Cover Photos 1 2 1. Leighton Hill development in Causeway Bay 2. Le Sommet, North Point 3. One International Finance Centre, above Hong Kong 3 Station on the Airport Railway 4 4. SmarTone Telecommunications 5. Route 3 (Country Park Section) 6. Hong Kong Business Aviation Centre 5 6 SUN HUNG KAI PROPERTIES LIMITED Annual Report1998-99 Web site : http://www.shkp.com.hk Contents 4 Corporate Information 5 Shareholders’ Information 6 Financial Highlights 8 Corporate Structure 10 Chairman’s Statement 24 Directors’ Report Review of Operations 34 Land Bank 36 Property Development 39 Property Investment 53 Related Business Activities 64 Infrastructure and Transportation 71 Other Investment Holdings 80 Mainland China Business 81 Group Finance 85 Investor Relations 86 Customer Service 87 Environmental Protection and Promotion 90 Staff Relations and Training 92 The Group and The Community 94 96 Management Discussion and Analysis 107 Group Financial Summary 109 Directors and Organisation A1 Report of the Auditors A3 Principal Accounting Policies A15 Consolidated Profit and Loss Account A16 Consolidated Balance Sheet A17 Parent Company Balance Sheet A18 Consolidated Cash Flow Statement A19 Notes to the Financial Statements A35 Principal Subsidiaries A45 Principal Jointly Controlled Entities A48 Principal Associated Companies Corporate Information Directors KWOK Ping-sheung, Walter Chairman & Chief Executive LEE Shau-kee Vice Chairman KWOK Ping-kwong, Thomas Vice Chairman & Managing Director KWOK Ping-luen, Raymond Vice Chairman & Managing Director HO Tim Independent Non-Executive Director WOO Po-shing Independent Non-Executive Director FUNG Kwok-king, Victor Independent Non-Executive Director KWAN Cheuk-yin, William Independent Non-Executive Director LO Chiu-chun, Clement Non-Executive Director LAW King-wan Executive Director CHAN Kai-ming Executive Director CHAN Kui-yuen, Thomas Executive Director KWONG Chun Executive Director WONG Yick-kam, Michael Executive Director WONG Chik-wing, Mike Executive Director Secretary LAI Ho-kai, Ernest Registered Office 30 45th Floor, Sun Hung Kai Centre, 45 30 Harbour Road, Wanchai, Hong Kong. (852) 2827 8111 Telephone: (852) 2827 8111 (852) 2827 2862 Facsimile: (852) 2827 2862 http://www.shkp.com.hk Internet: http://www.shkp.com.hk [email protected] E-mail: [email protected] Auditors Deloitte Touche Tohmatsu Registrars 183 Central Registration Hong Kong Limited 17 1712-6 Shops 1712-6, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong. Principal Bankers The Hongkong & Shanghai Banking Corporation Limited Bank of China Hang Seng Bank Limited Standard Chartered Bank The Bank of Tokyo – Mitsubishi Limited The Sanwa Bank Limited The Sumitomo Bank, Limited The Chase Manhattan Bank Banque Nationale de Paris ABN Amro Bank Solicitors Woo, Kwan, Lee & Lo Johnson, Stokes & Master Winston Chu & Company 4 Shareholders’ Information Shareholders’ Calendar Close for Register of Members 25/11/1999 - 2/12/1999 (both days inclusive) Annual General Meeting 2/12/1999 Dividends Interim (per share) HK$0.50 Paid on 15/4/1999 Final (per share) HK$1.05 Payable on 3/12/1999 Security Code Stock code 16 American Depositary Receipt CUSIP number 86676H302 Trading symbol SUHJY Ordinary share to ADR ratio 1:1 Listing Level One (OTC) Depositary Bank Citibank, N. A. ADR Department, 20th Floor, 111 Wall Street, New York, N.Y.10043 Toll-free telephone number 1-877-CITI-ADR (1-877-248-4237) 5 Financial Highlights For the year ended 30th June Turnover (HK$ million) Profit attributable to shareholders (HK$ million) • excluding exceptional items • including exceptional items Earnings per share (HK$) • excluding exceptional items • including exceptional items Dividends per share (HK$) Shareholders’ funds per share (HK$) Gross rental income (HK$ million) Net rental income (HK$ million) * Net recurrent earnings before interest and tax* (HK$ million) Net debt to shareholders’ funds ratio (%) Land bank (million square feet) * * Including contributions from jointly controlled entities and associated companies 6 Financial Highlights (cont’d) Turnover 1999 1998 % Change HK$ Million 30,000 28,960 25,000 23,222 23,680 22,619 23,680 23,222 +2% 20,000 19,845 15,000 10,000 8,683 11,960 -27% 5,000 9,278 7,260 +28% 0 1995 1996 1997 1998 1999 Year Earnings and Dividends Per Share HK$ 3.62 5.00 -28% 6 5.93 5 3.87 3.04 +27% 4.69 4.46 4 3.87 3.04 1.55 1.20 +29% 3 2.35 2 1.75 1.86 1.55 1.20 44.40 47.55 -7% 1 0 1995 1996 1997 1998 1999 Year 5,510 5,650 -2% Net Asset Value Per Share* 4,203 4,443 -5% HK$ 60 56.38 50 47.55 45.10 44.40 5,803 6,189 -6% 41.40 40 30 12.0 17.8 -33% 20 10 50.6 50.6 0 1995 1996 1997 1998 1999 Year 7 Corporate Structure 33% 26% 50% 65% 100% 35% 33% 20% 28.5% 50% * 8 Corporate Structure (cont’d) Sun Hung Kai Properties* Mainland Hong Kong China Property Infrastructure Property Property Property Related & Development Development Investment Business Transportation & Investment 18.5 million 27.9 million Mobile Phone 0.6 million sq.ft. completed Franchised Bus sq.ft. under Hotels Operation sq.ft. under investment (KMB*) development properties (SmarTone*) development 33% 26% 1.7 million 21 million Airport Freight 4.2 million sq.ft. completed sq.ft. of agricultural Toll Road Forwarding land sq.ft. under Construction investment (Route 3 CPS) Centre (site area) development properties 50% 65% Transport Property Infrastructure Business Management Management Aviation Centre (Wilson Group) 100% 35% Financial River Trade Landfill & Waste Services Terminal Management 33% 20% Container Insurance Terminal (CT9) 28.5% Mid-Stream Operation 50% * Listed in Hong Kong 9 Chairman’s Statement 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 1999 was HK$9,278 million, an increase of 28 per cent compared with last year’s profit of HK$7,260 million. Earnings per share for the year was HK$3.87, representing an increase of 27 per cent compared with HK$3.04 for the previous year. Dividends The Directors have recommended the payment of a final dividend for the year ended 30th June 1999 of HK$1.05 per share. Together with the interim dividend of HK$0.50 per share, the total dividend for the full year is HK$1.55 per share, representing an increase of 29 per cent when compared with the previous year. Le Sommet (left) in North Point and The Belcher’s (bottom) in Mid-Levels West both sold extremely well when they were launched. 10 Chairman’s Statement (cont’d) Review Sales During the year ended 30th June 1999, total property sales generated by the Group, both as principal and as agent, amounted to HK$21,904 million, compared with last year’s sales of HK$25,916 million. Major projects marketed during the period included Scenic View in Ngau Chi Wan, Grand Horizon in Tsing Yi, Castello in Shatin, Le Sommet in North Point, Chelsea Heights Phase 2 in Tuen Mun and The Belcher’s Phase 1 in Mid- Levels West. During the year under review, the Group completed the following twelve projects, with an attributable gross floor area of about 5 million square feet: Group’s Attributable Project Location Usage Interest Gross Floor Area (%) (square feet) 100 1,328,500 Symphony Bay Sai Sha Road, Residential Sai Kung 100 1,050,000 Grand Pacific Views Castle Peak Road, Residential/ & Grand Pacific Heights Tuen Mun Shops 1 20 192,800 Tung Chung Crescent Tung Chung Town Residential (Blocks 1 - 6) Lot 1 1 5 100 165,900 Waterfront South 1 - 5 Yue Wok Street, Residential/ Aberdeen Shops 8 22.5 158,000 Villa Esplanada 8 Nga Ying Chau Street, Residential Phase 2 Tsing Yi 11 Chairman’s Statement (cont’d) Group’s Attributable Project Location Usage Interest Gross Floor Area (%) (square feet) 1 100 144,000 Chateau Royale 1 Yung Yi Road, Residential Tai Po 100 144,000 Hillview Court Pak Shek Wo, Residential Sai Kung 8 100 100,700 Le Palais 8 Pak Pat Shan Road, Residential Tai Tam 3 8 92,400 Belair Monte 3 Ma Sik Road, Fanling Residential/ Shopping Centre 1 7 22,200 Greenfields 1 Fung Kam Street, Residential Yuen Long * 388 100 1,230,000 Millennium City 388 Kwun Tong Road, Office Phase 1* Kowloon East * 1 47.5 373,000 One International 1 Harbour View Street, Office Finance Centre* Central Total 5,001,500 * * Retained for investment, except 300,000 square feet of Millennium City Phase 1, which was sold to an end-user. 12 Chairman’s Statement (cont’d) Approximately 95 per cent of the residential units completed and marketed during the year have been sold. Land Bank During the year, the Group added a total of 3.8 million square feet of attributable gross floor area to its land bank through land use conversion and other means: Attributable Group’s Attributable Gross Floor Project Usage Interest Site Area Area (%) (square feet) (square feet) 504 100 314,000 1,743,000 Yuen Long Town Lot 504 Residential/ Commercial 736,000 Ma Wan (additional plot ratio) Residential Joint Venture N/A 399 100 125,000 375,000 Tuen Mun Town Lot 399 Residential 1 31,600 158,000 1 Ho Man Tin Hill Road Residential Joint Venture 100 123,600 152,000 To Fung Shan Residential Phases 3 & 4, Shatin 6328 35.44 72,000 590,000 NKIL 6328, Cheung Sha Wan Residential/ Commercial/ Hotel Total 666,200 3,754,000 13 Chairman’s Statement (cont’d) In addition, the Group recently acquired two other sites, 418A 418 A 129 Kwun Tong Road and AIL 129 in Ap Lei Chau.