Annual Report

Contents Delivering Value 2 Ten-Year Financial Summary 4 Chairman’s Statement 6 Financial Highlights 9 Management Discussion and Analysis Review of Operations 10 Financial Review 38 Credit Analysis 46 Corporate Governance Corporate Governance 53 Directors and Offi cers 66 Directors’ Report 68 Sustainable Development 75 Auditor’s Report and Accounts Independent Auditor’s Report 83 Consolidated Profi t and Loss Account 84 Consolidated Balance Sheet 85 Company Balance Sheet 86 Consolidated Cash Flow Statement 87 Consolidated Statement of Changes in Equity 88 Notes to the Accounts 89 Principal Accounting Policies 141 Principal Subsidiary, Jointly Controlled and Associated Companies and Investments 151 Supplementary Information Cathay Pacifi c Airways Limited – Abridged Financial Statements 160 Schedule of Principal Group Properties 163 Group Structure Chart 174 Glossary 176 Financial Calendar and Information for Investors 177 2007 Annual Report 1 Delivering Value Swire Pacifi c is one of the leading companies in Hong Kong with fi ve operating divisions: Property, Aviation, Beverages, Marine Services and Trading & Industrial. The Group’s operations are predominantly in Greater China where the name Swire or 太古 has been established for over 130 years. Swire Pacifi c is deeply committed to Hong Kong where our subsidiaries, jointly controlled and associated companies employ over 43,000 staff. Globally we employ over 70,000 staff. We are committed to ensuring that our The Group’s total net assets employed Excluding the impact of the sale affairs are conducted with high ethical increased by HK$32.2 billion during of the Group’s interest in Shekou standards which is a key component 2007 to HK$159.2 billion at the year- Container Terminals during the year, of our long-term success. This refl ects end. The profi t attributable to the the other divisions’ total net assets our belief that in achieving our business Company’s shareholders in the year employed increased by HK$1.1 billion objectives, it is imperative that we was HK$26.3 billion, against HK$22.6 to HK$11.7 billion at the year-end. act with high standards of probity, billion in 2006. Profi ts attributable to the Company’s transparency and accountability, shareholders for the year were HK$2.4 and with dignity, respect and in a The Property Division employed billion giving an average return on socially responsible manner within the HK$124.2 billion (78%) of the Group’s equity attributable to the Company’s communities in which we operate. net assets at the year-end and generated shareholders of 21.4%. profi ts of HK$19.2 billion giving an We focus on the long-term development average return on equity attributable to The Group overall achieved an average of businesses where we can create the Company’s shareholders of 21.7%. return on equity attributable to the shareholder value in accordance with The division’s profi t on an underlying Company’s shareholders of 21.0%, the return on capital appropriate to basis was HK$3.3 billion against HK$3.1 down from 21.6% in 2006 refl ecting each business. In this respect, we are billion in 2006 and average return on the signifi cant investment in ongoing well placed to contribute to and benefi t underlying equity attributable to the property development projects in from the growth of Mainland China Company’s shareholders was 3.2%. the year. On an underlying basis the where we will leverage our industry- Group’s average return was 7.3% specifi c experience and focus on our Net assets employed by the Aviation against 7.5% in 2006. core strengths. Division increased by HK$2.3 billion at the year-end to HK$22.2 billion. Profi ts attributable to the Company’s shareholders in the year were HK$3.3 billion providing an average return on equity attributable to the Company’s shareholders of 15.9%. 2 Swire Pacifi c At a glance 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 HK$M HK$M HK$M HK$M HK$M HK$M HK$M HK$M HK$M HK$M PROFIT AND LOSS ACCOUNT Turnover Property 6,363 7,024 5,787 6,163 5,798 7,539 7,306 6,197 5,595 6,060 Beverages 4,552 4,450 4,439 4,513 4,787 4,955 4,978 5,187 5,750 7,066 Marine Services 970 809 843 893 991 1,216 1,297 1,492 1,997 3,104 Trading & Industrial 4,851 4,420 3,816 3,453 3,442 3,637 4,704 6,036 5,554 5,306 Head Offi ce 28 21 21 29 28 40 39 25 215 17 16,764 16,724 14,906 15,051 15,046 17,387 18,324 18,937 19,111 21,553 Profi t attributable to the Company’s shareholders Property (23,137 ) 5,341 4,881 (2,956 ) (2,129 ) 68 15,097 12,684 16,983 19,225 Aviation (106 ) 1,040 2,510 520 2,128 843 2,393 1,928 3,605 3,330 Beverages 266 164 153 235 276 363 385 474 480 507 Marine Services 626 467 505 617 658 646 741 3,035 834 2,550 Trading & Industrial (198 ) 92 (84 ) 130 4 228 388 520 444 399 Head Offi ce (413 ) (475 ) (187 ) (193 ) (300 ) (132 ) (186 ) 116 220 249 Less: (22,962 ) 6,629 7,778 (1,647 ) 637 2,016 18,818 18,757 22,566 26,260 Interim and fi nal dividends for the year 1,304 1,707 1,738 1,738 1,996 2,052 3,062 3,154 4,321 4,899 Share repurchases – – – – 540 60 – – – 1,296 Retained profi t less share repurchases (24,266 ) 4,922 6,040 (3,385 ) (1,899 ) (96 ) 15,756 15,603 18,245 20,065 BALANCE SHEET Net assets employed Property –– costcost andand workingworking capitalcapital 28,550 29,346 27,272 33,932 33,380 32,114 30,041 29,609 30,558 39,023 –– valuationvaluation surplussurplus 26,956 30,110 38,141 28,510 23,011 20,217 36,004 48,483 65,694 85,173 Aviation 13,381 14,323 16,740 15,898 16,565 16,260 17,304 18,431 19,874 22,183 Beverages 3,723 3,838 3,509 3,369 3,479 3,111 2,936 2,930 3,201 3,403 Marine Services 2,569 2,962 2,752 2,899 3,814 4,335 4,772 5,061 6,026 6,496 Trading & Industrial 2,283 1,994 1,849 1,767 1,379 1,042 1,363 1,540 1,715 1,774 Head Offi ce 540 637 87 102 27 283 410 166 (114 ) 1,118 78,002 83,210 90,350 86,477 81,655 77,362 92,830 106,220 126,954 159,170 Financed by Equity attributable to the Company’s shareholders 56,649 62,473 68,923 65,507 62,983 62,440 78,625 94,843 114,414 135,517 Minority interests 3,494 3,972 4,691 4,291 4,537 4,806 5,943 5,929 610 1,161 Net debt 17,859 16,765 16,736 16,679 14,135 10,116 8,262 5,448 11,930 22,492 78,002 83,210 90,350 86,477 81,655 77,362 92,830 106,220 126,954 159,170 HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ ‘A’ shares Earnings/(loss) per share (14.75 ) 4.27 5.02 (1.06 ) 0.41 1.32 12.29 12.25 14.74 17.26 Dividends per share 0.84 1.10 1.12 1.12 1.30 1.34 2.00 2.06 2.83 3.23 Equity attributable to shareholders per share 36.50 40.25 44.41 42.20 41.09 40.79 51.35 61.95 74.73 89.38 ‘B’ shares Earnings/(loss) per share (2.95 ) 0.85 1.00 (0.21 ) 0.08 0.26 2.46 2.45 2.95 3.45 Dividends per share 0.17 0.22 0.22 0.22 0.26 0.27 0.40 0.41 0.57 0.65 Equity attributable to shareholders per share 7.30 8.05 8.88 8.44 8.22 8.16 10.27 12.39 14.95 17.88 Ratio Return on average equity attributable to the Company’s shareholders -33.16% 11.13% 11.84% -2.45% 0.99% 3.21% 26.68% 21.63% 21.57% 21.01% Return on average equity attributable to the Company’s shareholders (historic cost) 4.62% 11.15% 9.53% 10.17% 11.76% 10.30% 12.80% 15.46% 14.24% 15.42% Gearing ratio 29.69% 25.23% 22.73% 23.90% 20.93% 15.04% 9.77% 5.41% 10.37% 16.46% Interest cover – times (85.69 ) 14.87 22.28 (4.57 ) (1.96 ) 4.45 21.72 34.09 46.65 53.91 Dividend cover – times (17.61 ) 3.88 4.48 (0.95 ) 0.32 0.98 6.15 5.95 5.22 5.36 Underlying Profi t (HK$M) 1,701 4,235 3,792 4,307 5,389 4,942 6,538 8,742 8,716 10,283 Equity attributable to Company’s shareholders (HK$M) 63,333 69,541 76,985 72,540 68,957 68,107 87,020 105,300 128,496 153,341 Return on average equity attributable to Company’s shareholders 2.17% 6.37% 5.18% 5.76% 7.62% 7.21% 8.43% 9.09% 7.46% 7.

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