Wilson Group, a wholly owned subsidiary of the Mack & Co. Carpark Management, manages more than Group, oversees parking, tunnel, bridge, tollway and 240 car parks with over 67,000 parking bays. Wilson other transport-related management businesses. Parking is the largest parking operator in Hong Kong It was established in July 1998 following Wilson Parking’s and is ISO-9002-certified. It is re-equipping its access diversification into these business areas. The Wilson control systems to link car parks to an operations Group employs a total of around 4,000 staff. support centre in order to turn its operations cashierless in two years’ time.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS Transportation, Infrastructure and Logistics 48

Through a wholly-owned subsidiary, the Wilson Group PORT BUSINESS has been managing and maintaining the Shing Mun and Asia Container Terminals Limited is 28.5 per cent Tseung Kwan O tunnels under a six-year contract which owned by the Group. It participates in the development commenced in June 2000. In addition, its 66.67 per cent of two berths at Container Terminal 9 on Tsing Yi Island. owned Tsing Ma Management Limited renewed its Construction of the berths began in mid 2000 and will management-operation-maintenance contract for the be completed in stages, with the first stage to commence Tsing Ma Control Area for six years with effect from operation in August 2003. Upon completion, it will May 2001. Wilson Tunnel Management Limited, another exchange its two berths there for two existing berths wholly-owned subsidiary of the Wilson Group, manages at Container Terminal 8. Project financing is already in the Route 3 (CPS). place.

In September 2001, the Wilson Group began managing The Group has a 33 per cent interest in the River public transport interchange facilities at the Olympic Trade Terminal, which occupies a 65-hectare site in and Kowloon stations on the Tung Chung Line through Tuen Mun with 3,000 metres of quayfront and 60 berths, a wholly-owned subsidiary. providing a unique range of containerized and breakbulk cargo handling and storage services for river trade In October 2000, the Wilson Group acquired an between the Pearl River Delta and Hong Kong. Business additional 25 per cent share in Autotoll Limited, making has been growing gradually since operations began. it a 50 per cent shareholder in the only electronic toll collection operator for all ten tolled tunnels and The Group holds a 50 per cent interest in both Hoi expressways in Hong Kong. Kong Container Services Company Limited and Faith & Safe Transportation Company Limited, The Wilson Group has a 30 per cent interest in the two market leaders in the mid-stream industry in Hong Hong Kong School of Motoring Limited. The school Kong. Business during the year was satisfactory for the has been operating successfully for the past 18 years. companies. As the major provider of off-street driver training facilities in Hong Kong, it currently operates three centres in Shatin, Wong Chuk Hang and Yuen Long.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS Transportation, Infrastructure and Logistics 49

AIR TRANSPORT AFFC has been in operation since 1998. It comprises 1.3 million square feet of cargo handling space and The Airport Freight Forwarding Centre 175,000 square feet of premium quality office space, Company Limited (AFFC) became a wholly-owned offering flexible leasing terms and competitive rates for subsidiary of the Group during the year under review. its airport location. Tenants include logistics companies, AFFC operates the only premium freight forwarding freight forwarders and other businesses requiring and logistics centre at the Hong Kong International superior access to the Hong Kong airport’s various Airport. Its strategic airport location and accessibility cargo, maintenance, commercial, passenger and support to the Pearl River Delta region with the Hong Kong services. AFFC’s advanced facilities and supply-chain International Airport Marine Cargo Terminal and Route management capabilities enable tenants to cope with 3 have made it an important transport hub for out- all the demands of global trade in the information age. bound air cargo from southern China.

The Group’s Hong Kong Business Aviation Centre Limited is a franchise at the Hong Kong International Airport that serves all business aircraft flying in and out of Hong Kong. The facilities, located in the southwest corner of the Chek Lap Kok reclamation, include a dedicated apron for aircraft parking, an executive terminal and a 23,800 square-foot hangar, all built to the highest international standards.

Since commencing business in 1998, there has been a steady growth in the number of aircraft movements. The franchise is now in its third year of operation, AFFC’s facilities and services allow tenants generating positive cash flows, and profitability is to meet the needs of global trade. anticipated in the near future. The Group owns 35 per cent of the franchise.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS Transportation, Infrastructure and Logistics 50

LOGISTICS BUSINESS WASTE MANAGEMENT

Capitalizing on its expertise in real estate development Through 20 per cent ownership of Green Valley and management, transport infrastructure, information Landfill Limited, South China Transfer Limited technology and air freight-related businesses, the Group and Pearl Delta Limited, the Group works closely has been exploring wide-ranging opportunities in with PWM Environmental Services – a member logistics. Through Sun Hung Kai Super Logistics company of the French-based multinational Onyx – for Limited and its subsidiaries, as well as a 50 per cent a better environment for Hong Kong. interest in Sun Logistics Company Limited, it is now offering customers a full range of third party logistics The companies are engaged in various environmental services, from warehouse management, distribution and protection and waste management projects. Green fulfilment, to value-added services including assembly, Valley built and operates a 100-hectare landfill site in bundling, labelling and repackaging. Tseung Kwan O with the capacity to handle 43 million cubic metres of waste. South China Transfer built and The Group is seeking logistics business opportunities in operates the largest refuse transfer station in Hong Kong. Mainland China. Investments will concentrate primarily Located on Stonecutters Island, the station can process on major cities, with a focus on air freight logistics. It 2,875 tons of waste a day. Pearl Delta has been plans to work with joint venture partners on the collecting and managing waste at the Hong Kong Mainland and other allies worldwide to create a International Airport at Chek Lap Kok since it opened comprehensive logistics network, positioning itself as in July 1998. the partner of choice for logistics in the Asia Pacific region.

The Group’s logistics arm offers a full range of third party logistics services.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS OTHER INVESTMENT HOLDINGS 51

Thomas Cook Hung Kai Currency Exchange Limited is a joint venture between the Group and Thomas Cook in which the Group holds a 25 per cent interest. As the sole money changer at Hong Kong’s international airport, the company’s major businesses are foreign exchange and the sale of various travel-related products. Revenue has been growing steadily with the increase in passengers travelling through the airport.

New-Alliance Asset Management (Asia) Limited is a 50/50 joint venture between the Group and Alliance Capital Management LP. Since its incorporation in 1997, the company has been engaged in investment management and unit trust and mutual fund distribution in Hong Kong, providing a broad range of services to pension funds of publicly-listed companies and institutional and individual clients. Through the distribution of unit trusts and mutual funds via major financial intermediaries, including some of the world’s top ten banks, the company’s market share in the fund distribution industry is rising.

USI Holdings Limited, a publicly-listed company in which the Group owns a 19 per cent interest, is engaged in garment manufacturing and trading, property development and technology investments. 2000 was a challenging year for the company which registered a net loss of HK$68.9 million. USI aims to consolidate its investments and strengthen its financial position in 2001. The company recorded a net profit of HK$8.1 million in the first half of this year.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 Sun Dong An Plaza, Beijing

With China’s entry to the WTO, continued economic reform and Beijing’s successful bid to host the 2008 Olympic Games, the Group will capitalize on this

favourable environment to expand its investments on the Mainland. MAINLAND CHINA BUSINESS REVIEW OF OPERATIONS MAINLAND CHINA BUSINESS 54

With Beijing’s successful bid to host the 2008 Olympic Games, China’s Land Bank in entry to the WTO and continued economic reform, the Chinese economy Mainland China Attributable gross floor area: will continue to prosper. While maintaining a focused approach, the Group 2.4 million square feet will capitalize on this favourable environment to expand its investments on 42% 37% Shopping Centre Residential the Mainland gradually over time, concentrating on the property business. Taking advantage of experience gained through the development of various landmark projects over past years, the Group will continue to identify new opportunities, primarily in major cities including Beijing, Shanghai, Guangzhou and Shenzhen. BY USAGE

The Group holds 1.8 million square feet of completed investment properties on the Mainland, consisting mainly of offices and shopping centres in prime 21% Office locations. Another 0.6 million square feet of properties are under development, most of which are residential projects. The Group’s land 42% 37% bank in Mainland China, is summarized as follows: Beijing Shanghai

Land Bank in Mainland China Attributable gross floor area in million square feet Shopping Residential Centre Office Total Properties under BY LOCATION development Shanghai 0.1 – – 0.1 21% Guangzhou and Guangzhou Pearl River Delta 0.4 0.1 – 0.5 and Pearl River Delta Subtotal 0.5 0.1 – 0.6 Completed Investment Properties Beijing – 0.8 0.2 1.0 Shanghai 0.4 0.1 0.3 0.8 Subtotal 0.4 0.9 0.5 1.8 To t a l 0 . 9 1 . 00.52.4

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS Mainland China Business 55

MAJOR PROJECTS IN MAINLAND Guangzhou and Pearl River Delta CHINA Guangzhou Glorious Beijing 858 Dongfeng Road East (30% owned) Sun Dong An Plaza The first two phases of 1.7 million square feet of

138 Wangfujing Dajie (50% owned) residential property are complete and virtually fully sold. Details of the third phase of the development are being Sun Dong An Plaza recorded encouraging leasing results planned. during the year and is now 95 per cent let. It comprises 1.3 million square feet of retail space and 430,000 square Zhongshan Residential Project feet of offices. It is held under a 50-year lease that runs to 2043. As an established landmark, it was named Zhongshan 5 Road (Joint venture) one of the Top Ten Beijing Construction Projects of the This project is planned for development into a large- 90s in a poll of Beijing citizens. scale residential estate in phases. The first phase of the project will have approximately 400 units. Preparation Shanghai work is in progress. Central Plaza

381 Huaihai Zhong Road (75% owned)

Central Plaza in Shanghai has become a focal point for the city since its completion in 1999. It consists of 455,000 square feet of offices and a 133,000 square- foot shopping centre. The property is held under a 50-year lease that runs to 2044. Leasing performance has been satisfactory with an overall occupancy rate of 93 per cent.

Arcadia Shanghai

88 Guang Yuan Xi Road, Xu Hui (66.5% owned)

The first phase of about 500,000 square feet of residential units and serviced apartments was completed Arcadia Shanghai is located in Xu Hui District, in 1999. The first batch of residential units is being a traditional deluxe residential area of Shanghai. launched for sale and leasing of the remaining units is satisfactory. Planning of the second phase is being finalized. The property is held under a 70-year lease that expires in 2064.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS CORPORATE FINANCE 56

Maintaining a low gearing, high liquidity, long debt maturities, abundant committed standby banking facilities, a diverse funding base and minimum refinancing risk have always been elements of the Group’s prudent financial policy. The Group will also continue its conservative management of foreign exchange and interest rate risks, avoiding speculative derivatives. Nearly all of its borrowings are in Hong Kong dollars and exposure to foreign currency risk is negligible.

In March 2001, the Group procured a seven-year HK$7.8 billion syndicated loan facility at competitive pricing, and after the overwhelming response from banks, it arranged another seven-year syndicated loan at more favourable terms with 17 leading financial institutions, subscribing for a total of HK$7.5 billion. From July 2000 to September 2001, the Group issued fixed and floating rate notes amounting to HK$2,150 million, with terms of up to eight years under its Euro Medium Term Note Programme. Part of the loan and note proceeds were used to retire the Group’s HK$8 billion syndicated term loan due in January 2002. The remaining funds were used to refinance other short-term debts and provide general working capital.

The Group’s strong financial position is reflected by the up-grade of its rating outlook from stable to positive by Moody’s, on a par with the Hong Kong Government’s sovereign ceiling for foreign debt.

Credit Ratings Foreign Currency Local Currency Moody’s A3 A2 Standard & Poor’s A A

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS INVESTOR RELATIONS 57

Believing that it is important to maintain interactive communications with investors about its corporate strategy and developments, the Group will continue its transparent and open approach to investor relations.

The Group strives to disseminate market-sensitive information on a timely basis through various channels. It holds press conferences and analysts’ meetings immediately after results are announced, with directors and senior management available to answer questions, and it distributes regular press releases and publications such as the SHKP Quarterly in addition to annual and interim reports. All this information is also available on the Group’s Internet site www.shkp.com.hk. In January 2001, the Group introduced an Investor Relations Contact section in its web site to encourage more effective communications with investors via e-mail.

During the year, the Group organized property visits for analysts and investors to various developments, including exclusive previews of The Leighton Hill show flats and the Two International Finance Centre multi- media showcase. The Group received highly-positive comments from the investment community on its commitments to developing premium-quality projects and providing customer-oriented service. As part of its corporate culture, the Group emphasizes two-way communication, and during the year it took part in a number of conferences and presentations, both in Hong Kong and overseas. Senior management gave numerous investor interviews, and also went on road shows to the US, Europe and Singapore to update investors about the Hong Kong property market and the Group’s latest developments.

The Group has consistently been placed highly in Asiamoney magazine’s Best Managed Company rankings over the years, and its Internet site has been praised by independent surveys. The Group will continue to enrich and update the contents of its web site frequently with the latest financial and corporate information, employing all available channels to reach out to the investment community.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 Customer care is a top priority for the Group. During the year under review, its property management companies Hong Yip and

Kai Shing won over 30 awards from a variety of organizations for superb management service. CUSTOMER SERVICE REVIEW OF OPERATIONS CUSTOMER SERVICE 60

Customer care is a top priority for the Group, and it is constantly looking for new ways to improve the quality of products and services for all its customers.

All the Group’s front-line staff undergo extensive training in customer service, including attitude, manners and dress. The training is on-going and supported by systematic evaluation.

The Group and its property management subsidiaries Hong Yip and Kai Shing do everything possible to offer residents a comfortable and convenient lifestyle, as well as a harmonious community. As a result, the management companies consistently receive accolades for their service. In the year under review, the two companies won over 30 prizes from a variety of organizations, including trade associations, Government departments and the news media.

During the year under review, Kai Shing extended the use of information technology in property management, monitoring facilities via the Internet and allowing residents to check services or the progress of repairs on-line in some of the Group’s estates with Super e-Management. As part of the quest to continually improve service quality, the system will be extended to cover more than 100 estates.

For buyers of new residential properties, a special inter-departmental team was formed in 1996 to assess the quality of each newly-completed unit and assist owners with handover procedures. This service has further improved during the year under review. Owners now receive one-stop service, with one staff member assigned to look after the handover and any repair work for each owner.

To serve consumers in the Group’s shopping centres better, Customer Service Centres were established in more malls over the year. The centres are staffed by courteous, well-dressed Customer Service Ambassadors to assist visitors.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS Customer Service 61

In an effort to improve communications with the general public, the Group founded the SHKP Club. Membership in the Club continues to grow, now standing at over 140,000. Building on the success of initiatives such as the Show Flat Preview Loyalty Scheme, the Club introduced various new benefits and services for members during the year under review, such as its Member-Property Buyers Reward Programme. With a wide range of leisure and property-related activities, the Club offers members total service.

The Citibank SHKP Club VISA Card launched in 1999 is the world’s first four-in-one smart card. With the card, residents enjoy exclusive shopping, residential and banking services, as well as all the privileges of Club membership and special offers in eight of the Group’s major shopping centres.

The Club will continue to attract new members and promote two-way communication with the public through various means, including property previews and related activities, leisure events and the Internet.

In recognition of the Group’s efforts at customer service Top: Show flat previews are well received by the SHKP Club’s 140,000 members. and two-way communication, its Internet site was named Bottom: New owners get one-stop service when they take Best Property Developer’s web site in all of Asia in a possession, with help in completing documentation and follow-up on repairs. survey.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS ENVIRONMENTAL PROTECTION AND PROMOTION 62

The Group’s dedication to environmental protection has won recognition and praise from various environmental organizations.

Green living space is an essential element of the Group’s property designs. New properties make extensive use of environmentally- friendly building materials and include energy-saving facilities. While construction is under way, workers follow strict environmental protection guidelines in order to minimize pollution.

During the year under review, both The Parcville and Villa by the Park in Yuen Long received Excellent ratings from the Business Kai Shing won first prize in the Environment Council, under its Hong Kong Building Environmental Outstanding Green Project Awards 2000. Assessment Method. The Parcville was the first private residential estate in Hong Kong to have received this honour, while Villa by the Park received the highest rating.

Promoting community awareness of environmental protection, the Group’s two property management companies, Kai Shing and Hong Yip, staged a number of green activities in their estates with good results. Hong Yip was named ‘Most Environmentally-friendly Property Management Agent’ this year by the Hong Kong Housing Authority, and Kai Shing took three prizes in the 2000 Hong Kong Eco-Business Awards. Kai Shing also won first prize in the ‘Outstanding Green Project Awards 2000’ in the Landscape Management category, for its achievements in Palm Springs and Royal Palms in Yuen Long with the ‘Friendly Neighbour of Mai Po’ environmental landscape management plan.

Always looking for new ways to safeguard the environment, the Group’s wholly-owned subsidiary Nixon Cleaning was the first in Hong Kong to use patented technology from North America to produce Totally Degradable Plastics (TDP). TDP can be used to manufacture a full range of environmentally-friendly plastic products, making a major contribution to solving the problem of plastic waste. Many TDP products are now being used in the Group’s developments.

The Group also promotes environmental awareness through community activities. The Group’s Metroplaza in Kwai Chung staged an event in which 57 local Girl Guides tried to create the world’s largest aluminum-can mosaic and the attempt has been submitted to the Guinness Book of World Records. SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS STAFF RELATIONS AND TRAINING 63

Knowing that staff training and career development are essential to sustaining a company’s growth, the Group organized more than 350 classes for over 10,000 attendees during the period under review. The Group’s 18,000 employees (not counting those employed by associated companies) had the opportunity to benefit from a variety of programmes. Training courses are designed to support diverse business needs, focusing on key areas such as customer service, management techniques, business and technology, language and communication, interpersonal and technical skills and personal as well as quality management.

To support the Group’s core objective of providing premium products and service, an ongoing Service Excellence Programme began in 1999, producing visible results. In the year under review, 7,000 service staff went through this tailor-made programme followed up with comprehensive on- the-job coaching and measurement. To further improve the quality of new developments, a Performance Excellence Programme was also introduced in 1999 for all construction staff. The first batch of 100 staff completed the one-year course in stages during 2000, emerging with greater technical and management competence. The programme continues, with more staff taking part each year.

Staff at all levels can apply for sponsorship to take courses offered by external institutions. Programmes ranging from short seminars to full degree courses are eligible for substantial sponsorship.

Self-learning is also promoted within the Group. A training library with a full collection of self-learning materials has been in existence since 2000. Staff are also encouraged to use the Group’s corporate intranet and the Internet to search for information and enhance their knowledge and skills.

The Group organized over 350 courses for more than 10,000 attendees during the year.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS THE GROUP AND THE COMMUNITY 64

As part of its commitment to being a good corporate citizen, the Group offers ongoing support for quality education and the less fortunate in society. During the year under review, the Group donated a total of HK$47 million to charitable causes.

Promoting education is one of the Group’s primary goals, and it gives money and assistance through various channels to boost education and encourage talent in both Hong Kong and Mainland China. The Group is also concerned about how young people cope with the changing society, and it donated HK$2 million to the Boys’ and Girls’ Clubs Association of Hong Kong during the year, so they could set up hotlines for children and a counselling centre to help young people.

To support the development of quality education, the Group began the Northwest New Territories Elite Students Programme some years ago, giving 12 Yuen Long and Tuen Mun primary and secondary schools added funds to offer extra-curricular courses and raise standards. This year, for the first time, the Group sponsored two top students from the northwest New Territories to attend the US ‘Presidential Classroom’ in Washington DC. In addition, the Group continued its sponsorship of six MBA students at The Chinese University of Hong Kong.

Furthering higher education in Mainland China, the Group established a funding programme at Tsinghua University in Beijing to encourage distinguished professors. This is the fifth consecutive year that the Group has injected HK$1 million to the fund, enabling more outstanding scholars to benefit. The Group also donated money to encourage excellence among management and administrative staff at Tsinghua University, as well as to a programme helping disadvantaged students with serious illnesses in Guangzhou complete their studies.

In addition to supporting educational institutions in Mainland China, the Group donated HK$1 million to set up the ‘Sun Hung Kai Properties Group Scholarships’ at The Chinese University of Hong Kong, helping young people from the Mainland to do undergraduate studies there.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REVIEW OF OPERATIONS The Group and the Community 65

The Community Chest is one organization that the Group has supported for many years. During the year under review, the Group donated HK$1 million to the Community Chest as sole sponsor of the annual Hong Kong Walk for Millions and an additional HK$1 million in support of the Chest’s Corporate Challenge Marathon. Many staff members took part in those events with the Group’s encouragement.

The Group continues its support for the SHKP Fund for the Elderly, helping improve quality of life for needy seniors. The Group also supports charities in other ways. For many years, the Group has provided office space to Project ORBIS in Hong Kong for a token rent, and this year ORBIS presented the Group with its Crystal Award. The Group also supported a blood donation drive organized by the Hong Kong Red Cross this year. About 150 staff members joined in, and the Group’s residential estates and shopping malls also held successful blood donation campaigns. In recognition of the Group’s efforts, the Hong Kong Red Cross presented it with a Special Merit Award.

Above: The Northwest New Territories Elite Students Programme is part of the Group’s support for quality education. Top right: The Group was the sole sponsor of the annual Hong Kong Walk for Millions organized by the Community Chest. Bottom right: The Group’s support has helped train distinguished scholars at Tsinghua University in Beijing for a number of years.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 FINANCIAL REVIEW 66

REVIEW OF RESULTS

The Group’s profit attributable to shareholders for the year ended 30th June 2001 was HK$8,330 million, lower by 23 per cent compared to HK$10,822 million achieved in the previous year. The profit for the previous year included an exceptional gain of HK$2,688 million arising from the spin off of SUNeVision. Excluding this non-recurring item, the profit for the current year would show an increase of 2.4 per cent.

Property Sales Property sales revenue for the year was HK$8,218 million (2000: HK$16,957 million). Profit generated from property sales was HK$3,625 million (2000: HK$4,078 million). The decline in sales revenue and profit reported at the Group level was mainly due to the fact that almost half of the volume of property developments completed for sale was engaged through joint venture companies whereby the sales were recognized under the share of results from jointly controlled entities and associates. Including the Group’s share of the jointly controlled entities and associates, property sale turnover was HK$14,359 million, down by 17 per cent whereas profit from property sales was HK$4,861 million, up by 18 per cent over the previous year. The improvement in profitability was mainly attributable to the two major development profit contributors, Le Sommet and Chelsea Heights Phase 2, both of which achieved a high margin primarily due to the low land cost.

Rental Income Performance of the Group’s rental portfolio was satisfactory. Average occupancy levels stayed high throughout the year. Gross rental income increased marginally by almost 2 per cent to HK$5,392 million. Net rental income was HK$4,073 million compared to HK$4,059 million last year. These figures have not included the rental contributions from joint venture companies. Including the Group’s share of rental income from jointly controlled entities, total gross and net rental income was HK$5,877 million and HK$4,401 million, up by 3.7 per cent and 1.7 per cent respectively over the previous year. The growth was mainly due to the full-year rental contribution from One International Finance Centre, Millennium City Phase 1 and Phase 2 as well as the increased rental income from investment properties in China, namely Sun Dong An Plaza in Beijing and Central Plaza in Shanghai, following the continuous improvement on the occupancy levels.

Property Management Profit contribution from property management business grew steadily by 7.7 per cent to HK$252 million with the gradual expansion of the Group’s property management portfolio.

Hotel Operations Both average occupancy rates and room rates of the Group’s three hotels continued to improve during the year resulting in higher operating efficiency and greater profit margin. Operating profit from hotel operations increased substantially by 30 per cent to HK$195 million.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 FINANCIAL REVIEW 67

Other Business Activities Profits generated from other business activities reported a decline by HK$141 million to HK$122 million, mainly due to the operating loss incurred by its subsidiary, SUNeVision.

Other Revenue Other revenue, which comprised mainly income from investments in securities and interest income from advances to joint venture companies, increased to HK$547 million (2000: HK$42 million), due to increase in investment activities during the year.

Finance Costs Net finance costs for the year increased by HK$21 million to HK$1,158 million after capitalization of HK$593 million (2000: HK$114 million). The increase in net finance costs was the result of an increase in average net debt. More interest was capitalized for the year than last year owing to higher capital expenditures incurred on investment properties under development.

Profit on Disposal of Investments The Group recorded a profit of HK$445 million (2000: HK$1,236 million) from disposal of investments, comprising mainly listed shares originally held for long-term investment.

Share of Profits Less Losses of Associates and Jointly Controlled Entities Share of profits before taxation from associates and jointly controlled entities increased by HK$1,204 million to HK$1,582 million. The increase was mainly due to profits from property sales in the total amount of HK$1,236 million generated from joint venture property development projects including The Belcher’s Phase 1, Royal Peninsula, Ocean Shores Phase 1 and Villa Esplanada Phase 3. Share of pre-tax profit from KMB increased by seven per cent to HK$304 million while share of loss from SmarTone reduced to HK$81 million from HK$96 million.

FINANCIAL RESOURCES AND LIQUIDITY

The Group’s financial position remains strong, with a large capital base and a low debt leverage. The Group’s total shareholders’ funds increased to HK$126,007 million as at 30th June 2001 compared to HK$120,904 million at the previous year end, mainly due to the upward revaluation of the Group’s investment property portfolio and profits retained for the year.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 FINANCIAL REVIEW 68

At 30th June 2001, the Group’s total borrowings amounted to HK$28,992 million. Net debt (after deducting cash and bank deposits of HK$9,061 million) amounted to HK$19,931 million. All of the Group’s borrowings are unsecured and arranged on a committed, medium to long term basis with a maturity profile analyzed as follows :

2001 2000 HK$M HK$M

Repayable: Within one year 4,997 4,584 After one year but within two years 6,680 12,868 After two years but within five years 10,473 9,522 After five years 6,842 1,415

Total borrowings 28,992 28,389

Cash and bank deposits 9,061 10,414

Net debt 19,931 17,975

The Group’s net debt was up by HK$1,956 million during the year. The increase in net debt level was primarily due to increased expenditure for land acquisitions, including the land premium for the Airport Railway Kowloon Station Development Packages 5, 6 and 7. Gearing ratio at the year end, measured by net debt to shareholders’ funds, stood at 15.8 per cent (2000: 14.9 per cent). Interest coverage for the year, measured by the ratio of profit from operations to interest expenses before capitalization, remained strong at 4.8 times (2000: 6.7 times).

Apart from refinancing short term debts with long term borrowings, the Group has also secured substantial undrawn facilities on a committed basis from its relationship banks, which helps the Group minimize refinancing risk of its debt and provides the Group with strong financing flexibility.

Net Debt to Shareholders’ Net Debt Debt Maturity Profile Funds Ratio As at 30th June 2001

Percentage HK$ million 24% 36% 25 30,000 Over 5 years 2-5 years 26,671 19.8 25,000 20 17.8 20,295 19,931 15.8 20,000 14.9 17,975 15 15,000 12,786 12.0 10 10,000

5 5,000 17% 23% Within 1 year 1-2 years

1997 1998 1999 2000 2001 1997 1998 1999 2000 2001

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 FINANCIAL REVIEW 69

All the Group’s financing and treasury activities are centrally managed and controlled at the corporate level. As at 30th June 2001, 96 per cent of the Group’s borrowings were raised through its wholly-owned finance subsidiaries and the remaining 4 per cent through operating subsidiaries.

The Group adopts a conservative policy in financial risk management, having little exposure to foreign exchange and interest rate risks. Approximately 95 per cent of the Group’s borrowings were denominated in Hong Kong dollars, with the balance in US dollars and Renminbi to fund property projects in the Mainland. The Group’s borrowings are mostly arranged on a floating rate basis. For the fixed rate notes issued under the Euro Medium Term Note Programme, interest rate swaps have been utilized to convert the rates into floating rate basis. When appropriate, hedging instruments including interest rate and currency swaps are used to assist the Group to manage its exposure to interest rate and foreign currency exchange fluctuations in connection with its borrowings. The Group will not enter into derivative transactions for speculative purposes.

Expenditures incurred on acquisitions of land for the year amounted to HK$7,400 million, which were financed primarily by internally generated funds from operations and, to the extent required, by debt financing. With substantial committed banking facilities in place, continuous cash inflow from property sales and a solid base of recurrent income, the Group is in a strong liquidity position and has sufficient financial resources to satisfy its capital commitments and ongoing working capital requirements.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 GROUP FINANCIAL SUMMARY 70

1997 1998 1999 2000 2001 For the year ended 30th June HK$ HK$ HK$ HK$ HK$

Earnings per share 5.93 3.04 3.87 4.51 3.47 Dividends per share 2.35 1.20 1.55 1.75 1.55 Special cash bonus per share 0.38 – – – – Shareholders’ funds at book value per share 56.38 47.55 44.40 50.36 52.48 Financial ratios: Net debt to shareholders’ funds Net debt 19.8% 17.8% 12.0% 14.9% 15.8% Shareholders’ funds Interest cover Profit from operations 12.9 5.4 5.4 6.7 4.8 Net interest expenses before capitalization HK$M HK$M HK$M HK$M HK$M

Turnover 28,425 22,890 23,404 25,826 17,701 Profit from operations 15,942 14,128 10,159 8,340 8,329 Profit attributable to shareholders 14,160 7,260 9,278 10,822 8,330

Balance Sheet 1997 1998 1999 2000 2001 As at 30th June HK$M HK$M HK$M HK$M HK$M

Fixed assets 111,547 91,210 77,915 86,291 94,698 Investments and loans 23,652 18,173 26,111 27,708 28,786 Land pending development 21,052 22,658 15,137 18,908 17,324 Net current assets 13,169 6,668 4,670 13,413 10,804 Long term liabilities (33,763) (24,127) (16,253) (23,805) (23,995) Minority interests (948) (880) (967) (1,611) (1,610)

134,709 113,702 106,613 120,904 126,007 Share capital 1,195 1,196 1,201 1,201 1,201 Share premium and reserves 133,514 112,506 105,412 119,703 124,806

Shareholders’ funds 134,709 113,702 106,613 120,904 126,007

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 DIRECTORS’ REPORT 71

The directors present their report for the year ended 30th June 2001:

PRINCIPAL ACTIVITIES The principal activity of the Company continues to be holding investments in various subsidiaries.

The principal activities of the Group continue to be the development of and investment in properties for sale and rent. Ancillary and supporting businesses, which are described under subsidiaries on pages 116 to 120, are integrated with the main business of the Group. Turnover and contributions to operating profit from overseas activities are immaterial. A segmented analysis of turnover and contributions to operating profit for the Group (excluding jointly controlled entities and associates) is set out below: Profit from Operations Tu rnover before Finance Cost 2001 2000 2001 2000 HK$M HK$M HK$M HK$M Property sales 8,218 16,957 3,625 4,078 Rental income 5,392 5,292 4,073 4,059 Property management 860 817 252 234 Hotel operation 590 542 195 150 Other business activities 2,641 2,218 122 263 17,701 25,826 8,267 8,784 Other revenue 547 42 Unallocated administrative expenses (485) (486) Profit from operations 8,329 8,340

GROUP PROFITS Profit after taxation, including shares of profit from jointly controlled entities and associates, amounted to HK$8,340 million (2000: HK$10,809 million). After taking minority interests into account, profit attributable to shareholders was HK$8,330 million (2000: HK$10,822 million).

DIVIDENDS An interim dividend of HK$0.55 per share (2000: HK$0.55) was paid on 12th April 2001. The directors recommend a final dividend of HK$1.00 per share (2000: HK$1.20), making a total dividend of HK$1.55 per share for the full year ended 30th June 2001 (2000: HK$1.75).

PURCHASE, SALE OR REDEMPTION OF SHARES The Company did not redeem any of its ordinary shares during the year. Neither the Company nor any of its subsidiaries purchased or sold any of the Company’s ordinary shares during the year.

SHARE PREMIUM AND RESERVES Movements in the share premium and reserves of the Company and the Group during the year are shown in note 26 to the financial statements.

FIXED ASSETS Movements of fixed assets during the year are shown in note 11 to the financial statements.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 DIRECTORS’ REPORT 72

GROUP FINANCIAL SUMMARY The results, assets and liabilities of the Group for the last five years are summarized on page 70.

PROPERTIES Particulars of major investment properties held by the Group are set out on pages 36 to 37.

DIRECTORS The list of directors is set out on page 2 of the report and their particulars are set out on pages 79 to 82. All directors, other than Dr. Ho Tim who retired on 20th March 2001 and Sir Sze-yuen Chung who has been appointed as independent non- executive director on 30th March 2001, held office for the whole year. In accordance with Article 95 of the Company’s Articles of Association, the new director, Sir Sze-yuen Chung, will retire at the forthcoming Annual General Meeting and, being eligible, will offer himself for re-election. In accordance with Article 104(A) of the Company’s Articles of Association, Dr. Victor Fung Kwok-king, Messrs. Kwong Chun, Michael Wong Yick-kam and Mike Wong Chik-wing will retire by rotation at the forthcoming Annual General Meeting and, being eligible, will offer themselves for re-election. None of the directors proposed for re-election has a service agreement with the Company or any of its subsidiaries which is not determinable within one year without payment of compensation, other than statutory compensation. Mr. Law King-wan, executive director, will retire on 1st October 2001 but will continue to act as non-executive director.

DISCLOSURE OF INTERESTS Directors’ Interests in the Company As at 30th June 2001, the interests of the directors and the chief executive of the Company in the equity securities of the Company, as recorded in the register required to be kept under Section 29 of the Securities (Disclosure of Interests) Ordinance (the “Ordinance”), were as follows:

No. of shares in which the Directors were interested Category of Interest Personal Family Corporate Other Name of Director Interest Interest Interest Interest Total Kwok Ping-sheung, Walter – – – 1,073,792,522 1,073,792,522 (Note 1) Lee Shau-kee 486,340 – – 343,000 829,340 Kwok Ping-kwong, Thomas 1,901,281 304,065 – 1,071,842,214 1,074,047,560 (Note 1) Kwok Ping-luen, Raymond – 1,000 – 1,074,985,895 1,074,986,895 (Note 1) Kwan Cheuk-yin, William 123,780 – – – 123,780 Lo Chiu-chun, Clement 137,273 62,117 – – 199,390 Law King-wan 20,000 70,267 – – 90,267 Chan Kai-ming 41,186 – – – 41,186 Chan Kui-yuen, Thomas 126,500 66,000 – – 192,500 Kwong Chun 702,722 339,358 – – 1,042,080 Wong Yick-kam, Michael 50,904 – – – 50,904 Wong Chik-wing, Mike 150,999 – – – 150,999

Note 1 Messrs. Walter Kwok Ping-sheung, Thomas Kwok Ping-kwong and Raymond Kwok Ping-luen were deemed (by virtue of the Ordinance) to be interested in the number of shares in the Company shown opposite their names respectively. Of those shares, 1,051,808,347 shares represented the same interests and were therefore duplicated among those three directors.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 DIRECTORS’ REPORT 73

Directors’ Interests in Other Associated Corporations As at 30th June 2001, the interests of the directors and the chief executive of the Company in the equity securities of any associated corporation (within the meaning of the Ordinance), as recorded in the register required to be kept under section 29 of the Ordinance, were as follows:

(i) The following directors had the following interests in the equity securities of SUNeVision Holdings Limited:

No. of shares in which the Directors were interested Category of Interest

Personal Family Corporate Other Name of Director Interest Interest Interest Interest Total Kwok Ping-sheung, Walter – – – 1,070,000 1,070,000 (Note 2) Kwok Ping-kwong, Thomas – – – 1,070,000 1,070,000 (Note 2) Kwok Ping-luen, Raymond 672,500 – – 1,070,000 1,742,500 (Note 2) Fung Kwok-king, Victor – – – 8,000 8,000 Kwan Cheuk-yin, William 884 – – – 884 Lo Chiu-chun, Clement 2,771 – – – 2,771 Chan Kai-ming 115,000 – – – 115,000 Kwong Chun 300,000 – – – 300,000 Wong Chik-wing, Mike 109,000 – – – 109,000

Note 2 Messrs. Walter Kwok Ping-sheung, Thomas Kwok Ping-kwong and Raymond Kwok Ping-luen were deemed (by virtue of the Ordinance) to be interested in the number of shares shown opposite their names respectively. Of those shares 1,070,000 shares represented the same interests and were therefore duplicated among those three directors.

(ii) Each of Messrs. Walter Kwok Ping-sheung, Thomas Kwok Ping-kwong and Raymond Kwok Ping-luen had the following interests in the equity securities of the following associated corporations:

Associated Corporation No. and Class of Securities Category of Interest Superindo Company Limited 10 shares Personal Super Fly Company Limited 10 shares Personal Splendid Kai Limited 2,500 shares Corporate Hung Carom Company Limited 25 shares Corporate Tinyau Company Limited 1 share Corporate Open Step Limited 8 shares Corporate

(iii) Mr. Walter Kwok Ping-sheung, Mr. Raymond Kwok Ping-luen and Sir Sze-yuen Chung had personal interests of 61,522 shares, 393,350 shares and 18,821 shares respectively in the equity securities of The Kowloon Motor Bus Holdings Limited. (iv) Mr. Raymond Kwok Ping-luen had a personal interest of 692,846 shares in the equity securities of SmarTone Telecommunications Holdings Limited.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 DIRECTORS’ REPORT 74

(v) Dr. Lee Shau-kee has other interests in the equity securities of the following associated corporations:

Associated Corporation (Note 3) No. and Class of Securities Mightypattern Limited 200 shares Star Play Development Limited 1 share Central Waterfront Property Holdings Limited 47.5% of issued share capital Newfoundworld Holdings Limited 40,000 shares Topcycle Development Limited 1 share Anbok Limited 2 shares Teamfield Property Limited 4,918 shares SmarTone Telecommunications Holdings Limited 179,500 shares

Note 3 The shares in Mightypattern Limited and Star Play Development Limited were beneficially owned by Henderson Investment Limited (“HI”). The respective interests of Henderson Land Development Company Limited (“HL”) and The Hong Kong and China Gas Company Limited (a company in which the subsidiaries of HI owned more than one-third of its issued shares) in Central Waterfront Property Holdings Limited were 32.5 per cent and 15 per cent respectively. The shares in Newfoundworld Holdings Limited and Topcycle Development Limited were beneficially owned by HL. The shares in Anbok Limited and in Teamfield Property Limited were held by a company in which HL had a 50 per cent interest. The shares in SmarTone Telecommunications Holdings Limited were beneficially owned by a subsidiary of the Hong Kong and China Gas Company Limited. Dr. Lee Shau-kee beneficially owned all the issued capital of Hopkins (Cayman) Limited. Hopkins (Cayman) Limited, as the trustee of a unit trust, owned all the issued ordinary shares which carried voting rights in the capital of Henderson Development Limited (“HD”). HD was the holding company of HL, which was the holding company of HI. By virtue of the provisions of the Ordinance and the matters aforesaid, Dr. Lee Shau-kee was taken to be interested in the shares and interests as mentioned above. (vi)Dr. Victor Fung Kwok-king had corporate interests of 70 shares in the equity securities of Fun Fun World Investment Limited. (vii) None of the directors had any interests in any debt securities issued by the Company or any jointly controlled entities and associated corporation.

SHARE OPTION SCHEME Share option scheme of the Company The following directors were granted options at HK$1.00 per option in respect of shares of the Company under its share option scheme during the period ended 30th June 2001 as follows:

Exercise Option Exercised Balance Outstanding Name of Director Date of Grant Price (HK$) No. of Shares During the Year at 30/6/2001 Chan Kui-yuen, Thomas 15/2/2000 70.00 150,000 – 150,000 Wong Yick-kam, Michael 15/2/2000 70.00 150,000 – 150,000 Wong Chik-wing, Mike 15/2/2000 70.00 150,000 – 150,000

The above mentioned options can be exercised in accordance with the following terms: (i) other than in the circumstances set out in the scheme, the options are not exercisable during the first year of the option period running from 15th February 2000; and (ii) the option holder can exercise up to one third of the option during the second year of the option period, up to two thirds of the option during the third year of the option period and all or part of the option any time three years after 15th February 2000.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 DIRECTORS’ REPORT 75

Share option scheme of SUNeVision Holdings Limited The following directors were granted options at HK$1.00 per option in respect of shares of SUNeVision Holdings Limited under its share option scheme during the period ended 30th June 2001 as follows:

Exercise Option Exercised Balance Outstanding Name of Director Date of Grant Price (HK$) No. of Shares During the Year at 30/6/2001 Kwok Ping-sheung, Walter 28/3/2000 10.38 415,000 – 7/4/2001 2.34 180,000 – 595,000 Kwok Ping-Kwong, Thomas 28/3/2000 10.38 415,000 – 7/4/2001 2.34 180,000 – 595,000 Kwok Ping-luen, Raymond 28/3/2000 10.38 755,000 – 7/4/2001 2.34 350,000 – 1,105,000 Chan Kui-yuen, Thomas 28/3/2000 10.38 510,000 – 7/4/2001 2.34 180,000 – 690,000 Wong Yick-kam, Michael 28/3/2000 10.38 360,000 – 7/4/2001 2.34 180,000 – 540,000

The above mentioned options at the exercise price of HK$10.38 per share may be exercised in accordance with the following terms: (i) one third of the options within three years commencing on 31st December 2000; (ii) a further one third of the options within three years commencing on 31st December 2001; and (iii) the remaining one third of the options within three years commencing on 31st December 2002.

The above mentioned options at the exercise price of HK$2.34 per share may be exercised in accordance with the following terms: (i) one third of the options within three years commencing on 20th March 2002; (ii) a further one third of the options within three years commencing on 20th March 2003; and (iii) the remaining one third of the options within three years commencing on 20th March 2004.

Other Share Option Schemes Two more share option schemes were approved for two subsidiaries of the Company, iAdvantage Limited and SUNeVision Red-Dots Limited, allowing their respective boards of directors the right to grant to their full-time employees and executive directors the chance to subscribe for their shares, which in aggregate represent up to 10 per cent of the issued capital of the respective companies from time to time. No such options were granted to any director of the Company during the year.

ARRANGEMENT TO PURCHASE SHARES OR DEBENTURES Other than the share option schemes as mentioned above, at no time during the year was the Company or any of its subsidiaries a party to any arrangement to enable the directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or of any other body corporate.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 DIRECTORS’ REPORT 76

SUBSTANTIAL SHAREHOLDERS As at 30th June 2001, the interests of every person, other than a director or the chief executive of the Company, being 10 per cent or more in the equity securities of the Company, as recorded in the register required to be kept under Section 16(1) of the Ordinance, were as follows:

Name of Shareholder No. of Shares in which the Shareholder was interested HSBC Holdings plc 1,123,601,108 HSBC Finance (Netherlands) 1,123,031,659 HSBC Holdings B.V. 1,123,031,659 HSBC Investment Bank Holdings B.V. 1,081,551,594 HSBC International Trustee Limited (Note 4) 1,080,582,744

Note 4 The shares in which HSBC International Trustee Limited was interested formed part of the shares in which HSBC Investment Bank Holdings B.V. was interested; the shares in which HSBC Investment Bank Holdings B.V. was interested formed part of the shares in which HSBC Holdings B.V. was interested; the shares in which HSBC Holdings B.V. was interested were the shares in which HSBC Finance (Netherlands) was interested and the shares in which HSBC Finance (Netherlands) was interested formed part of the shares in which HSBC Holdings plc was interested. Of the above shares in the Company in which HSBC International Trustee Limited was interested, 1,051,808,347 shares were part of the shares referred to in Note 1 above.

BANK BORROWINGS Details of bank borrowings are set out in notes 20 and 22 to the financial statements on pages 108 and 109.

INTEREST CAPITALIZED Interest capitalized during the year amounted to HK$593 million (2000: HK$114 million).

CHARITABLE DONATIONS HK$47 million was donated during the year (2000: HK$25 million).

DIRECTORS’ INTERESTS IN COMPETING BUSINESSES The interests of directors of the Company in competing businesses as at 30th June 2001 required to be disclosed pursuant to Rule 8.10 of the Listing Rules were as follows:

Messrs. Kwok Ping-sheung, Walter, Kwok Ping-kwong, Thomas and Kwok Ping-luen, Raymond are brothers (collectively “the Kwok Brothers”) within a family whose businesses consist of property development and investment in Hong Kong through companies in which they have maintained certain personal and deemed interests. As such, they are regarded as being interested in such competing businesses (“Excluded Businesses”) with the Company and its subsidiaries (“the Group”). However, when compared with the dominance and size of operations of the Group, such Excluded Businesses are immaterial. Since the Group does not have property developments and investments in locations other than in Hong Kong and Mainland China and the Kwok family does not have such businesses in the Mainland, the Kwok Brothers are therefore not regarded to be interested in such Excluded Businesses of the Group in the Mainland.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 DIRECTORS’ REPORT 77

Messrs. Kwok Ping-sheung, Walter and Kwok Ping-luen, Raymond are directors of The Kowloon Motor Bus Holdings Limited in which the Group has a substantial interest, which businesses consist of property development and investment. In this regard, each of them is regarded to be interested in such Excluded Businesses with the Group.

Mr. Kwok Ping-luen, Raymond is the Chairman of SmarTone Telecommunications Holdings Limited in which the Group has a substantial interest, which businesses consist of Internet services. In this respect, he is regarded to be interested in such Excluded Businesses with SUNeVision Holdings Limited, the technology arm of the Group.

Dr. Lee Shau-kee is the Chairman and Managing Director of Henderson Land Development Co. Limited and Henderson Investment Limited. He is also Chairman of Henderson China Holdings Limited, a director of The Miramar Hotel and Investment Co. Limited, The Hong Kong and China Gas Company Limited and certain subsidiaries of the aforementioned listed companies. In addition to his being a director, Dr. Lee has maintained certain personal and deemed interests in some of these companies, which businesses consist of property development and investment, property management, infrastructure, Internet and telecommunication services, which constitute Excluded Businesses of the Group. Dr. Lee is a non-executive director of the Company, who is not involved in the daily management of the Group.

The Kwok Brothers are directors of USI Holdings Limited and Mr. Wong Yick-kam, Michael is an alternate director to them. The Group has a substantial interest in the company, which businesses consist of property development and investment, and therefore each of them is regarded to be interested in such Excluded Businesses with the Group.

Other than the family businesses of the Kwok Brothers, the above-mentioned Excluded Businesses are managed by separate publicly listed companies with independent management and administration. In this respect, coupled with the diligence of its independent non-executive directors and the Audit Committee, the Group is capable of carrying on its businesses independent of, and at arms length from, the Excluded Businesses mentioned above.

INTEREST IN CONTRACTS No contracts of significance to which the Company or any of its subsidiaries was a party and in which a director had a material interest subsisted at any time during the year.

MAJOR CUSTOMERS AND SUPPLIERS During the year, less than 30 per cent of the Group’s sales and less than 30 per cent of the Group’s purchases were attributable to the Group’s five largest customers and five largest suppliers respectively.

AUDITORS The retiring auditors, Messrs. Deloitte Touche Tohmatsu, have signified their willingness to continue in office. A resolution will be proposed at the Annual General Meeting to re-appoint them and to authorize the directors to fix their remuneration.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 DIRECTORS’ REPORT 78

AUDIT COMMITTEE The Audit Committee, which was established pursuant to the requirements of the Rules Governing the Listing of Securities of The Stock Exchange of Hong Kong Limited, comprising Mr. William Kwan Cheuk-yin (Chairman), Sir Sze-yuen Chung (appointed on 9th July 2001 in replacement of Dr. Ho Tim) and Mr. Clement Lo Chiu-chun, met twice in the year.

During the meetings, the Committee reviewed and made recommendations on the improvement of the Company’s financial reporting process and internal controls.

CODE OF BEST PRACTICE The Company has complied with the Code of Best Practice as set out in Appendix 14 to the Listing Rules of The Stock Exchange of Hong Kong Limited during the accounting period covered by this annual report.

This report is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the Board.

Kwok Ping-sheung, Walter Chairman & Chief Executive

Hong Kong, 27th September 2001

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 DIRECTORS AND ORGANIZATION 79

DIRECTORS AND SENIOR MANAGEMENT

KWOK Ping-sheung, Walter KWOK Ping-kwong, Thomas Msc(Lond), DIC, MICE, JP MSc (Bus Adm), BSc (Eng), FCPA, JP Chairman & Chief Executive (Age: 50) Vice Chairman & Managing Director (Age: 49)

Mr. Kwok has been with the Group for 27 years. He holds a Mr. Kwok is Vice Chairman & Managing Director of Sun Hung Master of Science degree in Civil Engineering from Imperial Kai Properties Limited, and has been with the Group for 24 College, University of London, and is a member of the Institute years. He is also Chairman of Route 3 (CPS) Company Limited, of Civil Engineers. He is an executive director of SUNeVision Joint Chairman of IFC Development Limited, an executive Holdings Limited, and a director of The Kowloon Motor Bus director of SUNeVision Holdings Limited and a non-executive Holdings Ltd., USI Holdings Ltd., Wilson Parking (HK) Ltd. and director of USI Holdings Limited and The Bank of East Hung Cheong Import & Export Co., Ltd. Asia, Limited.

He is also a director of The Real Estate Developers Association Mr. Kwok holds a Master’s degree in Business Administration of Hong Kong and Tsimshatsui East Property Developers’ from The London Business School, University of London and Association Ltd. and Honorary Treasurer of the Federation of a Bachelor’s degree in Civil Engineering from Imperial College, Hong Kong Hotel Owners. On the community front, he is University of London. the Chairman of the Former Directors Committee of the Hong He is Executive Vice President of The Real Estate Developers Kong Community Chest, board member of the Lord Wilson Association of Hong Kong, a committee member of the Land Heritage Trust, a member of the Young Presidents’ Organization Sub-Committee & Planning Sub-Committee of the Land & (China Chapter) and a member of the Hong Kong & China Building Advisory Committee. He also serves as a Government Committee of the Pacific Basin Economic Council. appointed member of the Business Advisory Group. Mr. Kwok is an Honorary Citizen of Beijing & Guangzhou, a In the past he has served as a member of the Social Welfare member of the National Committee of the Chinese People’s Policies & Services Committee, the Land & Building Advisory Political Consultative Conference and Vice Chairman of the Committee, the Registered Contractors’ Disciplinary Board, All-China Federation of Industry and Commerce. the Council of The Open University of Hong Kong and the Mr. Kwok is the elder brother of Mr. Thomas Kwok Ping- General Chamber of Commerce Industrial Affairs Committee. kwong and Mr. Raymond Kwok Ping-luen. He was also Chairman of the Property Management Committee of the Building Contractors’ Association, Council Member of the Hong Kong Construction Association and a Dr. LEE Shau-kee board member of the Community Chest of Hong Kong. DBA(Hon), DSSc(Hon), LLD(Hon) Non-Executive Director (Age: 73) Mr. Kwok is an Honorary Citizen of Guangzhou and a member Vice Chairman of the Ninth Chinese People‘s Political Consultative Conference Shanghai Committee. Dr. Lee has been a non-executive director of the Company for the last 29 years. He is the founder and Chairman and Mr. Kwok is the younger brother of Mr. Walter Kwok Managing Director of Henderson Land Development Ping-sheung and the elder brother of Mr. Raymond Kwok Company Ltd. and Henderson Investment Ltd. He has been Ping-luen. engaged in property development in Hong Kong for more than 45 years. He is also Chairman of Henderson Cyber Ltd. and The Hong Kong and China Gas Company Ltd. as well as a director of Henderson China Holdings Ltd., The Hong Kong Ferry (Holdings) Company Ltd., The Bank of East Asia, Ltd. and Miramar Hotel and Investment Company Ltd.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 DIRECTORS AND ORGANIZATION 80

KWOK Ping-luen, Raymond The Hon Sir Sze-yuen CHUNG MA (Cantab), MBA, Hon DBA GBM, GBE, PhD, FREng, JP Vice Chairman & Managing Director (Age: 48) Non-Executive Director (Age: 83)

Mr. Kwok has been with the Group for 23 years. He holds a Sir Sze-yuen Chung is Chairman and Non-Executive Director Master of Arts degree in Law from Cambridge University, a of The Kowloon Motor Bus Holdings Limited. He is also Master’s degree in Business Administration from Harvard Director of CLP Holdings Limited and Wheelock & Company University and an Honorary Doctorate in Business Limited; and Pro-Chancellor of Hong Kong University of Administration from The Open University of Hong Kong. Science & Technology. He has contributed significantly in Hong He is Chairman and Chief Executive Officer of SUNeVision Kong’s political, industrial and tertiary education fields for over Holdings Limited, Chairman of SmarTone Telecommunications four decades. He was Senior Member of Hong Kong Legislative Holdings Limited and a director of The Kowloon Motor Bus Council (1974-78), Executive Council (1980-88), and again Holdings Limited, Route 3 (CPS) Company Limited and Airport Convenor of HKSAR Executive Council (1997-99). He was Freight Forwarding Centre Company Limited. Chairman of Federation of Hong Kong Industries (1966-70), and Hong Kong Productivity Council (1974-78); and President In civic activities, Mr. Kwok is a non-executive director of the of Engineering Society of Hong Kong (1960-61) and Hong Securities and Futures Commission, a director of The Real Kong Academy of Engineering Sciences (1994-97). He Estate Developers Association of Hong Kong, a member of established Hong Kong Polytechnic in 1972, City Polytechnic the General Committee of The Hong Kong General Chamber in 1984, Hong Kong University of Science & Technology in of Commerce, a member of the Hong Kong Port and Maritime 1991 and Hospital Authority in 1990. He was deeply involved Board and Vice-Chairman of the Council of The Chinese in the Sino-British Negotiation of Hong Kong’s future (1982- University of Hong Kong. He is also a member of the Advisory 85) and the establishment of the Hong Kong Special Council of One Country Two Systems Research Institute Administrative Region (1994-97). Limited and Chairman of the Management Committees of the Police Children’s Education Trust and the Police Education and Welfare Trust. Mr. Kwok is also a member of the Ninth Sir Po-shing WOO Chinese People’s Political Consultative Conference Beijing Hon. LLD., FCIArb, F.I. Mgt., FInstD Committee. Non-Executive Director (Age: 72)

Mr. Kwok is the younger brother of Mr. Walter Kwok Ping- Sir Po-shing Woo has been a non-executive director of the sheung and Mr. Thomas Kwok Ping-kwong. Company since 1972. He is a solicitor and a consultant of Woo, Kwan, Lee & Lo, Solicitors & Notaries, a director of Henderson Development Ltd., Henderson Land Development Co., Ltd. and Henderson Investment Ltd. He was admitted to practice as solicitor in England and Hong Kong and is also a fellow of The Hong Kong Management Association, The Chartered Institute of Arbitrators, The Institute of Management and The Institute of Directors of England. He was awarded an Hon. LLD. by the City University of Hong Kong and is a Fellow of King’s College of London as well as Honorary Professor of Nankai University of Tianjin. He is also the founder of the Woo Po Shing Medal in Law and the Woo Po Shing Overseas Summer School Travelling Scholarship, both at the University of Hong Kong, and the Woo Po Shing Professor (Chair) of Chinese and Comparative Law at City University.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 DIRECTORS AND ORGANIZATION 81

Dr. FUNG Kwok-king, Victor LO Chiu-chun, Clement BSc, MSc, PhD Non-Executive Director (Age: 71) Non-Executive Director (Age: 56) Mr. Lo was an executive director of the Company and Dr. Victor Fung was appointed as one of the Group’s Company Secretary of the Group for 28 years before he independent non-executive directors in May 1999. resigned from both positions in early 1998. Mr. Lo has been Dr. Fung is Chairman of the Li & Fung Group and Prudential in the property development industry since 1960s. Asia Investments Ltd., a non-executive director of Pacific Century CyberWorks Ltd., Hysan Development Company Ltd., Kerry Properties Ltd., Orient Overseas (International) Ltd., LAW King-wan Dao Heng Bank Group Ltd., Bank of China (Hong Kong) Ltd. Non-Executive Director (Age: 65) and DBS Kwong On Bank Ltd. and director of a number of Mr. Law was an executive director of the Company. He headed other companies. He was appointed by the Hong Kong the Sales Department of the Group for 32 years before he Government as Chairman of the Airport Authority in 1999 retired at end of September 2001. He is a member of the and as Chairman of the Hong Kong University Council in 2001. Standing Committee of the Guangdong Provincial Committee From 1991 to September 2000, Dr. Fung was Chairman of of the Chinese People’s Political Consultative Conference, a the Hong Kong Trade Development Council. He holds a standing committee member of the Chinese General Chamber Bachelor and a Master Degree from the Massachusetts Institute of Commerce, Founding President of the Hong Kong Institute of Technology, and a Doctorate from Harvard University. of Real Estate Administration and President of the Shun Tak Fraternal Association. KWAN Cheuk-yin, William LLB Non-Executive Director (Age: 67) CHAN Kai-ming CEng, FIStructE, MICE Mr. William Kwan was appointed as one of the Group’s Executive Director (Age: 69) independent non-executive directors in July 1999. Mr. Chan has been an executive director since 1981. Mr. Chan As a Senior Partner with the Solicitors firm of Woo, Kwan, also served as an appointed member of the District Board of Lee & Lo, Mr. Kwan has 39 years of experience in legal practice. Shatin for three years from 1985. He is a former director and adviser and currently a voting member of the Tung Wah Group of Hospitals, a past member CHAN Kui-yuen, Thomas of the Stamp Advisory Committee, Vice Chairman of the Hong B Comm Kong Scout Foundation, Chairman of the Hong Kong Branch Executive Director (Age: 55) of the King’s College London Association, President of the Hong Kong Philatelic Society, Vice Chairman of the Federation Mr. Chan graduated from the United College, The Chinese of Inter-Asia Philately, a permanent advisor of Wah Yan (Hong University of Hong Kong. He joined the Group in 1973 and is Kong) Past Students Association and an honorary legal advisor now responsible for land acquisitions and project planning to the Hong Kong Society for Reproductive Society. matters as well as all of the Group’s projects in China. Mr. Chan is also an executive director of SUNeVision Holdings Mr. Kwan was Commissioner General and Vice Chairman of Limited. the Organizing Committees of the Hong Kong ’94, ’97 and 2001 Stamp Exhibitions. He served on the Hong Kong Golf Club General Committee on several occasions in various capacities. He graduated from King’s College, London University and is a fellow of both King’s College and the Institute of Arbitrators.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 DIRECTORS AND ORGANIZATION 82

KWONG Chun

Executive Director (Age: 72)

Mr. Kwong graduated from the Zhong Nan Finance & Economics College of Wuhan in China. He worked for the Guangzhou office of the People’s Bank of China before coming to Hong Kong in 1962 to work for Eternal Enterprises Ltd. He was transferred to Sun Hung Kai Enterprises Ltd. in 1963. In 1972, Sun Hung Kai Properties Ltd. became a listed company and he has worked for it ever since. He was appointed an executive director in 1992.

WONG Yick-kam, Michael BBA, MBA Executive Director (Age: 49)

Mr. Wong has been with the Group for 20 years. He obtained his Bachelor’s and Master’s degrees in Business Administration from The Chinese University of Hong Kong. He was appointed an executive director in 1996 and is currently responsible for the Group’s strategic and corporate planning, infrastructure projects, financial investments, and relations with the investment community. Mr. Wong is also an executive director of SUNeVision Holdings Limited and a non-executive director of RoadShow Holdings Limited and SmarTone Telecommunications Holdings Limited.

WONG Chik-wing, Mike FHKIS, Registered Professional Surveyor (BS) Executive Director (Age: 45)

Mr. Wong graduated from the Hong Kong Polytechnic with distinction. He is a Fellow of the Hong Kong Institute of Surveyors and a Registered Professional Surveyor. He joined the Group in 1981 and is currently responsible for project management matters of the Group’s development projects.

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Organization Chart and Senior Executives

Chairman & Chief Executive Walter P.S. Kwok (1)

Vice Chairman & Vice Chairman & Managing Director Managing Director Thomas P.K. Kwok Raymond P.L. Kwok

Architectural & Building Corporate Project Planning Management Planning & Engineering Leasing Sales China Investments Executive Director Executive Director Executive Director (10) Thomas K.Y. Chan (13) Executive Director K. M. Chan (12) Kwong Chun (11) Michael Y.K. Wong (2) (14) (15)

Project Management Business Executive Director Development Mike C.W. Wong (16) (3) Kowloon Station Strategic Project Office Development (4) (17) Special Projects SUNeVision (5) (18) Transport Construction Infrastructure (6) Management (19) Mechanical & Logistics Electrical Services Installation (20) (6a) Project Financial Monitoring Services (7) (21) Valuation Insurance (8) (22) Estate Hotel Management (9) (23) Corporate Finance (24) Company Secretarial & Legal (25) Internal Affairs (26) Accounts (27)

Internal Audit (28)

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 DIRECTORS AND ORGANIZATION 84

(1) EXECUTIVE COMMITTEE Li Kwong-hing Lam Kin-ning BSc(Eng), MSc, DIC, CEng, MIMechE, MCIBSE, MHKIE BArch, BA(AS)Hons, MSc(Urban Planning), HKIA Kwok Ping-sheung, Walter Chief Building Services Engineer Authorized Person MSc(Lond), DIC, MICE, JP Deputy Manager Ng Tze-kwan, Jeff Chairman and Chief Executive BArch, MAIBC, MRAIC, HKIA Au Ho-cheung, David Kwok Ping-kwong, Thomas Registered Architect BSc(Arch), MArch, HKIA MSc(Bus Adm), BSc(Eng), FCPA, JP Authorized Person Registered Architect Deputy Chief Architect Authorized Person Vice Chairman and Managing Director Deputy Manager Kwok Ping-luen, Raymond Yau Hin-chung, William BA(AS) Chu Kwok-kit, Ringo MA(Cantab), MBA, Hon DBA BA(AS), BArch, RIBA, HKIA, ARAIA Vice Chairman and Managing Director Deputy Manager Registered Architect Chan Kai-ming Ng Chuek-ting Authorized Person BSc(Eng) Deputy Manager CEng, FIStructE, MICE Senior Structural Engineer Executive Director (Architectural & Lu Chee-yuen, Spencer Engineering) Li Chun-kou BEng, MEng, CEng, MIStructE, MHKIE, RPE Chan Kui-yuen, Thomas BSc(Eng) Authorized Person Deputy Manager B Comm Senior Structural Engineer Executive Director (Project Planning) Choi Siu-chuen Wong Kim-wing, Ball BA(AS), BArch, HKIA Kwong Chun MHKIE Deputy Chief Building Services Engineer Registered Architect Executive Director (Building Management) Authorized Person Deputy Manager Wong Yick-kam, Michael Leung Yuen-dick, Dick BA(AS), BArch, MA Arbitration, HKIA BBA, MBA Tung Siu-lun Registered Architect Executive Director (Corporate Planning & BSc(Eng), CEng, MIEE Authorized Person Investments) Senior Architect Deputy Manager Wong Chik-wing, Mike Lau Kay-shui Ng Chak-kin, Clarence FHKIS, RPS (BS) MSc, CEng, MIStructE, MHKIE, RPE, RSE BA(AS), BArch, RIBA, HKIA, ARAIA Authorized Person Senior Structural Engineer Registered Architect Executive Director (Project Management) Authorized Person Chiu Wai-kuen, Stephen Assistant Manager BSc(Eng) Woo Yan-fan, Stella (1a) MANAGEMENT Senior Structural Engineer BA(AS), MArch, MBA, HKIA CONSULTANT Chiu Tai-shing, Joseph Registered Architect BASc Authorized Person Yung Wing-chung Assistant Manager Senior Structural Engineer Leung Kui-king, Donald Chiu Hon-hang, Elvin BSc Li Ka-wing BES, BEDS, BArch, RIBA, HKIA, ARAIA Assistant Manager Registered Architect Authorized Person Assistant Manager (1b) CHAIRMAN’S OFFICE (3) PROJECT MANAGEMENT Chan Hong-ki, Robert So Sing-tak, Andrew BSc, MRICS, AHKIS, RPS(BS) Wong Chik-wing, Mike BA, MBA Authorized Person FHKIS, RPS(BS) Assistant Manager Authorized Person Executive Director Chui Ching-sai, Alex (2) ARCHITECTURAL AND BSc, MBA ENGINEERING Tung Chi-ho, Eric Assistant Manager BA(AS)Hons, BArch, RIBA, HKIA Registered Architect Ip Pui-tung, Paul Chan Kai-ming Authorized Person BA(AS), BArch, HKIA, RIBA CEng, FIStructE, MICE Manager Registered Architect Executive Director Authorized Person Tam Tin-fong, Martin Assistant Manager Sitt Nam-hoi BArch, RIBA, FHKIA BA(Hons), BArch(Distinction), HKIA Registered Architect Cheung Chin-hung Registered Architect Authorized Person BEng(Hons), CEng, MHKIE, MICE, MGSHK, EUR.ING, Authorized Person Manager RPE Chief Architect Assistant Manager Au Yeung Shiu-keung Yu Chung-yeung BSc(Eng), CEng, FHKIE, FCIBSE, FIEE, FIEAust CEng, FIStructE, FHKIE, MICE, RSE, RPE Manager Principal Engineer

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 DIRECTORS AND ORGANIZATION 85

(4) KOWLOON STATION Kwok Leung Kit-kan, Ingrid Chan Ying-kuen, David PROJECT OFFICE MSc(Bus Adm), BSc(Hons), CEng, MBCS, MHKIE Assistant Manager (Accounting) Manager Fung Siu-kei, Cecilia Chan Kai-ming Tsoi Siu-ho, Robert CEng, FIStructE, MICE Assistant Manager (Accounting) BSc, MSc, FHKSA, ACMA, ARCS, DIC Executive Director & Manager (Central Function) Chan Wai-leung, Eric Consultant MRICS, AHKIS, AAIQS Wong Chik-wing, Mike Lee Bing-shu Assistant Manager (Contracts) FHKIS, RPS(BS) Manager (Central Function) Loo Wing-lam, William Authorized Person Mo Kon-fei, Kenneth DMS, MIFPO, MIAAI, MHKISA, MIMgt, MIIRSM, CPM Executive Director MSc(Eng), MBA, CEng, MHKIE, MICE, RSE Assistant Manager (Safety and Security) Sitt Nam-hoi Authorized Person BA(Hons), BArch(Distinction), HKIA Deputy Manager Lai Siu-ki, Pele Registered Architect (Construction Management) MIHRM (HK) Assistant Manager (Personnel & Authorized Person Lu Chee-yuen, Spencer Project Director Administration) BEng, MEng, CEng, MIStructE, MHKIE, RPE Chu Kwok-kit, Ringo Authorized Person Fung Chi-on, Ricky BA(AS), BArch, RIBA, HKIA, ARAIA Deputy Manager Assistant Manager (Purchasing) Registered Architect (Construction Management) Mak Kwok-leung Authorized Person Chan Hon-yee Deputy Project Director BSc, CEng, MIMechE, MHKIE, RPE ACMA, AHKSA Assistant Manager (Plant & Machinery) Cheung Kai-wah, Gabriel Deputy Manager MConstMgt, FHKIS, FRICS, FCIOB, MCIArb, (Construction Management) MACostE, MHKICM, RPS(QS) Tsoi Yuk-man, Desmond Senior Project Manager (6a) MECHANICAL & (Quantity Surveying) MA, FCIArb, MRICS, AHKIS, MCIOB ELECTRICAL Deputy Manager INSTALLATION Lau Man-kwan, Julia (Construction Management) BArch, HKIA Hui Lin-sing, Roger Yu Yiu-wing Registered Architect Authorized Person BSc(Eng), CEng, MICE, MIStructE, MHKIE, RSE, RPE Manager Project Manager (Architectural) Deputy Manager (Construction Management) Sin Hung-fai Assistant Manager (Fire Services) Wong Leung Kit-wah, Linda (5) SPECIAL PROJECTS Deputy Manager (Purchasing) Ng Chung-ming Assistant Manager (Fire Services) Chu Chung-kai, Samson Lam Fuk-wing BSc(Hons), MRICS, AHKIS BSc (Civil Eng) Chan Chor-tat, Gilbert Manager Assistant Manager Assistant Manager (Fire Services) (Construction Management) Pih Kam-shen, Philip Ta m Ping-ip MHKIE, MASHRAE, MRSES, MHIREA, RPE Lee Kwok-wa, Chris DMS, MIEEE Deputy Manager (Building Services & Assistant Manager Assistant Manager (Electrical Services) Maintenance) (Construction Management) Pang Ki-kai Chiu Ching-shi, Iris Cheung Kam-fan AIIM B Comm Assistant Manager Assistant Manager (Electrical Services) Deputy Manager (Construction Management) (Leasing & Management) Lam Chung-mo, Moses Tse Kam-hon, Sidney BEng(Hons), CEng, MIEE, MHKIE, RPE Lau Lai-ching, Ellijah Assistant Manager Assistant Manager (Electrical Services) Dip.BS(Mktg), MHIREA, MCIH, MHKIH (Construction Management) Deputy Manager (Leasing & Management) Ng Kwok-cheung, Barry BCSc (Hons) (7) PROJECT MONITORING Assistant Manager (Information Technology) (6) CONSTRUCTION Luk Wang-kwong, John BSc(Eng), LLB, MSc(Eng), MBA, PDCE, PhD, CEng, Lau Wai-keung, Dennis FICE, FIStructE, FHKIE, FCIArb Wong Chik-wing, Mike ARICS, AHKIS Project Advisor FHKIS, RPS(BS) Assistant Manager (Contract Subletting) Authorized Person Wong Wai-tung Executive Director Chan Kin-wah, Jonathan FHKIE, FCIOB, MCIArb, RPE TechRICS Deputy Manager Chien Chung-kwong, Philip Assistant Manager (Contract Subletting) BSc, MEng Tsang Wai-keung, Savio Consultant Lai Wai-ching, Phoebe MBA, MCIOB, MCIArb, MASI MSc, FCCA, AHKSA Assistant Manager Assistant Manager (Accounting)

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(8) VALUATION Yeung Siu-mei, Joanna (13) CHINA Deputy Manager Fung Chu-hee, Andrew Chan Kui-yuen, Thomas MRICS, AHKIS, RPS Lam Ka-keung, Henry B Comm Chartered Valuation Surveyor BSc(Hons), MSc(Const & Real Est) Executive Director Manager Assistant Manager Kwong Chun Siu Man-wai Wong, Ann Executive Director BSc(Hons), MRICS, AHKIS, RPS Assistant Manager Chartered Valuation Surveyor Tam Tin-fong, Martin Deputy Manager b. Kwong Chun BArch, RIBA, FHKIA Registered Architect c. Au Yeung Hau-cheong Authorized Person Manager (Design and Construction) (9) HOTEL d. Chu Chung-kai, Samson Leung Yu-kai, David BSc(Hons), MRICS, AHKIS FCCA, FHKSA a. Royal Garden Hotels Manager (Finance and Administration) International Corporation (11)PROJECT PLANNING Lam Yuet-wah, Joseph Chow Yum-chong, Francis MBA, BBus, AHKSA, ASA FCCA, FHKSA Deputy Manager Chan Kui-yuen, Thomas Vice President (Finance) B Comm O Nam-yuen The Royal Garden Executive Director Deputy Manager Chan Tin-yau, Keven Au Shiu-tung, Patrick Chau Sai-yim, Stephen FRICS, FHKIS, RPS CHSP Deputy Manager General Manager Authorized Person Project Planning Advisor Fok Yau-kit Cheung Kin-man, Ricky FCEA, DMS, MBIM BMgt(Hons), B Comm, ASA Chien Yuan-hwei, George BSc(Eng), MSc, DIC, CEng, PEng, FICE, MITE Assistant Manager Financial Controller Transportation Advisor b. New Town Management Company Roger Nissim Limited (14) BUILDING MANAGEMENT FRICS, FHKIS, RPS Manager Wong Hoi-jen, Rebecca Kwong Chun Vice President (Operations & Planning) Au Yeung Hau-cheong Executive Director Manager Royal Park Hotel Mok Chi-hung FCIH, FHKIH, MHIREA, RPHM Lui Wai-tat, Andy Wong Hoi-jen, Rebecca Manager Manager General Manager Kwong Ching-wai, Alkin Yiu Wai-ha, Connie BSc(Eng), PgDIT, MIStructE, MHKIE, RPE, RSE Tang Cheuk-wai, Willy MRICS, AHKIS, RPS Executive Assistant Manager (Marketing) Authorized Person Deputy Manager Deputy Manager Ta m Kam-ming, Andrew Law Yee-wah, Alice Lam Chak-hin, Ivan BEc Financial Controller SSCE, Foreign Assoc. ASLA Deputy Manager Royal Plaza Hotel Deputy Manager (Hong Chui) Lam Kam-wing, Stafen Kwok Chan-fai Wong Hoi-jen, Rebecca MCIM, MSc General Manager MCIH, MHKIH, RPHM Assistant Manager Deputy Manager (Hong Yip) Kwok Kam-moon, Sunny Wong Kei-on Executive Assistant Manager (Operation) (12) SALES BA, MHKIH, MCIH, RPHM Lee Chi-keung, Marvey Assistant Manager (Hong Yip) Financial Controller Chow Kwok-yin, Eric Chan Wah-kay Manager B Comm Assistant Manager (Personnel) (10) LEASING Yim Dao-kit Deputy Manager Lee Tze-leung, Adrian BBA, MBA, FCCA, AHKSA a. Chan Kai-ming Kong Kit CEng, FIStructE, MICE Assistant Manager (Accounting) Deputy Manager Executive Director Leung Nai-yin, Arthur Lam Po-tung, Josephine BBus, FCCA, FHKSA, ACIB, AHKIB, CGA, CPA(Aust) Wu Po-ong, Lawrence BA BA(Hons) Assistant Manager (Internal Audit) Deputy Manager Manager

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Ho Yun-kuen, John (16) BUSINESS DEVELOPMENT Wong Yuk-lan, Nancy MRICS, AHKIS, PQS, F.PFM Financial Controller Assistant Manager (Contracts) Lui Ting, Victor BBA Chau Chung-yiu, Dominic MBA, MRICS, AHKIS Manager (Property Investment) (20)LOGISTICS SERVICES Assistant Manager (Technical) Tsim Tak-po, Paul BSc(Hons), ACA, AHKSA Yu Ngai-cheung, Almon Chan Cheng-san, Sam BBA Manager (Business Development) B Comm Chief Executive Officer Assistant Manager (Nixon & Nicole) Chan Sau-yin, Anita Teresa Sun Hung Kai Super Logistics MRICS, AHKIS, RPS Kwan Yu-kuen, Ricky Wong Pak-ho, Lawrence Deputy Manager (Property Investment) Assistant Manager (SHK Real Estate BEng, MBA, CEng, CDipAF, PEng(S’pore), MICE, Management) Ng Kwok-keung FHKIE BSc Managing Director SHK Logistics – China Assistant Manager (Property Investment) Leung Lai-chi, Michelle (15)CORPORATE PLANNING Ly Nhut-quang, Paul MMgt, MIHRM AND INVESTMENTS BSc, MBA, MAF Director Assistant Manager (Business SHK Super Logistics Management Wong Yick-kam, Michael Development) BBA, MBA Yiu Kwong-yick, Christopher Executive Director BA (17) STRATEGIC Commercial Director Ma Sau-hon, Chris DEVELOPMENT SHK Logistics – China BSc, MSc, MBA, DIC, MISE, FHKIE, FICE, RPE, CEng Manager (Project) Leung Yiu-wah, Philip Chan Kai-lung, Patrick BSc(Hons), MBA, MRICS, AHKIS, RPS BEc(Hons), MEc Lau Mei-mui, May General Manager Manager (Corporate Communications) Manager Airport Freight Forwarding Centre Wong Pak-ho, Lawrence Cheang lat-meng, Simon BEng, MBA, CEng, CDipAF, PEng(S’pore), MICE, (18)SUNEVISION BBA FHKIE Chief Technology Officer Manager (Infrastructure) E-Supply Chain Management SUNeVision Holdings Limited Hui Chi-ming, Raymond Lau Shung-oi, Susanna Yen Shiao-hua, Sheridan BA, ACA BBus, MCIT BSc(Eng) Manager (Corporate Planning) Chief Logistics Officer Managing Director E-Supply Chain Management Mak Nak-keung BSoc.Sc, MPhil Deputy Manager (Economic Research) (19) TRANSPORT INFRASTRUCTURE (21) FINANCIAL SERVICES Hong Pak-cheung, William MANAGEMENT BSc Au Mo-cheung, Alex Deputy Manager Wilson Group Manager Chan How-kwan, Irene Paul A. Simpson Chan Kwok-yan, Vincent Assistant Manager Chief Executive Officer BA Ramsay, Robert Guy Deputy Manager BA(Hons), PhD Sham Yat-wah, Samuel Director & General Manager Chung Wah-sang, Welson Assistant Manager MA, ACIS, MHKSI Cheong Suk-ying, Linda Luk Kam-hon, Gary Deputy Manager BSoc.Sc, MBA General Manager Ta m Kim-hung, Joseph Assistant Manager Route 3 (CPS) Company Limited & Tsing Ma Management Limited MBA, FCIS, ACIB Tse Man-kuen, Winnie Deputy Manager Fong Ping, Vincent Assistant Manager General Manager Chan Pang-chi Poon Chun-wing, Johnny China Tollways Limited Assistant Manager BSoc.Sc, MBA, CFA, ACCA Wu Tung-chai, Peter Assistant Manager General Manager (22)INSURANCE Sung Lai-ha, Louisa Parking Systems Limited BEc, MTax Cheng Siu-hung, Paul Chow Ka-yin Assistant Manager General Manager Manager Autotoll Limited

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 DIRECTORS AND ORGANIZATION 88

Wong Kwai-chuen, Andrew Ho Ka-wai, Josephine Fok Yat-cheong, Edward BBA, ACII MBA MSc(Eng) Deputy Manager Assistant Manager Deputy Manager (EDP) Ng Man-tong, Anthony Lee Hung-chak, Maurice ACII, AIIC BBA(Hons), FCCA, AHKSA (25) COMPANY SECRETARIAL Deputy Manager Deputy Manager AND LEGAL Yim Ka-yan, Amy Chow Cheuk-wing, Eric AAII Lai Ho-kai, Ernest FCCA, FHKSA Deputy Manager FCIS Senior Accountant Company Secretary Ho Chi-hong, Kurt MCIH, MIMBM (23) ESTATE MANAGEMENT Ta m Sai-ming, William LLM, MSc, MBA, FCIS, MHKSI Assistant Manager Manager Wong Chin-wah, Jimmy Ko Ping-yin, Albert BSc (Est Mgt) Cert Ed, MSISV, AHKIS, MAPFM, Yung Sheung-tat, Sandy Chief Cashier MHIREA, RPS BA(Law)Hons Manager Manager Cheung Wai-wah BBA Chan Kam-fai Kwok Po-chi, Helen Assistant Manager (EDP) MCIH LLB(London)Hons Deputy Manager Legal Advisor Yuen Chork, Charles Assistant Manager Lam Man-pak, Patrick Tse Kar-lun, Frankie BA(Hons), MCIH LLB(Hons) Leung Cheuk-ming, Eric Deputy Manager Assistant Manager MSc Assistant Manager (EDP) Leung Chung-kong, Johnny Yeung Ming-yip, Jason Deputy Manager LLB(Hons) Assistant Manager Lee Cheung-yiu, Gordon (28)INTERNAL AUDIT BSc(Hons), MRICS, MCIOB, AHKIS, ACIArb Deputy Manager Chiu Yue-ming, Daniel (26)INTERNAL AFFAIRS MAcc, FCCA, FHKSA, FCIS, ACMA, FCPA Mak Hung-cheung, James Manager Deputy Manager Wu Tze-cheung, Philip BA(Hons), FCCA, FHKSA, MIHRM (HK) Ho Kui-yuen, Kenneth Fung Sau-yim, Maureen Manager BSoc.Sc, MBA, DTM BSc(Hons)Est. Mgt., MHousMan(Distinction), MBA, Deputy Manager (Training) FIIM, MHIREA Ho Lick-tin Deputy Manager Deputy Manager (Marketing of Retail Wong Chung-wai, Barry Leasing) BA(Hons), MBA, FCCA, AHKSA Sham Sik-shing, Simon Assistant Manager (Audit) BTech(Hons), MCIH Chan Choi-yin, Clara Assistant Manager MIHRM(HK) Hui Sui-tak, Andrew Deputy Manager (Personnel) MBA, FCCA, AHKSA Chan Shing-wai Assistant Manager (Audit) Dip.BA, MCIH Chan Suk-kuen, Dora Assistant Manager BSc Assistant Manager Hon Shuk-ching, Irene Assistant Manager Wong Ho-keung, Jimmy Assistant Manager (Office Management) Shiu Wai-ching, Teresa Assistant Manager Fung Yick-lam, Cris Assistant Manager (Corporate Affairs) Sham Wai-man, Raymond MHKIH, MCIH, MHIREA Assistant Manager (27) ACCOUNTS

Pun Wing-mou, Bernard (24) CORPORATE FINANCE FCA, FHKSA Chief Accountant Au Man-to LLB, FCIS, ACIB Zhou Yimin, Andrew Manager MBA, CMgr Manager Kwok Yue-yee, Amy B Comm Li Ching-kam, Frederick Deputy Manager FCCA, AHKSA Deputy Chief Accountant

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 REPORT OF THE AUDITORS 89

Certified Public Accountants 26/F, Wing On Centre 111 Connaught Road Central Hong Kong

TO THE SHAREHOLDERS OF SUN HUNG KAI PROPERTIES LIMITED (incorporated in Hong Kong with limited liability)

We have audited the financial statements on pages 90 to 123 which have been prepared in accordance with accounting principles generally accepted in Hong Kong.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS The Companies Ordinance requires the directors to prepare financial statements which give a true and fair view. In preparing financial statements 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 statements 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 financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the financial statements, 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 financial statements are free from material misstatement. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. We believe that our audit provides a reasonable basis for our opinion.

OPINION In our opinion the financial statements give a true and fair view of the state of affairs of the Company and the Group as at 30th June, 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 Companies Ordinance.

Deloitte Touche Tohmatsu Certified Public Accountants, Hong Kong

Hong Kong, 27th September, 2001

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 CONSOLIDATED PROFIT AND LOSS ACCOUNT 90

For the year ended 30th June 2001 (Expressed in millions of Hong Kong dollars)

Note 2001 2000

Turnover 2 17,701 25,826 Cost of sales (8,440) (15,990)

Gross profit 9,261 9,836 Other revenue 547 42 Selling and marketing expenses (366) (535) Administrative expenses (1,113) (1,003)

Profit from operations 2 8,329 8,340 Finance cost (1,622) (1,709) Finance income 464 572 Net finance cost 3 (1,158) (1,137) Profit on disposal of investments 445 1,236 Profit on partial disposal of interest in a subsidiary - 2,688 Share of profits less losses of associates 573 208 Share of profits less losses of jointly controlled entities 1,009 170

Profit before taxation 4 9,198 11,505 Taxation 7 (858) (696)

Profit after taxation 8,340 10,809 Minority interests (10) 13

Profit attributable to shareholders 8 8,330 10,822 Dividends 9 (3,722) (4,202)

Profit for the year retained 4,608 6,620

Profit for the year retained by: Company and subsidiaries 4,897 7,384 Associates 138 (92) Jointly controlled entities (427) (672)

4,608 6,620

(Expressed in Hong Kong dollars)

Note 2001 2000

Earnings per share 10 Basic $3.47 $4.51 Diluted $3.47 N/A

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 CONSOLIDATED BALANCE SHEET 91

As at 30th June 2001 (Expressed in millions of Hong Kong dollars)

Note 2001 2000

Non-current assets Fixed assets 11 94,698 86,291 Associates 13 5,043 4,592 Jointly controlled entities 14 20,029 19,280 Investments 15 2,192 1,992 Loans receivable 1,522 1,844 Land pending development 17,324 18,908

140,808 132,907

Current assets Stocks 16 25,334 22,972 Trade and other receivables 17 3,340 3,417 Marketable securities 18 399 1,111 Bank balances and deposits 19 9,061 10,414

38,134 37,914

Current liabilities Bank and other borrowings 20 (4,997) (4,584) Trade and other payables 21 (9,345) (9,884) Deposits received on sale of properties (8,013) (4,669) Taxation (2,574) (2,483) Proposed final dividend (2,401) (2,881)

(27,330) (24,501)

Net current assets 10,804 13,413

Total assets less current liabilities 151,612 146,320 Non-current liabilities Bank and other borrowings 22 (23,995) (23,805) Minority interests 23 (1,610) (1,611)

NET ASSETS 126,007 120,904

CAPITAL AND RESERVES Share capital 24 1,201 1,201 Share premium and reserves 26 124,806 119,703

SHAREHOLDERS’ FUNDS 126,007 120,904

Directors Walter P.S. Kwok Raymond P.L. Kwok

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 PARENT COMPANY BALANCE SHEET 92

As at 30th June 2001 (Expressed in millions of Hong Kong dollars)

Note 2001 2000

Non-current assets Subsidiaries 12 30,076 30,079 Jointly controlled entities 14 (64) (16) Investments 15 (3) (1)

30,009 30,062

Current assets Trade and other receivables 17 240 284 Amounts due from subsidiaries less provision 84,054 74,809

84,294 75,093

Current liabilities Bank and other borrowings 20 (11) - Trade and other payables 21 (214) (213) Amounts due to subsidiaries (31,817) (26,898) Proposed final dividend (2,401) (2,881)

(34,443) (29,992)

Net current assets 49,851 45,101

NET ASSETS 79,860 75,163

CAPITAL AND RESERVES Share capital 24 1,201 1,201 Share premium and reserves 26 78,659 73,962

SHAREHOLDERS’ FUNDS 79,860 75,163

Directors Walter P.S. Kwok Raymond P.L. Kwok

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 CONSOLIDATED CASH FLOW STATEMENT 93

For the year ended 30th June 2001 (Expressed in millions of Hong Kong dollars)

Note 2001 2000

Net cash inflow from operating activities 27a 12,183 4,421

Returns on investments and servicing of finance Interest received 518 575 Interest paid (2,413) (1,830) Dividends received from listed investments 74 15 Dividends received from unlisted investments 3 10 Dividends received from associates and jointly controlled entities 369 1,046 Dividends paid to shareholders (4,202) (3,842) Dividends paid to minority shareholders (48) (56)

Net cash outflow from returns on investments and servicing of finance (5,699) (4,082)

Taxation Hong Kong profits tax paid (650) (1,398)

Investing activities Purchase of subsidiaries 27b (58) (41) Purchase of additional interest in subsidiaries (80) (113) Purchase of associates (147) (52) Purchase of jointly controlled entities (19) (120) Purchase of investments (1,019) (1,448) Advances to associates, jointly controlled entities and investee companies (221) (2,093) Acquisition of land pending development (1,844) (5,719) Additions to fixed assets (5,839) (813) Proceeds from disposal of investment properties 361 179 Net proceeds from partial disposal of interest in a subsidiary - 3,382 Proceeds from disposal of jointly controlled entities - 19 Proceeds from disposal of investments 1,303 2,038 Proceeds from disposal of other fixed assets 10 27 Proceeds from disposal of land pending development - 52 Loans and advances repaid 375 549

Net cash outflow from investing activities (7,178) (4,153)

Net cash outflow before financing (1,344) (5,212)

Financing Bank borrowings 12,205 12,455 Other borrowings 2,050 1,438 Repayment of bank and other borrowings (14,109) (6,543) Capital injection by minority shareholders of a subsidiary 7 - Fundings from/(to) minority shareholders (155) 23

Net cash inflow/(outflow) from financing 27c (2) 7,373

Increase/(decrease) in cash and cash equivalents (1,346) 2,161 Cash and cash equivalents at beginning of year 10,354 8,193

Cash and cash equivalents at end of year 27d 9,008 10,354

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 CONSOLIDATED STATEMENT OF RECOGNIZED GAINS AND LOSSES 94

For the year ended 30th June 2001 (Expressed in millions of Hong Kong dollars)

Note 2001 2000

Increase in property valuation arising during the year 26 805 7,933 Exchange differences on translation of the financial statements of foreign entities 26 11 5

Net gains not recognized in the consolidated profit and loss account 816 7,938 Profit attributable to shareholders for the year 8,330 10,822 Realized surplus on disposal of investment properties transferred to operating profits 26 (278) (172)

Total recognized gains and losses 8,868 18,588 Net goodwill arising on consolidation 26 (43) (95)

8,825 18,493

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 NOTES TO THE FINANCIAL STATEMENTS 95

1. PRINCIPAL ACCOUNTING POLICIES a. Basis of Preparation The financial statements have been prepared in accordance with all applicable Statements of Standard Accounting Practice and Interpretations issued by the Hong Kong Society of Accountants, generally accepted accounting principles in Hong Kong and the requirements of the Hong Kong Companies Ordinance. The financial statements are prepared under the historical cost convention as modified for the revaluation of certain properties and investments in securities.

b. Basis of Consolidation The consolidated financial statements of the Group incorporate the financial statements of the Company and all its subsidiaries made up to 30th June each year and include the Group’s interests in associates and jointly controlled entities on the basis set out in note 1(f) and note 1(g) below respectively. The financial statements of the associates and jointly controlled entities used for this purpose are either co-terminus with the financial statements of the Company or cover a year ended not more than six months before the Company’s year-end. The results of subsidiaries, associates and jointly controlled entities acquired or disposed of during the year are included in the consolidated profit and loss account from the effective dates of acquisition or to the effective dates of disposal. All material intra-group transactions and balances are eliminated on consolidation.

Goodwill or capital reserve arising on acquisition of a subsidiary, an associate or a jointly controlled entity, representing the excess or shortfall of the value of purchase consideration paid over the Group’s share of the fair value ascribed to separable net assets of the subsidiary, associate or jointly controlled entity acquired at the date of acquisition, is eliminated against or credited to reserves immediately on acquisition. Upon disposal of a subsidiary, an associate or a jointly controlled entity, the attributable amount of goodwill or capital reserve previously taken to reserves is transferred to profit and loss account in calculating the profit or loss on disposal.

Minority interests in the consolidated profit and loss account and balance sheet represents the interests of third parties outside the Group in the results and net assets of subsidiaries.

c. Turnover Turnover derived from the Group’s principal activities comprises proceeds from sale of properties (excluding proceeds on development properties sold prior to their completion which are included in deposits received on sale of properties under current liabilities), gross rental income from properties letting under operating leases, income from property management, revenue from hotel operation and revenue derived from other business activities including car parking and transport infrastructure management, logistics business, construction, financial services, insurance, stock broking and IT infrastructure and e-commerce businesses. It does not include the turnover of associates and jointly controlled entities.

d. Revenue Recognition Revenue of a transaction is recognized when it is probable that the economic benefits associated with the transaction will flow to the Group which will result in increases in equity and these benefits can be measured reliably, on the following basis:

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 NOTES TO THE FINANCIAL STATEMENTS 96

1. PRINCIPAL ACCOUNTING POLICIES (Continued) d. Revenue Recognition (Continued) (i) Property sales Revenue and profit from sale of completed properties is recognized upon execution of the sale agreements.

When a development property is sold in advance of completion, revenue and profit is only recognized upon completion of the development. Deposits and instalments received from purchasers prior to this stage are included in current liabilities.

Where properties are sold under deferred terms with part of the sales proceeds being receivable after an interest-free period, that portions of the differences between the sale prices with and without such terms representing finance income are allocated to the profit and loss account on a basis that takes into account the effective yields on the amounts of the sales proceeds receivable over the interest-free period.

(ii) Rental income Rental income from properties letting under operating leases is recognized on straight line basis over the lease terms.

(iii) Hotel operation Revenue from hotel operation is recognized upon provision of services.

(iv) Interest income Interest income is accrued on a time proportion basis that takes into account the effective yields on the carrying amount of assets.

(v) Construction Revenue in respect of building construction job is recognized on the percentage of completion method measured by reference to the proportion that costs incurred to date bear to estimated total costs for the contract.

(vi) Investment income Income from securities and other investments is recognized when the right to receive payment is established.

(vii) Use of internet services centre facilities Revenue from customer use of internet services centre facilities is recognized ratably over the term of the agreement.

(viii) Other income Property management service fee, car parking management fee, insurance income and stock brokerage are recognized when the services are rendered.

e. 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 are carried in the balance sheet of the Company at cost less provision for impairment in value.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 NOTES TO THE FINANCIAL STATEMENTS 97

1. PRINCIPAL ACCOUNTING POLICIES (Continued) f. Associates Associates are those in which the Group is in a position to exercise significant influence, but not control or joint control, over the management, including participation in the financial and operating policy decisions.

Results of associates are incorporated in the consolidated profit and loss account to the extent of the Group’s share of post-acquisition profits less losses whereas accounted for in the profit and loss account of the Company only to the extent of dividend income.

Interests in associates are accounted for in the consolidated balance sheet under the equity method and are initially recorded at cost and adjusted for goodwill arising on consolidation at date of acquisition and thereafter for post acquisition change in the Group’s share of their net assets whereas in the balance sheet of the Company are stated at cost less provision for impairment in value.

g. Joint Ventures A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity which is subject to joint control and over which none of the parties has unilateral control.

(i) Jointly controlled entities Jointly controlled entities involve the establishment of a separate entity in which the Group has a long term interest and over which the Group is in a position to exercise joint control with other venturers in accordance with contractual arrangements.

Results of jointly controlled entities are incorporated in the consolidated profit and loss account to the extent of the Group’s share of post-acquisition profits less losses whereas accounted for in the profit and loss account of the Company only to the extent of dividend income.

Interests in jointly controlled entities are accounted for in the consolidated balance sheet under the equity method and are initially recorded at cost and adjusted for goodwill arising on consolidation at date of acquisition and thereafter for post acquisition change in the Group’s share of their net assets whereas in the balance sheet of the Company are stated at cost less provision for impairment in value.

(ii) Jointly controlled assets Jointly controlled assets are assets of a joint venture over which the Group has joint control with other venturers in accordance with contractual arrangements and through the joint control of which the Group has control over its share of future economic benefits earned from the assets.

The Group’s share of jointly controlled assets and any liabilities incurred jointly with other venturers are recognized in the balance sheets and classified according to their nature. Liabilities and expenses incurred directly in respect of its interests in jointly controlled assets are accounted for on an accrual basis. Income from the sale or use of the Group’s share of the output of the jointly controlled assets, together with its share of any expenses incurred by the joint ventures, are recognized in the profit and loss account when it is probable that the economic benefits associated with the transactions will flow to or from the Group.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 NOTES TO THE FINANCIAL STATEMENTS 98

1. PRINCIPAL ACCOUNTING POLICIES (Continued) h. Investments in Securities (i) Investments Investments in debt and equity securities held for an identified long-term or strategic purpose are stated at cost less provision for impairment in value. Results of investments are accounted for to the extent of dividend and interest income.

Investments in debt securities which are intended to be held to maturity are measured at amortized cost, less any impairment losses recognized, if necessary, in the balance sheet. The amortization of any discount or premium arising on acquisition is aggregated with other investment income receivable over the period from the date of acquisition to the date of maturity so as to give a constant yield on the investment.

(ii) Marketable securities Marketable securities, which are that part of liquid assets temporarily invested in debt and equity securities, are stated at fair value, with unrealized gains and losses included in net profit or loss for the year.

i. Properties (i) Land pending development Land pending development, which is stated at cost less provision for impairment in value made by the directors, embraces all land acquired pending any definite intention whether to develop it for long term retention or for sale. When the intention is clear and action initiated, land to be developed for long term retention is reclassified as fixed assets whereas land to be developed for sale and expected to be realized in the normal course of the Group’s property development cycle is reclassified as stocks under current assets.

(ii) Investment properties Investment properties are completed properties which are income producing and held for their investment potential on a long term basis. Investment properties are included in fixed assets at open market value on the basis of an annual professional valuation related to properties on the basis that increases in valuations are credited to the investment property revaluation reserve and decreases in valuations are first set off against increases on earlier valuations on a portfolio basis and thereafter charged to operating profit. Upon disposal of an investment property, the revaluation surplus/deficit realized is transferred to operating profit in calculating the profit or loss on disposal.

(iii) Hotel properties Hotel properties and their integral fixed plant used in the operation of hotel are included in fixed assets at open market value on the basis of an annual professional valuation related to individual hotel properties.

(iv) Properties under development Properties under development for long term retention are classified under fixed assets and are stated at cost less provision for impairment in value. These properties are reclassified as investment properties or other properties as the case may be upon completion of the development.

Properties under development for sale are included in stocks at the lower of cost and net realizable value. Net realizable value takes into account the price ultimately expected to be realized and the anticipated costs to completion.

Cost of property in the course of development comprises land cost and development costs during the development period.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 NOTES TO THE FINANCIAL STATEMENTS 99

1. PRINCIPAL ACCOUNTING POLICIES (Continued) i. Properties (Continued) (v) Stocks of completed properties Completed properties remaining unsold at year end are stated at the lower of cost and net realizable value.

Cost is determined by apportionment of the total land and development costs attributable to the unsold properties.

Net realizable value is determined by reference to sale proceeds of properties sold in the ordinary course of business less all estimated selling expenses after the balance sheet date, or by management estimates based on prevailing market conditions.

(vi) Other properties Other properties are properties held for production or administrative purposes and are included in fixed assets at cost less accumulated depreciation.

j. Depreciation (i) Investment properties No depreciation is provided on investment property except where the unexpired term of the lease of the investment property is 20 years or less, in which case the then carrying amount is amortized on a straight line basis over the remaining unexpired term of the lease.

(ii) Hotel properties No depreciation is provided on hotel property or on its integral fixed plant. It is the Group’s policy to maintain these assets in a continual state of sound repair and maintenance and to extend and make improvements thereto from time to time, and accordingly the directors consider that given the estimated lives of these assets and their high residual values, any depreciation would be insignificant. The related repair and maintenance expenditure is charged to the profit and loss account in the year in which they are incurred. The costs of significant improvements are capitalized.

(iii) Properties under development No depreciation is provided on properties under development.

(iv) Other properties The cost of leasehold land and construction cost of buildings thereon are depreciated on a straight line basis over the term of the lease.

(v) Other fixed assets Other fixed assets including equipment, furniture, fixtures and vehicles are stated at cost less depreciation calculated on a straight line method to write off the assets over their estimated useful lives at rates ranging from 10 per cent to 33.3 per cent per annum.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 NOTES TO THE FINANCIAL STATEMENTS 100

1. PRINCIPAL ACCOUNTING POLICIES (Continued) k. Capitalization of Borrowing Costs Borrowing costs are expensed as incurred, except to the extent that they are capitalized as being directly attributable to the construction or production of assets which necessarily take a substantial period of time to get ready for their intended use or sale. Capitalization of such borrowing costs begins when construction or production activities commence and ceases when the assets are substantially ready for their intended use or sale.

l. Materials Materials comprising mainly building materials and hotel stocks are valued at cost, calculated on a weighted average cost basis, less provisions, if any.

m. Translation of Foreign Currencies Foreign currency transactions during the year are converted into Hong Kong dollars at the market rates of exchange ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies and financial statements of overseas subsidiaries, associates and jointly controlled entities expressed in foreign currencies are translated into Hong Kong dollars at the market rates of exchange ruling at the date of the balance sheet. Exchange differences arising from the translation of the financial statements of overseas subsidiaries, associates and jointly controlled entities are taken directly to reserves. All other exchange differences are dealt with in the profit and loss account.

n. Deferred Taxation Deferred taxation is provided, using the liability method, on all material timing differences other than those which are not expected to crystallize in the foreseeable future. Deferred tax asset is not recognized unless its realization is certain.

o. Financial Instruments and Derivatives Interest rate and currency swaps are used to manage the Group’s exposure to interest rate and foreign exchange rate fluctuation. It is the Group’s policy not to enter into derivative transactions for speculative purposes. The notional amounts of interest rate and currency swaps are recorded off balance sheet. Interest flows arising on the interest rate swaps are accounted for on an accrual basis.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 NOTES TO THE FINANCIAL STATEMENTS 101

(Expressed in millions of Hong Kong dollars)

2. TURNOVER AND PROFIT FROM OPERATIONS The Group’s turnover and contribution to profit from operations before finance cost by principal activities are analyzed as follows:

Profit from operations Tu rnover before finance cost 2001 2000 2001 2000 Property sales 8,218 16,957 3,625 4,078 Rental income 5,392 5,292 4,073 4,059 Property management 860 817 252 234 Hotel operation 590 542 195 150 Other business activities 2,641 2,218 122 263 17,701 25,826 8,267 8,784 Other revenue 547 42 Unallocated administrative expenses (485) (486) Profit from operations 8,329 8,340

Other business activities comprise revenue and profit derived from other activities including car parking and transport infrastructure management, logistics business, construction financial services, insurance, stock broking, IT infrastructure and e-commerce businesses. Turnover and contribution to profit from operations outside Hong Kong are insignificant.

3. NET FINANCE COST 2001 2000 Interest expense on Bank loans and overdrafts 1,551 1,077 Other loans wholly repayable within 5 years 568 691 Other loans wholly repayable after 5 years 96 55 2,215 1,823 Less: Portion capitalized (593) (114) 1,622 1,709 Interest income on bank deposits (464) (572) 1,158 1,137

Interest is capitalized at an average annual rate of approximately 6.3 per cent (2000: 6.9 per cent).

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 NOTES TO THE FINANCIAL STATEMENTS 102

(Expressed in millions of Hong Kong dollars)

4. PROFIT BEFORE TAXATION 2001 2000 Profit before taxation is arrived at after charging: Cost of properties sold 4,119 12,000 Depreciation 223 242 Staff costs (including the directors’ emoluments and retirement schemes contributions) 1,865 1,607 Auditors’ remuneration 7 6 and crediting: Dividend income from: listed investments 74 15 unlisted investments 3 10 Interest income from: listed investments 11 14 Profit on disposal of marketable securities 104 14 Net holding gain on marketable securities 42 155

5. DIRECTORS’ EMOLUMENTS AND FIVE HIGHEST PAID INDIVIDUALS 2001 2000 Directors’ emoluments: - Fees 1 1 Salaries, allowances and benefits in kind 17 16 Bonuses 28 11 Provident fund contributions 1 1 47 29

Fees paid to independent non-executive directors amounted to HK$200,000 (2000: HK$250,000). They received HK$700,000 (2000: nil) as other emoluments. Number of directors whose emoluments fell within: - 2001 2000 Emoluments Band Number Number HK$M HK$M 0 - 1.0 8 7 1.5 - 2.0 4 4 3.5 - 4.0 - 1 4.0 - 4.5 2 - 4.5 - 5.0 1 - 5.0 - 5.5 - 2 6.5 - 7.0 - 1 25.5 - 26.0 1 - 16 15

The above analysis included two (2000: four) individuals whose emoluments were among the five highest in the Group. Details of the emoluments paid to the other three (2000: one) individuals are:

2001 2000 Salaries, allowances and benefits in kind 10 9 Bonuses 10 1 20 10

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 NOTES TO THE FINANCIAL STATEMENTS 103

(Expressed in millions of Hong Kong dollars)

5. DIRECTORS’ EMOLUMENTS AND FIVE HIGHEST PAID INDIVIDUALS (Continued) Number of employees whose emoluments fell within: - 2001 2000 Emoluments Band Number Number HK$M HK$M 5.0 - 5.5 1 - 6.0 - 6.5 1 - 8.0 - 8.5 1 - 9.5 - 10.0 - 1 3 1

6. STAFF RETIREMENT SCHEMES The Group operates a number of defined contribution schemes for all qualified employees. The assets of these schemes are held separately from those of the Group in independently administered funds. Contributions to these schemes are made by both the employers and employees at rates ranging from 5 per cent to 10 per cent on the employees’ salary. With effect from 1st December 2000, the Group sets up an employer sponsored scheme (“MPF Scheme”) for other employees. The MPF Scheme is registered with the Mandatory Provident Fund Schemes Authority under the Mandatory Provident Fund Schemes Ordinance. The assets of the MPF Scheme are held separately from those of the Group in independently administered funds. Pursuant to the rules of the MPF Scheme, the Group and its employees are each required to make contributions to the scheme at specific rates. Contributions of the Group to the MPF Scheme are charged to profit and loss account as incurred. To tal contributions to the retirement schemes made by the Group during the year amounted to HK$91 million (2000: HK$60 million). Forfeited contributions for the year of HK$9 million (2000: HK$13 million) were used to reduce the existing level of contributions.

7. TAXATION 2001 2000 Hong Kong Company and subsidiaries 722 609 Under/(over) provision in prior year 19 (9) 741 600 Associates 59 52 Jointly controlled entities 58 28 858 680 Outside Hong Kong Jointly controlled entities - 16 858 696

(a) Hong Kong profits tax is provided at the rate of 16 per cent (2000: 16 per cent) based on the estimated assessable profits for the year. Tax outside Hong Kong is calculated at rate applicable in the relevant jurisdiction. (b) No provision for deferred taxation has been made as the aggregate effect of all timing differences is insignificant.

8. PROFIT ATTRIBUTABLE TO SHAREHOLDERS Profit attributable to shareholders dealt with in the profit and loss account of the Company amounts to HK$8,419 million (2000: HK$8,292 million).

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 NOTES TO THE FINANCIAL STATEMENTS 104

(Expressed in millions of Hong Kong dollars)

9. DIVIDENDS 2001 2000 Interim dividend of HK$0.55 per share based on 2,401 million shares (2000: HK$0.55 per share based on 2,401 million shares) paid 1,321 1,321 Proposed final dividend of HK$1.00 per share based on 2,401 million shares (2000: HK$1.20 per share based on 2,401 million shares) 2,401 2,881 3,722 4,202

10. EARNINGS PER SHARE The calculation of basic earnings per share is based on HK$8,330 million (2000: HK$10,822 million) being profit attributable to shareholders and on 2,400,907,362 shares (2000: 2,400,907,362 shares) in issue during the year. The calculation of diluted earnings per share for the year is based on HK$8,330 million being profit attributable to shareholders and on the weighted average number of 2,400,935,185 shares after adjusting for the dilutive effects of all potential ordinary shares. No diluted earnings per share is presented for the year ended 30th June 2000 as the exercise of the share options outstanding during that year have no dilutive effect on the earnings per share.

2001 2000 Number of ordinary shares used in calculating basic earnings per share 2,400,907,362 2,400,907,362 Number of ordinary shares deemed to be issued for nominal consideration for share options 27,823 - Weighted average number of shares used in calculating diluted earnings per share 2,400,935,185 2,400,907,362

11. FIXED ASSETS Properties Investment Hotel under Other Other The Group properties properties development properties fixed assets Total (a) Movement during year Cost or valuation At beginning of year 77,611 3,950 2,120 1,884 1,513 87,078 Additions 1,306 27 5,641 - 566 7,540 Transfer in 424 - 137 664 22 1,247 Disposals (350) ---(54) (404) Transfer out (47) - (358) - (306) (711) Revaluation surplus 684 233 ---917 At end of year 79,628 4,210 7,540 2,548 1,741 95,667 Accumulated depreciation At beginning of year ---175 612 787 Charge for the year ---68 155 223 Transfer in ---46 - 46 Disposals ----(41) (41) Transfer out ----(46) (46) At end of year ---289 680 969 Net book value at 30/6/2001 79,628 4,210 7,540 2,259 1,061 94,698 Net book value at 30/6/2000 77,611 3,950 2,120 1,709 901 86,291

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 NOTES TO THE FINANCIAL STATEMENTS 105

(Expressed in millions of Hong Kong dollars)

11. FIXED ASSETS (Continued) Properties Investment Hotel under Other Other The Group properties properties development properties fixed assets Total (b) Basis of book value 2001 professional valuation 79,628 4,210 ---83,838 Cost --7,540 2,548 1,741 11,829 79,628 4,210 7,540 2,548 1,741 95,667

(c) Net book value of properties shown above comprises: 2001 2000 Land in Hong Kong held under Long Lease (not less than 50 years) Investment properties 18,363 18,752 Hotel properties 1,400 1,250 Properties under development - 283 Other properties 541 178 20,304 20,463 Medium-term lease (less than 50 years but not less than 10 years) Investment properties 59,409 58,173 Hotel properties 2,810 2,700 Properties under development 7,448 1,736 Other properties 1,718 1,531 71,385 64,140 Land outside Hong Kong held under Long Lease (not less than 50 years) Investment properties 686 686 Properties under development 92 101 778 787 Medium-term lease (less than 50 years but not less than 10 years) Investment properties 1,170 - 1,170 - 93,637 85,390

(d) Investment properties and hotel properties revaluation The Group’s investment properties and hotel properties have been revalued as at 30th June, 2001 by Messrs. Knight Frank, Chartered Surveyors on an open market value basis in their existing state by reference to comparable market transactions and where appropriate on the basis of capitalization of the net income allowing for reversionary income potential. (e) Gross rental receivable from and profit on disposal of the Group’s investment properties during the year amounted to HK$5,008 million (2000: HK$4,920 million) and HK$289 million (2000: HK$113 million) respectively. (f) The carrying amount of properties under development as at 30th June 2001 included interest capitalized in the amount of HK$707 million (2000: HK$415 million).

12. SUBSIDIARIES The Company 2001 2000 Unlisted shares, at cost 30,076 30,079

Particulars regarding principal subsidiaries are set out on pages 116 to 120.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 NOTES TO THE FINANCIAL STATEMENTS 106

(Expressed in millions of Hong Kong dollars)

13. ASSOCIATES The Group 2001 2000 Unlisted shares, at cost 156 169 Hong Kong listed shares, at cost 806 680 Share of post-acquisition reserves 2,041 1,905 3,003 2,754 Goodwill on acquisition of associates eliminated (149) (113) Share of net assets 2,854 2,641 Amounts due from associates 2,221 1,974 Amounts due to associates (32) (23) 5,043 4,592 Market value of Hong Kong listed shares 4,887 4,951

Particulars regarding principal associates are set out on page 123.

14. JOINTLY CONTROLLED ENTITIES 2001 2000 The Group The Company The Group The Company Unlisted shares, at cost 1,072 4 1,156 4 Share of post-acquisition reserves 1,997 - 2,509 - 3,069 4 3,665 4 Goodwill on acquisition of jointly controlled entities eliminated (91) (91) Share of net assets 2,978 3,574 Amounts due from jointly controlled entities 17,798 1 15,992 1 Amounts due to jointly controlled entities (747) (69) (286) (21) 20,029 (64) 19,280 (16)

Particulars regarding principal jointly controlled entities are set out on pages 121 to 122.

15. INVESTMENTS 2001 2000 The Group The Company The Group The Company Listed held-to-maturity debt securities, overseas 532 - -- Unlisted held-to-maturity debt securities 61 - -- Listed equity securities, Hong Kong 525 - 1,354 - Unlisted equity securities 1,004 - 585 - 2,122 - 1,939 - Amounts due from investee companies 98 - 88 - Amounts due to investee companies (28) (3) (35) (1) 2,192 (3) 1,992 (1) Market value Listed overseas 544 - -- Listed in Hong Kong 580 - 1,827 - 1,124 - 1,827 -

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 NOTES TO THE FINANCIAL STATEMENTS 107

(Expressed in millions of Hong Kong dollars)

16. STOCKS The Group 2001 2000 Properties under development 22,496 19,651 Stock of completed properties for sale 2,785 3,265 Materials 53 56 25,334 22,972

The amount of the above stocks that are carried at net realizable value was HK$1,259 million (2000: HK$854 million).

17. TRADE AND OTHER RECEIVABLES 2001 2000 Note The Group The Company The Group The Company Debtors, deposits and prepayments 2,864 240 2,926 284 Amounts due from customers for contract work 17a 76 - 38 - Short term loans 400 - 453 - 3,340 240 3,417 284

Consideration in respect of sold properties are payable by the purchasers pursuant to the terms of the sale and purchase agreements. Monthly rent in respect of leased properties are payable in advance by the tenants. Other trade debtors settle their accounts according to the payment terms as stated in contracts. Included in trade and other receivables are trade debtors of HK$1,373 million (2000: HK$1,186 million), of which 80 per cent aged less than 60 days, 4 per cent between 61 to 90 days and 16 per cent more than 90 days (2000: 74 per cent, 7 per cent and 19 per cent respectively).

17a. Amounts due from/(to) customers for contract works The Group Note 2001 2000 Contract costs incurred plus recognized profits less recognized losses 196 2,304 Less: Progress billings (135) (2,444) 61 (140) Represented by: Due from customers included in current assets 17 76 38 Due to customers included in current liabilities 21 (15) (178) 61 (140)

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 NOTES TO THE FINANCIAL STATEMENTS 108

(Expressed in millions of Hong Kong dollars)

18. MARKETABLE SECURITIES The Group 2001 2000 Equity securities, at market value Listed in Hong Kong 318 278 Listed overseas 31 201 Debt securities, at market value Listed overseas 50 632 399 1,111

19. BANK BALANCES AND DEPOSITS The Group 2001 2000 Short term bank deposits 8,736 10,205 Bank balances and cash 325 209 9,061 10,414

20. BANK AND OTHER BORROWINGS 2001 2000 Note The Group The Company The Group The Company Unsecured bank overdrafts 53 11 60 - Non-current liabilities due within 1 year 22 4,944 - 4,524 - 4,997 11 4,584 -

21. TRADE AND OTHER PAYABLES 2001 2000 Note The Group The Company The Group The Company Creditors and accrued expenses 9,330 214 9,706 213 Amounts due to customers for contract work 17a 15 - 178 - 9,345 214 9,884 213

Included in trade and other payables are trade creditors of HK$458 million (2000: HK$511 million), of which 86 per cent aged less than 60 days, 1 per cent between 61 to 90 days and 13 per cent more than 90 days (2000: 75 per cent, 1 per cent and 24 per cent respectively).

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 NOTES TO THE FINANCIAL STATEMENTS 109

(Expressed in millions of Hong Kong dollars)

22. BANK AND OTHER BORROWINGS The Group Note 2001 2000 Unsecured bank loans repayable Within 1 year 4,269 2,074 After 1 year, but within 2 years 6,380 12,193 After 2 years, but within 5 years 8,171 8,422 After 5 years 5,258 379 24,078 23,068 Other unsecured loans repayable Within 1 year 675 2,450 After 1 year, but within 2 years 300 675 After 2 years, but within 5 years 2,302 1,100 After 5 years 1,584 1,036 4,861 5,261 28,939 28,329 Less: Amount due within 1 year included under current liabilities 20 (4,944) (4,524) 23,995 23,805

(a) The above other unsecured loans are repayable on various dates up to 30th June 2010 at commercial market rates. (b) Bank loans shown above that are not wholly repayable within 5 years amounted to HK$7,208 million (2000: HK$1,023 million).

23. MINORITY INTERESTS The Group 2001 2000 Share of equity and reserves in subsidiaries 729 728 Amounts due to minority shareholders 923 943 Amounts due from minority shareholders (42) (60) 1,610 1,611

24. SHARE CAPITAL 2001 2000 Number Number of shares of shares in million Amount in million Amount Authorized: Ordinary shares of $0.50 each At beginning and end of year 2,900 1,450 2,900 1,450 Issued and fully paid: Ordinary shares of $0.50 each At beginning and end of year 2,401 1,201 2,401 1,201

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 NOTES TO THE FINANCIAL STATEMENTS 110

(Expressed in millions of Hong Kong dollars)

25. SHARE OPTION SCHEMES (a) The Company’s share option scheme In accordance with the Company’s share option scheme for employees, the Board of directors of the Company may grant options to eligible employees, including executive directors of the Company or any subsidiary of the Company, to subscribe for shares in the Company. The subscription price is set at not less than the higher of the nominal value of the share and 80 per cent of the average of the closing prices on the five trading days immediately preceding the date of offer of the option. The maximum number of shares over which options may be outstanding may not exceed 1 per cent of the issued share capital of the Company from time to time. As at 30th June 2001, there were 810,000 share options outstanding, granted at HK$1 per lot to a number of Directors and senior employees of the Company, which were exercisable, inter alia, between 15th February 2001 and 14th February 2005 at an exercise price of HK$70 per share and at the maximum of one-third per annum during the first three years. No options were exercised and expired during the year.

(b) Subsidiary’s share option scheme The Company’s subsidiary, SUNeVision Holdings Limited (“SUNeVision”) operates a share option scheme pursuant to which SUNeVision may grant, for a consideration of HK$1 for each lot, options to any full time employees, including executive directors of SUNeVision or its subsidiaries to subscribe for shares in SUNeVision. The subscription price is the highest of the closing price of SUNeVision’s share on the date of the offer; the average closing price on the five trading days immediately preceding the date of offer; and the nominal value of SUNeVision’s share. The maximum number of shares over which options may be granted shall not exceed 10 per cent of the issued share capital of SUNeVision from time to time. Movements in share options to subscribe for ordinary shares in SUNeVision during the year are as follows: Number of share options Exercise Exercisable At beginning Granted during Lapsed during Date of grant price period of year the year the year At end of year 28th March 2000 HK$10.380 31.12.2000 9,920,000 - (1,685,000) 8,235,000 to 30.12.2005 30th November 2000 HK$3.885 15.11.2001 - 4,115,500 (240,000) 3,875,500 to 14.11.2006 7th April 2001 HK$2.340 20.3.2002 - 4,925,000 - 4,925,000 to 19.3.2007 9,920,000 9,040,500 (1,925,000) 17,035,500

26. SHARE PREMIUM AND RESERVES 2001 2000 The Group The Company The Group The Company Share premium At beginning of year and end of year 17,000 17,000 17,000 17,000 Capital reserve At beginning of year 664 5,281 727 5,281 Goodwill on purchase of additional interest in subsidiaries (94) - (88) - Net reserve on acquisition of subsidiaries 93 - -- Goodwill on acquisition of associates (36) - (6) - Reserve on acquisition of jointly controlled entities --31 - At end of year 627 5,281 664 5,281

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 NOTES TO THE FINANCIAL STATEMENTS 111

(Expressed in millions of Hong Kong dollars)

26. SHARE PREMIUM AND RESERVES (Continued) 2001 2000 The Group The Company The Group The Company Property revaluation reserves At beginning of year 49,955 - 42,194 - Surplus on revaluation of properties held by subsidiaries attributable to the Group - Investment properties 668 - 7,181 - - Hotel properties 233 - 356 - Surplus realized on disposal of investment properties held by - Subsidiaries (278) - (117) - - Jointly controlled entities --(55) - Share of surplus/(deficit) on revaluation of investment properties held by jointly controlled entities (96) - 396 - At end of year 50,482 - 49,955 - Building reserve At beginning of year --830 830 Transfer to retained profits --(830) (830) At end of year ---- Dividend equalization reserve At beginning of year --350 350 Transfer to retained profits --(350) (350) At end of year ---- General reserve At beginning of year --5 - Transfer to retained profits --(5) - At end of year ---- Exchange reserve At beginning of year (4) - (9) - Exchange difference arising on translation of financial statements of - Subsidiaries 6 - 1 - - Associates 1 - -- - Jointly controlled entities 4 - 4 - At end of year 7 - (4) - Retained profits At beginning of year 52,088 51,681 44,315 46,411 Transfer from building reserve --830 830 Transfer from dividend equalization reserve --350 350 Transfer from general reserve --5 - Goodwill adjustment on acquisition of a subsidiary by a jointly controlled entity --(32) - Goodwill adjustment on acquisition of a subsidiary by an associate (6) - -- Profit for the year retained 4,608 4,697 6,620 4,090 At end of year 56,690 56,378 52,088 51,681 Total share premium and reserves 124,806 78,659 119,703 73,962

Distributable reserves of the Company as at 30th June 2001 amounted to HK$56,378 million (2000: HK$51,681 million).

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 NOTES TO THE FINANCIAL STATEMENTS 112

(Expressed in millions of Hong Kong dollars)

26. SHARE PREMIUM AND RESERVES (Continued) 2001 2000 Share premium The Company Jointly The Company Jointly and reserves of the and controlled and controlled Group retained by: subsidiaries Associates entities subsidiaries Associates entities Share premium 17,000 --17,000 -- Capital reserve 604 23 - 641 23 - Investment property revaluation reserve 47,441 - 1,919 47,004 - 2,062 Hotel property revaluation reserve 1,122 --889 -- Exchange reserve 12 - (5) 6 (1) (9) Retained profits 55,577 1,030 83 50,740 894 454 121,756 1,053 1,997 116,280 916 2,507

27. NOTES TO CONSOLIDATED CASH FLOW STATEMENT (a) Reconciliation of profit from operations to net cash inflow from operating activities 2001 2000 Profit from operations 8,329 8,340 Depreciation 223 242 Profit on disposal of investment properties (289) (113) Loss on disposal of other fixed assets 3 - Loss on disposal of land pending development - 7 Dividends received from investments (77) (25) Interest income (242) (14) Provision for diminution in value of a jointly controlled entity - 223 Provision for diminution in value of a long term investment 9 - Loss on disposal of a jointly controlled entity - 8 Decrease in stocks 520 7,649 Decrease in trade and other receivables 225 193 Decrease/(increase) in marketable securities 712 (824) Increase/(decrease) in trade and other payables (574) 337 Increase/(decrease) in deposits received on sale of properties 3,344 (11,602) Net cash inflow from operating activities 12,183 4,421

(b) Purchase of subsidiaries 2001 2000 Net assets acquired: Fixed assets 1,105 - Associates 3 - Jointly controlled entities 45 - Land pending development - 434 Trade and other receivables 13 - Bank balances and deposits 57 - Trade and other payables (291) (393) Bank borrowings (464) - Minority interests (155) - 313 41 Less: Associates (2) - Jointly controlled entities (103) - 208 41 Net reserve on acquisition (93) - 115 41

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 NOTES TO THE FINANCIAL STATEMENTS 113

(Expressed in millions of Hong Kong dollars)

27. NOTES TO CONSOLIDATED CASH FLOW STATEMENT (Continued) (b) Purchase of subsidiaries (Continued) 2001 2000 Satisfied by: Cash paid 115 41 Analysis of net cash outflow of cash and cash equivalents in respect of the purchase of subsidiaries: Cash consideration paid 115 41 Bank balances and deposits acquired (57) - 58 41

(c) Analysis of changes in financing during the year Share capital Bank and and share other Minority premium borrowings interests Total At 1st July 1999 18,201 20,979 967 40,147 Net cash inflow from financing - 7,350 23 7,373 Minority interests in - losses --(13) (13) - investment property revaluation reserve --18 18 - exchange reserve --33 Dividends paid to minority shareholders --(56) (56) Partial disposal of interest in a subsidiary --694 694 Effect of purchase of additional interest in a subsidiary --(25) (25) At 30th June 2000 and 1st July 2000 18,201 28,329 1,611 48,141 Net cash inflow/(outflow) from financing - 146 (148) (2) Arising on purchase of subsidiaries - 464 155 619 Minority interests in - profits --10 10 - investment property revaluation reserve --16 16 Dividends paid to minority shareholders --(48) (48) Effect of purchase of additional interest in subsidiaries --14 14 At 30th June 2001 18,201 28,939 1,610 48,750

(d) Analysis of the balances of cash and cash equivalents at end of year 2001 2000 Short term bank deposits 8,736 10,205 Bank balances and cash 325 209 Bank overdrafts (53) (60) 9,008 10,354

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 NOTES TO THE FINANCIAL STATEMENTS 114

(Expressed in millions of Hong Kong dollars)

28. JOINTLY CONTROLLED ASSETS At the date of the balance sheet, the aggregate amounts of assets and liabilities recognized in the financial statements relating to the Group’s interests in jointly controlled assets are as follows:

2001 2000 Investment properties 5,980 5,980 Land pending development 71 70 Land under development 1,889 - Stocks of completed properties for sale 58 58 7,998 6,108 Creditors and accrued expenses 93 94

29. RELATED PARTY TRANSACTIONS During the year, the Group undertook various transactions with related parties for provision of finance, lease of premises, purchasing of goods and rendering of certain services related to property construction, management and marketing activities. The following is a summary of significant transactions between the Group and related parties, which were carried out at similar terms to other customers or suppliers and at market prices:

Associates Jointly controlled entities 2001 2000 2001 2000 Interest income 131 140 357 48 Rental income 76 48 4 4 Other revenue from services rendered 63 966 1,051 929 Purchase of goods and services - - 442 276

The outstanding balances with associates and jointly controlled entities at the balance sheet date were disclosed in Notes (13) and (14).

30. CONTINGENT LIABILITIES AND COMMITMENTS The Group At the date of the balance sheet, the Group had contingent liabilities and commitments, so far as not provided for in the consolidated financial statements, as follows:

2001 2000 (a) Capital commitments in respect of fixed assets Contracted but not provided for 1,685 1,713 Authorized but not contracted for 363 - (b) Group’s share of capital commitments of joint ventures: Contracted but not provided for 3,629 858 Authorized but not contracted for 156 209 (c) Guarantees given to banks and financial institutions in respect of facilities drawn by an associate and jointly controlled entities amounting to approximately HK$1,046 million (2000: HK$1,463 million) and HK$6,652 million (2000: HK$4,651 million) respectively.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 NOTES TO THE FINANCIAL STATEMENTS 115

(Expressed in millions of Hong Kong dollars)

30. CONTINGENT LIABILITIES AND COMMITMENTS (Continued) The Company At the date of the balance sheet, the Company had contingent liabilities, not included in the Company’s financial statements, in respect of guarantees for bank and other borrowings drawn by:

2001 2000 Subsidiaries 28,849 27,922 Associate 1,046 1,463 Jointly controlled entities 6,575 4,651 36,470 34,036

31. FINANCIAL INSTRUMENTS Details of the Group’s outstanding interest rate swaps and currency swaps at balance sheet date are as follows: Net notional principal amount 2001 2000 Interest rate swaps - Less than 1 year 675 1,800 - 1 to 5 years 1,700 1,775 - After 5 years 1,250 100 3,625 3,675 Currency swaps - After 5 years 234 234 234 234

Counterparties to swap transactions are reputable international financial institutions with strong credit ratings. The Group has established treasury policies and control procedures to assess and monitor the counterparty limits and exposure. The Group does not consider that it has any significant exposure to any individual counterparty, nor does it anticipate non- performance by any of its counterparties.

32. APPROVAL OF FINANCIAL STATEMENTS The financial statements set out on pages 90 to 123 were approved by the board of directors on 27th September, 2001.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 PRINCIPAL SUBSIDIARIES 116

The directors are of the opinion that a complete list of the particulars of all subsidiaries will be of excessive length and therefore the list following contains only the particulars of subsidiaries which principally affect the profit and loss account or assets of the Group. A complete list of all the subsidiaries will be annexed to the Company’s 2001 annual return. Unless otherwise stated, all principal subsidiaries are incorporated and operating in Hong Kong and unlisted. Percentage of issued ordinary share capital held Issued Capital Name Note The Company The Group Activities (HK$) SUNeVision Holdings Limited 2 - 84.34 IT Infrastructure & 203,347,900 (Listed in Hong Kong) Internet Services Investment Sun Hung Kai Real Estate 100 100 General management 1,000,000 Agency Limited & agency New Town (N.T.) Properties Limited 11.89 100 Investment holding 2,287,659,338 Hung Kai Finance Company Limited 100 100 Registered deposit-taking 100,000,200 company Fidelity Finance Company Limited 100 100 Finance 200 Honour Finance Company Limited 100 100 Finance 500,000 Sun Hung Kai Properties 100 100 Finance 100,000 (Financial Services) Limited Sun Hung Kai Properties 100 100 General insurance 75,000,000 Insurance Limited Honour Securities Company Limited - 100 Share broking 6,000,000 Sun Hung Kai Engineering 100 100 Architectural & engineering 350,000 Company Limited Sanfield Building Contractors Limited 100 100 Building construction 2,500,000 Everlight Engineering Company Limited - 100 Fire prevention & 50,000 mechanical engineering Aegis Engineering Company Limited - 100 Plant and machine hire 100,000 Hong Yip Service Company Limited - 100 Property management 100,000 Kai Shing Management Services Limited 100 100 Property management 10,000 Mantegna Investment Company Limited 1 - 100 Hotel ownership 10,000,000 New Town Serviced Apartment - 100 Furnished apartment 200 Management Company Limited management Royaltelle International Limited - 100 Hotel management 2 Additech Ltd. 1 - 100 Property investment US$1 Addpower Properties Limited 1 - 100 Property investment US$1 Airport Freight Forwarding Centre - 100 Freight forwarding centre 100 Company Limited Amglo Master Ltd. 1 - 100 Property investment US$1 Antanpark Limited 1 - 100 Property investment US$1 Antinio Investments Limited 1 - 100 Property investment US$1 Ao Ta Development Company Limited 50 100 Property investment 200 Artsland Properties Investment Ltd. 1 - 100 Property investment US$1 Barnard Enterprises Limited 1 - 75 Property investment US$100 Beauty Marble Investment Limited - 100 Property investment 2

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 PRINCIPAL SUBSIDIARIES 117

Percentage of issued ordinary share capital held Issued Capital Name Note The Company The Group Activities (HK$) Biliboss Limited 1 - 100 Property investment US$1 Biliwide Limited - 100 Property development 20 Billion Mix Limited - 100 Property investment 2 Borracho Company Limited - 100 Property investment 200 Branhall Investments Limited 1 - 100 Property investment 40,000,000 Campsie Enterprise Limited 1 - 100 Property investment US$1 Caranko Limited - 100 Property investment 2 Cherry Land Company Limited - 100 Property investment 1,500,000 Coundon Enterprise Limited 1 - 100 Property investment US$1 Country Well (H.K.) Limited - 100 Property investment 2 Crownsnest Enterprise Limited 1 - 100 Property investment US$1 Darlinghurst Enterprise Limited 1 - 100 Property investment US$1 Deluxe Plan Enterprises Limited - 100 Property investment 2 Deporte Limited 1 - 100 Property investment US$1 Dictado Company Limited - 100 Property investment 200 Dipende Limited 1 - 100 Property investment US$1 Donora Company Limited 50 100 Property development, 2 share investment and dealing Durbanham Enterprise Limited 1 - 100 Property investment US$1 Entero Company Limited 50 100 Property investment 200 Ever Channel Limited - 100 Property investment 2 Excellent Chance Limited 1 - 100 Property investment US$1 Far Fortune Investment Limited - 100 Property investment 2 Firstmax Limited - 100 Property investment 2 Forever Glory Investments Limited 1 - 100 Property investment US$1 Fortune Honor Limited - 100 Property investment 2 Fortune Yield Investment Limited - 100 Property investment 2 Full Market Limited - 100 Property investment 2 Garudia Limited - 100 Property investment 2 Getherich Ltd. 1 - 100 Property investment US$1 Gleamland Limited 1 - 100 Property investment US$1 Golden Square Properties 1 - 100 Property investment 1,000,000 Enterprises Limited Goldland Limited 1 - 100 Property investment US$1 Grand Kosky Ltd. 1 - 100 Property investment US$1 Groupland Ltd. 1 - 100 Property investment US$1 Grumete Company Limited 100 100 Property development 200 Harsco Limited - 100 Property development 2 Henca Limited 1 - 100 Property investment US$1 Hintline Investments Limited - 100 Property development 5,000

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 PRINCIPAL SUBSIDIARIES 118

Percentage of issued ordinary share capital held Issued Capital Name Note The Company The Group Activities (HK$) Honenberg Limited - 100 Property investment 2 Hong Kong Business Aviation 4 - 35 Business Aviation Centre 1,000,000 Centre Limited Honour Futures Limited - 100 Commodities dealing 7,000,000 Hopley International Limited 1 - 100 Property investment US$1 Horway Limited 1 - 100 Property development US$1 Hung Kai Finance Investment - 100 Property investment 200 Holding Limited Jugada Company Limited - 100 Property investment 2 Kamchatka Company Limited - 100 Property investment 200 Kartasun Limited - 100 Property investment 2 Kimrose Investments Ltd. 1 - 100 Property investment US$1 King Star Estate Limited - 99.9 Property development 10,000 Kingsgrove Enterprise Limited 1 - 100 Property investment US$1 Laboster Company Limited 50 100 Property investment 2 Lee Bit Kai Investment 100 100 Property investment 1,000 Company Limited Light Time Investments Limited - 100 Property development 2 and investment Little Jewel Limited 1 - 100 Property development US$1 Long Tesak Company Limited - 100 Property investment 100,000 Lonsale Company Limited - 100 Property investment 2 Lorient Holdings Ltd. 1 - 100 Property investment US$1 Lunalite Company Limited - 100 Property development 2 and investment Luxsky Ltd. 1 - 100 Property investment US$1 Main Global Limited - 100 Property investment 2 Manceton Limited - 100 Property investment 2 Manmouth Limited - 100 Property development 2 and investment Merit Success Company Limited - 100 Property investment 2 Mindano Limited - 100 Property investment 10,000 Morifunn Ltd. (Formerly Morifund Ltd.) 1 - 100 Property investment US$1 Moristrong Limited 1 - 100 Property investment US$1 Moscova Company Limited 50 100 Property investment 200 Nixon Cleaning Company Limited - 100 Cleaning service 100,000 Open Step Limited - 60 Property investment 10 Oriental Eagle Enterprises Limited - 100 Property investment 2 Pacotilla Company Limited - 100 Property investment 200 Pako Shun Limited - 100 Property investment 2 Parico Fortune Ltd. 1 - 100 Property investment US$1

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 PRINCIPAL SUBSIDIARIES 119

Percentage of issued ordinary share capital held Issued Capital Name Note The Company The Group Activities (HK$) Peach Blossom Company Limited 1 - 100 Property investment US$1 Perfect Smart Enterprises Ltd. 1 - 100 Property investment US$1 Ponente Company Limited - 100 Property investment 200 Prelong Limited - 100 Property development 2 and investment Profit Richness Limited 1 - 100 Property investment US$1 Protasan Limited - 100 Property investment 100 Rainforce Limited - 100 Property development 2 SHK (N.T.) Shopping Limited - 100 Property investment 2 SHK Sheung Shui Landmark 50 100 Property investment 200 Investment Limited Shubbery Company Limited - 100 Property investment 200 Speed Cheer Ltd. - 75 Property development 10,000 Speed Wise Limited - 100 Property investment 2 Splendid Kent Limited - 100 Property development 4 Standard Top Limited - 100 Property investment 2 Startrack Company Limited - 100 Property investment 200 Sun Carol Company Limited - 100 Property investment 200 Sun Hung Kai China Trading Limited - 100 Property investment 2 Sun Hung Kai Properties - 100 Property investment 2 Consultants Limited Sun Hung Kai Properties Pacific Limited - 100 Property investment 2 Sun Hung Kai Real Estate - 100 Property investment 2 Consultants Limited Sun Hung Kai Secretarial 50 100 Secretarial services 200 Services Limited Sun Yuen Long Centre Management - 87.5 Property investment 50,000 Company Limited and management Sunfez Company Limited - 100 Property investment 200 Sunrit Enterprises Limited - 100 Property investment 4,000,000 Super Bold Limited - 100 Property investment 10,000 Super Sun Limited - 100 Property development 2 Supreme Ford Limited - 100 Property development 2 Ta inam Holdings Limited 1 - 100 Property investment US$1 Ten Choice Development Limited - 100 Property investment 2 Tipro Development Limited - 99.2 Property investment 1,000,000 Tobright Ltd. 1 - 100 Property development US$1 Tonthai Investment Enterprises Limited 1 - 100 Property investment US$1 To wn Descant Company Limited - 100 Property investment 200 and development To wn Fierce Company Limited - 100 Property investment 10,000

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 PRINCIPAL SUBSIDIARIES 120

Percentage of issued ordinary share capital held Issued Capital Name Note The Company The Group Activities (HK$) Tr uebright Investments Limited - 100 Property development 2 and Investment Tsi Mai Company Limited - 100 Property investment 200 Tsing Ma Management Limited - 66.7 Road management 70,000,000 Tyr anny Company Limited 75 100 Property development 400 and investment Uniland Investment 1 - 100 Property investment US$1 Enterprises Limited Upper Hill Company Limited 1 - 100 Property investment US$1 Victory Force Limited - 100 Property investment 2 Victory Winner Limited - 100 Property investment 2 Vimson Limited 1 - 100 Property investment US$1 Virile Investment Enterprises Limited 1 - 100 Property investment US$1 Wai Hung Development 85.7 100 Investment holding and 70,000 Company Limited property investment Warrior Company Limited - 100 Property investment 300 Well Logic Properties 1 - 100 Property investment US$1 Investment Limited Wellden Limited - 100 Property investment 2 Wilson Parking (Holdings) Limited - 100 Investment holding and 1,000 car parks operation Wisearn Properties Investment Limited 1 - 100 Property investment US$1 Wiselink Investments 1 - 100 Property development US$1 Enterprises Limited WTC (Club) Limited - 100 Club management 200 Wylproud Company Limited 50 100 Property investment 2 Yancon Limited - 100 Property investment 2 Zarabanda Company Limited - 100 Property investment 2 Zindemar Investments Corp. 3 100 100 Property development US$2

Notes 1. Incorporated in the British Virgin Islands. 2. Incorporated in the Cayman Islands. 3. Incorporated in Panama. 4. Indirectly held by the Company and the Group.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 PRINCIPAL JOINTLY CONTROLLED ENTITIES 121

The directors are of the opinion that a complete list of the particulars of all jointly controlled entities will be of excessive length and therefore the list following contains only the particulars of jointly controlled entities which principally affect the profit and loss account or assets of the Group. A complete list of all jointly controlled entities will be annexed to the Company’s 2001 annual return.

Unless otherwise stated, all principal jointly controlled entities are incorporated and operating in Hong Kong and unlisted.

Percentage of issued ordinary share capital held Name Note The Company The Group Activities Altomatic Limited - 50 Property investment #+ Anbok Limited - 25 Property development Arrowtown Assets Limited 1 - 49 Property development #+ Asia Container Terminals Limited - 28.5 Container terminals development # Beijing Sun Dong An Co. Ltd. 2 - 50 Property investment IFC Development Limited 1 - 47.5 Property development (Formerly Central Waterfront Property Development Limited # Dragon Beauty International Limited - 50 Property development #+ Faith & Safe Transportation Limited - 50 Mid stream operator Glorious Concrete (H.K.) Limited - 50 Manufacturers of ready mixed concrete #+ Green Valley Landfill Limited - 20 Landfill waste disposal facility #+ Hoi Kong Container Services - 50 Mid stream operator Company Limited #+ Hong Kong Parking Limited - 50 Parking meters operator Jade Land Resources Limited - 25 Property development # Kerry Hung Kai Warehouse - 50 Godown operation (Cheung Sha Wan) Limited Krimark Investments Limited - 30 Property development + Mightypattern Limited 25 25 Investment holding + New-Alliance Asset Investment - 50 Investment management services Management (Asia) Limited + Newfoundworld Holdings Limited - 20 Property development and investment #+ Pearl Delta Limited (Formerly - 20 Solid waste management and Pearl Delta WMI Limited) environmental services #+ Primecredit (Asia) Limited - 46.5 Provision of money lending services #+ Primecredit Limited - 46.5 Deposit-taking company Ranny Limited - 50 Property investment #+ River Trade Terminal Co. Ltd. 1 - 33 River trade terminal # Route 3 (CPS) Company Limited - 50 Toll road operation # Senica International Limited - 22.5 Investment holding #+ South China Transfer Limited (Formerly - 20 Solid waste management and South China WMI Transfer Limited) environmental services Splendid Shing Limited - 50 Property investment + Star Play Development Limited - 33.3 Property investment + Tinyau Company Limited - 50 Property investment

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 PRINCIPAL JOINTLY CONTROLLED ENTITIES 122

Percentage of issued ordinary share capital held Name Note The Company The Group Activities + Topcycle Development Limited - 50 Property development #+ Uttoxeter Limited - 30 Property development #+ Waldorf Realty Limited - 25 Property investment # Wisdom Choice Investment Limited - 40 Property development # Wolver Hollow Company Limited - 50 Property investment Xipho Development Company Limited 33.3 33.3 Property development

+ The financial statements of these companies have been audited by firms other than Deloitte Touche Tohmatsu. The aggregate net assets and profits after taxation of these jointly controlled entities attributable to the Group amounted to HK$959 million (2000: HK$1,033 million) and HK$487 million (2000: HK$125 million) respectively.

# Companies with year ends not co-terminous with that of Sun Hung Kai Properties Limited.

Note 1. Incorporated in the British Virgin Islands. 2. Incorporated in The People’s Republic of China.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 PRINCIPAL ASSOCIATES 123

The directors are of the opinion that a complete list of the particulars of all associates will be of excessive length and therefore the list following contains only the particulars of associates which principally affect the profit and loss account or assets of the Group. A complete list of all associates will be annexed to the Company’s 2001 annual return.

Unless otherwise stated, all principal associates are incorporated and operating in Hong Kong and unlisted.

Percentage of issued ordinary share capital held Name Note The Company The Group Activities #+ The Kowloon Motor Bus 1 - 33.99 Public transportation Holdings Limited (listed in Hong Kong) #+ Ranex Investments Limited - 29 Property development + SmarTone Telecommunications 1 - 28.21 Mobile telephone system operation Holdings Limited (listed in Hong Kong) #+ The Hong Kong School of - 30 Driving School Motoring Limited #+ Thomas Cook Hung Kai Airport - 25 Money exchange services Currency Exchange Limited

+ The financial statements of these companies have been audited by firms other than Deloitte Touche Tohmatsu. The aggregate net assets and profits after taxation of these associates attributable to the Group amounted to HK$2,844 million (2000: HK$2,642 million) and HK$522 million (2000: HK$158 million) respectively.

# Companies with year ends not co-terminous with that of Sun Hung Kai Properties Limited. Note 1. Incorporated in Bermuda.

SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2000/01 T LIMITED

DESIGN: FORMA