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TES LTD. www.tda.com.hk TES LTD. About the cover The Apple Countdown at Times Square on New Year’s Eve has become a Hong Kong landmark event since its debut in 1993. Every year, more than 50,000 people gathered at the complex to celebrate the arrival of the new year. DESIGN: THE DESIGN ASSOCIA CONTENTS 4 Corporate Information 6 Chairman’s Letter 12 Financial Highlights 14 Business Review Property China CME 48 Management Discussion and Analysis 52 Disclosure of Further Corporate Information 59 Report of the Directors 64 Report of the Auditors 65 Consolidated Profit and Loss Account 66 Consolidated Statement of Recognised Gains and Losses 67 Consolidated Balance Sheet 68 Company Balance Sheet 69 Consolidated Cash Flow Statement 73 Notes to the Accounts 108 Principal Subsidiaries and Associates 110 Schedule of Principal Properties 114 Ten-Year Financial Summary THE WHARF (HOLDINGS) LIMITED ANNUAL REPORT 2001 1 2 THE WHARF (HOLDINGS) LIMITED ANNUAL REPORT 2001 The Wharf (Holdings) Limited, founded in 1886, is strategically focused on Hong Kong and China. Driven by strong recurrent earnings and value creation opportunities originating from its flagship property at Kowloon Point, it is complemented by major investments in CME (communications, media and entertainment) and Logistics (container and sea/air terminals). Core brands including Harbour City, Times Square, i-CABLE Communications, Wharf New T&T and Modern Terminals make up 90 per cent of the Group’s business assets. Development of these core brands will steer the Group’s future investments in Hong Kong and China. THE WHARF (HOLDINGS) LIMITED ANNUAL REPORT 2001 3 CORPORATE INFORMATION Board of Directors Mr Peter K C Woo, GBS, JP, Chairman CME Mr Gonzaga W J Li, Senior Deputy Chairman (Communications, Media Mr Stephen T H Ng, Deputy Chairman & Managing Director and Entertainment) Mr Paul Y C Tsui, Executive Director Mr David J Lawrence, Executive Director Mr Robert H Burns* Mr Vincent Fang* Mr Hans M Jebsen, BBS* Mr Christopher P Langley, OBE* Wharf Communications Limited Mr Quinn Y K Law Mr K H Leung Stephen Ng Professor Arthur K C Li, GBS, JP* Chairman & Chief Executive Officer Mr Ian H Melrose Mr T Y Ng Mr James E Thompson* * Independent Non-executive Directors Secretary Mr Wilson W S Chan, FCIS Auditors KPMG Principal Banker The Hongkong and Shanghai Banking Corporation Limited Registrars Tengis Limited 4th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong Registered Office 16th Floor, Ocean Centre, Harbour City, Canton Road, Kowloon, Hong Kong Telephone : (852) 2118 8118 Fax : (852) 2118 8018 Website: www.wharfholdings.com 4 THE WHARF (HOLDINGS) LIMITED ANNUAL REPORT 2001 Peter Woo Chairman PROPERTY CHINA Wharf Estates Limited Wharf China Limited Gonzaga Li Chairman & Chief Executive Property Estate Estate Development Logistics Property Hotels Division Division Division David Lawrence Executive Director Wharf Estates Wharf Estates China Limited Limited Erik Doreen Lee K C Leung Michael Kalyk Director & Director & Christensen President General Manager General Manager Managing Director THE WHARF (HOLDINGS) LIMITED ANNUAL REPORT 2001 5 CHAIRMAN’S LETTER To our shareholders, I By optimizing and I The Group has taken from Creating Value redeveloping certain parts of start-up to fully established To understand the Wharf Harbour City, total square operations i-CABLE and Group, it is important to footage has grown by over 40 Wharf New T&T, which now understand its five core assets per cent since early 1980s to run Hong Kong’s leading and the Group’s ability to today’s 8.29 million square Pay-TV operator (licensed in create increasing value for its feet, more than triple the size 1993), quite possibly the shareholders over time. of a Manhattan midtown city world’s first profitable block. As a result, Harbour broadband operator (licensed These five core assets — City has critical mass in the in 2000) and Hong Kong’s Harbour City, Times Square, Tsimshatsui area and now fastest growing fixed telecom Modern Terminals, i-CABLE accounts for 50 per cent of the network operator (licensed in and Wharf New T&T — have Group’s business assets. 1995). Under the leadership of become firmly established Mr Stephen Ng and his team, brands in Hong Kong. Times I An old tram depot in all of these businesses are now Square and Modern Causeway Bay was redeveloped in profit and represent the Terminals are now building into today’s highly valuable Group’s newest growth engine. their names in China. Times Square. Accounting for almost 20 per cent of the I The Group’s container Over the past 20 years, the Wharf Group’s business assets, the terminal assets in Kwai Group has continually invested two-million-square-foot retail Chung managed to expand and reinvested in its property and and office complex is now the substantially from the initial logistics holdings and seized focal point within the popular 40 per cent interest in just one opportunities to enter the district of Causeway Bay. The berth to today’s controlling important new (at the time) field Times Square brand has now stake of 55.3 per cent in of communications, media and been successfully transferred to Modern Terminals, which will entertainment (CME). The China with major developments control seven berths after the value of the Group’s business operating in Beijing and completion of Container assets has grown by over 20 Shanghai and under Terminal 9. Under the times in the past two decades. construction in Chongqing. leadership of Mr Erik 6 THE WHARF (HOLDINGS) LIMITED ANNUAL REPORT 2001 Peter K C Woo THE WHARFChairman (HOLDINGS) LIMITED ANNUAL REPORT 2001 7 CHAIRMAN’S LETTER Christensen and his team, It is also particularly important income, an improvement of six Modern Terminals has over during uncertain times to have per cent over a year ago, not- the last five years increased a good proportion of earnings withstanding a soft property market share to 30.7 per cent from recurrent revenue. This is market. from 21.6 per cent and essential to support investment improved productivity by needs for longer-term growth I Nelson Court on Waterloo almost 100 per cent. and to pay dividends to Road and Sorrento Phase I at shareholders. Over the past the MTR’s Kowloon Station The Group’s core assets have eight years, recurrent earnings sold very well in 2001. consistently underpinned our streams have grown stronger. journey through the ups and As a result, even during the I i-CABLE’s net profit downs of the various economic very challenging situation that increased by 735 per cent peaks and troughs. As they emerged in 2001, the Wharf to $167 million. Wharf account for about 90 per cent Group performed well. New T&T broke into net of Wharf’s business assets, we profitability with just six per intend to report on them more Corporate Results cent market share and a 34 per thoroughly. For the very challenging year cent increase in revenue. that ended December 31, 2001, Good management is key Group profit attributable to I Modern Terminals’ to maintaining a track record shareholders was $2,519 profitability was maintained of value creation, just as a million, an increase of one per at the 2000 level with an simple Group structure helps cent. Earnings per share were increased throughput of achieve higher corporate $1.03 compared with $1.02 for 4.7 per cent over a year ago efficiency. Disposal of the the preceding year, an increase and productivity gains of Group’s interest in Beauforte of one per cent. almost 12 per cent. Investors Corporation Limited in October 2000 and its I Core properties Harbour An interim dividend of 28 cents stake in The Cross-Harbour City and Times Square, with per share was paid in November (Holdings) Limited in high occupancy rates, 2001 and your Directors March 2001 was consistent contributed an aggregated recommend a final dividend of with this policy. $3 billion in rental 50 cents per share to be 8 THE WHARF (HOLDINGS) LIMITED ANNUAL REPORT 2001 approved at the forthcoming outstanding colleague and fiscal year, the Group has made Annual General Meeting. a great team player. As a a number of management good friend and colleague, I changes, Mr Gonzaga Li will With high liquidity in the wish him all the best with his focus on the Group’s growing banking sector during 2001, future pursuits. China activities. Mr David the Group continued to Lawrence is taking charge of refinance its loan facilities with A team approach and the our Hong Kong property remarkably lower spreads and dedication of Group development activities. Under more favourable terms. management and staff have their leadership, we expect been the important basic these key operations to Board and Management ingredients for the Group’s continue to strengthen. As a special note, I would like long-term success, particularly to thank Mr Gonzaga Li for during challenging times. On Mr Erik Christensen and his his able stewardship as behalf of our shareholders and team will continue their re- Chairman during the past my fellow board members, engineering efforts to further eight years, when much of our I would like to record my improve Modern Terminals’ value creation took place. I am heartfelt thanks to them all. productivity to maintain pleased that he will continue as competitiveness while seeking the Group’s Senior Deputy Furthermore, I would like to new expansion opportunities. Chairman and will lead our welcome Messrs Christopher China operations as Chairman Langley, Hans Michael Jebsen, Under Mr Stephen Ng, the and Chief Executive of Wharf James Thompson and Professor digitisation programme at China Limited. Arthur Li Kwok Cheung on CABLE TV will increase their joining our Group’s penetration and yield to I would also like to thank main board as Non-executive enhance bottom line benefits, Mr John Terence Hung, who Directors.