Hysan Development Company Limited

CHAIRMAN'S STATEMENT

Results

I am pleased to report for the year 1996, a profit growth of 10.12% for the Group. The consolidated profit after tax and minority interests for the period under review was HK$1,349.04 million representing an increase of HK$124.02 million over HK$1,225.02 million in 1995. Earnings per share were HK$1.31 representing an increase of 7.38% over that of last year (1995:HK$1.22). Turnover for 1996 amounted to HK$2,218.16 million, an increase of HK$254.48 million. The operating profit also improved by 13.26% over that of last year.

Dividends

Your Directors propose to recommend a final dividend of 72 cents per share (1995:68 cents per share) at the Annual General Meeting to be held on 30th April 1997. Together with the interim dividend of 40 cents per share already paid on 18th October 1996, the Group's total distribution will be HK$1.12 per share for the whole year (1995:HK$1.05 per share).

The Register of Members will be closed from 24th April 1997 to 30th April 1997, both dates inclusive, during which period no transfer of shares can be registered. The final dividend will be payable on 1st May 1997 to shareholders whose names appear on the Register of Members on 30th April 1997.

Investment Properties

1. Residential Properties
   
   Leasing of luxury residential properties stabilised with some upward adjustments in rentals. The Group's residential portfolio is about 97% let.
   
   
2. Office Properties
   
   There has been increased activities in the office leasing market and rental level is firm. The Group's office space is virtually fully let.
   
   
3. Retail Properties
   
   The retail market has improved especially in traditional shopping areas, like Causeway Bay. After the letting of the remaining space at the Lee Theatre Plaza, the Group's retail portfolio is now virtually fully let.
   
   

Development Projects

1. The Lee Gardens
   
   The completion of this office/retail development with a total gross floor area of about 84,000 square metres (900,000 square feet) is now expected to be delayed to the second quarter of 1997.
   
   The pre-leasing of the Lee Gardens is encouraging. Today, over 90% of the retail space are committed by internationally renowned fashion boutiques, motor showrooms, restaurants and about 70% of the office space committed by multinational corporations.
   
   
2. Melville Park, Singapore
   
   All the 1,232 units in this 129,000 square metres (1.39 million square feet) residential project were sold and delivered to the buyers. Profit generated from this development will be distributed to the shareholders as dividend after the tax clearance in Singapore is obtained.
   
   
3. Stratford Court, Upper Changi Road, Singapore
   
   This residential project in which the Group has a 10% interest, consists of 268 units with a total gross floor area of 35,976 square metres (387,100 square feet). Construction work has recently been commenced and pre-sale of the project is in progress.
   
   
4. Peace Garden, Shanghai
   
   The Peace Garden is planned to be developed in two phases. Phase 1 consisting of three blocks, with a total area of 65,828 square metres (708,310 square feet) of residential space has been completed and the application of the occupation permit is in hand. Today, about 30% of the units in one of the three blocks have been sold as the property market in Shanghai is generally slow.
   
   
5. Grand Gateway, Shanghai
   
   Construction of Phase 1 is in progress. This development in which the Group has a 15% interest with gross floor area of about 340,000 square metres (3.66 million square feet) of retail, office and residential space, will be completed in phases. Phase 1 consists of one residential tower and part of the retail podium.
   
   

Acquisition and Disposal of Properties

1. Entertainment Building
   
   The Group has, on 3rd December 1996, entered into a sale and purchase agreement for acquisition of the Entertainment Building in core Central at a consideration of HK$3,640 million. This commercial building contributes an additional gross floor area of about 14,542 square metres (156,532 square feet) of office space and 5,072 square metres (54,597 square feet) of retail area to the Group's rental portfolio. Completion of the acquisition is scheduled on 20 May 1997.
   
   
2. Cimbria Court
   
   The whole development consisting of total gross floor area of 2,079 square metres (22,370 square feet), was sold to an independent third party on 13th December 1996 for a consideration of HK$168 million. The Group has a 50% interest in this project. Completion of sale is subject to the issue of the occupation permit which is expected by the end of March.
   
   
3. Development projects in Singapore
   
   During the year, the Group has participated in two additional joint ventures with First Capital Corporation Limited for two residential projects located at Bishan and Tanjong Rhu of Singapore. The gross floor area of the projects at Bishan and Tanjong Rhu is about 87,373 square metres (940,570 square feet) and 66,040 square metres (710,929 square feet) respectively. The Group has a 10% interest in both joint ventures.
   
   

Issue of Floating Rate Notes

The Group, on 3rd March 1997, successfully arranged an issue of HK$2,000 million 5-year Floating Rate Notes with full repayment in Year 2002. These unsecured notes are guaranteed by the Group and priced at an interest rate of 0.565% over the 3-month HIBOR. The issue received strong support from 14 international and local financial institutions.

Net Asset Value

An independent valuation of the Group's investment properties and properties under development has been carried out by Knight Frank. Taking into account the revaluation of all the Group's investment properties, properties under development and other investments, the net asset value of the Group as at 31st December 1996 was HK$36.70 per share (1995:HK$29.66 per share) based on the shares outstanding as at 31st December 1996 (1,028,786,870 shares).

The investment properties were appraised on open market value basis by capitalizing the net income with due allowance for outgoings and provisions for reversionary income potential. Properties under development have been valued on the basis that they will be developed in accordance with the building plans or development proposals and having regard to the locality and prevailing market conditions. However, no allowance has been made in the valuation for any expenses or taxation which may be incurred in effecting a sale.

Re-purchase of Company's Listed Securities

During the year, no ordinary shares or warrants of the Company were repurchased.

Directors and Staff

I would also like to take this opportunity to express my sincere thanks to my fellow Directors for their guidance and support and to all members of the staff for their loyalty and dedication throughout the year.

Prospects

With the election of the first Chief Executive of the Hong Kong Special Administration Region and the appointment of his inner cabinet and policy secretaries, a smooth transition looks assured. The economic fundamentals of Hong Kong would continue to improve.

The Hong Kong property market would likely remain active. Following the surge in capital values of luxury residential and commercial properties, rental is anticipated to increase. A better economic environment would also benefit the retail sector and retail rental is expected to improve.

The Group's investment property portfolio would further be strengthened after the completion of the Lee Gardens and the acquisition of the Entertainment Building. Barring unforseen circumstances, the Group's performance for 1997 is expected to be satisfactory.

H.C. LEE
Chairman
Hong Kong, 12th March 1997

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