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CorporatePlanningandFinancialManagementCorporatePlanningandFinancialManagementANNUALREPORT200962NetAssets(asat31March2009)HK$BillionRentalProperties&OtherFixedAssetsHousingInventories/PropertiesunderDevelopmentforSaleOtherNetAssetsDespitetheglobalfinancialtsunami,theHousingSocietycontinuestomanageourfinancesbothprudentlyandresponsibly.Duringtheyear,wehavecontinuedwithourstrategicobjectiveofservingourcustomersthroughtheprovisionofqualityhousingandrelatedservices,whileimprovingthequalityoflivinginthecommunityatlarge.StrategicFocusesUnderthisobjective,theHousingSocietyhasfocuseditsbusinessinitiativesonfourstrategicareas,namelyhousingfortheelderly,buildingmanagementandmaintenance,upgradingrentalestatesandurbanrenewal.Inviewoftheageingcommunity,theHousingSocietycontinuestoexploreinnovativehousingandservicesforourseniorpopulationacrossthemiddle-incomespectrum.Theseincludereviewingandbuildingelderlyhousingfacilitiesthroughrehabilitationofourrentalestatesandredevelopmentofurbanrenewalprojects,andatthesametimedevelopingelderlyhousingfortheseniorcitizenswithhigheraffordabilityintwonewsitesatTannerHillandWetlandPark.RidingonthesuccessofourBuildingManagementandMaintenanceScheme(BMMS)andtheBuildingMaintenanceGrantSchemeforElderlyOwners(BMGSEO),theGovernmentfurtherinvitedtheHousingSocietytoparticipatein“OperationBuildingBright”(OBB),acampaigntopreservejobsintheconstructionindustryandprovideone-stopassistancetoownersofoldbuildingstocarryoutrepairworks.AVoluntaryBuildingClassificationScheme(VBCS)wasalsounderpreparationtocomplementtheimpendingMandatoryBuildingInspectionScheme(MBIS)tobelaunchedbytheGovernment.5.5(22%)4.1(16%)15.6(62%)63Redevelopment/RehabilitationofRentalEstatesBMMS&MBISElderlyHousingUrbanRenewal&CityRevitalisationProjectsTotalDespitefreezingthedomesticrentsforanotheryear,theHousingSocietycontinuedwiththeimprovementandrehabilitationofourrentalestatestoprovidetenantswithasafeandcomfortablelivingenvironment.FundswerealsoallocatedforurbanrenewalincludingvariousrevitalisationandrehabilitationprojectsthatenhancethecityscapeofHongKong.Toensurethatfundswillbeavailabletoredevelopourrentalestatesinthecoming20years,theExecutiveCommitteedecidedtoturnourlongterminvestmentportfoliointoasinkingfundforthispurpose.ThefundwillbetoppeduptoHK$8billionfromourcashreserve.Toensurethealignmentofthestrategicfocusesoftheorganisationwithoperationaltactics,wecontinuedtorefineourBalancedScorecardsystem.OurScorecardemphasisesabalancedapproachonfourkeyperspectives:theprovisionofservicestoouridentifiedcustomersectors,thefinancialstrengthrequiredtodeliverourservices,theoptimisationofinternalprocesses,andtheresourcesandcapabilitiesrequiredbytheorganisationtoachieveourobjectives.Wealsocontinuedtodevelopandimplementanenterpriseriskmanagementframeworktosystematicallyidentifypotentialeventsthatmayaffecttheoperations,tomanagethepertaininginherentriskswithinadefinedriskappetite,andtoprovidereasonableassuranceregardingtheachievementoftheobjectivesoftheHousingSociety.Theframeworkcomprisesfivekeyperspectives:riskgovernance,riskassessment,riskquantificationandaggregation,riskmonitoringandreporting,andbalancingofriskandcontrol.FundsCommittedforFutureInitiativesHK$Billion3.6(22%)3.0(18%)2.0(12%)8.0(48%)16.6CorporatePlanningandFinancialManagementANNUALREPORT200964Undertheframework,keystrategicmanagementrisksandoperationalrisksareidentified,evaluated,prioritisedandmonitored.Movingforward,themanagementwillproactivelymonitorandmanagetherisksfacedbytheHousingSocietythroughasystematicapproach.FinancialManagementAtthebeginningofthefinancialyearwhentheHousingSocietybudgetwasprepared,weanticipatedaslowdownintheglobaleconomicgrowthandinthefinancialmarkets.Wewereadditionallyconcernedthattheequityandfixed-incomemarketsseemedtobedrivenmorebyliquiditythanbysoundfundamentals.Notingthepotentialconsequences,weloweredtheexpectedreturnfromtheseinstrumentsanddecidedtomaintainaconservativeapproachtoassetallocation.However,whathappenedinthefinancialmarketsduringtheyearwentalongwaybeyondourexpectations.Whatbeganasasub-primemortgageproblemwithadropinpropertypricesintheUnitedStatesmushroomedtobecomeaglobalfinancialandeconomiccrisis.Thespeedandthemagnitudeofthede-leveragingonthemarketwereferocious.Liquidityallbutdriedupandfinancialmarketsplummeted.Althoughourinvestmentsinequitiesweresignificantlyhit,ourconservativeapproachinmaintainingmorethan50percentofourinvestmentfundsincashpaidoffandcushionedtheoverallimpact.IncomeDistributionfor2008/09(asat31March2009)HK$MillionPropertySalesPropertyLeasingandManagementIncomeOthers1,277(58.5%)895.9(41%)11(0.5%)65Asat31March2009,theHousingSocietywasmanagingHK$16.4billionininvestmentassets.Thefinancialcrisisaffectedthereturnsofourinvestmentsandfortheyearended31March2009,theHousingSocietyrecordedalossof10.89percentonouroverallinvestments,comparedwithagainof5.54percentfor2007/2008.Withtheexceptionofcash,whichrecordedareturnof2.28percent,allotherassetclassessufferedlossinvaryingdegrees.Ourequityinvestmentsrecordedalossof45.14percent,whilefixedin