IMPORTANT NOTICE THIS OFFERING IS AVAILABLE ONLY TO INVESTORS WHO ARE OUTSIDE OF THE U.S.
IMPORTANT: You must read the following before continuing. The following applies to the preliminary offering memorandum following this page, and you are therefore advised to read this carefully before reading, accessing or making any other use of the offering memorandum. In accessing the offering memorandum, you agree to be bound by the following terms and conditions, including any modifications to them any time you receive any information from us as a result of such access. NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE ‘‘SECURITIES ACT’’), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION AND THE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT), EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIES LAWS. THE FOLLOWING OFFERING MEMORANDUM MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORIZED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. IF YOU HAVE GAINED ACCESS TO THIS TRANSMISSION CONTRARY TO ANY OF THE FOREGOING RESTRICTIONS, YOU ARE NOT AUTHORIZED AND WILL NOT BE ABLE TO PURCHASE ANY OF THE SECURITIES DESCRIBED THEREIN. Confirmation and your representation: In order to be eligible to view this preliminary offering memorandum or make an investment decision with respect to the securities, investors must be outside the United States. By accepting the e-mail and accessing this offering memorandum, you shall be deemed to have represented to us that (1) you and any customers you represent are outside the United States and that the electronic mail address that you gave us and to which this e-mail has been delivered is not located in the United States and (2) that you consent to delivery of such offering memorandum by electronic transmission. Within the United Kingdom, the preliminary offering memorandum is being directed solely at and may only be communicated to persons who: (i) fall within Article 19(5) or Article 49(2)(a)–(d) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, (ii) are outside the United Kingdom, or (iii) are persons to whom an invitation or inducement to engage in an investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with the issue or sale of any securities may otherwise be lawfully communicated or caused to be communicated (all such persons collectively being referred to as ‘‘Relevant Persons’’). The preliminary offering memorandum is directed only at Relevant Persons and must not be acted on or relied on by persons who are not Relevant Persons. Any investment or investment activity to which this offering memorandum relates is available only to Relevant Persons and will be engaged in only with Relevant Persons. The preliminary offering memorandum and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other person. Any person who is not a Relevant Person should not act or rely on the offering memorandum or any of its contents. PRIIPs REGULATION/PROHIBITION OF SALES TO EEA RETAIL INVESTORS — The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area (the ‘‘EEA’’). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, ‘‘MiFID II’’); (ii) a customer within the meaning of Directive EU (2016/97) (‘‘Insurance Distribution Directive’’), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II or (iii) not a qualified investor as defined in Regulation (EU) 2017/1129 (the ‘‘Prospectus Regulation’’). Consequently no key information document required by Regulation (EU) No 1286/2014 (the ‘‘PRIIPs Regulation’’) for offering or selling the Notes or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the Notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPS Regulation. Notification under Section 309B(1)(c) of the Securities and Futures Act, Chapter 289 of Singapore (the ‘‘SFA’’) — the issuer has determined, and hereby notifies all relevant persons (as defined in Section 309A(1) of the SFA), that the Notes are prescribed capital markets products (as defined in the Securities and Futures (Capital Markets Products) Regulations 2018 of Singapore) and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products). You are reminded that this preliminary offering memorandum has been delivered to you on the basis that you are a person into whose possession this preliminary offering memorandum may be lawfully delivered in accordance with the laws of jurisdiction in which you are located and you may not, nor are you authorized to, deliver or disclose the contents of this preliminary offering memorandum to any other person. The materials relating to the offering do not constitute, and may not be used in connection with, an offer or solicitation in any place where offers or solicitations are not permitted by law. If a jurisdiction requires that the offering be made by a licensed broker or dealer and the initial purchasers or any affiliate of the initial purchasers is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by the initial purchasers or such affiliate on behalf of the issuer in such jurisdiction. This offering memorandum has been sent to you in an electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently, none of DBS Bank Ltd., The Hongkong and Shanghai Banking Corporation Limited or Standard Chartered Bank (Singapore) Limited, as Joint Lead Managers, nor any person who controls any of them nor any director, officer, employee or agent of any of them or affiliate of any such person accepts any liability or responsibility whatsoever in respect of any difference between the offering memorandum distributed to you in electronic format and the hard copy version available to you on request from the Joint Lead Managers. You are responsible for protecting against viruses and other destructive items. Your use of this e-mail is at your own risk and it is your responsibility to take precautions to ensure that it is free from viruses and other items of a destructive nature. Subject to Completion Preliminary Offering Memorandum dated August 21, 2019
OFFERING MEMORANDUM STRICTLY CONFIDENTIAL offer to sell US$ ed.
Yanlord Land (HK) Co., Limited (Incorporated with limited liability under the laws of Hong Kong)
% SENIOR NOTES DUE 20 Unconditionally and Irrevocably Guaranteed by Yanlord Land Group Limited (Company Registration Number 200601911K) (Incorporated with limited liability under the laws of Singapore)
ISSUE PRICE % AND ACCRUED INTEREST, IF ANY
Interest payable on and
The US$ % Senior Notes due 20 (the ‘‘Notes’’)tobeissuedbyYanlordLand(HK)Co.,Limited(the‘‘Issuer’’) will bear interest from , 2019, at % per annum payable semi-annually in arrears on and of each year, beginning , 2020. The Notes will mature on , .
re such offer, solicitation or sale is not permitt The Notes are senior obligations of the Issuer irrevocably and unconditionally guaranteed (the ‘‘Parent Guarantee’’) by Yanlord Land Group Limited (the ‘‘Company’’ or the ‘‘Parent Guarantor’’) and the Company’s existing subsidiaries (the ‘‘Subsidiary Guarantors’’) other than (1) those organized under the laws of the PRC and (2) certain other subsidiaries specified in ‘‘Description of the Notes.’’ We refer to the guarantees by the Subsidiary Guarantors as Subsidiary Guarantees. Under certain circumstances and subject to certain conditions, a Subsidiary Guarantee required to be provided by a subsidiary of the Company may be replaced by a limited-recourse guarantee (a ‘‘JV Subsidiary Guarantee’’). We refer to the subsidiaries providing a JV Subsidiary Guarantee as JV Subsidiary Guarantors. We refer to the Company, the Subsidiary Guarantors and the JV Subsidiary Guarantors collectively as the ‘‘Guarantors’’ and the Parent Guarantee, the Subsidiary Guarantees and the JV Subsidiary Guarantees collectively as the ‘‘Guarantees.’’ We may at our option redeem the Notes, in whole or in part, at any time and from time to time on or after , at the redemption prices set forth in this offering memorandum plus accrued and unpaid interest, if any, to the redemption date. At any time prior to , , we may redeem up to 35% of the Notes, at a redemption price of % of the principal amount, plus accrued and unpaid interest, if any, in each case, using the net cash proceeds from sales of certain kinds of capital stock. In addition, we may redeem the Notes, in whole but not in part, at any time prior to , , at a price equal to 100% of the principal amount of the applicable Notes plus a premium as set forth in this offering memorandum. Upon the occurrence of a Change of Control Triggering Event (as defined in ‘‘Description of the Notes’’), we must make an offer to repurchase all Notes outstanding at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the date of repurchase. The Notes will (1) rank at least pari passu in right of payment against the Issuer and the Company with respect to all unsecured, unsubordinated indebtedness of the Issuer and the Company (subject to any priority rights of such unsubordinated indebtedness pursuant to applicable law), (2) rank senior in right of payment to any existing and future obligations of the Issuer expressly subordinated in right of payment to the Notes, (3) be effectively subordinated to the other secured obligations of the Issuer, the Company, the Subsidiary Guarantors and the JV Subsidiary Guarantors (if any), to the extent of the value of the assets serving as security therefor, and (4) be effectively subordinated to all existing and future obligations of the Non-Guarantor Subsidiaries (as defined in ‘‘Description of the Notes’’). However, applicable law may limit the enforceability of the Parent Guarantee, the Subsidiary Guarantees, the JV Subsidiary Guarantees and the charge over any collateral. See ‘‘Risk Factors — Risks Relating to the Guarantees and the Collateral.’’ For a more detailed description of the Notes, see ‘‘Description of the Notes’’ beginning on page 207.
Investing in the Notes involves risks. See ‘‘Risk Factors’’ beginning on page 18.
Approval in-principle has been received from the Singapore Exchange Securities Trading Limited (the ‘‘SGX-ST’’) for the listing and quotation of the Notes on the SGX-ST. The SGX-ST assumes no responsibility for the correctness of any of the statements made, opinions expressed or reports contained in this offering memorandum. Approval in-principle from, admission to the Official List of, and listing and quotation of the Notes on, the SGX-ST are not to be taken as an indication of the merits of the Issuer, the Company, the Subsidiary Guarantors, the Company’s associated companies or the Notes.
r to buy these securities in any jurisdiction whe The Notes are expected to be rated ‘‘Ba3’’ by Moody’s Investors Service, Inc. (‘‘Moody’s’’)and‘‘BB-’’ by Standard & Poor’s Ratings Services (‘‘S&P’’). These ratings do not constitute a recommendation to buy, sell or hold the Notes and may be subject to suspension, reduction or withdrawal at any time by the relevant rating organization. The Notes and the Guarantees have not been and will not be registered under the United States Securities Act of 1933, as amended (the ‘‘Securities Act’’), and may not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Accordingly, the Notes are being offered and sold by the Initial Purchasers only outside the United States in offshore transactions in compliance with Regulation S under the Securities Act. For a description of certain restrictions on resale or transfer, see ‘‘Transfer Restrictions’’ beginning on page 194. It is expected that the delivery of the Notes will be made through the facilities of Euroclear Bank SA/NV (‘‘Euroclear’’) and Clearstream Banking S.A. (‘‘Clearstream’’), on or about , 2019 against payment therefor in immediately available funds. The Notes will be issued only in fully registered form, without coupons, in minimum denominations of US$200,000 of principal amount and integral multiples of US$1,000 in excess thereof and will be initially represented by a global certificate (the ‘‘Global Certificate’’) deposited with a common depositary and registered in the name of the common depositary or its nominee. Beneficial interests in the Global Certificate will be shown on, and transfer thereof will be effected only through, the records maintained by Euroclear and Clearstream. The Issuer, the Parent Guarantor and the Subsidiary Guarantors accept full responsibility for the accuracy of the information contained in this offering memorandum and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.
Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers
DBS Bank Ltd. HSBC Standard Chartered Bank
The date of this offering memorandum is , 2019 The information contained in this preliminary offering memorandum is not complete and may be changed. This preliminary offering memorandum is not an these securities and is not a solicitation of an offe TABLE OF CONTENTS
Page
SUMMARY ...... 1
THE OFFERING ...... 7
SUMMARY CONSOLIDATED FINANCIAL INFORMATION ...... 13
RISK FACTORS ...... 19
USE OF PROCEEDS ...... 51
EXCHANGE RATE INFORMATION ...... 52
CAPITALIZATION AND INDEBTEDNESS ...... 53
SELECTED CONSOLIDATED FINANCIAL INFORMATION ...... 54
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ...... 60
INDUSTRY OVERVIEW ...... 81
CORPORATE STRUCTURE ...... 99
BUSINESS ...... 103
REGULATION ...... 148
MANAGEMENT ...... 181
RELATED PARTY TRANSACTIONS ...... 192
PRINCIPAL SHAREHOLDERS ...... 194
TRANSFER RESTRICTIONS ...... 195
RATINGS ...... 196
DESCRIPTION OF OTHER MATERIAL INDEBTEDNESS ...... 197
DESCRIPTION OF THE NOTES ...... 208
TAXATION ...... 279
IMPORTANT NOTICE TO HOLDERS OF NOTES ...... 283
PLAN OF DISTRIBUTION ...... 284
LEGAL MATTERS ...... 289
CERTIFIED PUBLIC ACCOUNTANTS ...... 290
INDEX TO CONSOLIDATED FINANCIAL INFORMATION ...... F-1
— i — THIS CONFIDENTIAL OFFERING MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY NOTE OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS OFFERING MEMORANDUM NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUER, THE COMPANY OR THE COMPANY’S SUBSIDIARIES OR THAT THE INFORMATION SET FORTH IN THIS OFFERING MEMORANDUM IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
IN CONNECTION WITH THIS OFFERING, ANY JOINT LEAD MANAGER WHO MAY BE APPOINTED AS STABILIZATION MANAGER OR ANY PERSON ACTING FOR DBS BANK LTD., THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED AND STANDARD CHARTERED BANK (SINGAPORE) LIMITED (THE ‘‘INITIAL PURCHASERS’’), MAY PURCHASE AND SELL THE NOTES IN THE OPEN MARKET. THESE TRANSACTIONS MAY, TO THE EXTENT PERMITTED BY APPLICABLE LAWS AND REGULATIONS, INCLUDE SHORT SALES, STABILIZING TRANSACTIONS AND PURCHASES TO COVER POSITIONS CREATED BY SHORT SALES. THESE ACTIVITIES MAY STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF THE NOTES. AS A RESULT, THE PRICE OF THE NOTES MAY BE HIGHER THAN THE PRICE THAT OTHERWISE MIGHT EXIST IN THE OPEN MARKET. IF THESE ACTIVITIES ARE COMMENCED, THEY MAY BE DISCONTINUED AT ANY TIME AND MUST IN ANY EVENT BE BROUGHT TO AN END AFTER A LIMITED TIME. THESE ACTIVITIES WILL BE UNDERTAKEN SOLELY FOR THE ACCOUNT OF THE INITIAL PURCHASERS AND NOT FOR OR ON BEHALF OF THE ISSUER.
PRIIPs REGULATION/PROHIBITION OF SALES TO EEA RETAIL INVESTORS — The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area (the ‘‘EEA’’). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, ‘‘MiFID II’’); (ii) a customer within the meaning of Directive EU (2016/97) (‘‘Insurance Distribution Directive’’), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II or (iii) not a qualified investor as defined in Regulation (EU) 2017/1129 (the ‘‘Prospectus Regulation’’). Consequently no key information document required by Regulation (EU) No 1286/2014 (the ‘‘PRIIPs Regulation’’) for offering or selling the Notes or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the Notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPS Regulation.
You should rely only on the information contained in this offering memorandum. We have not authorized anyone to provide you with information that is different from that contained in this offering memorandum. We are offering to sell, and seeking offers to buy, the Notes only in jurisdictions where offers and sales are permitted. The information contained in this offering memorandum is accurate only as of the date of this offering memorandum, regardless of the time of delivery of this offering memorandum or any sale of the Notes. Our business, financial condition, results of operations and prospects may have changed since that date.
This offering memorandum is highly confidential and has been prepared by us solely for use in connection with the proposed offering of the Notes. We reserve the right to withdraw the offering of the Notes at any time. We and the Initial Purchasers also reserve the right to reject any offer to purchase, in whole or in part, for any reason, or to sell less than all of the Notes offered hereby. This offering memorandum is personal to the offeree to whom it has been delivered and does not constitute an offer to any other person or to the public in general to subscribe for or otherwise acquire the Notes. Distribution of this offering memorandum by you to any person other than those persons, if any, retained to advise you with respect to this offering memorandum is unauthorized, and any disclosure of any of the contents of this offering memorandum, without our prior written consent, is prohibited. By accepting delivery of this offering memorandum, each offeree agrees to the foregoing and to make no photocopies of this offering memorandum.
You acknowledge that (i) you have been afforded an opportunity to request from us and to review, and have received, all additional information considered by you to be necessary to verify the accuracy of, or to supplement, the information contained in this offering memorandum, (ii) you have not relied on the Initial Purchasers or the Trustee or the Agents (as defined below) or any person affiliated with the Initial Purchasers or the Trustee, respectively in connection with your investigation of the accuracy of such information or your investment decision, and (iii) no person has been authorized to give any information or to make any representation concerning us, our subsidiaries, the Notes or the Guarantees
— ii — (other than as contained in this offering memorandum) and, if given or made, any such other information or representation should not be relied upon as having been authorized by us or the Initial Purchasers or the Trustee.
None of the Initial Purchasers, the Trustee or the Principal Paying and Transfer agent or Registrar (collectively, the ‘‘Agents’’) or any of their respective affiliates, employees, officers, directors or advisors undertakes to review the financial condition or affairs of the Issuer, the Company or its subsidiaries as a group during the life of the Notes contemplated by this offering memorandum nor to advise any investor or potential investor in the Notes of any information coming to the attention of the Initial Purchasers, the Trustee or the Agents. Laws in certain jurisdictions may restrict the distribution of this offering memorandum and the offer and sale of the Notes. Persons into whose possession this offering memorandum or any of the Notes are delivered must inform themselves about, and observe, any such restrictions. Each prospective purchaser of the Notes must comply with all applicable laws and regulations in force in any jurisdiction in which it purchases, offers or sells the Notes or possesses or distributes this offering memorandum and must obtain any consent, approval or permission required under any regulations in force in any jurisdiction to which it is subject or in which it makes such purchases, offers or sales, and neither we nor the Initial Purchasers shall have any responsibility therefor.
IN MAKING AN INVESTMENT DECISION, YOU MUST RELY ON YOUR OWN EXAMINATION OF OUR BUSINESS AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS OFFERING MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE U.S. SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS OR EXEMPTION THEREFROM. YOU SHOULD BE AWARE THAT YOU MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
NEITHER THE INITIAL PURCHASERS NOR THE TRUSTEE NOR THE AGENTS HAVE INDEPENDENTLY VERIFIED THE INFORMATION CONTAINED HEREIN. ACCORDINGLY, THE INITIAL PURCHASERS, THE TRUSTEE AND THE AGENTS ARE NOT MAKING ANY REPRESENTATION OR WARRANTY AS TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION IN THIS OFFERING MEMORANDUM, AND NOTHING CONTAINED IN THIS OFFERING MEMORANDUM IS, OR MAY BE RELIED UPON AS, A PROMISE OR REPRESENTATION, WHETHER AS TO THE PAST OR THE FUTURE. THE INITIAL PURCHASERS, THE TRUSTEE AND THE AGENTS OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, ADVISORS, AND AFFILIATES ASSUME NO RESPONSIBILITY FOR THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED IN THIS OFFERING MEMORANDUM. TO THE FULLEST EXTENT PERMITTED BY LAW, NONE OF THE INITIAL PURCHASERS, THE TRUSTEE NOR THE AGENTS OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, ADVISORS, AND AFFILIATES ACCEPT ANY RESPONSIBILITY FOR THE CONTENTS OF THIS OFFERING MEMORANDUM OR FOR ANY STATEMENT MADE OR PURPORTED TO BE MADE BY THE INITIAL PURCHASERS OR THE TRUSTEE OR ON THEIR RESPECTIVE BEHALF IN CONNECTION WITH THE ISSUER OR THE COMPANY OR THE ISSUE AND OFFERING OF THE NOTES. THE INITIAL PURCHASERS AND THE TRUSTEE ACCORDINGLY DISCLAIM ALL AND ANY LIABILITY WHETHER ARISING IN TORT OR CONTRACT OR OTHERWISE WHICH THEY MIGHT OTHERWISE HAVE IN RESPECT OF THIS OFFERING MEMORANDUM OR ANY SUCH STATEMENT.
Neither we nor the Initial Purchasers or any of their respective representatives are making any representation to you regarding the legality of an investment in the Notes and the Guarantees by you under applicable legal investment or similar laws. You should not consider any information in this offering memorandum to be legal, business or tax advice. You should consult your own advisors as to legal, tax, business, financial and related aspects of the purchase of the Notes.
— iii — CERTAIN CONVENTIONS AND CURRENCY PRESENTATION
Market data and certain industry forecasts and statistics in this offering memorandum have been obtained from both public and private sources, including market research, publicly available information and industry publications. Although we believe this information to be reliable, it has not been independently verified by us or the Initial Purchasers or our or their respective directors and advisors, and neither we, the Initial Purchasers nor our or their respective directors and advisors make any representation as to the accuracy or completeness of that information. In addition, third party information providers may have obtained information from market participants and such information may not have been independently verified. This offering memorandum summarizes certain documents and other information, and investors should refer to them for a more complete understanding of what is discussed in those documents. In making an investment decision, each investor must rely on its own examination of us and the terms of the offering and the Notes, including the merits and risks involved.
The statistics set forth in this offering memorandum relating to the PRC and the property industry in the PRC were taken or derived from various government and private publications. The Initial Purchasers do not make any representation as to the accuracy of such statistics, which may not be consistent with other information compiled within or outside the PRC. Due to possibly inconsistent collection methods and other problems, the statistics herein may be inaccurate and should not be unduly relied upon.
In this offering memorandum, references to ‘‘China’’ or the ‘‘PRC’’ are to the People’s Republic of China, excluding Hong Kong, Macau and Taiwan (except where the context requires); references to ‘‘US$’’ or ‘‘U.S. dollars’’ are to the lawful currency of the United States; references to ‘‘RMB’’ or ‘‘Renminbi’’ are to the lawful currency of China and ‘‘S$’’ or ‘‘Singapore dollars’’ are to the lawful currency of Singapore. Solely for your convenience, RMB amounts as of and for the year ended December 31, 2018 have been converted into U.S. dollars based on the exchange rate of RMB6.8755 = US$1.00 and RMB amounts as of and for the six months ended June 30, 2019, and for any dates thereafter, have been converted into U.S. dollars based on the exchange rate of RMB6.8650 = U.S.$1.00, both of which were the noon buying rates as certified for customs purposes by the Federal Reserve Bank of New York for cable transfers for RMB on December 31, 2018 and June 28, 2019, respectively. No representation is made that RMB could have been, or could be, converted into U.S. dollars at that rate or at any other rate. No representation is made that the Singapore dollar amounts could be, converted into RMB at that rate or at any other rate, or that RMB could have been, or could be, converted into U.S. dollar at that rate or at any other rate.
In this offering memorandum, the terms ‘‘we,’’ ‘‘us,’’ ‘‘our,’’ ‘‘Company,’’ ‘‘Parent,’’ ‘‘Parent Guarantor,’’ ‘‘Group’’ and ‘‘Yanlord Land Group’’ refer to Yanlord Land Group Limited and, where relevant, its subsidiaries, and ‘‘Issuer’’ refers to Yanlord Land (HK) Co., Limited.
In this offering memorandum, the term ‘‘2016 WL Facility’’ refers to the HK$625 million equivalent multi-currency revolving and term loan facility dated April 26, 2016 and the supplemental agreement dated February 26, 2018 with Wing Lung Bank Limited as lender. The term ‘‘2017 Syndicated Loan Facility’’ refers to the US$1.05 billion syndicated loan facility dated April 24, 2017 with Hang Seng Bank Limited, The HongKong and Shanghai Banking Corporation Limited, Standard Chartered Bank (Hong Kong) Limited, DBS Bank Ltd. and Wing Lung Bank, Limited as mandated lead arrangers and bookrunners, China Construction Bank Corporation, Hong Kong Branch, Industrial and Commercial Bank of China (Asia) Limited, The Bank of East Asia, Limited, Shanghai Pudong Development Bank Co., Ltd., Shanghai Pudong Development Bank Co., Ltd., Hong Kong Branch, Shanghai Pudong Development Bank Co., Ltd. Singapore Branch, China Merchants Bank Co., Ltd., Hong Kong Branch, China Merchants Bank Co., Ltd Off-Shore Banking Center, Industrial and Commercial Bank of China (Macau) Limited, Ping An Bank Co., Ltd, Tianjin Pilot Free Trade Zone Branch, Nanyang Commercial Bank, Limited, Nanyang Commercial Bank (China) Limited Wuxi Branch, Shanghai Rural Commercial Bank Changning Branch, United Overseas Bank Limited, Hong Kong Branch, United Overseas Bank Limited, Singapore Branch as mandated lead arrangers, Chong Hing Bank Limited, Tai Fung Bank Limited, Bank of Shanghai (Hong Kong) Limited, China Everbright Bank Co., Ltd., Hong Kong Branch, China Guangfa Bank Co., Ltd., Macau Branch and Taiwan Cooperative Bank Limited, Hong Kong Branch as lead arrangers and Hang Seng Bank Limited as facility agent, comprising of US$761.2 million equivalent dual-tranche term loan facility and US$288.8 million equivalent dual-tranche revolving credit facility. The term ‘‘2019 CMB WL Facilities’’ refers to the RMB1,430 million term loan facility dated January 14, 2019 with CMB Wing Lung Bank Limited as lender. The term ‘‘2019 Dual-Tranche Term Loan Facility’’ refers to the US$364 million dual-tranche term loan facility dated April 9, 2019 with Bank of Shanghai (Hong Kong) Limited, China Construction Bank (Asia) Corporation Limited, China Merchants Bank Co., Ltd., Hong Kong Branch, China
— iv — Merchants Bank Co. Ltd, Singapore Branch, Hang Seng Bank Limited, Shanghai Pudong Development Bank Co., Ltd., Hong Kong Branch and The Hongkong and Shanghai Banking Corporation Limited as mandated lead arrangers, Hang Seng Bank Limited as facility agent and the financial institutions listed therein as original lenders. The 2016 WL Facility, the 2017 Syndicated Loan Facility, the 2019 CMB WL Facilities and the 2019 Dual-Tranche Term Loan Facility, collectively, are hereinafter known as the ‘‘Offshore Loans.’’ The term ‘‘2017 Senior Notes’’ refers to the US$450 million 5.875% senior notes due 2022 issued by the Issuer in January 2017. The term ‘‘2018 Senior Notes’’ refers to the US$350 million 6.75% senior notes due 2023 issued by the Issuer in April 2018.
Unless the context otherwise requires, each phase of a property development project referred to in this offering memorandum is considered as a separate property development.
In this offering memorandum, where information has been presented in thousands, millions or billions of units, amounts may have been rounded up or down. Totals of columns or rows in tables may not equal the sum of the individual items, and actual numbers may differ from those contained in this offering memorandum due to rounding.
— v — FORWARD-LOOKING STATEMENTS
This offering memorandum includes ‘‘forward-looking statements.’’ All statements other than statements of historical fact contained in this offering memorandum, including, without limitation, those regarding our future financial position and results of operations, strategy, plans, objectives, goals and targets, future developments in the markets where we participate or are seeking to participate, and any statements preceded by, followed by or that include the words ‘‘believe,’’ ‘‘expect,’’ ‘‘aim,’’ ‘‘intend,’’ ‘‘will,’’ ‘‘would,’’ ‘‘may,’’ ‘‘anticipate,’’ ‘‘seek,’’ ‘‘should,’’ ‘‘estimate,’’ ‘‘potential’’ or similar expressions or the negative thereof, are forward-looking statements. These forward-looking statements relate to events that are subject to known and unknown risks, uncertainties and other factors, some of which are beyond our control, which may cause our actual results, performance or achievements, or industry results to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
These forward-looking statements are based on numerous assumptions regarding our present and future business strategies and the environment in which we will operate in the future. Important factors that could cause our actual results, performance or achievements to differ materially from those in the forward-looking statements include, among others, the following:
. our business and operating strategies; . our capital expenditure plans; . various business opportunities that we may pursue; . our operations and business prospects; . our financial condition and results of operations; . availability of and changes to bank loans and other forms of financing; . our ability to acquire land at prime locations and complete development projects successfully and according to our schedule; . the industry outlook generally; . future developments in the PRC property market; . the performance of the property market in areas of the PRC in which we engage in property development; . changes in political, economic, legal and social conditions in the PRC, including the PRC government’s specific policies that affect land supply, availability and cost of financing, and pre-sale, pricing and volume of our development properties and taxation; . the timely repayments by our purchasers of mortgage loans guaranteed by us; . changes in competitive conditions and our ability to compete under these conditions; . the performance of the obligations and commitments of our joint venture partners under the existing and future joint venture agreements; . the performance of the obligations and undertakings of the independent contractors under various construction, building, interior decoration and installation contracts; . changes in currency exchange control and rates; . significant delay in obtaining the occupation permits, proper legal titles or approvals for our properties under development or held for future development; and . other factors beyond our control.
Additional factors that could cause actual results, performance or achievements to differ materially include, but are not limited to, those discussed under ‘‘Risk Factors’’ and elsewhere in this offering memorandum. We caution you not to place undue reliance on these forward-looking statements which reflect our management’s view only as of the date of this offering memorandum. We undertake no obligation to update, revise or publicly announce any forward-looking statements, whether as a result of new information, future events or otherwise. We are, however, subject to the provisions of the Securities and Futures Act, Chapter 289 of Singapore (the ‘‘SFA’’) and the SGX-ST Mainboard Listing Manual (the ‘‘SGX-ST Listing Manual’’) regarding corporate disclosure. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this offering memorandum might not occur.
— vi — ENFORCEABILITY OF CIVIL LIABILITIES
The Issuer is incorporated as a company with limited liability in Hong Kong, Yanlord Land Group Limited is incorporated as a company with limited liability under the laws of Singapore and each Subsidiary Guarantor is also incorporated outside the United States in either Hong Kong or Singapore. Hong Kong and Singapore each has a different body of securities laws from the United States and protections for investors may differ.
Almost all of our current operations are conducted in the PRC, and substantially all of our assets and assets of the Subsidiary Guarantors are located in the PRC. All of our directors and officers, the Issuer’s directors and officers and the Subsidiary Guarantors’ directors and officers are nationals or residents of jurisdictions other than the United States and all of their assets are located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon us, the Issuer, any of the Subsidiary Guarantors or such persons, or to enforce against us, the Issuer, any of the Guarantors or such persons judgments obtained in the United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.
We have been advised by Allen & Overy, our Hong Kong legal advisor, that as Hong Kong has no statutory or other arrangement for the reciprocal enforcement of judgments with the United States, a judgment obtained in the courts of New York cannot be enforced by registration in Hong Kong. However, under Hong Kong common law, a foreign judgment (including one from a court in the United States predicated upon U.S. federal or state securities laws) may be enforced in Hong Kong by bringing an action in a Hong Kong court, and then seeking summary or default judgment on the strength of the foreign judgment, provided that the foreign judgment is for a debt or definite sum of money and is final and conclusive on the merits. In addition, the Hong Kong courts may refuse to recognize or enforce a foreign judgment if such judgment:
a. was obtained by fraud;
b. was rendered by a foreign court that lacked the appropriate jurisdiction at the time;
c. is contrary to public policy or substantial justice;
d. is for a tax, fine or penalty or for multiple damages (as defined by the Protection of Trading Interests Ordinance (Cap. 471) of Hong Kong); or
e. is inconsistent with a Hong Kong judgment in respect of the same points at issue between the same parties.
There is uncertainty as to whether the courts of Singapore would recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States insofar as they may be penal or punitive in nature; or entertain original actions brought in Singapore against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States. A final and conclusive judgment in the federal or state courts of the United States under which a sum of money is payable, other than a sum payable in respect of taxes, fines, penalties or similar charges, may be sued upon as a liquidated sum owed in the courts of Singapore. Civil liability provisions of the U.S. federal and state securities law permit punitive damages against us, or our directors and officers; however, Singapore courts may not recognize or enforce a foreign judgment against us or our directors and officers to the extent that it will amount to the direct or indirect enforcement of foreign penal, revenue or other public law. It is uncertain as to whether a judgment obtained from the U.S. courts under civil liability provisions of the securities law would be determined by Singapore courts as penal or punitive in nature.
— vii — Our PRC counsel has advised us, that there is uncertainty as to whether the courts of the PRC would recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; or entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States. Our PRC counsel has advised us further that the recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. Courts in the PRC may decide to recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based on treaties between the PRC and the country where the judgment is made or on reciprocity between jurisdictions. China does not have any treaties or other arrangements that provide for the reciprocal recognition and enforcement of foreign judgments with the United States. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide such judgment violates the basic principles of PRC law or national sovereignty, security or public interest. So, it is uncertain whether a judgment obtained from a U.S. court under the securities law would be enforceable by courts in the PRC.
— viii — PRESENTATION OF FINANCIAL INFORMATION
We have prepared our consolidated financial statements in accordance with Singapore Financial Reporting Standards (‘‘SFRSs’’) for the years ended December 31, 2016 and 2017, and in accordance with Singapore Financial Reporting Standards (International) (‘‘SFRS(I)s’’) and International Financial Reporting Standards (‘‘IFRSs’’) for the year ended December 31, 2018 and as of June 30, 2019 and for the six months ended June 30, 2018 and 2019. Which differ in certain respects from generally accepted accounting principles in certain other countries.
— ix — SUMMARY
The following summary highlights information contained elsewhere in this offering memorandum. Because this is only a summary, it does not contain all of the information that you should consider before deciding to invest in the Notes. You should read the entire offering memorandum carefully, including the ‘‘Risk Factors’’ section and our consolidated financial statements and related notes.
Overview
We are a PRC-based leading real estate developer that focuses on developing fully-fitted residential properties and high-quality commercial and integrated properties in prime locations, within strategically-selected, key-established top-tier cities across six major economic regions in the PRC. Listed on the SGX-ST, we currently have significant subsidiaries in the PRC, Singapore and Hong Kong. We believe that our established track record as a leading developer of fully-fitted residential development properties in prime locations within the affluent Shanghai and Nanjing areas along the PRC’s Yangtze River Delta, has helped us build significant recognition of our ‘‘Yanlord’’ brand name which has resulted in premium pricing. In 2016 and 2017, our Yanlord Landmark commercial project and Yanlord Riverbay (Phase 1) residential project in Chengdu, and our Yanlord Marina Centre integrated project and Yanlord Marina Peninsula Gardens (Phases 1 and 2) integrated projects in Zhuhai have won various awards from industry associations in the PRC, including the LEED — EB platinum certification, the 2016–2017 Luban Award and National award for civil engineering in Chengdu, the Top 10 City Landmark in 2016 and Guangdong Province — Award for Structural and Engineering Excellence in Zhuhai. In 2018, we have earned the accolade of one of the 2018 China Top 100 Real Estate Developers, as well as one of the Top 10 developers in terms of Financial Stability among the 2018 China Top 100 Real Estate Developers, jointly by Enterprise Research Institute under the Development Research Center of the State Council, Property Research Institute of Tsinghua University and China Index Academy. In the same year, we have also received the National Award for Civil Engineering granted by China Construction Industry Association. In 2019, our Crowne Plaza Sanya Haitang Bay Resort has won the Best Service Award in China Hotel Golden Horse Awards. In the same year, we have also obtained the Singapore Prestige Brand Award (SPBA) granted by Lianhe Zaobao (聯 合早報).
Leveraging our reputation and expertise, we have expanded the geographical reach of our residential property development business into 15 established top-tier cities strategically located within six major economic regions in the PRC: the Yangtze River Delta (Shanghai, Nanjing, Suzhou, Hangzhou and Nantong), Western China (Chengdu), Bohai Rim (Tianjin, Tangshan and Jinan), Southern China (Shenzhen, Zhuhai and Zhongshan), Hainan (Haikou and Sanya) and Central China (Wuhan). In 2018, we started the entry into the residential property market in Singapore. Our residential development properties, including apartments, townhouses and villas, are typically characterized by fully-fitted, large- scale, multi-phased projects with community facilities designed and built by leading architects, designers and contractors and targeted at the upper income market segment.
Since our establishment in 1993, we have grown from a start-up property developer with one development project comprising 53,049 sq.m. of GFA to become one of the major developers in the premium residential segment with a presence in 15 cities in the PRC. In April 2018, we made our maiden entry into the Singapore residential development market through the joint acquisition of a freehold development site located in District 10 of Singapore known as Tulip Garden with MCL Land Limited, a subsidiary of Hongkong Land Holdings Limited. As of December 31, 2018, we had a portfolio of:
. 79 completed development properties with a total site area and GFA of 4,633,107 sq.m. and 8,820,078 sq.m., respectively (including a total site area and GFA of 88,825 sq.m. and 157,727 sq.m., respectively, held under associate and joint venture investments);
. 28 properties under development with a total site area and GFA of 1,684,508 sq.m. and 3,545,729 sq.m., respectively (including a total site area and GFA of 945,132 sq.m. and 1,897,391 sq.m., respectively, held under associate and joint venture investments); and
. 22 properties held for future development with a total site area and GFA of 2,172,572 sq.m. and 3,695,334 sq.m., respectively (including a total site area and GFA of 1,333,827 sq.m. and 2,378,568 sq.m., respectively, held under associate and joint venture investments).
— 1 — As of the date of this offering memorandum, we have not yet obtained the land use right certificates for seven of our future projects. These seven projects represent a total site area and GFA of 307,298 sq.m. and 944,615 sq.m., respectively (including a total site area and GFA of 132,361 sq.m. and 310,545 sq.m., respectively, held under associate and joint venture investments).
Since 2003, we have also been developing high-quality commercial and integrated properties, such as shopping malls, office buildings, serviced apartments and hotels, for sale and lease. Our completed commercial and integrated development properties comprise Hengye International Plaza, a four-storey household products wholesale mall, Yanlord Landmark, an integrated complex consisting of a five- storey upmarket retail mall, a 360-room serviced apartment building and an office building in Chengdu, Yanlord Riverside Plaza, a premium integrated commercial complex consisting of a retail mall, an office building and a commercial street in Tianjin, Yanlord Marina Centre, a large-scale integrated development, consisting of office, retail shopping space and a 324-room five-star hotel in Zhuhai, as well as a pedestrian shopping street in Guiyang, a serviced apartment building in Nanjing, a luxury five- star hotel in Sanya, certain commercial podiums in Shanghai, a commercial street in Zhuhai and other miscellaneous accessorial retail shops in Shanghai, Nanjing, Suzhou, Zhuhai, Shenzhen, Tianjin and Tangshan. In particular, in 2018, our five-star hotels in Sanya and Zhuhai, namely Crowne Plaza Sanya Haitang Bay Resort and InterContinental Zhuhai, respectively, officially opened for business. We also provide high-quality property management services for all the projects we have developed to ensure that our developments retain a high level of quality.
In addition to operating our property development business through our PRC subsidiaries, we have set up joint ventures to help us grow our business further. These include joint ventures we formed with an affiliate of GIC Real Estate, the real estate investment unit of the Government of Singapore Investment Corporation, to invest in a residential development project in Nanjing in 2006 and subsequently in other property development projects in Shanghai, Suzhou, Chengdu and Tianjin. We also formed four joint ventures with Ho Bee Land Limited and its affiliate to invest in an integrated property development project in Tangshan, a residential development in Shanghai and two residential developments in Zhuhai. In 2009, we formed a joint venture company with Sembcorp Development Ltd. and certain other partners as the primary developers for the Sino-Singapore Nanjing Eco Hi-tech Island in Nanjing, a technology focused sustainable city development project with a mix of residential, commercial, industrial and research and development businesses. In April 2014, we set up a joint venture company in Haimen through our wholly-owned subsidiary, Yanlord Land Pte. Ltd., with Haimen City Development Co., Ltd. and Longxin Construction Group Co., Ltd. to jointly develop the Sino- Singapore Yanlord (Haimen) Yangtze Eco Hi-Tech City project. Since 2015, we have partnered with other leading property developers and other renowned institutions, such as Beijing Capital Land Ltd., China Merchants Property Development Co., Ltd., China Resources Land Ltd., Hangzhou Binjiang Real Estate Group Co., Ltd., Hongkong Land Holdings Limited, Longxin Construction Group Co., Ltd., Nanjing AnJu Affordable Housing Construction Development Co., Ltd., Ping An Insurance (Group) Company of China, Ltd., Poly Real Estate Group Co., Ltd., Shinsun Real Estate Group Co., Ltd., Tianjin Realty Development (Group) Co., Ltd., SND Real Estate Group., Ltd. and Suzhou HengTai Commercial Real Estate Co., Ltd. to form 17 joint ventures to develop our projects in Nanjing, Suzhou, Hangzhou, Nantong, Tianjin, Jinan, Zhuhai and Zhongshan of the PRC, and Singapore. We may from time to time continue to form joint ventures with future business partners by transferring a portion of our interest in existing or future projects to them or acquire a portion of business partners’ interest in existing projects.
— 2 — The following table sets forth the breakdown of the GFA of our completed properties by residential properties and commercial properties as of December 31, 2018. The number of developments includes each phase of a particular development.
No. of Total GFA Location Developments (sq.m.) Residential Shanghai...... 20 2,924,859 Nanjing...... 18 1,910,539 Suzhou...... 13 765,375 Nantong...... 1 64,561 Zhuhai...... 6 833,640 Shenzhen...... 1 143,952 Chengdu ...... 3 343,867 Guiyang...... 1 36,131 Tianjin...... 7 921,415 Tangshan...... 2 154,307 Sanya...... 1 23,394 73 8,122,040
Commercial Shanghai(1) ...... — 41,149(2)(3) Nanjing(1)...... 2 79,979(2)(4) Suzhou(1) ...... — 10,366(2)(5) Zhuhai(1) ...... 1 87,846(2)(6) Shenzhen(1) ...... — 4,472(2)(7) Chengdu(1) ...... 2 215,530(2)(8) Guiyang...... 1 14,376 Tianjin(1) ...... — 162,814(2)(9) Tangshan...... — 3,420(2)(10) Sanya...... — 78,086 6 698,038 79 8,820,078
Notes:
(1) Consists of properties held for investment with unexpired terms of lease between 25 and 63 years as of December 31, 2018.
(2) Consists of GFA from residential and integrated commercial developments.
(3) Part of Yanlord Riverside City (Phase 2), Yanlord Sunland Gardens (Phase 2), Yunjie Riverside Gardens (Phase 1), Yunjie Riverside Gardens (Phase 2) and Bayside Gardens, residential and commercial developments with a total GFA of 265,623 sq.m., 164,302 sq.m., 158,047 sq.m. 95,001 sq.m. and 116,408 sq.m., respectively.
(4) Part of Yanlord G53 Apartments, Yanlord Yangtze Riverbay Town (Phase 1) and Yanlord Yangtze Riverbay Town (Phase 2), residential and commercial developments with a total GFA of 96,354 sq.m., 124,357 sq.m. and 189,897 sq.m., respectively.
(5) Part of Yanlord Lakeview Bay — Land Parcels A6 and A7, residential and commercial developments with a total GFA of 77,721 sq.m. and 64,546 sq.m., respectively.
(6) Part of Yanlord New City Gardens (Phase 1), Yanlord New City Gardens (Phase 2 — Section 2), Yanlord Marina Centre — Section B, Yanlord Marina Peninsula Gardens (Phase 1) and Yanlord Marina Peninsula Gardens (Phase 2), residential and commercial developments with a total GFA of 97,747 sq.m., 206,504 sq.m., 135,383 sq.m., 152,926 sq.m. and 161,606 sq.m., respectively.
(7) Part of Yanlord Rosemite, a residential and commercial development with a total GFA of 148,424 sq.m.
(8) Part of Hengye Star Gardens and Yanlord Riverbay (Phase 1), residential and commercial developments with a total GFA of 83,943 sq.m. and 126,716 sq.m., respectively.
(9) Part of Tianjin Jinnan Land (Phase 1), Yanlord Riverside Plaza (Phase 1), and Yanlord Riverside Plaza (Phase 2), residential and commercial developments with a total GFA of 94,357 sq.m., 217,812 sq.m. and 163,971 sq.m., respectively.
(10) Part of Tangshan Nanhu Eco-City — Land Parcel A9, a residential and commercial development with a total GFA of 119,116 sq.m.
(11) Part of Sanya Hai Tang Bay — Land Parcel 9, residential and hotel development with a total GFA of 101,480 sq.m.
— 3 — The following table sets forth the breakdown of our properties under development and properties held for future development by residential properties and integrated residential and commercial properties as of December 31, 2018.
No. of Total GFA Location Developments (sq.m.) Residential Shanghai...... 1 33,989 Nanjing...... 1 87,123 Suzhou...... 2 191,811 Hangzhou...... 2 147,943 Nantong...... 2 211,865 Zhuhai...... 1 103,448 Shenzhen...... 2 199,740 Chengdu ...... 2 228,265 Tianjin...... 1 160,029 Tangshan...... 1 169,553 Wuhan...... 1 151,851 Singapore...... 1 51,785 17 1,737,402 Integrated residential and commercial Shanghai...... 1 183,187 Nanjing...... 6 1,427,283 Suzhou...... 4 534,138 Hangzhou...... 3 787,007 Nantong...... 1 71,870 Zhuhai(1) ...... 2 161,280 Shenzhen...... 7 1,055,497 Tianjin...... 6 1,052,301 Tangshan...... 1 73,949 Jinan...... 2 157,149 33 5,503,661 50 7,241,063
Note:
(1) Number of developments includes Yanlord Marina Centre — Section A in Zhuhai, which are partially completed and GFA numbers exclude completed GFA but include GFA under development. Please refer to ‘‘Business — Business Operations’’ for details.
As of December 31, 2018, our integrated developments comprised residential apartments in developments mixed with an aggregate GFA of 1,684,882 sq.m. for commercial use, such as shopping malls, office buildings and hotels.
For the year ended December 31, 2018, we acquired 11 parcels of land, in seven cities in the PRC and acquired a parcel of land in Singapore, with a combined total site area and GFA of 853,177 sq.m. and 1,836,531 sq.m., respectively (including a combined total site area and GFA of 794,665 sq.m. and 1,545,714 sq.m., respectively, held under associate and joint venture investments).
In 2016, 2017 and 2018, we delivered an aggregate GFA of 944,834 sq.m., 556,237 sq.m. and 632,129 sq.m., respectively. In 2016, 2017 and 2018, we recorded revenue of RMB25.664 billion, RMB25.638 billion and RMB24.888 billion (US$3.620 billion), and profit attributable to owners of the Company of RMB2.697 billion, RMB3.216 billion and RMB3.545 billion (US$516 million), respectively. During these periods, we generated substantially all of our revenue from the sale of residential properties. Our revenue also consisted of income from resettlement service, hotel operations, property investment, property management and other services. In 2016, 2017 and 2018, we recorded revenue from property investment of RMB363 million, RMB358 million and RMB411 million (US$60 million), respectively. As we complete more commercial development properties and begin generating more rental revenue from our investment properties, we expect our revenue derived from investment properties to increase over time. In 2018, our pre-sale, including sales of carparks, amounted to RMB25.774 billion, representing a GFA of 686,174 sq.m.
Our shares have been listed on the Mainboard of the SGX-ST since June 2006 under stock code Z25. As of August 20, 2019, our market capitalization was approximately RMB12.010 billion (US$1.700 billion) based on the closing price of our shares as quoted on the Mainboard of the SGX-ST and excluding treasury shares.
— 4 — Recent Developments
We remain prudent in our land acquisition and acquire landbank selectively. Complimenting our existing land acquisition strategies, we have, since 2016 sought out opportunities to expand our land bank through collaborations and acquisitions to better manage market volatilities.
In January 2019, we partnered with a consortium of property developers, including SND Real Estate Group Co., Ltd. and Suzhou HengTai Commercial Real Estate Co., Ltd. to develop Suzhou Industrial Park No. 2018–04 Land with a maximum allowable residential GFA of 135,777 sq.m. for a consideration of RMB3.533 billion. We hold a 15% interest in this project.
In June 2019, we partnered with a consortium of property developers, including SND Real Estate Group Co., Ltd., China Merchants Property Development Co., Ltd. and Suzhou HengTai Commercial Real Estate Co., Ltd. to develop Suzhou No. 2019-WG-7 Land Parcels with a maximum allowable residential GFA of 186,757 sq.m. for a consideration of RMB5.017 billion. We hold a 15% interest in this project.
Competitive Strengths
We believe that the following competitive strengths have enabled and will continue to enable us to take advantage of the growth potential of and to compete effectively in the PRC real estate market.
. Robust Growth Building on Solid Fundamentals through Industry Cycle
. Prime Landbank with Healthy Replenishment
. Strong Relations with International Partners and China SOEs
. Quality Investment Portfolio Contributing to Stable Recurring Income
. Well-Diversified Funding Channels across Equity and Debt
. Long Track Record with Strong Management Team
Business Strategies
Our goal is to build on the brand we have established in Shanghai and grow our business by further expanding into other cities and further expanding in the commercial property segment. We have successfully replicated our success in Shanghai and diversified into other top-tier cities such as Nanjing and Tianjin. To achieve our business objectives, we plan to adopt the following strategies to drive our future growth.
. Entrench Our Leading Market Position in Our Selected Cities
. Selectively Expand Our Business in Our Six Major Economic Regions
. Focus on High-Quality, Fully-Fitted Residential Property Developments in Prime Locations
. Further Expand Our Presence in the Commercial Property Market and Prudently Increase our Portfolio of Investment Properties
. Maintain an Optimal Balance Between Land Bank Acquisitions and Prudent Financial Policy
. Build on Reputation and ‘‘Yanlord’’ Branding
. Maintain Strong Relations with Local Community and Government to Support Continued Growth of Our Development Pipeline
. Continue to Leverage Our Experienced Management Team
— 5 — Corporate Information
We are a limited liability company incorporated under the laws of Singapore. In June 2006, we listed our ordinary shares on the Mainboard of the SGX-ST. Our registered office is located at 9 Temasek Boulevard #36-02, Suntec Tower Two, Singapore 038989, and our telephone number is +65- 6336-2922. Our website address is www.yanlordland.com. Information contained on our website does not form part of this offering memorandum.
— 6 — THE OFFERING
The following summary is provided solely for your convenience. This summary is not intended to be complete. You should read the full text and more specific details contained elsewhere in this preliminary offering memorandum. For a more detailed description of the Notes, see ‘‘Description of the Notes’’. Terms used in this summary and not defined shall have the same meanings given to them in Description of the Notes.
Issuer...... YanlordLand(HK)Co.,Limited.
NotesOffered...... US$ aggregate principal amount of % Senior Notes due 20 , (the ‘‘Notes’’).
OfferingPrice...... % of the principal amount of the Notes.
MaturityDate......
Interest...... TheNoteswillbearinterestfromandincluding , 2019 at the rate of % per annum, payable semi-annually in arrears.
InterestPaymentDates...... and of each year, commencing , 2020.
RankingoftheNotes...... TheNotesare:
. general obligations of the Issuer;
. senior in right of payment to any existing and future obligations of the Issuer expressly subordinated in right of payment to the Notes;
. at least pari passu in right of payment with all unsecured, unsubordinated Indebtedness of the Issuer (subject to any priority rights of such unsubordinated Indebtedness pursuant to applicable law);
. guaranteed by the Company, the Subsidiary Guarantors and the JV Subsidiary Guarantors (if any) on a senior basis, subject to the limitations described below under the caption ‘‘Description of the Notes — The Parent Guarantee,’’ the caption ‘‘Description of the Notes — The Subsidiary Guarantees’’ and in ‘‘Risk Factors — Risks Relating to the Guarantees and the Collateral;’’
. effectively subordinated to the other secured obligations of the Issuer, the Company and the Subsidiary Guarantors and the JV Subsidiary Guarantors (if any), to the extent of the value of the assets serving as security therefor; and
. effectively subordinated to all existing and future obligations of the Non-Guarantor Subsidiaries.
Subject to the limitations described in ‘‘Risk Factors — Risks Relating to the Guarantees and the Collateral,’’ the Notes will be secured by the Collateral as described below under the caption ‘‘Description of the Notes — Security’’ and will:
. be entitled to a first priority Lien on the Collateral (subject to any Permitted Liens and the Intercreditor Deed) shared on a pari passu basis with (i) the holders of the 2017 Senior Notes and the 2018 Senior Notes, (ii) the lenders under the 2016 WL Facility, the 2017 Syndicated Loan Facility and the 2019 Dual-Tranche Term Loan Facility and (iii) any other creditors with respect to Permitted Pari Passu Secured Indebtedness;
— 7 — . rank effectively senior in right of payment to unsecured obligations of the Company with respect to the value of the Collateral pledged by the Company securing the Notes (subject to any priority rights of such unsecured obligations pursuant to applicable law); and
. rank effectively senior in right of payment to unsecured obligations of the Subsidiary Guarantor Pledgors to the extent of the Collateral charged by each Subsidiary Guarantor Pledgor securing the Notes (subject to any priority rights of such unsecured obligations pursuant to applicable law).
ParentGuarantee...... TheCompanywillirrevocablyandunconditionally guarantee the due and punctual payment of the principal of, premium, if any, and interest on, and all other amounts payable under, the Notes.
The Parent Guarantee may be released in certain circumstances. See ‘‘Description of the Notes — Release of the Parent Guarantee.’’
Ranking of the Parent Guarantee . . The Parent Guarantee:
. is a general obligation of the Company;
. is effectively subordinated to secured obligations of the Company, to the extent of the value of the assets serving as security therefor;
. is senior in right of payment to all future obligations of the Company expressly subordinated in right of payment to the Parent Guarantee; and
. ranks at least pari passu with all unsecured, unsubordinated Indebtedness of the Company (subject to any priority rights of such unsubordinated Indebtedness pursuant to applicable law).
In addition, subject to the limitations described in ‘‘Risk Factors — Risks Relating to the Guarantees and the Collateral,’’ the Parent Guarantee will be secured by the Collateral, pledged by it as described below under ‘‘Description of the Notes — Security’’ and will:
. be entitled to a Lien on the Collateral (subject to any Permitted Liens and the Intercreditor Deed) pledged by the Company, as described below under ‘‘Description of the Notes — Security,’’ shared on a pari passu basis with (i) the holders of the 2017 Senior Notes and the 2018 Senior Notes, (ii) the lenders under the 2016 WL Facility, the 2017 Syndicated Loan Facility and the 2019 Dual-Tranche Term Loan Facility, and (iii) any other creditors with respect to Permitted Pari Passu Secured Indebtedness; and
. rank effectively senior in right of payment to the unsecured obligations of the Company with respect to the value of the Collateral securing the Parent Guarantee (subject to any priority rights of such unsecured obligations pursuant to applicable law).
SubsidiaryGuarantees...... EachoftheSubsidiaryGuarantorswill, jointly and severally, guarantee the due and punctual payment of the principal of, premium, if any, and interest on, and all other amounts payable under, the Notes.
— 8 — A Subsidiary Guarantee may be released in certain circumstances. See ‘‘Description of the Notes — Release of the Subsidiary Guarantees.’’
The initial Subsidiary Guarantors will consist of all of the Restricted Subsidiaries other than (i) those Restricted Subsidiaries organized under the laws of the PRC and (ii) certain other subsidiaries specified in ‘‘Description of the Notes.’’
All of the initial Subsidiary Guarantors are holding companies that do not have significant operations.
Any future Restricted Subsidiary, as defined under ‘‘Description of the Notes — Certain Definitions’’ (other than subsidiaries organized under the laws of the PRC and New Non-Guarantor Restricted Subsidiaries), will provide a guarantee of the Notes as soon as practicable and in any event within 30 days after becoming a Restricted Subsidiary.
Ranking of Subsidiary Guarantees . The Subsidiary Guarantee of each Subsidiary Guarantor:
. is a general obligation of such Subsidiary Guarantor;
. is effectively subordinated to secured obligations of such Subsidiary Guarantor, to the extent of the value of the assets serving as security therefor;
. is senior in right of payment to all future obligations of such Subsidiary Guarantor expressly subordinated in right of payment to such Subsidiary Guarantee; and
. ranks at least pari passu with all unsecured, unsubordinated Indebtedness of such Subsidiary Guarantor (subject to any priority rights of such unsubordinated Indebtedness pursuant to applicable law).
Subsidiary Guarantees of each Subsidiary Guarantor Pledgor:
. prior to the Release Date (as defined under ‘‘Description of Notes’’ will be entitled to a first priority Lien on the Collateral (subject to any Permitted Liens) pledged by such Subsidiary Guarantor Pledgor shared on a pari passu basis with (i) the holders of the 2017 Senior Notes and the 2018 Senior Notes, (ii) the lenders under the 2016 WL Facility, the 2017 Syndicated Loan Facility and the 2019 Dual- Tranche Term Loan Facility, and (iii) any other creditors with respect to Permitted Pari Passu Secured Indebtedness; and
. will rank effectively senior in right of payment to the unsecured obligations of such Subsidiary Guarantor Pledgor with respect to the value of the Collateral securing such Subsidiary Guarantee (subject to any priority rights of such unsecured obligations pursuant to applicable law).
See ‘‘Risk Factors — Risks Relating to the Guarantees and the Collateral.’’
— 9 — JVSubsidiaryGuarantees...... A JVSubsidiaryGuaranteeisrequiredtobedeliveredbya Subsidiary Guarantor and the Company if the Company wishes to release such Subsidiary Guarantor from its Subsidiary Guarantee following a sale by the Company or any of its Restricted Subsidiaries of Capital Stock in (a) such Subsidiary Guarantor or (b) any other Subsidiary Guarantor that, directly or indirectly, owns a majority of the Capital Stock of such Subsidiary Guarantor, in each case where such sale is for no less than 20% and no more than 49.9% of the issued Capital Stock of the relevant Subsidiary Guarantor. No JV Subsidiary Guarantee exists as of the Original Issue Date. The JV Subsidiary Guarantee of each JV Subsidiary Guarantor:
. will be a general obligation of such JV Subsidiary Guarantor;
. will be limited as to enforceability to the JV Entitlement Amount (as defined in the ‘‘Description of the Notes’’);
. will be effectively subordinated to the secured obligations of such JV Subsidiary Guarantor to the extent of the value of the assets serving as security therefor;
. subject to the limitation to the JV Entitlement Amount, will be senior in right of payment to all future obligations of such JV Subsidiary Guarantor expressly subordinated in right of payment to such JV Subsidiary Guarantee; and
. subject to the limitation to the JV Entitlement Amount, will rank at least pari passu with all other unsecured, unsubordinated Indebtedness of such JV Subsidiary Guarantor (subject to any priority rights of such unsubordinated Indebtedness pursuant to applicable law).
The Company may also deliver a JV Subsidiary Guarantee instead of a Subsidiary Guarantee on substantially similar conditions for certain Restricted Subsidiaries that are established after the Original Issue Date.
IntercreditorDeed...... OntheissuedateoftheNotes,theTrusteewillexecutean accession deed and become a party to the intercreditor deed, dated May 4, 2010. This intercreditor deed provides that the security interests created over the Collateral will be shared on a pari passu basis among (i) the holders of the 2017 Senior Notes and the 2018 Senior Notes, (ii) the holders of the Notes, (iii) the lenders under the 2016 WL Facility, the 2017 Syndicated Loan Facility and the 2019 Dual-Tranche Term Loan Facility, and (iv) any other creditors with respect to Permitted Pari Passu Secured Indebtedness.
Use of Proceeds ...... Weintendtousethenetproceedsfromthisofferingforproject development and acquisition and general corporate purposes. See ‘‘Use of Proceeds’’.
OptionalRedemption...... Onorafter , 20 , the Issuer may redeem all or any of the Notes at the redemption prices set forth in the first paragraph of ‘‘Description of the Notes — Optional Redemption’’ plus accrued and unpaid interest, if any, on the Notes redeemed, to (but not including) the applicable date of redemption.
— 10 — At any time prior to , 20 , the Issuer may at its option redeem the Notes, in whole but not in part, at a redemption price equal to 100% of the principal amount of the Notes plus the Applicable Premium as of, and accrued and unpaid interest, if any, to the redemption date, as set forth in ‘‘Description of the Notes – Optional Redemption.’’
At any time prior to , 20 , the Issuer may redeem up to 35% of the aggregate principal amount of the Notes with the Net Cash Proceeds of one or more sales of Common Stock of the Company in an Equity Offering at a redemption price equal to % of the principal amount of the applicable Notes, plus accrued and unpaid interest, if any, with the proceeds from sales of certain kinds of its capital stock, subject to certain conditions.
Repurchase of Notes Upon Upon the occurrence of a Change of Control Triggering Event, a Change of Control the Issuer or the Company will make an offer to repurchase all TriggeringEvent...... outstanding Notes at a purchase price equal to 101% of their principal amount plus accrued and unpaid interest, if any, to the repurchase date.
Redemption for Taxation Reason . . Subject to certain exceptions, the Issuer may redeem the Notes, as a whole but not in part, at a redemption price equal to 100% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date fixed by the Issuer for redemption, if the Issuer, the Company or a Subsidiary Guarantor would become obligated to pay certain additional amounts as a result of certain changes in specified tax laws. See ‘‘Description of the Notes — Redemption for Taxation Reasons.’’
Covenants...... The Notes, the Indenture governing the Notes, the Parent Guarantee and the Subsidiary Guarantees will limit the ability of the Company and the Issuer and the ability of its Restricted Subsidiaries to, among other things:
. incur or guarantee additional indebtedness and issue disqualified or preferred stock;
. declare dividends on its capital stock or purchase or redeem capital stock;
. make investments or other specified restricted payments; issue or sell capital stock of Restricted Subsidiaries; guarantee indebtedness of Restricted Subsidiaries;
. sell assets;
. create liens;
. enter into sale and leaseback transactions;
. enter into agreements that restrict the Restricted Subsidiaries’ ability to pay dividends, transfer assets or make intercompany loans;
. enter into transactions with shareholders or affiliates; and effect a consolidation or merger.
These covenants are subject to a number of important qualifications and exceptions described in ‘‘Description of the Notes — Certain Covenants.’’
— 11 — TransferRestrictions...... TheNoteswillnotberegisteredundertheSecurities Act or under any state securities laws of the United States and will be subject to customary restrictions on transfer and resale. See ‘‘Transfer Restrictions.’’
Form, Denomination and The Notes will be issued only in fully registered form, without Registration...... coupons, in minimum denominations of US$200,000 of principal amount and integral multiples of US$1,000 in excess thereof and will be initially represented by the Global Certificate deposited with a common depositary and registered in the name of the common depositary or its nominee. Beneficial interests in the Global Certificate will be shown on, and transfer thereof will be effected only through, the records maintained by Euroclear and Clearstream.
Book-EntryOnly...... TheNoteswillbeissuedinbook-entryformthroughthefacilities of Euroclear and Clearstream. For a description of certain factors relating to clearance and settlement, see ‘‘Description of the Notes — Book-Entry; Delivery and Form.’’
DeliveryoftheNotes...... TheCompanyexpectstomakedeliveryoftheNotes,against payment in same-day funds on or about , 2019, which the Company expects will be the business day following the date of this offering memorandum referred to as ‘‘T+ .’’ You should note that initial trading of the Notes may be affected by the T+ settlement. See ‘‘Plan of Distribution.’’
Trustee...... Citicorp International Limited Principal Paying and Transfer Citibank, N.A., London Branch AgentandRegistrar...... GlobalSecurityAgent...... Citicorp International Limited
Ratings...... TheNotesareexpectedtoberated‘‘Ba3’’ by Moody’sand‘‘BB-’’ by S&P. We cannot assure investors that these ratings will be confirmed or they will not be adversely revised or withdrawn either before or after delivery of the Notes. SecurityCodes...... ISIN:XS2030531938 Common Code: 203053193
Listing...... Approvalin-principlehasbeenreceivedfromtheSGX-STforthe listing and quotation of the Notes on the SGX-ST. The SGX-ST assumes no responsibility for the correctness of any of the statements made, opinions expressed or reports contained herein. Approval in-principle from, admission to the Official List of, and listing and quotation of the Notes on, the SGX-ST are not to be taken as an indication of the merits of the Issuer, the Company, the Subsidiary Guarantors, the Company’s associated companies or the Notes.
For as long as the Notes are listed on the SGX-ST and the rules of the SGX-ST so require, the Notes, if traded on the SGX-ST, will be traded in a minimum board lot size of S$200,000 (or its equivalent in foreign currencies). Accordingly, the Notes, if traded on the SGX-ST, will be traded in a minimum board lot size of US$200,000.
GoverningLaw...... TheNotes,theGuaranteesandtheIndenturewillbegovernedby and will be construed in accordance with the laws of the State of New York.
RiskFactors...... Fora discussionofcertainfactorsthatshouldbeconsideredin evaluating an investment in the Notes, see ‘‘Risk Factors.’’
— 12 — SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth our summary consolidated financial information as of the dates and for the years/periods indicated. This data has been derived from our audited consolidated financial statements as of and for the years ended December 31, 2016, 2017 and 2018 including the notes thereto, included elsewhere in this offering memorandum, as well as our unaudited consolidated financial statements as of and for the six months ended June 30, 2018 and 2019 that we have publicly announced on August 14, 2018 and August 13, 2019, respectively but have not been included elsewhere in this offering memorandum. The unaudited summary financial data as of June 30, 2019 and for the six months ended June 30, 2018 and 2019 contain all adjustments that our management believes are necessary for the fair presentation of such data. Results for interim periods are not necessarily indicative of results for the full year and investors should not place undue reliance on such results. You should read the summary consolidated financial information in conjunction with those financial statements and related notes included elsewhere in this offering memorandum. We have prepared our consolidated financial statements in accordance with SFRSs for the years ended December 31, 2016 and 2017, and in accordance with SFRS(I)s and IFRSs for the year ended December 31, 2018 and as of June 30, 2019 and for the six months ended June 30, 2018 and 2019. SFRS(I)s was applied for the first time for financial year ended December 31, 2018 and SFRS(I) 1 First-time Adoption of Singapore Financial Reporting Standards (International) has been applied in the first set of SFRS(I) financial statements. For the year ended December 31, 2018, certain other payables was classified as contract liabilities instead of other payables. The details are included under Note 39 of the consolidated financial statements for the year ended December 31, 2018. The financial information for the years ended December 31, 2016 and 2017 set forth in the following tables do not reflect such reclassification.
Year ended December 31, Six months ended June 30, 2016 2017 2018 2018 2019 RMB RMB RMB US$ RMB RMB US$ (audited) (audited) (audited) (unaudited) (unaudited) (unaudited) (unaudited) (in thousands, except percentages) Consolidated statement of profit or loss data Revenue...... 25,664,408 25,638,407 24,888,041 3,619,815 16,851,067 7,711,904 1,123,365 Cost of sales...... (17,644,673) (13,594,462) (13,432,692) (1,953,704) (9,015,732) (4,127,393) (601,223) Gross profit...... 8,019,735 12,043,945 11,455,349 1,666,111 7,835,335 3,584,511 522,142 Other operating income and other gains ...... 446,191 472,279 714,587 103,932 246,109 385,738 56,189 Fair value gain on investment properties . . . 366,090 148,321 391,372 56,923 — 791,018 115,225 Selling expenses ...... (397,153) (330,537) (398,278) (57,927) (150,648) (180,372) (26,274) Administrative expenses . . . (594,997) (809,328) (955,359) (138,950) (476,828) (512,991) (74,725) Other operating expenses . . (15,202) (15,660) (33,454) (4,866) (5,783) (2,963) (432) Finance cost ...... (347,819) (484,690) (693,994) (100,937) (287,370) (498,789) (72,657) Share of loss of associates . (11,790) (8,114) (12,689) (1,846) (1,901) (6,428) (936) Share of profit (loss) of joint ventures ...... 7,099 346,008 74,123 10,781 138,449 (31,944) (4,653) Profit before income tax . . 7,472,154 11,362,224 10,541,657 1,533,221 7,297,363 3,527,780 513,879 Income tax ...... (3,494,956) (5,741,957) (5,146,207) (748,485) (3,482,556) (1,570,843) (228,819) Profit for the year/period . 3,977,198 5,620,267 5,395,450 784,736 3,814,807 1,956,937 285,060 Profit attributable to: Owners of the Company . 2,697,361 3,216,440 3,544,570 515,537 2,275,258 1,188,376 173,106 Non-controlling interests 1,279,837 2,403,827 1,850,880 269,199 1,539,549 768,561 111,954 3,977,198 5,620,267 5,395,450 784,736 3,814,807 1,956,937 285,060 Other financial data (unaudited): EBITDA(1) ...... 9,009,297 12,701,601 11,341,007 1,649,481 N/A(3) N/A(3) N/A(3) EBITDA margin(2) ...... 35.1% 49.5% 45.6% 45.6% N/A(3) N/A(3) N/A(3)
Notes:
(1) EBITDA refers to our profit before interest income, fair value gain on financial asset at fair value through profit or loss and from put liability to acquire non-controlling interests, finance cost, interest capitalized in cost of sales, net foreign exchange gain/loss, income tax and depreciation expense. EBITDA is not a standard measure under SFRSs, SFRS(I)s or IFRSs. As the property development business is capital intensive, capital expenditure and levels of debt and interest expenses may have a significant impact on the profit for the year/period of companies with similar operating results. Therefore, we believe that the investor community commonly uses this type of financial measure to assess the operating performance of companies in
— 13 — our industry. As a measure of our operating performance, we believe that the most directly comparable SFRSs, SFRS(I)s or IFRSs measure to EBITDA is profit for the year/period. We operate in a capital-intensive industry. We use EBITDA in addition to profit for the year/period because profit for the year/period includes many accounting items associated with capital expenditures, such as depreciation, as well as non-operating items or non-recurring items, such as interest income and changes in fair value on financial asset at fair value through profit or loss and from put liability to acquire non- controlling interests, finance cost, interest capitalized in cost of sales and foreign exchange. These accounting items may vary between companies depending on the method of accounting adopted by a company. By minimizing differences in capital expenditures and the associated depreciation expenses as well as reported tax positions, interest income, changes in fair value on financial asset at fair value through profit or loss and from put liability to acquire non-controlling interests, finance cost, interest capitalized in cost of sales and changes in foreign exchange, EBITDA provides further information about our operating performance and an additional measure for comparing our operating performance with the results of other companies. You should not consider our EBITDA in isolation or construe it as an alternative to cash flows, profit or any other measure of performance or as an indicator of our operating performance, liquidity, profitability or cash flows generated by operating, investing or financing activities. EBITDA presented in this offering memorandum may not be comparable to similarly titled measures presented by other companies. EBITDA, as presented in this offering memorandum, also differs from Consolidated EBITDA, as defined in the Notes.
(2) EBITDA margin refers to EBITDA divided by revenue for the relevant year, expressed as a percentage.
(3) N/A Not Applicable.
The following table reconciles our profit for the year under SFRSs, or SFRS(I)s and IFRSs to our EBITDA for the years indicated.
Year ended December 31, 2016 2017 2018 RMB RMB RMB US$ (in thousands, except percentages) Profitfortheyear...... 3,977,198 5,620,267 5,395,450 784,736 Interestincome...... (268,270) (359,168) (551,080) (80,151) Fair value gain on financial asset at fair value through profit or loss ...... (5,967) — (142) (21) Fair value gain from put liability to acquire non-controlling interests. . . . . — (87,554) (13,411) (1,950) Financecost...... 347,819 484,690 693,994 100,937 Interest capitalized in cost of sales. . . . . 1,560,824 1,091,022 684,587 99,569 Net foreign exchange (gain) loss ...... (129,348) 177,180 (102,119) (14,853) Incometax...... 3,494,956 5,741,957 5,146,207 748,485 Depreciationexpense...... 32,085 33,207 87,521 12,729 EBITDA...... 9,009,297 12,701,601 11,341,007 1,649,481 EBITDAmargin...... 35.1% 49.5% 45.6% 45.6%
— 14 — As of December 31, As of June 30, 2016 2017 2018 2019 RMB RMB RMB US$ RMB US$ (audited) (audited) (audited) (unaudited) (unaudited) (unaudited) (in thousands) Consolidated statement of financial position data Non-current assets ...... 22,837,911 42,983,401 52,080,449 7,574,787 42,692,996 6,218,936 Properties for development ...... 2,792,938 15,079,352 16,940,162 2,463,844 5,742,432 836,480 Current assets ...... 70,610,501 63,217,957 54,600,330 7,941,289 66,379,864 9,669,317 Completed properties for sale ...... 4,704,316 8,487,306 5,957,456 866,476 5,723,112 833,665 Properties under development for sale . 38,214,800 25,587,718 21,124,992 3,072,503 22,284,627 3,246,122 Total assets ...... 93,448,412 106,201,358 106,680,779 15,516,076 109,072,860 15,888,253 Non-current liabilities Bank and other borrowings — due after one year ...... 12,438,479 27,664,355 27,998,178 4,072,166 20,952,949 3,052,141 Seniornotes...... — 2,911,604 5,440,228 791,248 5,455,618 794,700 Lease liabilities ...... ————56,984 8,301 Deferred tax liabilities ...... 2,243,610 2,607,761 2,831,594 411,838 3,124,297 455,105 Non-trade amounts due to: Jointventures...... ——805,377 117,137 820,279 119,487 Non-controlling shareholders of subsidiaries...... 337,127 1,265,625 ———— Put liability to acquire non-controlling interests...... 1,421,698 1,334,144 ———— Deferredincome...... — 138,083 335,702 48,826 428,697 62,447 Total non-current liabilities ...... 16,440,914 35,921,572 37,411,079 5,441,215 30,838,824 4,492,181 Current liabilities Bank and other borrowings — due within one year...... 8,311,176 2,557,063 8,293,294 1,206,210 12,545,963 1,827,526 Seniornotes...... 1,916,309 ————— Lease liabilities ...... ————25,265 3,680 Trade payables ...... 7,926,994 7,307,244 8,246,981 1,199,474 8,642,030 1,258,854 Other payables ...... 24,088,948 22,051,664 1,453,353 211,381 3,636,598 529,731 Contractliabilities...... ——9,857,831 1,433,762 9,856,528 1,435,765 Non-trade amounts due to: Associates...... ——257,596 37,466 621,903 90,590 Jointventures...... 365 — 674,391 98,086 1,726,165 251,444 Ultimate holding company ...... 672,486 ————— Directors ...... 42,418 49,663 56,315 8,191 56,134 8,177 Non-controlling shareholders of subsidiaries...... 297,347 688,573 705,139 102,558 548,189 79,853 Other related parties...... 47,630 55,676 44,808 6,517 36,310 5,289 Income tax payable ...... 3,694,269 4,867,092 5,480,641 797,126 5,122,025 746,107 Put liability to acquire non-controlling interests...... ——1,320,733 192,093 1,320,733 192,386 Total current liabilities...... 46,997,942 37,576,975 36,391,082 5,292,864 44,137,843 6,429,402
Equity attributable to owners of the Company ...... 21,046,794 22,730,524 25,030,104 3,640,478 25,518,222 3,717,148 Non-controlling interests ...... 8,962,762 9,972,287 7,848,514 1,141,519 8,577,971 1,249,522 Total liabilities and equity ...... 93,448,412 106,201,358 106,680,779 15,516,076 109,072,860 15,888,253
— 15 — Year Ended December 31, Six months ended June 30, 2016 2017 2018 2018 2019 RMB RMB RMB US$ RMB RMB US$ (audited) (audited) (audited) (unaudited) (unaudited) (unaudited) (unaudited) (in thousands) Consolidated statement of cash flows data Operating activities Profit before income tax . . . 7,472,154 11,362,224 10,541,657 1,533,221 7,297,363 3,527,780 513,879 Adjustments for: Allowance for doubtful debts and bad debts writtenoff...... — 43 3,782 550 — 10 1 Depreciation expense . . . 32,085 33,207 87,521 12,729 35,661 81,492 11,871 Dividend income from other financial asset . . ——(347) (50) ——— Fair value gain on investment properties . (366,090) (148,321) (391,372) (56,923) — (791,018) (115,224) Fair value gain on financial asset at fair value through profit orloss...... (5,967) — (142) (21) — (143) (21) Fair value gain from put liability to acquire non-controlling interests...... — (87,554) (13,411) (1,950) ——— Finance cost ...... 347,819 484,690 693,994 100,937 287,370 498,789 72,657 Interest income ...... (268,270) (359,168) (551,080) (80,151) (228,853) (357,670) (52,101) Net (gain) loss on disposal of property, plant and equipment. . (7,135) (192) (447) (65) (52) 304 44 Net gain on disposal of investment properties . (7,251) (5,002) (1,009) (147) (762) (1,238) (180) Net loss on disposal of financial asset at fair value through profit orloss...... 937 —————— Payable written off . . . . —————(6,523) (950) Share of loss of associates ...... 11,790 8,114 12,689 1,846 1,901 6,428 936 Share of (profit) loss of joint ventures ...... (7,099) (346,008) (74,123) (10,781) (138,449) 31,944 4,653 Gain on change of control from subsidiaries to joint ventures...... —————(266) (39) Gain on disposal of asubsidiary...... —————(51) (7) Operating cash flows before movements in working capital ...... 7,202,973 10,942,033 10,307,712 1,499,195 7,254,179 2,989,838 435,519 Properties for development ...... (270,461) (19,767,496) (1,814,891) (263,965) (952,198) (1,878,670) (273,659) Inventories ...... (14,071) (19,479) (20,004) (2,909) (29,218) 593 86 Completed properties for sale ...... 12,733,840 8,412,880 10,747,985 1,563,230 7,824,814 1,610,730 234,629 Properties under development for sale . (7,388,342) (426,819) (2,036,377) (296,179) (527,393) (73,958) (10,773) Trade and other receivables and deposits ...... (2,481,718) (750,890) 515,092 74,917 (2,671,551) (1,104,738) (160,923) Trade and other payables 4,688,181 (3,261,681) 908,268 132,101 (622,495) 3,253,903 473,985 Contract liabilities . . . . . ——(10,831,466) (1,575,371) (9,153,388) (1,303) (190) Cash generated from (used in) operations ...... 14,470,402 (4,871,452) 7,776,319 1,131,019 1,122,750 4,796,395 698,674 Interest paid ...... (1,230,321) (1,702,981) (2,155,416) (313,492) (919,285) (1,115,466) (162,486) Income tax paid ...... (2,950,647) (4,072,278) (4,110,825) (597,895) (3,493,579) (1,498,006) (218,209) Net cash from (used in) operating activities . . . . 10,289,434 (10,646,711) 1,510,078 219,632 (3,290,114) 2,182,923 317,979
— 16 — Year Ended December 31, Six months ended June 30, 2016 2017 2018 2018 2019 RMB RMB RMB US$ RMB RMB US$ (audited) (audited) (audited) (unaudited) (unaudited) (unaudited) (unaudited) (in thousands) Investing activities Acquisition of subsidiaries...... (1,499,913) (582,003) (418,545) (60,875) (303,000) (40,000) (5,827) Change of control from subsidiaries to associates...... (146,984) —————— Change of control from subsidiaries to joint ventures...... — (85,879) ———(20,995) (3,058) Investments in associates (495,408) — (800,740) (116,463) — (150,000) (21,850) Investments in joint ventures ...... (51,160) (1,877,680) (1,002,805) (145,852) (150,150) (562,858) (81,990) Dividend received from other financial asset . . ——347 50 ——— Interest received ...... 191,740 186,120 383,243 55,740 134,023 368,246 53,641 (Increase) Decrease in pledged bank deposits ...... (469,313) 480,651 (291,019) (42,327) 8,947 (405,683) (59,094) Proceeds on disposal of property, plant and equipment ...... 21,971 2,163 2,099 305 852 253 37 Proceeds on disposal of investment properties . 39,599 14,056 2,042 297 1,429 2,381 347 Proceeds on disposal of held-for-trading investment...... 24,374 —————— Proceeds on disposal of financial asset at fair value through profit orloss...... ——12,911 1,878 — 2,000 291 Payment for property, plant and equipment. . (382,911) (1,060,294) (463,488) (67,412) (228,040) (52,735) (7,682) Payment for investment properties ...... (1,608,985) (152,557) (190,921) (27,768) (16,939) (10,148) (1,478) Purchase of available- for-sale investment . . — (2,990) ————— Purchase of other financial assets . . . . . ——(172,933) (25,152) ——— Payment for intangible assets...... — (199) (1,280) (186) (1,280) —— Purchase of financial assetatfairvalue through profit or loss . ——(2,000) (291) — (13,600) (1,981) Advance to associates . . (1,266,762) (89,987) (1,480,253) (215,293) (23,197) (363,170) (52,901) Repayment from associates...... 177,282 — 1,601,220 232,888 44,220 270,418 39,391 Advance to joint ventures ...... (3,288,874) (2,522,333) (10,601,175) (1,541,877) (2,343,879) (2,171,745) (316,350) Repayment from joint ventures ...... 2,446,508 2,576,327 1,616,778 235,151 20,411 4,246,596 618,586 Advance to non- controlling shareholders of subsidiaries...... (1,824,530) (1,516,755) (602,230) (87,591) (29,017) (2,369,344) (345,134) Advance to a related company...... ——(167) (24) (167) —— Netcashusedininvesting activities ...... (8,133,366) (4,631,360) (12,408,916) (1,804,802) (2,885,787) (1,270,384) (185,052)
— 17 — Year Ended December 31, Six months ended June 30, 2016 2017 2018 2018 2019 RMB RMB RMB US$ RMB RMB US$ (audited) (audited) (audited) (unaudited) (unaudited) (unaudited) (unaudited) (in thousands) Financing activities Dividends paid ...... (141,836) (415,855) (630,453) (91,696) (630,453) (652,033) (94,979) Dividends paid to non- controlling shareholders of subsidiaries...... (746,936) (213,578) (1,337,009) (194,460) (967,009) (4,401) (641) Net proceeds on issue of seniornotes...... — 3,085,026 2,178,613 316,866 2,178,613 —— Proceeds from bank and other borrowings . . . . 15,834,321 26,303,899 9,922,460 1,443,162 3,421,320 10,714,405 1,560,729 Repayment of bank and other borrowings . . . . (9,821,984) (10,119,950) (4,190,668) (609,507) (1,412,716) (5,079,737) (739,947) Purchase of treasury shares...... (47,006) (85,303) ————— Repayment of lease liabilities ...... —————(12,163) (1,772) Repurchase and redemption of senior notes...... (4,514,269) (1,974,600) ————— Advance from associates ——30,343 4,413 — 362,685 52,832 Advance from (Repayment to) joint ventures ...... 365 (365) 1,174,391 170,808 200,319 582,374 84,832 Advance from (Repayment to) directors...... 16,853 6,056 5,590 813 (49,794) (981) (143) Advance from ultimate holding company. . . . 677,572 341,030 ————— Repayment to ultimate holding company. . . . — (1,013,448) ————— Advance from non- controlling shareholders of subsidiaries...... 401,243 2,163,954 352,220 51,228 321,330 3,311 482 Repayment to non- controlling shareholders of subsidiaries...... (1,708,461) (1,087,285) (1,326,297) (192,902) (1,355,804) (230,250) (33,540) Advance from (Repayment to) other related parties ...... 37,776 8,046 (10,868) (1,581) 3,222 (8,498) (1,238) Capital injection from non-controlling shareholders of subsidiaries...... 112,513 — 4,900 713 4,900 —— Capital withdrawal by non-controlling shareholders of subsidiaries...... (1,806,473) (359,385) (721,156) (104,888) (447,431) (34,000) (4,953) Acquisition of non- controlling interest in subsidiaries...... (2,500) (1,412,840) (1,904,691) (277,025) (1,045,884) —— Disposal of partial interest in a subsidiary — 12,000 ———7,963 1,160 Net cash (used in) from financing activities . . . . (1,708,822) 15,237,402 3,547,375 515,944 220,613 5,648,675 822,822 Net increase (decrease) in cash and cash equivalents ...... 447,246 (40,669) (7,351,463) (1,069,226) (5,955,288) 6,561,214 955,749 Cash and cash equivalents at beginning of year/ period ...... 17,516,991 17,583,383 17,798,313 2,588,657 17,798,313 10,317,374 1,502,895 Effect of exchange rate changes on the balance of cash held in foreign currencies...... (380,854) 255,599 (129,476) (18,831) (35,627) 61,377 8,941 Cash and cash equivalents at end of year/period . . 17,583,383 17,798,313 10,317,374 1,500,600 11,807,398 16,939,965 2,467,585
— 18 — RISK FACTORS
An investment in the Notes involves significant risks. You should carefully consider the risks described below and the other information in this offering memorandum before you decide to invest in the Notes. If any of the possible events described below actually occurs, our business, prospects, financial condition or results of operations could be materially and adversely affected. In such case, we may not be able to satisfy our obligations under the Notes, the trading price of the Notes could decline, and you may lose all or part of your investment.
Risks Relating to Our Business
Our business is dependent on the performance of the PRC property sector
Most of our current and proposed property development projects are located in two municipal cities under the direct jurisdiction of the PRC central government, namely Shanghai and Tianjin, and eight provinces, namely Jiangsu (Nanjing, Suzhou and Nantong), Zhejiang (Hangzhou), Sichuan (Chengdu), Hebei (Tangshan), Shandong (Jinan), Guangdong (Shenzhen, Zhuhai and Zhongshan), Hainan (Sanya and Haikou) and Hubei (Wuhan). Our business is therefore dependent on the continuing growth of the PRC economy generally and the property sector of the PRC specifically. The property development market may be adversely affected by economic, political, social, regulatory or diplomatic developments in or affecting the PRC real estate sector generally. Our business may be adversely affected by changes in inflation, interest rates, taxation, or other regulatory, political, social or economic factors affecting the two municipal cities and eight provinces, particularly Shanghai, Tianjin and Jiangsu Province, and any adverse developments in the supply and demand or housing prices in the property sector. Our business is also subject to the cyclical nature of the property industry, and is therefore vulnerable to any downturn in the residential and/or commercial property development market in the PRC.
Our operations are subject to extensive governmental regulations, and in particular, we are susceptible to changes in policies related to therealestateindustryinthePRC,andthePRC government may adopt further measures to slow down growth in the real estate sector
Our business is subject to extensive governmental regulations. As with other PRC property developers, we must comply with various requirements mandated by the relevant PRC laws and regulations, including the policies and procedures established by local authorities designed for the implementation of such laws and regulations. In particular, the PRC government exerts considerable direct and indirect influence on the PRC property sector by imposing industry policies and other economic and fiscal measures, such as control over the supply of land for property development, foreign exchange, property financing, taxation and foreign investment.
From 2004 to the first half of 2008, in response to concerns over the scale of the increase in property investment and the overheating of the property sector in the PRC, the PRC government introduced policies to restrict development in the property sector, including, among other things:
. limiting monthly mortgage payments to 50% of an individual borrower’s monthly income and limiting all monthly debt service payments of an individual borrower to 55% of his or her monthly income;
. suspending or restricting land grants and development approvals for villas and larger sized units;
. charging an idle land fee for land which has not been developed for one year starting from the commencement date stipulated in the land use rights grant contract and voiding land use rights for land which has not been developed for two years or more;
. prohibiting any onward transfer of pre-sold properties before the ownership certificate is obtained;
. requiring that at least 70% of the land supply approved by a local government for residential property development for any given year be used for developing low-to-medium-cost and small-to-medium-size units and low-cost rental properties;
— 19 — . requiring that at least 70% of residential projects approved or constructed on or after June 1, 2006 consist of units with floor area of less than 90 sq.m. per unit, and that projects which have received project approvals prior to this date but have not obtained construction permits to adjust their construction plan in order to be in compliance with this new requirement, with the exception of municipalities under direct administration of the PRC government, provincial capitals and certain cities which may deviate from this ratio under special circumstances upon the approval by the Ministry of Construction (the ‘‘70:90 rule’’);
. tightening the availability of bank loans to property developers and purchasers of developed properties and increasing the reserve requirements for commercial banks;
. imposing or increasing taxes on short-term gains from second-hand property sales;
. restricting foreign investment in the property sector by, among other things, increasing registered capital and other requirements for establishing foreign-invested real estate enterprises, tightening foreign exchange control and imposing restrictions on purchases of properties in China by foreign individuals and institutions; and
. limiting the number of the residential properties that a single household may purchase.
Starting from late 2009, the PRC government has adopted a series of new policies to cool down the property market, including, among other things:
. abolishing certain preferential treatments relating to business taxes payable upon transfers of residential properties by property owners and imposing more stringent requirements on the payment of land premium by property developers;
. imposing property purchase restrictions on non-resident citizens by decreasing the maximum loan to value ratio of mortgage loans offered to borrowers that are non-resident citizens;
. increasing the minimum down-payment to at least 60% of the total purchase price for second- time property purchases with a minimum lending interest rate of at least 110% of the benchmark rate;
. restricting purchasers, in certain targeted cities, from acquiring second (or further) residential properties and restricting non-residents that are non-local citizens who cannot provide proof of local tax or social security payments for more than a specified time period from purchasing any residential properties;
. extending the period for transfers subject to business tax on the full amount of transfer price if an individual owner transfers a residential property to five years after the purchase date;
. launching new property tax schemes in certain cities such as Shanghai and Chongqing on a trial basis by levying property tax on certain individual residential properties in these two cities;
. urging provincial governments to implement property purchase restrictions to control property prices, and listed certain criteria for the implementation of restrictions, and in the second half of 2011, extending such home purchase restrictions to certain second-tier cities in addition to the first- and second-tier cities which have already adopted home purchase restriction measures;
. strictly enforcing the idle land related laws and regulations; and
. restricting the grant or extension of revolving credit facilities to property developers that hold a large amount of idle land and vacant commodity properties.
On February 26, 2013, the State Council issued the Notice on Continuing Adjustment and Control of Property Markets《關於繼續做好房地產市場調控工作的通知》(the ‘‘2013 National Regulating Provisions’’), which comprises measures on the control of the PRC property market, including: (1) stabilizing property prices, which requires each major city in China to compile and announce in 2013 its proposed measures for controlling prices of newly completed commodity properties; (2) strictly limiting speculative purchase of properties by implementing restrictions on purchasing commodity properties and expanding
— 20 — the scope of the pilot taxation scheme against residential properties held by individuals; (3) increasing the supply of small to medium-sized commodity properties and lands; (4) accelerating the construction of housing for low-income individuals; and (5) strengthening the supervision of the property market. The notice provides that further restraining measures are to be adopted to strengthen the regulation of the property market. Major cities which have implemented the commodity housing purchase restrictions are required to enforce purchase restrictions in all administrative areas of cities and restricted housing are to include new commodity housing and second-hand housing. Non-local residents who have one or more residential properties and fail to provide one-year or longer tax payment certificates or social insurance payment certificates will be barred from purchasing any residential properties located in the administrative areas subject to restrictions. For cities where housing prices are increasing at an excessively high rate, local branches of the People’s Bank of China (the ‘‘PBOC’’) may further raise the down-payment rate and mortgage interest rate for the purchase of a second residential property. In addition, the Notice stipulates that a 20% individual income tax on profits from sales of properties will be strictly enforced. Financial institutions, subject to credit requirements, will prioritize requests for mortgages for ordinary commodity housing construction projects in which medium and small housing units constitute 70% or more of the total units in such construction projects. Pursuant to the 2013 National Regulating Provisions, Shanghai, Nanjing and Shenzhen municipal governments promulgated specific measures at the end of 2013, which raised the down-payment rate for purchase of second residential properties to 70%. Shanghai municipal government further provided that non- Shanghai residents who are unable to provide at least two-year tax payment certificates or social insurance payment certificates are not allowed to purchase residential properties in Shanghai.
In October 2016, local governments and regulators introduced measures to cool down the PRC’s property market, which included raising down-payment requirements for first and second homes and tightening buyer eligibility criteria for real estate purchases. In addition, the CSRC and the National Development and Reform Commission (the ‘‘NDRC’’) have sought to limit fundraising activities by PRC property companies.
On February 13, 2017, the Asset Management Association of China issued Circular 4 of Regulation for Registration Management of Private Asset Management Plan by Securities and Future Institutions (the ‘‘Circular 4’’). Circular 4 provides that any private equity and asset management plan that is adopted to make either direct or indirect investment into any ordinary residential property project located in certain PRC cities where the property price rises too fast shall not be filed for a record temporarily. Such cities currently include 16 major cities in the PRC, such as Shanghai, Nanjing, Suzhou, Tianjin, Shenzhen, Jinan, Chengdu and Wuhan, and the list of such cities may be updated from time to time in the future according to the relevant regulations of the Ministry of Housing and Urban- Rural Development of the PRC. In addition, a private equity and asset management plan shall neither be used to finance any real estate developer by means of bank entrusted loans, trust plans, or usufruct of transferee assets, for the purpose of paying the price of land grant or supplementing the working capital, nor be used to directly or indirectly facilitate any violation or illegality of various institutions’ granting of loans for down payments.
Since March 2017, local governments in certain major cities in the PRC, such as Shanghai, Hangzhou and other cities in which we operate, have introduced further policies to restrain property purchases for speculation purposes and refrained property prices from rising too quickly. Such policies include suspending the provision of individual housing loans with the term of more than 25 years, raising the minimum percentage of down payment of the purchase price and strictly restricting purchasers from acquiring second (or more) residential property. On April 1, 2017, the Ministry of Land andResourcesandMinistryofHousingandUrban-Rural Development issued the Circular of the Ministry of Housing and Urban-Rural Development and the Ministry of Land and Resources on Tightening the Management and Control over Intermediate Residential Properties and Land Supply 《住房城鄉建設部、國土資源部關於加強近期住房及用地供應管理和調控有關工作的通知》.To maintain a housing supply-demand balance, cities facing serious demand over supply and overheating market shall increase the supply of housing land, especially for ordinary commercial houses; and cities with excessive housing supply shall reduce or suspend the land supply for housing. All the local governments shall build an inspection system to monitor the source of funds for land acquisition to ensure that the real estate developers use their own legal funds to purchase lands. These measures reduced the transaction volumes in certain major cities in the PRC in 2017.
— 21 — In July 2017, NDRC, CSRC, Ministry of Finance, Ministry of Housing and Urban-Rural Development, Ministry of Public Security, MLR, SAT, SAIC and PBOC jointly issued the Notice on Accelerating the Development of Renting Market in Large and Medium-sized Cities with Influx Population《關於在人口淨流入的大中城市加快發展住房租賃市場的通知》, promoting the development of renting market through multiple channels, such as increasing the land banks to be granted for house renting, encouraging the development of ancillary renting housing in new commodity properties.
We have had to adapt our operations to these austerity measures. We cannot assure you that the PRC government will not adopt more stringent policies, regulations and measures in the future. If we fail to adapt our operations to new policies, regulations and measures that may come into effect from time to time with respect to the real property industry, or such policy changes disrupt our business or cause us to incur additional costs, our business, financial condition, results of operations and prospects may be materially and adversely affected.
You should read the various risk factors under the section entitled ‘‘— RisksRelatingtothe Property Industry in the PRC’’ below for more risks and uncertainties relating to the extensive PRC regulations.
Our business is sensitive to the current global economic environment. Severe or prolonged instability in the global economy could materially and adversely affect our revenue and results of operations
The global economic slowdown and turmoil in the global financial markets that started in the second half of 2008 have had a negative impact on the world economy, which in turn affected the PRC real estate industry and many other industries. Subsequently, global markets and economic conditions were adversely affected by the credit crisis in Europe, the credit rating downgrade of the United States and heightened market volatility in major stock markets. In addition, on June 23, 2016, the United Kingdom held a remain-or-leave referendum on its membership within the European Union, the result of which favored the exit of the United Kingdom from the European Union (‘‘Brexit’’). In addition, on March 29, 2017, the United Kingdom notified the European Council of its intention to withdraw from the European Union in accordance with Article 50(2) of the Treaty on European. A process of negotiation will determine the future terms of the United Kingdom’s relationship with the European Union, as well as whether the United Kingdom will be able to continue to benefit from the European Union’s free trade and similar agreements. The timing of the Brexit and potential impact of Brexit on the economic conditions in the United Kingdom, the European Union and global markets is unclear. As at the date of this offering memorandum, the proposed Brexit arrangements have been rejected by the United Kingdom Parliament in several rounds of votes, resulting in an extension of the deadline for Brexit to October 31, 2019. Given the lack of precedent, it is unclear how Brexit would affect the fiscal, monetary and regulatory landscape within the UK, the EU and globally. This event has resulted in a downgrade of the credit ratings of the United Kingdom and the uncertainty before, during and after the period of negotiation may also create a negative economic impact and increase volatility in global markets.
Moreover, the U.S. administration under President Donald Trump has advocated greater restrictions on trade generally and significant increases on tariffs on certain goods imported into the United States, particularly from China, and has recently taken steps toward restricting trade in certain goods. For example, in March 2018, the United States began to enforce a 25% tariff on steel and a 10% tariff on aluminum imports. In addition, on June 15, 2018, President Trump announced that the United States would impose a 25% tariff on certain Chinese exports, valued at approximately US$34 billion, to be implemented beginning July 6, 2018. President Trump further stated on June 22, 2018 that the United States would impose additional 10% tariffs on another US$200 billion worth of Chinese imports if China retaliates against the U.S. tariffs announced on June 15. On July 20, 2018, President Trump indicated a willingness to have the United States impose tariffs on substantially all U.S. imports from China, valued at approximately US$500 billion in 2017. The current U.S. administration has also created uncertainty with respect to, among other things, existing and proposed trade agreements, free trade generally, and potential significant increases on tariffs on goods imported into the U.S., particularly from Mexico, Canada and China. It is possible that further measures will be announced. In response, China and other countries have retaliated in response to new trade policies, treaties and tariffs implemented by the United States. For example, in response to the United States’ tariff plan on steel and aluminum, China announced planned tariffs on various goods imported from the United States, including a 15% tariff on U.S. steel pipes, fresh fruit and wine, and a 25% tariff on pork and recycled aluminium.
— 22 — Further, China has announced plans to introduce tariffs on goods imported from the United States in response to the additional U.S. tariffs of June 15, 2018. Such policy retaliations could ultimately result in further trade policy responses by the United States and other countries, and result in an escalation leading to a trade war, which would have an adverse effect on manufacturing levels, trade levels and industries, including logistics, retail sales and other businesses and services that rely on trade, commerce and manufacturing. On August 5, 2019, the U.S. Treasury Department labelled China a currency manipulator, further escalating the trade war between the China. Although it remains unclear to what extent the trade tensions or a trade war between United States and China will affect the global economy and in particular, the PRC real estate industry, this has resulted in fluctuations in the global debt and equity markets due to trade-war fears, and the uncertainty before, during and after the period of such trade war, if any, may create a negative economic impact and increase volatility in global markets, which may materially and adversely affect our results of operations, business prospects and financial positions.
The outlook for the world economy and financial markets also remains uncertain. In Europe, several countries are facing difficulties in refinancing sovereign debt. In the United States, the recovery in the housing market remains subdued. In Asia and other emerging markets, some countries are expecting increasing inflationary pressure as a consequence of liberal monetary policy or excessive foreign fund inflow, or both. In the Middle East, political unrest in various countries has resulted in economic instability and uncertainty. Economic conditions in the PRC are sensitive to global economic conditions, and it is impossible to predict how the PRC economy will develop in the future and whether it might slow down due to the global crisis or experience a financial crisis in a manner and scale similar to that in the United States and the European countries. As the real estate industry is sensitive to macroeconomic trends, real estate prices tend to fluctuate along with the change of macroeconomic conditions.
These and other issues resulting from the global economic slowdown and financial market turmoil have adversely affected, and may continue adversely affecting, homeowners and potential property purchasers, which may lead to a decline in the general demand for our products and erosion of their sale prices. In addition, any further tightening of liquidity in the global financial markets may negatively affect our liquidity. Therefore, if the global economic slowdown and turmoil in the financial markets crisis continue, our business, financial condition and results of operations may be negatively affected.
We may not be successful in implementing our business expansion plans
Historically, the majority of our completed projects have been comprised of residential development properties in Shanghai, Nanjing and Tianjin built for sale. We have also completed residential and commercial development properties in Shanghai, Nanjing, Suzhou, Nantong, Chengdu, Tianjin, Tangshan, Shenzhen, Zhuhai, Sanya and Guiyang. Our core strategies include continuing to expand our business into the commercial property sector through the development of shopping malls, office buildings, serviced apartments and hotels, and into new geographical markets, such as Hangzhou, Jinan, Haikou, Wuhan and Singapore.
As of December 31, 2018, the gross floor area (‘‘GFA’’) of the commercial component of our integrated properties under development and intended for future development amounted to 1,684,882 sq.m., representing approximately 23.3% of the total GFA of all our properties under development and intended for future development. Commercial development properties require different regulatory approvals, types of design, layout and building materials, as well as different development, marketing and management strategies and skills than residential development properties.
We have less experience in the marketing and management of shopping malls, office buildings, serviced apartments and hotels than for residential properties. We may need to hire additional staff, or enter into joint ventures or other contractual arrangements with third parties, with appropriate expertise in particular fields in relation to the development or management of particular commercial properties in order to successfully implement our commercial property strategies.
In addition, our future commercial development properties may be located in cities that we have not previously ventured into. These cities may differ from Shanghai, Nanjing and Tianjin in terms of the level and pace of economic development, culture, regulatory practices, topography, our familiarity with contractors, suppliers and other partners, business practices, customs, and customer tastes, preferences and behavior. Accordingly, our experience in Shanghai, Nanjing and Tianjin may not be applicable to these cities. We cannot assure you that our commercial development properties in general will achieve
— 23 — the same levels of success that our residential development properties in Shanghai, Nanjing and Tianjin have attained. If our expansion into new market sectors and cities is not successful, our reputation, business, prospects, results of operations and financial condition could be materially and adversely affected.
Wemaybeunabletoidentifyoracquirelandfor development at commercially viable prices
We believe that maintaining a sizable and high-quality land bank for future development is critical to sustain our growth. We cannot assure you that we will be able to identify and acquire attractive sites in the future at commercially viable prices, or at all. In the PRC, the supply of land is controlled by government authorities, and our ability to acquire land use rights and their corresponding acquisition costs will be affected by government policies toward land supply, development and pricing. The central and local governments regulate the means by which property developers obtain land for development. See ‘‘Regulation — Land for Property Development’’ for a description of the material laws and regulations in the PRC that apply to the acquisition of land use rights.
In particular, the central government introduced regulations in May 2002 that require government departments and agencies to grant state-owned land use rights for residential and commercial property development by public tender, auction or listing-for-sale, and such requirement has been restated in the relevant regulation promulgated in September 2007. In September 2010, the Ministry of Land and Resources and the Ministry of Housing and Urban-Rural Development jointly issued the Notice on Further Strengthening the Administration and Control of Real Estate Land and Construction《關於進一 步加強房地產用地和建設管理調控的通知》, which stipulates, among other things, that the planning and construction conditions and land use standards should be specified when a parcel of land is to be granted, and the restrictions on the area of any parcel of land granted for commodity properties should be strictly implemented. The development and construction of large low-density residential properties should be strictly restricted, and the plot ratio for residential land is required to be more than 1:1. In addition, a property developer and its controlling shareholders will be prohibited from participating in any bidding to acquire additional land until any illegal behavior in which it has engaged, such as leaving its land idle for more than one year, has been completely rectified. The implementation of these regulations may increase land transfer prices and require property developers to maintain a higher level of working capital. On January 26, 2011, the General Office of the State Council issued the notice to further strengthen the principle that no less than 70% of the residential land shall be used for the construction of low-rent housing, economic housing, restricted-price housing and medium and small ordinary commodity housing. The notice also imposed more stringent fines on idle property. On April 1, 2017, the Ministry of Land and Resources and the Ministry of Housing and Urban-Rural Development jointly issued the Circular on Tightening the Management and Control over Intermediate Residential Properties and Land Supply《關於加強近期住房及用地供應管理和調控有關工作的通知 》, pursuant to which, all the local authorities shall build a land purchase money inspection system to ensure that the real estate developers use their own legal funds to purchase land. If any source of funding does not meet the requirements as a result of review by the department of land and resources and the relevant financial department, the real estate developer shall be disqualified from land bidding and be prohibited from participating in land bidding, auction and listing for a period of time. Such measures and any other similar measures in the future may limit our ability to develop a wide variety of commercially viable products in our future property developments. We believe these regulations have contributed to an increase in the acquisition costs to property developers throughout China and have made it more difficult to identify commercially viable opportunities for future development. If we are unable to identify and acquire attractive new sites at commercially viable prices, this could impair our ability to compete with other property developers and could materially and adversely affect our business and results of operations.
WemayberequiredtoforfeitlanduserightstothePRCgovernmentifwefailtocomplywiththe terms of the land grant contracts
Under PRC laws, if a developer fails to comply with or develop land according to the terms of the land grant contract (including those relating to payment of fees, land use or the schedule for commencement and completion of the development of the land), the relevant government authority may give a warning to or impose a penalty on the developer or require forfeiture of the land use rights granted to the developer. Therefore, if we are affected by circumstances which would cause us to breach the terms of the land grant contract and lead to our land use rights being subject to forfeiture by the government, our business and prospects will be adversely affected.
— 24 — Any non-compliant GFA of our completed development properties may be subject to governmental approval and additional payments
The local government authorities inspect our development properties after completion and issue completion certificates if the developments are in compliance with the relevant laws and regulations. If the total constructed GFA of a property development exceeds the amount of GFA authorized in the relevant land grant contracts or construction permit, or if the completed property contains built-up areas that are not in conformity with the plan authorized by the construction permit, we may be required to make additional payments or take corrective actions with respect to such non-compliant GFA before the property development may obtain a completion certificate. If we fail to obtain the completion certificate due to such non-compliance, we will not be allowed to deliver the relevant properties or recognize any revenue from the relevant pre-sold properties and may also be subject to liabilities under the pre-sale contracts. Any of the above could have a material adverse effect on our business, financial condition and results of operations.
We may not have adequate resources to finance land acquisitions or development properties
Property development is capital intensive. The availability of adequate financing is crucial to our ability to acquire land and to complete our development projects according to plan. We finance our land acquisitions from a combination of internal funds, shareholders’ loans, bank and other borrowings and proceeds from debt and equity offerings. Our property development projects are financed through a combination of internal funds, pre-sale proceeds and bank and other borrowings. Under PRC law, pre- sale proceeds may only be used to fund the property development costs of the relevant projects to which they relate.
Our ability to arrange adequate financing for land acquisitions or development properties on terms that will allow us a commercially acceptable return depends on a number of factors that are beyond our control, including general economic and political conditions, the terms on which financial institutions are willing to extend credit to us and the availability of other sources of debt or equity financing. We cannot assure you that we will have sufficient internal funds available for land acquisitions or development properties or that we will be able to achieve sufficient pre-sales in order to fund our development properties. In addition, we may not be able to secure adequate financing or renew credit facilities granted by banks and financial institutions, on attractive terms or at all. As of December 31, 2018, our outstanding bank and other borrowings amounted to RMB36.291 billion (US$5.278 billion).
The PRC government has in recent years taken a number of policy initiatives in the financial sector to further tighten lending requirements for property developers, which, among other things:
. forbid PRC commercial banks from extending loans to property developers to finance land premiums;
. restrict the grant or extension of revolving credit facilities to property developers that hold a large amount of idle land and vacant commodity properties;
. prohibit commercial banks from taking commodity properties that have been vacant for more than three years as security for mortgage loans;
. forbid property developers from using borrowings obtained from any local banks to fund property developments outside that local region;
. require a minimum down-payment of 50% of the land premium to be paid within one month after the signing of a land grant contract and the rest of the land premium must be fully paid within one year after the signing of a land grant contract;
. forbid commercial banks from issuing loans or providing loan extension services to a developer for its new projects if the developer has a record of maintaining idle land; and
. changing the land use purpose and nature without proper approval, delaying the construction commencement or completion date, hoarding properties or other forms of non-compliance.
In addition, the PBOC regulates the reserve requirement ratio for commercial banks in the PRC, which affects the availability and cost of financing from PRC commercial banks. The reserve requirement ratio for commercial banks currently ranges from 8.0% to 14.0% with effect as of the date
— 25 — of this offering memorandum. The incurrence of debt will increase our interest payments required to service our debt obligations and could result in operating and financial covenants that restrict our operations and our ability to obtain further debt financing. If we do not have adequate resources to finance land acquisitions or development properties, our business and financial condition may be materially and adversely affected.
Our financing costs are affected by changes in interest rates
Changes in interest rates will affect our interest income and interest expenses from short term deposits and other interest-bearing financial assets and liabilities. This could in turn have a material and adverse effect on our financing costs and, as a result, our results of operations. A substantial portion of our borrowings are linked to benchmark lending rates published by the PBOC. As of the date of this offering memorandum, the benchmark one-year lending rate was at 4.35%. As of December 31, 2018, the effective interest rate on our outstanding Renminbi-denominated bank and other borrowings was 6.0%. As of December 31, 2018, we had RMB36.291 billion (US$5.278 billion) of outstanding bank and other borrowings. Our interest expense on bank and other borrowings for the years ended December 31, 2016, 2017 and 2018 were RMB887 million, RMB1.437 billion and RMB1.921 billion (US$279 million), respectively. In addition, changes in interest rates may affect our customers’ ability to secure mortgages on acceptable terms, which, in turn, may affect their ability to purchase our properties. We cannot assure you that the PBOC will not increase lending rates further or otherwise discourage bank lending or that our business, financial condition and results of operations may not be materially and adversely affected as a result.
We face significant risks before we realize any benefits from our development properties
Our primary business is the development of residential and commercial properties. Development properties typically require substantial capital outlay during the land acquisition and construction phases and may take one or more years before positive cash flows may be generated through pre-sales or sales of a completed property development. Depending on the size of the development, the time span for completing a property development usually lasts for more than a year. Consequently, changes in the business environment during the length of the project may affect the revenue and cost of the development, which in turn has a direct impact on the profitability of the project. Factors that may affect the profitability of a project include the risk that the receipt of government approvals may take more time than expected, the failure to complete construction according to original specifications, schedule or budget, and lackluster sales or leasing of the properties. The sales and the value of a property development project may be adversely affected by a number of factors, including but not limited to the international, regional and local political and economic climate, local real estate conditions, perceptions of property buyers, businesses, retailers or shoppers in terms of the convenience and attractiveness of the projects, competition from other available properties, changes in market rates for comparable sales, and increased business and operating costs. If any of the property development risks described above materializes, our returns on investments may be lower than originally expected and our financial performance will be materially and adversely affected.
Our results of operations may be adversely affected by more rigorous enforcement of Land Appreciation Tax collection
All income from the sale or transfer of state-owned land use rights, buildings and their attached facilities in the PRC is subject to Land Appreciation Tax (‘‘LAT’’) at progressive rates ranging from 30% to 60% of the appreciated value of the property, which is calculated by deducting from the gross sales proceeds the cost associated with the property development and certain other deductibles. See ‘‘Regulation — Major Taxes Applicable to Real Estate Developers — Land Appreciation Tax.’’ There are certain exemptions available for the sale of ordinary residential properties if the appreciated value does not exceed 20% of the total deductible items (as defined in the relevant tax laws). The sale of certain premium apartments, villas, townhouses and other residential properties that do not fall within the scope of ordinary housing is not eligible for such exemptions. Since 2003, local tax bureaus in certain cities have required prepayment of LAT on the pre-sales or sales proceeds of development properties. In the years ended December 31, 2016, 2017 and 2018, we prepaid LAT generally at rates of 2% to 16.4% of our gross sales proceeds from all of our pre-sold or sold properties, in the aggregate amount of RMB1.443 billion, RMB1.105 billion and RMB1.043 billion (US$152 million), respectively.
— 26 — A PRC State Administration of Taxation circular that took effect on February 1, 2007 stipulates that LAT shall be paid if a development project meets certain criteria, such as when a development project has been completed and fully sold. Moreover, relevant tax bureaus may require real estate developers to settle the final LAT payments in respect of their development projects that meet certain criteria, such as when 85% of a development project has been pre-sold or sold. See ‘‘Regulation — Major Taxes Applicable to Real Estate Developers — Land Appreciation Tax.’’ Local authorities in Shenzhen and Sichuan Province have issued local regulations in response to the circular, and other local authorities, including the Shanghai authorities, are also required to issue regulations in compliance with the circular in consideration of local conditions. On May 19, 2010, the State Administration of Taxation issued a circular specifying issues relating to the determination of income, deduction items, demolition expenses and overdue fines in the settlement of LAT. The more rigorous enforcement of LAT collection by the PRC government would reduce the profitability of our development projects.
In respect of our developments in the Shanghai Pudong New District, we have not pre-paid or paid any LAT prior to October 1, 2006 when we began to prepay LAT at the rate of 1.0% (on apartments) of gross sale proceeds. Prior to October 1, 2006, the local tax authority in the Shanghai Pudong New District did not levy or require the prepayment or payment of LAT on the proceeds from the sale of properties located in the district. We did not make any provision for the possible payment of LAT for the properties located in the Shanghai Pudong New District, as we believed that any possible change of policy by the local tax bureau in the Shanghai Pudong New District would not be applied retrospectively to properties sold before such change. If LAT was to be levied on our Shanghai Pudong New District properties on a retrospective basis, we would have incurred additional LAT in the aggregate amount of RMB597 million for the financial periods prior to October 1, 2006, as adjusted for non-controlling interests and for income tax deductions.
In the years ended December 31, 2016, 2017 and 2018, we incurred LAT in amounts of RMB1.405 billion, RMB2.988 billion and RMB2.840 billion (US$413 million), respectively, in respect of all our projects, which we have either paid or made provision for. If our assessment is incorrect and the remaining amount of LAT that we are required to pay significantly exceeds our provisions, we cannot assure you that our obligation to pay such amount will not materially and adversely affect our business, our results of operations or financial condition.
The land use rights for some of our development sites will not be formally vested until we have received the relevant land use right certificates
Under current PRC land grant policies, the relevant authorities will not issue the formal land use right certificate for a piece of land until the developer has paid the land premium in full, completed the resettlement process and is in compliance with other land grant conditions. We have yet to obtain the formal land use right certificates for some of our future project sites. As of December 31, 2018, the development sites for which we had not obtained formal land use right certificates accounted for 15.9% of our total land bank (based on projected GFA) and comprised certain of our properties held for future development, namely, Hangzhou D-05 Land, Hangzhou West Lake Land, Shanghai Yangpu District 81 and 83 Redevelopment Project, Shenzhen Longgang District Bantian Redevelopment Project, Shenzhen Longgang District Economic Residential Housing, Shenzhen Longgang District Redevelopment Projects (Phase 3 and 4), The Mansion In Park (Phase 2 and 3) in Tianjin and Tulip Garden in Singapore. We cannot assure you that we will be able to obtain the formal land use right certificates for all these projects as planned. For example, for our Shenzhen Longgang District Bantian Redevelopment Project, we are currently only allowed to begin the demolition works. We have not signed any land grant contract or obtained any approvals from the relevant authorities and will need to go through a bidding invitation and auction procedures for our land acquisition. If we are successful in the bid invitation and auction, we may then proceed to sign the land grant contract and obtain the formal land use right certificate for this project. However, we are unable to guarantee the results of bid invitation and auction procedures, which may affect our ability to obtain the formal land use right certificate for this project.
The land use rights for these properties and the land that we may acquire in the future will not be formally vested until we have received the corresponding formal land use right certificates. Furthermore, there could be delays in the authorities’ issuance of the formal land use right certificates and such delays could materially and adversely affect our operations, including the delivery of properties to our customers in a timely fashion.
— 27 — Our failure to meet all requirements for the issue of property ownership certificates may lead to compensatory liability to our customers
According to PRC law, property developers must meet various requirements within 90 days after delivery of property or such other time period provided in sales contracts for the customers to apply for property ownership certificates, including passing various governmental clearances, formalities and procedures. We usually stipulate the delivery dates in our sales contracts so as to leave sufficient time for us to complete the formalities and obtain the relevant approvals. However, we cannot assure you that there will not be delays in our property development. There may also be factors beyond our control that may delay the delivery of property ownership certificates, including shortage in human resources at various governmental offices and time-consuming inspections and approval processes at various government agencies. Under current PRC laws and regulations and under our sales contracts, we are required to compensate our customers for delays in our deliveries. In the case of serious delays on one or more property projects, our business and reputation will be harmed.
We guarantee the mortgages provided to our customers and consequently are liable to the mortgagee banks if our customers default on their mortgage payments
We arrange for various domestic banks in the PRC to provide loans and mortgage facilities to our customers prior to completion. In line with consumer banking practices in the PRC, these banks require us to provide guarantees in respect of these loans. These guarantees are discharged after we submit the relevant individual property ownership certificates and certificates of other interests in the property to the mortgagee banks on behalf of the purchasers. If a purchaser defaults on a loan before the relevant individual property ownership certificate is obtained, we have to repay the entire outstanding principal amount of the loan, together with all accrued interest thereon, owed by the purchaser to the relevant mortgagee bank. In line with industry practice, we do not conduct independent credit checks on purchasers but rely on the credit checks conducted by the mortgagee banks. As of December 31, 2016, 2017 and 2018, our outstanding guarantees in respect of mortgages provided to our customers amounted to RMB11.495 billion, RMB7.508 billion and RMB5.065 billion (US$737 million), respectively. As part of our guarantee obligations, we previously provided cash deposits to purchasers’ mortgagee banks of an amount up to 5% of the mortgaged amount. If a purchaser defaults in its payment obligations during the term of our guarantee, the relevant bank may deduct the defaulted mortgage payment from our deposit and require that we immediately replenish our deposit to the original amount. As of December 31, 2018, we had such guaranteed cash deposits of RMB31 million (US$5 million) with the relevant mortgagee banks. If there should be substantial defaults on the loans during the period of the guarantee and the guarantee is called upon, our business could be affected to the extent that we may be unable to re-sell these properties or re-sell them at prices that are above the loan amounts repaid, and our financial condition and results of operations may be materially and adversely affected.
The terms on which mortgages are available, if at all, may affect our sales
A majority of purchasers of our residential properties rely on mortgages to fund their purchases. An increase in interest rates may significantly increase the cost of mortgage financing, thus reducing the attractiveness of mortgages as a source of financing for property purchases and adversely affecting the affordability of residential properties. In addition, the PRC government and commercial banks may also increase the down-payment requirements, impose other conditions or otherwise change the regulatory framework in a manner that would make mortgage financing unavailable or unattractive to potential property purchasers. For example, in the past, the China Banking Regulatory Commission (the ‘‘CBRC’’) issued a regulation in September 2004 to limit mortgage loans on properties to 80% of the sale price of the underlying properties. In September 2007, the PBOC and CBRC further increased the minimum down-payment requirement for residential properties with a GFA of 90 sq.m. or above. The down-payment for first owner-occupied residential property with a GFA of 90 sq.m. or above must not be less than 30% of the purchase price; the down-payment for second home mortgages must not be less than 40% of the purchase price and the loan interest rate cannot be lower than 1.1 times the corresponding benchmark lending rate published by the PBOC for loans with the same tenure and the same purpose. In addition, the down-payment requirements for commercial properties and commercial/ residential dual-purpose properties have been increased to 50% and 45% of their purchase prices, respectively. Subsequently, the CBRC made further revisions to the down-payment requirement for first or second home mortgages. Currently, in a city with house purchase quota policy, a first owner-occupied residential property requires a down-payment of at least 30% of the purchase price; in a city without house purchase quota policy, a first owner-occupied residential property requires a down-payment of
— 28 — approximately 20% to 25%. For a family that owns one housing unit and has not paid off the corresponding housing loan, if the family applies for another commercial individual housing loan to purchase an ordinary housing unit for its own living to improve its current living conditions, the minimum down payment ratio shall not be lower than 40% of the purchase price in a city with house purchase quota policy, or 30% of the purchase price in a city without house purchase quota policy. The down-payment for a second home non-ordinary housing unit mortgage must not be less than 60% of the purchase price. See ‘‘Regulation — Restrictions on the Grant of Residential Development Loans and Individual Property Purchase Loans by Banks’’ and ‘‘Regulation — Measures on Stabilizing Housing Prices.’’ If the availability or attractiveness of mortgage financing is reduced or limited, many of our prospective customers may not be able to purchase our properties and, as a result, our business, liquidity and results of operations could be adversely affected.
In line with industry practice, we provide guarantees to banks for mortgages they offer to our purchasers in connection with the pre-sales of our properties. If there are changes in laws, regulations, policies and practices that prohibit real estate developers from providing guarantees to banks in respect of mortgages offered to property purchasers and these banks do not accept any alternative guarantees by other third parties, or if no third party is available in the market to provide such guarantees, it may become more difficult for property purchasers to obtain mortgages from banks during pre-sales. Such difficulties in financing could result in a substantially lower rate of pre-sales of our properties, which could adversely affect our business, liquidity, financial condition and results of operations.
We are subject to risks in relation to our pre-sold properties
We pre-sell most of our properties prior to completion in line with industry practice. In the event of a failure or delay in the delivery of our pre-sold properties to purchasers, we may be liable for potential losses that purchasers may suffer as a result. Failure to complete a property development on time may be attributed to factors such as the time taken and the costs involved in completing construction, which are in turn adversely affected by factors such as delays in obtaining requisite licenses, permits or approvals from government agencies or authorities, shortages of labor, adverse weather conditions, natural disasters, labor disputes, disputes with contractors, accidents and changes in government priorities and policies. If the delay in delivery extends beyond the contractually specified delivery date, the purchasers may also be entitled to terminate the pre-sale agreements and claim refunds of monies paid, damages and compensation for late delivery. There is no assurance that we will not experience significant delays in completion or delivery.
Our operating results fluctuate from period to period and the fluctuations make it difficult to predict our future performance
Our results of operations have varied significantly in the past and may continue to fluctuate significantly from period to period in the future. In the years ended December 31, 2016, 2017 and 2018, our revenue was RMB25.664 billion, RMB25.638 billion and RMB24.888 billion (US$3.620 billion), respectively, and our profit attributable to owners of the Company was RMB2.697 billion, RMB3.216 billion and RMB3.545 billion (US$516 million), respectively. Because we derive most of our revenue from the sale of properties, our results of operations are affected by the demand for our properties and the price at which we are able to sell them. The demand for and pricing of the properties are in turn, to a large extent, affected by the general conditions of the property markets. Our delivery of properties is generally more concentrated in the second half of a year, with the lowest number of deliveries in the first quarter because of the spring festival, or Chinese New Year, celebrations in January or February. In addition, we recognize proceeds from the sale of a property as revenue only upon the delivery of the property. Therefore, our revenue and profit during any given period reflects the quantity of properties delivered during that period and are affected by any peaks or troughs of our property delivery schedule and may not be indicative of the actual demand for our properties or sales achieved during that period. Our revenue and profit during any given period generally reflect property investment decisions made by purchasers at some significant time in the past, typically at least in the prior fiscal period. As a result, we believe that our operating results for any period are not necessarily indicative of results that may be expected for any future period.
Our results may fluctuate due to revaluation gains or losses on our investment properties
Under SFRS(I) 1-40 — Investment Property, gains or losses arising from changes in the fair value of investment properties are recognized directly in the statement of profit or loss for the year in which they arise. The revaluation gains on investment properties that were credited to our statement of profit or
— 29 — loss for the years ended December 31, 2016, 2017 and 2018 were RMB366 million, RMB148 million and RMB391 million (US$57 million), respectively. The amount of revaluation gains has been, and may continue to be, significantly affected by property market fluctuations. In addition, revaluation gains or losses may be affected by changes in relevant accounting or evaluation rules.
We may not be able to generate adequate returns on our properties held for long-term investment purposes
We have completed commercial podiums and retail shops in Shanghai, a serviced apartment and retail shops in Nanjing, retail shops in Suzhou, a four-story household-product wholesale mall, a premium mixed use commercial development comprising of a premium retail mall, a serviced apartment building and an office tower in Chengdu, a premium integrated commercial complex comprising of a retail mall, an office building and a commercial street and retail shops in Tianjin, a commercial street, retail shops and a large-scale integrated development, consisting of office and retail shopping space in Zhuhai and retail shops in Shenzhen, and are in the process of developing additional premium commercial and integrated properties in cities such as Suzhou. Property investment is subject to varying degrees of risk. The investment returns available from investments in real estate depend, to a large extent, on the amount of capital appreciation generated, income earned from the rental of the relevant properties as well as the expenses incurred. Maximizing yields from properties held for long-term investment also depends to a large extent on active ongoing management and maintenance of the properties. The ability to eventually dispose of investment properties will also depend on market conditions and levels of liquidity, which may be limited or subject to significant fluctuation in the case of certain types of commercial properties. The revenue derived from and the value of property investment may be adversely affected by a number of factors, including but not limited to changes in market rates for comparable rentals, the inability to collect rent due to bankruptcy or insolvency of tenants and the costs resulting from periodic maintenance, repair and re-letting. If we expand the property investment aspect of our business but are unable to generate adequate returns, our financial condition and results of operations may be adversely affected.
We face increasing competition that could adversely affect our business and financial position
In recent years, a large number of property developers have begun to undertake property development and investment projects in China. In addition, a number of international developers have expanded their operations into China, including a number of leading Hong Kong and Singapore real estate development and investment groups. Many of these developers, both private and state-owned, have significant financial, managerial, marketing and other resources, as well as experience in property and land development. Moreover, an increasing number of developers have entered the market of premium, fully-fitted residential property projects. Competition between property developers is intense and may result in, among other things, increased costs for the acquisition of land for development, oversupply of properties in certain parts of China, a decrease in property prices, a slowdown in the rate at which new property development projects will be approved and/or reviewed by the relevant government authorities, an increase in construction costs, and difficulty in obtaining high quality contractors and qualified employees. Any such consequences may adversely affect our business, results of operations and financial position. In addition, the real estate market in China is subject to rapid change. If we cannot respond to changes in market conditions more swiftly or effectively than our competitors do, our ability to generate revenue, our financial condition and our results of operations will be adversely affected.
The interests of our existing controlling shareholder may not be aligned with those of our other shareholders
Mr. Zhong Sheng Jian, our Chairman and CEO, has effective control over approximately 70.111% of our issued share capital (excluding treasury shares) as of August 16, 2019. Mr. Zhong is able to significantly influence most matters requiring our shareholders’ approval, including the election of directors and the approval of significant corporate transactions, including mergers and acquisitions, save for matters for which he shall abstain pursuant to relevant statutory and regulatory requirements. In case of an equality of votes, whether on a show of hands or on a poll, the Chairman of general meeting at which the show of hands takes place or at which the poll is taken shall be entitled to a casting vote. The interests of Mr. Zhong may not be consistent with our interests or those of our creditors, including holders of the Notes. To the extent that there are conflicts of interest between Mr. Zhong and our
— 30 — company or our creditors, we cannot assure you that Mr. Zhong will not cause us to enter into transactions or take, or omit to take, other actions or make decisions that conflict with the best interests of our creditors, including holders of the Notes.
We rely on independent contractors, in particular the Longxin Group (formerly known as Haimen City Construction and Renovation Company)
We engage independent third-party contractors to provide various services, including design, construction, piling and foundation, building and property fit-out works, installation of air-conditioning units and elevators, and interior decoration. We invite contractors to tender bids according to their reputation for quality and track record. We cannot assure you that the services rendered by independent third-party contractors will be satisfactory or that it will match the level of quality that we require. Moreover, contractors may experience financial or other difficulties that may affect their ability to carry out the work for which they were contracted, thus delaying the completion of our property development projects or resulting in additional costs for us. Any of these factors could adversely affect our results of operations and hence, our reputation.
The construction of many of our projects, representing approximately 82.6%, 78.1% and 63.0% in terms of total GFA of properties constructed or under contract to be constructed and 22.8%, 19.7% and 19.8%, in terms of total construction costs, was undertaken by the Longxin Group in the years ended December 31, 2016, 2017 and 2018. The Longxin Group has played an instrumental role in ensuring the quality of our developments and helping us build our reputation as a developer of high-quality projects. We cannot assure you that we will be able to continue to rely on the Longxin Group’s service for future projects. Moreover, should we lose all or a substantial portion of the services currently provided by the Longxin Group, we may not be able to secure substitute services from other independent contractors on comparable terms in a timely manner, or at all. If we fail to secure sufficient services or services of a comparable quality, the quality of our development properties may be adversely affected and, accordingly, the results of our operations and profits may also be materially and adversely affected. Although we have started engaging other independent third-party contractors in each city to provide similar contractor services, we are currently still reliant on the Longxin Group. For more information on the Longxin Group, see ‘‘Business — Major Supplier.’’
We depend on key personnel for our continued success, and may not be able to replace them if they ceasetoworkforus
We believe our success to date has been largely attributable to the contributions and expertise of our Chairman and CEO, Mr. Zhong Sheng Jian, as well as our other executive directors and executive officers, many of whom have been employed by us for more than 10 years. Our continued success will depend, to a large extent, on our ability to retain the services of our Chairman and CEO, our other executive directors and executive officers. The loss of the services of our Chairman and CEO or any of our other executive directors and executive officers without suitable and timely replacement, or the inability to attract and retain other qualified personnel, would adversely affect our operations and hence, our revenue and profitability.
Our results of operations may be adversely affected if we fail to obtain, or if there are material delays in obtaining, requisite governmental approvals for our development properties
The real estate industry in the PRC is heavily regulated by the PRC government. PRC real estate developers must comply with various requirements mandated by applicable laws and regulations, including the policies and procedures established by local authorities designed for the implementation of such laws and regulations. In order to develop and complete a property development, a property developer must obtain various permits, licenses, certificates and other approvals from the relevant administrative authorities at various stages of the property development process, including land use rights documents, planning permits, construction permits, pre-sale permits and certificates or confirmation of completion and acceptance. Each approval is dependent on the satisfaction of certain conditions. We cannot assure you that we will not encounter problems in obtaining such government approvals or in fulfilling the conditions required for obtaining the approvals, or that we will be able to adapt ourselves to new laws, regulations or policies that may come into effect from time to time with respect to the real estate industry in general or the particular processes with respect to the granting of approvals. If we fail to obtain relevant approvals or fulfill the conditions of those approvals for a significant number of our development properties, these developments may not proceed on schedule, and our business, financial condition and results of operations may be adversely affected.
— 31 — Potential liability for environmental problems could result in substantial costs
We are subject to a variety of laws and regulations concerning the protection of health and the environment. The particular environmental laws and regulations which apply to any given project development site vary greatly according to the site’s location, the site’s environmental condition, the present and former uses of the site, as well as the nature of the adjoining properties. Environmental laws and conditions may cause us to incur substantial compliance and other costs and can prohibit, delay, or severely restrict project development activity in environmentally-sensitive regions or areas.
As required by PRC laws and regulations, each project we develop is required to undergo environmental assessments and an environmental impact assessment document is required to be submitted to the relevant government authorities for approval before commencement of construction. If approval of the environmental impact assessment document has not been granted to any of our projects prior to the commencement of construction, the relevant authority may order the construction unit to stop constructing and impose a fine of not less than 1% of the total investment amount but not more than 5% of the total investment amount, and may order for repristination, according to the illegal condition and harmful consequences. In addition, PRC law requires environmental facilities to be included in a property development to pass the acceptance check by the project owner before commencing operations and the acceptance check report shall be released to the public. Some of our residential and hotel property projects have environmental facilities that are subject to this requirement. If we fail to comply with such requirement, the local environmental authorities may order us to suspend the construction or use of such facilities, which may disrupt our operations and adversely affect our business. The authorities may also impose on us a fine of up to RMB2,000,000 per breach in respect of such projects. In the event that we are ordered to suspend the construction or use of such facilities or if fines are imposed on us, our business, results of operations and financial condition may be materially and adversely affected.
We do not have insurance to cover potential losses and claims arising from certain events
There are certain losses for which insurance is not available on commercially practicable terms in China, such as losses suffered due to earthquake, typhoon, flooding, war and civil disorder. In addition, we do not have insurance for destruction of or damage to our development properties except in Nanjing, Hangzhou, Chengdu, Tianjin, Zhuhai, Shenzhen, Haikou, Sanya and Wuhan, see ‘‘Business — Insurance’’. If we suffer any uninsured losses, damages and liabilities in the course of our operations and property development, we may not have sufficient funds to cover any such losses, damages or liabilities or to replace any property development that has been destroyed. In addition, any payment we make to cover any losses, damages or liabilities could have a material adverse effect on our business, results of operations and financial condition.
We may encounter problems with our joint ventures that may adversely affect our business
We have, and expect in the future to have, interests in PRC joint venture entities in connection with our property development plans. If there are disagreements between us and our joint venture partners regarding the business and operations of the joint ventures, we cannot assure you that we will be able to resolve them in a manner that will be in our best interests. In addition, our joint venture partners may (i) have economic or business interests or goals that are inconsistent with ours; (ii) take actions contrary to our instructions, requests, policies or objectives; (iii) be unable or unwilling to fulfill their obligations; (iv) have financial difficulties; or (v) have disputes with us as to the scope of their responsibilities and obligations. Furthermore, from time to time we have made and may make in the future advances to certain of our joint venture partners and are therefore exposed to the credit risk of such joint venture partners. As of December 31, 2018, we had non-trade amounts of RMB3.648 billion (US$531 million) due from the non-controlling shareholders of certain of our subsidiaries. Any of the foregoing or other factors may materially and adversely affect the performance of our joint ventures, which may in turn materially and adversely affect our financial condition and results of operations.
There is a lack of reliable and updated information on property market conditions in the provinces where our development properties are located and in the PRC generally
We are subject to property market conditions in the PRC generally and, in particular, in the provinces where our development properties are located. Currently, reliable and up-to-date information on the amount and nature of property development and investment activities, the demand for such development, the supply of new properties being developed or the availability of land and buildings
— 32 — suitable for development and investment is not generally available in the PRC and in the relevant municipal cities and provinces. Consequently, our investment and business decisions may not always have been, and may not in the future be, based on accurate, complete and timely information. Inaccurate information may adversely affect our business decisions, which could materially and adversely affect our results of operations and financial condition.
We may have to bear the resettlement costs associated with our development properties
We purchase land from both the PRC government and private entities. Where land is obtained from the PRC government, resettlement costs are usually included in the land premium payable. Where the land is obtained from private parties other than the PRC government, the resettlement costs are agreed upon between the seller and us. In accordance with the City Housing Resettlement Administration Regulations and applicable local regulations, a real estate developer in the PRC is required to enter into written agreements with the owners or residents of existing buildings to be demolished for development to provide compensation for their relocation and resettlement. The compensation payable by the real estate developer is calculated by applying prescribed formulae provided by the relevant provincial authorities. When we purchase land that is occupied, any delay or difficulty in the resettlement process may cause a delay in the delivery of the land to us in whole or in part and may require an increase in the fees payable in connection with the resettlement process. However, there is no assurance that the relevant provincial authorities will not change their compensation formulae. If they do, construction costs may be subject to substantial increases which could adversely affect our business and financial condition. Furthermore, if we fail to reach agreements with the owners or residents on the amount of compensation payable, any party may apply to the relevant housing resettlement authorities for a ruling on the amount of compensation, which may delay the completion schedule of our projects and increase our holding costs.
We are subject to risks in relation to changes in commodity prices
We face risks in relation to changes in commodity prices, particularly as a result of the consumption of large quantities of building materials, including raw iron, steel and concrete, in our property development operations. As a property developer, in general, we enter into fixed or guaranteed maximum price construction contracts with independent construction companies, each of which concerns the development of a significant part of our overall development project. These contracts typically cover both the supply of the building materials and the construction of the facilities, for a construction period of one to three years. In accordance with industry practice, we or our contractors may amend existing construction contracts, including fixed or maximum price terms, to take into account significant price movements of construction materials. Therefore, should the price of building materials increase significantly prior to our entering into a fixed or guaranteed maximum price construction contract, or should our existing contractors fail to perform under their contracts, we might be required to pay more to existing or prospective contractors, which could materially and adversely affect our results of operations and financial condition.
We may be treated as a PRC resident enterprise for PRC tax purposes, which may subject us to PRC income taxes on our worldwide income and may subject our investors to PRC withholding taxes on interest we pay on the Notes and PRC income tax on gains from the transfer of the Notes
Under the Enterprise Income Tax Law (the ‘‘EIT Law’’) and the implementation rules which both took effect on January 1, 2008, enterprises established outside the PRC whose ‘‘de facto management bodies’’ are located in China are considered ‘‘resident enterprises’’ for PRC tax purposes. The implementation rules define the term ‘‘de facto management body’’ as a management body that exercises full and substantial control and management over the business, personnel, accounts and properties of an enterprise. In April 2009, the State Administration of Taxation specified certain criteria for the determination of the ‘‘de facto management bodies’’ for foreign enterprises that are controlled by PRC enterprises. However, there have been no official implementation rules regarding the determination of the ‘‘de facto management bodies’’ for foreign enterprises that are not controlled by PRC enterprises (including companies like ourselves).
Although it is unclear under PRC tax law whether we have a ‘‘de facto management body’’ located in China for PRC tax purposes, we take the position that none of the Company or any of its non-PRC subsidiaries (including the Issuer) is a PRC resident enterprise for tax purposes. We cannot assure you that the tax authorities will agree with our position. If we are deemed to be a PRC resident enterprise for PRC tax purposes, we would be subject to the PRC enterprise income tax at the rate of 25% on our
— 33 — worldwide income (except that dividends from our PRC subsidiaries should be excluded from such taxable worldwide income). Furthermore, if we were deemed to be a PRC resident enterprise, we would be obligated to withhold PRC income tax at a rate of 10% on payments of interest and redemption premium on the Notes (by the Issuer or any Guarantor) to investors that are non-resident enterprises, if the interest and redemption premium were regarded as being derived from sources within the PRC. In addition, if we were deemed to be a PRC resident enterprise, any gain realized by non-resident enterprise investors from the transfer of the Notes mayberegardedasbeingderivedfromsourceswithin the PRC and accordingly may be subject to a 10% PRC tax. Furthermore, if we are considered a PRC resident enterprise and relevant PRC tax authorities consider interest and redemption premium we pay with respect to the Notes, or any gains realized from the transfer of Notes, to be income derived from sources within the PRC, such interest or gains earned by non-resident individuals may be subject to PRC income tax (which, in the case of interest and redemption premium, may be withheld at source by us) at a rate of 20%. Any PRC tax liability on interest, redemption premium or gain may be reduced under applicable tax treaties. However, it is unclear whether in practice non-resident investors might be able to obtain the benefit of income tax treaties entered into between PRC and their countries. If we failed to withhold, if withholding were required, we might be subject to fines and other penalties.
If we were deemed to be a PRC resident enterprise and were required to withhold PRC tax on payments of interest, we would be required to withhold PRC tax on interest payable to certain of our non-resident investors and pay, subject to certain exceptions, additional amounts with respect to such withholding tax, which could have an adverse effect on our cash flows.
Property owners may terminate our engagement as the provider of property management services
We provide property management services through our property management subsidiaries for residential and commercial properties we develop. We have also partnered with Frasers Hospitality to assist us in the management of our serviced apartments in Nanjing and Chengdu. In addition, we entered into management contracts with an affiliate of InterContinental Hotels Group to manage the hotels that are currently being operated in Zhuhai and Sanya. We believe that property management is an integral part of our business and critical to the successful marketing and promotion of our development properties as well as an important source of revenue. Under PRC laws and regulations, the home owners of a residential community of certain scale have the right to change the property management service provider upon the consent of a certain percentage of the home owners. If homeowners of the properties that we manage choose to terminate our property management services, or property buyers dislike our property management services, our reputation and results of operations could be materially and adversely affected.
Any failure to protect our brand and trademarks could have a negative impact on our business
We believe our brands and trademarks are critical to our success. The controlling shareholder of the Company, Yanlord Holdings Pte. Ltd. (‘‘Yanlord Holdings’’), is the registered owner of the Yanlord logo, the Yanlord name and their Chinese renditions. While Yanlord Holdings has licensed to us an irrevocable, non-exclusive and perpetual right to use the Yanlord trademarks registered in the PRC and Singapore, we cannot assure you that Yanlord Holdings would not grant such right to other parties. In addition, any unauthorized use of our brands, trademarks and other intellectual property rights could harm our competitive advantages and business. Historically, the PRC has not protected intellectual property rights to the same extent as certain other countries, and infringement of intellectual property rights continues to pose a serious risk of doing business in the PRC. Monitoring and preventing unauthorized use is difficult. The measures we take to protect our intellectual property rights may not be adequate. Furthermore, the application of laws governing intellectual property rights in the PRC and abroad is uncertain and evolving, and could involve substantial risks to us. If we are unable to adequately protect our brand, trademarks and other intellectual property rights, we may lose these rights and our business may suffer materially.
We may be involved from time to time in material disputes, legal and other proceedings arising out of our operations and may face significant liabilities as a result
We may be involved from time to time in material disputes with various parties involved in the development and sale of our properties, including contractors, suppliers, construction workers, original residents, partners, banks and purchasers. These disputes may lead to protests, legal or other proceedings and may result in damage to our reputation, substantial costs and diversion of resources and management’s attention. As most of our projects are comprised of multiple phases, purchasers of our
— 34 — properties in earlier phases may commence legal actions against us if our subsequent planning and development of the projects are perceived to be inconsistent with our representations and warranties made to such earlier purchasers. In addition, we may have compliance issues with regulatory bodies in the course of our operations, which may subject us to administrative proceedings and unfavorable decrees that result in liabilities and cause delays to our development properties.
RisksRelatingtothePropertyIndustryinthePRC
The PRC government has implemented restrictions on the ability of PRC property developers to obtain offshore financing which could affect how quickly we can deploy, as well as our ability to deploy, the funds raised in the offering in our business in the PRC
On July 10, 2007, the General Affairs Department of the State Administration of Foreign Exchange (‘‘SAFE’’) issued the Notice Regarding the Publication of the List of the First Batch of Property Development Projects with Foreign Investment That Have Properly Registered with the PRC Ministry of Commerce (‘‘MOFCOM’’). The notice stipulates, among other things, (i) that SAFE will no longer process foreign debt registrations or applications for purchase of foreign exchange submitted by real estate enterprises with foreign investment who obtained authorization certificates from and registered with MOFCOM on or after June 1, 2007 and (ii) that SAFE will no longer process foreign exchange registrations (or change of such registrations) or applications for sale and purchase of foreign exchange submitted by real estate enterprises with foreign investment who obtained approval certificates from local government commerce departments on or after June 1, 2007 but who did not register with MOFCOM. This regulation restricts the ability of foreign-invested real estate companies to raise funds offshore for the purpose of injecting such funds into such companies by way of shareholder loans. We cannot assure you that we will obtain in a timely manner all relevant necessary approval certificates or will obtain in a timely manner all necessary registration for all our operating subsidiaries in the PRC to comply with this regulation. Further, we cannot assure you that the PRC government will not introduce new policies that further restrict our ability to deploy in the PRC, or that prevents us from deploying in the PRC, the funds raised in this offering. Therefore, we may not be able to use all or any of the capital that we may raise from this offering to finance our property acquisitions or our new projects in a timely manner or at all.
The PRC property sector is susceptible to the macro-economic policies and austerity measures of the PRC government
The PRC government has exercised and continues to exercise significant influence over the PRC’s economy in general, which, among other things, affects the property sector in the PRC. From time to time, the PRC government adjusts its monetary and economic policies to prevent or curtail the overheating of the national and provincial economies, which may affect the real estate markets in which we operate. For example, the PBOC has raised and lowered the benchmark one-year lending rate over time to its current rate of 4.35% as of October 24, 2015. The PBOC also adjusted the reserve requirement ratio several times to 14.0% for large-scale financial institutions with effect from January 15, 2019. The reserve requirement refers to the amount of funds that banks must hold in reserve against deposits made by their customers. Increases of the bank reserve requirement ratio may negatively impact the amount of funds available to commercial banks in China to lend to businesses, including us, or to consumers to finance property purchases. Any action by the PRC government concerning the economy could have a material adverse effect on our financial condition and results of operations. The central and local authorities may continue to adjust interest rates, tax rates and other economic policies or impose other regulations or restrictions that may have an adverse effect on the property market in China, which may adversely affect our business.
Our investments in the PRC are subject to the PRC government’s control over foreign investment in the property sector
The PRC government has in the past imposed restrictions on foreign investment in the property sector to curtail the overheating of the property sector by, among other things, increasing the capital and other requirements for establishing foreign-invested real estate enterprises, tightening foreign exchange control and imposing restrictions on purchases of properties in China by foreign persons. On May 23, 2007, MOFCOM and SAFE jointly issued the Notice on Further Strengthening and Regulating the Approval and Supervision on Foreign Investment in Real Estate Sector in the PRC, which, among other things, provides that:
— 35 — . foreign investment in the property sector in the PRC relating to premium properties should be strictly controlled;
. prior to obtaining approval for the establishment of foreign-invested real estate enterprises, either (i) both the land use right certificates and housing title certificates should be obtained, or (ii) contracts for obtaining land use rights or housing titles should be entered into;
. foreign-invested real estate enterprises approved by local authorities shall immediately register with MOFCOM through a filing made by the local authorities; and
. foreign exchange administration authorities and banks authorized to conduct foreign exchange business should not affect foreign exchange settlements of capital account items for those foreign-invested real estate enterprises which have not completed their filings with MOFCOM or fail to pass the annual inspection.
In June 2008, MOFCOM issued the Notice Regarding Completing the Registration of Foreign Investment in the Real Estate Sector, often known as Notice 23. According to Notice 23, MOFCOM has entrusted provincial MOFCOM departments to verify materials on file by foreign-invested real estate enterprises (‘‘FIREE’’). Notice 23 requires that each FIREE may engage in one approved real estate project only.
In November 2010, MOFCOM promulgated the Notice on Strengthening Administration of the Approval and Registration of Foreign Investment into Real Estate Industry, which provides, among other things, that, where a real estate enterprise is established in China with overseas capital, it is prohibited from purchasing and/or selling real estate properties completed or under construction for arbitrage purposes. The local MOFCOM authorities are not permitted to allow investment companies to engage in the real estate development and management.
Restrictions imposed by the PRC government on foreign investment in the property sector may affect our ability to make further investments in our PRC subsidiaries and as a result may limit our business growth and have an adverse effect on our business, financial condition and results of operations.
The PRC government has implemented restrictions on the payment terms for land use rights
On September 28, 2007, the Ministry of Land and Resources issued a regulation requiring property developers to fully pay the land premium for the entire parcel under the land grant contract before they can receive a land use rights certificate and commence development on the land. This regulation became effective on November 1, 2007. As a result, property developers are not allowed to bid for a large piece of land, make partial payment, and then apply for a land use rights certificate for the corresponding portion of land in order to commence development, which had been the practice in many PRC cities. The implementation of the regulation requires property developers to maintain a higher level of working capital. This may have a material adverse effect on our cash flow, financial condition and business plans.
Changes of laws and regulations with respect to pre-sales may adversely affect our cash flow and our business
We depend on cash flows from pre-sale of properties as an important source of funding for our property projects. Under current PRC laws and regulations, property developers must fulfill certain conditions before they can commence pre-sale of the relevant properties and may only use pre-sale proceeds to finance their developments. On August 5, 2005, the PBOC issued a report entitled ‘‘2004 Real Estate Financing Report,’’ in which it recommended to discontinue the practice of pre-selling uncompleted properties as it creates significant market risks and generates transactional irregularities. At the ‘‘two meetings’’ (the plenary session of the National People’s Congress and that of the Chinese People’s Political Consultative Conference) held in March 2006, a total of 33 delegates to the National People Congress put forward a motion to abolish the system for sale of forward delivery housing. In May 2006, the head of the Real Estate Finance Division of the Financial Market Department of the PBOC published an article pointing out that the way to perfect the system for commodity housing presale of China is to abolish the financing function of presale. On July 24, 2007, the NDRC proposed to change the existing system for sale of forward delivery housing into one for sale of completed housing. On April 13, 2010, the MOHURD encouraged the pilot program for sale of completed housing
— 36 — but did not suspend or ban the existing pre-sale system. However, there can be no assurance that the PRC government will not ban the practice of pre-selling uncompleted properties or implement further restrictions on the pre-sale of properties, such as imposing additional conditions for a pre-sale permit or further restrictions on the use of pre-sale proceeds. Any such measure will adversely affect our cash flow and force us to seek alternative sources of funding for much of our property development business.
We are subject to legal and business risks if we fail to obtain formal qualification certificates
In accordance with the Regulations on Administration of Urban Real Estate Development, property developers in the PRC are required to obtain the relevant class of qualification certificates for the development of certain types of properties and certain sizes of property development projects. These regulations provide that when a property developer engages in the development and sale of real estate without any qualification certificates or exceeding its qualification, it must rectify such default within the time limit set by the real estate development authorities under the local government on or above the county level. A fine ranging from RMB50,000 to RMB100,000 will also be imposed. If the property developer fails to rectify the default within the time limit, its business license may be revoked by the Administration for Industry and Commerce. The developer must pass the related annual examination to maintain the certificate. The property developer’s registered capital, property development investments, history of property development, quality of property construction, expertise of the management or any illegalities on the part of the developer will be taken into account by the local authorities in deciding whether to approve the annual examination. 23 of our PRC subsidiaries, namely, Nanjing Yanlord Real Estate Co., Ltd., Nanjing Renbei Property Development Co., Ltd., Shanghai Yanlord Hongqiao Property Co., Ltd., Shanghai Yanlord Senlan Real Estate Co., Ltd., Shanghai Yanlord Xing Tang Real Estate Co., Ltd., Shanghai Yanlord Yangpu Property Co., Ltd., Shanghai Yanlord Property Co., Ltd., Shanghai Renan Property Development Co., Ltd., Shanghai Renhang Real Estate Co., Ltd., Shanghai Renrui Real Estate Co., Ltd, Shanghai Renjie Hebin Garden Property Co., Ltd., Yanlord Development (Tianjin) Co., Ltd., Tianjin Yanlord Haihe Development Co., Ltd., Tianjin Yanlord Beiyang Real Estate Co., Ltd., Zhuhai Yanlord Real Estate Development Co., Ltd., Suzhou Yinghan Property Development Co., Ltd., Yanlord Property (Suzhou) Co., Ltd., Hainan Jinzhonghong Industrial Development Co., Ltd., Zhongshan Renyuan Real Estate Co., Ltd., Jinan Yanlord Real Estate Co., Ltd., Yanlord Land (Wuhan) Co., Ltd., Hangzhou Renan Property Co., Ltd. and Hangzhou Renrui Property Development Co., Ltd. have not yet renewed or obtained the relevant qualification certificates mainly because they are not currently engaged in property developments. One of our PRC Subsidiaries, namely Shanghai Renpin Property Development Co., Ltd. is in the process of renewing its qualification certificate. Further, in accordance with the Regulations on Administration of Qualifications of Urban Landscape Enterprises, urban landscape enterprises which engage in landscape and green space planning and designing, or which undertake the construction, maintenance or management of landscaping works are required to obtain relevant qualification certificates in order to operate. Two of our PRC subsidiaries, Nanjing Yu Dian Landscape Development Co., Ltd. and Tianjin Yanlord Garden Co., Ltd., have not yet obtained the relevant qualification certificates as they are not currently engaged in garden design and construction business. In addition, in accordance with Shanghai Administration for Classified Permit and Registration of Non-state Schools, which came into effect on January 1, 2018 (the ‘‘Effective Date’’), every for-profit non-state training institution that was established prior to the Effective Date should amend its articles of association, improve its legal entity’s governance structure and school conditions in accordance with the relevant laws and regulations, and submit an application to competent authorities for a license to operate such institution, prior to December 31, 2019. Shanghai Yanlord Education Training Co., Ltd., as a for- profit non-state training institution, is in process of applying for such operating license. If we fail to obtain or renew the requisite qualification certificates or pass the annual examination, or rectify any default, our business operations will be adversely affected.
RisksRelatingtothePRC
Changes in the social, political and economic conditions in the PRC could affect our business
Substantially all of our assets and our revenue are derived from our business operations located in the PRC. Accordingly, any significant slowdowninthePRCeconomyordeclineindemandforour properties from customers in the PRC will have an adverse effect on our business, financial condition and results of operations. Furthermore, any unfavorable changes in the social and political conditions of the PRC may also adversely affect our business and operations.
— 37 — Since the adoption of the ‘‘open door policy’’ in 1978 and the ‘‘socialist market economy’’ in 1993, the PRC government has been undergoing reforms in its economic and political systems, which are expected to continue. Any changes in the social, political and economic policies of the PRC government may lead to changes in the laws and regulations or the interpretation of the same, as well as changes in the foreign exchange regulations, taxation and land ownership and development restrictions, which may in turn adversely affect our financial performance. Although we believe these reforms will have a positive effect on our overall and long-term development, we cannot predict whether changes in PRC’s political, economic and social conditions, laws, regulations and policies will have any adverse effect on our current or future business, results of operations or financial condition.
Interpretation of PRC laws and regulations involves uncertainty
Our operations in the PRC are subject to the laws and regulations promulgated by the PRC government. The PRC legal system is a codified legal system made up of the PRC constitution, written laws, regulations, circulars, directives and other government orders. The PRC government is still in the process of developing its legal system so as to meet the needs of investors and to encourage foreign investment. Generally, the PRC economy is developing at a faster pace than its legal system. Therefore, some degree of uncertainty exists in connection with whether existing laws and regulations will apply to certain events or circumstances, and if so, the manner of such application. In particular, unlike common law jurisdictions like Singapore, decided cases do not form part of the legal structure of the PRC and thus have no binding effect. The administration of the PRC laws and regulations may be subject to a certain degree of discretion by the executive authorities. This has resulted in the outcome of dispute resolutions not being as consistent or predictable compared to more developed jurisdictions. In addition, it may be difficult to obtain a swift and equitable enforcement of laws in the PRC, or the enforcement of judgments by a court of another jurisdiction.
National Development and Reform Commission (the ‘‘NDRC’’) of the PRC promulgated and put into effect the Notice on Promoting the Reform of the Filing and Registration System for Issuance of ForeignDebtbyEnterprises《國家發展改革委關於推進企業發行外債備案登記制管理改革的通知》(the ‘‘NDRC Notice’’) on September 14, 2015. The NDRC Notice is applicable to issuance of foreign debt by onshore issuers or offshore issuers which are controlled by PRC enterprises. If the NDRC Notice is applicable to an issuer, the issuer will be required to register the issuance of foreign debt with the NDRC, obtain a certificate from the NDRC evidencing such pre-issue registration and cause relevant information relating to the issuance to be reported to the NDRC within ten working days after the issuance.
As we are not a PRC issuer or an issuer controlled by a PRC enterprise, we believe the NDRC Notice is not applicable to the issuance of the Note. Consequently, we have not registered the issuance of the Notes with the NDRC, nor have we obtained a certificate from the NDRC evidencing any pre- issue registration. However, because there are still uncertainties regarding the NDRC Notice as to its interpretation, implementation and enforcement by the NDRC, there is no assurance that our belief of no applicability of the NDRC Notice is and will be always correct. If NDRC takes the position that the NDRC Notice is applicable to us, and we fail to complete any registration with the NDRC in accordance with the such regulation, we may be subjected to penalties or other enforcement actions by relevant PRC government authorities.
Furthermore, in line with its transformation from a centrally planned economy to a free market oriented economy, the PRC government is still in the process of developing a comprehensive set of laws and regulations. As the legal system in the PRC is still evolving, laws and regulations or the interpretation of the same may be subject to change.
There is foreign exchange control in the PRC
Our PRC subsidiaries are subject to the relevant PRC rules and regulations on currency conversion. In the PRC, SAFE regulates the conversion of Renminbi into foreign currencies. Currently, foreign invested enterprises (‘‘FIEs’’) are required to conduct foreign exchange registration with the competent bank through the capital account information system of the SAFE. Upon the completion of such registration, FIEs are allowed to open relevant foreign currency accounts such as ‘‘capital account.’’ Currently, conversion of currency under the ‘‘current items’’, for purposes such as the remittance of foreign currencies for payment of dividends, can be effected without the approval of
— 38 — SAFE. In January 2014, SAFE further simplified the regulation on remittance of dividends paid by PRC entities. However, the conversion of currency under the ‘‘capital items’’, for purpose such as direct investments, loans and securities, still requires the approval of SAFE.
The ability of our PRC subsidiaries to pay dividends or make other distributions to us may be restricted by, among other things, the availability of funds, and statutory and other legal restrictions including PRC foreign exchange control restrictions. In the event the ability of our subsidiaries to distribute funds to us is restricted, it may have an adverse effect on our ability to distribute dividends to our shareholders in the future.
We face risks related to natural disasters and occurrence of epidemics
Our business is subject to general economic and social conditions in the PRC, in particular, in regions where our property development projects are located. Natural disasters and epidemics that are beyond our control may adversely affect the economy, infrastructure and livelihood of the people in those regions. Some regions where we operate face threats of flood, earthquake, sandstorm, snowstorm, fire and drought, and epidemics, such as avian and swine flu. For instance, a serious earthquake and its successive aftershocks hit Sichuan Province in May 2008 and resulted in tremendous injury, loss of life and destruction of assets. In April 2013, another earthquake and aftershocks struck Sichuan Province again and the epicenter was approximately 100 kilometers from Chengdu. In addition, past occurrences of epidemics, depending on their scale, have caused varying degrees of damage to the national and local economies in the PRC. An outbreak of avian flu, swine flu or a similar epidemic, the fear of such an outbreak, or the measures taken by the PRC government or local governments of affected regions against such an outbreak, could severely disrupt our business operations and undermine investor confidence, thereby materially and adversely affecting our financial condition or results of operations.
We cannot guarantee the accuracy of facts, forecasts and other statistics with respect to the PRC, the PRC economy, the PRC real estate industry and the selected PRC regional data contained in this offering memorandum
Facts, forecasts and other statistics in this offering memorandum relating to the PRC, the PRC economy, the PRC real estate industry and the selected PRC regional data have been derived from various official or other publications available in the PRC and may not be consistent with other information compiled within or outside the PRC. However, we cannot guarantee the quality or reliability of such source materials. They have not been prepared or independently verified by us, the Initial Purchasers or any of our or their affiliates or advisors (including legal advisors), or other participants in this offering and, therefore, we make no representation as to the accuracy of such facts, forecasts and statistics. We have, however, taken reasonable care in the reproduction and/or extraction of the official and other publications for the purpose of disclosure in this offering memorandum. Due to possibly flawed or ineffective collection methods or discrepancies between published information and market practice, the facts, forecasts and statistics in this offering memorandum may be inaccurate or may not be comparable to facts, forecasts and statistics produced with respect to other economies. Further, we cannot assure you that they are stated or compiled on the same basis or with the same degree of accuracy as in other jurisdictions. Therefore, you should not unduly rely upon the facts, forecasts and statistics with respect to the PRC, the PRC economy, the PRC real estate industry and the selected PRC regional data contained in this offering memorandum.
RisksRelatingtotheNotes
The Company is a holding company and payments with respect to the Guarantees are structurally subordinated to liabilities, contingent liabilities and obligations of the Company‘ssubsidiaries
The Company is a holding company with no material operations. We conduct almost all of our operations through our PRC subsidiaries. The Notes will not be guaranteed by any current or future PRC subsidiaries. Moreover, the Notes will not be guaranteed by the Non-Guarantor Subsidiaries and the New Non-Guarantor Restricted Subsidiaries. Our primary assets are loans to and ownership interests in our PRC subsidiaries, which are held through the Subsidiary Guarantors, the JV Subsidiary Guarantors (if any) and certain Non-Guarantor Subsidiaries incorporated outside the PRC. The Subsidiary Guarantors do not, and the JV Subsidiary Guarantors (if any) may not, have material operations.
— 39 — Accordingly, our ability to pay principal and interest on the Notes and the ability of the Guarantors to satisfy their obligations under the Guarantees will depend upon our receipt of principal and interest payments on the intercompany loans and distributions of dividends from our subsidiaries.
Creditors, including trade creditors, of our PRC subsidiaries and any holders of preferred shares in such entities, would have a claim on our PRC subsidiaries’ assets that would be prior to the claims of the holders of the Notes. As a result, our payment obligations under the Notes will be effectively subordinated to all existing and future obligations of our PRC subsidiaries (including obligations of our PRC subsidiaries under guarantees issued in connection with our business), and all claims of creditors of our PRC subsidiaries, will have priority as to the assets of such entities over our claims and those of our creditors, including holders of the Notes. As of December 31, 2018, our PRC subsidiaries had unsubordinated indebtedness in the amount of RMB27.126 billion (US$3.945 billion) and capital commitment and contingent liabilities arising from guarantees of RMB5.323 billion (US$774 million).
The Notes and the Indenture permit us, the Issuer, the Subsidiary Guarantors, the JV Subsidiary Guarantors (if any) and our Non-Guarantor Subsidiaries to incur additional indebtedness and issue additional guarantees, subject to certain limitations. In addition, our secured creditors or those of the Issuer, any Subsidiary Guarantor or JV Subsidiary Guarantor (if any) would have priority as to our assets or the assets of such Subsidiary Guarantor or JV Subsidiary Guarantor (if any) securing the related obligations over claims of holders of the Notes.
Under the terms of the Notes, a non-PRC Restricted Subsidiary established after the Original Issue Date does not have to provide a Subsidiary Guarantee if (i) the Company confirms, within 30 days of establishment of such Restricted Subsidiary, it is in discussions to sell or issue more than 20% of the Capital Stock of such Restricted Subsidiary to one or more third parties and (ii) such sale or issuance takes place within 180 days of the establishment of such Restricted Subsidiary.
Moreover, under the terms of the Notes, a Subsidiary Guarantee required to be provided by a subsidiary of the Company under the terms of the Notes may be replaced by a limited-recourse guarantee, or JV Subsidiary Guarantee, following thesaleorissuancetoathirdpartyofa20%to49.9% equity interest in such subsidiary or its direct or indirect majority shareholders (subject to the satisfaction of certain conditions). Recovery under a JV Subsidiary Guarantee is limited to an amount equal to our proportional interest in the issued share capital of such JV Subsidiary Guarantor, multiplied by the fair market value of the total assets in such JV Subsidiary Guarantor and its subsidiaries, on a consolidated basis, as of the date of the last fiscal year end of the Company. As a result, the amount that may be recovered by the Trustee pursuant to a JV Subsidiary Guarantee (compared to a Subsidiary Guarantee) is reduced, which in turn may affect your ability to recover any amounts due under the Notes.
Our subsidiaries are subject to restrictions on the payment of dividends and the repayment of intercompany loans or advances to us and our subsidiaries
As a holding company, we depend on the receipt of dividends and the interest or principal payments on intercompany loans or advances from our subsidiaries, including our PRC subsidiaries, to satisfy our obligations, including our obligations under the Notes. The ability of our subsidiaries to pay dividends and make payments on intercompany loans or advances to their shareholders is subject to, among other things, distributable earnings, cash flow conditions, restrictions contained in the articles of association of our subsidiaries and applicable laws. In addition, if any of our subsidiaries raises capital by issuing equity securities to third parties, dividends declared and paid with respect to such shares would not be available to us to make payments on the Notes. These restrictions could reduce the amounts that we receive from our subsidiaries, which would restrict our ability to meet our payment obligations under the Notes and the ability of the Subsidiary Guarantors or JV Subsidiary Guarantors (if any) to satisfy their obligations under the Subsidiary Guarantees or JV Subsidiary Guarantee as the case may be.
PRC laws and regulations permit payment of dividends only out of accumulated profits as determined in accordance with PRC accounting standards and regulations and such profits differ from profits determined in accordance with SFRSs, SFRS(I)s or IFRSs in certain significant respects, including the use of different bases of recognition of revenue and expenses. Our PRC subsidiaries are also required to set aside a portion of their after-tax profits according to PRC accounting standards and regulations to fund certain reserve funds that are not distributable as cash dividends by the board of directors. In practice, our PRC subsidiaries may pay dividends once a year. As a result of such
— 40 — limitations, there could be timing limitations on payments from our PRC subsidiaries to meet payments required by the Notes or obligations under the Subsidiary Guarantees or JV Subsidiary Guarantees as the case may be, and there could be restrictions on payments required to pay off the Notes at maturity or as required for any early redemption.
According to the applicable EIT Law, income such as dividends distributed out of the profits generated since January 1, 2008, from a PRC company to a foreign enterprise which has no establishment in the PRC is subject to a 10% withholding tax, subject to reduction as provided by any applicable double taxation treaty, unless the relevant income is specifically exempted from tax under the applicable EIT Law. Pursuant to a tax treaty between the PRC and the Republic of Singapore which became effective on January 1, 2008, a company incorporated in Singapore will be subject to a withholding tax at the rate of no more than 5% of the gross amount of the dividends it receives from a company incorporated in the PRC if it holds directly a 25% or more interest in the PRC company, or no more than 10% of the gross amount of the dividends if it holds less than a 25% direct interest in the PRC company. However, under applicable PRC tax regulations, an approval from the local tax authority is required in order to benefit from the reduced treaty rate and such lower rate may be denied if the recipient company is a ‘‘conduit’’ or a company with no business substance.
Furthermore, in practice, the market interest rate that our PRC subsidiaries can pay with respect to offshore loans generally may not exceed comparable interest rates in the international finance markets. The interest rates on shareholders’ loans paid by our subsidiaries, therefore, are likely to be lower than the interest rate for the Notes. Our PRC subsidiaries are also required to pay a 10% withholding tax on our behalf on the interest paid under any shareholders’ loans. PRC regulations require approval by SAFE prior to any of our non-PRC subsidiaries making shareholder loans in foreign currencies to our PRC subsidiaries and require such loans to be registered with SAFE. Prior to payment of interest and principal on any such shareholder loan, the PRC subsidiaries must present evidence of payment of the 10% withholding tax on the interest payable on any such shareholder loan and evidence of registration with SAFE, as well as any other documents that SAFE or its local branch may require.
As a result of the foregoing, we cannot assure you that we will have sufficient cash flow from dividends or payments on intercompany loans or advances from our subsidiaries to satisfy our obligations under the Notes or the obligations of the Subsidiary Guarantors or JV Subsidiary Guarantors (if any) under the Subsidiary Guarantees or JV Subsidiary Guarantees as the case may be.
The terms of the Notes permit us to designate any Non-core Entity as an Unrestricted Subsidiary in connection with any Qualified IPO, and investments we retain in such Unrestricted Subsidiaries will not constitute Restricted Payments upon such designation.
As part of our strategy, we have taken initiatives or made plans to enter new businesses with a view to establishing alternative revenue sources and diversifying our business. We may spin off our non-core businesses which are any businesses other than the acquisition and development of residential property in the PRC in the future as we desire. Subject to certain restrictions and limitations, in connection with a listing of Non-core Entities (as defined in the Indenture) that are engaged in businesses other than our core PRC residential real estate acquisition and development business, the terms of the Notes permit us to designate any such Non-core Entity as an Unrestricted Subsidiary, and any interests we retain in such Non-core Entities will not constitute Restricted Payments upon such designation. See ‘‘Description of the Notes — Certain Covenants — Limitation on Restricted Payments’’ and the definition of ‘‘Permitted Investment’’. We currently do not have any plan for such spin off listing and do not expect to make such designations. The effects of any such designation, if applicable, include, but are not limited to, that:
. the business, assets and liabilities of such Non-core Entity will no longer be part of the underlying credit of the Notes;
. any entity so designated as an Unrestricted Subsidiary will no longer be subject to the covenants under the Indenture governing the Notes;
. the Subsidiary Guarantees of any entity so designated as an Unrestricted Subsidiary may be released, and the shares of such entity previously pledged to the collateral agent or the trustee for the benefit of the holders of the Notes may be released; and
— 41 — . interest expenses on Indebtedness (as defined in the Indenture) of any entity so designated as an Unrestricted Subsidiary will not be included in the calculation of our Consolidated Interest Expense (as defined in the Indenture), other than such interest expenses on Indebtedness that is guaranteed by the Company or a Restricted Subsidiary.
As a result of any such designation, the value of assets subject to the restrictive covenants under the Indenture may decrease and the market price and trading of the Notes may be materially affected.
We may not be able to repurchase the Notes upon a Change of Control Triggering Event
We must offer to purchase the Notes upon the occurrence of a Change of Control Triggering Event, at a purchase price equal to 101% of the principal amount plus accrued and unpaid interest. See ‘‘Description of the Notes’’.
The source of funds for any such purchase would be our available cash or third-party financing. However, we may not have enough available funds at the time of the occurrence of any Change of Control Triggering Event to make purchases of outstanding Notes. Our failure to make the offer to purchase or purchase the outstanding Notes would constitute an event of default under the Notes. The event of default may, in turn, constitute an event of default under other indebtedness, any of which could cause the related debt to be accelerated after any applicable notice or grace periods. If our other debt were to be accelerated, we may not have sufficient funds to purchase the Notes and repay the debt.
In addition, the definition of Change of Control Triggering Event for purposes of the indenture governing the Notes does not necessarily afford protection for the holders of the Notes in the event of some highly leveraged transactions, including certain acquisitions, mergers, refinancings, restructurings or other recapitalizations, although these types of transactions could increase our indebtedness or otherwise affect our capital structure or credit ratings. The definition of Change of Control Triggering Event for purposes of the indenture governing the Notes also includes a phrase relating to the sale of ‘‘all or substantially all’’ of our assets. Although there is a limited body of case law interpreting the phrase ‘‘substantially all,’’ there is no precise established definition under applicable law. Accordingly, our obligation to make an offer to purchase the Notes, and the ability of a holder of the Notes to require us to purchase its Notes pursuant to the offer as a result of a highly-leveraged transaction or a sale of less than all of our assets may be uncertain.
There may be difficulties in enforcing U.S. judgments against us and our management
The Company is incorporated in Singapore and the Issuer is incorporated in Hong Kong. All of our directors and management (and certain of the other parties named in this offering memorandum) reside outside the United States, and all of our assets are located outside the United States. As a result, it may be difficult or impossible for investors to effect service of process upon us or such persons within the United States or other jurisdictions, or to enforce against us or such persons in such jurisdiction, judgments obtained in courts of that jurisdiction, including judgments predicated upon the civil liability provisions of the federal securities laws of the United States. In particular, you should be aware that judgments of U.S. courts based upon the civil liability provisions of the federal securities laws of the United States may not be enforceable in Singapore or Hong Kong courts and there is doubt as to whether Singapore or Hong Kong courts will enter judgments in original actions brought in Singapore or Hong Kong courts (as the case may be) based solely upon the civil liability provisions of the federal securities laws of the United States.
The insolvency laws of Singapore, Hong Kong and other local insolvency laws may differ from U.S. bankruptcy law or those of another jurisdiction with which holders of the Notes are familiar
Because we and some of the Subsidiary Guarantors are incorporated, and the JV Subsidiary Guarantors (if any) may be incorporated, under the laws of Singapore, an insolvency proceeding relating to us or any such Subsidiary Guarantor or JV Subsidiary Guarantor, even if brought in the United States, would likely involve Singapore insolvency laws, the procedural and substantive provisions of which may differ from comparable provisions of United States federal bankruptcy law. In addition, the Issuer and our other Subsidiary Guarantors and JV Subsidiary Guarantors (if any) are incorporated or may be incorporated in Hong Kong or other non-U.S. jurisdictions and the insolvency laws of Hong Kong or such other jurisdictions may also differ from the laws of the United States or other jurisdictions with
— 42 — which the holders of the Notes are familiar. The differences in insolvency laws across jurisdictions engender a multitude of issues, especially with respect to the recognition of the claims of foreign creditors and recognition and enforcement of foreign insolvency proceedings and judgments.
We conduct most of our business operations through PRC-incorporated subsidiaries in the PRC. The Subsidiary Guarantors, as equity holders in our PRC subsidiaries, are necessarily subject to the bankruptcy and insolvency laws of the PRC in a bankruptcy or insolvency proceeding involving any of such PRC subsidiaries. Any JV Subsidiary Guarantors which become equity holders of our PRC subsidiaries would also be subject to such laws. The PRC laws and regulations relating to bankruptcy and insolvency and the legal proceedings in that regard may significantly differ from those of the United States and other jurisdictions with which the holders of the Notes are familiar. You should analyze these risks and related uncertainties carefully before you invest in our Notes.
We may be unable to obtain and remit foreign exchange
Our ability to satisfy our obligations under the Notes depends solely upon the ability of our subsidiaries in the PRC to obtain and remit sufficient foreign currency to pay dividends to us and to repay outstanding shareholder loans. Our PRC subsidiaries must present certain documents to SAFE, its authorized branch, or the designated foreign exchange bank, for approval before they can obtain and remit foreign currencies out of the PRC (including, in the case of dividends, evidence that the relevant PRC taxes have been paid and, in the case of shareholder loans, evidence of the registration of the loan with SAFE). Prior to payment of interest and principal on any outstanding shareholder loan we made to our PRC subsidiaries, the relevant PRC subsidiary must also present evidence of payment of the 10% withholding tax on the interest payable in respect of such shareholder loan. If any of our PRC subsidiaries for any reason fails to satisfy any of the PRC legal requirements for remitting foreign currency, such PRC subsidiary will be unable to pay us dividends, which would adversely affect our ability to satisfy our obligations under the Notes.
Under PRC regulations, we may not be able to transfer to our PRC subsidiaries proceeds from this offering in the form of a loan, which could impair our ability to make timely payments of interest, or even principal, under the Notes
According to the existing PRC rules and regulations relating to supervision of foreign debt, loans by foreign companies to their subsidiaries in China, such as our PRC subsidiaries established as foreign- invested enterprises in China, are considered foreign debt, and such loans must be registered with the relevant local branches of SAFE. Such rules and regulations also provide that the total outstanding amount of such foreign debt borrowed by any foreign-invested enterprise may not exceed (1) the difference between its total investment and its registered capital, each as approved by the relevant PRC authorities or (2) twice of its capital or net assets, which can be chosen by the foreign-invested enterprise itself. In addition, in July 2007, SAFE issued a circular indicating that it would not process any foreign debt registration or conversion of foreign debt for foreign-invested enterprises in the real estate sector that was approved by the local office of MOFCOM and registered with MOFCOM after June 1, 2007. Foreign-invested enterprises include joint ventures and wholly foreign-owned enterprises established in China, such as most of our PRC subsidiaries. Therefore, the proceeds of the current offering that will be used for land acquisitions and developments in China may only be transferred to our PRC subsidiaries as equity investments and not as loans. We would therefore have to rely on dividend payments from our PRC subsidiaries, and we cannot assure you that dividend payments will be available on each interest payment date to pay the interest due and payable under the Notes, or on the maturity date to pay the principal of the outstanding Notes.
We have substantial indebtedness and may incur substantial additional indebtedness in the future, which could adversely affect our financial health and our ability to generate sufficient cash to satisfy our outstanding and future debt obligations
We now have, and will continue to have after the offering of the Notes, a substantial amount of indebtedness.
Our substantial indebtedness could have important consequences to you. For example, it could:
. limit our ability to satisfy our obligations under the Notes and other debt;
. increase our vulnerability to adverse general economic and industry conditions;
— 43 — . require us to dedicate a substantial portion of our cash flow from operations to servicing and repaying our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes;
. limit our flexibility in planning for or reacting to changes in our businesses and the industry in which we operate;
. place us at a competitive disadvantage compared to our competitors that have less debt;
. limit, along with the financial and other restrictive covenants of our indebtedness, among other things, our ability to borrow additional funds; and
. increase the cost of additional financing.
In the future, we may from time to time incur substantial additional indebtedness and contingent liabilities. Although the indenture governing the Notes restricts us and our Restricted Subsidiaries from incurring additional debt and contingent liabilities, these restrictions are subject to important exceptions and qualifications. For example, under the Notes, our ability to incur additional debt is subject to the limitation on indebtedness and preferred stock covenant. Under such covenant, we may incur (i) certain Permitted Indebtedness or (ii) additional indebtedness if we can, among other things, satisfy the Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio is derived by dividing Consolidated EBITDA by Consolidated Fixed Charges. Because our definition of Consolidated EBITDA includes our unrealized gains on valuation adjustments on our investment properties, our Consolidated EBITDA, and therefore our ability to incur additional debt under such covenant, could be substantially larger when compared to other similarly situated PRC-based issuers of high-yield bonds whose covenant does not include unrealized gains in the calculation of their respective Consolidated EBITDA. If we or our subsidiaries incur additional debt, the risks that we face as a result of our already substantial indebtedness and leverage could intensify.
Our ability to generate sufficient cash to satisfy our outstanding and future debt obligations will depend upon our future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, many of which are beyond our control. We anticipate that our operating cash flow will be sufficient to meet our anticipated operating expenses and to service our debt obligations as they become due. However, we may not generate sufficient cash flow for these purposes. If we are unable to service our indebtedness, we will be forced to adopt an alternative strategy that may include actions such as reducing or delaying capital expenditures, selling assets, restructuring or refinancing our indebtedness or seeking equity capital. These strategies may not be instituted on satisfactory terms, if at all.
In addition, the terms of the indenture governing the Notes (as well as the instruments creating the 2017 Senior Notes and the 2018 Senior Notes) prohibit us from incurring additional indebtedness unless we are able to satisfy certain financial ratios, and contain other restrictions. Our ability to meet our financial ratios may be affected by events beyond our control. We cannot assure you that we will be able to meet these ratios. Certain of our financing arrangements also impose operating and financial restrictions on our business. See ‘‘Description of Other Material Indebtedness’’. Such restrictions in the Notes and our other financing arrangements may negatively affect our ability to react to changes in market conditions, take advantage of business opportunities we believe to be desirable, obtain future financing, fund needed capital expenditures, or withstand a continuing or future downturn in our business. Any of these factors could materially and adversely affect our ability to satisfy our obligations under the Notes and our other debt.
If we are unable to comply with the restrictions and covenants in our debt agreements or the indenture governing the Notes, there could be a default under the terms of these agreements or the indenture governing the Notes, which could cause repayment of our debt to be accelerated
If we are unable to comply with the restrictions and covenants in the indenture governing the Notes, or our current or future debt and other agreements, there could be a default under the terms of these agreements. In the event of a default under these agreements, the holders of the debt could terminate their commitments to lend to us, accelerate the debt and declare all amounts borrowed due and payable or terminate the agreements, as the case may be. Furthermore, some of our debt agreements, including the indenture governing the Notes, contain cross-acceleration or cross-default provisions. See ‘‘Description of Other Material Indebtedness’’. As a result, our default under one debt agreement may
— 44 — cause the acceleration of debt, including the Notes, or result in a default under our other debt agreements, including the indenture governing the Notes. If any of these events occur, we cannot assure you that our assets and cash flow would be sufficient to repay in full all of our indebtedness, or that we would be able to find alternative financing. Even if we could obtain alternative financing, we cannot assure you that it would be on terms that are favorable or acceptable to us.
Our operations are restricted by the terms of the Notes, which could limit our ability to plan for or to react to market conditions or meet our capital needs, which could increase your credit risk
The indenture governing the Notes includes a number of significant restrictive covenants. These covenants restrict, among other things, our ability, and the ability of our Restricted Subsidiaries, to:
. incur or guarantee additional indebtedness and issue disqualified or preferred stock;
. declare dividends on capital stock or purchase or redeem capital stock;
. make investments or other specified restricted payments;
. issue or sell capital stock of Restricted Subsidiaries;
. guarantee indebtedness of Restricted Subsidiaries;
. sell assets;
. create liens;
. enter into sale and leaseback transactions;
. enter into agreements that restrict the Restricted Subsidiaries’ ability to pay dividends, transfer assets or make intercompany loans;
. enter into transactions with shareholders or affiliates; and
. effect a consolidation or merger.
These covenants could limit our ability to plan for or react to market conditions or to meet our capital needs. Our ability to comply with these covenants may be affected by events beyond our control, and we may have to curtail some of our operations and growth plans to maintain compliance.
The terms of the Notes permit us to make investments in Unrestricted Subsidiaries and minority owned joint ventures
As a result of the relatively high land prices and the trend for larger size land parcels to be put up for sale in the PRC, there is an increasing trend of developing projects jointly with other PRC property companies. As a result, we may be increasingly required to make significant investments in joint ventures (including joint ventures in which we may own less than a 50% equity interest) and such joint ventures may or may not be Restricted Subsidiaries. Although the indenture governing the Notes restricts us and our Restricted Subsidiaries from making investments in Unrestricted Subsidiaries or minority joint ventures, these restrictions are subject to important exceptions and qualifications. See the section entitled ‘‘Limitation on Restricted Payments’’ and the definition of ‘‘Permitted Investments’’ in ‘‘Description of the Notes’’.
A trading market for the Notes may not develop, and there are restrictions on resales of the Notes
The Notes are a new issue of securities for which there is currently no trading market. Although approval in-principle has been received from the SGX-ST for the listing and quotation of the Notes on the SGX-ST, we cannot assure you that we will obtain or be able to maintain a listing on the SGX-ST, or that, if listed, a liquid trading market will develop. We have been advised that the Initial Purchasers intend to make a market in the Notes, but they are not obligated to do so and may discontinue such market-making activity at any time without notice. In addition, the Notes are being offered pursuant to exemptions from registration under the U.S. Securities Act and, as a result, you will only be able to resell your Notes in transactions that have been registered under the U.S. Securities Act or in
— 45 — transactions not subject to or exempt from registration under the U.S. Securities Act. See ‘‘Transfer Restrictions’’. We cannot predict whether an active trading market for the Notes will develop or be sustained.
The ratings assigned to the Notes and our corporate ratings may be lowered or withdrawn in the future
The Notes are expected to be assigned a rating of ‘‘BB-’’ by S&P and a rating of ‘‘Ba3’’ by Moody’s. The ratings address our ability to perform our obligations under the terms of the Notes and credit risks in determining the likelihood that payments will be made when due under the Notes. In addition, we have been assigned a long-term corporate credit rating of ‘‘BB’’ with a stable outlook by S&P and a corporate family rating of ‘‘Ba2’’ with a stable outlook by Moody’s. A rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time. We cannot assure you that a rating will remain for any given period of time or that a rating will not be lowered or withdrawn entirely by the relevant rating agency if in its judgment circumstances in the future so warrant, such circumstances include, for example, if we or our Restricted Subsidiaries were to incur substantial additional indebtedness to the extent permitted under the Indenture. We have no obligation to inform holders of the Notes of any such revision, downgrade or withdrawal. A suspension, reduction or withdrawal at any time of the rating assigned to the Notes may adversely affect the market price of the Notes.
The liquidity and price of the Notes following the offering may be volatile
The price and trading volume of the Notes may be highly volatile. Factors such as variations in our revenue, earnings and cash flows and proposals of new investments, strategic alliances and/or acquisitions, interest rates and fluctuations in prices for comparable companies could cause the price of the Notes to change. Any such developments may result in large and sudden changes in the volume and price at which the Notes will trade. We cannot assure you that these developments will not occur in the future.
There may be less publicly available information about us than is available in certain other jurisdictions
There may be less publicly available information about companies listed in Singapore than is regularly made available by public companies in certain other countries. In addition, our financial statements are prepared and presented in accordance with SFRSs, or SFRS(I)s and IFRSs.
We will follow the applicable corporate disclosure standards for debt securities listed on the SGX-ST, which standards may be different from those applicable to securities listed on other exchanges
We will be subject to continuing listing obligations in respect of the Notes to be listed on the SGX-ST. The disclosure standards imposed by the SGX-ST may be different than those imposed by securities exchanges in other countries or regions such as the United States or Hong Kong. As a result, the level of information that is available may not correspond to what investors in the Notes are accustomed to.
We may be able to redeem the Notes in whole at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest in the event we are required to pay additional amounts because we are treated as a PRC resident enterprise
As described above, we may be treated as a PRC resident enterprise under the EIT Law. See ‘‘Risk Relating to Our Business — We may be treated as a PRC resident enterprise for PRC tax purposes, which may subject us to PRC income taxes on our worldwide income and may subject our investors to PRC withholding taxes on interest we pay on the Notes and to PRC income tax on gains from the transfer of the Notes’’. If we are treated as a PRC resident enterprise under the EIT Law, we would be required to withhold PRC tax on interest payable to certain of our non-resident investors and pay, subject to certain exceptions, additional amounts with respect to such withholding tax. As described in ‘‘Description of the Notes — Redemption for Taxation Reasons’’, in the event we are required to pay additional amounts as a result of certain changes in tax law, including changes to an existing official position or the stating of an official position that results in our being required to withhold tax due to our being treated as a PRC resident enterprise, we may redeem the Notes in whole but not in part at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest.
— 46 — Risks Relating to the Guarantees and the Collateral
Our initial Subsidiary Guarantors do not currently have significant operations and certain Subsidiary Guarantees may in some cases be replaced by limited-recourse guarantees
We conduct substantially all of our business operations through our PRC subsidiaries, but none of our current PRC subsidiaries and their direct PRC or non-PRC subsidiaries will provide a Subsidiary Guarantee or a JV Subsidiary Guarantee either upon issuance of the Notes or at any time thereafter. No future subsidiaries that are organized under the laws of the PRC or their future PRC or non-PRC subsidiaries will provide a Subsidiary Guarantee or a JV Subsidiary Guarantee at any time in the future. Moreover, the Notes will not be guaranteed by the Non-Guarantor Subsidiaries. As a result, the Notes will be effectively subordinated to all the debt and other obligations, including contingent obligations and trade payables, of the PRC subsidiaries and such Non-Guarantor Subsidiaries. See the section entitled ‘‘Description of the Notes — The Subsidiary Guarantees and the JV Subsidiary Guarantees’’ for a list of the Non-Guarantor Subsidiaries. Moreover, the Collateral will not include the capital stock of our existing or future Non-Guarantor Subsidiaries, including our PRC subsidiaries.
The initial Subsidiary Guarantors that will guarantee the Notes do not have significant operations. We cannot assure you that the initial Subsidiary Guarantors or any subsidiaries that may become Subsidiary Guarantors or JV Subsidiary Guarantors in the future will have the funds necessary to satisfy our financial obligations under the Notes if we are unable to do so. See the section entitled ‘‘— Risks Relating to the Notes — The Company is a holding company and payments with respect to the Guarantees are structurally subordinated to liabilities, contingent liabilities and obligations of the Company’ssubsidiaries’’.
Under the terms of the Notes, a non-PRC Restricted Subsidiary established after the Original Issue Date does not have to provide a Subsidiary Guarantee if (i) the Company confirms, within 30 days of establishment of such Restricted Subsidiary, it is in discussions to sell or issue more than 20% of the Capital Stock of such Restricted Subsidiary to one or more third parties and (ii) such sale or issuance takes place within 180 days of the establishment of such Restricted Subsidiary. In addition, we may elect any future Restricted Subsidiary organized outside of the PRC not to provide a Subsidiary Guarantee if the consolidated assets of all such Restricted Subsidiaries (subject to certain exceptions) do not account for more than 20% of our Total Assets.
In addition, a Subsidiary Guarantee required to be provided by a subsidiary of the Company under the terms of the Notes may be replaced by a limited-recourse JV Subsidiary Guarantee following the sale or issuance to a third party of a non-controlling interest in such subsidiary or its direct or indirect majority shareholders. Recovery under a JV Subsidiary Guarantee is limited to an amount equal to our proportional interest in the issued share capital of such JV Subsidiary Guarantor multiplied by the fair market value of the total assets in such JV Subsidiary Guarantor and its subsidiaries, on a consolidated basis, as of the date of the last fiscal year end of the Company.
The Guarantees may be challenged under applicable insolvency or fraudulent transfer laws, which could impair the enforceability of the Guarantees
Although bankruptcy laws, fraudulent transfer laws, insolvency or unfair preference or similar laws differ among Singapore, Hong Kong and other jurisdictions where future Guarantors may be established, in general a guarantee could be voided, or claims in respect of a guarantee could be subordinated to all other debts of that guarantor if, among other things, the guarantor, at the time it incurred the indebtedness evidenced by, or when it gives, its guarantee:
. incurred the debt with the intent to hinder, delay or defraud creditors or was influenced by a desire to put the beneficiary of the guarantee in a position which, in the event of the guarantor’s insolvency, would be better than the position the beneficiary would have been in had the guarantee not been given;
. received less than reasonably equivalent value or fair consideration for the incurrence of such guarantee;
. was insolvent or rendered insolvent by reason of the incurrence of such guarantee;
— 47 — . was engaged in a business or transaction for which the guarantor’s remaining assets constituted unreasonably small capital; or
. intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature.
The measure of insolvency for purposes of the foregoing will vary depending on the laws of the applicable jurisdiction. Generally, however, a guarantor would be considered insolvent at a particular time if it were unable to pay its debts as they fell due or if the sum of its debts was then greater than all of its properties at a fair valuation or if the present fair saleable value of its assets was then less than the amount that would be required to pay its probable liabilities in respect of its existing debts as they became absolute and matured.
In addition, a guarantee may be subject to review under applicable insolvency or fraudulent transfer laws in certain jurisdictions or subject to a lawsuit by creditors of the guarantor or the appointed insolvency administrator. In such case, the analysis set forth above would generally apply, except that the guarantee could also be subject to the claim that, since the guarantee was not incurred for the benefit of the guarantor, the obligations of the guarantor thereunder were incurred for less than reasonably equivalent value or fair consideration.
In an attempt to limit the applicability of insolvency and fraudulent transfer laws in certain jurisdictions, the obligations of the Guarantors under the Guarantees will be limited to the maximum amount that can be guaranteed by the applicable Guarantor without rendering the guarantee, as it relates to such Guarantor, voidable under such applicable insolvency or fraudulent transfer laws.
If a court voids a Guarantee, subordinates such Guarantee to other indebtedness of the Guarantor, or holds the Guarantee unenforceable for any other reason, holders of the Notes would cease to have a claim against that Guarantor based upon such Guarantee, would be subject to the prior payment of all liabilities (including trade payables) of such Guarantor, and would solely be creditors of us and the Guarantor whose Guarantees have not been voided or held unenforceable. We cannot assure you that, in such an event, after providing for all prior claims, there would be sufficient assets to satisfy the claims of the holders of the Notes.
The pledge of certain Collateral may in certain circumstances be voidable
The pledge of the Collateral securing the Notes may be voidable as a preference under insolvency or fraudulent transfer or similar laws of Singapore and Hong Kong at any time within six months of the perfection of the pledge or, under some circumstances, within a longer period. In addition, the pledge of certain Collateral may be voided based on the analysis set forth under ‘‘— The Guarantees may be challenged under applicable insolvency or fraudulent transfer laws, which could impair the enforceability of the Guarantees’’. If the pledges of the Collateral were to be voided for any reason, holders of the Notes would have only an unsecured claim against us.
The proceeds realizable from the Collateral will likely not be sufficient to satisfy our obligations under the Notes
The Collateral securing the Notes will consist only of the capital stock of our initial Subsidiary Guarantors that are incorporated outside China. The security interest in respect of certain Collateral may be released upon the disposition of such Collateral and any proceeds from such disposition may be applied, prior to repaying any amounts due under the Notes, to repay other debt or to make investments in properties and assets that will not be pledged as additional Collateral. None of the capital stock of any future Restricted Subsidiary will be pledged at any time in the future unless otherwise required.
The ability of the trustee, on behalf of the holders of the Notes, to foreclose on the Collateral upon the occurrence of an event of default or otherwise, will be subject in certain instances to perfection and priority issues. Although procedures will be undertaken to support the validity and enforceability of the security interests, we cannot assure you that the trustee or holders of the Notes will be able to enforce the security interest.
The Collateral will be shared on a pari passu basis among (i) the holders of the 2017 Senior Notes and the 2018 Senior Notes, (ii) the lenders under the 2016 WL Facility, the 2017 Syndicated Loan Facility and the 2019 Dual-Tranche Term Loan Facility, and (iii) any other creditors with respect to
— 48 — Permitted Pari Passu Secured Indebtedness. Accordingly, in the event of a default on the Notes or the other secured indebtedness and a foreclosure on the Collateral, any foreclosure proceeds would be shared by the holders of secured indebtedness in proportion to the outstanding amounts of each class of secured indebtedness. The value of the Collateral securing the Notes and the Guarantees of the Guarantor Pledgor is unlikely to be sufficient to satisfy our and the Guarantor Pledgor’s obligations under the Notes and the Guarantees, and the Collateral securing the Notes and such Guarantee may be reduced or diluted under certain circumstances, including the issuance of Additional Notes and the disposition of assets comprising the Collateral, subject to the terms of the Indenture.
The value of the Collateral in the event of a liquidation will depend upon market and economic conditions, the availability of buyers and similar factors. No independent appraisals of any of the Collateral have been prepared by or on behalf of us in connection with this offering of the Notes. Accordingly, we cannot assure you that the proceeds of any sale of the Collateral following an acceleration of the Notes would be sufficient to satisfy, or would not be substantially less than, amounts due and payable on the Notes. By their nature, the Collateral may be illiquid and may have no readily ascertainable market value. Likewise, we cannot assure you that the Collateral will be saleable or, if saleable, that there will not be substantial delays in its liquidation.
The Intercreditor Deed may impact our ability and the ability of the Subsidiary Guarantors and JV Subsidiary Guarantors to pay amounts due under the Notes and the Subsidiary Guarantees and the Intercreditor Deed may limit the rights of holders of the Notes to the Collateral
Provided the Global Security Agent is indemnified and/or secured to its satisfaction, it may be required to take action to enforce the Collateral in accordance with the instructions of (i) the holders of the 2017 Senior Notes and the 2018 Senior Notes, (ii) the lenders under the 2016 WL Facility, the 2017 Syndicated Loan Facility and the 2019 Dual-Tranche Term Loan Facility, and (iii) any other creditors with respect to Permitted Pari Passu Secured Indebtedness and creditors of other Permitted Pari Passu Secured Indebtedness given under and in accordance with the Intercreditor Deed. Any enforcement action taken by the Global Security Agent will adversely affect our entitlement to receive distributions from the Collateral, which will, in turn, have an adverse impact on our ability to fulfill our payment obligations under the Notes. Further, the Subsidiary Guarantors’ ability to pay under the Subsidiary Guarantees, will be adversely affected. The ability of holders of the Notes to enforce the Collateral is restricted under the Intercreditor Deed, as only the Global Security Agent is permitted to take enforcement actions. If an Event of Default occurs under the Notes, the holders of the 2017 Senior Notes and the 2018 Senior Notes, the lenders under the 2016 WL Facility, the 2017 Syndicated Loan Facility and the 2019 Dual-Tranche Term Loan Facility, and any other creditors with respect to Permitted Pari Passu Secured Indebtedness must decide whether to take any enforcement action and thereafter, through their respective trustee or agent, subject to the satisfaction of the conditions under the Intercreditor Deed, may instruct the Global Security Agent to take such enforcement action. By virtue of the instructions given to the Global Security Agent described above, actions may be taken in respect of the Collateral that may be adverse to holders of the Notes.
The Global Security Agent, acting in its capacity as such, will have such duties with respect to the Collateral pledged, charged, assigned or granted pursuant to the Intercreditor Deed and the Security Documents as are set forth in the Intercreditor Deed and as trustee and agent in respect of the 2017 Senior Notes and the 2018 Senior Notes and under the 2016 WL Facility, the 2017 Syndicated Loan Facility and the 2019 Dual-Tranche Term Loan Facility. Under certain circumstances, the Global Security Agent may have obligations under the Security Documents or the Intercreditor Deed and the underlying indentures that are in conflict with the interests of the holders of the Notes. The Global Security Agent will not be under any obligation to exercise any rights or powers conferred under the Intercreditor Deed or any of the Security Documents for the benefit of the holders of the Notes, unless such holders have offered to the Global Security Agent indemnity and/or security satisfactory to the Global Security Agent against any loss, liability, cost or expense.
The pledge of certain Collateral may be released under certain circumstances
In the event the conditions applicable to the replacement of a Subsidiary Guarantee with a JV Subsidiary Guarantee are satisfied, we are permitted to release the pledge of the shares granted by such Subsidiary Guarantor, as well as the pledge of the shares granted by the subsidiaries of such Subsidiary Guarantor. We are only required to deliver a replacement share pledge for the shares that we continue to hold in such JV Subsidiary Guarantor (but not the subsidiaries of such JV Subsidiary Guarantor)
— 49 — following the sale of the equity interests in such Subsidiary Guarantor. As a result, in the event we sell non-controlling equity interests in our Subsidiary Guarantors or otherwise create JV Subsidiary Guarantors in accordance with the terms of the Indenture, the Collateral will be reduced in value and scope, and holders of the Notes would be subject to increased risks.
— 50 — USE OF PROCEEDS
We estimate that we will receive net proceeds from this offering of approximately US$ million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds from this offering for project development and acquisition and general corporate purposes.
Pending application of the net proceeds of these offerings, we intend to invest such net proceeds in ‘‘Temporary Cash Investments’’ as defined under ‘‘Description of the Notes.’’ We may adjust the foregoing plan in response to changing market conditions and thus reallocate the use of proceeds.
— 51 — EXCHANGE RATE INFORMATION
The following table sets forth, for the periods indicated, information concerning the exchange rates between RMB and U.S. dollars based on the noon buying rate for U.S. dollars as set forth in the H.10 Statistical release of the Federal Reserve Board. The table illustrates how many RMB it would take to buy one U.S. dollar. The PBOC sets and publishes daily a base exchange rate with reference primarily to the supply and demand of Renminbi against a basket of currencies in the market during the prior day. The PBOC also takes into account other factors, such as the general conditions existing in the international foreign exchange markets. On July 21, 2005, the PRC government introduced a managed floating exchange rate system to allow the value of the Renminbi to fluctuate within a regulated band based on market supply and demand and by reference to a basket of currencies. On May 18, 2007, the PBOC expanded the floating band for the trading prices in the inter-bank foreign exchange market of the Renminbi against the U.S. dollar from 0.3% to 0.5% around the central parity rate, effective on May 21, 2007. This allows the Renminbi to fluctuate against the U.S. dollar by up to 0.5% above or below the central parity rate published by the PBOC. The floating band was further widened to 1.0% on April 16, 2012. On March 17, 2014, the PBOC further widened the floating band against the U.S. dollar to 2.0%. In August 2015, the PBOC changed the way it calculates the mid-point price of the Renminbi against the U.S. dollar, requiring the market-makers who submit reference rates to the PBOC to consider the previous day’s spot rate, foreign exchange demand and supply as well as any change in major currency rates. The PRC government in the future may make further adjustments to the exchange rate system. The PBOC announces the closing price of a foreign currency traded against the Renminbi in the inter-bank foreign exchange market after the closing of the market on each working day, and makes it the central parity rate for the trading against the Renminbi on the following working day.
The following table sets forth information concerning exchange rates between the Renminbi and U.S. dollar for the periods indicated:
RMB Per One U.S. Dollar Period End Average(1) Low High 2014...... 6.2046 6.1704 6.0402 6.2591 2015...... 6.4778 6.2869 6.1870 6.4896 2016...... 6.9430 6.6549 6.4480 6.9580 2017...... 6.5063 6.7350 6.4773 6.9575 2018...... 6.8755 6.6292 6.2649 6.9737 2019 February...... 6.6912 6.7367 6.6822 6.7907 March...... 6.7112 6.7119 6.6916 6.7381 April...... 6.7347 6.7161 6.6870 6.7418 May...... 6.9027 6.8519 6.7319 6.9182 June...... 6.8650 6.8977 6.8510 6.9298 July...... 6.8833 6.8774 6.8487 6.8927 August (through August 9) ...... 7.0613 7.0284 7.0613 6.8972
(1) Determined by averaging the rates on the last business day of each month during the relevant year, except for monthly average rates, which are determined by averaging the daily rates during the respective months.
— 52 — CAPITALIZATION AND INDEBTEDNESS
The table below shows our unaudited consolidated cash and cash equivalents, short-term debt and capitalization as of June 30, 2019, presented:
. on an actual basis; and
. on an adjusted basis to reflect the issue of the Notes in this offering, after deducting the underwriting discounts and commissions and other estimated expenses payable by us in connection with the offering.
As of June 30, 2019 Actual As adjusted RMBUS$RMBUS$ (in thousands) Cash and cash equivalents(1) ...... 16,939,965 2,467,584 Short-term debt(2): Secured...... 9,121,207 1,328,654 9,121,207 1,328,654 Unsecured...... 3,624,254 527,932 3,624,254 527,932 Total short-term debt ...... 12,745,461 1,856,586 12,745,461 1,856,586 Long-term debt(3): Secured ...... 11,732,278 1,708,999 11,732,278 1,708,999 Unsecured ...... 9,220,671 1,343,142 9,220,671 1,343,142 Senior notes ...... 5,455,618 794,700 5,455,618 794,700 Notestobeissuedinthisoffering...... —— Total long-term debt ...... 26,408,567 3,846,841 Share capital...... 7,261,726 1,057,790 7,261,726 1,057,790 Reserves ...... 18,256,496 2,659,358 18,256,496 2,659,358 Equity attributable to owners of the Company . 25,518,222 3,717,148 25,518,222 3,717,148 Non-controlling interests ...... 8,577,971 1,249,522 8,577,971 1,249,522 Total capital and reserves ...... 34,096,193 4,966,670 34,096,193 4,966,670 Total capitalization(4) ...... 60,504,760 8,813,511
Notes:
(1) Cash and cash equivalents exclude pledged bank deposits of RMB737 million (US$107 million).
(2) Short-term debt includes the current portion of long-term debt.
(3) Long-term debt excludes the current portion of long-term debt.
(4) Total capitalization includes total long-term debt plus total capital and reserves.
We maintain committed bank credit facilities in respect of which undrawn amounts are available as described in ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Borrowings’’ and ‘‘Description of Other Material Indebtedness.’’
We continue to enter into short-term and long-term borrowings in the ordinary course of business, such as project loans. In addition, we may from time to time enter into other financing arrangements, such as onshore bonds and offshore facilities. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources’’ and ‘‘Description of Other Material Indebtedness.’’
Except as disclosed above, there has been no material change in our capitalization since June 30, 2019.
— 53 — SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth our selected consolidated financial information as of the dates and for the years/periods indicated. This data has been derived from our audited consolidated financial statements as of and for the years ended December 31, 2016, 2017 and 2018, including the notes thereto, included elsewhere in this offering memorandum, as well as our unaudited consolidated financial statements as of and for the six months ended June 30, 2018 and 2019 that we have publicly announced on August 14, 2018 and August 13, 2019, respectively but have not been included elsewhere in this offering memorandum. The unaudited selected financial data as of June 30, 2019 and for the six months ended June 30, 2018 and 2019 contain all adjustments that our management believes are necessary for the fair presentation of such data. Results for interim periods are not necessarily indicative of results for the full year and investors should not place undue reliance on such results. You should read the selected consolidated financial information in conjunction with those financial statements and related notes included elsewhere in this offering memorandum. We have prepared our consolidated financial statements in accordance with SFRSs for the years ended December 31, 2016 and 2017, and in accordance with SFRS(I)s and IFRSs for the year ended December 31, 2018 and as of June 30, 2019 and for the six months ended June 30, 2018 and 2019. SFRS(I)s was applied for the first time for financial year ended December 31, 2018 and SFRS(I) 1 First-time Adoption of Singapore Financial Reporting Standards (International) has been applied in the first set of SFRS(I) financial statements. For the year ended December 31, 2018, certain other payables was classified as contract liabilities instead of other payables. The details are included under Note 39 of the consolidated financial statements for the year ended December 31, 2018. The financial information for the years ended December 31, 2016 and 2017 set forth in the following tables do not reflect such reclassification.
Year ended December 31, Six months ended June 30, 2016 2017 2018 2018 2019 RMB RMB RMB US$ RMB RMB US$ (audited) (audited) (audited) (unaudited) (unaudited) (unaudited) (unaudited) (in thousands, except percentages) Consolidated statement of profit or loss data Revenue...... 25,664,408 25,638,407 24,888,041 3,619,815 16,851,067 7,711,904 1,123,365 Cost of sales...... (17,644,673) (13,594,462) (13,432,692) (1,953,704) (9,015,732) (4,127,393) (601,223) Gross profit...... 8,019,735 12,043,945 11,455,349 1,666,111 7,835,335 3,584,511 522,142 Other operating income and other gains ...... 446,191 472,279 714,587 103,932 246,109 385,738 56,189 Fair value gain on investment properties . . . 366,090 148,321 391,372 56,923 — 791,018 115,225 Selling expenses ...... (397,153) (330,537) (398,278) (57,927) (150,648) (180,372) (26,274) Administrative expenses . . . (594,997) (809,328) (955,359) (138,950) (476,828) (512,991) (74,725) Other operating expenses . . (15,202) (15,660) (33,454) (4,866) (5,783) (2,963) (432) Finance cost ...... (347,819) (484,690) (693,994) (100,937) (287,370) (498,789) (72,657) Share of loss of associates . (11,790) (8,114) (12,689) (1,846) (1,901) (6,428) (936) Share of profit (loss) of joint ventures ...... 7,099 346,008 74,123 10,781 138,449 (31,944) (4,653) Profit before income tax . . 7,472,154 11,362,224 10,541,657 1,533,221 7,297,363 3,527,780 513,879 Income tax ...... (3,494,956) (5,741,957) (5,146,207) (748,485) (3,482,556) (1,570,843) (228,819) Profit for the year/period . 3,977,198 5,620,267 5,395,450 784,736 3,814,807 1,956,937 285,060 Profit attributable to: Owners of the Company . 2,697,361 3,216,440 3,544,570 515,537 2,275,258 1,188,376 173,106 Non-controlling interests 1,279,837 2,403,827 1,850,880 269,199 1,539,549 768,561 111,954 3,977,198 5,620,267 5,395,450 784,736 3,814,807 1,956,937 285,060 Other financial data (unaudited): EBITDA(1) ...... 9,009,297 12,701,601 11,341,007 1,649,481 N/A(3) N/A(3) N/A(3) EBITDA margin(2) ...... 35.1% 49.5% 45.6% 45.6% N/A(3) N/A(3) N/A(3)
Notes:
(1) EBITDA refers to our profit before interest income, fair value gain on financial asset at fair value through profit or loss and from put liability to acquire non-controlling interests, finance cost, interest capitalized in cost of sales, net foreign exchange gain/loss, income tax and depreciation expense. EBITDA is not a standard measure under SFRSs, SFRS(I)s or IFRSs. As the property development business is capital intensive, capital expenditure and levels of debt and interest expenses may have a significant impact on the profit for the year/period of companies with similar operating results. Therefore, we believe that the investor community commonly uses this type of financial measure to assess the operating performance of companies in
— 54 — our industry. As a measure of our operating performance, we believe that the most directly comparable SFRSs, SFRS(I)s or IFRSs measure to EBITDA is profit for the year/period. We operate in a capital-intensive industry. We use EBITDA in addition to profit for the year/period because profit for the year/period includes many accounting items associated with capital expenditures, such as depreciation, as well as non-operating items or non-recurring items, such as interest income and changes in fair value on financial asset at fair value through profit or loss and from put liability to acquire non- controlling interests, finance cost, interest capitalized in cost of sales and foreign exchange. These accounting items may vary between companies depending on the method of accounting adopted by a company. By minimizing differences in capital expenditures and the associated depreciation expenses as well as reported tax positions, interest income, changes in fair value on financial asset at fair value through profit or loss and from put liability to acquire non-controlling interests, finance cost, interest capitalized in cost of sales and changes in foreign exchange, EBITDA provides further information about our operating performance and an additional measure for comparing our operating performance with the results of other companies. You should not consider our EBITDA in isolation or construe it as an alternative to cash flows, profit or any other measure of performance or as an indicator of our operating performance, liquidity, profitability or cash flows generated by operating, investing or financing activities. EBITDA presented in this offering memorandum may not be comparable to similarly titled measures presented by other companies. EBITDA, as presented in this offering memorandum, also differs from Consolidated EBITDA, as defined in the Notes.
(2) EBITDA margin refers to EBITDA divided by revenue for the relevant year/period, expressed as a percentage.
(3) N/A Not Applicable.
The following table reconciles our profit for the year under SFRSs, or SFRS(I)s and IFRSs to our EBITDA for the years indicated.
Year ended December 31, 2016 2017 2018 RMB RMB RMB US$ (in thousands, except percentages) Profitfortheyear...... 3,977,198 5,620,267 5,395,450 784,736 Interestincome...... (268,270) (359,168) (551,080) (80,151) Fair value gain on financial asset at fair value through profit or loss ...... (5,967) — (142) (21) Fair value gain from put liability to acquire non-controlling interests. . . . . — (87,554) (13,411) (1,950) Financecost...... 347,819 484,690 693,994 100,937 Interest capitalized in cost of sales. . . . . 1,560,824 1,091,022 684,587 99,569 Net foreign exchange (gain) loss ...... (129,348) 177,180 (102,119) (14,853) Incometax...... 3,494,956 5,741,957 5,146,207 748,485 Depreciationexpense...... 32,085 33,207 87,521 12,729 EBITDA...... 9,009,297 12,701,601 11,341,007 1,649,481 EBITDAmargin...... 35.1% 49.5% 45.6% 45.6%
— 55 — As of December 31, As of June 30, 2016 2017 2018 2019 RMB RMB RMB US$ RMB US$ (audited) (audited) (audited) (unaudited) (unaudited) (unaudited) (in thousands) Consolidated statement of financial position data Non-current assets ...... 22,837,911 42,983,401 52,080,449 7,574,787 42,692,996 6,218,936 Properties for development ...... 2,792,938 15,079,352 16,940,162 2,463,844 5,742,432 836,480 Current assets ...... 70,610,501 63,217,957 54,600,330 7,941,289 66,379,864 9,669,317 Completed properties for sale ...... 4,704,316 8,487,306 5,957,456 866,476 5,723,112 833,665 Properties under development for sale . 38,214,800 25,587,718 21,124,992 3,072,503 22,284,627 3,246,122 Total assets ...... 93,448,412 106,201,358 106,680,779 15,516,076 109,072,860 15,888,253 Non-current liabilities Bank and other borrowings — due after one year ...... 12,438,479 27,664,355 27,998,178 4,072,166 20,952,949 3,052,141 Seniornotes...... — 2,911,604 5,440,228 791,248 5,455,618 794,700 Lease liabilities ...... ————56,984 8,301 Deferred tax liabilities ...... 2,243,610 2,607,761 2,831,594 411,838 3,124,297 455,105 Non-trade amounts due to: Jointventures...... ——805,377 117,137 820,279 119,487 Non-controlling shareholders of subsidiaries...... 337,127 1,265,625 ———— Put liability to acquire non-controlling interests...... 1,421,698 1,334,144 ———— Deferredincome...... — 138,083 335,702 48,826 428,697 62,447 Total non-current liabilities ...... 16,440,914 35,921,572 37,411,079 5,441,215 30,838,824 4,492,181 Current liabilities Bank and other borrowings — due within one year...... 8,311,176 2,557,063 8,293,294 1,206,210 12,545,963 1,827,526 Seniornotes...... 1,916,309 ————— Lease liabilities ...... ————25,265 3,680 Trade payables ...... 7,926,994 7,307,244 8,246,981 1,199,474 8,642,030 1,258,854 Other payables ...... 24,088,948 22,051,664 1,453,353 211,381 3,636,598 529,731 Contractliabilities...... ——9,857,831 1,433,762 9,856,528 1,435,765 Non-trade amounts due to: Associates...... ——257,596 37,466 621,903 90,590 Jointventures...... 365 — 674,391 98,086 1,726,165 251,444 Ultimate holding company ...... 672,486 ————— Directors ...... 42,418 49,663 56,315 8,191 56,134 8,177 Non-controlling shareholders of subsidiaries...... 297,347 688,573 705,139 102,558 548,189 79,853 Other related parties...... 47,630 55,676 44,808 6,517 36,310 5,289 Income tax payable ...... 3,694,269 4,867,092 5,480,641 797,126 5,122,025 746,107 Put liability to acquire non-controlling interests...... ——1,320,733 192,093 1,320,733 192,386 Total current liabilities...... 46,997,942 37,576,975 36,391,082 5,292,864 44,137,843 6,429,402
Equity attributable to owners of the Company ...... 21,046,794 22,730,524 25,030,104 3,640,478 25,518,222 3,717,148 Non-controlling interests ...... 8,962,762 9,972,287 7,848,514 1,141,519 8,577,971 1,249,522 Total liabilities and equity ...... 93,448,412 106,201,358 106,680,779 15,516,076 109,072,860 15,888,253
— 56 — Year Ended December 31, Six months ended June 30, 2016 2017 2018 2018 2019 RMB RMB RMB US$ RMB RMB US$ (audited) (audited) (audited) (unaudited) (unaudited) (unaudited) (unaudited) (in thousands) Consolidated statement of cash flows data Operating activities Profit before income tax . . . 7,472,154 11,362,224 10,541,657 1,533,221 7,297,363 3,527,780 513,879 Adjustments for: Allowance for doubtful debts and bad debts writtenoff...... — 43 3,782 550 — 10 1 Depreciation expense . . . 32,085 33,207 87,521 12,729 35,661 81,492 11,871 Dividend income from other financial asset . . ——(347) (50) ——— Fair value gain on investment properties . (366,090) (148,321) (391,372) (56,923) — (791,018) (115,224) Fair value gain on financial asset at fair value through profit orloss...... (5,967) — (142) (21) — (143) (21) Fair value gain from put liability to acquire non-controlling interests...... — (87,554) (13,411) (1,950) ——— Finance cost ...... 347,819 484,690 693,994 100,937 287,370 498,789 72,657 Interest income ...... (268,270) (359,168) (551,080) (80,151) (228,853) (357,670) (52,101) Net (gain) loss on disposal of property, plant and equipment. . (7,135) (192) (447) (65) (52) 304 44 Net gain on disposal of investment properties . (7,251) (5,002) (1,009) (147) (762) (1,238) (180) Net loss on disposal of financial asset at fair value through profit orloss...... 937 —————— Payable written off . . . . —————(6,523) (950) Share of loss of associates ...... 11,790 8,114 12,689 1,846 1,901 6,428 936 Share of (profit) loss of joint ventures ...... (7,099) (346,008) (74,123) (10,781) (138,449) 31,944 4,653 Gain on change of control from subsidiaries to joint ventures...... —————(266) (39) Gain on disposal of asubsidiary...... —————(51) (7) Operating cash flows before movements in working capital ...... 7,202,973 10,942,033 10,307,712 1,499,195 7,254,179 2,989,838 435,519 Properties for development ...... (270,461) (19,767,496) (1,814,891) (263,965) (952,198) (1,878,670) (273,659) Inventories ...... (14,071) (19,479) (20,004) (2,909) (29,218) 593 86 Completed properties for sale ...... 12,733,840 8,412,880 10,747,985 1,563,230 7,824,814 1,610,730 234,629 Properties under development for sale . (7,388,342) (426,819) (2,036,377) (296,179) (527,393) (73,958) (10,773) Trade and other receivables and deposits ...... (2,481,718) (750,890) 515,092 74,917 (2,671,551) (1,104,738) (160,923) Trade and other payables 4,688,181 (3,261,681) 908,268 132,101 (622,495) 3,253,903 473,985 Contract liabilities . . . . . ——(10,831,466) (1,575,371) (9,153,388) (1,303) (190) Cash generated from (used in) operations ...... 14,470,402 (4,871,452) 7,776,319 1,131,019 1,122,750 4,796,395 698,674 Interest paid ...... (1,230,321) (1,702,981) (2,155,416) (313,492) (919,285) (1,115,466) (162,486) Income tax paid ...... (2,950,647) (4,072,278) (4,110,825) (597,895) (3,493,579) (1,498,006) (218,209) Net cash from (used in) operating activities . . . . 10,289,434 (10,646,711) 1,510,078 219,632 (3,290,114) 2,182,923 317,979
— 57 — Year Ended December 31, Six months ended June 30, 2016 2017 2018 2018 2019 RMB RMB RMB US$ RMB RMB US$ (audited) (audited) (audited) (unaudited) (unaudited) (unaudited) (unaudited) (in thousands) Investing activities Acquisition of subsidiaries...... (1,499,913) (582,003) (418,545) (60,875) (303,000) (40,000) (5,827) Change of control from subsidiaries to associates...... (146,984) —————— Change of control from subsidiaries to joint ventures...... — (85,879) ———(20,995) (3,058) Investments in associates (495,408) — (800,740) (116,463) — (150,000) (21,850) Investments in joint ventures ...... (51,160) (1,877,680) (1,002,805) (145,852) (150,150) (562,858) (81,990) Dividend received from other financial asset . . ——347 50 ——— Interest received ...... 191,740 186,120 383,243 55,740 134,023 368,246 53,641 (Increase) Decrease in pledged bank deposits ...... (469,313) 480,651 (291,019) (42,327) 8,947 (405,683) (59,094) Proceeds on disposal of property, plant and equipment ...... 21,971 2,163 2,099 305 852 253 37 Proceeds on disposal of investment properties . 39,599 14,056 2,042 297 1,429 2,381 347 Proceeds on disposal of held-for-trading investment...... 24,374 —————— Proceeds on disposal of financial asset at fair value through profit orloss...... ——12,911 1,878 — 2,000 291 Payment for property, plant and equipment. . (382,911) (1,060,294) (463,488) (67,412) (228,040) (52,735) (7,682) Payment for investment properties ...... (1,608,985) (152,557) (190,921) (27,768) (16,939) (10,148) (1,478) Purchase of available- for-sale investment . . — (2,990) ————— Purchase of other financial assets . . . . . ——(172,933) (25,152) ——— Payment for intangible assets...... — (199) (1,280) (186) (1,280) —— Purchase of financial assetatfairvalue through profit or loss . ——(2,000) (291) — (13,600) (1,981) Advance to associates . . (1,266,762) (89,987) (1,480,253) (215,293) (23,197) (363,170) (52,901) Repayment from associates...... 177,282 — 1,601,220 232,888 44,220 270,418 39,391 Advance to joint ventures ...... (3,288,874) (2,522,333) (10,601,175) (1,541,877) (2,343,879) (2,171,745) (316,350) Repayment from joint ventures ...... 2,446,508 2,576,327 1,616,778 235,151 20,411 4,246,596 618,586 Advance to non- controlling shareholders of subsidiaries...... (1,824,530) (1,516,755) (602,230) (87,591) (29,017) (2,369,344) (345,134) Advance to a related company...... ——(167) (24) (167) —— Netcashusedininvesting activities ...... (8,133,366) (4,631,360) (12,408,916) (1,804,802) (2,885,787) (1,270,384) (185,052)
— 58 — Year Ended December 31, Six months ended June 30, 2016 2017 2018 2018 2019 RMB RMB RMB US$ RMB RMB US$ (audited) (audited) (audited) (unaudited) (unaudited) (unaudited) (unaudited) (in thousands) Financing activities Dividends paid ...... (141,836) (415,855) (630,453) (91,696) (630,453) (652,033) (94,979) Dividends paid to non- controlling shareholders of subsidiaries...... (746,936) (213,578) (1,337,009) (194,460) (967,009) (4,401) (641) Net proceeds on issue of seniornotes...... — 3,085,026 2,178,613 316,866 2,178,613 —— Proceeds from bank and other borrowings . . . . 15,834,321 26,303,899 9,922,460 1,443,162 3,421,320 10,714,405 1,560,729 Repayment of bank and other borrowings . . . . (9,821,984) (10,119,950) (4,190,668) (609,507) (1,412,716) (5,079,737) (739,947) Purchase of treasury shares...... (47,006) (85,303) ————— Repayment of lease liabilities ...... —————(12,163) (1,772) Repurchase and redemption of senior notes...... (4,514,269) (1,974,600) ————— Advance from associates ——30,343 4,413 — 362,685 52,832 Advance from (Repayment to) joint ventures ...... 365 (365) 1,174,391 170,808 200,319 582,374 84,832 Advance from (Repayment to) directors...... 16,853 6,056 5,590 813 (49,794) (981) (143) Advance from ultimate holding company. . . . 677,572 341,030 ————— Repayment to ultimate holding company. . . . — (1,013,448) ————— Advance from non- controlling shareholders of subsidiaries...... 401,243 2,163,954 352,220 51,228 321,330 3,311 482 Repayment to non- controlling shareholders of subsidiaries...... (1,708,461) (1,087,285) (1,326,297) (192,902) (1,355,804) (230,250) (33,540) Advance from (Repayment to) other related parties ...... 37,776 8,046 (10,868) (1,581) 3,222 (8,498) (1,238) Capital injection from non-controlling shareholders of subsidiaries...... 112,513 — 4,900 713 4,900 —— Capital withdrawal by non-controlling shareholders of subsidiaries...... (1,806,473) (359,385) (721,156) (104,888) (447,431) (34,000) (4,953) Acquisition of non- controlling interest in subsidiaries...... (2,500) (1,412,840) (1,904,691) (277,025) (1,045,884) —— Disposal of partial interest in a subsidiary — 12,000 ———7,963 1,160 Net cash (used in) from financing activities . . . . (1,708,822) 15,237,402 3,547,375 515,944 220,613 5,648,675 822,822 Net increase (decrease) in cash and cash equivalents ...... 447,246 (40,669) (7,351,463) (1,069,226) (5,955,288) 6,561,214 955,749 Cash and cash equivalents at beginning of year/ period ...... 17,516,991 17,583,383 17,798,313 2,588,657 17,798,313 10,317,374 1,502,895 Effect of exchange rate changes on the balance of cash held in foreign currencies...... (380,854) 255,599 (129,476) (18,831) (35,627) 61,377 8,941 Cash and cash equivalents at end of year/period . . 17,583,383 17,798,313 10,317,374 1,500,600 11,807,398 16,939,965 2,467,585
— 59 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with ‘‘Selected Consolidated Financial Information’’ and our consolidated financial statements and related notes included elsewhere in this offering memorandum. We have prepared our consolidated financial statements in accordance with SFRSs for the years ended December 31, 2016 and 2017, and in accordance with SFRS(I)s and IFRSs for the year ended December 31, 2018.
Overview
We are a PRC-based leading real estate developer that focuses on developing fully-fitted residential properties and high-quality commercial and integrated properties in prime locations, within strategically-selected, key-established top-tier cities across six major economic regions in the PRC. Listed on the SGX-ST, we currently have significant subsidiaries in the PRC, Singapore and Hong Kong. We believe that our established track record as a leading developer of fully-fitted residential development properties in prime locations within the affluent Shanghai and Nanjing areas along the PRC’s Yangtze River Delta, has helped us build significant recognition of our ‘‘Yanlord’’ brand name which has resulted in premium pricing. In 2016 and 2017, our Yanlord Landmark commercial project and Yanlord Riverbay (Phase 1) residential project in Chengdu, and our Yanlord Marina Centre integrated project and Yanlord Marina Peninsula Gardens (Phases 1 and 2) integrated projects in Zhuhai have won various awards from industry associations in the PRC, including the LEED — EB platinum certification, the 2016–2017 Luban Award and National award for civil engineering in Chengdu, the Top 10 City Landmark in 2016 and Guangdong Province — Award for Structural and Engineering Excellence in Zhuhai. In 2018, we have earned the accolade of one of the 2018 China Top 100 Real Estate Developers, as well as one of the Top 10 developers in terms of Financial Stability among the 2018 China Top 100 Real Estate Developers, jointly by Enterprise Research Institute under the Development Research Center of the State Council, Property Research Institute of Tsinghua University and China Index Academy. In the same year, we have also received the National Award for Civil Engineering granted by China Construction Industry Association. In 2019, our Crowne Plaza Sanya Haitang Bay Resort has won the Best Service Award in China Hotel Golden Horse Awards. In the same year, we have also obtained the Singapore Prestige Brand Award (SPBA) granted by Lianhe Zaobao (聯 合早報).
Leveraging our reputation and expertise, we have expanded the geographical reach of our residential property development business into 15 established top-tier cities strategically located within six major economic regions in the PRC: the Yangtze River Delta (Shanghai, Nanjing, Suzhou, Hangzhou and Nantong), Western China (Chengdu), Bohai Rim (Tianjin, Tangshan and Jinan), Southern China (Shenzhen, Zhuhai and Zhongshan), Hainan (Haikou and Sanya) and Central China (Wuhan). In 2018, we started the entry into the residential property market in Singapore. Our residential development properties, including apartments, townhouses and villas, are typically characterized by fully-fitted, large- scale, multi-phased projects with community facilities designed and built by leading architects, designers and contractors and targeted at the upper income market segment.
Since our establishment in 1993, we have grown from a start-up property developer with one development project comprising 53,049 sq.m. of GFA to become one of the major developers in the premium residential segment with a presence in 15 cities in the PRC. In April 2018, we made our maiden entry into the Singapore residential development market through the joint acquisition of a freehold development site located in District 10 of Singapore known as Tulip Garden with MCL Land Limited, a subsidiary of Hongkong Land Holdings Limited. As of December 31, 2018, we had a portfolio of:
. 79 completed development properties with a total site area and GFA of 4,633,107 sq.m. and 8,820,078 sq.m., respectively (including a total site area and GFA of 88,825 sq.m. and 157,727 sq.m., respectively, held under associate and joint venture investments);
. 28 properties under development with a total site area and GFA of 1,684,508 sq.m. and 3,545,729 sq.m., respectively (including a total site area and GFA of 945,132 sq.m. and 1,897,391 sq.m., respectively, held under associate and joint venture investments); and
— 60 — . 22 properties held for future development with a total site area and GFA of 2,172,572 sq.m. and 3,695,334 sq.m., respectively (including a total site area and GFA of 1,333,827 sq.m. and 2,378,568 sq.m., respectively, held under associate and joint venture investments).
For the year ended December 31, 2018, we acquired 11 parcels of land, in seven cities in the PRC and acquired a parcel of land in Singapore, with a combined total site area and GFA of 853,177 sq.m. and 1,836,531 sq.m., respectively (including a combined total site area and GFA of 794,665 sq.m. and 1,545,714 sq.m., respectively, held under associate and joint venture investments).
In 2016, 2017 and 2018, we delivered an aggregate GFA of 944,834 sq.m., 556,237 sq.m. and 632,129 sq.m., respectively. In 2016, 2017 and 2018, we recorded revenue of RMB25.664 billion, RMB25.638 billion and RMB24.888 billion (US$3.620 billion), and profit attributable to owners of the Company of RMB2.697 billion, RMB3.216 billion and RMB3.545 billion (US$516 million), respectively. During these periods, we generated substantially all of our revenue from the sale of residential properties. Our revenue also consisted of income from resettlement service, hotel operations, property investment, property management and other services. In 2016, 2017 and 2018, we recorded revenue from property investment of RMB363 million, RMB358 million and RMB411 million (US$60 million), respectively. As we complete more commercial development properties and begin generating more rental revenue from our investment properties, we expect our revenue derived from investment properties to increase over time. In 2018, our pre-sale, including sales of carparks, amounted to RMB25.774 billion, representing a GFA of 686,174 sq.m.
Factors Affecting Our Results of Operations
General Economic Conditions in the PRC and Government Regulation
We believe that demand for our properties is driven in large part by the overall economic development, rising wages and the standard of living in the PRC. Since the second half of 2008, the global economic slowdown and turmoil in the global financial markets have resulted in adverse impact on the overall economy of the PRC, including the PRC real estate market, from which our entire revenues are generated. The economic conditions and volatility of property prices in the PRC may continue to impact our business and results of operations. At the current stage of economic development in the PRC, while the real estate industry is regarded by the PRC government as one of the pillar industries in the PRC, the real estate industry is significantly dependent on the overall economic growth and the resultant consumer demand for residential properties.
PRC governmental policies and measures on property development and related industries have a direct impact on our business and results of operations. From time to time, the PRC central government adjusts its macroeconomic control policies to encourage or restrict development in the private property sector through regulating, among other things, land supply, pre-sale of properties, land usage, plot ratio, bank financing and taxation. Local government authorities in different areas of the PRC also promulgate local policies with respect to the property development in their jurisdiction. In the last several years, in response to the rising property prices across the country, the PRC government announced new policies and adopted new measures to curtail speculation in the real estate market and imposed more stringent requirements on property developers. The new measures include, among other things, higher minimum down-payment requirements, restrictions on purchase of properties and increases in bank lending rates for mortgage financings. Since a substantial portion of our customers depend on mortgage financing to purchase our properties, regulations or measures adopted by the PRC government that are intended to restrict the ability of purchasers to obtain mortgages, that limit their ability to resell their properties or that raise the cost of mortgage financing may decrease market demand for our properties and adversely affect our revenue. These austerity measures may limit our access to capital resources, reduce market demand for our product and increase our operating costs in complying with the measures. PRC regulatory measures in the real estate industry will continue to impact our business and results of operations. See ‘‘Industry Overview — TheRealEstateMarketinthePRC— Real Estate Reform and Regulatory Measures in the PRC’’ and ‘‘Regulation’’ for more details on the relevant PRC regulations.
As a result of the foregoing, our results of operations are subject to general political, economic, legal and social developments in the PRC, including:
. the performance of China’s real estate market, in particular, the supply and demand for private properties, market pricing trends, standard of living, level of disposable income and demographic changes in the PRC;
— 61 — . the regulatory environment of the PRC, including land grant policies, pre-sale policies, financing policies and tax policies; and
. the political and economic policies of the PRC in general.
See ‘‘Risk Factors — Risks Relating to the Property Industry in the PRC’’ and ‘‘Risk Factors — RisksRelatingtothePRC’’ in this offering memorandum for further discussions of these risks and uncertainties.
Revenue Recognition, Sales Volume and Pricing
For the years ended December 31, 2016, 2017 and 2018, we derived substantially all our revenue from the sale of residential properties. As we recognize revenue from the sale of residential properties only upon their delivery, our revenue primarily depends on the volume of properties we sell, the prices at which we make the sales and the timing of delivery of sold properties to purchasers. The volume of properties we sell and the timing of delivery of sold properties depend on the progress on the construction of our properties and the market response we obtain when we launch our property sales.
The prices of our properties are determined by the market forces of supply and demand rather than by state guidance or state-prescribed pricing. We price our properties by reference to the market prices for similar types of properties at comparable locations and the market response to our property launches. The average price of our projects therefore depends on the location and mix of properties sold and delivered during each fiscal period. In addition, we generally develop and sell our residential projects in phases. For each development, we generally price the subsequent phases higher than the initial launch, partly reflecting the landscaping, amenities and infrastructure that are completed in subsequent phases.
Revenue from sales of properties fluctuates based on the levels of actual completion of construction and delivery of our properties and therefore can vary significantly from period to period. Our revenue may fluctuate because of the mix of our projects, the timing of completion of our projects and the timing of recognition of revenue from pre-sales of units in our development properties. Our delivery of properties is generally more concentrated in the second half of a year, with the lowest number of deliveries in the first quarter because of the spring festival, or Chinese New Year, celebrations in January or February. While we generally are involved in a number of projects at any given time and those projects may be at varying stages of completion, many of our projects are large and thus necessarily require substantial time to complete. Accordingly, even assuming a constant level of market demand for our properties, the number of properties that we have available for sale can vary significantly from period to period.
Land Acquisition and Construction Costs
The predominant components of our cost of sales are land acquisition and construction costs. Property developments require substantial capital outlay for land acquisition and construction and may take many months or years before positive cash flows can be generated.
Land premium is the payment to the land bureau for the right to occupy, use and develop a particular development site. The land bureau determines the actual land premium payable. We understand that the land bureau fixes the amount of land premium payable based on the following principal factors:
. the location of the land and the land premium in respect of comparable sites in the vicinity;
. the national industrial policies and local economic conditions;
. the expected GFA for the proposed development or plot ratio; and
. the intended category of use for the development, with commercial use generally commanding a higher premium compared with residential use.
In addition, the PRC central government introduced regulations in May 2002 that require government departments and agencies to grant state-owned land use rights for residential and commercial property development by public tender, auction or listing-for-sale. To the extent that there are competing bids for a piece of land, the cost of acquisition could also increase.
— 62 — In some situations, we also pay resettlement costs in connection with our land acquisition, which comprise the actual expenditure we incur in relocating the residents originally occupying the buildings subject to demolition on the relevant site, including resettlement compensation paid to the original residents. The PRC government has laid down some basic principles for determining the appropriate level of resettlement compensation, including:
. the replacement cost or market price of the property subject to demolition;
. the location of the property;
. the purpose and use of the property subject to demolition; and
. the GFA of the property to be demolished.
Construction costs encompass all costs for the design and construction of a project, including payments to independent contractors, costs of raw materials, foundation and substructure, fittings, facilities for utilities and related infrastructure such as roads and pipelines. Historically, construction material costs have been the principal driver of the construction costs of our development properties, with the cost of independent contractors remaining relatively stable. Construction costs may fluctuate as a result of the volatile price movement of construction materials such as steel and cement. We try to reduce our exposure to short-term price fluctuations of construction materials and limit project cost overruns by outsourcing the construction work (including some of the procurement of supplies) of most of our development properties at fixed prices. Nonetheless, we are still subject to longer term price movements of construction materials. In addition, in line with industry practice, we and our construction contractors may amend existing construction contracts to take into account significant price movements of construction materials. Furthermore, price movements of other supplies in relation to development properties, including construction equipment and tools, ventilation systems, plant watering systems, elevators and interior decoration materials, may also increase our construction costs. Costs associated with foundation/substructure design and construction are another major component of our construction costs and vary not only according to the area and height of the buildings but also to the geologic conditions of the site. The foundation/substructure designs and construction process for developments in different localities and the respective costs incurred may vary significantly. Therefore, construction costs of a development property may be substantially higher if the conditions of the site require more complex designs and procedures or more expensive materials in order to provide the desired foundation support.
We believe that our experience and reputation in the property development industry and our scale of business operations provide us leverage when negotiating with construction companies, other service providers and suppliers. However, there could be significant price movement of commodities in the future and we cannot ensure that we would be able to pass on any future increase in construction costs to our customers in the form of higher pricing for our properties.
Land Appreciation Tax
All income from the sale or transfer of state-owned land use rights, buildings and their attached facilities in the PRC is subject to LAT at progressive rates ranging from 30% to 60% of the appreciated value of the property, which is calculated by deducting from the gross sales proceeds the cost associated with the property development and certain other deductibles. See ‘‘Regulation — Major Taxes Applicable to Real Estate Developers — Land Appreciation Tax.’’ There are certain exemptions available for the sale of ordinary residential properties if the appreciated value does not exceed 20% of the total deductible items (as defined in the relevant tax laws). Sale of commercial properties is not eligible for such exemption. Under relevant regulations, real estate developers were also exempted from the payment of LAT on the first transfer of land and buildings made during the five years commencing on January 1, 1994, subject to certain conditions. The period of LAT exemption was subsequently extended to the end of 2000. Since 2003, local tax bureaus in certain cities have required prepayment of LAT on the pre-sales or sales proceeds of development properties. In 2018, we prepaid our LAT generally at the rate of 2% to 16.4% of our gross sales proceeds in respect of our development properties. For each of this period, we assessed the difference between the amount we prepaid and our estimated LAT liability. In 2018, we made provision in the amount of RMB1.668 billion (US$243 million). We estimate and, if necessary, make provisions for the full amount of applicable LAT in accordance with the requirements set forth in the relevant PRC tax laws and regulations.
— 63 — If our assessment is incorrect and the amount of LAT that we are required to pay significantly exceeds what we have prepaid or made provision for, we cannot assure you that our obligation to pay such amount will not materially and adversely affect our business, our results of operations or financial condition.
Accrued PRC Enterprise Income Tax and Deferred Tax Liabilities
Accrued PRC enterprise income tax is charged to taxation in our statement of profit or loss. Tax prepayment and tax payable within one year are recorded on our statement of financial position as current assets and current liabilities, respectively. Certain items of income and expense are recognized for tax purposes in a different accounting period from that in which they are recognized in the financial statements, principally as a result of differences between SFRSs/SFRS(I)s/IFRSs and PRC tax laws regarding revenue recognition. Deferred tax is recognized on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized. The carrying amount of deferred tax assets, if any, is reviewed by our directors at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Critical Accounting Policies
Our consolidated financial information has been prepared in accordance with SFRSs, or SFRS(I)s and IFRSs, which requires us to make judgments, estimates and assumptions that affect (1) the reported amounts of our assets and liabilities, (2) the disclosure of our contingent assets and liabilities at the end of each fiscal period and (3) the reported amounts of revenues and expenses during each fiscal period. We continually evaluate these estimates based on our own historical experience, knowledge and assessment of current business and other conditions, our expectations regarding the future based on available information and reasonable assumptions, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require a higher degree of judgment than others in their application.
When reviewing our financial statements, you should consider (1) our selection of critical accounting policies, (2) the judgment and other uncertainties affecting the application of those policies, and (3) the sensitivity of reported results to changes in conditions and assumptions. We believe the following accounting policies involve the most significant judgment and estimates used in the preparation of our financial statements.
Revenue Recognition
Our revenue is recorded as gross income that we receive or are expected to receive from the sale of properties, the lease of our investment properties, the operations of hotels, the provision of management services and other services after deducting value added tax, net of business tax. We recognize revenue from sales of properties when the legal title passes to the buyer or when the equitable interest in the property vests in the buyer upon release on the handover notice of the respective property to the buyer, whichever is earlier. Any payments we receive before we recognize revenue are recorded in our statement of financial position as ‘‘Contract liabilities.’’ Our rental income from investment properties is recognized on a straight-line basis over the term of the relevant lease. The revenue from hotel operations is recognised over time by using output method. With respect to the services that we provide, we recognize the revenue over the time elapsed by using output method.
Taxation
We account for income taxes under the provisions of SFRS(I) 1-12 Income Taxes, with the required disclosures as described in Note 2 to our consolidated financial statements for the year ended December 31, 2018. For the years ended December 31, 2016, 2017 and 2018, we recorded deferred tax assets on tax loss of RMB1.042 billion, RMB707 million and RMB682 million (US$99 million), respectively, as we believed that it is likely that such tax loss can be utilized. In the event we determine that we would not be able to realize such deferred tax assets in the future in excess of their recorded amount, an adjustment to our deferred tax assets would decrease our income in the period such determination is made. Likewise, if we determine that we would be able to utilize all or part of our unrecognized deferred tax on tax loss of RMB207 million, RMB365 million and RMB558 million
— 64 — (US$81 million) for the years ended December 31, 2016, 2017 and 2018, respectively, which is currently not expected to be utilized in the future, an adjustment to our deferred tax assets would increase our income in the period during which such determination is made. We record deferred tax using the balance sheet liability method at the rates that have been enacted or substantively enacted by the end of the reporting period.
Land Appreciation Tax
All income from the sale or transfer of state-owned land use rights, buildings and their attached facilities in the PRC is subject to LAT at progressive rates ranging from 30% to 60% of the appreciated value of the property, which is calculated by deducting from the gross sales proceeds the cost associated with the property development and certain other deductibles. We estimate and provide for LAT in accordance with PRC tax laws and regulations.
Depreciation of Property, Plant and Equipment
We exercise judgment in estimating the useful lives of our depreciable assets. We depreciate our property, plant and equipment over their estimated useful lives on a straight line basis, substantially on the following bases:
. Leasehold land and buildings: 2% to 5%
. Motor vehicles: 10% to 25%
. Furniture, fixtures and equipment: 20%
When we dispose of a property, plant or equipment, we recognize the gain or loss in the statement of profit or loss for the year as the difference between the sales proceeds and the carrying amount of the asset.
Allowance for Receivables
We exercise judgment in estimating the collectability of our receivables. If we determine that certain receivables are not collectible, we will make special allowances for such receivables. We do not have a policy requiring general provisions for receivables.
Provision for Completed Properties for Sale, Properties for Development and Properties Under Development for Sale
We use the proportion of project costs incurred to date to the estimated total project costs, to estimate the total project costs. Project revenue is estimated based on prevailing market values. When it is probable that the total cumulative project costs will exceed the total project revenue, i.e. realizable value, the amount in excess of realizable value should be recognized as an expense immediately. These computations are based on the assumption that the outcome of a project can be estimated reliably.
We perform cost studies, taking into account the costs to date and costs to complete each development project. We also review the status of such development projects to ensure that the total project cost and project revenue estimates are realistic and reflect prevailing market conditions.
Valuation of Our Investment Properties
Our investment properties are measured initially at cost, including transaction costs and subsequent to initial recognition, stated at fair value. In connection with the valuation of investment properties, we also seek for valuations performed by an independent professional valuer at least once every year.
Certain Statement of Profit or Loss Items
Revenue
We derive substantially all our revenue from proceeds from development and sales of our properties. See ‘‘— Factors Affecting Our Results of Operations — Revenue Recognition, Sales Volume and Pricing.’’ A small proportion of our revenue is comprised of income from property investment, income from hotel operations and income from others. Our income from property investment primarily includes rental income from our property leasing. Our income from hotel operations primarily includes revenue generated from our operation of two five-star hotels, namely Crowne Plaza Sanya Haitang Bay
— 65 — Resort and InterContinental Zhuhai, both of which commenced business operation in 2018. Our income from others primarily includes property management fee income, fees from our provision of ancillary services and other service income. For the years ended December 31, 2016, 2017 and 2018, the aggregate amount of our income from property investment, income from hotel operations and our income from others represented 3.0%, 3.4% and 4.9% of our total revenue, respectively. As we expand our operations into commercial property development, we expect revenue from property investment, income from hotel operations and other recurring income from our commercial properties to increase in the future.
The following table sets out a breakdown of the GFA delivered and the average realized selling price (‘‘ASP’’) per sq.m. (calculated by dividing the gross income from sale of properties by the GFA sold) for the years ended December 31, 2016, 2017 and 2018:
Year Ended December 31, GFA Delivered (sq.m.) 2016 2017 2018 YanlordRiverbay(Phase1)...... 12,303 13,847 1,865 YanlordRiverbay(Phase2)...... 103,408 31,865 2,029 BambooGardens...... 150 –– OasisNewIslandGardens(Phase1)...... 101,382 –– OasisNewIslandGardens(Phase2)...... – 75,351 17,815 OasisNewIslandGardens(Phase3)...... ––72,167 PlumMansions,includingLakesideMansions...... – 39 – YanlordYangtzeRiverbayTown...... 117,022 64,647 152 FourSeasonsGardens(Phase1)...... ––63,659 Sanya Hai Tang Bay – LandParcel9...... ––17,138 YanlordEasternGardens...... 97,126 64,472 13,046 YanlordonthePark...... – 66,455 57,308 YanlordSunlandGardens...... 41,418 1,479 282 YanlordTownhouse...... 4,316 –– YanlordWesternGardens...... 57,525 75,095 50,043 YunjieRiversideGardens...... 1,794 1,648 964 YanlordRosemite...... 22,264 581 – Suzhou Wuzhong Area C1 Land – Villas...... 1,143 3,945 5,650 TangYueBayGardens...... 61,701 80,811 25,681 YanlordLakeviewBay...... 37,100 25,561 1,369 YanlordPeninsula(Townhouse)...... 548 –– TianjinJinnanLand(Phase1)...... 74,648 6,387 676 TianjinJinnanLand(Phase2)...... 67,280 7,878 94 TianjinJinnanLand(Phase3)...... ––202,047 YanlordRiversideGardens...... 17,694 165 21 Yanlord Marina Centre – SectionB...... 9,475 24,551 13,409 YanlordMarinaPeninsulaGardens(Phase1)...... 116,537 11,460 1,018 YanlordMarinaPeninsulaGardens(Phase2)...... ––85,696 Total...... 944,834 556,237 632,129
Year Ended December 31, Average Realized Selling Price (RMB per sq.m.) 2016 2017 2018 YanlordRiverbay(Phase1)...... 18,483 21,659 19,818 YanlordRiverbay(Phase2)...... 16,531 20,361 22,478 BambooGardens...... 24,991 –– OasisNewIslandGardens(Phase1)...... 25,760 –– OasisNewIslandGardens(Phase2)...... – 28,591 34,284 OasisNewIslandGardens(Phase3)...... ––34,299 YanlordYangtzeRiverbayTown...... 38,451 41,585 27,406 FourSeasonsGardens(Phase1)...... ––11,319 Sanya Hai Tang Bay – LandParcel9...... ––125,554 YanlordEasternGardens...... 43,026 57,068 62,513 YanlordonthePark...... – 91,335 100,248 YanlordSunlandGardens...... 47,582 53,787 48,767 YanlordTownhouse...... 51,613 –– YanlordWesternGardens...... 40,970 49,833 55,544 YunjieRiversideGardens...... 18,721 16,210 17,665 YanlordRosemite...... 28,131 30,616 – Suzhou Wuzhong Area C1 Land – Villas...... 44,177 47,196 52,051 TangYueBayGardens...... 18,999 25,039 30,016 YanlordLakeviewBay...... 26,177 28,969 31,072 YanlordPeninsula(Townhouse)...... 18,963 –– TianjinJinnanLand(Phase1)...... 13,245 17,005 18,583 TianjinJinnanLand(Phase2)...... 12,695 16,345 18,181 TianjinJinnanLand(Phase3)...... ––17,759 YanlordRiversideGardens...... 25,251 22,873 22,358 Yanlord Marina Centre – SectionB...... 42,927 48,498 55,195 YanlordMarinaPeninsulaGardens(Phase1)...... 17,088 25,451 25,068 YanlordMarinaPeninsulaGardens(Phase2)...... ––23,918 Total...... 26,812 43,288 36,293
— 66 — Cost of Sales
Our cost of sales is principally comprised of construction costs, land costs (including land premium and resettlement costs) and capitalized borrowing costs. See ‘‘— Factors Affecting Our Results of Operations — Land Acquisition and Construction Costs.’’
The table below sets forth information relating to cost of properties sold, the largest component of our cost of sales, for the years ended December 31, 2016, 2017 and 2018.
Year Ended December 31. 2016 2017 2018 RMB % RMB % RMB US$ % (in thousands, except percentages) Land use rights ...... 7,430,007 43.2% 6,057,170 46.3% 5,634,298 819,475 44.3% Construction cost...... 8,203,540 47.7% 5,926,226 45.3% 6,405,644 931,662 50.3% Interest capitalized...... 1,560,824 9.1% 1,091,022 8.4% 684,587 99,569 5.4% Total ...... 17,194,371 100.0% 13,074,418 100.0% 12,724,529 1,850,706 100.0%
Other Operating Income and Other Gains
Other operating income and other gains is principally comprised of interest income, net foreign exchange gain arose mainly from year end conversion of foreign currency denominated monetary items against functional currency in certain entities of the Group and realised exchange difference arising from conversion of different monetary currencies in ordinary course of business, fair value gain from put liability to acquire non-controlling interests, government subsidies and other miscellaneous income.
Fair Value Gain on Investment Properties
We develop and hold certain investment properties on a long-term basis for rental income or capital appreciation. Our investment properties are recorded as non-current assets in our consolidated statements of financial position at fair value as of each year end date on the basis of valuations carried out by independent valuers having recognized professional qualifications and recent experienced in the location and category of the properties being valued, and not related to us. Gains or losses arising from changes in the fair value of our investment properties are accounted for as gains or losses in our consolidated statement of profit or loss, which may have an effect on our profits for the relevant years.
Selling Expenses
Our selling expenses consist primarily of staff expenses for the sales personnel, advertising and promotion expenses, intermediary agency fees and other expenses incurred during the relevant years.
Administrative Expenses
Our administrative expenses principally include staff expenses for the administrative personnel, depreciation, rental, service fees paid to the auditors and other professionals, utilities, traveling, entertainment, office expenses, bank charges and net foreign exchange loss incurred during the relevant years.
Other Operating Expenses
Our other operating expenses primarily comprise donations, net loss on disposal of financial asset at fair value through profit or loss and other miscellaneous expenses.
Finance Cost
Our finance cost consists primarily of interest costs, net of any capitalized interest. We capitalize our borrowing costs as part of the costs for a development property when there is evidence that the borrowing is used to finance such development property until the construction of the development property is completed. Because the construction period for a project does not necessarily coincide with the interest payment period of the relevant loan, not all of the interest costs related to a project can be capitalized. Finance cost incurred after a development property is completed (or finance cost not related
— 67 — to the development property) is charged to the statement of profit or loss in the period in which it is incurred. As a result, finance cost for a given period on its own may not reflect the level of our borrowings and tend to fluctuate, as a percentage of revenue, depending on the timing of capitalization.
Income Tax
PRC Enterprise Income Tax
Our income tax expenses consist of tax currently payable and deferred tax. The tax currently payable is based on our taxable profit for each year. Taxable profit differs from net profit as reported in our statement of profit or loss because it excludes items of income and expense that are taxable or deductible in other years, and it further excludes statement of profit or loss items that are not taxable or deductible, even on a going-forward basis. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be used. Such assets and liabilities are not recognized if the temporary difference arises from goodwill (or negative goodwill) or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Land Appreciation Tax
Our income tax expenses also include a provision for LAT at progressive rates ranging from 30% to 60% of the appreciated value of the property, which is calculated by deducting from the gross sales proceeds the cost associated with the property development and certain other deductibles. We estimate and make provisions for the full amount of applicable LAT in accordance with the requirements set forth in the relevant PRC tax laws and regulations, but only pay a portion of such provisions each year as required by the local tax authorities. We cannot assure you that our LAT provisions are sufficient to cover our LAT obligations or that the tax authorities will agree with the basis on which we calculate our LAT obligations. See ‘‘Risk Factors — Risks Relating to Our Business — Our results of operations may be adversely affected by more rigorous enforcement of Land Appreciation Tax collection’’ and ‘‘— Factors Affecting Our Results of Operations — Land Appreciation Tax.’’
In the years ended December 31, 2016, 2017 and 2018, LAT charged to our income tax expenses was RMB1.405 billion, RMB2.988 billion and RMB2.840 billion (US$413 million), respectively. For the same periods, we made payments for provisional LAT in the amount of RMB1.443 billion, RMB1.105 billion and RMB1.043 billion (US$152 million), respectively. Our LAT provision balance as of December 31, 2016, 2017 and 2018 totaled RMB4.365 billion, RMB5.585 billion and RMB7.253 billion (US$1.055 billion), respectively.
Withholding Tax
According to a PRC tax circular of State Administration of Taxation, Guoshuihan (2008) No. 112, dividend distributed out of the profits generated since January 1, 2008 held by the PRC entity to non- resident investors shall be subject to PRC withholding income tax.
Singapore Income Tax
We are subject to Singapore income tax. The tax currently payable is based on our taxable profit for each year, using tax rates enacted each year.
Profits Attributable to Non-controlling Interests
Non-controlling interests represent the portion of our profit that is attributable to the shareholding in our consolidated subsidiaries that we do not own.
— 68 — Results of Operations
The table below sets forth our results of operations and their respective percentage of revenues for the years indicated.
Year Ended December 31, 2016 2017 2018 RMB % RMB % RMB US$ % (in thousands, except percentages) Revenue...... 25,664,408 100.0 25,638,407 100.0 24,888,041 3,619,815 100.0 Cost of sales...... (17,644,673) (68.8) (13,594,462) (53.0) (13,432,692) (1,953,704) (54.0) Gross profit ...... 8,019,735 31.2 12,043,945 47.0 11,455,349 1,666,111 46.0 Other operating income and other gains ...... 446,191 1.8 472,279 1.8 714,587 103,932 2.9 Fair value gain on investment properties ...... 366,090 1.4 148,321 0.6 391,372 56,923 1.6 Selling expenses ...... (397,153) (1.5) (330,537) (1.3) (398,278) (57,927) (1.6) Administrative expenses ...... (594,997) (2.3) (809,328) (3.1) (955,359) (138,950) (3.8) Other operating expenses ...... (15,202) (0.1) (15,660) (0.1) (33,454) (4,866) (0.1) Finance cost ...... (347,819) (1.4) (484,690) (1.9) (693,994) (100,937) (2.8) Share of loss of associates ...... (11,790) 0.0 (8,114) 0.0 (12,689) (1,846) (0.1) Share of profit of joint ventures. . . 7,099 0.0 346,008 1.3 74,123 10,781 0.3 Profit before income tax ...... 7,472,154 29.1 11,362,224 44.3 10,541,657 1,533,221 42.4 Income tax ...... (3,494,956) (13.6) (5,741,957) (22.4) (5,146,207) (748,485) (20.7) Profit for the year ...... 3,977,198 15.5 5,620,267 21.9 5,395,450 784,736 21.7 Profit attributable to: Owners of the Company ...... 2,697,361 10.5 3,216,440 12.5 3,544,570 515,537 14.3 Non-controlling interests ...... 1,279,837 5.0 2,403,827 9.4 1,850,880 269,199 7.4 3,977,198 15.5 5,620,267 21.9 5,395,450 784,736 21.7
The table below sets forth a breakdown of our gross income from the sale of properties by development project and the percentage of the gross income from the sale of properties for the years indicated.
Year Ended December 31. 2016 2017 2018 RMB % RMB % RMB US$ % (in thousands, except percentages) Shanghai Bayside Gardens (禦瀾灣苑)...... 15,566 0.0 ––1,282 186 0.0 Yanlord Eastern Gardens (仁恒東邑雅苑)...... 4,178,933 16.1 3,679,243 14.5 1,071,621 155,861 4.5 Yanlord on the Park (仁恒世紀公寓)...... ––6,069,640 23.9 5,994,433 871,854 25.1 Yanlord Riverside City (Phase 1) (仁恒河濱城，一期) ...... 31,275 0.1 –– – –– Yanlord Riverside City (Phase 2) (仁恒河濱城，二期) ...... 30,658 0.1 46,952 0.2 17,657 2,568 0.1 Yanlord Sunland Gardens (Phase 1) (仁恒森蘭雅苑，一期)...... 575,471 2.2 84,702 0.3 3,529 513 0.0 Yanlord Sunland Gardens (Phase 2) (仁恒森蘭雅苑，二期)...... 1,500,617 5.8 140,224 0.7 18,389 2,675 0.1 Yanlord Townhouse (仁恒怡庭) . . . . . 237,847 1.0 11,457 0.0 2,000 291 0.0 Yanlord Western Gardens (仁恒西郊雅苑)...... 2,356,784 9.1 3,960,454 15.6 2,832,551 411,978 11.9 Yunjie Riverside Gardens (Phase 1) (運杰河濱花園， 一期)...... ––26,719 0.1 17,036 2,478 0.0 Yunjie Riverside Gardens (Phase 2) (運杰河濱花園，二期)...... 35,121 0.1 –– – –– Others...... 170 0.0 381 0.0 ––– Sub total ...... 8,962,442 34.5 14,019,772 55.3 9,958,498 1,448,404 41.7
— 69 — Year Ended December 31. 2016 2017 2018 RMB % RMB % RMB US$ % (in thousands, except percentages) Nanjing Bamboo Gardens (翠竹園)...... 3,760 0.0 (6) 0.0 ––– Oasis New Island Gardens (Phase 1) (綠洲新島花園，一期)...... 2,739,615 10.6 55,818 0.2 257 37 0.0 Oasis New Island Gardens (Phase 2) (綠洲新島花園，二期)...... ––2,287,106 9.0 635,043 92,363 2.7 Oasis New Island Gardens (Phase 3) (綠洲新島花園，三期)...... –– ––2,580,707 375,348 10.8 Yanlord G53 Apartments (仁恒G53公寓)...... 143 0.0 –– – –– Yanlord Yangtze Riverbay Town (Phase 2) (仁恒江灣城，二期) .... 4,188 0.0 ––4,161 605 0.0 Yanlord Yangtze Riverbay Town (Phase 3) (仁恒江灣城，三期) . . . . 52,600 0.2 5,530 0.0 1,771 258 0.0 Yanlord Yangtze Riverbay Town (Phase 4) (仁恒江灣城，四期) . . . . 4,460,782 17.2 2,936,392 11.6 1,286 187 0.0 Others...... 49 0.0 –– – –– Sub total ...... 7,261,137 28.0 5,284,840 20.8 3,223,225 468,798 13.5
Nantong Four Seasons Gardens (Phase 1) (四季花園，一期)...... –– ––750,335 109,132 3.1 Subtotal...... –– ––750,335 109,132 3.1
Sanya Sanya Hai Tang Bay – Land Parcel 9 (三亞海棠灣 – 9 號地塊)...... –– ––2,151,692 312,951 9.0 Subtotal...... –– ––2,151,692 312,951 9.0
Suzhou Suzhou Wuzhong Area C1 Land – Villas (蘇州吳中區C1地塊 – 別墅) ...... 50,476 0.2 186,194 0.7 294,095 42,774 1.2 Tang Yue Bay Gardens (棠悅灣花園). . 1,172,270 4.5 2,107,501 8.4 795,279 115,669 3.3 Yanlord Lakeview Bay – Land Parcel A1 (仁恒雙湖灣，A1 地塊)...... ––679,128 2.7 27,458 3,994 0.2 Yanlord Lakeview Bay – Land Parcel A2 (仁恒雙湖灣，A2地塊) ...... 358,632 1.5 44,233 0.2 14,286 2,078 0.1 Yanlord Lakeview Bay – Land Parcel A3 (仁恒雙湖灣，A3 地塊) ...... 386,960 1.5 8,772 0.0 ––– Yanlord Lakeview Bay – Land Parcel A4 (仁恒雙湖灣，A4地塊) ...... 133,211 0.5 –– – –– Yanlord Lakeview Bay – Land Parcel A5 (仁恒雙湖灣，A5地塊) ...... 38,261 0.1 –– – –– Yanlord Lakeview Bay – Land Parcel A6 (仁恒雙湖灣，A6地塊) ...... 56,285 0.3 4,393 0.0 3,488 507 0.0 Yanlord Lakeview Bay – Land Parcel A7 (仁恒雙湖灣，A7地塊) ...... 12,777 0.0 11,198 0.0 724 105 0.0 Yanlord Peninsula – Apartment – Phase 1(星嶼仁恒，一期)...... 8,447 0.0 976 0.0 724 105 0.0 Yanlord Peninsula – Townhouse – Phase 1(星島仁恒，一期)...... 10,398 0.0 –– – –– Sub total ...... 2,227,717 8.6 3,042,395 12.0 1,136,054 165,232 4.8
Zhuhai Yanlord Marina Centre – Section B (仁恒濱海中心，B標 段)...... 406,747 1.6 1,276,455 5.0 746,712 108,604 3.1 Yanlord Marina Peninsula Gardens (Phase 1) (仁恒濱海半島花園，一期) 1,991,391 7.7 383,117 1.6 27,156 3,950 0.2 Yanlord Marina Peninsula Gardens (Phase 2) (仁恒濱海半島花園，二期) –– ––2,049,694 298,115 8.6 Yanlord New City Gardens (Phase 1) (仁恒星園，一期) ...... 4,388 0.0 4,869 0.0 3,134 456 0.0 Yanlord New City Gardens (Phase 2 – Section 1) (仁恒星園，二期一段) . . 4,332 0.0 4,902 0.0 5,787 842 0.0 Yanlord New City Gardens (Phase 2 – Section 2) (仁恒星園，二期二段) . . 13,393 0.0 6,441 0.0 6,881 1,001 0.0 Sub total ...... 2,420,251 9.3 1,675,784 6.6 2,839,364 412,968 11.9
— 70 — Year Ended December 31. 2016 2017 2018 RMB % RMB % RMB US$ % (in thousands, except percentages)
Tianjin Tianjin Jinnan Land (Phase 1) (景新花園，一期) ...... 1,048,503 4.0 121,383 0.5 15,235 2,216 0.1 Tianjin Jinnan Land (Phase 2) (景新花園，二期) ...... 854,155 3.3 128,770 0.6 1,703 248 0.0 Tianjin Jinnan Land (Phase 3) (景新花園，三期)...... –– ––3,672,575 534,154 15.4 Yanlord Riverside Gardens (Phase 1) (仁恒河濱花園，一期)...... 21,829 0.1 8,715 0.0 3,391 493 0.0 Yanlord Riverside Gardens (Phase 2) (仁恒河濱花園，二期)...... 500,822 2.0 16,104 0.0 4,926 716 0.0 Yanlord Riverside Plaza (Phase 1) (仁恒海河廣場，一期)...... 11,592 0.0 6,158 0.0 3,788 551 0.0 Yanlord Riverside Plaza (Phase 2) (仁恒海河廣場，二期)...... 17,361 0.1 6,287 0.0 1,517 221 0.0 Sub total ...... 2,454,262 9.5 287,417 1.1 3,703,135 538,599 15.5
Chengdu Yanlord Riverbay (Phase 1) (仁恒濱河灣，一期) ...... 227,394 0.9 298,290 1.2 36,959 5,376 0.2 Yanlord Riverbay (Phase 2) (仁恒濱河灣，二期) ...... 1,773,832 6.8 731,981 2.9 81,450 11,846 0.3 Sub total ...... 2,001,226 7.7 1,030,271 4.1 118,409 17,222 0.5
Shenzhen Yanlord Rosemite (仁恒巒山美地花園) 626,304 2.4 17,800 0.1 ––– Subtotal...... 626,304 2.4 17,800 0.1 ––– Total gross income from property sales ...... 25,953,339 100.0 25,358,279 100.0 23,880,712 3,473,306 100.0
2018 Compared with 2017
Revenue
In 2018, our revenue remained largely stable at RMB24.888 billion (US$3.620 billion), as compared to RMB25.638 billion in 2017, primarily due to a decrease in average selling price from RMB43,288 per sq.m. in 2017 to RMB36,293 per sq.m. in 2018, reflecting a change in product mix of delivered units, of which a larger portion of relatively lower-priced projects was included in 2018 as compared to that of 2017, which was partially offset by an increase in GFA delivered to our customers from 566,237 sq.m. in 2017 to 632,129 sq.m. in 2018 in line with our project delivery schedule.
Cost of Sales
In 2018, our cost of sales decreased slightly to RMB13.433 billion (US$1.954 billion) from RMB13.594 billion in 2017, in tandem with the decrease in our revenue. Cost of sales in 2018 was mainly comprised of land costs, construction costs and capitalized borrowing costs, representing 44.3%, 50.3% and 5.4%, respectively, of total cost of properties sold for the year. Cost of sales as a percentage of revenue increased slightly to 54.0% in 2018 from 53.0% in 2017 mainly attributable to a change in composition of product mix.
Gross Profit
In 2018, our gross profit decreased by RMB589 million, or 4.9%, to RMB11.455 billion (US$1.666 billion) from RMB12.044 billion in 2017. Despite the declines in our revenue and gross profit, our gross profit margin remains relatively stable at 46.0% in 2018, as compared to 47.0% in 2017, propelled by the greater contribution of our higher-gross-profit margin projects in 2018 as a result of (i) a strong demand of our high-quality developments in the PRC real estate market; and (ii) our strategic, prudent project launch planning and execution in light of the volatile market conditions.
— 71 — Other Operating Income and Other Gains
In 2018, our other operating income and other gains increased by RMB243 million, or 51.3%, to RMB715 million (US$104 million) from RMB472 million in 2017. The increase was largely attributable to increases in interest income on non-trade amounts due from joint ventures in 2018 as compared with 2017 and net foreign exchange gain which was not recorded in 2017.
Fair Value Gain on Investment Properties
In 2018, our fair value gain on investment properties increased by RMB243 million, or 163.9%, to RMB391 million (US$57 million) from RMB148 million in 2017. The increase was largely attributable to larger growth in fair value of our existing investment properties from 2017 to 2018.
Selling Expenses
In 2018, our selling expenses increased by RMB67 million, or 20.5%, to RMB398 million (US$58 million) from RMB331 million in 2017. The increase was primarily attributable to higher staff costs and advertising and promotion expenses, as well as increased spending on consumable goods for our new hotels in Sanya and Zhuhai in 2018 compared to 2017.
Administrative Expenses
In 2018, our administrative expenses increased by RMB146 million, or 18.0%, to RMB955 million (US$139 million) from RMB809 million in 2017. Excluding net foreign exchange effects, the increase in administrative expenses was primarily due to increases in staff costs and professional fees to support the continuing growth of our business.
Finance Cost
In 2018, our finance cost increased by RMB209 million, or 43.2% to RMB694 million (US$101 million) from RMB485 million in 2017. The increase in finance cost was primarily due to increase in the borrowing costs incurred for our completed projects. In accordance with the Group’s accounting policy, the finance cost used to finance the development would be capitalised.
Income Tax
Our income tax expenses for 2018 decreased by RMB596 million, or 10.4%, to RMB5.146 billion (US$748 million) from RMB5.742 billion in 2017. The decrease in income tax expenses was in line with the decrease in profit before income tax in 2018 compared to 2017.
Profit Attributable to Owners of the Company
In 2018, our profit attributable to owners of the Company increased by RMB329 million, or 10.2%, to RMB3.545 billion (US$516 million) from RMB3.216 billion in 2017 as a result of the cumulative effect of the foregoing factors. As a percentage of revenue, profit attributable to owners of the Company increased from 12.5% in 2017 to 14.2% in 2018.
Profit Attributable to Non-Controlling Interests
In 2018, profit attributable to non-controlling interests decreased by RMB553 million, or 23.0%, to RMB1.851 billion (US$269 million) in 2018 from RMB2.404 billion in 2017.
2017 Compared with 2016
Revenue
In 2017, our revenue remained relatively stable at RMB25.638 billion, as compared to RMB25.664 billion in 2016, primarily as a result of a decrease in GFA delivered to customers from 944,834 sq.m. in 2016 to 566,237 sq.m. in 2017 which is in line with our project delivery schedule, which was largely offset by a 61.5% increase in average selling price to RMB43,288 per sq.m. in 2017 from RMB26,812 per sq.m. in 2016 achieved as a result of the delivery of higher-priced projects in our core markets in the PRC.
— 72 — Cost of Sales
In 2017, our cost of sales decreased by RMB4.050 billion, or 23.0%, to RMB13.594 billion from RMB17.645 billion in 2016, in tandem with the decrease in GFA delivered to the customers. Cost of sales in 2017 was mainly comprised of land costs, construction costs and capitalized borrowing costs, representing 46.3%, 45.3% and 8.4%, respectively, of total cost of properties sold for the year. Cost of sales as a percentage of revenue decreased to 53.0% in 2017 from 68.8% in 2016 mainly attributable to a change in composition of product mix.
Gross Profit
In 2017, our gross profit increased by RMB4.024 billion, or 50.2%, to RMB12.044 billion from RMB8.020 billion in 2016. Our gross profit margin increased from 31.2% for 2016 to 47.0% for 2017 propelled by the delivery of higher-gross-profit margin projects in our core markets in 2017.
Other Operating Income and Other Gains
In 2017, our other operating income and other gains increased by RMB26 million, or 5.8%, to RMB472 million from RMB446 million in 2016. Excluding net foreign exchange effects, this increase was largely attributable to fair value gain from put liability to acquire non-controlling interests in 2017 and an increase in interest income on non-trade amounts due from joint ventures in 2017 as compared to 2016.
Fair Value Gain on Investment Properties
In 2017, our fair value gain on investment properties decreased by RMB218 million, or 59.5%, to RMB148 million from RMB366 million in 2016. The decrease was largely attributable to the slower growth in fair value of our investment properties in 2017 as compared to 2016. In 2016, the growth rate of fair value on investment properties was higher primarily due to an increase in our investment property portfolio after reclassification of our certain properties.
Selling Expenses
In 2017, our selling expenses decreased by RMB67 million, or 16.8%, to RMB331 million from RMB397 million in 2016. The decrease was primarily attributable to lower advertising and promotion expenses as well as intermediary agency fees incurred in 2017, as compared to those of 2016, which is in line with the decrease in GFA delivered to the customers from 2016 to 2017.
Administrative Expenses
In 2017, our administrative expenses increased by RMB214 million, or 36.0%, to RMB809 million from RMB595 million in 2016. Excluding net foreign exchange effects, the increase in administrative expenses was primarily due to increases in staff costs and bank charges.
Finance Cost
In 2017, our finance cost increased by RMB137 million, or 39.4% to RMB485 million from RMB348 million in 2016. The increase in finance cost was primarily due to (i) the refinancing of our development projects completed during the year and (ii) the reclassification of borrowing costs for our development projects that were previously capitalized into interest costs, upon completion of their respective project construction.
Income Tax
Our income tax expenses for 2017 increased by RMB2.247 billion, or 64.3%, to RMB5.742 billion from RMB3.495 billion in 2016. The increase in tax expenses was primarily due to the increase in profit before income tax in 2017 compared to 2016.
— 73 — Profit Attributable to Owners of the Company
In 2017, our profit attributable to owners of the Company increased by RMB519 million, or 19.2%, to RMB3.216 billion from RMB2.697 billion in 2016 as a result of the cumulative effect of the foregoing factors. As a percentage of revenue, profit attributable to owners of the Company increased from 10.5% in 2016 to 12.5% in 2017.
Profit Attributable to Non-Controlling Interests
In 2017, profit attributable to non-controlling interests increased by RMB1.124 billion, or 87.8%, to RMB2.404 billion from RMB1.280 billion in 2016.
Liquidity and Capital Resources
To date, we have financed our working capital, capital expenditures and other capital requirements primarily through internally generated cash flows, bank and other borrowings, debt and equity issuances, including the issuance of our 2017 Senior Notes and our 2018 Senior Notes and the entering into of our Offshore Loans (see ‘‘Description of Other Material Indebtedness’’) and loans from our controlling shareholder and non-controlling shareholders of our subsidiaries in the PRC. The following table presents our cash flow data for the years indicated.
Year Ended December 31, 2016 2017 2018 RMB RMB RMB US$ (in thousands) Net cash from (used in) operating activities...... 10,289,434 (10,646,711) 1,510,078 219,632 Net cash used in investing activities...... (8,133,366) (4,631,360) (12,408,916) (1,804,802) Net cash (used in) from financing activities...... (1,708,822) 15,237,402 3,547,375 515,944 Net increase (decrease) in cash and cash equivalents ...... 447,246 (40,669) (7,351,463) (1,069,226) Cash and cash equivalents at beginning of year ...... 17,516,991 17,583,383 17,798,313 2,588,657 Cash and cash equivalents at end of year ...... 17,583,383 17,798,313 10,317,374 1,500,600
Operating Activities
Our cash used in operations principally comprises amounts we pay for our property development activities, which are reflected on our statements of financial position as an increase in aggregate amount of completed properties for sale, properties under development for sale and properties for development. Our cash from operations is generated principally from the proceeds from sales of our properties, including pre-sales of properties under development.
Our net cash from operating activities in 2018 was RMB1.510 billion (US$220 million). We generated a profit before income tax of RMB10.542 billion (US$1.533 billion) (including a non-cash in interest income of RMB551 million (US$80 million) and fair value gain on investment properties of RMB391 million (US$57 million), partially offset by cash outflow from contract liabilities.
Our net cash used in operating activities in 2017 was RMB10.647 billion. Although we generated a profit before income tax of RMB11.362 billion (including a non-cash in interest income of RMB359 million and share of profit of joint ventures of RMB346 million), our cash flow was reduced primarily by the cash outflows from properties for development.
Our net cash from operating activities in 2016 was RMB10.289 billion, primarily attributable to our profit before income tax of RMB7.472 billion (including a non-cash fair value gain on investment properties of RMB366 million and interest income of RMB268 million), partially offset by the cash outflows from properties for development and properties under development for sale, both resulting from the increased construction costs and land costs payment.
Investing Activities
Our net cash used in investing activities in 2018 was RMB12.409 billion (US$1.805 billion). Net cash used in investing activities was primarily attributable to advance to joint ventures of RMB10.601 billion (US$1.542 billion), advance to associates of RMB1.480 billion (US$215 million) and investments in joint ventures of RMB1.003 billion (US$146 million), which were partially offset by repayment from joint ventures of RMB1.617 billion (US$235 million) and repayment from associates of RMB1.601 billion (US$233 million).
— 74 — Our net cash used in investing activities in 2017 was RMB4.631 billion. Net cash used in investing activities was primarily attributable to advance to joint ventures of RMB2.522 billion, investments in joint ventures of RMB1.878 billion and advance to non-controlling shareholders of subsidiaries of RMB1.517 billion, which were partially offset by repayment from joint ventures of RMB2.576 billion.
Our net cash used in investing activities in 2016 was RMB8.133 billion, which was primarily attributable to advance to joint ventures of RMB3.289 billion, advance to non-controlling shareholders of subsidiaries of RMB1.825 billion, payment for investment properties of RMB1.609 billion, acquisitions of subsidiaries of RMB1.500 billion, which were partially offset by repayment from joint ventures of RMB2.447 billion.
Financing Activities
Our cash from financing activities consists principally of proceeds from equity and debt issuances, cash injections from non-controlling shareholders of our subsidiaries and drawdowns of loans in relation to our development properties, which are offset by repayments of loans and dividend distributions during the periods.
Our net cash from financing activities in 2018 was RMB3.547 billion (US$516 million). This amount was primarily attributable to proceeds from bank and other borrowings of RMB9.922 billion (US$1.443 billion), which was partially offset by repayment of bank and other borrowings of RMB4.191 billion (US$610 million).
Our net cash from financing activities in 2017 was RMB15.237 billion. This amount was primarily attributable to proceeds from bank and other borrowings of RMB26.304 billion, which was partially offset by repayment of bank and other borrowings of RMB10.120 billion.
Our net used in financing activities in 2016 was RMB1.709 billion. This amount was primarily attributable to proceeds from bank and other borrowings of RMB15.834 billion. These amounts were partially offset by repayment of bank and other borrowings of RMB9.822 billion and repurchase and redemption of senior notes of RMB4.514 billion.
Financing of Our Projects
Since June 2003 commercial banks in the PRC have been prohibited under PBOC guidelines from advancing loans to fund the payment of land premium. We have funded our payments of land premium with proceeds from the sales and pre-sales of properties, offering of shares and convertible bonds, senior notes and borrowings from banks outside the PRC. We plan to use part of the proceeds from this offering, proceeds from the sales and pre-sales of properties and other internal funds to finance our future payments of land premium.
In addition to restrictions on land premium financing, the PRC government also encourages property developers to use internal funds to develop their property projects. Under guidelines jointly issued by the Ministry of Construction and other PRC government authorities in May 2006, commercial banks in China are not permitted to lend funds to property developers with an internal capital ratio, calculated by dividing the internal funds available by the total capital required for the project, of less than 35%, an increase of five percentage points from 30% as previously required. Such internal capital ratio was reduced to 20% in May 2009 as part of the PRC government’s plan for stimulating economic growth. We typically use internal funds and project loans from PRC banks to finance the initial construction costs for our development properties. Additional cash is generated from pre-sales of properties when they meet the requirements of pre-sale under national and local regulations. Such proceeds from pre-sales, together with the project loans, are the major sources of funding for the construction of our projects.
Working Capital
Our cash and bank balances as of December 31, 2016, 2017 and 2018 were RMB17.583 billion, RMB17.798 billion and RMB10.317 billion (US$1.501 billion) respectively. We plan to use part of the proceeds from this offering to finance our project development and acquisition and general corporate purposes. We may, however, require additional cash due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our existing cash is insufficient to meet our requirements, we may seek to sell additional equity securities, debt securities
— 75 — or borrow from lending institutions. The incurrence of debt will increase our interest payments required to service our debt obligations and could result in operating and financial covenants that restrict our operations and our ability to pay dividends to our shareholders.
When we receive cash from pre-sales, we place the cash in bank accounts that are earmarked for use for the related project, as required by law. PRC national law requires that funds received from pre- sales only be used for the relevant construction project. In some of the cities where we construct development properties, we are subject to additional restrictions, such as opening specific accounts that are monitored by government authorities. See ‘‘Regulation — Sale of Commodity Buildings.’’
Borrowings
Our borrowings as of the dates indicated are set forth below.
As of December 31, 2016 2017 2018 RMB RMB RMB US$ (in thousands) Bankandotherborrowings...... 20,749,655 30,221,418 36,291,472 5,278,376 Seniornotes...... 1,916,309 2,911,604 5,440,228 791,248 Loan from ultimate holding company ...... 671,930 ——— Loan from non-controlling shareholders of subsidiaries . . . . . 337,127 1,265,625 403,498 58,686 Totalborrowings...... 23,675,021 34,398,647 42,135,198 6,128,310 Less: Amount due within one year ...... 10,899,415 2,557,063 8,696,792 1,264,896 Non-current borrowings ...... 12,775,606 31,841,584 33,438,406 4,863,414
Set forth below is the maturity profile of our bank and other borrowings as of the dates indicated.
As of December 31, 2016 2017 2018 RMB RMB RMB US$ (in thousands) Due within one year ...... 8,311,176 2,557,063 8,293,294 1,206,210 Duemorethanoneyear...... 12,438,479 27,664,355 27,998,178 4,072,166 Total...... 20,749,655 30,221,418 36,291,472 5,278,376
We endeavor to maintain our financial strength through prudent financial practices. We monitor our financing activities for each of our projects. Before we acquire land for a project, we prepare a financing plan with estimated capital requirements and allocated funding resources for the project. We use internal resources and offshore financing to finance land acquisitions as well as most of the capital expenditures at earlier stages of a project. We use loans from local banks in the PRC to fund the balance of our construction and other project development costs.
Our bank and other borrowings have a range of maturities from one year to 15 years. Our bank loans generally bear interest at floating rates. The effective average interest rate paid was 5.1%, 5.3% and 5.8%, in 2016, 2017 and 2018, respectively. A substantial amount of our bank and other borrowings are of a long-term nature matching the funding requirements for the construction of our properties.
As of December 31, 2018, our outstanding bank and other borrowings amounted to RMB36.291 billion (US$5.278 billion). For a description of our material outstanding indebtedness, see ‘‘Description of Other Material Indebtedness’’. As of December 31, 2018, our PRC and non-PRC committed bank credit facilities were RMB7.061 billion (US$1.027 billion) and RMB609 million (US$89 million).
We also borrow from non-controlling shareholders of subsidiaries. Their maturity profiles as of the dates indicated are set forth below.
As of December 31, 2016 2017 2018 RMB RMB RMB US$ (in thousands) Repayable on demand or within one year ...... ——403,498 58,686 Duemorethanoneyear...... 337,127 1,265,625 —— Total...... 337,127 1,265,625 403,498 58,686
— 76 — Material Commitments and Contingencies
We have various contractual obligations, some of which are required to be recorded as liabilities in our financial statements, including long-term and short-term loans. Others, such as purchase obligations and payment guarantees, are not generally required to be recorded as liabilities on our financial statements. We have certain additional commitments and contingencies that are not recorded on our financial statements but may result in future cash requirements.
In line with market practices, we provide guarantees to banks in connection with our customers’ borrowing of mortgage loans to finance their purchase of our properties. These mortgage guarantees are discharged after we submit the relevant individual property ownership certificates and certificates of other interests in the property to the mortgagee banks on behalf of the purchasers. Generally, our mortgage guarantees last less than one year because all guaranteed properties are delivered within one year. As of December 31, 2018, the aggregate principal amount of such mortgage guarantees was RMB5.065 billion (US$737 million).
If a purchaser defaults in its payment obligations during the term of our guarantee, the relevant bank may deduct the defaulted mortgage payment from our deposit and require that we immediately replenish our deposit to the original amount. As of December 31, 2018, we have such guaranteed cash deposits of RMB31 million (US$5 million) with the relevant mortgagee banks.
The following table sets forth the aggregate amounts of our future contractual cash obligations and commitments on a consolidated basis as of December 31, 2018.
Commitment Due by Period Less than After Total 1Year 1–3 Years 4–5Years 5Years RMB RMB RMB RMB RMB (in thousands) Bank and other borrowings ...... 36,291,472 8,293,294 16,875,132 3,249,611 7,873,435 Loan from non-controlling shareholders of subsidiaries...... 403,498 403,498 ——— Seniornotes...... 5,440,228 ——5,440,228 — Operating lease obligations ...... 106,531 28,353 46,816 14,217 17,145 Investmentproperties...... 18,978 18,978 ——— Investments in joint ventures...... 239,000 231,000 ——8,000 Total ...... 42,499,707 8,975,123 16,921,948 8,704,056 7,898,580
Off-Balance Sheet Commitments and Arrangement
Except for the contingent liabilities set forth above, we have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity, or that are not reflected in our consolidated financial statements. We do not have any variable interests in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing or hedging or research and development services with us.
Market Risk
Market risk is the risk of loss related to adverse changes in market prices, including interest rate and foreign exchange rates of financial instruments. We are exposed to various types of market risks in the normal course of business. For instance, we are exposed to market foreign currency risks attributable to exchange rate movements on foreign currency denominated borrowings and operating expenses. We have not in the past used derivatives to manage our exposure to market interest rate risk or foreign exchange risk.
Credit Risk
For properties that are still under construction, we typically provide guarantees to banks in respect of mortgage loans extended by the banks to our customers to finance their purchase of our properties. The principal amount of a mortgage loan typically does not exceed 70% of the total purchase price of the property. If a purchaser defaults on a mortgage payment during the term of the guarantee, the mortgagee bank may demand that we repay the outstanding amount under the loan and accrued interest. If we make payments under a guarantee, we will be entitled to sell the related property to recover any
— 77 — amounts paid by us to the bank. However, we cannot assure you that we will be able to recover the full amount of our guarantee payments from the sale proceeds. See ‘‘Risk Factors — Risks Relating to Our Business — We guarantee the mortgages provided to our customers and consequently are liable to the mortgage banks if our customers default on their mortgage payments.’’
With respect to the non-trade amounts due from non-controlling shareholders of subsidiaries, security is provided by undistributed retained earnings distributable as dividends to the non-controlling shareholders of a subsidiary, the non-controlling shareholder’s shares in a subsidiary and expected future earnings that will be distributed by a subsidiary to the non-controlling shareholders.
Interest Rate Risk
We are subject to market risks due to fluctuations in interest rates and refinancing of short-term debt. Our net profit is affected by changes in interest rates as a result of the impact such changes have on interest income and interest expense from short-term deposits and other interest-bearing financial assets and liabilities, in particular certain of our Offshore Loans, which bear a variable interest rate. See ‘‘Description of Other Material Indebtedness’’. In addition, an increase in interest rates would adversely affect our prospective customers’ willingness and ability to purchase our properties, our ability to service loans that we have guaranteed and our ability to raise and service long-term debt and to finance our developments, all of which in turn would adversely affect our results of operations. Our indebtedness consists primarily of bank and other loans as well as the 2018 Senior Notes. Our bank loans generally bear interest at floating rates and our effective average interest rate paid was 5.1%, 5.3% and 5.8% in 2016, 2017 and 2018, respectively. The 2014 Senior Notes which we redeemed at its maturity in 2017 accrued interest at a rate of 6.2% per annum payable semi-annually on arrears. The 2017 Senior Notes accrue interest at a rate of 5.875% per annum payable semi-annually on arrears. The 2018 Senior Notes accrue interest at a rate of 6.75% per annum payable semi-annually on arrears. If the interest rates on our bank loans had been 100 basis points higher or lower and all other variables were held constant, our profit before income tax would decrease/increase by RMB114 million, RMB210 million and RMB249 million (US$36 million) in 2016, 2017 and 2018, respectively.
ForeignCurrencyExchangeRateRisk
Substantially all of our revenues and most of our expenses are denominated in RMB. Our exposure to foreign exchange risk relates primarily to our U.S. dollar, Singapore dollar or Hong Kong dollar- denominated indebtedness, including the 2018 Senior Notes, 2017 Senior Notes and the Offshore Loans, as well as our bank deposits in U.S. dollars and other foreign currencies. We do not believe that we currently have any significant direct foreign exchange risk and do not have hedging exposures denominated in foreign currencies or any other derivative financial instruments.
The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in China’s political and economic conditions. The conversion of RMB into foreign currencies, including U.S. dollars, has been based on rates set by the PBOC. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar. Under the new policy, the RMB is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. See ‘‘Exchange Rate Information’’ for additional details on the change in exchange rate policy from the PBOC. Further, from May 18, 2007, the PBOC enlarged the floating band for the trading prices in the interbank foreign exchange market of the Renminbi against the U.S. dollar from 0.3% to 0.5% around the central parity rate, effective on May 21, 2007. This allows the Renminbi to fluctuate against the U.S. dollar by up to 0.5% above or below the central parity rate published by the PBOC. The floating band was further widened to 1.0% on April 16, 2012. Further, in August 2015, the midpoint price of Renminbi against U.S. dollar decreased by 4.78% from August 10 to August 27, 2015, and further fluctuated in January 2016 after the PBOC announced an adjustment to the mechanism of determining the midpoint price of Renminbi against the U.S. dollar to make the exchange rate of Renminbi more market-based.
To the extent that we need to convert U.S. dollars we receive from our U.S. dollar-denominated borrowings into RMB for our operations, appreciation of the RMB against the U.S. dollar would have an adverse effect on the RMB amount we receive from the conversion. Conversely, when we convert our RMB-denominated cash amounts into U.S. dollars amounts for the purpose of making payments for dividends on our U.S. dollar-denominated debt or for other business purposes, appreciation of the U.S.
— 78 — dollar against the RMB would have a negative effect on the U.S. amount available to us. We have not used any forward contracts or currency borrowings to hedge our exposure to foreign currency exchange risk.
Fluctuations in exchange rates may adversely affect the value, translated or converted into U.S. dollars, of our net assets and earnings. There can be no assurance that any future movements in the exchange rate of the Renminbi against the U.S. dollar, Singapore dollar or other foreign currencies will not adversely affect our results of operations and financial condition. We believe that significant depreciation in the Renminbi against major foreign currencies may have an adverse impact on our results of operations, financial condition and our ability to repay indebtedness incurred in foreign currencies, including the Notes.
Commodities Risk
We consume large quantities of building materials, including raw iron, steel and concrete, in our property development operations. We typically enter into fixed or guaranteed maximum price construction contracts with independent construction companies, each of which covers the development of a significant part of our overall project. These contracts typically cover both the supply of the building materials and the construction of the facility, for a construction period of one to three years. If the price of building materials were to increase significantly prior to our entering into a fixed or guaranteed maximum price construction contract, we might be required to pay more to prospective contractors.
Inflation Risk
According to the National Bureau of Statistics of China, China’s overall national inflation rate, as represented by the general consumer price index, was approximately 2.0% in 2016, 1.6% in 2017 and 2.1% in 2018. We have not in the past been materially affected by any such inflation, but we can provide no assurance that we will not be affected in the future.
Non-GAAP Financial Measures
EBITDA refers to our profit before interest income, fair value gain on financial asset at fair value through profit or loss and from put liability to acquire non-controlling interests, finance cost, interest capitalized in cost of sales, net foreign exchange gain/loss, income tax and depreciation expense. EBITDA is not a standard measure under SFRS, SFRS(I)s or IFRSs. As the property development business is capital intensive, capital expenditure and levels of debt and interest expenses may have a significant impact on the profit for the year of companies with similar operating results. Therefore, we believe that the investor community commonly uses this type of financial measure to assess the operating performance of companies in our industry.
As a measure of our operating performance, we believe that the most directly comparable SFRSs, SFRS(I)s or IFRSs measure to EBITDA is profit for the year. We operate in a capital-intensive industry. We use EBITDA in addition to profit for the year because profit for the year includes many accounting items associated with capital expenditures, such as depreciation, as well as non-operating items or non- recurring items, such as interest income and changes in fair value on financial asset at fair value through profit or loss and from put liability to acquire non-controlling interests, finance cost, interest capitalized in cost of sales and foreign exchange. These accounting items may vary between companies depending on the method of accounting adopted by a company. By minimizing differences in capital expenditures and the associated depreciation expenses as well as reported tax positions, interest income, changes in fair value on financial asset at fair value through profit or loss and from put liability to acquire non- controlling interests, finance cost, interest capitalized in cost of sales and changes in foreign exchange, EBITDA provides further information about our operating performance and an additional measure for comparing our operating performance with the results of other companies.
— 79 — The following table reconciles our profit for the year under SFRSs, or SFRS(I)s and IFRSs to our EBITDA for the years indicated.
Year Ended December 31, 2016 2017 2018 RMB RMB RMB US$ (in thousands, except percentages) Profit for the year ...... 3,977,198 5,620,267 5,395,450 784,736 Interestincome...... (268,270) (359,168) (551,080) (80,151) Fair value gain on financial asset at fairvaluethroughprofitorloss...... (5,967) — (142) (21) Fair value gain from put liability to acquirenon-controllinginterests...... — (87,554) (13,411) (1,950) Financecost...... 347,819 484,690 693,994 100,937 Interest capitalized in cost of sales...... 1,560,824 1,091,022 684,587 99,569 Netforeignexchange(gain)loss...... (129,348) 177,180 (102,119) (14,853) Incometax...... 3,494,956 5,741,957 5,146,207 748,485 Depreciationexpense...... 32,085 33,207 87,521 12,729 EBITDA...... 9,009,297 12,701,601 11,341,007 1,649,481 EBITDA margin(1) ...... 35.1% 49.5% 45.6% 45.6%
(1) EBITDA margin refers to EBITDA divided by revenue for the relevant year, expressed as a percentage.
You should not consider our EBITDA in isolation or construe it as an alternative to cash flows, profit or any other measure of performance or as an indicator of our operating performance, liquidity, profitability or cash flows generated by operating, investing or financing activities. EBITDA presented in this offering memorandum may not be comparable to similarly titled measures presented by other companies. EBITDA, as presented in this offering memorandum, also differs from Consolidated EBITDA, as defined in the Notes.
— 80 — INDUSTRY OVERVIEW
The information in the section below has been derived, in part, from various government publications unless otherwise indicated. This information has not been independently verified by us or the Initial Purchasers or any of our and their respective affiliates or advisors. The information may not be consistent with other information compiled within or outside the PRC.
TheEconomyofthePRC
The PRC economy has grown significantly since the PRC government introduced economic reforms in the late 1970s. China’s accession to the World Trade Organization, or the WTO, in 2001 has further accelerated the reform of the PRC economy. Between 2009 and 2018, China’sGDPhasincreased from approximately RMB34,908.1 billion in 2009 to approximately RMB90,031.0 billion in 2018 at a compound annual growth rate, or CAGR, of approximately 11.1%.
The table below sets out selected economic statistics of China for the periods indicated.
CAGR (2009– 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018) Nominal GDP (RMB in billions) . . . 34,908.1 41,303.0 48,930.0 54,036.7 59,524.4 64,397.4 68,550.6 74,358.6 82,712.2 90,031.0 11.1% Real GDP growth rate (%) ...... 9.2 10.4 9.3 7.7 7.7 7.4 6.9 6.7 6.8 6.6 NA(1) Per capita GDP (RMB). . 26,222.0 30,876.0 36,403.0 40,007.0 43,852.0 47,203.0 49,992.0 53,935.0 59,201.0 64,644.0 10.55% Foreign Direct Investment — Actual investment (USD in billions). . . . 94.1 114.7 124.0 121.1 117.6 119.6 126.3 126.0 131.0 n/a(2) NA(1) Fixed Asset investment (RMB in billions) . . . 22,459.9 27,812.2 31,148.5 37,469.5 44,629.4 51,202.1 56,200.0 59,650.1 63,168.4 63,563.6 12.25%
Note:
(1) NA refers to not applicable
(2) n/a refers to not available
Source: CEIC and National Bureau of Statistics of China
TheRealEstateMarketinthePRC
According to National Bureau of Statistics of China, annual investment in real estate increased from RMB3,624.2 billion in 2009 to RMB12,026.4 billion in 2018, growing at a CAGR of 14.3% over the period. From January to December 2018, the total GFA of projects under construction was 8,223.0 million sq.m., a CAGR of 11.0%.
Meanwhile, as a result of increasing demand, the average price of residential and commercial property increased steadily at a CAGR of 7.5% and 5.5% from 2009 to 2018, respectively. During the same period, total GFA sold in the PRC increased from approximately 947.6 million sq.m. in 2009 to approximately 1,716.5 million sq.m. in 2018.
— 81 — The following table sets forth selected data relating to the PRC property market for the periods indicated.
CAGR (2009– 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018) Supply indicators: Investment in real estate (RMB in billions) . . . 3,624.2 4,825.9 6,179.7 7,180.4 8,601.3 9,503.6 9,597.9 10,258.0 10,979.9 12,026.4 14.3% GFA of projects under construction (sq.m. in millions) . . . 3,203.7 4,053.6 5,067.8 5,734.2 6,655.7 7,264.8 7,356.9 7,589.7 7,814.8 8,223.0 11.0% GFA of new developments (sq.m. in millions) . . . 1,164.2 1,636.5 1,912.4 1,773.3 2,012.1 1,795.9 1,544.5 1,669.3 1,786.5 n/a(1) NA(2) Demand indicators: Total GFA sold (sq.m. in millions) . . . 947.6 1,047.6 1,093.7 1,113.0 1,305.5 1,206.5 1,284.9 1,573.5 1,694.1 1,716.5 6.8% GFA of residential properties sold (sq.m. in millions) . . . 861.8 933.8 965.3 984.7 1,157.2 1,051.9 1,124.1 1,375.4 1,447.9 1,479.3 6.2% GFA of commercial properties sold (sq.m. in millions) . . . 53.3 69.9 78.7 77.6 84.7 90.8 92.5 89.4 128.4 119.7 9.4% Average price of all properties (RMB per sq.m.) . . . . 4,681.0 5,032.0 5,357.1 5,791.0 6,237.3 6,324.0 6,792.5 7,475.6 7,892.3 8,736.9 7.2% Average price of residential properties (RMB per sq.m.) . . . . 4,459.0 4,725.0 4,993.2 5,429.9 5,849.7 5,933.0 6,472.4 7,202.5 7,613.8 8,544.1 7.5% Average price of commercial properties (RMB per sq.m.) . . . . 6,871.0 7,747.0 8,488.2 9,021.0 9,777.1 9,817.0 9,560.8 9,786.2 10,322.0 11,150.5 5.5%
Note:
(1) n/a refers to not available
(2) NA refers to not applicable
Source: CEIC, National Bureau of Statistics of China and China Statistical Yearbook 2015–2018
The housing reforms together with the rapid economic growth of China, an increase in disposable income, emergence of the mortgage lending market and an increase in the urbanization rate, are key factors in sustaining the growth of China’s property market. Government housing reforms continue to encourage private ownership and it is expected that an increasing proportion of urban residents will own their private properties in the near future.
The following table sets forth the selected figures showing China’s urbanization rate and the increase in disposable income levels of the urban population in China for the periods indicated.
CAGR (2009– 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018) Urban population (in millions) ...... 645.1 669.8 690.8 711.8 731.01 749.2 771.2 793.0 813.5 831.4 2.9% Total population (in millions) ...... 1,334.5 1,340.9 1,347.4 1,354.0 1,360.7 1,367.8 1,374.6 1,382.7 1,390.1 1,395.4 0.5% Urbanization rate (%). . . 48.3 50.0 51.3 52.6 53.7 54.8 56.1 57.4 58.5 59.6 2.4% Per capita disposable income for urban households (RMB). . . 17,174.7 19,109.4 21,809.9 24,564.7 29,467.0 28,843.9 31,194.8 33,616.2 36,396.2 39,250 9.6%
Source: CEIC and National Bureau of Statistics of China
— 82 — Real Estate Reform and Regulatory Measures in the PRC
The rapid growth of the PRC real estate market over the past few years has raised increasing concerns that certain sectors of the PRC real estate market have started to overheat. Since 2004, the PRC government has taken measures intended to curtail the overheating of property development in the PRC and a number of these measures have been detailed below. Please note that is intended to be a discussion of the main measures and is not meant to be exhaustive:
. limiting the monthly mortgage payment and total monthly debt service payments to 50% and 55% of an individual borrower’s monthly income, respectively;
. requiring property developers to finance 35% rather than 20% of the total projected capital outlay of any property development with their capital funds;
. increasing the required reserve ratio of funds that a commercial bank must hold on deposit from time to time, to 19.5% as of February 24, 2011, effectively reducing the amount of money a bank is able to lend; and
. tightening regulations governing mortgage lending and restricting approval of new development zones.
In April 2005, the Ministry of Construction and other relevant PRC government authorities jointly issued the Opinions on Stabilizing Property Prices followed by a set of new measures to tackle the overheating of the real estate industry and include:
. a business tax levy, effective June 1, 2005, on the sales proceeds subject to the length of holding period and type of properties;
. a ban on onward transfer of uncompleted properties;
. an imposition of a land idle fee for land which has not been developed for one year starting from the commencement date stipulated in the land grant contract and cancellation of land use right for land idle for two years or more;
. a revocation of approvals for projects which are not in compliance with their planning permits; and
. a ban on land grant for villa construction and a restriction on land provision for premium residential property construction.
In recent years, the PRC government implemented a series of new measures on land supply, bank mortgage finance, taxation and other aspects with an aim to slow down the increase in real property prices, encourage development of more low- and middle-end properties, restrict foreign investment in the PRC real estate industry and promote a better environment for the growth and development of the PRC property industry, including:
. with effect from June 1, 2006, a requirement that residential units each with floor area of less than 90 sq.m. represent at least 70% of the total floor area of the residential developments of projects in a city, county or district, unless approval is obtained;
. a business tax to be levied on total sale value of residential property within five years of purchase, as well as a business tax to be levied on any gains from the sale of residential properties which are not deemed to be ordinary residential properties, after five years of purchase by an individual;
. with effect from June 1, 2006, a minimum down-payment of 30% of the total purchase price of a residential unit with floor area of over 90 sq.m. This applies to all existing units and units yet to be completed. A minimum down-payment of 20% is required for residential units purchased for self-use with floor area of 90 sq.m. and below;
— 83 — . with effect from August 1, 2006, definitions are set out on property values for different types of residential property for computing taxable gains for individual income tax on transfer of residential property and reasonable deductible costs with maximum cap on each such allowable costs;
. with effect from July 11, 2006, offshore entities without an onshore branch or representative agency, or foreign individuals who study or work in the PRC for less than a year, are not allowed to purchase commercial properties and residential properties;
. with effect from January 1, 2007, the tax rate on urban land use right has been raised to RMBl.5 to RMB30 per sq.m. for metropolitan areas depending on the location and type of use, which is higher than the previous statutory rate set forth in the Interim Regulations of PRC on Land Use Tax in respect of Urban Land as amended by State Council, and any foreign investment enterprise using urban land is required, for the first time, to pay the tax on urban land use from January 1, 2007;
. with effect from February 1, 2007, the State Administration of Taxation’s Notice in Relation to the Settlement of LAT Levied on Real Estate Development Enterprises regulates, among others, (1) the conditions under which the LAT must be settled; (2) the methods in which taxable gains are computed; (3) identifying items which are allowable deductible costs; (4) time frame for settlement of the LAT; and (5) requirements for filing of documents. The purpose of the notice was to regulate the settlement of LAT by property development enterprises more stringently;
. with effect from September 27, 2007, a minimum down-payment of 40% of the total purchase price of a residential unit with floor area of over 90 sq.m. while the mortgage rate for such purchases must be no less than 1.1 times the benchmark lending rate published by the PBOC for loan applications for additional purchases of residential units. However, for buyers purchasing their first residential units, the down-payment for buying homes smaller than 90 sq.m. will remain unchanged at 20%, while for larger residential units, the rate will be kept at 30%;
. with effect from January 1, 2008, the EIT Law imposes a single uniform income tax rate of 25% for most domestic enterprises and foreign-invested enterprises. It contemplates various transition periods and measures for existing preferential tax policies, including among others, a grace period for as long as five years for foreign-invested enterprises which are currently entitled to a lower income tax rate and continued implementation of preferential tax treatment with fixed term until the expiration of such fixed term. In addition, under the EIT Law, foreign investors are not expressly exempted from the income tax on dividends from a foreign-invested enterprise. According to the EIT Law, income such as dividends and profit distribution from the PRC derived from a foreign enterprise which has no establishment in the PRC is subject to a 10% withholding tax, subject to reduction as provided by any applicable double taxation treaty, unless the relevant income is specifically exempted from tax under the applicable EIT Law. Pursuant to a tax treaty between the PRC and the Republic of Singapore which became effective on January 1, 2008, a company incorporated in Singapore is subject to a withholding tax at the rate of no more than 5% of the gross amount of the dividends it receives from a company incorporated in the PRC if it holds directly a 25% or more interest in the PRC company, or no more than 10% of the gross amount of the dividends if it holds less than a 25% direct interest in the PRC company. However, under applicable PRC tax regulations, an approval from the local tax authority is required in order to benefit from the reduced treaty rate and such lower rate may be denied if the recipient company is a "conduit" or a company with no business substance;
. on January 3, 2008, the State Council issued the Notice on the Promotion of Economizing and Intensifying Use of Land, which requires strict policy implementation for idle land disposal. If a piece of land has been idle for two years or more, subject to certain statutory conditions, it must be taken back free of charge resolutely and rearranged for other uses; if the land does not meet the statutory conditions for recovery, it must be timely dealt with and fully used through changing its uses, replacement by parity value, temporary use or
— 84 — incorporation into government reserves. If a piece of land has been idle for more than one year but less than two years, the idle land fee must be collected at 20% of the land grant price;
. with effect from October 27, 2008, the minimum down-payment for commercial individual housing loans is adjusted to 20% of the purchase price with the minimum mortgage loan interest rate adjusted to 70% of the relevant PBOC benchmark interest rate. The policy that the borrower’s monthly expenditure on repayment of housing loans shall not exceed 50% of such borrower’s monthly income remains unchanged;
. on August 11, 2009, the Ministry of Land and Reserves issued the Notice Regarding the Strict Enforcement of the Management of Construction Land and Promotion on the Utilization of Acquired but Unused Land, pursuant to which construction land that has been acquired and held for two years but on which construction work has not commenced should be disposed of strictly in accordance with the disposal of idle land policies, in order to promote the utilization of such land as soon as possible;
. on November 18, 2009, the Notice on Strengthening the Management of Incomes and Expenses Related to Grant of Land Use Rights was promulgated. The new rules require a minimum down-payment of 50% of the land premium relating to land purchases from the PRC government. The new rules also provide that the installment period stipulated in the relevant land grant contracts may not exceed one year generally, provided that, for special projects, upon collective approval by the relevant government authorities, the installment period stipulated in the relevant land grant contracts can be two years. Developers will not be permitted to acquire any new land if they fail to pay off such land premium in time. The new rules also forbid local governments from giving discounts to developers or allowing developers to delay payments except as stipulated by the State Council;
. with effect from January 1, 2010, transfers of non-ordinary residential properties by individuals who have held them for less than five years are subject to business tax calculated on a gross basis; transfers of (i) non-ordinary residential properties by individuals who have held them for five years or more or (ii) ordinary residential properties by individuals who have held them for less than five years are subject to business tax calculated on a net basis; and transfers of ordinary residential properties by individuals who have held them for five years or more are exempted from business tax; and
. in April 2010, the General Office of the State Council issued additional measures to curb overheating of the property market, including further increasing the down-payment requirement for any mortgage loan to purchase additional housing properties to no less than 50% of the purchase price. See ‘‘Regulation — Restrictions on the Grant of Residential Development Loans and Individual Property Purchase Loans by Banks’’ and ‘‘— Measures on Stabilizing Housing Prices.’’
A PRC State Administration of Taxation circular that took effect on February 1, 2007 stipulates that LAT must be paid if a development project meets certain criteria, such as when a development project has been completed and fully sold. Moreover, relevant tax bureaus may require real estate developers to settle their final LAT payments with respect to their development projects that meet certain criteria, such as when 85% of a development project has been pre-sold or sold. See ‘‘Regulation — Major Taxes Applicable to Real Estate Developers — Land Appreciation Tax.’’ On May 25, 2010, the State Administration of Taxation issued a circular which adjusts the prepaid LAT rate. With the exception of indemnificatory housing, the prepaid rate shall be no less than 2.0% for eastern provinces, 1.5% for central and northeast provinces and 1.0% for western provinces. In regions where the LAT has not been pre-collected, the pre-payment of LAT will be required.
On May 26, 2010, the MOHURD, the PBOC and the CBRC jointly issued a notice which provides for the regulation of second home mortgages. Pursuant to such notice, the number of homes owned by the intended purchasing family (including the borrower, spouse and minor children) will be taken into consideration. In the following circumstances, the borrower will be subject to the second home mortgage policy: (i) if the borrower applies for a housing loan for the first time and the family of the borrower already owns a home in the region where the borrower intends to purchase residential property; (ii) the borrower has already purchased a residential property using a housing loan and applies for a housing loan for a second time; and (iii) the lender discovers, through its own due diligence, that the family of
— 85 — the borrower already owns a residential property. For a non-local resident applying for a housing loan, the applicant must provide proof of payment of local taxes for one-year or proof of payment of the social insurance premium, pursuant to the second home mortgages policy. In an area where the price of commercial residential property is extraordinarily high, the price has risen too quickly or supply is tight, commercial banks can suspend the process of granting housing loans to non-local resident applicants who cannot provide proof of payment of local taxes or proof of payment of the social insurance premium.
On September 21, 2010, the Ministry of Land Resources and the MOHURD jointly issued the Notice on Further Strengthening the Regulating and Controlling of Land Use and Construction of Real Estate. Pursuant to such notice, the plot ratio of a residence must be greater than 1.0. If the land is left unused for one year or more due to the decision of the real estate development enterprise, such enterprise and its controlling shareholder are forbidden to participate in land bidding. Construction of residential properties must commence within one year from the delivery of the land and must be completed within three years from the commencement date.
On September 29, 2010, the PBOC and the CBRC issued a notice which suspended the grant of housing loans to (i) local residents who applied in order to purchase their third or more residential property; (ii) non-local resident applicants who could not provide proof of payment of local taxes for one year or proof of payment of the social insurance premium. A first owner-occupied residential property requires a down-payment of at least 30% of the purchase price; the down-payment for second home mortgages must not be less than 50% of the purchase price and the loan interest rate cannot be lower than 1.1 times the corresponding benchmark lending rate. Pursuant to the notice issued by the General Office of the State Council on January 26, 2011, the down-payment for a second home mortgage has been further increased so that it can be no less than 60% of the purchase price.
On November 2, 2010, the Ministry of Finance, MOHURD, CBRC and PBOC jointly issued the Circular on Issues Concerning Policies on Regulation of Personal Housing Provident Fund Loan, which provides that where personal housing provident fund loan is used to buy the first ordinary self-use house and the floor area of the house is no more than 90 sq.m., the down-payment proportion shall not be lower than 20%; where the floor area of the house is more than 90 sq.m., the down-payment proportion shall not be lower than 30%. Only the housing provident fund-paying families whose floor area per capita is less than local average shall have access to personal housing provident fund loan which is used to buy the second house, and the loan shall be used to buy ordinary self-use house so as to improve dwelling conditions. Where the personal housing provident fund loan is used to buy the second house, the down-payment proportion shall not be lower than 50%, and the interest rate of such loan shall not be less than 1.1 times of the interest rate of the personal housing provident fund loan for the purchase of the first house. Personal housing provident fund loan for the purchase of a third or more houses by housing provident fund-paying families shall be suspended.
On January 26, 2011, the State Council issued the Notice on Further Adjustment and Control of Property Markets which requires, among other restrictive measures: (i) a minimum down-payment of 60% of the total purchase price with a minimum mortgage interest rate of 110% of the benchmark rate published by PBOC for the purchase of a second residential property; and (ii) in municipalities directly under the central government, cities listed on state plans, provincial capitals, and cities where the housing prices are exceedingly high or increasing at an excessively high rate, local residents with two or more residential properties, non-local residents with one or more residential properties and non-local residents that are unable to provide documentation certifying payment of local tax or social insurance payment for a specified time period, are not permitted to purchase any residential properties located in the local administrative area.
In January 2011, the State Council also approved, on a trial basis, the launch of a new property tax scheme in selected cities. The detailed measures will be formulated by the governments of the pilot provinces, autonomous regions or municipalities directly under the central government. On January 27, 2011, the governments of Shanghai and Chongqing issued their respective measures for implementing pilot property tax schemes, which became effective on January 28, 2011.
— 86 — On March 8, 2011, the General Office of CBRC issued the Notice on Promoting Housing Financial Services and Strengthening Risk Management, which stipulates that in handling the individual housing loan business financial institutions must strictly implement the provision that, with respect to families that purchase second residential properties through a loan, the down-payment may not be less than 60%, and the loan interest rate may not be less than 1.1 times the benchmark rate.
On February 15, 2012, the Ministry of Land and Resources promulgated the Notice on Accomplishment of Real Estate Land Administration and Control in 2012 which stipulates the following: (i) the real estate control policy shall be firmly performed and the key tasks shall be clarified; (ii) the real estate land supply shall be properly managed for the purpose of the welfare of the masses; (iii) the land supply for social security housing projects shall be guaranteed; (iv) unlawful acts shall be strictly punished and development and construction shall be vigorously encouraged; and (v) supervision analysis and media propaganda shall be strengthened to provide positive guidance towards the market.
In May 2012, the Ministry of Land and Resources and the NDRC jointly issued a Circular on the Distribution of the Catalogue for Restricted Land Use Projects (2012 Version) and the Catalogue for Prohibited Land Use Projects (2012 Version), as a supplement to its 2006 version. In this Circular, the Ministry of Land and Resources has set forth a ceiling for the land granted by local governments for development of commodity housing of 7 hectares for small cities and towns, 14 hectares for medium- sized cities and 20 hectares for large cities.
On June 1, 2012, the Ministry of Land and Resources promulgated the revised Measures on the Disposal of Idle Land, which became effective on July 1, 2012. Under these measures, if any land parcel constitutes ‘‘idle land’’ due to government-related action, the holder of the relevant land use rights is required to explain to the relevant municipality or county-level land administrative department(s) the reasons for the land becoming idle, consult the relevant government authorities and rectify the situation accordingly. The means of rectification include but are not limited to the extension of the period permitted for commencing development, the adjustment of the land use and planning conditions or the substitution of the relevant idle land parcels with other land parcels.
On July 12, 2011, the State Council announced the PRC government’sintentiontoimpose austerity measures on second- and third-tier cities. The State Council ordered the MOHURD to compile a list of the specific second- and third-tier cities that will be affected by the austerity measures. If austerity measures on second- and third-tier cities are implemented, particularly in second- and third-tier cities where we have property projects or plan to have property projects, our business, financial condition and operating results may be materially and adversely affected.
On July 19, 2012, the Ministry of Land and Resources and the Ministry of Housing and Urban- Rural Development jointly issued the Urgent Notice to Further Tighten Real Property Land Administration and Consolidate the Regulation of the Real Property Market to strengthen the enforcement of macroeconomic policy in the real property market. In accordance with the notice, local governments must strictly implement the macroeconomic control policies for the real property market and must secure the supply of residential land, especially land used for development of government- subsidized residential units. Residential construction projects must commence within one year of the delivery date of the land title, which is stipulated in the land allocation decision or land grant contract, and must be completed within three years of the date of commencement of the project.
On September 6, 2012, the Ministry of Land and Resources promulgated the Notice on Strictly Implementing Land Use Standard and Vigorously Promoting Economical Intensive Land Use, which stipulated that land use standards shall be strictly implemented and continuously improved in accordance with the principle of economical intensive land use.
On February 26, 2013, the State Council issued the Notice on Continuing Adjustment and Control of Property Markets which, among other restrictive measures, provides that further restraining measures are to be adopted to strengthen the regulation of the real estate market. Major cities which have implemented the commodity housing purchase restrictions are required to enforce purchase restrictions in all administrative areas of cities and restricted housing are to include new commodity housing and second-hand housing. Non-local residents who have one or more residential property and fail to provide one-year or longer tax payment certificates or social insurance payment certificates will be barred from purchasing any residential properties located in the administrative areas subject to restrictions. For cities where housing prices are increasing at an excessively high rate, local branches of the PBOC may further raise the down-payment rate and mortgage interest rate for the purchase of a second residential property.
— 87 — In addition, the Notice stipulates that the state will strictly enforce a 20% tax on profits from sales of homes. Financial institutions, subject to credit requirements being satisfied, will prioritize requests for mortgages for ordinary commodity housing construction projects in which medium and small housing units constitute 70% or more of the total units in such construction project.
On July 19, 2013, the PBOC announced a few measures to further liberalize China’slending interest rate effective from July 20, 2013, among which the most important is the removal of the lending rate floor, which was 30% below the benchmark rates. The floor on the benchmark mortgage rate will however remain to curb speculative demand on the property market and maintain a healthy development of the market.
On November 8, 2013, pressed by sustained rapid growth in residential prices in Shanghai, the Shanghai Housing Bureau released additional property regulation policies known as the ‘‘Shanghai Seven Measures’’ (上海市政府進一步嚴格執行國家房地產市場調控政策相關措施). The new measures aim to: (1) increase residential land supply, especially for small- and medium-sized units. Total land supply target for 2013 is raised to 30% above the average of the past five years, and the actual supply should not be lower than 10 million sq.m.; (2) raise minimum down-payment for second home mortgages from 60% to 70% (in line with policy changes in Beijing and Shenzhen); (3) tighten HPRs and require two consecutive years of social security payment record for non-residents (previously only one year of payment record was required); (4) regulate the pre-sales activities and ensure that the residential price growth target for 2013 is met; (5) extend the coverage of affordable housing and lower the application criteria to cover more people; (6) more stringently enforce existing regulations and taxes, including the pre-collection of LAT and property tax; and (7) strengthen the regulation framework.
As of September 26, 2014, among 46 cities that restricted home purchases, 41 cities have cancelled the restrictions. On July 19, 2014, Wuhan eased the restriction on the purchase of homes with area over 140 sq.m. and subsequently announced on September 23, 2014 that it will remove its home purchase restriction policy, effective from September 24, 2014. On August 7, 2014, Foshan eased its home purchase restriction allowing non-residents to buy one housing unit and registered local residents to buy up to two units. On September 3, 2014, Dalian removed its home purchase restriction, allowing both residents and non-residents to buy houses in Dalian without limits on the number of units purchased.
On September 29, 2014, the PBOC and CBRC jointly issued a circular to relax lending rules for the property market. Under the new mortgage lending policy, second-home buyers are eligible for preferential terms of mortgage loans (minimum 30% down payment requirement and up to 30% discount of the benchmark mortgage rate) as long as they have paid off their first-home mortgage. The ban on mortgages for third homes was lifted in cities that have withdrawn or do not have purchase restrictions. Qualified property developers were encouraged to issue bonds in the interbank bond market to raise funds.
In order to support the local residential market, many provincial governments (including those of Hebei, Fujian, Jiangsu, Qinghai, Gansu, Shandong, Zhejiang, Jiangsu, Guizhou and Shaanxi) scrapped their home purchase restrictions during the third quarter of 2014.
Effective on March 1, 2015, China’s new property registration rule《 ( 不動產登記暫行條例》) unified property registration nationwide. The new registration system shares information such as property location, area and origin of ownership in real time among government departments including the police, taxation and audit authorities in real time.
On March 25, 2015, the MOHURD and MLR jointly issued a notice to address the property oversupply issue《 ( 關於優化2015年住房及用地供應結構促進房地產市場平穩健康發展的通知》). Key measures included adjusting land supply, allowing developers to change their project planning (i.e. adjusting the unit sizes of apartments), and allowing developers to change the land uses (e.g., from residential to social housing, commercial, recreational, tourism and cultural uses) of land plots where construction had yet to commence.
On March 30, 2015, the PBOC, CBRC and MOHURD jointly announced an easing of the housing mortgage policy《 ( 關於個人住房貸款政策有關問題的通知》). The second home downpayment requirement for self-use ordinary housing was lowered from 60–70% to 40%, and the interest rate floor (1.1x) was eliminated. The down payment requirement eased from 30% to 20% for first home purchases, and from 60% to 30% for second home purchases under the Housing Provident Fund scheme. The MOF exempted business tax on second-hand sales of ordinary housing held for more than two years.
— 88 — On May 10, 2015, the PBOC announced that the one-year lending rate will decrease to 5.1% and the one-year deposit rate will decrease to 2.25%. The floating range cap of the deposit rate increased from 1.3 times the benchmark deposit rate to 1.5 times.
On June 27, 2015, the PBOC announced that the one-year lending rate will decrease to 4.85% and the one-year deposit rate will decrease to 2%. On August 25, 2015, the PBOC announced that the one- year lending rate will decrease to 4.6% and the one-year deposit rate will decrease to 1.75%.
On August 27, 2015, the PBOC, MOF and MOHURD jointly announced an easing of the housing mortgage policy. The down payment requirement eased from 30% to 20% for second home purchases under the Housing Provident Fund scheme. The rule does not apply to tier one cities.
On September 30, 2015, the PBOC and CBRC jointly announced that for the cities without housing restriction policy, The first home downpayment requirement for self-use ordinary housing was set to be 25%.
On October 8, 2015, the MOHURD raised housing fund loan upper limit for eligible cities and launched non-local housing fund loan application.
On October 23, 2015, the PBOC announced that the one-year lending rate will decrease to 4.35% and the one-year deposit rate will decrease to 1.5%. The deposit reserve ratio of financial institutions decreased by 0.5%. The floating range cap of the deposit rate for commercial bank and rural cooperative financial institutions was eliminated.
On February 1, 2016, the PBOC and CBRC jointly announced that for the cities without housing restriction policy, the minimum down payment for first home purchase and second home purchase was set to be 25% and 30% of the purchase price, respectively. Various regions may decrease by 5% based on the 25% minimum down payment for first home purchase.
On February 21, 2016, the PBOC raised the interest rate of Employee Housing Provident Fund.
On March 1, 2016, PBOC announced that the deposit reserve ratio of financial institutions decreased by 0.5%.
On March 24, 2016, General Office of the People’s Government of Shanghai Municipality unveiled the new housing policy《 ( 關於進一步完善本市住房市場體系和保障體系促進房地產市場平穩健康發展 若干意見的通知》), which included: (1) raise the hurdle for home purchase by non-local residents (non- Shanghai residents now have to pay social insurance or individual income tax for five consecutive years to become a qualified buyer, instead of two years); (2) tighten the definition of ‘‘second-home buyer’’; (3) increase down payment for second-homes (buyers of second homes will have to pay a minimum 70 percent down payment for ‘‘non-ordinary housing’’ and a minimum 50 percent for ‘‘ordinary housing’’, where as previously, a 40 percent down payment was required for both types of house); and (4) restrict housing transactions by company-owned property.
During the third quarter of 2016, many tier two cities’ municipal governments began fine-tuning property policies. The municipal governments of Xiamen, Wuhan, Nanjing, Suzhou, Chengdu and Zhuhai etc. have issued different restrictive policies (raising down payment requirements or restricting home purchases again) to rein in rises in housing price. For example, the Wuhan municipal government raised down payment to 50% for second-homes buyers on October 3, 2016.
On November 29, 2016, the Shanghai Housing Provident Fund Management Committee issued the Circular on Adjusting the Policies of Shanghai Municipality on Housing Provident Fund for Individual Loan《 ( 關於調整本市住房公積金個人貸款政策的通知》), which, among other things, (1) provides that, for any family which has no residential property in Shanghai nor any record of housing provident fund loan, the residential property bought by such family shall be treated as the first residential property for its loan application and the credit policy remains unchanged; (2) provides that, for any family which has no residential property in Shanghai but has one loan record, or has one residential property and intends to purchase the second residential property to improve its living conditions, the residential property bought by such family shall be treated as the second residential property for improving living conditions for its loan application; and (3) prohibits the Shanghai Housing Provident Fund Management Center from providing a loan to any applicant if the family already has two loan records or if the purpose of purchasing a second residential property by the family is not for improving living conditions.
— 89 — On April 1, 2017, the MOHURD and the Ministry of Land and Resources jointly issued the ‘‘Circular of Relevant Work on Strengthening the Recent Administration and Control of Housing and Land Supply’’ 《( 關於加強近期住房及用地供應管理和調控有關工作的通知》) which provides, among others, that cities and counties that have more than one million inhabitants shall make three year (2017– 2019) and five-year (2017–2021) plans for housing land supply, and make such plans public by the end of June 2017. The circular further requires that local governments shall adjust the size, structure and timing of land supply for residential housing in due course based on the period of depleting commodity residential housing inventory. In addition, the circular stipulates that local authorities shall adopt the examination system of land acquisition capital to insure that the property developers use internal funds to acquire lands and that, if the land bid capital originate from a questionable source, the property developers shall be disqualified and prohibited from bidding for land for a designated time.
The Real Estate Market in Selected Cities
The Property Market in Shanghai
Shanghai has experienced unprecedented economic growth over the past few years, and it is widely regarded as the emerging economic powerhouse and financial center of the PRC. As a result, an increasing number of multi-national companies have chosen to locate their PRC headquarters in Shanghai. Coupled with the PRC government’s initiatives in driving urbanization, Shanghai continues to experience robust growth and its population is expected to grow steadily over the next few years. In 2018, Shanghai’s GDP reached approximately RMB3,268.0 billion, representing a CAGR of approximately 9% between 2009 and 2018. The table below sets out selected economic statistics of Shanghai for the periods indicated.
(CAGR (2009– 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018) GDP (RMB in billions) . 1,504.6 1,716.6 1,919.6 2,018.2 2,160.2 2,356.8 2,512.3 2,817.9 3,063.3 3,268.0 9% Total investment in fixed assets (RMB in billions) . . . 527.3 531.8 506.7 525.4 564.8 601.6 635.3 675.6 724.1 n/a(1) NA(2) Annual disposable income percapitaforurban households (RMB). . . 28,838 31,838 36,230 40,188 43,851 47,710 52,962 57,692 62,595 68,034 10.0% Unemployment (%) . . . . 4.3 4.4 3.5 3.1 4.0 4.1 4.1 4.1 3.9 3.6 NA(2)
Note:
(1) n/a refers to not available
(2) NA refers to not applicable
Source: CEIC, Shanghai Statistics Bureau
Shanghai has been the focal point of China’s real estate market. Being the financial center of the PRC, a total GFA of approximately 31.2 million sq.m. of commodity properties was completed in Shanghai in 2018, and a total GFA of approximately 17.7 million sq.m. of commodity properties was sold in 2018.
CAGR (2009– 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018) GFA completed (sq.m. in millions) . . . 21.0 19.4 23.8 23.1 22.5 23.1 26.5 25.5 33.9 31.2 4.5% GFA sold (sq.m. in millions) . . . 33.7 20.6 17.9 19.0 23.8 20.8 24.3 27.1 16.9 17.7 (6.9)% Average price per sq.m. (RMB) ...... 12,840 14,464 14,603 14,061 16,420 16,787 20,949 24,747 23,804 23,774.6 7.1% Sales revenue (RMB in billions) . . . 433.0 298.1 261.5 266.9 391.2 350.0 509.4 702.2 402.3 475.2 1.0%
Source: CEIC, Shanghai Statistics Bureau
— 90 — The Property Market in Nanjing
Nanjing is the capital city of Jiangsu Province and is located in the eastern part of China, 254 km from Shanghai. Nanjing is the political, economic and cultural center of Jiangsu Province and an important city in the lower reaches of the Yangtze River. It is widely recognized as an important industrial base in eastern China, and features an international airport and the largest inland foreign trade river port in the PRC. In 2018, Nanjing’s GDP reached approximately RMB1,282.0 billion, representing a CAGR of 13.1% between 2009 and 2018. The table below sets out selected economic statistics of Nanjing for the periods indicated.
CAGR (2009– 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018) GDP (RMB in billions) . 423.0 513.0 614.6 720.2 801.2 882.1 972.1 1,050.3 1,171.5 1,282.0 13.1% Total investment in fixed assets (RMB in billions) . . . 266.8 330.6 375.7 468.3 526.6 543.1 548.4 553.4 636.2 471.8 6.5% Annual disposable income percapitaforurban households (RMB). . . 24,678 27,383 31,100 35,092 39,125 42,568 46,104 49,997 54,538 59,308 10.2% Unemployment (%) . . . . 3.0 2.6 2.7 2.7 2.7 n/a(2) 1.9 n/a(2) n/a(2) n/a(2) NA(1)
Note:
(1) NA refers to not applicable
(2) n/a refers to not available
Source: CEIC, Nanjing Statistics Bureau
According to the Nanjing Statistics Bureau, a total GFA of approximately 11.8 million sq.m. of commodity properties was completed in Nanjing in 2018. A total GFA of approximately 12.2 million sq.m. of commodity properties was sold in Nanjing in 2018 with an average selling price per sq.m. of approximately RMB18,704.
CAGR (2009– 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018) GFA completed (sq.m. in millions) . . . 15.2 10.4 11.7 17.0 10.4 9.7 14.5 12.4 10.8 11.8 (2.8)% GFA sold (sq.m. in millions) . . . 11.9 8.2 7.7 9.5 12.2 12.1 15.4 15.6 14.3 12.2 0.3% Average price per sq.m. (RMB) ...... 7,185 9,565 9,310 10,106 11,495 11,197 11,489 17,754 15,653 18,703.7 11.2% Sales revenue (RMB in billions) . . . 85.3 78.7 71.5 96.1 140.5 135.2 177.5 277.0 223.8 273.2 13.8%
Source: CEIC, Nanjing Statistics Bureau
The Property Market in Chengdu
Chengdu is a transportation hub for south-western China where infrastructure is generally not well developed. It has the largest international airport in this part of China and has strong railway links. As a result of its transportation links, Chengdu is considered the central economic gateway to south-western China and is the one of the most important cities in this part of China. In 2018, Chengdu’s GDP reached approximately RMB1,534 billion, representing a CAGR of 14.6% between 2009 and 2018. The table below sets out selected economic statistics of Chengdu for the periods indicated.
CAGR (2009– 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018) GDP (RMB in billions) . 450.3 555.1 685.5 813.9 910.9 1,005.7 1,080.1 1,217.0 1,388.9 1,534.0 14.6% Total Investment in fixed assets (RMB in billions) . . . 402.2 425.5 499.6 589.0 650.1 662.0 700.7 837.1 940.0 834.0 8.4% Annual disposable income per capita (RMB) . . . 17,589 19,920 23,048 26,590 29,968 30,996 33,476 35,902 38,918 42,128 10.2% Unemployment (%) . . . . 3.0 2.5 3.0 2.9 n/a(2) n/a(2) n/a(2) 3.3 n/a(2) n/a(2) NA(1)
— 91 — Note:
(1) NA refers to not applicable
(2) n/a refers to not available
Source: CEIC
According to the CEIC, a total GFA of approximately 36.8 million sq.m. of commodity properties was sold in Chengdu in 2018.
CAGR (2009– 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018) GFA completed (sq.m. in millions) . . . 17.4 15.8 15.6 21.1 18.8 21.2 14.4 27.3 18.6 17.2 (0.1)% GFA sold (sq.m. in millions) . . . 27.1 25.6 26.8 28.4 29.5 29.5 30.0 39.3 39.3 36.8 3.5% Average price per sq.m. (RMB) ...... 4,925 5,937 6,677 7,288 7,197 7,032 6,875 7,497 8,731 n/a(2) NA(1) Sales volume (RMB in billions) . . . 133.4 151.9 181.1 207.3 212.3 207.5 206.1 294.6 342.8 363.3 11.8%
Note:
(1) NA refers to not applicable
(2) n/a refers to not available
Source: CEIC
The Property Market in Zhuhai
Zhuhai is situated on the west bank of the estuary of the Pearl River in southern Guangdong and was one of the first regions to be designated as a special economic zone by the PRC government. In 2018, Zhuhai’s GDP reached approximately RMB291.5 billion, representing a CAGR of 12.2% between 2009 and 2018. Zhuhai’s key industries include the mechanical and electrical equipment industry, heavy industry and the chemicals industry. The table below sets out selected economic statistics of Zhuhai for the periods indicated.
CAGR (2009– 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018) GDP (RMB in billions) . 103.8 120.3 140.3 150.4 166.2 186.7 202.5 222.6 267.5 291.5 12.2% Total Investment in fixed assets (RMB in billions) . . . 41.1 50.2 63.8 78.8 96.1 113.5 130.5 139.0 166.2 185.9 18.3% Annual disposable income per capita of urban households (RMB). . . 22,859 25,382 28,731 32,978 32,344 35,287 38,322 42,537 46,826 50,713 9.3% Unemployment (%) . . . . 2.8 2.7 2.4 2.3 2.3 n/a(2) n/a(2) n/a(2) n/a(2) n/a(2) NA(1)
Note:
(1) NA refers to not applicable
(2) n/a refers to not available
Source: CEIC and Zhuhai Statistics Bureau
— 92 — Since the rapid growth of the Macau housing market in recent years especially due to the liberalization of the Macau gaming industry, planned construction of the Hong Kong-Zhuhai-Macau Bridge and strong economic growth, an increasing number of Macau residents have been attracted to buy housing in Zhuhai. According to the Zhuhai Statistics Bureau, a total GFA of approximately 3.0 million sq.m. of commodity properties was sold in Zhuhai in 2018, which represented a CAGR of 0.8% between 2009 and 2018.
CAGR (2009– 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018) GFA completed (sq.m. in millions) . . . 3.7 2.1 3.5 4.0 3.8 n/a(2) n/a(2) n/a(2) n/a(2) n/a(2) NA(1) GFA sold (sq.m. in millions) . . . 2.8 2.6 2.4 2.5 3.4 3.5 4.2 6.5 5.1 3.0 0.8% Average price per sq.m. (RMB) ...... 7,485 10,693 11,679 10,687 11,472 11,697 14,232 18,611 21,454 n/a(2) NA(1) Sales revenue (RMB in billions) . . . 21.5 29.3 25.8 26.8 39.3 40.8 59.8 121.0 109.3 70.4 14.1%
Note:
(1) NA refers to not applicable
(2) n/a refers to not available
Source: CEIC and Zhuhai Statistics Bureau
The Property Market in Suzhou
Suzhou is a well-known historical and cultural city, as well as a popular tourist attraction. In 2018, Suzhou’s GDP reached approximately RMB1,859.7 billion, representing a CAGR of 10.2% between 2009 and 2018. Suzhou has been designated by the PRC government as one of the five special economic development zones in the PRC, which is expected to support continued rapid growth. The table below sets out selected economic statistics of Suzhou for the periods indicated.
CAGR (2009– 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018) GDP (RMB in billions) . 774.0 922.9 1,071.7 1,201.2 1,301.6 1,376.1 1,450.4 1,547.5 1,732.0 1,859.7 10.2% Total Investment in fixed assets (RMB in billions) . . . 296.7 361.8 428.0 514.3 572.2 605.4 612.4 564.8 563.0 455.6 4.9% Annual disposable income per capita of urban households (RMB). . . 26,320 29,219 33,243 37,531 41,143 46,677 50,400 54,341 58,806 63,481 10.3% Unemployment (%) . . . . 2.9 2.8 2.7 2.7 n/a(2) 1.9 n/a(2) n/a(2) n/a(2) n/a(2) NA(1)
Note:
(1) NA refers to not applicable
(2) n/a refers to not available
Source: CEIC and Suzhou Statistics Bureau
— 93 — According to the Suzhou Statistics Bureau, a total GFA of approximately 15.1 million sq.m. of commodity properties was completed in Suzhou in 2018. A total GFA of approximately 19.9 million sq.m. of commodity properties was sold in Suzhou in 2018.
CAGR (2009– 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018) GFA completed (sq.m. in millions) . . . 18.8 17.6 15.1 18.3 16.9 15.9 21.3 18.8 21.5 15.1 (2.4)% GFA sold (sq.m. in millions) . . . 23.5 15.1 12.1 14.7 18.8 16.0 19.4 24.9 19.4 19.9 (1.8)% Average price per sq.m. (RMB)...... 6,423 8,243 9,013 n/a(2) n/a(2) n/a(2) n/a(2) n/a(2) n/a(2) n/a(2) NA(1) Sales Revenue (RMB in billions) . . . 150.7 124.8 109.1 133.6 180.1 154.7 220.0 332.3 289.4 311.8 8.4%
Note:
(1) NA refers to not applicable
(2) n/a refers to not available
Source: CEIC, and Suzhou Statistics Bureau
The Property Market in Tianjin
Tianjin is one of four municipalities directly under the PRC central government and the largest port city of northern China. It is also the main port serving the capital city of Beijing, making the city one of the most important economic and trade centers in northern China. Tianjin has experienced rapid economic growth with recorded GDP of RMB1,881.0 billion in 2018, representing a CAGR of 10.8% between 2009 and 2018. The table below sets out selected economic statistics of Tianjin for the periods indicated.
CAGR (2009– 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018) GDP (RMB in billions) . 750.1 910.9 1,119.1 1,285.5 1,437.0 1,572.2 1,653.8 1,788.5 1,854.9 1,881.0 10.8% Total Investment in fixed assets (RMB in billions) . . . 473.8 627.8 706.8 793.5 913.0 1,051.8 1,183.2 1,277.9 1,128.9 n/a(2) NA(1) Annual disposable income per capita of urban households (RMB). . . 21,430 24,293 26,921 29,626 32,658 31,506 34,101 37,109 40,278 42,976 8.0% Unemployment (%) . . . . 3.6 3.6 3.6 3.6 3.6 3.5 3.5 3.5 3.5 3.5 NA(1)
Note:
(1) NA refers to not applicable
(2) n/a refers to not available
Source: CEIC and Tianjin Statistics Bureau
— 94 — According to the Tianjin Municipal Bureau of Statistics, the commodity properties market in Tianjin experienced consistent and steady growth in recent years. Total GFA of commodity properties sold increased at a CAGR of 12.5% from 2009 to 2018, reaching 12.5 million sq.m. in 2018.
CAGR (2009– 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018) GFA completed (sq.m. in millions) . . . 19.0 21.0 21.0 25.4 28.1 29.2 29.0 29.1 20.2 20.9 1.1% GFA sold (sq.m. in millions) . . . 15.9 15.6 16.4 16.6 18.5 16.1 17.7 27.1 14.8 12.5 (2.6)% Average price per sq.m. (RMB) ...... 6,886 8,197 8,965 8,218 8,746 9,219 10,107 12,830 15,738.4 15,837.3 9.7% Sales revenue (RMB in billions) . . . 109.5 128.2 147.3 136.6 161.5 148.7 179.0 347.7 227.2 200.7 7.0%
Source: CEIC and Tianjin Statistics Bureau
The Property Market in Shenzhen
Shenzhen is located in the Southern part of Guangdong Province and China’s first special economic zone. Shenzhen has experienced significant growth in GDP in recent years from approximately RMB820.1 billion in 2009 to approximately RMB2,422.2 billion in 2018, representing a CAGR of 12.8%. The table below sets out selected economic statistics of Shenzhen for the periods indicated.
CAGR (2009– 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018) GDP (RMB in billions) . 820.1 951.1 1,150.2 1,295.0 1,450.0 1,600.1 1,750.3 1,949.3 2,243.8 2,422.2 12.8% Total Investment in fixed assets (RMB in billions) . . . 170.9 194.5 213.6 231.4 250.1 271.7 329.8 407.8 514.7 619.1 15.4% Annual disposable income per capita of urban households (RMB). . . 29,245 32,381 36,505 40,742 44,653 40,948 44,633 48,695 52,938 n/a(2) NA(1) Unemployment (%) . . . . 2.6 2.5 2.2 2.4 2.4 2.3 n/a(2) n/a(2) n/a(2) n/a(2) NA(1)
Note:
(1) NA refers to not applicable
(2) n/a refers to not available
Source: CEIC and Shenzhen Statistics Bureau
According to Shenzhen Statistics Bureau, a total GFA of approximately 2.6 million sq.m. of commodity properties were completed in Shenzhen in 2018. A total GFA of approximately 7.2 million sq.m. of commodity properties were sold in Shenzhen in 2018.
CAGR (2009– 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018) GFA completed (sq.m. in millions) . . . 4.0 3.4 3.4 4.3 3.5 4.3 3.6 4.9 2.9 2.6 (4.7)% GFA sold (sq.m. in millions) . . . 7.6 4.7 5.0 5.3 5.9 5.3 8.3 7.4 6.7 7.2 (0.6)% Average price per sq.m. (RMB) ...... 14,615 19,170 21,350 19,590 24,401 24,723 33,942 45,146 48,622 55,441 16.0% Sales revenue (RMB in billions) . . . 111.4 89.3 106.1 103.0 143.6 131.7 282.2 332.4 321.7 390.8 15.0%
Source: CEIC and Shenzhen Statistics Bureau
— 95 — The Property Market in Sanya
Sanya is located in the Southern part of Hainan Province. It is renowned for its tropical climate and has emerged as a popular tourist destination. Sanya has experienced significant growth in GDP in recent years from approximately RMB17.5 billion in 2009 to approximately RMB59.6 billion in 2018, representing a CAGR of 14.6%. The table below sets out selected economic statistics of Sanya for the periods indicated.
CAGR (2009– 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018) GDP (RMB in billions) . 17.5 23.1 28.5 33.1 37.3 40.2 43.5 47.6 52.9 59.6 14.6% Total Investment in fixed assets (RMB in billions) . . . 21.1 30.5 35.8 43.0 52.3 63.0 70.6 78.3 86.8 n/a(2) NA(1) Annual disposable income per capita of urban households (RMB). . . 15,233 17,758 20,472 23,295 24,824 26,860 28,782 31,103 33,638 36,417 10.2% Unemployment (%) . . . . 1.4 1.6 2.0 1.9 n/a(2) n/a(2) n/a(2) n/a(2) n/a(2) n/a(2) NA(1)
Note:
(1) NA refers to not applicable
(2) n/a refers to not available
Source: CEIC and Sanya Statistics Bureau
According to Sanya Statistics Bureau, a total GFA of approximately 2.0 million sq.m. of commodity properties were completed in Sanya in 2018. A total GFA of approximately 2.4 million sq.m. of commodity properties was sold in Sanya in 2018.
CAGR (2009– 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018) GFA completed (sq.m. in millions) . . . 1.2 1.3 0.9 1.6 0.5 3.2 1.9 2.4 1.2 2.0 5.8% GFA sold (sq.m. in millions) . . . 1.1 1.4 1.6 1.8 1.8 1.0 1.0 1.5 2.1 2.4 9.1% Average price per sq.m. (RMB) ...... 11,113 17,321 12,784 11,623 14,420 19,513 18,166 18,493 23,410.4 n/a(2) 8.6% Sales revenue (RMB in billions) . . . 12.7 24.4 20.9 20.9 26.6 19.7 n/a(2) n/a(2) n/a(2) n/a(2) NA(1)
Note:
(1) NA refers to not applicable
(2) n/a refers to not available
Source: CEIC and Sanya Statistics Bureau
— 96 — The Property Market in Tangshan
Tangshan is located in the northeast region of Hebei Province. The city borders Qinhuangdao to the east and adjoins Beijing and Tianjin to the west, making it a strategic area as well as a corridor that connects North China and Northeast China. GDP has increased rapidly over the years, from RMB381.3 billion in 2009 to RMB695.5 billion in 2018, representing a CAGR of 6.9%. The table below sets out selected economic statistics of Tangshan for the periods indicated.
CAGR (2009– 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018) GDP (RMB in billions) . 381.3 446.9 544.2 586.2 612.1 622.5 610.3 635.5 653.0 695.5 6.9% Total Investment in fixed assets (RMB in billions) . . . 218.0 266.6 249.2 306.6 316.4 414.6 454.4 497.5 530.5 n/a(2) NA(1) Annual disposable income percapitaforurban households (RMB). . . 18,053 19,556 21,785 24,358 26,704 28,891 31,272 33,725 36,415 39,365 9.1% Unemployment (%) . . . . 4.1 4.1 4.0 4.0 n/a(2) n/a(2) n/a(2) n/a(2) n/a(2) n/a(2) NA(1)
Note:
(1) NA refers to not applicable
(2) n/a refers to not available
Source: CEIC and Tangshan Statistics Bureau
The total GFA of commodity properties sold in Tangshan increased from 4.2 million sq.m. in 2009 to 7.3 million sq.m. in 2017.
CAGR (2009– 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018) GFA completed (sq.m. million) . . . . . 8.6 11.2 10.9 6.1 n/a(2) n/a(2) n/a(2) n/a(2) n/a(2) n/a(2) NA(1) GFA sold (sq.m. million) . . . . . 4.2 4.8 6.9 8.4 10.1 8.5 7.9 8.5 7.3 n/a(2) NA(1) Average price per sq.m. (RMB) ...... 3,533 4,089 5,183 5,865 5,303 5,291 5,278 4,717 5,359.7 n/a(2) NA(1) Sales revenue (RMB billions) . . . . . 14.8 19.7 35.6 49.0 53.8 45.1 41.7 40.1 39.4 n/a(2) NA(1)
Note:
(1) NA refers to not applicable
(2) n/a refers to not available
Source: CEIC and Tangshan Statistics Bureau
— 97 — The Property Market in Nantong
Nantong is located in the southeast region of Jiangsu Province. The city is at the northern bank of the Yangtze River and is a vital river port bordering Yancheng to the north, Taizhou to the west, Suzhou and Shanghai to the south across the river and the East China Sea to the east. Nantong’sGDPhas increased steadily from RMB287.3 billion in 2009 to RMB842.7 billion in 2018, representing a CAGR of 12.7%. The table below sets out selected economic statistics of Tangshan for the periods indicated.
CAGR (2009– 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018) GDP (RMB in billions) . 287.3 346.6 408.0 455.6 503.9 565.3 589.6 676.8 773.5 842.7 12.7% Total Investment in fixed assets (RMB in billions) . . . 180.2 216.8 237.8 288.6 319.9 389.6 436.7 481.2 495.9 n/a(2) NA(1) Annual disposable income percapitaforurban households (RMB). . . 19,469 21,825 25,094 28,292 30,646 33,374 36,291 39,247 42,756 46,321 10.1% Unemployment (%) . . . . n/a(1) 2.7 2.5 2.5 n/a(2) 2.0 n/a(2) n/a(2) n/a(2) n/a(2) NA(1)
Note:
(1) NA refers to not applicable
(2) n/a refers to not available
Source: CEIC and Nantong Statistics Bureau
The total GFA of commodity properties sold in Nantong increased from 6.7 million sq.m. in 2009 to 17.3 million sq.m. in 2018 representing a CAGR of 11.1%.
CAGR (2009– 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018) GFA completed (sq.m. million)> . . . . n/a(2) n/a(2) n/a(2) n/a(2) n/a(2) n/a(2) n/a(2) n/a(2) n/a(2) n/a(2) NA(1) GFA sold (sq.m. million) . . . . . 6.7 7.4 6.8 7.1 10.4 9.2 9.4 12.0 16.6 17.3 11.1% Average price per sq.m. (RMB) ...... 3,533 4,089 5,183 5,865 5,303 n/a(2) n/a(2) n/a(2) n/a(2) n/a(2) NA(1) Sales revenue (RMB billions) . . . . . 29.2 35.7 38.1 40.2 58.2 n/a(2) n/a(2) n/a(2) n/a(2) n/a(2) NA(1)
Note:
(1) NA refers to not applicable
(2) n/a refers to not available
Source: CEIC and Nantong Statistics Bureau
— 98 — CORPORATE STRUCTURE
The following diagram illustrates our corporate structure as of the date of this offering memorandum.
= Parent Guarantor
= Subsidiary Guarantors
Yanlord Land Group Limited
仁恒置地集團 有限公司
100% 100% 100%
Yanlord Land Yanlord Yanlord Land (HK) Co., Limited Commercial Pte. Ltd. Property Investments Pte. Ltd.
仁恒地產(香港) 仁恒商業地產 仁恒置地 有限公司 投資有限公司 有限公司
49% 100% 100% 100% 80% 100% 100%
Yanlord Perennial Yanlord Yanlord Yanlord Flourish Fair Successful East Hero Investment Singapore Singapore Singapore Limited Global Investment Ltd. (Singapore) Retail Pte. Ltd. Office Pte. Ltd. Residential Consultancy Pte. Ltd. Pte. Ltd. Co., Ltd.
仁恒鵬瑞利 茂藝有限公司 成順環球咨詢 東亨投資 投資(新加坡) 有限公司 有限公司 有限公司
100% 100% 51% 100% 100% 100% 100% 67% 100% 100%
Zhuhai Maokai Xinfu Trade Chengdu Yanlord Hotel Nanjing Yanlord Suzhou Zhonghui Yanlord Land Shanghai Yanlord Shanghai Yanlord Yanlord Equity Eco Hi-tech (Chengdu) Everrising Asset Management Hotel Property Investment Property Yangpu Property Investment Co., Ltd. Co., Ltd. Management (Chengdu) Management Development Management Co., Ltd. Co., Ltd. Management Co., Ltd. Co., Ltd. Co., Ltd. Co., Ltd. (Shanghai) (Shanghai) Co., Ltd. Co., Ltd.
珠海茂凱 信富商貿 成都市恒業東升 仁恒酒店管理 南京仁恒酒店 蘇州中輝房地產 仁恒置地投資 上海仁恒房地產 上海仁恒楊浦 仁恒股權 生態科技 （成都） 資產經營管理 （成都） 管理有限公司 開發有限公司 管理(上海) 有限公司 房地產有限公司 投資管理 有限公司 有限公司 有限公司 有限公司 有限公司 (上海)有限公司
100% 100% 100% 51%49% 100% 50% 51% 85% 100% 100% 75% 80% 20% 100% 100%
Tianjin Yanlord Nanjing Yu Dian Shanghai Fengrui Shanghai Yanlord Shanghai Renan Shanghai Renpin Shanghai Renjie Changsu Future Shanghai Renlan Shanghai Ranzhuo Shanghai Yanlord Shanghai Yanlord Yanlord Cultural Sanya Yanlord Garden Co., Ltd. Landscape Trade Co., Ltd. Investment Property Property Hebin Garden Land Yuexin Industrial Industrial Gaoqiao Property Xing Tang Real Tourism Real Estate Development Management Development Development Property Co., Property Co., Ltd. Co., Ltd. Co., Ltd. Estate Development Co., Ltd. Co., Ltd. Co., Ltd. Co., Ltd. Co., Ltd. Ltd. Development Co., Ltd. Co., Ltd. Co., Ltd. 天津藝宛園林 南京御典園林 上海奉睿商貿 上海仁恒投資 上海仁安房地產 上海仁品房地產 上海仁杰河濱園 上海仁斕實業 上海仁琢實業 上海仁恒高喬 上海仁恒興唐 仁恒文旅發展 三亞仁恒置業 有限公司 發展有限公司 有限公司 管理有限公司 開發有限公司 開發有限公司 房地產有限公司 常熟新城悅欣 有限公司 有限公司 房地產有限公司 置業有限公司 有限公司 有限公司 房地產開發 有限公司
100% 50% 100% 100% 100% 5% 100% 100% 33%
Shanghai Hangzhou Hangzhou Renrui Shanghai Pudong Shanghai Yanlord Shanghai Zhongshan Zhongshan Beijing Zhongting Renyuan Property New District Entertainment Rensheng Renyuan Renyuan Zhonggang Property Property Development Private Development Real Estate Real Estate Investment International Development Development Co., Ltd. Yanlord Co., Ltd. Co., Ltd. Co., Ltd. Co., Ltd. Property Co., Ltd. Co., Ltd. Kindergarten Development Co., Ltd. 上海中庭房地產 杭州仁遠房地產 杭州仁睿房地產 上海市浦東新區 上海仁恒演藝 上海仁晟置業 中山仁遠置業 中山仁遠投資 北京中港國際 開發有限公司 開發有限公司 開發有限公司 民辦仁恒幼兒園 發展有限公司 有限公司 有限公司 有限公司 房地產開發 有限公司
100% 35%
Hangzhou Zhongshan China Renxiang Resources Land Property Property Development Development Co., Ltd. Co., Ltd.
杭州仁祥房地產 中山市華潤置地 開發有限公司 房地產發展 有限公司
85% 51%
Zhongshan Zhongshan Xinyue Xiqu Service Caihong Property Development Co., Ltd. and Investment (Integrated Reform Pilot Zone) Co., Ltd.
中山市星月彩虹 中山市 房地產有限公司 西區服務業 綜合改革試驗區 開發投資 有限公司
— 99 — 100%
Yanlord Property Pte. Ltd.
仁恒地產 有限公司
100% 100% 100% 60% 100% 60% 100% 100% 100% 100% 100%
Yanlord Yanlord Land Suzhou Yinghan Shanghai Yanlord Shanghai Tianjin Yanlord Yanlord Yanlord Property Shanghai Renlan Shanghai Renpu Shanghai Renzui Investment (Chengdu) Property Hongqiao Property Renchong Beiyang Real Development Development Real Estate Real Estate Real Estate (Nanjing) Co., Ltd. Development Co., Ltd. Real Estate Estate Co., Ltd. (Tianjin) Co., Ltd. (Suzhou) Co., Ltd. Co., Ltd. Co., Ltd. Co., Ltd. Co., Ltd. Co., Ltd. Co., Ltd.
仁恒投資(南京) 仁恒置地(成都) 蘇州鷹漢房地產 上海仁恒虹橋 上海仁崇置業 天津仁恒北洋 仁恒發展(天津) 仁恒置業(蘇州) 上海仁瀾置業 上海仁浦置業 上海仁竺置業 有限公司 有限公司 開發有限公司 房地產有限公司 有限公司 置業有限公司 有限公司 有限公司 有限公司 有限公司 有限公司
100% 2.94% 97.06% 80% 100% 80% 50% 100% 100% 100%
Nanjing Renyuan Chengdu Yanlord Chongzhou Shanghai Renjia Tianjin Yanlord Tianjin Shenglin Yanlord Property Nanjing Yanlord Nanjing Yanlord Investment Investment Yanlord Land Property Haihe Property (Suzhou) Co., Ltd. Real Estate Commercial Co., Ltd. Management Co., Ltd. Development Development Development Co., Ltd. Management Co., Ltd. Co., Ltd. Co., Ltd. Co., Ltd. Co., Ltd.
南京仁遠投資 成都仁恒投資 崇州仁恒置地 上海仁嘉房地產 天津仁恒海河 天津市 仁恒地產(蘇州) 南京仁恒置業 南京仁恒商業 有限公司 管理有限公司 有限公司 開發有限公司 開發有限公司 晟林房地產開發 有限公司 有限公司 管理有限公司 有限公司
100% 100% 100% 100% 100% 100% 55% 100% 16.5% 60% 24.7% 100% 15% 40% 100% 30% 100% 30% 15% 60%
Shanghai Renrui Shanghai Renhang Zhuhai Renyuan Zhuhai Renyuan Zhuhai Renyuan Zhuhai Renyuan Wuhan Yanlord Yanlord Land Tianjin Lianzhan Tianjin Yanlord Tianjin Hefa Hangzhou Renan Suzhou Suzhou Rentong Suzhou Renyuan Suzhou Renan Suzhou Peninsula Suzhou Jinjun Suzhou Industrial Hainan Yanlord Real Estate Real Estate Investment Real Estate Property Land Co., Ltd. Zhuyeshan (Wuhan) Co., Ltd. Property Hehai Property Property Co., Ltd. Xinshengjie Property Real Estate Real Estate Yanlord Property Park Yuanhengjie Beautycrown Co., Ltd. Co., Ltd. Co., Ltd. Co., Ltd. Development Real Estate Development Real Estate Development Land Co., Ltd. Development Co., Ltd. Co., Ltd. Real Estate Development Construction Cultural Co., Ltd. Co., Ltd. Co., Ltd. Co., Ltd. Co., Ltd. Co., Ltd. Co., Ltd. Co., Ltd. Development Tourism Co., Ltd. Development Co., Ltd.
上海仁睿置業 上海仁杭置業 珠海仁遠投資 珠海仁遠置業 珠海仁遠房地產 珠海市仁遠置地 武漢仁恒竹葉山 仁恒置地(武漢) 天津市聯展 天津仁恒和海 天津合發房地產 杭州仁安房地產 蘇州新晟捷置地 蘇州市仁通 蘇州仁遠置業 蘇州仁安置業 蘇州星島仁恒 蘇州金俊房地產 蘇州工業園區 海南仁恒 有限公司 有限公司 有限公司 有限公司 開發有限公司 有限公司 置業有限公司 有限公司 房地產開發 置業有限公司 開發有限公司 有限公司 有限公司 房地產開發 有限公司 有限公司 置業有限公司 開發有限公司 園恒捷建設發展 美麗之冠文化 有限公司 有限公司 有限公司 旅遊發展 有限公司
30% 30% 99% 1% 50%
Hangzhou Hangzhou Keyi Shenzhen Hangzhou Binbai Kesheng Property Property Huarong Investment Development Development Innovation Management Co., Ltd. Co., Ltd. Investment Co., Ltd. Co., Ltd.
杭州科昇房地產 杭州科誼房地產 開發有限公司 有限公司 深圳市華融 杭州濱柏投資 創新投資股份 管理有限公司 有限公司
100%
Hangzhou Binheng Property Development Co., Ltd.
杭州濱恒房地產 開發有限公司
— 100 — 25% 50% 95%
Yanlord Property Yanlord Ho Bee Yanlord Real Investments Investments Estate Pte. Ltd. Pte. Ltd. Pte. Ltd.
仁恒地產投資 仁恒和美投資 仁恒置業發展 有限公司 有限公司 有限公司
100% 100% 90%57% 55% 100%
Yanlord Ho Bee Yanlord Land Zhuhai Yanlord Singapore Sino-Singapore Yanlord Property Property (Shenzhen) Real Estate Intelligent Yanlord (Haimen) Service Development Co., Ltd. Development Eco Island Yangtze Eco Management (Tangshan) Co., Ltd. Development Hi-Tech (China) Co., Ltd. Co., Ltd. Pte. Ltd. City Co., Ltd. 仁恒和美 仁恒置地(深圳) 珠海仁恒置業 新加坡智慧 中新仁恒(海門) 仁恒物業服務 房地產開發 有限公司 發展有限公司 生態島開發 長江生態科技城 管理(中國) (唐山)有限公司 有限公司 有限公司 有限公司
60% 40% 60% 100% 50%100% 100% 100% 100% 100%
Yanlord Real Zhuhai Yanlord Zhuhai Yanlord Sino-Singapore Sino-Singapore Zhuhai Yanlord Tangshan Yanlord Tianjin Yanlord Suzhou Gusheng Estate (Chengdu) Heyou Land Industrial Ltd. Nanjing Eco Yanlord Haimen Property Property Property Fitness Services Co., Ltd. Co., Ltd. Hi-tech Yangtze Eco Management Management Management Co., Ltd. Island Hi-Tech Co., Ltd. Co., Ltd. Co., Ltd. Development City Investment Co., Ltd. and Development Co., Ltd.
仁恒置業(成都) 珠海仁恒和由 珠海仁恒實業 中新南京 中新仁恒海門 珠海仁恒物業 唐山仁恒物業 天津仁恒物業 蘇州固盛健身 有限公司 置地有限公司 有限公司 生態科技島開發 長江生態科技城 管理有限公司 服務有限公司 服務有限公司 服務有限公司 有限公司 投資發展 有限公司
40% 100% 50% 100% 100% 60% 100% 33% 51% 65% 35% 100% 100% 100%
Shanghai Jiaxun Jinan Yanlord Nanjing Yiyan Nanjing Renbei Nanjing Yanlord Yanlord Land Nantong Yanlord Nanjing Shanjieyi Nanjing Daji Nanjing Yanlord Zhuhai Yanlord Sino-Singapore Tianjin Yanlord Enterprise Real Estate Real Estate Property Information (Nantong) Intelligent Property Real Estate Jiangzhou Heyuan Land Nanjing Eco Fitness Development Co., Ltd. Co., Ltd. Development Technology Co., Ltd. Construction Development Development Property Co., Ltd. Hi-tech Services Co., Ltd Co., Ltd. Co., Ltd. Hi-Tech Co., Ltd. Co., Ltd. Co., Ltd. Development Island Investment Co., Ltd. Co., Ltd. and Development Co., Ltd. 上海嘉訊企業 濟南仁恒置業 南京頤燕置業 南京仁北房地產 南京仁恒信息 仁恒置地(南通) 南通仁恒智慧 南京善杰義 南京大吉房地產 南京仁恒江洲 珠海仁恒和遠 中新南京 天津仁恒健身 發展有限公司 有限公司 有限公司 開發有限公司 技術有限公司 有限公司 建築科技 房地產開發 開發有限公司 房地產開發 置地有限公司 生態科技島 服務有限公司 有限公司 有限公司 有限公司 投資發展 有限公司
10% 26% 51% 5% 95% 70% 100% 70%
Jinan Anqi Nanjing Yusheng Nantong Yanlord Nanjing Zhoudao Nanjing Zhoudao Nanjing Zhoudao Property Real Estate Hechuang (Shenzhen) Modern Property Modern Service Development Co., Ltd. Real Estate Investment Agriculture Development Development Co., Ltd. Co., Ltd. Management Development Co., Ltd. Co., Ltd. Co., Ltd. Co., Ltd. 濟南安齊房地產 南京裕晟置業 南通禾創置業 仁恒(深圳)投資 南京洲島 南京洲島置業 南京洲島 開發有限公司 有限公司 有限公司 實業有限公司 現代農業發展 有限公司 現代服務業發展 有限公司 有限公司
25% 51% 100% 100% 49% 94.90% 100% 25% 100% 65% 100% 100% 100%
Tianjin Lianjin Hainan Yanlord Yanlord Land Xingheng Shenzhen Shenzhen Long Yanlord Shenzhen Shenzhen Shenzhen Shenzhen Shenzhen Shenzhen Bantian Property Luqiao (Hainan) (Shenzhen) Shengzhong Wei Xin (Shenzhen) Hengying Hengming Dongguan Yanlord City Yanlord Yanlord Development Investment Co., Ltd. Investment Real Estate Investment Hotel Huarui Commercial Shengtai Re-development Commercial Investment Co., Ltd. Co., Ltd. Management Co., Ltd. Co., Ltd. Management Consultancy Co., Ltd. Investment Co., Ltd. Management and Development Co., Ltd Co., Ltd. Co., Ltd. Co., Ltd Co., Ltd. Co., Ltd. 天津聯津 海南仁恒 仁恒置地(海南) 興恒(深圳)投資 深圳市盛中置業 深圳市 仁恒(深圳) 深圳市 深圳市 深圳市 深圳市 深圳市 深圳市 房地產開發 陸僑投資 有限公司 實業有限公司 有限公司 龍威信投資實業 酒店管理 恒盈華睿咨詢 恒明商業 東關盛泰投資 仁恒城市更新 仁恒商業管理 坂田仁恒投資 有限公司 有限公司 有限公司 有限公司 有限公司 有限公司 有限公司 發展有限公司 有限公司 發展有限公司
100%
Hainan Jinzhonghong Industrial Development Co., Ltd. 海南金中鴻 實業發展 有限公司
— 101 — 67% 51% 100%50% 50% 50%
Palovale Pte Ltd Yanlord Eco Greens Blossom Blossom HK Universal Estate Island Investments Investments HK (Residential) (Commercial) Ltd. Pte. Ltd. Pte. Ltd. Ltd. Ltd.
柏龍威有限公司 仁恒生態島投資 綠色投資 有限公司 有限公司
100% 60% 100%100% 100%
Nanjing Yanlord Zhuhai Blossom Blossom Asia Radiant Jiangdao International Residential Commercial Pte. Ltd. Real Estate Golf Amusement Holdings Holdings Co., Ltd. Co., Ltd. Pte. Ltd. Pte. Ltd.
南京仁恒江島 珠海國際高爾夫 置業有限公司 遊樂有限公司
100% 100% 100% 50% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Blossom Blossom Sanya Yanlord Shenzhen Nanjing Yanlord Hangzhou Guiyang Yanlord Chengdu Yanlord Shanghai Yanlord Shanghai Shanghai Yanlord Shanghai Yanlord Shanghai Yanlord Residential Commercial Travel Service Yanlord Property Renhang Property Property Land Property Gusheng Elevator Co., Ltd. Industrial Property Investments Investments Co., Ltd. Property Management Property Management Management Management Construction Development Management Pte. Ltd. Pte. Ltd. Management Co., Ltd. Management Co., Ltd. Co., Ltd. Service Intelligent Co., Ltd. Co., Ltd. Co., Ltd. Co., Ltd. Co., Ltd. Engineering Co., Ltd.
三亞仁恒旅行社 深圳市仁恒物業 南京仁恒物業 杭州仁杭物業 貴陽仁恒物業 成都仁恒物業 上海仁恒置地 上海固盛建築 上海仁恒電梯 上海仁恒實業 上海仁恒物業 有限公司 管理有限公司 管理有限公司 管理有限公司 管理有限公司 管理有限公司 物業服務管理 智能化工程 有限公司 發展有限公司 管理有限公司 有限公司 有限公司
100% 100% 60%40% 1% 83.85% 100% 100%
Blossom Blossom Shenzhen Yanlord Shanghai Yanlord Shanghai Yanlord Shanghai Yanlord Residential Commercial Home Coffee Education Senlan Real Real Estate Development Development Co., Ltd. Training Estate Co., Ltd. Pte. Ltd. Pte. Ltd. Co., Ltd. Co., Ltd.
深圳市仁恒家 上海仁恒教育 上海仁恒森蘭 上海仁恒置業 咖啡有限公司 培訓有限公司 置業有限公司 發展有限公司
— 102 — BUSINESS
Overview
We are a PRC-based leading real estate developer that focuses on developing fully-fitted residential properties and high-quality commercial and integrated properties in prime locations, within strategically-selected, key-established top-tier cities across six major economic regions in the PRC. Listed on the SGX-ST, we currently have significant subsidiaries in the PRC, Singapore and Hong Kong. We believe that our established track record as a leading developer of fully-fitted residential development properties in prime locations within the affluent Shanghai and Nanjing areas along the PRC’s Yangtze River Delta, has helped us build significant recognition of our ‘‘Yanlord’’ brand name which has resulted in premium pricing. In 2016 and 2017, our Yanlord Landmark commercial project and Yanlord Riverbay (Phase 1) residential project in Chengdu, and our Yanlord Marina Centre integrated project and Yanlord Marina Peninsula Gardens (Phases 1 and 2) integrated projects in Zhuhai have won various awards from industry associations in the PRC, including the LEED — EB platinum certification, the 2016–2017 Luban Award and National award for civil engineering in Chengdu, the Top 10 City Landmark in 2016 and Guangdong Province — Award for Structural and Engineering Excellence in Zhuhai. In 2018, we have earned the accolade of one of the 2018 China Top 100 Real Estate Developers, as well as one of the Top 10 developers in terms of Financial Stability among the 2018 China Top 100 Real Estate Developers, jointly by Enterprise Research Institute under the Development Research Center of the State Council, Property Research Institute of Tsinghua University and China Index Academy. In the same year, we have also received the National Award for Civil Engineering granted by China Construction Industry Association. In 2019, our Crowne Plaza Sanya Haitang Bay Resort has won the Best Service Award in China Hotel Golden Horse Awards. In the same year, we have also obtained the Singapore Prestige Brand Award (SPBA) granted by Lianhe Zaobao (聯 合早報).
Leveraging our reputation and expertise, we have expanded the geographical reach of our residential property development business into 15 established top-tier cities strategically located within six major economic regions in the PRC: the Yangtze River Delta (Shanghai, Nanjing, Suzhou, Hangzhou and Nantong), Western China (Chengdu), Bohai Rim (Tianjin, Tangshan and Jinan), Southern China (Shenzhen, Zhuhai and Zhongshan), Hainan (Haikou and Sanya) and Central China (Wuhan). In 2018, we started the entry into the residential property market in Singapore. Our residential development properties, including apartments, townhouses and villas, are typically characterized by fully-fitted, large- scale, multi-phased projects with community facilities designed and built by leading architects, designers and contractors and targeted at the upper income market segment.
Since our establishment in 1993, we have grown from a start-up property developer with one development project comprising 53,049 sq.m. of GFA to become one of the major developers in the premium residential segment with a presence in 15 cities in the PRC. In April 2018, we made our maiden entry into the Singapore residential development market through the joint acquisition of a freehold development site located in District 10 of Singapore known as Tulip Garden with MCL Land Limited, a subsidiary of Hongkong Land Holdings Limited. As of December 31, 2018, we had a portfolio of:
. 79 completed development properties with a total site area and GFA of 4,633,107 sq.m. and 8,820,078 sq.m., respectively (including a total site area and GFA of 88,825 sq.m. and 157,727 sq.m., respectively, held under associate and joint venture investments);
. 28 properties under development with a total site area and GFA of 1,684,508 sq.m. and 3,545,729 sq.m., respectively (including a total site area and GFA of 945,132 sq.m. and 1,897,391 sq.m., respectively, held under associate and joint venture investments); and
. 22 properties held for future development with a total site area and GFA of 2,172,572 sq.m. and 3,695,334 sq.m., respectively (including a total site area and GFA of 1,333,827 sq.m. and 2,378,568 sq.m., respectively, held under associate and joint venture investments).
As of the date of this offering memorandum, we have not yet obtained the land use right certificates for seven of our future projects. These seven projects represent a total site area and GFA of 307,298 sq.m. and 944,615 sq.m., respectively (including a total site area and GFA of 132,361 sq.m. and 310,545 sq.m., respectively, held under associate and joint venture investments).
— 103 — Since 2003, we have also been developing high-quality commercial and integrated properties, such as shopping malls, office buildings, serviced apartments and hotels, for sale and lease. Our completed commercial and integrated development properties comprise Hengye International Plaza, a four-storey household products wholesale mall, Yanlord Landmark, an integrated complex consisting of a five- storey upmarket retail mall, a 360-room serviced apartment building and an office building in Chengdu, Yanlord Riverside Plaza, a premium integrated commercial complex consisting of a retail mall, an office building and a commercial street in Tianjin, Yanlord Marina Centre, a large-scale integrated development, consisting of office, retail shopping space and a 324-room five-star hotel in Zhuhai, as well as a pedestrian shopping street in Guiyang, a serviced apartment building in Nanjing, a luxury five- star hotel in Sanya, certain commercial podiums in Shanghai, a commercial street in Zhuhai and other miscellaneous accessorial retail shops in Shanghai, Nanjing, Suzhou, Zhuhai, Shenzhen, Tianjin and Tangshan. In particular, in 2018, our five-star hotels in Sanya and Zhuhai, namely Crowne Plaza Sanya Haitang Bay Resort and InterContinental Zhuhai, respectively, officially opened for business. We also provide high-quality property management services for all the projects we have developed to ensure that our developments retain a high level of quality.
In addition to operating our property development business through our PRC subsidiaries, we have set up joint ventures to help us grow our business further. These include joint ventures we formed with an affiliate of GIC Real Estate, the real estate investment unit of the Government of Singapore Investment Corporation, to invest in a residential development project in Nanjing in 2006 and subsequently in other property development projects in Shanghai, Suzhou, Chengdu and Tianjin. We also formed four joint ventures with Ho Bee Land Limited and its affiliate to invest in an integrated property development project in Tangshan, a residential development in Shanghai and two residential developments in Zhuhai. In 2009, we formed a joint venture company with Sembcorp Development Ltd. and certain other partners as the primary developers for the Sino-Singapore Nanjing Eco Hi-tech Island in Nanjing, a technology focused sustainable city development project with a mix of residential, commercial, industrial and research and development businesses. In April 2014, we set up a joint venture company in Haimen through our wholly-owned subsidiary, Yanlord Land Pte. Ltd., with Haimen City Development Co., Ltd. and Longxin Construction Group Co., Ltd. to jointly develop the Sino- Singapore Yanlord (Haimen) Yangtze Eco Hi-Tech City project. Since 2015, we have partnered with other leading property developers and other renowned institutions, such as Beijing Capital Land Ltd., China Merchants Property Development Co., Ltd., China Resources Land Ltd., Hangzhou Binjiang Real Estate Group Co., Ltd., Hongkong Land Holdings Limited, Longxin Construction Group Co., Ltd., Nanjing AnJu Affordable Housing Construction Development Co., Ltd., Ping An Insurance (Group) Company of China, Ltd., Poly Real Estate Group Co., Ltd., Shinsun Real Estate Group Co., Ltd., Tianjin Realty Development (Group) Co., Ltd., SND Real Estate Group., Ltd. and Suzhou HengTai Commercial Real Estate Co., Ltd. to form 17 joint ventures to develop our projects in Nanjing, Suzhou, Hangzhou, Nantong, Tianjin, Jinan, Zhuhai and Zhongshan of the PRC, and Singapore. We may from time to time continue to form joint ventures with future business partners by transferring a portion of our interest in existing or future projects to them or acquire a portion of business partners’ interest in existing projects.
— 104 — The following table sets forth the breakdown of the GFA of our completed properties by residential properties and commercial properties as of December 31, 2018. The number of developments includes each phase of a particular development.
No. of Total GFA Location Developments (sq.m.) Residential Shanghai...... 20 2,924,859 Nanjing...... 18 1,910,539 Suzhou...... 13 765,375 Nantong...... 1 64,561 Zhuhai...... 6 833,640 Shenzhen...... 1 143,952 Chengdu ...... 3 343,867 Guiyang...... 1 36,131 Tianjin...... 7 921,415 Tangshan...... 2 154,307 Sanya...... 1 23,394 73 8,122,040
Commercial Shanghai(1) ...... — 41,149(2)(3) Nanjing(1)...... 2 79,979(2)(4) Suzhou(1) ...... — 10,366(2)(5) Zhuhai(1) ...... 1 87,846(2)(6) Shenzhen(1) ...... — 4,472(2)(7) Chengdu(1) ...... 2 215,530(2)(8) Guiyang...... 1 14,376 Tianjin(1) ...... — 162,814(2)(9) Tangshan...... — 3,420(2)(10) Sanya...... — 78,086 6698,038 79 8,820,078
Notes:
(1) Consists of properties held for investment with unexpired terms of lease between 25 and 63 years as of December 31, 2018.
(2) Consists of GFA from residential and integrated commercial developments.
(3) Part of Yanlord Riverside City (Phase 2), Yanlord Sunland Gardens (Phase 2), Yunjie Riverside Gardens (Phase 1), Yunjie Riverside Gardens (Phase 2) and Bayside Gardens, residential and commercial developments with a total GFA of 265,623 sq.m., 164,302 sq.m., 158,047 sq.m., 95,001 sq.m. and 116,408 sq.m., respectively.
(4) Part of Yanlord G53 Apartments, Yanlord Yangtze Riverbay Town (Phase 1) and Yanlord Yangtze Riverbay Town (Phase 2), residential and commercial developments with a total GFA of 96,354 sq.m., 124,357 sq.m. and 189,897 sq.m., respectively.
(5) Part of Yanlord Lakeview Bay — Land Parcels A6 and A7, residential and commercial developments with a total GFA of 77,721 sq.m. and 64,546 sq.m., respectively.
(6) Part of Yanlord New City Gardens (Phase 1), Yanlord New City Gardens (Phase 2 — Section 2), Yanlord Marina Centre — Section B, Yanlord Marina Peninsula Gardens (Phase 1) and Yanlord Marina Peninsula Gardens (Phase 2), residential and commercial developments with a total GFA of 97,747 sq.m., 206,504 sq.m., 135,383 sq.m., 152,926 sq.m. and 161,606 sq.m., respectively.
(7) Part of Yanlord Rosemite, a residential and commercial development with a total GFA of 148,424 sq.m.
(8) Part of Hengye Star Gardens and Yanlord Riverbay (Phase 1), residential and commercial developments with a total GFA of 83,943 sq.m. and 126,716 sq.m., respectively.
(9) Part of Tianjin Jinnan Land (Phase 1), Yanlord Riverside Plaza (Phase 1), and Yanlord Riverside Plaza (Phase 2), residential and commercial developments with a total GFA of 94,357 sq.m., 217,812 sq.m. and 163,971 sq.m., respectively.
(10) Part of Tangshan Nanhu Eco-City — Land Parcel A9, a residential and commercial development with a total GFA of 119,116 sq.m.
(11) Part of Sanya Hai Tang Bay — Land Parcel 9, residential and hotel development with a total GFA of 101,480 sq.m.
— 105 — The following table sets forth the breakdown of our properties under development and properties held for future development by residential properties and integrated residential and commercial properties as of December 31, 2018.
No. of Total GFA Location Developments (sq.m.) Residential Shanghai...... 1 33,989 Nanjing...... 1 87,123 Suzhou...... 2 191,811 Hangzhou...... 2 147,943 Nantong...... 2 211,865 Zhuhai...... 1 103,448 Shenzhen...... 2 199,740 Chengdu ...... 2 228,265 Tianjin...... 1 160,029 Tangshan...... 1 169,553 Wuhan...... 1 151,851 Singapore...... 1 51,785 17 1,737,402 Integrated residential and commercial Shanghai...... 1 183,187 Nanjing...... 6 1,427,283 Suzhou...... 4 534,138 Hangzhou...... 3 787,007 Nantong...... 1 71,870 Zhuhai(1) ...... 2 161,280 Shenzhen...... 7 1,055,497 Tianjin...... 6 1,052,301 Tangshan...... 1 73,949 Jinan...... 2 157,149 33 5,503,661 50 7,241,063
Note:
(1) Number of developments includes Yanlord Marina Centre — Section A in Zhuhai, which are partially completed and GFA numbers exclude completed GFA but include GFA under development. Please refer to ‘‘Business — Business Operations’’ for details.
As of December 31, 2018, our integrated developments comprised residential apartments in developments mixed with an aggregate GFA of 1,684,882 sq.m. for commercial use, such as shopping malls, office buildings and hotels.
For the year ended December 31, 2018, we acquired 11 parcels of land, in seven cities in the PRC and acquired a parcel of land in Singapore, with a combined total site area and GFA of 853,177 sq.m. and 1,836,531 sq.m., respectively (including a combined total site area and GFA of 794,665 sq.m. and 1,545,714 sq.m., respectively, held under associate and joint venture investments).
— 106 — The map of the PRC set out below shows the cities in which our property development projects are located as of the date of this offering memorandum.
Tianjin Tangshan
Jinan
Suzhou Nantong
Chengdu Wuhan Nanjing Shanghai
Hangzhou
Zhongshan Shenzhen
Haikou Zhuhai
Sanya
In 2016, 2017 and 2018, we delivered an aggregate GFA of 944,834 sq.m., 556,237 sq.m. and 632,129 sq.m., respectively. In 2016, 2017 and 2018, we recorded revenue of RMB25.664 billion, RMB25.638 billion and RMB24.888 billion (US$3.620 billion), and profit attributable to owners of the Company of RMB2.697 billion, RMB3.216 billion and RMB3.545 billion (US$516 million), respectively. During these periods, we generated substantially all of our revenue from the sale of residential properties. Our revenue also consisted of income from resettlement service, hotel operations, property investment, property management and other services. In 2016, 2017 and 2018, we recorded revenue from property investment of RMB363 million, RMB358 million and RMB411 million (US$60 million), respectively. As we complete more commercial development properties and begin generating more rental revenue from our investment properties, we expect our revenue derived from investment properties to increase over time. In 2018, our pre-sale, including sales of carparks, amounted to RMB25.774 billion, representing a GFA of 686,174 sq.m.
Our accumulated pre-sales pending recognition as of December 31, 2018 stood at RMB12.882 billion with advances received for pre-sale of properties amounting to approximately RMB9.858 billion.
Our shares have been listed on the Mainboard of the SGX-ST since June 2006 under stock code Z25. As of August 20, 2019, our market capitalization was approximately RMB12.010 billion (US$1.700 billion) based on the closing price of our shares as quoted on the Mainboard of the SGX-ST and excluding treasury shares.
Recent Developments
We remain prudent in our land acquisition and acquire landbank selectively. Complimenting our existing land acquisition strategies, we have, since 2016 sought out opportunities to expand our land bank through collaborations and acquisitions to better manage market volatilities.
In January 2019, we partnered with a consortium of property developers, including SND Real Estate Group Co., Ltd. and Suzhou HengTai Commercial Real Estate Co., Ltd. to develop Suzhou Industrial Park No. 2018-04 Land with a maximum allowable residential GFA of 135,777 sq.m. for a consideration of RMB3.533 billion. We hold a 15% interest in this project.
— 107 — In June 2019, we partnered with a consortium of property developers, including SND Real Estate Group Co., Ltd., China Merchants Property Development Co., Ltd. and Suzhou HengTai Commercial Real Estate Co., Ltd. to develop Suzhou No. 2019-WG-7 Land Parcels with a maximum allowable residential GFA of 186,757 sq.m. for a consideration of RMB5.017 billion. We hold a 15% interest in this project.
Competitive Strengths
We believe that the following competitive strengths have enabled and will continue to enable us to take advantage of the growth potential of and to compete effectively in the PRC real estate market.
Robust Growth Building on Solid Fundamentals through Industry Cycle
We believe that our business model enables us to sustain resilient growth throughout the market cycle. Firstly, our land bank is strategically-focused in selected top tier-1 and top tier-2 cities in the PRC or Singapore, and our projects are typically located in city centers or other prime locations with convenient access to transportation hubs. Secondly, we believe that superior product quality and property management capability have established the ‘‘Yanlord’’ brand name and increased customer recognition over the years. Thirdly, we have maintained a prudent land acquisition strategy, with our average land cost being approximately RMB13,047 per sq.m. of saleable area, which equated to approximately 36% of the average selling price achieved in 2018 of RMB36,293 per sq.m., affording us flexibility to adjust pricing strategies to sustain healthy cash flows.
We also pursue adaptive financial management to reduce risks. In light of uncertain market conditions between 2015 and 2018, and in particular, the backdrop of the PRC Central Government’s support for the sustainable development of the PRC real estate sector since early 2017, we have taken various measures to deleverage and accelerate asset turnover by strategically managing our project launch schedules and inventory levels to better capture market opportunities for enhanced returns. This has not only allowed us to reduce gearing levels effectively, but also ensured us that we maintain a healthy cash flow and low financing costs despite the credit tightening in China. We do not use high- cost trust financing like many of our peers. We also carefully manage our liquidity position so that our cash and cash equivalents cover our short-term borrowings. In terms of cash flow management, we have taken proactive measures to manage cash flow and maintain a healthy financial position.
Our flexible marketing strategies also enable us to progress in a changing market. In the recent market up cycle, our pre-sales grew to a record of approximately RMB33 billion in 2016 and stood at approximately RMB26 billion in 2017 despite the changing market and regulatory environment since 2017. In 2018, supported by the positive market environment in our core markets, our accumulated pre- sales pending recognition as of December 31, 2018 stood at RMB12.882 billion with advances received for pre-sales of properties amounting to approximately RMB9.858 billion, respectively. During the same periods, we have maintained a steady growth of profit margins, achieving gross profit margins of 31.2%, 47.0% and 46.0% in 2016, 2017 and 2018, respectively.
Prime Landbank with Healthy Replenishment
Our strategic presence encompasses six major economic regions of the PRC, namely the Yangtze River Delta (Shanghai, Nanjing, Suzhou, Hangzhou and Nantong), Western China (Chengdu), Bohai Rim (Tianjin, Tangshan and Jinan), Southern China (Shenzhen, Zhuhai and Zhongshan), Hainan (Haikou and Sanya) and Central China (Wuhan), as well as the core central region of Singapore. We undertake extensive market research to identify land in cities with significant development and growth potential. We have adopted an expansion strategy in which we will only focus on new land acquisitions that are financially prudent for us to pursue. We have also applied stringent land selection criteria by only acquiring land that (i) will allow us to generate reasonable gross profit margin and (ii) is sizable with convenient transportation connectivity. We have also entered into partnerships with high quality joint venture partners in order to mitigate risks while retaining control over the projects. Please refer to the ‘‘Strong Relations with International Partners and China SOEs’’ section below for more details on our cooperation with our joint venture partners. As a result of these prudent land acquisition strategies, we believe we are well placed to capitalize on the high growth potential of the six economic regions in the PRC in which we have strategic presence.
— 108 — As of December 31, 2018, we had a total GFA of approximately 3.5 million sq.m. of properties under development and 3.7 million sq.m. GFA of properties held for future development in the PRC and Singapore. Our development sites are strategically located in prime locations in our target cities. These prime locations are typically characterized by proximity to city centers or good access to transportation and attractive views. For example, our Yanlord Gardens in Shanghai is located in the Lujiazui Financial District in Shanghai Pudong, on the banks of the Huangpu River that runs through the heart of Shanghai. Yanlord on the Park in Shanghai is located within the key residential district of the Lujiazui Financial Centre and is bordered by the city’s arterial thoroughfares. Orchid Mansions has a lake view while being near the city center of Nanjing. Yanlord Landmark is in the heart of Chengdu. Yanlord Marina Centre in Zhuhai has a 650-meter-long beachfront facing Macau. Our site in Sanya offers unobstructed seafront views of the picturesque Hai Tang Bay — Land Parcel 9.
Strong Relations with International Partners and China SOEs
We have a strong relationship with international partners of real estate developers and hotel operators and China SOEs, which enables us to reinforce our strength in delivering high-quality products and services along the value chain of our property development business, ranging from design and construction to property management, serviced apartment and hotel operations.
The following represents our international partnerships formed over the past decade that are important to our business operations:
. In November 2006, we formed a joint venture with an affiliate of GIC Real Estate, the real estate investment unit of the Government of Singapore Investment Corporation, for the purpose of investing in a residential development project in Nanjing, namely Yanlord Yangtze Riverbay Town. In 2007, this joint venture company acquired another residential project in Nanjing, namely Yanlord G53 Apartments. In 2009, we entered into a share transfer agreement with the affiliate of GIC Real Estate. Upon completion of the transfer, we jointly developed the Yanlord Lakeview Bay project in Suzhou. In 2009, 2010 and 2011, we formed a joint venture company with the affiliate of GIC Real Estate to develop the Yanlord Sunland Gardens project in Shanghai, the Yanlord Riverbay project in Chengdu and the Tianjin Jinnan Land project, respectively.
. Since 2006, we have also built up strong working relationships with reputable international partners, such as Frasers Hospitality, a market leader in the management of serviced residences. In 2010, we also entered into management contracts with InterContinental Hotels Group PLC for the management of hotels in Sanya and Zhuhai.
. In 2009, we formed a joint venture company with Sembcorp Development Ltd. and certain other partners, as the primary developers for the Sino-Singapore Nanjing Eco Hi-tech Island in Nanjing, a technology-focused sustainable city development project with a mix of residential, commercial, industrial and research and development businesses.
. In 2010, we formed two joint venture companies with Ho Bee Land Limited and its affiliate for the development of an integrated property project, namely Tangshan Nanhu Eco-City Land Parcels, and a residential project, namely Yanlord Western Gardens in Shanghai.
. In 2011, we further developed relationships with our existing international partner Ho Bee Land Limited and a new partner, Shanghai Youyou Group. During the year, we formed two joint venture companies with Ho Bee Land Limited, together with Shanghai Youyou Group, for the development of residential projects, namely Yanlord Marina Peninsula Gardens in Zhuhai.
. In 2017, we entered into a shareholders’ agreement with Perennial UW Pte. Ltd. and Heng Yue Holdings Limited for acquisition of 49% interest in a company with the intention to acquire shares in United Engineers Limited (‘‘UEL’’) and its subsidiary, WBL Corporation Limited (‘‘WBL’’). UEL and WBL are involved in property development, hospitality, engineering, distribution, and manufacturing business. UEL is listed on the Mainboard of the SGX-ST.
. In 2017, we established two joint ventures with Hongkong Land Holdings Limited to jointly develop integrated developments with total GFA of 745,603 sq.m. in Hangzhou.
— 109 — . In 2018, we made our maiden entry into the Singapore residential development market through the joint acquisition of a freehold development site known as Tulip Garden with MCL Land Limited, a subsidiary of Hongkong Land Holdings Limited for a consideration of S$906.9 million. Being located within Singapore’s prime District 10 address, this site is ideally situated in close proximity to the chic Holland Village enclave and is well connected via the key thoroughfare of Farrer Road and Singapore’s Circle line subway network. The site has an area of 29,423 sq.m. and a plot ratio of 1.6 and could potentially yield up to 672 prime residential units.
GIC Real Estate, Ho Bee Land Limited, Sembcorp Development Ltd., Perennial UW Pte. Ltd., Hongkong Land Holdings Limited, or their affiliates are among the leading companies in Singapore and Hong Kong in township planning and development, industrial park planning and development, or property investment and development. We expect these joint ventures will help us to grow our business further through leveraging our experience in the development of fully-fitted residential properties and high-quality commercial and integrated projects in the PRC.
Since 2016, we have formed several strategic partnerships with China State-Owned Enterprises (‘‘SOEs’’) with strong financial positions and government relationships. We have proven ourselves as an established brand in the PRC market to lead project developments with these China SOEs.
The following illustrates our selected partnerships with Chinese SOEs established since 2016:
. In May 2016, we partnered with Ping An Insurance (Group) Company of China, Ltd., Tianjin Realty Development (Group) Co., Ltd. and Beijing Capital Land Ltd. to jointly acquire a land parcel with an approximate GFA of 351,338 sq.m. in Tianjin Hong Qiao District for RMB2.374 billion. The mixed-use site will include high-end residential and commercial units, as well as educational facilities. We hold a 25% stake in this joint venture.
. In June 2016, we partnered with China Merchants Property Development Co., Ltd. and a subsidiary of Ping An Insurance (Group) Company of China, Ltd. to develop a land parcel with GFA of 297,972 sq.m. in Suzhou city’s Gusu district, which was acquired through a public land auction for approximately RMB4 billion. We hold a 30% stake in the project. This acquisition provides a unique opportunity for us to acquire a prime site within the core region of Suzhou city and will augment our existing initiatives within the Suzhou real estate market.
. In August 2016, we partnered with China Merchants Property Development Co., Ltd. and Poly Real Estate Group Co., Ltd. to develop a site of approximately 170,000 sq.m. in Nanjing city’s Gulou district. Such joint venture acquired the land parcel for approximately RMB4.82 billion and we hold a 33% stake in the project. In developing this prime site within the heart of Nanjing, we are able to capitalize on our track record for the development of high-end international communities in Nanjing.
. In September 2016, we formed a strategic alliance with a subsidiary of China Resources Land Limited to develop a provincial level redevelopment project with a site area of 1.23 sq.km. in Zhongshan city. Through a RMB64 million purchase consideration paid and a RMB255 million capital injection in alliance companies, this project will be redeveloped into a landmark lifestyle and services hub. We hold a 35% stake in this project. Such partnership provides us with a strategic partner to jointly explore property development in Zhongshan and enhances Yanlord’s existing presence in the Pearl River Delta region.
. In June 2017, we entered into a cooperation agreement with a third party, Nanjing AnJu Affordable Housing Construction Development Co., Ltd. (‘‘Nanjing Anju’’) to acquire 50% interest in a wholly-owned company of Nanjing Anju, which owned an empty plot of land parcel in Nanjing obtained through land tender in March 2017 for a consideration of RMB2.010 billion. The land parcel has been fully paid for by Nanjing Anju.
. In 2018, we partnered with a consortium of property developers, including but not limited to, Capital (Tianjin) Property Management Limited, a subsidiary of Beijing Capital Land Ltd. and Tianjin Realty Development (Group) Co., Ltd., an affiliate company of Tianjin Real Estate Group Co., Ltd. and other developers, to jointly acquire the land use rights of two land parcels, namely Land Parcels 189 and 188, in Bei Chen District, Tianjin, with a maximum
— 110 — allowable residential GFA of 250,446 sq.m. and 165,188 sq.m. for a consideration of RMB4.60 billion and RMB2.95 billion, respectively, to further expand our footprint in the Bohai Rim. We hold a 19.8% interest and a 16.5% interest in Tianjin Hefa Property Development Co., Ltd. for the development of Land Parcel 189 and Tianjin Lianzhan Property Development Co., Ltd. for the development of Land Parcel 188, respectively. These two projects are nested in the outer fringe of Tianjin city center and will be developed into a prime mixed-use development with a comprehensive and mature suite of lifestyle amenities such as hospitals, schools and shopping malls.
. In 2018, we entered into three strategic collaborations with state-owned companies in Shanghai to oversee the project management of approximately 4,300 rental housing units in Shanghai with a total gross floor area of approximately 400,000 sq.m.
. In January 2019, we partnered with a consortium of property developers, including SND Real Estate Group Co., Ltd. and Suzhou HengTai Commercial Real Estate Co., Ltd. to develop Suzhou Industrial Park No. 2018–04 Land with a maximum allowable residential GFA of 135,777 sq.m. for a consideration of RMB3.533 billion. We hold a 15% interest in this project.
. In June 2019, we partnered with a consortium of property developers, including SND Real Estate Group Co., Ltd., China Merchants Property Development Co., Ltd. and Suzhou HengTai Commercial Real Estate Co., Ltd., to develop Suzhou No. 2019-WG-7 Land Parcels with a maximum allowable residential GFA of 186,757 sq.m. for a consideration of RMB5.017 billion. We hold a 15% interest in this project.
Quality Investment Portfolio Contributing to Stable Recurring Income
We have leveraged our brand and experience in developing high-quality residences to build a growing portfolio of diversified investment properties. As of December 31, 2018, we had a total saleable GFA of 438,255 sq.m. attributable to completed investment properties and a total GFA of 1,684,882 sq.m. attributable to commercial and investment properties under development or held for future development. Our net revenue from property investment and hotel operations was RMB363 million, RMB358 million, RMB549 million (US$80 million) in 2016, 2017 and 2018, respectively.
Our ability to service interest obligations with rental income, as defined by rental income from investment properties over finance cost (including capitalized interest), is among the highest of our peers with a comparable rating (‘‘BB’’ or ‘‘BB–’’). We have completed, and will continue to prudently expand, our portfolio of properties for commercial and investment holding purposes, including commercial space, serviced apartments, and integrated commercial properties, in cities such as Nanjing, Suzhou, Chengdu, Tianjin and Zhuhai. We have our own commercial management team to manage and lease commercial and investment properties, which sets us apart from most of our competitors who outsource those functions to external service providers. Lease and management income from integrated commercial properties creates additional stable and recurring revenue streams to complement our existing businesses. To further enhance the stable development of our retail investment properties, we have signed key tenancy agreements with many global retailers, including but not limited to LVMH, Prada and ROLEX.
Well-Diversified Funding Channels across Equity and Debt
We have employed well-diversified funding channels across equity and debt and believe that our ability to access global capital markets provides us with more flexibility to fund our operations and enhance our liquidity. Since our S$1.7 billion initial public offering and listing of shares on the Mainboard of the SGX-ST in 2006, we have engaged in a variety of capital raising transactions. We completed the concurrent offerings of our shares and convertible notes on February 7, 2007, raising proceeds of approximately S$311 million and S$477 million, respectively. On November 7, 2007, we completed a three-year offshore syndicated loan of US$200 million and refinanced it with a US$400 million offshore syndicated loan on December 18, 2009, which was then the largest offshore syndicated loan by a non-state-owned property developer in the PRC. On July 13, 2009, we again completed concurrent offerings of our shares and convertible bonds, with net proceeds of approximately S$226 million and S$370 million, respectively. On May 8, 2014, we completed the issuance of S$400 million 6.2% senior notes due 2017. On May 5, 2015, Yanlord Land (HK) Co., Limited entered into a US$170 million equivalent dual-tranche term loan facility with four commercial banks. On January 23, 2017, we, through our wholly-owned subsidiary, Yanlord Land (HK) Co., Limited, completed the issuance of
— 111 — US$450 million 5.875% senior notes due 2022. On April 24, 2017, Yanlord Land (HK) Co., Limited entered into a 3.5-year US$1.05 billion offshore syndicated credit facility with 26 global commercial banks and financial institutions. On April 23, 2018, we through our wholly-owned subsidiary Yanlord Land (HK) Co., Limited issued US$350 million 6.75% senior notes due 2023. On April 10, 2019, we through our wholly-owned subsidiary, Yanlord Land (HK) Co., Limited entered into a dual-tranche term loan facility of up to US$364 million equivalent with seven global commercial banks. At present, we have established strong banking relationships with Chinese banks, including but not limited to, Agricultural Bank of China, Bank of Beijing, Bank of China, Bank of Shanghai, China Minsheng Bank, Citic Bank, Bank of Communications, China Bohai Bank, China Merchants Bank, Industrial and Commercial Bank of China and SPD Bank, and international banks, including but not limited to, DBS Bank Ltd., Hang Seng Bank Limited, HSBC, Standard Chartered Bank and CMB Wing Lung Bank. See ‘‘Description of Other Material Indebtedness’’ for additional information regarding the offshore loans we have obtained since 2015. We continue to maintain good relationships with onshore and offshore banks, which we believe allows us to capitalize on the low interest rate environment in the offshore market.
In addition, we have formed various joint ventures with renowned international partners and China SOEs as a way of project-level financing. For details please refer to ‘‘Strong Relations with International Partners and China SOEs’’ competitive strength mentioned above.
Long Track Record with Strong Management Team
We have an experienced management team that has successfully led our operations through rapid organic growth and gradually expanded our portfolio of high-quality property development projects. Our Chairman and CEO, Mr. Zhong Sheng Jian, has long-standing relationships with the local governments in the cities where our properties are currently located. He has also participated in numerous government-to-government activities between Singapore and the PRC. This has also helped raise our profile among government officials in the PRC, particularly where our projects are located. Our senior management team has, on average, over 15 years of property development experience working in Yanlord. A majority of our management team progressed through the ranks within our company and they have actively helped to shape our business culture, direction and vision. We believe the consistently low turnover rate of less than 5% of our management team provides continuity in carrying out our philosophy of building high-quality products.
Our management’s extensive relationships, experience and market knowledge enable us to source attractive development opportunities, to acquire sites at reasonable prices, and to successfully replicate our business models in Shanghai and Nanjing to Suzhou, Hangzhou, Nantong, Chengdu, Tianjin, Tangshan, Jinan, Zhuhai, Shenzhen, Zhongshan, Sanya, Haikou and Wuhan in the PRC.
Our management believes our employees are key contributors to our growth and we recognize that our success and ability to maintain our competitiveness depend on the wellbeing, quality and skills of our staff. As such, continuous professional development has been provided to the staff. Our human resources department organizes and manages a one-week internal training program for our employees on a quarterly basis. Each of our subsidiaries is required to commit employees to participate in our internal training programs.
Business Strategies
Our goal is to build on the brand we have established in Shanghai and grow our business by further expanding into other cities and further expanding in the commercial property segment. We have successfully replicated our success in Shanghai and diversified into other top-tier cities such as Nanjing and Tianjin. To achieve our business objectives, we plan to adopt the following strategies to drive our future growth.
Entrench Our Leading Market Position in Our Selected Cities
We aim to maintain a leading market position in the markets where we operate. We also intend to continue increasing our market share in cities in which we penetrate into by leveraging our superior brand name, high product quality, innovative design and level of craftsmanship. We believe that achieving leading market positions accord us an advantage in growing our brand awareness and reputation, as well as achieving steady sales even in difficult market conditions.
— 112 — Selectively Expand Our Business in Our Six Major Economic Regions
We choose the locations for our projects carefully and strategically. We have established our presence in six major economic regions in the PRC: the Yangtze River Delta (Shanghai, Nanjing, Suzhou, Hangzhou and Nantong), Western China (Chengdu), Bohai Rim (Tianjin, Tangshan and Jinan), Southern China (Shenzhen, Zhuhai and Zhongshan), Hainan (Haikou and Sanya) and Central China (Wuhan); and also Singapore. We intend to continue expanding our business in and allocating our resources to these six major economic regions, as they represent a substantial portion of the urban growth in the PRC. This will include expanding our business in 15 cities in the PRC as well as Singapore in which we have development projects as well as expanding into new cities in these regions when opportunities arise. We intend to ensure our sustained development by leveraging our established brand and market position and capitalizing on the growth potential of the property markets in these cities. We also seek to maintain a land bank of development sites sufficient to support a development pipeline of five years on a rolling basis.
Focus on High-Quality, Fully-Fitted Residential Property Developments in Prime Locations
We will maintain our core business focus on developing fully-fitted residential properties in prime locations in the PRC and Singapore. We believe that both the PRC and Singapore’seconomicgrowth and the accompanying increase in personal income of its citizens, as well as macro-economic policies designed to curb the supply of large-size residential properties, will drive the demand for high-quality residential properties. We believe our designs and planning concepts are innovative and are designed to meet the needs of our high-income target customers. Our properties are generally fully-fitted, with all finishing work and air-conditioning pre-installed, to reduce the labor and expense to our buyers of installing such items. Most of our properties also contain communal facilities such as club houses, restaurants, sports facilities and parking garages. We intend to continue to emphasize quality of delivery, interior design, integrated landscaping and a comprehensive range of facilities to create a desirable living environment. We believe this fully-fitted property development strategy coupled with our track record of detail-oriented and meticulous execution allows us to charge a premium when selling. We will continue to build on our long-standing industry experience, market knowledge and brand.
Further Expand Our Presence in the Commercial Property Market and Prudently Increase our Portfolio of Investment Properties
We intend to leverage our residential property development expertise, our ability to acquire prime development sites and our strong financial position to prudently expand into the premium integrated commercial property market. In 2018, revenue generated from our property development and our property investment including hotel operations constituted approximately 95% and 2% of our total revenue, respectively. We intend to continue to develop high-quality shopping malls, office buildings, serviced apartments and hotels for sale and lease, particularly on prime sites, the value of which would be optimally realized through commercial developments. We expect that the lease and management income from such integrated commercial properties will generate a stable and growing recurrent revenue stream.
Maintain an Optimal Balance Between Land Bank Acquisitions and Prudent Financial Policy
To grow our business, we will continue to acquire development sites in prime locations for future development at commercially viable prices, either through direct land acquisitions or through the acquisition of or joint ventures with other companies that own development sites. We adhere to a disciplined approach in land acquisition to ensure the maintenance of our internal return requirement. We seek to maintain a land bank of development sites sufficient to support a development pipeline of five years on a rolling basis. At the same time, we will maintain a prudent financial policy. We will continue to closely monitor our cash position, liquidity and gearing levels and actively manage our financing planning and cash flow. We will remain disciplined in our capital commitments and intend to maintain an optimal balance between land acquisitions and prudent financial management.
Build on Reputation and ‘‘Yanlord’’ Branding
In the past, we have been consistently able to achieve a premium on our projects in our core markets even over other large reputable developers, as evidenced by our ability to achieve higher average selling prices year on year. Our projects are typically acknowledged for their quality and characterized by large-scale, multi-phased projects designed and built by international architects, leading
— 113 — designers and reputable contractors. We have been able to maintain high standards of customer satisfaction by delivering projects in a timely fashion. We believe our high-quality products and services have contributed to our strong branding and have allowed us to command a premium when pricing our properties. We intend to continue to build on our ‘‘Yanlord’’ brand to achieve attractive returns on our projects in the future.
Maintain Strong Relations with Local Community and Government to Support Continued Growth of Our Development Pipeline
We believe that many of our projects contribute to the overall development of local communities where they are located and contribute to capital growth of properties in the vicinity of our projects. As such, we believe that such contribution establishes a good reputation among local governments and gives us a significant advantage in obtaining prime development sites and allows us to maintain a sufficient project pipeline that is integral to our ongoing growth. Given our track record in building quality and representative projects commanding premium prices, our development properties are often visited by government officials from around the PRC. These visits often lead to invitations for us to tender for development projects in new cities. Such invitations provide us with early information on prime development sites in cities that we may be interested in, as well as timely and accurate information relating to property development policies and land policies. This gives us a competitive advantage in identifying and acquiring prime sites for our future developments. We intend to continue building quality projects that contribute to our relationship with local communities and governments.
Continue to Leverage Our Experienced Management Team
The experience of our management team has been crucial for our success. Our senior management has been with us for nearly 15 years on average and has been instrumental in positioning Yanlord as a premium residential developer in PRC. Our management has excellent working relationships confirm with various stakeholders and has been consistently able to procure land banks at attractive costs, even in non-core markets. The numerous awards won by us at the national, provincial and municipal levels also reflect the quality of our management team’s leadership. We hope to leverage our wealth of knowledge and experience to further expand successfully into other geographies in the PRC as well as develop a stronghold in other asset classes (commercial and retail) which currently form a relatively small portion of our portfolio.
Awards and Certificates
Over the years, we have received a number of certificates and awards, including:
Applicable Period Certificate/Award Recipient of Award of Award Shortlisted for National Award for Engineering Excellence Chengdu Yanlord Riverbay (Phase 2) 2019 入選國家優質工程獎評選...... (成都仁恒濱河灣二期) Best Service Award Crowne Plaza Sanya Haitang Bay Resort 2019 最佳卓越服務酒店 ...... (三亞海棠灣仁恒皇冠假日度假酒店) China Top 10 Leading Brands Award YanlordLandGroupLimited 2019 中國十大行業領軍品牌獎...... (仁恒置地集團有限公司) Model Construction Site for Work Safety and Dream Park (Shenzhen) 2018 On-site Management (深圳夢公寓項目) 深圳市安全生產文明施工示範工 地 ...... China Real Estate Design Award (Landscape) Suzhou Tang Yue Bay Gardens 2018 2017–2018年度地產設計優秀獎(園林景觀)...... (蘇州棠悅灣花園) Provincial Award for Engineering Excellence (Jiangsu) Block 8 of Suzhou Tang Yue Bay 2018 2018年度江蘇省優質工程獎‘‘揚子杯’’ ...... Gardens (蘇州棠悅灣花園8號樓) National Award for Civil Engineering (by China Construction YanlordLandGroupLimited 2018 IndustryAssociation)...... (仁恒置地集團有限公司) 2018 China TOP 100 Real Estate Developers — Financial YanlordLandGroupLimited 2018 Stability TOP 10 (仁恒置地集團有限公司) 2018年中國房地產百強企業 — 穩健性TOP10...... 2017–2018 Luban Award for Engineering Excellence Chengdu Yanlord Riverbay (Phase 2) 2018 2017–2018年度中國建設工程魯班獎(國家優質工程)...... (仁恒置地集團有限公司) Gold Award of China’s Construction Engineering Steel Structure Yanlord Marina Centre in Zhuhai 2018 中國建築工程鋼結構金獎...... (珠海仁恒濱海中心)
— 114 — Applicable Period Certificate/Award Recipient of Award of Award ‘‘Most Family-Friendly Hotel’’ in the 18th China Hotel Industry Crowne Plaza Sanya Haitang 2018 Golden Horse Awards Bay Resort ‘‘中國最佳親子酒店’’榮譽 ...... (三亞海棠灣仁恒皇冠假日度假酒店) ‘‘White Magnolia Cup’’ Yanlord on the Park, Yanlord Eastern 2018 白玉蘭...... Gardens and Yanlord Western Gardens in Shanghai (上海仁恒世紀公寓、上海仁恒東 邑雅苑、以及上海仁恒西郊雅苑) ‘‘JinLingCup’’ Oasis New Island Gardens (Phase 2) 2018 金陵杯...... in Nanjing (南京綠洲新島花園二期) ‘‘Guangdong Structure and Engineering Excellence’’ Yanlord Marina Centre in Zhuhai 2018 ‘‘廣東省優質機構’’ ...... (珠海仁恒濱海中心) ‘‘Guangdong’s Construction Engineering Excellence — Gold Yanlord Marina Centre in Zhuhai 2018 award’’ (珠海仁恒濱海中心) ‘‘廣東省建設工程金匠獎’’ ...... LEED-EB platinum certification Chengdu Yanlord Landmark 2017 LEED-EB 鉑金級認證 ...... (成都仁恒置地廣場) 2016–2017 Luban Award, National award for civil engineering Chengdu Yanlord Riverbay (Phase 1) 2017 2016–2017年度中國建設工程魯班獎(國家優質工 程)...... (仁恒置地集團有限公司) Best in Sector (Property Development) by The Edge Singapore YanlordLandGroupLimited 2017 Billion Dollar Club 2017 (仁恒置地集團有限公司) 《The Edge Singapore》 授予‘‘2017年最佳表現股份獎’’ ...... Best Performing Stock (Property Development) by The Edge YanlordLandGroupLimited 2017 Singapore Billion Dollar Club 2017 (仁恒置地集團有限公司) 《The Edge Singapore》 授予‘‘2017年房產開發業內最佳獎’’ ...... Guangdong Province — Award for Structural and Engineering Yanlord Marina Centre Centre Section B 2017 Excellence and Yanlord Marina Peninsula 廣東省優質結構工程 ...... Gardens (Phases 1 and 2) in Zhuhai (珠海仁恒濱海中心 — B標段以及 仁恒濱海半島花園一期及二期) Nanjing Jin Ling Cup Oasis New Island Gardens (Phase 1) 2017 金陵杯...... (南京綠洲新島花園一期) Tianjin ‘‘Hai He Cup’’ TianjinJinnanLand(Phase3) 2017 海河杯...... (天津景新花園三期) Shanghai White Magnolia Cup Yanlord Western Gardens and Yanlord 2017 白玉蘭...... Eastern Gardens in Shanghai (上海仁恒西郊雅苑及仁恒東邑雅苑) Sichuan ‘‘Tian Fu Cup’’ Yanlord Riverbay (Phase 2) in Chengdu 2017 天府杯 ...... (成都仁恒濱河灣二期) 2017 National Customer Satisfaction Project YanlordLandGroupLimited 2017 Customer Satisfaction Index (CSI) Assessment — (仁恒置地集團有限公司) Company with Satisfaction Rating 全國實施用戶滿意度工程用戶滿意度指數CSI測評用戶 滿意企業 ...... Shanghai City User Satisfaction Award — Company Category YanlordLandGroupLimited 2017 LEED-EB platinum certification (仁恒置地集團有限公司) 上海市實施用戶滿意度工程(企業類) LEED EB鉑金級認證 ...... Jiangsu Province Top 50 Property Management Company Award YanlordLandGroupLimited 2017 江蘇省物業服務行業綜合實力50強企業 ...... (仁恒置地集團有限公司) World Travel Awards in 2016 Frasers Suites Chengdu 2016 2016世界旅游大獎 ...... (成都仁恒輝盛閣) Top 10 City Landmark of Zhuhai in 2016 Yanlord Marina Centre 2016 2016年入選珠海‘‘十大城市地標’’ ...... (仁恒濱海中心)
Business Operations
The tables below summarize the details as of December 31, 2018 of (i) our completed development properties; (ii) properties under development; and (iii) properties held for future development.
— 115 — Completed Development Properties
Interest Project City Attributable GFA (sq.m.) Type Hengye International Plaza(1) (恒業國際廣場)(1) ...... Chengdu 51% 40,655 S Hengye Star Gardens (恒業星園)...... Chengdu 51% 83,943 R,S Yanlord Landmark(1) (仁恒置地廣場)(1) ...... Chengdu 100% 165,755 O,S,H Yanlord Riverbay (Phase 1) (仁恒濱河灣，一期) ...... Chengdu 70% 126,716 R Yanlord Riverbay (Phase 2) (仁恒濱河灣，二期) ...... Chengdu 70% 142,328 R Xintian Centre (新天商業中心)...... Guiyang 67% 14,376 S Yanlord Villas (仁恒別墅)...... Guiyang 67% 36,131 R Bamboo Gardens (翠竹園) ...... Nanjing 100% 394,310 R Oasis New Island Gardens (Phase 1) (綠洲新島花園，一期)...... Nanjing 100% 102,065 R Oasis New Island Gardens (Phase 2) (綠洲新島花園，二期)...... Nanjing 100% 93,995 R Oasis New Island Gardens (Phase 3) (綠洲新島花園，三期)...... Nanjing 100% 75,454 R Orchid Mansions(1) (玉蘭山莊)(1) ...... Nanjing 100% 69,649 R Plum Mansions,including Lakeside Mansions (梅花山莊‧湖畔之星)...... Nanjing 100% 327,667 R Yanlord G53 Apartments(1) (仁恒G53公寓)(1) ...... Nanjing 100% 96,354 R,S Yanlord International Apartments, Tower A(1) (仁恒國際公寓，A棟)(1)...... Nanjing 100% 42,494 H Yanlord International Apartments, Tower B (仁恒國際公寓，B棟)...... Nanjing 100% 67,683 R Yanlord Yangtze Riverbay Town(1) (仁恒江灣城)(1) ...... Nanjing 100% 720,847 R,S Four Seasons Gardens (Phase 1) (四季花園，一期)...... Nantong 60% 64,561 R Sanya Hai Tang Bay — Land Parcel 9(2) (三亞海棠灣 — 9號地塊)(2) ...... Sanya 100% 101,480 R,H Bayside Gardens (禦瀾灣苑)...... Shanghai 51% 116,408 R,S Yanlord Apartments (仁恒公寓)...... Shanghai 67% 13,579 R Yanlord Eastern Gardens (仁恒東邑雅苑)...... Shanghai 100% 180,583 R Yanlord Gardens (仁恒濱江園)...... Shanghai 67% 415,360 R Yanlord on the Park (仁恒世紀公寓)...... Shanghai 50% 148,122 R Yanlord Plaza (仁恒廣場)...... Shanghai 67% 53,049 R,O Yanlord Riverside City(1) (仁恒河濱城)(1) ...... Shanghai 67% 741,417 R,S Yanlord Riverside Gardens (仁恒河濱花園)...... Shanghai 100% 319,756 R Yanlord Sunland Gardens(1) (仁恒森蘭雅苑)(1) ...... Shanghai 100% 336,038 R,S,H Yanlord Town (仁恒家園)...... Shanghai 50% 75,573 R Yanlord Townhouse (仁恒怡庭)...... Shanghai 100% 65,572 R Yanlord Western Gardens (仁恒西郊雅苑)...... Shanghai 60% 247,503 R Yunjie Riverside Gardens (運杰河濱花園)...... Shanghai 51% 253,048 R,S Yanlord Rosemite (仁恒巒山美地花園) ...... Shenzhen 100% 148,424 R,S Suzhou Wuzhong Area C1 Land — Villas (蘇州吳中區C1地塊 — 別墅) ...... Suzhou 100% 22,614 R
— 116 — Interest Project City Attributable GFA (sq.m.) Type Tang Yue Bay Gardens (棠悅灣花園)...... Suzhou 100% 172,942 R Yanlord Lakeview Bay(1) (仁恒雙湖灣)(1) ...... Suzhou 100% 387,880 R,S Yanlord Peninsula (Apartment) (星嶼仁恒)...... Suzhou 100% 100,342 R Yanlord Peninsula (Townhouse) (星島仁恒)...... Suzhou 100% 91,963 R Tangshan Nanhu Eco-City — Land Parcel A9(3) (唐山南湖生態城，A9地塊)(3)...... Tangshan 50% 119,116 R,S Tangshan Nanhu Eco-City — Land Parcel A19(3) (唐山南湖生態城，A19地塊)(3) ...... Tangshan 50% 38,611 R Tianjin Jinnan Land(1) (景新花園)(1) ...... Tianjin 60% 376,440 R,S Yanlord Riverside Gardens (仁恒河濱花園)...... Tianjin 80% 326,006 R Yanlord Riverside Plaza (Phase 1)(1) (仁恒海河廣場，一期)(1) ...... Tianjin 100% 217,812 R,S Yanlord Riverside Plaza (Phase 2)(1) (仁恒海河廣場，二期)(1) ...... Tianjin 100% 163,971 R,O,S Yanlord Marina Centre — Section A(2) (仁恒濱海中心，A標段)(2) ...... Zhuhai 95% 58,559 H Yanlord Marina Centre — Section B(1) (仁恒濱海中心，B標段)(1) ...... Zhuhai 95% 135,383 R,S Yanlord Marina Peninsula Gardens (Phase 1)(1) (仁恒濱海半島花園，一期)(1) ...... Zhuhai 57% 152,926 R,S Yanlord Marina Peninsula Gardens (Phase 2) (仁恒濱海半島花園，二期) ...... Zhuhai 57% 161,606 R,S Yanlord New City Gardens(1) (仁恒星園)(1) ...... Zhuhai 90% 413,012 R,S Total...... 8,820,078
Notes:
R = Residential; O = Office; S = Shop & Retail; H = Hotel & Serviced Apartment
(1) Consists of properties held for investment with unexpired terms of lease between 25 years to 63 years as of December 31, 2018.
(2) Consists of GFA of 127,400 sq.m. under hotel operations.
(3) Being held under associate or joint venture.
As of December 31, 2018, an aggregated saleable GFA of 817,052 sq.m. out of the total GFA of 8,820,078 sq.m. of completed property were unsold or retained as investment properties or fixed assets (including 3,420 sq.m. being held under our associate or joint venture).
Properties Under Development
Interest Estimated GFA Project City Attributable Completion Date (sq.m.) Type Yanlord Riverbay (Phase 3) (仁恒濱河灣，三期) ...... Chengdu 70% Dec-2019 125,307 R Hangzhou Intelligent City Project — Commercial Land Parcels (Phase 1)(1) (杭州傳化科技城項目 — 國際 商貿園，一期)(1)...... Hangzhou 30% 1st Quarter 2020 79,631 R Jinan CBD Project — A3 Land(1) (濟南CBD項目 — A3地塊)(1) . Jinan 35% 2nd Quarter 2021 45,838 O, S, H Jinan CBD Project — B5 Land(1) (濟南CBD項目 — B5地塊)(1) . Jinan 35% 3rd Quarter 2021 111,311 R, S Nanjing Eco Hi-tech Island — Land Parcel G73 (南京生態科技島 — G73地塊) Nanjing 100% 2nd Quarter 2020 97,034 O, S, H
— 117 — Interest Estimated GFA Project City Attributable Completion Date (sq.m.) Type Yanlord Phoenix Hill (Phase 1)(2) (鳳凰山居，一期)(2) ...... Nanjing 51% Jul-2019 78,336 R, S Yanlord Taoyuan Gardens(1)(3) (桃園世紀華庭)(1)(3)...... Nanjing 33% 2nd Quarter 2021 153,427 R, O, S Nanjing No. 2017G01 Land(1) (南京No. 2017G01地塊)(1) . . . Nanjing 50% 1st Quarter 2020 87,123 R Four Seasons Gardens (Phase 2) (四季花園，二期) ...... Nantong 60% Jun-2019 71,870 R, S Nantong R17014 Land (Phase 1)(1) (南通R17014地塊，一期)(1) . . Nantong 31% 4th Quarter 2020 82,999 R Shenzhen Longgang District Redevelopment Project (Phase 1) (深圳龍崗區 — 城中村改造項 目，一期) ...... Shenzhen 95% 2nd Quarter 2021 125,810 R, S Yanlord Centre (Phase 1) (仁恒中心，一期) ...... Shenzhen 100% Nov-2019 123,280 S, H Yanlord Centre (Phase 2) (仁恒中心，二期) ...... Shenzhen 100% 2nd Quarter 2022 209,440 O, S, H Canal Times(4) (運河時代花園)(4) ...... Suzhou 100% Dec-2019 52,514 R New Tang’sMansion(1) (淺棠平江)(1) ...... Suzhou 30% 2nd Quarter 2021 139,297 R Riverbay Gardens (Phase 1) (江灣雅園，一期) ...... Suzhou 30% Jan-2019 158,391 R, S Riverbay Gardens (Phase 2) (江灣雅園，二期) ...... Suzhou 30% Dec-2019 137,687 R, S Suzhou No. 2016-WG-46 Land Parcels(5) (蘇州No. 2016-WG-46地塊)(5) Suzhou 100% 3rd Quarter 2023 52,090 R, S Tangshan Nanhu Eco-City — Land Parcel A8(1) (唐山南湖生態城，A8地塊)(1). Tangshan 50% 4th Quarter 2020 169,553 R Tianjin Beichen No. 2017-189 Land(1) (天津北辰No. 2017-189 地塊)(1) ...... Tianjin 20% 2ndQuarter2021 242,280 R,S Tianjin Hong Qiao Land (Phase 1)(1) (紅咸雅苑，一期)(1) ...... Tianjin 25% Dec-2019 203,878 R, S The Mansion In Park (Phase 1)(1)(6) (仁恒公園世紀，一期)(1)(6) . . . Tianjin 50% 3rd Quarter 2021 161,100 R, S Yanlord Majestive Mansion(1) (仁恒海和院)(1) ...... Tianjin 60% 3rdQuarter2020 260,925 R,S Yiwan Gardens(1) (依灣花園)(1) ...... Tianjin 17% 3rdQuarter2021 160,029 R Yanlord on the Park(7) (仁恒‧公園世紀)(7) ...... Wuhan 55% 3rd Quarter 2020 151,851 R Yanlord Marina Centre — Section A(5) (仁恒濱海中心 — A標段)(5) . . Zhuhai 95% Jan-2019 35,250 O, S Yanlord Marina Peninsula Gardens (Phase 3) (仁恒濱海半島花園，三期) . . Zhuhai 57% 4th Quarter 2020 185,774 R Yanlord North Shore Gardens(8) (仁恒北岸苑)(8) ...... Zhuhai 57% 4th Quarter 2022 43,704 R Total...... 3,545,729
Notes:
R = Residential; O = Office; S = Shop & Retail; H = Hotel & Serviced Apartment
(1) Being held under associate or joint venture
(2) Formerly known as Nanjing Daji Land Parcels (南京大吉別墅項目)
— 118 — (3) Formerly known as Nanjing No. 2016G01 Land (南京No. 2016G01地塊)
(4) Formerly known as Suzhou No. 2016-WG-63 Land Parcels (蘇州No. 2016-WG-63地塊)
(5) Consists of properties held for investment with unexpired terms of lease between 27 years to 39 years as at 31 December 2018
(6) Formerly known as Tianjin No. 2013-090 Land Parcels (天津No. 2013-090地塊)
(7) Formerly known as Wuhan Metropolis Project (武漢大都會項目)
(8) Formerly known as Zhuhai No. 2017-21 Land (珠海No. 2017-21地塊)
Properties Held For Future Development
Interest GFA Project City Attributable (sq.m.) Type Chongzhou Project Land Parcels (崇州項目地塊)...... Chengdu 80% 102,958 R Hangzhou D-05 Land(1) (杭州南星項目地塊)(1) ...... Hangzhou 50% 68,312 R Hangzhou Intelligent City Project — Commercial Land Parcels (Phase 2 and 3)(1) (杭州傳化科技城項目 — 國際商貿園， 二、三期)(1) ...... Hangzhou 30% 215,274 R,S,H Hangzhou Intelligent City Project — Medical Land Parcels(1) (杭州傳化科技城項目 — 國際醫療園)(1) . . . . Hangzhou 30% 450,773 R, O, H Hangzhou West Lake Land(1) (杭州西湖之江項目地塊)(1)...... Hangzhou 50% 120,960 R,S Yanlord Phoenix Hill (Phase 2 to 4)(2) (鳳凰山居，二至四期)(2) ...... Nanjing 51% 199,925 R,S Nanjing No. 2016G84 Land(1) (南京No. 2016G84地塊)(1) ...... Nanjing 51% 533,345 R,H Nanjing No. 2018G26 Land(1) (南京No. 2018G26地塊)(1) ...... Nanjing 12% 365,216 R,S Nantong R17014 Land (Phase 2 and 3)(1) (南通R17014地塊，二、三期)(1) ...... Nantong 31% 128,866 R Shanghai San Jia Gang Land Plot (仁恒濱海度假村)...... Shanghai 67% 33,989 R Shanghai Yangpu District 81 and 83 Redevelopment Project (上海楊浦區81、83街坊舊區 改造項目) ...... Shanghai 100% 183,187 R,S Shenzhen Longgang District Bantian Redevelopment Project (深圳龍崗區 — 坂田城市更新項目) ...... Shenzhen 100% 235,717 R, O, S Shenzhen Longgang District Economic Residential Housing (深圳龍崗區 — 經濟適用房) ...... Shenzhen 95% 149,080 R Shenzhen Longgang District Redevelopment Project (Phase 2 and 3) (深圳龍崗區 — 城中村改造項目，二、三期) . Shenzhen 95% 292,470 R, S Shenzhen Longgang District Redevelopment Project (Phase 4) (深圳龍崗區 — 城中村改造項目，四期) . . . . Shenzhen 95% 50,660 R Yanlord Century Mansion(3) (仁恒世紀大廈)(3) ...... Shenzhen 65% 55,100 S,H Yanlord Landmark (仁恒置地廣場)...... Shenzhen 100% 13,680 R,O,S Suzhou No. 2018-WG-11 Land Parcels(1) (蘇州No. 2018-WG-11地塊)(1) ...... Suzhou 60% 185,970 R,S TangshanNanhuEco-CityLandParcels(1) (唐山南湖生態城地塊)(1) ...... Tangshan 50% 73,949 O Tianjin Hong Qiao Land (Phase 2)(1) (紅咸雅苑，二期)(1) ...... Tianjin 25% 56,760 O,S The Mansion In Park (Phase 2 and 3)(1)(4) (仁恒公園世紀，二、三期)(1)(4) ...... Tianjin 50% 127,358 S,H Subtotal (PRC) ...... 3,643,549 Singapore
Tulip Garden(1) (金香園)(1) ...... Singapore 50% 51,785 R Subtotal (Non-PRC) ...... 51,785 Total...... 3,695,334
— 119 — Notes:
R = Residential; O = Office; S = Shop & Retail; H = Hotel & Serviced Apartment
(1) Being held under associate or joint venture
(2) Formerly known as Nanjing Daji Land Parcels (南京大吉別墅項目)
(3) Formerly known as Shenzhen Luohu Land Parcel (深圳羅湖地塊)
(4) Formerly known as Tianjin No. 2013-090 Land Parcels (天津No. 2013-090地塊)
Property Development
We are a property developer of fully-fitted residential properties and high-quality commercial and integrated properties in prime locations within strategically-selected, key-established top-tier cities in six major economic regions in the PRC. We have an established track record in developing premium residential properties in selected established top-tier cities in the Yangtze River Delta region, namely, Shanghai and Nanjing, and more recently, in other established top-tier cities in the PRC, namely, Suzhou, Hangzhou, Nantong, Chengdu, Tianjin, Tangshan, Jinan, Shenzhen, Zhuhai, Zhongshan, Haikou, Sanya and Wuhan. In 2018, we made our maiden entry into the Singapore residential development market through the joint acquisition of a freehold development site located in the core central region of Singapore. We have also expanded our property portfolio to include integrated commercial development properties, such as premium shopping malls, offices, serviced apartments and hotels.
Residential Property Developments
Our residential development properties are mainly large-scale, multi-phase projects located in premier residential areas in key established top-tier cities in the PRC. Our developments comprise apartments, townhouses and villas that are designed accordingly to provide our customers with an assurance of quality, a complete lifestyle experience and a sense of community living. To achieve this, we carefully research market trends and the levels of demand and supply in the cities where our development properties are located to ensure that the locations we choose are both convenient and desirable.
Our residential development properties are of high quality and international standards; they are typically integrated with facilities such as childcare centers and kindergartens, exclusive dining facilities, gym facilities, swimming pools, other sporting facilities and retail establishments. We focus on designing fully-fitted properties. Fully-fitted properties are those properties that are in move-in condition, as opposed to being delivered as an empty concrete shell which is many apartments in the PRC are currently delivered. When we deliver our properties, each unit contains pre-installed air- conditioning. Our fully-fitted apartments also contain pipes and wiring, tiled or wooden floors, bathroom fixtures, kitchens and painted walls.
In addition, we ensure that our residential development properties are built with quality workmanship, leading interior design and well-designed landscaping. Leading international architects and designers, including NBBJ Architects, RMJM Architects and Engineers, JGP Architecture Benoy Limited, Lead8 Hong Kong Limited and Skidmore, Owings & Merrill LLP (SOM), are engaged in the development and construction phases to ensure a premium and innovative product. As a result, we are able to command attractive prices for our residential development properties. For example, our residential development properties, namely Bayside Gardens (禦瀾灣苑), Yanlord Eastern Gardens (仁恒 東邑雅苑), Yanlord on the Park (仁恒世紀公寓), Yanlord Riverside City (仁恒河濱城), Yanlord Riverside Gardens (仁恒河濱花園), Yanlord Sunland Gardens (仁恒森蘭雅苑), Yanlord Town (仁恒家 園), Yanlord Townhouse (仁恒怡庭), Yanlord Western Gardens (仁恒 西郊雅苑) and Yunjie Riverside Gardens (運杰河濱花園) in Shanghai, Bamboo Gardens (翠竹園), Oasis New Island Gardens (綠洲新島 花園), Yanlord G53 Apartments (仁恒G53公寓), Yanlord International Apartments, Tower B (仁恒國際 公寓，B棟) and Yanlord Yangtze Riverbay Town (仁恒江灣城) in Nanjing, Riverbay Gardens (Phase 1) (江灣雅園，一期), Suzhou Wuzhong Area C1 Land — Villas (蘇州吳中區C1地塊 — 別墅), Tang Yue Bay Gardens (棠悅灣花園), Yanlord Lakeview Bay (仁恒雙湖灣) and Yanlord Peninsula (Apartment and Townhouse) (星嶼仁恒及星島仁恒) in Suzhou, Four Seasons Gardens (Phase 1) (四季花園，一期) in Nantong, Yanlord Marina Centre — Section B(仁恒濱海中心，B標段), Yanlord Marina Peninsula Gardens (Phase 1 and 2) (仁恒濱海半島花園，一期及二期) and Yanlord New City Gardens (仁恒星園)
— 120 — in Zhuhai, Yanlord Rosemite (仁恒巒山美地花園) in Shenzhen, Henye Star Gardens (恒業星園)and Yanlord Riverbay (Phase 1 and 2) (仁恒濱河灣，一期及二期) in Chengdu, Tianjin Jinan Land (景新花 園), Yanlord Riverside Gardens (仁恒河濱花園) and Yanlord Riverside Plaza (Phases 1 and 2) (海河廣 場，一期及二期) in Tianjin, Tangshan Nanhu Eco-City — Land Parcel A9 and A19 (唐山南湖生態城， A9及A19地塊) in Tangshan, and Sanya Hai Tang Bay — Land Parcel 9 (三亞海棠灣 — 9號地塊)in Sanya, had been completed with high quality of construction. We also intend to or are in the process of developing premium residential development properties in PRC cities (Shanghai, Nanjing, Suzhou, Hangzhou, Nantong, Chengdu, Tianjin, Tangshan, Jinan, Shenzhen, Zhuhai, Haikou and Wuhan) and Singapore.
Integrated Residential and Commercial Developments
In 2003, we began to expand into the development of high-quality commercial and integrated properties, such as shopping malls, offices, serviced apartments and hotels, for sale and lease. Our expansion into the development of premium commercial and integrated properties has enabled us to enter the property leasing market for shopping malls, office spaces, serviced apartments and hotels.
Our current portfolio of completed high-quality commercial and integrated properties includes Yanlord Landmark (仁恒置地廣場) with a GFA of 165,755 sq.m., a premium commercial development comprising of a five-storey upmarket retail mall, a 360-room serviced apartment building and an office building in Chengdu, Yanlord Riverside Plaza (海 河廣場) with a GFA of 159,428 sq.m., a premium integrated commercial complex comprising of a retail mall, an office building and a commercial street in Tianjin, Yanlord Marina Centre (仁恒濱海中心) with a GFA of 103,410 sq.m., a large-scale integrated development, consisting of office, retail shopping space and a 324-room five-star hotel operates under the name of InterContinental Zhuhai, in close proximity to the entrance of the Hong Kong-Zhuhai- Macau Bridge in Zhuhai, Sanya Hai Tang Bay — Land Parcel 9 (三亞海棠灣 — 9號地塊), a 404-room five-star luxury hotel operates under the name of Crowne Plaza Sanya Haitang Bay Resort in Sanya, Yanlord International Apartments (仁恒國際公寓), a twin-tower design development comprising both residential and a 210-room serviced apartment tower in Nanjing, and Hengye International Plaza (恒業 國際廣場), a four-story household products wholesale mall in Chengdu. Others include Yanlord Riverside City (仁恒河濱濱城), Yanlord Sunland Gardens (仁恒森蘭雅苑), Yunjie Riverside Gardens (運杰河濱花園), commercial podiums and retail shops in Shanghai, Yanlord G53 Apartments (仁恒G53 公寓) and Yanlord Yangtze Riverbay Town (仁恒江灣灣城), retail shops in Nanjing, Yanlord Lakeview Bay (仁恒雙湖灣), retail shops in Suzhou, Yanlord Marina Peninsula Gardens (Phases 1 and 2) (仁恒濱 海半島花園，一期及二期) and Yanlord New City Gardens (仁 恒星園), retail shops and a commercial street in Zhuhai, Yanlord Rosemite (仁恒巒山美地花園), retail shops in Shenzhen, and Tianjin Jinan Land (景新花園), retail shops in Tianjin.
We are currently developing additional high-quality commercial and integrated properties, including retail malls, office suites and premium hotels in established top-tier cities such as Nanjing Eco Hi-tech Island — Land Parcel G73 (南京生態科技島 — G73地塊) in Nanjing, Suzhou No. 2016- WG-46LandParcels(蘇州No. 2016-WG-46地塊) in Suzhou and Yanlord Centre (仁恒中心)in Shenzhen. Sited in city-centric locations, these developments possess high intrinsic value and development potential. In 2018, our five star hotels in Sanya and Zhuhai, namely Crowne Plaza Sanya Haitang Bay Resort and InterContinental Zhuhai officially opened for business.
Holding of Investment Properties
As part of our strategy to generate a stable and growing recurrent revenue stream, we will retain the non-residential components of some of our residential and commercial developments as investment properties for lease. This will allow us to take advantage of the growth potential of the selected commercial property segments in the key established top-tier cities that we focus on. We intend to build up a portfolio of investment properties selectively and progressively, while continuing to grow our core residential property development business.
Our completed investment property holdings include Yanlord Landmark (仁恒置地廣場), a premium commercial development, comprising office buildings, serviced apartments and a premium shopping mall in Chengdu, which commenced operations in September 2010, Yanlord Riverside Plaza (海河廣場), a premium integrated commercial complex comprising of a retail mall, an office building and a commercial street in Tianjin, which commenced operations in 2011, Yanlord Marina Centre (仁恒 濱海中心), a large-scale integrated development, consisting of office, retail shopping space and a five- star hotel, which commenced operations in 2018, Sanya Hai Tang Bay — Land Parcel 9 (三亞海棠灣 —
— 121 — 9號地塊), a 404-room five-star luxury hotel in Sanya, which commenced operations in 2018, Frasers Suites Nanjing, the serviced apartment tower of our Yanlord International Apartments, Tower A (仁恒國 際公寓，A棟), which commenced operations in December 2007 and Hengye International Plaza (恒業國 際廣場), a household products wholesale mall in Chengdu which has been in operation since May 2006. Other investment properties primarily include commercial podiums and retail shops of Yanlord Riverside City (仁恒河濱城) and Yanlord Sunland Gardens (仁恒森蘭雅苑) in Shanghai which commenced operations in 2008 and 2015, respectively, the retail shops of Yanlord G53 Apartments (仁恒G53公寓) and Yanlord Yangtze Riverbay Town ( 仁恒江灣城) in Nanjing both commenced operations in 2011, the retail shops of Yanlord Lakeview Bay (仁恒雙湖灣) in Suzhou commenced operations in 2013, the retail shops and a commercial street of Yanlord Marina Peninsula Gardens (Phases 1) (仁恒濱海半島花園，一 期) and Yanlord New City Gardens (仁恒星園) in Zhuhai which commenced operations in 2016 and 2008, respectively, the retail shops of Yanlord Rosemite (仁恒巒山美地花園) in Shenzhen and Tianjin JinanLand(景新花園) in Tianjin both commenced operations in 2016. )
Our investment property portfolio currently under development and held for future development include Suzhou No.2016-WG-46 Land Parcel (蘇州No. 2016-WG-46地塊) in Suzhou, which construction is expected to be completed in 2023.
As the properties we intend to develop and retain for long-term property investment are situated in prime locations in key established top-tier cities in China, we believe that the risks associated with these ventures will be mitigated by the anticipated strong demand for such properties. We have also engaged professional advisers and industry consultants from time to time to advise and assist us in relation to our commercial property development and investment plans. We also have secured, and will continue to seek, partnerships with internationally recognized hotel and serviced apartment management companies to assist us with the management of certain hotels and serviced apartments.
Property Management
We also provide property management services for residential and commercial properties we develop. Although we place strong emphasis on maintaining the quality of our development properties, we also view our quality property management services as a way to increase our brand recognition with our customers and protect the integrity and image of our developments. We believe that this helps to preserve the value of our existing development properties and enhance our reputation as a responsible property developer.
We provide a full range of property management services, including security, building and equipment maintenance and repairs, facilities management, provision of child-care and other ancillary services, as well as the organization of social and residential community functions. We provide property management services for all of our residential and commercial development properties. Our property management services are conducted by our property management subsidiaries, whose teams have won numerous awards at national, provincial and municipal levels.
We have established property management companies in Shanghai, Nanjing, Chengdu, Tianjin and Tangshan, Shenzhen, Zhuhai and Wuhan. All of our property management companies are ISO 9001 and ISO 14000 certified, except those companies in Tangshan, Shenzhen and Wuhan. Through an open tender process as required under PRC regulations governing the appointment of property management companies, our property management companies have been awarded the property management contracts for our developments prior to the formation of their governing residents’ committee. The residents’ committee will then have full discretion on the appointment of the property management company to manage the development. We believe that our retention by residents’ committees as the property management company for substantially all of our developments is in part attributable to the high quality of the services we offer.
We have partnered with Frasers Hospitality to assist us in the management of our serviced apartments in Nanjing and Chengdu. We also entered into management contracts with an affiliate of InterContinental Hotels Group to manage the hotels that are currently being operated in Zhuhai and Sanya. We expect to continue to partner with reputable international hotel and serviced apartment management companies to assist us in the management of our future hotel and serviced apartment projects.
— 122 — Property Development Process
The diagram below summarizes the stages and elements of our property development process.
Stage Description StrategyDevelopment...... BoardandSeniorManagement
SiteIdentification...... InvestmentCommitteeandProjectCommittees
LandAcquisition...... Low cost land acquisition strategy via direct negotiations with vendors
. Land use rights obtained by:
— Acquiring directly from the government land bureau through public tender, auction or competitive bidding
— Acquiring companies that hold development sites, and
— Forming joint ventures and partnerships with companies that own development sites
Project Concept and Design ...... More than 250 professionals in the product development construction monitoring team, working with external consultants and contractors — responsible for the design, construction progress and quality of projects
. Design contractors and consultants for each project typically selected through a tender process
. Key factors in determining the design of projects include: (1) target market and product positioning; (2) environmental factors; (3) government approved plot ratios; (4) advice of architects and planning experts; (5) proposed development — residential, commercial or integrated
ConstructionWork...... Construction
. Construction contracted out to independent construction companies, selected via competitive tender
. Typical construction contract provides for a security deposit of 5% of total construction cost — retained by Yanlord for 12–24 months after project completion to cover additional costs, e.g., defects, rectification works
. Progress payments determined by quantity surveyor certification of completed works
. No major disputes with contractors to date
Project Management
. Project management teams located in each city — responsible for timely construction process
. Progress monitored by on-site inspections, project management companies and progress reports
. Stringent financial controls maintained through budget planning and review of expenditure reports
Quality Controls
. Contractors subject to strict internal quality control procedures including examination of materials and finishings, on-site inspections and progress reports
Pre-Sales, Sales and Rental of Property . . Pre-sales commenced when relevant land use certificates, construction permits and pre-sale permits are obtained
. Selling prices are determined basedonlocalmarkettrends,costof development, expected returns on investment and prevailing demand-supply dynamics
— 123 — Stage Description . Standard sale contracts specify the GFA of the property sold, purchase price, method of payment and delivery date of property
. Initial payment of 30% to 70% of the sale price required from each purchaser upon execution of a property sale. Purchase price is paid in full typically within two or three months after the property sale execution
. Arrangements are made with domestic banks to provide mortgage financing schemes for buyers. PRC banks extending mortgage financing to buyers is generally conditional on Yanlord guaranteeing loans until issuance of the ownership certificate
. Guarantees typically last for one year
. Offering quality after-sales service enhances brand equity and goodwill, helping to generate new sales and customer referrals for Yanlord properties
. After sales service includes: property management, title registration and management of customer feedback
Strategy Development
Property development begins with the formulation of our overall development strategies and investment plan. Our board and senior management undertake an in-depth assessment of certain key matters, including:
. the macro-economic policies and development plans of the PRC government and the likely impact on the economic growth and development of the city concerned and, particularly, the impact on the real estate market in that city;
. the economic growth and prospects and the demand and supply conditions in the real estate market of the city concerned; and
. the level of our proposed investment commitment in the city within a three to five year time frame.
Once our overall development and investment strategy is formed, we then analyze reports and investment proposals submitted by the management team of each city after which we determine the amount of investment we are prepared to commit to each selected city.
Site Identification and Market Analysis and Research
Our investment committee is responsible for site selection. The investment committee is led by our Chairman and CEO, Mr. Zhong Sheng Jian, and includes other key members our management team as well as architects and engineers.
Our investment committee considers the following factors, among other things, in site selection:
. zoning plans or city planning restrictions imposed by the government for the relevant site;
. accessibility of the area and the available supporting infrastructure;
. marketability of the development and demand for properties in that area;
. convenience and accessibility to the city center; and
. costs of development, investment and financial return ratios.
For every potential site acquisition, a project committee is responsible for carrying out comprehensive feasibility studies with respect to key factors including market supply and demand, comparable projects, potential pricing, site suitability, environment and competitors for residential and commercial properties in the vicinity. The project committee typically comprises the general manager of our operations in that city and other employees such as those involved in the design and planning of our property developments. Based on the feasibility studies, the project committee prepares a proposal for site selection and land acquisition setting out certain key factors for consideration by the investment
— 124 — committee, including the type of property development suitable for the market and chosen site, specific factors that should be considered in the light of market and site conditions, and the initial financial modeling of the cost and financing of the land acquisition costs. This proposal is then presented to the investment committee, which considers the findings of the feasibility study and the proposal and decides whether or not to acquire the development site in question.
Land Acquisition
Prior to the introduction of the PRC regulations requiring land use rights for property development to be sold by tender or auction, we generally acquired land use rights through private negotiations and agreements.
The Regulations on the Grant of State-Owned Land Use Rights through Competitive Bidding, Public Auction and Public Announcements issued by the Ministry of Land and Resources provide that, from July 1, 2002, land use rights for the purposes of commercial use, tourism, entertainment and commodity residential property development in the PRC may be granted by the government only through public tender, auction or competitive bidding. Where land use rights are granted by way of a tender, an evaluation committee consisting of not fewer than five members (including a representative of the grantor and other experts) will evaluate the tenders that have been submitted to decide upon the most competitive tender. The relevant authorities will consider not only the tender price, but also the credit history and qualifications of each bidder and their proposals. Where land use rights are granted by way of an auction, a public auction will be held by the relevant local land bureau and the land use rights will be granted to the highest bidder. Where land use rights are granted by way of bidding, a public notice will be issued by the local land bureau to specify the location, area and purpose of use of land and the initial bidding price, period for receiving bids and the terms and conditions upon which the land use rights are proposed to be granted. The land use rights will be granted to the highest bidder that satisfies the terms and conditions.
We believe that these measures have resulted in a more transparent land grant process, which has enabled property developers to compete on a more level playing field. Since July 1, 2002, we have acquired, and will continue to acquire, all our land use rights in respect of our development projects through the following methods:
. acquiring directly from the government land bureau or government related entities through public tender, auction or competitive bidding;
. acquiring companies that hold development sites; and
. forming joint ventures and partnerships with companies that own development sites.
In the future, we may consider purchasing land directly from third-party owners as an additional method of land acquisition.
We fund our land acquisitions primarily through internal resources, financing from shareholders and proceeds of debt and equity offerings. Typically, in the preliminary stages of our development properties, we use our internal resources to pay land premiums for the acquisition of land-use rights. We are generally able to obtain bank loans to fund our project development costs only after we have paid the initial 30% to 35% of the development costs. The amount of bank finance that we require also depends on, among other things, the amount and timing of pre-sales. Our ability to obtain bank finance depends on pre-sales, as a high pre-sales ratio is regarded by banks as a good indicator of our ability to generate sufficient cash. This in turn gives the banks added confidence in our ability to repay our debt obligations, therefore influencing and increasing the willingness of the banks to provide financing to us.
In recent years, the government authorities have taken measures to restrict the property markets. See ‘‘Risk Factors — Risks Relating to Our Business — We may not have adequate resources to finance land acquisitions or development properties’’ and ‘‘Risk Factors — RisksRelatingtotheProperty Industry in the PRC — The PRC property sector is susceptible to the macro-economic policies and austerity measures of the PRC government.’’
— 125 — Project Conceptualization, Planning and Design
Our in-house product development team based across the cities where our properties are located is responsible for the management of the project conceptualization, planning and design for our property developments. As of December 31, 2018, our property development team comprised of around 1,200 staffs, with professionals, such as architects, landscape specialists, planning experts, interior designers, as well as structural, civil, mechanical and electrical engineers, who were based in the cities where our property developments are located. The design process includes architectural, exterior and interior design, engineering and landscaping.
Our property development team also works in collaboration with external professional firms throughout the design process. In selecting these firms, we consider their reputation for reliability and quality, their pricing, references and design proposals. Design contractors are typically selected through a tender process for each project. The product development team constantly monitors the progress and quality of the design teams to ensure they meet our required standards. The team is also responsible for overseeing and ensuring that we complete our projects on time and in accordance with our strict quality requirements.
In general, we will consider the following principal factors in determining the design of a particular property development:
. target market segment and product positioning;
. the surrounding environment of the site;
. plot ratio as approved by the relevant government authorities;
. advice and recommendations of professional advisors including architects and planning experts; and
. the proposed type of development, whether residential or commercial.
Construction Work
We contract out our construction work to independent construction companies selected through an invitation tender process, based on their reputation, track record, experience of the relevant project team members and cost competitiveness. The tender process is governed by the Property Development and Municipal Facilities Construction Tender Management Regulations promulgated by the Ministry of Construction in June 2001.
We engage reputable construction companies and in particular, we have established a reliable long term relationship with the Longxin Group. The Longxin Group has been one of our major construction contractors since our establishment in 1993 and has successfully bid for the construction work of many of our projects. In addition to selecting a primary lead contractor for our projects, we also engage secondary contractors to provide some of the required construction work in order to achieve better pricing and terms through competition and reduce the risks of over reliance on one lead contractor. The terms of the construction contracts that we enter into with the Longxin Group are consistent with the terms of the construction contracts that we enter into with other construction contractors. The Longxin Group and other construction contractors provide various services, including piling and foundation works, construction works and installation and fitting-out works. We believe that the Longxin Group has enabled us to consistently achieve the quality objectives of our premium development projects over the years and this has helped us to enhance our reputation and brand.
We enter into construction contracts with construction companies selected via a competitive bidding process based on the terms of the tender documents. Our standard construction contract contains warranties from the construction company in respect of quality and timely completion of construction. In addition, the construction contract provides that a security deposit equivalent to 3% to 5% of the total construction cost is retained by us for a period of between 12 and 24 months after completion of the works to cover additional costs arising from defects and rectification works. We require construction companies to comply with the relevant PRC laws and regulations on the quality of construction products as well as our stringent quality control standards and requirements. Contractors are also subject to our internal quality control procedures, including examination of materials and supplies, on-site inspection
— 126 — and production of progress reports. Construction progress payments are determined following certification by a quantity surveyor based on the amount of works completed. In the event of delay in construction or unsatisfactory quality of workmanship, we may withhold construction payments or require the construction company to pay a penalty or provide other remedies under PRC law and our contracts to recover any loss. We have not had any major disputes with any of our contractors. All construction progress payment claims are verified by professional quantity surveyors engaged by us.
Project Management
We have a project management team in each city where our properties are located. Each project management team is responsible for the management and supervision of the construction of our property developments in accordance with the relevant PRC regulations. We also engage project management companies to manage and supervise each individual project. We believe that our in-house project management system has enabled our projects to be developed efficiently and cost effectively.
We strive to create and ensure a safe working environment. In line with this, we have established strict internal workflow policies and safety monitoring procedures to ensure that we comply with the compliance of all relevant PRC laws and regulations in the PRC.
Our project management team is also responsible for ensuring that the construction of our properties progresses in a timely manner. Construction work is constantly monitored through regular on- site inspections and progress reports.
In line with our prudent financial management philosophy, we ensure that the construction of our property developments is carried out in a cost-effective manner. We have stringent financial controls and actively manage and control our costs through careful budget planning processes such as reviews of project expenditure reports. Our project management team ensures that our cost control policies are effectively applied in the construction process of our property developments.
Quality Control
We apply strict quality control standards and procedures at every stage of the entire development process, including project conceptualization, planning and design, and throughout construction. In addition to engaging external professionals, our project management team reviews all construction processes, as well as selection of materials and finishings. It is also responsible for closely overseeing the construction progress, particularly the quality and timeliness of construction works. This helps to ensure that our property developments comply with applicable national quality control standards as well as our own stringent quality control standards. We have established internal guidelines that we strictly enforce to ensure control over documentation, record-keeping, internal audit, service standards, preventive actions, remedial actions, management control, construction standards, staff quality, recruitment standards, staff training, construction supervision, supervisory inspection, monitoring and surveillance, information exchange and data analysis.
Pre-Sales, Sales and Rental of Property
In line with our marketing strategy, we generally conduct pre-sales (i.e. selling property via contract in advance of our construction completion) of our developments in accordance with applicable PRC laws. We must obtain from the relevant government authorities the ‘‘Permit for Pre-completion Sale of Commodity Buildings’’ before we can commence sales of our properties.
We commence pre-sales of our properties when the following conditions are met:
. the selling developer holds a valid legal person certificate and a qualification certificate for real estate development enterprises;
. the relevant land use right certificates, the permit for construction project planning and the permit for commencement of construction have been obtained; and
. the pre-sale permit has been obtained.
— 127 — Under the Measures for Administration of Pre-completion Sale of Urban Commodity Buildings promulgated by the Ministry of Construction in July 2004, pre-sale permits will only be granted if:
. the grant price for the relevant land use rights has been fully paid and the relevant land use right certificates have been obtained;
. the permit for construction project planning and the permit for commencement of construction have been obtained; and
. at least 25% of the total amount to be invested in the development has been paid and the progress of works and the completion and delivery dates have been ascertained.
Delivery of our completed properties is subject to the following conditions:
. related basic facilities, including water, electricity, heat, gas and communication, shall be qualified for delivery and use. Other basic facilities and public facilities shall be qualified for use or the completion schedule and delivery date of each has been set;
. property management plan has been implemented;
. the development units shall have passed completion, inspection and acceptance; and
. receipt of the completion inspection certificate.
We set selling prices for our properties after taking into account local market trends, costs of development, expected investment returns and prevailing supply and demand conditions. We adopt a standard contract to be entered into between us and the purchaser. Our standard contract specifies the GFA of the property sold, purchase price, method and manner of payment, and date and manner of delivery of the completed property. There are also provisions for examination, acceptance and certification to be carried out by relevant government authorities before delivery of the completed property. During a pre-sale, we require from each purchaser an initial payment of between 30% and 70% of the purchase price (depending on the type of property) upon the execution of a sale and purchase of property contract. The balance of the purchase price is satisfied typically within two or three months either by a lump sum payment of the entire balance, either with or without mortgage facilities arranged with banks, or installment payments.
We may enter into arrangements with certain domestic banks to provide mortgage financing schemes for purchasers to take out a mortgage. In line with the prevailing consumer banking practices in the PRC, banks generally only extend mortgage financing to our purchasers on the condition that we guarantee their loans until the real estate ownership certificate, the registry certificate of the eligibility of a pre-sold property for mortgage, or the registry certificate of the eligibility of a sold property for mortgage loan has been issued and the mortgage is registered. Typically, these guarantees last for up to one year.
For our commercial properties held for long-term investment purposes, we intend to enter into long-term tenancies with our customers. These tenancies typically have a term of one to three years.
After-Sales Services
As part of our after-sales services, we assist our customers with the title registration for their properties and in leasing out their properties. We have a customer service department at each of our development projects to handle customer feedback. We believe that the provision of quality after-sales service enhances our brand and goodwill, and helps to generate new sales and customer referrals for our properties.
Details of Our Property Developments
Completed Development Properties
As of December 31, 2018, the total site area and GFA of our completed properties are 4,633,107 sq.m. and 8,820,078 sq.m., respectively (including a total site area and GFA of 88,825 sq.m. and 157,727 sq.m., respectively held under associate and joint venture investments). Details of our completed development properties are set out below.
— 128 — Chengdu
Hengye International Plaza (恒業國際廣場)
Hengye International Plaza is located at No. 88 Section 1 of North Shangmao Avenue, Jinniu District, Chengdu City, Sichuan Province. It is located in the Jinniu District of Chengdu, an important logistics hub of Chengdu City. This development is the first exchange market specializing in household goods in Western China. Hengye International Plaza is developed by Chengdu Everrising Asset Management Co., Ltd (成都市恒業東升資產經營管理有限公司), a joint venture between Yanlord Land Pte. Ltd. and Zhengye Property Co., Ltd (正業房地產有限公司). This development occupies a site area of 26,473 sq.m. and has a GFA of 40,655 sq.m. and a total saleable GFA of 39,999 sq.m. We commenced the construction of this development in December 2004 and completed construction in April 2006. As of December 31, 2018, 38,959 sq.m. of the total saleable GFA had been leased. We have 51% ownership in this development.
Hengye Star Gardens (恒業星園)
Hengye Gardens is located in the traditional commercial area of North Chengdu and is a premium Singapore garden-style residential project. This development occupies a site area of 23,036 sq.m. and has a GFA of 83,943 sq.m. and a total saleable GFA of 82,819 sq.m. We commenced the construction of this development in May 2006 and completed construction in April 2008. As of December 31, 2018, 82,675 sq.m. of the total saleable GFA had been sold. We have 51% ownership in this development.
Yanlord Landmark (仁恒置地廣場)
Yanlord Landmark is located on the main thoroughfare of Chengdu city at the second section of Renmin South Road in Jinjiang District. This is the central business district of this hub city in Western China. This development is located at the intersection of the mass rapid transit line through the city. This development occupies a site area of 19,166 sq.m. and has a GFA of 165,755 sq.m. and a total saleable GFA of 157,437 sq.m. The total saleable GFA of the office tower, retail mall and serviced apartments are 64,048 sq.m., 50,805 sq.m. and 42,584 sq.m., respectively. We commenced construction of this development in August 2006 and completed construction in December 2010. The occupancy rate for the project as of December 31, 2018 was approximately 94% for the office tower, 87% for the retail mall and 62% for the serviced apartments. The land cost of the project was approximately RMB1,346 per sq.m. We have 100% ownership in this development.
Yanlord Riverbay (Phase 1) (仁恒濱河灣，一期)
Yanlord Riverbay is located in Jinjiang District, Chengdu City. In an area earmarked to be Chengdu’s new financial services hub. The first phase of this residential development occupies a site area of 44,428 sq.m. and has a GFA of 126,716 sq.m. and a total saleable GFA of 125,099 sq.m. We commenced the construction of this development in November 2011 and completed construction in June 2014. As of December 31, 2018, 118,510 sq.m. of the total saleable GFA had been sold. We have 70% ownership in this development.
Yanlord Riverbay (Phase 2) (仁恒濱河灣，二期)
The second phase of this residential development occupies a site area of 37,641 sq.m. and has a GFA of 142,328 sq.m. and a total saleable GFA of 137,850 sq.m. We commenced the construction of this development in December 2013 and completed construction in November 2016. As of December 31, 2018, 137,302 sq.m. of the total saleable GFA had been sold. We have 70% ownership in this development.
Guiyang
Xintian Centre (新天商業中心)
Xintian Centre is located at No. 88 segment, north of Xintian Avenue, Wudang District, Guiyang City. This development occupies a site area of 18,820 sq.m. and has a GFA of 14,376 sq.m. It comprises 123 retail units with a total saleable GFA of 14,346 sq.m. We commenced the construction of this development in November 2003 and completed construction in October 2004. As of December 31, 2018, all of the total saleable GFA had been sold. We have 67% ownership in this development.
— 129 — Yanlord Villas (仁恒別墅)
Yanlord Villas is located at Yanshan Alley, Xintian Stockade, Wudang District, Guiyang City. This development occupies a site area of 53,541 sq.m. and has a GFA of 36,131 sq.m. It comprises 92 villas with a total saleable GFA of 35,033 sq.m. We commenced the construction of this development in June 2004 and completed construction in March 2006. As of December 31, 2018, all of the total saleable GFA had been sold. We have 67% ownership in this development.
Nanjing
Bamboo Gardens (翠竹園)
Bamboo Gardens is located at No. 5 Yulan Road, Yuhuatai District, Nanjing City. It is located in the area around Huashen Lake, south of the main Nanjing City and is near the scenic Yuhuatai District. The three phases of this development comprises residential properties with 2,770 units. This development occupies a combined site area of 233,000 sq.m. and has a combined GFA of 394,310 sq.m. and a combined total saleable GFA of 385,308 sq.m. We commenced the construction of this development in November 2000 and completed construction of the entire development in December 2008. As of December 31, 2018, all of the total saleable GFA had been sold. We have 100% ownership in this development.
Oasis New Island Gardens (綠洲新島花園)
Oasis New Island Gardens is located at No. 66 Xiankun Road (Phase 1), No. 68 Xiankun Road (Phase 2) and No. 99 Hongxing Road (Phase 3), Jianye District, Nanjing City. The three phases of this development comprises residential properties and occupies a combined site area of 109,467 sq.m. and has a combined GFA of 271,514 sq.m. and a combined total saleable GFA of 271,275 sq.m. We commenced construction of this development in June 2014 and completed construction of the entire development in April 2018. As of December 31, 2018, 266,882 sq.m. of the total saleable GFA had been sold. We have 100% ownership in this development.
Orchid Mansions (玉蘭山莊)
Orchid Mansions is located No. 2 Yulan Road, Yuhuatai District, Nanjing City. It is located within the Yuhuatai region. It comprises 259 villas with approximately 70% of the land used for landscaping. This development occupies a site area of 94,134 sq.m. and has a GFA of 69,649 sq.m. and a total saleable GFA of 67,489 sq.m. We commenced the construction of this development in November 2000 and completed construction in September 2003. As of December 31, 2018, 67,149 sq.m. of the total saleable GFA had been sold. We have 100% ownership in this development.
Plum Mansions (梅花山莊), inclusive of Lakeside Mansions (湖畔之星)
Plum Mansions is located at No. 66 Muxuyuan Ave., Nanjing City. The development enjoys a good view of its natural surroundings, as it faces Yueya Lake and has Mount Zijinshan as a backdrop. This development is a residential development with 1,943 units and comprises of five phases, the last phase of which is called Lakeside Mansions. This development occupies a combined site area of 113,182 sq.m. and has a combined GFA of 327,667 sq.m. and a combined total saleable GFA of 241,000 sq.m. We commenced construction of this development in May 1994 and completed construction of the entire development in December 2002. As of December 31, 2018, 240,500 sq.m. of the total saleable GFA had been sold. We have 100% ownership in this development.
Yanlord G53 Apartments (仁恒G53公寓)
Yanlord G53 Apartments is located at No. 78 East Nanxi River East Street, Jianye District, Nanjing City. It is located in the Hexi New Area. This development comprises residential properties and retail shops. This development occupies a total site area of 46,640 sq.m. and has a GFA of 96,354 sq.m. and a total saleable GFA of 92,052 sq.m. We commenced construction of this development in July 2009 and completed construction in December 2011. As of December 31, 2018, 82,528 sq.m. of the total saleable GFA had been sold. We have 100% ownership in this development.
— 130 — Yanlord International Apartments (仁恒國際公寓)
Yanlord International Apartments is located at No. 116 Lushan Road, Jianye District, Nanjing City. It is located in the central business district area in the Hexi New City center and is also beside the Nanjing Olympic Centre Stadium. This development consists of Tower A and B, comprising approximately 464 apartment units and ancillary facilities. Tower A comprises Frasers Suites Nanjing, the first serviced apartments managed by an international hospitality company in Nanjing, and Tower B comprises 254 fully-fitted executive apartments. This development occupies a combined site area of 28,415 sq.m. and has a combined GFA of 110,177 sq.m. and a combined total saleable GFA of 96,910 sq.m. We commenced construction of this development in May 2004 and completed construction of the entire development in June 2008. As of December 31, 2018, all of the total saleable GFA in Tower B had been sold and Tower A with a GFA of 42,494 sq.m. is held as investment property to generate rental income. Land cost for this development was RMB912 per sq.m. We have 100% ownership in this development.
Yanlord Yangtze Riverbay Town (仁恒江灣城)
Yanlord Yangtze Riverbay Town is located at No. 198 Leshan Road, Jianye District, Nanjing City. It is located along the Yangtze River in Hexi New Area. This development comprises residential properties and retail shops. The four phases of this development occupies a combined site area of 303,379 sq.m. and has a combined GFA of 720,847 sq.m. and a combined total saleable GFA of 697,186 sq.m. We commenced construction of this development in January 2008 and completed construction of the entire development in September 2017. As of December 31, 2018, 668,465 sq.m. of the total saleable GFA had been sold. We have 100% ownership in this development.
Nantong
Four Seasons Gardens (Phase 1) (四季花園，一期)
Four Seasons Gardens is located at Haimen City. The first phase of this development comprises residential properties and occupies a site area of 27,750 sq.m. and has a GFA of 64,561 sq.m. and a total saleable GFA of 64,412 sq.m. We commenced construction of this development in February 2016 and complete construction in August 2018. As of December 31, 2018, 63,659 sq.m. of the total saleable GFA had been sold. We have 60% ownership in this development.
Sanya
Sanya Hai Tang Bay — Land Parcel 9 (三亞海棠灣 — 9號地塊)
Sanya Hai Tang Bay — Land Parcel 9 is located at Site No. 9, Hai Tang Bay, Sanya City, Hainan Province. This development comprises 189 luxurious villas for sale and a 5-star hotel. This site occupies a combined site area of 193,772 sq.m. and has a combined GFA of 101,480 sq.m. and a combined total saleable GFA of 100,835 sq.m. We commenced construction of this development in December 2014 and completed construction of the entire development in June 2018. Land cost for this development was RMB17,193 per sq.m. As of December 31, 2018, 17,137 sq.m. of the total saleable GFA had been sold and the 5-star hotel with a GFA 78,086 sq.m. is held as fixed asset to generate hotel operation income. We have 100% ownership in this development.
Shanghai
Bayside Gardens (禦瀾灣苑)
Bayside Gardens is located at No. 199 Dianshan Lake Avenue, Qingpu District, Shanghai City. It is situated between Hongqiao Central Business District & Transportation Hub and the scenic spots of Dianshan Lake and Zhujiajiao area and is a short 20-minute drive from Bayside Gardens to Hongqiao Airport. This development comprises multi-story apartments and retail shops. This development occupies a site area of 117,399 sq.m. and has a GFA of 116,408 sq.m. and a total saleable GFA of 115,136 sq.m. We commenced the construction of this development in May 2010 and completed construction in July 2013. As of December 31, 2018, 114,315 sq.m. of the total saleable GFA had been sold. We have 51% ownership in this development.
— 131 — Yanlord Apartments (仁恒公寓)
Yanlord Apartments is located at No. 1255–1277 Zhangyang Road, Pudong New District, Shanghai City. This development is a residential development consisting of an 18-story apartment tower with 95 units, including an underground carpark. This development occupies a site area of 4,146 sq.m. and has a GFA of 13,579 sq.m. and a total saleable GFA of 10,663 sq.m. We commenced construction of this development in November 1994 and completed construction in November 1997. As of December 31, 2018, all of the total saleable GFA had been sold. We have 67% ownership in this development.
Yanlord Eastern Gardens (仁恒東邑雅苑)
Yanlord Eastern Gardens is located at south of Long Dong Avenue in Tangzhen New District, Pudong, Shanghai City. This development comprises residential apartments and occupies a site area of 128,532 sq.m. and has a GFA of 180,583 sq.m. and a total saleable GFA of 178,240 sq.m. We commenced construction of this development in December 2013 and completed construction in November 2017. As of December 31, 2018, 174,643 sq.m. of the total saleable GFA had been sold. We have 100% ownership in this development.
Yanlord Gardens (仁恒濱江園)
Yanlord Gardens is located at Dong Chang Road, Pudong New District, Shanghai City. It is located at the center of the Lujiazui central business district, adjacent to the Huangpu River with the main Pudong District center to its east. The three phases of this development comprises 11 residential apartment blocks with 1,943 units, including a carpark. This development occupies a combined site area of 138,802 sq.m. and has a combined GFA of 415,360 sq.m. and a combined total saleable GFA of 357,549 sq.m. We commenced the construction of this development in November 1997 and completed construction of the entire development in September 2003. As of December 31, 2018, all of the total saleable GFA had been sold. We have 67% ownership in this development.
Yanlord on the Park (仁恒世紀公寓)
Yanlord on the Park is located at Shanghai’s Century Park International Community District and bordered by Jin Kang Road, Pujian Road and the Yanggao South Road. This development comprises residential apartments and occupies a site area of 55,776 sq.m. and has a GFA of 148,122 sq.m. and a total saleable GFA of 145,988 sq.m. We commenced construction of this development in November 2013 and completed construction in December 2017. As of December 31, 2018, 123,762 sq.m. of the total saleable GFA had been sold. We have 50% ownership in this development.
Yanlord Plaza (仁恒廣場)
Yanlord Plaza is located at No. 80 Pu Jian Road West, Pudong New District, Shanghai City. It is centrally located at the south of the Pudong Lujiazui area and along the eastern banks of the Huangpu River. This development comprises 415 residential units and 4-storey office spaces, including an underground carpark. This development occupies a site area of 10,845 sq.m. and has a GFA of 53,049 sq.m. and a total saleable GFA of 53,049 sq.m. We commenced the construction of this development in March 1993 and completed construction in November 1996. As of December 31, 2018, 51,550 sq.m. of the total saleable GFA had been sold. We have 67% ownership in this development.
Yanlord Riverside City (仁恒河濱城)
Yanlord Riverside City is located at Lane 1599 Dingxiang Road, Pudong New District, Shanghai City. It is located within the sub-district of Pudong Lianyan and enjoys close proximity to many amenities. The three phases of this development comprises a total of 40 residential apartment blocks with approximately 4,200 units, including an underground carpark and a commercial podium. This development is also known as ‘‘Yanlord Town (仁恒家園)’’ in the PRC. This development occupies a combined site area of 306,406 sq.m. and has a combined GFA of 741,417 sq.m. and a combined total saleable GFA of 731,379 sq.m. We commenced the construction of the first, second and third phases of this development in May 2003, August 2005 and March 2007, respectively, and completed the first, second and third phases in September 2006, May 2008 and June 2010, respectively. As of December 31, 2018, 722,745 sq.m. of the total saleable GFA had been sold. We have 67% ownership in this development.
— 132 — Yanlord Riverside Gardens (仁恒河濱花園)
Yanlord Riverside Gardens is located at Lane 388 Furongjiang Road, Changning District, Shanghai City. It adjoins the Hongqiao Development Zone and the Gubei premium residential area. The two phases of this development comprises 14 residential apartment blocks with 1,663 units, including an underground carpark and ancillary facilities. This development occupies a combined site area of 128,895 sq.m. and a combined GFA of 319,756 sq.m. and has a combined total saleable GFA of 319,193 sq.m. We commenced the construction of this development in May 2002 and completed construction of the entire development in March 2007. As of December 31, 2018, all of the total saleable GFA had been sold. We have 100% ownership in this development.
Yanlord Sunland Gardens (仁恒森蘭雅苑)
Yanlord Sunland Gardens is located at No. 1688 Langu Road, Pudong District, Shanghai City. It adjoins the Waigaoqiao Free Trade Zone and Jinqiao Export Processing Zone. The two phases of this development comprises residential apartment blocks, a serviced apartment and retail shops. This development occupies a combined site area of 202,851 sq.m. and a combined GFA of 336,038 sq.m. and has a combined total saleable GFA of 333,914 sq.m. We commenced the construction of this development in June 2010 and completed construction of the entire development in December 2015. As of December 31, 2018, 313,804 sq.m. of the total saleable GFA had been sold. We have 100% ownership in this development.
Yanlord Town (仁恒家園)
Yanlord Town is located at the junction of Yanggao Road North and Dongrong Road, Shanghai City. It is located within the Waigaoqiao district, which has become a major residential area with the completion of the Metro Line No. 6. This development comprises 12 residential apartment blocks with a total of approximately 428 units. This development is also known as ‘‘Yanlord Parkside’’ in the PRC. This development occupies a site area of 94,174 sq.m. and has a GFA of 75,573 sq.m. and a total saleable GFA of 73,353 sq.m. We commenced the construction of this development in September 2005 and completed construction in December 2007. As of December 31, 2018, all of the total saleable GFA had been sold. We have 50% ownership in this development.
Yanlord Townhouse (仁恒怡庭)
Yanlord Townhouse is located at No. 388 Zhenghe Road, Yangpu District, Shanghai City. It is situated within the heart of New Jiangwan City, one of the few remaining wetland ecological conservation zones in Shanghai, and sited in close proximity to the Wu Jiao Chang sub-center of the Shanghai Municipality as well as the Yangpu University District. This development comprises high- quality fully furnished villas and stylistic apartment blocks that are seamlessly integrated with the lush natural surroundings. This development occupies a total site area of 54,208 sq.m. and has a GFA of 65,572 sq.m. and a total saleable GFA of 65,318 sq.m. We commenced the construction of this development in September 2009 and completed construction in December 2011. As of December 31, 2018, 64,640 sq.m. of the total saleable GFA had been sold. We have 100% ownership in this development.
Yanlord Western Gardens (仁恒西郊雅苑)
Yanlord Western Gardens is located at the east of the Xuying Road, Xujing Town, Qingpu District, Shanghai City, formerly known as Shanghai Qingpu Xujing Town Land (上海青浦徐涇鎮地塊). This residential development occupies a site area of 136,937 sq.m. and has a GFA of 247,503 sq.m. and a total saleable GFA of 244,640 sq.m. We commenced the construction of this development in April 2013 and completed construction in January 2017. As of December 31, 2018, 237,823 sq.m. of the total saleable GFA had been sold. We have 60% ownership in this development.
Yunjie Riverside Gardens (運杰河濱花園)
Yunjie Riverside Gardens is located on South Huaqing Road to the south of Qingpu New Township in Shanghai City. It is designed in accordance with the standards the municipal government of Shanghai sets for an Environment Friendly Compound. The two phases of this development comprises of low-rise townhouses, duplexes, multi-story apartments and retail shops. This development occupies a combined site area of 210,566 sq.m. and has a combined GFA of 253,048 sq.m. and a combined total
— 133 — saleable GFA of 250,233 sq.m. We commenced the construction of first and second phases in March 2005 and July 2008, respectively, and completed construction of the first and second phases in April 2008 and July 2011, respectively. As of December 31, 2018, 248,651 sq.m. of the total saleable GFA had been sold. We have 51% ownership in this development.
Shenzhen
Yanlord Rosemite (仁恒巒山美地花園)
Yanlord Rosemite is located at the junction of Baohe Road and Danhe road, Longgang District, Shenzhen City. This is an integrated residential and commercial development that comprises residential apartments and retail shops. This development occupies a site area of 46,777 sq.m. and has a GFA of 148,424 sq.m. and a total saleable GFA of 142,496 sq.m. We commenced the construction of this development in September 2012 and completed construction in September 2015. As of December 31, 2018, 137,849 sq.m. of the total saleable GFA had been sold. We have 100% ownership in this development.
Suzhou
SuzhouWuzhongAreaC1Land— Villas (蘇州吳中區C1地塊 — 別墅)
Suzhou Wuzhong Area C1 Land is located at No. 1808 Tongda Road, West Dushu Lake, Suzhou City. This development comprises residential properties (22 villas) and occupies a total site area of 57,857 sq.m. and has a GFA of 22,614 sq.m. and a total saleable GFA of 21,927 sq.m. We commenced the construction of this development in October 2008 and completed construction in December 2012. As of December 31, 2018, 18,313 sq.m. of the total saleable GFA had been sold. We have 100% ownership in this development.
Tang Yue Bay Gardens (棠悅灣花園)
Tang Yue Bay Gardens is located at Suzhou Gao Xin District. This development comprises residential properties and occupies a site area of 77,820 sq.m. and has a GFA of 172,942 sq.m. and a total saleable GFA of 169,643 sq.m. We commenced construction of this development in February 2015 and completed construction in May 2017. As of December 31, 2018, 168,192 sq.m. of the total saleable GFA had been sold. We have 100% ownership in this development.
Yanlord Lakeview Bay (仁恒雙湖灣)
Yanlord Lakeview Bay is located at No. 1211 Xinghu Street, within the Suzhou Industrial Park. It is situated between the scenic Jinji Lake and Dushu Lake. This development consists of seven land parcels (namely Land Parcel A1 to A7 correspondingly) and comprises residential properties and retail shops. This development occupies a combined site area of 368,104 sq.m. and has a combined GFA of 387,880 sq.m. and a combined total saleable GFA of 380,860 sq.m. We commenced the construction of this development in October 2009 and completed construction of the entire development in April 2017. As of December 31, 2018, 369,769 sq.m. of the total saleable GFA had been sold. We have 100% ownership in this development.
Yanlord Peninsula (Apartment) (星嶼仁恒)
Yanlord Peninsula is located at 1808 and 2388 Tongda Road, West Dushu Lake, Suzhou City. The two phases of this development occupies a combined site area of 78,310 sq.m. and has a combined GFA of 100,342 sq.m. and a combined total saleable GFA of 100,206 sq.m. We commenced the construction of the both phases of this development in May 2006 and completed construction of the first and second phases in March 2009 and June 2010, respectively. As of December 31, 2018, 99,875 sq.m. of the total saleable GFA had been sold. We have 100% ownership in this development.
Yanlord Peninsula (Townhouse) (星島仁恒)
Yanlord Peninsula is located at 1808 and 2388 Tongda Road, West Dushu Lake, Suzhou City and is a lakeside townhouse project in the premium residential area of Suzhou in vicinity to Jinji Lake and Dushu Lake. This two phases development comprises of 350 townhouses and duplexes, occupying a combined site area of 168,000 sq.m. and a combined GFA of 91,963 sq.m. and a combined total saleable GFA of 89,359 sq.m. We commenced construction of the first and second phases in November 2005 and
— 134 — May 2006, respectively and completed construction in January 2008 and June 2009, respectively. As of December 31, 2018, all of the total saleable GFA had been sold. We have 100% ownership in this development.
Tangshan
Tangshan Nanhu Eco-City — Land Parcels A9 (唐山南湖生態城，A9地塊)
Tangshan Nanhu Eco-City — Land Parcels A9 is a development comprises residential properties and retail shops. This development occupies a site area of 42,626 sq.m. and has a GFA of 119,116 sq.m. and a total saleable GFA of 118,847 sq.m. We commenced the construction of this development in November 2011 and completed construction in December 2015. As of December 31, 2018, 115,427 sq.m. of the total saleable GFA had been sold. We have 50% ownership in this development.
Tangshan Nanhu Eco-City — Land Parcels A19 (唐山南湖生態城，A19地塊)
Tangshan Nanhu Eco-City — Land Parcels A19 is a residential development occupies a site area of 46,199 sq.m. and has a GFA of 38,611 sq.m. and a total saleable GFA of 38,611 sq.m. We commenced the construction of this development in July 2012 and completed construction in May 2015. As of December 31, 2018, all of the total saleable GFA had been sold. We have 50% ownership in this development.
Tianjin
Tianjin Jinnan Land (景新花園)
Tianjin Jinnan Land is located at 8058 # No. 9 Ju Xing Road, Haihe Industrial Zone, Tianjin City, formerly known as Tianjin Jinnan Land (天津津南地塊). The three phases of this development comprises residential apartments and retail shops. This development occupies a combined site area of 165,812 sq.m. and has a combined GFA of 376,440 sq.m. and a combined total saleable GFA of 361,085 sq.m. We commenced the construction of this development in December 2012 and completed construction of the entire development in June 2018. As of December 31, 2018, 359,011 sq.m. of the total saleable GFA had been sold. We have 60% ownership in this development.
Yanlord Riverside Gardens (仁恒河濱花園)
Yanlord Riverside Gardens is located in Hebei District, Yuan Wei Lu, Fifth Avenue, Haihe East Road, Xinkaihe, Tianjin City. The two phases of this development comprises residential properties and occupies a combined site area of 130,789 sq.m. and has a combined GFA of 326,006 sq.m. and a combined total saleable GFA of 314,896 sq.m. We commenced construction of first and second phases in October 2009 and November 2012, respectively and completed construction in June 2012 and December 2015, respectively. As of December 31, 2018, all of the total saleable GFA had been sold. We have 80% ownership in this development.
Yanlord Riverside Plaza (Phase 1) (海河廣場，一期)
Yanlord Riverside Plaza is located at South Shuige Avenue, Dongma Road, Nankou District, Tianjin City. Located in the traditional downtown area of Tianjin, this two phases development enjoys local commercial and historical resources and is a modern building complex that encompasses residential apartments, an office building and retail spaces. The first phase of this development comprises residential apartment units, a retail shop mall and carparks. The first phase of this development occupies a site area of 43,605 sq.m. and has a GFA of 217,812 sq.m. and a total saleable GFA of 214,190 sq.m. We commenced the construction of this development in October 2007 and completed construction in May 2015. As of December 31, 2018, 134,638 sq.m. of total saleable GFA had been sold. Retail spaces with a GFA of 83,132 sq.m. is held as investment property to generate rental income. Land cost for this development was RMB2,475 per sq.m. We have 100% ownership in this development.
Yanlord Riverside Plaza (Phase 2) (海河廣場，二期)
The second phase of this development occupies a site area of 51,672 sq.m. and has a GFA of 163,971 sq.m. and a total saleable GFA of 142,135 sq.m. The second phase of this development comprises residential apartment units, an office tower, a retail street and carparks. We commenced the construction of this development in January 2011 and completed construction in December 2016. As of
— 135 — December 31, 2018, 87,670 sq.m. of total saleable GFA had been sold. The office tower and a retail street with a combined GFA of 76,296 sq.m. are held as investment properties to generate rental income. Land cost for this development was RMB3,064 per sq.m. We have 100% ownership in this development.
Zhuhai
Yanlord Marina Centre — Section A (仁恒濱海中心 — A標段)
Yanlord Marina Centre is located near South Qinglu Road, Gongbei District, Zhuhai City. It is adjacent to the Macau Zhuhai customs checkpoint at Gongbei District, Zhuhai. The project, with a 650 meter water frontage is also situated in close proximity to the planned Hong Kong-Zhuhai-Macau Bridge crossing. The completed Section A of this development comprises a 5-star hotel and occupies a site area of 6,543 sq.m. and has a GFA of 58,559 sq.m. and a total saleable GFA of 50,337 sq.m. We commenced construction of this development in July 2011 and completed construction in December 2018. As of December 31, 2018, the five-star hotel with a GFA 58,559 sq.m. is held as fixed asset to generate hotel operation income. We have 95% ownership in this development.
Yanlord Marina Centre — Section B (仁恒濱海中心 — B標段)
Section B of this development comprises high-grade residential apartments and retail shops. This development occupies a site area of 31,722 sq.m. and has a GFA of 135,383 sq.m. and a total saleable GFA of 131,745 sq.m. We commenced construction of this development in November 2009 and completed construction in December 2018. As of December 31, 2018, 63,624 sq.m. of the total saleable GFA had been sold. We have 95% ownership in this development.
Yanlord Marina Peninsula Gardens (Phase 1) (仁恒濱海半島花園，一期)
Yanlord Marina Peninsula Gardens is located in Xiangzhou District, Zhuhai City. The first phase of this development comprises residential apartments and retail shops. This development occupies a site area of 62,285 sq.m. and has a GFA of 152,926 sq.m. and a total saleable GFA of 143,689 sq.m. We commenced construction of the first and second section of this development in February 2014 and June 2014, respectively and completed construction in September 2016 and October 2017, respectively. As of December 31, 2018, 129,015 sq.m. of the total saleable GFA had been sold. We have 57% ownership in this development.
Yanlord Marina Peninsula Gardens (Phase 2) (仁恒濱海半島花園，二期)
The second phase of this development comprises residential apartments and retail shops. This development occupies a site area of 62,674 sq.m. and has a GFA of 161,606 sq.m. and a total saleable GFA of 161,305 sq.m. We commenced construction of this development in February 2014 and completed construction in December 2018. As of December 31, 2018, 85,696 sq.m. of the total saleable GFA had been sold. We have 57% ownership in this development.
Yanlord New City Gardens (仁恒星園)
Yanlord New City Gardens is located at the junction of Renmin Road West and Santaishi Road, Xinxiangzhou District, Zhuhai City. This development is located in the newly established administrative and cultural center of Zhuhai. This is an integrated residential and commercial development that comprises residential apartments, retail shops and ancillary facilities. The first phase and second phase of this development together occupy a combined site area of 229,931 sq.m. and have a combined GFA of 413,012 sq.m. and a combined total saleable GFA of 407,542 sq.m. We commenced the construction of the first phase and the second phase of this development in September 2006 and August 2007, respectively, and completed construction in December 2007 and April 2012, respectively. As of December 31, 2018, 396,425 sq.m. of the total saleable GFA had been sold. The commercial street and a kindergarten with total GFA of 7,493 sq.m. and 3,506 sq.m., respectively are held as investment properties to generate rental income. We have 90% ownership in this development.
Properties Under Development
As of December 31, 2018, the total site area and GFA of our properties under development are 1,684,508 sq.m. and 3,545,729 sq.m., respectively (including a total site area and GFA of 945,131 sq.m. and 1,897,391 sq.m., respectively held under associate and joint venture investments). Details of our properties under development are set out below.
— 136 — Chengdu
Yanlord Riverbay (Phase 3) (仁恒濱河灣，三期)
The third phase of this development comprises residential properties and occupies a site area of 36,974 sq.m. and has a GFA of 125,307 sq.m. and a total saleable GFA of 124,894 sq.m. We commenced the construction of this development in February 2015 and expect to complete construction in December 2019. We have 70% ownership in this development.
Hangzhou
Hangzhou Intelligent City Project — Commercial Land Parcels (Phase 1) (杭州傳化科技城項目 — 國 際商貿園，一期)
Hangzhou Intelligent City Project — Commercial Land Parcels is located within the core of Xiaoshan Technology City, Xiaoshan District, Hangzhou City. This development comprises residential properties and commercial complex, including other commercial components. This development is divided into three phases and the first phase of this development occupies a site area of 39,778 sq.m. and has a GFA of 79,631 sq.m. and a total saleable GFA of 77,556 sq.m. We commence the construction of this development in July 2018 and expect to complete construction in the first quarter of 2020. We have 30% ownership in this development.
Jinan
Jinan CBD Project — A3 Land Parcel (濟南CBD項目 — A3地塊)
Jinan CBD Project is located at Jinan City. This development comprises retail shops and commercial complex. This development occupies a site area of 9,169 sq.m. and has a projected GFA of 45,838 sq.m. and a total saleable GFA of 45,210 sq.m. We commence the construction of this development in November 2018 and expect to complete construction in the second quarter of 2021. We have 35% ownership in this development.
Jinan CBD Project — B5 Land Parcel (濟南CBD項目 — B5地塊)
This development comprises residential properties and occupies a site area of 47,166 sq.m. and has a projected GFA of 111,311 sq.m. and a total saleable GFA of 110,593 sq.m. We commence the construction of this development in November 2018 and expect to complete construction in the third quarter of 2021. We have 35% ownership in this development.
Nanjing
Nanjing Eco Hi-tech Island — Land Parcel G73 (南京生態科技島 — G73地塊)
Nanjing Eco Hi-tech Island — Land Parcel G73 is located at South of Weiqi Road Yangze River Tunnel, Jiangxinzhou, Jianye District, Nanjing City. This development comprises commercial complex and occupies a site area of 45,067 sq.m. and has a GFA of 97,034 sq.m. and a total saleable GFA of 97,034 sq.m. We commenced the construction of this development in July 2017 and expect to complete construction in the second quarter of 2020. We have 100% ownership in this development.
Yanlord Phoenix Hill (Phase 1) (鳳凰山居，一期)
Yanlord Phoenix Hill is located within Nanjing’s picturesque Jiangbei District and is cradled within the lush surroundings of the Nanjing Daji Botanical Gardens, the scenic Lantau Peak and the Laoshan National Park, the site boasts its very own natural hot spring which can be piped into each of the townhouse and villa units within the development. This development is divided into four phases and the first phase of this development occupies a site area of 138,884 sq.m. and has a GFA of 78,336 sq.m. and a total saleable GFA of 77,924 sq.m. We commence the construction of this development in April 2018 and expect to complete construction in July 2019. As of December 31, 2018, 18,141 sq.m. of the total saleable GFA had been pre-sold. We have 51% ownership in this development.
Yanlord Taoyuan Gardens (桃園世紀華庭)
Yanlord Taoyuan Gardens is located at Gulou District, Nanjing City. Ideally situated within the core region of Nanjing city, this site benefits from excellent connectivity as well as a comprehensive and mature suite of lifestyle amenities to cater to every need. This development comprises residential properties and commercial complex and occupies a site area of 61,465 sq.m. and has a GFA of 153,427 sq.m. and a total saleable GFA of 153,427 sq.m. We commenced the construction of this development in
— 137 — April 2017 and expect to complete construction in the second quarter of 2021. As of December 31, 2018, 101,608 sq.m. of the total saleable GFA had been pre-sold. We have 33% ownership in this development.
Nanjing No. 2017G01 Land (南京No. 2017G01地塊)
Nanjing No. 2017G01 Land is located at Yanziji, Xixia District, Nanjing City. This development comprises residential properties and occupies a site area of 52,785 sq.m. and has a GFA of 87,123 sq.m. and a total saleable GFA of 84,059 sq.m. We commenced the construction of this development in March 2018 and expect to complete construction in the first quarter of 2020. We have 50% ownership in this development.
Nantong
Four Seasons Gardens (Phase 2) (四季花園，二期)
This second phase of this development comprises residential properties and retail shops. This development occupies a site area of 34,401 sq.m. and has a GFA of 71,870 sq.m. and a total saleable GFA of 70,553 sq.m. We commenced construction of this development in June 2016 and completed construction in June 2019. As of December 31, 2018, 65,071 sq.m. of the total saleable GFA had been pre-sold. We have 60% ownership in this development.
Nantong R17014 Land (Phase 1) (南通R17014地塊，一期)
Nantong R17014 Land is surrounded by three natural parks and located at Central Innovation District, Nantong City. This development is divided into three phases and the first phase of this development comprises residential properties. This development occupies a site area of 46,157 sq.m. and has a GFA of 82,999 sq.m. and a total saleable GFA of 80,705 sq.m. We commenced the construction of this development in October 2018 and expect to complete construction in the fourth quarter of 2020. We have 31% ownership in this development.
Shenzhen
Shenzhen Longgang District Redevelopment Project (Phase 1) (深圳龍崗區 — 城中村改造項目，一期)
Shenzhen Longgang District Redevelopment Project is located at Longgang District, Shenzhen City. This development is divided into four phases and the first phase of this development comprises residential properties and retail shops. This development occupies a site area of 28,959 sq.m. and has a GFA of 125,810 sq.m. and a total saleable GFA of 121,228 sq.m. We commenced construction of this development in March 2017 and expect to complete construction in the second quarter of 2021. We have 95% ownership in this development.
Yanlord Centre (Phase 1) (仁恒中心，一期)
Yanlord Centre is located at Longgang District, Shenzhen City. The first phase of this development comprises serviced apartments and retail shops. This development occupies a site area of 36,953 sq.m. and has a GFA of 123,280 sq.m. and a total saleable GFA of 119,523 sq.m. We commenced construction of this development in August 2017 and expect to complete construction in November 2019. We have 100% ownership in this development.
Yanlord Centre (Phase 2) (仁恒中心，二期)
The second phase of this development comprises commercial complex and occupies a site area of 29,790 sq.m. and has a GFA of 209,440 sq.m. and a total saleable GFA of 209,440 sq.m. We commenced construction of this development in February 2019 and expect to complete construction in the second quarter of 2022. We have 100% ownership in this development.
Suzhou
Canal Times (運河時代花園)
Canal Times is located at Suzhou’s city’s administrative district, the Gao Xin district. This development comprises residential properties and occupies a site area of 24,938 sq.m. and has a GFA of 52,514 sq.m. and a total saleable GFA of 51,229 sq.m. We commenced construction of this development in September 2017 and expect to complete construction in December 2019. We have 100% ownership in this development.
— 138 — New Tang’sMansion(淺棠平江)
New Tang’s Mansion comprises residential properties and occupies a site area of 56,746 sq.m. and has a GFA of 139,297 sq.m. and a total saleable GFA of 139,297 sq.m. We commenced construction of this development in July 2018 and expect to complete construction in the second quarter of 2021. As of December 31, 2018, 2,921 sq.m. of the total saleable GFA had been pre-sold. We have 30% ownership in this development.
Riverbay Gardens (Phase 1) (江灣雅園，一期)
Riverbay Gardens is located at Suzhou’s city’s administrative district, the Gusu district. The first phase of this development comprises residential properties and retail shops. This development occupies a site area of 68,268 sq.m. and has a GFA of 158,391 sq.m. and a total saleable GFA of 156,243 sq.m. We commenced construction of this development in June 2016 and completed construction in January 2019. As of December 31, 2018, 116,179 sq.m. of the total saleable GFA had been pre-sold. We have 30% ownership in this development.
Riverbay Gardens (Phase 2) (江灣雅園，二期)
The second phase of this development comprises residential properties and retail shops. This development occupies a site area of 55,045 sq.m. and has a GFA of 137,687 sq.m. and a total saleable GFA of 128,070 sq.m. We commenced construction of this development in September 2016 and expect to complete construction in December 2019. As of December 31, 2018, 83,400 sq.m. of the total saleable GFA had been pre-sold. We have 30% ownership in this development.
Suzhou No. 2016-WG-46 Land Parcels (蘇州No. 2016-WG-46地塊)
Suzhou No. 2016-WG-46 Land Parcels is located at Suzhou’s city’s administrative district, the Gusu district. This development comprises residential properties and a retail mall. This development occupies a site area of 84,199 sq.m. and has a GFA of 52,090 sq.m. and a total saleable GFA of 52,090 sq.m. We commenced construction of this development in September 2018 and expect to complete construction in the third quarter of 2023. We have 100% ownership in this development.
Tangshan
Tangshan Nanhu Eco-City — Land Parcels A8 (唐山南湖生態城，A8地塊)
Tangshan Nanhu Eco-City — Land Parcels A8 is a residential development occupies a site area of 64,656 sq.m. and has a GFA of 169,553 sq.m. and a total saleable GFA of 166,436 sq.m. We commenced the construction of this development in December 2017 and expect to completed construction in fourth quarter of 2020. As of December 31, 2018, 99,112 sq.m. of the total saleable GFA had been pre-sold. We have 50% ownership in this development.
Tianjin
Tianjin Beichen No. 2017-189 Land (天津北辰No. 2017-189地塊)
Tianjin Beichen No. 2017-189 Land is located at Beichen District, Tianjin City. This development comprises residential properties and retail shops. This development occupies a site area of 129,904 sq.m. and has a GFA of 242,280 sq.m. and a total saleable GFA of 242,280 sq.m. We commenced construction of this development in November 2018 and expect to complete construction in the second quarter of 2021. We have 20% ownership in this development.
Tianjin Hong Qiao Land (Phase 1) (紅咸雅苑，一期)
Tianjin Hong Qiao Land is located at Tianjin’s education district, which is a mixed-use site that will include high-end residential and commercial units as well as educational facilities. The first phase of this development comprises residential properties and retail shops. This development occupies a site area of 73,207 sq.m. and has a GFA of 203,878 sq.m. and a total saleable GFA of 187,648 sq.m. We commenced construction of this development in May 2016 and expect to complete construction in December 2019. As of December 31, 2018, 172,580 sq.m. of the total saleable GFA had been pre-sold. We have 25% ownership in this development.
— 139 — The Mansion In Park (Phase 1) (仁恒公園世紀，一期)
The Mansion In Park is located at Hexi District, Tianjin City. The first phase of this development comprises residential properties and retail shops. This development occupies a site area of 72,321 sq.m. and has a GFA of 161,100 sq.m. and a total saleable GFA of 152,890 sq.m. We commenced construction of this development in May 2018 and expect to complete construction in the third quarter of 2021. As of December 31, 2018, 36,794 sq.m. of the total saleable GFA had been pre-sold. We have 50% ownership in this development.
Yanlord Majestive Mansion (仁恒海和院)
Yanlord Majestive Mansion is located at Tianjin’s Haihe Academic Park and benefits from the Tianjin government initiatives to develop the area into a key educational district. This development comprises residential properties and retail shops. This development occupies a site area of 193,514 sq.m. and has a GFA of 260,925 sq.m. and a total saleable GFA of 260,925 sq.m. We commenced construction of this development in May 2017 and expect to complete construction in the third quarter of 2020. As of December 31, 2018, 61,404 sq.m. of the total saleable GFA had been pre-sold. We have 60% ownership in this development.
Yiwan Gardens (依灣花園)
Yiwan Gardens is located at Beichen District, Tianjin City. This development comprises residential properties and occupies a site area of 98,264 sq.m. and has a GFA of 160,029 sq.m. and a total saleable GFA of 160,029 sq.m. We commenced construction of this development in September 2018 and expect to complete construction in the third quarter of 2021. As of December 31, 2018, 9,284 sq.m. of the total saleable GFA had been pre-sold. We have 17% ownership in this development.
Wuhan
Yanlord on the Park (仁恒‧公園世紀)
Yanlord on the Park is located at Jiang An District, Wuhan City, which has been earmarked as a lifestyle hub within the second ring road of Wuhan City. This development comprises residential properties and occupies a site area of 35,296 sq.m. and has a GFA of 151,851 sq.m. and a total saleable GFA of 141,751 sq.m. We commenced construction of this development in November 2018 and expect to complete construction in the third quarter of 2020. We have 55% ownership in this development.
Zhuhai
Yanlord Marina Centre — Section A (仁恒濱海中心 — A標段)
Section A of this development comprises office spaces and retail shops. Section A of this development occupies a site area of 3,939 sq.m., has a GFA of 35,250 sq.m. and a total saleable GFA of 35,250 sq.m. We commenced construction of this development in July 2011 and completed construction in January 2019. Land cost for this development was RMB1,518 per sq.m. We have 95% ownership in this development.
Yanlord Marina Peninsula Gardens (Phase 3) (仁恒濱海半島花園，三期)
The third phase of this development comprises residential properties and occupies a site area of 102,725 sq.m. and has a projected GFA of 185,774 sq.m. and a total saleable GFA of 182,038 sq.m. We commenced construction of this development in June 2016 and the first phase of this development is expected to complete construction in November 2019 and the second phase is expected to complete construction in the fourth quarter of 2020. As of December 31, 2018, 31,651 sq.m. of the total saleable GFA had been pre-sold. We have 57% ownership in this development.
Yanlord North Shore Gardens (仁恒北岸苑)
Yanlord North Shore Gardens is located at Gao Xin District, Zhuhai City. This development comprises residential properties and occupies a site area of 13,938 sq.m. and has a GFA of 43,704 sq.m. and a total saleable GFA of 36,436 sq.m. We commenced construction of this development in April 2018 and expect to complete construction in the fourth quarter of 2022. We have 57% ownership in this development.
— 140 — Properties Held for Future Development
As of December 31, 2018, the total site area and GFA of our properties held for future development are 2,172,572 sq.m. and 3,695,334 sq.m., respectively (including a total site area and GFA of 1,333,827 sq.m. and 2,378,568 sq.m., respectively held under associate and joint venture investments). Details of our properties held for future development are set out below.
Chengdu
Chongzhou Project Land Parcels (崇州項目地塊)
This development site is located at Chongzhou District, Chengdu City, which is near the thousand- year old Jiezi Ancient Town. This development comprises residential properties and occupies a site area of 150,067 sq.m. and has a projected GFA of 102,958 sq.m. We commenced construction of this development in April 2019 and expect to complete construction in 2022. We have 80% ownership in this development.
Hangzhou
Hangzhou D-05 Land (杭州南星橋項目地塊)
Hangzhou D-05 Land is located at Shang Cheng District, Hangzhou City. This development comprises residential properties and occupies a site area of 31,776 sq.m. and has a projected GFA of 68,312 sq.m. We commenced construction of this development in May 2019 and expect to complete construction in 2021. We have 50% ownership in this development.
Hangzhou Intelligent City Project — Commercial Land Parcels (Phase 2 and 3) (杭州傳化科技城項目 — 國際商貿園，二、三期)
The second and third phases of this development comprise residential properties and commercial complex. These developments occupy a combined site area of 120,241 sq.m. and have a combined projected GFA of 215,274 sq.m. We commenced construction the second phase of this development in March 2019 and expect to complete construction of the third phase in 2024. We have 30% ownership in this development.
Hangzhou Intelligent City Project — Medical Land Parcels (杭州傳化科技城項目 — 國際醫療園)
Hangzhou Intelligent City Project — Medical Land Parcels is located within the core of Xiaoshan Technology City, Xiaoshan District, Hangzhou City. This development comprises residential properties and commercial complex, including healthcare and hospitality components. This development will be divided into four phases and occupies a combined site area of 193,903 sq.m. and has a combined projected GFA of 450,773 sq.m. We expect to commence construction of this development in December 2019 and complete construction of the final phase in 2024. We have 30% ownership in this development.
Hangzhou West Lake Land (杭州西湖之江項目地塊)
Hangzhou West Lake Land is located at Xihu District, Hangzhou City. This development comprises residential properties and occupies a site area of 77,273 sq.m. and has a projected GFA of 120,960 sq.m. We commenced construction of this development in May 2019 and expect to complete construction in 2021. We have 50% ownership in this development.
Nanjing
YanlordPhoenixHill(Phase2to4)(鳳凰山居，二至四期)
The second to fourth phases of this development comprise residential properties and retail shops. These developments occupy a combined site area of 356,327 sq.m. and have a combined projected GFA of 199,925 sq.m. We expect to commence construction the second phase of this development in December 2019 and complete construction of the fourth phase in 2025. We have 51% ownership in this development.
Nanjing No. 2016G84 Land (南京No. 2016G84地塊)
Nanjing No. 2016G84 Land is located at Nanjing Eco Hi-tech Island and rests along the island’s idyllic riverfront offering an unobstructed view of the Yangtze River. This development comprises residential properties and commercial complex. This project will be divided into several parcels for
— 141 — development and occupies a combined site area of 426,439 sq.m. and has a combined projected GFA of 533,345 sq.m. We commenced construction the Land Parcel C and E of this development in June and May 2019, respectively, and expect to complete construction of the final parcel in 2022. We have 51% ownership in this development.
Nanjing No. 2018G26 Land (南京No. 2018G26地塊)
Nanjing No. 2018G26 Land is located at Jiangning District, Nanjing City. This development comprises residential properties and retail shops. This development occupies a site area of 153,262 sq.m. and has a projected GFA of 365,216 sq.m. We commenced construction of this development in May 2019 and expect to complete construction in 2021. We have 12% ownership in this development.
Nantong
Nantong R17014 Land (Phase 2 and 3) (南通R17014地塊，二、三期)
The second and third phases of this development comprise residential properties and retail shops. These developments occupy a combined site area of 85,420 sq.m. and have a combined projected GFA of 128,866 sq.m. We commenced construction of the second phase of this development in March 2019 and expect to complete construction of the third phase in 2022. We have 30% ownership in this development.
Shanghai
Shanghai San Jia Gang Land Plot (仁恒濱海度假村)
Shanghai San Jia Gang Land Plot is located at San Jia Gang, No. 81 parcel, Heqing Town, Shanghai City. This development comprises high-end villas and occupies a site area of 67,978 sq.m. and has a projected GFA of 33,989 sq.m. We expect to commence construction of this development in 2020 and complete construction in 2021. We have 67% ownership in this development.
Shanghai Yangpu District 81 and 83 Redevelopment Project (上海楊浦區81、83街坊舊區改造項目)
This development site is located near the heart of Yangpu District in Shanghai City. It comprises residential properties and retail shops. This development occupies a site area of 69,389 sq.m. and has a projected GFA of 183,187 sq.m. We expect to commence construction of this development in 2020 and complete construction in 2023. We have 100% ownership in this development.
Shenzhen
Shenzhen Longgang District Bantian Redevelopment Project (深圳龍崗區 — 坂田城市更新項目)
Shenzhen Longgang District Bantian Redevelopment Project is located at Longgang District, Shenzhen City. This development comprises residential properties and commercial complex. This development occupies a site area of 52,768 sq.m. and has a projected GFA of 235,717 sq.m. We expect to commence construction of this development in 2021 and complete construction in 2023. We have 100% ownership in this development.
Shenzhen Longgang District Economic Residential Housing (深圳龍崗區 — 經濟適用房)
Shenzhen Longgang District Economic Residential Housing is located at Longgang District, Shenzhen City. This development comprises residential apartments and occupies a site area of 48,021 sq.m. and has a projected GFA of 149,080 sq.m. We are currently in the project conceptualization, planning and design stage for this development. We have 95% ownership in this development.
Shenzhen Longgang District Redevelopment Project (Phase 2 and 3) (深圳龍崗區 — 城中村改造項 目， 二、三期)
The second and third phases of this development comprises residential properties and retail shops. These developments occupy a combined site area of 72,807 sq.m. and have a combined projected GFA of 292,470 sq.m. We expect to commence construction of the second phase of this development in December 2019 and complete construction of the third phase in 2021. We have 95% ownership in this development.
— 142 — Shenzhen Longgang District Redevelopment Project (Phase 4) (深圳龍崗區 — 城中村改造項目，四期)
The fourth phase of this development comprises residential properties and occupies a site area of 13,131 sq.m. and has a projected GFA of 50,660 sq.m. We are currently in the project conceptualization, planning and design stage for this development. We have 95% ownership in this development.
Yanlord Century Mansion (仁恒世紀大廈)
Yanlord Century Mansion is located at Luohu District, Shenzhen City. This development comprises serviced apartments and retail shops. This development occupies a site area of 5,744 sq.m. and has a projected GFA of 55,100 sq.m. We commenced construction of this development in January 2019 and expect to complete construction in 2021. We have 65% ownership in this development.
Yanlord Landmark (仁恒置地廣場)
Yanlord Landmark is located at Luohu District, Shenzhen City. This development comprises residential properties and commercial complex. This development occupies a site area of 2,513 sq.m. and has a projected GFA of 13,680 sq.m. We are currently in the project conceptualization, planning and design stage for this development. We have 100% ownership in this development.
Suzhou
Suzhou No. 2018-WG-11 Land Parcels (蘇州No. 2018-WG-11地塊)
Suzhou No. 2018-WG-11 Land Parcels is located at Xiangcheng District, Suzhou City. This development comprises residential properties and retail shops. This development occupies a site area of 86,441 sq.m. and has a projected GFA of 185,970 sq.m. We commenced construction of this development in February 2019 and expect to complete construction in 2021. We have 60% ownership in this development.
Tangshan
Tangshan Nanhu Eco-City Land Parcels (唐山南湖生態城地塊)
Tangshan Nanhu Eco-City Land Parcels comprise an office tower and occupies a site area of 32,964 sq.m. and has a projected GFA of 73,949 sq.m. We are currently in the project conceptualization, planning and design stage for this development. We have 50% ownership in this development.
Tianjin
Tianjin Hong Qiao Land (Phase 2) (紅咸雅苑，二期)
The second phase of this development comprises an office tower and retail shops. This development occupies a site area of 33,713 sq.m. and has a projected GFA of 56,760 sq.m. We expect to commence construction of this development in December 2019 and complete construction in 2023. We have 25% ownership in this development.
The Mansion In Park (Phase 2 and 3) (仁恒公園世紀，二、三期)
The second and third phase of this development comprises commercial complex and occupies a combined site area of 62,971 sq.m. and has a combined projected GFA of 127,358 sq.m. We expect to commence construction of the second phase of this development in 2020 and to complete construction of the entire phases in 2023. We have 50% ownership in this development.
Singapore
Tulip Garden (金香園)
Tulip Garden is located in Singapore’s prime District 10 and lies a stone’s throw away from the chic and vibrant Holland Village enclave. This residential development has a site area and projected GFA of 29,423 sq.m. and 51,785 sq.m. respectively. We have commenced construction (including demolition works) of this development in August 2019 and expect to complete construction in 2022. We have a 50% ownership stake in this development.
— 143 — Land Use Right Certificates
As of the date of this offering memorandum, we have not yet obtained the land use right certificates for the following projects:
. Shanghai Jingan District No. 18-03 Land (上海靜安區市北高新技術服務業園區地塊);
. Shanghai Yangpu District 81 and 83 Redevelopment Project (上海楊浦區81、83街坊舊區改 造項目);
. Shenzhen Longgang District Bantian Redevelopment Project (深圳龍崗區 — 坂田城市更新 項目);
. Shenzhen Longgang District Economic Residential Housing (深圳龍崗區 — 經濟適用房);
. Shenzhen Longgang District Redevelopment Project (Phases 3 and 4) (深圳龍崗區 — 城中村 改造項目三、四期); and
. The Mansion In Park (Phase 2 and 3) (仁恒公園世紀，二、三期)
Major Supplier
The following table sets forth our major supplier, which is our construction contractor, accounting for 5% or more of our total construction costs, for each of the last three financial years ended 2016, 2017 and 2018.
As a Percentage of Our Total Construction Costs (%) Major Supplier Nature of supply 2016 2017 2018 LongxinGroup...... Constructionwork 22.8 19.7 19.8
Our construction work is typically contracted out to independent construction companies selected through a tender process for each property development.
None of our directors, executive officers, substantial shareholders or any of their associates is related to or has any interest, direct or indirect in our major supplier listed above. We have no arrangements or understandings with any of our major suppliers pursuant to which any of our directors or executive officers was selected as a director or executive officer.
The Longxin Group
Since our establishment in 1993, we have developed a stable long-term relationship with the Longxin Group, which has been one of our major construction contractors over the years. The construction of many of our projects, representing approximately 82.6%, 78.1% and 63.0% of the GFA of properties constructed or under contract to be constructed, was undertaken by the Longxin Group in the three years ended December 31, 2016, 2017 and 2018, respectively. The Longxin Group has played an instrumental role in ensuring the quality of our developments and helping us build our reputation as a developer of high-quality projects. The Longxin Group is an unrelated party and none of our directors, executive officers, substantial shareholders or any of their associates have any interest, direct or indirect, in the Longxin Group.
To reduce our reliance on the Longxin Group, we have started engaging other independent third- party contractors in each city to provide similar services, including design, construction, piling and foundation, building and property fitting-out works, installation of air-conditioning units and elevators and interior decoration. These independent third-party contractors are able to provide quality workmanship and services that are comparable to that provided by the Longxin Group.
Competition
We believe that the premium property development market is capital intensive and requires specialized industry knowledge. We believe that our major competitors are large national or regional property developers who engage in the development of premium residential and commercial developments. The principal competitive factors influencing the property development sector generally and in the selected cities in the PRC and Singapore where we operate include the pricing scheme adopted by the developers, the quality and workmanship of the projects, the location of the properties, the marketing strategies adopted by the developers and the timing of the launch of the property projects.
— 144 — Intellectual Property
We recognize the importance of our intellectual property, particularly our trademarks, to our strong brand recognition and our ability to compete successfully in PRC’s competitive property development market. Our controlling shareholder, Yanlord Holdings, is the registered owner of the Yanlord logo, the Yanlord name and their Chinese renditions. Yanlord Holdings has licensed to us an irrevocable, non- exclusive and perpetual right to use the Yanlord trademarks registered in the PRC and Singapore.
Insurance
PRC laws, regulations and government rules do not require property developers to purchase insurance policies for its real estate developments. However, we maintain insurance for destruction of or damage to our property developments in Nanjing, Hangzhou, Chengdu, Tianjin, Zhuhai, Shenzhen, Haikou, Sanya and Wuhan whether they are under development or have been completed and are pending delivery. We also insure against additional liability for personal injuries that may occur to our employees and third parties during the construction of our property developments. However, our insurance does not cover construction workers engaged by our construction contractors, who are required to maintain accident insurance for their construction workers pursuant to PRC law. We have not suffered any losses or damage or incurred any liabilities relating to our properties that have had a material and adverse effect on our business.
We maintain insurance coverage for certain clubhouses and offices. In addition, we also purchase employee-related insurance, such as medical insurance and social welfare insurance, for our employees.
Environment and Safety Features
We are subject to PRC national and local environmental laws and regulations governing air pollution, noise emissions, water and waste discharge and other environmental matters. Major environmental laws and regulations to which we are subject include the Regulations on the Administration of Environmental Protection of Construction Project, the Procedures on the Administration of Environmental Protection of Construction Projects and the Provisions on the Inspection and Acceptance of Environmental Protection of Construction Projects.
Our property developments must undergo environmental assessments and we must submit environmental impact study reports to the relevant government authorities before approval is granted for the development of the property. The environmental impact study reports include various standards and procedures that we must comply with during the compliance period of each of our projects. Upon completion of a property development, the government authorities will inspect the site to ensure our compliance with applicable environmental standards. The inspection report is presented together with other specified documents to the local construction administration authorities for their record. Our project development department is in charge of coordinating the preparation of the environmental impact study reports by qualified environmental assessment agencies and the governmental inspection and acceptance by the relevant government authorities.
There has not been any major accident at any construction site operated by us since our establishment. To the best of our directors’ knowledge, we have complied with applicable environmental laws and regulations and have not breached any applicable environmental laws or regulations since our establishment.
Staff
As of December 31, 2018, we had 8,122 full-time employees. The following table sets forth the breakdown of our full-time employees by geographical location as of December 31, 2018.
Location Employees Singapore...... 20 HongKong...... 29 PRC...... 8,073 Total...... 8,122
— 145 — The following table sets forth the breakdown of our full-time employees by function as of December 31, 2018.
Number of Function Employees Management(1) ...... 107 PropertyDevelopment...... 1,233 ProjectManagement...... 6,234 Financial and Corporate Support Services ...... 421 HumanResources...... 127 Total...... 8,122
Note:
(1) Executive directors and executive officers are classified under management.
Our employees located in the PRC are unionized. Our management enjoys good relations with the relevant labor unions. In addition, the relationship between management and staff is good and there has not been any incidence of work stoppages or labor disputes which has affected our operations.
Staff Training and Development
Our employees are key contributors to our growth. We recognize that our success and ability to maintain our competitiveness depend on the well-being, quality and skills of our staff. As such, our human resource policies focus on providing our employees with a good and well-balanced working environment. We believe in creating a corporate culture where we are open to our employees’ constructive ideas and suggestions in respect of our business and internal development. We also believe in cultivating a positive and healthy working environment for our employees. This in turn contributes to the development of a dedicated and motivated workforce with high morale which is vital to our current and future success.
In addition, we also encourage continuous professional development of our staff. We are highly selective in our hiring process, focusing on recruiting employees who have the potential to become committed, pro-active and efficient members of our management team. We regularly train our staff on technical skills and product knowledge, management techniques and the importance of corporate culture. We also place emphasis on training programs which ensure that our employees are updated on the latest safety regulations and technological developments related to our property developments. To this end, we organize external and in-house training programs for our employees. Our human resources department organizes and manages a one-week internal training program for our employees quarterly. Each of our subsidiaries is required to commit employees to participate in our internal training programs. The scope and area of the internal training programs together with the list of employees to whom the training program is most relevant will be disseminated by our human resource department to every subsidiary concerned.
We also engage external professionals to conduct training courses for our employees. For example, we organized for our management and staff a course on the technical aspects of property management.
We also organize market research trips from time to time for our management team to countries such as Australia, Singapore, Hong Kong, the United States and the United Kingdom, in order to enable them to better understand new and upcoming trends and developments in these countries and regions.
Sales and Marketing
We have a sales and marketing team in each city where we have property developments. As of December 31, 2018, our sales and marketing teams comprised more than 300 employees, all of whom received regular training. Our sales managers and marketing managers cooperate closely to determine appropriate advertising and sales plans for a particular property development. They also work together to plan and organize on-site procedures, conduct market research, design sales, arrange promotional activities, collect customer data and comments and recommend pricing strategies.
In addition to a fixed monthly salary, we compensate our sales and marketing teams with bonuses in lieu of sales commissions upon reaching their allocated sales quota.
— 146 — Our sales and marketing initiatives include, but are not limited to, advertisements in newspapers, magazines and outdoor advertising boards. In addition, we participate in real estate exhibitions, set up show flats and on-site sales centers and provide shuttle services for our potential customers who are interested in visiting and viewing our property developments. To achieve our objectives, our sales and marketing teams will either develop and design strategies internally or work closely with advertising agencies, design houses, print media companies and event coordinators.
Our sales and marketing efforts have successfully attracted customers from the upper income bracket in the cities where our properties are located. We will continue to focus on our target market in these cities.
Legal Proceedings
We are currently not a party to any material legal proceedings. From time to time, we may be involved in various legal proceedings arising from the ordinary course of business, including claims relating to our guarantees for mortgage loans provided to our customers and contract disputes with our customers and suppliers. Although we cannot predict with certainty the results of such litigation, we believe that the final outcome of potential litigation will not have a material adverse effect on our business and results of operations. Regardless of the outcome, however, any litigation can result in substantial costs and diversion of management resources and attention.
— 147 — REGULATION
The Land System of the PRC
All land in the PRC is either state-owned or collectively owned, depending on the location of the land. All land in the urban areas of a city or town is state-owned, and all land in the rural areas of a city or town and all rural land is, unless otherwise specified by law, collectively owned. The state has the right to reclaim land in accordance with PRC law if required for the benefit of the public.
Although all land in the PRC is owned by the state or by collectives, private individuals and businesses and other organizations are permitted to hold, lease and develop land for which they are granted land use rights.
National legislation
In April 1988, the constitution of the PRC was amended by the National People’s Congress (the ‘‘NPC’’) to allow for the transfer of land use rights for value. In December 1988, the Land Administration Law of the PRC was amended to permit the transfer of land use rights for value.
Under the Interim Regulations of the PRC on Grant and Transfer of the Right to Use State-owned Urban Land (‘‘Interim Regulations on Grant and Transfer’’) promulgated in May 1990, local governments at or above county level have the power to grant land use rights for specific purposes and for a definite period to a land user pursuant to a contract for the grant of land use rights against payment of a grant premium.
Under the Interim Regulations on Grant and Transfer, there are different maximum periods of grant for different uses of land. They are generally as follows:
Maximum Period in Use of Land Years Commercial,tourism,entertainment...... 40 Residential...... 70 Industrial...... 50 Public utilities...... 50 Others...... 50
Under the Interim Regulations on Grant and Transfer, all local and foreign enterprises are permitted to acquire land use rights unless the law provides otherwise. The state may not reclaim lawfully granted land use rights prior to expiration of the term of grant. If public interest requires repossession by the state under special circumstances during the term of grant, compensation will be paid by the state. A land grantee may lawfully transfer, mortgage or lease its land use rights to a third party for the remainder of the term of grant.
Upon expiration of the term of grant, renewal is possible subject to the execution of a new contract for the grant of land use rights and payment of a premium. If the term of the grant is not renewed, the land use rights and ownership of any buildings erected on the land will revert to the state without compensation.
In accordance with the Regulations on the Grant of State-owned Land-Use Rights Through Competitive Bidding, Public Auction and Public Announcements promulgated by the Ministry of Land and Resources (the ‘‘MLR’’) on May 9, 2002 and implemented on July 1, 2002, and the Urban Real Estate Management Law implemented on January 1, 1995 and amended on August 30, 2007, land for commercial use, tourism, entertainment and commodity housing development must be granted by means of competitive bidding, public auction or listing-for-sale.
According to the Regulations on the Grant of State-owned Construction Land-Use Rights through Competitive Bidding, Public Auction and Public Announcements promulgated by the MLR on September 28, 2007 and implemented on November 1, 2007, land for industrial use, commercial use, tourism, entertainment, commodity housing development and dual-use land must be granted by means of competitive bidding, public auction or listing-for-sale.
— 148 — Grant
PRC law distinguishes between the ownership of land and the right to use land. Land use rights can be granted by the state to us to entitle us to the exclusive use of a piece of land for a specified purpose within a specified term and on such other terms and conditions as may be prescribed. A premium is payable on the grant of land use rights. The maximum term that can be granted for the right to use a piece land depends on the purpose for which the land is used. As described above, the maximum limits specified in the relevant regulations vary from 40 to 70 years depending on the purpose for which the land is used.
Under the Interim Regulations on Grant and Transfer, there are four methods in which land use rights may be granted, namely by agreement, tender, auction or listing-for-sale. A tender is organized by the Urban Land Authorities, who will make a tender notice or invitation. Bidders will pay a deposit and seal the bids in a tender box. An evaluation committee organized by the Urban Land Authority evaluates the tenders. An auction takes place in public at an appointed time and place, at which bidders will bid publicly. Where land use rights are granted by way of listing-for-sale, a public notice will be issued by the local land bureau to specify the location, area and purpose of use of land and the initial bidding price, period for receiving bids and terms and conditions upon which the land use rights are proposed to be granted. The land use rights are granted to the bidder with the highest bid who satisfies the terms and conditions. The successful bidder will enter into a land grant contract with the local land bureau and pay the relevant land premium within a prescribed period.
Under the Regulations on the Grant of State-owned Land-Use Rights through Competitive Bidding, Public Auction and Public Announcements, competitive bidding of land-use rights is where the relevant land administration authority (the ‘‘grantor’’) issues a bidding announcement, inviting individuals, legal persons or other organizations (whether specified or otherwise) to participate in tender for the land-use rights of a particular parcel of land, with the land usertobedeterminedaccordingtotheresultsofthe biddings. Auction for land-use rights is where the grantor issues an auction announcement, and the bidders can at specified time and location openly bid for a parcel of land. Listing-for-sale is where the grantor issues a listing-for-sale announcement, and in accordance with the announcement, the land grant conditions will be listed in a specified land grant exchange within a specified period, bidders’ payment applications will be listed and the land user will be granted according to the bidder’spayment applications at the end of such listing period. The procedures are as follows:
(i) The land authority under the government of the city and county issues an announcement at least 20 days prior to the day of competitive bidding, public auction or listing-for-sale. The announcement includes basic particulars of the land parcel, qualification requirements of the bidder and auction applicants, the methods and criterion used to confirm the winning tender or winning bidder and conditions such as the deposit of the bid;
(ii) The grantor conduct a qualification verification of the bidding applicants and auction applicants and instructs the applicants who satisfy the requirements of the announcement to attend the competitive bidding, public auction or listing-for-sale;
(iii) After determining the winning tender or the winning bidder by holding a competitive bidding, public auction or listing-for-sale, the grantor and the winning tender or winning bidder then enter into a confirmation. The grantor refunds the other applicants their deposits;
(iv) The grantor and the winning tender or winning bidder then enter into a contract for State- owned land-use rights grant at the time and venue set in the confirmation. The deposit of the bid paid by the winning tender or winning bidder is deemed as part of the assignment price of the state-owned land-use rights; and
(v) The winning tender or winning bidder applies for the land registration after paying the assignment price. The people’s government of the municipality and county level or above then issues the ‘‘Land-Use Rights Certificate.’’
The Regulations on the Grant of State-owned Construction Land-Use Rights through Competitive Bidding, Public Auction and Public Announcements promulgated by the MLR on September 28, 2007 and implemented on November 1, 2007 further emphasized that the winning tender or winning bidder must apply for the land registration after paying the entire assignment price, in accordance with the State-owned Construction Land-Use Right Assignment, before obtaining the State-owned Construction
— 149 — Land-Use Right Certificate. If the winning tender or winning bidder does not pay the entire assignment price, it will not be granted the state-owned construction land-use right certificates. Proportional division and grant of the state-owned construction land-use right certificates corresponding to the amount of the assignment price paid is not allowed.
In June 2003, the MLR promulgated the Regulation on Transfer of State-Owned Land Use Rights by Agreement. According to this regulation, if there is only one entity interested in using the land, the land use rights (excluding land use rights used for business purposes including commercial, tourism, entertainment and commodity residential properties) may be granted by way of agreement. The local land bureau, together with other relevant government departments including the city planning authority, will formulate a plan concerning issues including the specific location, boundary, purpose of use, area, term of grant, conditions of use, conditions for planning and design as well as the proposed land premium, which shall not be lower than the minimum price regulated by the state, and submit such plan to the relevant government for approval. Afterwards, the local land bureau and the person who is interested will negotiate and enter into the grant contract based on the above-mentioned plan. If two or more entities are interested in the land use rights to be granted, such land use rights shall be granted by means of tender, auction or listing-for-sale.
Upon signing the land grant contract the grantee is required to pay the land premium pursuant to the terms of the contract and the contract is then submitted to the relevant local bureau for the issue of the land use right certificate. Upon expiration of the term of grant, the grantee may apply for its renewal. Upon approval by the relevant local land bureau, a new contract is entered into to renew the grant, and a grant premium shall be paid.
On November 18, 2009, the Ministry of Finance, the MLR, the PBOC, the Ministry of Supervision and the Auditing Administration jointly promulgated the Notice on Further Strengthening the Administration on Income and Expenditure of the Land Grant, which emphasizes that the total land grant fee shall be paid up within one year if the land grant fee is paid in installments and the first installment shall be no less than 50% of the total land grant fee.
On March 8, 2010, the MLR promulgated the Notice on Relevant Issues of Strengthening the Supply and Supervision of Property Use Land, which emphasizes that, after confirming the winner bidder or tender, the land use right grant contract shall be entered into within 10 days, and the down- payment of 50% of the total land grant fee shall be fully paid within one month after the signing date of the land use right grant contract. The outstanding amount of the land grant fee shall be fully paid in accordance with the land use right grant contract and no longer than one year.
In order to control and facilitate the procedure for obtaining land use rights, several local governments have stipulated standard provisions in land grant contracts. Such provisions generally include terms such as use of land, land premium and manner of payment, building restrictions including site coverage, total GFA and height limitations, constructions of public facilities, submission of building plans and approvals, deadlines for completion of construction, town planning requirements, restrictions against alienation before payment of premiums and completion of prescribed development and liabilities for breach of contract. Any change requested by the land user in the specified use of land after the execution of a land grant contract will be subject to approvals from the relevant land bureau and the relevant urban planning department, and a new land use contract may have to be signed and the land premium may have to be adjusted to reflect the appreciation of the new use. Registration procedures must then be carried out immediately.
According to the Notice of the MLR on Relevant Issues Concerning the Strengthening of Examination and Approval of Land Use in Urban Construction, promulgated by the MLR on September 4, 2003, from the day of issuance of the Notice, the grant of land-use rights for luxurious commodity houses will be stringently controlled, and applications of land-use rights for villas are discontinued. On May 30, 2006, the MLR issued the Urgent Notice on Strengthening the Administration of Land. The Notice stated that (i) land for property development must be assigned by competitive bidding, public auction or listing-for-sale; (ii) the rules prohibiting development projects for villas should be strictly enforced; and (iii) land supply and relevant procedures of land use for villas ceased to have effect from the date of the notice.
— 150 — In May 2012, the MLR and the NDRC jointly issued a Circular on the Distribution of the Catalogue for Restricted Land Use Projects (2012 Version) and the Catalogue for Prohibited Land Use Projects (2012 Version), as a supplement to its 2006 version. In this Circular, the MLR set forth a ceiling for the land granted by local governments for development of commodity housing of 7 hectares for small cities and towns, 14 hectares for medium-sized cities and 20 hectares for large cities.
On June 1, 2012, the MLR promulgated the revised Measures on the Disposal of Idle Land, which became effective on July 1, 2012. Under these measures, if any land parcel constitutes ‘‘idle land’’ due to government-related action, the holder of the relevant land use rights is required to explain to the relevant municipality or county-level land administrative department(s) the reasons for the land becoming idle, consult the relevant government authorities and rectify the situation accordingly. The means of rectification include but are not limited to the extension of the period permitted for commencing development, the adjustment of the land use and planning conditions or the substitution of the relevant idle land parcels with other land parcels.
Transfer
After land use rights relating to a particular area of land have been granted by the state, unless any restriction is imposed, the party to whom such land use rights have been granted may transfer, lease or mortgage such land use rights for a term not exceeding the term which has been granted by the state. The difference between a transfer and a lease is that a transfer involves the vesting of the land use rights by the transferor in the transferee during the term for which such land use rights are vested in the transferor. A lease, on the other hand, does not involve a transfer of such rights by the lessor to the lessee. Furthermore, a lease, unlike a transfer, does not usually involve the payment of a premium. Instead, a rent is payable during the term of the lease. Land use rights cannot be transferred, leased or mortgaged if the provisions of the land grant contract, with respect to the prescribed period and conditions of investment, development and use of the land, have not been complied with. In addition, different areas of the PRC have different conditions which must have been fulfilled before the respective land use rights can be transferred, leased or mortgaged.
All transfers, mortgages and leases of land use rights must be evidenced by a written contract registered with the relevant local land bureau at municipality or county level. Upon a transfer of land use rights, all rights and obligations contained in the contract pursuant to which the land use rights were originally granted by the state are deemed to be incorporated as part of the terms and conditions of such transfer, depending on the nature of the transaction.
Under Article 38 of the PRC Law on Administration of Urban Real Estate (the ‘‘Urban Real Estate Law’’), real property that has not been registered and a title certificate for which has not been obtained in accordance with the law cannot be transferred. Under Article 39 of the Urban Real Estate Law, if land use rights are acquired by means of grant, the following conditions must have been met before the land use rights may be transferred: (i) the premium for the grant of land use rights must have been paid in full in accordance with the land grant contract and a land use right certificate must have been obtained; (ii) investment or development must have been made or carried out in accordance with terms of the land grant contract; (iii) more than 25% of the total amount of investment or development must have been made or completed; and (iv) where the investment or development involves a large tract of land, conditions for use of the land for industrial or other construction purpose have been confirmed.
Termination
A land use right terminates upon the expiry of the term of grant specified in the land grant contract and the resumption by the state of that right.
The state generally will not withdraw a land use right before the expiration of its term of grant and if it does so for special reasons, such as in the public interest, it must offer proper compensation to the land user, having regard to the surrounding circumstances and the period for which the land use right has been enjoyed by the user.
Upon expiry, the land use right and ownership of the related buildings erected on the land and other attachments may be acquired by the state without compensation. The land user will take steps to surrender the land use right certificate and cancel the registration of the certificate in accordance with relevant regulations.
— 151 — A land user may apply for renewal of the land use rights and, if the application is granted, the land user is required to enter into a new land grant contract, pay a premium and effect appropriate registration for the renewal grant.
Document of Title
In the PRC, prior to March 1, 2015, there are two registers for real estate. Land registration is achieved by the issue of a land use right certificate by the relevant authorities to the land user. It is evidence that the land user has obtained land use rights which can be transferred, mortgaged or leased. The building registration is the issue of a real estate certificate to the owner. It is evidence that the owner has obtained building ownership rights in respect of the buildings erected on that piece of land. According to the Land Registration Regulations promulgated by the State Land Administration Bureau on December 18, 1995 and implemented on February 1, 1996, and the Administrative Rules on Registration of Urban Real Estate Property promulgated by the Ministry of Construction on October 27, 1997 and implemented on January 1, 1998, all duly registered land use rights and building ownership rights are protected by the law.
On November 25, 2014, the State Council promulgated the Interim Regulation on Real Estate Registration (不動產登記暫行條例), which came into effect since March 1, 2015. On January 1, 2016, the MLR promulgated the Implementation Rules of the Interim Regulation on Real Estate Registration (不動產登記暫行條例實施細則), which came into effect since the same day. Pursuant to these regulations, the state applies a uniform registration system for real estate, including land, sea area and fixtures such as buildings and woods. The real estate registration authority shall establish a uniform real estate register, which is the evidence of the ownership of the land use rights or buildings erected on the land.
Establishment of a Real Estate Development Enterprise
According to the Urban Real Estate Law promulgated by the Standing Committee of the NPC in July 1994, as amended on August 30, 2007, a real estate developer is defined as an enterprise which engages in the development and sale of real estate for the purpose of making profits. Under the Regulations on Administration of Development of Urban Real Estate (the ‘‘Development Regulations’’) promulgated by the State Council on July 20, 1998, in addition to requirements on establishing enterprises, an enterprise that engages in development of real estate must satisfy the following requirements: (1) its registered capital must be RMB1 million or more and (2) it must have four or more full-time professional real estate/construction technicians and two or more fulltime accounting officers, each of whom must hold the relevant qualification certificate. The local government of a province, autonomous region or municipality directly under the central government may, based on local circumstances, impose more stringent requirements on the registered capital and the professional personnel of a real estate developer.
To establish a real estate development enterprise, the developer should apply for registration with the administration for industry and commerce on or above the county level. The real estate developer must also report its establishment to the real estate development authority in the location of the registration authority, within 30 days of the receipt of its Business License.
Under the Foreign Investment Industrial Guidance Catalogue promulgated jointly by MOFCOM and the NDRC in November 2004, the development and construction of ordinary residential units falls within the category of industries in which foreign investment is encouraged, whereas the development of a whole land lot and the construction and operation of high end hotels, villas, premium office buildings and international conference centers falls within the category of industries in which foreign investment is subject to restrictions, while other real estate development falls within the category of industry in which foreign investment is permitted. A foreign investor intending to engage in the development and sale of real estate may establish a joint venture or cooperative venture in accordance with the PRC Law on Sino-Foreign Joint Ventures or the PRC Law on Sino-Foreign Cooperative Ventures, respectively. Prior to its registration, the parties to the joint venture or cooperative venture must sign a joint venture/ cooperative venture agreement, contract and articles of association, which must be approved by the foreign economic and trade authorities, upon which an Approval Certificate for a Foreign-Invested Enterprise will be issued.
— 152 — On July 11, 2006, the Ministry of Construction, MOFCOM, NDRC, PBOC, SAIC and SAFE jointly promulgated the Opinions on Foreign Investment in Real Estate, which state that: (i) an overseas entity or individual investing in real estate in China other than for self-use, shall apply for the establishment of a Foreign Invested Real Estate Enterprise, or FIREE, in accordance with applicable PRC laws and shall only conduct operations within the authorized business scope after obtaining the relevant approvals from and registering with the relevant governmental authorities; (ii) the registered capital of a FIREE with a total investment of US$10 million or more shall not be less than 50% of its total investment amount, whereas for a FIREE with a total investment of less than US$10 million, the current rules on registered capital shall apply; (iii) a newly established FIREE can only obtain an approval certificate and business license which are valid for one year. The approval certificate and business license can be obtained by submitting the land use right certificate to the relevant government departments after the land grant premium for the land has been paid, and the tax registration is completed; (iv) an equity transfer of a FIREE or the transfer of its projects, as well as the acquisition of a domestic real estate enterprise by foreign investors, must first be approved by the commercial authorities. The investor shall submit a letter to the commercial authorities confirming that it will abide with the land grant contract, the construction land planning permit and the construction works planning permit. In addition, the investor shall also submit the land use right certificate, the registration of change of investor and evidence from the tax authorities confirming that tax relating to the transfer has been fully paid; (v) foreign investors acquiring a domestic real estate enterprise through an equity transfer, acquiring the Chinese investors’ equity interest in an equity joint venture or through any other methods shall pay the purchase price from its own capital in a lump sum rather than by installments and shall ensure that the enterprise’s employees and bank loans are treated and dealt with in accordance with applicable PRC laws; (vi) if the registered capital of a FIREE is not fully paid up, its land use right certificate has not been obtained or the paid-in capital is less than 35% of the total investment amount of the project, the FIREE is prohibited from borrowing from any domestic or foreign lenders and SAFE shall not approve the settlement of any foreign loans; (vii) the investors in a FIREE shall not in any manner stipulate a fixed return clause or equivalent clause in their joint venture contract or in any other documents; (viii) a branch or representative office established by a foreign investor in China (other than a FIREE), or a foreign individual working or studying in the PRC for more than one year, is permitted to purchase commodity residential properties located in the PRC only for the purpose of self-residence. Residents of Hong Kong, Macau and Taiwan and overseas Chinese may purchase commodity residential properties of a stipulated floor area based on their living requirements in the PRC for self-residence purposes.
On May 23, 2007, MOFCOM and SAFE jointly issued the Notice on Further Strengthening and Regulating the Approval and Supervision on Foreign Investment in Real Estate Sector in the PRC which made the following requirements for approval and supervision of foreign investment in real estate:
. foreign investment in the real estate sector in the PRC relating to high-grade properties will be strictly controlled;
. before obtaining approval for the setup of real estate entities with foreign investment, either (i) both the land use right certificates and housing ownership right certificates must be obtained or, (ii) contracts for obtaining land use rights or housing ownership rights must be entered into;
. entities which have been set up with foreign investment need to obtain approval before they expand their business operations into the real estate sector and entities which have been set up for real estate development operation need to obtain new approval if they expand their real estate business operations;
. acquisitions of real estate entities and foreign investment in the real estate sector by way of round trip investment will be strictly regulated. Foreign investors must not avoid approval procedures by changing actual controlling persons;
. parties to real estate entities with foreign investment should not in any way guarantee a fixed investment return;
. registration must be immediately effected according to applicable laws with MOFCOM regarding the setup of real estate entities, with foreign investment approved by local PRC governmental authorities;
— 153 — . foreign exchange administration authorities and banks authorized to conduct foreign exchange business should not effectuate foreign exchange settlements regarding capital account items to those that fail to file with MOFCOM or fail to pass the annual reviews; and
. for those real estate entities which are wrongfully approved by local authorities for their organization, (i) MOFCOM should carry out investigation, order punishment and rectification, and (ii) foreign exchange administrative authorities should not carry out foreign exchange registrations for such entities.
On July 10, 2007, SAFE issued the Notice Regarding the Publication of the First Group of Real Estate Enterprises with Foreign Investment That Have Properly Registered with MOFCOM. This new regulation restricts the ability of foreign invested real estate companies to raise funds offshore and then inject funds into the companies either through capital increase or by way of shareholder loans. The notice stipulates, among other things:
. that SAFE will no longer process foreign debt registration or application for purchase of foreign exchange for real estate enterprises with foreign investment that obtained authorization certificates from and registered with MOFCOM on or after June 1, 2007; and
. that SAFE will no longer process foreign exchange registration (or change of such registration) or applications for sale and purchase of foreign exchange for real estate enterprises with foreign investment that obtained approval certificates from local governments’ commerce department on or after June 1, 2007 but have not registered with MOFCOM.
August 19, 2015, the MOHURD, MOFCOM, NDRC and other departments jointly promulgated the Notice on Adjusting the Policies on the Market Access and Administration of Foreign Investment in the Real Estate Market (關於調整房地產市場外資准入和管理有關政策的通知). According to the notice, for the purpose of promoting the stable and sound development of the real estate market, it has been decided to adjust some policies on the purchase of housing units by foreign-funded real estate enterprises, and overseas institutions and individuals. The notice stipulates, among other things:
. the proportion of the registered capital of a foreign-funded real estate enterprise to its total investment shall be the same with common foreign-funded enterprise.
. the requirement that foreign-funded real estate enterprises must fully pay up their registered capital to apply for domestic loans, overseas loans, and settlement of foreign exchange loans is cancelled.
. branch offices or representative offices (except for enterprises approved to engage in the real estate business) which are formed within China by overseas institutions and overseas individuals who work or study in China may purchase commercial housing units for their own use according to their actual needs. For cities implementing house purchase quota policies, the purchase of housing units by overseas individuals shall comply with local policies.
. from the date of issuance of this Notice, foreign-funded real estate enterprises may, in accordance with the relevant provisions on foreign exchange administration, directly undergo the relevant foreign exchange registration under foreign direct investment with banks.
Qualifications of a Real Estate Developer
Under the Development Regulations, the real estate development authorities shall examine applications for registration of qualifications of a real estate developer when it reports its establishment, by considering its assets, professional personnel and business results. A real estate developer shall only undertake real estate development projects in compliance with the approved qualification registration.
In accordance with the Provisions on Administration of Qualifications of Real Estate Developers (‘‘Provisions on Administration of Qualifications’’) promulgated by the Ministry of Construction on March 29, 2000, a real estate developer shall apply for registration of its qualifications according to such Provisions. An enterprise may not engage in development and sale of real estate without a qualification classification certificate for real estate development. The construction authority under the
— 154 — State Council oversees the qualifications of real estate developers throughout the country, and the real estate development authority under a local government on or above the county level shall oversee the qualifications of local real estate developers.
In accordance with the Provisions on Administration of Qualifications, real estate developers are classified into four classes. The approval system is tiered, so that confirmation of class 1 qualifications shall be subject to preliminary examination by the construction authority under the people’s government of the relevant province, autonomous region or municipality directly under the central government and then final approval of the construction authority under the State Council. Procedures for approval of developers of class 2 or lower qualifications shall be formulated by the construction authority under the people’s government of the relevant province, autonomous region or municipality directly under the central government. A developer that passes the qualification examination will be issued a qualification certificate of the relevant class by the qualification examination authority.
After a newly established real estate developer reports its establishment to the real estate development authority, the latter shall issue a Provisional Qualification Certificate to the eligible developer within 30 days of its receipt of the above report. The valid period of the Provisional Qualification Certificate is one year, the real estate development authority can extend the period according to the developer’s specific operating circumstances. But the period of extension may not exceed two years. The real estate developer may apply for qualification classification by the real estate development authority within one month before expiry of the Provisional Qualification Certificate.
A developer of any qualification classification may only engage in the development and sale of real estate within its approved scope of business and may not engage in business which is limited to another classification. A class 1 real estate developer is not restricted as to the scale of real estate project to be developed and may undertake a real estate development project anywhere in the country. A real estate developer of class 2 or lower may undertake a project with a GFA of less than 250,000 sq.m. and the specific scope of business shall be as confirmed by the construction authority under the people’s government of the relevant province, autonomous region or municipality directly under the central government.
Development of a Real Estate Project
Under the Foreign Investment Industrial Guidance Catalogue promulgated jointly by MOFCOM and the NDRC in November 2004, the development and construction of ordinary residential units falls within the category of industries in which foreign investment is encouraged, whereas the development of a whole land lot and the construction and operation of high end hotels, villas, premium office buildings, international conference centers and large theme parks falls within the category of industries in which foreign investment is subject to restrictions, while other real estate development falls within the category of industry in which foreign investment is permitted.
According to the Interim Provisions on Approving Foreign Investment Project promulgated by the NDRC in October 2004, the NDRC shall examine and approve the foreign investment projects with total investment of US$100 million or more within the category of industries in which foreign investment is encouraged or permitted and those with total investment of US$50 million or more within the category of industries in which foreign investment is subject to restrictions as classified in the ‘‘Foreign Investment Industrial Guidance Catalogue,’’ while the local development and reform authorities shall examine and approve the foreign investment projects with a total investment of less than US$100 million within the category of industries in which foreign investment is encouraged or permitted and those with a total investment of less than US$50 million within the category of industries in which foreign investment is subject to restrictions as classified in the ‘‘Foreign Investment Industrial Guidance Catalogue.’’
The Development Regulations provide that a real estate development project may be carried out having regard to the overall land use plan, annual construction land schedule, applicable municipal zoning plan and the annual property development scheme. Those projects which should be approved by the planning control authorities in accordance with the relevant rules should also be reported and approved by the planning control authorities and be brought into the annual planning of the investment in fixed assets. Under the State Council’s Notice on Stringent Control Over High Class Real Estate Development Projects issued in May 1995, for a high class real estate project with a GFA of more than 100,000 sq.m. or total investment of more than RMB200 million or foreign investment of US$30 million or more, the project proposal and commencement of works shall be subject to approval of the State
— 155 — Development Planning Commission. For a high class real estate project with a GFA of more than 20,000 sq.m. but less than 100,000 sq.m. or total investment of more than RMB30 million but less than RMB200 million, the project proposal and commencement of works shall be subject to approval of the Development Planning Commission of the relevant province, autonomous region, municipality directly under the central government or separate-planning city and then a report to the State Development Planning Commission. A high class real estate project with foreign investment of more than US$100 million is subject to approval of the State Council based on the recommendation of the State Development Planning Commission.
Under the Interim Regulations on Grant and Transfer, a system of grant and transfer of the right to use State-owned land is adopted. A land user shall pay a grant price to the State as consideration for the grant of the right to use a land site within a certain term, and the land user may transfer, lease out, mortgage or otherwise commercially exploit the land use right within the term of use. Under the Interim Regulations on Grant and Transfer and the Urban Real Estate Law, the land administration authority under the local government of the relevant city or county shall enter into a grant contract with the land user to provide for the grant of land use right. The land user shall pay the grant price as provided by the grant contract. After payment in full of the grant price, the land user shall register with the land administration authority and obtain a Land Use Right Certificate which evidences the acquisition of land use rights.
The Urban Real Estate Law and the Development Regulations provide that, except for land use rights which may be obtained through allocation pursuant to PRC laws or the stipulations of the State Council, land use rights for a site intended for real estate development shall be obtained through grant. Please refer to ‘‘— Land for Property Development’’ for further details.
Under the Regulations on the Grant of State-owned Land-Use Rights Through Competitive Bidding, Public Auction and Public Announcements effective from July 1, 2002, and the Urban Real Estate Management Law implemented on January 1, 1995 and amended on August 30, 2007, state- owned land use rights for the purposes of commercial use, tourism, entertainment and commodity residential property development in the PRC may be granted by the government only through public tender, auction and listing-for-sale.
When carrying out the feasibility study for a construction project, a construction entity shall make a preliminary application for construction on the relevant site to the land administration authority of the same level as the project approval authority, in accordance with the Measures for Administration of Examination and Approval for Construction Sites and the Measures for Administration of Preliminary Examination of Construction Project Sites promulgated by the MLR in March 1999 and in July 2001 (amended in October 2004) respectively. After receiving the preliminary application, the land administration authority shall carry out preliminary approval of various matters relating to the construction project in compliance with the overall zoning plans and land supply policy of the State, and shall then issue a preliminary approval report in respect of the project site. The preliminary approval report is the requisite document of the approval of the construction project. The land administration authority under the people’s government of the relevant city or county shall sign a land use right grant contract with the land user and issue an Approval for Construction Site to the construction entity.
The Development Regulations also provide that a real estate developer shall record any major events which occur in the course of construction in the Real Estate Development Project Manual and periodically submit the same to the real estate development authority for its records.
Under the Measures for Control and Administration of Grant and Transfer of Right to Use Urban State-owned Land promulgated by the Ministry of Construction in December 1992, the assignee to a grant contract, i.e. a real estate developer, shall legally apply for a Planning Permit for Land Use and Construction from the municipal planning authority with the grant contract, which permits use planning for the land to be developed by the real estate developer.
After obtaining a Planning Permit for Land Use and Construction, a real estate developer shall organize the necessary survey, planning and design work having regard to planning and design requirements. For the planning and design proposal in respect of a real estate development project, the relevant report and approval procedures required by the PRC Law on Municipal Planning promulgated by the Standing Committee of the NPC in December 1989, and local statutes on municipal planning must be followed and a Planning Permit for Construction Projects must be obtained from the municipal planning authority.
— 156 — On July 6, 2006, the Ministry of Construction promulgated ‘‘Several Opinions Regarding the Implementation of Requirements on the Structure Portion of Newly Built Housing’’ (the ‘‘Opinion’’) prescribing that the ratio of the dwelling space of an apartment development (including economic housing) of which the built up area is no more than 90 sq.m. per apartment must exceed 70% of the total dwelling space of that apartment development. The Opinion applies to all the newly approved and developed commercial residential housings from June 1, 2006.
For projects for which approval was obtained before June 1, 2006 but which did not obtain the Permit for Erection of Construction Projects, the planning and designing proposals must be rectified in accordance with the requirements and the proposals must be submitted to the relevant authorities for a renewed examination and approval.
Demolition and Removal
In accordance with the Regulations for the Administration of Demolition and Removal of Urban Housing, which were promulgated by the State Council on June 13, 2001, upon obtaining approvals for a construction project, construction plan and State-owned land use rights, a real estate development organization may apply to the municipal, or county people’s government of the place where the real estate is located (i.e. the administration bureau of State-owned land resources and housing of the relevant city, district on county) for a permit for housing demolition and removal. Upon granting an approval and issuing a demolition and removal permit, the real estate administration department shall issue a demolition and removal notice to the inhabitants of the area to be demolished. The demolition and removal party shall implement the demolition and removal within the area and period specified in the housing demolition and removal permit. If the demolition and removal party fails to complete the demolition and removal works within the permitted period, it shall, within 15 days prior to the expiry of the permit, apply to the original approval department in charge of demolition and removal for an extension.
During the demolition and removal period announced by the department in charge of demolition and removal, the demolition and removal party and the parties subject to demolition and removal shall enter into an agreement for compensation and resettlement in respect of the demolition and removal. If the demolition and removal party, the parties subject to demolition and removal and the housing lessee cannot reach an agreement, any party concerned may apply to the original approval department in charge of demolition and removal for a ruling. Such ruling shall be rendered within 30 days of the application.
If any party disagrees with the ruling, it may initiate proceedings in the People’s Court within 3 months after the service of the ruling. Pursuant to law, if the demolition and removal party has provided housing to the party subject to demolition and removal or the party subject to demolition and removal has provided housing to a lessee, the demolition and removal shall not be stopped during the period of legal proceedings.
Pursuant to Regulations for the Administration of Demolition and Removal of Urban Housing, compensation for housing demolition and removal may be effected by way of monetary compensation or exchange of property rights. If the monetary compensation method is used, the amount of compensation shall be assessed on the basis of the real property market price determined by the location, uses and the gross area of the housing to be demolished. The demolition and removal party shall entrust a qualified real estate assessment agency to conduct an assessment on the housing to be demolished. If property right exchange is used, the demolition and removal party and the party subject to demolition and removal shall, on the basis of the real property market price and the location, uses and the gross area of the housing to be demolished, calculate the amount of compensation which shall be made for the housing to be demolished, the real property market price of the housing to be exchanged for the housing to be demolished, and work out thedifferencebetweenthetwo.
In addition to paying the demolition and removal compensation, the demolition and removal party shall pay removal allowance to the party subject to demolition and removal. During the interim period, when the party subject to demolition and removal arranges accommodation by himself, the demolition and removal party shall pay temporary allocation allowance. On the other hand, when the demolition and removal party provides accommodation to the party subject to demolition and removal during the interim period, the demolition and removal party need not to pay the temporary allocation allowance.
— 157 — Construction
After a real estate developer has carried out the above work, the site is ready for the commencement of construction works, the progress of demolition and relocation of existing buildings complies with construction needs and funds for the construction have been made available, the developer shall apply for a Permit for Erection of Construction Projects from the construction authority under the local people’s government above the county level according to the Measures for Administration of Granting Permission for Commencement of Construction Works promulgated by the Ministry of Construction in October 1999 (amended in July 2001).
Under the Property Development and Municipal Facilities Construction Tender Management Regulations (the ‘‘Tender Regulations’’) promulgated in June 2001 which states that a Tender Appraisal Committee should be set up for the appraisal of the tender for construction works for the project. According to the Tender Regulations, the Tender Appraisal Committee to be organized by our Group shall include our representatives and relevant specialists selected by our Group from a list certified by the construction administration authorities. The number of members of the Tender Appraisal Committee shall be an odd number and shall consist of at least five members. The relevant specialists shall make up no less than two-thirds of the membership. In accordance with the Tender Regulations, if the estimated price of a single construction contract amounts to at least RMB2 million or the total investment of the project is at least RMB30 million, the developer is required to undertake a bidding process for the award of the construction contracts. Our Group will set the tender conditions according to the written tender report provided by the Tender Appraisal Committee, and after the tender, our Group (through a subsidiary) and the successful tenderer shall sign a written contract according to the terms of the tender. The quality and timeliness of the construction are usually warranted in these contracts. Typically, these construction contracts provide for progress payments to be made by our Group to the construction companies at agreed stages of completion of the constructions works.
Pursuant to the Development regulations and the Interim Measures for the Administration of the Registration of the Inspection and Acceptance of the Completed Building Construction Works and the Municipal Infrastructure Facilities promulgated by the Ministry of Construction in April 2000 and the Interim Provisions on Acceptance Examination Upon Completion of Buildings and Municipal Infrastructure, after the completion of the real estate development project, the real estate developer should apply for the project completion inspection and acceptance to the county level or higher local real estate administration authorities. A real estate development project may only be delivered to the buyer after passing the necessary acceptance examination, and may not be delivered before the necessary acceptance examination is conducted or without passing such an acceptance examination. For a housing estate or other building complex project, an acceptance examination shall be conducted upon completion of the whole project and where such a project is developed in phases, an acceptance examination may be carried out for each completed phase. The real estate developer should register the project completion inspection and acceptance within 15 days from the pass of the inspection and acceptance. The project should not be delivered to use without passing or fail to pass the project completion inspection and acceptance. Projects like residential house quarters should pass the completion inspection and acceptance. Projects developed by stages can also be inspected and accepted by stages.
Pursuant to the Development Regulations and the Circular of the State Council on Adjusting the Capital Ratios of Fixed Asset Investment Projects in Some Industries promulgated by the State Council in April 2004, the capital ratio of the real estate development projects has been increased from 20% to 35%. Pursuant to the Notice of the State Council on Adjusting the Proportion of Capital in Fixed Asset Investment Projects promulgated by the State Council on May 25, 2009, the minimum proportion of capital in a project of government-subsidized housing and ordinary commodity housing shall be 20%, while the minimum proportion of capital in any other real estate development project shall be 30%.
The real estate development should be in accordance with the provisions of the land use grant contract on the usage of the land and commencement date of the project. When a project is not commenced within 1 year since the date of commencement stipulated in the land use grant contract, additional fees may be imposed on the developer with an amount of not more 20% of the land grant price. If the delay is more than 2 years, the land use right may be appropriated by the government without any refund.
— 158 — On September 21, 2010, the Ministry of Land Resources and the MOHURD jointly issued the Notice on Further Strengthening the Regulating and Controlling of Land Use and Construction of Real Estate. Pursuant to the Notice, the plot ratio of a residence must be greater than 1.0. If the land is left unused for one year or more due to the decision of the real estate development enterprise, such enterprise and its controlling shareholder are forbidden to participate in land bidding. Construction of residential properties must commence within one year from the delivery of the land and completed within three years from the commencement date.
Land for Property Development
According to the PRC Law of Land Administration as amended in August 2004 by the Standing Committee of the NPC, and the Regulations for the Implementation of the Law of Land Administration promulgated by the State Council in December 1998, the state regulates and controls the usage of land, the land register and record system and the land certificate issuing system. When there are approved construction projects that involve the use of state-owned construction land, the construction entity should first apply to those county level or higher land administration authorities who have the authorization for the construction land use approval and hand in the documents that prescribed in law and regulations. After the examination of the land administration authorities, the application must be reported to and approved by the same level government. Whereas occupation of land for construction purposes involves the conversion of agricultural land into land for construction purposes, the examination and approval procedures in this regard shall be required.
The provisions of the PRC Law on Administration of Urban Real Estate provide that, except for land use rights which may be obtained through appropriation pursuant to PRC laws or the stipulations of the State Council, land for property development shall be obtained by grant.
The Law on the Administration of Real Estate expressly provides: ‘‘Grant of land use right may be by public auction or competitive bidding or by a mutual agreement between both parties. Land for commercial use, tourism, entertainment and construction of luxury flats shall be sold by public auction wherever it is feasible, and may be sold by mutual agreement if sale by public auction or competitive bidding is not feasible.’’ And it regulated that the pre-sale proceeds could only be used for the construction of the relevant project. On April 30, 2001, the State Council promulgated a Notice on Strengthening the Administration of State-owned Land (the ‘‘Notice’’), which stipulates that State-owned land use rights shall as far as possible be sold by public auction or competitive bidding. The Notice further stipulates as follows: ‘‘The supply of state-owned land shall be made known to the public unless state security or confidentiality requirements are involved. If, after a supply schedule of land for commercial development and other uses is announced, there are two or more prospective investors who intend to develop the same land parcel, the relevant land parcel shall be made available to the market by the government at the municipal or county levels through competitive bidding or public auction. The competitive bidding and public auction of State-owned land use rights shall be conducted openly.’’
The State Bureau of Land Resources of the PRC promulgated the Regulations on the Grant of State-owned Land Use Rights through Competitive Bidding, Public Auction and Public Announcements on May 9, 2002 and the Regulations on the Grant of State-owned Construction Land Use Rights through Competitive Bidding, Public Auction and Public Announcements on September 28, 2007 (collectively, ‘‘The New Regulations’’). The New Regulations stipulate the legal basis, principles, scope, procedures and legal liability arising from and in connection with the grant of State-owned land use rights by tender and auction. Pursuant to the New Regulations, land for commercial use, tourism, entertainment and commodity housing development shall be granted by competitive bidding, public auction or listing-for- sale and, in the event that a land parcel for uses other than commerce, tourism, entertainment and commodity housing development has two or more prospective purchasers after the promulgation of the relevant land supply schedule, the grant of the land parcel shall be performed by competitive bidding, public auction or listing-for-sale. Under these regulations, the grantor shall prepare the auction and tender documents and shall make an announcement 20 days prior to the day of auction or tender to announce the basic particulars of the land parcel and the time and venue of the auction or tender. The grantor shall conduct a qualification verification of the tender applicants and auction applicants, accept an open public bidding to determine the winning tender; or hold an auction to ascertain a winning bidder. The grantor and the winner of the auction or tender shall then enter into a confirmation, and the grantor and the winner of the auction or tender shall then enter into a contract for the grant of state- owned land use rights.
— 159 — On November 7, 2006, the Ministry of Finance, the MLR and the PBOC jointly promulgated the Circular on Adjusting the Policies of Land Use Fee of the Increased Construction Land stipulating that the land use fee on newly approved construction land will double beginning on January 1, 2007.
On December 12, 2006, the MLR and the NDRC issued the ‘‘Land Use Project Prohibition Catalog (Version 2006)’’ and the ‘‘Land Use Project Restriction Catalog (Version 2006).’’ On November 10, 2009, the ‘‘Land Use Project Prohibition Catalog (2006 Enlarged Version)’’ (the ‘‘Prohibition Catalog’’) and the ‘‘Land Use Project Restriction Catalog (2006 Enlarged Version)’’ (the ‘‘Restriction Catalog’’) were issued. The land and resources administrative authorities and investment administrative authorities at all levels shall not approve any procedures relating to construction projects listed in the first ten sections of the Restriction Catalog. Villa real estate development projects are listed in the Prohibition Catalog. For commodity housing projects, the area of the granted land shall not exceed the following standards: seven hectares for a small-sized town, 14 hectares for a medium-sized town and 20 hectares for a large-sized town.
On April 1, 2017, the MLR and MOHURD jointly issued the Circular on Tightening the Management and Control over Intermediate Residential Properties and Land Supply (關於加強近期住房 及用地供應管理和調控有關工作的通知), pursuant to which, all the local authorities shall build a land purchase money inspection system to ensure that the real estate developers use their own legal funds to purchase land. If any source of funding does not meet the requirements as a result of review by the department of land and resources and the relevant financial department, the real estate developer shall be disqualified from land bidding and be prohibited from participating in land bidding, auction and listing for a period of time.
Sale of Commodity Buildings
Under the Measures for Administration of Sale of Commodity Buildings promulgated by the Ministry of Construction in April 2001, sale of commodity buildings can include both post-completion and pre-completion sales. Commodity buildings may be put to post-completion sale only when the preconditions for such sale have been satisfied. Before the post-completion sale of a commodity building, a real estate developer shall submit the Real Estate Development Project Manual and other documents evidencing the satisfaction of preconditions for post-completion sale to the real estate development authority for its record.
Any pre-completion sale of commodity buildings shall be conducted in accordance with the Measures for Administration of Pre-completion Sale of Commodity Buildings (the ‘‘Pre-completion Sale Measures’’)promulgatedbytheMinistryofConstructioninNovember1999andasamendedinAugust 2001 and in July 2004, and the Development Regulations. The Pre-completion Sale Measures provide that pre-completion sale of commodity buildings is subject to certain procedures. According to the Development Regulations and the Pre-completion Sale Measures, a permit shall be obtained before a commodity building may be put to pre-completion sale. A developer intending to sell a commodity building before its completion shall make the necessary pre-completion sale registration with the real estate development authority of the relevant city or county to obtain a Permit for Pre-completion Sale of Commodity Buildings. A commodity building may only be sold before completion provided that: 1) the assignment price has been paid in full for the assignment of the land use rights involved and a land use right certificate has been obtained; 2) a Planning Permit for Construction Projects and a Permit for Erection of Construction Projects have been obtained; 3) the funds invested in the development of the commodity buildings put to pre-completion sale represent 25% or more of the total investment in the project and the progress of works and the completion and delivery dates have been ascertained. Pre- completion sale of commodity buildings can only be carried out after the Permit for Pre-completion Sale of Commodity Buildings has been obtained.
Pre-sale regulations have been issued in Shanghai and some other cities. Pursuant to the Regulations on the Transfer of Real Estate of Shanghai (上海市房地產轉讓辦法) announced on April 30, 1997 and amended on September 20, 2000, April 21, 2004, June 24, 2004 and December 20, 2010, the pre-sale of commodity houses in Shanghai is subject to the above-mentioned pre-sale regulations as well as the following principal requirements:
. the construction work for commodity houses must have been completed up to the stipulated standard;
. the construction plan of the ancillary facilities must have been confirmed;
— 160 — . a pre-sale fund escrow agreement with a local authorized real estate funding supervisory body must have been executed; and
. the covenant of use of the commodity houses must have been formulated and an initial property management service agreement must have been entered into with a real estate management company.
With regards to Shanghai property, according to the Approval Concerning the Adjustment of the Standard of Project Construction Schedule for Pre-sale of Commodity Houses implemented by the Shanghai Municipal Government on October 1, 2000, the rules concerning the stipulated standard referred to in the first bullet of the preceding paragraph are supplemented as follows:
. for commodity houses consisting of seven stories or less, the basic foundation work and the main structural construction of the building must have been completed; and
. for commodity houses consisting of eight stories or more, the basic foundation must have been completed and at least two-thirds of the main structural construction must have been completed, and at least seven stories must have been completed in any event.
Pursuant to the Decisions Concerning the Transfer of Pre-sale Commodity Apartment Units issued by the People’s Government of Shanghai, with effect from April 26, 2004, the real estate registration department in Shanghai no longer accepts the registration of the transfer of a pre-sold apartment unit before the Real Estate Ownership Certificate has been obtained for such unit.
On October 27, 2010, Shanghai Housing Security and Real Estate Administrative Bureau issued the Notice on Adjusting the Standard of Pre-sale of Commodity Houses, which specifies that commercial residential property projects that obtained the Permit for Erection of Construction Projects after July 1, 2010 can only pre-sell upon the capping of the main structure and passing an inspection.
With regards to pre-sale of property in Nanjing, according to the Administration Regulations on the Trading of Real Estate of Nanjing, which came into effect on September 4, 2003, a property developer shall apply for the pre-sale permits/sale permits from the real estate administration bureaus at the city or county level of Nanjing, and shall comply with the following conditions: (i) the land premium has been fully paid and the land use right certificate has been obtained; (ii) the construction works planning permit has been obtained; (iii) the amount of funds allocated to the development of the projects is no less than 25% of the total amount of the project investment; (iv) the progress and the expected completion date of the construction work have been determined; (v) a pre-sale fund escrow agreement has been signed with banks registered in the same city; (vi) a covenant of the use of the properties has been formulated; and (vii) an initial property management services contract has been signed with a property management company. For completed property, the completion acceptance document shall be obtained before the property can be sold. For property units to be sold in the overseas market, an approval for the overseas sale is also required in addition to the conditions set out above.
In Shanghai, pursuant to the Certain Opinion Concerning the Merger of the Commodity Housing For Sale in Domestic and Overseas Markets issued jointly by Shanghai Development Planning Committee, Shanghai Construction and Management Committee, Shanghai Foreign Investment Committee, Shanghai Financial Bureau, Shanghai City Planning Management Bureau and Shanghai Real Estate and Land Resources Management Bureau on June 25, 2001, the markets for domestic sale and overseas sale of commodity housing were merged, and domestic and overseas enterprises, organizations and individuals may purchase and/or lease commodity houses irrespective of whether the respective land use rights have been obtained before or after such merger.
In Sichuan Province, under the ‘‘Provincial Measures for the Administration of Pre-sale of Commodity Housing of Sichuan Province’’ promulgated by the Sichuan Provincial Government in March 2000, any pre-sale of commodity properties in Sichuan Province must satisfy the following conditions:
. thelandpremiumhasbeenpaidinfullforthegrantoftherelevantlanduseright(exceptfor the supply of land by administrative allocation according to national regulations), and a land use right certificate has been obtained;
. a Permit for Construction Works Planning has been obtained;
— 161 — . in the case of a commodity property with not more than six stories, the structural construction and the topping-out must have been completed. In the case of a non-residential property with not more than six stories and a commodity property with seven stories or more, (i) the foundation and ground floor structural construction must have been completed if the building has underground facilities and (ii) the foundation and structural construction for the first six floors must have been completed if the building does not have underground facilities; and
. the construction progress and timetable and the completion date have been confirmed.
In Guangdong Province, under the Regulations of Guangdong Province on the Administration of Pre-sales of Commodity Housing promulgated by Standing Committee of Guangdong Provincial People’s Committee in July 1998 and amended on October 14, 2000, July 23, 2010 and September 25, 2014, any pre-sale of commodity properties in Guangdong Province must satisfy the following conditions:
. the enterprise has obtained the Qualification Certificate of the Property Development Enterprise and the Business License;
. the land premium has been fully paid and the land use right certificate has been obtained;
. a Permit for Construction Works Planning and a Permit for Construction Works Constructing have been obtained, and the supervising procedures of the quality and safety of the construction works have been conducted;
. the progress and the expected completion date of the construction work have been determined;
. in the case of a commodity property with not more than three stories, the foundation and structural construction must have been completed. In the case of a commodity property with four stories or more, (i) the foundation and ground floor structural construction must have been completed if the building has underground facilities and (ii) the foundation and structural construction for the first four floors must have been completed if the building does not have underground facilities;
. a pre-sale fund account has been opened in banks located at the place of the project;
. no encumbrances imposed on the pre-sale properties and the land thereof; and
. other conditions required by the laws and regulations.
According to the ‘‘Circular on Further Rectifying and Standardizing of the Real Estate Transaction Order’’ dated July 6, 2006, real estate development enterprises shall initiate the sale of commodity housing within 10 days from the date obtaining the License for Advance Sale.
Under the Pre-completion Sale Measures and Urban Real Estate Law, the pre-sale proceeds of commodity buildings may only be used to fund the property development costs of the relevant projects. The proceeds of pre-sale are also regulated in some of the cities in which we construct developments, including the provisions mentioned above for Shanghai and Nanjing, as well as:
. Guiyang: The Interim Provision on Supervision and Control of Use of Pre-Payment of Commodity Houses, effective as of August 1, 2002, and amended on January 21, 2014, prescribes that the pre-payment of commodity houses shall be used only for the construction of the relevant project. The development enterprises together with relevant real estate administrative authorities shall go through the formalities of supervision of the use of pre- payment with the bank where the company’s account is kept.
. Sichuan Province (including Chengdu): The Implementation Opinions Regarding the Strengthening of the Administration of Pre-Sale of Urban Commodity Houses, effective as of March 23, 2000, issued by Sichuan Provincial Construction Commission states that the proceeds from pre-payment of commodity houses shall be deposited in the particular bank account which has been filed with relevant construction administrative authorities of the real estate development enterprises.
— 162 — . Tianjin: The Measures on Supervision of Pre-payment of Newly Constructed Commodity Houses, effective on August 1, 2016, prescribes that prior to applying for the Pre-sale Permit of the Commodity Houses, the enterprise shall choose a bank to open a pre-payment supervision account. Meanwhile, a supervision agreement shall be signed among the Real Estate Trading Capital Supervising Center, the bank and the enterprise.
. Guangdong: the Regulations of Guangdong Province on the Administration of Pre-sales of Commodity Housing promulgated by Standing Committee of Guangdong Provincial People’s Committee in July 1998 and amended on October 14, 2000, July 23, 2010 and September 25, 2014, states that the pre-payment of commodity houses shall be used only for purchasing the necessary construction materials or equipment or paying for the construction of the relevant project as well as the tax.
Transfer of Real Estate
AccordingtotheUrbanRealEstateLawandtheProvisions on Administration of Transfer of Urban Real Estate promulgated by the Ministry of Construction in August 1995, as amended in August 2001, a real estate owner may sell, bequeath or otherwise legally transfer real estate to another person or legal entity. When transferring a building, the ownership of the building and the land use rights to the site on which the building is situated are transferred. The parties to a transfer shall enter into a real estate transfer contract in writing and register the transfer with the real estate administration authority having jurisdiction over the location of the real estate within 90 days of the execution of the transfer contract.
Where the land use rights were originally obtained by grant, the real property may only be transferred on the condition that: (1) the grant price has been paid in full for the grant of the land use rights as provided by the grant contract and a land use right certificate has been obtained; (2) development has been carried out according to the grant contract; and in the case of a project in which buildings are being developed, development representing more than 25% of the total investment has been completed, or in case of a whole land lot development project, construction works has been carried out as planned, water supply, sewerage, electricity supply, heat supply, access roads, telecommunications and other infrastructure or utilities have been made available, and the site has been leveled and made ready for industrial or other construction purposes.
If the land use rights were originally obtained by grant, the term of the land use rights after transfer of the real estate shall be the remaining portion of the original term provided by the land use right grant contract after deducting the time that has been used by the former land users. In the event that the transferee intends to change the usage of the land provided in the original grant contract, consent shall first be obtained from the original assignor and the planning administration authority under the local government of the relevant city or county and an agreement to amend the land use right grant contract or a new land use right grant contract shall be signed in order to, inter alia, adjust the land use right grant price accordingly.
If the land use rights were originally obtained by allocation, transfer of the real property shall be subject to the approval of the government vested with the necessary approval power as required by the State Council. After the People’s Government vested with the necessary approval power approves such a transfer, the transferee shall complete the formalities for transfer of the land use rights, unless the relevant statutes require no transfer formalities, and pay the transfer price according to the relevant statutes.
Warranty and Maintenance of Buildings
Under the PRC Construction Law promulgated by the Standing Committee of the NPC on November 1, 1997, the Measures on Administration of Sale of Commodity Buildings promulgated by the Ministry of Construction in April 2001, the Rules on the Implementation of the System on Residence Quality Guarantee and Residence Usage Specification promulgated by the Ministry of Construction on May 20, 1998, and the Regulations on Quality Management of Construction Projects promulgated by the State Council on January 30, 2000, when a real property developer delivers newly built residential houses, it should provide the Residence Usage Specification and Residence Quality Guarantee. The Residence Quality Guarantee is the legal document stipulating the warranty and maintenance obligations a real property developer should bear for the already sold residential houses and it can be a supplementary agreement to the Commodity House Purchase Contract.
— 163 — AccordingtoMeasuresontheWarrantyandMaintenance of Building Construction Projects promulgated by the Ministry of Construction on June 30, 2000 and other laws, regulations, under the natural usage, the warranty and maintenance period to different parts of the construction projects should not be shorter than the following:
. the reasonable using period as stipulated by the project designing documents for the groundwork foundation and main body structure project;
. 5 years for the waterproof project of the surface, the toilet and rooms having waterproof requirements, the leakage preventing of the outside metope;
. 2 heating periods/cooling periods for the heating and cooling system;
. 2 years for the electrical system, water supply pipe and drainpipe, equipment fixing; and
. 2 years for the fitment project.
The warranty and maintenance period of other parts may be determined by real estate developers at their discretion.
Leases of Buildings
Under the Urban Real Estate Law and the Measures for Administration of Leases of Buildings in Urban Areas promulgated by the Ministry of Construction in April 1995, the parties to a lease of a building shall enter into a lease contract in writing. A system has been adopted to register the leases of buildings. When a lease contract is signed, amended or terminated, the parties shall register the details with the real estate administration authority under the local government of the city or county in which the building is situated.
Restrictions on the Grant of Residential Development Loans and Individual Property Purchase Loans by Banks
According to the Notice of the PBOC on Regulating Home Financing Business promulgated in June 2001, all banks must comply with the following requirements before granting residential development loans, individual home mortgage loans and individual commercial flat loans:
. Housing development loans from banks shall only be granted to real estate development enterprises with adequate development assets and higher credit ratings. Such loans shall be offered to residential projects with good market potential. While the borrowing enterprise must have an amount of capital no less than 30% of the total investment required of the project, the project itself must have been issued with a Land Use Permit for State-Owned Land, Planning Permit for Land Use and Construction, Planning Permit for Construction Projects and Permit for Erection of Construction Projects.
. In respect of the grant of individual home mortgage loans, the ratio between the loan amount and actual value of the security (the ‘‘Mortgage Ratio’’) shall never exceed 80%. Where an individual applies for a home purchase loan to buy a pre-sale property, the said property must have achieved the stage of ‘‘topping-out of the main structure completed’’ for multi-story buildings and ‘‘two-thirds of the total investment completed’’ for high-rise buildings.
. In respect of the grant of individual commercial flat loans, the Mortgage Ratio under the application for commercial flat loans shall not exceed 60% with a maximum loan period of 10 years and the subject commercial flat already completed.
The PBOC issued the Circular on Further Strengthening the Management of Loans for Property Business in June 2003 to specify the requirements for banks to provide loans for the purposes of residential development, individual home mortgage and individual commodity houses as follows:
. Property development loans should be granted to property developers who are qualified for property development, rank high in credibility and have no overdue payment for construction. For property developers with commodity houses of high vacancy rate and debt ratio, strict approval procedures shall be applied for their new property development loans and their activities shall also be in the focus of attention.
— 164 — . Commercial banks shall not grant loans to property developers to pay off land premium.
. Commercial banks may only provide housing loans to individual buyers when the main structural buildings have been topped out. When a borrower applies for individual home loans for his first residential unit, the first installment remains to be 20%. In respect of his loan application for additional purchase of residential unit(s), the percentage of the first installment shall be increased.
. When a borrower applies for mortgaged loan of individual commodity house, the mortgage shall not be more than 60%. In addition, the term of loan may not be more than 10 years and the commodity house shall be duly completed and accepted after inspection.
In the Circular on Facilitating the Continuously Healthy Development of Property Market issued by the State Council in August 2003, a series of measures are contained for the government to control the property market. They include, but not limiting to, strengthening the construction and management of economical houses, increasing the supply of ordinary commodity houses and controlling the construction of premium commodity houses. Besides, the government also staged a series of measures for the loan of housing development. They include, but not limiting to, putting more effort at provision of loans, improving the guarantee mechanism of individual home loans and strengthening the monitor over property loans. It is expected that the circular will have positive effect on the development of the PRC property market in the long run by facilitating the continuously healthy growth of property market.
Pursuant to the Guidance on Risk Management of Property Loans Granted by Commercial Banks issued by CBRC in September 2004, commercial banks may not be provided any loan in any form for a project without the State-Owned Land Use Right Certificate, Construction Land Use Planning Permit, Construction Works Planning Permit and Construction Works Commencement Permit. Any property developer applying for property development loans shall have at least 35% of capital required for the development, a commercial bank should maintain a strict loan system for considering applications for property development loans.
Under the Notice of the PBOC on Adjusting the Housing Credit Policies of Commercial Banks and Deposit Interest Rate of the Excess Part of the Reserve issued by the PBOC on March 16, 2005 and effective from March 17, 2005, the minimum amount of down-payment for an individual residence shall be increased from 20% to 30% of the purchase price for properties in cities where the property market is considered to be overheating.
On May 24, 2006, the Ministry of Construction, NDRC, the Ministry of Supervision, the Ministry of Finance, the MLR, PBOC, the State Bureau of Statistics, the State Administration of Taxation and the CBRC jointly issued the Opinions on Adjusting Housing Supply Structure and Stabilization of Housing Prices. These opinions stipulate that a commercial bank shall not lend funds to property developers with an internal capital ratio of less than 35%, or grant revolving credit facilities to property developers holding a large amount of idle land and vacant commodity properties, or take commodity properties which have been vacant for more than three years as security for mortgage loans. The opinions also require that, from June 1, 2006, the minimum amount of down- payment shall not be less than 30% of the purchase price of the underlying individual commodity houses with a GFA of 90 sq.m. or more.
In accordance with the Circular on Further Strengthening the Credit Management of Real Estate issued by the CBRC dated July 22, 2006, banking institutions are forbidden to grant loans to (a) real estate development enterprises without the following certificates: State-owned Land Use Right Certificate, Permit for the Planning of Land for Construction, Permit for the Planning of Construction Projects and Permit for Erection of Construction Projects; (b) projects in which the project capital portion, which is the ratio of the project’s paid-up capital to its total investment, is less than 35% (excluding economic housing); or (c) real estate development enterprises failing to meet other requirements of the loan as set by the banking institution.
In accordance with the Circular on Strengthening Commercial Real Estate Loan Administration jointly issued by the PBOC and CBRC on September 27, 2007, when a borrower applies for individual home loans for his first owner-occupied housing property with a GFA of more than 90 sq.m., the down- payment may not be less than 30%; with respect to his loan application for additional purchases of housing properties, the down-payment may not be less than 40%, the loan interest cannot be lower than 1.1 times the benchmark lending rate published by the PBOC in the same period, and the amount of the down-payment and interest of the loan should be increased based on the number of the purchased
— 165 — apartments. The level of increase should be decided by commercial banks according to loan risk management principals. The down-payment of commercial flat loans should not be less than 50% with a maximum loan period of 10 years, and the loan interest should be no less than 1.1 times of the benchmark lending rate published by the PBOC at the same period and level. The level of down- payment, period of loan and interest level should be decided by commercial banks according to loan risk management principals. With respect to loan applications for integrated commercial and residential projects, the down-payment should be no less than 45% and the loan period and interest should be decided according to the commercial flat loan management rules. Furthermore, commercial banks should not advance loans to property development enterprises which hold coemption of land or building resources as confirmed by the land and resources authorities and construction authorities.
According to the Circular on Widening the Floating Downward Range of Interest Rate for Commercial Individual Housing Loan, starting from October 27, 2008, the minimum rate for commodity housing loans for individuals was widened to 70% of the corresponding benchmark lending rate and the minimum amount of down-payment was adjusted to 20% of the purchase price. Financial institutions may give favorable terms on interest payment and down-payment proportion for loan applications for first owner-occupied ordinary residential units or for the improvement of owner-occupied ordinary residential units. The financial institutions shall appropriately increase the requirements for loan application for non-owner-occupied, non-ordinary residential units. However, details for the aforementioned supporting measures and enhanced requirements have not been clearly stipulated. The requirement that the monthly repayment amount for housing loans shall not exceed 50% of the borrower’s monthly income remains unchanged.
Pursuant to the notice promulgated by the General Office of the State Council on January 7, 2010, financial institutions shall strictly manage loans to purchasers of additional housing properties. If a family already has a mortgage loan outstanding for its housing property, the down-payment requirement for any mortgage loan to purchase additional housing properties shall be no less than 40% of the purchase price.
According to the measures issued by the General Office of the State Council on April 14, 2010, the down-payment requirement for mortgage loans to purchase additional housing properties shall be further increased to no less than 50% of the purchase price and the applicable mortgage rates shall be at least 1.1 times the relevant benchmark lending rate published by the PBOC. The down-payment for first owner-occupied housing properties with a GFA of more than 90 sq.m. shall be at least 30% of the purchase price.
Pursuant to the Notice on Strictly Controlling the Escalation of Property Prices in Selected Cities promulgated by the State Council on April 17, 2010, in those areas where property prices have escalated and property supply is tight, commercial banks may, depending on the level of risk, refuse to grant mortgage loans to those purchasing their third or subsequent properties or to those non-local residents who cannot provide documentation showing payment of local tax or social security for one year or more.
On September 29, 2010, the PBOC and the CBRC issued a notice which suspended the grant of housing loans to (i) local residents who applied in order to purchase their third or more residential property; (ii) non-local resident applicants who could not provide proof of payment of local taxes for one year or payment of the social insurance premium. A first owner-occupied residential property requires a down-payment of at least 30% of the purchase price; the down-payment for second home mortgages must not be less than 50% of the purchase price and the loan interest rate cannot be lower than 1.1 times the corresponding benchmark lending rate.
Pursuant to the notice issued by the General Office of the State Council on January 26, 2011, the down-payment for a second home mortgage has been further increased so that it can be no less than 60% of the purchase price.
On February 26, 2013, the General Office of the State Council issued the Notice on Continuing Adjustment and Control of Property Markets (the ‘‘2013 National Regulating Provisions’’) which, among other restrictive measures, provides that further restraining measures are to be adopted to strengthen the regulation of the real estate market. Major cities which have implemented the commodity housing purchase restrictions are required to enforce purchase restrictions in all administrative areas of cities and purchase restriction housing shall include new commodity housing and second-hand housing. Non-local residents who have one or more residential property or could not provide one-year or longer tax
— 166 — payment certificates or social insurance payment certificates will be barred from purchasing any residential properties located in the administrative areas. For cities where housing prices rise excessively, local branches of the PBOC may further raise the down-payment rate and mortgage interest rate for purchase of a second residential property. In addition, the Notice stipulates that the state will strictly enforce the collection of the income tax at the rate of 20% on the profits gained from sales of housing. Pursuant to the 2013 National Regulating Provisions, Shanghai, Nanjing and Shenzhen municipal governments promulgated specific measures at the end of 2013, which raised the down- payment rate for purchase of second residential properties to 70%. Shanghai municipal government further provided that non-Shanghai residents who are unable to provide at least two-year tax payment certificates or social insurance payment certificates are not allowed to purchase residential properties in Shanghai.
On March 30, 2015, the PBOC, MOHURD and CBRC jointly issued the Notice on Issues concerning Individual Housing Loan Policies (關於個人住房貸款政策有關問題的通知), pursuant to which, for a resident’s family that owns one housing unit and has not paid off the corresponding housing loan, if the family applies again for a commercial individual housing loan to purchase an ordinary housing unit for its own living to improve its current living conditions, the minimum down payment ratio shall not be lower than 40%, and the specific down payment ratio and lending rate shall be rationally determined by the banking financial institution according to the borrower’s credit standing and repayment capability, among others.
On February 1, 2016, the PBOC and CBRC jointly issued the Notice on Issues concerning Adjusting the Individual Housing Loan Policies (關於調整個人住房貸款政策有關問題的通知), pursuant to which, in cities where ‘‘housing purchase restriction’’ measures are not implemented, the minimum down payment ratio for commercial individual housing loans granted to households of residents for purchasing ordinary housing units for the first time shall generally be 25%, and may be lowered by five percentage points by local governments; and where a household which owns one housing unit but has not paid off the relevant housing loan applies again for a commercial individual housing loan to purchase an ordinary housing unit to improve living conditions, the minimum down payment ratio shall not be less than 30%.
Since September 2016, many cities municipal governments promulgated new specific measures, which have provided more strict limitation for purchasing commodity properties. For example, Shenzhen and Shanghai have increased the time limitation with regard to tax payment certificates or social insurance payment certificates for non local residents to five years.
On April 7, 2017, the CBRC issued the Guiding Opinions of the China Banking Regulatory Commission on Risk Prevention and Control for the Banking Sector (關於銀行業風險防控工作的指導 意見), pursuant to which, the banks are required to insist on category-based regulation and implement city-based policy, and prevent risks in the real estate field. The banks are also required to sternly crack down on ‘‘loans for down payment’’ and others, to practically restrain the real estate bubble in hotspot cities.
Real Estate Management
Pursuant to the Regulations on Property Management promulgated by the State Council in June 2003, as amended in August 2007 and February 2016, and the Qualification Management Method of Property Management Enterprise promulgated by the Ministry of Construction in March 2004, as amended on November 26, 2007 and May 4, 2015, a real estate management enterprise shall apply for assessment of qualifications by the qualification approval authority. An enterprise which passes such a qualification assessment will be issued a Qualification Certificate evidencing the qualification classification by the authority. No enterprise may engage in real estate management without undertaking a qualification assessment conducted by the authority and then obtaining a Qualification Certificate.
On December 15, 2017, the General Office of the MOHURD promulgated the Notice on Doing Well in Relevant Works concerning Cancelling Qualification Assessment of Property Service Enterprise (關於做好取消物業服務企業資質核定相關工作的通知), pursuant to which, the qualification assessment application, as well as the qualification modification, change, or reissuing application will not be accepted. The original approved property service enterprise qualification shall not be as the condition for undertaking property management business of such property service enterprise.
— 167 — On March 8, 2018, the Qualification Management Method of Property Management Enterprise has been abolished.
Insurance
There is no mandatory provision in the PRC laws, regulations and government rules which require a property developer to take out insurance policies for its real estate developments.
Major Taxes Applicable to Real Estate Developers
Business Tax
Pursuant to the PRC Interim Regulations on Business Tax promulgated by the State Council in December 1993 and last amended on November 5, 2008, the tax rate of the transfer of immovable properties, their superstructures and attachments is 5%.
According to the Several Opinions on Promoting the Healthy Development of Real Estate Market promulgated by the General Office of the State Council on December 20, 2008, the term for which businesstaxonanordinaryresidencepurchasedbyan individual is exempted shall be no less than two years. If an ordinary residence purchased by individual is transferred within two years from the date of its purchase, the basis for collection of business tax shall be the difference between the income from the transfer and the original purchase price of the residence. The term for which business tax on a non- ordinary residence purchased by an individual is collected shall be no less than two years and is based on the difference between the income from the transfer and the original price for purchasing the residence. If a non-ordinary residence purchased by an individual is transferred within two years from the date of its purchase, business tax shall still be collected according to the full amount of the income from the transfer. Such policy shall be implemented until December 31, 2009.
According to the Notice on Adjusting the Business Tax Policy on Housing Transfer of Individuals, jointly promulgated by the Ministry of Finance and the State Administration of Taxation on December 22, 2009, with effect from January 1, 2010, if a non-ordinary residence purchased by an individual is sold within five years from the date of its purchase, business tax shall be collected according to the full amount of the income from the sale. The term for which business tax on a non-ordinary residence purchased by an individual is collected shall be no less than five years and is based on the difference between the income from the sale and the original price for purchasing the residence. If an ordinary residence purchased by an individual is sold within five years from the date of its purchase, the basis for collection of business tax shall be the difference between the income from the sale and the original purchase price for purchasing the residence. If an ordinary residence purchased by an individual is sold more than five years from the date of its purchase, the business tax shall be exempted.
Pursuant to the Notice on Adjusting the Business Tax Policy on Housing Transfer of Individuals, jointly promulgated by the Ministry of Finance and the State Administration of Taxation on January 27, 2011, with effect from January 28, 2011, if a residence purchased by an individual is sold within five years from the date of its purchase, a business tax shall be collected according to the full amount of the income from the sale. The term for which the business tax on a non-ordinary residence purchased by an individual is collected shall be no less than five years and is based on the difference between the income from the sale and the original price for purchasing the residence. If an ordinary residence purchased by an individual is sold more than five years from the date of its purchase, the sale will be exempt from the business tax.
According to the Implementation Rules of the Pilot for Conversion to Value-added Tax from Business Tax, which was jointly promulgated by the Ministry of Finance and the State Administration of Taxation on March 24, 2016, business tax in connection with the real estate industry was converted to value-added tax, effective on May 1, 2016.
Land Appreciation Tax
Pursuant to the PRC Provisional Regulations on Land Appreciation Tax (the ‘‘Provisional Regulations’’) promulgated by the State Council on December 13, 1993 and effected on January 1, 1994, and the PRC Detailed Implementation Rules on the Provisional Regulations of the PRC on Land Appreciation Tax (the ‘‘Detailed Implementation Rules’’) which was promulgated and effected on January 27, 1995, any appreciation amount gained from taxpayer’s transfer of property shall be subject
— 168 — to LAT. LAT is calculated based on a 4-band excess progressive tax rate: for the portion with appreciation not exceeding 50% of the deductible amount, the applicable tax rate is 30%; the applicable tax rate for the portion with appreciation exceeding 50% but not exceeding 100% of the deductible amount is 40%; the applicable tax rate for the portion exceeding 100%, but not exceeding 200% of the deductible amount is 50%; the applicable tax rate for the portion exceeding 200% of the deductible amount is 60%. The related deductible items aforesaid include the following:
. amount paid for obtaining the land use right;
. costs and expenses for development of land;
. costs and expenses of new buildings and ancillary facilities, or evaluated prices of old buildings and constructions;
. related tax payable for transfer of property; and
. for real estate developers, an additional 20% of the first two deductible items described above.
According to the requirements of the Provisional Regulations, the Detailed Implementation Rules and the Notice issued by the Ministry of Finance in respect of the Levy and Exemption of Land Appreciation Tax for Development and Transfer Contracts signed before January 1, 1994, which was announced by the Ministry of Finance on January 27, 1995, LAT is exempted under any one of the following circumstances:
. taxpayers constructing ordinary standard residences for sale (i.e. the residences built in accordance with the local standard for general civilian used residential properties. Deluxe apartments, villas, resorts, etc. are not under the category of ordinary standard residences), where the appreciation amount does not exceed 20% of the sum of deductible items;
. real estate taken over and repossessed according to laws due to the construction requirements of the State;
. due to redeployment of work or improvement of living standard, individuals transfer originally self-used residential property, of which they have been living there for 5 years or more, and after obtaining tax authorities’ approval;
. for real estate assignments which were signed before January 1, 1994, whenever the properties are transferred, the LAT shall be exempted; and
. either when the real estate assignments were signed before January 1, 1994 or when the project proposal has been approved and that capital was injected for development in accordance with the conditions agreed, the LAT shall be exempted if the properties are transferred within 5 years after January 1, 1994 for the first time. The date of signing the assignment shall be the date of signing the Sale and Purchase Agreement. Particular real estate projects which are approved by the Government for the development of the whole piece of land and long-term development, of which the properties are transferred for the first time after the 5-year tax-free period, after auditing being conducted by the local financial and tax authorities, and approved by Ministry of Finance and State Taxation Bureau, the tax-free period would then be appropriately prolonged.
On December 24, 1999, the Ministry of Finance and the State Taxation Bureau issued the Notice in respect of the Extension of the Period for the Land Appreciation Tax Exemption Policy that extended the period for the LAT exemption policy as mentioned in paragraph above to the end of 2000.
After the enactment of the Provisional Regulations and the Detailed Implementation Rules, due to the longer period for the real estate development and transfer, many districts, while they were implementing the regulations and rules, did not force the real estate development enterprises to declare and pay the LAT. Therefore, in order to assist the local tax authorities in the collection of LAT, the Ministry of Finance, State Taxation Bureau, Ministry of Construction and State Land Administration Bureau had separately and jointly issued several notices to restate the following: After the assignments are signed, the taxpayers should declare the tax to the local tax authorities where the real estates are located, and pay the LAT in accordance with the amount as calculated by the tax authority and the time
— 169 — as required. For those who fail to acquire proof as regards the tax paid or the tax exemption from the tax authorities, the real estate administration authority shall not process the relevant title change procedures, and shall not issue the real estate title certificate.
The State Taxation Bureau also issued the Notice issued by the State Taxation Bureau in respect of the Serious Handling of Administration Work in relation to the Collection of Land Appreciation Tax on July 10, 2002 to request local tax authorities to modify the management system of LAT collection and operation details, to build up sound taxpaying declaration system for LAT, to modify the methods of pre-levying for the pre-sale of real estates. That notice also pointed out that either for the real estate assignments which were signed before January 1, 1994 or where the project proposal has been approved and capital was injected for development, the privilege policy for LAT exemption for the properties that are transferred within 5 years after January 1, 1994 for the first time is expired, and such tax shall be levied again.
According to the Circular on Several Issues of the Levy and Administration of Land Appreciation Tax promulgated jointly by the State Administration of Taxation and the State Land Administration Bureau on February 1996 and the Circular on Issues related to the Administration and Levy of the Land Appreciation Tax promulgated by the State Administration of Taxation and the Ministry of Construction in April 1996, the taxation authorities all over the country should establish a whole system of the levy and administration of the LAT in accordance with the related regulations and the above two circulars.
On March 2, 2006, the Ministry of Finance and State Administration of Taxation issued the Notice on Several Points on Land Appreciation Tax to clarify the relevant issues regarding LAT as follows.
(a) Tax collection and exemption in the sale of ordinary standard residential housing as built by taxpayers as well as in the transfer of ordinary residential houses by individual residents:
. The notice sets out the standards for ordinary standard residential houses. Where any developers build ordinary residential houses as well as other commercial houses, the appreciation amount of land must be verified. Before the day when this notice is publicized, as to any application for tax exemption for ordinary standard residential houses that has been filed to the tax authority at the locality of the property, especially any ordinary standard residential houses which have been given the treatment of exemption from LAT upon examination according to the standards for ordinary standard residential houses as determined by the people’s government of a province, autonomous region or municipality directly under the Central Government, no adjustment shall be retroactively made.
(b) Advance collection and settlement of LAT:
. All regions must decide the advance collection rate in a scientific and reasonable manner, and adjust it at a proper time according to the value addition level of the property as well as the market development level within the region and on the basis of the specific housing categories, namely, ordinary standard residential houses, non- ordinary standard residential houses and commercial houses. After a project is completed, the relevant settlement shall be handled in a timely manner, with any overpayment refunded or any underpayment being made up;
. As to any tax that fails to be collected in advance within the advance collection term, the overdue fines will be collected as of the day following the expiration of the prescribed advance collection term according to the relevant provisions of the Tax Collection and Administration Law and implementation rules;
. As to any property project that has been completed and has gone through the acceptance procedure, where the floor area of the property as transferred makes up 85% or more of the saleable floor area, the tax authority may require the relevant taxpayer to conduct the settlement of LAT on the transferred property according to the matching principles regarding the proportion between the income as generated from the transfer of property and the amount under the item of deduction. The specific method of settlement will be prescribed by the local tax authority of a province, autonomous region or municipality directly under the Central Government, or a city under separate state planning; and
— 170 — . As to the tax collection and exemption for investment or association by means of the property: As to any investment or association by using land (property) as payment for the purchase of shares, where an enterprise involved in the investment or association engages in the property development or where any other property development enterprise makes investment or conducts association with the commercial houses it itself builds, such enterprise will not be governed by the regulation of the interim exemption of LAT when the property (land) is transferred to the enterprise by means of investment or association.
On October 20, 2006, the Ministry of Finance and the State Administration of Taxation issued the Circular on Relevant Policies of Land Appreciation Tax on Ordinary Standard Residences. The circular prescribes that the Ordinary Standard Residences that may enjoy the preferential policy must satisfy all the following conditions: (1) the plot ratio of the residential quarter exceeds 1.0; (2) the GFA per unit is no greater than 120 sq.m.; (3) the actual transaction price of the housing does not exceed 120% of the average transaction price of the housing on the same class of land; (4) these requirements (except the plot ratio requirement) can be adjusted according to regional conditions, but not by more than 20%.
The State Administration of Taxation promulgated the Circular Concerning the Settlement of the LAT Imposed on Real Property Developers (the ‘‘Circular’’) on December 28, 2006. Pursuant to the Circular, effective from February 1, 2007, a real property developer shall settle and clear the LAT payment of its development projects that meet certain criteria with the tax authorities in accordance with the applicable LAT tax rates. The LAT shall be settled for projects approved by the competent authorities. For projects developed in different stages, the LAT shall be settled in stages. LAT must be paid if the projects meet any of the following requirements: (1) the property development projects are completed and sold out; (2) the property developer transfers the whole unfinished development project; or (3) the land use right is transferred. In addition, the competent tax departments may require the developer to settle the LAT if either of the following criteria meet: (1) for the completed property development projects, the transferred GFA represents more than 85% of the total saleable GFA, or the proportion represented is less than 85%, but the remaining saleable GFA has been leased out or used by the developer; (2) the project has not been sold out for more than three years after obtaining the sale or pre-sale permits; (3) the developer applies for cancellation of the tax registration without having settled the LAT; or (4) other conditions stipulated by the competent tax departments. The tax bureaus at the provincial level shall, taking account of the local practical conditions, stipulate specific rules or measures on the management of the LAT settlement in accordance with the Circular.
Where a real estate enterprise is under any of the following circumstances, the tax authority may, by consulting the tax burdens of the local enterprises similar to it in terms of development scale and income level, collect LAT against it by verification on the basis of the levying rate that is not lower than the advance levying rate: (1) it shall set up accounting books in accordance with the provisions of laws and administrative regulations but fails to do so; (2) it destroys the accounting books without authorization or refuses to provide the data of tax payments; (3) it has established accounting books, but the accounting items are confusing, or its cost information, revenue vouchers and expense vouchers are mutilated and incomplete and it is difficult to determine the transfer income or amount under the deductible items; (4) it satisfies the settlement conditions of LAT, but it fails to go through the settlement formalities within the prescribed time limit, and it is ordered by the tax authority to conduct settlement within a certain time limit but still fails to do so upon the expiration of the time limit; (5) the taxable basis declared is obviously on the low side and it has no legitimate reason to do so.
In accordance with the Notice Regarding Forwarding the Circular by the Local Tax Bureau of Sichuan Province promulgated on February 27, 2007, where a real estate enterprise is under any of the circumstances listed in the above paragraph, the local tax authorities shall collect LAT against it by verification on the basis of the levying rate within the range of 1.5% to 2.5%.
On May 25, 2010, the State Administration of Taxation issued a circular which adjusts the prepaid LAT rate. With the exception of indemnificatory housing, the prepaid rate shall be no less than 2.0% for eastern provinces, 1.5% for central and northeast provinces and 1.0% for western provinces. In regions where the LAT has not been pre-collected, the pre-payment of LAT will be required.
— 171 — Deed Tax
Pursuant to the PRC Interim Regulations on Deed Tax promulgated by the State Council in July 1997, the transferee, whether an individual or otherwise, of the title to a land site or building in the PRC shall be the obliged taxpayer for deed tax. The rate of deed tax is 3% to 5%. The governments of provinces, autonomous regions and municipalities directly under the central government may, within the foresaid range, determine and report their effective tax rates to the Ministry of Finance and State Administration of Taxation for the record.
Pursuant to the Notice on Adjusting the Tax Policy of the Property Transaction jointly promulgated by the Ministry of Finance and the State Taxation Bureau on October 22, 2008, since November 1, 2008, the deed tax rate for the purchase of ordinary commodity housing where the GFA is 90 sq.m. and below for the first time is 1%.
In accordance with the Notice on Deed Tax Policy of Purchasing Ordinary Houses for the First Time jointly promulgated by the Ministry of Finance and the State Taxation Bureau on March 9, 2010, if two or more persons jointly purchase the ordinary houses whose GFA is 90 sq.m. or below, and one or more person has purchased the house before, the co-purchaser shall not enjoy the favorable deed tax rate as the purchase for the first time.
The Ministry of Finance, the State Administration of Taxation and the MOHURD jointly issued the Notice on Adjustment of Preferential Treatment on Deed Tax and Individual Income Tax of the Property Transaction on September 29, 2010. Pursuant to the notice, where the purchaser intends to purchase ordinary residential property and such residential property is the only residence of the family (including the purchaser, his/her spouse and minor children), the purchaser will be entitled to a reduction of 50% of the deed tax. Where a purchaser purchases ordinary residential property where the GFA is 90 sq.m. and below and such residential property is the only residence of the family, the deed tax rate shall be 1%.
On February 17, 2016, the MOF, SAT and MOHURD jointly issued the Notice on Adjusting the Preferential Policies on Deed Tax and Business Tax during Real Estate Transactions (關於調整房地產交 易環節契稅營業稅優惠政策的通知), pursuant to which, (i) where any housing unit with an area of 90 square meters or less is purchased by an individual as the only home of the family, the deed tax thereon shall be levied at the reduced tax rate of 1%; or where the area of the housing unit is more than 90 square meters, the deed tax thereon shall be levied at the reduced tax rate of 1.5%. (ii) where an individual purchases his or her second housing unit with an area of 90 square meters or less for improving the current living conditions of his or her family, the deed tax shall be levied at the reduced tax rate of 1%; or where the area of the housing unit is more than 90 square meters, the deed tax thereon shall be levied at the reduced tax rate of 2%. However, the preferential policies on deed tax in Item (ii) of the deed tax shall not be implemented temporarily in Beijing, Shanghai, Guangzhou, and Shenzhen.
Land Use Tax
Pursuant to the PRC Interim Regulations on Land Use Tax in respect of Urban Land promulgated by the State Council in September 1988 and amended on December 31, 2006, the land use tax in respect of urban land is levied according to the area of relevant land.
The annual tax per square meter of urban land is between RMB0.2 and RMB10 and is collected according to the tax rate determined by the local tax authority. According to the Notice on Land Use Tax Exemption of Foreign-Invested Enterprises and Institutions of Foreign Enterprises in China promulgated by the Ministry of Finance on November 2, 1988, and the Approval on Land Use Tax Exemption of Foreign-Invested Enterprises issued by State Administration of Taxation on March 27, 1997, land use fees should be collected, instead of land use tax, in a foreign-invested enterprise. However, the Provisional Regulations of the PRC Governing Land Use Tax in Urban Areas were revised by the State Council on December 31, 2006. As of January 1, 2007, annual land use tax is collected from foreign-invested enterprises at a rate per square meter of between RMB0.6 and RMB30.0 for urban land.
— 172 — Buildings Tax
Under the PRC Interim Regulations on Buildings Tax promulgated by the State Council in September 1986, buildings tax shall be 1.2% if it is calculated on the basis of the residual value of a building, and 12% if it is calculated on the basis of the rental. According to a relevant circular issued by the State Taxation Bureau on July 15, 2003, buildings tax will not be collected from real estate development enterprises before the sale of commodity properties. However, buildings tax will be collected if the commodity properties have been used or leased before sale.
Properties owned by individuals for non-business use is exempted from the buildings tax.
Pursuant to notices issued by the Shanghai Municipal People’s Government and Chongqing Municipal People’s Government respectively, a pilot program to collect buildings tax on properties owned by individuals has been put into place in Shanghai and Chongqing.
Stamp Duty
Under the PRC Interim Regulations on Stamp Duty promulgated by the State Council in August 1988, for building property transfer instruments, including those in respect of property ownership transfer, the duty rate shall be 0.05% of the amount stated therein; for permits and certificates relating to rights, including real estate title certificates and land use right certificates, stamp duty shall be levied on an item basis at an annual rate of RMB5 per item.
Municipal Maintenance Tax
Under the PRC Interim Regulations on Municipal Maintenance Tax promulgated by the State Council in February 1985, any taxpayer, whether an individual or otherwise, of product tax, value-added tax or business tax shall be required to pay municipal maintenance tax. The tax rate shall be 7% for a taxpayer whose domicile is in an urban area, 5% for a taxpayer whose domicile is in a county and a town, and 1% for a taxpayer whose domicile is not in any urban area or county or town.
Under the Circular Concerning Temporary Exemption from Municipal Maintenance Tax and Education Surcharge for Foreign-invested Enterprises and Foreign Enterprises, and the Approval on Exemption of Municipal Maintenance Tax and Education Surcharge in Foreign-Invested Freightage Enterprises issued by State Administration of Taxation on February 25, 1994 and on September 14, 2005 respectively, the municipal maintenance tax is not be applicable to foreign-invested enterprises with foreign investment until further explicit stipulations are issued by the State Council.
Education Surcharge
Under the Interim Provisions on Imposition of Education Surcharge promulgated by the State Council in April 1986 (lastly revised by the State Council in August 2005), any taxpayer, whether an individual or otherwise, of product tax, value-added tax or business tax shall pay an education surcharge, unless such obliged taxpayer is instead required to pay a rural area education surcharge as provided by the Notice of the State Council on Raising Funds for Schools in Rural Areas. Education surcharge shall be calculated and levied at a rate of 1% on the actual amount of product tax, value- added tax and business tax paid by the taxpayer.
Under the Supplementary Notice Concerning Imposition of Education Surcharge issued by the State Council on October 12, 1994, the Circular Concerning Temporary Exemption from Municipal Maintenance Tax and Education Surcharge for Foreign-invested Enterprises and Foreign Enterprises and the Approval on Exemption of Municipal Maintenance Tax and Education Surcharge in Foreign-Invested Freightage Enterprises issued by State Administration of Taxation on February 25, 1994 and on September 14, 2005 respectively, the education surcharge is not applicable to enterprises with foreign investment until further explicit stipulations are issued by the State Council.
Enterprise Income Tax
Pursuant to the PRC Interim Regulations on the Enterprise Income Tax promulgated by the State Council in December 1993, state-owned enterprises, collective-owned enterprises, private enterprises, coordinated enterprises, share-issuing enterprises and other organizations within the territory of China which have production and management income or other income, were subject to the enterprise income tax. The enterprise income tax rate was 33%.
— 173 — Pursuant to PRC Income Tax Law on Foreign-investment Enterprise and Foreign Enterprise promulgated by the NPC in April 1991, production, management income and other income of foreign- investment enterprises and foreign enterprises within the territory of China were subject to income tax. For foreign investment enterprises and foreign enterprises with a place of business within the territory of China, the income tax rate generally was 30% and the local income tax rate generally was 3%.
According to the EIT Law enacted by the NPC on March 16, 2007 that became effective on January 1, 2008, a uniform income tax rate of 25% applies to foreign investment and foreign enterprises which have set up institutions or facilities in the PRC, as well as PRC enterprises. The EIT Law adopts some transitional preferential measures for enterprises established before the promulgation of the EIT Law which enjoy low tax rates or regular tax reduction and exemption treatment under current tax laws and administrative regulations. According to these transitional measures, enterprises which were entitled to enjoy preferential income tax treatment under the former tax laws may, pursuant to the regulations of the State Council, continue to enjoy a gradually increasing transitional income tax rate within five years after the EIT Law became effective. These enterprises may continue to enjoy the remaining incentives in accordance with the requirements and period specified by the former income tax laws. However, for enterprises that have not made any profits and thus not enjoyed such preferential treatment, the period for enjoying preferential income tax treatment is calculated from the year in which the EIT Law becomes effective.
According to the Notice on the Implementation of Preferential Transitional Enterprise Income Tax Policy promulgated by the State Council on December 26, 2007 which came into effect on January 1, 2008, the transitional income tax rate for enterprises which originally enjoyed the enterprise income tax rate of 15% is 18% in 2008, 20% in 2009, 22% in 2010, 24% in 2011 and 25% in 2012; the income tax rate for enterprises which originally enjoyed the enterprise income tax rate of 24% has been fixed at 25% starting from 2008.
According to the applicable EIT Law, income such as dividends and profit distribution from the PRC derived from a foreign enterprise which has no establishment in the PRC is subject to a 10% withholding tax, subject to reduction as provided by any applicable double taxation treaty, unless the relevant income is specifically exempted from tax under the applicable EIT Law. Pursuant to a tax treaty between the PRC and the Republic of Singapore which became effective on January 1, 2008, a company incorporated in Singapore will be subject to a withholding tax at the rate of no more than 5% of the gross amount of the dividends it receives from a company incorporated in the PRC if it holds directly a 25% or more interest in the PRC company, or no more than 10% of the gross amount of the dividends if it holds less than a 25% direct interest in the PRC company. However, under applicable PRC tax regulations, an approval from the local tax authority is required in order to benefit from the reduced treaty rate and such lower rate may be denied if the recipient company is a ‘‘conduit’’ or a company with no business substance.
Under the EIT Law and its implementation rules, enterprises established outside the PRC whose ‘‘de facto management bodies’’ are located in China are considered ‘‘resident enterprises’’ for PRC tax purposes and are subject to PRC enterprise income tax at a rate of 25% on their worldwide income.
Major Environmental Protection Requirements
In accordance with the PRC Environmental Protection Law adopted by the Standing Committee of the NPC on December 26, 1989, and amended on April 24, 2014, the Administration Supervisory Department of Environmental Protection of the State Council sets the national guidelines for the discharge of pollutants. The provincial and municipal governments of provinces, autonomous regions and municipalities may also set their own guidelines for the discharge of pollutants within their own provinces or districts in the event that the national guidelines are inadequate.
A company or enterprise which causes environmental pollution and discharges other polluting materials which endanger the public should implement environmental protection methods and procedures into their business operations. This may be achieved by setting up a system of accountability within the company’s business structure for environmental protection; adopting effective procedures to prevent environmental hazards such as waste gases, water and residues, dust powder, radioactive materials and noise arising from production, construction and other activities from polluting and endangering the environment. The environmental protection system and procedures should be implemented simultaneously with the commencement of and during the operation of construction, production and other activities undertaken by the company. Any company or enterprise which discharges environmental
— 174 — pollutants should report and register such discharge with the Administration Supervisory Department of Environmental Protection and pay any fines imposed for the discharge. A fee may also be imposed on the company for the cost of any work required to restore the environment to its original state. Companies which have cause severe pollution to the environment are required to restore the environment or remedy the effects of the pollution within a prescribed time limit.
If a company fails to report and/or register the environmental pollution caused by it, it will receive a warning or be penalized. Companies which fail to restore the environment or remedy the effects of the pollution within the prescribed time will be penalized or have their business licenses terminated. Companies or enterprises which have polluted and endangered the environment must bear the responsibility for remedying the danger and effects of the pollution, as well as to compensate the any losses or damages suffered as a result of such environmental pollution.
AccordingtotheRegulationontheAdministration of Construction Project Environmental Protection promulgated by the State Council on November 29, 1998 and amended on July 16, 2017, as well as the Law of the PRC on Environmental Impact Assessment promulgated by the Standing Committee of the NPC on October 28, 2002 and amended on July 2, 2016 and December 29, 2018, classified management over the assessment of the environmental impacts of construction projects has been implemented according to the seriousness of such impacts. The relevant construction entities shall work out the report of environmental impacts, the report form of environmental impacts or the registration form of environmental impacts (hereafter the ‘‘environmental impact appraisal documents’’) according to the levels of environmental impact on each construction project. Where the environmental impact assessment document of a construction project fails to undergo the examination of the relevant approval authority in accordance with the applicable laws or is disapproved after such examination, the relevant construction entity shall not commence construction of such construction project.
And in accordance with Regulation on the Administration of Construction Project Environmental Protection, a project owner shall, after the completion of the construction project for which the environmental impact report or environmental impact statement is prepared, conduct acceptance check of the constructed supporting environmental protection facilities and prepare the acceptance check report. Except for those that shall be kept confidential in accordance with the state provisions, a project owner shall release to the public the acceptance check report in accordance with the applicable laws. The construction project for which the environmental impact report or environmental impact statement is prepared may not be put into production or use until the constructed supporting environmental protection facilities have passed the acceptance check. The facilities that have not undergone or fail to pass the acceptance check shall not be put into production or use. In addition, after the construction project prescribed aforesaid is put into production or use, the environmental impact post-assessment shall be conducted.
Measures on Stabilizing Housing Prices
On March 26, 2005, the General Office of the State Council promulgated the Notice on Effectively Stabilizing House Prices to restrain the excessive increase of house prices and promote the sound development of the real estate market. The notice provided that housing prices should be stabilized and the system governing housing supply should be vigorously adjusted and improved. In accordance with the notice, seven departments of the State Council including Ministry of Construction issued an Opinion on the Work of Stabilizing Housing Prices on April 30, 2005. The opinion stated, amongst the others, that: (1) the local government should focus on ensuring the supply of low to medium-end ordinary residential houses while controlling the construction of premium residential houses; (2) to curb any speculation in the real estate market, business taxes would be levied from June 1, 2005 on the total revenue arising from any transfer by individuals of houses within two years upon their purchase thereof or on the difference between the transfer price and the original price for any transfer of non-ordinary houses by individuals after two or more years upon their purchase thereof; and (3) the real estate registration department will no longer register the transfer of apartment units which are pre-sold, where such units have not obtained the relevant real estate ownership certificates.
On May 24, 2006, the General Office of the State Council further issued the Notice on Adjusting the Housing Structure and Stabilizing Housing Prices. The notice provided for the following broad directives, amongst the others, that (1) encourage mass market residential developments and curb the development of premium residential properties; (2) enforce the collection of business taxes on property sales (business taxes will be levied on the entire sale price of any property sold within five years, or on
— 175 — the profit arising from any property sold after five years subject to possible exemptions for ordinary residential properties); (3) restrict housing mortgage loan to not more than 70% of the total property price (for houses purchased for self-residential purposes and with an area of less than 90 sq.m., the owners are still able to apply for housing mortgage up to an amount representing 80% of the total property price); (4) halt land supply for villas projects and restrict land supply for premium, low density residential projects; (5) moderate the progress and scale of demolition of old properties for redevelopment; (6) local governments are also required to ensure that at least 70% of the total development and construction area must consist of units of less than 90 sq.m. in size (with any exceptions requiring the approval of the Ministry of Construction); and (7) prohibit banks from providing loans to a property developer whose total capital fund is less than 35% of the total investment amount in an intended development project.
On June 13, 2006, the General Office of the State Council issued a Notice on Further Regulating and Controlling Investment in Fixed Assets and Strictly Controlling the Number of New Projects The notice provided for: (1) clearing and rectifying all new projects; (2) strictly examining all planning projects, strengthening supervision and examination on implementing industry policy, development plan, market access requirements and construction procedures across the country; and (3) strictly controlling loans provided for infrastructure.
On July 13, 2006, the General Office of the State Council issued the Notice about Relevant Matters on Establishing State Land Supervision System. In accordance with this notice, the Ministry of Land and Natural Resources will establish the State Land Supervision General Office and send its local counterparts State Land Supervision Bureau in order to strengthen supervision and management on land and practice the strictest possible land management system.
On August 31, 2006, the State Council issued the Notice about Relevant Matters on Strengthening Control on Land in order to hold back the problems of excessive increase in the aggregate amount of construction land, the excessive expansion of low cost industrial land, the illegal use of land and abusive occupation of cultivated land. The notice implemented the following major measures: (1) adjusting land approval measures for urban construction in accordance with the principle of sharing both rights and responsibilities; (2) only after guaranteeing the social security fee for the land expropriated from farmers can the approval of land expropriation be granted; (3) the total amount of money from the sale of state- owned land use rights shall be fully accounted for in the local budget and collected into the local government treasury, and the ‘‘line of income and expenditure’’ shall be administrated separately; (4) raising the standard for land use right fee of newly added construction land as well as urban land use tax and rural cultivated land use tax; (5) the State formulating and promulgating the unified minimum standard for granting industrial land across the country, and industrial land being granted by tender, auction or putting up for bidding; and (6) prohibiting conversion of agricultural land into construction land ‘‘in the name of leasing while actually expropriating’’ or other illegal ways.
On November 7, 2006, the Ministry of Finance, the Ministry of Land and Natural Resources and the PBOC issued the Notice about Relevant Matters on Policy Adjusting Concerning Land Use Fee for Newly Created Construction Land. The notice required the doubling of land use fee on newly created construction land from January 1, 2007.
On December 20, 2008, the General Office of the State Council further issued the Certain Opinions on Promoting the Healthy Development of the Real Estate Market (the ‘‘Opinions’’). The Opinions provided for the following broad directives, including that (1) if a resident who has purchased through a loan an ordinary residence for self-use where the average per capita living space is lower than the local average applies for a loan to purchase the a second residence for improving living conditions, such loan may be handled with reference to the preferential policy for purchasing an ordinary residence for self-use through a loan for the first time; (2) where a resident purchases the second residence or above through a loan, the loan interest rate shall be determined reasonably based on the benchmark rate by the relevant commercial bank in consideration of the risks; (3) the term of reduction/exemption of business tax in the process of transfer of a residence shall be one year and the term for which business taxonanordinaryresidencepurchasedbyanindividual is exempted shall be no less than two years; if an ordinary residence purchased by individual is transferred within two years from the date of its purchase, the basis for collection of business tax shall be the difference between the income from the transfer and the original purchase price of the residence; (4) the term for which business tax on a non- ordinary residence purchased by an individual is collected shall be not less than two years and is based on the difference between the income from the transfer and the original price for purchasing the
— 176 — residence; if a non-ordinary residence purchased by an individual is transferred within two years from the date of purchase, business tax shall still be collected according to the full amount of the income from the transfer; (5) the urban real estate tax is cancelled according to legal procedures and the Interim Regulations of the People’s Republic of China on Real Estate Tax shall be applicable to both domestic and foreign investment enterprises and individuals.
On January 7, 2010, the General Office of the State Council promulgated the Notice on Promoting the Stable and Healthy Development of Real Estate Market, among which (1) financial institutions shall strictly manage the loans for second residential properties while continuing to support loans for first owner-occupied ordinary residential properties. If the family (including the loan applicant, his/her spouse and minor children) obtained its second residential properties again through mortgage loans, the down-payment proportion shall be no less than 40% of the purchase price and the interest rate shall be determined strictly in accordance with the risks; and (2) the minimum scale for permit on pre-sale of commodity housing shall be reasonably determined and it is not allowed to apply for pre-sale permit layer by layer or unit by unit. Real estate development enterprises which have already obtained the license for pre-sale shall fully disclose all housing resources at one time within the specified time limit and sell the houses at the reported price.
On April 13, 2010, the MOHURD promulgated the Notice on Further Strengthening the Supervision of the Real Estate Market and Improving the Pre-Sale System of Commercial Residential Properties. Pursuant to such notice, (1) real estate development enterprises which have already obtained a license for pre-sale had to fully disclose all housing resources at one time within ten days of the issuing date of the license for pre-sale; and (2) the minimum scale permitted for the pre-sale of commodity housing shall be no smaller than building by building.
On April 14, 2010, the General Office of the State Council issued additional measures to stabilize housing prices, including further raising the down-payment requirement for mortgage loans to purchase additional housing properties to be no less than 50% of the purchase price and requiring the applicable mortgage rates to be no less than 1.1 times the relevant benchmark lending rate published by the PBOC. The down-payment for first owner-occupied housing properties with a GFA of more than 90 sq.m. shall be at least 30% of the purchase price.
On April 17, 2010, the State Council promulgated the Notice on Strictly Controlling the Escalation of Property Prices in Selected Cities. Pursuant to the notice, in those areas where property prices have escalated and property supply is tight, commercial banks may, depending on the level of risk, refuse to grant mortgage loans to those purchasing their third or more properties or to those non-local residents who cannot provide documentation showing payment of local tax or social security for one year or more.
On May 26, 2010, the MOHURD, the PBOC and the CBRC jointly issued a notice which provides for the regulation of second home mortgages. Pursuant to the notice, the number of homes owned by the family intended purchasing family (including the borrower, spouse and minor children) will be taken into consideration. In the following circumstances, the borrower will be subject to the second home mortgage policy: (i) if the borrower applies for a housing loan for the first time and the family of the borrower already owns a home in the region where the borrower intends to purchase residential property; (ii) the borrower has already purchased a residential property using a housing loan and applies for a housing loan for a second time; and (iii) the lender discovers, through its own due diligence, that the family of the borrower already owns a residential property. For a non-local resident applying for a housing loan, the applicant must provide proof of payment of local taxes for one-year or proof of payment of social insurance premium, pursuant to the second home mortgages policy. In an area where the price of commercial residential property is extraordinarily high, the price has risen too quickly or supply is tight, commercial banks can suspend the process of granting housing loans to non-local resident applicants who cannot provide proof of payment of local taxes or proof of payment of the social insurance premium.
On September 29, 2010, the PBOC and the CBRC issued a notice which suspended the grant of housing loans to (i) local residents who applied in order to purchase their third or more residential property; (ii) non-local resident applicants who could not provide proof of payment of local taxes for one year or payment of the social insurance premium. A first owner-occupied residential property
— 177 — requires a down-payment of at least 30% of the purchase price; the down-payment for second home mortgages must not be less than 50% of the purchase price and the loan interest rate cannot be lower than 1.1 times the corresponding benchmark lending rate.
On January 26, 2011, the General Office of the State Council issued the Notice on Further Regulating and Controlling of Real Estate Market. Pursuant to the notice, (i) if a residence purchased by an individual is sold within five years from the date of its purchase, a business tax shall be collected, assessed based on the full amount of the income from the sale; (ii) the down-payment for mortgage loans to purchase second residential properties shall be no less than 60% of the purchase price and the applicable mortgage rates shall be no less than 1.1 times the relevant benchmark lending rate published by the PBOC; (iii) in cities where the price of residential properties is too high, strict measures on restricting the purchase of residential properties shall be formulated and implemented. In principle, local resident families and non-local resident families who can provide proof of payment of local taxes for one year or proof of payment of the social insurance premium and already have one residential property are allowed to purchase one residential property. Locally resident families who already own two or more residential properties, non-local resident families who already own one or more residential properties or non-local resident families who cannot provide proof of payment of local taxes or proof of payment of the social insurance premium for a certain number of years are not allowed to purchase properties in that administrative area.
On February 26, 2013, the General Office of the State Council issued the Notice on Continuing Adjustment and Control of Property Markets (the ‘‘2013 National Regulating Provisions’’) which, among other restrictive measures, provides that further restraining measures are to be adopted to strengthen the regulation of the real estate market. Major cities which have implemented the commodity housing purchase restrictions are required to enforce purchase restrictions in all administrative areas of cities and purchase restriction housing shall include new commodity housing and second-hand housing. Non-local residents who have one or more residential property or could not provide one-year or longer tax payment certificates or social insurance payment certificates will be barred from purchasing any residential properties located in the administrative areas. For cities where housing prices rises excessively, local branches of the PBOC may further raise the down-payment rate and mortgage interest rate for purchase of a second residential property. In addition, the Notice stipulates that the state will strictly enforce the collection of the income tax at the rate of 20% on the profits gained from sales of housing. Pursuant to the 2013 National Regulating Provisions, Shanghai, Nanjing and Shenzhen municipal governments promulgated specific measures at the end of 2013, which raised the down- payment rate for purchase of second residential properties to 70%. Shanghai municipal government further provided that non-Shanghai residents who are unable to provide at least two-year tax payment certificates or social insurance payment certificates are not allowed to purchase residential properties in Shanghai.
In October 2016, local governments and regulators introduced measures to cool the PRC’s property market, which included raising down-payment requirements for first and second homes and tightening buyer eligibility criteria for real estate purchases. In addition, the CSRC and the NDRC have sought to limit fundraising activities by PRC property companies.
On April 1, 2017, the MLR and MOHURD jointly issued the Circular on Tightening the Management and Control over Intermediate Residential Properties and Land Supply (關於加強近期住房 及用地供應管理和調控有關工作的通知), pursuant to which, the bidding method shall be determined in a flexible manner, according to the local actual status and specific conditions of land transfer, and the high total regional price or high unit price of land or buildings shall be prevented, for prevention of disturbance of market expectation by expensive land. In addition, implement the regime of real estate transaction price reporting, and execute strict clear pricing and ‘‘one house one price’’ system. Strengthen the management of the pre-sales of commercial real estate, and urge real estate developers to determine the reasonable price of real estate.
Foreign Exchange Controls
The lawful currency of the PRC is the Renminbi, which is subject to foreign exchange controls and is not freely convertible into foreign exchange at this time. SAFE, under the authority of the PBOC, is empowered with the functions of administering all matters relating to foreign exchange, including the enforcement of foreign exchange control regulations.
— 178 — On January 1, 1994, the former dual exchange rate system for Renminbi was abolished and replaced by a controlled floating exchange rate system, which is determined by demand and supply of Renminbi. Pursuant to such systems, the PBOC sets and publishes the daily Renminbi-U.S. dollar exchange rate. Such exchange rate is determined with reference to the transaction price for Renminbi- U.S. dollar in the inter-bank foreign exchange market on the previous day. Also, the PBOC, with reference to exchange rates in the international foreign exchange market, announced the exchange rates of Renminbi against other major foreign currencies. In foreign exchange transactions, designated foreign exchange banks may, within a specified range, freely determine the applicable exchange rate in accordance with the rate announced by the PBOC.
On January 29, 1996, the State Council promulgated Regulations for the Control of Foreign Exchange (‘‘Control of Foreign Exchange Regulations’’) which became effective from April 1, 1996. The Control of Foreign Exchange Regulations classify all international payments and transfers into current account-items and capital account items. Current account items are no longer subject to SAFE approval while capital account items still are. The Control of Foreign Exchange Regulations were subsequently amended on January 14, 1997. Such amendment affirms that the State shall not restrict international current account payments and transfers.
On June 20, 1996, PBOC promulgated the Regulations for Administration of Settlement, Sale and Payment of Foreign Exchange (the ‘‘Settlement Regulations’’) which became effective on July 1, 1996. The Settlement Regulations abolished the remaining restrictions on convertibility of foreign exchange in respect of current account items while retaining the existing restrictions on foreign exchange transactions in respect of capital account items. On the basis of the Settlement Regulations, the PBOC published the Announcement on the Implementation of Foreign Exchange Settlement and Sale Banks by Foreign-invested Enterprises. The announcement permits foreign-invested enterprises to open, on the basis of their needs, foreign exchange settlement accounts for current account receipts and payments of foreign exchange, and specialized accounts for capital account receipts and payments at designated foreign exchange banks.
On October 25, 1998, PBOC and SAFE promulgated the Notice Concerning the Discontinuance of Foreign Exchange Swapping Business pursuant to which and with effect from December 1, 1998, all foreign exchange swapping business in the PRC for foreign-invested enterprises shall be discontinued, while the trading of foreign exchange by foreign-invested enterprises shall be regulated under the system for the settlement and sale of foreign exchange applicable to banks. On July 21, 2005, the PBOC announced that, beginning from July 21, 2005, China will implement a regulated and managed floating exchange rate system based on market supply and demand and by reference to a basket of currencies. The Renminbi exchange rate is no longer pegged to the U.S. dollar. The PBOC will announce the closing price of a foreign currency such as the U.S. dollar traded against the Renminbi in the inter-bank foreign exchange market after the closing of the market on each business day, setting the central parity for trading of the Renminbi on the following business day.
Save for foreign-invested enterprises or other enterprises which are specially exempted by relevant regulations, all entities in China (except for foreign trading companies and production enterprises having import and export rights, which are entitled to retain part of foreign exchange income generated from their current account transactions and to make payments using such retained foreign exchanges in their current account transactions or approved capital account transactions) must sell their foreign exchange income to designated foreign exchange banks. Foreign exchange income from loans issued by organizations outside the territory or from the issuance of bonds and shares is not required to be sold to designated banks, but may be deposited in foreign exchange accounts with designated banks.
Enterprises in China (including foreign-invested enterprises) which require foreign exchange for transactions relating to current account items, may, without the approval of SAFE, effect payment from their foreign exchange account or convert and pay at the designated foreign exchange banks, upon presentation of valid receipts and proof. Foreign-invested enterprises which need foreign currencies for the distribution of profits to their shareholders, and PRC enterprises which, in accordance with regulations, are required to pay dividends to shareholders in foreign currencies, may with the approval of board resolutions on the distribution of profits, effect payment from their foreign exchange account or convert and pay at the designated foreign exchange banks.
Convertibility of foreign exchange in respect of capital account items, like direct investment and capital contribution, is still subject to restriction, and prior approval from SAFE or its competent branch.
— 179 — In January and April 2005, SAFE issued two regulations that require PRC residents to register with and receive approvals from SAFE in connection with their offshore investment activities. SAFE also announced that the purpose of these regulations is to achieve the proper balance of foreign exchange and the standardization of all cross-border flows of funds.
On September 1, 2006, the Ministry of Construction and SAFE promulgated the Circular on the Issues Concerning the Regulation of Foreign Exchange Administration of the Real Estate Market. This circular states that: (i) where foreign exchange is remitted for a real estate purchase, the foreign purchaser shall be subject to examination by the designated foreign exchange bank. The remitted funds shall be directly remitted by the bank to the Renminbi account of the real estate development enterprise and no payment remitted from abroad by the purchasers shall be kept in the foreign exchange current account of the real estate development enterprises; (ii) where the real estate purchase fails to complete and the foreign purchaser intends to remit the purchase price in Renminbi back to foreign currencies, the foreign purchaser shall be subject to examination by the designated foreign exchange bank; (iii) when selling real estates in China and the purchase price received in Renminbi is remitted to foreign currencies, the foreign purchaser shall be subject to examination by the local branch of SAFE; and (iv) if the registered capital of a FIREE is not fully paid up, its land use right certificate has not been obtained or the paid-in capital is less than 35% of the total investment amount of the project, the FIREE is prohibited from borrowing from any domestic or foreign lenders and SAFE shall not approve the settlement of any foreign loans.
On August 1, 2008, the State Council further amended the Regulations for the Control of Foreign Exchange (‘‘New Control of Foreign Exchange Regulations’’) which became effective beginning August 5, 2008. According to the New Control of Foreign Exchange Regulations, foreign exchange earnings of domestic institutions and individuals could be repatriated into the PRC as well as deposited overseas. The conditions and time limitation for repatriation into the PRC or deposit overseas shall be specified by the State Council foreign exchange management departments in accordance with the international balance payments situations and the needs of foreign exchange managements. Furthermore, foreign exchange earnings under the current account items could be retained or to be sold to financial institutions which conduct business of settlement sale and payment of foreign exchange.
— 180 — MANAGEMENT
Our directors are entrusted with the responsibility for our overall management. Our directors are assisted by a team of experienced and qualified key management, each responsible for different functions. The particulars of our directors and key management as of the date of this offering memorandum are set forth in the following table.
Name Age Position ZhongShengJian...... 61 ChairmanandCEO Zhong Siliang ...... 41 ExecutiveDirector ChanYiuLing...... 56 ExecutiveDirector ZhongMing...... 32 ExecutiveDirector RonaldSeahLimSiang...... 71 LeadIndependentDirector NgShinEin...... 45 IndependentDirector HeeThengFong...... 64 IndependentDirector HongPianTee...... 74 IndependentDirector ZhangHaoNing...... 51 ExecutiveVice-President ChenPing...... 56 ExecutiveVice-President WangXi...... 49 ExecutiveVice-President JimChanChiWai...... 49 GroupFinancialController ZhouYiqun...... 40 GeneralManager,Shanghai HuangZhongXin...... 51 GeneralManager,Chengdu LamChingFung...... 56 Chairman,Zhuhai GaoYongjun...... 48 GeneralManager,NanjingandSanya ZhouCheng...... 51 GeneralManager,Suzhou LinJunTing...... 52 GeneralManager,Tianjin,TangshanandJinan RuanXinKun...... 46 GeneralManager,Haimen LiuJichao...... 49 GeneralManager,Wuhan
The business address of our directors and key management is 9 Temasek Boulevard, #36-02 Suntec Tower Two, Singapore 038989.
Executive Directors
Mr. Zhong Sheng Jian
Mr. Zhong Sheng Jian is the founder, Chairman and CEO of Yanlord Land Group Limited and was first appointed to our Board of Directors on February 13, 2006. His last re-election as our Director was on April 29, 2019. He is the father of Mr. Zhong Ming and uncle of Mr. Zhong Siliang, our Executive Directors. He is responsible for the overall management and strategy development of Yanlord Land Group Limited. Since the 1980s, Mr. Zhong has founded and established a number of businesses in trading, manufacturing and real estate spanning China, Singapore and Hong Kong. He started our property development business in the early 1990s through the setting up of our offices in Shanghai and Nanjing, which are now part of the Singapore Exchange mainboard listed Yanlord Land Group Limited. Mr. Zhong is also the Executive Chairman and Non-Independent and Executive Director of United Engineers Limited, a company listed on the mainboard of the Singapore Exchange.
In recognition of his contribution to various parts of China, Mr. Zhong has been awarded with Honorary Citizenships in Nanjing, Zhuhai, Shanwei and Suzhou in China. In 2005, he was also awarded with the Magnolia Silver Award in Shanghai for his contributions to the Municipal City of Shanghai.
Mr. Zhong is a council member of several Singapore-China investment and trade committees, including Singapore-Sichuan Trade & Investment Committee, Singapore-Tianjin Economic & Trade Council, Singapore-Jiangsu Cooperation Council, Singapore-Guangdong Collaboration Council and Singapore-China Business Council. He is also the Honorary President of Teochew Poit Ip Huay Kuan, council member of the Singapore Chinese Chamber of Commerce & Industry, Director of Business China, Vice-President of the Singapore Federation of Chinese Clan Associations and Vice Chairman of the Singapore Chinese Cultural Centre.
In 2010, Mr. Zhong was named and awarded the Singapore Businessman of the Year 2009. In 2015, Mr. Zhong was awarded with the Public Service Medal (Pingat Bakti Masyarakat), a Singapore National Day Award.
— 181 — Mr. Zhong Siliang
Mr. Zhong Siliang is our Executive Director and was first appointed on May 11, 2006. His last re- election as our Director was on April 29, 2019. He is the nephew of Mr. Zhong Sheng Jian, our Chairman and CEO, and cousin of Mr. Zhong Ming, our Executive Director. Since October 2005, he has held the position of Assistant General Manager of our Investments Department and in this capacity, he assists in the evaluation of new business developments and conducts feasibility studies on potential property transactions for investments.
Mr. Zhong Siliang is responsible for establishing relations with architectural firms, real estate consultants and the district and national government officials, for the execution of our investments in the PRC. He also works closely with our Chairman and CEO, Mr. Zhong Sheng Jian, and assists in other group decisions. In addition, Mr. Zhong Siliang assists in the overall management of Yanlord Land (Shenzhen) Co., Ltd. and is also the Deputy Director of our operations in the Group since 2007.
Mr. Zhong Siliang holds a Master’s Degree from the Washington University-Fudan University EMBA programme and a Bachelor’s Degree in Business Administration from the University of Portsmouth, England.
Ms. Chan Yiu Ling
Ms. Chan Yiu Ling is our Executive Director and was first appointed on May 11, 2006. Her last re-election as our Director was on April 27, 2018. Since 1999, Ms. Chan has been assisting our Chairman and CEO, Mr. Zhong Sheng Jian, and is responsible for various administrative functions of our Group. Prior to that, she was the Sales Manager of Yanlord Industrial Ltd., where she managed its sales and marketing department for close to 10 years. Ms. Chan has approximately eight years of administration experience working as an Administration Executive in various companies before joining us. Ms. Chan graduated with a diploma from the Chinese YMCA Secretarial Course in 1982.
Mr. Zhong Ming
Mr. Zhong Ming is our Executive Director and was first appointed on October 1, 2016. His last re- election as our Director was on April 27, 2017. He is the son of Mr. Zhong Sheng Jian, our Chairman and CEO and cousin of Mr. Zhong Siliang, our Executive Director. Since 2013, Mr. Zhong Ming has been holding various positions from property management to property development in various subsidiaries of Yanlord Land Group Limited. Mr. Zhong Ming is also an Independent Director of SIIC Environment Holdings Ltd.
Mr. Zhong Ming is currently holding positions as director of few subsidiaries of our Group in Shanghai and Tianjin. In this capacity, he oversees the execution of our Group’s strategies at the city level, helping to obtain prime sites in Shanghai and Tianjin, driving forward our Group’s development and expansion strategies in China.
Mr. Zhong Ming graduated from the University of Melbourne with a Bachelor’sDegreein Accounting and Finance.
Independent Directors
Mr. Ronald Seah Lim Siang
Mr. Ronald Seah Lim Siang is our Lead Independent Director and was first appointed on May 11, 2006. His last re-election as our Director was on April 29, 2019. Over a 26-year period between 1980 and 2006, Mr. Seah held various senior positions within the AIG Group in Singapore, initially as AIA Singapore’s Vice-President and Chief Investment Officer managing the investment portfolio of AIA Singapore and later as Vice-President, Direct Investments of AIG Global Investment Corporation (Singapore) Ltd. Between 2001 and 2006, Mr. Seah was also Chairman of the Board of Directors of AIG Global Investment Corporation (Singapore) Ltd.
From 1978 to 1980, Mr. Seah managed the investment portfolio of Post Office Savings Bank as Deputy Head of the Investment and Credit Department. Prior to that, he worked at Singapore Nomura Merchant Bank as an Assistant Manager with responsibilities covering the sale of bonds and securities and offshore (ACU) loan administration for the bank. Between 2002 and 2003, Mr. Seah served on the panel of experts of the Commercial Affairs Department of Singapore. He served on the Investment Committee of the National Council of Social Service between 1996 and 2014.
— 182 — Mr. Seah serves on the boards of other listed companies namely, Global Investments Limited, Telechoice International Limited and PGG Wrightson Limited (listed on the New Zealand Stock Exchange). Mr. Seah is also an Independent Director on the boards of M&C REIT Management Limited (as manager of CDL Hospitality Real Estate Investment Trust) and M&C Business Trust Management Limited (as trustee-manager of CDL Hospitality Business Trust). He is currently Chairman of Nucleus Connect Pte. Ltd., sole proprietor of SoftCapital SG, a business consultancy, director of LifeHealth Group Limited, LifeClinic Limited as well as LifeHub Limited.
Mr. Seah graduated with a Bachelor of Arts and Social Sciences (Second Class Upper Honours in Economics) from the then University of Singapore in 1975.
Ms. Ng Shin Ein
Ms. Ng Shin Ein is our Independent Director and was first appointed on May 11, 2006. Her last re-election as our Director was on April 27, 2018. Ms. Ng brings with her a rare blend of legal, business, financial and diplomatic experience. Ms. Ng is the co-founder of Gryphus Capital, a pan-Asian private equity investment firm. She invests actively and leads a network of family offices and other private equity firms to provide strategic capital for companies. For these investments, she engages with portfolio companies, focusing on strategy and business development.
Prior to this, Ms. Ng spent a number of years at the Singapore Exchange where she was responsible for developing Singapore’s capital market and bringing foreign companies to list in Singapore. Additionally, she was part of the Singapore Exchange’s IPO Approval Committee, where she contributed industry perspectives and also acted as a conduit between the marketplace and regulators.
Ms. Ng was admitted as an advocate and solicitor of the Singapore Supreme Court in 1998 and practiced as a corporate lawyer in Messrs Lee & Lee. Whilst at Messrs Lee & Lee, she advised clients on joint ventures, mergers and acquisitions and fundraising exercises.
Ms. Ng serves on the boards of other companies listed on the mainboard of the Singapore Exchange namely, Starhub Limited, First Resources Limited and Avarga Limited (formerly known as UPP Holdings Limited). She was appointed the youngest ever director of Fairprice, Singapore’slargest supermarket operator, and served on the boards of Eu Yan Sang International Limited and Sabana Real Estate Investment Management Pte Ltd.
Apart from corporate boards, Ms. Ng serves as Singapore’s Non-Resident Ambassador to the Republic of Hungary. She is also on the Board of Governors of the Singapore International Foundation.
Ms. Ng holds a Degree in Law (LLB Honours) from Queen Mary and Westfield College, University of London. She also holds a graduate diploma in Singapore law from the National University of Singapore.
Mr. Hee Theng Fong
Mr. Hee Theng Fong is our Independent Director and was first appointed on October 11, 2017. His last re-election as our Director was on April 27, 2018.
Mr. Hee is a senior lawyer in Singapore with over 30 years of experience. Mr. Hee is on the panel of many institutions including Singapore International Arbitration Centre, China International Economic and Trade Arbitration Commission, Shanghai International Arbitration Centre, Beijing International Arbitration Commission, Hainan International Arbitration Court and Hong Kong International Arbitration Centre. He is also a mediator, Specialist Mediator (China) and Ambassador for Singapore International Mediation Centre. He has handled more than one hundred cases in civil litigation and arbitration as lead counsel or arbitrator in many countries including Singapore, PRC and Hong Kong. Many of the cases handled by him have been reported in Singapore Law Report.
Mr. Hee also serves as a director of several listed companies, including Straco Corporation Limited, China Jinjiang Environment Holding Company Limited, Tye Soon Limited, APAC Realty Limited and Haidilao International Holding Ltd.. Mr. Hee was also an Independent Director of Delong Holdings Limited, First Resources Limited, Datapulse Technology Limited and YHI International Limited. He has been regularly invited to speak on directors’ duties and corporate governance.
Mr. Hee also serves as a director of Singapore Chinese Cultural Centre. He is also the Deputy Chairman of Singapore Medishield Life Council and Chairman of Citizenship Committee of Inquiry (ICA).
— 183 — Mr. Hee graduated in 1979 from the Law Faculty of the University of Singapore. He is also a holder of a Diploma in PRC Law.
Mr. Hong Pian Tee
Mr. Hong Pian Tee is our Independent Director and was first appointed on September 1, 2018. His last re-election as our Director was on April 29, 2019. Mr. Hong was a partner of PricewaterhouseCoopers from 1985 to 1999 prior to his retirement on December 31, 1999.
Mr. Hong’s experience and expertise are in corporate advisory, financial reconstruction and corporate insolvencies since 1977. He has been a corporate/financial advisor to clients with businesses in Singapore and Indonesia and in addition was engaged to restructure companies with operations in Taiwan, Indonesia and Malaysia.
Mr. Hong is currently the chairman of Pei Hwa Foundation Limited and is also an Independent Director of two companies listed on the official list of the Singapore Exchange Securities Trading Limited namely, XMH Holdings Ltd. and Sinarmas Land Limited.
Mr. Hong was previously an Independent Director of Golden Agri-Resources Ltd., Memstar Technology Ltd. and AsiaPhos Limited.
Key Management
Mr. Zhang Hao Ning
Mr. Zhang Hao Ning has been our Executive Vice-President since May 2012 and is responsible for project development. Prior to this, he was the General Manager of our Nanjing operations since 2005 and was responsible for the overall management of our business in Nanjing. He was our Assistant General Manager of our Nanjing operations between 2000 and 2005, and the Manager of our Nanjing operations department from 1994 to 2000. Prior to joining us, he worked as a Cost Engineer in the Architecture Design Institute, Nanjing and Hong Kong Changjiang Pte. Ltd., Nanjing between 1990 and 1994, and was responsible for the management of their engineering budgets and was also involved in the design work of the Architecture Design Institute. Mr. Zhang obtained a Master’s Degree in Economics from the Nanjing University in the PRC in 1995. He is also a registered Cost Engineer with the Jiangsu Department of Personnel since 1998.
Mr. Chen Ping
Mr. Chen Ping has been our Executive Vice-President since January 2013 and is responsible for the Group’s property management business. Prior to this, Mr. Chen was the General Manager of Shanghai Yanlord Property Management Co., Ltd. between 2004 and January 2013. Between 1994 and 2004, Mr. Chen was a Sales Manager of Shanghai Yanlord Property Co., Ltd. Before joining the Group, Mr. Chen was an Engineer of Shanghai Xin Hu Steel Factory. Mr. Chen graduated from Tongji University, Shanghai, majoring in Civil and Industrial Engineering.
Mr. Wang Xi
Mr. Wang Xi was appointed our Executive Vice-President in November 2016. Prior to his appointment, Mr. Wang was the Deputy General Manager of China Merchants Shekou Holdings Co., Ltd., and concurrently held the position of General Manager of its East China operations. Mr. Wang also served as the Director of Business Development at China Merchant’s Property Development Subsidiary (CMPD) prior to the merger of China Merchants’ Shekou Group and CMPD. Mr. Wang has also held key positions in various companies such as the President of Xing Zhi Ye Real Estate Agency Co., Ltd. in Shenzhen between June 2004 and December 2005 as well as the Director of Marketing and Architectural Design at Shanghai Industrial Investment (Holdings) Co., Ltd.’s property development unit and the General Manager of the subsidiary’s Zhengzhou operations from January 2003 to April 2004. Mr. Wang graduated from Shenzhen University in 1993 with a Bachelor’s Degree in Architecture. He obtained his Master’s Degree in Management and Engineering from the South China University of Technology in 2001. Mr. Wang is also a Certified Civil Engineer.
Mr. Jim Chan Chi Wai
Mr. Jim Chan Chi Wai has been our Group Financial Controller since 2003. He is responsible for our day-to-day finance and accounting functions and is also involved in the supervision of our finance staff. He has more than 10 years of experience as an auditor and accountant. Prior to joining Yanlord, he
— 184 — was the Financial Controller of Komark Hong Kong Co., Ltd., a subsidiary of KomarkCorp Berhad, a multinational company listed in Malaysia, for approximately two years. He was also a Senior Accountant at Cathay International Limited, a multinational company with investments in the United Kingdom and the PRC from 1997 to 2001 and Senior Audit Accountant at PricewaterhouseCoopers from 1993 to 1997. Mr. Chan graduated with a Bachelor of Arts in Accountancy with Second Class Honours, Upper Division, from the City University of Hong Kong in 1993. He is a Certified Public Accountant registered with the Hong Kong Institute of Certified Public Accountants and a fellow of the Association of Chartered Certified Accountants, Hong Kong.
Mr. Zhou Yiqun
Mr. Zhou Yiqun was appointed the General Manager of our Shanghai operations in December 2015 and is responsible for the overall management of our business in Shanghai. Mr. Zhou has more than 10 years of operational experience in real estate development. Prior to this appointment, Mr. Zhou served as our Group’s Investment and Operation Director and the Executive Director of our Shanghai subsidiary. Before joining Yanlord, Mr. Zhou served in various managerial positions of Hong Kong based RK Properties. Mr. Zhou was the General Manager of RK Group’s Shanghai subsidiary from 2009 to 2014. He was the Executive Deputy General Manager of its Jinan subsidiary from 2007 to 2009. Mr. Zhou was with Sunco Group from 2005 to 2007, working as the Assistant to the General Manager at its Wuxi subsidiary and Senior Manager of the Sunco’s Strategic Development Center. Mr. Zhou graduated from Suzhou University with a Master’s Degree in Management. He also completed his EMBA programme (2014–2015) at Cheung Kong Graduate School of Business.
Mr. Huang Zhong Xin
Mr. Huang Zhong Xin has been the General Manager of our Chengdu operations since 2005 and is responsible for the overall management of our operations in Chengdu. Since 2002, he served as the Assistant General Manager and later the General Manager of Yanlord Land (Chengdu) Co., Ltd. He was involved in day to day operations of the company. Mr. Huang has been with Yanlord since 1989. He was first involved in the international trading business of Yanlord Holdings until 1993. Subsequently, he was the Assistant General Manager of Yanlord Industrial (Shenzhen) Co., Ltd. and was responsible for two years setting up industrial centers. From 1994 to 2002, he was the Assistant General Manager at Yanlord Investment (Nanjing) Co., Ltd. and Acting General Manager of Yanlord Property Management Co., Ltd. and was involved in the marketing, project planning and property management functions of these companies.
Mr. Lam Ching Fung
Mr. Lam Ching Fung was appointed in 2018 as the Chairman of our Zhuhai operations and is responsible for the overall management of our business in Zhuhai. He held the position of General Manager of our Zhuhai operations from 2005. He was previously a Director of the Zhuhai Special Economic Zone Longshi Bottle Capping Factory and was responsible for the overall management of the business. Mr. Lam completed an executive course in Advanced Business Management conducted by Tsinghua University, Zhuhai.
Mr. Gao Yongjun
Mr. Gao Yongjun was appointed the General Manager of our Nanjing operations in May 2012 and has been the General Manager of our Sanya operations since March 2010. He is responsible for the overall management of our businesses in Nanjing and Sanya. Mr. Gao joined Yanlord in March 1998 and worked as Project Manager, Director of Engineering Department and Assistant General Manager of our Nanjing subsidiary over the years, taking charge of project development and landscaping. Between December 2006 and March 2010, Mr. Gao was the Vice General Manager of our Nanjing subsidiary. Mr. Gao graduated from Yangzhou University in 1993 and majored in Industrial and Civil Engineering.
Mr. Zhou Cheng
Mr. Zhou Cheng is the General Manager of our Suzhou operations and is responsible for the overall management of our business in Suzhou. Mr. Zhou joined Yanlord in April 2000 as a Project Manager in the Group’s Nanjing subsidiary and has assumed numerous roles including the Manager of the Engineering Department at our Nanjing subsidiary before assuming the role as the Vice General Manager of our Suzhou subsidiary in 2005. Between 1999 and April 2000, Mr. Zhou was the Project
— 185 — Manager and Civil & HVAC Engineer at Pepsi Cola Nanjing. Between 1989 and 1999, Mr. Zhou was Project Manager at Nanjing Steel Group. Mr. Zhou graduated from Xi’an University of Architecture and Technology in 1989 with a Degree in Industrial and Civil Engineering.
Mr. Lin Jun Ting
Mr. Lin Jun Ting was appointed the General Manager of our Tianjin and Tangshan operations in March 2017, also appointed General Manager of our Jinan operations in late 2017 and had served as the Assistant General Manager of operations in Tianjin from June 2004 to June 2014. He is responsible for the overall planning and management of our business in Tianjin. Prior to joining Yanlord, he served as Director and General Manager of Hong Kong Art and Decoration Co., Ltd. between 2001 and 2003. Before that, Mr. Lin worked as Director and General Manager at a catering management company in Canada. Mr. Lin graduated in LaSalle College of Montreal Canada in 1993 and majored in hotel management.
Mr. Ruan Xin Kun
Mr. Ruan Xin Kun was appointed the General Manager of our Haimen operations in April 2014 and is responsible for the overall management of our business in Haimen. Mr. Ruan was the Assistant General Manager of our Suzhou operations from 2003 to 2014 and was responsible for cost management, finance, sales and business development. Prior to joining Yanlord, Mr. Ruan served as a Department Manager of Chuxiong Renheng Fertilizer Co., Ltd. and as an Executive Director of Suzhou Renheng QingLing Motor Trading Co., Ltd.
Mr. Liu Jichao
Mr. Liu Jichao was appointed the General Manager of our Wuhan operations in March 2017 and is responsible for the overall management of our business in Wuhan. Mr. Liu joined Yanlord in March 2002 as a Project Manager in the Group’s Nanjing subsidiary and has assumed numerous roles including the Manager of the Engineering Department in 2008 and Assistant to General Manager in 2010 before assuming the role as the Deputy General Manager of our Nanjing subsidiary in 2012, responsible for project development, cost management and business operations. Between 1995 and 2002, Mr. Liu served in various managerial positions of civil engineering projects at Nanjing Dadi Construction Group and Nanjing Overseas Construction Engineering Co., Ltd. Mr. Liu graduated from China University of Mining and Technology, majoring in Civil Engineering in 1995.
Except as disclosed above, none of our directors or key management is related to each other or to any of our substantial shareholders pursuant to the SGX-ST listing rules.
— 186 — Management Reporting Structure
Our management reporting structure is set out below: uhan Liu Jichao General W Manager, Ruan Xin Kun Kun Xin Ruan General Haimen Manager, Shenzhen Zhong Siliang Executive Director, Director, Executive Wang Xi Executive Vice-President Executive Huang Zhong Xin Xin Zhong Huang General Manager, Chengdu Manager, General Chen Ping Ping Chen Zhong Sheng Jian Sheng Zhong Chairman & CEO & Chairman Property Management Property Board Directors of Gao Yongjun Gao Executive ViceExecutive President Nanjing and Sanya and Nanjing General Manager, Manager, General Lam Fung Ching Chairman, Zhuhai Chairman, Zhang Hao Ning Ning Hao Zhang Project Development Project Executive Vice-President Vice-President Executive Zhou Yiqun General Manager, Shanghai Jim Chan Chi Wai Group Financial Controller Zhou Cheng General Manager, Suzhou Manager, General Lin JunTing Tangshan and Jinan Tangshan General Manager, Tianjin,
— 187 — Remuneration of Directors and Key Management
The remuneration (which includes basic salaries, annual performance incentives, provident fund contributions, directors’ fees and other benefits including benefits in kind, if any) paid or payable to our directors and key management for services rendered to us in all capacities for 2016, 2017 and 2018 was RMB82 million, RMB95 million and RMB95 million (US$14 million), respectively.
Apart from employee benefit plans such as contributions to labor, medical, social welfare insurance and unemployment insurance for our employees as required under the relevant laws in the PRC, Hong Kong and Singapore, where applicable, we do not set aside or accrue any pension or retirement benefits for any of our employees.
Service Agreement
On May 11, 2006, we entered into a service agreement with Chairman and CEO, Mr. Zhong Sheng Jian, for an initial term of three years commencing from the date of our admission to the Official List of the SGX-ST, which will continue thereafter unless either party notify the other in writing not less than 90 days prior to the expiry of the term that the service agreement shall not be extended. Pursuant to the terms of the service agreement, Mr. Zhong is entitled to an aggregate annual basic salary of S$260,000 and an annual discretionary bonus that may not exceed 5% of our audited consolidated or combined net profits (after taxation, non-controlling interests, and extraordinary and exceptional items) in respect of any financial year. For the financial year ended December 31, 2006 and thereafter, the annual basic salary of Mr. Zhong may be subject to such increase as our remuneration committee may determine in its absolute discretion, provided that such increase shall not exceed 15% per annum of the amount of salary paid during the immediately preceding 12-month period. Either party may terminate the service agreement prior to the expiry of the term by giving not less than three months’ notice in writing (provided that we have the option to pay Mr. Zhong salary in lieu of any required period of notice). If Mr. Zhong is disqualified to act as an executive director under any applicable law or rules prescribed by the SGX-ST, found guilty of dishonesty, gross misconduct or willful neglect of duty or any continued material breach of the service agreement, becomes bankrupt or otherwise acts to our prejudice, we may terminate the service agreement immediately.
All travel and travel-related expenses, entertainment expenses and other out-of-pocket expenses reasonably incurred by Mr. Zhong Sheng Jian in the process of discharging his duties on our behalf will be borne by us. The service agreement also provides that we will bear all expenses including service and repair, maintenance, insurance, road tax and fuel expenses of Mr. Zhong Sheng Jian’s car, and monthly subscriptions and related expenses of club memberships used by Mr. Zhong Sheng Jian.
Pursuant to his service agreement, Mr. Zhong Sheng Jian shall not, without the prior consent of our board of directors, at any time during the period of his employment with us and for a period of twelve months after the expiry or termination of his employment with us, accept any office or employment or engage or be concerned or interested directly or indirectly in any business or occupation or hold an investment in any company which is in competition, directly or indirectly, with the business carried on by us or our Group. This restriction does not prevent Mr. Zhong from holding equity interest in any company the share capital of which is quoted and dealt in upon any recognized stock exchange to the extent of the aggregate of his such holding and the holding of such shares by his associates does not exceed 5% of the total issued share capital, nor does he or any of his associates participate nor be involved in the management of such company.
Service agreements were entered into between Yanlord Land Group Limited and Mr. Zhong Siliang, Ms. Chan Yiu Ling and Mr. Zhong Ming, our executive directors, on May 11, 2006, May 11, 2006 and October 1, 2016, respectively. These executive directors receive remuneration from designated subsidiaries assigned by the Group, in accordance with the letter of employment or any employment contract with that subsidiary(ies), in their capacity as directors and/or executives of that subsidiary(ies). Save as above, the executive directors do not receive any other fees from the Company for their appointment. The terms of appointment commenced with effect from the date of the respective executive directors’ written consent to act as a director and either party may terminate the appointment by giving the other not less than three months’ notice in writing or such other shorter notice period as so agreed by both parties.
Except as disclosed above, there are no other existing or proposed service agreements between us or our subsidiaries and any of our directors or key management.
— 188 — There is no existing or proposed service contract entered or to be entered into by our directors with us or any of our subsidiaries that provides for benefits upon termination of employment.
Share Buyback Mandate
The share buyback mandate (‘‘Share Buyback Mandate’’) was first approved by our shareholders at the Extraordinary General Meeting of the Company held on April 29, 2009 and such mandate was renewed on the yearly basis at the subsequent annual general meetings of the Company. As of August 16, 2019, we had purchased a total of 17,201,100 ordinary shares as treasury shares under the Share Buyback Mandate.
Board Practices
Term of Office
Apart from our Chairman and CEO, Mr. Zhong Sheng Jian, who has been in office since our incorporation on February 13, 2006, our directors, namely, Mr. Zhong Siliang, Ms. Chan Yiu Ling, Mr. Ronald Seah Sim Liang and Ms. Ng Shin Ein have served in office since May 11, 2006. Our directors, Mr. Zhong Ming, Mr. Hee Theng Fong and Mr. Hong Pian Tee have served in office since October 1, 2016, October 11, 2017 and September 1, 2018, respectively.
At each annual general meeting, one-third (or, if their number is not a multiple of 3, the number nearest to but not less than one-third) of our directors shall retire from office by rotation; provided always that all our directors shall retire at least once every three years. A retiring director shall be eligible for re-election.
Corporate Governance
Our directors recognize the importance of corporate governance and in the offering of high standards of accountability to our shareholders. Where the Chairman and CEO is the same person, the Code of Corporate Governance 2012 recommends that the independent directors should make up at least half of the board of directors. Accordingly, our independent directors make up at least half of our board of directors as our Chairman and CEO is the same person. Taking cognisance that the impending Rule 210(5)(d)(iii) of the Listing Manual in respect of the 9-year tenure for independent directors will take effect from January 1, 2022 as well as the Code of Corporate Governance 2018 which provides that the independent directors to make up a majority of the Board where the chairman is not an independent director and that non-executive directors to make up a majority of the Board, which will be applicable to the annual report of the Company for financial year commencing on or after January 1, 2019, our nominating committee and board of directors shall review and assess the structure and composition of our board in due course.
We have also established an audit committee, a remuneration committee, a nominating committee and a risk management committee.
Audit Committee
Our audit committee is comprised of Mr. Ronald Seah Lim Siang, Ms. Ng Shin Ein and Mr. Hong Pian Tee. The chairman of the audit committee is Mr. Ronald Seah Lim Siang.
Our audit committee assists our board of directors in discharging its responsibility to safeguard our Group’s assets, maintain adequate accounting records, and develop and maintain effective systems of internal control, with the overall objective of ensuring that our management creates and maintains an effective control environment in our Group. Our audit committee provides a channel of communication between our board of directors, our management and our external auditors on matters relating to audit.
— 189 — The duties of our audit committee include:
. reviewing with the external auditors and where applicable, our internal auditors, their audit plans, their evaluation of the system of internal accounting controls, their letters to management and the management’s response;
. reviewing quarterly and annual financial results announcements before submission to our board for approval, focusing in particular on changes in accounting policies and practices, major risk areas, significant adjustments resulting from the audit, compliance with accounting standards and compliance with the SGX-ST Listing Manual and any other relevant statutory or regulatory requirements;
. reviewing and reporting to our board the adequacy and effectiveness of the internal controls, including financial, operational, compliance and information technology controls and ensuring co-ordination between the external auditors and our management, reviewing the assistance given by our management to the auditors, and discussing issues and concerns, if any, arising from audits, and any matters which the auditors may wish to discuss (in the absence of our management, where necessary);
. reviewing and discussing with the external auditors any suspected fraud or irregularity, or suspected infringement of any relevant laws, rules or regulations, which has or is likely to have a material impact on our Group’s operating results or financial position, and our management’s response;
. considering and recommending the appointment or re-appointment of the external auditors and matters relating to the resignation or dismissal of the auditors;
. reviewing interested person transactions (if any) falling within the scope of Chapter 9 of the SGX-ST Listing Manual;
. reviewing potential conflicts of interest, if any;
. undertaking such other reviews and projects as may be requested by our board of directors, and reporting to our board its findings from time to time on matters arising and requiring the attention of our audit committee; and
. generally undertaking such other functions and duties as may be required by statute or the SGX-ST Listing Manual, or by such amendments as may be made thereto from time to time.
In addition, our audit committee has explicit authority to commission and review the findings of internal investigations into matters where there is any suspected fraud or irregularity, or failure of internal controls or infringement of any Singapore law, rule or regulation which has or is likely to have a material impact on the Group’s operating results and/or financial position. In the event that a member of our audit committee is interested in any matter being considered by our audit committee, he or she will abstain from reviewing that particular transaction and voting on that particular resolution.
Remuneration Committee
Our remuneration committee is comprised of Mr. Hong Pian Tee, Mr. Ronald Seah Lim Siang and Ms. Ng Shin Ein. The chairman of the remuneration committee is Mr. Hong Pian Tee.
Our remuneration committee recommends to our board, a framework of remuneration for the directors and review the remuneration packages for each director and key management personnel. The recommendations of our remuneration committee are submitted for endorsement by the board. All aspects of remuneration, including but not limited to directors’ fees, salaries, annual performance incentives and other benefits including benefits in kind are reviewed by our remuneration committee. In addition, our remuneration committee performs an annual review of the remuneration of employees who are immediate family members of a director or the CEO, in accordance with the Code of Corporate Governance. Each member of the remuneration committee shall abstain from voting on any resolutions in respect of his or her remuneration package or that of employees related to him or her.
— 190 — Nominating Committee
Our nominating committee is comprised of Mr. Hee Theng Fong, Mr. Zhong Sheng Jian and Mr. Ronald Seah Lim Siang. The chairman of the nominating committee is Mr. Hee Theng Fong.
The responsibilities of our nominating committee include:
. reviewing and recommending the nomination and re-election of our directors having regard to the director’s contribution and performance;
. determining on an annual basis whether or not a director is independent;
. developing a process and criteria for evaluation of the performance of our board, board committees, the chairman and CEO and the directors;
. assessing the performance of our board, board committees as well as contribution of the chairman and CEO and each director to the effectiveness of the board and the need for directors’ relevant training; and
. reviewing the board composition and assessing any need for change, taking into consideration of point no. 2 and 4 above on an annual basis.
Each member of our nominating committee must abstain from voting on any resolutions in respect of the assessment of his or her performance or independence.
Risk Management Committee
Our risk management committee is comprised of Ms. Ng Shin Ein, Mr. Zhong Sheng Jian, Mr. Hee Theng Fong, and Mr. Hong Pian Tee. The chairperson of the risk management committee is Ms. Ng Shin Ein.
The responsibilities of our risk management committee include:
. identifying, measuring, managing and controlling risks that may have a significant impact on our Group’s property development activities;
. reviewing and assessing our Group’s risk related policies and methodologies; and
. considering and reviewing matters that may have a significant impact on the stability and integrity of the property market in China.
— 191 — RELATED PARTY TRANSACTIONS
We have in the past engaged in transactions with our directors, controlling shareholders and other related parties. We expect that we will continue to engage in these transactions in the future.
As a listed company on the SGX-ST, we are subject to the requirements of Chapter 9 of the SGX- ST Listing Manual which require certain ‘‘interested person transactions’’ with ‘‘interested persons’’ be approved by a company’s independent shareholders. Each of our related party transactions disclosed below that constitutes an interested person transaction within the meaning of the SGX-ST Listing Manual, and if requiring shareholders’ approval, would have been so approved, or otherwise exempted from compliance under Chapter 9 of the SGX-ST Listing Manual.
Loans from or to Related Parties
As of December 31, 2018, we had aggregate net payables of RMB98 million (US$14 million) due to Mr. Zhong and his associates.
In the past, Mr. Zhong and his associates have also extended unsecured advances to us for investment and working capital purposes.
We entered into a loan agreement dated May 14, 2019 with Yanlord Holdings, our ultimate holding company which is owned by Mr. Zhong and his wife, under which Yanlord Holdings agreed to loan to us banking facilities that Yanlord Capital Pte. Ltd (‘‘YCPL’’), its wholly-owned subsidiary, obtained from financial institutions of up to S$107 million. We agreed to pay interest at a rate equal to the cost of funds of financial institutions plus 1.0% to 1.5% per annum or SWAP offer rate of financial institutions plus 1.0% to 1.5% per annum, whichever is higher, which was the same rate paid by YCPL under the banking facilities. We were responsible for the proportion of arrangement fee and renewal fee based on the amount utilized by us.
Sale of Residential Properties and Carpark Lots
From time to time we sold residential properties and carparks to related parties, including our directors, chief executive officer or controlling shareholder and their relatives as well as key management personnel and close members of their families, for a consideration based on the average selling price of the units in the same project, and the other terms of the transaction were the same as those offered to unrelated purchasers of units in that project. For the years ended December 31, 2016, 2017 and 2018, the aggregate amounts for the sales of residential properties and carparks to related parties were RMB26 million, RMB90 million and RMB30 million (US$4 million), respectively.
Each sale of residential properties and car park lots to our directors, chief executive officer or controlling shareholders and their relatives was reviewed and approved by our audit committee and board of directors, who were satisfied that its terms were fair and reasonable and not prejudicial to our interests or those of our non-controlling shareholders. The directors who were involved in the relevant sales abstained from deliberation and voting on relevant resolutions to approve such a transaction.
Lease of Premises From Mr. Zhong Sheng Jian
On December 10, 2012, Mr. Zhong Sheng Jian has leased space at Unit No. 37 and 38 in Yanlord Gardens, Lane 99, Puming Road, Pudong, Shanghai, PRC to us as accommodation and for meeting purposes for our guests and staff during their stay in Shanghai. The tenancy agreement was valid for an initial term of three years and was renewed on December 14, 2018 for a further term of three years at an annual rental of approximately RMB3 million.
Similar transactions in the future will be subject to review by our audit committee and board of directors in accordance with the requirements of Chapter 9 of the SGX-ST Listing Manual to ensure that they are on an arm’s length basis and remain comparable to the prevailing market rates.
Lease of Office Premises From Pretty Honour Investment Ltd.
Pretty Honour Investment Ltd. is wholly-owned by Mr. Zhong Sheng Jian and Mrs. Zhong Lin Miao Jun. Since January 1, 2003, Pretty Honour has leased office space at 38/F, Far East Finance Centre, 16 Harcourt Road, Admiralty, Hong Kong to us.
— 192 — On January 1, 2006, we entered into a tenancy agreement with Pretty Honour, pursuant to which an annual rental of approximately S$1 million was payable for use of the premises as our office. The tenancy agreement was valid for an initial term of three years and was renewed on December 14, 2017 for a further term of three years effective from January 1, 2018 at an annual rental of approximately RMB9 million. The tenancy agreement was entered into on an arm’s length basis and in accordance with the prevailing market rates for tenancies in that area.
Similar transactions in the future will be subject to review by our audit committee and board of directors in accordance with the requirements of Chapter 9 of the SGX-ST Listing Manual to ensure that they are on an arm’s length basis and remain comparable to the prevailing market rates.
Issuance of Senior Note to Mr. Zhong Sheng Jian
On April 23, 2018, Mr. Zhong Sheng Jian, our Chairman and CEO, subscribed for a total of US$50,000,000 of our 2018 Senior Notes based on market terms.
Review Procedures for Future Interested Person Transactions
Our audit committee and board of directors will review or approve (as the case may be) all relevant interested person transactions in accordance with the requirements set out in Chapter 9 of the SGX-ST Listing Manual.
We will prepare relevant information and resources to assist our audit committee and board of directors in their respective review of all relevant interested person transactions.
If a member of our audit committee or board of directors is interested in any interested person transactions, he or she will abstain from deliberating and reviewing that particular transaction. Any decision to proceed with such an agreement or arrangement would be recorded for review by our audit committee and board of directors.
— 193 — PRINCIPAL SHAREHOLDERS
Our principal shareholders and their respective shareholdings in our company as of August 16, 2019, as stated in the Register of Directors’ Interests and Register of Substantial Shareholders of the Company, are set out below:
Number of Shares Deemed Percentage of Direct Interest Interest Total Interest Shares(5) Directors Zhong Sheng Jian(1)...... 75,820,800 1,278,390,000 1,354,210,800 70.111 Zhong Siliang(2) ...... 320,000 30,095,000 30,415,000 1.575 ChanYiuLing...... 400,000 — 400,000 0.021 ZhongMing...... ———— RonaldSeahLimSiang...... 20,000 — 20,000 0.001 Ng Shin Ein(3) ...... 118,000 — 118,000 0.006 HeeThengFong...... ———— Hong Pian Tee(4) ...... 219,700 100,000 319,700 0.017
Substantial Shareholders Yanlord Holdings Pte. Ltd.(1) ...... 1,278,390,000 — 1,278,390,000 66.185
Notes:
(1) Zhong Sheng Jian is a substantial shareholder of the Company via his deemed interest of 1,278,390,000 ordinary shares in the Company held by Yanlord Holdings Pte. Ltd. (‘‘YHPL’’). YHPL is a company which is owned by Zhong Sheng Jian (95% shareholding interest) and his spouse (5% shareholding interest). The total number of 1,328,343,100 ordinary shares are held directly and via nominee accounts. Zhong Sheng Jian further holds US$50,000,000 of 6.75% Senior Notes due 2023 issued by a subsidiary of the Company.
(2) Zhong Siliang is deemed to have an interest in 30,095,000 ordinary shares in the Company held by Investor Growth Co., Limited, a company which is wholly-owned by Zhong Siliang.
(3) Ng Shin Ein further holds US$2,800,000 of 5.875% Senior Notes due 2022 issued by a subsidiary of the Company.
(4) Hong Pian Tee is deemed to have an interest in 100,000 ordinary shares in the Company held by his spouse.
(5) As a percentage of the issued share capital of the Company, comprising 1,931,535,376 ordinary shares excluding the 17,201,100 treasury shares.
— 194 — TRANSFER RESTRICTIONS
Because of the following restrictions, purchasers are advised to consult their legal counsel prior to making any offer, sale, resale, pledge or other transfer of the Notes.
The Notes and the Guarantees have not been and will not be registered under the Securities Act and may not be offered, sold or delivered within the United States (as defined in Regulation S under the Securities Act) except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Accordingly, the Notes are being offered and sold only outside the United States in offshore transactions in reliance on Regulation S under the Securities Act.
By its purchase of the Notes, each purchaser of the Notes will be deemed to have represented and agreed that:
1. it is not an ‘‘affiliate’’ (as defined in Rule 144 under the Securities Act) of the Company or the Issuer or acting on behalf of the Company or the Issuer and is outside the United States, anditispurchasingtheNotesinanoffshoretransaction in accordance with Regulation S;
2. it acknowledges that the Notes and the Guarantees have not been and will not be registered under the Securities Act or with any securities regulatory authority of any jurisdiction, are being offered and sold only outside of the United States in offshore transactions in reliance on Regulation S under the Securities Act and may not be offered or sold within the United States except as set forth below;
3. it understands that the Notes will bear a legend substantially to the following effect, unless otherwise agreed to by the Company and the Issuer:
‘‘THIS NOTE AND THE GUARANTEES RELATING TO THIS NOTE (COLLECTIVELY, THE ‘‘SECURITY’’) HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, (THE ‘‘SECURITIES ACT’’) AS AMENDED, OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. BY ITS ACQUISITION HEREOF, THE HOLDER HEREOF REPRESENTS THAT IT IS ACQUIRING THE NOTE IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT;’’ and
4. it acknowledges that the Issuer, the Company and the Initial Purchasers, the Trustee, the Agents and others will rely upon the truth and accuracy of the foregoing acknowledgments, representations and agreements and agrees that, if any of such acknowledgments, representations or agreements deemed to have been made by virtue of its purchase of Notes are no longer accurate, it shall promptly notify the Issuer and the Transfer Agent, and if it is acquiring any Notes as a fiduciary or agent for one or more accounts, it represents that it has sole investment discretion with respect to each such account and that it has full power to make the foregoing acknowledgments, representations and agreements on behalf of each such account.
— 195 — RATINGS
The Notes are expected to be rated ‘‘BB-’’ by S&P and rated ‘‘Ba3’’ by Moody’s. The ratings reflect the rating agencies’ assessment of the likelihood of timely payment of the principal of and interest on the Notes. The ratings do not address the payment of any Additional Amounts and do not constitute recommendations to purchase, hold or sell the Notes inasmuch as such ratings do not comment as to market price or suitability for a particular investor. Each such rating should be evaluated independently of any other rating on the Notes, on other securities of ours, or on us. Additionally, we have been assigned a long-term corporate credit rating of ‘‘BB’’ with a stable outlook by S&P and a corporate family rating of ‘‘Ba2’’ with a stable outlook by Moody’s. We cannot assure you that the ratings will remain in effect for any given period or that the ratings will not be revised by such rating agencies in the future if in their judgment circumstances so warrant.
— 196 — DESCRIPTION OF OTHER MATERIAL INDEBTEDNESS
To fund our existing property projects and to finance our working capital requirements, we and our subsidiaries have entered into loan agreements with various financial institutions. Set forth below is a summary of the material terms and conditions of certain of these loans and other indebtedness.
Project Loan Agreements
Certain of our PRC subsidiaries and certain of our non-PRC subsidiaries have entered into loan agreements with various PRC banks, primarily Agricultural Bank of China, Bank of China, Bank of Shanghai, China CITIC Bank, China Minsheng Bank, China Bohai Bank, Bank of Communications, Shanghai Pudong Development Bank and China Merchants Bank, as well as trust companies, asset management companies and their financing vehicles. These loans are typically term loan facilities for the purposes of financing the construction of our projects (the ‘‘project loans’’) and have terms ranging from 12 to 96 months. In some of the project loans, the relevant subsidiary borrower is required to repay the loan in full on the date when 70% to 80% of the development financed by that project loan is sold or leased. As of December 31, 2018, the aggregate outstanding amount under these project loans was approximately RMB22.394 billion (US$3.257 billion).
Interest
The principal amounts outstanding under the project loans generally bear interest at floating rates calculated by reference to the PBOC’s base interest rate per annum. Floating interest rates generally are subject to review by the lenders annually. Interest payments are payable either monthly or quarterly and must be made on each payment date as provided in the relevant loan agreement. As of December 31, 2018, the weighted average interest rate on the aggregate outstanding amount of our project loans was 6.0% per annum.
Covenants
Certain of our subsidiary borrowers have agreed, among other things, that:
. they will notify the lenders if there are any material connected transactions between them and their controlling shareholders or their affiliates which may affect their normal operation;
. they will notify the lenders if there are any material legal proceedings or criminal or administrative actions; and
. the lenders may require the subsidiary borrowers to provide additional security or to repay the relevant project loan in full or in part if the subsidiary borrowers grant security or issue guarantee with respect to third party indebtedness which may adversely affect their ability to comply with their obligations under the project loans.
In addition, certain of our subsidiary borrowers have agreed, among other things, that they will not carry out the following actions without first obtaining the relevant lenders’ consent:
. grant security over any of their assets which are financed by the relevant project loans;
. grant security over any of their assets to secure any third party indebtedness if such security would adversely affect the relevant subsidiary borrower’s ability to comply with its obligations under the project loans or where the secured amount would exceed a specified percentage above its net assets value;
. issue guarantee with respect to any third party indebtedness if such guarantee would adversely affect the relevant subsidiary borrower’s ability to comply with its obligations under the project loans or where the guaranteed amount would exceed a certain amount or a certain percentage above its net assets value; and
. undergo any major change to their corporate structure or business operations, such as conducting mergers and acquisitions, reorganizations, asset disposals, decrease in registered capital or joint ventures.
— 197 — Restriction of Other Indebtedness
Our PRC subsidiaries have agreed that project loans shall rank at least pari passu with all of their other indebtedness of the same nature.
Events of Default
The project loans contain certain customary events of default, including insolvency, breaches of the terms of the loan agreements and cross-default.
The lenders are entitled to cancel their remaining commitments, accelerate the loans, demand immediate repayment of the loans and all accrued interest and/or to enforce the security (if any) upon the occurrence of an event of default.
Guarantee and Security
Certain of our PRC subsidiaries and their associated companies have created guarantees and granted mortgages in favor of the PRC banks in connection with some of the project loans. The guarantors agreed that, without the prior consent of the relevant lenders, they will not dispose of all or material assets and will not make any major change to their corporate structure, such as entering into joint venture, mergers and acquisitions and reorganizations. The guarantors also agreed that their guarantee obligations will not be subordinated to their other obligations. As of December 31, 2018, RMB11.304 billion (US$1.644 billion) of the project loans were secured by land use rights, properties under construction and certain other assets of our PRC subsidiaries.
Customer Guarantees
Certain of our PRC subsidiaries have entered into agreements with various PRC banks, under which the PRC banks agreed to grant mortgage loans to purchasers of properties developed by us. Our PRC subsidiaries are required to provide guarantees to mortgagee banks in respect of mortgage loans taken out by purchasers of our properties. As of December 31, 2018, the aggregate outstanding amount guaranteed was RMB5.065 billion (US$737 million).
Merger and Acquisition Loan Agreements
Certain of our PRC subsidiaries, such as Shanghai Yanlord Industrial Development Co., Ltd., Yanlord Land (Chengdu) Co., Ltd. and Yanlord (Shenzhen) Investment Management Co., Ltd. have entered into loan agreements with various PRC commercial banks, such as Bank of Shanghai, China Minsheng Bank and China Merchants Bank. These loans are typically term loan facilities for the purposes of financing the merger and acquisition of our target companies (the ‘‘merger and acquisition loans’’) for property development and land acquisitions and have terms of two to five years. As of December 31, 2018, the aggregate outstanding amount under these merger and acquisition loans was approximately RMB1.925 billion (US$280 million).
The principal amounts outstanding under the merger and acquisition loans generally bear interest at floating rates. Interest payments are payable quarterly and must be made on each payment date as provided in the relevant loan agreements. As of December 31, 2018, the weighted average interest rate on the aggregate outstanding amount of our merger and acquisition loans was 7.2% per annum.
The loan agreements for the merger and acquisition loans contain customary covenants and events of default.
Operating Property Loan Agreements
Certain of our PRC subsidiaries, such as Sanya Yanlord Real Estate Co., Ltd., Yanlord Land (Chengdu) Co., Ltd. and Yanlord Development (Tianjin) Co., Ltd. have entered into loan agreements with Bank of China, China CITIC Bank and China Bohai Bank. These loans are typically term loan facilities for financing the repayments of outstanding loans of our PRC subsidiaries holding investment properties and hotel, and have terms ranging from 10 to 15 years (the ‘‘operating property loans’’). These loans shall be repaid mainly using the rental income generated from our investment properties and income generated from hotel operation. As of December 31, 2018, the aggregate outstanding amount under the operating property loans was approximately RMB3.904 billion (US$568 million).
— 198 — The principal amounts outstanding under the operating property loans generally bear interest at floating rates calculated by reference to the PBOC’s base interest rate per annum. Floating interest rates generally are subject to review by the lending banks annually. Interest payments are payable quarterly and must be made on each payment date as provided in the relevant loan agreement. As of December 31, 2018, the weighted average interest rate on the aggregate outstanding amount of our operating property loans was 5.1% per annum.
The loan agreements for the operating property loan contain customary covenants and events of default.
Working Capital Loan Agreement
The Parent Guarantor has entered into a working capital term loan agreement with Bank of Shanghai for the purposes of financing the interest payments of overseas bonds, loans or senior notes, stock dividends and other working capital needs of the Group (the ‘‘working capital loan’’), which has a term of three years. As of December 31, 2018, the aggregate outstanding amount under the working capital loan was approximately RMB640 million (US$93 million).
The principal amounts outstanding under the working capital loan generally bear interest at floating rates calculated by reference to the PBOC’s base interest rate per annum. Interest payments are payable quarterly and must be made on each payment date as provided in the relevant loan agreement. As of December 31, 2018, the average interest rate on the aggregate outstanding amount of our working capital loan was 5.1% per annum.
The loan agreement for the working capital loan contains customary covenants and events of default.
2016 WL Facility
On April 26 2016, the Issuer entered into a HK$625 million equivalent multi-currency revolving and term loan facility with Wing Lung Bank as lender. This loan facility was amended by a supplemental agreement dated February 26, 2018 between both parties. In April 2019, this loan facility has been extended for additional two years. As of the date of this offering memorandum, the principal amount outstanding under the 2016 WL Facility was HK$625 million and nil is available for drawdown.
Collateral
The lenders of the 2016 WL Facility acceded to the Intercreditor Deed to share in the Collateral.
Interest
Principal amounts outstanding under the 2016 WL Facility bear interest at a fixed or floating rate depending on the denomination of loans under the facility. Interest on U.S. dollar loans is calculated by reference to LIBOR with an additional margin of 3.0% per annum. Interest on HK dollar loans is calculated by reference to HIBOR with an additional margin of 3.0% per annum. Interest on RMB loans is calculated at a fixed rate of 5.5% per annum. Accrued interest must be paid on the end of the term of the loan, or, it has terms is longer than six months, on interest payment dates.
Guarantee
Each of the Original Guarantors (as defined under the 2016 WL Facility) agreed to, jointly and severally, guarantee the punctual performance by the Parent Guarantor of all of its obligations under the 2016 WL Facility. The Original Guarantors under the 2016 WL Facility include Yanlord Land Group Limited, Yanlord Land Pte., Ltd., Yanlord Real Estate Pte. Ltd., Successful Global Consultancy Co., Limited, Yanlord Commercial Property Investments Pte. Ltd. and East Hero Investment Limited. Future subsidiaries of the Parent Guarantor incorporated outside of the PRC 75% or more of the voting capital of which is owned by the Parent Guarantor become additional guarantors under the 2016 WL Facility (with the exception of Yanlord Property Pte. Ltd., Palovale Pte. Ltd., Singapore Intelligent Eco Island Development Pte. Ltd. and Yanlord Ho Bee Investments Pte. Ltd.).
— 199 — Covenants
The 2016 WL Facility limits our ability and the ability of the Restricted Subsidiaries (as defined under the 2016 WL Facility) to, among other things:
. create liens;
. sell assets;
. make loans to or guarantees of the indebtedness of third parties;
. declare dividends or make other cash distributions to shareholders;
. incur restrictions on dividend payments or repayment of financial indebtedness owed by subsidiaries of the Parent Guarantor to any other member of the group;
. change the general nature of scope of the business of any the Parent Guarantor or any other obligor under the 2016 WL Facility;
. effect a consolidation or merger; or
. change our listing status on the SGX-ST.
Financial Ratio Requirements
The terms of the 2016 WL Facility require that the Parent Guarantor maintain the following conditions, which are tested semi-anuually:
. the Parent Guarantor’s Consolidated Tangible Net Worth (as defined under the 2016 WL Facility) must exceed RMB20 billion;
. the Parent Guarantor’s ratio of consolidated current assets to consolidated current liabilities must not be less than 1.20:1.00 at any time;
. the Parent Guarantor’s ratio of Consolidated Net Borrowings to the aggregate of Consolidated Tangible Net Worth (in each case as defined under the 2016 WL Facility) and the amount attributable to non-controlling interests in the subsidiaries of the Parent Guarantor must not be more than 0.95:1.00 at any time;
. the Fixed Charge Coverage Ratio (as defined under the 2016 WL Facility) must not be less than 2.50:1.00 at any time; and
. the ratio of Consolidated PRC Borrowings to Consolidated Total Assets (each as defined under the 2016 WL Facility) must not be more than 0.30:1.00 at any time.
Events of Default
The 2016 WL Facility contains certain customary events of default, including the following:
. expropriation, attachment, sequestration, distress or execution pursuant to court order or analogous events affecting assets of the Parent Guarantor or its subsidiaries having an aggregate value of at least US$15 million;
. cessation of the business of the Parent Guarantor or any of its subsidiaries (except for permitted disposals);
. the finance documents for the 2016 WL Facility cease to be effective;
. failure to maintain ownership of the obligors under the 2016 WL Facility;
. occurrence of events which, in the opinion of the Majority Lenders, gives reasonable grounds to believe that an event having a Material Adverse Effect (in each case as defined under the 2016 WL Facility) has occurred;
— 200 — . a change of control occurs whereby Mr. Zhong Sheng Jian ceases (i) to be beneficial owner directly or indirectly through wholly-owned subsidiaries of 40 percent or more of the issued share capital of the Parent Guarantor, (ii) to control the Parent Guarantor, or (iii) to be the single largest shareholder of the Parent Guarantor; and
. any obligor under the 2016 WL Facility becoming a declared company under the provisions of Part IX of the Companies Act, Chapter 50 of Singapore.
2017 Syndicated Loan Facility
On April 24, 2017, the Issuer entered into a US$1.05 billion syndicated loan facility with Hang Seng Bank Limited, The Hong Kong and Shanghai Banking Corporation Limited, Standard Chartered Bank (Hong Kong) Limited, DBS Bank Ltd. and Wing Lung Bank, Limited as mandated lead arrangers and bookrunners, China Construction Bank Corporation, Hong Kong Branch, Industrial and Commercial Bank of China (Asia) Limited, The Bank of East Asia, Limited, Shanghai Pudong Development Bank Co., Ltd., Shanghai Pudong Development Bank Co., Ltd., Hong Kong Branch, Shanghai Pudong Development Bank Co., Ltd. Singapore Branch, China Merchants Bank Co., Ltd., Hong Kong Branch, China Merchants Bank Co., Ltd Off-Shore Banking Center, Industrial and Commercial Bank of China (Macau) Limited, Ping An Bank Co., Ltd, Tianjin Pilot Free Trade Zone Branch, Nanyang Commercial Bank, Limited, Nanyang Commercial Bank (China) Limited Wuxi Branch, Shanghai Rural Commercial Bank Changning Branch, United Overseas Bank Limited, Hong Kong Branch, United Overseas Bank Limited, Singapore Branch as mandated lead arrangers, Chong Hing Bank Limited, Tai Fung Bank Limited, Bank of Shanghai (Hong Kong) Limited, China Everbright Bank Co., Ltd., Hong Kong Branch, China Guangfa Bank Co., Ltd., Macau Branch and Taiwan Cooperative Bank Limited, Hong Kong Branch as lead arrangers and Hang Seng Bank Limited as facility agent (the ‘‘Facility Agent’’)(the ‘‘2017 Syndicated Loan Facility’’), comprising of US$761.2 million equivalent dual-tranche term loan facility (the ‘‘Term Loan Facility’’) and US$288.8 million equivalent dual-tranche revolving credit facility (the ‘‘Revolving Credit Facility’’). As of the date of this offering memorandum, the principal amount outstanding under the 2017 Syndicated Loan Facility was US$1.012 billion and Nil is available for drawdown.
Under the Term Loan Facility, the Issuer must repay term loans of each term tranche made to it in full by four semi-annual instalments. Under the Revolving Credit Facility, the Issuer must repay each revolving credit facility loan on its maturity date. The final maturity date of the 2017 Syndicated Loan Facility is the date falling 42 months after the date of the 2017 Syndicated Loan Facility.
Collateral
The lenders of the 2017 Syndicated Loan Facility acceded to the Intercreditor Deed to share in the Collateral.
Interest
The rate of interest on each loan for each term is the percentage rate per annum equal to the aggregate of 3.35% per annum and the applicable LIBOR or HIBOR (as defined under the 2017 Syndicated Loan Facility).
Guarantee
Each of Yanlord Land Group Limited, Yanlord Land Pte. Ltd., Yanlord Real Estate Pte. Ltd., Successful Global Consultancy Co., Limited, Yanlord Commercial Property Investments Pte. Ltd., East Hero Investment Limited, any member of the Group which becomes a guarantor after the date of the 2017 Syndicated Loan Facility and the JV Subsidiary Guarantors (as defined in the 2017 Indenture as defined below) (the ‘‘2017 Syndicated Loan Facility Guarantors’’) jointly and severally, guarantees punctual performance by the Issuer of all its obligations under the 2017 Syndicated Loan Facility.
Covenants
Subject to certain exemptions, the 2017 Syndicated Loan Facility limits our ability or the ability of the 2017 Syndicated Loan Facility Guarantors to, among other things:
. create or allow to exist any Security Interest (as defined under the 2017 Syndicated Loan Facility);
— 201 — . sell, transfer or otherwise dispose of assets;
. give any guarantee or indemnities or make any loan or other financial accommodation or credit to any person;
. incur restrictions on dividend payments or repayment of financial indebtedness; and
. with respect to Yanlord Land Group Limited, declare or pay any dividends or make any income distribution in the form of cash to its shareholders in excess of 35% of its consolidated net profit after tax in any financial year.
Financial Ratio Requirements
The terms of the 2017 Syndicated Loan Facility require that Yanlord Land Group Limited maintain the following financial conditions, which are tested semi-annually:
. Consolidated Tangible Net Worth (as defined under the 2017 Syndicated Loan Facility) is not at any time less than RMB20 billion;
. the ratio of Consolidated Current Assets to Consolidated Current Liabilities (as defined under the 2017 Syndicated Loan Facility) is not at any time less than 1.20 to 1;
. the ratio of Consolidated Net Borrowings to the aggregate of Consolidated Tangible Net Worth (as defined under the 2017 Syndicated Loan Facility) and the amount attributable to non-controlling interests in Yanlord Land Group Limited’s Subsidiaries (as defined under the 2017 Syndicated Loan Facility) is not at any time more than 0.95 to 1;
. the Fixed Charge Coverage Ratio (as defined under the 2017 Syndicated Loan Facility) is not atanytimelessthan2.50to1;
. the ratio of Consolidated PRC Borrowings to Consolidated Total Assets (as defined under the 2017 Syndicated Loan Facility) is not at any time more than 0.30 to 1; and
. the value of any dividends and any other income distribution in the form of cash to its shareholders declared and paid in any financial year does not exceed 35% of its consolidated net profit after tax for such financial year.
Events of Default
The 2017 Syndicated Loan Facility contain certain customary events of default, including, among others, non-payment, breach of obligations under the 2017 Syndicated Loan Facility, cross-default, insolvency, material adverse change and change of control.
If an event of default is outstanding, the Facility Agent may cancel all or any part of the total commitments, accelerate all or any part of the amounts outstanding under the 2017 Syndicated Loan Facility and demand immediate repayment, and relevant parties may exercise any or all of their respective rights, remedies, powers and directions under the 2017 Syndicated Loan Facility.
2019 CMB WL Facilities
On January 14, 2019, Yanlord Land Pte. Ltd., entered into two term loan facilities with CMB Wing Lung Bank Limited as the lender. The first facility is a one-year term loan facility with a principal amount of RMB715 million or its U.S. dollar equivalents (the ‘‘Facility I’’) and the second facility is a two-year term loan facility with a principal amount of RMB715 million (the ‘‘Facility II’’). As of the date of this offering memorandum, the principal amount outstanding under the 2019 CMB WL Facilities was USD96.5 million and RMB715 million, and Nil is available for drawdown.
The proceeds of the 2019 CMB WL Facilities will be used to support the establishment of Universal Estate Pte. Ltd., a joint venture of the Company, with HK Land by means of shareholder’s loan and to finance our dividend payment and other general working capital requirements.
— 202 — Interest
Principal amounts outstanding under the Facility I bear interest at a fixed or floating rate depending on the denomination of loans under the facility. Interest on RMB loans is calculated at a fixed rate of 5.15% per annum, and interest on U.S. dollar loans is calculated by reference to LIBOR (as defined under the 2019 CMB WL Facilities) with an additional margin of 1.1% per annum or any other rates to be agreed by both parties upon drawdown.
Principal amounts outstanding under the Facility II bear interest at a fixed rate under the facility, and the interest is calculated at a fixed rate of 4.90% per annum, or any other rates to be agreed by both parties upon drawdown.
Standby Letter of Credit
An irrevocable standby letter of credit in RMB for the total amount not less than RMB1.43 billion was issued by Bank of Shanghai Co., Ltd. Nanjing Branch or other financial institutions acceptable to the lender, in favor of the lender.
Covenants
The 2019 CMB WL Facilities limit our ability and the ability of the Restricted Subsidiaries (as defined under the 2019 CMB WL Facilities) to, among other things:
. change the general nature of scope of the business;
. effect a consolidation, merger or sale that would cause the Parent Guarantor cease to hold, directly or indirectly, 100% share interest in Yanlord Land Pte. Ltd; or
In addition, Yanlord Land Pte. Ltd. shall continue to be the majority holding of the Group’s onshore projects in terms of developable GFA during the tenor of the loan.
Financial Ratio Requirements
The terms of the 2019 CMB WL Facilities require that the Parent Guarantor maintain the following conditions, which are tested biannually:
. the Parent Guarantor’s Consolidated Tangible Net Worth (as defined under the 2019 CMB WL Facilities) shall not be less than RMB20 billion; and
. the Parent Guarantor’s ratio of Consolidated Net Borrowings (exclusive of shareholders’ loans and loans from related companies) to the aggregate of Consolidated Tangible Net Worth (including all amounts attributable to minority interests) (in each case as defined under the 2019 CMB WL Facilities) shall not be more than 0.95:1.00 at any time.
Events of Default
The 2019 CMB WL Facilities contain certain customary events of default, including, among others, non-payment, breach of representations and warranties, covenants and undertakings under the 2019 CMB WL Facilities, cross-default, insolvency, material adverse change and change of control.
2019 Dual-Tranche Term Loan Facility
On April 9, 2019, the Issuer entered into a US$363.5 million dual-tranche term loan facility with Bank of Shanghai (Hong Kong) Limited, China Construction Bank (Asia) Corporation Limited, China Merchants Bank Co., Ltd., Hong Kong Branch, China Merchants Bank Co. Ltd, Singapore Branch, Hang Seng Bank Limited, Shanghai Pudong Development Bank Co., Ltd., Hong Kong Branch and The Hongkong and Shanghai Banking Corporation Limited as mandated lead arrangers, Hang Seng Bank Limited as facility agent (the ‘‘Facility Agent’’) and the financial institutions listed therein as original lenders (the ‘‘2019 Dual-Tranche Term Loan Facility’’), comprising of a U.S. dollar tranche in an aggregate amount equal to US$95 million and a Hong Kong dollar tranche in an aggregate amount equal to HK$2.094 billion. As of the date of this offering memorandum, the principal amount outstanding under the 2019 Dual-Tranche Term Loan Facility was US$363.5 million and Nil is available for drawdown.
— 203 — Under the 2019 Dual-Tranche Term Loan Facility, the Issuer must repay the loans of each tranche made to it in full by four semi-annual instalments, one such instalment to be repaid on each Repayment Instalment Date (as defined under the 2019 Dual-Tranche Term Loan Facility). The final maturity date of the 2019 Dual-Tranche Term Loan Facility is the date falling 42 months after the date of the 2019 Dual-Tranche Term Loan Facility. If a term for a loan would otherwise overrun the final maturity date, it will be shortened so that it ends on the final maturity date.
Collateral
The lenders of the 2019 Dual-Tranche Term Loan Facility acceded to the Intercreditor Deed to share in the Collateral.
Interest
The rate of interest on each loan for each term is the percentage rate per annum equal to the aggregate of 3.95% per annum and the applicable LIBOR (if the loan is drawn or outstanding in U.S. dollars) or HIBOR (if the loan is drawn or outstanding in Hong Kong dollars) (as defined under the 2019 Dual-Tranche Term Loan Facility).
Guarantee
Each of Yanlord Land Group Limited, Yanlord Land Pte. Ltd., Yanlord Real Estate Pte. Ltd., Successful Global Consultancy Co., Limited, Yanlord Commercial Property Investments Pte. Ltd., East Hero Investment Limited, any member of the Group which becomes a guarantor after the date of the 2019 Dual-Tranche Term Loan Facility and the JV Subsidiary Guarantors (as defined in the 2018 Indenture as defined below) (the ‘‘2019 Dual-Tranche Term Loan Facility Guarantors’’) jointly and severally, guarantees punctual performance by the Issuer of all its obligations under the 2019 Dual- Tranche Term Loan Facility.
Covenants
Subject to certain exemptions, the 2019 Dual-Tranche Term Loan Facility limits our ability or the ability of the 2019 Dual-Tranche Term Loan Facility Guarantors to, among other things:
. create or allow to exist any Security Interest (as defined under the 2019 Dual-Tranche Term Loan Facility) on any of its assets;
. sell, transfer or otherwise dispose of assets;
. give any guarantee or indemnity or make any loan or other financial accommodation or credit to any person;
. incur restrictions on dividend payments or repayment of financial indebtedness owed to any other member of the Group (as defined under the 2019 Dual-Tranche Term Loan Facility); and
. with respect to Yanlord Land Group Limited, declare or pay any dividends or make any income distribution in the form of cash to its shareholders in excess of 35% of its consolidated net profit after tax in any financial year.
Financial Ratio Requirements
The terms of the 2019 Dual-Tranche Term Loan Facility require that Yanlord Land Group Limited maintain the following financial conditions, which are tested semi-annually:
. Consolidated Tangible Net Worth (as defined under the 2019 Dual-Tranche Term Loan Facility) is not at any time less than RMB20 billion;
. the ratio of Consolidated Current Assets to Consolidated Current Liabilities (as defined under the 2019 Dual-Tranche Term Loan Facility) is not at any time less than 1.20 to 1;
— 204 — . the ratio of Consolidated Net Borrowings to the aggregate of Consolidated Tangible Net Worth (as defined under the 2019 Dual-Tranche Term Loan Facility) and the amount attributable to non-controlling interests in Yanlord Land Group Limited’s Subsidiaries (as defined under the 2019 Dual-Tranche Term Loan Facility) is not at any time more than 0.95 to 1;
. the Fixed Charge Coverage Ratio (as defined under the 2019 Dual-Tranche Term Loan Facility)isnotatanytimelessthan2.50to1;
. the ratio of Consolidated PRC Borrowings to Consolidated Total Assets (as defined under the 2019 Dual-Tranche Term Loan Facility) is not at any time more than 0.30 to 1; and
. the value of any dividends and any other income distribution in the form of cash to its shareholders declared and paid in any financial year does not exceed 35% of its consolidated net profit after tax for such financial year.
Events of Default
The 2019 Dual-Tranche Term Loan Facility contain certain customary events of default, including, among others, non-payment, breach of obligations under the 2019 Dual-Tranche Term Loan Facility, cross-default, insolvency, material adverse change and change of control.
If an event of default is outstanding, the Facility Agent may cancel all or any part of the total commitments, accelerate all or any part of the amounts outstanding under the 2019 Dual-Tranche Term Loan Facility and demand immediate repayment, and relevant parties may exercise any or all of their respective rights, remedies, powers and directions under the 2019 Dual-Tranche Term Loan Facility.
2017 Senior Notes
On January 23, 2017, we entered into an indenture (the ‘‘2017 Indenture’’) pursuant to which we issued the 2017 Senior Notes. As of the date of this offering memorandum, we had a total of US$450 million principal amount of the 2017 Senior Notes outstanding.
Guarantees
Each of the Subsidiary Guarantors (as defined under the 2017 Indenture) (other than New Non- Guarantor Restricted Subsidiaries) agreed to, jointly and severally, guarantee the due and punctual payment of the principal of, premium, if any, and interest on, and all other amounts payable under, the 2017 Senior Notes.
The initial Subsidiary Guarantors consisted of all the Restricted Subsidiaries (as defined under the 2017 Indenture) other than (i) those Restricted Subsidiaries organized under the laws of the PRC and (ii) certain other subsidiaries specified in the 2017 Indenture.
Collateral
The trustee of the 2017 Notes acceded to the security agency and intercreditor deed dated May 4, 2010, among the Company, Yanlord Land Pte. Ltd., and the trustees and agents named therein, as acceded to from time to time (the ‘‘Intercreditor Deed’’) to share in the Collateral.
Interest
The 2017 Senior Notes bore interest from and including January 23, 2017 at the rate of 5.875% per annum, payable semi-annually in arrears.
Covenants
The 2017 Senior Notes, the 2017 Indenture governing the 2017 Senior Notes and the Subsidiary Guarantees (as defined under the 2017 Indenture) limit our ability and the ability of our Restricted Subsidiaries to, among other things:
. Incur or guarantee additional indebtedness and issue disqualified or preferred stock;
. declare dividends on its capital stock or purchase or redeem capital stock;
— 205 — . make investments or other specified restricted payments; issue or sell capital stock of Restricted Subsidiaries; guarantee indebtedness of Restricted Subsidiaries;
. sell assets;
. create liens;
. enter into sale and leaseback transaction;
. enter into agreements that restrict the Restricted Subsidiaries’ ability to pay dividends, transfer assets or make intercompany loans;
. enter into transaction with shareholders or affiliates; and effect a consolidation or merger;
. make loans to or guarantees of the indebtedness of third parties.
Events of Default
The 2017 Indenture contains certain customary events of default. If an event of default occurs and is continuing under the 2017 Indenture, the trustee or the holders of at least 25% in aggregate principal amount of the 2017 Senior Notes then outstanding, by written notice to the Company (and to the trustee if such notice if given by the holders), may, and the trustee at the request of such holders shall, declare the principal of, premium, if any, and accrued and unpaid interest on the 2017 Senior Notes to be immediately due and payable.
Change of Control
Upon the occurrence of certain events of change of control, we must make an offer to repurchase all 2017 Senior Notes outstanding at a purchase price equal to 101% of their principal amount, plus any accrued and unpaid interest.
Maturity and Redemption
The maturity date of the 2017 Senior Notes is January 23, 2022.
At any time prior to January 23, 2020, we may redeem up to 35% of the 2017 Senior Notes, at a redemption price of 105.875% of the principal amount of the 2017 Senior Notes plus accrued and unpaid interest, if any, with the proceeds from sales of certain kinds of the Company’s capital stock, subject to certain restrictions.
2018 Senior Notes
On April 23, 2018, we entered into an indenture (the ‘‘2018 Indenture’’) pursuant to which we issued the 2018 Senior Notes. As of the date of this offering memorandum, we had a total of US$350 million principal amount of the 2018 Senior Notes outstanding.
Guarantees
Each of the Subsidiary Guarantors (as defined under the 2018 Indenture) (other than New Non- Guarantor Restricted Subsidiaries) agreed to, jointly and severally, guarantee the due and punctual payment of the principal of, premium, if any, and interest on, and all other amounts payable under, the 2018 Senior Notes.
The initial Subsidiary Guarantors consisted of all the Restricted Subsidiaries (as defined under the 2018 Indenture) other than (i) those Restricted Subsidiaries organized under the laws of the PRC and (ii) certain other subsidiaries specified in the 2018 Indenture.
Collateral
The trustee of the 2018 Notes acceded to the Intercreditor Deed to share in the Collateral.
— 206 — Interest
The 2018 Senior Notes bore interest from and including April 23, 2018 at the rate of 6.75% per annum, payable semi-annually in arrears.
Covenants
The 2018 Senior Notes, the 2018 Indenture governing the 2018 Senior Notes and the Subsidiary Guarantees (as defined under the 2018 Indenture) limit our ability and the ability of our Restricted Subsidiaries to, among other things:
. Incur or guarantee additional indebtedness and issue disqualified or preferred stock;
. declare dividends on its capital stock or purchase or redeem capital stock;
. make investments or other specified restricted payments; issue or sell capital stock of Restricted Subsidiaries; guarantee indebtedness of Restricted Subsidiaries;
. sell assets;
. create liens;
. enter into sale and leaseback transaction;
. enter into agreements that restrict the Restricted Subsidiaries’ ability to pay dividends, transfer assets or make intercompany loans;
. enter into transaction with shareholders or affiliates; and effect a consolidation or merger.
Events of Default
The 2018 Indenture contains certain customary events of default. If an event of default occurs and is continuing under the 2018 Indenture, the trustee or the holders of at least 25% in aggregate principal amount of the 2018 Senior Notes then outstanding, by written notice to the Company (and to the trustee if such notice if given by the holders), may, and the trustee at the request of such holders shall, declare the principal of, premium, if any, and accrued and unpaid interest on the 2018 Senior Notes to be immediately due and payable.
Change of Control
Upon the occurrence of certain events of change of control, we must make an offer to repurchase all the 2018 Senior Notes outstanding at a purchase price equal to 101% of their principal amount, plus any accrued and unpaid interest.
Maturity and Redemption
The maturity date of the 2018 Senior Notes is April 23, 2023.
At any time prior to April 23, 2021, we may redeem up to 35% of the 2018 Senior Notes, at a redemption price of 106.75% of the principal amount of the 2018 Senior Notes plus accrued and unpaid interest, if any, with the proceeds from sales of certain kinds of the Company’s capital stock, subject to certain restrictions.
— 207 — DESCRIPTION OF THE NOTES
For purposes of this ‘‘Description of the Notes,’’ (i) the term ‘‘Issuer’’ refers only to Yanlord Land (HK) Co., Limited, a company incorporated with limited liability under the laws of Hong Kong, and any successor obligor on the Notes, and not to any of its Subsidiaries or Affiliates, (ii) the term ‘‘Parent Guarantor’’ refers only to Yanlord Land Group Limited, a company incorporated with limited liability under the laws of Singapore, and any successor obligor on the Notes, and not to any of its Subsidiaries or Affiliates. The Parent Guarantor’s guarantee of the Notes is referred to as the ‘‘Parent Guarantee.’’ Each Subsidiary of the Parent Guarantor that guarantees the Notes (other than as a JV Subsidiary Guarantor) is referred to as a ‘‘Subsidiary Guarantor,’’ and each such guarantee is referred to as a ‘‘Subsidiary Guarantee.’’ Each Subsidiary of the Parent Guarantor that provides a JV Subsidiary Guarantee is referred to as a ‘‘JV Subsidiary Guarantor,’’ and each such guarantee is referred to as a ‘‘JV Subsidiary Guarantee.’’ The term ‘‘Guarantor’’ refers to the Parent Guarantor, a Subsidiary Guarantor or a JV Subsidiary Guarantor, as the context requires, and the term ‘‘Guarantee’’ refers to the Parent Guarantee, a Subsidiary Guarantee or a JV Subsidiary Guarantee, as the context requires. The term ‘‘Guarantors’’ refers to the Parent Guarantor, the Subsidiary Guarantors and the JV Subsidiary Guarantors collectively, and the term ‘‘Guarantees’’ refers to the Parent Guarantee, the Subsidiary Guarantees and the JV Subsidiary Guarantees collectively.
The Notes are to be issued under an indenture (the ‘‘Indenture’’), to be dated as of the Original Issue Date, among the Issuer, the Parent Guarantor and the Subsidiary Guarantors, as guarantors, and Citicorp International Limited, as trustee (the ‘‘Trustee’’).
The following is a summary of certain material provisions of the Indenture, the Notes, the Parent Guarantee, the Subsidiary Guarantees, the JV Subsidiary Guarantees, the Intercreditor Deed and the Security Documents. This summary does not purport to be complete and is qualified in its entirety by reference to all of the provisions of the Indenture, the Notes, the Parent Guarantee, the Subsidiary Guarantees, the JV Subsidiary Guarantees, the Intercreditor Deed and the Security Documents. It does not restate those agreements in their entirety. Whenever particular sections or defined terms of the Indenture not otherwise defined herein are referred to, such sections or defined terms are incorporated herein by reference. Copies of the Indenture, the Intercreditor Deed and the Security Documents will be available for inspection during normal business hours on or after the Original Issue Date at the corporate trust office of the Trustee at 20/F Citi Tower, One Bay East, 83 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong.
Brief Description of the Notes
The Notes are:
. general obligations of the Issuer;
. senior in right of payment to any existing and future obligations of the Issuer expressly subordinated in right of payment to the Notes;
. at least pari passu in right of payment with all unsecured, unsubordinated Indebtedness of the Issuer (subject to any priority rights of such unsubordinated Indebtedness pursuant to applicable law);
. guaranteed by the Parent Guarantor, the Subsidiary Guarantors and the JV Subsidiary Guarantors (if any) on a senior basis, subject to the limitations described below under the caption ‘‘— The Parent Guarantee,’’ the caption ‘‘— The Subsidiary Guarantees and the JV Subsidiary Guarantees’’ and in ‘‘Risk Factors — Risks Relating to the Guarantees and the Collateral’’;
. effectively subordinated to the other secured obligations of the Issuer, the Parent Guarantor, the Subsidiary Guarantors and the JV Subsidiary Guarantors (if any), to the extent of the value of the assets serving as security therefor; and
. effectively subordinated to all existing and future obligations of the Non-Guarantor Subsidiaries.
— 208 — In addition, on the Original Issue Date, subject to the limitations described in ‘‘Risk Factors — Risks Relating to the Guarantees and the Collateral,’’ the Notes will be secured by the Collateral as described below under the caption ‘‘— Security’’ and will:
. be entitled to a Lien on the Collateral (subject to any Permitted Liens and the Intercreditor Deed) shared on a pari passu basis with (i) the holders of the 2017 Senior Notes and the 2018 Senior Notes, (ii) the lenders under the 2016 WL Facility, the 2017 Syndicated Loan Facility and the 2019 Dual-Tranche Term Loan Facility and (iii) any other creditors with respect to Permitted Pari Passu Secured Indebtedness;
. rank effectively senior in right of payment to unsecured obligations of the Parent Guarantor with respect to the value of the Collateral pledged by the Parent Guarantor securing the Notes (subject to any priority rights of such unsecured obligations pursuant to applicable law); and
. rank effectively senior in right of payment to unsecured obligations of the Subsidiary Guarantor Pledgors to the extent of the Collateral charged by each Subsidiary Guarantor Pledgor securing the Notes (subject to any priority rights of such unsecured obligations pursuant to applicable law).
The Notes will mature on August , 20 , unless earlier redeemed pursuant to the terms thereof and the Indenture. The Indenture allows additional Notes to be issued from time to time (the ‘‘Additional Notes’’), subject to certain limitations described under ‘‘— Further Issues.’’ Unless the context requires otherwise, references to the ‘‘Notes’’ for all purposes of the Indenture and this ‘‘Description of the Notes’’ include any Additional Notes that are actually issued. The Notes will bear interest at % per annum from the Original Issue Date or from the most recent interest payment date to which interest has been paid or duly provided for, payable semiannually in arrears on August and February of each year (each an ‘‘Interest Payment Date’’), commencing February , 2020.
Interest on the Notes will be paid to Holders of record at the close of business on August or February immediately preceding an Interest Payment Date (each, a ‘‘Record Date’’), notwithstanding any transfer, exchange or cancellation thereof after a Record Date and prior to the immediately following Interest Payment Date. So long as the Notes are held in global form, each payment in respect of the Global Note will be made to the person shown as the holder of the Notes in the Register at the close of business (of the relevant clearing system) on the Clearing System Business Day before the due date for such payments, where ‘‘Clearing System Business Day’’ means a weekday (Monday to Friday, inclusive) except December, 25 and January, 1. In any case in which the date of the payment of principal of, premium or interest on the Notes is not a Business Day in the relevant place of payment or in the place of business of the Paying Agent, then payment of principal, premium or interest need not be made in such place on such date but may be made on the next succeeding Business Day in such place. Any payment made on such Business Day shall have the same force and effect as if made on the date on which such payment is due, and no interest on the Notes shall accrue for the period after such date. Interest on the Notes will be calculated on the basis of a 360-day year comprised of twelve 30-day months.
The Notes will be issued only in fully registered form, without coupons, in denominations of US$200,000 and integral multiples of US$1,000 in excess thereof. No service charge will be made for any registration of transfer or exchange of Notes, but the Issuer may require payment of a sum sufficient to cover any transfer tax or other similar governmental charge payable in connection therewith.
For as long as the Notes are listed on the SGX-ST and the rules of the SGX-ST so require, the Notes, if traded on the SGX-ST, will be traded in a minimum board lot size of S$200,000 (or its equivalent in foreign currencies). Accordingly, the Notes, if traded on the SGX-ST, will be traded on the SGX-ST in a minimum board lot size of US$200,000.
All payments on the Notes will be made in U.S. dollars by the Issuer at the office or agency of the Issuer maintained for that purpose (which initially will be the specified office of the Paying Agent, currently located at Citibank, N.A., London Branch, c/o Citibank, N.A., Dublin Branch, One North Wall Quay, Dublin 1, Ireland), and the Notes may be presented for registration of transfer or exchange at the specified office of the Paying Agent. Interest payable on the Notes held through Euroclear and Clearstream will be available to Euroclear and Clearstream participants (as defined herein) on the Business Day following payment thereof.
— 209 — The Parent Guarantee
The Parent Guarantee:
. is a general obligation of the Parent Guarantor;
. is effectively subordinated to secured obligations of the Parent Guarantor, to the extent of the value of the assets serving as security therefor;
. is senior in right of payment to all future obligations of the Parent Guarantor expressly subordinated in right of payment to the Parent Guarantee; and
. ranks at least pari passu with all unsecured, unsubordinated Indebtedness of the Parent Guarantor (subject to any priority rights of such unsubordinated Indebtedness pursuant to applicable law).
In addition, subject to the limitations described in ‘‘Risk Factors — Risks Relating to the Guarantees and the Collateral,’’ the Parent Guarantee will be secured by the Collateral, pledged by it as described below under the caption ‘‘— Security’’ and will:
. be entitled to a Lien on the Collateral (subject to any Permitted Liens and the Intercreditor Deed) pledged by the Parent Guarantor, as described below under the caption ‘‘— Security,’’ shared on a pari passu basis with (i) the holders of the 2017 Senior Notes and the 2018 Senior Notes, (ii) the lenders under the 2016 WL Facility, the 2017 Syndicated Loan Facility and the 2019 Dual-Tranche Term Loan Facility and (iii) any other creditors with respect to Permitted Pari Passu Secured Indebtedness; and
. rank effectively senior in right of payment to the unsecured obligations of the Parent Guarantor with respect to the value of the Collateral securing the Parent Guarantee (subject to any priority rights of such unsecured obligations pursuant to applicable law).
Under the Indenture, the Parent Guarantor will irrevocably and unconditionally guarantee the due and punctual payment of the principal of, premium, if any, and interest on, and all other amounts payable under (including any Additional Amounts payable in respect of), the Notes when and as the same shall become due and payable, whether on the stated maturity, upon acceleration, by call for redemption or otherwise. The Parent Guarantor will (1) agree that its obligations under the Parent Guarantee will be as if the Parent Guarantor were principal obligor and not merely surety, and will be enforceable irrespective of any invalidity, irregularity or unenforceability of the Notes or the Indenture and (2) waive its right to require the Trustee to pursue or exhaust its legal or equitable remedies against the Issuer prior to exercising its rights under the Parent Guarantee. The Parent Guarantee will not be discharged with respect to any Note except by payment in full of the principal thereof, interest thereon and all other amounts payable thereunder (including any Additional Amounts payable in respect thereof). Moreover, if at any time any amount paid under a Note or the Indenture is rescinded or must otherwise be restored, the rights of the Holders under the Parent Guarantee will be reinstated with respect to such payments as though such payment had not been made. All payments under the Parent Guarantee are required to be made in U.S. dollars.
Release of the Parent Guarantee
The Parent Guarantee may be automatically and unconditionally released and discharged in certain circumstances, including:
. upon repayment in full of the Notes;
. upon a defeasance as described under ‘‘— Defeasance — Defeasance and Discharge’’;
. in whole or in part, with the requisite consent of the Holders in accordance with the provisions described under ‘‘— Amendments and Waiver’’;or
. upon the merger or consolidation of the Parent Guarantor with and into the Issuer that is the Surviving Person in such merger or consolidation, or upon the liquidation of the Parent Guarantor following the transfer of all or substantially all of its assets to the Issuer, in each case in compliance with the applicable provisions of the Indenture.
— 210 — The Subsidiary Guarantees and the JV Subsidiary Guarantees
The initial Subsidiary Guarantors that will execute the Indenture on the Original Issue Date will consist of all of the Parent Guarantor’s Restricted Subsidiaries other than the Issuer and the Non- Guarantor Subsidiaries (defined below). All of the Subsidiary Guarantors are holding companies that do not have significant operations.
The following Restricted Subsidiaries will not be Subsidiary Guarantors on the Original Issue Date:
. the Issuer;
. all Subsidiaries organized under the laws of the PRC (together, the ‘‘PRC Non-Guarantor Subsidiaries’’); and
. Yanlord Singapore Retail Pte. Ltd., Yanlord Singapore Office Pte. Ltd., Yanlord Singapore Residential Pte. Ltd., Yanlord Property Pte. Ltd., Yanlord Ho Bee Investments Pte. Ltd., Singapore Intelligent Eco Island Development Pte. Ltd., Palovale Pte Ltd, Yanlord Eco Island Investments Pte. Ltd., Greens Investments Ltd., Blossom HK (Residential) Ltd., Blossom Residential Holdings Pte. Ltd., Blossom Residential Investments Pte. Ltd., Blossom Residential Development Pte. Ltd., Blossom HK (Commercial) Ltd., Blossom Commercial Holdings Pte. Ltd., Blossom Commercial Investment Pte. Ltd., Blossom Commercial Development Investment Pte. Ltd., Universal Estate Pte. Ltd., Asia Radiant Pte. Ltd. and Flourish Fair Limited (the ‘‘Other Non-Guarantor Subsidiaries’’ which, together with the PRC Non-Guarantor Subsidiaries and the New Non-Guarantor Restricted Subsidiaries (as defined below), are referred to herein as the ‘‘Non-Guarantor Subsidiaries’’).
None of the existing Non-Guarantor Subsidiaries will at any time in the future provide a Subsidiary Guarantee or JV Subsidiary Guarantee, except that if any of the Other Non-Guarantor Subsidiaries were to Guarantee the Indebtedness of the Parent Guarantor, the Issuer, any Subsidiary Guarantor or any JV Subsidiary Guarantor after the Original Issue Date, such Other Non-Guarantor Subsidiary will be required to deliver to the Trustee, as soon as practicable and in any event within 30 days of entering into such Guarantee, a duly executed supplemental indenture to the Indenture pursuant to which such Other Non-Guarantor Subsidiary will guarantee the payment of the Notes as either a Subsidiary Guarantor or a JV Subsidiary Guarantor.
Moreover, no future Restricted Subsidiaries organized under the laws of the PRC will provide a Subsidiary Guarantee or JV Subsidiary Guarantee at any time in the future. Although the Indenture contains limitations on the amount of additional Indebtedness that Restricted Subsidiaries organized under the laws of the PRC and the Other Non-Guarantor Subsidiaries may incur, the amount of such additional Indebtedness could be substantial. In the event of a bankruptcy, liquidation or reorganization of any Non-Guarantor Subsidiary, the Non-Guarantor Subsidiaries will pay the holders of their debt and their trade creditors before they will be able to distribute any of their assets to the Parent Guarantor.
In the case of any Restricted Subsidiary organized under the laws of a jurisdiction other than the PRC that is, or is proposed by the Parent Guarantor or any of its Restricted Subsidiaries to be, established after the Original Issue Date, such Restricted Subsidiary shall not be required to provide a Subsidiary Guarantee or a JV Subsidiary Guarantee provided that (i) within 30 days of the establishment of such Restricted Subsidiary, the Parent Guarantor delivers an Officers’ Certificate to the Trustee confirming that it is in discussions with one or more Independent Third Parties for the potential investment by such Independent Third Parties in such Restricted Subsidiary and (ii) such Independent Third Party or Parties acquires no less than 20% of the Capital Stock of such Restricted Subsidiary within 180 days of the establishment of such Restricted Subsidiary (such Restricted Subsidiaries, the ‘‘Future Non-Guarantor Subsidiaries’’). If either of the above conditions is not satisfied, such Restricted Subsidiary will be required to promptly deliver to the Trustee a duly executed supplemental indenture to the Indenture pursuant to which such Restricted Subsidiary will guarantee the payment of the Notes as either a Subsidiary Guarantor or JV Subsidiary Guarantor. Notwithstanding the foregoing and without limiting the Parent Guarantor’s ability to establish such Future Non-Guarantor Subsidiaries, the Parent Guarantor may elect to have any future Restricted Subsidiary organized outside the PRC not provide a Subsidiary Guarantee or a JV Subsidiary Guarantee (Restricted Subsidiaries organized outside the PRC that provide neither a Subsidiary Guarantee nor a JV Subsidiary Guarantee in accordance with the Indenture, and together with the Future Non-Guarantor Subsidiaries, the ‘‘New Non-Guarantor Restricted Subsidiaries’’) at the time such entity becomes a Restricted Subsidiary; provided that, after giving effect to the consolidated assets of such Restricted Subsidiary, the Consolidated Assets of all Restricted Subsidiaries organized outside the PRC that are neither a Subsidiary Guarantor nor a JV Subsidiary Guarantor (but excluding the Other Non-Guarantor Subsidiaries and the Future Non-Guarantor Subsidiaries) do not account for more than 30% of the Total Assets of the Parent Guarantor. If any of
— 211 — the New Non-Guarantor Restricted Subsidiaries were to guarantee the Indebtedness of the Issuer, the Parent Guarantor or any Subsidiary Guarantor after the Original Issue Date, such New Non-Guarantor Restricted Subsidiary will be required to deliver to theTrustee,assoonaspracticable and in any event within 30 days of entering into such Guarantee, a duly executed supplemental indenture to the Indenture pursuant to which such New Non-Guarantor Restricted Subsidiary will guarantee the payment of the Notes as either a Subsidiary Guarantor or a JV Subsidiary Guarantor.
Notwithstanding the foregoing, no Subsidiary Guarantor existing as of the Original Issue Date may become a New Non-Guarantor Restricted Subsidiary.
In the event of a bankruptcy, liquidation or reorganization of any Non-Guarantor Subsidiary, such Non-Guarantor Subsidiary will pay the holders of its debt and its trade creditors before it will be able to distribute any of its assets to the Parent Guarantor.
As of December 31, 2018,
. the Parent Guarantor and its consolidated subsidiaries had total consolidated indebtedness of approximately RMB42.135 billion (US$6.128 billion);
. the Parent Guarantor, the Issuer and the Subsidiary Guarantors had no secured indebtedness other than indebtedness in connection with the 2016 WL Facility, the 2017 Senior Notes, the 2017 Syndicated Loan Facility, the 2018 Senior Notes and the 2019 Dual-Tranche Term Loan Facility, the respective holders and lenders of which shall share in the lien on the Collateral on a pari passu basis, and the 2019 CMB WL Facilities; and
. the Non-Guarantor Subsidiaries had total liabilities of approximately RMB58.524 billion (US$8.512 billion).
In addition, as of December 31, 2018, the Non-Guarantor Subsidiaries had capital commitments and contingent liabilities of approximately RMB5.324 billion (US$0.774 billion).
The Subsidiary Guarantee of each Subsidiary Guarantor:
. is a general obligation of such Subsidiary Guarantor;
. is effectively subordinated to secured obligations of such Subsidiary Guarantor, to the extent of the value of the assets serving as security therefor;
. is senior in right of payment to all future obligations of such Subsidiary Guarantor expressly subordinated in right of payment to such Subsidiary Guarantee; and
. ranks at least pari passu with all unsecured, unsubordinated Indebtedness of such Subsidiary Guarantor (subject to any priority rights of such unsubordinated Indebtedness pursuant to applicable law).
If any is provided, the JV Subsidiary Guarantee of each JV Subsidiary Guarantor:
. will be a general obligation of such JV Subsidiary Guarantor;
. will be enforceable only up to the JV Entitlement Amount;
. will be effectively subordinated to secured obligations of such JV Subsidiary Guarantor, to the extent of the value of the assets serving as security therefor;
. will be limited to the JV Entitlement Amount and will be senior in right of payment to all future obligations of such JV Subsidiary Guarantor expressly subordinated in right of payment to such JV Subsidiary Guarantee; and
. will be limited to the JV Entitlement Amount and will rank at least pari passu with all other unsecured, unsubordinated Indebtedness of such JV Subsidiary Guarantor (subject to any priority rights of such unsubordinated Indebtedness pursuant to applicable law).
The Parent Guarantor will cause each of its future Restricted Subsidiaries (other than (x) Persons organized under the laws of the PRC and (y) any New Non-Guarantor Restricted Subsidiary), as soon as practicable and in any event within 30 days of becoming a Restricted Subsidiary, to execute and deliver to the Trustee a supplemental indenture to the Indenture, pursuant to which such Restricted Subsidiary will guarantee the payment of the Notes on a senior basis as either a Subsidiary Guarantor or a JV
— 212 — Subsidiary Guarantor. Each Restricted Subsidiary that guarantees the Notes after the Original Issue Date other than a JV Subsidiary Guarantor is referred to as a ‘‘Future Subsidiary Guarantor’’ and upon execution of the applicable supplemental indenture to the Indenture will be a ‘‘Subsidiary Guarantor.’’
In addition, subject to the limitations described in ‘‘Risk Factors — Risks Relating to the Guarantees and the Collateral,’’
. the Subsidiary Guarantee of each Subsidiary Guarantor Pledgor will be secured by the Collateral, pledged by it as described below under the caption ‘‘— Security’’ and:
(i) prior to the Release Date (as defined herein), will be entitled to a Lien on the Collateral (subject to any Permitted Liens and the Intercreditor Deed) pledged by such Subsidiary Guarantor Pledgor shared on a pari passu basis with the holders of the 2017 Senior Notes and the 2018 Senior Notes, the lenders under the 2016 WL Facility, the 2017 Syndicated Loan Facility and the 2019 Dual-Tranche Term Loan Facility and any other creditors with respect to Permitted Pari Passu Secured Indebtedness; and
(ii) will rank effectively senior in right of payment to the unsecured obligations of such Subsidiary Guarantor Pledgor with respect to the value of the Collateral securing such Subsidiary Guarantee (subject to any priority rights of such unsecured obligations pursuant to applicable law); and
. the JV Subsidiary Guarantee of each JV Subsidiary Guarantor will not be secured (each JV Subsidiary Guarantee is not required to pledge the shares of any Restricted Subsidiary that it holds).
Under the Indenture, and any supplemental indenture to the Indenture, as applicable, each of the Subsidiary Guarantors and JV Subsidiary Guarantors (if any) will jointly and severally guarantee the due and punctual payment of the principal of, premium, if any, and interest on, and all other amounts payable under, the Notes; provided that any JV Subsidiary Guarantee will be limited to the JV Entitlement Amount. The Subsidiary Guarantors and the JV Subsidiary Guarantors will (1) agree that their respective obligations under the Subsidiary Guarantees and the JV Subsidiary Guarantees, as the case may be, will be enforceable irrespective of any invalidity, irregularity or unenforceability of the Notes or the Indenture and (2) waive their right to require the Trustee to pursue or exhaust its legal or equitable remedies against the Issuer and the Parent Guarantor prior to exercising its rights under the Subsidiary Guarantees and the JV Subsidiary Guarantees, as the case may be. Moreover, if at any time any amount paid under a Note or the Indenture is rescinded or must otherwise be restored, the rights of the Holders under the Subsidiary Guarantees and the JV Subsidiary Guarantees, as the case may be, will be reinstated with respect to such payment as though such payments had not been made. All payments under the Subsidiary Guarantees and the JV Subsidiary Guarantees, as the case may be, are required to be made in U.S. dollars.
Under the Indenture, and any supplemental indenture to the Indenture, as applicable,
. each Subsidiary Guarantee will be limited to an amount not to exceed the maximum amount that can be guaranteed by the applicable Subsidiary Guarantor without rendering the Subsidiary Guarantee, as it relates to such Subsidiary Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally; and
. each JV Subsidiary Guarantee will be limited to an amount which is the lower of (i) the JV Entitlement Amount and (ii) an amount not to exceed the maximum amount that can be guaranteed by the applicable JV Subsidiary Guarantor without rendering the JV Subsidiary Guarantee, as it relates to such JV Subsidiary Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally.
If a Subsidiary Guarantee or a JV Subsidiary Guarantee were to be rendered voidable, it could be subordinated by a court to all other indebtedness (including guarantees and other contingent liabilities) of the applicable Subsidiary Guarantor or JV Subsidiary Guarantor, as the case may be, and, depending
— 213 — on the amount of such indebtedness, a Subsidiary Guarantor’s liability on its Subsidiary Guarantee or a JV Subsidiary Guarantor’s liability on its JV Subsidiary Guarantee, as the case may be, could in each case be reduced to zero.
The obligations of each Subsidiary Guarantor under its Subsidiary Guarantee and the enforceability of the Collateral granted in respect of the Subsidiary Guarantees of the Subsidiary Guarantor Pledgors may be limited, or possibly invalid, under applicable laws. Similarly, the obligations of each JV Subsidiary Guarantor under its JV Subsidiary Guarantee may be limited, or possibly invalid, under applicable laws. See ‘‘Risk Factors — Risks Relating to the Guarantees and the Collateral — The Guarantees may be challenged under applicable insolvency or fraudulent transfer laws, which could impair the enforceability of the Guarantees.’’
Release of the Subsidiary Guarantees and the JV Subsidiary Guarantees
A Subsidiary Guarantee given by a Subsidiary Guarantor and a JV Subsidiary Guarantee given by a JV Subsidiary Guarantor may be released in certain circumstances, including:
. upon repayment in full of the Notes;
. upon a defeasance as described under ‘‘— Defeasance — Defeasance and Discharge’’;
. in the case of a Subsidiary Guarantee, upon the replacement of such Subsidiary Guarantee with a JV Subsidiary Guarantee in compliance with the terms of the Indenture;
. upon the designation by the Parent Guarantor of a Subsidiary Guarantor or a JV Subsidiary Guarantor, as the case may be, as an Unrestricted Subsidiary in compliance with the terms of the Indenture;
. in the case of a Subsidiary Guarantor or a JV Subsidiary Guarantor that becomes a New Non- Guarantor Restricted Subsidiary, in compliance with the terms of the Indenture; or
. upon the sale, merger or disposition of a Subsidiary Guarantor or a JV Subsidiary Guarantor, as the case may be, in compliance with the terms of the Indenture (including the covenants under the captions ‘‘— Certain Covenants — Limitation on Sales and Issuances of Capital Stock in Restricted Subsidiaries,’’ ‘‘— Certain Covenants — Limitation on Asset Sales’’ and ‘‘— Consolidation, Merger and Sale of Assets’’) resulting in such Subsidiary Guarantor or JV Subsidiary Guarantor, as the case may be, no longer being a Restricted Subsidiary, so long as (1) such Subsidiary Guarantor or JV Subsidiary Guarantor is simultaneously released from its obligations in respect of any of the Parent Guarantor’s other Indebtedness or any Indebtedness of any other Restricted Subsidiary and (2) the proceeds from such sale or disposition are used for the purposes permitted or required by the Indenture.
Except with respect to the Subsidiary Guarantee of a Subsidiary Guarantor existing as of the Original Issue Date, at any time the Company may instruct the Trustee to release any Subsidiary Guarantees provided by a Subsidiary Guarantor and each of its Restricted Subsidiaries organized outside the PRC, and upon such release such Subsidiary Guarantor and its Restricted Subsidiaries organized outside the PRC will become New Non-Guarantor Restricted Subsidiaries (such that each New Non- Guarantor Restricted Subsidiary will no longer guarantee the Notes); provided that, after the release of such Subsidiary Guarantees, the Consolidated Assets of all Restricted Subsidiaries organized outside the PRC that are neither Subsidiary Guarantors nor JV Subsidiary Guarantors (including the New Non- Guarantor Restricted Subsidiaries but excluding the Other Non-Guarantor Subsidiaries and the Future Non-Guarantor Subsidiaries) do not account for more than 30% of the Total Assets of the Parent Guarantor. A Subsidiary Guarantee of a Subsidiary Guarantor may only be released pursuant to this paragraph if as of the date of such proposed release, no document exists that is binding on the Parent Guarantor or any of the Restricted Subsidiaries that would have the effect of (a) prohibiting the Parent Guarantor or any of the Restricted Subsidiaries from releasing such Subsidiary Guarantee or (b) requiring the Parent Guarantor or such Subsidiary Guarantor to deliver or keep in place a guarantee of other Indebtedness of the Parent Guarantor by such Subsidiary Guarantor.
— 214 — No release of a Subsidiary Guarantor from its Subsidiary Guarantee or a JV Subsidiary Guarantor from its JV Subsidiary Guarantee shall be effective against the Trustee, the Global Security Agent or the Holders until the Parent Guarantor has delivered to the Trustee and the Global Security Agent an Officer’s Certificate stating that all requirements relating to such release have been complied with and that such release is authorized and permitted by the Indenture.
Replacement of the Subsidiary Guarantees with the JV Subsidiary Guarantees
A Subsidiary Guarantee given by a Subsidiary Guarantor may be released following the sale or issuance by the Parent Guarantor or any of its Restricted Subsidiaries of Capital Stock in (a) such Subsidiary Guarantor or (b) any other Subsidiary Guarantor that, directly or indirectly, owns a majority of the Capital Stock of such Subsidiary Guarantor, in each case where such sale or issuance, whether through the sale of existing shares or the issuance of new shares, is for no less than 20% and no more than 49.9% of the issued Capital Stock of the relevant Subsidiary Guarantor, provided that the following conditions are satisfied or complied with:
. as of the date of such proposed release, no document exists that is binding on the Parent Guarantor or any of the Restricted Subsidiaries that would have the effect of (a) prohibiting the Parent Guarantor or any of the Restricted Subsidiaries from releasing such Subsidiary Guarantee, (b) prohibiting the Parent Guarantor or any of the Restricted Subsidiaries from providing such JV Subsidiary Guarantee or (c) requiring the Parent Guarantor or any of the Restricted Subsidiaries to deliver or keep in force a replacement guarantee on terms that are more favorable to the recipients of such guarantee than the JV Subsidiary Guarantee;
. such sale or issuance of Capital Stock is made to an Independent Third Party at a consideration that is not less than the appraised value of such Capital Stock by an independent appraisal firm of recognized international standing appointed by the Parent Guarantor, provided that no such appraisal is required if the sale or issuance of Capital Stock to such Independent Third Party is made within 180 days after land use rights are acquired by such Subsidiary Guarantor or any Restricted Subsidiary of such Subsidiary Guarantor;
. concurrently with the release of such Subsidiary Guarantee, the Parent Guarantor shall or shall cause such JV Subsidiary Guarantor to deliver to the Trustee, and in the case of the Security Documents also to the Global Security Agent:
(i) (A) a duly executed JV Subsidiary Guarantee of such JV Subsidiary Guarantor and each Restricted Subsidiary of such JV Subsidiary Guarantor that is not organized under the laws of the PRC, and (B) a duly executed supplemental indenture to the Indenture pursuant to which such JV Subsidiary Guarantor will guarantee the payment of the Notes, each of which provides, among other things, that the aggregate claims of the Trustee under such JV Subsidiary Guarantee will be limited to the JV Entitlement Amount;
(ii) prior to the Release Date, a duly executed Security Document that pledges in favor of the Global Security Agent the Capital Stock of such JV Subsidiary Guarantor held by the Parent Guarantor or any Subsidiary Guarantor, but not the Capital Stock of the direct or indirect Subsidiaries of such JV Subsidiary Guarantor;
(iii) an Officers’ Certificate certifying a copy of a Board Resolution to the effect that such JV Subsidiary Guarantee has been approved by a majority of the disinterested members of the Board of Directors; and
(iv) a legal opinion by a law firm of recognized international standing confirming that under New York law such JV Subsidiary Guarantee is valid, binding and enforceable against the JV Subsidiary Guarantor providing such JV Subsidiary Guarantee (subject to customary qualifications and assumptions).
Notwithstanding the foregoing paragraph, any such sale or issuance of the Capital Stock of the relevant Subsidiary Guarantor (including where such sale results in the relevant Subsidiary Guarantor ceasing to be a Restricted Subsidiary) will need to comply with the other covenants set forth in the Indenture, including the ‘‘Limitation on Asset Sales’’ and ‘‘Limitation on Restricted Payments’’ covenants.
— 215 — Any Net Cash Proceeds from the sale of such Capital Stock shall be applied by the Parent Guarantor (or any Restricted Subsidiary) in accordance with the ‘‘Limitation on Asset Sales’’ covenant.
As of the date of the Indenture, all of the Parent Guarantor’s Subsidiaries will be ‘‘Restricted Subsidiaries.’’ However, under the circumstances described below under the caption ‘‘— Certain Covenants — Designation of Restricted and Unrestricted Subsidiaries,’’ the Parent Guarantor will be permitted to designate certain of its Subsidiaries as ‘‘Unrestricted Subsidiaries.’’ The Parent Guarantor’s Unrestricted Subsidiaries will generally not be subject to the restrictive covenants in the Indenture. The Parent Guarantor’s Unrestricted Subsidiaries will not guarantee the Notes.
Security
The Parent Guarantor has pledged and caused the initial Subsidiary Guarantor Pledgor to pledge, as the case may be, the Capital Stock of all of the initial Subsidiary Guarantors (the ‘‘Collateral’’) owned by the Parent Guarantor or the Subsidiary Guarantor Pledgor (subject to any Permitted Liens and pari passu sharing as described below) to secure the obligations of the Parent Guarantor under the Secured Liabilities. On the Original Issue Date, the Trustee will execute an accession deed and become a party to the Intercreditor Deed, following which the Trustee will share Liens (subject to any Permitted Liens and pari passu sharing as described below) created on the Collateral with the other Secured Creditors. The Parent Guarantor and the initial Subsidiary Guarantor Pledgor have:
(a) executed one or more Security Documents granting to the Global Security Agent (as defined in the Intercreditor Deed referred to below), for the benefit of the Secured Creditors, Liens (subject to any Permitted Liens and pari passu sharing as described below) on relevant Collateral, substantially in the form attached to the Indenture;
(b) taken all requisite steps under applicable laws and undertake other customary procedures in connection with the granting and perfection (if relevant) of the Lien on relevant Collateral (subject to any Permitted Liens); and
(c) agreed to promptly deliver to the Trustee an Opinion of Counsel and Officers’ Certificate relating to each such pledge in form and substance as set forth in the Indenture.
The initial Subsidiary Guarantor Pledgor will be Yanlord Land Pte. Ltd. The Capital Stock pledged by the Parent Guarantor and the initial Subsidiary Guarantor Pledgor will be that of the initial Subsidiary Guarantors, all of which are holding companies or special purpose companies that do not have significant operations or real property assets other than Capital Stock of the Non-Guarantor Subsidiaries.
None of the Capital Stock of the Non-Guarantor Subsidiaries will be pledged on the Original Issue Date or at any time in the future. In addition, none of the Capital Stock of (x) any future Restricted Subsidiary that may be organized under the laws of the PRC or (y) any other future Restricted Subsidiary (unless otherwise required under the covenant under the caption ‘‘— Limitation on Liens’’) will be pledged at any time in the future.
The Parent Guarantor and the Subsidiary Guarantor Pledgors are referred to collectively as the ‘‘Guarantor Pledgors.’’
The Collateral will be shared on a pari passu basis by the holders of the Notes and the holders of other secured indebtedness including the holders of the 2017 Senior Notes and the 2018 Senior Notes, the 2016 WL Facility, the 2017 Syndicated Loan Facility and the 2019 Dual-Tranche Term Loan Facility and any other creditors with respect to Permitted Pari Passu Secured Indebtedness. As of the date of this offering memorandum, the aggregate principle amount of the 2017 Senior Notes outstanding was US$450 million, the aggregate principle amount of the 2018 Senior Notes outstanding was US$350 million, the aggregate amount drawn under the 2016 WL Facility was HK$625 million, the aggregate amount drawn under the 2017 Syndicated Loan Facility was US$1.012 billion and the aggregate amount drawn under the 2019 Dual-Tranche Term Loan Facility was US$363.5 million. Accordingly, in the event of a default on the Notes or the other secured indebtedness and a foreclosure on the Collateral, any foreclosure proceeds would be shared by the holders of secured indebtedness in proportion to the outstanding amounts of each class of secured indebtedness. The proceeds realizable from the Collateral (as reduced by the obligations owed to other secured creditors under the Intercreditor Deed) will likely not be sufficient to satisfy the Issuer’s obligations under the Notes, the Parent Guarantor’s and each of
— 216 — the Subsidiary Guarantor Pledgors’ obligations under the Parent Guarantee and the Subsidiary Guarantees of the Subsidiary Guarantor Pledgors, and the Collateral (as reduced by the obligations owed to other secured creditors under the Intercreditor Deed) may be reduced or diluted under certain circumstances, including the issuance of Additional Notes and other Permitted Pari Passu Secured Indebtedness and the disposition of assets comprising the Collateral, subject to the terms of the Indenture. See ‘‘— Release of Security’’ and ‘‘Risk Factors — Risks Relating to the Guarantees and the Collateral — The value of the Collateral is unlikely to be sufficient to satisfy our obligations under the Notes.’’
Citicorp International Limited will initially act as Trustee. Citicorp International Limited is currently acting as the Global Security Agent under the Security Documents in respect of the security over the Collateral. The Global Security Agent, acting in its capacity as such, shall have such duties with respect to the Collateral pledged, assigned or granted pursuant to the Security Documents as are set forth in the Indenture, the Intercreditor Deed and the Security Documents. Under certain circumstances, the Trustee and the Global Security Agent may have obligations under the Indenture, the Security Documents or the Intercreditor Deed that are in conflict with the interests of the Holders and the beneficiaries of the Secured Liabilities. Neither the Trustee nor the Global Security Agent will be under any obligation to exercise any rights or powers conferred under the Indenture, the Intercreditor Deed or any of the Security Documents for the benefit of the such parties, unless such parties have offered to the Trustee and/or the Global Security Agent indemnity and/or security satisfactory to the Trustee and the Global Security Agent, as applicable, against any loss, liability or expense. Furthermore, each Holder, by accepting the Notes will agree, for the benefit of the Global Security Agent and the Trustee, that it is solely responsible for its own independent appraisal of and investigation into all risks arising under or in connection with the Intercreditor Deed and the Security Documents and has not relied on and will not at any time rely on the Global Security Agent or the Trustee in respect of such risks.
No appraisals of the Collateral have been prepared in connection with this offering of the Notes. There can be no assurance that the proceeds of any sale of the Collateral, in whole or in part, pursuant to the Indenture and the Security Documents following an Event of Default (as reduced by the obligations owed to other secured creditors under the Intercreditor Deed), would be sufficient to satisfy amounts due on the Notes, the Parent Guarantee or the Guarantees of the Guarantor Pledgors. By its nature, some or all of the Collateral will be illiquid and may have no readily ascertainable market value. Accordingly, there can be no assurance that the Collateral would be sold in a timely manner or at all.
So long as no Payment Default has occurred and is continuing, and subject to the terms of the Security Documents and the Indenture, the Guarantor Pledgors, as the case may be, will be entitled to exercise any and all voting rights and to receive, retain and use any and all cash dividends, stock dividends, liquidating dividends, non-cash dividends, shares or stock resulting from stock splits or reclassifications, rights issues, warrants, options and other distributions (whether similar or dissimilar to the foregoing) in respect of Capital Stock constituting Collateral.
Permitted Pari Passu Secured Indebtedness
On or after the Original Issue Date, the Issuer and each Guarantor Pledgor may create Liens on the Collateral pari passu with the Liens for the benefit of the Holders to secure Indebtedness of the Issuer (including Additional Notes), the Parent Guarantor or any Subsidiary Guarantor, and any pari passu Guarantee or SPV Indebtedness with respect to such Indebtedness (such Indebtedness of the Issuer, the Parent Guarantor or any Subsidiary Guarantor, and any such pari passu Guarantee, ‘‘Permitted Pari Passu Secured Indebtedness’’); provided that (1) the Issuer or such Guarantor Pledgor was permitted to Incur such Indebtedness under the covenant under the caption ‘‘— Limitation on Indebtedness and Preferred Stock,’’ (2) the holders of such Indebtedness (or their representatives), other than Additional Notes, become party to the Intercreditor Deed referred to below; and (3) the Issuer and such Guarantor Pledgor deliver to the Trustee and the Global Security Agent an Opinion of Counsel and Officer’s Certificate with respect to compliance with the conditions stated immediately above and other corporate and collateral matters in connection with the Security Documents. The Trustee and/or the Global Security Agent, as the case may be, are permitted and authorized, without the consent of any Holder, to enter into any amendments to the Security Documents, the Intercreditor Deed or the Indenture and take any other action necessary to permit the creation and registration of Liens on the Collateral to secure Permitted Pari Passu Secured Indebtedness in accordance with this paragraph.
— 217 — Except for certain Permitted Liens and the Permitted Pari Passu Secured Indebtedness, the Parent Guarantor and its Restricted Subsidiaries will not be permitted to issue or Incur any other Indebtedness secured by all or any portion of the Collateral without the consent of each Holder of the Notes then outstanding.
Intercreditor Deed
Wing Lung Bank Limited (the ‘‘2016 WL Facility Agent’’) on behalf of the lenders under the 2016 WL Facility, Citicorp International Limited (the ‘‘2017 Trustee’’)onbehalfoftheholdersofthe2017 Senior Notes, Hang Seng Bank Limited (the ‘‘2017 Facility Agent’’) on behalf of the lenders under the 2017 Syndicated Loan Facility, Citicorp International Limited (the “2018 Trustee”)onbehalfofthe holders of the 2018 Senior Notes, Hang Seng Bank Limited (the “2019 Facility Agent”)onbehalfofthe lenders under the 2019 Dual-Tranche Term Loan Facility, the Parent Guarantor, the Subsidiary Guarantor Pledgor and Citicorp International Limited, as the Global Security Agent, among others, are parties to a security agency and intercreditor deed, dated May 4, 2010 and as amended, (the ‘‘Intercreditor Deed’’) pursuant to which the Global Security Agent agreed to act as security agent for the Trustee, the 2016 WL Facility Agent, the 2017 Trustee, the 2017 Facility Agent, the 2018 Trustee and the 2019 Facility Agent and holders of any Permitted Pari Passu Secured Indebtedness incurred after the date thereof or their trustee or agent (such holders or their trustee or agent, together with the Trustee, the 2016 WL Facility Agent, the 2017 Trustee, the 2017 Facility Agent, the 2018 Trustee and the 2019 Facility Agent, the ‘‘Creditor Representatives’’) with respect to the Collateral securing the obligations under the Indenture, the 2016 WL Facility, the 2017 Indenture, the 2017 Syndicated Loan Facility, the 2018 Indenture and the 2019 Dual-Term Term Loan Facility or with respect to the Permitted Pari Passu Secured Indebtedness (if any) (such obligations, collectively, are herein referred to as the ‘‘Secured Liabilities’’).
On the Original Issue Date, the Trustee will execute an accession deed and become a party to the Intercreditor Deed, at which time the Trustee will become a Creditor Representative and the obligations under the Notes, the Parent Guarantee and the Subsidiary Guarantees will become Secured Liabilities. The Intercreditor Deed will, among other things, (1) provide that the Secured Liabilities shall rank pari passu among themselves and the Liens on the Collateral securing the Secured Liabilities shall rank pari passu among themselves; (2) provide for the conditions under which any Lien on such Collateral may be released; and (3) provide for the conditions under which the Global Security Agent will take enforcement actions with respect to such Collateral.
Prior to the Incurrence of any Permitted Pari Passu Secured Indebtedness (other than Additional Notes) and prior to the Release Date, the Parent Guarantor will procure that the holders of such Permitted Pari Passu Secured Indebtedness (through their trustee, representative or agent) will execute and deliver an accession deed, which shall be in a form substantially similar to the form of applicable accession deed as prescribed by the Intercreditor Deed, to become parties to the Intercreditor Deed.
By accepting the Notes, each Holder shall be deemed to have consented to the execution and delivery of the Intercreditor Deed, any amendments or modifications thereto, and any future intercreditor agreement required under the Indenture.
Enforcement of Security
The Liens securing the Secured Liabilities have been granted to the Global Security Agent subject to the Intercreditor Deed. The Global Security Agent for itself and the creditors under the Debt Documents will hold such Liens and security interests in the Collateral granted pursuant to the Security Documents with sole authority as directed by the Creditor Representatives to exercise remedies under the Security Documents. The Global Security Agent has agreed to act as secured party on behalf of the creditors under the Debt Documents under the applicable Security Documents, to follow the instructions provided to it by one or more of the Creditor Representatives under the Intercreditor Deed and to carry out certain other duties. The Trustee will give instructions to the Global Security Agent in accordance with instructions it receives from the Holders under the Indenture.
The Intercreditor Deed will provide that the Global Security Agent will enforce the Collateral in accordance with a written instruction by any Creditor Representative to do so if it does not receive any conflicting instruction, and in the case of conflicting instructions delivered by two or more Creditor Representatives, the Global Security Agent will only enforce the Collateral upon receiving written
— 218 — instructions from the Majority Creditors. Furthermore, the Intercreditor Deed will provide that, subject to the rights of any creditor with prior security or any preferential claim under applicable laws, the proceeds of enforcement of any Collateral under the Security Documents will be applied as follows:
firstly, in or towards payment of any unpaid fees, costs and expenses of the Global Security Agent and any receiver, attorney or agent appointed under the Intercreditor Deed and Security Documents and any amount for which the Global Security Agent is entitled to indemnification under the Intercreditor Deed;
secondly, pro-rata, in or towards payment to the trustee and/or agents under the 2016 WL Facility, the 2017 Indenture, the 2017 Syndicated Loan Facility, the 2018 Indenture and the 2019 Dual-Tranche Term Loan Facility and the Indenture as well as each of the Creditor Representatives for the Secured Liabilities for application against any fees, costs and expenses payable to them under the Debt Documents and any amount for which such trustees and/or agents are entitled to indemnification under the applicable Debt Document;
thirdly, pro-rata, in or towards payment to each of the Creditor Representatives for the Secured Liabilities for application against the interest and principal payable under the Debt Documents relevant to it;
fourthly, pro-rata, in or towards payment of any other sum payable to each of the Creditor Representatives for the Secured Liabilities under the Debt Documents relevant to it; and
lastly, the payment of the surplus (if any) to the Parent Guarantor, the Issuer or the Subsidiary Guarantor Pledgors or to whomever may be lawfully entitled thereto.
The Global Security Agent may refrain from acting in accordance with the instructions of the Creditor Representatives until it has received indemnity and/or security satisfactory to it against any liability or loss which it may incur in complying with the instructions. In addition, the Global Security Agent’s ability to foreclose on the Collateral may be subject to lack of perfection, the consent of third parties, prior Liens and practical problems associated with the realization of the Global Security Agent’s Liens on the Collateral.
Neither the Global Security Agent nor the Trustee nor any of their officers, directors, employees, attorneys or agents will be responsible or liable for the existence, genuineness, value or protection of any Collateral securing the Secured Liabilities, for the legality, enforceability, effectiveness or sufficiency of the Security Documents or the Intercreditor Deed, for the creation, perfection, priority, sufficiency or protection of any of the Liens, or for any defect or deficiency as to any such matters, or for any failure to demand, collect, foreclose or realize upon or otherwise enforce any of the Liens or Security Documents or any delay in doing so. Nor will the Global Security Agent nor the Trustee be responsible for (i) the right or title of any person in or to, or the value of, or sufficiency of any part of the Collateral created by the Security Documents; (ii) the priority of any Lien on the Collateral created by the Security Documents; or (iii) the existence of any other Lien affecting any asset secured under a Security Document.
The Intercreditor Deed and Security Documents will provide that the Guarantor Pledgors shall jointly and severally forthwith on demand indemnify the Global Security Agent for any liability, damage, cost, expense or loss incurred by the Global Security Agent in any way relating to or arising out of its acting as the Global Security Agent, except to the extent that the liability, damage, cost, expense or loss arises directly from the Global Security Agent’s fraud, willful default, gross negligence or willful misconduct.
This section, ‘‘— Enforcement of Security,’’ shall be subject to any amendments to the Security Documents or the Indenture to permit the creation of Liens on the Collateral to secure Permitted Pari Passu Secured Indebtedness in accordance with ‘‘— Permitted Pari Passu Secured Indebtedness’’ above.
— 219 — Release of Security
The security created in respect of the Collateral granted under the Security Documents may be released in certain circumstances, including:
. upon repayment in full of the Notes;
. upon defeasance and discharge of the Notes as provided below under the caption ‘‘— Defeasance — Defeasance and Discharge’’;
. upon certain dispositions of the Collateral in compliance with the covenants under the captions ‘‘— Limitation on Sales and Issuances of Capital Stock in Restricted Subsidiaries’’ or ‘‘— Limitation on Asset Sales’’ or in accordance with the provision under the caption ‘‘— Consolidation, Merger and Sale of Assets’’;
. with respect to security granted by a Guarantor Pledgor, upon the release of the Guarantee of such Guarantor Pledgor in accordance with the terms of the Indenture;
. in connection with and upon execution of a JV Subsidiary Guarantee, all pledges of Capital Stock granted by the JV Subsidiary Guarantor and its direct and indirect Subsidiaries shall be released;
. with respect to any pledge over any Capital Stock of any Subsidiary Guarantor or JV Subsidiary Guarantor, upon the release of the Guarantee, as the case may be, of such Guarantor in accordance with the terms of the Indenture;
. with respect to any pledge over any Capital Stock of any Subsidiary Guarantor or JV Subsidiary Guarantor, upon the designation by the Parent Guarantor of such Guarantor as an Unrestricted Subsidiary in accordance with the terms of the Indenture; and
. with respect to the Collateral, either upon (i) the repayment in full of all amounts owing by the Parent Guarantor, the Issuer or any Subsidiary Guarantors or JV Subsidiary Guarantors the 2016 WL Facility, the 2017 Senior Notes, the 2017 Syndicated Loan Facility, the 2018 Senior Notes and the 2019 Dual-Tranche Term Loan Facility or (ii) the concurrent release of the Lien on the Collateral securing all other Indebtedness (the ‘‘Release Date’’); provided that, no Default has occurred and is continuing on such date or no Default would have occurred as a result of such release.
Further Issues
Subject to the covenants described below, the Issuer may, from time to time, without notice to or the consent of the Holders, create and issue Additional Notes having the same terms and conditions as the Notes (including the benefit of the Guarantees) in all respects (or in all respects except for the issue date, issue price and the first payment of interest on them and, to the extent necessary, certain temporary securities law transfer restrictions) (a ‘‘Further Issue’’) so that such Additional Notes may be consolidated and form a single class with the previously outstanding Notes and vote together as one class on all matters with respect to the Notes; provided that the issuance of any such Additional Notes shall then be permitted under the ‘‘Limitation on Indebtedness and Preferred Stock’’ covenant described below and the other provisions of the Indenture.
Optional Redemption
At any time and from time to time on or after August , 20 , the Issuer may redeem the Notes, in whole or in part, at a redemption price equal to the percentage of principal amount set forth below plus accrued and unpaid interest, if any, to (but not including) the redemption date if redeemed during the twelve-month period beginning on August of each of the years indicated below.
Redemption Period Price 20 ...... % 20 andthereafter...... %
— 220 — At any time prior to August , 20 , the Issuer may at its option redeem the Notes, in whole but not in part, at a redemption price equal to 100% of the principal amount of the Notes plus the Applicable Premium as of, and accrued and unpaid interest, if any, to (but not including) the redemption date. Neither the Trustee nor any Agents shall be responsible for calculating or verifying the Applicable Premium.
At any time prior to August , 20 , the Issuer may redeem up to 35% of the aggregate principal amount of the Notes with the Net Cash Proceeds of one or more sales of Common Stock of the Parent Guarantor in an Equity Offering at a redemption price of % of the principal amount of the Notes, plus accrued and unpaid interest, if any, to (but not including) the redemption date; provided that at least 65% of the aggregate principal amount of the Notes originally issued on the Original Issue Date remains outstanding after each such redemption and any such redemption takes place within 60 days after the closing of the related Equity Offering.
The Issuer will give not less than 15 days’ nor more than 60 days’ notice of any redemption. If less than all of the Notes are to be redeemed at any time, the Notes for redemption will be selected as follows:
(1) if the Notes are listed on any recognized securities exchange and/or are held through any clearing system, in compliance with the requirements of the principal recognized securities exchange on which the Notes are listed and/or the clearing systems through which the Notes are held; or
(2) if the Notes are not listed on any recognized securities exchange and/or not held through any clearing system, on a pro rata basis, by lot or bysuchmethodastheTrusteedeemsfairand appropriate, unless otherwise required by law.
Notices of redemption may, at the Issuer’s discretion, be subject to the satisfaction of one or more conditions precedent.
A Note of US$200,000 in principal amount or less shall not be redeemed in part. If any Note is to be redeemed in part only, the notice of redemption relating to such Note will state the portion of the principal amount to be redeemed. A new Note in principal amount equal to the unredeemed portion will be issued upon cancellation of the original Note, provided, however, that no such partial redemption shall be allowed if it would result in the issuance of a new Note, representing the unredeemed portion, in an amount of less than US$200,000. On and after the redemption date, interest will cease to accrue on Notes or portions of them called for redemption.
Repurchase of Notes Upon a Change of Control Triggering Event
Not later than 30 days following a Change of Control Triggering Event, the Issuer or the Parent Guarantor will make an Offer to Purchase all outstanding Notes (a ‘‘Change of Control Offer’’)ata purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to (but not including) the Offer to Purchase Payment Date.
The Issuer and the Parent Guarantor have agreed in the Indenture that they will timely repay all Indebtedness or obtain consents as necessary under, or terminate, agreements or instruments that would otherwise prohibit a Change of Control Offer required to be made pursuant to the Indenture. Notwithstanding this agreement of the Issuer and the Parent Guarantor, it is important to note that if the Issuer and the Parent Guarantor are unable to repay (or cause to be repaid) all of the Indebtedness, if any, that would prohibit repurchase of the Notes or is unable to obtain the requisite consents of the holders of such Indebtedness, or terminate any agreements or instruments that would otherwise prohibit a Change of Control Offer, they would continue to be prohibited from purchasing the Notes. In that case, the failure of the Issuer or the Parent Guarantor to purchase tendered Notes would constitute an Event of Default under the Indenture.
Certain of the events constituting a Change of Control Triggering Event under the Notes will also constitute an event of default under certain debt instruments of the Parent Guarantor and its Subsidiaries. Under each of the 2016 WL Facility, the 2017 Syndicated Loan Facility and the 2019 Dual-Tranche Term Loan Facility, Mr. Zhong Sheng Jian’s ceasing: (1) to maintain, directly or indirectly, not less than 40% beneficial shareholding interest in the issued share capital of the Parent Guarantor; (2) to control the Parent Guarantor; or (3) to be the single largest shareholder of the Parent Guarantor, constitutes an
— 221 — event of default. Future debt of the Issuer and the Parent Guarantor may also (a) prohibit the Issuer and the Parent Guarantor from purchasing Notes in the event of a Change of Control Triggering Event; (b) provide that a Change of Control Triggering Event is a default; or (c) require repurchase of such debt upon a Change of Control Triggering Event. Moreover, the exercise by the Holders of their right to require the Issuer and the Parent Guarantor to purchase the Notes could cause a default under other Indebtedness, even if the Change of Control Triggering Event itself does not, due to the financial effect of the purchase on the Issuer and the Parent Guarantor. The Issuer and the Parent Guarantor’s ability to pay cash to the Holders following the occurrence of a Change of Control Triggering Event may be limited by the Issuer’s, the Parent Guarantor’s and the Subsidiary Guarantor’s then-existing financial resources. There can be no assurance that sufficient funds will be available when necessary to make the required purchase of the Notes. See ‘‘Risk Factors — Risks Relating to the Notes — We may not be able to repurchase the Notes upon a Change of Control Triggering Event.’’
On the Offer to Purchase Payment Date, the Issuer and the Parent Guarantor shall to the extent lawful: (a) accept for payment on a pro rata basis Notes or portions thereof tendered pursuant to an Offer to Purchase; and (b) deliver, or cause to be delivered, to the Trustee all Notes or portions thereof so accepted together with an Officers’ Certificate specifying the Notes or portions thereof accepted for payment by the Issuer and the Parent Guarantor. The Tender Agent shall promptly mail to the Holders of Notes so accepted payment in an amount equal to the purchase price, and the Trustee or an authenticating agent shall promptly authenticate and mail to such Holders a new Note equal in principal amount to any unpurchased portion of the Note surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of US$200,000 or integral multiples of US$1,000. The Issuer and the Parent Guarantor will publicly announce the results of an Offer to Purchase as soon as practicable after the Payment Date.
The Issuer and the Parent Guarantor will not be required to make an Offer to Purchase if a third party makes the Offer to Purchase in compliance with the requirements set forth in the indenture applicable to an Offer to Purchase made by the Issuer and the Parent Guarantor and purchases all Notes properly tendered and not withdrawn under the Offer to Purchase.
The offer is required to contain or incorporate by reference information concerning the business of the Parent Guarantor and its Subsidiaries which the Issuer and the Parent Guarantor in good faith believe will assist such Holders to make an informed decision with respect to the Offer to Purchase, including a brief description of the events requiring the Issuer and the Parent Guarantor to make the Offer to Purchase,andanyotherinformationrequiredbyapplicable law to be included therein. The offer is required to contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Offer to Purchase.
The definition of Change of Control includes a phrase relating to the sale of ‘‘all or substantially all’’ the assets of the Parent Guarantor. Although there is a limited body of case law interpreting the phrase ‘‘substantially all,’’ no precise definition of the phrase has been established. Accordingly, the ability of a Holder of Notes to require the Issuer and the Parent Guarantor to repurchase such Holder’s Notes as a result of a sale of less than all the assets of the Parent Guarantor to another person or group is uncertain and will be dependent upon particular facts and circumstances.
Except as described above with respect to a Change of Control Triggering Event, the Indenture does not contain provisions that permit the Holders to require that the Issuer and the Parent Guarantor purchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction.
No Mandatory Redemption or Sinking Fund
There will be no mandatory redemption or sinking fund payments for the Notes.
Additional Amounts
All payments of principal of, and premium (if any) and interest on the Notes or under the Guarantees by or on behalf of the Issuer, a Surviving Person (as defined under the caption ‘‘— Consolidation, Merger and Sale of Assets’’) or an applicable Guarantor will be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or within any jurisdiction in which the Issuer, a Surviving Person or an applicable Guarantor is organized or resident for tax purposes or through which payment is made (or any political subdivision or taxing authority thereof or therein)
— 222 — (each, as applicable, a ‘‘Relevant Jurisdiction’’), unless such withholding or deduction is required by law or by regulation or governmental policy having the force of law. In the event that any such withholding or deduction is so required, the Issuer, a Surviving Person or the applicable Guarantor, as the case may be, will pay such additional amounts (‘‘Additional Amounts’’) as will result in receipt by the Holder of each Note or the Guarantees, as the case may be, of such amounts as would have been received by such Holder had no such withholding or deduction been required, except that no Additional Amounts shall be payable:
(1) for or on account of:
(a) any tax, duty, assessment or other governmental charge that would not have been imposed but for:
(i) the existence of any present or former connection between the Holder or beneficial owner of such Note or Guarantee, as the case may be, and the Relevant Jurisdiction other than merely holding such Note or the receipt of payments thereunder or under a Guarantee, including, without limitation, such Holder or beneficial owner being or having been a national, domiciliary or resident of such Relevant Jurisdiction or treated as a resident thereof or being or having been physically present or engaged in a trade or business therein or having or having had a permanent establishment therein;
(ii) the presentation of such Note (in cases in which presentation is required) more than 30 days after the later of the date on which the payment of the principal of, premium, if any, and interest on, such Note became due and payable pursuant to the terms thereof or was made or duly provided for, except to the extent that the Holder thereof would have been entitled to such Additional Amounts if it had presented such Note for payment on any date within such 30-day period;
(iii) the failure of the Holder or beneficial owner to comply with a timely request of the Issuer, a Surviving Person or any Guarantor addressed to the Holder to provide information concerning such Holder’s or beneficial owner’s nationality, residence, identity or connection with any Relevant Jurisdiction, if and to the extent that due and timely compliance with such request is required by statute or regulation of a Relevant Jurisdiction to reduce or eliminate any withholding or deduction as to which Additional Amounts would have otherwise been payable to such Holder;
(iv) the presentation of such Note (in cases in which presentation is required) for payment in the Relevant Jurisdiction, unless such Note could not have been presented for payment elsewhere;
(b) any estate, inheritance, gift, sale, transfer, personal property or similar tax, assessment or other governmental charge;
(c) any tax, assessment, withholding or deduction required by sections 1471 through 1474 of the Internal Revenue Code of 1986, as amended (‘‘FATCA’’), any current or future U.S. Treasury regulations or rulings promulgated thereunder, any intergovernmental agreement between the United States and any other jurisdiction to implement FATCA, any law, regulation or other official guidance enacted or published in any jurisdiction implementing an intergovernmental agreement with respect to FATCA, or any agreement with the U.S. Internal Revenue Service under FATCA; or
(d) any combination of taxes, duties, assessments or other governmental charges referred to in the preceding clauses (a), (b) and (c); or
(2) to a Holder that is a fiduciary, partnership or person other than the sole beneficial owner of any payment to the extent that such payment would be required to be included in the income under the laws of a Relevant Jurisdiction, for tax purposes, of a beneficiary or settlor with respect to the fiduciary, or a member of that partnership or a beneficial owner who would not have been entitled to such Additional Amounts had that beneficiary, settlor, partner or beneficial owner been the Holder thereof.
— 223 — Whenever there is mentioned in any context the payment of principal of, and any premium or interest on, any Note or under any Guarantee, such mention shall be deemed to include payment of Additional Amounts provided for in the Indenture to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof.
Redemption for Taxation Reasons
The Notes may be redeemed, at the option of the Issuer or a Surviving Person, as a whole but not in part, upon giving not less than 30 days’ nor more than 60 days’ notice to the Holders and upon reasonable notice in advance of such notice to Holders to the Trustee and the Paying and Transfer Agent (which notice shall be irrevocable), at a redemption price equal to 100% of the principal amount thereof, together with accrued and unpaid interest (including any Additional Amounts), if any, to the date fixed by the Issuer or the Surviving Person, as the case may be, for redemption (the ‘‘TaxRedemptionDate’’) if, as a result of:
(1) any change in, or amendment to, the laws (or any regulations or rulings promulgated thereunder) of a Relevant Jurisdiction affecting taxation; or
(2) any change in the existing official position or the stating of an official position regarding the application or interpretation of such laws, regulations or rulings (including a holding, judgment or order by a court of competent jurisdiction), which change or amendment becomes effective or, in the case of an official position, is announced (i) except as described in (ii) immediately below, on or after the Original Issue Date, or (ii) with respect to any Future Subsidiary Guarantor, JV Subsidiary Guarantor or Surviving Person that is organized or tax resident in a jurisdiction that is not already a Relevant Jurisdiction as of the date on which such Future Subsidiary Guarantor, JV Subsidiary Guarantor or Surviving Person becomes a Subsidiary Guarantor, JV Subsidiary Guarantor or Surviving Person (the ‘‘Assumption Date’’), on or after the Assumption Date, with respect to any payment due or to become due under the Notes or the Indenture, the Issuer, a Surviving Person or a Guarantor, as the case may be, is, or on the next Interest Payment Date would be, required to pay Additional Amounts, and such requirement cannot be avoided by the taking of reasonable measures by the Issuer, a Surviving Person or a Guarantor, as the case may be; provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer, a Surviving Person or a Guarantor, as the case may be, would be obligated to pay such Additional Amounts if a payment in respect of the Notes were then due.
Prior to giving of any notice of redemption of the Notes pursuant to the foregoing, the Issuer, a Surviving Person or a Guarantor, as the case may be, will deliver to the Trustee at least 30 days but not more than 60 days before a redemption date:
(1) an Officers’ Certificate stating that such change, amendment or statement of an official position referred to in the prior paragraph has occurred, describing the facts related thereto and stating that such requirement cannot be avoided by the Issuer, a Surviving Person or a Guarantor, as the case may be, taking reasonable measures available to it; and
(2) an Opinion of Counsel or an opinion of a tax consultant, in either case of recognized standing with respect to tax matters of the Relevant Jurisdiction, stating that the requirement to pay such Additional Amounts results from such change, amendment or statement of an official position referred to in the prior paragraph.
The Trustee shall accept such certificate and opinion as sufficient evidence of the satisfaction of the conditions precedent described above, in which event it shall be conclusive and binding on the Holders.
Any Notes that are redeemed will be cancelled.
Certain Covenants
Set forth below are summaries of certain covenants contained in the Indenture.
— 224 — Limitation on Indebtedness and Preferred Stock
(1) The Parent Guarantor will not, and will not permit any Restricted Subsidiary to, Incur any Indebtedness (including Acquired Indebtedness), and the Parent Guarantor will not permit any Restricted Subsidiary to issue Preferred Stock, provided that the Parent Guarantor, the Issuer or any Subsidiary Guarantor may Incur Indebtedness (including Acquired Indebtedness) and any Restricted Subsidiary (other than the Issuer or a Subsidiary Guarantor) may Incur Permitted Subsidiary Indebtedness if, after giving effect to the Incurrence of such Indebtedness and the receipt and application of the proceeds therefrom, (x) no Default has occurred and is continuing and (y) the Fixed Charge Coverage Ratio would be not less than 2.5 to 1.0 with respect to any Incurrence of Indebtedness. Notwithstanding the foregoing, the Parent Guarantor will not permit any Restricted Subsidiary to Incur any Disqualified Stock or Preferred Stock (other than Disqualified Stock or Preferred Stock of Restricted Subsidiaries held by the Parent Guarantor, the Issuer or a Subsidiary Guarantor, so long as it is so held).
(2) Notwithstanding the foregoing, the Parent Guarantor and, to the extent provided below, any Restricted Subsidiary may Incur each and all of the following (‘‘Permitted Indebtedness’’):
(a) Indebtedness under the Notes (excluding any Additional Notes and any Permitted Pari Passu Secured Indebtedness of the Parent Guarantor) and each Subsidiary Guarantee and JV Subsidiary Guarantee;
(b) (i) any pari passu Guarantees by the Issuer, any Subsidiary Guarantor or JV Subsidiary Guarantor or (ii) any Indebtedness of the Issuer, a Subsidiary Guarantor that is guaranteed by the Parent Guarantor, provided that in the case of (ii) only such guarantee and Indebtedness by the Parent Guarantor would have been permitted to have been incurred by the Parent Guarantor under this ‘‘Limitation on Indebtedness and Preferred Stock’’ covenant;
(c) Indebtedness of the Parent Guarantor or any Restricted Subsidiary outstanding on the Original Issue Date excluding Indebtedness permitted under clause (d); provided that such Indebtedness of Restricted Subsidiaries shall be included in the calculation of Permitted Subsidiary Indebtedness (other than any such Indebtedness excluded in the proviso contained in the definition of Permitted Subsidiary Indebtedness);
(d) Indebtedness of the Parent Guarantor or any Restricted Subsidiary owed to the Parent Guarantor or any Restricted Subsidiary; provided that (i) any event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of such Indebtedness (other than to the Parent Guarantor or any Restricted Subsidiary) shall be deemed, in each case, to constitute an Incurrence of such Indebtedness not permitted by this clause (d) and (ii) if the Parent Guarantor or any Subsidiary Guarantor or any JV Subsidiary Guarantor is the obligor on such Indebtedness, such Indebtedness must be unsecured and be expressly subordinated in right of payment to the Parent Guarantee, in the case of the Parent Guarantor, or the Subsidiary Guarantee of such Subsidiary Guarantor, in the case of a Subsidiary Guarantor, or the JV Subsidiary Guarantee, in the case of a JV Subsidiary Guarantor;
(e) Indebtedness (‘‘Permitted Refinancing Indebtedness’’) issued in exchange for, or the net proceeds of which are used to refinance or refund, replace, exchange, renew, repay, defease, discharge or extend (collectively, ‘‘refinance’’ and ‘‘refinances’’ and ‘‘refinanced’’ shall have a correlative meaning), then outstanding Indebtedness (or Indebtedness repaid substantially concurrently with but in any case before the Incurrence of such Permitted Refinancing Indebtedness) Incurred under the immediately precedingparagraph(1)orclauses(a),(b),(c),(e),(h),(p),(q),(r),(s),(t),(v),(w),(x) or (y) of this paragraph (2) and any refinancings thereof in an amount not to exceed the amount so refinanced or refunded (plus premiums, accrued interest, fees and expenses); provided that (i) Indebtedness the proceeds of which are used to refinance or refund the Notes or Indebtedness that is pari passu with, or subordinated in right of payment to, the Notes or a Subsidiary Guarantee or a JV Subsidiary Guarantee shall only be permitted under this clause (e) if (A) in case the Notes are refinanced in part or the Indebtedness to be refinanced is pari passu with the Notes or a Subsidiary Guarantee or
— 225 — a JV Subsidiary Guarantee, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is outstanding, is pari passu with, or expressly made subordinate in right of payment to, the remaining Notes or such Subsidiary Guarantee or such JV Subsidiary Guarantee, or (B) in case the Indebtedness to be refinanced is subordinated in right of payment to the Notes or a Subsidiary Guarantee or a JV Subsidiary Guarantee, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is issued or remains outstanding, is expressly made subordinate in right of payment to the Notes or such Subsidiary Guarantee or such JV Subsidiary Guarantee at least to the extent that the Indebtedness to be refinanced is subordinated to the Notes or such Subsidiary Guarantee or such JV Subsidiary Guarantee, (ii) such new Indebtedness, determined as of the date of Incurrence of such new Indebtedness, does not mature prior to the earlier of the final maturity date of the Notes and the Stated Maturity of the Indebtedness to be refinanced or refunded, and the Average Life of such new Indebtedness is at least equal to the remaining Average Life of the Indebtedness to be refinanced or refunded, (iii) in no event may Indebtedness of the Parent Guarantor or any Subsidiary Guarantor be refinanced pursuant to this clause by means of any Indebtedness of any Restricted Subsidiary that is not a Subsidiary Guarantor or the Issuer and (iv) in no event may Indebtedness of the Parent Guarantor or any Subsidiary Guarantor be refinanced pursuant to this clause by means of any Indebtedness of any JV Subsidiary Guarantor;
(f) Indebtedness Incurred by the Parent Guarantor or any Restricted Subsidiary pursuant to Hedging Obligations designed to protect the Parent Guarantor or any of its Restricted Subsidiaries from fluctuations in interest rates, currencies or the price of commodities and not for speculation;
(g) Pre-Registration Mortgage Guarantees by the Parent Guarantor or any Restricted Subsidiary;
(h) Indebtedness Incurred by the Parent Guarantor or any Restricted Subsidiary for the purpose of financing (x) all or any part of the purchase price of assets, real or personal property (including the lease purchase price of land use rights) or equipment to be used in the ordinary course of business by the Parent Guarantor or a Restricted Subsidiary, including any such purchase through the acquisition of Capital Stock of any Person that owns such real or personal property or equipment, or (y) all or any part of the purchase price or the cost of development, construction or improvement of real or personal property (including the lease purchase price of land use rights) or equipment to be used in the ordinary course of business by the Parent Guarantor or such Restricted Subsidiary; provided that in the case of clauses (x) and (y), (A) the aggregate principal amount of such Indebtedness shall not exceed such purchase price or cost, (B) such Indebtedness shall be Incurred no later than 180 days after the acquisition of such property or completion of such development, construction or improvement and (C) on the date of the Incurrence of such Indebtedness and after giving effect thereto, the sum of (1) the aggregate amount outstanding of all Indebtedness permitted under this clause (h) (together with refinancings thereof, but excluding any Contractor Guarantee Incurred under this clause (h) to the extent the amount of such Contractor Guarantee is otherwise reflected in such aggregate principal amount), plus (2) the aggregate principal amount outstanding of all Indebtedness permitted under clauses (q), (s), (t), (u), (v), (w), (x) and (y) below (together with refinancing thereof, but excluding any Contractor Guarantee or guarantee Incurred under clauses (q), (s), (t), (u), (v), (w), (x) and (y), to the extent the amount of such Contractor Guarantee or guarantee is otherwise reflected in such aggregate principal amount), does not exceed an amount equal to 35% of Total Assets;
(i) Indebtedness Incurred by the Parent Guarantor or any Restricted Subsidiary constituting reimbursement obligations with respect to workers’ compensation claims or self- insurance obligations or bid, performance or surety bonds (in each case other than for an obligation for borrowed money);
— 226 — (j) Indebtedness Incurred by the Parent Guarantor or any Restricted Subsidiary constituting reimbursement obligations with respect to letters of credit, trade guarantees or similar instruments issued in the ordinary course of business to the extent that such letters of credit, trade guarantees or similar instruments are not drawn upon or, if drawn upon, to the extent such drawing is reimbursed no later than the 30 days following receipt by the Parent Guarantor or such Restricted Subsidiary of a demand for reimbursement;
(k) Indebtedness arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from guarantees or letters of credit, surety bonds or performance bonds securing any obligation of the Parent Guarantor or any Restricted Subsidiary pursuant to such agreements, in any case, Incurred in connection with the disposition of any business, assets or Restricted Subsidiary, other than Guarantees of Indebtedness Incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiary for the purpose of financing such acquisition; provided that the maximum aggregate liability in respect of all such Indebtedness in the nature of such guarantee shall at no time exceed the gross proceeds actually received from the sale of such business, assets or Restricted Subsidiary;
(l) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business;
(m) Guarantees by the Parent Guarantor or any Restricted Subsidiary of Indebtedness of the Parent Guarantor or any Restricted Subsidiary that was permitted to be Incurred by another provision of this covenant, subject to the ‘‘Limitation on Issuances of Guarantees by Restricted Subsidiaries’’ covenant;
(n) Indebtedness of the Parent Guarantor or any Restricted Subsidiary with a maturity of one year or less used by the Parent Guarantor or any Restricted Subsidiary for working capital; provided that the aggregate principal amount of Indebtedness permitted by this clause (n) at any time outstanding does not exceed US$50 million (or the Dollar Equivalent thereof using the exchange rates existing as of the Original Issue Date);
(o) Indebtedness Incurred by the Parent Guarantor or a Restricted Subsidiary constituting a Subordinated Shareholder Loan;
(p) Indebtedness of the Parent Guarantor or any Restricted Subsidiary constituting an obligation to pay the deferred purchase price of Capital Stock in a Person pursuant to a Staged Acquisition Agreement, to the extent that such deferred purchase price is paid within 30 months after the date the Parent Guarantor or such Restricted Subsidiary enters into such Staged Acquisition Agreement;
(q) Bank Deposit Secured Indebtedness Incurred by the Parent Guarantor or any Restricted Subsidiary; provided that, on the date of the Incurrence of such Indebtedness and after giving effect thereto, the sum of (1) the aggregate amount outstanding of all Indebtedness permitted under this clause (q) (together with refinancings thereof, but excluding any guarantee Incurred under this clause (q) to the extent the amount of such guarantee is otherwise reflected in such aggregate principal amount), plus (2) the aggregate principal amount outstanding of all Indebtedness permitted under clause (h) above and clauses (s), (t), (u), (v), (w), (x) and (y) below (together with refinancing thereof, but excluding any Contractor Guarantee or guarantee Incurred under clauses (h), (s), (t), (u), (v), (w), (x) and (y) to the extent the amount of such Contractor Guarantee or guarantee is otherwise reflected in such aggregate principal amount), does not exceed an amount equal to 35% of Total Assets;
(r) Indebtedness of the Parent Guarantor or any Restricted Subsidiary in an aggregate principal amount outstanding at any time (together with refinancings thereof) not to exceed US$50 million (or the Dollar Equivalent thereof using the exchange rates existing as of the Original Issue Date);
(s) (i) Indebtedness Incurred by any Restricted Subsidiary which is secured by Investment Properties, and guarantees thereof by the Parent Guarantor or any such Restricted Subsidiary or (ii) Capitalized Lease Obligations or Attributable Indebtedness with
— 227 — respect to a Sale and Leaseback Transaction that would otherwise be permitted under the covenant under the caption ‘‘— Limitation on Sale and Leaseback Transactions’’ incurred by any PRC Restricted Subsidiary; provided that on the date of the Incurrence of such Indebtedness and after giving effect thereto, the sum of (1) the aggregate amount outstanding of all Indebtedness permitted under this clause (s) (together with refinancings thereof, but excluding any guarantee Incurred under this clause (s) to the extent the amount of such guarantee is otherwise reflected in such aggregate principal amount), plus (2) the aggregate principal amount outstanding of all Indebtedness permitted under clauses (h) and (q) above and clauses (t), (u), (v), (w), (x) and (y) below (together with refinancing thereof, but excluding any Contractor Guarantee or guarantee Incurred under clauses (h), (q), (t), (u), (v), (w), (x) and (y), to the extent the amount of such Contractor Guarantee or guarantee is otherwise reflected in such aggregate principal amount), does not exceed an amount equal to 35% of Total Assets;
(t) Preferred Stock or Disqualified Stock issued or assigned by a Restricted Subsidiary in connection with, and Indebtedness of the Parent Guarantor or a Restricted Subsidiary constituting a guarantee by, or grant of a Lien on the assets of, the Parent Guarantor or such Restricted Subsidiary in favor of any Trust Company Investor with respect to the obligation of a Subsidiary of such Restricted Subsidiary to pay a guaranteed or preferredreturntosuchTrustCompanyInvestoronCapitalStockofsuchRestricted Subsidiary held by such Trust Company Investor, provided that on the date of such Incurrence of all Indebtedness (including Preferred Stock and Disqualified Stock) and after giving effect thereto, the sum of (1) the aggregate amount outstanding of all Indebtedness (including Preferred Stock and Disqualified Stock) permitted under this clause (t) plus (2) the aggregate principal amount outstanding of all Indebtedness permitted under clauses (h), (q) and (s) above and (u), (v), (w), (x) and (y) below (together with refinancing thereof, but excluding any Contractor Guarantee and guarantee Incurred under such clauses (h), (q), (s), (u), (v), (w), (x) and (y) to the extent the amount of such Contractor Guarantee or guarantee is otherwise reflected in such aggregate principal amount), does not exceed an amount equal to 35% of Total Assets;
(u) Indebtedness Incurred by the Parent Guarantor or any Restricted Subsidiary constituting a guarantee of Indebtedness of any Person (other than the Parent Guarantor or a Restricted Subsidiary) by the Parent Guarantor or such Restricted Subsidiary, if the aggregate of all Indebtedness Incurred under this clause (u) (together with refinancing thereof and the aggregate principal amount outstanding of Indebtedness that was permitted to be Incurred under clauses (h), (q), (s) and (t) above and (v), (w), (x) and (y) below and the refinancings thereof, but excluding any Contractor Guarantee or guarantee Incurred under such clauses and this clause (u) to the extent the amount of such Contractor guarantee or guarantee is otherwise reflected in such aggregate principal amount) does not exceed an amount equal to 35% of Total Assets.
(v) Onshore Secured Indebtedness Incurred by the Parent Guarantor or any Restricted Subsidiary, provided that on the date of the Incurrence of such Indebtedness and after giving effect thereto, the sum of (1) the aggregate amount outstanding of all Indebtedness under this clause (v) (together with refinancings thereof, but excluding any guarantee Incurred under this clause (v) to the extent the amount of such guarantee is otherwise reflected in such aggregate principal amount), plus (2) the aggregate principal amount outstanding of all Indebtedness permitted under clauses (h), (q), (s), (t) and (u) above and clauses (w), (x) and (y) below (together with refinancing thereof, but excluding any Contractor Guarantee or guarantee Incurred under clauses (h), (q), (s), (t), (u), (w), (x) and (y) to the extent the amount of such Contractor Guarantee or guarantee is otherwise reflected in such aggregate principal amount), does not exceed an amount equal to 35% of Total Assets; and
(w) Indebtedness of the Parent Guarantor or any Restricted Subsidiary constituting an obligation to pay the deferred purchase price of Capital Stock in a Person pursuant to a Minority Interest Staged Acquisition Agreement, to the extent that such deferred purchase price is paid within 12 months after the date the Parent Guarantor or such Restricted Subsidiary enters into such Minority Interest Staged Acquisition Agreement, provided that on the date of the Incurrence of such Indebtedness and after giving effect thereto, the sum of (1) the aggregate amount outstanding of all Indebtedness permitted under this clause (w) (together with refinancings thereof, but excluding any guarantee
— 228 — Incurred under this clause (w) to the extent the amount of such guarantee is otherwise reflected in such aggregate principal amount), plus (2) the aggregate principal amount outstanding of all Indebtedness permitted under clauses (h), (q), (s), (t), (u) and (v) above and clauses (x) and (y) below (together with refinancing thereof, but excluding any Contractor Guarantee or guarantee Incurred under clauses (h), (q), (s), (t), (u), (v), (x) and (y) to the extent the amount of such Contractor Guarantee or guarantee is otherwise reflected in such aggregate principal amount), does not exceed an amount equal to 35% of Total Assets;
(x) Acquired Indebtedness of any Restricted Subsidiary Incurred and outstanding on the dateonwhichsuchPersonbecomesaRestricted Subsidiary (other than Indebtedness Incurred (i) to provide all or any portion of the funds utilized to consummate the transaction or series of transactions pursuant to which a Person becomes a Restricted Subsidiary or (ii) otherwise in contemplation of a Person becoming a Restricted Subsidiary or any such acquisition); provided that on the date of the Incurrence of such Indebtedness and after giving effect thereto, the aggregate principal amount outstanding of all such Indebtedness permitted to be Incurred pursuant to this clause (x) (together with refinancing thereof and the aggregate principal amount outstanding of Indebtedness that was Incurred under clauses (h), (q), (s), (t), (u), (v) and (w) above and clause (y) below and the refinancings thereof, but excluding any Contractor Guarantee or guarantee Incurred under such clauses and this clause (x) to the extent the amount of such Contractor Guarantee or guarantee is otherwise reflected in such aggregate principal amount) does not exceed an amount equal to 35% of Total Assets;
(y) Indebtedness Incurred by the Parent Guarantor or any Restricted Subsidiary under Credit Facilities, provided that on the date of the Incurrence of such Indebtedness and after giving effect thereto, the aggregate principal amount outstanding of all such Indebtedness permitted to be Incurred pursuant to this clause (y) (together with refinancing thereof and the aggregate principal amount outstanding of Indebtedness that was Incurred under clauses (h), (q), (s), (t), (u), (v), (w) and (x) above and the refinancings thereof, but excluding any Contractor Guarantee or guarantee Incurred under such clauses and this clause (y) to the extent the amount of such Contractor Guarantee or guarantee is otherwise reflected in such aggregate principal amount) does not exceed an amount equal to 35% of Total Assets;
(3) For purposes of determining compliance with this ‘‘Limitation on Indebtedness and Preferred Stock’’ covenant, in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described above, including under the proviso in the first paragraph of part (1), the Parent Guarantor, in its sole discretion, shall classify, and from time to time may reclassify, such item of Indebtedness.
(4) Notwithstanding any other provision of this covenant, the maximum amount of Indebtedness that may be Incurred pursuant to this covenant will not be deemed to be exceeded with respect to any outstanding Indebtedness due solely to the result of fluctuations in the exchange rates of currencies, provided that such Indebtedness was permitted to be Incurred at the time of such Incurrence.
Limitation on Restricted Payments
The Parent Guarantor will not, and will not permit any Restricted Subsidiary to, directly or indirectly (the payments or any other actions described in clauses (1) through (4) below being collectively referred to as ‘‘Restricted Payments’’):
(1) declare or pay any dividend or make any distribution on or with respect to the Parent Guarantor’s or any of its Restricted Subsidiaries’ Capital Stock (other than dividends or distributions payable or paid in shares of the Parent Guarantor’s or any of its Restricted Subsidiaries’ Capital Stock (other than Disqualified Stock or Preferred Stock) or in options, warrants or other rights to acquire shares of such Capital Stock) held by Persons other than the Parent Guarantor or any Restricted Subsidiary;
(2) purchase, call for redemption or redeem, retire or otherwise acquire for value any shares of Capital Stock of the Parent Guarantor or any Restricted Subsidiary (including options, warrants or other rights to acquire such shares of Capital Stock) or any direct or indirect parent of the Parent Guarantor held by any Persons other than the Parent Guarantor or any
— 229 — Restricted Subsidiary other than (i) the purchase of Capital Stock of a Restricted Subsidiary pursuant to a Staged Acquisition Agreement permitted to be entered into under the Indenture or (ii) the purchase of Capital Stock of a Restricted Subsidiary held by any Trust Company Investor permitted to be entered into under the Indenture;
(3) make any voluntary or optional principal payment, or voluntary or optional redemption, repurchase, defeasance, or other acquisition or retirement for value, of Indebtedness that is subordinated in right of payment to the Notes or any of the Subsidiary Guarantees or any of the JV Subsidiary Guarantees (excluding any intercompany Indebtedness between or among the Parent Guarantor and any Restricted Subsidiary); or
(4) make any Investment, other than a Permitted Investment;
if, at the time of, and after giving effect to, the proposed Restricted Payment:
(a) a Default has occurred and is continuing or would occur as a result of such Restricted Payment;
(b) the Parent Guarantor could not Incur at least US$1.00 of Indebtedness under the proviso in the first paragraph of part (1) of the covenant under the caption ‘‘— Limitation on Indebtedness and Preferred Stock’’;or
(c) such Restricted Payment, together with the aggregate amount of all (1) Restricted Payments made by the Company and its Restricted Subsidiaries after the Original Issue Date and (2) payments made by the Company and its Restricted Subsidiaries after May 4, 2010 but on or before the Original Issue Date that would have been Restricted Payments had they been made after the Original Issue Date, shall exceed the sum of:
(i) 50% of the aggregate amount of the Consolidated Net Income of the Parent Guarantor (or, if the Consolidated Net Income is a loss, minus 100% of the amount of such loss) accrued on a cumulative basis during the period (taken as one accounting period) beginning on the first day of the first fiscal quarter of 2009 and ending on the last day of the Parent Guarantor’s most recently ended fiscal quarter for which consolidated financial statements of the Parent Guarantor (which the Parent Guarantor shall use its reasonable best efforts to compile in a timely manner) are available (which may include internal consolidated financial statements); plus
(ii) 100% of the aggregate Net Cash Proceeds received by the Parent Guarantor after May 4, 2010 (1) as a capital contribution to its common equity or from the issuance and sale of its Capital Stock (other than Disqualified Stock) to a Person who is not a Subsidiary of the Parent Guarantor, (2) from the issuance of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of the Parent Guarantor that have been converted or exchanged into Capital Stock (other than Disqualified Stock) of the Parent Guarantor, or (3) from the exercise by a Person who is not a Subsidiary of the Parent Guarantor of any options, warrants or other rights to acquire Capital Stock of the Parent Guarantor (other than Disqualified Stock); plus
(iii) the amount by which Indebtedness of the Parent Guarantor or any of its Restricted Subsidiaries is reduced on the Parent Guarantor’s consolidated balance sheet upon the conversion or exchange subsequent to May 4, 2010 of any Indebtedness of the Parent Guarantor or any Restricted Subsidiary convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Parent Guarantor (less the amount of any cash, or the Fair Market Value of any other property, distributed by the Parent Guarantor upon such conversion or exchange); provided, however, that the foregoing amount shall not exceed the Net Cash Proceeds received by the Parent Guarantor or any Restricted Subsidiary from the sale of such Indebtedness (excluding Net Cash Proceeds from sales to the Parent Guarantor or a Subsidiary of the Parent Guarantor or to an employee stock ownership plan or to a trust established by the Parent Guarantor or any of its Subsidiaries for the benefit of their employees); plus
— 230 — (iv) an amount equal to the sum of:
(A) (1) the net reduction in Investments (other than reductions in Permitted Investments) made after May 4, 2010 in any Person other than the Parent Guarantor or a Restricted Subsidiary resulting from (x) dividends, repayments of loans or advances or other transfers of property, in each case to the Parent Guarantor or any Restricted Subsidiary from such Person or (y) the unconditional release of a Guarantee provided by the Parent Guarantor or a Restricted Subsidiary made after May 4, 2010 or (2) to the extent that an Investment made after May 4, 2010 is sold or otherwise liquidated or repaid for cash, the lesser of (x) the cash return of capital with respect to such Investment (less the cost of disposition, if any) and (y) the initial amount of such Investment, plus
(B) the portion (proportionate to the Parent Guarantor’s equity interest in such Unrestricted Subsidiary) of the Fair Market Value of the net assets of an Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated a Restricted Subsidiary at any time after May 4, 2010; provided, however, that the foregoing sum shall not exceed, in the case of any Person, the amount of Investments previously made (and treated as a Restricted Payment under the Indenture, the 2017 Indenture and the 2018 Indenture) by the Parent Guarantor or any Restricted Subsidiary in such Person, and provided further, that no amount will be included under this clause (iv) to the extent it is already included in Consolidated Net Income as described in clause (i) of this paragraph.
The foregoing provision shall not be violated by reason of:
(1) the payment of any dividend or redemption of any Capital Stock within 90 days after the related date of declaration or call for redemption if, at said date of declaration or call for redemption, such payment or redemption would comply with the preceding paragraph;
(2) the redemption, repurchase, defeasance or other acquisition or retirement for value of Subordinated Indebtedness of the Parent Guarantor, the Issuer or any of the Subsidiary Guarantors or JV Subsidiary Guarantors with the Net Cash Proceeds of, or in exchange for, a substantially concurrent Incurrence of Permitted Refinancing Indebtedness;
(3) the redemption, repurchase or other acquisition of Capital Stock of the Parent Guarantor, the Issuer or any Subsidiary Guarantor or JV Subsidiary Guarantors (or options, warrants or other rights to acquire such Capital Stock) in exchange for, or out of the Net Cash Proceeds of a substantially concurrent capital contribution or sale (other than to a Subsidiary of the Parent Guarantor) of, shares of Capital Stock (other than Disqualified Stock) of the Parent Guarantor or Capital Stock (other than Disqualified or Preferred Stock) of the Issuer or any Subsidiary Guarantor (or options, warrants or other rights to acquire such Capital Stock); provided that the amount of any such Net Cash Proceeds that are utilized for any such Restricted Payment will be excluded from clause (c)(ii) of the preceding paragraph;
(4) the redemption, repurchase, defeasance or other acquisition or retirement for value of Subordinated Indebtedness of the Parent Guarantor, the Issuer or any of the Subsidiary Guarantors or JV Subsidiary Guarantors in exchange for, or out of the Net Cash Proceeds of, a substantially concurrent capital contribution or sale (other than to a Subsidiary of the Parent Guarantor) of, shares of Capital Stock (other than Disqualified Stock) of the Parent Guarantor or Capital Stock (other than Disqualified or Preferred Stock) of the Issuer or any of the Subsidiary Guarantors or JV Subsidiary Guarantors (or options, warrants or other rights to acquire such Capital Stock); provided that the amount of any such Net Cash Proceeds that are utilized for any such Restricted Payment will be excluded from clause (c)(ii) of the preceding paragraph;
(5) the payment of any dividends or distributions declared, paid or made by a Restricted Subsidiary payable, on a pro rata basis or on a basis more favorable to the Parent Guarantor, to all holders of any class of Capital Stock of such Restricted Subsidiary;
— 231 — (6) cash payments in lieu of fractional shares in connection with the exercise of warrants, options or other securities convertible into or exchangeable for Capital Stock of the Parent Guarantor; provided, however, that any such cash payment shall not be for the purpose of evading the limitation of this ‘‘— Limitation on Restricted Payments’’ covenant (as determined in good faith by the Board of Directors of the Parent Guarantor);
(7) the repurchase, redemption or other acquisition or retirement for value of any Capital Stock of the Parent Guarantor or any Restricted Subsidiary held by an employee benefit plan of the Parent Guarantor or any Restricted Subsidiary, any current or former officer, director, consultant, or employee of the Parent Guarantor or any Restricted Subsidiary (or permitted transferees, estates or heirs of any of the foregoing), provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Capital Stock may not exceed US$25 million (or the Dollar Equivalent using the Original Issue Date as the date of determination);
(8) the purchase of Capital Stock of a Person and payments made pursuant to a Staged Acquisition Agreement or payments pursuant to a Minority Interest Staged Acquisition Agreement if, on the date that such Minority Staged Acquisition Agreement was entered into, such payments would have complied with the preceding paragraph;
(9) dividends paid to, or the purchase of Capital Stock of any Restricted Subsidiary held by any Trust Company Investor in respect of any Indebtedness outstanding on the Original Issue Date or of the type of Indebtedness described under paragraph (2)(t) of the ‘‘— Limitation on Indebtedness and Preferred Stock’’ covenant;
(10) any Restricted Payment in an aggregate amount, taken together with all other Restricted Payments made in reliance on this clause (10), not to exceed US$25 million (or the Dollar Equivalent thereof using the exchange rates existing as of the Original Issue Date);
(11) the redemption, repurchase or other acquisition of Capital Stock of any Restricted Subsidiary holding any real estate project; provided that not less than 70% of the aggregate gross planned floor area of the real estate projects held by such Restricted Subsidiary has been sold or pre-sold;
(12) the declaration and payment of dividends by the Parent Guarantor with respect to any financial year up to an aggregate amount not to exceed 25% of the Parent Guarantor’s consolidated net profit in such financial year; provided that the conditions of clauses (a) and (c) of the first paragraph of this ‘‘Limitation on Restricted Payments’’ covenant would not be violated as a consequence of such declaration and payment of dividends;
(13) any purchase, redemption, retirement or acquisition of any shares of Capital Stock of any Restricted Subsidiary in an arm’s length transaction, provided that any such purchase, redemption, retirement or acquisition shall be deemed to be an arm’s length transaction if the consideration paid by the Issuer or the relevant Restricted Subsidiary, as the case may be, is not more than the Fair Market Value of the shares of Capital Stock so purchased, redeemed, retired or acquired; or
(14) payments, including distributions, made under or in connection with any Perpetual Bond Obligation pursuant to the terms thereof or in connection with a repurchase or redemption thereof, provided that, in the case of clause (2), (3), (4), (10), (11) or (12) of the preceding paragraph, no Default shall have occurred and be continuing or would occur as a consequence of the actions or payments set forth therein.
Each Restricted Payment permitted pursuant to clause (1) or (12) of the preceding paragraph shall be included in calculating whether the conditions of clause (c) of the first paragraph of this ‘‘Limitation on Restricted Payments’’ covenant have been met with respect to any subsequent Restricted Payments.
The amount of any Restricted Payments (other than cash) will be the Fair Market Value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Parent Guarantor or the Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
— 232 — The value of any assets or securities that are required to be valued by this covenant will be the Fair Market Value. The Board of Directors’ determination of the Fair Market Value of a Restricted Payment or any such assets or securities (other than any Restricted Payment set forth in clauses (5) through (14) above) must be based upon an opinion or appraisal issued by an appraisal or investment banking firm of recognized international standing if the Fair Market Value exceeds US$10 million (or the Dollar Equivalent thereof).
Not later than the date of making any Restricted Payment in excess of US$10 million (or the Dollar Equivalent thereof) (other than any Restricted Payments set forth in clauses (5) through (14) above to the extent the rules and regulations of the SGX-ST or any other recognized exchange on which the Parent Guarantor’s common shares are then listed for trading do not require a fairness opinion or appraisal for making such Restricted Payment), the Parent Guarantor will deliver to the Trustee an Officers’ Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this ‘‘— Limitation on Restricted Payments’’ covenant were computed, together with a copy of any fairness opinion or appraisal required by the Indenture.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
(1) Except as provided below, the Parent Guarantor will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary (other than the Issuer) to:
(a) pay dividends or make any other distributions on any Capital Stock of such Restricted Subsidiary owned by the Parent Guarantor or any other Restricted Subsidiary;
(b) pay any Indebtedness or other obligation owed to the Parent Guarantor or any other Restricted Subsidiary;
(c) make loans or advances to the Parent Guarantor or any other Restricted Subsidiary; or
(d) sell, lease or transfer any of its property or assets to the Parent Guarantor or any other Restricted Subsidiary;
provided that for the avoidance of doubt the following shall not be deemed to constitute such an encumbrance or restriction: (i) the priority of any Preferred Stock in receiving dividends or liquidating distributions prior to dividends or liquidating distributions being paid on Common Stock; (ii) the subordination of loans or advances made to the Parent Guarantor or any Restricted Subsidiary to other Indebtedness Incurred by the Parent Guarantor or any Restricted Subsidiary; and (iii) the provisions contained in documentation governing Indebtedness requiring transactions between or among the Parent Guarantor and any Restricted Subsidiary or between or among any Restricted Subsidiary to be on fair and reasonable terms or on an arm’s length basis.
(2) The provisions of paragraph (1) do not apply to any encumbrances or restrictions:
(a) existing in agreements as in effect on the Original Issue Date, or in the Notes, the Guarantees, the Indenture, the Security Documents, or under any Permitted Pari Passu Secured Indebtedness of the Parent Guarantor or any Subsidiary Guarantor Pledgor, pari passu Guarantee or any SPV Indebtedness, and any extensions, refinancings, renewals or replacements of any of the foregoing agreements; provided that the encumbrances and restrictions in any such extension, refinancing, renewal or replacement, taken as a whole, are no more restrictive in any material respect than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed or replaced;
(b) existing under or by reason of applicable law, rule, regulation or order;
(c) existing with respect to any Person or the property or assets of such Person acquired by the Parent Guarantor or any Restricted Subsidiary, at the time of such acquisition and not incurred in contemplation thereof, which encumbrances or restrictions are not applicable to any Person or the property or assets of any Person other than such Person or the property or assets of such Person so acquired, and any extensions, refinancings,
— 233 — renewals or replacements thereof; provided that the encumbrances and restrictions in any such extension, refinancing, renewal or replacement, taken as a whole, are no more restrictive in any material respect to the Holders than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed or replaced;
(d) that otherwise would be prohibited by the provision described in clause (1)(d) of this covenant if they arise, or are agreed to, in the ordinary course of business and, that (i) restrict in a customary manner the subletting, assignment or transfer of any property or asset that is subject to a lease or license, or (ii) exist by virtue of any Lien on, or agreement to transfer, option or similar right with respect to any property or assets of the Parent Guarantor or any Restricted Subsidiary not otherwise prohibited by the Indenture or (iii) do not relate to any Indebtedness, and that do not, individually or in the aggregate, detract from the value of property or assets of the Parent Guarantor or any Restricted Subsidiary in any manner material to the Parent Guarantor or any Restricted Subsidiary;
(e) with respect to a Restricted Subsidiary and imposed pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock of, or property and assets of, such Restricted Subsidiary that is permitted by the ‘‘— Limitation on Sales and Issuances of Capital Stock in Restricted Subsidiaries,’’ ‘‘— Limitation on Indebtedness and Preferred Stock’’ and ‘‘— Limitation on Asset Sales’’ covenants;
(f) existing in customary provisions in shareholders’ agreement, joint venture agreements and other similar agreements permitted under the Indenture, to the extent such encumbrance or restriction relates to the activities or assets of a Restricted Subsidiary that is a party to such joint venture and if (as determined in good faith by the Board of Directors) (i) the encumbrances or restrictions are customary for a shareholders’ agreement, joint venture or similar agreement of that type and (ii) the encumbrances or restrictions would not, at the time agreed to, be expect to materially adversely affect the ability of the Issuer to make required payments on the Notes;
(g) with respect to any Restricted Subsidiary and imposed pursuant to an agreement that has been entered into for the Incurrence of Indebtedness permitted under paragraph (1) or clauses (2)(e), (g), (h), (n), (o), (p), (q), (r), (s), (t), (u), (v), (w), (x) or (y) of the ‘‘Limitation on Indebtedness and Preferred Stock’’ covenant if, as determined by the Board of Directors, the encumbrances or restrictions are (i) customary for such types of agreements and (ii) would not, at the time agreed to, be expected to materially and adversely affect the ability of the Issuer to make required payment on the Notes and the Parent Guarantor under the Parent Guarantee and any extensions, refinancings, renewals or replacements of any of the foregoing agreements; provided that the encumbrances and restrictions in any such extension, refinancing, renewal or replacement, taken as a whole, are no more restrictive in any material respect to the Holders than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed or replaced; provided further that, the Board of Directors is empowered to determine whether the conditions set forth in clauses (i) and (ii) are met, which determination shall be conclusive if evidenced by a Board Resolution; or
(h) existing with respect to any Unrestricted Subsidiary or the property or assets of such Unrestricted Subsidiary that is designated as a Restricted Subsidiary in accordance with the terms of the Indenture at the time of such designation and not incurred in contemplation of such designation, which encumbrances or restrictions are not applicable to any Person or the property or assets of any Person other than such Subsidiary or its subsidiaries or the property or assets of such Subsidiary or its subsidiaries, and any extensions, refinancing, renewals or replacements thereof; provided that the encumbrances and restrictions in any such extension, refinancing, renewal or replacement, taken as a whole, are no more restrictive in any material respect to the Holders than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed or replaced.
— 234 — Limitation on Sales and Issuances of Capital Stock in Restricted Subsidiaries
The Parent Guarantor will not sell, and will not permit any Restricted Subsidiary, directly or indirectly, to issue or sell any shares of Capital Stock of a Restricted Subsidiary (including options, warrants or other rights to purchase shares of such Capital Stock) except:
(1) to the Parent Guarantor or a Wholly-Owned Restricted Subsidiary, or in the case of a Restricted Subsidiary that is not Wholly-Owned, pro rata to its shareholders or incorporators;
(2) to the extent such Capital Stock represents director’s qualifying shares or is required by applicable law to be held by a Person other than the Parent Guarantor or a Wholly-Owned Restricted Subsidiary;
(3) the issuance or sale of Capital Stock of a Restricted Subsidiary if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any remaining Investment in such Person would have been permitted to be made under the ‘‘Limitation on Restricted Payments’’ covenant if made on thedateofsuchissuanceorsaleandprovided that the Parent Guarantor complies with the ‘‘— Limitation on Asset Sales’’ covenant; or
(4) the issuance or sale of Capital Stock of a Restricted Subsidiary (which remains a Restricted Subsidiary after any such issuance or sale); provided that the Parent Guarantor or such Restricted Subsidiary applies the Net Cash Proceeds of such issuance or sale in accordance with the ‘‘— Limitation on Asset Sales’’ covenant.
Limitation on Issuances of Guarantees by Restricted Subsidiaries
The Parent Guarantor will not permit any Restricted Subsidiary which is not the Issuer or a Subsidiary Guarantor or a JV Subsidiary Guarantor, directly or indirectly, to guarantee any Indebtedness (‘‘Guaranteed Indebtedness’’) of the Parent Guarantor, the Issuer or any Subsidiary Guarantor, unless (1) (a) such Restricted Subsidiary, simultaneously executes and delivers a supplemental indenture to the Indenture providing for an unsubordinated Subsidiary Guarantee (in the case of Subsidiary Guarantor) or JV Subsidiary Guarantee (in the case of JV Subsidiary Guarantor) of payment of the Notes by such Restricted Subsidiary and (b) such Restricted Subsidiary waives and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Parent Guarantor or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Subsidiary Guarantee or JV Subsidiary Guarantee, as the case may be, until the Notes have been paid in full or (2) such guarantee and such Guaranteed Indebtedness are permitted by clauses (2)(c), (d), (q) or (v) (in the case of clauses (q) or (v), with respect to the guarantee provided by the Parent Guarantor or any Restricted Subsidiary through the pledge of one or more bank accounts, bank deposits, other assets or share capital to secure (or the use of any guarantee or letter of credit or similar instruments to guarantee), as applicable, any Bank Deposit Secured Indebtedness or Onshore Secured Indebtedness), under the caption ‘‘— Limitation on Indebtedness and Preferred Stock.’’
If the Guaranteed Indebtedness (1) ranks pari passu in right of payment with the Notes, any Subsidiary Guarantee or any JV Subsidiary Guarantee, then the guarantee of such Guaranteed Indebtedness shall rank pari passu in right of payment with, or subordinated to, the Subsidiary Guarantee or JV Subsidiary Guarantee, as the case may be, or (2) is subordinated in right of payment to the Notes or any Subsidiary Guarantee or any JV Subsidiary Guarantee, then the guarantee of such Guaranteed Indebtedness shall be subordinated in right of payment to the Subsidiary Guarantee or the JV Subsidiary Guarantee at least to the extent that the Guaranteed Indebtedness is subordinated to the Notes, the Subsidiary Guarantee or the JV Subsidiary Guarantee.
The Parent Guarantor will not permit any JV Subsidiary Guarantor, directly or indirectly, to guarantee any Indebtedness of the Parent Guarantor or any other Restricted Subsidiary unless the aggregate claims of the creditor under such guarantee will be limited to the JV Entitlement Amount. If any JV Subsidiary Guarantor guarantees any Indebtedness of the Parent Guarantor or any other Restricted Subsidiary where the aggregate claims of the creditor under such guarantee exceeds the JV Entitlement Amount, such JV Subsidiary Guarantee shall be replaced with a Subsidiary Guarantee given by a Subsidiary Guarantor.
— 235 — Limitation on Transactions with Shareholders and Affiliates
The Parent Guarantor will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into, renew or extend any transaction or arrangement (including, without limitation, the purchase, sale, lease or exchange of property or assets, or the rendering of any service) with (x) any holder (or any Affiliate of such holder) of 10% or more of any class of Capital Stock of the Parent Guarantor or (y) any Affiliate of the Parent Guarantor (each an ‘‘Affiliate Transaction’’), unless:
(1) the Affiliate Transaction is on terms that are no less favorable to the Parent Guarantor or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Parent Guarantor or the relevant Restricted Subsidiary with a Person that is not an Affiliate of the Parent Guarantor; and
(2) the Parent Guarantor delivers to the Trustee:
(a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of US$10 million (or the Dollar Equivalent thereof), a Board Resolution set forth in an Officers’ Certificate certifying that such Affiliate Transaction complies with this covenant and such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors; and
(b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of US$20 million (or the Dollar Equivalent thereof), in addition to the Board Resolution required in clause (2)(a) above, an opinion as to the fairness to the Parent Guarantor or such Restricted Subsidiary of such Affiliate Transaction from a financial point of view or confirming that the terms of such Affiliate Transaction are no less favorable to the Parent Guarantor or the relevant Restricted Subsidiary than terms available to (or from, as applicable) a Person that is not an Affiliate of the Parent Guarantor or a Restricted Subsidiary issued by an accounting, appraisal or investment banking firm of recognized international standing.
The foregoing limitation does not limit, and shall not apply to:
(1) the payment of reasonable and customary regular fees to directors of the Parent Guarantor who are not employees of the Parent Guarantor;
(2) loans or advances to employees, officers or directors in the ordinary course of business not to exceed US$5 million in the aggregate at any one time outstanding;
(3) any employment, consulting, service or termination agreement, or reasonable and customary indemnification arrangements, entered into by the Parent Guarantor or any of its Restricted Subsidiaries with directors, officers, employees and consultants in the ordinary course of business and the payment of compensation pursuant thereto (including amounts paid pursuant to employee benefit plans, employee stock option or similar plans);
(4) any sale of apartment units by the Parent Guarantor or a Restricted Subsidiary in the ordinary course of business to employees, officers, directors or their respective family members at a discount from the listed price not greater that that applicable generally to all employees of the Parent Guarantor and its Subsidiaries with respect to those apartment units; provided that (x) revenues from all such sales in any fiscal year shall not exceed 2% of the revenues for that year as shown in the consolidated financial statements of the Parent Guarantor for that period in accordance with GAAP and (y) any such discount shall not be in excess of 15% to the Fair Market Value of the relevant apartment unit;
(5) transactions between or among the Parent Guarantor and any of its Wholly-Owned Restricted Subsidiaries or between or among Wholly-Owned Restricted Subsidiaries;
(6) any Restricted Payment of the type described in clauses (1), (2) or (3) of the first paragraph of the covenant described above under the caption ‘‘— Limitation on Restricted Payments’’ if permitted by that covenant;
— 236 — (7) any sale of Capital Stock (other than Disqualified Stock) of the Parent Guarantor or any incurrence by the Parent Guarantor or any Restricted Subsidiary of Subordinated Shareholder Loans;
(8) any repurchase, redemption or other acquisition or retirement for value of any Capital Stock of the Parent Guarantor or any Restricted Subsidiary pursuant to clause (7) of the second paragraph of the ‘‘Limitation on Restricted Payments’’ covenant;
(9) transactions with a Person (other than an Unrestricted Subsidiary of the Parent Guarantor) that is an Affiliate of the Parent Guarantor solely because the Parent Guarantor owns, directly or through a Restricted Subsidiary, an interest in the Capital Stock of such Person;
(10) any transaction between (A) the Parent Guarantor or any Restricted Subsidiary and (B) any entity in a Restructuring Group entered into in connection with a proposed Restructuring, including but not limited to transactions entered into for purposes of any reorganization in connection with such proposed Restructuring and the entry into, and the performance thereof, of any underwriting agreement or other transaction documents in connection with such proposed Restructuring; and
(11) any transaction between (A) the Parent Guarantor or any Restricted Subsidiary and (B) any entity in a Restructuring Group entered into in the ordinary course of business, on fair and reasonable terms and disclosed in the offering document issued in connection with a proposed Restructuring, or any amendment or modification or extension or replacement thereof, so long as such amendment, modification or replacement is not more disadvantageous to the Parent Guarantor and its Restricted Subsidiaries than the original transaction described in the offering document issued in connection with such proposed Restructuring and in compliance with the rules of the SGX-ST or any other recognized exchange on which the Parent Guarantor’s ordinary shares are then listed for trading.
The requirements of clause (2)(b) of the first paragraph of this covenant shall not apply to any unsecured loan provided by Yanlord Holdings Pte. Limited to the Parent Guarantor bearing commercial terms that are substantially similar to those obtained by Yanlord Holdings Pte. Limited from an Independent Third Party.
In addition, the requirements of clause (2) of the first paragraph of this covenant shall not apply to (i) Investments (including Permitted Investments that are permitted under paragraph (21) of the definition of ‘‘Permitted Investments’’ but otherwise excluding any other Permitted Investments) not prohibited by the ‘‘Limitation on Restricted Payments’’ covenant, (ii) transactions pursuant to agreements in effect on the Original Issue Date and described in this Offering Circular, or any amendment or modification or replacement thereof, so long as such amendment, modification or replacement is not more disadvantageous to the Parent Guarantor and its Restricted Subsidiaries than the original agreement in effect on the Original Issue Date and (iii) (A) any transaction between or among any of the Parent Guarantor, any Wholly-Owned Restricted Subsidiary and any Restricted Subsidiary that is not a Wholly-Owned Restricted Subsidiary or (B) the Parent Guarantor or a Restricted Subsidiary and any Jointly Controlled Entity; provided that in the case of clause (iii), (a) such transaction is entered into in the ordinary course of business and (b) none of the minority shareholders or minority partners of or in such Restricted Subsidiary that is not a Wholly-Owned Restricted Subsidiary or Jointly Controlled Entity is a Person described in clauses (x) or (y) of the first paragraph of this covenant (other than by reason of such minority shareholder or minority partner being a shareholder, officer or director of such Restricted Subsidiary or Jointly Controlled Entity).
Limitation on Liens
The Parent Guarantor will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, incur, assume or permit to exist any Lien on the Collateral (other than Permitted Liens).
The Parent Guarantor will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, incur, assume or permit to exist any Lien of any nature whatsoever on any of its assets or properties of any kind (other than, prior to the Release Date, the Collateral), whether owned at the Original Issue Date or thereafter acquired, except Permitted Liens, unless the Notes are equally and ratablysecuredbysuchLien.
— 237 — Limitation on Sale and Leaseback Transactions
The Parent Guarantor will not, and will not permit any of its Restricted Subsidiaries to, enter into any Sale and Leaseback Transaction; provided that the Parent Guarantor or any Restricted Subsidiary may enter into a Sale and Leaseback Transaction if:
(1) the Parent Guarantor or any Restricted Subsidiary could have (a) incurred Indebtedness in an amount equal to the Attributable Indebtedness relating to such Sale and Leaseback Transaction under the covenant described above under ‘‘— Limitation on Indebtedness and Preferred Stock’’ and (b) incurred a Lien to secure such Indebtedness pursuant to the covenant described above under the caption ‘‘— Limitation on Liens,’’ in which case, the corresponding Indebtedness and Lien will be deemed incurred pursuant to those provisions;
(2) the gross cash proceeds of that Sale and Leaseback Transaction are at least equal to the Fair Market Value of the property that is the subject of such Sale and Leaseback Transaction; and
(3) the transfer of assets in that Sale and Leaseback Transaction is permitted by, and the Parent Guarantor or any Restricted Subsidiary applies the proceeds of such transaction in compliance with, the covenant described below under the caption ‘‘— LimitationonAsset Sales.’’
Limitation on Asset Sales
The Parent Guarantor will not, and will not permit any Restricted Subsidiary to, consummate any Asset Sale, unless:
(1) no Default shall have occurred and be continuing or would occur as a result of such Asset Sale;
(2) the consideration received by the Parent Guarantor or such Restricted Subsidiary, as the case may be, is at least equal to the Fair Market Value of the assets sold or disposed of; and
(3) at least 75% of the consideration received consists of cash, Temporary Cash Investments or Replacement Assets; provided that in the case of an Asset Sale in which the Parent Guarantor or such Restricted Subsidiary receives Replacement Assets involving aggregate consideration in excess of US$50 million (or the Dollar Equivalent thereof), the Parent Guarantor shall deliver to the Trustee an opinion as to the fairness to the Parent Guarantor or such Restricted Subsidiary of such Asset Sale from a financial point of view issued by an accounting, appraisal or investment banking firm of international standing. For purposes of this provision, each of the following will be deemed to be cash:
(a) any liabilities, as shown on the Parent Guarantor’s most recent consolidated balance sheet, of the Parent Guarantor or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes, any Subsidiary Guarantee or any JV Subsidiary Guarantee) that are assumed by the transferee of any such assets pursuant to a customary assumption, assignment, novation or similar agreement that releases the Parent Guarantor or such Restricted Subsidiary from further liability; and
(b) any securities, notes or other obligations received by the Parent Guarantor or any Restricted Subsidiary from such transferee that are promptly, but in any event within 30 days of closing, converted by the Parent Guarantor or such Restricted Subsidiary into cash, to the extent of the cash received in that conversion;
Within 360 days after the receipt of any Net Cash Proceeds from an Asset Sale, the Parent Guarantor (or the applicable Restricted Subsidiary, as the case may be) may apply such Net Cash Proceeds to:
(1) permanently repay Senior Indebtedness of the Parent Guarantor or a Subsidiary Guarantor or any Indebtedness of a Restricted Subsidiary that is not a Subsidiary Guarantor (and, if such Senior Indebtedness repaid is revolving credit Indebtedness, to correspondingly reduce permanently commitments with respect thereto) in each case owing to a Person other than the Parent Guarantor or a Restricted Subsidiary;
— 238 — (2) acquire Replacement Assets; or
(3) make an Investment in Temporary Cash Investments pending application of such Net Cash Proceeds as set forth in clause (1) or (2) above.
Any Net Cash Proceeds from Asset Sales that are not applied or invested as provided in clauses (1) and (2) in the immediately preceding paragraph will constitute ‘‘Excess Proceeds.’’ Excess Proceeds of less than US$20.0 million (or the Dollar Equivalent thereof) will be carried forward and accumulated. When accumulated Excess Proceeds exceeds US$20 million (or the Dollar Equivalent thereof), within 10 days thereof, the Issuer must make an Offer to Purchase Notes having a principal amount equal to:
(1) accumulated Excess Proceeds, multiplied by
(2) a fraction (x) the numerator of which is equal to the outstanding principal amount of the Notes and (y) the denominator of which is equal to the outstanding principal amount of the Notes and all pari passu Indebtedness similarly required to be repaid, redeemed or tendered for in connection with the Asset Sale, rounded down to the nearest US$1,000.
The offer price in any Offer to Purchase will be equal to 100% of the principal amount plus accrued and unpaid interest to the date of purchase, and will be payable in cash.
On the Offer to Purchase Payment Date, the Issuer shall to the extent lawful: (a) accept for payment on a pro rata basis Notes or portions thereof tendered pursuant to an Offer to Purchase; and (b) deliver, or cause to be delivered, to the Trustee all Notes or portions thereof so accepted together with an Officers’ Certificate specifying the Notes or portions thereof accepted for payment by the Issuer. The Tender Agent shall promptly mail to the Holders of Notes so accepted payment in an amount equal to the purchase price, and the Trustee or an authenticating agent shall promptly authenticate and mail to such Holders a new Note equal in principal amount to any unpurchased portion of the Note surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of US$200,000 or integral multiples of US$1,000. The Issuer will publicly announce the results of an Offer to Purchase as soon as practicable after the Payment Date.
The Issuer will not be required to make an Offer to Purchaser if a third party makes the Offer to Purchase in compliance with the requirements set forth in the indenture applicable to an Offer to Purchase made by the Issuer and purchases all Notes properly tendered and not withdrawn under the Offer to Purchase.
The offer is required to contain or incorporate by reference information concerning the business of the Parent Guarantor and its Subsidiaries which the Issuer in good faith believes will assist such Holders to make an informed decision with respect to the Offer to Purchase, including a brief description of the events requiring the Issuer to make the Offer to Purchase, and any other information required by applicable law to be included therein. The offer is required to contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Offer to Purchase.
If any Excess Proceeds remain after consummation of an Offer to Purchase, the Issuer may use those Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes (and any other pari passu Indebtedness) tendered in such Offer to Purchase exceeds the amount of Excess Proceeds, the Notes (and such other pari passu Indebtedness) will be purchased on a pro rata basis by the Issuer. Upon completion of each Offer to Purchase, the amount of Excess Proceeds will be reset at zero.
Limitation on the Parent Guarantor’s Business Activities
The Parent Guarantor will not, and will not permit any Restricted Subsidiary to, directly or indirectly, engage in any business other than a Permitted Business; provided, however, that the Parent Guarantor or any Restricted Subsidiary may own Capital Stock of an Unrestricted Subsidiary or joint venture or other entity that is engaged in a business other than Permitted Businesses as long as any Investment therein was not prohibited when made by the covenant under the caption ‘‘— Limitation on Restricted Payments.’’
— 239 — Use of Proceeds
The Parent Guarantor will not, and will not permit any Restricted Subsidiary to, use the net proceeds from the sale of the Notes, in any amount, for any purpose other than (1) in the approximate amounts and for the purposes specified, including any adjustment in response to changes in acquisition or development plans as contemplated, under the caption ‘‘Use of Proceeds’’ in this offering memorandum and (2) pending the application of all of such net proceeds in such manner, to invest the portion of such net proceeds not yet so applied in Temporary Cash Investments.
Designation of Restricted and Unrestricted Subsidiaries
The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary; provided that (1) no Default shall have occurred and be continuing at the time of or after giving effect to such designation; (2) neither the Parent Guarantor nor any Subsidiary Guarantor provides credit support (other than any guarantee in compliance with clause (6) below) for the Indebtedness of such Restricted Subsidiary; (3) such Restricted Subsidiary has no outstanding Indebtedness that could trigger across— default to the Indebtedness of the Parent Guarantor; (4) such Restricted Subsidiary does not own any Disqualified Stock of the Parent Guarantor or Disqualified or Preferred Stock of another Restricted Subsidiary or hold any Indebtedness of, or any Lien on any property of, the Parent Guarantor or any Restricted Subsidiary, if such Disqualified or Preferred Stock or Indebtedness could not be Incurred under the covenant described under the caption ‘‘— Limitation on Indebtedness and Preferred Stock’’ or such Lien would violate the covenant described under the caption ‘‘— Limitation on Liens’’; (5) such Restricted Subsidiary does not own any Voting Stock of another Restricted Subsidiary, and all of its Subsidiaries are Unrestricted Subsidiaries or are being concurrently designated to be Unrestricted Subsidiaries in accordance with this paragraph; and (6) the Investment deemed to have been made thereby in such newly-designated Unrestricted Subsidiary and each other newly-designated Unrestricted Subsidiary being concurrently redesignated would be permitted to be made by the covenant described under ‘‘— Limitation on Restricted Payments.’’
The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that (1) no Default shall have occurred and be continuing at the time of or after giving effect to such designation; (2) any Indebtedness of such Unrestricted Subsidiary outstanding at the time of such designation which will be deemed to have been Incurred by such newly-designated Restricted Subsidiary as a result of such designation would be permitted to be Incurred by the covenant described under the caption ‘‘— LimitationonIndebtednessandPreferredStock’’; (3) any Lien on the property of such Unrestricted Subsidiary at the time of such designation which will be deemed to have been incurred by such newly-designated Restricted Subsidiary as a result of such designation would be permitted to be incurred by the covenant described under the caption ‘‘— Limitation on Liens’’;(4)such Unrestricted Subsidiary is not a Subsidiary of another Unrestricted Subsidiary (that is not concurrently being designated as a Restricted Subsidiary); (5) if such Restricted Subsidiary is not organized under the laws of the PRC, such Restricted Subsidiary shall upon such designation execute and deliver to the Trustee a supplemental indenture to the Indenture by which such Restricted Subsidiary shall become a Subsidiary Guarantor; and (6) if such Restricted Subsidiary is not organized under the laws of the PRC, all Capital Stock of such Restricted Subsidiary owned by the Parent Guarantor or any other Restricted Subsidiary shall be pledged as required under ‘‘— Security.’’
Government Approvals and Licenses; Compliance with Law
The Parent Guarantor will, and will cause each Restricted Subsidiary to, (1) obtain and maintain in full force and effect all governmental approvals, authorizations, consents, permits, concessions and licenses as are necessary to engage in the Permitted Businesses; (2) preserve and maintain good and valid title to its properties and assets (including land-use rights) free and clear of any Liens other than Permitted Liens; and (3) comply with all laws, regulations, orders, judgments and decrees of any governmental body, except to the extent that failure so to obtain, maintain, preserve and comply would not reasonably be expected to have a material adverse effect on (a) the business, results of operations or prospects of the Parent Guarantor and its Restricted Subsidiaries, taken as a whole, or (b) the ability of the Parent Guarantor, any Subsidiary Guarantor or any JV Subsidiary Guarantor to perform its obligations under the Notes, the relevant Subsidiary Guarantee, the relevant JV Subsidiary Guarantee or the Indenture.
— 240 — Anti-Layering
The Parent Guarantor will not Incur, and will not permit any Subsidiary Guarantor or JV Subsidiary Guarantor to Incur, any Indebtedness if such Indebtedness is contractually subordinated in right of payment to any other Indebtedness of the Parent Guarantor, such Subsidiary Guarantor or such JV Subsidiary Guarantor, as the case may be, unless such Indebtedness is also contractually subordinated in right of payment to the Notes, the applicable Subsidiary Guarantee or the applicable JV Subsidiary Guarantee, on substantially identical terms. This does not apply to distinctions between categories of Indebtedness that exist by reason of any Liens or guarantees securing or in favor of some but not all of such Indebtedness.
Suspension of Certain Covenants
If, on any date following the date of the Indenture, the Notes have a rating of Investment Grade from both of the Rating Agencies and no Default has occurred and is continuing (a ‘‘Suspension Event’’), then, beginning on that day and continuing until such time, if any, at which the Notes cease to have a rating of Investment Grade from either of the Rating Agencies, the provisions of the Indenture summarized under the following captions will be suspended:
(1) ‘‘— Certain Covenants — LimitationonIndebtednessandPreferredStock’’;
(2) ‘‘— Certain Covenants — Limitation on Restricted Payments’’;
(3) ‘‘— Certain Covenants — Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries’’;
(4) ‘‘— Certain Covenants — Limitation on Sales and Issuances of Capital Stock in Restricted Subsidiaries’’;
(5) ‘‘— Certain Covenants — Limitation on Issuances of Guarantees by Restricted Subsidiaries’’;
(6) ‘‘— Certain Covenants — Limitation on the Parent Guarantor’s Business Activities’’;
(7) ‘‘— Certain Covenants — Limitation on Sale and Leaseback Transactions’’;
(8) ‘‘— Certain Covenants — Limitation on Asset Sales’’;and
(9) clauses (3), (4) and 5(x) of the first, second and third paragraphs of ‘‘— Consolidation, Merger and Sale of Assets’’.
During any period that the foregoing covenants have been suspended, the Board of Directors may not designate any of the Restricted Subsidiaries as Unrestricted Subsidiaries pursuant to the covenant summarized under the caption ‘‘— Certain Covenants — Designation of Restricted and Unrestricted Subsidiaries’’ or the definition of ‘‘Unrestricted Subsidiary.’’
Such covenants will be reinstituted and apply according to their terms as of and from the first day on which a Suspension Event ceases to be in effect. Such covenants will not, however, be of any effect with regard to actions of the Parent Guarantor or any Restricted Subsidiary properly taken in compliance with the provisions of the Indenture during the continuance of the Suspension Event, and following reinstatement the calculations under the covenant summarized under ‘‘— Certain Covenants — Limitation on Restricted Payments’’ will be made as if such covenant had been in effect since the date of the Indenture except that no Default will be deemed to have occurred solely by reason of a Restricted Payment made while that covenant was suspended.
There can be no assurance that the Notes will ever achieve a rating of Investment Grade or that any such rating will be maintained.
Provision of Financial Statements and Reports
(1) So long as any of the Notes remain outstanding, the Parent Guarantor will file with the Trustee and furnish to the Holders upon request, as soon as they are available but in any event not more than 10 calendar days after they are filed with SGX-ST or any other recognized exchange on which the Parent Guarantor’s common shares are at any time listed
— 241 — for trading, true and correct copies of any financial or other report filed with such exchange; provided that if at any time the Common Stock of the Parent Guarantor ceases to be listed for trading on a recognized stock exchange, the Parent Guarantor will file with the Trustee and furnish to the Holders in the English language:
(a) as soon as they are available, but in any event within 90 calendar days after the end of the fiscal year of the Parent Guarantor, copies of its financial statements (on a consolidated basis) in respect of such financial year (including a statement of income, balance sheet and cash flow statement) audited by a member firm of an internationally- recognized firm of independent accountants;
(b) as soon as they are available, but in any event within 45 calendar days after the end of the second financial quarter of the Parent Guarantor, copies of its financial statements (on a consolidated basis) in respect of such half-year period (including a statement of income, balance sheet and cash flow statement) reviewed by a member firm of an internationally-recognized firm of independent accountants; and
(c) as soon as they are available, but in any event within 45 calendar days after the end of each of the first and third financial quarter of the Parent Guarantor, copies of its unaudited financial statements (on a consolidated basis), including a statement of income, balance sheet and cash flow statement, prepared on a basis consistent with the audited financial statements of the Parent Guarantor together with a certificate signed by the person then authorized to sign financial statements on behalf of the Parent Guarantor to the effect that such financial statements are true in all material respects and present fairly the financial position of the Parent Guarantor as at the end of, and the results of its operations for, the relevant quarterly period.
(2) In addition, so long as any of the Notes remain outstanding, the Parent Guarantor will provide to the Trustee (a) within 120 days after the close of each fiscal year, an Officers’ Certificate stating the Fixed Charge Coverage Ratio with respect to the two most recent fiscal semi-annual periods and showing in reasonable detail the calculation of the Fixed Charge Coverage Ratio, including the arithmetic computations of each component of the Fixed Charge Coverage Ratio, with a certificate from a member of the Parent Guarantor’sBoardof Directors verifying the accuracy and correctness of the calculation and arithmetic computation and (b) as soon as possible and in any event within 30 days after the Parent Guarantor becomes aware or should reasonably become aware of the occurrence of a Default, an Officers’ Certificate setting forth the details of the Default, and the action which the Parent Guarantor proposes to take with respect thereto.
Events of Default
The following events will be defined as ‘‘Events of Default’’ in the Indenture:
(1) default in the payment of principal of (or premium, if any, on) the Notes when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise;
(2) default in the payment of interest on any Note when the same becomes due and payable, and such default continues for a period of 30 consecutive days;
(3) default in the performance or breach of the provisions of the covenants described under ‘‘— Consolidation, Merger and Sale of Assets,’’ the failure by the Parent Guarantor to make or consummate an Offer to Purchase in the manner described under the captions ‘‘— Repurchase of Notes upon a Change of Control Triggering Event’’ or ‘‘— Limitation on Asset Sales’’;
(4) the Parent Guarantor or any Restricted Subsidiary defaults in the performance of or breaches any other covenant or agreement in the Indenture or under the Notes (other than a default specified in clause (1), (2) or (3) above) and such default or breach continues for a period of 30 consecutive days after written notice by the Trustee or the Holders of 25% or more in aggregate principal amount of the Notes;
— 242 — (5) there occurs with respect to any Indebtedness of the Parent Guarantor or any Restricted Subsidiary having an outstanding principal amount of US$20 million (or the Dollar Equivalent thereof) or more in the aggregate for all such Indebtedness of all such Persons, whether such Indebtedness now exists or shall hereafter be created, (a) an event of default that has caused the holder thereof to declare such Indebtedness to be due and payable prior to its Stated Maturity and/or (b) the failure to make a principal payment when due;
(6) one or more final judgments or orders for the payment of money are rendered against the Parent Guarantor or any of its Restricted Subsidiaries and are not paid or discharged, and there is a period of 60 consecutive days following entry of the final judgment or order that causes the aggregate amount for all such final judgments or orders outstanding and not paid or discharged against all such Persons to exceed US$20 million (or the Dollar Equivalent thereof) (in excess of amounts which the Parent Guarantor’s or such Restricted Subsidiary’s insurance carriers have agreed to pay under applicable policies) during which a stay of enforcement, by reason of a pending appeal or otherwise, is not in effect;
(7) an involuntary case or other proceeding is commenced against the Parent Guarantor or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary with respect to it or its debts under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect seeking the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Parent Guarantor or any Restricted Subsidiary or for any substantial part of the property and assets of the Parent Guarantor or any Restricted Subsidiary and such involuntary case or other proceeding remains undismissed and unstayed for a period of 60 consecutive days; or an order for relief is entered against the Parent Guarantor or any Restricted Subsidiary under any applicable bankruptcy, insolvency or other similar law as now or hereafter in effect;
(8) the Parent Guarantor or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary (a) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (b) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Parent Guarantor or any Restricted Subsidiary or for all or substantially all of the property and assets of the Parent Guarantor or any Restricted Subsidiary or (c) effects any general assignment for the benefit of creditors;
(9) any Subsidiary Guarantor or JV Subsidiary Guarantor denies or disaffirms in writing its obligations under its Subsidiary Guarantee or JV Subsidiary Guarantee or, except as permitted by the Indenture, any Subsidiary Guarantee or JV Subsidiary Guarantee is determined to be unenforceable or invalid or shall for any reason cease to be in full force and effect;
(10) any default by the Parent Guarantor or any Subsidiary Guarantor Pledgor in the performance of any of its obligations under the Security Documents or the Indenture, which adversely affects the enforceability, validity, perfection or priority of the applicable Lien on the Collateral or which adversely affects the condition or value of the Collateral, taken as a whole, in any material respect; or
(11) the Parent Guarantor or any Subsidiary Guarantor Pledgor denies or disaffirms in writing its obligations under the Indenture, the Intercreditor Deed, any Security Document or, other than in accordance with the Indenture and the Security Documents, any Security Document ceases to be or is not in full force and effect or the Global Security Agent ceases to have a security interest in the Collateral (subject to any Permitted Liens).
If an Event of Default (other than an Event of Default specified in clause (7) or (8) above) occurs and is continuing under the Indenture, the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding, by written notice to the Issuer (and to the Trustee if such notice is given by the Holders), may, and the Trustee at the request of such Holders shall (subject to receiving indemnity and/or security to its satisfaction), declare the principal of, premium, if any, and accrued and unpaid interest on the Notes to be immediately due and payable. Upon a declaration of acceleration, such principal of, premium, if any, and accrued and unpaid interest shall be immediately due and
— 243 — payable. If an Event of Default specified in clause (7) or (8) above occurs with respect to the Parent Guarantor or any Restricted Subsidiary, the principal of, premium, if any, and accrued and unpaid interest on the Notes then outstanding shall automatically become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder.
The Holders of at least a majority in principal amount of the outstanding Notes by written notice to the Issuer and to the Trustee may waive all past defaults and rescind and annul a declaration of acceleration and its consequences if:
(1) all existing Events of Default, other than the nonpayment of the principal of, premium, if any, and interest on the Notes that have become due solely by such declaration of acceleration, have been cured or waived, and
(2) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction.
Upon such waiver, the Default will cease to exist, and any Event of Default arising therefrom will be deemed to have been cured, but no such waiver will extend to any subsequent or other Default or impair any right consequent thereon.
If an Event of Default occurs and is continuing, the Trustee may pursue, in its own name or as trustee of an express trust, any available remedy by proceeding at law or in equity to collect the payment of principal of and interest on the Notes or to enforce the performance of any provision of the Notes or the Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. In addition, if an Event of Default occurs and is continuing, the Trustee may, and shall upon request of Holders of at least 25% in aggregate principal amount of outstanding Notes (subject to receiving indemnity and/or security to its satisfaction), (i) give the Global Security Agent a written notice of the occurrence of such continuing Event of Default and (ii) instruct the Global Security Agent in accordance with the terms of the Intercreditor Deed to foreclose on the Collateral in accordance with the terms of the Security Documents and take such further action on behalf of the Holders of the Notes with respect to the Collateral as the Trustee deems appropriate. See ‘‘— Security.’’
The Holders of at least a majority in aggregate principal amount of the outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or the Indenture, that may involve the Trustee in personal liability, or that is unduly prejudicial to the rights of Holders not joining in the giving of such direction and may take any other action it deems proper that is not inconsistent with any such direction received from Holders.
A Holder may not institute any proceeding, judicial or otherwise, with respect to the Indenture or the Notes, or for the appointment of a receiver or trustee, or for any other remedy under the Indenture or the Notes, unless:
(1) the Holder has previously given the Trustee written notice of a continuing Event of Default;
(2) the Holders of at least 25% in aggregate principal amount of outstanding Notes make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer the Trustee indemnity and/or security satisfactory to the Trustee against any costs, liability or expense to be incurred in compliance with such request;
(4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity and/or security; and
(5) during such 60-day period, the Holders of a majority in aggregate principal amount of the outstanding Notes do not give the Trustee a written direction that is inconsistent with the request.
However, such limitations do not apply to the right of any Holder of a Note to receive payment of the principal of, premium, if any, or interest on, such Note, or to bring suit for the enforcement of any such payment, on or after the due date expressed in the Notes, which right shall not be impaired or affected without the consent of the Holder.
— 244 — For the avoidance of doubt, no Applicable Premium in respect of the Notes shall be payable as a result of any Default or Event of Default (other than an Event of Default for failing to pay the redemption price when due following the Issuer’s voluntary election, if any, to redeem the Notes pursuant to the second paragraph under the caption ‘‘— Optional Redemption,’’ to the extent any Applicable Premium is due in connection therewith).
Officers of the Parent Guarantor must certify to the Trustee in writing, on or before a date not more than 120 days after the end of each fiscal year, that a review has been conducted of the activities of the Parent Guarantor and its Restricted Subsidiaries and the Parent Guarantor’s and its Restricted Subsidiaries’ performance under the Indenture and that the Parent Guarantor has fulfilled all obligations thereunder, or, if there has been a default in the fulfillment of any such obligation, specifying each such default and the nature and status thereof. The Issuer will also be obligated to notify the Trustee of any default or defaults in the performance of any covenants or agreements under the Indenture. See ‘‘— Provision of Financial Statements and Reports.’’
Consolidation, Merger and Sale of Assets
The Parent Guarantor will not consolidate with, merge with or into another Person, permit any Person to merge with or into it, or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its and its Restricted Subsidiaries’ properties and assets (computed on a consolidated basis) (as an entirety or substantially an entirety in one transaction or a series of related transactions), unless:
(1) the Parent Guarantor shall be the continuing Person, or the Person (if other than it) formed by such consolidation or merger or that acquired or leased such property and assets (the ‘‘Surviving Person’’) shall be a corporation organized and validly existing under the laws of Singapore, the Cayman Islands, Hong Kong, Bermuda or the British Virgin Islands and shall expressly assume, by a supplemental indenture to the Indenture, executed and delivered to the Trustee, all the obligations of the Parent Guarantor under the Indenture, the Notes and the Security Documents, as the case may be, including the obligation to pay Additional Amounts, and the Indenture, the Notes and the Security Documents, as the case may be, shall remain in full force and effect;
(2) immediately after giving effect to such transaction, no Default shall have occurred and be continuing;
(3) immediately after giving effect to such transaction on a pro forma basis, the Parent Guarantor or the Surviving Person, as the case may be, shall have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Parent Guarantor immediately prior to such transaction;
(4) immediately after giving effect to such transaction on a pro forma basis the Parent Guarantor or the Surviving Person, as the case may be, could Incur at least US$1.00 of Indebtedness under the first paragraph of the covenant under the caption ‘‘— Limitation on Indebtedness and Preferred Stock’’;
(5) the Parent Guarantor delivers to the Trustee (x) an Officers’ Certificate (attaching the arithmetic computations to demonstrate compliance with clauses (3) and (4)) and (y) an Opinion of Counsel, in each case stating that such consolidation, merger or transfer and the relevant supplemental indenture complies with this provision and that all conditions precedent provided for in the Indenture relating to such transaction have been complied with;
(6) each Subsidiary Guarantor and JV Subsidiary Guarantor, unless such Subsidiary Guarantor or JV Subsidiary Guarantor is the Person with which the Parent Guarantor has entered into a transaction described under the caption ‘‘— Consolidation, Merger and Sale of Assets,’’ shall execute and deliver a supplemental indenture to the Indenture confirming that its Subsidiary Guarantee or JV Subsidiary Guarantee, as applicable, shall apply to the obligations of the Parent Guarantor or the Surviving Person in accordance with the Notes and the Indenture; and
(7) no Rating Decline shall have occurred.
— 245 — The Issuer will not consolidate with, merge with or into another Person, permit any Person to merge with or into it, or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its and its Restricted Subsidiaries’ (if any) properties and assets (computed on a consolidated basis) (as an entirety or substantially an entirety in one transaction or a series of related transactions), unless:
(1) the Issuer shall be the continuing Person or the Surviving Person shall be a corporation organized and validly existing under the laws of Singapore, the Cayman Islands, Hong Kong, Bermuda or the British Virgin Islands and shall expressly assume, by a supplemental indenture to the Indenture, executed and delivered to the Trustee, all the obligations of the Issuer under the Indenture, the Notes and the Security Documents, as the case may be, including the obligation to pay Additional Amounts, and the Indenture, the Notes and the Security Documents, as the case may be, shall remain in full force and effect;
(2) immediately after giving effect to such transaction, no Default shall have occurred and be continuing;
(3) immediately after giving effect to such transaction on a pro forma basis, the Issuer or the Surviving Person, as the case may be, shall have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Issuer immediately prior to such transaction;
(4) immediately after giving effect to such transaction on a pro forma basis the Parent Guarantor or the Surviving Person, as the case may be, could Incur at least US$1.00 of Indebtedness under the first paragraph of the covenant under the caption ‘‘— Limitation on Indebtedness and Preferred Stock’’;
(5) the Parent Guarantor delivers to the Trustee (x) an Officers’ Certificate (attaching the arithmetic computations to demonstrate compliance with clauses (3) and (4)) and (y) an Opinion of Counsel, in each case stating that such consolidation, merger or transfer and the relevant supplemental indenture complies with this provision and that all conditions precedent provided for in the Indenture relating to such transaction have been complied with;
(6) each Subsidiary Guarantor and JV Subsidiary Guarantor shall execute and deliver a supplemental indenture to the Indenture confirming that its Subsidiary Guarantee or JV Subsidiary Guarantee, as applicable, shall apply to the obligations of the Issuer or the Surviving Person in accordance with the Notes and the Indenture; and
(7) no Rating Decline shall have occurred.
No Subsidiary Guarantor or JV Subsidiary Guarantor will consolidate with or merge with or into another Person, permit any Person to merge with or into it, or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its and its Restricted Subsidiaries’ properties and assets (computed on a consolidated basis) (as an entirety or substantially an entirety in one transaction or a series of related transactions) to another Person (other than the Parent Guarantor or another Subsidiary Guarantor or, in the case of a JV Subsidiary Guarantor, other than another JV Subsidiary Guarantor, the Parent Guarantor or another Subsidiary Guarantor), unless:
(1) such Subsidiary Guarantor or JV Subsidiary Guarantor shall be the continuing Person, or the Person (if other than it) formed by such consolidation or merger or that acquired or leased such property and assets shall be the Parent Guarantor, another Subsidiary Guarantor or shall become a Subsidiary Guarantor concurrently with the transaction (or, in the case of a JV Subsidiary Guarantor, another JV Subsidiary Guarantor, the Parent Guarantor or a Subsidiary Guarantor) and shall expressly assume, by a supplemental indenture to the Indenture, executed and delivered to the Trustee, all the obligations of the Subsidiary Guarantor or JV Subsidiary Guarantor under the Indenture, the Notes and the Security Documents, as the case may be, including the obligation to pay Additional Amounts, and the Indenture, the Notes and the Security Documents, as the case may be, shall remain in full force and effect;
(2) immediately after giving effect to such transaction, no Default shall have occurred and be continuing;
(3) immediately after giving effect to such transaction on a pro forma basis, the Parent Guarantor shall have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Parent Guarantor immediately prior to such transaction;
— 246 — (4) immediately after giving effect to such transaction on a pro forma basis, the Parent Guarantor could Incur at least US$1.00 of Indebtedness under the first paragraph of the covenant under the caption ‘‘— LimitationonIndebtednessandPreferredStock’’;
(5) the Parent Guarantor delivers to the Trustee (x) an Officers’ Certificate (attaching the arithmetic computations to demonstrate compliance with clauses (3) and (4)) and (y) an Opinion of Counsel, in each case stating that such consolidation, merger or transfer and the relevant supplemental indenture complies with this provision and that all conditions precedent provided for in the Indenture relating to such transaction have been complied with; and
(6) no Rating Decline shall have occurred; provided that this paragraph shall not apply to any sale or other disposition that complies with the ‘‘— Limitation on Asset Sales’’ covenant or any Subsidiary Guarantor or JV Subsidiary Guarantor whose Subsidiary Guarantee or JV Subsidiary Guarantee, as the case may be, is unconditionally released in accordance with the provisions described under ‘‘— The Subsidiary Guarantees and the JV Subsidiary Guarantees — Release of the Subsidiary Guarantees and the JV Subsidiary Guarantees.’’
Although there is a limited body of case law interpreting the phrase ‘‘substantially all,’’ there is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve ‘‘all or substantially all’’ of the property or assets of a Person.
The foregoing requirements shall not apply to a consolidation or merger of the Issuer or any Subsidiary Guarantor or JV Subsidiary Guarantor with and into the Parent Guarantor, the Issuer or any other Subsidiary Guarantor, so long as the Parent Guarantor, the Issuer or such Subsidiary Guarantor or JV Subsidiary Guarantor survives such consolidation or merger.
The foregoing provisions would not necessarily afford Holders protection in the event of highly- leveraged or other transactions involving the Parent Guarantor, the Issuer or any Subsidiary Guarantor that may adversely affect Holders.
No Payments for Consents
The Parent Guarantor will not, and shall not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the IndentureortheNotesunlesssuchconsiderationisofferedtobepaidorispaidtoallHoldersthat consent, waive or agree to amend such term or provision within the time period set forth in the solicitation documents relating to such consent, waiver or amendment. Notwithstanding the foregoing, in any offer or payment of consideration for, or as an inducement to, any consent, waiver or amendment of any of the terms or provisions of the Indenture or the Notes in connection with an exchange or tender offer, the Parent Guarantor and any Restricted Subsidiary may exclude (i) Holders or beneficial owners of the Notes that are not ‘‘Qualified Institutional Buyers’’ as defined in Rule 144A under the Securities Act, and (ii) Holders or beneficial owners of the Notes in any jurisdiction where the inclusion of such Holders or beneficial owners would require the Parent Guarantor or any Restricted Subsidiary to comply with the registration requirements or other similar requirements under any securities laws of such jurisdiction, or the solicitation of such consent, waiver or amendment from, or the granting of such consent or waiver, or the approval of such amendment by, Holders or beneficial owners in such jurisdiction would be unlawful, in each case as determined by the Parent Guarantor in its sole discretion.
— 247 — Defeasance
Defeasance and Discharge
The Indenture will provide that the Issuer will be deemed to have paid and will be discharged from any and all obligations in respect of the Notes on the 183rd day after the deposit referred to below, and the provisions of the Indenture and the Security Documents will no longer be in effect with respect to the Notes (except for, among other matters, certain obligations to register the transfer or exchange of the Notes, to replace stolen, lost or mutilated Notes, to maintain paying agencies and to hold monies for payment in trust) if, among other things:
(1) the Issuer (a) has deposited with the Trustee, in trust, money that through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient to pay the principal of, premium, if any, and accrued interest on the Notes on the Stated Maturity of such payments in accordance with the terms of the Indenture and the Notes and (b) delivers to the Trustee an Opinion of Counsel or a certificate of an internationally-recognized firm of independent accountants to the effect that the amount deposited by the Issuer is sufficient to provide payment for the principal of, premium, if any, and accrued interest on, the Notes on the Stated Maturity of such payment in accordance with the terms of the Indenture; and
(2) immediately after giving effect to such deposit on a pro forma basis, no Event of Default, or event that after the giving of notice or lapse of time or both would become an Event of Default, shall have occurred and be continuing on the date of such deposit or during the period ending on the 183rd day after the date of such deposit, and such defeasance shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Parent Guarantor or any of its Restricted Subsidiaries is a party or by which the Parent Guarantor or any of its Restricted Subsidiaries is bound.
In the case of either discharge or defeasance of the Notes, the Subsidiary Guarantees and the JV Subsidiary Guarantees will terminate.
Defeasance of Certain Covenants
The Indenture further will provide that (i) the provisions of the Indenture will no longer be in effect with respect to clauses (3), (4), (5)(x) and (7) under the first paragraph, clauses (3), (4), (5)(x) and (7) under the second paragraph and clauses (3), (4), (5)(x) and (6) under the third paragraph under ‘‘— Consolidation, Merger and Sale of Assets’’ and all the covenants described herein under ‘‘— Certain Covenants,’’ other than as described under ‘‘— Certain Covenants-Government Approvals and Licenses; Compliance with Law’’ and ‘‘— Certain Covenants — Anti-Layering,’’ and (ii) clause (3) under ‘‘Events of Default’’ with respect to such clauses (3), (4), (5)(x) and (7) under the first paragraph, clauses (3), (4), (5)(x) and (7) under the second paragraph and clauses (3), (4), (5)(x) and (6) under the third paragraph under ‘‘Consolidation, Merger and Sale of Assets’’ and with respect to the other events set forth in clause (i) above, clause (4) under ‘‘Events of Default’’ with respect to such other covenants in clause (i) above and clauses (5) and (6) under ‘‘Events of Default’’ shall be deemed not to be Events of Default upon, among other things, the deposit with the Trustee, in trust, of money that through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient to pay the principal of, premium, if any, and accrued interest on the Notes on the Stated Maturity of such payments in accordancewiththetermsoftheIndentureandtheNotes.
Defeasance and Certain Other Events of Default
In the event that the Issuer exercises its option to omit compliance with certain covenants and provisions of the Indenture with respect to the Notes as described in the immediately preceding paragraph and the Notes are declared due and payable because of the occurrence of an Event of Default that remains applicable, the amount of money on deposit with the Trustee will be sufficient to pay amounts due on the Notes at the time of their Stated Maturity but may not be sufficient to pay amounts due on the Notes at the time of the acceleration resulting from such Event of Default. However, the Issuer will remain liable for such payments.
— 248 — Amendments and Waiver
Amendments Without Consent of Holders
The Indenture, the Notes, the Intercreditor Deed or any Security Document may be amended, without the consent of any Holder, to:
(1) cure any ambiguity, defect, omission or inconsistency in the Indenture, the Notes, the Intercreditor Deed or any Security Document;
(2) comply with the provisions described under ‘‘— Consolidation, Merger and Sale of Assets’’;
(3) evidence and provide for the acceptance of appointment by a successor Trustee or Global Security Agent;
(4) add any Guarantor, or any Guarantee, or release any Guarantor from any Guarantee, as the case may be, as provided or permitted by the terms of the Indenture or the Intercreditor Deed;
(5) provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture;
(6) add any Guarantor Pledgor or release any Guarantor Pledgor (including the corresponding Collateral granted by such Guarantor Pledgor) as provided or permitted by the terms of the Indenture;
(7) add additional Collateral to secure the Notes or any Guarantee;
(8) in any other case where a supplemental indenture to the Indenture is required or permitted to be entered into pursuant to the provisions of the Indenture without the consent of any Holder;
(9) effect any changes to the Indenture in a manner necessary to comply with the procedures of Euroclear or Clearstream or any applicable securities depositary;
(10) permit Permitted Pari Passu Secured Indebtedness in accordance with the terms of the Indenture (including, without limitation, permitting the Trustee and the Global Security Agent to enter into any amendments to the Intercreditor Deed or Security Documents or the Indenture and take any other action necessary to permit the creation and registration of Liens on the Collateral to secure Permitted Pari Passu Secured Indebtedness, in accordance with the Indenture);
(11) permit the Global Security Agent to hold the Collateral for the Holders and the holders of any Permitted Pari Passu Secured Indebtedness;
(12) make any other change that does not materially and adversely affect the rights of any Holder; or
(13) conform the text of the Indenture, the Notes or the Guarantees or to any provision of this ‘‘Description of the Notes’’ to the extent that such provision in this ‘‘Description of the Notes’’ was intended to be a verbatim recitation of a provision in the Indenture, the Notes, the Parent Guarantee, the Subsidiary Guarantees or the JV Subsidiary Guarantees.
Amendments With Consent of Holders
Amendments of the Indenture, the Intercreditor Deed, the Notes or any Security Document may be made by the Issuer, the Guarantors, the Trustee and the Global Security Agent with the consent of the Holders of not less than a majority in aggregate principal amount of the outstanding Notes, and the holders of a majority in principal amount of the outstanding Notes may waive future compliance by the Issuer with any provision of the Indenture, the Notes, the Intercreditor Deed or any Security Documents; provided, however, that no such modification, amendment or waiver may, without the consent of each Holder affected thereby:
(1) change the Stated Maturity of the principal of, or any installment of interest on, any Note;
— 249 — (2) reduce the principal amount of, or premium, if any, or interest on, any Note;
(3) change the place, currency or time of payment of principal of, or premium, if any, or interest on, any Note;
(4) impair the right to institute suit for the enforcement of any payment on or after the Stated Maturity (or, in the case of a redemption, on or after the redemption date) of any Note;
(5) reduce the above-stated percentage of outstanding Notes the consent of whose Holders is necessary to modify or amend the Indenture;
(6) waive a default in the payment of principal of, premium, if any, or interest on the Notes;
(7) release any Guarantor from its Guarantee, as the case may be, except as provided in the Indenture;
(8) release any Collateral, except as provided in the Intercreditor Deed, the Indenture and the Security Documents;
(9) reduce the percentage or aggregate principal amount of outstanding Notes the consent of whose Holders is necessary for waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults;
(10) amend, change or modify any Guarantee in a manner that adversely affects the Holders;
(11) amend, change or modify any provision of any Security Document, or any provision of the Indenture relating to the Collateral, in a manner that adversely affects the Holders, except in accordance with the other provisions of the Indenture;
(12) reduce the amount payable upon a Change of Control Offer or an Offer to Purchase with the Excess Proceeds from any Asset Sale or, change the time or manner by which a Change of Control Offer or an Offer to Purchase with the Excess Proceeds or other proceeds from any Asset Sale may be made or by which the Notes must be repurchased pursuant to a Change of Control Offer or an Offer to Purchase with the Excess Proceeds or other proceeds from any Asset Sale;
(13) consent to the assignment or transfer by the Issuer or any Guarantor or of any of their rights or obligations under the Indenture or the Guarantees, as the case may be, except as permitted pursuant to the provisions described under ‘‘Consolidations, Merger and Sale of Assets’’;
(14) change the redemption date or the redemption price of the Notes from that stated under the captions ‘‘— Optional Redemption’’ or ‘‘— Redemption for Taxation Reasons’’;
(15) amend, change or modify the obligation of the Issuer or any Guarantor to pay Additional Amounts; or
(16) amend, change or modify any provision of the Indenture or the related definition affecting the ranking of the Notes or any Guarantee or in a manner which adversely affects the Holders.
Unclaimed Money
Claims against the Issuer or any Guarantor for the payment of principal of, premium, if any, or interest, on the Notes will become void unless presentation for payment is made as required in the Indenture within a period of six years.
No Personal Liability of Incorporators, Stockholders, Officers, Directors or Employees
No recourse for the payment of the principal of, premium, if any, or interest on any of the Notes or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Issuer or any of the Guarantors in the Indenture, or in any of the Notes, the Guarantees or because of the creation of any Indebtedness represented thereby, shall be had against any incorporator, stockholder, officer, director, employee or controlling person of the Issuer, any of the Guarantors, or of any successor Person thereof. Each Holder, by accepting the Notes, waives
— 250 — and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes and the Guarantees. Such waiver may not be effective to waive liabilities under the federal securities laws.
Concerning the Trustee, the Global Security Agent and the Agents
Citicorp International Limited has been appointed as Trustee under the Indenture and as Global Security Agent with respect to the Collateral under the Security Documents and the Intercreditor Deed, and Citibank, N.A., London Branch has been appointed as registrar (the ‘‘Registrar’’), paying agent (the ‘‘Paying Agent’’) and transfer agent (the ‘‘Transfer Agent’’, together with the Registrar and the Paying Agent, the ‘‘Agents’’) with regard to the Notes. Except during the continuance of a Default, the Trustee will not be liable, except for the performance of such duties as are specifically set forth in the Indenture. If an Event of Default has occurred and is continuing, the Trustee will use the same degree of care and skill, as applicable, in its exercise of the rights and powers vested in it under the Indenture as a prudent person would exercise under the circumstances in the conduct of such person’s own affairs.
The Indenture contains limitations on the rights of the Trustee and the Global Security Agent, should they become creditors of the Issuer or any of the Guarantors, to obtain payment of claims in certain cases or to realize on certain property received by it in respect of any such claims, as security or otherwise. The Trustee, the Agents and the Global Security Agent are permitted to engage in other transactions with the Parent Guarantor and its Affiliates and can profit therefrom without being obliged to account for any profit. The Trustee, the Agents or the Global Security Agent may have interest in or may be providing or may in the future provide financial or other services to other parties.
So long as the Notes are listed on the SGX-ST and the rules of the SGX-ST so require, in the event that the Global Certificates of the Notes are exchanged for certificates in definitive form, the Issuer shall appoint and maintain a paying agent in Singapore, where the Notes may be presented or surrendered for payment or redemption. In addition, in the event that the Global Certificates of the Notes are exchanged for certificates in definitive form, an announcement of such exchange shall be made by or on behalf of the Issuer through the SGX-ST and such announcement will include all material information with respect to the delivery of the certificates in definitive form, including details of the paying agent in Singapore.
Citicorp International Limited is currently the Global Security Agent under the Security Documents in respect of the Security over the Collateral. The Global Security Agent, acting in its capacity as such, shall have such duties with respect to the Collateral pledged, assigned or granted pursuant to the Security Documents as are set forth in the Indenture, the Security Documents and/or the Intercreditor Deed. Under certain circumstances, the Global Security Agent or the Trustee may have obligations under the Indenture, the Intercreditor Deed and the Security Documents that are in conflict with the interests of the Holders. The Trustee and Global Security Agent will be under no obligation to exercise any rights or powers conferred under the Indenture or any of the Security Documents for the benefit of the Holders unless such Holders have offered to the Trustee and Global Security Agent indemnity and/or security satisfactory to the Trustee or the Global Security Agent, as applicable against any loss, liability or expense. Furthermore, each Holder, by accepting the Notes will agree, for the benefit of the Trustee and Global Security Agent, that it is solely responsible for its own independent appraisal of and investigation into all risks arising under or in connection with the Notes, the Indenture, the Intercreditor Deed and the Security Documents and has not relied on and will not at any time rely on the Trustee or the Global Security Agent in respect of such risks.
Book-Entry; Delivery and Form
The Notes will be represented by the Global Certificate in registered form without interest coupons attached (each a ‘‘Global Note’’). On the Original Issue Date, the Global Certificate will be deposited with a common depositary and registered in the name of the common depositary or its nominee for the accounts of Euroclear and Clearstream.
— 251 — Global Certificate
Ownership of beneficial interests in the Global Certificate (the ‘‘book-entry interests’’) will be limited to persons that have accounts with Euroclear and/or Clearstream or persons that may hold interests through such participants. Book-entry interests will be shown on, and transfers thereof will be effected only through, records maintained in book-entry form by Euroclear and Clearstream and their participants.
Except as set forth below under ‘‘— Individual Definitive Notes,’’ the book-entry interests will not be held in definitive form. Instead, Euroclear and/or Clearstream will credit on their respective book- entry registration and transfer systems a participant’s account with the interest beneficially owned by such participant. The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of such securities in definitive form. The foregoing limitations may impair the ability to own, transfer or pledge book-entry interests.
So long as the Notes are held in global form, the common depositary for Euroclear and/or Clearstream (or its nominee) will be considered the sole holder of the Global Certificate for all purposes under the Indenture and ‘‘holders’’ of book-entry interests will not be considered the owners or ‘‘Holders’’ of Notes for any purpose. As such, participants must rely on the procedures of Euroclear and Clearstream and indirect participants must rely on the procedures of the participants through which they own book-entry interests in order to transfer their interests in the Notes or to exercise any rights of Holders under the Indenture.
None of the Issuer, the Trustee, the Global Security Agent or any of their respective agents will have any responsibility or be liable for any aspect of the records relating to the book-entry interests. The Notes are not issuable in bearer form.
Payments on the Global Certificate
Payments of any amounts owing in respect of the Global Certificate (including principal, premium, interest and Additional Amounts) will be made to the Paying Agent. The Paying Agent will, in turn, make such payments to the common depositary for Euroclear and Clearstream, which will distribute such payments to participants in accordance with their procedures. The Issuer will make payments of all such amounts without deduction or withholding for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature, except as may be required by law and subject to the requirement to pay Additional Amounts, as described under ‘‘— Additional Amounts.’’
Under the terms of the Indenture, the Issuer and the Trustee will treat the registered holder of the Global Certificate (i.e., the common depositary or its nominee) as the owner thereof for the purpose of receiving payments and for all other purposes. Consequently, none of the Issuer, the Trustee or any of their respective agents has or will have any responsibility or liability for:
. any aspect of the records of Euroclear, Clearstream or any participant or indirect participant relating to or payments made on account of a book-entry interest, for any such payments made by Euroclear, Clearstream or any participant or indirect participants, or for maintaining, supervising or reviewing any of the records of Euroclear, Clearstream or any participant or indirect participant relating to or payments made on account of a book-entry interest; or
. Euroclear, Clearstream or any participant or indirect participant.
Payments by participants to owners of book-entry interests held through participants are the responsibility of such participants.
Redemption of Global Certificate
In the event the Global Certificate, or any portion thereof, is redeemed, the common depositary will distribute the amount received by it in respect of the Global Certificate so redeemed to Euroclear and/or Clearstream, as applicable, who will distribute such amount to the holders of the book-entry interests in such Global Certificate. The redemption price payable in connection with the redemption of such book-entry interests will be equal to the amount received by the common depositary, Euroclear or Clearstream, as applicable, in connection with the redemption of such Global Certificate (or any portion thereof). The Issuer understands that under existing practices of Euroclear and Clearstream, if fewer than all of the Notes are to be redeemed at any time, Euroclear and Clearstream will credit their respective
— 252 — participants’ accounts on a proportionate basis (with adjustments to prevent fractions) or by lot or on such other basis as they deem fair and appropriate; provided, however, that no book-entry interest of US$200,000 principal amount, or less, as the case may be, will be redeemed in part.
Action by Owners of Book-Entry Interests
Euroclear and Clearstream have advised that they will take any action permitted to be taken by a Holder only at the direction of one or more participants to whose account the book-entry interests in the Global Certificate are credited and only in respect of such portion of the aggregate principal amount of Notes as to which such participant or participants has or have given such direction. Euroclear and Clearstream will not exercise any discretion in the granting of consents, waivers or the taking of any other action in respect of the Global Certificate. If there is an Event of Default under the Notes, however, each of Euroclear and Clearstream reserves the right to exchange the Global Certificate for individual definitive notes in certificated form, and to distribute such individual definitive notes to their participants.
Transfers
Transfers between participants in Euroclear and Clearstream will be effected in accordance with Euroclear and Clearstream’s rules and will be settled in immediately available funds. If a Holder requires physical delivery of individual definitive notes for any reason, including to sell the Notes to persons in jurisdictions which require physical delivery of such securities or to pledge such securities, such Holder must transfer its interest in the Global Certificate in accordance with the normal procedures of Euroclear and Clearstream and in accordance with the provisions of the Indenture.
Any book-entry interest in a Global Certificate that is transferred to a person who takes delivery in the form of a book-entry interest in another Global Certificate will, upon transfer, cease to be a book- entry interest in the first-mentioned Global Certificate and become a book-entry interest in the other Global Certificate and, accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to book-entry interests in such other Global Certificate for as long as it retains such a book-entry interest.
Global Clearance and Settlement Under the Book-Entry System
Book-entry interests owned through Euroclear or Clearstream accounts will follow the settlement procedures applicable. Book-entry interests will be credited to the securities custody accounts of Euroclear and Clearstream holders on the business day following the settlement date against payment for value on the settlement date.
The book-entry interests will trade through participants of Euroclear or Clearstream, and will settle in immediately available funds. Since the purchaser determines the place of delivery, it is important to establish at the time of trading of any book-entry interests where both the purchaser’s and seller’s accounts are located to ensure that settlement can be made on the desired value date.
Information Concerning Euroclear and Clearstream
We understand as follows with respect to Euroclear and Clearstream:
Euroclear and Clearstream hold securities for participating organizations and facilitate the clearance and settlement of securities transactions between their respective participants through electronic book-entry changes in accounts of such participants. Euroclear and Clearstream provide to their participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Euroclear and Clearstream interface with domestic securities markets. Euroclear and Clearstream participants are financial institutions, such as underwriters, securities brokers and dealers, banks and trust companies, and certain other organizations. Indirect access to Euroclear or Clearstream is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodian relationship with a Euroclear or Clearstream participant, either directly or indirectly.
Although the foregoing sets out the procedures of Euroclear and Clearstream in order to facilitate the original issue and subsequent transfers of interests in the Notes among participants of Euroclear and Clearstream, neither Euroclear nor Clearstream is under any obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time.
— 253 — None of the Issuer, the Trustee, the Global Security Agent or any of their respective agents will have responsibility for the performance of Euroclear or Clearstream or their respective participants of their respective obligations under the rules and procedures governing their operations, including, without limitation, rules and procedures relating to book-entry interests.
Individual Definitive Notes
If (1) the common depositary or any successor to the common depositary is at any time unwilling or unable to continue as a depositary for the reasons described in the Indenture and a successor depositary is not appointed by the Issuer within 90 days (2) either Euroclear or Clearstream, or a successor clearing system is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention to permanently cease business or does in fact do so, or (3) any of the Notes has become immediately due and payable in accordance with ‘‘— Events of Default’’ and the Issuer has received a written request from a Holder, the Issuer will issue individual definitive notes in registered form in exchange for the Global Certificate. Upon receipt of such notice from the common depositary or the Trustee, as the case may be, the Issuer will use its best efforts to make arrangements with the common depositary for the exchange of interests in the Global Certificate for individual definitive notes and cause the requested individual definitive notes to be executed and delivered to the registrar in sufficient quantities and authenticated by the Trustee for delivery to Holders. Persons exchanging interests in the Global Certificate for individual definitive notes will be required to provide the registrar, through the relevant clearing system, with written instruction and other information required by the Issuer and the registrar to complete, execute and deliver such individual definitive notes. In all cases, individual definitive notes delivered in exchange for any Global Certificate or beneficial interests therein will be registered in the names, and issued in any approved denominations, requested by the relevant clearing system.
Individual definitive notes will not be eligible for clearing and settlement through Euroclear or Clearstream.
Notices
All notices, instructions or demands required or permitted by the terms of the Notes or the Indenture to be given to or by the Holders are required to be in writing and may be given or served by being sent by prepaid courier or first-class mail (if intended for the Issuer or any Guarantor) addressed to the Issuer or such Guarantor, as the case may be, at the registered/principal office of the Company; (if intended for the Trustee) at the corporate trust office of the Trustee; and (if intended for any Holder) addressed to such Holder at such Holder’s last address as it appears in the Note register.
Any such notice or demand will be deemed to have been sufficiently given or served when so sent or deposited and, if to the Holders, when delivered in accordance with the applicable rules and procedures of Euroclear or Clearstream. Any such notice shall be deemed to have been delivered on the day such notice is delivered to Euroclear or Clearstream or if by mail, when so sent or deposited.
Consent to Jurisdiction; Service of Process
The Issuer and each of the Guarantors will irrevocably (1) submit to the non-exclusive jurisdiction of any U.S. federal or New York state court located in the Borough of Manhattan, The City of New York in connection with any suit, action or proceeding arising out of, or relating to, the Notes, any Guarantee, the Indenture or any transaction contemplated thereby; and (2) designate and appoint Law Debenture Corporate Services Inc. for receipt of service of process in any such suit, action or proceeding.
Governing Law
Each of the Notes, the Guarantees and the Indenture will be governed by, and construed in accordance with, the laws of the State of New York. The Intercreditor Deed is governed by English law and the other Security Documents are governed by the laws of Hong Kong and Singapore.
Definitions
Set forth below are defined terms used in the covenants and other provisions of the Indenture. Reference is made to the Indenture for other capitalized terms used in this ‘‘Description of the Notes’’ for which no definition is provided.
— 254 — ‘‘2016 WL Facility’’ means the HK$625 million equivalent multi-currency revolving and term loan facility dated April 26, 2016, as amended and restated by a supplemental agreement dated February 26, 2018, made between Wing Lung Bank Limited as lender, the Issuer and the guarantors provided therein, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time.
‘‘2017 Indenture’’ means the indenture dated January 23, 2017 pursuant to which the 2017 Senior Notes were issued.
‘‘2018 Indenture’’ means the indenture dated April 23, 2018 pursuant to which the 2018 Senior Notes were issued.
‘‘2017 Syndicated Loan Facility’’ means the US$1.05 billion syndicated loan facility dated April 24, 2017 with Hang Seng Bank Limited, The HongKong and Shanghai Banking Corporation Limited, Standard Chartered Bank (Hong Kong) Limited, DBS Bank Ltd. and Wing Lung Bank, Limited as mandated lead arrangers and bookrunners, China Construction Bank Corporation, Hong Kong Branch, Industrial and Commercial Bank of China (Asia) Limited, The Bank of East Asia, Limited, Shanghai Pudong Development Bank Co., Ltd., Shanghai Pudong Development Bank Co., Ltd., Hong Kong Branch, Shanghai Pudong Development Bank Co., Ltd. Singapore Branch, China Merchants Bank Co., Ltd., Hong Kong Branch, China Merchants Bank Co., Ltd Off-Shore Banking Center, Industrial and Commercial Bank of China (Macau) Limited, Ping An Bank Co., Ltd, Tianjin Pilot Free Trade Zone Branch, Nanyang Commercial Bank, Limited, Nanyang Commercial Bank (China) Limited Wuxi Branch, Shanghai Rural Commercial Bank Changning Branch, United Overseas Bank Limited, Hong Kong Branch, United Overseas Bank Limited, Singapore Branch as mandated lead arrangers, Chong Hing Bank Limited, Tai Fung Bank Limited, Bank of Shanghai (Hong Kong) Limited, China Everbright Bank Co., Ltd., Hong Kong Branch, China Guangfa Bank Co., Ltd., Macau Branch and Taiwan Cooperative Bank Limited, Hong Kong Branch as lead arrangers and Hang Seng Bank Limited as facility agent comprising of US$761.2 million equivalent dual-tranche term loan facility and US$288.8 million equivalent dual-tranche revolving credit facility.
‘‘2017 Senior Notes’’ means the US$450 million 5.875% senior notes due 2022 issued by the Issuer pursuant to the 2017 Indenture.
‘‘2018 Senior Notes’’ means the US$350 million 6.75% senior notes due 2023 issued by the Issuer pursuant to the 2018 Indenture.
‘‘2019 CMB WL Facilities’’ means the RMB1.43 billion term loan facilities dated January 14, 2019 made between CMB Wing Lung Bank Limited as lender and Yanlord Land Pte. Ltd. as borrower comprising of RMB715 million or equivalent US$ term loan facility and RMB715 million term loan facility.
‘‘2019 Dual-Tranche Term Loan Facility’’ means the US$363.5 million syndicated loan facility dated 9 April 2019 with Bank of Shanghai (Hong Kong) Limited, China Construction Bank (Asia) Corporation Limited, China Merchants Bank Co., Ltd., Hong Kong Branch, China Merchants Bank Co. Ltd, Singapore Branch, Hang Seng Bank Limited, Shanghai Pudong Development Bank Co., Ltd., Hong Kong Branch and The Hongkong and Shanghai Banking Corporation Limited as mandated lead arrangers and Hang Seng Bank Limited as facility agent comprising of US$95 million term loan facility and HK$2.094 billion term loan facility.
‘‘Acquired Indebtedness’’ means Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary or Indebtedness of a Restricted Subsidiary assumed in connection with an Asset Acquisition by such Restricted Subsidiary whether or not Incurred in connection with, or in contemplation of, the Person merging with or into or becoming a Restricted Subsidiary.
‘‘Adjusted Treasury Rate’’ means, with respect to any redemption date, (i) the yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated ‘‘H.15(519)’’ or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption ‘‘Treasury Constant Maturities,’’ for the maturity corresponding to the Comparable Treasury Issue (if no maturity is within three (3) months before or after August , 20 , yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined and the Adjusted Treasury Rate shall be interpolated or extrapolated from such yields on a straight line basis, rounding to the nearest month) or (ii) if such release (or any successor release) is not
— 255 — published during the week preceding the calculation date or does not contain such yields, the rate per year equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date, in each case calculated on the third Business Day immediately preceding the redemption date.
‘‘Affiliate’’ means, with respect to any Person, any other Person (1) directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person; (2) who is a director or officer of such Person or any Subsidiary of such Person or of any Person referred to in clause (1) of this definition; or (3) who is a direct family member of Mr. Zhong Sheng Jian. For purposes of this definition, ‘‘control’’ (including, with correlative meanings, the terms ‘‘controlling,’’ ‘‘controlled by’’ and ‘‘under common control with’’), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.
‘‘Applicable Premium’’ means with respect to a Note at any redemption date, the greater of (1) 1.00% of the principal amount of such Note and (2) the excess of (A) the present value at such redemption date of (x) the redemption price of such Note at August , 20 (such redemption price being set forth in the table appearing above under the caption ‘‘— Optional Redemption’’), plus (y) all required remaining scheduled interest payments due on such Note through August , 20 (but excluding accrued and unpaid interest to the redemption date), computed using a discount rate equal to the Adjusted Treasury Rate plus 100 basis points, over (B) the principal amount of such Note on such redemption date.
‘‘Asset Acquisition’’ means (1) an investment by the Parent Guarantor or any of its Restricted Subsidiaries in any other Person pursuant to which such Person shall become a Restricted Subsidiary or shall be merged into or consolidated with the Parent Guarantor or any of its Restricted Subsidiaries; or (2) an acquisition by the Parent Guarantor or any of its Restricted Subsidiaries of the property and assets of any Person other than the Parent Guarantor or any of its Restricted Subsidiaries that constitute substantially all of a division or line of business of such Person.
‘‘Asset Disposition’’ means the sale or other disposition by the Parent Guarantor or any of its Restricted Subsidiaries (other than to the Parent Guarantor or another Restricted Subsidiary) of (1) all or substantially all of the Capital Stock of any Restricted Subsidiary; or (2) all or substantially all of the assets that constitute a division or line of business of the Parent Guarantor or any of its Restricted Subsidiaries.
‘‘Asset Sale’’ means any sale, transfer or other disposition (including by way of merger, consolidation or Sale and Leaseback Transaction) of any of its property or assets (including any sale or issuance of Capital Stock of a Subsidiary) in one transaction or a series of related transactions by the Parent Guarantor or any of its Restricted Subsidiaries to any Person; provided that ‘‘Asset Sale’’ shall not include:
(1) sales or other dispositions of inventory, receivables and other current assets (including properties under development for sale and completed properties for sale) in the ordinary course of business;
(2) sales or other dispositions of cash and Temporary Cash Investments;
(3) sales, transfers or other dispositions of assets constituting a Permitted Investment or Restricted Payment permitted to be made under the ‘‘— Limitation on Restricted Payments’’ covenant;
(4) sales, transfers or other dispositions of assets with a Fair Market Value not in excess of US$1 million (or the Dollar Equivalent thereof) in any transaction or series of related transactions;
(5) any sale, transfer, assignment or other disposition of any property, or equipment that has become damaged, worn out, obsolete or otherwise unsuitable for use in connection with the business of the Parent Guarantor or its Restricted Subsidiaries;
(6) any transfer, assignment or other disposition deemed to occur in connection with creating or granting any Permitted Lien;
(7) a transaction covered by the covenant under the caption ‘‘— Consolidation, Merger and Sale of Assets’’;
— 256 — (8) any sale, transfer or other disposition by the Parent Guarantor or any of its Restricted Subsidiaries, including the sale or issuance by the Parent Guarantor or any Restricted Subsidiary of any Capital Stock of any Subsidiary, to the Parent Guarantor or any Restricted Subsidiary; and
(9) any sale by the Parent Guarantor or any of its Restricted Subsidiaries to a Trust Company Investor or in connection with a Receivable Financing.
‘‘Attributable Indebtedness’’ means, in respect of a Sale and Leaseback Transaction, the present value, discounted at the interest rate implicit in the Sale and Leaseback Transaction, of the total obligations of the lessee for rental payments during the remaining term of the lease in the Sale and Leaseback Transaction.
‘‘Average Life’’ means, at any date of determination with respect to any Indebtedness, the quotient obtained by dividing (1) the sum of the products of (a) the number of years from such date of determination to the dates of each successive scheduled principal payment of such Indebtedness and (b) the amount of such principal payment by (2) the sum of all such principal payments.
‘‘Bank Deposit Secured Indebtedness’’ means Indebtedness of the Parent Guarantor or any Restricted Subsidiary that is (i) secured by a pledge of one or more bank accounts or deposits of the Parent Guarantor or a Restricted Subsidiary or (ii) guaranteed by a guarantee or a letter of credit (or similar instruments) from or arranged by the Parent Guarantor or a Restricted Subsidiary and is used by the Parent Guarantor and its Restricted Subsidiaries to in effect exchange U.S. dollars, Hong Kong dollars, Renminbi or Singapore dollars located in one jurisdiction for U.S. dollars, Hong Kong dollars, Renminbi or Singapore dollars in another jurisdiction.
‘‘Board of Directors’’ means the board of directors of the Parent Guarantor or any committee of such board duly authorized to take the action purported to be taken by such committee.
‘‘Board Resolution’’ means any resolution of the Board of Directors taking an action which it is authorized to take and adopted at a meeting duly called and held at which a quorum of disinterested members (if so required) was present and acting throughout or adopted by written resolution executed by every member of the Board of Directors.
‘‘Business Day’’ means any day which is not a Saturday, Sunday, legal holiday or other day on which banking institutions in the City of New York, London, Singapore or Hong Kong (or in any other place in which payments on the Notes are to be made) are authorized by law or governmental regulation to close.
‘‘Capital Stock’’ means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) in equity of such Person, whether outstanding on the Original Issue Date or issued thereafter, including, without limitation, all Common Stock and Preferred Stock but excluding debt securities convertible into such equity.
‘‘Capitalized Lease’’ means, with respect to any Person, any lease of any property (whether real, personal or mixed) which, in conformity with GAAP, is required to be capitalized on the balance sheet of such Person.
‘‘Capitalized Lease Obligations’’ means the discounted present value of the rental obligations under a Capitalized Lease.
‘‘Change of Control’’ means the occurrence of one or more of the following events:
(1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Parent Guarantor and its Restricted Subsidiaries, taken as a whole, to any ‘‘person’’ (within the meaning of Section 13(d) of the Exchange Act), other than one or more Permitted Holders unless holders of a majority of the aggregate voting power of the Voting Stock of the Parent Guarantor, immediately prior to such transaction, hold securities of the surviving or transferee Person that represent, immediately after such transaction, at least a majority of the aggregate voting power of the Voting Stock of the surviving or transferee person;
— 257 — (2) the merger, amalgamation or consolidation of the Parent Guarantor with or into another Person or the merger or amalgamation of another Person with or into the Parent Guarantor, or the sale of all or substantially all the assets of the Parent Guarantor to another Person;
(3) the Permitted Holders are the beneficial owners within the meaning of Rule 13d-3 under the Exchange Act of less than 30% of the total voting power of the Voting Stock of the Parent Guarantor;
(4) any ‘‘person’’ or ‘‘group’’ (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the ‘‘beneficial owner’’ (assuchtermisusedinRule13d-3of the Exchange Act), directly or indirectly, of total voting power of the Voting Stock of the Parent Guarantor greater than such total voting power held beneficially by the Permitted Holders;
(5) individuals who on the Original Issue Date constituted the board of directors of the Parent Guarantor, together with any new directors whose election by the board of directors was approved by a vote of at least majority of the directors then still in office who were either directors or whose election was previously so approved, cease for any reason to constitute a majority of the board of directors of the Parent Guarantor then in office; or
(6) the adoption of a plan relating to the liquidation or dissolution of the Parent Guarantor.
‘‘Change of Control Triggering Event’’ means the occurrence of both a Change of Control and, provided that the Notes are rated by at least one Rating Agency, a Rating Decline.
‘‘Clearstream’’ means Clearstream Banking S.A.
‘‘Collateral’’ means all collateral securing, or purported to be securing, directly or indirectly, the Notes or Guarantees pursuant to the Security Documents, and shall initially consist of the Capital Stock of the initial Subsidiary Guarantors owned by the Parent Guarantor or a Subsidiary Guarantor.
‘‘Commodity Hedging Agreement’’ means any spot, forward or option commodity price protection agreements or other similar agreement or arrangement designed to protect against fluctuations in commodity prices.
‘‘Common Stock’’ means, with respect to any Person, any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person’s common stock or ordinary shares, whether or not outstanding at the date of the Indenture, and include, without limitation, all series and classes of such common stock or ordinary shares.
‘‘Comparable Treasury Issue’’ means the U.S. Treasury security having a maturity comparable to August , 20 that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities with a maturity comparable to August , 20 .
‘‘Comparable Treasury Price’’ means, with respect to any redemption date, if clause (ii) of the Adjusted Treasury Rate is applicable, the average of three, or such lesser number as is obtained by the Parent Guarantor, Reference Treasury Dealer Quotations for such redemption date.
‘‘Consolidated Assets’’ means, with respect to any Restricted Subsidiary at any date of determination, the Parent Guarantor and its Restricted Subsidiaries’ proportionate interest in the total consolidated assets of that Restricted Subsidiary and its Restricted Subsidiaries measured in accordance with GAAP as of the last day of the most recent semi-annual period for which consolidated financial statements of the Parent Guarantor and its Restricted Subsidiaries (which the Parent Guarantor shall use its best efforts to compile on a timely manner) are available (which may be internal consolidated financial statements).
‘‘Consolidated EBITDA’’ means, for any period, Consolidated Net Income for such period plus, to the extent such amount was deducted in calculating such Consolidated Net Income:
(1) Consolidated Interest Expense, including for the avoidance of doubt, capitalized interest included in cost of sales,
— 258 — (2) income taxes (other than income taxes attributable to extraordinary and non-recurring gains (or losses) or sales of assets not included in the calculation of Consolidated EBITDA) including, for the avoidance of doubt, enterprise income tax and land appreciation tax, and
(3) depreciation expense, amortization expense and all other non-cash items reducing Consolidated Net Income (other than non-cash items in a period which reflect cash expenses paid or to be paid in another period and other than losses on Investment Properties arising from fair value adjustments made in conformity with GAAP), less all non-cash items increasing Consolidated Net Income (other than gains on Investment Properties arising from fair value adjustments made in conformity with GAAP) other than accrual of revenue in the ordinary course of business, all as determined on a consolidated basis for the Parent Guarantor and its Restricted Subsidiaries in conformity with GAAP; provided that (1) if any Restricted Subsidiary is not a Wholly-Owned Restricted Subsidiary, Consolidated EBITDA shall be reduced (to the extent not otherwise reduced in accordance with GAAP) by an amount equal to (A) the amount of the Consolidated Net Income attributable to such Restricted Subsidiary multiplied by (B) the percentage ownership interest in the income of such Restricted Subsidiary not owned on the last day of such period by the Parent Guarantor or any of its Restricted Subsidiaries and (2) in the case of any PRC CJV (consolidated in accordance with GAAP), Consolidated EBITDA shall be reduced (to the extent not already reduced in accordance with GAAP) by any payments, distributions or amounts (including the Fair Market Value of any non-cash payments, distributions or amounts) required to be made or paid by such PRC CJV to the PRC CJV Partner, or to which the PRC CJV Partner otherwise has a right or is entitled, pursuant to the joint venture agreement governing such PRC CJV.
‘‘Consolidated Fixed Charges’’ means, for any period, the sum (without duplication) of (1) Consolidated Interest Expense for such period and (2) all cash and non-cash dividends paid, declared, accrued or accumulated during such period on any Disqualified Stock or Preferred Stock of the Parent Guarantor or any Restricted Subsidiary held by Persons other than the Parent Guarantor or any Wholly- Owned Restricted Subsidiary, except for dividends payable in the Parent Guarantor’s Capital Stock (other than Disqualified Stock) or paid to the Parent Guarantor or to a Wholly-Owned Restricted Subsidiary.
‘‘Consolidated Interest Expense’’ means, for any period, the amount that would be included in net interest expense (interest expense net of interest income) on a consolidated income statement prepared in accordance with GAAP for such period of the Parent Guarantor and its Restricted Subsidiaries, plus, to the extent not included in such net interest expense, and to the extent incurred, accrued or payable during such period by the Parent Guarantor and its Restricted Subsidiaries, without duplication, (1) interest expense attributable to Capitalized Lease Obligations, (2) amortization of debt issuance costs and original issue discount expense and non-cash interest payments in respect of any Indebtedness, (3) the interest portion of any deferred payment obligation, (4) all commissions, discounts and other fees and charges with respect to letters of credit or similar instruments issued for financing purposes or in respect of any Indebtedness, (5) the net costs associated with Hedging Obligations (including the amortization of fees), (6) interest accruing on Indebtedness of any other Person that is guaranteed by the Parent Guarantor or any Restricted Subsidiary (other than Pre-Registration Mortgage Guarantees) to the extent that such interest has become payable by the Parent Guarantor or any Restricted Subsidiary and (7) any capitalized interest, provided that interest expense attributable to interest on any Indebtedness bearing a floating interest rate will be computed on a pro forma basis as if the rate in effect on the date of determination had been the applicable rate for the entire relevant period and, for the avoidance of doubt, distributions incurred, accrued or payments on any Perpetual Bond Obligation shall not be included in the calculation of Consolidated Interest Expense.
‘‘Consolidated Net Income’’ means, with respect to any specified Person for any period, the aggregate of the net income (or loss) of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in conformity with GAAP; provided that the following items shall be excluded in computing Consolidated Net Income (without duplication):
(1) the net income (or loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting except that:
(a) subject to the exclusion contained in clause (5) below, the Parent Guarantor’s equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by
— 259 — such Person during such period to the Parent Guarantor or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to a Restricted Subsidiary, to the limitations contained in clause (3) below); and
(b) the Parent Guarantor’s equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income to the extent funded with cash or other assets of the Parent Guarantor or Restricted Subsidiaries;
(2) the net income (or loss) of any Person accrued prior to the date it becomes a Restricted Subsidiary or is merged into or consolidated with the Parent Guarantor or any of its Restricted Subsidiaries or all or substantially all of the property and assets of such Person are acquired by the Parent Guarantor or any of its Restricted Subsidiaries;
(3) the net income (but not loss) of any Restricted Subsidiary (other than the Issuer) to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of such net income is not at the time permitted by the operation of the terms of its charter, articles of association or other similar constitutive documents, or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Restricted Subsidiary;
(4) the cumulative effect of a change in accounting principles;
(5) any net after tax gains realized on the sale or other disposition of (a) any property or assets of the Parent Guarantor or any Restricted Subsidiary which is not sold in the ordinary course of its business or (b) any Capital Stock of any Person (including any gains by the Parent Guarantor realized on sales of Capital Stock of the Parent Guarantor or other Restricted Subsidiaries);
(6) any translation gains and losses due solely to fluctuations in currency values and related tax effects; and
(7) any net after-tax extraordinary or non-recurring gains; provided that (A) solely for purposes of calculating Consolidated EBITDA and the Fixed Charge Coverage Ratio, any net after tax gains derived from direct or indirect sale by the Parent Guarantor or any Restricted Subsidiary of (i) Capital Stock of a Restricted Subsidiary primarily engaged in the holding of Investment Property or (ii) an interest in any Investment Property arising from the difference between the current book value and the cash sale price shall be added to Consolidated Net Income; (B) for purposes of this Consolidated Net Income calculation (but not for purposes of calculating Consolidated EBITDA and the Fixed Charge Coverage Ratio) any net after tax gains derived from direct or indirect sale by the Parent Guarantor or any Restricted Subsidiary of (i) Capital Stock of a Restricted Subsidiary primarily engaged in the holding of Investment Property or (ii) an interest in any Investment Property arising from the difference between the original cost basis and the cash sale price shall be added to Consolidated Net Income to the extent not already included in the net income for such period as determined in conformity with GAAP and Consolidated Net Income and (C) solely for the purposes of calculating Consolidated EBITDA and the Fixed Charge Coverage Ratio, any net after tax gains on Investment Properties arising from fair value adjustments made in conformity with GAAP shall be added to Consolidated Net Income.
‘‘Consolidated Net Worth’’ means, at any date of determination, stockholders’ equity as set forth on the most recently available semi-annual or annual consolidated balance sheet of the Parent Guarantor and its Restricted Subsidiaries, plus, to the extent not included, any Preferred Stock of the Parent Guarantor, less any amounts attributable to Disqualified Stock or any equity security convertible into or exchangeable for Indebtedness, the cost of treasury stock and the principal amount of any promissory notes receivable from the sale of the Capital Stock of the Parent Guarantor or any of its Restricted Subsidiaries, each item to be determined in conformity with GAAP.
‘‘Contractor Guarantees’’ means any guarantee by the Parent Guarantor or any Restricted Subsidiary of Indebtedness of any contractor, builder or other similar Person engaged by the Parent Guarantor or such Restricted Subsidiary in connection with the development, construction or improvement of real or personal property or equipment to be used in a Permitted Business by the Parent Guarantor or any Restricted Subsidiary in the ordinary course of business, which Indebtedness was Incurred by such contractor, builder or other similar Person to finance the cost of such development, construction or improvement.
— 260 — ‘‘Credit Facilities’’ means one or more bank facilities, commercial paper facilities, indentures or trust deeds, in each case, with banks or other lenders, institutions or investors providing for revolving credit loans, term loans, receivables financings (including without limitation through the sale of receivables or assets to such institutions or to special purpose entities formed to borrow from such institutions or to issue securities arranged by such institutions against such receivables or assets or the creation of any Liens in respect of such receivables or assets in favor of such institutions or in connection with securitization or similar transactions involving such assets), letters of credit, bonds, notes, debentures or other corporate debt instruments, including, without limitation, Indebtedness Incurred by the Parent Guarantor or any Restricted Subsidiary constituting a guarantee of Indebtedness of, or securing the Indebtedness of, any Person (other than the Parent Guarantor or a Restricted Subsidiary) by the Parent Guarantor or such Restricted Subsidiary, in each case, including all agreements and documents executed and delivered pursuant to or in connection with any of the foregoing, including but not limited to, any notes and letters of credit issued pursuant thereto and any related guarantee, in each case as the same may be amended, supplemented, waived or otherwise modified from time to time, or refunded, refinanced, restructured, replaced, renewed, repaid, increased or extended from time to time (whether in whole or in part, whether with the original banks, lenders, institutions or investors or other banks, lenders, institutions or investors or otherwise, and whether provided under any original Credit Facility or one or more other credit agreements, indentures, financing agreements or other Credit Facilities or otherwise). Without limiting the generality of the foregoing, the term ‘‘Credit Facility’’ shall include any agreement (1) changing the maturity of any Indebtedness Incurred thereunder or contemplated thereby, (2) adding Subsidiaries as additional borrowers or guarantors thereunder, (3) increasing the amount of Indebtedness Incurred thereunder or available to be borrowed thereunder or (4) otherwise altering the terms and conditions thereof.
‘‘Currency Agreement’’ means any foreign exchange forward contract, currency swap agreement or other similar agreement or arrangement designed to protect against fluctuations in foreign exchange rates.
‘‘Debt Documents’’ means, collectively, the Indenture, the documents evidencing the Permitted Pari Passu Secured Indebtedness, the 2016 WL Facility, the 2017 Indenture, the 2017 Syndicated Loan Facility, the 2018 Indenture, the 2019 CMB WL Facilities and the 2019 Dual-Tranche Loan Term Facility and any letters appointing any agent or Global Security Agent.
‘‘Default’’ means any event that is, or after notice or passage of time or both would be, an Event of Default.
‘‘Disqualified Stock’’ means any class or series of Capital Stock of any Person that by its terms or otherwise is (1) required to be redeemed prior to the date that is 183 days after the Stated Maturity of the Notes, (2) redeemable at the option of the holder of such class or series of Capital Stock at any time prior to the date that is 183 days after the Stated Maturity of the Notes or (3) convertible into or exchangeable for Capital Stock referred to in clause (1) or (2) above or Indebtedness having a scheduled maturity prior to the date that is 183 days after the Stated Maturity of the Notes; provided that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an ‘‘asset sale’’ or ‘‘change of control’’ occurring prior to the Stated Maturity of the Notes shall not constitute Disqualified Stock if the ‘‘asset sale’’ or ‘‘change of control’’ provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in the ‘‘— Limitation on Asset Sales’’ and ‘‘— Repurchase of Notes upon a Change of Control Triggering Event’’ covenants and such Capital Stock specifically provides that such Person will not repurchase or redeem any such stock pursuant to such provision prior to the Issuer’s repurchase of such Notes as are required to be repurchased pursuant to the ‘‘— Limitation on Asset Sales’’ and ‘‘— Repurchase of Notes upon a Change of Control Triggering Event’’ covenants.
‘‘Dollar Equivalent’’ means, with respect to any monetary amount in a currency other than U.S. dollars, at any time for the determination thereof, the amount of U.S. dollars obtained by converting such foreign currency involved in such computation into U.S. dollars at the base rate for the purchase of U.S. dollars with the applicable foreign currency as quoted by the Federal Reserve Bank of New York on the date of determination.
‘‘Entrusted Loans’’ means borrowings by a PRC Restricted Subsidiary from a bank that are secured by a pledge of deposits made by another PRC Restricted Subsidiary to the lending bank as security for such borrowings, provided that, such borrowings are not reflected on the consolidated balance sheet of the Parent Guarantor.
— 261 — ‘‘Equity Offering’’ means any private placement or public offering of Common Stock (other than Disqualified Stock) of the Parent Guarantor to any Person other than a Subsidiary of the Parent Guarantor; provided that the aggregate gross cash proceeds received by the Parent Guarantor from such offering shall be no less than US$20 million (or the Dollar Equivalent thereof).
‘‘Euroclear’’ means Euroclear Bank SA/NV.
‘‘Fair Market Value’’ means the price that would be paid in an arm’s-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy, as determined in good faith by the Board of Directors, whose determination shall be conclusive if evidenced by a Board Resolution, except in the case of a determination of Fair Market Value of total assets for the purposes of determining a JV Entitlement Amount, in which case such price shall be determined by an accounting, appraisal or investment banking firm of international standing appointed by the Parent Guarantor.
‘‘Fixed Charge Coverage Ratio’’ means, on any Transaction Date, the ratio of (1) the aggregate amount of Consolidated EBITDA for the then most recent four fiscal quarter periods prior to such Transaction Date for which consolidated financial statements of the Parent Guarantor (which the Parent Guarantor shall use its reasonable best efforts to compile in a timely manner) are available (which may be internal consolidated financial statements) (the ‘‘Four Quarter Period’’) to (2) the aggregate Consolidated Fixed Charges during such Four Quarter Period. In making the foregoing calculation:
(a) pro forma effect shall be given to any Indebtedness, Disqualified Stock or Preferred Stock Incurred, repaid or redeemed during the period (the ‘‘Reference Period’’) commencing on and including the first day of the Four Quarter Period and ending on and including the Transaction Date (other than Indebtedness Incurred or repaid under a revolving credit or similar arrangement (or under any predecessor revolving credit or similar arrangement) in effect on the last day of such Four Quarter Period), in each case as if such Indebtedness, Disqualified Stock or Preferred Stock had been Incurred, repaid or redeemed on the first day of such Reference Period; provided that, in the event of any such repayment or redemption, Consolidated EBITDA for such period shall be calculated as if the Parent Guarantor or such Restricted Subsidiary had not earned any interest income actually earned during such period in respect of the funds used to repay such Indebtedness, Disqualified Stock or Preferred Stock;
(b) Consolidated Interest Expense attributable to interest on any Indebtedness (whether existing or being Incurred) computed on a pro forma basis and bearing a floating interest rate shall be computed as if the rate in effect on the Transaction Date (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months or, if shorter, at least equal to the remaining term of such Indebtedness) had been the applicable rate for the entire period;
(c) pro forma effect shall be given to the creation, designation or redesignation of Restricted and Unrestricted Subsidiaries as if such creation, designation or redesignation had occurred on the first day of such Reference Period;
(d) pro forma effect shall be given to Asset Dispositions and Asset Acquisitions (including giving pro forma effect to the application of proceeds of any Asset Disposition) that occur during such Reference Period as if they had occurred and such proceeds had been applied on thefirstdayofsuchReferencePeriod;and
(e) pro forma effect shall be given to asset dispositions and asset acquisitions (including giving pro forma effect to the application of proceeds of any asset disposition) that have been made by any Person that has become a Restricted Subsidiary or has been merged with or into the Parent Guarantor or any Restricted Subsidiary during such Reference Period and that would have constituted Asset Dispositions or Asset Acquisitions had such transactions occurred when such Person was a Restricted Subsidiary as if such asset dispositions or asset acquisitions were Asset Dispositions or Asset Acquisitions that occurred on the first day of such Reference Period;
— 262 — provided that to the extent that clause (d) or (e) of this sentence requires that pro forma effect be given to an Asset Acquisition or Asset Disposition (or asset acquisition or asset disposition), such pro forma calculation shall be based upon the two full fiscal semi-annual periods immediately preceding the Transaction Date of the Person, or division or line of business of the Person, that is acquired or disposed for which financial information is available.
‘‘GAAP’’ means generally accepted accounting principles in Singapore as in effect from time to time. All ratios and computations contained or referred to in the Indenture shall be computed in conformity with GAAP.
‘‘Governmental Authority’’ means any de facto or de jure government (or any agency or instrumentality thereof), court, tribunal, administrative or other governmental authority or any other entity (private or public) charged with the regulation of the financial markets (including the central bank) of Hong Kong.
‘‘guarantee’’ means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term ‘‘guarantee’’ shall not include endorsements for collection or deposit in the ordinary course of business. The term ‘‘guarantee’’ used as a verb has a corresponding meaning.
‘‘Hedging Obligation’’ of any Person means the obligations of such Person pursuant to any Commodity Hedging Agreement, Currency Agreement or Interest Rate Agreement.
‘‘Holder’’ means the Person in whose name a Note is registered in the Note register.
‘‘Incur’’ means, with respect to any Indebtedness or Capital Stock, to incur, create, issue, assume, guarantee or otherwise become liable for or with respect to, or become responsible for, the payment of, contingently or otherwise, such Indebtedness or Capital Stock; provided that (1) any Indebtedness and Capital Stock of a Person existing at the time such Person becomes a Restricted Subsidiary (or fails to meet the qualifications necessary to remain an Unrestricted Subsidiary) will be deemed to be Incurred by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary and (2) the accretion of original issue discount, the accrual of interest, the accrual of dividends, the payment of interest in the form of additional Indebtedness and the payment of dividends in the form of additional shares of Preferred Stock or Disqualified Stock shall not be considered an Incurrence of Indebtedness. The terms ‘‘Incurrence,’’ ‘‘Incurred’’ and ‘‘Incurring’’ have meanings correlative with the foregoing.
‘‘Indebtedness’’ means, with respect to any Person at any date of determination (without duplication):
(1) all indebtedness of such Person for borrowed money;
(2) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;
(3) all obligations of such Person in respect of letters of credit, bankers’ acceptances or other similar instruments;
(4) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, except Trade Payables;
(5) all Capitalized Lease Obligations and Attributable Indebtedness;
(6) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided that the amount of such Indebtedness shall be the lesser of (a) the Fair Market Value of such asset at such date of determination and (b) the amount of such Indebtedness;
— 263 — (7) all Indebtedness of other Persons Guaranteed by such Person to the extent such Indebtedness is guaranteed by such Person;
(8) to the extent not otherwise included in this definition, Hedging Obligations and any obligations in respect of derivatives contracts; and
(9) all Disqualified Stock issued by such Person valued at the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price plus accrued dividends.
Notwithstanding the foregoing, Indebtedness shall not include any capital commitments, deferred payment obligations, Entrusted Loans, Perpetual Bond Obligation, indemnities provided to joint venture partners, presale receipts in advance from customers or similar obligations, Incurred in the ordinary course of business in connection with the acquisition, development, construction or improvement of real or personal property (including land use rights); provided that such Indebtedness is not reflected on the consolidated balance sheet of the Parent Guarantor and its Restricted Subsidiaries as a loan or borrowing (contingent obligations and commitments referred to in a footnote to financial statements and not otherwise reflected on the balance sheet will not be deemed to be reflected as borrowings on such balance sheet).
The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation; provided
(1) that the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with GAAP,
(2) that money borrowed and set aside at the time of the Incurrence of any Indebtedness in order to prefund the payment of the interest on such Indebtedness shall not be deemed to be ‘‘Indebtedness’’ so long as such money is held to secure the payment of such interest, and
(3) that the amount of Indebtedness with respect to any Hedging Obligation or any obligations with respect to derivatives contracts shall be (a) zero if Incurred pursuant to paragraph 2(f) under the ‘‘LimitationonIndebtednessandPreferredStock’’ covenant, or (b) equal to the net amount payable by such Person if such Hedging Obligation or any obligations with respect to derivatives contracts terminated at that time if not incurred pursuant to such paragraph.
‘‘Independent Third Party’’ means any Person that is not an Affiliate of the Parent Guarantor.
‘‘Intercreditor Deed’’ has the meaning set forth under ‘‘— Security.’’
‘‘Interest Rate Agreement’’ means any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement, option or future contract or other similar agreement or arrangement designed to protect against fluctuations in interest rates, convert a fixed rate interest into a floating rate interest, convert a floating rate interest into a different floating rate interest or lower interest currently paid on Indebtedness of any Person.
‘‘Investment’’ means, with respect to any Person:
(1) any direct or indirect advance, loan or other extension of credit by such Person to another Person;
(2) any capital contribution by such Person to another Person (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others);
(3) any purchase or acquisition of Capital Stock, Indebtedness, bonds, notes, debentures or other similar instruments or securities by such Person issued by another Person; or
(4) any guarantee of any obligation by such Person of another Person to the extent such obligation is outstanding and to the extent guaranteed by such Person.
— 264 — An acquisition of assets, Capital Stock or other securities by the Parent Guarantor or a Subsidiary for consideration to the extent such consideration consists of Common Stock of the Parent Guarantor will not be deemed an Investment.
For the purposes of the provisions of the ‘‘Designation of Restricted and Unrestricted Subsidiaries’’ and ‘‘Limitation on Restricted Payments’’ covenants: (1) the Parent Guarantor will be deemed to have made an Investment in an Unrestricted Subsidiary in an amount equal to the Fair Market Value of Parent Guarantor’s proportionate interest in the assets (net of the Parent Guarantor’s proportionate interest in the liabilities owed to any Person other than the Parent Guarantor or a Restricted Subsidiary and that are not guaranteed by the Parent Guarantor or a Restricted Subsidiary) of a Restricted Subsidiary that is designated an Unrestricted Subsidiary at the time of such designation, and (2) any property transferred to or from any Person shall be valued at its Fair Market Value at the time of such transfer, as determined in good faith by the Board of Directors.
‘‘Investment Grade’’ means a rating of ‘‘AAA,’’ ‘‘AA,’’ ‘‘A’’ or ‘‘BBB,’’ as modified by a ‘‘+’’ or ‘‘–’’ indication, or an equivalent rating representing one of the four highest rating categories, by S&P or any of its successors or assigns or a rating of ‘‘Aaa,’’ or ‘‘Aa,’’ ‘‘A’’ or ‘‘Baa,’’ as modified by a ‘‘1,’’ ‘‘2’’ or ‘‘3’’ indication, or an equivalent rating representing one of the four highest rating categories, by Moody’s, or any of its successors or assigns or the equivalent ratings of any internationally recognized rating agency or agencies, as the case may be, which shall have been designated by the Parent Guarantor as having been substituted for S&P or Moody’s or both, as the case may be.
‘‘Investment Property’’ means any property that is owned and held by any Restricted Subsidiary primarily for rental yields or for capital appreciation or both, or any hotel owned by the Parent Guarantor or any Restricted Subsidiary from which the Parent Guarantor or any Restricted Subsidiary derives or expects to derive operating income.
‘‘Jointly Controlled Entity’’ means any corporation, association or other business entity of which 20% or more of the voting power of the outstanding Capital Stock is owned, directly or indirectly by the Parent Guarantor or a Restricted Subsidiary and such corporation, association or other business entity is treated as a ‘‘ jointly controlled entity’’ in accordance with GAAP and is primarily engaged in a Permitted Business, and such Jointly Controlled Entity’s Subsidiaries.
‘‘JV Entitlement Amount’’ means, with respect to any JV Subsidiary Guarantor together with (x) any of its Restricted Subsidiaries that are providing JV Subsidiary Guarantees and (y) any of its shareholders that are giving JV Subsidiary Guarantees (each, a ‘‘JV Subsidiary Group’’), an amount that is equal to the product of (i) the Fair Market Value of the total assets of such JV Subsidiary Group and its Subsidiaries, on a consolidated basis (without deducting any Indebtedness or other liabilities of such JV Subsidiary Group and its Subsidiaries) as of the date of the last fiscal year end of the Parent Guarantor; and (ii) a percentage equal to the effective ownership interest of the Parent Guarantor and its Restricted Subsidiaries expressed as a percentage in the JV Subsidiary Group.
‘‘JV Subsidiary Guarantee’’ has the meaning set forth under the caption ‘‘— The Subsidiary Guarantees and the JV Subsidiary Guarantees.’’
‘‘JV Subsidiary Guarantor’’ means a Restricted Subsidiary that executes a JV Subsidiary Guarantee.
‘‘Lien’’ means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof or any agreement to create any mortgage, pledge, security interest, lien, charge, easement or encumbrance of any kind).
‘‘Majority Creditors’’ means, as of any time of determination, the creditors under the Debt Documents that represent more than 50% of the aggregate principal amount of secured liabilities outstanding under the Debt Documents at such time.
‘‘Minority Interest Staged Acquisition Agreement’’ means an agreement between the Parent Guarantor or a Restricted Subsidiary and an Independent Third Party (x) pursuant to which the Parent Guarantor or such Restricted Subsidiary agrees to acquire less than a majority of the Capital Stock of a Person for a consideration that is not more than the Fair Market Value of such Capital Stock of such Person at the time the Parent Guarantor or such Restricted Subsidiary enters into such agreement and (y) which provides that the payment of the purchase price for such Capital Stock is made in more than one installment over a period of time.
— 265 — ‘‘Moody’s’’ means Moody’s Investors Service, Inc. and its successors.
‘‘Net Cash Proceeds’’ means:
(1) with respect to any Asset Sale, the proceeds of such Asset Sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents and proceeds from the conversion of other property received when converted to cash or cash equivalents, net of:
(a) brokerage commissions and other fees and expenses (including fees and expenses of counsel and investment bankers) related to such Asset Sale;
(b) provisions for all taxes (whether or not such taxes will actually be paid or are payable) as a result of such Asset Sale without regard to the consolidated results of operations of the Parent Guarantor and its Restricted Subsidiaries, taken as a whole;
(c) payments made to repay Indebtedness or any other obligation outstanding at the time of such Asset Sale that either (x) is secured by a Lien on the property or assets sold or (y) is required to be paid as a result of such sale;
(d) appropriate amounts to be provided by the Parent Guarantor or any Restricted Subsidiary as a reserve against any liabilities associated with such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as determined in conformity with GAAP; and
(2) with respect to any issuance or sale of Capital Stock or securities convertible or exchangeable into Capital Stock, the proceeds of such issuance or sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents and proceeds from the conversion of other property received when converted to cash or cash equivalents, net of attorneys’ fees, accountants’ fees, underwriters’ or placement agents’ fees, discounts or commissions and brokerage, consultant and other fees incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof.
‘‘Non-core Entity’’ means any Restricted Subsidiary which is primarily engaged, directly or indirectly, in any business other than the acquisition and development of residential property in the PRC.
‘‘Obligors’’ means, collectively, the Issuer, the Guarantor Pledgors and any other person who becomes a party to the Intercreditor Deed as an obligor after the date thereof.
‘‘Offer to Purchase’’ means an offer to purchase Notes by the Issuer or the Parent Guarantor from the Holders commenced by the Issuer or the Parent Guarantor mailing a notice by first class mail, postage prepaid, to the Trustee, the Paying and Transfer Agent and each Holder at its last address appearing in the Note register stating:
(1) the covenant pursuant to which the offer is being made and that all Notes validly tendered will be accepted for payment on a pro rata basis;
(2) the purchase price and the date of purchase (which shall be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the ‘‘Offer to Purchase Payment Date’’);
(3) that any Note not tendered will continue to accrue interest pursuant to its terms;
(4) that, unless the Issuer or the Parent Guarantor defaults in the payment of the purchase price, any Note accepted for payment pursuant to the Offer to Purchase shall cease to accrue interest on and after the Offer to Purchase Payment Date;
— 266 — (5) that Holders electing to have a Note purchased pursuant to the Offer to Purchase will be required to surrender the Note, together with the form entitled ‘‘Option of the Holder to Elect Purchase’’ on the reverse side of the Note completed, to the tender agent (‘‘Tender Agent’’) at the address specified in the notice prior to the close of business on the Business Day immediately preceding the Offer to Purchase Payment Date;
(6) that Holders will be entitled to withdraw their election if the Tender Agent receives, not later than the close of business on the third Business Day immediately preceding the Offer to Purchase Payment Date, a facsimile transmission or letter setting forth the name of such Holder, the principal amount of Notes delivered for purchase and a statement that such Holder is withdrawing his election to have such Notes purchased; and
(7) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of US$200,000 or integral multiples of US$1,000.
‘‘Officer’’ means one of the executive officers of the Parent Guarantor or, in the case of the Issuer, a Subsidiary Guarantor or JV Subsidiary Guarantor, one of the directors or officers of such Subsidiary Guarantor or JV Subsidiary Guarantor, as the case may be.
‘‘Officers’ Certificate’’ means a certificate signed by two Officers; provided that, with respect to the Officers’ Certificate required to be delivered by the Issuer or any Subsidiary Guarantor under the Indenture, Officers’ Certificate means a certificate signed by one Officer if there is only one Officer of the Issuer or such Subsidiary Guarantor at the time such certificate is required to be delivered.
‘‘Onshore Secured Indebtedness’’ means Indebtedness of the Parent Guarantor or any Restricted Subsidiary that is, through a standby letter of credit or other similar instrument issued by a bank or other financial institution, indirectly benefited from the pledge of assets or shares of a Restricted Subsidiary in the PRC or a guarantee or a letter of credit (or similar instruments) from or arranged by a Restricted Subsidiary in the PRC to such bank or other financial institution.
‘‘Opinion of Counsel’’ means a written opinion from legal counsel who is reasonably acceptable to the Trustee.
‘‘Original Issue Date’’ means the date on which the Notes are originally issued under the Indenture.
‘‘Pari Passu Guarantee’’ means a guarantee by the Issuer, the Parent Guarantor, any Subsidiary Guarantor or any JV Subsidiary Guarantor of Indebtedness of the Issuer (including Additional Notes), the Parent Guarantor, any Subsidiary Guarantor or any JV Subsidiary Guarantor; provided that (1) the Issuer, the Parent Guarantor or such Subsidiary Guarantor was permitted to Incur such Indebtedness under the covenant under the caption ‘‘— Limitation on Indebtedness and Preferred Stock’’ and (2) such guarantee ranks pari passu with the Parent Guarantee, the Issuer’s obligations under the Notes, any outstanding Subsidiary Guarantee of such Subsidiary Guarantor, or with any outstanding JV Subsidiary Guarantee of such JV Subsidiary Guarantor, as the case may be.
‘‘Payment Default’’ means (1) any default in the payment of interest on any Note when the same becomes due and payable, (2) any default in the payment of principal of (or premium, if any, on) the Notes when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise, (3) the failure by the Issuer or the Parent Guarantor to make or consummate a Change of Control Offer in the manner described under the caption ‘‘— Repurchase of Notes upon a Change of Control Triggering Event,’’ or an Offer to Purchase in the manner described under the caption ‘‘— Limitation on Asset Sales’’ or (4) any Event of Default specified in clause (5) of the definition of Events of Default.
‘‘Permitted Business’’ means any business which is the same as or related, ancillary or complementary to any of the businesses of the Parent Guarantor and its Restricted Subsidiaries (as described in this offering memorandum) on the Original Issue Date, including without limitation real estate investment trusts, real estate acquisition, development, leasing and management; hotel acquisition, development, operation and management; and the acquisition, development, management and operation of other facilities, in each case associated with real estate projects acquired or intended in good faith to be acquired, developed or managed by the Parent Guarantor or any Restricted Subsidiary.
— 267 — ‘‘Permitted Holders’’ means any or all of the following:
(1) Mr. Zhong Sheng Jian;
(2) the estate and any spouse or immediate family member of the Person specified in clause (1) or the legal representatives of any of the foregoing;
(3) any Affiliate (other than an Affiliate as defined in clause (2) or (3) of the definition of Affiliate) of the Person specified in clause (1) or (2); and
(4) any Person both the Capital Stock and the Voting Stock of which (or in the case of a trust, the beneficial interests in which) are owned 80% or more by one or more Persons specified in clauses (1), (2) and (3).
‘‘Permitted Investment’’ means:
(1) any Investment in the Parent Guarantor or a Restricted Subsidiary that is primarily engaged in a Permitted Business or a Person which will, upon the making of such Investment, become a Restricted Subsidiary that is primarily engaged in a Permitted Business or be merged or consolidated with or into or transfer or convey all or substantially all its assets to, the Parent Guarantor or a Restricted Subsidiary that is primarily engaged in a Permitted Business;
(2) Temporary Cash Investments;
(3) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses in accordance with GAAP;
(4) stock, obligations or securities received in satisfaction of judgments;
(5) an Investment in an Unrestricted Subsidiary consisting solely of an Investment in another Unrestricted Subsidiary;
(6) any Investment pursuant to a Hedging Obligation designed solely to protect the Parent Guarantor or any Restricted Subsidiary against fluctuations in commodity prices, interest rates or foreign currency exchange rates;
(7) receivables owing to the Parent Guarantor or any Restricted Subsidiary, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms;
(8) Investments made by the Parent Guarantor or any Restricted Subsidiary consisting of consideration received in connection with an Asset Sale made in compliance with the covenant under the caption ‘‘— Limitation on Asset Sales’’;
(9) pledges or deposits (x) with respect to leases or utilities provided to third parties in the ordinary course of business or (y) otherwise described in the definition of ‘‘Permitted Liens’’ or made in connection with Liens permitted under the covenant described under ‘‘— Limitation on Liens’’;
(10) any Investment pursuant to Pre-Registration Mortgage Guarantees or Contractor Guarantees by the Parent Guarantor or any Restricted Subsidiary otherwise permitted to be Incurred under the Indenture;
(11) Investments in securities of trade creditors, trade debtors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditor, trade debtor or customer;
(12) advances to contractors and suppliers for the acquisition of assets or consumables or services in the ordinary course of business that are recorded as deposits or prepaid expenses on the Parent Guarantor’s consolidated balance sheet;
(13) deposits of pre-sale proceeds made in order to secure the completion and delivery of pre-sold properties and issuance of the related land use title in the ordinary course of business;
— 268 — (14) deposits made in order to comply with statutory or regulatory obligations to maintain deposits for workers compensation claims and other purposes specified by statute or regulation from time to time in the ordinary course of business;
(15) deposits made in order to secure the performance of the Parent Guarantor or any of its Restricted Subsidiaries and prepayments made in connection with the acquisition of real property, land use rights by the Parent Guarantor or personal property (including, without limitation, Capital Stock) by the Parent Guarantor or any of its Restricted Subsidiaries (including, without limitation, by way of acquisition of Capital Stock of a Person), in each case in the ordinary course of business;
(16) advances to government authorities or government-affiliated entities in the People’s Republic of China in connection with the financing of primary land development in the ordinary course of business that are recorded as assets on the Parent Guarantor’s balance sheet;
(17) repurchase of the Notes;
(18) advances to the minority shareholder of Shanghai Yanlord Property Co., Ltd. pursuant to the agreement with such minority shareholder dated March 20, 2008 to the extent such advances are repaid or offset within 12 months through dividend distribution;
(19) advances to minority shareholders for the payment of their portion of the equity capital contribution in any joint ventures that is a Restricted Subsidiary to the extent each such advance does not require the approval of the shareholders of the Parent Guarantor under the Listing Rules of the SGX-ST;
(20) Guarantees permitted under clauses 2(s), 2(t) and 2(u) of the covenant under ‘‘— Limitation on Indebtedness and Preferred Stock’’;
(21) any Investment by the Parent Guarantor or any Restricted Subsidiary in any Person if at the time of such Investment (or, if earlier, at the time the Parent Guarantor or such Restricted Subsidiary contractually agreed to make such Investment) (x) the Parent Guarantor could Incur at least US$1.00 of Indebtedness under the proviso in the first paragraph of part (1) of the covenant under the caption ‘‘— Limitation on Indebtedness and Preferred Stock,’’ (y) no Default has occurred and is continuing or would occur as a result of such Investment and (z) the requirements (if any) under the ‘‘Limitation on Transactions with Shareholders and Affiliates’’ covenants are met; provided that, condition (x) above shall not apply if such Investment would otherwise have been permitted under this clause (21) and such Investment, together with the aggregate amount of all Investments made after the Original Issue Date in reliance on this proviso and without giving effect to any subsequent change in fair value of such Investment, less the aggregate amount of net reduction in all Investments made under this clause (21) since the Original Issue Date resulting from:
(a) payments of interest on Indebtedness, dividends or repayments of loans or advances made under this clause, in each case to the Parent Guarantor or any Restricted Subsidiary (except, in each case, to the extent any such payment or proceeds are included in the calculation of Consolidated Net Income),
(b) the unconditional release of a guarantee provided by the Parent Guarantor or a Restricted Subsidiary after the Original Issue Date under this clause of an obligation of anysuchPerson,
(c) to the extent that an Investment made after the Original Issue Date under this clause (21) is sold or otherwise liquidated or repaid for cash, the lesser of (x) cash return of capital with respect to such Investment (less the cost of disposition, if any) and (y) the initial amount of such Investment, or
(d) any such Person becoming a Restricted Subsidiary (whereupon all Investments made by the Parent Guarantor or any Restricted Subsidiary in such Person after the Original Issue Date shall be deemed to have been made pursuant to clause (1) of the definition of ‘‘Permitted Investment’’), not to exceed, in each case, the amount of Investments (other than Permitted Investments) made by the Parent Guarantor or a Restricted Subsidiary after the Original Issue Date in any such Person pursuant to this clause (21), does not exceed an amount equal to 15% of Total Assets; and
— 269 — (22) any Investment deemed to have been made by the Parent Guarantor or any Restricted Subsidiary in any Non-core Entity of a Restructuring Group upon the designation of such Non-core Entity as an Unrestricted Subsidiary; provided that the aggregate amount of all Investments made under this clause (22) since the Original Issue Date does not exceed an amount equal to 25% of Total Assets (for the avoidance of doubt, any portion of such Investments exceeding 25% of Total Assets will not constitute a Permitted Investment pursuant to this clause (22) but may be made, characterized and accounted for in accordance with the other provisions of the Indenture).
‘‘Permitted Liens’’ means:
(1) Liens for taxes, assessments, governmental charges or claims that are being contested in good faith by appropriate legal or administrative proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made;
(2) statutory and common law Liens of landlords and carriers, warehousemen, mechanics, suppliers, repairmen or other similar Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate legal or administrative proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made;
(3) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory or regulatory obligations, bankers’ acceptances, surety and appeal bonds, government contracts, performance, and return-of-money bonds and other obligations of a similar nature incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money);
(4) leases or subleases granted to others that do not materially interfere with the ordinary course of business of the Parent Guarantor and its Restricted Subsidiaries, taken as a whole;
(5) Liens encumbering property or assets under construction arising from progress or partial payments by a customer of the Parent Guarantor or its Restricted Subsidiaries relating to such property or assets;
(6) Liens on property of, or on shares of Capital Stock or Indebtedness of, any Person existing at the time such Person becomes, or becomes a part of, any Restricted Subsidiary; provided that such Liens do not extend to or cover any property or assets of the Parent Guarantor or any Restricted Subsidiary other than the property or assets acquired; provided further that such Liens were not created in contemplation of or in connection with the transactions or series of transactions pursuant to which such Person became a Restricted Subsidiary;
(7) Liens in favor of the Parent Guarantor or any Restricted Subsidiary;
(8) Liens arising from the rendering of a final judgment or order against the Parent Guarantor or any Restricted Subsidiary that does not give rise to an Event of Default;
(9) Liens securing reimbursement obligations with respect to letters of credit that encumber documents and other property relating to such letters of credit and the products and proceeds thereof;
(10) Liens encumbering customary initial deposits and margin deposits, and other Liens that are within the general parameters customary in the industry and incurred in the ordinary course of business, in each case, securing Indebtedness under Hedging Obligations permitted by clause (f) of the second paragraph of the covenant under the caption ‘‘— Limitation on Indebtedness and Preferred Stock’’;
(11) Liens existing on the Original Issue Date;
(12) Liens securing Indebtedness which is Incurred to refinance secured Indebtedness which is permitted to be Incurred under clause (e) of the second paragraph of the covenant described under the caption entitled ‘‘— Limitation on Indebtedness and Preferred Stock’’; provided that such Liens do not extend to or cover any property or assets of the Parent Guarantor or any Restricted Subsidiary other than the property or assets securing the Indebtedness being refinanced;
— 270 — (13) Liens under the Security Documents;
(14) Liens securing any Permitted Pari Passu Secured Indebtedness that complies with each of the requirements set forth under ‘‘— Security-Permitted Pari Passu Secured Indebtedness’’;
(15) any interest or title of a lessor in the property subject to any operating lease;
(16) Liens securing Indebtedness of the Parent Guarantor or any Restricted Subsidiary under any Pre-Registration Mortgage Guarantee which is permitted to be Incurred under clause (g) of the second paragraph of the covenant under the caption ‘‘— Limitation on Indebtedness and Preferred Stock’’;
(17) easements, rights-of-way, municipal and zoning ordinances or other restrictions as to the use of properties in favor of governmental agencies or utility companies that do not materially adversely affect the value of such properties or materially impair the use for the purposes of which such properties are held by the Parent Guarantor or any Restricted Subsidiary;
(18) Liens (including extensions and renewals thereof) upon real or personal property; provided that (a) such Lien is created solely for the purpose of securing Indebtedness of the type described under clause (2)(h) of the covenant under the caption entitled ‘‘— Limitation on Indebtedness and Preferred Stock’’ and such Lien is created prior to, at the time of or within 180 days after the later of the acquisition or the completion of development, construction or improvement of such property, (b) the principal amount of the Indebtedness secured by such Lien does not exceed 100% of the cost of such property, development, construction or improvement and (c) such Lien shall not extend to or cover any property or assets other than such item of property and any improvements on such item, provided that, in the case of clauses (b) and (c), such Lien may cover other property or assets (instead of or in addition to such item of property or improvements) and the principal amount of Indebtedness secured by such Lien may exceed 100% of such cost if (x) such Lien is incurred in the ordinary course of business and (y) the aggregate book value of property or assets (as reflected in the most recent available consolidated financial statements of the Parent Guarantor (which may be internal consolidated statements) or, if any such property or assets have been acquired since the date of such financial statements, the cost of such property or assets) subject to Liens incurred pursuant to this clause (18) does not exceed 130% of the aggregate principal amount of Indebtedness secured by such Liens (to the extent that if the aggregate book value of such other property or assets is partially or wholly dependent on the cost of such item of property or improvement, the cost of such item of property or improvement will be counted once);
(19) Liens on deposits of pre-sale proceeds made in order to secure the completion and delivery of pre-sold properties and issuance of the related land use title made in the ordinary course of business and not securing Indebtedness of the Parent Guarantor or any Restricted Subsidiary;
(20) Liens on deposits made in order to comply with statutory obligations to maintain deposits for workers compensation claims and other purposes specified by statute made in the ordinary course of business and not securing Indebtedness of the Parent Guarantor or any Restricted Subsidiary;
(21) Liens on deposits made in order to secure the performance of the Parent Guarantor or any of its Restricted Subsidiaries in connection with the acquisition of real property, land use rights or personal property (including, without limitation, Capital Stock) by the Parent Guarantor or any of its Restricted Subsidiaries (including, without limitation, by way of acquisition of Capital Stock of a Person) in the ordinary course of business and not securing Indebtedness of the Parent Guarantor or any Restricted Subsidiary;
(22) Liens securing Indebtedness of the type described under clause (2)(n) of the covenant described under the caption entitled ‘‘— Limitation on Indebtedness and Preferred Stock’’;
(23) Liens on Capital Stock of Restricted Subsidiaries that are to be transferred in favor of the prospective purchaser of such Capital Stock in transactions in accordance with ‘‘— Limitation on Asset Sales’’ covenant;
(24) Liens on Investment Properties securing Indebtedness of the Parent Guarantor or any Restricted Subsidiary of the type described under clause (2)(s) of the covenant described under the caption entitled ‘‘— Limitation on Indebtedness and Preferred Stock’’;
— 271 — (25) Liens securing Bank Deposit Secured Indebtedness of the type described under clause 2(q) of the covenant described under the caption entitled ‘‘— Limitation on Indebtedness and Preferred Stock’’;
(26) Liens incurred or deposits made to secure Entrusted Loans;
(27) Liens granted by the Parent Guarantor or a Restricted Subsidiary in favor of any Trust Company Investor to secure the obligations of a Subsidiary of such Restricted Subsidiary in which such Trust Company Investor holds or acquires a minority equity interest to pay a guaranteed or preferred return to such Trust Company Investor, including the Indebtedness of the type described under clause 2(t) of the covenant described under the caption entitled ‘‘— Limitation on Indebtedness and Preferred Stock’’;
(28) Liens on the Capital Stock of the Person that is to be acquired under the relevant Staged Acquisition Agreement securing Indebtedness permitted to be Incurred under clause 2(p) of the covenant described under the caption entitled ‘‘— Limitation on Indebtedness and Preferred Stock’’;
(29) Liens securing Indebtedness which is permitted to be Incurred under clause (2)(r) of the covenant described under the caption entitled ‘‘— Limitation on Indebtedness and Preferred Stock’’;and
(30) Liens securing Indebtedness permitted to be Incurred under clause 2(u), 2(v) or 2(y) of the covenant described under the caption entitled ‘‘— Limitation on Indebtedness and Preferred Stock.’’ provided that, with respect to the Collateral, ‘‘Permitted Liens’’ shall only refer to the Liens described in clauses (1), (2), (13) and (14) of this definition.
‘‘Permitted Pari Passu Secured Indebtedness’’ has the meaning set forth under ‘‘— Security — Permitted Pari Passu Secured Indebtedness.’’
‘‘Permitted Subsidiary Indebtedness’’ means Indebtedness of, and all Preferred Stock issued by, the Restricted Subsidiaries (excluding any Indebtedness of the Issuer or the Subsidiary Guarantors); provided that, on the date of the Incurrence of such Indebtedness and after giving effect thereto and the application of the proceeds thereof, the aggregate principal amount outstanding of all such Indebtedness (excluding the amount of any Public Indebtedness of any Restricted Subsidiary, any Indebtedness of the Issuer or any Subsidiary Guarantor, any SPV Indebtedness and any Indebtedness of any Restricted Subsidiary permitted under clauses 2 (a), (b), (d), (f), (g), (i) or (m) of the covenant described under ‘‘— Certain Covenants — Limitation on Indebtedness and Preferred Stock’’) does not exceed an amount equal to 15% of the Total Assets.
‘‘Perpetual Bond Obligation’’ means perpetual securities that are accounted for as equity in accordance with the relevant generally accepted accounting principles, the aggregate outstanding principal amount of which, if issued by the Parent Guarantor or any Restricted Subsidiary, does not exceed 20% of Total Assets at any time.
‘‘Person’’ means any individual, corporation, partnership, limited liability company, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof.
‘‘Pre-Registration Mortgage Guarantee’’ means any Indebtedness of the Parent Guarantor or any Restricted Subsidiary consisting of a guarantee in favor of any bank or other similar financial institutions in the ordinary course of business of secured loans of purchasers of individual units of properties from the Parent Guarantor or any Restricted Subsidiary; provided that, any such guarantee shallbereleasedinfullonorbeforetheperfection of a security interest in such properties under applicable law in favor of the relevant lender.
‘‘Preferred Stock’’ asappliedtotheCapitalStockofanyPerson means Capital Stock of any class or classes that by its term is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person.
‘‘PRC’’ means the People’s Republic of China, excluding the Hong Kong Special Administrative Region, the Macau Special Administrative Region, and Taiwan.
— 272 — ‘‘PRC CJV’’ means any Subsidiary that is a Sino-foreign cooperative joint venture enterprise with limited liability, established in the PRC pursuant to the Law of the People’s Republic of China on Sino- foreign Cooperative Joint Ventures adopted on April 13, 1988 (as most recently amended on October 13, 2000) and the Detailed Rules for the Implementation of the Law of the People’s Republic of China on Sino-foreign Cooperative Joint Ventures promulgated on September 4, 1995, as such laws may be amended.
‘‘PRC CJV Partner’’ means with respect to a PRC CJV, the other party to the joint venture agreement relating to such PRC CJV with the Parent Guarantor or any Restricted Subsidiary.
‘‘PRC Restricted Subsidiary’’ means a Restricted Subsidiary organized under the laws of the PRC.
‘‘Public Indebtedness’’ means any bonds, debentures, notes or similar debt securities issued in a public offering or a private placement (other than the Notes) to institutional investors.
‘‘Qualified Exchange’’ means either (1) The New York Stock Exchange, the London Stock Exchange, The Stock Exchange of Hong Kong Limited, the Nasdaq Stock market, Singapore Exchange Securities Trading Limited, the Australian Securities Exchange, the Shanghai Stock Exchange, the Shenzhen Stock Exchange or the Malaysian Stock Exchange or (2) a national securities exchange (as such term is defined in Section 6 of the Exchange Act) or a designated offshore securities market (as such term is defined in Rule 902(b) under the Securities Act).
‘‘Qualified IPO’’ means a listing (or a deemed new listing pursuant to the rules of the relevant stock exchange or governing body) of ordinary shares of a company or real estate investment trusts or instruments evidencing similar rights on a Qualified Exchange; provided that in the case that such listing is on a national securities exchange (as such term is defined in Section 6 of the Exchange Act) or a designated offshore securities market (as such term is defined in Rule 902(b) under the Securities Act), such listing shall result in a public float of no less than the percentage required by the applicable listing rules.
‘‘Rating Agencies’’ means (1) S&P and (2) Moody’s and (3) if S&P or Moody’s or both shall not make a rating of the Notes publicly available, a nationally recognized securities rating agency or agencies, as the case may be, selected by the Parent Guarantor, which shall be substituted for S&P or Moody’s or both, as the case may be.
‘‘Rating Category’’ means (1) with respect to S&P, any of the following categories: ‘‘BB,’’ ‘‘B,’’ ‘‘CCC,’’ ‘‘CC,’’ ‘‘C’’ and ‘‘D’’ (or equivalent successor categories); (2) with respect to Moody’s, any of the following categories: ‘‘, Ba ’’ ‘‘B,’’ ‘‘Caa,’’ ‘‘Ca,’’ ‘‘C’’ and ‘‘D’’ (or equivalent successor categories); and (3) the equivalent of any such category of S&P or Moody’susedbyanotherRatingAgency.In determining whether the rating of the Notes has decreased by one or more gradations, gradations within Rating Categories (‘‘+’’ and ‘‘–’’ for S&P; ‘‘1,’’ ‘‘2’’ and ‘‘3’’ for Moody’s; or the equivalent gradations for another Rating Agency) shall be taken into account (e.g., with respect to S&P, a decline in a rating from ‘‘BB+’’ to ‘‘BB,’’ as well as from ‘‘B-’’ to ‘‘B+,’’ will constitute a decrease of one gradation).
‘‘Rating Date’’ means (1) in connection with a Change of Control Triggering Event, that date which is 90 days prior to the earlier of (x) a Change of Control and (y) a public notice of the occurrence of a Change of Control or of the intention by the Parent Guarantor or any other Person or Persons to effect a Change of Control or (2) in connection with actions contemplated under the caption ‘‘— Consolidation, Merger and Sale of Assets,’’ that date which is 90 days prior to the earlier of (x) the occurrence of any such actions as set forth therein and (y) a public notice of the occurrence of any such actions.
‘‘Rating Decline’’ means (1) in connection with a Change of Control Triggering Event, the occurrence on, or within six months after, the date, or public notice of the occurrence of, a Change of Control or the intention by the Parent Guarantor or any other Person or Persons to effect a Change of Control (which period shall be extended so long as the rating of the Notes, is under publicly announced consideration for possible downgrade by any of the Rating Agencies) of any of the events listed below, or (2) in connection with actions contemplated under the caption ‘‘— Consolidation, Merger and Sale of Assets,’’ the notification by any of the Rating Agencies that such proposed actions will result in any of the events listed below:
(a) in the event the Notes are rated by both Moody’s and S&P on the Rating Date as Investment Grade, the rating of the Notes by either Rating Agency shall be below Investment Grade;
— 273 — (b) in the event the Notes are rated by either, but not both, of the Rating Agencies on the Rating Date as Investment Grade, the rating of the Notes by such Rating Agency shall be below Investment Grade; or
(c) in the event the Notes is rated below Investment Grade by both Rating Agencies on the Rating Date, the rating of the Notes by either Rating Agency shall be decreased by one or more gradations (including gradations within Rating Categories as well as between Rating Categories).
‘‘Receivable Financing’’ means any financing transaction or series of financing transactions that have been or may be entered into by the Company or any Restricted Subsidiary pursuant to which the Company or any Restricted Subsidiary may sell, convey or otherwise transfer to another Person, or may grant a security interest in, any of its receivables, mortgages, royalty, other revenue streams or interests therein (including without limitation, all security interests in goods financed thereby (including equipment and property), the proceeds of such receivables, and other assets which are customarily sold or in respect of which security interests are customarily granted in connection with securitization or factoring transactions involving such assets) for credit or liquidity management purposes (including discounting, securitization or factoring transactions) either (i) in the ordinary course of business or (ii) by way of selling by such other Person securities that are, or are capable of being, listed on any stock exchange or in any securities market and are offered using an offering memorandum or similar offering document.
‘‘Reference Treasury Dealer’’ means each of any three investment banks of recognized standing that is a primary U.S. Government securities dealer in The City of New York, selected by the Parent Guarantor in good faith.
‘‘Reference Treasury Dealer Quotations’’ means, with respect to each Reference Treasury Dealer and any redemption date, the average as determined by the Parent Guarantor, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Parent Guarantor by such Reference Treasury Dealer at 5:00 p.m. New York City time on the third Business Day preceding such redemption date.
‘‘Renminbi’’ and ‘‘RMB’’ mean the lawful currency of the People’s Republic of China, excluding Hong Kong, Macau and Taiwan for the purposes of the Indenture.
‘‘Replacement Assets’’ means, on any date, property or assets (other than current assets that are not land use rights, properties under development or completed property held for sale) of a nature or type or that are used in a Permitted Business and for the purposes of clause 3 of the first paragraph of the covenant under the caption ‘‘Limitation on Asset Sales,’’ shall include Capital Stock of any Person holding such property or assets, which is primarily engaged in a Permitted Business and will upon the acquisition by the Parent Guarantor or any of its Restricted Subsidiaries of such Capital Stock, become a Restricted Subsidiary.
‘‘Restricted Subsidiary’’ means any Subsidiary of the Parent Guarantor other than an Unrestricted Subsidiary.
‘‘Restructuring’’ means any restructuring and Qualified IPO of a Non-core Entity; provided that the Board of Directors has determined in good faith that the designation of such Non-core Entity and its Subsidiaries as Unrestricted Subsidiaries is desirable to obtain approval from a Qualified Exchange for such Qualified IPO.
‘‘Restructuring Group’’ means, collectively, (i) any Non-core Entity the ordinary shares or real estate investment trusts or instruments evidencing similar rights of which is, or is expected to be pursuant to a definitive plan, listed on a Qualified Exchange in a Restructuring, and (ii) the Subsidiaries of such Non-core Entity.
‘‘S&P’’ means Standard & Poor’s Ratings Group, a division of The McGraw-Hill Companies, and its successors.
‘‘Sale and Leaseback Transaction’’ means any direct or indirect arrangement relating to property (whether real, personal or mixed), now owned or hereafter acquired whereby the Parent Guarantor or any Restricted Subsidiary transfers such property to another Person and the Parent Guarantor or any Restricted Subsidiary leases it from such Person.
‘‘Secured Creditors’’ means, collectively, the creditors and agents under the Debt Documents.
— 274 — ‘‘Secured Liabilities’’ means, collectively, all present and future obligations, contingent or otherwise, of the Parent Guarantor to the noteholders, lenders and their agents or trustees under the Debt Documents, including any interest, fees and expenses accruing after the initiation of any insolvency proceeding (irrespective of whether such interest, fees and expenses are allowed as a claim in such proceeding).
‘‘Security Documents’’ means, collectively, the Intercreditor Deed, the pledge agreements and any other agreements or instruments that may evidence or create any security interest in favor of the Trustee and/or any Holders in any or all of the Collateral.
‘‘Senior Indebtedness’’ of the Parent Guarantor or a Restricted Subsidiary, as the case may be, means all Indebtedness of the Parent Guarantor or the Restricted Subsidiary, as relevant, whether outstanding on the Original Issue Date or thereafter created, except for Indebtedness which, in the instrument creating or evidencing the same, is expressly stated to be subordinated in right of payment to (a) in respect of the Parent Guarantor, the Notes or, (b) in respect of any Restricted Subsidiary that is a Subsidiary Guarantor, its Subsidiary Guarantee or, (c)inrespectofanyRestrictedSubsidiarythatisa JV Subsidiary Guarantor, its JV Subsidiary Guarantee; provided that Senior Indebtedness does not include (1) any obligation to the Parent Guarantor or any Restricted Subsidiary, (2) trade payables or (3) Indebtedness Incurred in violation of the Indenture.
‘‘SGX-ST’’ means the Singapore Exchange Securities Trading Limited.
‘‘Significant Subsidiary’’ means any Restricted Subsidiary that would be a ‘‘significant subsidiary’’ using the conditions specified in the definition of significant subsidiary in Article 1, Rule 1-02(w) of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date of this Indenture, if any of the conditions exceeds 5 percent.
‘‘Singapore dollar’’ or ‘‘S$’’ means the lawful currency of the Republic of Singapore.
‘‘SPV’’ means any Person who is Wholly-Owned by the Parent Guarantor and who does not engage in any business activity except (1) the incurrence of Indebtedness the entire proceeds of which are on-lent to the Parent Guarantor, (2) the issuance of pari passu Guarantees, (3) activity related to the establishment or maintenance of that Person’s corporate existence, and (4) any other activity in connection with or incidental to activities referred to in clauses (1) through (3).
‘‘SPV Indebtedness’’ means Indebtedness of a Subsidiary Guarantor that is an SPV.
‘‘Staged Acquisition Agreement’’ means an agreement between the Parent Guarantor or a Restricted Subsidiary and an Independent Third Party (x) pursuant to which the Parent Guarantor or such Restricted Subsidiary agrees to acquire not less than a majority of the Capital Stock of a Person for a consideration that is not more than the Fair Market Value of such Capital Stock of such Person at the time the Parent Guarantor or such Restricted Subsidiary enters into such agreement and (y) which provides that the payment of the purchase price for such Capital Stock is made in more than one installment over a period of time.
‘‘Stated Maturity’’ means, (1) with respect to any Indebtedness, the date specified in such debt security as the fixed date on which the final installment of principal of such Indebtedness is due and payable as set forth in the documentation governing such Indebtedness and (2) with respect to any scheduled installment of principal of or interest on any Indebtedness, the date specified as the fixed date on which such installment is due and payable as set forth in the documentation governing such Indebtedness.
‘‘Subordinated Indebtedness’’ means any Indebtedness of the Issuer, the Parent Guarantor, any Subsidiary Guarantor or any JV Subsidiary Guarantor which is contractually subordinated or junior in right of payment to the Notes, the Parent Guarantee, any Subsidiary Guarantee or any JV Subsidiary Guarantee, as applicable, pursuant to a written agreement to such effect.
‘‘ Subordinated Shareholder Loan’’ means unsecured Indebtedness Incurred by the Parent Guarantor or any Restricted Subsidiary from but only for long as such Indebtedness is owed to, any Permitted Holder (other than the Parent Guarantor or any Restricted Subsidiary) as to which (a) the payment of principal of (and premium, if any) and interest and other payment obligations in respect of such Indebtedness is, by its terms or by the terms of any agreement or instrument pursuant to which such Indebtedness is issued or remains outstanding and an agreement (the ‘‘Subordination Agreement’’)tobe entered into among the holders of such Indebtedness (or trustees or agents therefor) and the Trustee, is expressly made subordinate to the prior payment in full of the Notes to at least the following extent: (i) no payments of principal of (or premium, if any) or interest on or otherwise due in respect of such
— 275 — Indebtedness may be permitted for so long as any Default exists; (ii) such Indebtedness may not (x) provide for payments of principal of such Indebtedness at the Stated Maturity thereof or by way of a sinking fund applicable thereto or by way of any mandatory redemption, defeasance, retirement or repurchase thereof by the Parent Guarantor or such Subsidiary Guarantor (including any redemption, retirement or repurchase which is contingent upon events or circumstances), in each case prior to the final Stated Maturity of the Notes or (y) permit redemption or other retirement (including pursuant to an offer to purchase made by the Parent Guarantor or any Restricted Subsidiary) of such other Indebtedness at the option of the holder thereof prior to the final Stated Maturity of the Notes, except to the extent such redemption or other retirement is permitted under the covenant described under the caption ‘‘— Certain Covenants — Limitation on Restricted Payments’’ on the date of such redemption or other retirement, (iii) the Subordination Agreement will prevent the holders of such Indebtedness (or trustees or agents therefor) from pursuing remedies against the Parent Guarantor or any of the Restricted Subsidiaries or their respective assets or propertiesinaninsolvencyproceedingorinrespectofadefault under such Indebtedness and (iv) the Subordination Agreement will provide in the event that any payment is received by the holders of such Indebtedness (or any trustee or agent therefor) in respect of such Indebtedness where such payment is prohibited by one or more of the subordination provisions described in this definition, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the Trustee on behalf of the Holders of the Notes, and (b) the terms thereof provide that interest (and premium, if any) thereon is paid solely in the form of (i) pay-in-kind, or PIK, payments constituting additional Subordinated Shareholder Loans or (ii) cash (to the extent provided for when such Subordinated Shareholder Loan was originally Incurred) if such cash interest (or premium, if any) payment would be permitted to be made under the covenant described under the caption ‘‘— Certain Covenants — Limitation on Restricted Payments’’ on the date of such payment.
‘‘Subsidiary’’ means, with respect to any Person, any corporation, association or other business entity of which (1) more than 50% of the voting power of the outstanding Voting Stock is owned, directly or indirectly, by such Person and one or more other Subsidiaries of such Person, (2) 50% or less of the voting power of the outstanding Voting Stock is owned, directly or indirectly, by such Person and one or more other Subsidiaries of such Person and in each case which is ‘‘controlled’’ and consolidated by such Person in accordance with GAAP; provided, however, that with respect to clause (2), the occurrence of any event (other than the issuance or sale of Capital Stock) as a result of which such corporation, association or other business entity ceases to be ‘‘controlled ‘‘by such Person under GAAP and to constitute a Subsidiary of such Person shall be deemed to be an Investment by such Person in such entity or (3) (a) 50% of the voting power of the outstanding Voting Stock is owned, directly or indirectly, by such Person and one or more other Subsidiaries of such Person and (b) the board of directors of the such Person has, directly or indirectly, the requisite control over such corporation, association or other business entity to prevent it from Incurring any Indebtedness, or taking any other action at any time, in contravention of any of the provisions of the Indenture that are applicable to any Restricted Subsidiary.
‘‘Subsidiary Guarantee’’ means any guarantee of the obligations of the Issuer under the Indenture and the Notes by any Subsidiary Guarantor.
‘‘Subsidiary Guarantor’’ means any initial Subsidiary Guarantor named herein and any other Restricted Subsidiary which guarantees the payment of the Notes pursuant to the Indenture and the Notes; provided that Subsidiary Guarantor will not include (a) any Person whose Subsidiary Guarantee has been released in accordance with the Indenture and the Notes or (b) any JV Subsidiary Guarantor.
‘‘Subsidiary Guarantor Pledgor’’ means any initial Subsidiary Guarantor Pledgor named herein and any other Subsidiary Guarantor which pledges Collateral to secure the obligations of the Parent Guarantor under the Notes and the Indenture and of such Subsidiary Guarantor under its Subsidiary Guarantee; provided that a Subsidiary Guarantor Pledgor will not include any person whose pledge under the Security Documents has been released in accordance with the Security Documents, the Indenture and the Notes.
‘‘ Temporary Cash Investment’’ means any of the following:
(1) direct obligations of the United States of America, any state of the European Economic Area, the People’s Republic of China, Hong Kong and Singapore or any agency of any of the foregoing or obligations fully and unconditionally Guaranteed by the United States of America, any state of the European Economic Area, the People’s Republic of China, Hong Kong and Singapore or any agency of any of the foregoing, in each case maturing within one year;
— 276 — (2) demand or time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any state thereof, any state of the European Economic Area, Hong Kong or Singapore, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of US$100 million (or the Dollar Equivalent thereof) and has outstanding debt which is rated ‘‘A’’ (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Section 3(a)(62) of the Exchange Act) or any money market fund sponsored by a registered broker dealer or mutual fund distributor;
(3) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (1) above entered into with a bank or trust company meeting the qualifications described in clause (2) above;
(4) commercial paper, maturing not more than 180 days after the date of acquisition thereof, issued by a corporation (other than an Affiliate of the Parent Guarantor) organized and in existence under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of ‘‘P-1’’ (or higher) according to Moody’sor‘‘A-1’’ (or higher) according to S&P;
(5) securities, maturing within one year of the date of acquisition thereof, issued or fully and unconditionally guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least ‘‘A’’ by S&P or Moody’s;
(6) any money market fund that has at least 95% of its assets continuously invested in investments of the types described in clauses (1) through (5) above;
(7) demand or time deposit accounts, certificates of deposit, overnight or call deposits and money market deposits with (i) any banks or trust company or financial institutions organized under the laws of the PRC, Hong Kong or Singapore and (ii) with Hang Seng Bank Limited, Wing Lung Bank, Australia and New Zealand Banking Group Limited, DBS Bank Ltd., Industrial and Commercial Bank of China (Asia) Limited, China CITIC Bank International Limited, The Hongkong and Shanghai Banking Corporation, The Royal Bank of Scotland plc, Standard Chartered Bank, UBS AG, OCBC Bank, Bank SinoPac, United Overseas Bank Limited or HL Bank and any PRC branch of any bank under clause (ii); and
(8) structured deposit products with a term not exceeding six months that are principal protected with any bank or financial institution organized under the laws of the PRC or Hong Kong or Singapore.
‘‘Total Assets’’ means, as of any date, the total consolidated assets of the Parent Guarantor and its Restricted Subsidiaries measured in accordance with GAAP as of the last day of the most recent fiscal quarter for which consolidated financial statements of the Parent Guarantor (which the Parent Guarantor shall use its best efforts to compile on a timely manner) are available (which may be internal consolidated financial statements); provided that
(1) only with respect to Indebtedness of the type described in clause (2)(h) of ‘‘— Certain Covenants — Limitation on Indebtedness and Preferred Stock’’ covenant and the definition of ‘‘Permitted Subsidiary Indebtedness,’’ Total Assets shall be calculated after giving pro forma effect to include the cumulative value of all of the real or personal property or equipment the acquisition, development, construction or improvement of which requires or required the Incurrence of Indebtedness and calculation of Total Assets thereunder in each case as of such date, as measured by the purchase price or cost therefor or budgeted cost provided in good faith by the Parent Guarantor or any of its Restricted Subsidiaries to the bank or other similar financial institutional lender providing such Indebtedness;
(2) only with respect to clause (2)(v) of ‘‘— Certain Covenants — Limitation on Indebtedness and Preferred Stock’’ covenant, with respect to the Incurrence of any Acquired Indebtedness as a result of any Person becoming a Restricted Subsidiary. Total Assets shall be calculated after giving pro forma effect to include the consolidated assets of such Restricted Subsidiary and any other change to the consolidated assets of the Parent Guarantor as a result of such Person becoming a Restricted Subsidiary; and
— 277 — (3) only with respect to any Person becoming a New Non-Guarantor Restricted Subsidiary, pro forma effect shall at such time be given to the consolidated assets of such New Non- Guarantor Restricted Subsidiary (including giving pro forma effect to any other change to the consolidated assets of the Parent Guarantor, in each case as a result of such Person becoming a New Non-Guarantor Restricted Subsidiary).
‘‘Trade Payables’’ means, with respect to any Person, any accounts payable or any other indebtedness or monetary obligation to trade creditors created, assumed or guaranteed by such Person or any of its Subsidiaries arising in the ordinary course of business in connection with the acquisition of goods or services.
‘‘Transaction Date’’ means, with respect to the Incurrence of any Indebtedness, the date such Indebtedness is to be Incurred and, with respect to any Restricted Payment or Permitted Investments, the date such Restricted Payment or Permitted Investment is to be made (or, in the case of a Permitted Investment, at the time such Permitted Investment was contractually required to be made, if earlier).
‘‘Trust Company Investor’’ means an Independent Third Party that is a financial institution, trust company, fund management company, asset management company, financial management company, an insurance company or other company, or an Affiliate thereof, of such an insurance company that acquires the Capital Stock of a Restricted Subsidiary.
‘‘Unrestricted Subsidiary’’ means (1) any Subsidiary of the Parent Guarantor that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided in the Indenture; and (2) any Subsidiary of an Unrestricted Subsidiary.
‘‘Voting Stock’’ means, with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person.
‘‘Wholly-Owned’’ means, with respect to any Subsidiary of any Person, the ownership of all of the outstanding Capital Stock of such Subsidiary (other than any director’s qualifying shares or Investments by foreign nationals mandated by applicable law) by such Person or one or more Wholly-Owned Subsidiaries of such Person; provided that Subsidiaries that are PRC CJVs shall not be considered Wholly-Owned Subsidiaries.
— 278 — TAXATION
The following summary of certain Hong Kong, PRC and Singapore tax consequences of the purchase, ownership and disposition of Notes, is based upon applicable laws, regulations, rulings and decisions in effect as of the date of this offering memorandum, all of which are subject to change (possibly with retroactive effect). This discussion does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase, own or dispose of the Notes and does not purport to deal with consequences applicable to all categories of investors, some of which may be subject to special rules. Persons considering the purchase of Notes should consult their own tax advisors concerning the tax consequences of the purchase, ownership and disposition of Notes.
Hong Kong Taxation
Withholding Tax
Under current Hong Kong legislation, no tax in Hong Kong is required to be withheld from or chargeable on payments of principal or interest in respect of the Notes (for so long as the register of holders of the Notes is maintained outside Hong Kong).
Stamp Duty
No Hong Kong stamp duty will be chargeable upon the issue or subsequent transfer of a Note.
Profits Tax
Hong Kong profits tax is chargeable on every person carrying on a trade, profession or business in Hong Kong in respect of profits arising in or derived from Hong Kong from such trade, profession or business (excluding profits arising from the sale of capital assets).
Under the Inland Revenue Ordinance (Chapter 112 of the Laws of Hong Kong) (the ‘‘Inland Revenue Ordinance’’), interest on the Notes may be deemed to be profits arising in or derived from Hong Kong from a trade, profession or business carried on in Hong Kong in the following circumstances:
(i) interest on the Notes is derived from Hong Kong and is received by or accrues to a company carrying on a trade, profession or business in Hong Kong;
(ii) interest on the Notes is derived from Hong Kong and is received by or accrues to a person, other than a company, carrying on a trade, profession or business in Hong Kong and is in respect of the funds of that trade, profession or business; or
(iii) interest on the Notes is received by or accrues to a financial institution (as defined in the Inland Revenue Ordinance of Hong Kong (Chapter 112, Laws of Hong Kong)) and arises through or from the carrying on by the financial institution of its business in Hong Kong.
Sums derived from the sale, disposal or redemption of the Notes will be subject to Hong Kong profits tax where received by or accrued to a person, other than a financial institution, from the carrying on of a trade, profession or business in Hong Kong and the sum has a Hong Kong source. The source of such sums will generally be determined by having regard to the manner in which the Notes are acquired and disposed of.
Sums received by or accrued to a financial institution by way of gains or profits arising through or from the carrying on by the financial institution of its business in Hong Kong from the sale, disposal and redemption of the Notes will be subject to Hong Kong profits tax.
— 279 — Certain PRC Income Tax Considerations
For certain PRC tax considerations that may affect your investment in the Notes, please see ‘‘Risk Factors — RisksRelatingtoOurBusiness— We may be treated as a PRC resident enterprise for PRC tax purposes, which may subject us to PRC income taxes on our worldwide income and may subject our investors to PRC withholding taxes on interest we pay on the Notes and PRC income tax on gains from the transfer of the Notes.’’
Singapore Taxation
The statements below are general in nature and are based on certain aspects of current tax laws in Singapore and administrative guidelines and circulars issued by the Monetary Authority of Singapore (the ‘‘MAS’’) and the Inland Revenue Authority of Singapore (the ‘‘IRAS’’) in force as at the date of this offering memorandum and are subject to any changes in such laws, administrative guidelines or circulars, or the interpretation of those laws, administrative guidelines or circulars, occurring after such date, which changes could be made on a retroactive basis. These laws, administrative guidelines and circulars are also subject to various interpretations and the relevant tax authorities or the courts could later disagree with the explanations or conclusions set out below. Neither these statements nor any other statements in this offering memorandum are intended or are to be regarded as advice on the tax position of any holder of the Notes or of any person acquiring, selling or otherwise dealing with the Notes or on any tax implications arising from the acquisition, sale or other dealings in respect of the Notes. The statements made herein do not purport to be a comprehensive or exhaustive description of all the tax considerations that may be relevant to a decision to subscribe for, purchase, own or dispose of the Notes and do not purport to deal with the tax consequences applicable to all categories of investors, some of which (such as dealers in securities or financial institutions in Singapore which have been granted the relevant Financial Sector Incentive(s)) may be subject to special rules or tax rates. Prospective holders of the Notes are advised to consult their own professional tax advisers as to the Singapore or other tax consequences of the acquisition, ownership of or disposal of the Notes, including, in particular, the effect of any foreign, state or local tax laws to which they are subject. It is emphasized that neither the Issuer, the Initial Purchasers, the Company, the Subsidiary Guarantors nor any other persons involved in the issuance of the Notes accepts responsibility for any tax effects or liabilities resulting from the subscription for, purchase, holding or disposal of the Notes.
Interest and Other Payments
Subject to the following paragraphs, under Section 12(6) of the Income Tax Act, Chapter 134 of Singapore (the ‘‘ITA’’), the following payments are deemed to be derived from Singapore:
(a) any interest, commission, fee or any other payment in connection with any loan or indebtedness or with any arrangement, management, guarantee, or service relating to any loan or indebtedness which is (i) borne, directly or indirectly, by a person resident in Singapore or a permanent establishment in Singapore (except in respect of any business carried on outside Singapore through a permanent establishment outside Singapore or any immovable property situated outside Singapore) or (ii) deductible against any income accruing in or derived from Singapore; or
(b) any income derived from loans where the funds provided by such loans are brought into or used in Singapore.
Certain Singapore-sourced investment income derived by individuals from financial instruments is exempt from tax, including:
(a) interest from debt securities derived on or after January 1, 2004;
(b) discount income (not including discount income arising from secondary trading) from debt securities derived on or after February 17, 2006; and
(c) prepayment fee, redemption premium and break cost from debt securities derived on or after February 15, 2007,
— 280 — except where such income is derived through a partnership in Singapore or is derived from the carrying on of a trade, business or profession.
In addition, as more than half of the Initial Purchasers, namely DBS Bank Ltd. and Standard Chartered Bank (Singapore) Limited, are either a Financial Sector Incentive (Standard Tier) Company or Financial Sector Incentive (Capital Market) Company (each term as defined in the ITA), and the Notes are issued as debt securities, the Notes would be ‘‘qualifying debt securities’’ (‘‘QDS’’) for the purposes of the ITA, to which the following treatment shall apply:
i. subject to certain prescribed conditions having been fulfilled (including the furnishing by the Issuer, or such other person as the MAS may direct, to the MAS of a return on debt securities for the Notes in the prescribed format within such period as MAS may specify and such other particulars in connection with the Notes as MAS may require and the inclusion by the Issuer in all offering documents relating to the Notes of a statement to the effect that where interest, discount income, prepayment fee, redemption premium or break cost from the Notes is derived by a person who is not resident in Singapore and who carries on any operation in Singapore through a permanent establishment in Singapore, the tax exemption for qualifying debt securities shall not apply if the non-resident person acquires the Notes using the funds and profits of such person’s operations through the Singapore permanent establishment), interest, discount income (not including discount income arising from secondary trading), prepayment fee, redemption premium and break cost (collectively, the ‘‘Qualifying Income’’) from the Notes paid by the Issuer and derived by a holder who is not resident in Singapore and who (aa) does not have any permanent establishment in Singapore or (bb) carries on any operation in Singapore through a permanent establishment in Singapore but the funds used by that person to acquire the Notes are not obtained from such person’s operation through a permanent establishment in Singapore, are exempt from Singapore tax; and
ii. subject to certain conditions having been fulfilled (including the furnishing by the Issuer, or such other person as the MAS may direct, to the MAS of a return on debt securities for the Notes in the prescribed format within such period as MAS may specify and such other particulars in connection with the Notes as MAS may require), Qualifying Income from the Notes paid by the Issuer and derived by any company or body of persons (as defined in the ITA) in Singapore is subject to income tax at a concessionary rate of 10% (except for holders of the relevant Financial Sector Incentive(s) who may be taxed at different rates).
iii. subject to:
(aa) the Issuer including in all offering documents relating to the Notes a statement to the effect that any person whose interest, discount income, prepayment fee, redemption premium or break cost derived from the Notes is not exempt from tax shall include such income in a return of income made under the ITA; and
(bb) the furnishing by the Issuer, or such other person as the MAS may direct, to the MAS of a return on debt securities for the Notes in the prescribed format within such period as the MAS may specify and such other particulars in connection with the Notes as the MAS may require,
payments of Qualifying Income derived from the Notes are not subject to withholding of tax by the Issuer.
Notwithstanding the foregoing:
A. if during the primary launch of the Notes, the Notes are issued to fewer than four persons and 50% or more of the issue of the Notes is beneficially held or funded, directly or indirectly, by related parties of the Issuer, the Notes would not qualify as QDS; and
— 281 — B. even though the Notes are QDS, if, at any time during the tenure of the Notes, 50% or more of the Notes which are outstanding at any time during the life of their issue is beneficially held or funded, directly or indirectly, by any related party(ies) of the Issuer, Qualifying Income derived from the Notes held by:
i. any related party of the Issuer; or
ii. any other person where the funds used by such person to acquire the Notes are obtained, directly or indirectly, from any related party of the Issuer,
shall not be eligible for the tax exemption or concessionary rate of tax as described above.
The term ‘‘related party’’, in relation to a person, means any other person who, directly or indirectly, controls that person, or is controlled, directly or indirectly, by that person, or where he and that other person, directly or indirectly, are under the control of a common person.
The terms ‘‘break cost’’, ‘‘prepayment fee’’ and ‘‘redemption premium’’ are defined in the ITA as follows:
. ‘‘break cost’’, in relation to debt securities and qualifying debt securities, means any fee payable by the issuer of the securities on the early redemption of the securities, the amount of which is determined by any loss or liability incurred by the holder of the securities in connection with such redemption;
. ‘‘prepayment fee’’, in relation to debt securities and qualifying debt securities, means any fee payable by the issuer of the securities on the early redemption of the securities, the amount of which is determined by the terms of the issuance of the securities; and
. ‘‘redemption premium’’, in relation to debt securities and qualifying debt securities, means any premium payable by the issuer of the securities on the redemption of the securities upon their maturity.
References to ‘‘break cost’’, ‘‘prepayment fee’’ and ‘‘redemption premium’’ in this Singapore tax disclosure have the same meaning as defined in the ITA.
— 282 — IMPORTANT NOTICE TO HOLDERS OF NOTES
Where Qualifying Income (whether it is interest, discount income, prepayment fee, redemption premium or break cost) is derived from any of the Notes by any person who is not resident in Singapore and carries on any operations in Singapore through a permanent establishment in Singapore, the tax exemption available for QDS under the ITA (as mentioned above) shall not apply if such person acquires such Notes using the funds and profits of such person’s operations through a permanent establishment in Singapore. Any person whose Qualifying Income (whether it is interest, discount income, prepayment fee, redemption premium or break cost) derived from the Notes is not exempt from tax (including for the reasons described above) is required to include such income in a return of income made under the ITA.
Capital Gains
Any gains considered to be in the nature of capital made from the sale of the Notes will not be taxable in Singapore. However, any gains derived by any person from the sale of the Notes which are gains from any trade, business, profession or vocation carried on by that person, if accruing in or derived from Singapore, may be taxable as such gains are considered revenue in nature.
Holders of the Notes who apply or who are required to apply Singapore Financial Reporting Standard (‘‘SFRS’’) 39, SFRS 109 or Singapore Financial Reporting Standard (International) 9 (‘‘SFRS(I) 9’’) (as the case may be) may for Singapore income tax purposes be required to recognise gains or losses (not being gains or losses in the nature of capital) on the Notes, irrespective of disposal, in accordance with SFRS 39, SFRS 109 or SFRS(I) 9 (as the case may be). Please see the section below on ‘‘Adoption of SFRS 39, SFRS 109 or SFRS(I) 9 for Singapore Income Tax Purposes’’.
Adoption of SFRS 39, SFRS 109 or SFRS(I) 9 for Singapore Income Tax Purposes
Section 34A of the ITA provides for the tax treatment for financial instruments in accordance with SFRS 39 (subject to certain exceptions and ‘‘opt-out’’ provisions) to taxpayers who are required to comply with SFRS 39 for financial reporting purposes. The IRAS has also issued a circular entitled ‘‘Income Tax Implications Arising from the Adoption of FRS 39 — Financial Instruments: Recognition & Measurement’’.
SFRS 109 or SFRS(I) 9 (as the case may be) is mandatorily effective for annual periods beginning on or after 1 January 2018, replacing SFRS 39. Section 34AA of the ITA requires taxpayers who comply or who are required to comply with SFRS 109 or SFRS(I) 9 (as the case may be) for financial reporting purposes to calculate their profit, loss or expense for Singapore income tax purposes in respect of financial instruments in accordance with SFRS 109 or SFRS(I) 9 (as the case may be), subject to certain exceptions. The IRAS has also issued a circular entitled ‘‘Income Tax: Income Tax Treatment Arising from Adoption of FRS 109 — Financial Instruments’’.
Holders of the Notes who may be subject to the tax treatment under Sections 34A or 34AA of the ITA should consult their own accounting and tax advisers regarding the Singapore income tax consequences of their acquisition, holding or disposal of the Notes.
Estate Duty
Singapore estate duty has been abolished with respect to all deaths occurring on or after February 15, 2008.
— 283 — PLAN OF DISTRIBUTION
Under the terms and subject to the conditions contained in a purchase agreement dated , 2019 (the ‘‘Purchase Agreement’’) between DBS Bank Ltd., The Hongkong and Shanghai Banking Corporation Limited and Standard Chartered Bank (Singapore) Limited (each, an ‘‘Initial Purchaser’’ and collectively, the ‘‘Initial Purchasers’’), on the one hand, and us, the Issuer and the Subsidiary Guarantors, on the other hand, the Initial Purchasers, severally and not jointly, have agreed to purchase from us, and we have agreed to sell to the Initial Purchasers, the following aggregate principal amounts of the Notes:
Principal Name Amount DBSBankLtd...... US$ The Hongkong and Shanghai Banking Corporation Limited ...... US$ StandardCharteredBank(Singapore)Limited...... US$ TOTAL...... US$
The Purchase Agreement provides that the obligation of the Initial Purchasers to pay for and accept delivery of the Notes is several and not joint and is subject to the approval of certain legal matters by their counsel and certain other conditions. The Initial Purchasers are committed to take and pay for all of the Notes if any are taken. After the initial offering, the offering price and other selling terms may be varied from time to time by the Initial Purchasers without notice. The Initial Purchasers may offer and sell the Notes through certain of their affiliates.
Each of the Issuer, the Company and the Subsidiary Guarantors have agreed to, jointly and severally, indemnify the Initial Purchasers against certain liabilities, including liabilities under the Securities Act, and to contribute to payments which the Initial Purchasers may be required to make in respect thereof. In addition, each of the Issuer, the Company and the Subsidiary Guarantors have agreed to, jointly and severally, reimburse the Initial Purchasers for certain expenses incurred in connection with the offering of the Notes. In addition, we have agreed with the Initial Purchasers that we will pay a commission to certain private banks in connection with the distribution of the Notes to their clients. This commission will be based on the principal amount of the Notes so distributed, and may be deducted from the purchase price for the Notes payable by such private banks upon settlement.
The Notes are a new issue of securities with no established trading market. Approval in-principle has been received from the SGX-ST for the listing and quotation of the Notes on the SGX-ST. We have been advised by the Initial Purchasers that, in connection with the offering of the Notes, one or more of the Initial Purchasers may, to the extent permitted by applicable laws and regulations, engage in transactions that stabilize, maintain or otherwise affect the price of the Notes. Specifically, the Initial Purchasers may over-allot the offering, creating a syndicate short position. In addition, the Initial Purchasers may bid for, and purchase, the Notes in the open market to cover syndicate shorts or to stabilize the price of the Notes. Any of these activities, which may be effected in the over-the-counter market or otherwise, may stabilize or maintain the market price of the Notes above independent market levels. However, the Initial Purchasers are not obligated or required to engage in these activities, and may end any of these activities at any time at their sole discretion without prior notice. No assurance can be given as to the liquidity of, or the trading market for, the Notes.
We expect that delivery of the Notes will be made against payment therefor on or about , 2019 which we expect will be the business day following the pricing date of the Notes (this settlement cycle being referred to as ‘‘T+ ’’). To the extent that any trades in the secondary market generally are required to settle in three business days, purchasers who wish to trade Notes on the date of pricing or the next succeeding business day should be aware that they may be required, by virtue of the fact that the Notes initially will settle in T+ , to specify an alternate settlement cycle at the time of any such trade to prevent a failed settlement. Purchasers of the Notes who wish to trade the Notes on the date of pricing or succeeding business days should consult their own legal advisor.
Investors who purchase Notes from the Initial Purchasers may be required to pay stamp taxes and other charges in accordance with the laws and practices of the country of purchase in addition to the offering price set forth on the cover page of this offering memorandum.
— 284 — We have been advised that the Initial Purchasers presently intend to make a market in the Notes, as permitted by applicable laws and regulations. The Initial Purchasers are not obligated, however, to make a market in the Notes, and any such market making may be discontinued at any time without prior notice at the sole discretion of the Initial Purchasers. Accordingly, no assurance can be given as to the liquidity of, or trading markets for, the Notes.
We, the Issuer and the Subsidiary Guarantors have agreed that we will not, for a period beginning on the date of this offering memorandum to the date that is [30] days after the closing date of the offering of the Notes, without the prior written consent of the Initial Purchasers, directly or indirectly, offer, sell, contract to sell or otherwise dispose of, any debt securities of us or the Issuer (or guaranteed by us), as the case may be, that are substantially similar to the Notes outside of the PRC, except for the Notes sold to the Initial Purchasers pursuant to the Purchase Agreement.
The Initial Purchasers and their affiliates have in the past engaged, and may in the future engage, in transactions with and perform services, including financial advisory and investment banking services, for us and our affiliates in the ordinary course of business, for which they received or will receive customary fees and expenses. The Initial Purchasers or their affiliates are, or may in the future be, lenders to us. As of the date of this offering memorandum, certain of the Initial Purchasers or their affiliates are lenders under certain of our Offshore Loans. Furthermore, we may enter into hedging or other derivative transactions as part of our risk management strategy with one or more of the Initial Purchasers, which may include transactions relating to our obligations under the Notes. Our obligations under these transactions may be secured by cash or other collateral.
The Initial Purchasers or certain of their affiliates may purchase the Notes and be allocated Notes for asset management and/or proprietary purposes and not with a view to distribution. The Initial Purchasers or their respective affiliates may purchase the Notes for its or their own account and may retain, purchase or sell for its own account such securities and any securities of the Company or related investments and may offer or sell such securities or other investments otherwise than in connection with the offering of the Notes. Accordingly, references herein to the Notes being offered should be read as including any offering of the Notes to the Initial Purchasers or their affiliates acting in such capacity. Such persons do not intend to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligation to do so. The Initial Purchasers may also enter into transactions, including credit derivatives, such as asset swaps, repackaging and credit default swaps relating to the Notes and/or other securities of the Company or their respective subsidiaries or associates at the same time as the offer and sale of the Notes or in secondary market transactions. Such transactions would be carried out as bilateral trades with selected counterparties and separately from any existing sale or resale of the Notes to which this offering memorandum relates (notwithstanding that such selected counterparties may also be purchasers of the Notes).
United States
The Notes and the Guarantees have not been and will not be registered under the Securities Act and may not be offered, sold or delivered within the United States except pursuant to an exception from, or in a transaction not subject to, the registration requirements of the Securities Act. The Notes and the Guarantees are being offered and sold only outside the United States in offshore transactions in reliance on Regulation S under the Securities Act.
In addition, until 40 days after the commencement of the offering of the Notes and the Guarantees, an offer or sale of the Notes or the Guarantees within the United States by a dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act if such offer or sale is made otherwise than pursuant to an exemption from the registration requirements of the Securities Act.
We and the Initial Purchasers reserve the right to reject any offer to purchase the Notes, in whole or in part, for any reason. This offering memorandum does not constitute an offer to any person in the United States. Distribution of this offering memorandum within the United States is unauthorized and any disclosure without our prior written consent of any of its contents within the United States is prohibited.
— 285 — United Kingdom
Each Initial Purchaser has represented and agreed that:
(a) (i) it is a person whose ordinary activities involve it in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of its business and (ii) it has not offered or sold and will not offer or sell the Notes other than to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or as agent) for the purposes of their businesses or who it is reasonable to expect will acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of their businesses where the issue of the Notes would otherwise constitute a contravention of Section 19 of the FSMA by the Issuer;
(b) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of the Notes in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer or the Guarantor; and
(c) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom.
European Economic Area
Each Initial Purchaser has represented and agreed that it has not offered, sold or otherwise made available and will not offer, sell or otherwise make available any Notes to any retail investor in the European Economic Area. For the purposes of this provision:
(a) the expression ‘‘retail investor’’ means a person who is one (or more) of the following:
(i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, ‘‘MiFID II’’); or
(ii) a customer within the meaning of Directive (EU) 2016/97 (the ‘‘Insurance Distribution Directive’’), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or
(iii) not a qualified investor as defined in Regulation (EU) 2017/1129 (the ‘‘Prospectus Regulation’’); and
(b) the expression ‘‘offer’’ includes the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe the Notes.
Singapore
This offering memorandum has not been and will not be registered as a prospectus with the Monetary Authority of Singapore under the SFA. Accordingly, this offering memorandum and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Notes may not be circulated or distributed, nor may the Notes be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor under Section 274 of the SFA, (ii) to a relevant person pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA and (where applicable) Regulation 3 of the Securities and Futures (Classes of Investors) Regulations 2018, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
— 286 — Where the Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, securities or securities-based derivatives contracts (each term as defined in the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the Notes pursuant to an offer made under Section 275 of the SFA except:
(1) to an institutional investor or to a relevant person as defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;
(2) where no consideration is or will be given for the transfer;
(3) where the transfer is by operation of law;
(4) as specified in Section 276(7) of the SFA; or
(5) as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018 of Singapore.
Hong Kong
No Initial Purchaser (a) has offered or sold or will offer or sell in Hong Kong, by means of any document, any Notes other than (1) to ‘‘professional investors’’ as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (2) in other circumstances which do not result in the document being a ‘‘prospectus’’ as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance; or (b) has issued or had in its possession for the purposes of issue or will issue or have in its possession for the purposes of issue any advertisement, invitation or document relating to the Notes, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to ‘‘professional investors’’ as defined in the Securities and Futures Ordinance (Cap. 571) and any rules made thereunder.
Japan
The Notes have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (the ‘‘Financial Instruments and Exchange Act’’) and, accordingly, no Initial Purchaser has, directly or indirectly, offered or sold or will, directly or indirectly, offer or sell any Notes in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re- offering or resale, directly or indirectly, in Japan or to, or for the benefit of, a resident of Japan except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Act and any other applicable laws and regulations of Japan.
People’s Republic of China
The Initial Purchasers have represented and agreed that they have not circulated and will not circulate the offering memorandum and they have not offered or sold and will not offer or sell the Notes, directly or indirectly, in the People’s Republic of China (for such purpose, not including the Hong Kong and Macau Special Administrative Regions or Taiwan).
— 287 — General
No action is being taken or is contemplated by us that would, or is intended to, permit a public offering of the Notes or possession or distribution of any preliminary offering memorandum or offering memorandum or any amendment thereof, any supplement thereto or any other offering material relating to the Notes in any jurisdiction where, or in any other circumstance in which, action for those purposes is required. If a jurisdiction requires that the offering be made by a licensed broker or dealer and the Initial Purchasers or any affiliate of the Initial Purchasers is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by the Initial Purchasers or such affiliate on behalf of the issuer in such jurisdiction.
— 288 — LEGAL MATTERS
Certain legal matters in connection with the offering will be passed upon for us by Allen & Overy as to matters of United States federal and New York law and Hong Kong law and Shook Lin & Bok LLP as to matters of Singapore law. Certain legal matters will be passed upon for the Initial Purchasers by Davis Polk & Wardwell as to matters of United States federal and New York law and Yuan Tai Law OfficesastomattersofPRClaw.
— 289 — CERTIFIED PUBLIC ACCOUNTANTS
Our consolidated financial statements as of December 31, 2016, 2017 and 2018 and for the three years ended December 31, 2016, 2017 and 2018 have been audited by Deloitte & Touche LLP, Singapore, Certified Public Accountants.
— 290 — INDEX TO CONSOLIDATED FINANCIAL INFORMATION
2017 Annual Page Report
Audited Consolidated Financial Statements as of and for the year ended December 31, 2017 and 2016
Independent auditor’sreport...... F-2 60
Statements of financial position...... F-8 66 Consolidatedstatementofprofitorloss...... F-10 68
Consolidatedstatementofcomprehensiveincome...... F-11 69 Statementsofchangesinequity...... F-12 70 Consolidatedstatementofcashflows...... F-15 73
Notestofinancialstatements...... F-17 75
2018 Annual Page Report Audited Consolidated Financial Statements as of and for the year ended December 31, 2018 and 2017
Independent auditor’sreport...... F-97 66 Statements of financial position...... F-103 72
Consolidatedstatementofprofitorloss...... F-105 74 Consolidatedstatementofcomprehensiveincome...... F-106 75
Statementsofchangesinequity...... F-107 76 Consolidatedstatementofcashflows...... F-110 79
Notestofinancialstatements...... F-112 81
Note:
(1) Our audited consolidated financial statements set out herein have been reproduced from our annual reports for the years ended December 31, 2017 and 2018 and page references herein are references to pages set forth in such annual reports.
— F-1 — 60 YANLORD LAND GROUP LIMITED TO THEMEMBERSOFYANLORD LANDGROUPLIMITED AUDITOR’S REPORT INDEPENDENT under thosestandardsare furtherdescribedinthe We conductedourauditinaccordancewithSingapore StandardsonAuditing(“SSAs”).Ourresponsibilities Basis forOpinion on thatdate. in equityandconsolidatedcashflowsoftheGroup andchangesinequityoftheCompanyforyearended the CompanyasatDecember31,2017,andofconsolidatedfinancialperformance,changes so astogiveatrueandfairviewoftheconsolidatedfinancialpositionGroup andthefinancialpositionof provisions oftheCompaniesAct,Chapter50(“theAct”)andFinancialReportingStandardsinSingapore (“FRSs”) position andstatementofchangesinequitytheCompanyare properly drawnupinaccordancewiththe In ouropinion,theaccompanyingconsolidatedfinancialstatementsofGroup andthestatementoffinancial policies, assetoutonpages66to154. for theyearthenended,andnotestofinancialstatements,includingasummaryofsignificantaccounting and consolidatedstatementofcashflowstheGroup andthestatementofchangesinequityCompany profit orloss,consolidatedstatementofcomprehensive income,consolidatedstatementofchangesinequity the statementoffinancialpositionCompanyasatDecember31,2017,andconsolidated its subsidiaries(the“Group”), whichcomprisetheconsolidatedstatementoffinancialpositionGroup and We haveauditedtheaccompanyingfinancialstatementsofYanlord LandGroup Limited(the“Company”) and Opinion REPORT ONTHEAUDIT OFTHEFINANCIALSTATEMENTS on thesematters. financial statementsasawhole,andinformingouropinion thereon, andwedonotprovide aseparateopinion of thefinancialstatementscurrent year. Thesematterswere addressed inthecontextofouraudit Key auditmattersare thosemattersthat,inourprofessional judgement,were ofmostsignificance inouraudit Key AuditMatters appropriate toprovide abasisforouropinion. these requirements andtheACRACode.We believethattheauditevidencewehaveobtainedissufficientand financial statementsinSingapore, andwehavefulfilledourotherethicalresponsibilities inaccordancewith Accounting Entities Corporate RegulatoryAuthority(“ACRA”) Statements sectionofourreport. We are independentoftheGroup inaccordance withtheAccountingand (“ACRA Code”)togetherwiththeethicalrequirements that are relevant toourauditofthe Code ofProfessionalConduct — F-2 — Auditor’s ResponsibilitiesfortheAuditofFinancial and EthicsforPublicAccountants carrying amountoftheProperties. would result inasignificantimpactonthe made intheimpairmentassessment Inappropriate managementestimates each developmentproject. development statusandcoststocomplete account thecostsincurred todate,the cost studiesforeachproject, takinginto market conditions.Managementperforms properties andtheprevailing property the properties involvedorofcomparable timing ofsales,current market pricesof consideration ofthedevelopmentplan, amounts oftheProperties bytakinginto Management evaluatestherecoverable loss inprofit orloss. the costisaccountedforasanimpairment The shortfallinthenetrealisable valueover and theanticipatedcoststocompletion. price (netofallestimatedsellingexpenses) which takes intoaccountthefuture selling the estimationofnetrealisable value, is ajudgementalprocess whichrequires recoverable amountsoftheProperties Management’s assessmentofthe financial statements. are setoutinNote2totheconsolidated The accountingpoliciesforProperties Group’s statementoffinancialposition. significant proportion oftheassetsin properties forsale)(Note9)represent a development forsaleandcompleted for development,properties under Properties (consistingofproperties completed propertiesforsale under developmentforsaleand properties fordevelopment, Assessment ofrecoverableamountsfor Key auditmatters
statements. recoverable amountsfor Properties intheconsolidatedfinancial disclosures inrespect ofsignificantestimatesmadeonthe We havealsoassessedandvalidatedtheadequacy oftheGroup’s Group asatyearend. indicators ofimpairmentwere notedfortheProperties heldbythe Based onourprocedures, weagreed withmanagementthatno TMPXFS XJUI QSPKFDUT EFWFMPQNFOU PO XPSL PVS GPDVTFE 8F Ŕ 0OBTBNQMJOHCBTJT XFBHSFFEMBOEDPTUTUPUIFBDRVJTJUJPO Ŕ UIF UP SFMBUJOH BTTVNQUJPOT NBOBHFNFOU DIBMMFOHFE 8F Ŕ 8FEJTDVTTFEXJUINBOBHFNFOUUPVOEFSTUBOEUIFJSCBTJTVTFE Ŕ BOE EFTJHO UIF UFTUFE BOE VOEFSTUBOEJOH BO PCUBJOFE 8F Ŕ of theProperties included,amongothers: Our auditprocedures ontheassessmentofrecoverable amounts How thescopeofourauditrespondedtokey auditmatters of impairment. prices andcostsconsidered whetherthisindicatedarisk We evaluatedthesensitivityofmargintoachangeinsales differences, wecorroborated themanagement’s explanations. accuracy oftheGroup’s budgetingprocess. Where there were compared actualmarginsachievedtobudget,checkthe than expectedsalesorwithlownegativemargins. We similar projects basedontheproject plan. and compared totheconstructioncostsofGroup’s other construction coststotheagreements, ifavailable of landuserightagreements, corroborated projected consistent withthecurrent property market trends. and alsoconsidered whethertheexpectedsellingpricesare to eitherexternallypublishedbenchmarkswhere appropriate, current property market trends. We compared theseprices to adjustforanyoftheseestimatedpricesconsideringthe end oftheproperties involvedwhere available;andtheneed properties insimilarlocations;actualpricesachievedpostyear prices ofpastsalestheproperties involvedorofcomparable reasonableness ofthefuture saleswhichincludedtransacted and theamountofimpairmenttoberecorded, ifany. in determiningwhethertheGroup’s Properties are impaired setting budgetsandauthorisingrecording ofcosts. over reviewing andupdatingsellingpricecostforecasts, implementation oftheGroup’s controls bycheckingapprovals — F-3 — TO THEMEMBERSOFYANLORD LANDGROUPLIMITED AUDITOR’S REPORT AUDITOR’S REPORT INDEPENDENT
61 ANNUAL REPORT 2017 62 YANLORD LAND GROUP LIMITED TO THEMEMBERSOFYANLORD LANDGROUPLIMITED AUDITOR’S REPORT INDEPENDENT statement ofprofit orloss. fair valuechangesintheconsolidated of theinvestmentproperties andthe significant impactonthecarryingamount valuation assessmentwouldresult ina Inappropriate estimatesmadeinthe square metre permonth. capitalisation rates;(iii)market rent per include (i)pricepersquare metre; (ii) assumptions usedinthevaluation,which as itisunderpinnedbyanumberofkey properties isasignificantestimationarea The valuationoftheinvestment completed developmentvalue. and developer’sprofit from itsestimated development potentialbydeductingcosts of adevelopmentwithreference toits which isestimationofthecapitalvalue are valued usingresidual approach, Investment properties underconstruction capitalisation approach. comparison approach; and(ii)income valuation techniquesusedinclude:(i)direct nature of eachinvestmentproperty. These used bytheValuer, dependingonthe properties, twovaluationtechniquesare In determiningfairvaluesofcompleted “Valuer”). an independentprofessional valuer(the is basedonthevaluationperformedby The fairvalueoftheinvestmentproperties consolidated financialstatements. properties issetoutinNote2tothe The accountingpolicyforinvestment Group’s statementoffinancialposition. significant proportion oftheassetsin Investment properties (Note8)represent a Valuation ofinvestmentproperties Key auditmatters included, amongothers: Our auditprocedures onthevaluationofinvestmentproperties We havealsoassessedand validatedthattheadequacyof valuations tobewithinareasonable rangeofourexpectations. years. Inaddition,wenotedthatthekey assumptionsusedinthe similar property typesandconsistentwiththoseusedintheprior adopted bytheValuer are comparabletothemethodsusedfor Based onourprocedures, wenotedthatthevaluationmethodologies XF TQFDJBMJTU WBMVBUJPO JOUFSOBM PVS PG BTTJTUBODF UIF 8JUI Ŕ 8FEJTDVTTFEXJUIUIF7BMVFSUPVOEFSTUBOEUIFBTTVNQUJPOT Ŕ BOE DBQBCJMJUJFT BOE DPNQFUFODF 7BMVFSōT UIF BTTFTTFE 8F Ŕ 8FUFTUFEUIFLFZDPOUSPMTJNQMFNFOUFECZUIFNBOBHFNFOU Ŕ of therelevant accountingstandards. properly reflected theassumptionsusedandmetrequirements Group’s disclosures inrespect oftheinputsintovaluations How thescopeofourauditrespondedtokey auditmatters — F-4 — consistent withthecurrent market environment. and wealsoconsidered whethertheseassumptionsare data andcomparableproperty transactions,where available, in theirvaluationbyreference toexternallypublishedindustry we benchmarked andchallengedthekey assumptionsused Taking intoaccountthenature ofeachinvestmentproperty, used bytheValuer fortherespective investmentproperties. evaluated theappropriateness ofthevaluationtechniques support theirassumptions. properties andthemarket evidenceusedbytheValuer to and valuationtechniquesusedinvaluingtheinvestment and objectivityorimposedscopelimitationsuponthem. that there were no mattersthataffectedtheirindependence read theirtermsofengagementwiththeGroup, determining the Valuer. to appointtheValuer andtoreview and challengetheworkof
required toreport thatfact.We havenothingtoreport inthisregard. the workwehaveperformed,concludethatthere isa statements orourknowledgeobtainedintheauditotherwiseappearstobemateriallymisstated.If, basedon in doingso,considerwhethertheotherinformationismateriallyinconsistentwithconsolidatedfinancial In connectionwithourauditofthefinancialstatements,responsibility istoread theotherinformationand, of assuranceconclusionthereon. Our opiniononthefinancialstatementsdoesnotcoverotherinformationandwedoexpress anyform in theannualreport, butdoesnotincludethefinancialstatementsandourauditor’sreport thereon. Management isresponsible fortheotherinformation.Theinformationcomprisesincluded Information OtherthantheFinancialStatementsandAuditor’sReport Thereon statement ofprofit orloss. in asignificantimpacttotheconsolidated made intheprovision ofLAT wouldresult Inappropriate managementjudgement China (“PRC”) taxlawsandregulations. accordance withthePeople’sRepublicof in respect ofLAT provision (Note30)in The Group isrequired toexercise judgement Land appreciationtax(“LAT”) Key auditmatters consolidated financialstatements. judgements involvedintheLAT provisions inNote3ofthe contingencies inNote30,aswellthelevelofmanagement disclosures settingoutthebasisofLAT provisions and We havealsoassessedandvalidatedtheadequacyofGroup’s LAT provision madebytheGroup asatyearendisappropriate. Based onourprocedures, weconcurwithmanagementthatthe NBOBHFNFOUōT UP SFMBUJOH UBLFO KVEHFNFOUT FWBMVBUFE 8F Ŕ BTTFTTFE BOE DPNQVUBUJPOT -"5 (SPVQōT UIF DIFDLFE 8F Ŕ Our auditprocedures ontheLAT provision included,amongothers: How thescopeofourauditrespondedtokey auditmatters and review ofcorrespondence withtaxauthorities. provisioning forLAT, byreference tolocaltaxrequirements the PRC. standards, withtheassistanceofourinternaltaxspecialistsin for consistencywiththelocallegislationandaccounting — F-5 — material misstatementofthisotherinformation,weare TO THEMEMBERSOFYANLORD LANDGROUPLIMITED AUDITOR’S REPORT AUDITOR’S REPORT INDEPENDENT 63 ANNUAL REPORT 2017 64 YANLORD LAND GROUP LIMITED TO THEMEMBERSOFYANLORD LANDGROUPLIMITED AUDITOR’S REPORT INDEPENDENT d Concludeontheappropriateness ofmanagement’susethegoingconcernbasisaccounting and, (d) Evaluate theappropriateness ofaccountingpoliciesusedandthereasonableness ofaccountingestimates (c) Obtainanunderstandingofinternalcontrol relevant totheauditinorderdesignprocedures that (b) Identifyandassesstherisksofmaterialmisstatementfinancialstatements,whetherduetofraud (a) scepticism throughout theaudit.We also: As partofanauditinaccordancewithSSAs,weexercise professional judgementandmaintainprofessional to influencetheeconomicdecisionsofuserstaken onthebasisofthesefinancialstatements. fraud orerror andare considered materialif, individuallyorintheaggregate, theycouldreasonably beexpected accordance withSSAswillalwaysdetectamaterialmisstatementwhenitexists.Misstatementscanarisefrom opinion. Reasonableassuranceisahighlevelofassurance,butnotguaranteethatanauditconductedin from materialmisstatement,whetherduetofraudorerror, andtoissueanauditor’sreport thatincludesour Our objectivesare toobtainreasonable assuranceaboutwhetherthefinancialstatementsasawholeare free Auditor’s Responsibilities fortheAuditofFinancialStatements The directors’ responsibilities includeoverseeingtheGroup’s financialreporting process. alternative buttodoso. accounting unlessmanagementeitherintendstoliquidatetheGroup ortoceaseoperations,hasnorealistic a goingconcern,disclosing,asapplicable,mattersrelated togoingconcernandusingthebasisof In preparing thefinancialstatements,managementisresponsible forassessingtheGroup’s abilitytocontinueas preparation oftrueandfairfinancialstatementstomaintainaccountabilityassets. or disposition;andtransactionsare properly authorisedandthattheyare recorded asnecessarytopermitthe sufficient to provide a reasonableassurancethatassets are safeguardedagainstloss from unauthoriseduse with theprovisions oftheActandFRSs,fordevisingmaintainingasysteminternalaccountingcontrols Management isresponsible forthepreparation offinancialstatementsthatgiveatrueandfairviewinaccordance Responsibilities ofManagementandDirectorsfortheFinancialStatements future eventsorconditions maycausetheGroup toceasecontinueasagoing concern. conclusions are basedon theauditevidenceobtaineduptodateofourauditor’s report. However, disclosures inthefinancialstatementsor, ifsuchdisclosures are inadequate,tomodifyouropinion.Our that amaterialuncertaintyexists,weare required todrawattentioninourauditor’sreport totherelated that maycastsignificantdoubtontheGroup’s abilitytocontinueasagoingconcern.Ifweconclude based ontheauditevidenceobtained,whetheramaterial uncertaintyexistsrelated toeventsorconditions and related disclosures madebymanagement. of theGroup’s internalcontrol. are appropriate inthecircumstances, butnotfor thepurposeofexpressing anopinionontheeffectiveness collusion, forgery, intentionalomissions,misrepresentations, ortheoverrideofinternalcontrol. misstatement resulting from fraudishigherthanforoneresulting from error, asfraudmayinvolve is sufficientandappropriate to provide abasisforouropinion.Theriskofnotdetectingmaterial or error, designandperformauditprocedures responsive tothoserisks,andobtainauditevidencethat — F-6 — March 27,2018 Singapore Chartered Accountants Public Accountantsand Deloitte &ToucheLLP The engagementpartnerontheauditresulting inthisindependentauditor’sreport isTay HweeLing. accordance withtheprovisions oftheAct. subsidiary corporationsincorporatedinSingapore ofwhichweare theauditorshavebeenproperly kept in In ouropinion,theaccountingandotherrecords required bytheActtobekept bytheCompanyandthose REPORT ONOTHER LEGALANDREGULATORY REQUIREMENTS benefits ofsuchcommunication. because theadverseconsequencesofdoingsowouldreasonably beexpectedtooutweighthepublicinterest when, inextremely rare circumstances, wedetermine thatamattershouldnotbecommunicatedinourreport these mattersinourauditor’sreport unlesslaworregulation precludes publicdisclosure aboutthe matteror in theauditoffinancialstatementscurrent yearandare therefore thekey auditmatters. We describe From thematterscommunicatedwithdirectors, wedeterminethosemattersthatwere ofmostsignificance be thoughttobearonourindependence,andwhere applicable,related safeguards. regarding independence,andtocommunicatewiththemallrelationships andothermattersthatmayreasonably We alsoprovide thedirectors withastatementthatwehavecompliedrelevant ethicalrequirements audit. and significantauditfindings,includinganydeficienciesininternalcontrol thatweidentifyduringour We communicatewiththedirectors regarding, amongothermatters,theplannedscopeandtimingofaudit Obtainsufficientappropriate auditevidence regardingthefinancialinformationofentitiesandbusiness (f) Evaluate theoverallpresentation, structure andcontentofthefinancialstatements,including (e) opinion. direction, supervisionandperformanceofthegroup audit.We remain solelyresponsible forouraudit activities withintheGroup toexpress anopiniononthefinancialstatements.We are responsible forthe manner thatachievesfairpresentation. disclosures, andwhetherthefinancialstatementsrepresent theunderlyingtransactionsandeventsina — F-7 — TO THEMEMBERSOFYANLORD LANDGROUPLIMITED AUDITOR’S REPORT AUDITOR’S REPORT INDEPENDENT 65 ANNUAL REPORT 2017 66 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL POSITION STATEMENTS OF Cash andcashequivalents T eerdtxast 16 Deferred taxassets Total non-current assets rpry ln n qimn 7 Property, plantandequipment Non-current assets ASSETS netetpoete 8 Investment properties Otherrelated parties rprisfrdvlpet9 Properties fordevelopment Income taxprepayment netet nsbiire 10 Investments insubsidiaries Pledged bankdeposits fsbiire 13 12 Available-for-sale investment 14 ofsubsidiaries 11 12 Non-controlling shareholders Jointventures Non-trade amountsduefrom: Other receivables anddeposits Investments injointventures Investments inassociates Total assets nagbeast15 Intangible asset Inventories Current assets opee rprisfrsl 9 Completed properties forsale forsale Properties underdevelopment Trade receivables Other receivables anddeposits Subsidiaries Non-trade amountsduefrom: Jointventur Associates ofsubsidiaries Non-controlling shareholders otal current assets es Note 17 17 14 12 11 13 6 5 9 — F-8 — 106,201,358 17,798,313 13,986,380 15,079,352 25,587,718 63,217,957 42,983,401 2,842,863 2,696,774 2,402,132 4,542,033 8,487,306 3,923,692 1,283,682 2,336,464 2,849,514 M’0 M’0 M’0 RMB’000 RMB’000 RMB’000 RMB’000 445,184 791,636 400,000 584,881 2017 40,029 92,721 26,298 2,990 584 812 – – GROUP 17,583,383 13,694,556 93,448,412 38,214,800 70,610,501 22,837,911 1,819,467 2,792,938 1,202,561 1,200,199 4,704,316 4,903,935 1,176,327 2,287,134 444,061 520,680 916,334 873,153 200,000 610,363 207,750 2016 73,020 22,197 625 613 – – – 15,320,413 11,926,923 11,929,577 3,390,836 3,390,836 2017 2,650 COMPANY – – – – – – – – – – – – – – – – – – – – – 4 14,139,634 14,161,540 16,634,814 2,473,274 2,473,274 2016 21,902 – – – – – – – – – – – – – – – – – – – – – 4 See accompanyingnotesto financialstatements. T Reserves Income taxpayable Total non-current liabilities Total equity Non-controlling interests Deferred income hr aia 19 Share capital non-controllinginterests and Capital, reserves ANDLIABILITIES EQUITY oftheCompany Equity attributabletoowners Total equityandliabilities eirnts24 23 Senior notes –duewithinoneyear Bank andotherborrowings Current liabilities Sbiir 5 26 25 Subsidiary Non-trade amountsdueto: Other payables Trade payables 13 18 24 16 23 non-controlling interests Put liabilitytoacquire ofsubsidiaries non-controlling shareholders Non-trade amountsdueto Deferred taxliabilities Senior notes –dueafteroneyear Bank andotherborrowings Non-current liabilities Jitvnue12 5 Ultimateholdingcompany Jointventure Otherrelated parties ofsubsidiaries Non-controlling shareholders Directors otal curr ent liabilities Note 13 6 6 106,201,358 15,468,798 35,921,572 22,730,524 22,051,664 27,664,355 37,576,975 32,702,811 4,867,092 9,972,287 7,261,726 2,557,063 7,307,244 1,334,144 1,265,625 2,607,761 2,911,604 M’0 M’0 M’0 RMB’000 RMB’000 RMB’000 RMB’000 — F-9 — 138,083 688,573 2017 55,676 49,663 – – – – GROUP 13,785,068 16,440,914 21,046,794 93,448,412 24,088,948 12,438,479 46,997,942 30,009,556 3,694,269 8,962,762 7,261,726 8,311,176 1,916,309 7,926,994 1,421,698 2,243,610 337,127 297,347 672,486 2016 47,630 42,418 365 – – – 15,320,413 7,261,726 7,362,233 7,186,140 7,318,671 7,362,233 FINANCIAL POSITION 100,507 639,509 639,509 2017 79,201 49,663 3,667 COMPANY – – – – – – – – – – – – – STATEMENTS OF 16,634,814 7,261,726 7,178,315 1,916,309 5,386,074 8,534,245 7,178,315 495,221 922,254 672,486 922,254 2016 (83,411) 21,737 42,418 December 31,2017 – – – – – – – – – – – 67 ANNUAL REPORT 2017 68 YANLORD LAND GROUP LIMITED Financial yearendedDecember31,2017 OF PROFITORLOSS CONSOLIDATED STATEMENT See accompanyingnotesto financialstatements. Owners oftheCompany Cost ofsales hr fpoto on etrs12 Share ofprofit ofjointventures Revenue noetx30 11,362,224 Income tax Profit beforeincometax annsprsae(et)32 29 – Basic 11 Earnings pershare (cents) Non-controlling interests 28 Profit attributableto: Profit fortheyear Share oflossassociates Finance cost Other operatingexpenses Administrative expenses Selling expenses Other operatingincome Gross profit – Diluted — F-10 — oe21 2016 2017 Note 27 31 (13,594,462) 25,638,407 12,043,945 (5,741,957) M’0 RMB’000 RMB’000 3,216,440 5,620,267 2,403,827 5,620,267 (484,690) (809,328) (330,537) 346,008 620,600 (15,660) 166.12 166.12 (8,114) GROUP (17,644,673) 25,664,408 (3,494,956) 3,977,198 2,697,361 7,472,154 1,279,837 3,977,198 8,019,735 (347,819) (594,997) (397,153) 812,281 (11,790) (15,202) 138.56 138.56 7,099 See accompanyingnotesto financialstatements. Profit fortheyear netoftax ahflwhde22 Cash flowhedge Non-controlling interests Other comprehensiveincome(expense): Currency translationdifference Items thatmaybereclassified subsequentlytoprofit orloss: Total comprehensiveincomefortheyear Other comprehensiveincome(expense)fortheyear, Share ofothercomprehensive incomeofajointventure Owners oftheCompany Total comprehensiveincomeattributableto: — F-11 — OF COMPREHENSIVEINCOME oe21 2016 2017 Note CONSOLIDATED STATEMENT 31 Financial yearendedDecember31,2017 5,620,267 6,119,511 2,403,913 6,119,511 3,715,598 M’0 RMB’000 RMB’000 494,872 499,244 4,372 – GROUP 3,977,198 1,279,837 3,602,205 2,322,368 3,602,205 (411,354) (374,993) 36,361 – 69 ANNUAL REPORT 2017 70 YANLORD LAND GROUP LIMITED Financial yearendedDecember31,2017 CHANGES INEQUITY STATEMENTS OF See accompanyingnotesto financialstatements. expensefortheyear Total Appropriations Total usdaist soits3 – – – – – – – 36 subsidiariestoassociates Changeofcontrol from Balance atJanuary1,2016 GROUP Putliabilitytoacquire Profit fortheyear fortheyear: Total comprehensive income Rprhs fsae 0– 20 Repurchase ofshares Othercomprehensive subsidiaries Changeofinterest in equity: recognised directly in Transactions withowners, shareholders non-controlling Capitalinjectionfrom aac tDcme 1 0672176(706 6969 ,0,1 18409 17897 671792,4,9 ,6,6 30,009,556 8,962,762 21,046,794 16,711,769 (1,758,997) – (1,834,019) 1,403,010 (689,689) (47,006) 7,261,726 Balance atDecember31,2016 shareholders non-controlling Capitalwithdrawalby ofsubsidiaries arisingfrom acquisition Non-controlling interest Dividends shareholders non-controlling Dividendsdeclared to nncnrligitrss1 – – – – – – 18 non-controlling interests oecptlsae eev eev ectrsrersrepot opn neet Total interests Company profits reserve reserve deficit reserve reserve shares capital Note 0–––––– – – – – – 10 3––––––– – – – – – – 33 5––––––– – – – – – – 35 ,6,2 2835 ,4,3 18409 3,6)(3,9)1,1,2 035091,9,8 30,534,454 10,199,385 20,335,069 14,315,220 (337,196) (36,361) (1,834,019) 1,244,034 (278,335) – 7,261,726 M’0 M’0 M’0 M’0 M’0 M’0 M’0 M’0 M’0 M’0 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 hr rauytasainSauoyMre egn te cuuae ftecontrolling ofthe Accumulated Other Hedging Merger Statutory translation Treasury Share – – – – 4,0)–1896––(,2,0)(0,1)(,1,4)(,1,6)(4,127,103) (2,516,460) (1,610,643) (300,812) (1,421,801) – – 158,976 – (47,006) – 5,7 1896 – – – (158,976) – – – 158,976 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – Nt 0 (Note22) (Note 20) 4,0)––––– – – – – (47,006) Currency 4134 631– 36,361 – – (411,354) 4134 631–2673123238129873,602,205 1,279,837 2,322,368 2,697,361 – 36,361 – – (411,354) — F-12 — (1,421,698) (103) – ,9,6 ,9,6 ,7,3 3,977,198 1,279,837 2,697,361 2,697,361 1186 1186 (141,836) – (141,836) (141,836) 3493 (374,993) – (374,993) – 7442 (784,422) (784,422) – – – – 14168 (1,421,698) – (1,421,698) – 4,0)–(47,006) – (47,006) – 13 237 (2,500) (2,397) (103) – – – – – – – Attributable oonr Non- to owners 18643 (1,806,473) (1,806,473) 1815 (108,185) (108,185) 1,1 112,513 112,513 25472,504 72,504 Repurchase ofshares tojointventures Changeofcontrol from subsidiaries shareholders Dividendsdeclared tonon-controlling Dividends acquisitionofsubsidiaries Non-controlling interest arisingfrom shareholders Capitalwithdrawalbynon-controlling Cag fitrs nsbiire 10 Changeofinterest insubsidiaries recognised directly inequity: Transactions withowners, Total fortheyear Othercomprehensive income Total Profit fortheyear fortheyear: Total comprehensive income Appropriations Balance atJanuary1,2017 GROUP Balance atDecember31,2017 oecptlsae eev eev ectrsrepot opn neet Total interests Company profits reserve deficit reserve reserve shares capital Note 37 20 33 35 M’0 M’0 M’0 M’0 M’0 M’0 M’0 M’0 M’0 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 ,6,2 4,0)(8,8)14300(,3,1)(,5,9)1,1,6 106748927230,009,556 8,962,762 21,046,794 16,711,769 (1,758,997) (1,834,019) 1,403,010 (689,689) (47,006) 7,261,726 ,6,2 1239 1493 ,0,7 18409 32554 941702,3,2 ,7,8 32,702,811 9,972,287 22,730,524 19,411,720 (3,285,564) (1,834,019) 1,503,873 (194,903) (132,309) 7,261,726 hr rauytasainSauoyMre te cuuae ftecontrolling ofthe Accumulated Other Merger Statutory translation Treasury Share 62 62 957 (10,179) (9,517) (662) – (662) – – – – – – – – 8,0)–––––(85,303) – – – – – (85,303) – 4585 4585 (415,855) – (415,855) (415,855) – – – – – – – – – – – – – – – – – – – – 2 15027 15008 1332 (1,653,360) (123,312) (1,530,048) – (1,530,277) – 229 – – – 9,8 ,7 ,1,4 ,1,9 ,0,1 6,119,511 2,403,913 3,715,598 3,216,440 4,372 – – 494,786 – – 8,0)–1083–(,3,3)(1,8)(,3,6)(,9,8)(3,426,256) (1,394,388) (2,031,868) (516,489) (1,530,939) – 100,863 – (85,303) – 9,8 ,7 9,5 6499,244 86 499,158 – 4,372 – – 494,786 – – 0,3 (100,634) – – 100,634 – – – ,1,4 ,1,4 ,0,2 5,620,267 2,403,827 3,216,440 3,216,440 – – – – – – (Note 20) Currency — F-13 — ––– –––– Financial yearendedDecember31,2017 CHANGES INEQUITY Attributable oonr Non- to owners 13935 (1,359,385) (1,359,385) – 7,9 275,696 275,696 – – – – STATEMENTS OF 1780 (177,870) (177,870) (85,303) – 71 ANNUAL REPORT 2017 72 YANLORD LAND GROUP LIMITED Financial yearendedDecember31,2017 CHANGES INEQUITY STATEMENTS OF See accompanyingnotesto financialstatements. Total Repurchase ofshares Total fortheyear Total Repurchase ofshares Total fortheyear Balance atDecember31,2017 recognised directly inequity: Transaction withowners, Othercomprehensive income Profit fortheyear fortheyear: Total comprehensive income Balance atDecember31,2016 recognised directly inequity: Transaction withowners, Othercomprehensive income Profit fortheyear fortheyear: Total comprehensive income Balance atJanuary1,2016 COMPANY Dividends Dividends oecptlsae eev rfisTotal profits reserve shares capital Note 20 33 20 33 — F-14 — ,6,2 1239 1375 5,7 7,362,233 356,571 (123,755) (132,309) 7,261,726 ,6,2 4,0)(4,9)20587,178,315 210,588 (246,993) (47,006) 7,261,726 7,261,726 M’0 M’0 M’0 M’0 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Share Treasury translation (losses) (85,303) – (85,303) – – – (47,006) – (47,006) – – – – – – – 2,3 6,3 685,076 561,838 123,238 – 123,238 – 1,5 8,4 699,797 381,945 317,852 – 317,852 – – – – 5485 2,2)6,667,360 (29,521) (564,845) – – Currency Accumulated 4585 (501,158) (415,855) – – 1186 (188,842) (141,836) – – 4585 (415,855) (415,855) – 6,3 561,838 561,838 – (141,836) (141,836) – 8,4 381,945 381,945 – (85,303) – 123,238 – (47,006) – 317,852 – Net cash(usedin)from operatingactivities Incometaxpaid Trade andotherpayables Share ofprofit ofjointventures Net cashusedininvestingactivities Advancetonon-controlling shareholders ofsubsidiaries Interest paid Cash(usedin)generatedfrom operations Completedproperties forsale Inventories Properties fordevelopment Operatingcashflowsbefore movementsinworkingcapital Trade andotherreceivables anddeposits Properties underdevelopmentforsale Depreciation Allowancefordoubtfuldebtsandbadwrittenoff expense Adjustments for: Profit before incometax Operating activities Share oflossassociates Netlossondisposalofheld-for-trading investment Netgainondisposalofinvestmentproperties Netgainondisposalofproperty, plantandequipment Interest income Fair valuegainfrom putliabilitytoacquire Finance non-controlling interests cost Fair valuegainonheld-for-trading investment Fair valuegainoninvestmentproperties Repaymentfrom jointventures Advancetojointventures Repaymentfrom associates Advanceto associates Paymentforintangible assets Purchase ofavailable-for-sale investment Paymentforinvestment properties Paymentfor property, plantandequipment Proceeds ondisposalofheld-for-trading investment Proceeds ondisposalofinvestmentproperties custo fsbiire 35 36 37 Proceeds ondisposalofproperty, plantandequipment Decrease (Increase) inpledgedbankdeposits Interest Investments injointventures received Investmentsinassociates Changeofcontrol from subsidiariestojointventures Changeofcontrol from subsidiariestoassociates Acquisitionofsubsidiaries Investing activities — F-15 — CONSOLIDATED STATEMENT (10,646,711) (19,767,496) 10,942,033 11,362,224 Financial yearendedDecember31,2017 (4,072,278) (3,261,681) (1,702,981) (4,871,452) (4,631,360) (1,516,755) (2,522,333) (1,060,294) (1,877,680) 8,412,880 2,576,327 M’0 RMB’000 RMB’000 (346,008) (750,890) (426,819) (359,168) (148,321) (152,557) (582,003) 484,690 480,651 186,120 (19,479) (87,554) 072016 2017 (89,987) (85,879) 33,207 14,056 (5,002) (2,990) 8,114 2,163 (192) (199) 43 – – GROUP – – – – OF CASHFLOWS 10,289,434 14,470,402 12,733,840 (2,950,647) (1,230,321) (2,481,718) (7,388,342) (8,133,366) (1,824,530) (1,608,985) (3,288,874) (1,266,762) (1,499,913) 4,688,181 7,202,973 7,472,154 2,446,508 (270,461) (268,270) (366,090) (382,911) (469,313) (495,408) (146,984) 347,819 177,282 191,740 (14,071) (51,160) 32,085 11,790 24,374 39,599 21,971 (7,099) (5,967) (7,135) (7,251) 937 – – – – – 73 ANNUAL REPORT 2017 74 YANLORD LAND GROUP LIMITED Financial yearendedDecember31,2017 OF CASHFLOWS CONSOLIDATED STATEMENT See accompanyingnotesto financialstatements. RMB38 millionwhichwasdeclared inprioryears. In 2017,dividendspaidtonon-controlling shareholders ofsubsidiariesRMB214millionincluded included in“amounts duetonon-controlling shareholders ofsubsidiaries”asatDecember31,2017. shareholders ofsubsidiaries,whichRMB3million(2016:RMB37million)wasunpaidasatyearendand During theyear, theGroup declared dividendsofRMB178million(2016:RMB784million)tonon-controlling Note A Net cashfrom (usedin)financingactivities Disposalofpartialinterest inasubsidiary Advancefrom ultimateholdingcompany Advancefrom directors (Repaymentto)Advancefrom ajointventure Cash andcashequivalentsatbeginningofyear Net (decrease) increase incashandequivalents Acquisitionofnon-controlling interest insubsidiaries Repaymenttoultimateholdingcompany Repurchase andredemption ofseniornotes Capitalwithdrawalbynon-controlling shareholders ofsubsidiaries Capitalinjectionfrom non-controlling shareholders ofsubsidiaries Advancefrom otherrelated parties Advancefrom non-controlling shareholders ofsubsidiaries Repaymenttonon-controlling shareholders ofsubsidiaries Cash andcashequivalentsatendofyear Effect ofexchange rate changes onthebalanceofcashheldin Purchase oftreasury shares Repaymentofbankandotherborrowings Proceeds from bankandotherborrowings Netproceeds onissueofseniornotes Dividendspaidtonon-controlling shareholders ofsubsidiaries(NoteA) Dividends paid Financing activities foreign currencies — F-16 — oe21 2016 2017 Note 17 20 33 17 (10,119,950) 15,237,402 17,583,383 26,303,899 17,798,313 (1,412,840) (1,013,448) (1,974,600) (1,087,285) 2,163,954 3,085,026 M’0 RMB’000 RMB’000 (359,385) (213,578) (415,855) 341,030 255,599 (40,669) (85,303) 12,000 6,056 8,046 (365) – GROUP 17,516,991 15,834,321 17,583,383 (1,708,822) (4,514,269) (1,806,473) (1,708,461) (9,821,984) (380,854) (746,936) (141,836) 677,572 447,246 112,513 401,243 (47,006) 16,853 37,776 (2,500) 365 – – –
Inaddition,forfinancialreporting purposes, fairvaluemeasurements are categorisedintoLevel1,2 Fair valueisthepricethatwouldbereceived tosellanassetorpaidtransferaliabilityinorderly Historicalcostisgenerallybasedonthefairvalueofconsiderationgiveninexchange forgoodsand BASISOFACCOUNTING –Thefinancialstatements are prepared inaccordancewiththehistoricalcost SUMMARY OFSIGNIFICANTACCOUNTING POLICIES 2 TheconsolidatedfinancialstatementsoftheGroup andstatementoffinancialposition Theprincipalactivitiesofthesubsidiariesare disclosedinNote10tothefinancialstatements. TheprincipalactivityoftheCompanyistocarryonbusinessaninvestmentholdingcompanyand TheCompany(RegistrationNo.200601911K)isincorporatedintheRepublicofSingapore withitsprincipal 1 GENERAL -FWFMŭJOQVUTBSFVOPCTFSWBCMFJOQVUTGPSUIFBTTFUPSMJBCJ Ŕ -FWFMŬJOQVUTBSFJOQVUT PUIFSUIBORVPUFEQSJDFTJODMVEFE Ŕ UTGPSJEFOUJDBMBTTFUTPSMJBCJMJUJFTUIBU -FWFMūJOQVUTBSFRVPUFEQSJDFT VOBEKVTUFE JOBDUJWFNBSLF Ŕ significance oftheinputstofairvaluemeasurement initsentirety, whichare describedasfollows: or 3basedonthedegree towhichtheinputsfairvaluemeasurements are observableandthe value inFRS2Inventoriesoruse36ImpairmentofAssets. and measurements thathavesomesimilaritiestofairvaluebutare notfairvalue,suchasnetrealisable determined onsuchabasis,except forleasingtransactionsthatare withinthe scopeofFRS17 value formeasurement and/ordisclosure purposesintheseconsolidatedfinancialstatementsis participants wouldtake intoaccountwhenpricingtheassetorliabilityatmeasurement date.Fair asset oraliability, theGroup takes intoaccountthecharacteristicsofassetorliabilitywhich market directly observableorestimatedusinganothervaluationtechnique.Inestimatingthefairvalueofan transaction betweenmarket participantsatthemeasurement date,regardless ofwhetherthatpriceis services. provisions oftheSingapore CompaniesActandFinancialReportingStandardsinSingapore (“FRSs”). basis except asdisclosed intheaccountingpoliciesbelow, andare drawnupinaccordancewiththe issue bytheBoardofDirectors onMarch 27,2018. changes inequityoftheCompanyforfinancialyearendedDecember31,2017were authorisedfor procurer offunds. statements are expressed inRenminbi(“RMB”). 038989. TheCompanyislistedontheSingapore Exchange SecuritiesTrading Limited.Thefinancial place ofbusinessandregistered officeat9 TemasekBoulevard,#36-02Suntec Tower Two,Singapore the assetorliability, eitherdirectly orindirectly; and the entitycanaccessatmeasurement date; — F-17 — MJUZ XJUIJO-FWFMū UIBUBSFPCTFSWBCMFGPS FINANCIAL STATEMENTS Leases, December 31,2017 NOTES TO
75 ANNUAL REPORT 2017 76 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO SUMMARY OFSIGNIFICANTACCOUNTINGPOLICIES(Cont’d) 2 Reporting Standards(International) time forfinancialyearendingDecember31,2018andSFRS(I)1 Standards Board(IASB).TheGroup andtheCompanywillbeadoptingnewframeworkforfirst identical totheInternationalFinancialReportingStandards(IFRS)asissuedbyAccounting on theSingapore Exchange (SGX),forannualperiodsbeginningonorafterJanuary1,2018.SFRS(I)is Standards (International)(“SFRS(I)”),whichistobeadoptedbySingapore-incorporated companieslisted Standards Council(ASC)hasissuedanewfinancialreporting framework–Singapore FinancialReporting ADOPTION OFANEWFINANCIALREPORTINGFRAMEWORKIN2018–InDecember2017,theAccounting the current orprioryears. Group’s andtheCompany’saccountingpolicieshasnomaterialeffectonamounts reported for to itsoperations.Theadoptionofthesenew/revised FRSsandINTFRSdoesnotresult inchangestothe and revised FRSsandInterpretations ofFRS(“INT FRS”)thatare effectivefrom thatdateandare relevant ADOPTION OFNEWANDREVISEDSTANDARDS –OnJanuary1,2017,theGroup adoptedallthenew of estimatedeffectsdescribedbelow. pronouncements onSFRS(I)thatare effectiveas at December31,2018,theymayimpactthedisclosures effects asatdateofauthorisationcurrent year’sfinancialstatements.Ifthere are anysubsequent as atendofthefirstSFRS(I)reporting period(December31,2018),itisnotpossibletoknowall As SFRS(I)1requires afirst-timeadoptertoapply accountingpoliciesbasedoneachSFRS(I)effective below). that mayarisefrom implementingcertainnewSFRS(I)pronouncements effectiveatthesametime(see policies underFRSormaterialadjustmentsontheinitialtransitiontonewframework,otherthanthose and hasdeterminedthatthere willbenochangetotheGroup’s andtheCompany’scurrent accounting Management hasperformedadetailedanalysisofthetransitionoptionsandotherrequirements ofSFRS(I) also berequired forspecifictransitionadjustmentsifapplicable. the lastfinancialperiodunderFRS(foryearendedDecember31,2017).Additionaldisclosures may period underFRS(December31,2017),andfortotalcomprehensive incomeandcashflowsreported for adjustments are required forequityasatdateof transition(January1,2017)andasatendoflastfinancial Reconciliation statementsfrom previously reported FRSamountsandexplanatorynotesontransition financial positionasatdateoftransition(January1,2017)willbepresented, togetherwithrelated notes. financial statementsfortheyearendingDecember31,2018,anadditionalopeningstatementof except forareas ofexceptions andoptionalexemptions setoutinSFRS(I)1.Inthefirstof based oneachSFRS(I)effectiveasatendofthefirst reporting period(December31,2018), As afirst-timeadopter, theGroup andtheCompanyare toapplyretrospectively, accountingpolicies SFRS(I) 1First-timeAdoptionofSingaporeFinancialReportingStandards(International) willbeappliedinthefirstsetofSFRS(I)financialstatements. — F-18 — First-time AdoptionofSingaporeFinancial
SUMMARY OFSIGNIFICANTACCOUNTINGPOLICIES(Cont’d) 2 Effective forannualperiodsbeginningonorafterJanuary1,2018 framework: an impacttotheGroup andtheCompanyinperiodsoftheirinitialapplicationundernewSFRS(I) NEW SFRS(I)THAT MAY HAVE IMPACT –ThefollowingSFRS(I)pronouncements are expectedtohave Ŕ Ŕ Ŕ Ŕ Ŕ Ŕ Ŕ "MMSFDPHOJTFEţOBODJBMBTTFUTUIBUBSFXJUIJOUIFTDPQFPG4 Ŕ Key requirements ofSFRS(I)9: financial liabilities(ii)generalhedgeaccountingand(iii)impairmentrequirements forfinancialassets. SFRS(I) 9introduces newrequirements for(i)the classificationandmeasurement offinancialassets and SFRS(I) 9FinancialInstruments Effective forannualperiodsbeginningonorafterJanuary1,2019 held fortrading)atFVTOCI, withonlydividendincome generallyrecognised inprofit orloss. make anirrevocable election,atinitialrecognition, tomeasure anequityinvestment(thatisnot attheendofsubsequentaccountingperiods.Inaddition,underSFRS(I)9,entities may (FVTPL) All otherdebtinstrumentsandequityinvestmentsare measured atfairvaluethrough profit orloss amount outstanding,are measured atfairvaluethrough othercomprehensive income(FVTOCI). on specifieddatestocashflowsthatare solelypaymentsofprincipalandinterest ontheprincipal contractual cashflowsandsellingfinancialassets, that havecontractualtermsgiverise instruments thatare heldwithinabusinessmodelwhoseobjectiveisachievedbothbycollecting are generallymeasured atamortisedcostthe endofsubsequentaccountingperiods.Debt cash flowsthatare solelypaymentsofprincipalandinterest ontheprincipaloutstanding business modelwhoseobjectiveistocollectthecontractualcashflows,andthathave measured atamortisedcostorfairvalue.Specifically, debtinstrumentsthatare heldwithina SFRS(I) INT23UncertaintyoverIncomeTax Treatments Associates andJointVentures Amendments toSFRS(I)1-28InvestmentsinAssociatesandJointVentures: Long-termInterestsin SFRS(I) 16Leases SFRS(I) INT22ForeignCurrencyTransactions and AdvanceConsideration SFRS(I) 1-40InvestmentProperty:Transfers ofInvestmentProperty SFRS(I) 15RevenuefromContractswithCustomers SFRS(I) 9FinancialInstruments — F-19 — '34 * ųBSFSFRVJSFEUPCFTVCTFRVFOUMZ FINANCIAL STATEMENTS December 31,2017 NOTES TO
77 ANNUAL REPORT 2017 78 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO SUMMARY OFSIGNIFICANTACCOUNTINGPOLICIES(Cont’d) 2 Furthermore, extensivedisclosures are required bySFRS(I)15. the customer. Far more prescriptive guidancehasbeen addedinSFRS(I)15todealwithspecificscenarios. when “control” ofthegoodsorservicesunderlying theparticularperformanceobligationistransferred to Under SFRS(I)15,anentity recognises revenue when(oras)aperformance obligationissatisfied,i.e. 4UFQů3FDPHOJTFSFWFOVFXIFO PSBT UIFFOUJUZTBUJTţFTBQFSGPSNBODFPCMJHBUJPO Ŕ 4UFQŮ"MMPDBUFUIFUSBOTBDUJPOQSJDFUPUIFQFSGPSNBODFPCM Ŕ 4UFQŭ%FUFSNJOFUIFUSBOTBDUJPOQSJDF Ŕ 4UFQŬ*EFOUJGZUIFQFSGPSNBODFPCMJHBUJPOTJOUIFDPOUSBDU Ŕ 4UFQū*EFOUJGZUIFDPOUSBDU T XJUIBDVTUPNFS Ŕ 5-step approach torevenue recognition: expects tobeentitledinexchange forthosegoodsorservices.Specifically, theStandardintroduces a promised goodsorservicestocustomersinanamountthatreflects theconsiderationtowhichentity The core principleofSFRS(I)15isthatanentityshouldrecognise revenue todepictthetransferof from contractswithcustomers. SFRS(I) 15establishesasinglecomprehensive modelforentitiestouseinaccountingrevenue arising SFRS(I) 15RevenuefromContractswithCustomers BDDPVOUJOH IFEHF PG UZQFT UISFF UIF SFUBJO SFRVJSFNFOUT BDDPVOUJOH IFEHF HFOFSBM OFX 5IF Ŕ *OSFMBUJPOUPUIFJNQBJSNFOUPGţOBODJBMBTTFUT 4'34 * ųS Ŕ 8JUITPNFFYDFQUJPOT ţOBODJBMMJBCJMJUJFTBSFHFOFSBMMZTVCTFRVFOUMZNFBTVSFEBUBNPSUJTFEDPTU Ŕ have alsobeenintroduced. longer required. Enhanceddisclosure requirements aboutanentity’sriskmanagementactivities principle ofan‘economic relationship’. Retrospective assessmentofhedgeeffectivenessisalsono hedge accounting.Inaddition,theeffectivenesstesthasbeenoverhauledand replaced withthe hedging instrumentsandthetypesofriskcomponentsnon-financialitemsthatare eligiblefor eligible forhedgeaccounting,specificallybroadening thetypesofinstrumentsthatqualifyfor mechanisms. UnderSFRS(I)9,greater flexibilityhasbeenintroduced tothetypesoftransactions have occurred before credit lossesare recognised. credit risksinceinitialrecognition. Inotherwords,itisnolongernecessaryforacredit eventto losses andchangesinthoseexpectedcredit lossesateachreporting datetoreflect changesin to beapplied.Theexpectedcredit lossmodelrequires anentitytoaccountforexpectedcredit credit riskare notsubsequentlyreclassified toprofit orloss. accounting mismatchtoprofit orloss.Changesinfairvalueattributabletothefinancialliability’s of changesintheliability’scredit riskinothercomprehensive incomewouldcreate orenlargean the credit riskbepresented inothercomprehensive income,unlesstherecognition oftheeffects that theamountofchangeinfairvaluesuchfinancialliabilityisattributabletochanges SFRS(I)9requiresWith regard tothemeasurement offinancialliabilitiesdesignatedasatFVTPL, — F-20 — FRVJSFTBOFYQFDUFEDSFEJUMPTTNPEFM JHBUJPOTJOUIFDPOUSBDU
SUMMARY OFSIGNIFICANTACCOUNTINGPOLICIES(Cont’d) 2 December 31,2018. Management doesnotplan toearlyadopttheamendmentsSFRS(I)1-28for financial yearending an entity’snetinvestmentin theinvestees. interests inassociatesandjointventures towhich theequitymethodisnotappliedbutthatformpartof The pronouncement clarifiesthatSFRS(I)9,includingitsimpairmentrequirements, appliestolong-term Associates andJointVentures Amendments toSFRS(I)1-28InvestmentsinAssociatesandJointVentures: Long-termInterestsin Management doesnotplantoearlyadoptSFRS(I)16for financialyearendingDecember31,2018. the lessoraccountingapproach undertheexistingframework. exemptions forshort-termleasesandoflowvalueassets).TheStandard maintainssubstantially finance leasesremoved andassetsliabilitiesrecognised inrespect ofallleases(subjecttolimited Significant changestolesseeaccountingare introduced, withthedistinctionbetweenoperatingand controlled bythecustomer. between leasesandservicecontracts,are determinedonthebasisofwhetherthere isanidentifiedasset treatment inthefinancialstatementsofbothlesseesandlessors.Theidentificationleases,distinguishing The Standardprovides acomprehensive modelfortheidentificationofleasearrangementsandtheir SFRS(I) 16Leases JGUIFSFBSFNVMUJQMFQBZNFOUTPSSFDFJQUTJOBEWBODF BEBUF Ŕ UIFEBUFPGUIFUSBOTBDUJPO GPSUIFQVSQPTFPGEFUFSNJOJOHUIFFYDIBOHFSBUF JTUIFEBUFPGJOJUJBM Ŕ The Interpretation clarifiesthat: entity recognises therelated asset,expenseorincome. asset ornon-monetaryliabilityarisingfrom thepaymentorreceipt ofadvanceconsiderationbefore the The Interpretation appliestoaforeign currency transactionwhenanentityrecognises anon-monetary POMZ BSF PDDVSSFE IBT VTF PG SFRS(I) INT22ForeignCurrencyTransactions DIBOHF andAdvanceConsideration B PG FWJEFODF DPOTUJUVUJOH FWFOUT PG MJTU UIF UIBU DMBSJţFT Ŕ SFUBJOTUIFSFRVJSFNFOUUIBUBUSBOTGFSJOUP PSPVUPG JOWFTUNFOUQSPQFSUZDBOCFNBEFXIFO BOE Ŕ The pronouncement: SFRS(I) 1-40InvestmentProperty:Transfers ofInvestmentProperty payment orreceipt. recognition ofthenon-monetaryprepayment assetordeferred incomeliability. examples. only when,evidenceofachangeusetheproperty exists. — F-21 — PGUSBOTBDUJPOJTFTUBCMJTIFEGPSFBDI FINANCIAL STATEMENTS December 31,2017 NOTES TO 79 ANNUAL REPORT 2017 80 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO SUMMARY OFSIGNIFICANTACCOUNTINGPOLICIES(Cont’d) 2 there are changestoone ormore ofthethree elementsofcontrol listedabove. The Companyreassesses whetherornotitcontrols aninvesteeiffactsandcircumstances indicatethat )BTUIFBCJMJUZUPVTFJUTQPXFSUPBŢFDUJUTSFUVSOT *TFYQPTFE PSIBTSJHIUT UPWBSJBCMFSFUVSOTGSPNJUTJOWPMWFNFOUXJUIUIFJOWFTUFF BOE Ŕ )BTQPXFSPWFSUIFJOWFTUFF Ŕ Ŕ Control isachievedwhentheCompany: of theCompanyandentities(includingstructured entities)controlled bytheCompanyanditssubsidiaries. BASIS OFCONSOLIDATION –Theconsolidatedfinancialstatements incorporatethefinancialstatements Managementhasperformedapreliminary analysisofthoserelevant pronouncements whichare (b) Managementhasperformedadetailedanalysisofthosenewpronouncements relevant tothe (a) Impact assessment Management doesnotplantoearlyadoptSFRS(I)INT23forfinancialyearendingDecember31,2018. BTTFTTXIFUIFSJUJTQSPCBCMFUIBUBUBYBVUIPSJUZXJMMBDDFQUBOVODFSUBJOUBYUSFBUNFOUVTFE PS Ŕ EFUFSNJOFXIFUIFSVODFSUBJOUBYQPTJUJPOTBSFBTTFTTFETFQBSBUFMZPSBTBHSPVQ BOE Ŕ The Interpretation requires anentityto: over incometaxtreatments. The Interpretation provides guidanceondeterminingtheaccountingtaxpositionwhenthere isuncertainty SFRS(I) INT23UncertaintyoverIncomeTax Treatments adjustments. effective from annualperiodsbeginningonorafterJanuary1,2019,anddoesnotexpectmaterial $IBOHFJOCBTJTPGSFDPHOJTJOHJNQBJSNFOUMPTTFTGPSţOBODJBMBTTFUT Ŕ policies: than additionalenhanceddisclosures, andthefollowingchangestorecognition andmeasurement determined thatthere willbenomaterialadjustmentsexpectedfrom theinitialapplication,other Group andtheCompany, whichare effectivefrom financialyearendingDecember31,2018,and ifnotprobable, theentityshouldreflect theeffectofuncertaintyindeterminingitsaccounting – ifprobable, theentityshoulddetermineitsaccountingtaxpositionconsistentlywith – proposed tobeused,byanentityinitsincometaxfilings: tax position. treatment usedorplannedtobeinitsincometaxfilings. — F-22 —
SUMMARY OFSIGNIFICANTACCOUNTINGPOLICIES(Cont’d) 2 an investmentinassociate orajointventure. recognition forsubsequent accountingunderFRS39,whenapplicable,thecost oninitialrecognition of retained intheformersubsidiary atthedatewhencontrol islostregarded asthefairvalueoninitial to anothercategoryofequity asspecified/permittedbyapplicableFRSs).Thefairvalue ofanyinvestment disposed oftherelated assets orliabilitiesofthesubsidiary(i.e.reclassified to profit orlosstransferred other comprehensive incomeinrelation tothatsubsidiary are accountedforasiftheGroup haddirectly and liabilitiesofthesubsidiaryanynon-controlling interests. Allamountspreviously recognised in value ofanyretained interest and(ii)theprevious carryingamountoftheassets(includinggoodwill), as thedifference between(i)theaggregate ofthe fairvalueoftheconsideration received andthe fair When theGroup losescontrol ofasubsidiary, againorlossisrecognised inprofit orloss andiscalculated owners oftheCompany. and thefairvalueofconsiderationpaidorreceived isrecognised directly inequityandattributed to the subsidiaries.Anydifference betweentheamountbywhichnon-controlling interests are adjusted interests andthenon-controlling interests are adjustedtoreflect thechangesintheirrelative interests in over thesubsidiariesare accountedforasequitytransactions.ThecarryingamountsoftheGroup’s Changes intheGroup’s ownershipinterests insubsidiariesthatdonotresult intheGroup losingcontrol Changes intheGroup’s ownershipinterests inexistingsubsidiaries policies intolinewiththeGroup’s accountingpolicies. When necessary, adjustmentsare madetothefinancialstatementsofsubsidiariesbringtheiraccounting interests havingadeficitbalance. the ownersofCompanyandtonon-controlling interests evenifthisresults inthenon-controlling Company andtothenon-controlling interests. Total comprehensive incomeofsubsidiariesisattributedto Profit orlossandeachcomponentofothercomprehensive incomeare attributedtotheownersof the dateCompanygainscontrol untilthedatewhenCompanyceasestocontrol thesubsidiary. acquired ordisposedofduringtheyearare includedintheconsolidatedstatementofprofit orlossfrom when theCompanylosescontrol ofthesubsidiary. Specifically, incomeandexpenses ofasubsidiary Consolidation ofasubsidiarybeginswhentheCompanyobtainscontrol overthesubsidiaryandceases "OZBEEJUJPOBMGBDUTBOEDJSDVNTUBODFTUIBUJOEJDBUFUIBUUIF Ŕ 3JHIUTBSJTJOHGSPNPUIFSDPOUSBDUVBMBSSBOHFNFOUT BOE Ŕ 1PUFOUJBMWPUJOHSJHIUTIFMECZUIF$PNQBOZ PUIFSWPUFIPMEFSTPSPUIFSQBSUJFT Ŕ 5IFTJ[FPGUIF$PNQBOZōTIPMEJOHPGWPUJOHSJHIUTSFMBUJWFUPUIFTJ[FBOEEJTQFSTJPOPGIPMEJOHTPG Ŕ whether ornottheCompany’svotingrightsinaninvesteeare sufficienttogiveitpower, including: of theinvesteeunilaterally. TheCompanyconsidersallrelevant factsandcircumstances in assessing investee whenthevotingrightsare sufficienttogiveitthepracticalabilitydirect the relevantactivities When theCompanyhaslessthanamajorityofvotingrightsaninvestee,itpowerover voting patternsatprevious shareholders’ meetings. current abilitytodirect therelevant activitiesat thetimethatdecisionsneedtobemade,including the othervoteholders; — F-23 — $PNQBOZIBT PSEPFTOPUIBWF UIF FINANCIAL STATEMENTS December 31,2017 NOTES TO 81 ANNUAL REPORT 2017 82 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO IntheCompany’sfinancialstatements,investmentsinsubsidiariesare carriedatcostlessanyimpairment SUMMARY OFSIGNIFICANTACCOUNTINGPOLICIES(Cont’d) 2 Ŕ Ŕ %FGFSSFEUBYBTTFUTPSMJBCJMJUJFTBOEMJBCJMJUJFTPSBTTFUTSFMBUFEUPFNQMPZFFCFOFţUBSSBOHFNFOUT Ŕ recognition undertheFRSare recognised attheir fairvalueattheacquisitiondate,except that: The acquiree’s identifiableassets,liabilitiesandcontingentthatmeettheconditionsfor reclassified toprofit orloss,where suchtreatment wouldbeappropriate ifthatinterest were disposedof. prior totheacquisitiondatethathavepreviously beenrecognised inothercomprehensive incomeare resulting gainorloss,ifany, isrecognised inprofit orloss.Amountsarisingfrom interests intheacquiree entity are remeasured tofairvalueattheacquisition date(i.e.theGroup attainscontrol) andthe Where abusinesscombinationisachievedinstages,theGroup’s previously heldinterests intheacquired value, withchangesinfairvaluerecognised inprofit orloss. consideration thatisclassifiedasanassetoraliabilityremeasured atsubsequentreporting datesatfair subsequent reporting datesanditssubsequentsettlementisaccountedforwithinequity. Contingent consideration isclassified.Contingentthatclassifiedasequitynotremeasured at consideration thatdonotqualifyasmeasurement periodadjustmentsdependsonhowthecontingent adjustments (seebelow).Thesubsequentaccountingforchangesinthefairvalueofcontingent in suchfairvaluesare adjustedagainstthecostofacquisitionwhere theyqualifyasmeasurement period contingent considerationarrangement,measured atitsacquisition-datefairvalue.Subsequentchanges Where applicable,theconsiderationforacquisitionincludesanyassetorliabilityresulting from a related costsare recognised inprofit orlossasincurred. acquiree, andequityinterests issuedbytheGroup inexchange forcontrol oftheacquiree. Acquisition- the acquisitiondatefairvaluesofassetsgiven,liabilitiesincurred bytheGroup totheformerownersof for usingtheacquisitionmethod.Theconsiderationeachismeasured attheaggregate of The acquisitionofsubsidiariesfrom apartyotherthancommoncontrolling shareholder isaccounted acquisition ofthesubsidiaries. as theholdingcompanyofsubsidiariesforfinancialyearspresented ratherthanfrom thedateof accounted forusingthemergeraccountingmethod.Underthismethod,Companyhasbeentreated BUSINESS COMBINATIONS –Theacquisitionofsubsidiariesfrom acommoncontrolling shareholder is in netrecoverable valuethathasbeenrecognised inprofit orloss. Standard. current AssetsHeldforSale andDiscontinuedOperations Assets (ordisposalgroups) thatare classifiedasheld forsaleinaccordancewithFRS105 based Payment payment awardstransactionsoftheacquirer inaccordancewiththemethodFRS102 the replacement ofanacquiree’s share-based paymentawardstransactionswithshare-based Liabilities orequityinstrumentsrelated toshare-based paymenttransactionsoftheacquiree or Benefits respectively; are recognised andmeasured inaccordancewithFRS12 attheacquisitiondate;and — F-24 — are measured inaccordance withthat Income Taxes andFRS19 Employee Share- Non- Effectiveinterest method SUMMARY OFSIGNIFICANTACCOUNTINGPOLICIES(Cont’d) 2 financial instruments“at fairvaluethrough profit orloss”. Income andexpenseare recognised onaneffectiveinterest basisfordebt instrumentsotherthanthose discounts) through theexpected lifeofthefinancialinstrument,orwhere appropriate, ashorterperiod. received thatformanintegral partoftheeffectiveinterest rate,transactioncosts andotherpremiums or that exactlydiscountsestimated future cashreceipts orpayments(including allfeesonpointspaidor of allocatinginterest income orexpenseovertherelevant period.Theeffective interest rateisthe The effectiveinterest methodisaofcalculatingtheamortisedcostfinancialinstrumentand of financialpositionwhentheGroup becomesapartytothecontractualprovisions oftheinstrument. FINANCIAL INSTRUMENT–Financialassetsandfinancial liabilitiesare recognised ontheGroup’s statement in control overthesubsidiaryare accountedforas equitytransactions. whereby theacquisitionofGroup’s ownership interests inasubsidiarythatdonotresult inthechange reversed andthefinancialliabilitywillbederecognised andacquisitionaccountingwillbeapplied, liability willbederecognised. IfthePutInstrumentsare exercised, thenthechargetoequitywillbe If thePutInstrumentexpires unexercised, thenthechargetoequitywillbereversed andthefinancial financial liabilityisrecognised inprofit orloss. equity. Subsequenttoinitialrecognition ofthefinancialliability, changesinthecarrying amountofthe interests continuetoberecognised. Therefore, thepresent valueofthePutInstrumentsisrecognised in underlying ownershipinterests, theGroup haschosenanaccountingpolicythatthenon-controlling When thenon-controlling shareholders stillhavepresent accesstothereturns associatedwith the consolidated financialstatements)forcash. obligation fortheentitytopurchase itssubsidiary’sinstruments(constitutestheGroup’s ownequityinthe for thepresent valueoftheexercise priceofthePutInstruments.Thiscreates anobligationorpotential Instruments”) aspartoftheacquisitionasubsidiaryforsettlementincash,putliabilityisrecognised non-cancellable rightsfornon-controlling shareholders toputbacktheirshares totheentity(the“Put TOPUT LIABILITY ACQUIRE NON-CONTROLLING INTERESTS–WhenanentitywithintheGroup writes maximum ofoneyearfrom acquisitiondate. information aboutfactsandcircumstances thatexistedasoftheacquisitiondateandissubjecttoa The measurement periodisthefrom thedateofacquisitiontoGroup obtainscomplete recognised asofthatdate. and circumstances thatexistedasoftheacquisitiondatethat,ifknown,wouldhaveaffectedamounts below), oradditionalassetsliabilitiesare recognised, toreflect newinformationobtainedaboutfacts accounting isincomplete.Thoseprovisional amountsare adjustedduringthemeasurement period(see in whichthecombinationoccurs,Group reports provisional amountsfortheitemswhich If theinitialaccountingforabusinesscombinationisincompletebyendofreporting period specified inanotherFRS. Other typesofnon-controlling interests are measured atfairvalueor, whenapplicable,onthebasis identifiable netassets.Thechoiceofmeasurement basisismadeonatransaction-by-transactionbasis. or atthenon-controlling interests’ proportionate share oftherecognised amountsoftheacquiree’s share oftheentity’snetassetsineventliquidationmaybeinitiallymeasured eitheratfairvalue Non-controlling interests thatare present ownershipinterests andentitletheirholderstoaproportionate — F-25 — FINANCIAL STATEMENTS December 31,2017 NOTES TO
83 ANNUAL REPORT 2017 84 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO SUMMARY OFSIGNIFICANTACCOUNTINGPOLICIES(Cont’d) 2 asset, theestimatedfuture cashflowsoftheinvestmenthavebeenimpacted. evidence that,asaresult ofoneormore eventsthat occurred aftertheinitialrecognition ofthefinancial impairment attheendofeachreporting period.Financialassetsare impaired where there isobjective Financial assets,otherthanthoseatfairvaluethrough profit orloss,are assessedforindicators of Impairment offinancialassets effective interest method,except forshort-term receivables whentheeffect ofdiscountingisimmaterial. amortised costusingtheeffectiveinterest methodlessimpairment.Interest is recognised byapplyingthe quoted inanactivemarket are classifiedas“loansandreceivables”. Loansandreceivables are measured at Trade receivables, loansandother receivables thathavefixed ordeterminablepaymentsthatare not Loans andreceivables consolidated statementofprofit orloss.Fair valueisdeterminedinthemanner describedinNote4(c)(vi). the financialassetandisincludedin“other operatingincome”or“other operatingexpense”lineinthe loss. Thenetgainorlossrecognised inprofit orlossincorporatesanydividendinterest earnedon are statedatfairvalue,withanyresultant gainorlossrecognisedFinancial assetsatFVTPL inprofit or JUJTBEFSJWBUJWFUIBUJTOPUEFTJHOBUFEBOEFŢFDUJWFBTBI Ŕ JUJTBQBSUPGBOJEFOUJţFEQPSUGPMJPPGţOBODJBMJOTUSVNFOU Ŕ JUIBTCFFOBDRVJSFEQSJODJQBMMZGPSUIFQVSQPTFPGTFMMJOHJOUIFOFBSGVUVSF PS Ŕ A financialassetisclassifiedasheld-for-trading if: designated asatFVTPL. where thefinancialassetiseitherheld-for-tradingFinancial assetsare classifiedasatFVTPL oritis Financial assetsatfairvaluethrough profit orloss(FVTPL) financial assetsandisdeterminedatthetimeofinitialrecognition. profit orloss”and“loansreceivables”. Theclassificationdependsonthenature andpurposeof Financial assetsare classifiedintothefollowingspecifiedcategories:“financialassetsatfairvaluethrough value. for thosefinancialassetsclassifiedasatfairvaluethrough profit orlosswhichare initiallymeasured atfair established bythemarket concerned,andare initially measured atfairvalue,plustransactioncostsexcept an investmentisunderacontractwhosetermsrequire deliveryoftheinvestmentwithintimeframe All financialassetsare recognised andde-recognised onatradedatewhere thepurchase orsaleof Financial assets has arecent actualpatternofshort-termprofit-taking; or — F-26 — FEHJOHJOTUSVNFOU TUIBUUIF(SPVQNBOBHFTUPHFUIFSBOE Classificationasdebtorequity TheGroup derecognises afinancialassetonlywhenthecontractualrightstocashflows from the Derecognition offinancialassets SUMMARY OFSIGNIFICANTACCOUNTINGPOLICIES(Cont’d) 2 instrument. of thecontractualarrangements entered intoandthedefinitionsofafinancial liabilityandanequity Financial liabilitiesandequity instrumentsissuedbytheGroup are classifiedaccording tothesubstance Financial liabilitiesandequityinstruments financial assetandalsorecognises acollateralisedborrowing fortheproceeds received. the risksandrewards ofownershipatransferred financialasset,theGroup continuestorecognise the the assetandanassociatedliabilityforamountsitmay have topay. IftheGroup retains substantiallyall of ownershipandcontinuestocontrol thetransferred asset,theGroup recognises itsretained interest in the assettoanotherentity. IftheGroup neithertransfersnorretains substantiallyalltherisksandrewards asset expire, orittransfersthefinancialassetandsubstantiallyallrisksrewards ofownership what theamortisedcostwouldhavebeenhadimpairmentnotrecognised. that thecarryingamountoffinancialassetatdateimpairmentisreversed doesnotexceed was recognised, thepreviously recognised impairment lossisreversed through profit orlosstotheextent loss decreases andthedecrease canberelated objectively toaneventoccurringaftertheimpairmentloss For financialassetsmeasured atamortisedcost,if, inasubsequentperiod,theamountofimpairment or loss. allowance account.Changesinthecarryingamountofaccountare recognised inprofit allowance account.Subsequentrecoveries ofamountspreviously writtenoffare credited against the of anallowanceaccount.Whenatradeorotherreceivable isuncollectible,itwrittenoffagainstthe with theexception oftrade andotherreceivables where thecarryingamountisreduced through theuse The carryingamountofthefinancialassetisreduced bytheimpairmentlossdirectly forallfinancialassets effective interest rate. asset’s carryingamountandthepresent valueofestimatedfuture cashflows,discountedattheoriginal For financialassetscarriedatamortisedcost,theamountofimpairmentisdifference betweenthe observable changesinnationalorlocaleconomicconditionsthatcorrelate withdefaultonreceivables. an increase inthenumberofdelayedpaymentsportfoliopastaveragecredit period,aswell impairment foraportfolioofreceivables couldincludetheGroup’s pastexperienceofcollectingpayments, impaired individuallyare, inaddition,assessedforimpairmentonacollectivebasis.Objectiveevidenceof For certaincategoriesoffinancialassets,suchastradereceivables, assetsthatare assessednottobe *UCFDPNJOHQSPCBCMFUIBUUIFCPSSPXFSXJMMFOUFSCBOLSVQUDZ %FGBVMUPSEFMJORVFODZJOJOUFSFTUPSQSJODJQBMQBZNFOUT PS Ŕ 4JHOJţDBOUţOBODJBMEJťDVMUZPGUIFJTTVFSPSDPVOUFSQBSUZ P Ŕ Ŕ Objective evidenceofimpairmentcouldinclude: — F-27 — S PSţOBODJBMSFPSHBOJTBUJPO FINANCIAL STATEMENTS December 31,2017 NOTES TO 85 ANNUAL REPORT 2017 86 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO Derecognition offinancialliabilities Financial liabilities Equity SUMMARY OFSIGNIFICANTACCOUNTINGPOLICIES(Cont’d) 2 instruments instrument ismore than12monthsanditisnotexpectedtoberealised orsettledwithin12months. A derivativeispresented asanon-current assetor anon-current liabilityiftheremaining maturityofthe commitments (cashflowhedges). hedge relationship. TheGroup designatescertain derivativesashedgesofforeign currency riskoffirm instrument, inwhicheventthetimingofrecognition inprofit orlossdependsonthenature ofthe is recognised inprofit orlossimmediatelyunless the derivativeisdesignatedandeffectiveasahedging subsequently remeasured totheirfairvalueatthe end ofeachreporting period.Theresulting gainorloss Derivatives are initiallyrecognised atfairvaluethedateaderivativecontractisentered intoandare risk. Furtherdetailsofderivativefinancialinstrumentsare disclosedinNote21tothefinancialstatements. The Group entersintoderivativefinancialinstrumentstomanageitsexposure toforeign exchange rate Derivative financialinstrumentsandhedgeaccounting cancelled ortheyexpire. The Group derecognises financialliabilitieswhen,andonlytheGroup’s obligationsare discharged, amount initiallyrecognised lesscumulativeamortisationinaccordancewithFRS18 provision inaccordancewithFRS37 subsequentlyatthehigher oftheamountobligationundercontractrecognised asa as FVTPL, Financial guaranteecontractliabilitiesare measured initiallyattheirfairvaluesand,ifnotdesignated Group’s accountingpolicyforborrowing costs(seebelow). using theeffectiveinterest methodis recognised overthetermofborrowings inaccordancewiththe subsequently measured atamortisedcost,usingtheeffectiveinterest method.Interest expensecalculated Interest-bearing bankandotherborrowings andseniornotesare initiallymeasured atfairvalue,and are effective yieldbasis. measured atamortisedcost,usingtheeffectiveinterest method,withinterest expense recognised onan Trade andotherpayablesare initiallymeasured atfairvalue,netoftransactioncosts,andare subsequently costs. deducting allofitsliabilities.Equityinstrumentsare recorded attheproceeds received, netofdirect issue An equityinstrumentisanycontractthatevidencesaresidual interest intheassetsofGroup after — F-28 — Provisions, ContingentLiabilitiesandAssets Revenue. andthe SUMMARY OFSIGNIFICANTACCOUNTINGPOLICIES(Cont’d) 2 accumulated inequityisrecognised immediatelyinprofit orloss. above. Whenaforecast transaction isnolongerexpectedtooccur, thecumulativegainorlossthatwas from equityandincludedintheinitialmeasurement ofthecostassetorliabilityasdescribed ultimately recognised inprofit orloss,suchgainsand lossesare recognised inprofit orloss,transferred gain orlossaccumulatedinequityatthattimeremains inequityandwhentheforecast transactionis instrument expires orissold,terminated,exercised, ornolongerqualifies forhedgeaccounting.Any Hedge accountingisdiscontinuedwhentheGroup revokes thehedgingrelationship, thehedging are transferred from equityandincludedintheinitialmeasurement ofthecostassetorliability. of anon-financialassetorliability, thegainsandlossespreviously accumulatedinequity recognised hedgeditem.However, whentheforecast transaction thatishedgedresults intherecognition consolidated statementofprofit orlossandconsolidatedstatementofcomprehensive incomeasthe profit orlossintheperiodswhenhedgeditemisrecognised inprofit orlossinthesamelineof Amounts recognised inothercomprehensive incomeandaccumulatedinequityare reclassified to is recognised immediatelyinprofit orlossaspartofothergainsandlosses. hedges are recognised inothercomprehensive income.Thegainorlossrelating totheineffectiveportion The effectiveportionofchangesinfairvaluederivativesthatare designedandqualifyascashflow Cash flowhedge Movements inthehedgingreserve inothercomprehensive incomeare alsodetailedinNote22. Note 21containdetailsofthefairvaluesderivativeinstrumentsusedforhedgingpurposes. in offsettingchangesfairvaluesorcashflowsofthehedgeditem. Group documentswhetherthehedginginstrumentthatisusedinarelationship ishighlyeffective various hedgetransactions.Furthermore, attheinceptionofhedgeandonanongoingbasis, instrument andhedgeditem,alongwithitsriskmanagementobjectivesstrategyforundertaking At theinceptionofhedgerelationship theentitydocumentsrelationship betweenthehedging exchange riskonfirmcommitments are accountedforascashflowhedges. The Group designatescertainhedginginstrumentsofderivativesascashflowhedges.Hedgesforeign Hedge accounting as current assetsorcurrent liabilities. it isnotexpectedtoberealised orsettledwithin12months.Otherembeddedderivativesare presented maturity ofthehybridinstrumenttowhichembeddedderivativerelates ismore than12monthsand An embeddedderivativeispresented asanon-current assetoranon-current liabilityiftheremaining the hostcontractsare notmeasured atfairvaluewithchangesinrecognised inprofit orloss. derivatives whentheirrisksandcharacteristicsare notcloselyrelated tothoseofthehostcontractsand Derivatives embeddedinotherfinancialinstrumentsorhostcontractsare treated asseparate Embedded derivatives — F-29 — FINANCIAL STATEMENTS December 31,2017 NOTES TO
87 ANNUAL REPORT 2017 88 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO SUMMARY OFSIGNIFICANTACCOUNTINGPOLICIES(Cont’d) 2 after takingintoconsideration prevailing market conditions. estimated sellingexpenses; or isestimatedbymanagementintheabsenceofcomparable transactions determined byreference tosaleproceeds ofproperties soldintheordinary courseofbusinesslessall and capitalisedborrowing costsbasedonfloorarea oftheunsoldproperties. Netrealisable valueis net realisable value.Cost isdeterminedbyapportionmentofthetotallandcost, developmentcosts COMPLETED PROPERTIESFORSALE–Completedproperties forsaleare statedatlowerofcost or construction isexpectedtocommencewithintwelvemonths from theendof reporting period. preparatory activitieshavebeenapproved by management andhavecommenced,physical Properties underdevelopmentforsaleincludeproperties inrespect ofwhichconcrete planningand When completed,theunitsheldforsaleare classifiedascompletedproperties forsale. comprises landcost,developmentcostsandborrowing costscapitalisedduringthedevelopmentperiod. expected toberealised andtheanticipatedcoststocompletion.Costofproperty underdevelopment at lowerofcostandnetrealisable value.Netrealisable valuetakes intoaccountthepriceultimately PROPERTIES UNDERDEVELOPMENT FORSALE–Properties underdevelopmentforsaleare stated in value. months from theendofreporting period.Theyare statedatcostlessallowanceforanyimpairment future developmentinrespect ofwhichphysicalconstructionisnotexpectedtocommencewithintwelve PROPERTIES FORDEVELOPMENT –Properties fordevelopmentare mainlyvacantleaseholdlandfor are recognised asanexpenseintheperiodwhichtheyare incurred. economic benefitsfrom theleasedassetare consumed.Contingentrentals arisingunderoperatingleases of therelevant leaseunlessanothersystematicbasisismore representative ofthetimepatterninwhich Rentals payableunderoperatingleasesare chargedtoprofit orlossonastraight-linebasisovertheterm The Group aslessee income. operating leaseare recognised onastraight-linebasisovertheleasetermsameasleased derived from theleasedassetisdiminished.Initialdirect costsincurred innegotiatingandarrangingan lease unlessanothersystematicbasisismore representative ofthetimepatterninwhichusebenefit Rental incomefrom operatingleasesisrecognised onastraight-linebasisoverthetermofrelevant The Group aslessor the risksandrewards ofownershiptothelessee.Allotherleasesare classifiedasoperatingleases. LEASES –Leasesare classifiedasfinanceleaseswheneverthetermsofleasetransfersubstantiallyall the eventofdefault,insolvencyorbankruptcy. event andmustbeexercisable byanyofthecounterparties,bothinnormalcoursebusinessand liability simultaneously. Arighttoset-offmustbeavailabletodayratherthanbeingcontingentonafuture recognised amounts;andintendseithertosettleonanetbasis,orrealise theassetandsettle of financialpositionwhentheCompanyandGroup hasalegallyenforceable righttosetoffthe Financial assetsandfinancialliabilitiesare offsetandthenetamountpresented inthestatement Offsetting arrangements — F-30 —
Transfers are madetoorfrom investmentproperties whenandonlythere isachangeinuse.For Aninvestment property isderecognised upondisposalorwhentheinvestmentproperty ispermanently INVESTMENTPROPERTIES–Investment properties are properties heldtoearnrental incomeand/ 10%to25% – 20% 2%to5% – – Furniture, fixtures andequipment Motorvehicles Leaseholdlandandbuildings Depreciation ischargedsoastowriteoffthecostofproperty, plantandequipment,otherthanconstruction- Construction-in-progress consistsoflandcost,constructioncostsandcapitalisedborrowing costs PROPERTY, PLANTANDEQUIPMENT –Property, plantandequipmentare statedatcostlessaccumulated SUMMARY OFSIGNIFICANTACCOUNTINGPOLICIES(Cont’d) 2 less anyimpairmentloss. INTANGIBLE ASSET–Thisrelates toaclubmembershipheld onalong-termbasisandisstatedatcost its previous carryingamountisrecognised inprofit orloss. for saletoinvestmentproperties, anydifference between thefairvalueofproperties atthatdate and transfer from properties fordevelopment,properties underdevelopmentforsaleorcompletedproperties derecognised. and thecarryingamountofasset)isincludedinprofit orlossintheperiodwhichproperty is arising onderecognition oftheproperty (calculated asthedifference betweenthenetdisposalproceeds withdrawn from useandnofuture economicbenefitsare expectedfrom thedisposal.Anygainor loss cost. and alternativereliable estimatesoffairvalueare notavailable,theinvestmentproperty ismeasured at there isaninabilitytodeterminefairvaluereliably whencomparablemarket transactionsare infrequent fair valueofinvestmentproperty are includedinprofit orlossfortheperiodinwhichtheyarise.Where Professional valuationsare obtainedatleastonceeveryyear. Gainsorlossesarisingfrom changesinthe initially atcost,includingtransactioncostsandsubsequenttoinitialrecognition, measured atfairvalue. or forcapitalappreciation andproperties underconstructionforsuchpurposes.Theyare measured profit orloss. as thedifference betweenthesalesproceeds andthecarryingamountofassetis recognised in The gainorlossarisingonthedisposalretirement ofaproperty, plantandequipmentisdetermined Fully depreciated property, plantandequipmentstillinuseare retained inthefinancialstatements. the effectofanychangesinestimateaccountedforonaprospective basis. The estimatedusefullives,residual valuesanddepreciation methodare reviewed ateachyearend, with in-progress, overtheirestimatedusefullives,usingthestraight-linemethodonfollowingbases: incurred duringtheperiodofconstruction. depreciation andanyaccumulatedimpairmentlosses. — F-31 — FINANCIAL STATEMENTS December 31,2017 NOTES TO
89 ANNUAL REPORT 2017 90 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO SUMMARY OFSIGNIFICANTACCOUNTINGPOLICIES(Cont’d) 2 associate orjointventure. extent thattheGroup hasincurred legalorconstructive obligationsormadepaymentsonbehalfofthe Group discontinuesrecognising itsshare offurtherlosses.Additionallossesare recognised only tothe interests that,insubstance,formpartoftheGroup’s netinvestmentintheassociateorjointventure), the venture exceeds the Group’s interest inthatassociateorjointventure (whichincludesanylong-term income oftheassociateorjointventure. WhentheGroup’s share oflossesanassociateorajoint cost andadjustedthereafter torecognise theGroup’s share oftheprofit orlossandothercomprehensive an associateorajointventure isinitiallyrecognised intheconsolidatedstatementoffinancialpositionat financial statementsusingtheequitymethodofaccounting.Undermethod,aninvestmentin The results andassetsliabilitiesofassociatesorjointventures are incorporatedintheseconsolidated unanimous consentofthepartiessharingcontrol. of control ofanarrangement,whichexistsonlywhendecisionsabouttherelevant activitiesrequire have rightstothenetassetsofjointarrangement.Jointcontrol isthecontractuallyagreed sharing A jointventure isajointarrangementwhereby thepartiesthathavejointcontrol ofthearrangement of theinvesteebutisnotcontrol orjointcontrol overthosepolicies. influence. Significantinfluenceisthepowertoparticipateinfinancialandoperatingpolicydecisions ASSOCIATES ANDJOINTVENTURES–Anassociateisanentity overwhichtheGroup hassignificant recognised immediatelyinprofit orloss. been recognised fortheasset(cash-generatingunit)inprioryears.Areversal ofanimpairmentlossis amount doesnotexceed thecarryingamountthatwouldhavebeendeterminedhadnoimpairmentloss unit) isincreased totherevised estimateofitsrecoverable amount,butsothattheincreased carrying Where animpairmentlosssubsequentlyreverses, thecarryingamountofasset(cash-generating impairment lossisrecognised immediatelyinprofit orloss. amount, thecarryingamountofasset(cash-generatingunit)isreduced toitsrecoverable amount.An If therecoverable amountofanasset(orcash-generatingunit)isestimatedtobelessthanitscarrying reflects current market assessmentsofthetimevaluemoneyandrisksspecifictoasset. the estimatedfuture cashflowsare discountedtotheirpresent valueusingapre-tax discountratethat Recoverable amountisthehigheroffairvaluelesscoststosellandinuse.Inassessinguse, estimates therecoverable amountofthecash-generatingunittowhichassetbelongs. (if any).Where itisnotpossibletoestimatetherecoverable amountofanindividualasset,theGroup the recoverable amountoftheassetisestimatedinordertodetermineextentimpairmentloss there isanyindicationthatthoseassetshavesuffered animpairmentloss.Ifanysuchindicationexists, derivative financialinstrumentsandheld-for-trading investmentcarriedatfairvalue,todeterminewhether reviews thecarryingamountsofitstangibleandintangibleassetsotherthaninvestmentproperties, IMPAIRMENT OFTANGIBLE ANDINTANGIBLE ASSETS–Attheendofeachreporting period,theGroup — F-32 — SUMMARY OFSIGNIFICANTACCOUNTINGPOLICIES(Cont’d) 2 the Group. financial statementsonlyto the extentofinterests intheassociateorjointventure thatare notrelated to from thetransactionswithassociateorjointventure are recognised intheGroup’s consolidated When agroup entitytransactswithanassociateorajointventure oftheGroup, profits andlossesresulting liabilities. interest ifthatgainorlosswouldbereclassified to profit orlossonthedisposalofrelated assetsor had previously beenrecognised inothercomprehensive incomerelating tothatreduction inownership to usetheequitymethod,Group reclassifies to profit orlosstheproportion ofthegainorlossthat When theGroup reduces itsownershipinterest inanassociateorajointventure buttheGroup continues remeasurement tofairvalueuponsuchchangesin ownershipinterests. in ajointventure orinvestmentinajointventure becomesinvestmentinanassociate.There isno The Group continuestousetheequitymethodwheninvestmentinanassociatebecomes or loss(asareclassification adjustment)whentheequitymethodisdiscontinued. the disposalofrelated assetsorliabilities,theGroup reclassifies thegainorlossfrom equitytoprofit in othercomprehensive incomebythatassociateorjointventure wouldbereclassified toprofit orloss on had directly disposedoftherelated assetsorliabilities.Therefore, ifagainorlosspreviously recognised that associateorjointventure onthesamebasisaswouldberequired ifthatassociateorjointventure the Group accountsforallamountspreviously recognised inothercomprehensive incomeinrelation to included inthedeterminationofgainorlossondisposalassociatejointventure. Inaddition, retained interest andanyproceeds from disposingofapartinterest intheassociateorjointventure is the associateorjointventure atthedateequitymethodwasdiscontinued,andfairvalueofany value oninitialrecognition inaccordancewithFRS39.Thedifference betweenthecarryingamountof the Group measures theretained interest atfairvaluethatdateandtheisregarded asitsfair retains aninterest intheformerassociateorjointventure andtheretained interest isafinancialasset, an associateorajointventure, orwhentheinvestmentisclassifiedasheldforsale.WhenGroup The Group discontinuestheuseofequitymethodfrom thedatewheninvestmentceasestobe FRS 36totheextentthatrecoverable amountoftheinvestmentsubsequentlyincreases. carrying amountoftheinvestment.Anyreversal ofthatimpairmentlossisrecognised inaccordancewith fair valuelesscoststosell)withitscarryingamount,anyimpairmentlossrecognised formspartofthe 36 carrying amountoftheinvestment(includinggoodwill)istestedforimpairmentinaccordancewithFRS loss withrespect totheGroup’s investmentinanassociateorajointventure. Whennecessary, theentire The requirements ofFRS39are appliedtodeterminewhetheritisnecessaryrecognise anyimpairment immediately inprofit orlossintheperiodwhichinvestmentisacquired. the identifiableassetsandliabilitiesovercostofinvestment,afterreassessment, isrecognised within thecarryingamountofinvestment.Anyexcess oftheGroup’s share ofthenetfairvalue value oftheidentifiableassetsandliabilitiesinvesteeisrecognised asgoodwill,whichisincluded associate orajointventure, anyexcess ofthecostinvestmentoverGroup’s share ofthenetfair on whichtheinvesteebecomesanassociateorajointventure. Onacquisitionoftheinvestmentinan Investment inanassociateorajointventure isaccountedforusingtheequitymethodfrom thedate Impairment ofAssetsasasingleassetbycomparingitsrecoverable amount(higherofvalueinuseand — F-33 — FINANCIAL STATEMENTS December 31,2017 NOTES TO 91 ANNUAL REPORT 2017 92 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO Renderingofservices OTHER RESERVE–Thenegativebalanceinotherreserve comprises(i)thenetexcess ofpurchase STATUTORY RESERVE–Statutoryreserve represents theamounttransferred from profit aftertaxofthe MERGER DEFICIT–Mergerdeficitarisesfrom combinationof entitiesundercommoncontrol accounted SUMMARY OFSIGNIFICANTACCOUNTINGPOLICIES(Cont’d) 2 Management feeincomeand serviceincomeare recognised overtheperiodwhen servicesare rendered. current liabilities. this stageare recorded asadvancesreceived from customersforsalesofproperties andare classifiedas the respective property tothebuyer, whicheveristheearlier. Payments received from buyerspriorto when theequitableinterest intheproperty vests inthebuyeruponrelease ofthehandovernotice of Revenue from properties developedforsaleisrecognised whenthelegaltitlepassestobuyer or Sale ofproperties developed receivable. REVENUE RECOGNITION –Revenueismeasured atthefairvalueofconsiderationreceived or reserves andothercomprehensive incomeofajointventure. changes inthecarryingvalueofputliabilityare recognised inprofit orloss;and(iii)theshare of entered intowiththenon-controlling shareholders ontheirequityinterests inasubsidiary. Subsequent date ofacquisition;(ii)thechargepresent valueofaputliabilityinrelation toputinstruments consideration overthecarryingamountofnon-controlling interests acquired inthesubsidiariesat increasing capital. from therelevant PRCauthoritytoapplytheamounttowardssettingoffanyaccumulatedlossesor with thePRCrequirement. Thestatutoryreserve cannotbereduced except where approval isobtained subsidiaries incorporatedinthePeople’sRepublicofChina(“PRC”) (excluding HongKong) inaccordance Company asconsiderationfortheacquisition. on whichtheywere acquired bytheGroup and thenominalamountofshare capitalissuedby the difference betweentheaggregate nominalamountsoftheshare capitalofthesubsidiariesatdate for usingmergeraccountingmethod(see“Business Combinations”).Themergerreserve represents the be received andtheamountofreceivable canbemeasured reliably. from athirdparty, thereceivable isrecognised asanassetifitisvirtuallycertainthatreimbursement will When someoralloftheeconomicbenefitsrequired tosettleaprovision are expectedtoberecovered present obligation,itscarryingamountisthepresent valueofthosecashflows. surrounding theobligation.Where aprovision ismeasured usingthecashflowsestimatedtosettle present obligationattheendofreporting period,takingintoaccounttherisksanduncertainties The amountrecognised asaprovision isthebestestimateofconsiderationrequired tosettlethe reliable estimatecanbemadeoftheamountobligation. as aresult ofapastevent,itisprobable thattheGroup willberequired tosettletheobligation,anda PROVISIONS –Provisions are recognised whentheGroup hasapresent obligation(legalorconstructive) — F-34 — EMPLOYEE LEAVE ENTITLEMENT–Employeeentitlements toannualleaveare recognised whenthey Pursuanttotherelevant regulations ofthePRCgovernment,subsidiariesGroup (“PRC RETIREMENTBENEFITCOSTS –Paymentstodefinedcontributionretirement benefitplansare charged Allotherborrowing costsare recognised inprofit orlossintheperiodwhichtheyare incurred. BORROWINGCOSTS –Borrowing costsdirectly attributabletotheacquisition, constructionorproduction GOVERNMENTSUBSIDIES–Governmentsubsidiesare notrecognised untilthere isreasonable assurance Rental income Dividend income Interest SUMMARY OFSIGNIFICANTACCOUNTINGPOLICIES(Cont’d) 2 income rendered byemployees uptotheendofreporting period. accrue toemployees.Aprovision ismadefortheestimatedliabilityannualleave asaresult ofservices the Schemesare charged asexpensewhenincurred. is topaytheongoingrequired contributionsunder theSchemesmentionedabove.Contributionsunder employees ofthePRCSubsidiaries.Theonlyobligation thePRCSubsidiarieswithrespect totheSchemes governments undertake toassumetheretirement benefitobligationsofallexistingandfuture retired basic salariesoftheiremployeestotheSchemesfund theirretirement benefits.Thelocalmunicipal governments whereby thePRCSubsidiariesare required tocontributeacertainpercentage ofthe Subsidiaries”) haveparticipatedincentralpensionschemes (“theSchemes”)operatedbylocalmunicipal equivalent tothosearisinginadefinedcontributionretirement benefitplan. dealt withaspaymentstodefinedcontributionplanswhere theGroup’s obligationsundertheplansare made tostate-managedretirement benefitschemes,suchastheSingapore CentralProvident Fund, are as anexpensewhenemployeeshaverendered theservicesentitlingthemtocontributions.Payments for capitalisation. borrowings pendingtheirexpenditure onqualifyingassetsisdeductedfrom theborrowing costseligible ready fortheirintendeduseorsale.Investmentincomeearnedonthetemporaryinvestmentofspecific intended useorsale,are addedtothecostoftheseassets,untilsuchtimeasassetsare substantially of qualifyingassets,whichare assetsthatnecessarilytake asubstantialperiodoftimetogetready fortheir expenses are chargedtotheprofit orlossandare reported separatelyas“other operatingincome”. related costs.Governmentsubsidiesrelated toexpenseitemsare recognised inthesameperiodas those Government subsidiesare recognised asincomeovertheperiodsnecessarytomatchthemwith that theGroup willcomplywiththeconditionsattachingtothemandsubsidiesbereceived. relevant lease. Rental incomefrom investmentproperties isrecognised onastraight-linebasisoverthetermof been established. Dividend incomefrom investmentsisrecognised whentheshareholders’ rightstoreceive paymenthave interest rateapplicable. Interest incomeisaccruedonatimebasis,byreference totheprincipaloutstandingandateffective — F-35 — FINANCIAL STATEMENTS December 31,2017 NOTES TO
93 ANNUAL REPORT 2017 94 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO Forthe purposesofmeasuringdeferred taxliabilitiesanddeferred taxassetsforinvestmentproperties Thecarryingamountofdeferred taxassetsisreviewed attheendofeachreporting periodandreduced Deferred taxisrecognised ondifferences between thecarryingamountsofassetsandliabilitiesin Thetaxcurrently payableisbasedontaxableprofit fortheyear. Taxable profit differsfrom profit as INCOME TAX –Incometaxexpenserepresents thesumoftaxcurrently payableanddeferred tax. SUMMARY OFSIGNIFICANTACCOUNTINGPOLICIES(Cont’d) 2 authority andtheGroup intends tosettleitscurrent taxassetsandliabilitieson anetbasis. tax assetsagainstcurrent taxliabilitiesandwhentheyrelate toincometaxes leviedbythesametaxation Deferred taxassetsandliabilitiesare offsetwhen there isalegallyenforceable righttosetoffcurrent the investmentproperties willberecovered entirely through sale. over time,ratherthanthrough sale.TheGroup has rebutted thepresumption thatthecarryingamountof objective istoconsumesubstantiallyalloftheeconomic benefitsembodiedintheinvestmentproperty investment property isdepreciable andisheldwithin abusinessmodeloftheGroup whosebusiness be recovered through sale,unlessthepresumption isrebutted. Thepresumption isrebutted whenthe that are measured usingthefairvaluemodel, carryingamountsofsuchproperties are presumed to carrying amountofitsassetsandliabilities. from themannerinwhichGroup expects,attheendofreporting period,torecover orsettle the the measurement ofdeferred taxliabilitiesandassetsreflects thetaxconsequencesthatwouldfollow by theendofreporting period.Except forinvestmentproperties measured usingthefairvaluemodel, or theassetrealised basedonthetaxrates(andlaws)thathavebeenenactedorsubstantively Deferred taxiscalculatedatratesthatare expectedtoapplyintheperiodwhenliabilityissettled of theassettoberecovered. to theextentthatitisnolongerprobable thatsufficienttaxable profits willbeavailabletoallowallorpart foreseeable future. reversal ofthetemporarydifference anditisprobable thatthetemporarydifference willnot reverseinthe subsidiaries andassociates,interests injointventures, except where theGroup isabletocontrol the Deferred taxliabilitiesare recognised fortaxable temporarydifferences arisingoninvestments in other assetsandliabilitiesinatransactionthataffectsneitherthetaxableprofit northeaccountingprofit. difference arisesfrom goodwillorfrom theinitial recognition (otherthaninabusinesscombination) of temporary differences canbeutilised.Suchassetsandliabilitiesare not recognised ifthetemporary recognised totheextentthatitisprobable thattaxableprofits willbeavailableagainstwhichdeductible tax liabilitiesare generallyrecognised foralltaxabletemporarydifferences anddeferred taxassetsare financial statementsandthecorresponding taxbasesusedinthecomputationoftaxableprofit. Deferred the reporting period. enacted orsubstantivelyincountrieswhere theCompanyandsubsidiariesoperatebyendof deductible. TheGroup’s liabilityforcurrent taxiscalculatedusingrates(andlaws)thathavebeen that are taxableordeductibleinotheryearsanditfurtherexcludes itemsthatare nottaxableortax reported intheconsolidatedstatementofprofit orlossbecauseitexcludes itemsofincomeorexpense — F-36 — Forthe purposeofpresenting consolidatedfinancialstatements, theassetsandliabilitiesofentities Exchange differences arisingonthesettlementofmonetaryitems,and retranslation ofmonetary Current anddeferred taxare recognised asanexpenseorincomeinprofit orloss,except whenthey SUMMARY OFSIGNIFICANTACCOUNTINGPOLICIES(Cont’d) 2 deposits andare subject to aninsignificantriskofchangesinvalue. equivalents intheconsolidated statementofcashflowscompriseonhand, atbankandfixed CASH ANDEQUIVALENTS INTHECONSOLIDATED STATEMENT OFCASH FLOWS –Cashandcash and transferred totheGroup’s currency translationreserve. transactions are used.Exchange differences arising,ifany, are classifiedasothercomprehensive income rates fluctuatedsignificantlyduringthatperiod,inwhich casetheexchange rates atthedatesof (including comparatives)are translatedattheaverageexchange ratesfortheperiod,unlessexchange in RMBusingexchange ratesprevailing attheendofeachreporting period. Incomeandexpenseitems in theGroup whichdonothaveRMBasthefunctionalcurrency (includingcomparatives)are expressed described inthehedgeaccountingpoliciesabove. Exchange differences ontransactionsentered intoinordertohedgecertainforeign currency risksare interest costsonthoseforeign currency borrowings. productive use,are includedinthecostofthoseassetswhentheyare regarded asanadjustment to Exchange differences onforeign currency borrowings relating to assetsunderconstructionforfuture loss isalsorecognised directly inothercomprehensive income. other comprehensive income.Forsuchnon-monetaryitems,anyexchange componentofthatgainor arising ontheretranslation ofnon-monetaryitemsinrespect ofwhichgainsandlossesare recognised in non-monetary itemscarriedatfairvalueare includedinprofit orlossfortheperiodexcept fordifferences items are includedinprofit orlossfortheperiod.Exchange differences arisingonthe retranslation of are notretranslated. was determined.Non-monetaryitemsthatare measured intermsofhistoricalcostaforeign currency denominated inforeign currencies are retranslated attheratesprevailing onthedatewhenfairvalue the ratesprevailing attheendofeachreporting period.Non-monetaryitemscarriedatfairvaluethatare At theendofeachreporting period,monetaryitemsdenominatedinforeign currencies are retranslated at entity’s functionalcurrency are recorded atthe rates ofexchange prevailing onthedateoftransaction. In preparing thefinancialstatementsofindividualentities,transactionsincurrencies otherthanthe statements oftheGroup andthestatementoffinancialpositionCompanyisRMB. the entityoperates(itsfunctionalcurrency). Thepresentation currency fortheconsolidatedfinancial Group entityare measured andpresented inthecurrency oftheprimaryeconomicenvironment inwhich FOREIGN CURRENCYTRANSACTIONS ANDTRANSLATION –Theindividualfinancialstatementsofeach liabilities andcontingentovercost. determining theexcess oftheacquirer’s interest inthenetfairvalueofacquiree’s identifiableassets, In thecaseofabusinesscombination,taxeffectistaken intoaccountincalculatinggoodwillor income ordirectly inequity),orwhere theyarisefrom theinitialaccountingforabusinesscombination. in equity),whichcasethetaxisalsorecognised outsideprofit orloss(eitherinothercomprehensive relate toitemscredited ordebitedoutsideprofit orloss(eitherinothercomprehensive incomeordirectly — F-37 — FINANCIAL STATEMENTS December 31,2017 NOTES TO
95 ANNUAL REPORT 2017 96 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO CriticaljudgementsinapplyingtheGroup’saccountingpolicies CRITICAL ACCOUNTINGJUDGEMENTS ANDKEYSOURCESOFESTIMATION UNCERTAINTY 3 venture oftheGroup (Note 12). arrangements. Accordingly, Singapore IntelligentEcoIslandDevelopment Pte.Ltd.isclassifiedasajoint the partiestojointarrangements haverightstotheassetsandobligationsfor liabilitiesofthejoint Furthermore, there isnocontractualarrangement oranyotherfactsandcircumstances thatindicate legal formconfersseparationbetweenthepartiesto the jointarrangementandcompanyitself. Singapore IntelligentEcoIslandDevelopmentPte.Ltd.isaSingapore-incorporated companywhose Classification ofSingapore IntelligentEcoIslandDevelopmentPte.Ltd.asjointventure has unilateralcontrol overtheseentities. dominant votingrightandpowertodirect therelevant activitiesoftheseentitiesandtherefore theGroup contractual arrangements.Afterassessment,themanagement concludedthattheGroup hassufficiently unilaterally. Inmakingtheirjudgement,the managementconsidered theGroup’s rightsarisingfrom the based onwhethertheGroup hasthepracticalabilitytodirect therelevant activitiesoftheseentities The managementoftheCompanyassessedwhetherornotGroup hascontrol overtheseentities and shareholder’s votingrightsinthesetwoentitiesrespectively. Co., Ltd.are subsidiariesoftheGroup eventhoughtheGroup hasonlya50%and30%ownershipinterest /PUFūŪEFTDSJCFTUIBU4IBOHIBJ3FOQJO1SPQFSUZ%FWFMPQNFOU$P rights Control overentitiesforwhichtheGroup doesnothavemore than50%ownershipinterest andvoting reporting periodtobeadequate.TheLAT expenserecorded duringtheyearisdisclosedinNote30. and regulations. Themanagementhasassessedandconsiderstheprovision ofLAT asattheendof and regulations. Themanagementestimatesandprovides forLAT inaccordancewiththePRCtaxlaws Income from saleofproperties inthePRCissubjecttoLAT atprogressive ratesunderthePRCtaxlaws Land Appreciation Tax (“LAT”) significant effectontheamounts recognised inthefinancialstatements. management hasmadeintheprocess ofapplyingtheGroup’s accountingpoliciesandthathavethemost The followingare thecriticaljudgements,apartfrom thoseinvolvingestimations(seebelow),that periods. period, orintheperiodofrevision andfuture periodsiftherevision affectsbothcurrent andfuture estimates are recognised intheperiodwhichestimateisrevised iftherevision affectsonlythat The estimatesandunderlyingassumptionsare reviewed onanongoingbasis.Revisionstoaccounting differ from theseestimates. based onhistoricalexperienceandotherfactorsthatare considered toberelevant. Actualresults may liabilities thatare notreadily apparent from othersources. Theestimatesandassociatedassumptionsare is required tomake judgements,estimatesandassumptionsaboutthecarryingamountsofassets In theapplicationofGroup’s accountingpolicies,whichare describedinNote2above,management — F-38 — -UEBOE4V[IPV3FOBO3FBM&TUBUF
Inrelying ontheindependentprofessional valuation report, managementconsidered themethodof Anychange inthevariableparametersandprojections willresult inchangefairvalueestimateforthe AsdisclosedinNote8,investmentproperties are statedatfairvaluebasedonthevaluationperformed Valuation ofinvestmentproperties Keysourcesofestimationuncertainty CRITICAL ACCOUNTINGJUDGEMENTSANDKEYSOURCESOFESTIMATION UNCERTAINTY (Cont’d) 3 valuation andtheGroup’s marketing strategyandisoftheviewthatestimatedvaluesare reasonable. investment properties whichcanpotentiallybesignificant. including projected rental income,occupancyrate, rental yield,discountrateandterminalyield. as anestimateoffairvalue,andtheisdependentonseveralvariableparametersprojections The estimatedvaluefrom capitalisationoftheexistingandreversionary rental incomepotentialisused capitalisation oftheexistingandreversionary rental incomepotential. both thecomparablesalestransactionsasavailableinrelevant market oftheseproperties andthe by anindependentprofessional valuer. Indeterminingthefairvalues,valuerhasmadereference to plans, assumptionsandestimatescanpotentiallyimpactthecarryingamountsofrespective properties. to date,thedevelopmentstatusandcostscompleteeachproject. Anyfuture variationin conditions. Managementperformscoststudiesforeachproject, takingintoaccountthecostsincurred and theeffectofassumptionsin respect ofdevelopmentplans,timingsaleandtheprevailing market The process ofevaluatingthenetrealisable valueforeachproperty issubjecttomanagement’sjudgement immediately. expenses, i.e.netrealisable value,theamountinexcess ofnetrealisable valueisrecognised asanexpense When itisprobable thatthetotalproject costswillexceed thetotalprojected revenue netofselling basis. for impairmentinvalueoratthelowerofcostandnetrealisable values,assessedonanindividualproperty (2016 :RMB45.712billion),detailsofwhichare disclosedinNote9.Theyare statedatcostlessallowance The aggregate carryingamountoftheseproperties totalledRMB49.154billionasatDecember31,2017 development forsale Carrying amountsofproperties fordevelopment,completedproperties forsaleandproperties under of assetsandliabilitieswithinthenextfinancialyear, are discussedbelow. the reporting period,thathaveasignificantriskofcausingmaterialadjustmenttothecarryingamounts The key assumptionsconcerningthefuture, andother key sources ofestimationuncertaintyattheend — F-39 — FINANCIAL STATEMENTS December 31,2017 NOTES TO 97 ANNUAL REPORT 2017 98 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO Thefollowingtablesetsoutthefinancial instrumentsasattheendofreporting period: Categoriesoffinancialinstruments (a) FINANCIALINSTRUMENTS, FINANCIALRISKSANDCAPITAL RISKMANAGEMENT 4 b Financial instrumentssubjecttooffsetting,enforceablemasternettingarrangementsandsimilar Financial (b) assets agreements yeo nnilastast nnilpsto position financialposition assets Type offinancial asset Available-for-sale investment shareholders ofsubsidiaries duefrom non-controlling Non-trade amounts 2016 shareholders ofsubsidiaries duefrom non-controlling Non-trade amounts 2017 GROUP (includingcashandequivalents) Loans andreceivables Financial assets non-controlling interests Put liabilitytoacquire Financial liabilities Amortised cost — F-40 — 29,961,718 43,334,303 1,334,144 M’0 M’0 M’0 RMB’000 RMB’000 RMB’000 RMB’000 2017 2,990 mut ffiaca iblte presentedin financialliabilities amounts of eonsdstofi h thestatement setoffinthe recognised ,0,3 (14,501) 2,501,635 2,754,038 M’0 M’0 RMB’000 RMB’000 RMB’000 nnilsaeeto offinancial statementof financial GROUP rs frcgie assets ofrecognised Gross 24,207,375 32,559,183 1,421,698 2016 – rs mut offinancial Gross amounts 1,7)2,736,464 (17,574) 11,929,574 7,958,180 2017 COMPANY – – Net amounts 14,161,536 2,487,134 9,456,499 2016 – – b Financial instrumentssubjecttooffsetting,enforceablemasternettingarrangementsandsimilar (b) FINANCIALINSTRUMENTS, FINANCIALRISKSANDCAPITAL RISKMANAGEMENT(Cont’d) 4 c Financialriskmanagementpoliciesandobjectives (c) ThemanagementoftheGroup monitorsandmanagesthefinancialrisksrelating totheoperations TheCompanydoesnothaveanyfinancialinstruments whichare subjecttooffsetting,enforceable TheGroup doesnothaveanyrelated amountssubject toenforceable masternettingarrangements Inreconciling the‘Net amountsoffinancialassetsandliabilitiespresented inthestatement agreements ( and liquidityrisk. These risksincludemarket risk(foreign exchange risk,interest raterisk, equitypricerisk),credit risk of theGroup toensure appropriate measures are implementedinatimelyandeffectivemanner. master nettingarrangementsorsimilaragreements. and similararrangementswhichhavenotbeensetoffinthestatementoffinancialposition. arrangements andsimilaragreements. above amountsrepresent onlythosewhichare subjecttooffsetting,enforceable masternetting of financialposition’tothelineitemamountspresented inthestatementoffinancialposition, yeo nnillaiiylaiiisfiaca oiinposition financialposition liabilities Type offinancialliability shareholders ofsubsidiaries duetonon-controlling Non-trade amounts 2016 Financial liabilities shareholders ofsubsidiaries duetonon-controlling Non-trade amounts 2017 GROUP Cont’d) — F-41 — 1,971,772 mut ffiaca sespresentedin financialassets amounts of eonsdstofi h thestatement setoffinthe recognised M’0 M’0 RMB’000 RMB’000 RMB’000 nnilsaeeto offinancial statementof financial 4,7 (14,501) 648,975 rs frcgie liabilities ofrecognised Gross rs mut offinancial Gross amounts FINANCIAL STATEMENTS 1,7)1,954,198 (17,574) Net amounts 634,474 December 31,2017 NOTES TO
99 ANNUAL REPORT 2017 100 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO Foreign currency sensitivity i Foreignexchange riskmanagement (i) Financialriskmanagementpoliciesandobjectives( (c) FINANCIALINSTRUMENTS, FINANCIALRISKSANDCAPITAL RISKMANAGEMENT(Cont’d) 4 There hasbeennochangetotheGroup’s exposure tothesefinancialrisksorthemannerinwhich TheGroup doesnotholdorissuederivativefinancialinstrumentsforspeculativepurposes. TheGroup usesderivativefinancialinstrumentstomanageitsexposure toforeign currency risk Thefollowingtabledetailsthesensitivitytoa3% increase intheexchange rateofthe Attheendofreporting period,thecarryingamountsofmonetaryassetsand TheGroup entersintotransactionsinvariousforeign currencies, includingtheUnitedStates indicated below. it managesandmeasures therisks.Market riskexposures are measured usingsensitivityanalysis relating toitsforeign currency denominatedseniornotes. by 3%againsttherelevant foreign currencies. income taxandotherequitywhenthefunctionalcurrency ofeachGroup entitystrengthens profit orlossand/equity. Apositivenumberbelowindicatesanincrease inprofit before as intercompany loanswithintheGroup where theygaverisetoanimpactontheGroup’s rates. Thesensitivityanalysisincludesexternalloans, cash andequivalents,aswell items andadjuststheirtranslationattheyearendfor a3%changeinforeign currency The sensitivityanalysisincludesonlyoutstandingforeign currency denominatedmonetary and represents management’sassessmentofthepossible changeinforeign exchange rates. is thesensitivityrateusedbykey managementpersonnel inassessingforeign currency risk functional currency ofeachentitytheGroup against therelevant foreign currencies. 3% are asfollows: liabilities denominatedincurrencies otherthantherespective entities’functionalcurrencies therefore isexposedtoforeign exchange risk. (“US”) dollar, HongKong (“HK”) dollar, Singapore (“SG”) dollarandRenminbi(“RMB”) and US dollar SG dollar HK dollar RMB 11,926,678 M’0 M’0 M’0 M’0 M’0 M’0 M’0 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 2,731,728 545,094 0721 0721 0721 072016 2017 2016 2017 2016 2017 2016 2017 6,348 Liabilities 14,251,113 4,697,635 884,964 583,201 — F-42 — GROUP 7,228,573 145,023 888,177 61,989 Assets 1,240,642 5,388,618 326,736 31,374 Cont’d) 718,709 Liabilities – – – 416,220 797,910 COMPANY – – 201 107 41 Assets – 1,956 66 71 –
i) Interestrateriskmanagement (ii) i Foreignexchange riskmanagement(Cont’d) (i) Financialriskmanagementpoliciesandobjectives( (c) FINANCIALINSTRUMENTS, FINANCIALRISKSANDCAPITAL RISKMANAGEMENT(Cont’d) 4 Thesensitivityanalysisbelowhasbeendeterminedbasedontheexposure tointerest Interestratesensitivity SummaryquantitativedataoftheGroup’s interest-bearing financialinstrumentscanbe Fora3% weakening ofthefunctionalcurrency ofeachGroup entityagainsttherelevant assessment ofthepossiblechangeininterest rates. or decrease isusedwhenassessinginterest rate riskandrepresents themanagement’s reporting yearinthecaseofinstrumentsthathavefloatingrates.A100basispointincrease change takingplaceatthebeginningoffinancialyear andheldconstantthroughout the rates fornon-derivativeinstrumentsattheendof reporting periodandthestipulated do so. reduce volatility. However, itmayborrow atvariablerateswhenconsidered economicalto found inSection(v)ofthisNote.TheGroup’s policyistoobtainfixed rate borrowings to income taxandotherequity. foreign currencies, there wouldbeanequalandoppositeimpactontheprofit before income inprofit before tax (Decrease) Increase COMPANY inotherequity (Decrease) Increase income inprofit before tax (Decrease) Increase GROUP M’0 M’0 M’0 M’0 M’0 M’0 M’0 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (1,621) Sdla matH olripc Gdla matRMBimpact SGdollarimpact HKdollarimpact US dollarimpact 0721 0721 0721 072016 2017 2016 2017 2016 2017 2016 2017 (1) – (10,360) 12,121 — F-43 — – 11,654 (1) (6) Cont’d) 16,073 (2) – 138,074 (1,236) FINANCIAL STATEMENTS – 254,919 3,212 – (25,370) 20,930 79,066 50,570 23,183 76,738 December 31,2017 NOTES TO 101
ANNUAL REPORT 2017 102 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO i) Interestrateriskmanagement(Cont’d) (ii) Financialriskmanagementpoliciesandobjectives( (c) FINANCIALINSTRUMENTS, FINANCIALRISKSANDCAPITAL RISKMANAGEMENT(Cont’d) 4 ii Equitypriceriskmanagement (iii) Ifinterest rateshadbeen100basispointshigherorlowerandallothervariableswere held Themanagement wasoftheviewthatequitypricerisknotsignificantforGroup Available-for-sale investmentsare heldforstrategicratherthantradingpurposes.The Ifinterest rateshadbeen100basispointshigherorlowerandallothervariableswere constant, theGroup’s: Ŕ Ŕ analysis waspresented. due totherelatively smallamountofsuchinvestmentscarried.Hencenopricesensitivity Group andtheCompanydonotactivelytradeavailable-for-sale investments. during thecurrent yearduetothedecrease invariableratedebtinstruments. respectively byRMB21million).TheCompany’ssensitivitytointerest rateshasdecreased 2017 woulddecrease /increase respectively by RMB7million(2016:decrease /increase held constant,theCompany’sprofit before incometaxfortheyearendedDecember31, may affectprofit infuture financialyears. impact theprofit intheyearwhere interest expense isincurred andcapitalisedbut development. Hence,theabovementionedinterest ratefluctuationmaynotfully It istheGroup’s accountingpolicytocapitaliseborrowing costsrelevant toproperty instruments. the current yearduetotheincrease inthecarryingamountofvariableratedebt by RMB114million).TheGroup’s sensitivitytointerest rateshasincreased during / increase respectively byRMB210million(2016:decrease /increase respectively Profit before incometaxfortheyearendedDecember31,2017woulddecrease — F-44 — Cont’d) v Liquidityriskmanagement (v) Creditriskmanagement (iv) Financialriskmanagementpoliciesandobjectives( (c) FINANCIALINSTRUMENTS, FINANCIALRISKSANDCAPITAL RISKMANAGEMENT(Cont’d) 4 Inmanagingliquidityrisk,themanagementprepares cashflow forecasts usingvarious TheGroup maintainscashandequivalents,obtainsexternalbankotherborrowings TheGroup’s maximumexposure tocredit riskcomprise(i)thesumofcarryingamounts TheGroup doesnothaveanysignificantcredit riskexposure toanysinglecounterpartyor Credit riskrefers totheriskthatacounterpartymaydefaultonitscontractualobligations assumptions andmonitorsthecashflowsofGroup. credit facilitiesinrespect ofwhichallprecedent conditionshadbeenmet. available RMB11.434billion(2016:RMB9.571billion)ofundrawncommittedbankandother risk bykeeping committedcredit linesavailable.AtDecember31,2017,theGroup had and issuesseniornoteswithstaggered repayment dates.TheGroup alsominimisesliquidity properties, aselaboratedinNote40tothefinancialstatements. loans provided bythebankstothesecustomersforpurchase oftheGroup’s development RMB11.495 billion)tobanksforthebenefitofGroup’s customersinrespect ofmortgage losses; and(ii)credit riskrelating toguaranteesofapproximately RMB7.508billion(2016: of financialassetsrecorded inthefinancialstatements,grossed upforanyallowances by internationalcredit ratingagencies. equivalents islimitedbecausethecounterpartiesare bankswithhighcredit-ratings assigned relating tootherreceivables are disclosedin Note 14.Thecredit riskoncashand the subsidiarytonon-controlling shareholders (Note13).Informationoncredit risk to bedistributedasdividendsandfuture earningsthatare expectedtobedistributedby controlling interests are covered byundistributedretained earningsofthesubsidiaryyet due from non-controlling shareholders ofsubsidiaries. Partoftheamountsduefrom non- any group ofcounterpartieshavingsimilarcharacteristicsexcept fornon-trade amounts proceeds are fullysettledconcurrent withdeliveryofproperties. a meansofmitigatingtheriskfinanciallossfrom defaults.Forsalesofproperties, sales with creditworthy counterpartiesandobtainingsufficientcollateralwhere appropriate, as resulting infinanciallosstotheGroup. TheGroup hasadoptedapolicyofonlydealing — F-45 — Cont’d) FINANCIAL STATEMENTS December 31,2017 NOTES TO 103
ANNUAL REPORT 2017 104 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO v Liquidityriskmanagement(Cont’d) (v) Non-derivative Liquidityandinterestriskanalyses financial Financialriskmanagementpoliciesandobjectives( (c) liabilities FINANCIALINSTRUMENTS, FINANCIALRISKSANDCAPITAL RISKMANAGEMENT(Cont’d) 4 Thefollowingtablesdetailtheremaining contractualmaturityfornon-derivativefinancial the statementoffinancialposition. maturity analysiswhichisnotincludedinthecarryingamountoffinancialliabilitieson represents theestimatedfuture interest attributabletotheinstrumentincludedin pay. Thetableincludesbothinterest and principalcashflows.Theadjustmentcolumn liabilities basedontheearliestdatewhichGroup andCompanycanberequired to liabilities. Thetableshavebeendrawnupbasedontheundiscountedcashflowsoffinancial Non-interest 2016 Fixed interest Variable interest rt ntuet 4.9 rate instruments Total – bearing Non-interest 2017 GROUP Fixed interest Variable interest rt ntuet 6.2 rate instruments rt ntuet 4.3 rate instruments Total bearing rt ntuet 6.1 rate instruments neetrt er2yas5yas5yasAjsmnsTotal Adjustments 5years 5years 2years 1year interest rate egtdOn Weighted effective or within 1 year to 2 years toMorethan to2years 1year orwithin effective vrg eadMr hnMorethan Morethan demand average – M’0 M’0 M’0 M’0 M’0 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 % — F-46 — 182931,1,1 9975894593(,7,0)44,668,447 (6,672,409) 9,475,913 19,947,568 10,114,412 11,802,963 03284358811,4,2 ,5,6 26494 33,980,881 (2,684,934) 1,752,267 11,041,923 3,568,801 20,302,824 ,7,0 ,5,8 0231094593(,1,2)20,879,362 (4,319,921) 9,475,913 10,293,180 3,659,687 1,770,503 ,3,5 ,3,4 10,269,801 – – – 1,334,144 8,935,657 ,9,0 ,2,8 ,5,8 23248 13,519,284 (2,352,488) – 9,654,388 5,120,581 1,096,803 ,1,7 ,5,2 ,3,1 ,5,6 13974 11,351,983 (1,399,794) 1,752,267 4,430,310 2,050,927 4,518,273 ,8,3 ,2,9 10,103,034 – – 1,421,698 – 8,681,336 ,0,1 ,1,7 ,8,1 12510 12,525,864 (1,285,140) – 5,189,915 1,517,874 7,103,215 Cont’d) v Liquidityriskmanagement(Cont’d) (v) Financialriskmanagementpoliciesandobjectives( (c) FINANCIALINSTRUMENTS, FINANCIALRISKSANDCAPITAL RISKMANAGEMENT(Cont’d) 4 period. the guaranteescouldbecallediswithin1year(2016:year)from theendofreporting Theearliestperiodthat is jointlyguaranteedbytheCompanyandfiveofitssubsidiaries. RMB18.205 billion(2016:RMB6.203billion),RMB10.323RMB3.989billion) Outofthemaximumcontingentamount billion (2016:RMB6.203billion)(Note40). facilities grantedtosubsidiariesandaloanfacilityjointventure isRMB18.205 under thefinancialguaranteecontractsrelated toseniornotesissuedbyasubsidiary, loan In 2017,themaximumcontingentamountthatCompanycouldbeobligedtosettle considers thatthelikelihood oftheseguaranteesbeingcalleduponislow. : 1year)from theendofreporting period.AsmentionedinNote40,themanagement billion) (Note40).Theearliestperiodthattheguaranteescouldbecallediswithin1year(2016 guarantee contractsrelated tobankloansofbuyersisRMB7.508billion(2016:RMB11.495 In 2017,themaximumamountthatGroup couldbeobligedtosettleunderthefinancial Variable interest rate o-neetbaig ,5,8 5,450,785 – – – 5,450,785 – Non-interest bearing 2016 oa ,2,1 0,3 6,6)7,958,180 (69,269) – 704,739 7,322,710 Total Variable interest rate oa ,1,6 0,8 3,8 1971 9,456,499 (199,731) 737,584 306,485 8,612,161 Total Fixed interest rate Isrmns518,4 0,3 6,6)718,710 7,239,470 (69,269) – – – 704,739 83,240 – 5.1 7,239,470 – Instruments Non-interest bearing 2017 COMPANY isrmns6819843––(214 1,916,309 (52,124) – – 2,089,405 (147,607) 737,584 1,968,433 306,485 1,192,943 6.8 3.4 instruments instruments neetrt er2yas5yasAjsmnsTotal Adjustments 5years 2years 1year interest rate egtdOn Weighted effective or within 1 year to2years 1year orwithin effective vrg eadMr hnMorethan Morethan demand average M’0 M’0 M’0 M’0 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 % — F-47 — Cont’d) FINANCIAL STATEMENTS December 31,2017 NOTES TO 105
ANNUAL REPORT 2017 106 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO v Liquidityriskmanagement(Cont’d) (v) Non-derivative Financialriskmanagementpoliciesandobjectives( (c) financial assets FINANCIALINSTRUMENTS, FINANCIALRISKSANDCAPITAL RISKMANAGEMENT(Cont’d) 4 Thefollowingtablesdetailtheexpectedmaturityfornon-derivativefinancialassets. In2017 and2016,theCompany’snon-derivativefinancialassetsare mainlynon-interest Group andtheCompanyanticipatethatcashflowswilloccurinadifferent period. the financialassetsincludinginterest thatwillbeearnedonthoseassetsexcept where the tables belowhavebeendrawnupbasedontheundiscountedcontractualmaturitiesof bearing withexpectedmaturitywithinayear. oa 21788248623896–(6,3)24,207,375 (564,335) 18,952,895 – – 2,328,966 284,856 – 5,254,480 (564,335) 22,157,888 – 606,796 29,964,708 (912,762) 52,986 – 1,722,170 20,376,863 – 18,293,113 231,870 3,864,775 – 2,044,673 3,378,312 9,587,845 5.5 – 25,454,485 (912,762) Total – rate 256,633 instruments Fixed interest 1,348,208 bearing 1,788,040 18,772,022 Non-interest 2,030,104 6,682,463 – 2016 5.6 Total rate instruments Fixed interest bearing Non-interest 2017 GROUP interest rate Weighted effective average M’0 M’0 M’0 M’0 M’0 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 % — F-48 — or within demand 1 year On More than 1 yearto 2 years Cont’d) More than 2 yearsto 5 years More than er dutet Total Adjustments 5 years v) Fair valueoffinancialassetsandliabilities (vi) Financialriskmanagementpoliciesandobjectives( (c) FINANCIALINSTRUMENTS, FINANCIALRISKSANDCAPITAL RISKMANAGEMENT(Cont’d) 4 values ofthesefinancialassetsandliabilitiesare determined. the endofeachreporting period.Thefollowingtablegivesinformationabouthowthefair Some oftheGroup’s financialassetsandliabilitiesare measured atfairvalue value onarecurringbasis Fair valueoftheGroup’sfinancialassetsandliabilitiesthataremeasuredatfair following manner: The Group determinesfairvaluesofvariousfinancialassetsandliabilitiesinthe 1 A100basispointincrease /decrease incostofdebtusedasdiscountratewhileholding allothervariablesconstant (1) laiiis 0721 irrh n e nu()ipts fairvalue input(s) andkey input(s) hierarchy 2016 2017 / (liabilities) acquire non- Put liabilityto GROUP iaca sesFi au sa au ehiu()uosral inputsto unobservable technique(s) value Fair valueasat Financial assets interests controlling (2016 :RMB26million). would decrease /increase thecarryingamountofputliabilitytoacquire non-controlling interests byRMB15million (1,334,144) M’0 RMB’000 RMB’000 (1,421,698) Level 3 Discounted Discounted Level3 (1,421,698) — F-49 — arVlainSgicn unobservable Significant Valuation Fair Cont’d) exit at thetimeof the fairvalue by considering determined payment is expected of debt.The entity’s cost using the discounted payment, of expected present value based onthe estimated flows are Future cash cash flow. FINANCIAL STATEMENTS 10%) 2-3 yearsat at 9%(2016: of 1-2years with tenure Cost ofdebt Relationship of value in thefair a decrease will result in in isolation debt used the costof increase in A slight (1) December 31,2017 NOTES TO 107
ANNUAL REPORT 2017 108 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO v) Fair valueoffinancialassetsandliabilities(Cont’d) (vi) Financialriskmanagementpoliciesandobjectives( (c) FINANCIALINSTRUMENTS, FINANCIALRISKSANDCAPITAL RISKMANAGEMENT(Cont’d) 4 amortised costinthefinancialstatementsapproximate theirfairvalues: of financialassetsandliabilitiestheGroup andtheCompanyrecorded at Except asdetailedinthe followingtable,managementconsidersthatthecarryingamounts fair valueonarecurringbasis(butdisclosuresarerequired) Fair valueoftheGroup’sfinancialassetsandliabilitiesthatarenotmeasuredat There were notransfersbetweenLevel1and2ofthefairvaluehierarchy intheperiod. The Companyhadnofinancialassetsorliabilitiescarriedatfairvaluein2017and2016. Senior notes Senior Financial Liabilities 2017 GROUP Senior notes Financial Liabilities COMPANY Senior notes Financial Liabilities GROUP Senior notes Financial Liabilities 2016 — F-50 — ,1,0 3,027,132 2,911,604 M’0 M’0 M’0 RMB’000 RMB’000 RMB’000 RMB’000 M’0 M’0 M’0 RMB’000 RMB’000 RMB’000 RMB’000 arigFi arigFair Carrying Fair Carrying mutvleaon value amount value amount ee ee ee Total Level3 Level2 Level 1 –– – – – 2017 Cont’d) 3,027,132 1,941,494 Fair valuehierarchy ,1,0 1,941,494 1,916,309 1,941,494 1,916,309 – – 2016 3,027,132 1,941,494 d Capitalriskmanagementpoliciesandobjectives (d) v) Fair valueoffinancialassetsandliabilities(Cont’d) (vi) Financialriskmanagementpoliciesandobjectives( (c) FINANCIALINSTRUMENTS, FINANCIALRISKSANDCAPITAL RISKMANAGEMENT(Cont’d) 4 ThenetdebttoequityratiosasatDecember31,2017and2016were asfollows: TheGroup monitorscapitalonthebasisofnetdebttoequityratio.Thisratioiscalculated TheGroup manages itscapitaltoensure thatentitiesintheGroup willbeabletocontinueasa non-controlling interests asshownintheconsolidatedstatementoffinancialposition. to ownersoftheCompany, comprisingissued capital,reserves andaccumulatedprofits, aswell subsidiaries andultimateholdingcompany. Equityforthispurposecomprisesequityattributable borrowings, seniornotesandcertainnon-tradeamountsduetonon-controlling shareholders of as totaldebtlesscashandequivalentsdividedbyequity. Total debtincludebankandother and equitybalance. going concernwhilemaximisingthereturn toshareholders through theoptimisationofdebt providing the facilitiestotheGroup. notes issuedbytheCompany anditssubsidiaryborrowings withthefinancial institutions monitors thefinancialratios ofitsdebtcovenantsstatedintheagreements in respect ofsenior The Group’s overallstrategy remains unchangedfrom 2016.Inaddition,the Group alsospecifically Net debttoequityratio Equity Net debt Cash andcashequivalents Total debt Senior notes Financial Liabilities 2016 Senior notes Financial Liabilities 2017 COMPANY — F-51 — M’0 M’0 M’0 RMB’000 RMB’000 RMB’000 RMB’000 ee ee ee Total Level3 Level2 Level 1 – – Cont’d) 1,941,494 Fair valuehierarchy – FINANCIAL STATEMENTS (17,798,313) 34,398,647 32,702,811 16,600,334 M’0 RMB’000 RMB’000 072016 2017 50.8% GROUP – – (17,583,383) 23,675,021 30,009,556 1,941,494 6,091,638 20.3% December 31,2017 NOTES TO – 109
ANNUAL REPORT 2017 110 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO Duringtheyear, theGroup andtheCompanyentered intothefollowingtransactionswithitsultimate Transactions betweentheCompanyanditssubsidiaries,whichare related companiesoftheCompany, TheCompanyisasubsidiaryofYanlord HoldingsPte.Ltd.,incorporatedintheRepublicofSingapore, ULTIMATE HOLDINGCOMPANY ANDRELATED COMPANY TRANSACTIONS 5 Duringtheyear, theGroup entered intothefollowingtransactionswithrelated parties: SomeoftheGroup’s transactionsandarrangementsare withrelated partiesandtheeffectoftheseon the OTHER RELATED TRANSACTIONS PARTY 6 Non-tradeamountduetotheultimateholdingcompany amountingtoRMBNil(2016:RMB422million holding company: unsecured, interest-free andrepayable ondemandunlessotherwisestated. have beeneliminatedonconsolidationandare notdisclosedinthisnote.Theintercompany balancesare refer tomembersoftheultimateholdingcompany’sgroup ofcompanies. which isalsotheCompany’sultimateholdingcompany. Relatedcompaniesinthesefinancialstatements parties are unsecured, interest-free andrepayable ondemandunlessotherwisestated. basis determinedbetweenthepartiesisreflected inthesefinancialstatements.Thebalanceswithrelated balances are unsecured andrepayable ondemand. 1.5% perannum,andtheBank’scostoffundsorSWAP offerrateplus1.1%perannum respectively. The and RMB250million)bearsfloatinginterest ratesattheBank’scostoffundsorSWAP offerrateplus Rental expensestoadirector andacompanyinwhichthedirector hascontrol over Other incomefrom jointventures Other incomefrom anassociate Interest incomefrom jointventures Interest incomefrom associates andclosemembers oftheirfamilies Sales ofproperties tokey managementpersonnel Interest expensetoultimateholdingcompany(Note29) — F-52 — M’0 RMB’000 RMB’000 GROUP ANDCOMPANY M’0 RMB’000 RMB’000 (10,756) (95,544) (35,262) (46,467) 072016 2017 072016 2017 (6,306) 1,025 9,998 GROUP (50,805) (27,067) (15,421) (7,958) 9,855 560 (18) Attheendofreporting period,theGroup hasoutstandingcommitmentsofRMB30million OTHER RELATED TRANSACTIONS(Cont’d) PARTY 6 Theremuneration ofdirectors andothermembersofkey managementduringtheyearwasasfollows: Compensationofdirectorsandkey managementpersonnel AsatDecember31,2017,abankloanoftheCompanyamountingtoRMBNil(2016:RMB203million) Attheendofreporting period,theGroup haspre-sales ofproperties totalingRMB200million cancellable operatingleasesinrespect oflandandbuildingsforitsoffice premises andstaffaccommodation. (2016 :RMB13million)toadirector andacompanyinwhichthedirector hascontrol over, undernon- ultimate holdingcompanyandapersonalguaranteefrom adirector. drawn forgeneralworkingcapitaloftheGroup issecured byalegalchargeextendedtheCompany’s and closemembersoftheirfamiliesinrelation tothepre-sales ofproperties. advances amountingtoRMB55million(2016:RMB47million)havebeenreceived from key management (2016 :RMB47million)tokey managementandclosemembersoftheirfamilies.AsatDecember31,2017, Short-term benefits Post-employment benefits — F-53 — FINANCIAL STATEMENTS RMB’000 072016 2017 95,017 93,913 1,104 GROUP RMB’000 81,444 82,434 990 December 31,2017 NOTES TO
111
ANNUAL REPORT 2017 112 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO In2017,depreciation fortheyearincludes anamountofRMB2million(2016:million)capitalised in PROPERTY, ANDEQUIPMENT PLANT 7 disclosed inNote23. of construction-in-progress pledgedtobanksandotherlenderssecure bankandotherborrowings is the Group’s properties fordevelopmentandproperties underdevelopment forsale.Thecarryingamount Exchange difference Exchange difference Atbeginningofyear Atendofyear Carrying amount: toassociates(Note36) Eliminatedondisposals Depreciation forthe year AtDecember31,2016 underdevelopmentforsale Transfer toproperties Additions AtJanuary1,2016 Cost: GROUP AtDecember31,2017 tojointventures (Note37) Exchange difference Eliminatedondisposals Depreciation fortheyear AtJanuary1,2016 Accumulated depreciation: Disposals AtDecember31,2017 Exchange difference Disposals Additions AtDecember31,2016 Acquisition ofasubsidiary(Note35) Acquisition ofasubsidiary(Note35) Change ofcontrol from subsidiaries Change ofcontrol from subsidiaries Change ofcontrol from subsidiaries Change ofcontrol from subsidiaries toassociates(Note36) tojointventures (Note37) — F-54 — Leasehold ulig eilseupeti-rgesTotal in-progress equipment vehicles buildings M’0 M’0 M’0 M’0 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 adadMtrfitrsadConstruction- fixturesand Motor land and 2,1 0511488150002,079,769 1,510,020 164,888 80,551 324,310 7,5 5021,5 5,9 1,060,294 854,395 14,352 15,092 176,455 3,6 7401026121671,784,574 1,211,617 160,236 77,460 335,261 0,6 8901490234453,129,040 2,364,415 174,960 88,900 500,765 5,1 1393,3 ,1,2 1,819,467 1,510,020 2,842,863 32,135 2,364,415 35,749 21,399 27,932 255,913 414,767 1,7)(,2)(,0)–(21,498) – (4,201) (1,626) (15,671) 8375,5 132,753 59,152 68,397 8265,7 122,904 53,877 58,246 18377814,744 7,718 11,813 76174010,140 7,410 17,601 5986,6 139,211 60,968 85,998 162 138 362 (6,662) – (3,632) (1,368) (1,662) ,2 ,8 1423022382,911 360,292 11,412 6,487 4,720 833 28 – 740 27 – 113 126 (2,399) – (1,296) (1,103) – 552 362 (9,194) – (3,632) (5,562) – – – – 714 401 (11,165) – (4,041) (7,124) – – 3)(9 (71) – (39) (32) – – 177 263 (4,410) – (2,613) (1,797) – 7 7)–299 – (73) 372 – – 1)–(11) – (11) – 27 (207) – (207) – 14 – 41 9 Furniture, 6,8)(61,889) (61,889) – 61 – 67 – 260,302 – 235,027 – 34,275 – 35,151 – 286,177 – 14 – 50 – 8 INVESTMENT PROPERTIES DetailsoftheGroup’s investmentproperties andinformationabout thefairvaluehierarchy asatDecember Thefairvalueofinvestmentproperties atDecember31,2017and2016havebeendeterminedonthe There were notransfersbetweentherespective levels duringthe year. Theseincludethefollowing related toinvestmentproperties classifiedunderLevel3ofthefairvalue 31, 2017and2016are asfollows: There hasbeennochangetothevaluationtechniqueduringyear. In estimatingthefairvalueofproperties, thehighestandbestuseofproperties istheircurrent use. locality andadjustedbasedonthevaluers’knowledgeoffactorsspecifictorespective properties. rate adoptedismadebyreference totheyieldratesobservedbyvaluersforsimilarproperties inthe development value,costsincurred, expectedcosttocompletionanddeveloper’sprofit. Thecapitalisation the residual approach whereby thefairvalueis determined bytakingintoconsiderationtheprojected total rentals achievedinthelettableunitsaswellotherlettingsofsimilarproperties intheneighbourhoodand approach where themarket rentals ofalllettable unitsoftheproperties are assessedbyreference tothe reflects recent transactionpricesorcurrent asking pricesforsimilarproperties, theincomecapitalisation and notrelated totheGroup. Thefairvaluewasdeterminedbasedonthedirect comparisonapproach that professional qualificationandrecent experienceinthelocationandcategoryofproperties beingvalued, basis ofvaluationscarriedoutattherespective yearenddatesbyanindependentvaluerhavingrecognised hierarchy: Investment properties located inthePRC 2016 Investment properties locatedinthePRC 2017 GROUP Gain from fairvalueadjustmentincludedinprofit orloss Balanceasatendofyear Disposals Changeinfairvalue(Notes28and31) Transfer from completedproperties forsale Transfer from properties underdevelopmentforsale Additions Balanceasatbeginningofyear At fairvalue: — F-55 — M’0 M’0 M’0 RMB’000 RMB’000 RMB’000 RMB’000 ee ee ee December 31 Level3 Level2 Level 1 – – FINANCIAL STATEMENTS – – 13,986,380 13,694,556 M’0 RMB’000 RMB’000 RMB’000 RMB’000 148,321 152,557 148,321 13,694,556 13,986,380 072016 2017 2016 2017 (9,054) – – GROUP GROUP 13,694,556 11,566,890 Fair valueasat 1,608,985 13,694,556 13,986,380 366,090 134,777 366,090 (32,348) 50,162 December 31,2017 NOTES TO
113
ANNUAL REPORT 2017 114 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO ne osrcin square meter RMB260,000 RMB26,846– priceper approach priceperunit Residualapproach Direct comparison 1,884,600 underconstruction 550,980 Investmentproperties Carparkingspaces ne osrcin square meter RMB256,000 RMB27,053 – priceper priceperunit Residualapproach approach Direct comparison 1,738,000 underconstruction 551,856 Investmentproperties RMB28–RMB448 Carparkingspaces market rent per square meterper capitalisation Income month approach noe mre etpr RMB30–RMB412 market rent per Income month square approach capitalisation meter per Completed investment 11,404,700 properties properties Therental incomeearnedbytheGroup from itsinvestmentproperties amountedtoRMB343million Thecarrying amountsofinvestmentproperties pledgedtobanks andotherlenderstosecure thebank Range input(s) Completed technique(s) investment RMB’000 11,550,800 Thefollowingtableshowsthesignificantunobservableinputsusedinvaluationmodel: Description 8 INVESTMENT PROPERTIES (Cont’d) 2016 2017 amounted toRMB4million(2016 :RMB4million). (2016 :RMB330million).Direct operatingexpensesarisingontheinvestmentproperties intheyear and otherborrowings grantedtotheGroup are disclosedinNote23. (3) (2) (1) Anysignificantisolatedincreases (decreases) intheseinputswouldresult inasignificantlylower(higher)fairvaluemeasurement. Anysignificantisolatedincreases (decreases) intheseinputswouldresult inasignificantlyhigher(lower)fairvaluemeasurement. Outofthecompletedinvestmentproperties, someoftheproperties were basedoneithertheDirect ComparisonApproach (“DCA”) or theIncomeCapitalisationApproach (“ICA”), andtheotherproperties were basedonthecombinedapproach ofDCAandICA. Fair valueasat December unobservable Valuation 31 prah square meter approach prah square meter approach
(1) (1) ietcmaio priceper Direct comparison ietcmaio priceper Direct comparison — F-56 —
capitalisation rate capitalisation rate Significant (2) (2) (2) (2) (2) (2) (2) (2) RMB54,747 RMB42,184 RMB47,543 RMB41,045 RMB70,000 – RMB66,190 – (3) (3) 3.8%–9.0% 3.8%–9.0% RMB13,884 – RMB14,643 – , PROPERTIES FORDEVELOPMENT /COMPLETEDPROPERTIESFORSALE 9 0 INVESTMENTSINSUBSIDIARIES 10 Thecarryingamountsofproperties pledgedtobanksandotherlenderssecure bankandother Uptotheendofreporting period,totalinterest capitalisedisasfollows: Properties fordevelopment,completedproperties forsaleandproperties underdevelopmentforsaleare UNDER DEVELOPMENT FORSALE borrowings grantedtotheGroup are disclosed inNote23. located inthePRC. Unquoted equityshares, atcost Properties underdevelopmentforsale Completed properties forsale Properties fordevelopment Properties underdevelopmentforsale(Current assets) Completedproperties forsale(Current assets) Properties fordevelopment(Non-current assets) At cost: — F-57 — FINANCIAL STATEMENTS 49,154,376 25,587,718 15,079,352 3,390,836 1,619,595 8,487,306 M’0 RMB’000 RMB’000 M’0 RMB’000 RMB’000 RMB’000 RMB’000 459,053 664,983 072016 2017 072016 2017 2016 2017 COMPANY GROUP GROUP 45,712,054 38,214,800 2,473,274 2,100,562 2,792,938 4,704,316 269,961 301,986 December 31,2017 NOTES TO 115
ANNUAL REPORT 2017 116 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO Pte. Ltd. EastHero InvestmentLtd. Yanlord Singapore Residential Yanlord RealEstatePte. Ltd. ➋䛎㖑❡剣ꣳⰖ Yanlord Singapore Office Pte.Ltd. ➋䛎縨⚌〄㾝剣ꣳⰖ Yanlord Land(HK)Co.,Ltd. ➋䛎縨㖑剣ꣳⰖ SuccessfulGlobalConsultancy Co., ⚎❣䫏餴剣ꣳⰖ Ltd. PalovalePteLtd HeldbyYanlord LandPte.Ltd.anditssubsidiaries ➋䛎㖑❡ 껺度 剣ꣳⰖ Yanlord Property Pte.Ltd. 厣륫㪭剣ꣳⰖ 䧭곡梠椕ㅐ霧剣ꣳⰖ Yanlord Singapore Retail Pte.Ltd. Singapore Yanlord LandPte.Ltd. InvestmentsPte.Ltd. Yanlord Commercial Property HeldbytheCompany DetailsoftheCompany’ssignificantsubsidiariesare asfollows: INVESTMENTSINSUBSIDIARIES(Cont’d) 10 ➋䛎㉁⚌㖑❡䫏餴剣ꣳⰖ Name ofsubsidiary (1)(b) (b) (a) Singapore (a) (a) Singapore (a) (b) (b) Singapore Hong (a) Hong Singapore (1)(b) (1)(b) Singapore Singapore — F-58 — incorporation (or residence) Hong Kong Singapore Country of Country Kong Kong voting powerheld 100 – Investment holding 100 – Investment holding 100 – Investment holding 100 Investment holding 100 Investment holding 100 Management service 100 Management service 100 Investment holding 072016 2017 60 Investment holding 95 Investment holding 67 Investment holding %% of ownership interest and Proportion Principal activities ManagementCo.,Ltd. uyn alr rpry PRC ManagementCo.,Ltd. GuiyangYanlord Property 牠䊜➋䛎縨㖑剣ꣳⰖ alr elEtt Cegu PRC Yanlord RealEstate(Chengdu) ➋䛎縨㖑 䧭鿪 剣ꣳⰖ (Chengdu)Co.,Ltd. Yanlord HotelManagement ⥌㺢㉁館 䧭鿪 剣ꣳⰖ ChengduYanlord Investment 盗椚剣ꣳⰖ 䧭鿪䋑䛎⚌⚎⼮餴❡絑蠒 annYnodLqa PRC 嵳⽂➋䛎꣣⣪䫏餴剣ꣳⰖ Investment Co.,Ltd. Hainan Yanlord Luqiao 顜➋䛎暟⚌盗椚剣ꣳⰖ XinfuTrade (Chengdu)Co.,Ltd. 䧭鿪➋䛎暟⚌盗椚剣ꣳⰖ INVESTMENTSINSUBSIDIARIES(Cont’d) 10 Greens InvestmentsLtd. HeldbyYanlord LandPte.Ltd.anditssubsidiaries ManagementCo.,Ltd. Yanlord Land(Chengdu)Co.,Ltd. ➋䛎ꂊ䏅盗椚 䧭鿪 剣ꣳⰖ ChengduYanlord Property 䧭鿪➋䛎䫏餴盗椚剣ꣳⰖ
$IPOH[IPV:BOMPSE-BOE$P -UE ManagementCo.,Ltd. ChengduEverrising Asset Co., Ltd. Name ofsubsidiary 綁蒀䫏餴剣ꣳⰖ Islands ➋䛎縨⚌ 䧭鿪 剣ꣳⰖ (b) (b) (1)(b) (b) (b) (b) (b)
(2)(b) British (b) PRC (b) (2)(b) PRC PRC incorporation (or residence) Country of Country PRC PRC PRC PRC — F-59 —
Virgin voting powerheld 100 Management service 100 Property management 100 Property development 0 Hotelandserviced 100 100 100 Investment holding 100 Property management 100 – Investment holding 072016 2017 80 – Property development 70 Property development 51 – Property development 51 Property development %% of ownership interest and Proportion
FINANCIAL STATEMENTS Principal activities apartment management and investment and management and
investment December 31,2017 NOTES TO 117
ANNUAL REPORT 2017 118 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO LhasaXinfuTrading Co.,Ltd. 崸⽂➋䛎縨⚌剣ꣳⰖ ManagementCo.,Ltd. ajn alr indo PRC RealEstateCo.,Ltd. NanjingYanlord Jiangdao ❩鵴餴ꣳ PRC ManagementCo.,Ltd. NanjingYanlord Commercial ⽂❩➋鵴䫏餴剣ꣳⰖ 䬘蠖⥌㺢㉁館剣ꣳⰖ ajn ebiPoet PRC NanjingRenyuanInvestment Co.,Ltd. ⽂❩➋⻌䨻㖑❡䒓〄剣ꣳⰖ DevelopmentCo.,Ltd. NanjingRenbeiProperty ⽂❩㣐し䨻㖑❡䒓〄剣ꣳⰖ JinanYanlord RealEstate Co.,Ltd. 崸⽂➋䛎ㄤꤎ縨⚌剣ꣳⰖ PRC RealEstateCo.,Ltd. JinanYanlord Heyuan HeldbyYanlord LandPte.Ltd.anditssubsidiaries INVESTMENTSINSUBSIDIARIES(Cont’d) 10 NanjingYanlord Hotel ⽂❩➋䛎俒⻊假康❡⚌〄㾝剣ꣳⰖ IndustryDevelopmentCo.,Ltd. NanjingYanlord CulturalTourism ⽂❩➋䛎㉁⚌盗椚剣ꣳⰖ PRC DevelopmentCo.,Ltd. NanjingDajiRealEstate ⽂❩➋䛎ꂊ䏅盗椚剣ꣳⰖ ⽂❩➋䛎寐䀙縨⚌剣ꣳⰖ Name ofsubsidiary (1)(b) (3)(b) (b) (b) (1)(b) (b) (b) PRC (b) (1)(b) PRC (b) — F-60 — PRC incorporation (or residence) Country of Country PRC PRC
voting powerheld 100 – Investment holding 0 Hotelandserviced 100 100 100 Management service 0 Trading ofbuilding 100 100 100 – Property development 100 – Property development 100 Tourism investment 072016 2017 60 Property development 51 Property development %% of ownership interest and – 100 Property development Proportion
Principal activities and investment and assetmanagement and investment materials andhardware apartment management Yanlord Land(Nantong) Co.,Ltd. ➋䛎䫏餴 ⽂❩ 剣ꣳⰖ IOIO%OHBIOUJ 13$ InvestmentCo.,Ltd. 4IFO[IFO%POHHVBO4IFOHUBJ ajn uDa adcp PRC DevelopmentCo.,Ltd. NanjingYu DianLandscape Yanlord Investment(Nanjing)Co.,Ltd. ⽂❩䖵Ⱙ㔩卌〄㾝剣ꣳⰖ IOIO:OPE$U13$ 13$ 帿㖕䋑➋䛎㙹䋑刿倝〄㾝剣ꣳⰖ Re-development Co.,Ltd. 4IFO[IFO:BOMPSE$JUZ InvestmentCo.,Ltd. 13$ 4IFO[IFO-POH8FJ9JO 帿㖕䋑⼶輑倝䫏餴肅⟧剣ꣳⰖ Commercial Co.,Ltd. 4IFO[IFO)FOHNJOH 帿㖕䋑⚎Ⱒ渿岲䫏餴剣ꣳⰖ NanjingYanlord Real EstateCo.,Ltd. INVESTMENTSINSUBSIDIARIES(Cont’d) 10 BKOBMSJO[P13$ Property DevelopmentCo.,Ltd. /BOKJOH:BOMPSE+JBOH[IPV HeldbyYanlord LandPte.Ltd.anditssubsidiaries IOIO)BPH*OWUP13$ InvestmentCo.,Ltd. 4IFO[IFO)VBSPOH*OOPWBUJPO 帿㖕䋑䛎僈㉁⚌剣ꣳⰖ ajn alr rpry PRC ManagementCo.,Ltd. NanjingYanlord Property ➋䛎縨㖑 ⽂鸑 剣ꣳⰖ ⽂❩➋䛎縨⚌剣ꣳⰖ 帿㖕䋑륫㪭⥌䫏餴㹊⚌剣ꣳⰖ ⽂❩➋䛎暟⚌盗椚剣ꣳⰖ Name ofsubsidiary ⽂❩➋䛎寐崍䨻㖑❡䒓〄剣ꣳⰖ (2)(b) (b) (b) (b) (b) (b)
(1)(b) (b) (b) PRC (b) (b) PRC PRC incorporation (or residence) Country of Country — F-61 —
voting powerheld 100 Investment holding 100 Landscaping and 100 – City redevelopment 100 Property development 100 Property development 100 Property development 100 Property management 072016 2017 60 Property development 65 – Property development 60 Property development 95 75 Property development %% of ownership interest and Proportion
FINANCIAL STATEMENTS Principal activities gardening and management December 31,2017 NOTES TO 119
ANNUAL REPORT 2017 120 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO ManagementCo.,Ltd. :BOMPSE 4IFO[IFO )PUFM ➋䛎縨㖑 帿㖕 剣ꣳⰖ Construction ➋䛎 帿㖕 䫏餴㹊⚌剣ꣳⰖ Shanghai ManagementCo.,Ltd. Intelligent :BOMPSE 4IFO[IFO *OWFTUNFOU Gusheng ➋䛎 帿㖕 ꂊ䏅盗椚剣ꣳⰖ IOIO:OPE1PFU13$ :BOMPSE-BOE 4IFO[IFO $P -UE ManagementCo.,Ltd. 4IFO[IFO:BOMPSE1SPQFSUZ hnhiRnagRa PRC PRC Estate Co., Ltd. Shanghai RenhangReal ♳嵳➋㸝䨻㖑❡䒓〄剣ꣳⰖ PRC DevelopmentCo.,Ltd. ShanghaiRenanProperty PRC ♳嵳䋑嵙⚎倝⼓字⸅➋䛎䎓⯄㔩 PrivateYanlord Kindergarten ShanghaiPudongNewDistrict ♳嵳㸪ぜꢏ귬껏剪⸉盗椚剣ꣳⰖ ManagementCo.,Ltd. ShanghaiHongMingGe Food ♳嵳㔿渿䒊瘰兰腊⻊䊨玐剣ꣳⰖ IOIO:OPE)N13$ CoffeeCo.,Ltd. 4IFO[IFO:BOMPSE)PNF HeldbyYanlord LandPte.Ltd.anditssubsidiaries INVESTMENTSINSUBSIDIARIES(Cont’d) 10 ♳嵳➋匆縨⚌剣ꣳⰖ 帿㖕䋑➋䛎暟⚌盗椚剣ꣳⰖ 帿㖕䋑➋䛎㹻ㄳ㉰剣ꣳⰖ Name ofsubsidiary Engineering Co.,Ltd. & BeverageService (1)(b) (1)(b) (b) (b) (b) (b) (b) (b)
(4) (b) (b) PRC — F-62 — incorporation (or residence) Country of Country PRC 13$ 13$
voting powerheld 100 Hotel management 100 Property development 100 Investment holding 100 60 Construction engineering 100 Property management 100 – Property development 100 Property development Foodandbeverageservices – 100 072016 2017 50 Kindergarten operation 60 Restaurant operation %% of ownership interest and Proportion
Principal activities and management and management 嵳潇⚌ꣳ PRC EstateCo.,Ltd. ShanghaiRenshengReal ♳嵳➋潇縨⚌剣ꣳⰖ Training Co.,Ltd. Property Co.,Ltd. ShanghaiYanlord Gaoqiao hnhiYnodHnqa PRC Property Co.,Ltd. ShanghaiYanlord Hongqiao INVESTMENTSINSUBSIDIARIES(Cont’d) 10 ShanghaiYanlord Elevator Co.,Ltd. ♳嵳➋䛎侅肫㛆雲剣ꣳⰖ PRC PRC DevelopmentCo.,Ltd. ShanghaiRenpinProperty ♳嵳➋匊屎忡㔩䨻㖑❡剣ꣳⰖ GardenProperty Co.,Ltd. ShanghaiRenjieHebin HeldbyYanlord LandPte.Ltd.anditssubsidiaries ShanghaiRenruiRealEstateCo.,Ltd. ♳嵳➋ㅷ䨻㖑❡䒓〄剣ꣳⰖ hnhiYnodIvsmn PRC PRC Management Co.,Ltd. Shanghai Yanlord Investment DevelopmentCo.,Ltd. ShanghaiYanlord Industrial ShanghaiYanlord Education ♳嵳➋允縨⚌剣ꣳⰖ ♳嵳➋䛎歏唑剣ꣳⰖ ♳嵳➋䛎넞⛠䨻㖑❡剣ꣳⰖ Name ofsubsidiary ♳嵳➋䛎䫏餴盗椚剣ꣳⰖ ♳嵳➋䛎㹊⚌〄㾝剣ꣳⰖ ♳嵳➋䛎赙咕䨻㖑❡剣ꣳⰖ (1)(b) (b) (b) (4)(b) (b) (5)(b) (b) (b) (b) (1)(b) PRC PRC incorporation (or residence) Country of Country PRC PRC — F-63 — elevators
voting powerheld 100 – Property development 100 – Property development 0 Educationandtraining 100 100 0 Sale,installation,repair 100 100 100 Management service 100 Management service 072016 2017 50 Property development 60 Property development 50 Property development 51 Property development %% of ownership interest and Proportion
andmaintenanceof
FINANCIAL STATEMENTS Principal activities and management and management and investment and investment and management and management December 31,2017 NOTES TO 121
ANNUAL REPORT 2017 122 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO hnhiYnodSna PRC RealEstateCo.,Ltd. ShanghaiYanlord Senlan hnhiYnodPoet PRC ManagementCo.,Ltd. ShanghaiYanlord Property ➋䛎暟⚌剪⸉盗椚 ⚥㕂 剣ꣳⰖ hnhiYnodXn ag PRC RealEstateCo.,Ltd. ShanghaiYanlord XingTang ShanghaiYanlord Real EstateCo.,Ltd. alr rprySrie PRC PRC Management (China)Co.,Ltd. Yanlord Property Service PRC ➋䛎縨㖑䫏餴盗椚 ♳嵳 剣ꣳⰖ Management (Shanghai)Co.,Ltd. Yanlord LandInvestment ➋䛎肅勉䫏餴盗椚 ♳嵳 剣ꣳⰖ PRC Management(Shanghai)Co.,Ltd. Yanlord EquityInvestment DevelopmentCo.,Ltd. ShanghaiZhongtingProperty hnhiYnodLn rpry PRC ShanghaiYanlord Property Co.,Ltd. ManagementServiceCo.,Ltd. ShanghaiYanlord LandProperty HeldbyYanlord LandPte.Ltd.anditssubsidiaries INVESTMENTSINSUBSIDIARIES(Cont’d) 10 hnhiYnodYnp PRC Property Co.,Ltd. ShanghaiYanlord Yangpu ♳嵳➋䛎縨⚌〄㾝剣ꣳⰖ ♳嵳➋䛎䨻㖑❡剣ꣳⰖ ♳嵳➋䛎啿Ⱎ縨⚌剣ꣳⰖ ♳嵳➋䛎暟⚌盗椚剣ꣳⰖ ♳嵳⚥䏭䨻㖑❡䒓〄剣ꣳⰖ ♳嵳➋䛎勿嵙䨻㖑❡剣ꣳⰖ ♳嵳➋䛎縨㖑暟⚌剪⸉盗椚剣ꣳⰖ Name ofsubsidiary ♳嵳➋䛎Ⱓ縨⚌剣ꣳⰖ (b) (b) (b) (b) (b) (b) (1)(b)
(b) (b) (b) PRC (b) — F-64 — PRC incorporation (or residence) Country of Country
voting powerheld 100 Property development 0 Property and investment 100 100 100 Management service 100 Investment management 100 Property development 100 Property management 100 Property development 072016 2017 60 Property 57 development Property development 67 Property development 67 Property management %% of ownership interest and Proportion
Principal activities management and management 4V[IPV3FOZVBO3FBM&TUBUF$P -UE VIV(TFH'UFT 13$ ServicesCo.,Ltd. 4V[IPV(VTIFOH'JUOFTT SanyaYanlord Travel ServiceCo.,Ltd. DevelopmentCo.,Ltd. 4V[IPV:JOHIBO1SPQFSUZ
RealEstateCo.,Ltd. 4V[IPV1FOJOTVMB:BOMPSE 4V[IPV3FOBO3FBM&TUBUF$P -UE INVESTMENTSINSUBSIDIARIES(Cont’d) 10 utrlTuimDvlpet assetmanagement PRC SanyaYanlord RealEstate Co.,Ltd. 嵳⽂➋䛎繠⚽⛓ⱟ俒⻊假康〄㾝剣ꣳⰖ CulturalTourism Development HainanYanlord Beautycrown HeldbyYanlord LandPte.Ltd.anditssubsidiaries alr rpryDvlpet PRC 13$ 4V[IPV $P -UE Yanlord Property Development DevelopmentCo.,Ltd. 4V[IPV;IPOHIVJ1SPQFSUZ 蔼䊜뛒宪䨻㖑❡䒓〄剣ꣳⰖ :BOMPSE1SPQFSUZ 4V[IPV $P -UE ➋䛎縨⚌ 蔼䊜 剣ꣳⰖ 蔼䊜➋㸝縨⚌剣ꣳⰖ ❇䛎⚌ꣳ ♲❇➋䛎假遤爢剣ꣳⰖ ♲❇➋䛎縨⚌剣ꣳⰖ 蔼䊜➋鵴縨⚌剣ꣳⰖ ➋䛎㖑❡ 蔼䊜 剣ꣳⰖ 蔼䊜㔿渿⨴魧剪⸉剣ꣳⰖ 蔼䊜僤䀙➋䛎縨⚌剣ꣳⰖ Co., Ltd. 蔼䊜⚥鳋䨻㖑❡䒓〄剣ꣳⰖ Name ofsubsidiary (2)(b) (1)(b) (b) (b) (b) (b) (b) (5)(b) (b) PRC PRC (b) (b) PRC PRC PRC incorporation (or residence) Country of Country 13$ 13$ — F-65 —
voting powerheld 0 Tourism andtravelservices 100 100 100 Property development 100 – Fitness services 100 Property development 100 Property development 100 Property development 100 Property development 100 Property development 072016 2017 30 Property development 60 Property development Tourism investmentand – 60 %% of ownership interest and Proportion
FINANCIAL STATEMENTS Principal activities and management and management December 31,2017 NOTES TO 123
ANNUAL REPORT 2017 124 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO
hhiRnunIvsmn PRC ZhuhaiRenyuanInvestment Co., ➋䛎〄㾝 㣔峸 剣ꣳⰖ Ltd. ini alr eyn PRC RealEstateCo.,Ltd. TianjinYanlord Beiyang aghnYnodPoet PRC ManagementCo.,Ltd. Tangshan Yanlord Property HeldbyYanlord LandPte.Ltd.anditssubsidiaries INVESTMENTSINSUBSIDIARIES(Cont’d) 10
hhiYnodCmeca PRC Operation andManagementCo.,Ltd. Zhuhai Yanlord Commercial ini alr ah PRC PRC DevelopmentCo.,Ltd. PRC TianjinYanlord Haihe TianjinYanlord Garden Co., ServicesCo.,Ltd. Ltd. TianjinYanlord Fitness ini alr rpry PRC PRC Co.,Ltd. (Tianjin) PRC Yanlord ManagementCo.,Ltd. TianjinYanlord Property Development RealEstateCo.,Ltd. TianjinYanlord Hehai
棟嵳➋䛎㉁⚌絑蠒盗椚剣ꣳⰖ Zhuhai RenyuanLandCo.,Ltd. 棟嵳➋鵴䫏餴剣ꣳⰖ 㿋➋䛎暟⚌剪⸉剣ꣳⰖ 棟嵳䋑➋鵴縨㖑剣ꣳⰖ 㣔峸蒌㹃㔩卌剣ꣳⰖ 㣔峸➋䛎⨴魧剪⸉剣ꣳⰖ 㣔峸➋䛎⻌峕縨⚌剣ꣳⰖ Name ofsubsidiary 㣔峸➋䛎暟⚌剪⸉剣ꣳⰖ 㣔峸➋䛎ㄤ嵳縨⚌剣ꣳⰖ 㣔峸➋䛎嵳屎䒓〄剣ꣳⰖ (b) (6)(b) (b) (b) (7)(b) (b) (b) (b) (b) (b) (b) — F-66 — incorporation (or residence) Country of Country PRC
voting powerheld 100 Property management 100 Property development 100 Landscaping Leisure andfitness 100 and 100 100 Property development 100 Property management 072016 2017 90 Management service 60 Property development 90 Management service 80 Property development %% of ownership interest and – 100 Property development Proportion
and management gardening
Principal activities and investment and investment LandCo.,Ltd. hhiYnodPoet PRC ManagementCo.,Ltd. ZhuhaiYanlord Property 棟嵳➋䛎㹊⚌剣ꣳⰖ ZoghnR nun PRC ⚥㿋➋鵴縨⚌剣ꣳⰖ RealEstateCo.,Ltd. PRC ⚥㿋➋鵴䫏餴剣ꣳⰖ Zhongshan Renyuan DevelopmentCo.,Ltd. ZhuhaiYanlord Real Estate 棟嵳➋䛎暟⚌盗椚剣ꣳⰖ INVESTMENTSINSUBSIDIARIES(Cont’d) 10 Zhongshan Renyuan PRC ZhuhaiYanlord Industrial Ltd. LandCo.,Ltd. ZhuhaiYanlord Heyou HeldbyYanlord LandPte.Ltd.anditssubsidiaries InvestmentCo.,Ltd. ZhuhaiYanlord Heyuan 棟嵳➋䛎ㄤ歋縨㖑剣ꣳⰖ 棟嵳➋䛎縨⚌〄㾝剣ꣳⰖ 棟嵳➋䛎ㄤ鵴縨㖑剣ꣳⰖ Name ofsubsidiary (b) (a) (7) (6) (5) (4) (3) (2) (1) Notes onauditors Auditedby Deloitte &Touche LLP, Singapore. Asaresult ofchangearticles ofassociation,theGroup lostcontrol andreclassified theentityfrom subsidiarytojointv Formerlyknown asTianjinYanlord GardenCo.,Ltd. AlthoughtheGroup doesnoteffectivelyownmore than50%oftheequityshares oftheseentities,ithassufficientlydominantvo Theproportion ofownershipinterest andvotingpowerheldbytheGroup is50.2%. Asaresult ofchangeimmediateholdingcompanyfrom aGroup’s subsidiarytoajointventure, theGroup lostcontrol andre AuditedbyDeloitteTouche Tohmatsu CertifiedPublicAccountants LLP, Shanghai, PRCforconsolidationpurposes. Acquired duringtheyear(Note35). Incorporatedduringtheyear. the year(Note37). hence regards theseentitiesassubsidiaries. right andpowertodirect therelevant activitiesoftheseentitiesandtherefore theGroup hasunilateralcontrol overthesee the entityfrom subsidiarytojointventure duringtheyear(Note37). (1)(b) (b) (b) (b) (b) (b) (b) PRC 㣔峸➋䛎㔩卌剣ꣳⰖ. incorporation (or residence) Country of Country PRC PRC — F-67 —
voting powerheld 100 Property management 100 Investment holding 100 Investment holding 072016 2017 57 – Property development 95 Property development 90 Property development 57 Property development %% of ownership interest and Proportion
FINANCIAL STATEMENTS Principal activities and management enture during ntities and classified December 31,2017 NOTES TO ting 125
ANNUAL REPORT 2017 126 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO 0 INVESTMENTSINSUBSIDIARIES(Cont’d) 10
did notresult inchangeofcontrol, ontheequityattributabletoownersofparent: The followingscheduleshowstheeffectsofchangesingroup’s ownershipinterest insubsidiariesthat disclosed below: Details ofnonwholly-ownedsubsidiariesthathavematerialnon-controlling interests totheGroup are (2) (1) Name ofsubsidiary Amount paidonchangeofinterest insubsidiaries rpryC. t.PRC Property Co.,Ltd. Shanghai Yanlord Hongqiao ♳嵳➋ㅷ䨻㖑❡䒓〄剣ꣳⰖ Development Co.,Ltd. hnhiRni rpryPRC Shanghai RenpinProperty ⽂❩➋䛎縨⚌剣ꣳⰖ controlling interests subsidiaries withnon- Individually immaterial ♳嵳➋䛎赙咕䨻㖑❡剣ꣳⰖ Non-controlling interests acquired elEtt o,Ld PRC Real EstateCo.,Ltd. Nanjing Yanlord Difference recognised instatutoryandother reserve Represents comparativefigures of2017fornonwholly-ownedsubsidiarythathasmaterial non-controlling interest totheGroup i Represents comparativefigures of2016fornonwholly-ownedsubsidiarythathasmaterial non-controlling interest totheGroup i current year. prior year. incorporation and principal business Place of place of place of — F-68 — non-controlling non-controlling 0721 0721 072016 2017 2016 2017 2016 2017 of ownership of ownership voting rights voting rights interest and interest and 40 50 40 Proportion Proportion M’0 M’0 M’0 RMB’000 RMB’000 RMB’000 RMB’000 % % interests held by held by 40 50 40 2,403,827 1,368,936 233,520 428,639 372,732 non-controlling non-controlling attributable to attributable to Profit (Loss) Profit (Loss) interests (1) 1,279,837 560,703 550,219 177,768 (8,853) 1,530,048 1,653,360 (123,312) M’0 RMB’000 RMB’000 (2) 072016 2017 non-controlling interests non-controlling interests 1,274,872 1,999,569 9,972,287 4,641,675 2,056,171 Accumulated GROUP (1) (2,397) 1,630,633 8,962,762 4,669,403 1,760,586 2,500 902,140 103 n the n the (2) 0 INVESTMENTSINSUBSIDIARIES(Cont’d) 10 before intragroup eliminations. controlling interests issetoutbelow. Thesummarisedfinancialinformationbelowrepresents amounts Summarised financialinformationinrespect ofeachtheGroup’s subsidiariesthathasmaterialnon- (1) Net cash(outflow)inflow Non-current assets Current assets Non-current liabilities Total equity Current liabilities OwnersoftheCompany Equity attributableto: Non-controlling interests Revenue fortheyear income(expense) representing total Profit (Loss)fortheyear, OwnersoftheCompany attributableto: income(expense) Total comprehensive Non-controlling interests – Financingactivities – Investingactivities – Operatingactivities from: Net cash(outflow)inflow Including dividend paid interests to non-controlling (1)
(2,079,846) 3,784,591 3,187,180 1,912,308 1,274,872 2,908,342 1,738,164 RMB’000 (341,682) (600,124) 931,829 559,097 372,732 ⽂❩➋䛎縨⚌剣ꣳⰖ♳嵳➋ㅷ䨻㖑❡䒓〄剣ꣳⰖ♳嵳➋䛎赙咕䨻㖑❡剣ꣳⰖ ajn alr elSaga epnPoet ShanghaiYanlord Hongqiao ShanghaiRenpinProperty Nanjing Yanlord Real 0721 0721 072016 2017 2016 2017 2016 2017 2,713 Estate Co.,Ltd. – – – (1,709,926) (1,963,018) (4,338,650) (2,627,016) 6,590,099 2,255,350 1,353,210 4,303,934 1,401,757 2,373,924 M’0 M’0 M’0 M’0 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 902,140 841,054 560,703 3,901 – – — F-69 — 10,091,172 (2,032,215) (6,992,370) (2,495,181) 1,099,569 5,911,715 1,368,936 5,265,051 3,099,138 1,999,569 1,837,872 468,936 Development Co.,Ltd. 737,655 336 – – (5,237,572) (1,577,350) 8,482,502 1,630,633 3,215,492 1,225,809 3,261,266 1,630,633 (412,333) (17,706) 16,336 (8,853) (8,853) FINANCIAL STATEMENTS – – – (1,573,656) (1,530,455) 6,657,051 3,084,257 3,907,680 2,394,840 5,140,428 2,056,171 1,071,598 (426,352) (163,888) 642,959 438,033 428,639 57,033 Property Co.,Ltd. – (1,358,116) (1,908,276) 6,266,416 2,640,880 2,274,444 2,160,647 4,401,466 1,760,586 (821,796) 266,651 444,419 177,768 (19,265) 43,326 December 31,2017 NOTES TO – – 127
ANNUAL REPORT 2017 128 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO 1 INVESTMENTSINASSOCIATES 11 ) AsatDecember 31,2016,amountofRMB197millionwhichbore interest at9.0%perannum,was b) Amountof RMB217 million(2016:million)whichbearsinterest at6.25%perannum(2016 a) Amountsduefrom andtojointventures are interest-free, unsecured andrepayable ondemandexcept for 2 INVESTMENTSINJOINTVENTURES 12 TheGroup’s share oftheassociateslossfrom continuingoperationsandtotalcomprehensive income Aggregate informationoftheGroup’s associatesthatare notindividuallymaterial the following: as atDecember31,2017and2016isRMB585millionRMB610respectively. (2016 :RMB403,000)respectively. Theaggregate carryingamountoftheGroup’s interests inassociates the endofreporting periodamountedtoRMB179,000(2016:RMB298,000)andRMB582,000 share ofunrecognised lossesofanassociateforthefinancialyearandaccumulatedat losses whentheGroup’s share oflossassociatesexceeds itsinterest intheassociates.TheGroup’s for theyearare RMB8million(2016:RMB12million).TheGroup discontinuesrecognising further Deemed investmentsinjointventures Cost ofinvestmentsinassociates Cost ofinvestmentsinjointventures Deferred income Share ofpost-acquisition loss – Current assets(Note6) – Non-current assets(Note6) Non-trade amountsduefrom jointventures Share ofpost-acquisition profit Group’s share ofunrealised incomefrom associates Current non-tradeamountduetoajointventure (Note 6) Non-trade amountsduefrom associates(Current assets)(Note6) fully collectedduringthecurrent year. unsecured andrepayable within1yearfrom theendofreporting period. Theamounthasbeen (2016 :within5yearsfrom theendofreporting period). : 6.25%perannum),isunsecured andrepayable within 4yearsfrom theendofreporting period — F-70 — 3,662,470 1,283,682 2,849,514 2,696,774 4,542,033 M’0 RMB’000 RMB’000 M’0 RMB’000 RMB’000 315,109 630,076 138,083 426,371 584,881 (22,345) (22,850) 072016 2017 072016 2017 – GROUP GROUP 1,006,592 1,202,561 1,200,199 1,176,327 113,244 630,076 207,750 610,363 (14,231) 80,363 (5,482) 365 –
) AmountofRMB18million(2016:RMBNil)whichbearsinterest at4.35%perannum(2016:Nil%), l) Amountof RMB150 million(2016:RMBNil)whichbearsinterest at 9.0%perannum(2016:Nil%), k) AmountofRMB313million(2016:RMB Nil)whichbearsinterest at4.35%perannum(2016:Nil%), j) AmountofRMB554million(2016:RMB Nil)whichbearsinterest at4.35%perannum(2016:Nil%), i) Amountof RMB20 million(2016:RMBNil)whichbearsinterest at 8.0% perannum(2016:Nil%),is h) AmountofRMB1.017billion(2016:RMBNil)whichbearsinterest at4.35%perannum(2016:Nil%), g) AmountofRMB486 million(2016:RMBNil)whichbearsinterest at 8.0%perannum(2016:Nil%), f) AmountofRMB1.038billion(2016:RMBNil)whichbearsinterest at8.0%perannum(2016:Nil%), e) AmountofRMB350million(2016:RMB200million)whichbearsinterest at9.0%perannum(2016 d) AmountofRMB736million(2016:million)whichbearsinterest at9.0%perannum(2016 c) INVESTMENTSINJOINTVENTURES(Cont’d) 12 Aggregate informationoftheGroup’s jointventures thatare notindividuallymaterial Aggregate carryingamountoftheGroup’s interests inthesejointventures itsshare oftotalcomprehensive incomefortheyear Group’s share ofprofit from continuingoperations, representing is unsecured andrepayable within1yearfrom the endofreporting period. is unsecured andrepayable within1yearfrom the endofreporting period. is unsecured andrepayable within1yearfrom the endofreporting period. is unsecured andrepayable within1yearfrom the endofreporting period. unsecured andrepayable within1yearfrom the endofthereporting period. is unsecured andrepayable within1yearfrom the endofreporting period. is unsecured andrepayable within2yearsfrom theendofreporting period. is unsecured andrepayable within3yearsfrom theendofreporting period. (2016 :within2yearsfrom theendofreporting period). : 9.0%perannum),isunsecured andrepayable within1yearfrom theendofreporting period (2016 :within3yearsfrom theendofreporting period). : 9.0%perannum),isunsecured andrepayable within2yearsfrom theendofreporting period — F-71 — FINANCIAL STATEMENTS 4,542,033 M’0 RMB’000 RMB’000 346,008 072016 2017 GROUP 1,200,199 7,099 December 31,2017 NOTES TO 129
ANNUAL REPORT 2017 130 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO ) AmountofRMB803million(2016:million)whichbearsinterest atthePeople’sBankof f) AmountofRMB250million(2016:RMB Nil)whichbearsinterest at1.5%perannum(2016:Nil%), e) AsatDecember31,2016,amountofRMB150millionwhichbore interest at7.0%perannum,was d) AmountofRMB200million(2016:million)whichbearsinterest atthePeople’sBankof c) AsatDecember31,2016,amountofRMB253millionwhichbore interest at10.625%perannum b) AmountsofRMB17millionandRMB34(2016:RMB60RMB33million)which a) Amountsduefrom non-controlling shareholders ofsubsidiariesare interest-free, unsecured andrepayable NON-TRADE AMOUNTSDUEFROM/TO NON-CONTROLLING SHAREHOLDERS OF 13 ) Amountsof RMB32millionandRMB21(2016:RMBNilNil)are interest-free, h) Amountsof RMB693millionandRMB519(2016:RMB337RMBNil)whichbear g) on demandexcept forthefollowing: SUBSIDIARIES on demandexcept forthefollowing: Amounts duetonon-controlling shareholders of subsidiaries are interest-free, unsecured andrepayable reporting period. the non-controlling shareholder ofthatsubsidiaryandrepayable within1yearfrom theendof non-controlling shareholder ofthatsubsidiaryandthelanduserightownedbyrelated partyof non-controlling shareholder’s share inasubsidiary, guaranteeprovided byarelated partyofthe China’s benchmarkrate(2016:atthePeople’sBankofrate),issecured bythe is unsecured andrepayable within1yearfrom the endofreporting period. fully collectedduringthecurrent year. unsecured andrepayable within1yearfrom the endofthereporting period.Theamounthasbeen from theendofreporting period). unsecured andrepayable within3yearsfrom the endofthereporting period(2016:within4years China’s benchmarkrate(2016:atthePeople’sBankofuponrepayment), waived duringthecurrent year. controlling shareholders ofthatsubsidiaryandrepayable ondemand.Theamounthasbeenfully was secured byexpectedfuture earningsthatwouldbedistributedbyasubsidiarytothenon- subsidiary. Theamountisrepayable ondemand in2017and2016. earnings ofasubsidiaryyettobedistributedasdividendsthenon-controlling shareholder ofthat are secured bythenon-controlling shareholder’s shares inasubsidiaryandundistributedretained bear interest at5.0%and4.35%perannum(2016:annum)respectively and unsecured andrepayable within4yearsfrom the endofthereporting period. reporting period). 2 yearsfrom theendofreporting period(2016 :within3yearsandnilfrom theendof interest at7.0%perannum(2016:10%andNil%),are unsecured andrepayable within — F-72 —
15 INTANGIBLE ASSET Themanagementconsidersthecredit riskonotherreceivables anddepositstobelimitedbecausethe OTHER RECEIVABLES ANDDEPOSITS 14 AtDecember31,2017and2016,themanagementassessedmarketable valueoftheclubmembership counterparties are governmentagentsorthirdpartieswithlongbusinessrelationships withtheGroup. and determinedthatitwasinexcess ofitscarryingamount. (1) Club membership Advances tosuppliers Deposits forprojects Loan receivables Staff loans Other receivables Prepayments Value addedtax(“VAT”) prepayment Current Analysed as: Sales-related taxprepayment Non-current Interest receivables Payments forresettlement This relates topaymentsforresettlement oflandparcel inChengdu. (1) 3,353,260 1,540,441 6,325,824 6,325,824 3,923,692 2,402,132 M’0 M’0 M’0 RMB’000 RMB’000 RMB’000 RMB’000 600,319 403,098 245,924 37,373 12,850 95,042 30,526 2017 6,991 — F-73 — GROUP 3,871,844 5,777,088 5,777,088 4,903,935 600,319 200,001 246,183 559,444 188,224 873,153 2016 86,901 11,708 5,998 6,466 FINANCIAL STATEMENTS M’0 RMB’000 RMB’000 072016 2017 2017 812 – – – – – – – – – COMPANY 1 3 4 4 4 GROUP 2016 613 December 31,2017 – – – – – – – – – – 4 4 4 4 NOTES TO 131
ANNUAL REPORT 2017 132 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO 16 DEFERRED TAXATION PursuanttoPRCandHongKong taxregulations, attheendofreporting period,theGroup Thefollowingare themajordeferred taxassetsandliabilitiesrecognised bytheGroup andmovements including theretention ofmajorityshareholders as defined. forward for5yearsfrom theyearafterlossesare incurred, subjecttotheconditionsimposedbylaw (2016 :RMB207million)duetotheunpredictability offuture profit streams. Tax lossesmaybecarried 10% to25%.Nodeferred taxassethasbeenrecognised inrespect oftheremaining RMB365million in respect ofRMB707million(2016:RMB1.042billion)suchlossesatthetaxratesrangefrom future profits. Adeferred taxassetofRMB166million(2016:RMB249million)hasbeenrecognised has unutilisedtaxlossesofRMB1.072billion(2016 : RMB1.249billion)availableforoffsetagainst thereon duringthecurrent andpriorreporting year. Exchange difference At December31,2017 Exchange difference taxpayable Transfer to(from) income fortheyear(Note30) (Charge) Credit toprofit orloss At December31,2016 Change ofcontrol from At January1,2016 Group Deferred taxassets taxpayable Transfer to(from) income fortheyear(Note30) (Charge) Credit toprofit orloss Deferred taxliabilities subsidiaries toassociates fivsmn eutbeWthligcostsand Withholding deductible of investment 20088 5,7 5693 6,6 124,350 166,461 (596,923) 154,373 (2,010,838) 19569 323(1,6)29411137(1,799,549) 101,397 249,451 (317,961) 93,213 (1,925,649) 17078 454(6,4)33531337(1,457,593) 103,307 313,573 (168,249) 84,564 (1,790,788) eauto a development tax Revaluation rprisepne a a ossohr Total others Tax losses tax expenses properties M’0 M’0 M’0 M’0 M’0 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 1481 ,3 2747 5,6)(,1)(410,154) (1,910) (54,765) (227,457) 8,839 (134,861) 8,8)(075 3061 8,7)3,6 (467,034) 31,168 (81,577) (320,691) (10,745) (85,189) — F-74 — – – – – – – – – – – n xeso Unpaid and excess of depreciation depreciation Accelerated 1954,2 825 105,419 (8,215) – 41,729 71,905 tax tax 10 446 (4,606) – (4,416) – (190) 775(,7)–71,371 – (6,374) 77,745 143 (1,413) – (1,413) ,3 1,433 – 1,433 (2,162,577) (2,607,761) M’0 RMB’000 RMB’000 445,184 072016 2017 GROUP (1,799,549) (2,243,610) (2,162,577) 444,061
19 SHARE CAPITAL Thisrepresents thefairvalueofputliabilitytoacquire non-controlling interests aspartoftheshare TO ACQUIRENON-CONTROLLING INTERESTS PUTLIABILITY 18 Pledgedbankdepositsrepresent depositspledgedtobankssecure certain mortgageloansprovided by 7 PLEDGEDBANKDEPOSITSANDCASH EQUIVALENTS 17 Fullypaidupordinary shares, whichhavenoparvalue,carryonevotepershare andarighttodividends and 2016. (2016 :twoyears),theobligationisrecorded herewith as“non-current liabilities”asatDecember31,2017 the non-cancellablerightstoputbacktheirshares totheGroup are expectedbemore thanone year purchase agreement ofasubsidiary. Astheearliestdatesfornon-controlling shareholders toexercise banks tocustomersforthepurchase oftheGroup’s developmentproperties. as andwhendeclared bytheCompany. Pledged bankdeposits Atbeginningandendofyear Issued andpaidup: Cash onhand Fixed deposits Cash atbank Cash andcashequivalents 17,798,313 16,695,749 1,101,103 1,948,736 M’0 M’0 M’0 RMB’000 RMB’000 RMB’000 RMB’000 Number of ordinary shares Number ofordinary 2017 40,029 0721 072016 2017 2016 2017 ’000 1,461 — F-75 — GROUP 17,583,383 17,002,320 1,948,736 520,680 579,033 GROUP ANDCOMPANY 2016 00RB00RMB’000 RMB’000 ’000 2,030 FINANCIAL STATEMENTS 7,261,726 2017 2,650 2,643 – – COMPANY 7 7,261,726 2016 21,885 21,902 17 December 31,2017 – – NOTES TO 133
ANNUAL REPORT 2017 134 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO 20 TREASURY SHARES Thecross currency swapswere settledonasemi-annual basisandmatured onMay23,2016.Allcross AlloftheGroup’s cross currency swapswere designatedandeffectiveascashflowhedgesthefair In2016,theGroup usedcross currency swapstohedgetheforeign currency risksarisingfrom theinterest DERIVATIVE FINANCIALINSTRUMENTS 21 TheCompanyacquired 10,050,500(2016:7,150,600)ofitsownshares through purchases onthe from equitytoprofit orlossoverthetenure of the seniornotes. occurred simultaneouslyandtheamountrecognised inothercomprehensive incomewasreclassified the seniornotes.Thecross currency swapsandtheinterest andprincipalpaymentsontheseniornotes the Group’s cashflowexposure resulting from thefluctuationofRMBagainstUSdollarovertenure of denominated interest andprincipalpaymentswere designatedascashflowhedgesinordertoreduce currency swapcontractsexchanging RMBdenominatedinterest andprincipalpaymentsforUSdollar during thefinancialyearendedDecember31,2016. comprehensive income.AmountofRMB109millionhadbeenreclassified from equitytoprofit or loss value gainofthesecross currency swaps,amountingtoRMB145millionhadbeenrecognised inother receipts denominatedinRMBat5.375%perannum. billion hadfixed interest paymentsdenominatedinUSdollarsat4.325%per annumandfixed interest and principalpaymentsofitsRMBdenominatedseniornotes.ContractswithnominalvaluesRMB2 shares”. (2016 :RMB47million)andhasbeendeductedfrom shareholders’ equity. Theshares are heldas“treasury Singapore Exchange duringtheyear. Thetotalamountpaidtoacquire theshares wasRMB85million At January1 Repurchased during the year Repurchased duringtheyear At December31 — F-76 — Number of ordinary shares Number ofordinary 10,050 17,201 0721 072016 2017 2016 2017 00’0 M’0 RMB’000 RMB’000 ’000 ’000 7,151 GROUP ANDCOMPANY 7,151 7,151 – 132,309 47,006 85,303 47,006 47,006 – 22 HEDGING RESERVE 3 BANKANDOTHER BORROWINGS 23 Movement inhedgingreserve: impacts theprofit orloss. income andaccumulatedinhedgingreserves wasreclassified toprofit orlosswhenthehedgedtransaction flow hedges.Thecumulativedeferred gainorlossonthehedgerecognised inothercomprehensive The hedgingreserve represented hedginggainsandlossesrecognised ontheeffectiveportionofcash flow hedge. In 2016,thefullamountofhedgingreserves wasreclassified toprofit orlossuponmaturityofthecash More thanfiveyears – Non-current – Non-current notexceeding fiveyears More thantwoyearsbut notexceeding twoyears More thanoneyearbut On demandorwithinoneyear The bankandotherborrowings are repayable as follows: Change infairvalueofcross currency swaps At January1 Reclassification toprofit orloss At December31 – Current Secured: Amount dueforsettlementafter12months current liabilities) 12 Less: Amountdueforsettlementwithin – Current Unsecured: months (shown under (shown under 13,704,936 16,516,482 14,082,514 30,221,418 30,221,418 11,746,336 15,918,019 27,664,355 (2,557,063) 6,525,841 2,557,063 1,958,600 7,056,000 — F-77 — M’0 M’0 M’0 RMB’000 RMB’000 RMB’000 RMB’000 598,463 2017 GROUP 11,078,656 12,438,479 20,749,655 20,749,655 (8,311,176) 1,313,500 7,466,436 9,670,999 4,972,043 7,871,992 3,252,987 8,311,176 3,612,220 4,698,956 2016 FINANCIAL STATEMENTS M’0 RMB’000 RMB’000 718,710 639,509 639,509 639,509 718,710 718,710 (79,201) 2017 072016 2017 79,201 79,201 COMPANY – – – – – – – – – GROUP 1,001,255 1,417,475 1,417,475 (495,221) (108,875) 416,220 922,254 495,221 639,709 282,545 416,220 922,254 145,236 2016 (36,361) 79,001 December 31,2017 NOTES TO – – – 135
ANNUAL REPORT 2017 136 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO Thefollowingassetsare pledgedfortheabovesecured bankandotherborrowings andundrawnloan BANKANDOTHER BORROWINGS(Cont’d) 23 facilities: flows from financingactivities. were, orfuture cashflowswillbe,classifiedintheGroup’s consolidatedstatementofcashflowsas cash andnon-cashchanges.Liabilitiesarisingfrom financingactivitiesare thoseforwhichcashflows The tablebelowdetailschangesinthegroup’s liabilitiesarisingfrom financingactivities,includingboth Reconciliation ofliabilitiesarisingfrom financingactivities (4) (3) (2) (1) eirnts1,916,309 Senior notes Bank deposits Construction-in-progress Investment properties Properties underdevelopmentforsale Bank and other Bank andother Properties fordevelopment Non-trade amount due Non-trade amountdue oa 23,972,924 Total Non-trade amounts due Non-trade amountsdue orwns20,749,655 borrowings opn 672,486 company to ultimateholding usdais634,474 subsidiaries shareholders of to non-controlling The cashflowsmake upthenetamountofdividendspaidtonon-controlling shareholders ofsubsidiaries,advancefrom non- The cashflowsmake upthenetamountofadvancefrom ultimateholdingcompanyandrepayment toultimateholdingcompanyin The cashflowsmake upthenetamountofproceeds onissueofseniornotesandrepurchase andredemption ofseniornotesin The cashflowsmake upthenetamountofproceeds from bankandotherborrowings andrepayment ofbankandotherborrowings of cashflows. controlling shareholders ofsubsidiariesandrepayment tonon-controlling shareholders ofsubsidiariesintheconsolidated stat the consolidatedstatementofcashflows. the consolidatedstatementofcashflows. in theconsolidatedstatementofcashflows. January 1, 1, January M’0 M’0 M’0 M’0 M’0 M’0 M’0 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 2017 16,183,949 17,485,048 1,110,426 Financing Financing cash flow (672,418) 863,091 — F-78 — (2) (1) (4) (3) Acquisition Acquisition subsidiary 7,0 4,0 2,3 1,954,198 129,233 – – 249,000 78,400 of a of a 78,400 (6,319,300) 68,033 (375,943) 178,058 35,087,220 178,058 (375,943) 68,033 (6,319,300) 78,400 8 56 – (556) 488 2,911,604 – 49,381 (164,512) – – 30,221,418 – – – (211,919) 68,033 – (6,568,300) – control from control from subsidiaries subsidiaries Change of Change of ventures to joint to joint Non-cash changes Deferred Deferred finance finance charge 11,795,630 2,225,105 7,250,000 7,087,353 movement exchange exchange M’0 RMB’000 RMB’000 Foreign Foreign 072016 2017 – GROUP changes Other Other 16,163,346 1,505,654 7,398,000 1,211,774 482,000 December 31, December 31, 2017 ement Theseniornotescompriseissuedin2011,2013,2014and2017. 24 SENIOR NOTES d The seniornotesissuedonJanuary23,2017(“Notes 2022”)willmature onJanuary23,2022. (d) TheseniornotesissuedonMay 8,2014(“Notes 2017”)matured onMay8,2017.Theseniornotes (c) TheseniornotesissuedonMay23,2013(“Notes 2016”)matured onMay23,2016.Thesenior (b) TheseniornotesissuedonMarch 29,2011(“Notes 2018”)withanoriginalmaturitydateonMarch (a) (2) (1) Transaction costs Exchange difference Nominal valueofseniornotesissued Repurchase andredemption Cumulative interest paid Cumulative interest accrued At dateofissue Non-current Current Analysed as: Liability atendofyear includedinotherpayables(Note26) Interest payablewithinoneyear Total Changes inamountatdateofissue relative tothepreceding year’samountincludetheeffectoftranslationtopresentation Transaction costsincludednon-audit feesofRMB3million(2016:RMB5million)paidtotheauditors oftheCompanyinconnecti currency andhavebeenincludedinthecurrency translation reserve. with theissuanceofseniornotesby the Group (Note31). Indenture datedMay8,2014. the year, theCompanyfullyredeemed theNotes2017inaccordancewithtermssetout commencing onNovember8,2014.Theseniornoteswere denominatedinSGdollars.During bore interest at6.2%perannumwithinterest payable onMay8andNovemberofeachyear, 2013. was fullyredeemed in2016accordancewiththetermssetoutIndenture datedMay23, the Companyrepurchased certainamountsofNotes2016andtheremaining outstandingbalance year, commencingonNovember23,2013.Theseniornoteswere denominatedinRMB. In2015, notes bore interest at5.375%perannumwithinterest payableonMay23andNovemberofeach in theIndenture datedMarch 29,2011. dollars. In2016,theCompanyfullyredeemed theNotes2018inaccordancewithtermssetout 29 ofeachyear, commencingonSeptember29,2011.Theseniornoteswere denominatedinUS 29, 2018,bore interest at10.625%perannumwithinterest payableonMarch 29andSeptember US dollars. July 23ofeachyear, commencingonJuly23,2017.Theseniornotesare denominatedin The seniornotesbearsinterest at5.875%perannumwithinterest payableonJanuary23and (2) (1) (1,953,240) 4,834,113 2,987,421 — F-79 — 4,893,630 2,911,604 2,911,604 2,911,604 M’0 M’0 M’0 RMB’000 RMB’000 RMB’000 RMB’000 (450,006) 556,554 (59,517) 2017 (75,817) – GROUP – (4,660,221) (2,001,064) 6,387,511 2,184,536 6,286,342 1,916,309 1,933,919 1,916,309 1,916,309 (101,169) 124,326 2016 (17,610) – FINANCIAL STATEMENTS (1,953,240) 1,928,224 1,953,240 (363,635) 388,651 2017 (25,016) COMPANY – – – – – – – (2,660,838) (1,678,270) 4,387,511 1,832,223 4,316,478 1,916,309 1,933,919 1,916,309 1,916,309 124,326 2016 (71,033) (17,610) December 31,2017 NOTES TO – on
137
ANNUAL REPORT 2017 138 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO 25 TRADE PAYABLES ThemanagementestimatesthefairvalueofNotes2022atDecember31,2017tobeapproximately Thecumulativeinterests accruedonNotes2018,2016,2017and2022are calculated SENIORNOTES (Cont’d) 24 26 OTHER Theaveragecredit periodfortradepayablesis159days(2016:174days). PAYABLES of theglobalsecurityagentandtrusteeNotes2022. RMB2.940 billionasattheendof2017.Additionally, shares infiveofitssubsidiariesare chargedinfavour to US$450million)foratermoffiveyearsupJanuary22,2022.Thejointguaranteeapproximates 2022 issuedbyawholly-ownedsubsidiaryoftheCompanyamountingtoRMB2.940billion(equivalent In 2017,theCompanyandfiveofitssubsidiarieshasprovided ajointguaranteeinrespect ofNotes at December31,2016. in sixofitssubsidiarieswere chargedinfavouroftheglobalsecurityagentandtrusteeNotes2017as 8, 2017.Thejointguaranteeapproximated RMB1.920billionasattheendof2016. Additionally, shares Company amountingtoRMB1.856billion(equivalentS$400million)foratermofthree yearsuptoMay In 2014,sixofitssubsidiarieshadprovided ajointguaranteeinrespect ofNotes2017issuedbythe RMB3.027 billion(2016:RMBNil).Thisfairvalueisbasedonthepriceobtainedfrom abank’spublication. (2016 :Nil%)perannumrespectively. by applyingeffectiveinterest ratesofNil%(2016:11.3%),6.0%),6.8%6.8%)and6.2% Other payables Other interest payable VAT payable Interest payableonseniornotes Sales-related taxpayable Accrued expenses Advances received from customers Outside parties Non-controlling shareholder ofasubsidiary — F-80 — 21,091,084 22,051,664 M’0 M’0 M’0 RMB’000 RMB’000 RMB’000 RMB’000 2017 102,521 663,100 30,569 75,817 23,559 65,014 GROUP 23,449,697 24,088,948 2016 458,579 28,407 54,587 17,610 15,812 64,256 7,307,244 7,124,387 M’0 RMB’000 RMB’000 2017 182,857 072016 2017 3,457 3,667 210 COMPANY – – – – – GROUP 7,926,994 7,017,666 2016 909,328 17,610 21,737 3,380 747 – – – – 27 REVENUE 8 OTHER OPERATING INCOME 28 29 FINANCE COST Interest tonon-controlling shareholders ofsubsidiaries Interest onbankandotherborrowings Fair valuegainfrom putliabilitytoacquire non-controlling interests Fair valuegainonheld-for-trading investment Fair valuegainoninvestment properties (Note8) Income from property investment Income from property development Interest onseniornotes Income from others Interest income Total Others Government subsidies Net foreign exchange gain Net gainondisposalofinvestmentproperties Net gainondisposalofproperty, plantandequipment Interest toultimateholdingcompany(Note5) Total Net developmentforsaleinjointventure –properties fordevelopmentandproperties under –properties underdevelopmentforsale –properties fordevelopment Less: Interest capitalisedin Total borrowing costs — F-81 — FINANCIAL STATEMENTS 25,638,407 24,759,095 1,436,609 1,750,272 (827,471) (401,239) M’0 RMB’000 RMB’000 M’0 RMB’000 RMB’000 M’0 RMB’000 RMB’000 484,690 358,424 218,735 520,888 620,600 148,321 359,168 (36,872) 072016 2017 072016 2017 93,903 072016 2017 87,554 10,147 10,216 1,025 5,002 192 – – GROUP GROUP GROUP 24,893,558 25,664,408 (1,053,869) 1,479,413 208,290 886,602 363,396 383,961 407,454 347,819 366,090 268,270 812,281 129,348 (54,267) (23,458) 14,533 13,687 5,967 7,251 7,135 560 December 31,2017 – NOTES TO 139
ANNUAL REPORT 2017 140 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO Theseare theapplicable taxratesformostoftheGroup’s taxableprofits. * 30 INCOME TAX Theincometaxexpensevariedfrom theamountofincometaxexpensedeterminedbyapplying In2017and2016,mostofthetaxation arisinginthePRCiscalculatedatprevailing rate of25%. Noprovision forSingapore taxationhasbeenmadeasthemajorityofGroup’s incomeneitherarises above incometaxratetoprofit before incometaxasaresult ofthefollowingdifferences: in, norisderivedfrom Singapore. Non-deductible items Income taxexpenseatPRCapplicablerateof25%* Profit before incometax Deferred incometax(Note16) Current Non-taxable items Deferred withholdingtax(Note16) Effect ofunutilisedtaxlossesnot recognised asdeferred taxassets Under provision inprioryears Land appreciation tax(“LAT”) Effect ofdifferent taxratesforcertainsubsidiaries Total Effect oftaxdeductiononLAT LAT Withholding taxincurred Under provision inprioryears Others Total incometaxexpense — F-82 — 11,362,224 5,741,957 5,741,957 2,840,556 2,987,630 2,268,228 2,987,630 (746,907) M’0 RMB’000 RMB’000 M’0 RMB’000 RMB’000 307,746 320,691 146,343 320,691 (79,416) 67,877 19,065 072016 2017 20,066 072016 2017 19,065 4,649 GROUP GROUP 1,868,039 7,472,154 1,404,605 3,494,956 1,677,822 1,404,605 3,494,956 (351,151) 408,916 227,457 182,697 227,457 (26,502) (56,861) 9,415 8,663 2,375 2,375 TheactualGroup’s LAT liabilitiesare subjecttothedeterminationbytax authorities uponcompletion LAT AccordingtoaPRCtaxcircular ofStateAdministrationTaxation, Guoshuihan(2008)No.112, Incometaxforoverseassubsidiariesiscalculatedattheratesprevailing intherespective jurisdiction. 30 INCOME TAX (Cont’d) of theproperty developmentprojects. accordance withFRS37Provisions,ContingentLiabilitiesandAssets as atDecember31,2017.TheamounthasbeendisclosedpartoftheGroup’s contingentliabilitiesin effects ofdeductibilityforincometaxassessmentpurposeandadjustmentnon-controlling interests) has beenestimatedbymanagementtobeapproximately RMB597million(2016 :RMB597million)(before by theGroup. TheadditionalLAT taxexposure intheeventoffuture re-assessment bythetaxauthorities on theaboveprojects locatedinShanghaiPudongNewDistrictexcess ofthe provision previously made Management isoftheviewthatitnotprobable thatthetaxauthoritywillimposefurtherLAT taxpayments authorities. had commencedorcompletedwasadequatetomeetthetaxsettlementamountdeterminedby provision forLAT madebytheGroup relating totheaboveprojects forwhichthetaxsettlementprocess has previously provided forbasedonthetaxlaws.Managementhasassessedandconsidersthat for aphaseofproject whichhascommencedthetaxsettlementprocess waslowerthanwhattheGroup New DistrictsubsequenttoOctober1,2006,thetaxsettlementamountdeterminedbyauthorities additional LAT paymentsmadebytheGroup. Fortheprojects withproperties soldinShanghaiPudong with properties soldinShanghaiPudongNewDistrictpriortoOctober1,2006hadbeencompleted,with As atDecember31,2014,thetaxsettlementprocess foracompletedproject andaphaseofproject any LAT onaretrospective basis. Shanghai PudongTax Bureau, were oftheopinionthatrelevant taxauthorityisnotlikely toimpose directors oftheCompany, aftertakingintoaccountlegaladvicereceived andconsultationwiththelocal respect toproperties soldinShanghaiPudongNewDistrictpriortoOctober1,2006were notmadeasthe As disclosedintheprioryears’auditedconsolidatedfinancialstatements,provision fortheLAT with charged totheconsolidatedstatementofprofit orlossoftheyear. RMB321 million(2016:RMB227million)ontheundistributedearningsofPRCsubsidiarieshasbeen non-resident investorsshallbesubjecttoPRCwithholdingincometax.Deferred taxliabilityof dividend distributedoutoftheprofits generatedsinceJanuary1,2008heldbythePRCentityto — F-83 — FINANCIAL STATEMENTS (Note40). December 31,2017 NOTES TO
141
ANNUAL REPORT 2017 142 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO Profit fortheyearhasbeenarrivedataftercharging(crediting): PROFITFORTHEYEAR 31 (1) – paidtootherauditors Total auditfees Total non-audit fees – paidtootherauditors – paidtoauditorsoftheCompany Non-audit fees: – paidtoauditorsoftheCompany Audit fees: Cost ofcompletedproperties forsalerecognised asexpenses Net foreign exchange loss(gain) Net lossondisposalofheld-for-trading investment Net gainondisposalofinvestmentproperties Net gainondisposalofproperty, plantandequipment Fair valuegainonheld-for-trading investment Fair valuegainoninvestment properties (Note8) – ofthesubsidiaries Directors’ fees Total employeebenefitsexpense Salaries andothershort-termbenefits Fair valuegainfrom putliabilitytoacquire non-controlling interests – oftheCompany Directors’ remuneration: Retirement benefitschemecontributions Employee benefitsexpense(includingdirectors’ remuneration): Depreciation ofproperty, plantandequipment Allowance fordoubtfuldebtsandbadwrittenoff Aggregate amountoffeespaidtoauditors In 2017,totalnon-audit feespaidtoauditorsoftheCompanyin connection withtheissuanceofseniornotesbyGroup have capitalised inthecarryingamountofseniornotes(Note24). (1) — F-84 — 13,074,418 (148,321) M’0 RMB’000 RMB’000 177,180 869,361 786,411 (87,554) 072016 2017 57,297 49,581 82,950 33,207 (5,002) 6,606 7,478 2,333 4,273 7,716 1,792 (192) 872 446 426 43 – – GROUP 17,194,371 (129,348) (366,090) 784,117 712,093 50,189 41,766 72,024 32,085 (7,251) (7,135) (5,967) 2,193 6,262 4,069 8,423 1,916 6,954 692 167 937 525 – – been Thecalculationofthebasicanddilutedearningspershare attributabletotheordinaryownersof EARNINGSPERSHARE 32 Inrespect ofthecurrent year, thedirectors proposed afirstandfinalone-tiertaxexempt dividend of In2016,approximately RMB142millionofdividends waspaidinrespect ofafirstandfinalone-tiertax In2017,approximately RMB416millionofdividendswaspaidinrespect ofafirstandfinalone-tiertax 33 DIVIDENDS Company isbasedonthefollowingdata: has notbeenincludedasaliabilityinthesefinancialstatements. RMB643 million.Thedividendissubjecttoapproval byshareholders attheAnnualGeneralMeetingand 33.31 Renminbicents(equivalentto6.80Singapore cents)perordinaryshare amountingtoapproximately for thefinancialyearendedDecember31,2015. exempt dividendof7.28Renminbicents(equivalentto1.52Singapore cents)perordinaryshare declared for thefinancialyearendedDecember31,2016. exempt dividendof21.47 Renminbicents(equivalentto4.35Singapore cents) perordinaryshare declared There isnopotentialdilutiveordinaryshare in2017and2016. Basicanddiluted Earnings pershare (Renminbicents): purposesofbasicanddilutedearningspershare Weighted averagenumberofordinaryshares forthe Number ofshares (profit fortheyearattributabletoownersofCompany) Earnings forthepurposesofbasicanddilutedearningspershare Earnings — F-85 — FINANCIAL STATEMENTS 1,936,226 3,216,440 M’0 RMB’000 RMB’000 166.12 072016 2017 2016 2017 072016 2017 ’000 GROUP GROUP GROUP 1,946,656 2,697,361 ’000 138.56 December 31,2017 NOTES TO 143
ANNUAL REPORT 2017 144 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO Thefollowingisananalysisofthe Group’s revenue andresults byreportable segment: Segmentrevenueandresults Informationregarding theoperationsofeachreportable segmentsare includedbelow. Themanagement Others:Provision ofproperty management,ancillaryservices,advancepurchase ofconstruction (iii) Property investment:Leasingofproperties togeneraterental incomeandtogainfrom the (ii) Property development:Developmentofresidential, commercial and otherproperties. (i) TheGroup’s reportable operatingsegmentsare asfollows: 34 SEGMENT INFORMATION Segment profit represents theprofit earnedbyeachsegmentasdeterminedusingtheGroup’s accounting provided. The Group’s operationsare locatedinthePRC,hencenoanalysisbygeographicalarea ofoperationsis allocation andperformanceassessment. monitors theoperatingresults ofeachoperatingsegmentforthepurposemakingdecisionsonresource allocation andassessmentofsegmentperformance. policy. Thisisthemeasure reported tothechiefoperatingdecisionmaker forthepurposesofresources Total Others Property investment Property development materials andothers. appreciation inthevalueofproperties inthelongterm. — F-86 — 25,638,407 24,759,095 M’0 M’0 M’0 RMB’000 RMB’000 RMB’000 RMB’000 520,888 358,424 0721 072016 2017 2016 2017 Revenue 25,664,408 24,893,558 407,454 363,396 GROUP 11,362,224 11,627,907 (491,291) 225,608 before incometax Profit (loss) 7,290,139 7,472,154 (269,831) 451,846 Segment 34 SEGMENT assets INFORMATION (Cont’d) In2017and2016,there were acquisitionofsubsidiariesasfollows: ACQUISITIONOFSUBSIDIARIES 35 Othersegmentinformation Allassetsare allocatedtoreportable segments.Liabilitiesare notallocatedastheyare notmonitored by b OnMay20,2016,the Group acquired 51%oftheissuedshare capitalof NanjingDajiRealEstate (b) 0O+BOVBSZŬŲ ŬŪūŰ UIF(SPVQBDRVJSFEūŪŪPGUIFJTTVFE B Acquisition ofAssets performance. the chiefoperatingdecisionmaker forthepurposesofresource allocationandassessmentofsegment Others Property investment Property development Total assets Others Property investment Property development Total i NJDRowns3landparcels inPRC(“Parcel 1and2”,“Parcel 3”).Pursuanttothe (i) Development Co.,Ltd.(“NJ DR”)bywayofcapitalinjectionRMB156million. Innovation InvestmentsCo.,Ltd.foracashconsideration ofRMB300million. B isconsolidated. deemed separateentityunder FRS110 DR, whichisthedeveloperofParcel 3.Therefore, theGroup treats PortionBofNJDRasa legal formofNJDRasasingleentity. The Group onlyhascontrol overPortionBofNJ obligations toliabilitiesofParcel 1and2(referred toas“Portion A” thereafter) despitethe of NJDR,whichincludestheoperationParcel 1and2,thereby rightstoassetsand shareholders’ agreement, thenon-controlling shareholder hascontrol overspecifiedasset M’0 M’0 M’0 RMB’000 RMB’000 RMB’000 RMB’000 19,137 35,151 2017 8,588 7,426 — F-87 — Depreciation Consolidated FinancialStatement 2016 18,009 34,275 7,766 8,500 GROUP TIBSFDBQJUBMPG4IFO[IFO)VBSPOH FINANCIAL STATEMENTS 106,201,358 12,198,623 12,948,763 12,167,927 16,489,833 77,543,598 M’0 RMB’000 RMB’000 741,807 2017 072016 2017 8,333 non-current assets Additions to GROUP , andonlyPortion 93,448,412 14,928,045 69,570,606 1,931,905 1,259,279 3,196,206 8,949,761 2016 5,022 December 31,2017 NOTES TO 145
ANNUAL REPORT 2017 146 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO 5 ACQUISITIONOFSUBSIDIARIES(Cont’d) 35 I0O%FDFNCFSŲ ŬŪūű UIF(SPVQBDRVJSFEŰůPGUIFJTTVFETIBSFDBQJUBMPG4IFO[IFO%POHHVBO I 0O0DUPCFSŬŪ ŬŪūű UIF(SPVQBDRVJSFEŲŪPGUIFJTTVFET H OnJuly 18,2017,theGroup acquired 60%oftheissuedshare capitalofHainanYanlord Beautycrown (f) OnMay17,2017,theGroup acquired 100%equityinterest inGreens InvestmentsLtd.(“BV GI”) for (e) control (Note10). accounted forasachangeinGroup’s ownershipinterest inasubsidiarythatdoesnotresult inchangeof consideration ofRMB2.5millionandshareholder loanassumedofRMB1.122billion,whichhasbeen On December30,2016,theGroup acquired theremaining 25%issuedshare capitalofSCHCfora cash 0O"VHVTUŭŪ ŬŪūŰ UIF(SPVQBDRVJSFEűůPGUIFJTTVFETI E 0O+VOFŬŭ ŬŪūŰ UIF(SPVQBDRVJSFEŭŪPGUIFJTTVFETIBS D Acquisition ofAssets(Cont’d) of profits ofRMB293million. Shengtai InvestmentCo.,Ltd. the originalshareholders and otherthirdpartiesofRMB214million. of RMB107millionpayabletotheoriginalshareholders andassignmentofloanduefrom CDCZto Land Co.,Ltd.(“CD CZ”)foraconsiderationofRMB321million,whichcomprisecash Cultural Tourism DevelopmentCo.,Ltd. (“SYBC”)foracashconsiderationofRMB60million. a property managementcompany. are operationalatthedateofacquisition.Thejointventure alsoholds90%shareholding interest in has ownershipoveragolfcourseandanamusementpark, whichare bothsituatedinZhuhaiand a cashconsiderationofRMB600million.BVGIholdsinterests inajointventure. Thejointventure assumed ofRMB2.242billion. Commercial Co.,Ltd.(“SCHC”),foracashconsiderationofRMB7.5millionandshareholder loan due from SZRAtothenon-controlling shareholder ofRMB593million. Co., Ltd.(“SZRA”) bywayofcapitalinjectionRMB30millionandassignmentshareholder’s loan ii Thenon-controlling shareholder isentitledtoaguaranteeddividendofRMB1.100billion (iii) AlthoughunderthePRClaw, PortionBwillstillberequired tobeartheliabilitiesincurred (ii) acquisition dateandasattheendofreporting period. Accordingly, thefairvalueofcontingent considerationisestimatedtobeRMBNilasat of NJDR’sbudgetedprofit isexpectedtobemore thantheguaranteeddividendamount. budget asatacquisitiondateandyearend,thenon-controlling shareholder’s share which iscontingentontheperformanceofproject company. Basedonmanagement’s shall compensateforthedifference. Therefore, this represents acontingentconsideration upon completionofdevelopment.Intheeventshortfallavailabledividend,Group guaranteed dividendofRMB1.100billion(see(iii)below)issufficienttoserveascollateral. management hasassessedthatthenon-controlling interest’s share inPortionBand the cooperationagreement. Intheeventofdefaultnon-controlling shareholder, controlling shareholder isrequired torepay PortionBfortheliabilityasagreed under by PortionAshouldtheassetsofare insufficientto repayitsliabilities,thenon-
(“SC DG”) — F-88 — for acashconsiderationofRMB95 millionandconcession FDBQJUBMPG4V[IPV3FOBO3FBM&TUBUF IBSFDBQJUBMPG$IPOH[IPV:BOMPSE BSFDBQJUBMPG4IFO[IFO)FOHNJOH
Thefollowingsummarisestherecognised amountsofassetsacquired andliabilitiesassumedatthe AcquisitionofBusiness 5 ACQUISITIONOFSUBSIDIARIES(Cont’d) 35 acquisition dates: Impactofacquisitionontheresult oftheGroup ii. Goodwillarisingonacquisition i. accounting. land parcels inZhongshancity, PRC.Thisacquisitionwasaccountedforbythemethod of are investmentholdingandproperty developmentcompaniesinvolvedintheprimaryredevelopment of Real EstateCo.,Ltd.(“ZSRR”),whichinturnholdsinterests inthree jointventures. Thejointventures (“ZS RI”) foraconsiderationofRMB64million.ZSRIhaswholly-ownedsubsidiary, ZhongshanRenyuan On August8,2016,theGroup acquired 100%equityinterest inZhongshanRenyuanInvestmentCo.,Ltd. and were outofscopeFRS103 it intendstodevelopandselltheproperties. Theacquisitionswere accountedforasacquisitionofassets companies andtheGroup didnottake overanymanagement oroperationalprocess from thevendorsas The Group’s intentionwastoacquire thelandandvacatedproperties heldbytheabovementioned Acquisition ofAssets(Cont’d) Other payables Non-controlling interests Shareholders’ loansassumed Trade payables Non-trade amountsduetonon-controlling shareholders ofsubsidiaries Bank andotherborrowings Cash andcashequivalents Other receivables Investments injointventures Properties fordevelopment Property, plantandequipment(Note7) Net assetsatdateofacquisition Net assetsacquired Net cashoutflowarisingonacquisition Cash acquired Cash considerationpaidinprevious year Consideration payable Total consideration estimated thatthere wouldbenosignificantchangestotheGroup’s revenue andprofit for2016. Had thebusinesscombinationduringyearbeeneffectedatJanuary1,2016,management been recognised onacquisition. The fairvalueofidentifiablenetassetsacquired isRMB64million.Accordingly, nogoodwillhas Business Combinations — F-89 — . FINANCIAL STATEMENTS 1,022,744 1,430,790 1,155,094 1,369,584 (275,696) (258,596) (674,584) M’0 RMB’000 RMB’000 214,490 600,000 582,003 (78,400) (52,997) (60,000) 52,997 97,052 072016 2017 (5,000) (57) 50 GROUP (2,240,319) (2,600,000) (2,329,493) (1,555,000) 2,835,506 3,393,129 7,398,101 1,499,913 (334,833) 334,833 630,127 557,623 (72,504) 63,000 (3,383) 3,991 14 December 31,2017 – NOTES TO 147
ANNUAL REPORT 2017 148 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO Detailsofthechangecontrol were asfollow: OnAugust30,2016,asupplementaryshareholders’ agreement wassignedbetweentheGroup andthe CHANGEOFCONTROLFROMSUBSIDIARIESTO ASSOCIATES 36 consolidated financialstatement. Consequently, theHaimenCompanieswere deconsolidatedandwere equityaccountedforinthe as associates.TheGroup’s effectiveinterest intheHaimenCompanies remained unchangedat55%. 30, 2016.Accordingly, theHaimenCompaniesceasedtobesubsidiariesofGroup andare classified ŏ)BJNFO UIF DPMMFDUJWFMZ -UE $P Companies”), asaresult ofchangesinthearticleassociationSSYHYEwitheffectfrom September %FWFMPQNFOU BOE *OWFTUNFOU $JUZ )J5FDI &DP :BOHU[F )BJNFO OFETVCTJEJBSZ 4JOP4JOHBQPSF:BOMPSE :BOHU[F&DP)J5FDI$JUZ$P -UE ŏ44:):&Ő BOEJUTXIPMMZPX joint venture partners,andtheGroup lostcontrol andpoweroverSino-Singapore Yanlord (Haimen) Trade andotherpayables Non-controlling interests Cash andcashequivalents Other receivables anddeposits Properties underdevelopmentforsale Deferred taxasset Property, plantandequipment(Note7) Net assetsatdateofchangecontrol Cash andcashequivalentsderecognised Consideration received Net cashoutflowarisingfromchangeofcontrol Fair valueofretained interest Net assetderecognised Consideration received Gain (Loss)onchangeofcontrol Net assetsderecognised — F-90 — RMB’000 (108,185) (146,984) (146,984) (132,227) 146,984 147,353 240,412 132,227 132,227 Group (62,277) 1,735 4,606 2,011 – – –
Thefollowingsummarisesthedetails ofthechangecontrol: OnAugust28,2017,theGroup entered intocooperationagreement withthejointventure partners,and TheGroup lostcontrol andpoweroverTianjinYanlord Hehai”),as HehaiRealEstateCo.,Ltd.(“Tianjin CHANGEOFCONTROLFROMSUBSIDIARIESTO JOINTVENTURES 37 statement. Singapore Companieswere deconsolidatedandare equityaccountedforintheconsolidatedfinancial The Group’s effectiveinterest intheSino-Singapore Companies reduced to51%.Consequently, theSino- Sino-Singapore CompaniesceasedtobesubsidiariesoftheGroup andare classifiedasjointventures. Companies”), asaresult ofthedisposalinterest witheffectfrom August28,2017.Accordingly, the owned subsidiary, NanjingYanlord JiangdaoRealEstateCo.,Ltd.(collectively, the“Sino-Singapore the Group lostcontrol andpoweroverYanlord anditswholly- EcoIslandInvestmentsPte.Ltd.(“YEII”) is equityaccountedforintheconsolidatedfinancialstatement. Group’s effectiveinterest intheTianjinHehaiis60%.Consequently, TianjinHehaiwasdeconsolidatedand Accordingly, TianjinHehaiceasedtobeasubsidiaryoftheGroup andisclassifiedasajointventure. The a result ofchangesinthearticleassociationTianjinHehaiwitheffectfrom December4,2017. Amount duetonon-controlling shareholder ofasubsidiary Non-controlling interests Amounts duetoimmediateholdingcompanyandfellowsubsidiaries Trade andotherpayables Bank andotherborrowings Cash andcashequivalents Other receivables anddeposits Properties underdevelopmentforsale Properties fordevelopment Property, plantandequipment(Note7) Net assetsatdateofchangecontrol Fair valueofretained interest Net assetderecognised Consideration received Gain (Loss)onchangeofcontrol Net assetsderecognised Cash andcashequivalentsderecognised Consideration received Net cashoutflowarisingfromchangeofcontrol — F-91 — FINANCIAL STATEMENTS (4,562,462) (6,319,300) 2,292,349 8,419,775 RMB’000 (249,000) 432,140 Group (66,932) (23,128) (85,879) (85,879) 85,879 32,645 23,128 23,128 (9,517) 196 December 31,2017 – – – NOTES TO
149
ANNUAL REPORT 2017 150 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO TheGroup aslessee OPERATING LEASEARRANGEMENTS 38 Attheendofreporting period,theGroup hascontractedwithtenantsforthefollowingfuture minimum TheGroup rents outitsinvestmentproperties andcertaincompletedproperties forsaleinthe TheGroup aslessor Operatingleasepayments substantiallyrepresent rental payablesbytheGroup inrespect of landand operating leases,whichfalldueasfollows: At theendofreporting period,theGroup hasoutstandingcommitmentsundernon-cancellable lease receipts: (2016 :RMB349million). PRC underoperatingleases.Property rental incomeearnedduringtheyearwasRMB347million less than2years(2016:3years). buildings foritsoffice premises andstaffaccommodation. More thanfiveyears In thesecondtofifthyearinclusive Within oneyear recognised asanexpenseintheyear Minimum leasepaymentsunderoperatingleases Within oneyear In thesecondtofifthyearinclusive More thanfiveyears — F-92 — Leases are negotiatedforanaveragetermof 1,453,286 M’0 RMB’000 RMB’000 M’0 RMB’000 RMB’000 M’0 RMB’000 RMB’000 291,295 654,895 507,096 19,442 072016 2017 072016 2017 70,411 072016 2017 14,218 37,628 18,565 GROUP GROUP GROUP 1,282,316 227,767 583,778 470,771 16,456 41,639 15,708 16,318 9,613
Estimatedamountscommittedforfuture capitalexpenditure butnotprovided forinthefinancial CAPITAL EXPENDITURECOMMITMENTS 39 AsatDecember31,2017,theCompany, togetherwithfiveofitssubsidiaries, hasprovided jointguarantees AsatDecember31,2017,theCompany, togetherwithfiveofitssubsidiaries,hasprovided AsdescribedinNote30,theadditionalLAT taxexposure intheeventoffuture re-assessment by AsatDecember31,2017,theGroup hasprovided guaranteesofapproximately RMB7.508billion CONTINGENCIESANDGUARANTEES 40 statements: "MPBOGBDJMJUZBNPVOUJOHUP3.#ŰŲŰūCJMMJPO FRVJWBMFOUUP Ŕ "MPBOGBDJMJUZBNPVOUJOHUP3.#ůŬŬNJMMJPO FRVJWBMFOUUP),ŰŬůNJMMJPO ŬŪūŰ3.#ůůųNJMMJPO Ŕ to banksinrespect ofthefollowingloanfacilitiesgrantedtoasubsidiary: billion (equivalenttoUS$450million)foraremaining termoflessthanfiveyearsuptoJanuary22,2022. a jointguaranteeinrespect ofseniornotesissuedbyawholly-ownedsubsidiaryamountingtoRMB2.940 for non-controlling interests) asatDecember31,2017. (2016 :RMB597million)(before effectsofdeductibilityforincometaxassessmentpurposeandadjustment the taxauthoritieshasbeenestimatedbymanagementtobeapproximately RMB597million the banksfrom thecustomersassecurityformortgageloangranted. banks wouldbereleased uponreceiving thebuildingownershipcertificateofrespective properties by likelihood oftheseguaranteesbeingcalleduponislow. Theseguaranteesprovided bytheGroup tothe and considered theprofile ofcustomerswhoboughttheGroup’s properties andconcludedthat the the Group tothebanksdischargeobligations.Themanagementhasmadeenquirieswith guarantees becalledupon,there wouldbeanoutflowofcash(previously collectedbytheGroup) from by thebankstothesecustomersforpurchase oftheGroup’s developmentproperties. Shouldsuch (2016 :RMB11.495billion)tobanksforthebenefitofitscustomersinrespect ofmortgageloansprovided Investment properties Acquisition ofproperty amount ofRMB4.974billion(equivalenttoUS$761million) wasoutstanding. 2020.AsatDecember31,2017,an a remaining termoflessthanthree yearsuptoOctober 23, loan facilitywasfullydrawndownasattheendof2017 and2016. (equivalent toHK$625million))foraremaining termoflessthantwoyearsuptoApril25,2019.The — F-93 — 64ūŪůŪCJMMJPO ŬŪūŰ3.#/JM GPS FINANCIAL STATEMENTS M’0 RMB’000 RMB’000 58,686 58,686 072016 2017 – GROUP 132,611 108,979 23,632 December 31,2017 NOTES TO
151
ANNUAL REPORT 2017 152 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO AsatDecember31,2017,theCompanyhasprovided aguaranteetothirdpartyinrespect ofaloan AsatDecember31,2017,theCompanyhasprovided aguaranteetothirdpartyinrespect ofaloan AsatDecember31,2017,theCompanyhasprovided aguaranteetobankinrespect ofaloanfacility AsatDecember31,2017,theCompanyhasprovided aguaranteetobankinrespect ofaloanfacility AsatDecember31,2017,theCompanyhasprovided aguaranteetobankinrespect ofaloanfacility AsatDecember31,2017,theCompany, togetherwithasubsidiary, hasprovided jointguarantees toa AsatDecember31,2016,theCompany, together withfiveofitssubsidiaries,hadprovided jointguarantees CONTINGENCIESANDGUARANTEES (Cont’d) 40 and 2016. of lessthantwoyearsuptoApril26,2019.Theloanfacility wasfullydrawndownasattheendof2017 facility grantedtoasubsidiaryamountingRMB590million (2016:RMB590million)foraremaining term and 2016. of lessthantwoyearsuptoMarch 28,2019.Theloanfacilitywasfullydrawndownasattheendof2017 facility grantedtoasubsidiaryamountingRMB910million(2016:million)forremaining term guarantee islimitedtoanamountofRMB280million. three yearsuptoJuly31,2020.TheCompany’scontingentliabilityasatDecember2017forthis granted toasubsidiaryamountingRMB840billion(2016:RMBNil)forremaining termoflessthan three yearsuptoFebruary22,2020.Theloanfacilitywasfullydrawndownasattheendof2017. granted toasubsidiaryamountingRMB600billion(2016:RMBNil)forremaining termoflessthan than twoyearsuptoMay11,2019.Theloanfacilitywasfullydrawndownasattheendof2017and2016. granted toasubsidiaryamountingRMB510million(2016:RMB600million)forremaining termofless down asattheendof2017. Nil) foraremaining termoflessthanthree yearsuptoJanuary15,2020.Theloanfacilitywasfullydrawn bank inrespect ofaloanfacilitygrantedtoanothersubsidiaryamountingRMB1.800billion(2016:RMB "MPBOGBDJMJUZBNPVOUJOHUP3.#ūūűųCJMMJPO FRVJWBMFOUUP64ūűŪNJMMJPO GPSBSFNBJOJOHUFSN Ŕ "MPBOGBDJMJUZBNPVOUJOHUP3.#ŬŬůūCJMMJPO FRVJWBMFOUUP64ŭŬůNJMMJPO GPSBSFNBJOJOHUFSN Ŕ to banksinrespect ofthefollowingloanfacilitiesgrantedtoasubsidiary: cancelled accordingly. 2016. OnOctober25,2017,theloanandinterest payablewere fullyrepaid andtheloanfacilitywas of lessthantwoyearsuptoMay4,2018.Theloanfacilitywasfullydrawndownasattheend cancelled accordingly. 2016. OnJune23,2017,theloanandinterest payablewere fullyrepaid andtheloanfacilitywas 2017.Theloanfacilitywasfullydrawndownasattheendof of lessthanoneyearuptoJune 23, — F-94 — AsatDecember31,2016,theCompanyhadprovided aguaranteetobankinrespect ofaloanfacility AsatDecember31,2017,theCompanyhasprovided ajointguaranteetobankinrespect ofaloan CONTINGENCIESANDGUARANTEES (Cont’d) 40 "MPBOGBDJMJUZGPSBSFNBJOJOHUFSNPGMFTTUIBOUISFFZFBST Ŕ MPBO 5IF ŬŪŬŪ ūů +BOVBSZ UP VQ ZFBST UISFF UIBO MFTT PG UFSN SFNBJOJOH B GPS GBDJMJUZ MPBO " Ŕ "MPBOGBDJMJUZGPSBSFNBJOJOHUFSNPGMFTTUIBOPOFZFBSVQ Ŕ Nanjing EcoHi-techIslandDevelopmentCo.,Ltd.(“SSNEHID”): of thefollowingloanfacilitiesgrantedtoawholly-ownedsubsidiaryjointventure Sino-Singapore As atDecember31,2017,asubsidiaryoftheCompanyhasprovided jointguaranteestobanksinrespect 2017 forthisjointguaranteeislimitedtoanamountofRMB60million. term oflessthanfiveyearsuptoAugust20,2022.Thesubsidiary’scontingentliabilityasatDecember31, of aloanfacilitygrantedtojointventure amountingtoRMB236million(2016:RMBNil)foraremaining As atDecember31,2017,asubsidiaryoftheCompanyhasprovided ajointguaranteetobanksinrespect 2017 forthisjointguaranteeislimitedtoanamountofRMB203million. term oflessthanfiveyearsuptoMarch 19,2022.Thesubsidiary’scontingentliabilityasatDecember31, of aloanfacilitygrantedtojointventure amountingtoRMB600million(2016:RMBNil)foraremaining As atDecember31,2017,asubsidiaryoftheCompanyhasprovided ajointguaranteetobankinrespect accordingly. On October20,2017,theloanandinterest payablewere fullyrepaid andtheloanfacilitywascancelled less thantwoyearsuptoMarch 30,2018.Theloanfacilitywasfullydrawndownasattheendof2016. granted toasubsidiaryamountingRMB114million(equivalentS$24million)forremaining termof S$159 million). at December31,2017forthisjointguaranteeislimitedtoanamountofRMB776million(equivalent Nil) foraremaining termoflessthanoneyearuptoJuly12,2018.TheCompany’scontingentliabilityas facility grantedtoajointventure amountingtoRMB2.632billion(equivalentS$539million)(2016:RMB (2016 :RMB342million). as atDecember31,2017forthisjointguaranteeislimited toanamountofRMB278million was fullydrawndownasattheendof2017and2016. Thesubsidiary’scontingentliability (2016 :RMB388million). as atDecember31,2017forthisjointguaranteeislimited toanamountofRMB285million facility wasfullydrawndownasattheendof2017and2016.Thesubsidiary’scontingentliability RMB134 million). as atDecember31,2017forthisjointguaranteeislimitedtoanamountofRMB109million(2016: facility wasfullydrawndownasattheendof2017and2016.Thesubsidiary’scontingentliability — F-95 — VQUP+VMZū ŬŪŬŪ5IFMPBOGBDJMJUZ UP4FQUFNCFSŬů ŬŪūŲ5IFMPBO FINANCIAL STATEMENTS December 31,2017 NOTES TO
153
ANNUAL REPORT 2017 154 YANLORD LAND GROUP LIMITED December 31,2017 FINANCIAL STATEMENTS NOTES TO 0 CONTINGENCIESANDGUARANTEES (Cont’d) 40 the Companyare notsignificant. The managementisoftheviewthatfairvaluefinancialguaranteesprovided bytheGroup and payable were fullyrepaid andtheloanfacilitieswere cancelledaccordingly. provided guaranteeofRMB55millionforthesamecredit facilities.InMarch 2017,theloanandinterest its shareholding inSSNEHIDwaslimitedtoanamountofRMB72million.AsubsidiarytheCompanyhad owned subsidiaryofSSNEHIDforproperty development.SIEID’scontingentliabilityunderthispledgeof (“SIEID”) hadpledgeditsshares inSSNEHIDtobanksassecurityforcredit facilitiesusedbyawholly- As atDecember31,2016,thejointventure Singapore IntelligentEcoIslandDevelopmentPte.Ltd. 14, 2017,theloanandinterest payablewere fullyrepaid andtheloanfacilitywascancelledaccordingly. years uptoApril14,2018.Theloanfacilitywasfullydrawndownasattheendof2016.OnDecember loan facilitygrantedtoajointventure amountingtoRMB400millionforaremaining termoflessthantwo As atDecember31,2016,asubsidiaryoftheCompanyhadprovided aguaranteetobankinrespect ofa — F-96 — INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF YANLORD LAND GROUP LIMITED
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Opinion
We have audited the accompanying financial statements of Yanlord Land Group Limited (the “Company”) and its subsidiaries (the “Group”), which comprise the consolidated statement of financial position of the Group and the statement of financial position of the Company as at December 31, 2018, and the consolidated statement of profit or loss, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows of the Group and the statement of changes in equity of the Company for the year then ended, and the notes to the financial statements, including a summary of significant accounting policies, as set out on pages 72 to 168.
In our opinion, the accompanying consolidated financial statements of the Group and the statement of financial position and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Companies Act, Chapter 50 (“the Act”), Singapore Financial Reporting Standards (International) (“SFRS(I)s”) and International Financial Reporting Standards (“IFRSs”) so as to give a true and fair view of the consolidated financial position of the Group and the financial position of the Company as at December 31, 2018, and of the consolidated financial performance, consolidated changes in equity and consolidated cash flows of the Group and changes in equity of the Company for the year ended on that date.
Basis for Opinion 66 We conducted our audit in accordance with Singapore Standards on Auditing (“SSAs”). Our responsibilities under those Yanlord standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our Land Group Limited report. We are independent of the Group in accordance with the Accounting and Corporate Regulatory Authority (“ACRA”) Code of Professional Conduct and Ethics for Public Accountants and Accounting Entities (“ACRA Code”) together with the ethical requirements that are relevant to our audit of the financial statements in Singapore, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ACRA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current year. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
— F-97 — INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF YANLORD LAND GROUP LIMITED
Key audit matters How the scope of our audit responded to the key audit matters
Assessment of recoverable amounts for properties for development, properties under development for sale and completed properties for sale
Properties (consisting of properties for development, We obtained an understanding and tested the design and properties under development for sale and implementation of the Group’s relevant controls related to completed properties for sale) (Note 9) represent assessment of recoverable amounts for properties, which a significant proportion of the assets in the Group’s include checking approvals over the reviewing and updating of statement of financial position. selling prices and cost forecasts, the setting of budgets and the authorisation and recording of costs. The accounting policies for Properties are set out in Note 2 to the consolidated financial statements. We discussed with management to understand the basis used in determining whether the Group’s Properties are impaired and Management’s assessment of the recoverable the amount of impairment, if any. amounts of the Properties is a judgemental process which requires the estimation of the net realisable We challenged management assumptions relating to the value, which takes into account the future selling reasonableness of the future sales expectations including price (net of all estimated selling expenses) and the expected selling prices. We compared the expected selling 67 anticipated costs to completion. The shortfall in the prices to externally published benchmarks and also considered net realisable value over the cost is accounted for as whether these prices are consistent with the current property Annual Report an impairment loss in profit or loss. market trends. 2018
The assessment of recoverable amounts of the On a sampling basis, we agreed land costs to the acquisition of Properties also takes into consideration the land use right agreements, verified projected construction costs to development plan, timing of sales, current market the construction agreements, and compared to the construction prices of the properties involved or of comparable costs of the Group’s other similar projects. properties and the prevailing property market conditions. Management performs cost studies for On development projects with slower than expected sales or with each project, taking into account the costs incurred low or negative margins, we compared actual margins achieved to date, the development status and costs to to budget. We evaluated the sensitivity of the margin to changes complete each development project. in sales prices and costs.
We have also assessed the adequacy of the disclosures in respect of significant estimates made on the recoverable amounts for Properties in the consolidated financial statements.
— F-98 — INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF YANLORD LAND GROUP LIMITED
Key audit matters How the scope of our audit responded to the key audit matters
Valuation of investment properties
Investment properties (Note 8) represent a We tested the relevant controls implemented by the management significant proportion of the assets in the Group’s in appointing the Valuer and reviewed and challenged the work statement of financial position. of the Valuer.
The accounting policy for investment properties We assessed the Valuer’s competence, independence, is set out in Note 2 to the consolidated financial capabilities. We read their terms and scope of the valuation statements. engagement.
The fair value of the investment properties is based We discussed with the Valuer to understand the assumptions and on the valuation performed by an independent valuation techniques used in valuing the investment properties professional valuer (the “Valuer”). and the market evidence used by the Valuer to support their assumptions. In determining fair values of investment properties, two valuation techniques are used by the Valuer, With the assistance of our internal valuation specialists, we depending on the nature of each investment evaluated the appropriateness of the valuation techniques used property. These valuation techniques used include: by the Valuer. Taking into account the nature of each investment 68 (i) direct comparison approach; and (ii) income property, we benchmarked and challenged the key assumptions capitalisation approach. used by reference to externally published industry data and Yanlord comparable property transactions, where available, and we Land Group Limited The valuation of the investment properties is a also considered whether these assumptions are consistent with significant estimation area as it is underpinned the current market environment. by a number of key assumptions used in the valuation, which include (i) price per square metre; Based on our procedures, we noted that the valuation (ii) capitalisation rates; (iii) market rent per square methodologies adopted by the Valuer are comparable to the metre per month. methods used for similar property types. In addition, we noted that the key assumptions used in the valuations to be within a reasonable range of our expectations.
We have also assessed the adequacy of the Group’s disclosures including the inputs into the valuations and the assumptions used.
— F-99 — INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF YANLORD LAND GROUP LIMITED
Key audit matters How the scope of our audit responded to the key audit matters
Land appreciation tax (“LAT”)
LAT related provisions, as presented as part of We checked the Group’s LAT computations with reference to the income tax payable, is estimated according to local legislation with the assistance of our internal tax specialists the requirements set forth in the relevant People’s in the PRC. Republic of China (“PRC”) tax laws and regulations. Significant judgement is required in estimating the We evaluated management’s judgements in respect of the amount of land appreciation and other basis in provisioning for LAT by reference to the tax requirements. We calculating the provision for LAT. The final tax reviewed the correspondences with the tax authorities. outcome could be different from the initial recorded amounts, and these differences will impact the We have also assessed the adequacy of the Group’s LAT income tax expense and the related provisions in disclosures in the consolidated financial statements. the periods in which such tax is finalised.
Information Other than the Financial Statements and Auditor’s Report Thereon
Management is responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements and our auditor’s report thereon. 69 Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. Annual Report 2018 In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Directors for the Financial Statements
Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Act, SFRS(I)s and IFRSs, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair financial statements and to maintain accountability of assets.
In preparing the financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
The directors’ responsibilities include overseeing the Group’s financial reporting process.
— F-100 — INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF YANLORD LAND GROUP LIMITED
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with SSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
(a) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
(b) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s 70 internal control.
Yanlord (c) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and Land Group Limited related disclosures made by management.
(d) Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
(e) Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
(f) Obtain sufficient appropriate audit evidence regarding the financial information of the entities and business activities within the Group to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
— F-101 — INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF YANLORD LAND GROUP LIMITED
From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiary corporations incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.
The engagement partner on the audit resulting in this independent auditor’s report is Cheung Pui Yuen.
Deloitte & Touche LLP Public Accountants and Chartered Accountants 71 Singapore Annual Report 2018 March 27, 2019
— F-102 — STATEMENTS OF FINANCIAL POSITION December 31, 2018
GROUP COMPANY December 31, December 31, January 1, December 31, December 31, January 1, Note 2018 2017 2017 2018 2017 2017 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
ASSETS
Non-current assets Property, plant and equipment 7 3,177,663 2,842,863 1,819,467 – –– Investment properties 8 14,567,640 13,986,380 13,694,556 – –– Properties for development 9 16,940,162 15,079,352 2,792,938 – –– Investments in subsidiaries 10 – ––13,523,060 3,390,836 2,473,274 Investments in associates 11 1,418,593 584,881 610,363 – –– Investments in joint ventures 12 5,897,162 4,542,033 1,200,199 – –– Other receivables and deposits 14 3,114,118 2,402,132 873,153 – –– Non-trade amounts due from: Joint ventures 12 5,914,815 2,696,774 1,202,561 – –– Non-controlling shareholders of subsidiaries 13 400,000 400,000 200,000 – –– Other financial assets 175,923 2,990 – – –– Intangible assets 15 2,092 812 613 – –– 72 Deferred tax assets 16 472,281 445,184 444,061 – –– Total non-current assets 52,080,449 42,983,401 22,837,911 13,523,060 3,390,836 2,473,274
Yanlord Land Group Current assets Limited Inventories 117,027 92,721 73,020 – –– Completed properties for sale 9 5,957,456 8,487,306 4,704,316 – –– Properties under development for sale 9 21,124,992 25,587,718 38,214,800 – –– Trade receivables 48,183 26,298 22,197 – –– Other receivables and deposits 14 1,853,358 3,923,692 4,903,935 1 44 Non-trade amounts due from: Subsidiaries 5 – ––1,794,247 11,926,923 14,139,634 Associates 11 1,201,290 1,283,682 1,176,327 – –– Joint ventures 12 9,833,539 2,849,514 207,750 – –– Non-controlling shareholders of subsidiaries 13 3,247,508 2,336,464 2,287,134 – –– Other related parties 6 788 584 625 – –– Income tax prepayment 567,767 791,636 916,334 – –– Pledged bank deposits 17 331,048 40,029 520,680 – –– Cash and cash equivalents 17 10,317,374 17,798,313 17,583,383 9,404 2,650 21,902 Total current assets 54,600,330 63,217,957 70,610,501 1,803,652 11,929,577 14,161,540
Total assets 106,680,779 106,201,358 93,448,412 15,326,712 15,320,413 16,634,814
— F-103 — STATEMENTS OF FINANCIAL POSITION December 31, 2018
GROUP COMPANY December 31, December 31, January 1, December 31, December 31, January 1, Note 2018 2017 2017 2018 2017 2017 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
EQUITY AND LIABILITIES
Capital, reserves and non-controlling interests Share capital 19 7,261,726 7,261,726 7,261,726 7,261,726 7,261,726 7,261,726 Reserves 17,768,378 15,468,798 13,785,068 264,747 100,507 (83,411) Equity attributable to owners of the Company 25,030,104 22,730,524 21,046,794 7,526,473 7,362,233 7,178,315 Non-controlling interests 7,848,514 9,972,287 8,962,762 – –– Total equity 32,878,618 32,702,811 30,009,556 7,526,473 7,362,233 7,178,315
Non-current liabilities Bank and other borrowings – due after one year 21 27,998,178 27,664,355 12,438,479 – 639,509 922,254 Senior notes 22 5,440,228 2,911,604 – – –– Deferred tax liabilities 16 2,831,594 2,607,761 2,243,610 – –– Non-trade amounts due to: Joint ventures 12 805,377 –– – –– 73 Non-controlling shareholders Annual of subsidiaries 13 – 1,265,625 337,127 – –– Report Put liability to acquire 2018 non-controlling interests 18 – 1,334,144 1,421,698 – –– Deferred income 335,702 138,083 – – –– Total non-current liabilities 37,411,079 35,921,572 16,440,914 – 639,509 922,254
Current liabilities Bank and other borrowings – due within one year 21 8,293,294 2,557,063 8,311,176 639,509 79,201 495,221 Senior notes 22 – – 1,916,309 – – 1,916,309 Trade payables 23 8,246,981 7,307,244 7,926,994 – –– Other payables 24 1,453,353 1,362,367 1,294,640 3,837 3,667 21,737 Contract liabilities 25 9,857,831 20,689,297 22,794,308 – –– Non-trade amounts due to: Subsidiary 5 – ––7,100,578 7,186,140 5,386,074 Associates 11 257,596 –– – –– Joint ventures 12 674,391 – 365 – –– Ultimate holding company 5 – – 672,486 – – 672,486 Directors 6 56,315 49,663 42,418 56,315 49,663 42,418 Non-controlling shareholders of subsidiaries 13 705,139 688,573 297,347 – –– Other related parties 6 44,808 55,676 47,630 – –– Income tax payable 5,480,641 4,867,092 3,694,269 – –– Put liability to acquire non-controlling interests 18 1,320,733 –– – –– Total current liabilities 36,391,082 37,576,975 46,997,942 7,800,239 7,318,671 8,534,245
Total equity and liabilities 106,680,779 106,201,358 93,448,412 15,326,712 15,320,413 16,634,814
See accompanying notes to financial statements.
— F-104 — CONSOLIDATED STATEMENT OF PROFIT OR LOSS Financial year ended December 31, 2018
GROUP Note 2018 2017 RMB’000 RMB’000
Revenue 25 24,888,041 25,638,407 Cost of sales (13,432,692) (13,594,462) Gross profit 11,455,349 12,043,945 Other operating income and other gains 26 714,587 472,279 Fair value gain on investment properties 391,372 148,321 Selling expenses (398,278) (330,537) Administrative expenses (955,359) (809,328) Other operating expenses (33,454) (15,660) Finance cost 27 (693,994) (484,690) Share of loss of associates 11 (12,689) (8,114) Share of profit of joint ventures 12 74,123 346,008 Profit before income tax 10,541,657 11,362,224 74 Income tax 28 (5,146,207) (5,741,957)
Yanlord Profit for the year 29 5,395,450 5,620,267 Land Group Limited Profit attributable to: Owners of the Company 3,544,570 3,216,440 Non-controlling interests 1,850,880 2,403,827 5,395,450 5,620,267
Earnings per share (Renminbi cents) 30 – Basic 183.51 166.12 – Diluted 183.51 166.12
See accompanying notes to financial statements.
— F-105 — CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Financial year ended December 31, 2018
GROUP Note 2018 2017 RMB’000 RMB’000
Profit for the year 29 5,395,450 5,620,267
Other comprehensive (expense) income: Items that will not be reclassified subsequently to profit or loss: Currency translation difference (46,561) 823,231 Share of other comprehensive income of a joint venture 9,873 –
Items that may be reclassified subsequently to profit or loss: Currency translation difference (704,318) (328,359) Share of other comprehensive (expense) income of a joint venture (4,742) 4,372
Other comprehensive (expense) income for the year, net of tax (745,748) 499,244 75 Total comprehensive income for the year 4,649,702 6,119,511 Annual Report 2018
Total comprehensive income attributable to: Owners of the Company 2,798,917 3,715,598 Non-controlling interests 1,850,785 2,403,913 4,649,702 6,119,511
See accompanying notes to financial statements.
— F-106 — STATEMENTS OF CHANGES IN EQUITY Financial year ended December 31, 2018
Equity Currency attributable Non- Share Treasury translation Statutory Merger Other Accumulated to owners of controlling Note capital shares reserve reserve deficit reserve profits the Company interests Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Note 20)
GROUP
Balance at January 1, 2017 7,261,726 (47,006) (689,689) 1,403,010 (1,834,019) (1,758,997) 16,711,769 21,046,794 8,962,762 30,009,556 Total comprehensive income for the year: Profit for the year – – – – – – 3,216,440 3,216,440 2,403,827 5,620,267 Other comprehensive income for the year – – 494,786 – – 4,372 – 499,158 86 499,244 Total – – 494,786 – – 4,372 3,216,440 3,715,598 2,403,913 6,119,511 Transactions with owners, recognised directly in equity: Change of interest in subsidiaries 10 – – – 229 – (1,530,277) – (1,530,048) (123,312) (1,653,360) Capital withdrawal by non- controlling shareholders – – – – – – – – (1,359,385) (1,359,385) Non-controlling interest arising from acquisition of subsidiaries 33 – – – – – – – – 275,696 275,696 Dividends 31 – – – – – – (415,855) (415,855) – (415,855) Dividends declared to non- controlling shareholders – – – – – – – – (177,870) (177,870) 76 Change of control from subsidiaries to joint ventures 34 – – – – – (662) – (662) (9,517) (10,179) Yanlord Repurchase of shares 20 – (85,303) – – – – – (85,303) – (85,303) Land Group Appropriations – – – 100,634 – – (100,634) – – – Limited Total – (85,303) – 100,863 – (1,530,939) (516,489) (2,031,868) (1,394,388) (3,426,256)
Balance at December 31, 2017 7,261,726 (132,309) (194,903) 1,503,873 (1,834,019) (3,285,564) 19,411,720 22,730,524 9,972,287 32,702,811
— F-107 — STATEMENTS OF CHANGES IN EQUITY Financial year ended December 31, 2018
Equity Currency attributable Non- Share Treasury translation Statutory Merger Other Accumulated to owners of controlling Note capital shares reserve reserve deficit reserve profits the Company interests Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Note 20)
GROUP
Balance at January 1, 2018 7,261,726 (132,309) (194,903) 1,503,873 (1,834,019) (3,285,564) 19,411,720 22,730,524 9,972,287 32,702,811 Total comprehensive income for the year: Profit for the year – – – – – – 3,544,570 3,544,570 1,850,880 5,395,450 Other comprehensive income for the year – – (750,784) – – (4,742) 9,873 (745,653) (95) (745,748) Total – – (750,784) – – (4,742) 3,554,443 2,798,917 1,850,785 4,649,702
Transactions with owners, recognised directly in equity: Change of interest in subsidiaries 10 – – – 269,181 – (138,065) – 131,116 (2,032,104) (1,900,988) Capital injection from a non- controlling shareholder – – – – – – – – 4,900 4,900 Capital withdrawal by non-controlling shareholders – – – – – – – – (721,156) (721,156) Non-controlling interest arising from acquisition of subsidiaries 33 – – – – – – – – 270,089 270,089 Dividends 31 – – – – – – (630,453) (630,453) – (630,453) 77 Dividends declared to non- controlling shareholders – – – – – – – – (1,496,287) (1,496,287) Annual Appropriations – – – 238,066 – – (238,066) – – – Report Total – – – 507,247 – (138,065) (868,519) (499,337) (3,974,558) (4,473,895) 2018
Balance at December 31, 2018 7,261,726 (132,309) (945,687) 2,011,120 (1,834,019) (3,428,371) 22,097,644 25,030,104 7,848,514 32,878,618
— F-108 — STATEMENTS OF CHANGES IN EQUITY Financial year ended December 31, 2018
Currency Share Treasury translation Accumulated Note capital shares reserve profits Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Note 20) COMPANY
Balance at January 1, 2017 7,261,726 (47,006) (246,993) 210,588 7,178,315
Total comprehensive income for the year: Profit for the year – – – 561,838 561,838 Other comprehensive income for the year – – 123,238 – 123,238 Total – – 123,238 561,838 685,076
Transaction with owners, recognised directly in equity: Dividends 31 – – – (415,855) (415,855) Repurchase of shares 20 – (85,303) – – (85,303) Total – (85,303) – (415,855) (501,158) 78 Balance at December 31, 2017 7,261,726 (132,309) (123,755) 356,571 7,362,233 Yanlord Land Group Total comprehensive income Limited for the year: Profit for the year – – – 609,951 609,951 Other comprehensive income for the year – – 184,742 – 184,742 Total – – 184,742 609,951 794,693
Transaction with owners, recognised directly in equity: Dividends 31 – – – (630,453) (630,453) Total – – – (630,453) (630,453)
Balance at December 31, 2018 7,261,726 (132,309) 60,987 336,069 7,526,473
See accompanying notes to financial statements.
— F-109 — CONSOLIDATED STATEMENT OF CASH FLOWS Financial year ended December 31, 2018
GROUP Note 2018 2017 RMB’000 RMB’000
Operating activities Profit before income tax 10,541,657 11,362,224 Adjustments for: Allowance for doubtful debts and bad debts written off 3,782 43 Depreciation expense 87,521 33,207 Dividend income from other financial asset (347) – Fair value gain on investment properties (391,372) (148,321) Fair value gain on financial asset at fair value through profit or loss (142) – Fair value gain from put liability to acquire non-controlling interests (13,411) (87,554) Finance cost 693,994 484,690 Interest income (551,080) (359,168) Net gain on disposal of property, plant and equipment (447) (192) Net gain on disposal of investment properties (1,009) (5,002) Share of loss of associates 12,689 8,114 Share of profit of joint ventures (74,123) (346,008) Operating cash flows before movements in working capital 10,307,712 10,942,033
Properties for development (1,814,891) (19,767,496) Inventories (20,004) (19,479) Completed properties for sale 10,747,985 8,412,880 79 Properties under development for sale (2,036,377) (426,819) Trade and other receivables and deposits 515,092 (750,890) Annual Trade and other payables 908,268 (1,156,670) Report Contract liabilities (10,831,466) (2,105,011) 2018 Cash generated from (used in) operations 7,776,319 (4,871,452)
Interest paid (2,155,416) (1,702,981) Income tax paid (4,110,825) (4,072,278) Net cash from (used in) operating activities 1,510,078 (10,646,711)
Investing activities Acquisition of subsidiaries 33 (418,545) (582,003) Change of control from subsidiaries to joint ventures 34 – (85,879) Investments in associates (800,740) – Investments in joint ventures (1,002,805) (1,877,680) Dividend received from other financial asset 347 – Interest received 383,243 186,120 (Increase) Decrease in pledged bank deposits (291,019) 480,651 Proceeds on disposal of property, plant and equipment 2,099 2,163 Proceeds on disposal of investment properties 2,042 14,056 Proceeds on disposal of financial asset at fair value through profit or loss 12,911 – Payment for property, plant and equipment (463,488) (1,060,294) Payment for investment properties (190,921) (152,557) Purchase of other financial assets (172,933) (2,990) Payment for intangible assets (1,280) (199) Purchase of financial asset at fair value through profit or loss (2,000) – Advance to associates (1,480,253) (89,987) Repayment from associates 1,601,220 – Advance to joint ventures (10,601,175) (2,522,333) Repayment from joint ventures 1,616,778 2,576,327 Advance to non-controlling shareholders of subsidiaries (602,230) (1,516,755) Advance to a related company (167) – Net cash used in investing activities (12,408,916) (4,631,360)
— F-110 — CONSOLIDATED STATEMENT OF CASH FLOWS Financial year ended December 31, 2018
GROUP Note 2018 2017 RMB’000 RMB’000
Financing activities Dividends paid 31 (630,453) (415,855) Dividends paid to non-controlling shareholders of subsidiaries (1,337,009) (213,578) Net proceeds on issue of senior notes 2,178,613 3,085,026 Proceeds from bank and other borrowings 9,922,460 26,303,899 Repayment of bank and other borrowings (4,190,668) (10,119,950) Purchase of treasury shares 20 – (85,303) Redemption of senior notes – (1,974,600) Advance from associates 30,343 – Advance from (Repayment to) joint ventures 1,174,391 (365) Advance from directors 5,590 6,056 Advance from ultimate holding company – 341,030 Repayment to ultimate holding company – (1,013,448) Advance from non-controlling shareholders of subsidiaries 352,220 2,163,954 Repayment to non-controlling shareholders of subsidiaries (1,326,297) (1,087,285) (Repayment to) Advance from other related parties (10,868) 8,046 80 Capital injection from a non-controlling shareholder of a subsidiary 4,900 – Capital withdrawal by non-controlling shareholders of subsidiaries (721,156) (359,385) Yanlord Land Group Acquisition of non-controlling interest in subsidiaries (1,904,691) (1,412,840) Limited Disposal of partial interest in a subsidiary – 12,000 Net cash from financing activities 3,547,375 15,237,402
Net decrease in cash and cash equivalents (7,351,463) (40,669) Cash and cash equivalents at beginning of year 17 17,798,313 17,583,383 Effect of exchange rate changes on the balance of cash held in foreign currencies (129,476) 255,599 Cash and cash equivalents at end of year 17 10,317,374 17,798,313
See accompanying notes to financial statements.
— F-111 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
1. GENERAL
The Company (Registration No. 200601911K) is incorporated in the Republic of Singapore with its principal place of business and registered office at 9 Temasek Boulevard, #36-02 Suntec Tower Two, Singapore 038989. The Company is listed on the Singapore Exchange Securities Trading Limited. The financial statements are presented in Renminbi (“RMB”).
The principal activity of the Company is to carry on the business of an investment holding company and procurer of funds.
The principal activities of the subsidiaries are disclosed in Note 10 to the financial statements.
The consolidated financial statements of the Group and statement of financial position and statement of changes in equity of the Company for the financial year ended December 31, 2018 were authorised for issue by the Board of Directors on March 27, 2019.
For all periods up to and including the year ended December 31, 2017, the financial statements were prepared in accordance with the previous framework, Financial Reporting Standards in Singapore (“FRSs”). These financial statements for the year ended December 31, 2018 are the first set that the Group and the Company have prepared in accordance with Singapore Financial Reporting Standards (International) (“SFRS(I)”). Details of first-time adoption of SFRS(I) are included in Note 39. 81
Annual Report 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2018
BASIS OF ACCOUNTING - The financial statements are prepared in accordance with the historical cost basis except as disclosed in the accounting policies below, and are drawn up in accordance with the provisions of the Singapore Companies Act and SFRS(I).
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability which market participants would take into account when pricing the asset or liability at the measurement date. Fair value for measurement and / or disclosure purposes in these consolidated financial statements is determined on such a basis, except for measurements that have some similarities to fair value but are not fair value, such as net realisable value in SFRS(I) 1-2 Inventories or value in use in SFRS(I) 1-36 Impairment of Assets.
— F-112 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset or liability.
NEW SFRS(I) THAT MAY HAVE IMPACT – The following SFRS(I) pronouncements are expected to have an impact to the Group and the Company in the periods of their initial application under the new SFRS(I) framework:
Effective for annual periods beginning on or after January 1, 2019
• SFRS(I) 16 Leases 82 • Amendments to SFRS(I) 1-28 Investments in Associates and Joint Ventures: Long-term Interests in Associates and Joint Ventures Yanlord Land Group • SFRS(I) INT 23 Uncertainty over Income Tax Treatments Limited SFRS(I) 16 Leases
The Standard provides a comprehensive model for the identification of lease arrangements and their treatment in the financial statements of both lessees and lessors. The identification of leases, distinguishing between leases and service contracts, are determined on the basis of whether there is an identified asset controlled by the customer.
Significant changes to lessee accounting are introduced, with the distinction between operating and finance leases removed and assets and liabilities recognised in respect of all leases (subject to limited exemptions for short-term leases and leases of low value assets). The Standard maintains substantially the lessor accounting approach under the existing framework.
Amendments to SFRS(I) 1-28 Investments in Associates and Joint Ventures: Long-term Interests in Associates and Joint Ventures
The pronouncement clarifies that SFRS(I) 9, including its impairment requirements, applies to long-term interests in associates and joint ventures to which the equity method is not applied but that form part of an entity’s net investment in the investees.
— F-113 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
SFRS(I) INT 23 Uncertainty over Income Tax Treatments
The Interpretation provides guidance on determining the accounting tax position when there is uncertainty over income tax treatments.
The Interpretation requires an entity to:
• determine whether uncertain tax positions are assessed separately or as a group; and
• assess whether it is probable that a tax authority will accept an uncertain tax treatment used, or proposed to be used, by an entity in its income tax filings:
– if probable, the entity should determine its accounting tax position consistently with the tax treatment used or planned to be used in its income tax filings.
– if not probable, the entity should reflect the effect of uncertainty in determining its accounting tax position.
Impact assessment
Management has performed a preliminary analysis of those relevant pronouncements which are effective from 83 annual periods beginning on or after January 1, 2019, and does not expect material adjustments. Annual Report BASIS OF CONSOLIDATION - The consolidated financial statements incorporate the financial statements of the 2018 Company and entities (including structured entities) controlled by the Company and its subsidiaries. Control is achieved when the Company:
• Has power over the investee;
• Is exposed, or has rights, to variable returns from its involvement with the investee; and
• Has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.
When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company’s voting rights in an investee are sufficient to give it power, including:
• The size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;
• Potential voting rights held by the Company, other vote holders or other parties;
• Rights arising from other contractual arrangements; and
• Any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.
— F-114 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss from the date the Company gains control until the date when the Company ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
Changes in the Group’s ownership interests in existing subsidiaries
Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the 84 subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non- controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries including re- Yanlord attribution of relevant reserves between the Group and the non-controlling interests according to the Group’s and the Land Group Limited non-controlling interests’ proportionate interests.
Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.
When the Group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as specified / permitted by applicable SFRS(I)s). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under SFRS(I) 9, when applicable, the cost on initial recognition of an investment in an associate or a joint venture.
In the Company’s financial statements, investments in subsidiaries are carried at cost less any impairment in net recoverable value that has been recognised in profit or loss.
BUSINESS COMBINATIONS – The acquisition of subsidiaries from a common controlling shareholder is accounted for using the merger accounting method. Under this method, the Company has been treated as the holding company of the subsidiaries for the financial years presented rather than from the date of acquisition of the subsidiaries.
The acquisition of subsidiaries from a party other than a common controlling shareholder is accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the acquisition date fair values of assets given, liabilities incurred by the Group to the former owners of the acquiree, and equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.
— F-115 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments (see below). The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates at fair value, with changes in fair value recognised in profit or loss.
Where a business combination is achieved in stages, the Group’s previously held interests in the acquired entity are remeasured to fair value at the acquisition date (i.e. the date the Group attains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of.
The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under the SFRS(I) are recognised at their fair value at the acquisition date, except that:
• Deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are 85 recognised and measured in accordance with SFRS(I) 1-12 Income Taxes and SFRS(I) 1-19 Employee Benefits respectively; Annual Report 2018 • Liabilities or equity instruments related to share-based payment transactions of the acquiree or the replacement of an acquiree’s share-based payment awards transactions with share-based payment awards transactions of the acquirer in accordance with the method in SFRS(I) 2 Share-based Payment at the acquisition date; and
• Assets (or disposal groups) that are classified as held for sale in accordance with SFRS(I) 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another SFRS(I).
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see below), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date.
The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and circumstances that existed as of the acquisition date and is subject to a maximum of one year from acquisition date.
PUT LIABILITY TO ACQUIRE NON-CONTROLLING INTERESTS – When an entity within the Group writes non- cancellable rights for non-controlling shareholders to put back their shares to the entity (the “Put Instruments”) as part of the acquisition of a subsidiary for settlement in cash, a put liability is recognised for the present value of the exercise price of the Put Instruments. This creates an obligation or potential obligation for the entity to purchase its subsidiary’s instruments (constitutes the Group’s own equity in the consolidated financial statements) for cash.
— F-116 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
When the non-controlling shareholders still have present access to the returns associated with the underlying ownership interests, the Group has chosen an accounting policy that the non-controlling interests continue to be recognised. Therefore, the present value of the Put Instruments is recognised in equity. Subsequent to initial recognition of the financial liability, changes in the carrying amount of the financial liability is recognised in profit or loss.
If the Put Instrument expires unexercised, then the charge to equity will be reversed and the financial liability will be derecognised. If the Put Instruments are exercised, then the charge to equity will be reversed and the financial liability will be derecognised and acquisition accounting will be applied, whereby the acquisition of the Group’s ownership interests in a subsidiary that do not result in the change in control over the subsidiary are accounted for as equity transactions.
Before the adoption of SFRS(I) 9 on January 1, 2018
FINANCIAL INSTRUMENTS – Financial assets and financial liabilities are recognised on the Group’s statement of financial position when the Group becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transactions costs that are directly attributable to the acquisition or issue of financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss (“FVTPL”)) are added to or deducted from the fair value of the financial assets or financial 86 liabilities, as appropriate, on initial recognition, Transactions costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognised immediately in profit or loss. Yanlord Land Group Limited Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial instrument and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial instrument, or where appropriate, a shorter period, to the net carrying amount on initial recognition. Income and expense are recognised on an effective interest basis for debt instruments other than those financial instruments at FVTPL.
Financial assets
All financial assets are recognised and de-recognised on a trade date basis where the purchase or sale is under a contract whose terms require delivery of the asset within the timeframe established by the market concerned.
The Group’s financial assets are classified into the following specified categories: “financial assets at FVTPL”, “available-for-sale (“AFS”) financial assets” and “loans and receivables”. The classification depends on the nature and purpose of financial assets and is determined at the time of initial recognition.
Financial assets at FVTPL
Financial assets are classified as at FVTPL where the financial asset is either held-for-trading or it is designated as at FVTPL.
A financial asset is classified as held-for-trading if: • it has been acquired principally for the purpose of selling in the near future; or • it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or • it is a derivative that is not designated and effective as a hedging instrument.
— F-117 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset and is included in “other operating income and other gains” or “other operating expenses” line in the consolidated statement of profit or loss. Fair value is determined in the manner described in Note 4 (c) (vi).
Available-for-sale (AFS) financial assets
AFS financial assets are non-derivatives that are either designated as available-for-sale or are not classified as (a) loans and receivables, (b) held-to-maturity investments or (c) financial assets at FVTPL.
AFS equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less any identified impairment losses at the end of each reporting period.
Dividends on AFS equity instruments are recognised in profit or loss when the Group’s right to receive the dividends is established.
Loans and receivables
Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an 87 active market are classified as “loans and receivables”. Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest method, except Annual Report for short-term receivables when the effect of discounting is immaterial. 2018
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.
Objective evidence of impairment could include:
• Significant financial difficulty of the issuer or counterparty; or
• Default or delinquency in interest or principal payments; or
• It becoming probable that the borrower will enter bankruptcy or financial re-organisation.
For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables.
For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.
— F-118 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade and other receivables where the carrying amount is reduced through the use of an allowance account. When a trade or other receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.
For financial assets measured at amortised cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the financial asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it 88 may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the Yanlord proceeds received. Land Group Limited Financial liabilities and equity instruments
Classification as debt or equity
Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs.
Financial liabilities
Trade and other payables are initially measured at fair value, net of transaction costs, and are subsequently measured at amortised cost, using the effective interest method, with interest expense recognised on an effective yield basis.
Interest-bearing bank and other borrowings and senior notes are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest method. Interest expense calculated using the effective interest method is recognised over the term of the borrowings in accordance with the Group’s accounting policy for borrowing costs (see below).
Financial guarantee contract liabilities are measured initially at their fair values and, if not designated as FVTPL, subsequently at the higher of the amount of obligation under the contract recognised as a provision in accordance with FRS 37 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less cumulative amortisation in accordance with FRS 18 Revenue.
— F-119 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire.
Embedded derivatives
Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at fair value with changes in fair value recognised in profit or loss.
An embedded derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the hybrid instrument to which the embedded derivative relates is more than 12 months and it is not expected to be realised or settled within 12 months. Other embedded derivatives are presented as current assets or current liabilities.
Offsetting arrangements
Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when the Company and the Group has a legally enforceable right to set off the recognised amounts; and intends 89 either to settle on a net basis, or to realise the asset and settle the liability simultaneously. A right to set-off must be available today rather than being contingent on a future event and must be exercisable by any of the counterparties, Annual Report both in the normal course of business and in the event of default, insolvency or bankruptcy. 2018
After the adoption of SFRS(I) 9 on January 1, 2018
FINANCIAL INSTRUMENTS – Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions of the instrument. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.
Financial assets and financial liabilities are initially measured at fair value except for trade receivables arising from contracts with customers which are initially measured with SFRS(I) 15. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets or financial liabilities at FVTPL) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognised immediately in profit or loss.
The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating interest income and interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts and payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset or financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Financial assets
All financial assets are recognised and de-recognised on a trade date basis where the purchase or sale is under a contract whose terms require delivery of the asset within the timeframe established by the market concerned. All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.
— F-120 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Classification and subsequent measurement of financial assets
Financial assets that meet the following conditions are subsequently measured at amortised cost:
• the financial asset is held within a business model whose objective is to collect contractual cash flows; and
• the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets that meet the following conditions are subsequently measured at fair value through other comprehensive income (“FVTOCI”):
• the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling; and
• the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
90 All other financial assets are subsequently measured at FVTPL, except that at the date of initial application / initial recognition of a financial asset, the Group may irrevocably elect to present subsequent changes in fair value of an Yanlord equity investment in other comprehensive income if that equity investment is neither held for trading nor contingent Land Group Limited consideration recognised by an acquirer in a business combination to which SFRS(I) 3 Business Combination applies.
Amortised cost and interest income
Interest income is recognised using the effective interest method for financial assets measured subsequently at amortised cost. Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset, except for financial assets that have subsequently become credit-impaired. For financial assets that have subsequently become credit-impaired, interest income is recognised by applying the effective interest rate to the amortised cost of the financial asset from the next reporting period. If the credit risk on the credit-impaired financial instrument improves so that the financial asset is no longer credit-impaired, interest income is recognised by applying the effective interest rate to the gross carrying amount of the financial asset from the beginning of the reporting period following the determination that the asset is no longer credit impaired.
Equity instruments designated as at FVTOCI
Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognised in OCI and accumulated in the reserve; and are not subject to impairment assessment. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments, and will be transferred to accumulated profits.
Dividends from these investments in equity instruments are recognised in profit or loss when the Group’s right to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the investment. Dividends are included in the “other operating income and other gains” line item in profit or loss.
— F-121 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Impairment of financial assets
The Group recognises a loss allowance for ECL on financial assets which are subject to impairment under SFRS(I) 9 (including trade receivables, other receivables and non-trade amounts due from associates, joint ventures, non- controlling shareholders of subsidiaries and other related parties, pledged bank deposits, cash and cash equivalents and other financial assets). The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition.
Lifetime ECL represents the ECL that will result from all possible default events over the expected life of the relevant instrument. In contrast, 12-month ECL (“12m ECL”) represents the portion of lifetime ECL that is expected to result from default events that are possible within 12 months after the reporting date. Assessment are done based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current conditions at the reporting date as well as the forecast of future conditions.
The Group always recognises lifetime ECL for trade receivables and lease receivables. The ECL on these assets are assessed collectively with appropriate groupings.
For all other instruments and financial guarantees contracts, the Group measures the loss allowance equal to 12m ECL, unless when there has been a significant increase in credit risk since initial recognition, the Group recognises 91 lifetime ECL. The assessment of whether lifetime ECL should be recognised is based on significant increases in the likelihood or risk of a default occurring since initial recognition. Annual Report 2018 Significant increase in credit risk
In assessing whether the credit risk has increased significantly since initial recognition, the Group compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort.
In particular, the following information is taken into account when assessing whether credit risk has increased significantly:
• an actual or expected significant deterioration in the financial instrument’s external (if available) or internal credit rating;
• significant deterioration in external market indicators of credit risk, e.g. a significant increase in the credit spread, the credit default swap prices for the debtor;
• existing or forecast adverse changes in business, financial or economic conditions that are expected to cause a significant decrease in the debtor ’s ability to meet its debt obligations;
• an actual or expected significant deterioration in the operating results of the debtor;
• an actual or expected significant adverse change in the regulatory, economic, or technological environment of the debtor that results in a significant decrease in the debtor ’s ability to meet its debt obligations.
Irrespective of the outcome of the above assessment, the Group presumes that the credit risk has increased significantly since initial recognition when contractual payments are more than 30 days past due, unless the Group has reasonable and supportable information that demonstrates otherwise.
— F-122 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Despite the aforegoing, the Group assumes that the credit risk on a debt instrument has not increased significantly since initial recognition if the debt instrument is determined to have low credit risk at the reporting date. A debt instrument is determined to have low credit risk if (i) it has a low risk of default, (ii) the borrower has a strong capacity to meet its contractual cash flow obligations in the near term and (iii) adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations.
For financial guarantee contracts, the date that the Group becomes a party to the irrevocable commitment is considered to be the date of initial recognition for the purposes of assessing the financial instrument for impairment. In assessing whether there has been a significant increase in the credit risk since initial recognition of financial guarantee contracts, the Group considers the changes in the risk that the specified debtor will default on the contract.
The Group regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase in credit risk and revises them as appropriate to ensure that the criteria are capable of identifying significant increase in credit risk before the amount becomes past due.
Definition of default
92 For internal credit risk management, the Group considers an event of default occurs when information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the Yanlord Group, in full (without taking into account any collaterals held by the Group). Land Group Limited Irrespective of the above, the Group considers that default has occurred when a financial asset is more than 90 days past due unless the Group has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate.
Credit-impaired financial assets
A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired includes observable data about the following events:
• significant financial difficulty of the issuer or the borrower;
• a breach of contract, such as a default or past due event;
• the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider;
• it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or
• the disappearance of an active market for that financial asset because of financial difficulties.
Write-off policy
The Group writes off a financial asset when there is information indicating that the counterparty is in severe financial difficulty and there is no realistic prospect of recovery, for example, when the counterparty has been placed under liquidation or has entered into bankruptcy proceedings. Financial assets written off may still be subject to enforcement activities under the Group’s recovery procedures, taking into account legal advice where appropriate. A write-off constitutes a derecognition event. Any subsequent recoveries are recognised in profit or loss.
— F-123 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Measurement and recognition of ECL
The measurement of ECL is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a default) and the exposure at default. The assessment of the probability of default and loss given default is based on historical data adjusted by forward-looking information. Estimation of ECL reflects an unbiased and probability-weighted amount that is determined with the respective risks of default occurring as the weights.
Generally, the ECL is the difference between all contractual cash flows that are due to the Group in accordance with the contract and the cash flows that the Group expects to receive, discounted at the effective interest rate determined at initial recognition.
For a financial guarantee contract, the Group is required to make payments only in the event of a default by the debtor in accordance with the terms of the instrument that is guaranteed. Accordingly, the expected losses are the present value of the expected payments to reimburse the holder for a credit loss that it incurs less any amounts that the Group expects to receive from the holder, the debtor or any other party.
For ECL on financial guarantee contracts for which the effective interest rate cannot be determined, the Group will apply a discount rate that reflects the current market assessment of the time value of money and the risks that are specific to the cash flows but only if, and to the extent that, the risks are taken into account by adjusting the discount 93 rate instead of adjusting the cash shortfalls being discounted. Annual Report Where ECL is measured on a collective basis or cater for cases where evidence at the individual instrument level may 2018 not yet be available, the financial instruments are grouped on the following basis:
• Nature of financial instruments (i.e. the Group’s trade receivables and other receivables are each assessed as a separate group. Non-trade amounts due from associates, joint ventures, non controlling shareholders of subsidiaries and other related parties are assessed for expected credit losses on an individual basis);
• Past-due status;
• Nature, size and industry of debtors; and
• External credit ratings where available.
The grouping is regularly reviewed by management to ensure the constituents of each group continue to share similar credit risk characteristics.
Interest income is calculated based on the gross carrying amount of the financial asset unless the financial asset is credit impaired, in which case interest income is calculated based on amortised cost of the financial asset.
For financial guarantee contracts, the loss allowances are recognised at the higher of the amount of the loss allowance determined in accordance with SFRS(I) 9; and the amount initially recognised less, where appropriate, cumulative amount of income recognised over the guarantee period.
Except for financial guarantee contracts, the Group recognises an impairment gain or loss in profit or loss for all financial instruments by adjusting their carrying amount, with the exception of trade receivables, where the corresponding adjustment is recognised through a loss allowance account.
— F-124 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.
On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.
On derecognition of an investment in equity instrument which the Group has elected on initial recognition to measure at FVTOCI upon application of SFRS(I) 9, the cumulative gain or loss previously accumulated in the investments revaluation reserve is not reclassified to profit or loss, but is transferred to accumulated profits.
Financial liabilities and equity instruments
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. 94 Equity instruments Yanlord Land Group Limited An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.
Repurchase of the Company’s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.
Financial liabilities
All financial liabilities are subsequently measured at amortised cost using the effective interest method or at FVTPL.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is (i) contingent consideration of an acquirer in a business combination to which SFRS(I) 3 applies, (ii) held for trading or (iii) it is designated as at FVTPL.
A financial liability other than a financial liability held for trading or contingent consideration of an acquirer in a business combination may be designated as at FVTPL upon initial recognition if:
• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
• the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
• it forms part of a contract containing one or more embedded derivatives, and SFRS(I) 9 permits the entire combined contract to be designated as at FVTPL.
— F-125 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Upon application of SFRS(I) 9, for financial liabilities that are designated as at FVTPL, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognised in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. For financial liabilities that contain embedded derivatives, the changes in fair value of the embedded derivatives are excluded in determining the amount to be presented in other comprehensive income. Changes in fair value attributable to a financial liability’s credit risk that are recognised in other comprehensive income are not subsequently reclassified to profit or loss; instead, they are transferred to accumulated profits upon derecognition of the financial liability.
Financial liabilities at amortised cost
Financial liabilities including bank and other borrowings, senior notes, trade payables, other payables, non-trade amounts due to an associate, joint ventures, ultimate holding company, directors, non-controlling shareholders of subsidiaries and other related parties are subsequently measured at amortised cost, using the effective interest method.
Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the 95 terms of a debt instrument. Financial guarantee contracts are measured initially at their fair values. It is subsequently measured at the higher of: Annual Report 2018 • the amount of the loss allowance determined in accordance with SFRS(I) 9; and
• the amount initially recognised less, where appropriate, cumulative amortisation recognised over the guarantee period.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.
Offsetting arrangements
Financial assets and financial liabilities are offset and the net amount presented in the statements of financial position when the Company and the Group has a legally enforceable right to set off the recognised amounts; and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. A right to set-off must be available today rather than being contingent on a future event and must be exercisable by any of the counterparties, both in the normal course of business and in the event of default, insolvency or bankruptcy.
LEASES – Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
The Group as lessor
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease unless another systematic basis is more representative of the time pattern in which use benefit derived from the leased asset is diminished. Initial direct costs incurred in negotiating and arranging an operating lease are recognised on a straight-line basis over the lease term on the same basis as the lease income.
— F-126 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
The Group as lessee
Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
PROPERTIES FOR DEVELOPMENT – Properties for development are mainly vacant leasehold land for future development in respect of which physical construction is not expected to commence within twelve months from the end of the reporting period. They are stated at cost less allowance for any impairment in value.
PROPERTIES UNDER DEVELOPMENT FOR SALE – Properties under development for sale are stated at lower of cost and net realisable value. Net realisable value takes into account the price ultimately expected to be realised and the anticipated costs to completion. Cost of property under development comprises land cost, development costs and borrowing costs capitalised during the development period. When completed, the units held for sale are classified as completed properties for sale.
Properties under development for sale include properties in respect of which concrete planning and preparatory 96 activities have been approved by management and have commenced, and physical construction is expected to commence within twelve months from the end of the reporting period. Yanlord Land Group Limited COMPLETED PROPERTIES FOR SALE – Completed properties for sale are stated at lower of cost or net realisable value. Cost is determined by apportionment of the total land cost, development costs and capitalised borrowing costs based on floor area of the unsold properties. Net realisable value is determined by reference to sale proceeds of properties sold in the ordinary course of business less all estimated selling expenses; or is estimated by management in the absence of comparable transactions after taking into consideration prevailing market conditions.
PROPERTY, PLANT AND EQUIPMENT – Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.
Construction-in-progress consists of land cost, construction costs and capitalised borrowing costs incurred during the period of construction.
Depreciation is charged so as to write off the cost of property, plant and equipment, other than construction-in- progress, over their estimated useful lives, using the straight-line method on the following bases:
Leasehold land and buildings – 2% to 5% Motor vehicles – 10% to 25% Furniture, fixtures and equipment – 20%
The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis.
Fully depreciated property, plant and equipment still in use are retained in the financial statements.
The gain or loss arising on the disposal or retirement of a property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
— F-127 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
INVESTMENT PROPERTIES – Investment properties are properties held to earn rental income and / or for capital appreciation and properties under construction for such purposes. They are measured initially at cost, including transaction costs and subsequent to initial recognition, measured at fair value. Professional valuations are obtained at least once every year. Gains or losses arising from changes in the fair value of investment property are included in profit or loss for the period in which they arise. Where there is an inability to determine fair value reliably when comparable market transactions are infrequent and alternative reliable estimates of fair value are not available, the investment property is measured at cost.
Construction costs incurred for investment properties under construction are capitalised as part of the carrying amount of the investment properties under construction.
An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the property is derecognised.
Transfers are made to or from investment properties when and only when there is a change in use. For a transfer from properties for development, properties under development for sale or completed properties for sale to investment properties, any difference between the fair value of the properties at that date and its previous carrying amount is 97 recognised in profit or loss. Annual Report INTANGIBLE ASSET – This relates to a club membership held on a long-term basis and is stated at cost less any 2018 impairment loss.
IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS – At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets other than investment properties and other financial assets carried at fair value, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash- generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.
ASSOCIATES AND JOINT VENTURES – An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.
— F-128 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.
The results and assets and liabilities of associates or joint ventures are incorporated in these consolidated financial statements using the equity method of accounting. Under the equity method, an investment in an associate or a joint venture is initially recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group’s share of the profit or loss and other comprehensive income of the associate or joint venture. When the Group’s share of losses of an associate or a joint venture exceeds the Group’s interest in that associate or joint venture (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate or joint venture), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture.
Investment in an associate or a joint venture is accounted for using the equity method from the date on which the investee becomes an associate or a joint venture. On acquisition of the investment in an associate or a joint venture, any excess of the cost of the investment over the Group’s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any 98 excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired. Yanlord Land Group Limited The requirements of SFRS(I) 9 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group’s investment in an associate or a joint venture. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with SFRS(I) 1-36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount, any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with SFRS(I) 1-36 to the extent that the recoverable amount of the investment subsequently increases.
The Group discontinues the use of the equity method from the date when the investment ceases to be an associate or a joint venture, or when the investment is classified as held for sale. When the Group retains an interest in the former associate or joint venture and the retained interest is a financial asset, the Group measures the retained interest at fair value at that date and the fair value is regarded as its fair value on initial recognition in accordance with FRS 39 (before the adoption of SFRS(I) 9 as at January 1, 2018) or SFRS(I) 9 (after January 1, 2018). The difference between the carrying amount of the associate or joint venture at the date the equity method was discontinued, and the fair value of any retained interest and any proceeds from disposing of a part interest in the associate or joint venture is included in the determination of the gain or loss on disposal of the associate or joint venture. In addition, the Group accounts for all amounts previously recognised in other comprehensive income in relation to that associate or joint venture on the same basis as would be required if that associate or joint venture had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that associate or joint venture would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when the equity method is discontinued.
The Group continues to use the equity method when investment in an associate becomes investment in a joint venture or investment in a joint venture becomes investment in an associate. There is no remeasurement to fair value upon such changes in ownership interests.
— F-129 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
When the Group reduces its ownership interest in an associate or a joint venture but the Group continues to use the equity method, the Group reclassifies to profit or loss the proportion of the gain or loss that had previously been recognised in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities.
When a group entity transacts with an associate or a joint venture of the Group, profits and losses resulting from the transactions with the associate or joint venture are recognised in the Group’s consolidated financial statements only to the extent of interests in the associate or joint venture that are not related to the Group.
PROVISIONS – Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third 99 party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. Annual Report 2018 MERGER DEFICIT – Merger deficit arises from combination of entities under common control accounted for using merger accounting method (see “Business Combinations”). The merger reserve represents the difference between the aggregate nominal amounts of the share capital of the subsidiaries at the date on which they were acquired by the Group and the nominal amount of the share capital issued by the Company as consideration for the acquisition.
STATUTORY RESERVE – Statutory reserve represents the amount transferred from profit after tax of the subsidiaries incorporated in the People’s Republic of China (“PRC”) (excluding Hong Kong) in accordance with the PRC requirement. The statutory reserve cannot be reduced except where approval is obtained from the relevant PRC authority to apply the amount towards setting off any accumulated losses or increasing capital.
OTHER RESERVE – The negative balance in other reserve comprises (i) the net excess of purchase consideration over the carrying amount of non-controlling interests acquired in the subsidiaries at the date of acquisition; (ii) the charge of the present value of a put liability in relation to put instruments entered into with the non-controlling shareholders on their equity interests in a subsidiary. Subsequent changes in the carrying value of the put liability are recognised in profit or loss; and (iii) the share of reserves and other comprehensive income of a joint venture.
REVENUE RECOGNITION – The Group recognises revenue when (or as) a performance obligation is satisfied, i.e. when “control” of the goods or services underlying the particular performance obligation is transferred to the customer.
A performance obligation represents a promise in a contract with customers to transfer a good or service (or a bundle of goods or services) that is distinct or a series of distinct goods or services that are substantially the same.
— F-130 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Control is transferred over time and revenue is recognised over time by reference to the progress towards complete satisfaction of the relevant performance obligation if one of the following criteria is met:
• the customer simultaneously receives and consumes the benefits provided by the Group’s performance as the Group performs;
• the Group’s performance creates and enhances an asset that the customer controls as the Group performs; or
• the Group’s performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date.
Otherwise, revenue is recognised at a point in time when the customer obtains control of the distinct good or service.
A contract liability represents the Group’s obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer.
Over time revenue recognition: measurement of progress towards complete satisfaction of a performance obligation
100 Output method
Yanlord The progress towards complete satisfaction of a performance obligation is measured based on output method, which Land Group Limited is recognise revenue on the basis of direct measurements of the value of the goods or services transferred to the customer to date relative to the remaining goods or services promised under the contract, that best depict the Group’s performance in transferring control of goods or services.
Existence of significant financing component
In determining the transaction price, the Group adjusts the promised amount of consideration for the effects of the time value of money if the timing of payments agreed (either explicitly or implicitly) provides the customer or the Group with a significant benefit of financing the transfer of properties or services to the customer. In those circumstances, the contract contains a significant financing component. A significant financing component may exist regardless of whether the promise of financing is explicitly stated in the contract or implied by the payment terms agreed to by the parties to the contract.
For contracts where the period between payment and transfer of the associated goods or services is less than one year, the Group applies the practical expedient of not adjusting the transaction price for any significant financing component.
For advance payments received from customers before the transfer of the associated goods or services in which the Group adjusts for the promised amount of consideration for a significant financing component, the Group applies a discount rate that would be reflected in a separate financing transaction between the Group and the customer at contract inception. The relevant interest expenses during the period between the advance payments were received and the transfer of the associated goods and services are accounted for on the same basis as other borrowing costs.
— F-131 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Principal versus agent
When another party is involved in providing goods or services to a customer, the Group determines whether the nature of its promise is a performance obligation to provide the specified goods or services itself (i.e. the Group is a principal) or to arrange for those goods or services to be provided by the other party (i.e. the Group is an agent).
The Group is a principal if it controls the specified good or service before that good or service is transferred to a customer.
The Group is an agent if its performance obligation is to arrange for the provision of the specified good or service by another party. In this case, the Group does not control the specified good or service provided by another party before that good or service is transferred to the customer. When the Group acts as an agent, it recognises revenue in the amount of any fee or commission to which it expects to be entitled in exchange for arranging for the specified goods or services to be provided by the other party.
Incremental costs of obtaining a contract
Incremental costs of obtaining a contract are those costs that the Group incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained. 101
The Group recognises sales commissions as an asset if it expects to recover these costs. The asset so recognised is Annual Report subsequently amortised to profit or loss on a systematic basis that is consistent with the transfer to the customer of the 2018 properties or services to which the assets relate. The asset is subject to impairment review.
The Group applies the practical expedient of expensing all incremental costs to obtain a contract if these costs would otherwise have been fully amortised to profit or loss within one year.
Presentation of contract liabilities
A contract liability represents the Group’s obligation to transfer properties or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer.
The Group recognises revenue from the following major sources:
Income from property development
Income from property development represents the development and sales of residential properties. For property development and sales contracts for which the control of the property is transferred at a point in time, revenue is recognised when the customer obtains the control of the completed property and the Group has present right to payment and the collection of the consideration is probable.
Income from property investment and hotel operations
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. The revenue from hotel operations is recognised over time by using the output method.
— F-132 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Income from others
Income from others mainly represents income from property management and other related services. The Group provides property management and other related services to customers. The revenue from property management and other related service is recognised over time elapsed by using output method.
Interest income
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.
Dividend income
Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established.
GOVERNMENT SUBSIDIES – Government subsidies are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and the subsidies will be received. Government subsidies are recognised as income over the periods necessary to match them with the related costs. Government subsidies 102 related to expense items are recognised in the same period as those expenses are charged to the profit or loss and are reported separately as “other operating income and other gains”. Yanlord Land Group Limited BORROWING COSTS – Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of these assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
RETIREMENT BENEFIT COSTS – Payments to defined contribution retirement benefit plans are charged as an expense when employees have rendered the services entitling them to the contributions. Payments made to state- managed retirement benefit schemes, such as the Singapore Central Provident Fund, are dealt with as payments to defined contribution plans where the Group’s obligations under the plans are equivalent to those arising in a defined contribution retirement benefit plan.
Pursuant to the relevant regulations of the PRC government, the PRC subsidiaries of the Group (“PRC Subsidiaries”) have participated in central pension schemes (“the Schemes”) operated by local municipal governments whereby the PRC Subsidiaries are required to contribute a certain percentage of the basic salaries of their employees to the Schemes to fund their retirement benefits. The local municipal governments undertake to assume the retirement benefit obligations of all existing and future retired employees of the PRC Subsidiaries. The only obligation of the PRC Subsidiaries with respect to the Schemes is to pay the ongoing required contributions under the Schemes mentioned above. Contributions under the Schemes are charged as expense when incurred.
EMPLOYEE LEAVE ENTITLEMENT – Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the end of the reporting period.
— F-133 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
INCOME TAX – Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated statement of profit or loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable or tax deductible. The Group’s liability for current tax is calculated using tax rates (and tax laws) that have been enacted or substantively enacted in countries where the Company and subsidiaries operate by the end of the reporting period.
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. 103
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the Annual Report extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to 2018 be recovered.
Deferred tax is calculated at tax rates that are expected to apply in the period when the liability is settled or the asset realised based on the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Except for investment properties measured using the fair value model, the measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
For the purposes of measuring deferred tax liabilities and deferred tax assets for investment properties that are measured using the fair value model, the carrying amounts of such properties are presumed to be recovered through sale, unless the presumption is rebutted. The presumption is rebutted when the investment property is depreciable and is held within a business model of the Group whose business objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale. The Group has rebutted the presumption that the carrying amount of the investment properties will be recovered entirely through sale.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
— F-134 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items credited or debited outside profit or loss (either in other comprehensive income or directly in equity), in which case the tax is also recognised outside profit or loss (either in other comprehensive income or directly in equity), or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in calculating goodwill or determining the excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over cost.
FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION – The individual financial statements of each Group entity are measured and presented in the currency of the primary economic environment in which the entity operates (its functional currency). The presentation currency for the consolidated financial statements of the Group and the statement of financial position of the Company is RMB.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency are recorded at the rates of exchange prevailing on the date of the transaction. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the end of each reporting period. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. 104 Exchange differences arising on the settlement of monetary items, and on retranslation of monetary items are included Yanlord in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair Land Group Limited value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised in other comprehensive income. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in other comprehensive income.
Exchange differences on foreign currency borrowings relating to assets under construction for future productive use, are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings.
Exchange differences on transactions entered into in order to hedge certain foreign currency risks are described in the hedge accounting policies above.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the entities in the Group which do not have RMB as the functional currency (including comparatives) are expressed in RMB using exchange rates prevailing at the end of each reporting period. Income and expense items (including comparatives) are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are classified as other comprehensive income and transferred to the Group’s currency translation reserve.
CASH AND CASH EQUIVALENTS IN THE CONSOLIDATED STATEMENT OF CASH FLOWS – Cash and cash equivalents in the consolidated statement of cash flows comprise cash on hand, cash at bank and fixed deposits and are subject to an insignificant risk of changes in value.
— F-135 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group’s accounting policies, which are described in Note 2 above, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Critical judgements in applying the Group’s accounting policies
The following are the critical judgements, apart from those involving estimations (see below), that management has made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements.
Deferred taxation on investment properties
For the purposes of measuring deferred taxation arising from investment properties that are measured using the fair value model, the directors of the Company have reviewed the Group’s investment property portfolios and concluded 105 that the Group’s investment properties are held under a business model whose objective is to consume substantially all of the economic benefits embodied in the investment properties over time, rather than through sale. Therefore, in Annual Report determining the Group’s deferred taxation on investment properties, the directors of the Company have determined 2018 the presumption of investment properties measured using the fair value model are recovered entirely through sale is rebutted. As a result, the Group has recognised deferred taxation on revaluation of investment properties as the Group is subject to PRC Enterprise Income Tax (“EIT”).
Land Appreciation Tax (“LAT”)
Income from sale of properties in the PRC is subject to LAT at progressive rates under the PRC tax laws and regulations. The management estimates and provides for LAT in accordance with the PRC tax laws and regulations. The management has assessed and considers the provision of LAT as at the end of the reporting period to be adequate. The LAT expense recorded during the year is disclosed in Note 28.
Control over entities for which the Group does not have more than 50% ownership interest and voting rights
Note 10 describes that Shanghai Renpin Property Development Co., Ltd. and Suzhou Renan Real Estate Co., Ltd. are subsidiaries of the Group even though the Group has only a 50% and 30% ownership interest and shareholder’s voting rights in these two entities respectively.
The management of the Company assessed whether or not the Group has control over these entities based on whether the Group has the practical ability to direct the relevant activities of these entities unilaterally. In making their judgement, the management considered the Group’s rights arising from the contractual arrangements. After assessment, the management concluded that the Group has sufficiently dominant voting right and power to direct the relevant activities of these entities and therefore the Group has unilateral control over these entities.
— F-136 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Cont’d)
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.
Carrying amounts of properties for development, completed properties for sale and properties under development for sale
The aggregate carrying amount of these properties totalled RMB44.023 billion as at December 31, 2018 (December 31, 2017 : RMB49.154 billion, January 1, 2017 : RMB45.712 billion), details of which are disclosed in Note 9. They are stated at cost less allowance for impairment in value or at the lower of cost and net realisable values, assessed on an individual property basis.
When it is probable that the total project costs will exceed the total projected revenue net of selling expenses, i.e. net realisable value, the amount in excess of net realisable value is recognised as an expense immediately.
The process of evaluating the net realisable value for each property is subject to management’s judgement and 106 the effect of assumptions in respect of development plans, timing of sale and the prevailing market conditions. Management performs cost studies for each project, taking into account the costs incurred to date, the development Yanlord status and costs to complete each development project. Any future variation in plans, assumptions and estimates can Land Group Limited potentially impact the carrying amounts of the respective properties.
Valuation of investment properties
As disclosed in Note 8, investment properties are stated at fair value based on the valuation performed by independent professional valuers. In determining the fair values, the valuer has made reference to both the comparable sales transactions as available in the relevant market of these properties and the capitalisation of the existing and reversionary rental income potential.
The estimated value from capitalisation of the existing and reversionary rental income potential is used as an estimate of fair value, and the estimate is dependent on several variable parameters and projections including projected rental income, occupancy rate, rental yield, discount rate and terminal yield.
Any change in the variable parameters and projections will result in change in fair value estimate for the investment properties which can potentially be significant.
In relying on the independent professional valuation report, management considered the method of valuation and the Group’s marketing strategy and is of the view that the estimated values are reasonable.
Estimated loss allowance of debt instruments in non-trade nature and financial guarantee contracts
The management of the Group estimates the amount of loss allowance to 12-month ECL on debt instruments in non- trade nature (including other receivables and non-trade amounts due from associates, joint ventures, non-controlling shareholders of subsidiaries and other related parties) and financial guarantee contracts.
— F-137 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Cont’d)
Estimated loss allowance of debt instruments in non-trade nature and financial guarantee contracts (Cont’d)
In determining the ECL for these debt instruments and financial guarantee contracts, the management of the Group has taken into account the historical default experience and forward-looking information, as appropriate, for example the Group has considered the consistently low historical default rate, financial position, property development plan and cash flow projection, as well as pledge of assets of the counterparties and collateral value of the assets, equity interests, undistributed retained earnings in these entities and expected future earnings that would be distributed by entities, based which, the management of the Group has assessed that whether these debt instruments have any significant increase in credit risk since initial recognition. Such assessment of the credit risk of the respective financial instrument involves high degree of estimation and uncertainty. When the actual future cash flows are less than expected or more than expected, a material impairment loss or a material reversal of impairment loss may arise, accordingly.
4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT
(a) Categories of financial instruments
The following table sets out the financial instruments as at the end of the reporting period: 107 GROUP COMPANY December 31, December 31, January 1, December 31, December 31, January 1, Annual Report 2018 2017 2017 2018 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Financial assets Loans and receivables (including cash and cash equivalents) – 29,961,718 24,207,375 – 11,929,574 14,161,536 Financial assets at amortised cost (including cash and cash equivalents) 34,017,860 ––1,803,651 –– Available-for-sale Investment, at cost – 2,990 – – –– Financial assets at FVTOCI: Other financial assets 175,923 ––– ––
Financial liabilities Financial liabilities at FVTPL: Put liability to acquire non- controlling interests 1,320,733 1,334,144 1,421,698 – –– Amortised cost 53,373,661 43,334,303 32,559,183 7,800,239 7,958,180 9,456,499
— F-138 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d)
(b) Financial instruments subject to offsetting, enforceable master netting arrangements and similar agreements
Financial assets
Net amounts Gross amounts of financial Gross of recognised assets amounts of financial liabilities presented in recognised set off in the the statements financial statements of of financial Type of financial asset assets financial position position RMB’000 RMB’000 RMB’000
GROUP
December 31, 2018
Non-trade amounts due from non-controlling 108 shareholders of subsidiaries 3,662,718 (15,210) 3,647,508
Yanlord December 31, 2017 Land Group Limited Non-trade amounts due from non-controlling shareholders of subsidiaries 2,754,038 (17,574) 2,736,464
January 1, 2017
Non-trade amounts due from non-controlling shareholders of subsidiaries 2,501,635 (14,501) 2,487,134
— F-139 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d)
(b) Financial instruments subject to offsetting, enforceable master netting arrangements and similar agreements (Cont’d)
Financial liabilities
Net amounts Gross amounts of financial Gross of recognised liabilities amounts of financial assets presented in recognised set off in the the statements financial statements of of financial Type of financial liability liabilities financial position position RMB’000 RMB’000 RMB’000
GROUP
December 31, 2018
Non-trade amounts due to non-controlling shareholders of subsidiaries 720,349 (15,210) 705,139 109
December 31, 2017 Annual Report 2018 Non-trade amounts due to non-controlling shareholders of subsidiaries 1,971,772 (17,574) 1,954,198
January 1, 2017
Non-trade amounts due to non-controlling shareholders of subsidiaries 648,975 (14,501) 634,474
In reconciling the ‘Net amounts of financial assets and financial liabilities presented in the statements of financial position’ to the line item amounts presented in the consolidated statements of financial position, the above amounts represent only those which are subject to offsetting, enforceable master netting arrangements and similar agreements.
The Group does not have any related amounts subject to enforceable master netting arrangements and similar arrangements which have not been set off in the statements of financial position.
The Company does not have any financial instruments which are subject to offsetting, enforceable master netting arrangements or similar netting agreements.
— F-140 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d)
(c) Financial risk management policies and objectives
The management of the Group monitors and manages the financial risks relating to the operations of the Group to ensure appropriate measures are implemented in a timely and effective manner. These risks include market risk (foreign exchange risk, interest rate risk, equity price risk), credit risk and liquidity risk.
There has been no change to the Group’s exposure to these financial risks or the manner in which it manages and measures the risks. Market risk exposures are measured using sensitivity analysis indicated below.
(i) Foreign exchange risk management
The Group enters into transactions in various foreign currencies, including the United States dollar (“US dollar”, “US$”), Hong Kong dollar (“HK dollar”, “HK$”), Singapore dollar (“SG dollar”, “S$”) and RMB and therefore is exposed to foreign exchange risk.
At the end of the reporting period, the carrying amounts of monetary assets and monetary liabilities denominated in currencies other than the respective entities’ functional currencies are as follows:
110 GROUP COMPANY Liabilities Assets Liabilities Assets Dec 31, Dec 31, Jan 1, Dec 31, Dec 31, Jan 1, Dec 31, Dec 31, Jan 1, Dec 31, Dec 31, Jan 1, Yanlord 2018 2017 2017 2018 2017 2017 2018 2017 2017 2018 2017 2017 Land Group RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Limited
US dollar 480,424 6,348 884,964 6,083 61,989 1,240,642 – – 416,220 141 41 66 HK dollar 547,406 545,094 583,201 16,081 145,023 31,374 – ––8,646 201 71 SG dollar 1,793,965 11,926,678 14,251,113 7,102,552 7,228,573 5,388,618 – ––– –– RMB 2,837,928 2,731,728 4,697,635 3,864,394 888,177 326,736 639,509 718,709 797,910 168 107 1,956
Foreign currency sensitivity
The following table details the sensitivity to a 3% increase in the exchange rate of the functional currency of each entity of the Group against the relevant foreign currencies. 3% is the sensitivity rate used by key management personnel in assessing foreign currency risk and represents management’s assessment of the possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the year end for a 3% change in foreign currency rates. The sensitivity analysis includes external loans, cash and cash equivalents, as well as intercompany loans within the Group where they gave rise to an impact on the Group’s profit or loss and / or equity. A positive number below indicates an increase in profit before income tax and other equity when the functional currency of each group entity strengthens by 3% against the relevant foreign currencies.
— F-141 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d)
(c) Financial risk management policies and objectives (Cont’d)
(i) Foreign exchange risk management (Cont’d)
For a 3% weakening of the functional currency of each group entity against the relevant foreign currencies, there would be an equal and opposite impact on the profit before income tax and other equity.
US dollar impact HK dollar impact SG dollar impact RMB impact Dec 31, Dec 31, Jan 1, Dec 31, Dec 31, Jan 1, Dec 31, Dec 31, Jan 1, Dec 31, Dec 31, Jan 1, 2018 2017 2017 2018 2017 2017 2018 2017 2017 2018 2017 2017 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
GROUP
Increase (Decrease) in profit before income tax 13,816 (1,621) (10,360) 15,475 11,654 16,073 (57) (1,236) 3,212 71,361 79,066 76,738 (Decrease) Increase in other equity – ––– (1) – (154,562) 138,074 254,919 (101,258) (25,370) 50,570 COMPANY 111 (Decrease) Increase in profit before Annual income tax (4) (1) 12,121 (252) (6) (2) – ––18,622 20,930 23,183 Report 2018 (ii) Interest rate risk management
Summary quantitative data of the Group’s interest-bearing financial instruments can be found in Section (v) of this Note. The Group’s policy is to obtain fixed rate borrowings to reduce volatility. However, it may borrow at variable rates when considered economical to do so.
Interest rate sensitivity
The sensitivity analysis below has been determined based on the exposure to interest rates for non- derivative instruments at the end of the reporting period and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting year in the case of instruments that have floating rates. A 100 basis point increase or decrease is used when assessing interest rate risk and represents the management’s assessment of the possible change in interest rates.
If interest rates had been 100 basis points higher or lower and all other variables were held constant, the Group’s:
• Interest expense for the year ended December 31, 2018 would increase / decrease respectively by RMB249 million (December 31, 2017 : increase / decrease respectively by RMB210 million). The Group’s sensitivity to interest rates has increased during the current year due to the increase in the carrying amount of variable rate debt instruments.
• It is the Group’s accounting policy to capitalise borrowing costs relevant to property development. Hence, the above mentioned interest rate fluctuation may not fully impact the profit in the year where interest expense is incurred and capitalised but may affect profit in future financial years.
— F-142 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d)
(c) Financial risk management policies and objectives (Cont’d)
(ii) Interest rate risk management (Cont’d)
Interest rate sensitivity (Cont’d)
If interest rates had been 100 basis points higher or lower and all other variables were held constant, the Company’s interest expense for the year ended December 31, 2018 would increase / decrease respectively by RMB6 million (December 31, 2017 : increase / decrease respectively by RMB7 million). The Company’s sensitivity to interest rates has decreased during the current year due to the decrease in variable rate debt instruments.
(iii) Equity price risk management
Available-for-sale investment / other financial assets designated as at FVTOCI are held for strategic rather than trading purposes. The Group and the Company do not actively trade available-for-sale investment / other financial assets designated as at FVTOCI.
112 The management was of the view that the equity price risk was not significant for the Group due to the relatively small amount of such investments carried. Hence no price sensitivity analysis was presented. Yanlord Land Group Limited (iv) Credit risk management
Credit risk refers to the risk that a counterparty may default on its contractual obligations resulting in financial loss to the Group arising from the carrying amount of the respective recognised financial assets as stated in the consolidated statements of financial position and the amount of contingent liabilities disclosed in Note 38. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults.
For sales of properties, the Group requires advanced payment by the customers upon entering into sales agreement, and sales proceeds are fully settled concurrent with delivery of properties. For leasing of properties, advanced payments by the tenants are required prior to the lease term commenced.
The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics, except for non-trade amounts due from certain associates, join ventures and non-controlling shareholders of subsidiaries. The amounts due from those associates and joint ventures which are engaged in property development projects with strong financial position and sufficient future cash flow. Part of the amounts due from non-controlling interests are secured by undistributed retained earnings of the subsidiary yet to be distributed as dividends and future earnings that are expected to be distributed by the subsidiary to the non-controlling shareholders (Note 13). Information on credit risk relating to other receivables are disclosed in Note 14. The credit risk on cash and cash equivalents is limited because the counterparties are banks with high credit-ratings assigned by international credit rating agencies.
In order to minimise credit risk, the management of the Group has delegated a team to develop and maintain the Group’s credit risk grading to categorise exposures according to their degree of risk of default. The team uses publicly available financial information and the Group’s own historical repayment records to rate its major customers and debtors. The Group’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties.
— F-143 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d)
(c) Financial risk management policies and objectives (Cont’d)
(iv) Credit risk management (Cont’d)
The Group’s current credit risk grading framework comprises the following categories:
Category Description Basis for recognising ECL
Performing The counterparty has a low risk of default and 12m ECL does not have any past-due amounts.
Doubtful There has been a significant increase in credit Lifetime ECL- risk since initial recognition. not credit-impaired
In default There is evidence indicating the asset is credit- Lifetime ECL- impaired. credit-impaired
Write-off There is evidence indicating that the debtor is in Amount is written off severe financial difficulty and the Group has no realistic prospect of recovery. 113
In determining the ECL for other receivables and non-trade amounts due from associates, joint ventures, Annual Report non-controlling shareholders of subsidiaries and other related parties and financial guarantee contracts 2018 since January 1, 2018, the management of the Group has taken into account the historical default experience and forward-looking information, as appropriate, for example the Group has considered the consistently low historical default rate, financial position, property development plan and cash flow projection, as well as pledge of assets of the counterparties and collateral value of the assets, equity interests, undistributed retained earnings in these entities and expected future earnings that would be distributed by the entities in connection with non-trade amounts due from associates, joint ventures and non-controlling shareholders of subsidiaries, and concluded that credit risk inherent in the Group’s outstanding other receivables and non-trade amounts due from associates, joint ventures, non- controlling shareholders of subsidiaries and other related parties and financial guarantee contracts is insignificant. The management of the Group has assessed that other receivables and non-trade amounts due from associates, joint ventures, non-controlling shareholders of subsidiaries and other related parties and financial guarantee contracts have not had a significant increase in credit risk since initial recognition and risk of default is insignificant, and therefore, no impairment has been recognised.
As at December 31, 2018, the Group’s maximum exposure to credit risk comprise (i) the sum of the carrying amounts of financial assets recorded in the financial statements, grossed up for any allowances for losses; (ii) guarantees of approximately RMB5.065 billion (2017 : RMB7.508 billion) to banks for the benefit of the Group’s customers in respect of mortgage loans provided by the banks to these customers for the purchase of the Group’s development properties; (iii) guarantees of approximately RMB2.469 billion (2017 : RMB1.710 billion) to banks and other lenders in respect of bank and other borrowings to joint ventures; and (iv) a guarantee of approximately RMB1.710 billion (2017 : RMB Nil) to a bank in respect of a loan facility granted to a third party, as elaborated in Note 38 to the financial statements.
— F-144 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d)
(c) Financial risk management policies and objectives (Cont’d)
(v) Liquidity risk management
The Group maintains cash and cash equivalents, obtains external bank and other borrowings and issues senior notes with staggered repayment dates. The Group also minimises liquidity risk by keeping committed credit lines available. As at December 31, 2018, the Group had available RMB8.590 billion (December 31, 2017 : RMB11.434 billion, January 1, 2017 : RMB9.571 billion) of undrawn committed bank and other credit facilities in respect of which all precedent conditions had been met.
In managing liquidity risk, the management prepares cash flow forecasts using various assumptions and monitors the cash flows of the Group.
Liquidity and interest risk analyses
Non-derivative financial liabilities
The following tables detail the remaining contractual maturity for non-derivative financial liabilities. 114 The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group and Company can be required to pay. The table includes Yanlord both interest and principal cash flows. The adjustment column represents the estimated future interest Land Group Limited attributable to the instrument included in the maturity analysis which is not included in the carrying amount of the financial liabilities on the statement of financial position.
Weighted On average demand More than More than effective or within 1 year to 2 years to More than interest rate 1 year 2 years 5 years 5 years Adjustments Total % RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
GROUP
December 31, 2018
Non-interest bearing – 11,723,819 205,377 – – – 11,929,196 Variable interest rate instruments 5.2 3,540,647 8,913,327 6,699,805 11,110,046 (5,476,313) 24,787,512 Fixed interest rate instruments 6.8 6,081,270 8,550,924 6,067,005 – (2,721,513) 17,977,686 Total 21,345,736 17,669,628 12,766,810 11,110,046 (8,197,826) 54,694,394
December 31, 2017
Non-interest bearing – 8,935,657 1,334,144 – – – 10,269,801 Variable interest rate instruments 4.9 1,770,503 3,659,687 10,293,180 9,475,913 (4,319,921) 20,879,362 Fixed interest rate instruments 6.2 1,096,803 5,120,581 9,654,388 – (2,352,488) 13,519,284 Total 11,802,963 10,114,412 19,947,568 9,475,913 (6,672,409) 44,668,447
January 1, 2017
Non-interest bearing – 8,681,336 – 1,421,698 – – 10,103,034 Variable interest rate instruments 4.3 4,518,273 2,050,927 4,430,310 1,752,267 (1,399,794) 11,351,983 Fixed interest rate instruments 6.1 7,103,215 1,517,874 5,189,915 – (1,285,140) 12,525,864 Total 20,302,824 3,568,801 11,041,923 1,752,267 (2,684,934) 33,980,881
— F-145 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d)
(c) Financial risk management policies and objectives (Cont’d)
(v) Liquidity risk management (Cont’d)
Weighted On average demand More than More than effective or within 1 year to 2 years to interest rate 1 year 2 years 5 years Adjustments Total % RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
COMPANY
December 31, 2018
Non-interest bearing – 7,160,730 – – – 7,160,730 Variable interest rate instruments 5.1 672,124 – – (32,615) 639,509 Total 7,832,854 – – (32,615) 7,800,239
December 31, 2017
Non-interest bearing – 7,239,470 – – – 7,239,470 115
Variable interest Annual rate instruments 5.1 83,240 704,739 – (69,269) 718,710 Report Total 7,322,710 704,739 – (69,269) 7,958,180 2018
January 1, 2017
Non-interest bearing – 5,450,785 – – – 5,450,785 Variable interest rate instruments 3.4 1,192,943 306,485 737,584 (147,607) 2,089,405 Fixed interest rate instruments 6.8 1,968,433 – – (52,124) 1,916,309 Total 8,612,161 306,485 737,584 (199,731) 9,456,499
As at December 31, 2018, the maximum amount that the Group could be obliged to settle under the financial guarantee contracts related to (i) bank loans of buyers amounting to RMB5.065 billion (2017 : RMB7.508 billion); (ii) bank and other borrowings of joint ventures amounting to RMB2.469 billion (2017 : RMB1.710 billion); and (iii) a loan facility granted to a third party amounting to RMB1.710 billion (2017 : RMB Nil) (Note 38).
The following table detail the earliest period that the guarantees could be called.
On demand More than More than or within 1 year to 2 year to 1 year 2 years 5 years Total RMB’000 RMB’000 RMB’000 RMB’000
December 31, 2018 6,030,629 747,744 2,465,507 9,243,880
December 31, 2017 8,392,670 – 824,875 9,217,545
January 1, 2017 11,549,438 533,691 730,000 12,813,129
As mentioned in Note 38, the management considers that the likelihood of these guarantees being called upon is low.
— F-146 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d)
(c) Financial risk management policies and objectives (Cont’d)
(v) Liquidity risk management (Cont’d)
Non-derivative financial assets
The following tables detail the remaining contractual maturity for non-derivative financial assets. The tables below have been drawn up based on the undiscounted contractual maturities of the financial assets including interest that the cash flows will occur in a different period.
Weighted On average demand More than More than effective or within 1 year to 2 years to More than interest rate 1 year 2 years 5 years 5 years Adjustments Total % RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
GROUP
December 31, 2018
Non-interest bearing – 12,575,323 2,035,631 693,359 52,933 – 15,357,246 116 Fixed interest rate instruments 6.4 14,302,148 3,659,557 2,681,727 – (1,806,895) 18,836,537 Yanlord Total 26,877,471 5,695,188 3,375,086 52,933 (1,806,895) 34,193,783 Land Group Limited December 31, 2017
Non-interest bearing – 18,772,022 1,348,208 256,633 – – 20,376,863 Fixed interest rate instruments 5.6 6,682,463 2,030,104 1,788,040 – (912,762) 9,587,845 Total 25,454,485 3,378,312 2,044,673 – (912,762) 29,964,708
January 1, 2017
Non-interest bearing – 18,293,113 52,986 606,796 – – 18,952,895 Fixed interest rate instruments 5.5 3,864,775 231,870 1,722,170 – (564,335) 5,254,480 Total 22,157,888 284,856 2,328,966 – (564,335) 24,207,375
As at December 31, 2018, the Company’s non-derivative financial assets are mainly non-interest bearing with expected maturity within 1 year (December 31, 2017 : 1 year, January 1, 2017 : 1 year).
— F-147 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d)
(c) Financial risk management policies and objectives (Cont’d)
(vi) Fair value of financial assets and financial liabilities
The Group determines fair values of various financial assets and financial liabilities in the following manner:
Fair value of the Group’s financial assets and financial liabilities that are measured at fair value on a recurring basis
Some of the Group’s financial assets and financial liabilities are measured at fair value at the end of each reporting period. The following table gives information about how the fair values of these financial assets and financial liabilities are determined.
Fair value as at Relationship of Financial December Fair Valuation Significant unobservable assets/ December 31, 31, January 1, Value technique(s) unobservable inputs to fair (liabilities) 2018 2017 2017 hierarchy and key input(s) input(s) value RMB’000 RMB’000 RMB’000 117 GROUP Annual Put liability (1,320,733) (1,334,144) (1,421,698) Level 3 Discounted cash flow. Cost of debt A slight Report to acquire Future cash flows with tenure of increase in the 2018 non- are estimated based 0.25-1 year at cost of debt controlling on the present 9% (December used in isolation interests value of expected 31, 2017 : will result in a payment, discounted 1-2 years at decrease in the using the entity’s 9%, January fair value (1) cost of debt. The 1, 2017 : 2-3 expected payment years at 10%) is determined by considering the fair value at the time of exit
Other 55,293 2,990 – Level 3 Net asset value of the Net asset value The higher the financial investees net asset value, assets the higher the fair value
120,000 – – Level 3 Income approach Discount rate A slight - in this approach, of 10% per increase in the the discounted cash annum using a discount rate flow method was Capital Asset used in isolation used to capture the Pricing Model will result in a present value of decrease in the the expected future fair value (2) economic benefits to be derived from the ownership of this investee
(1) As at December 31, 2018, a 100 basis point increase / decrease in cost of debt used as discount rate while holding all other variables constant would decrease / increase the carrying amount of put liability to acquire non-controlling interests by RMB6 million (December 31, 2017 : RMB15 million, January 1, 2017 : RMB26 million).
(2) As at December 31, 2018, a 100 basis point increase in the discount rate while holding all other variables constant would decrease the carrying amount of this other financial asset by RMB10 million, while a 100 basis point decrease in the discount rate would increase the carrying amount of this other financial asset by RMB13 million.
There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the year.
— F-148 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d)
(c) Financial risk management policies and objectives (Cont’d)
(vi) Fair value of financial assets and financial liabilities (Cont’d)
Reconciliation of Level 3 fair value measurement
Put liability to acquire non–controlling Other financial interests assets Total RMB’000 RMB’000 RMB’000
At January 1, 2017 (1,421,698) – (1,421,698) Total gains in profit or loss 87,554 – 87,554 At December 31, 2017 (1,334,144) – (1,334,144) Transfer into Level 3 upon initial recognition of SFRS(I) 9 – 2,990 2,990 Recognition upon entering the agreements – 172,933 172,933 Total gains in profit or loss 13,411 – 13,411 118 At December 31, 2018 (1,320,733) 175,923 (1,144,810)
Yanlord Land Group Fair value of the Group’s and the Company’s financial assets and financial liabilities that are not Limited measured at fair value on a recurring basis (but fair value disclosures are required)
Except as detailed in the following table, management considers that the carrying amounts of financial assets and financial liabilities of the Group and the Company recorded at amortised cost in the financial statements approximate their fair values:
December 31, 2018 December 31, 2017 January 1, 2017 Carrying Fair Carrying Fair Carrying Fair amount value amount value amount value RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
GROUP
Financial Liabilities Senior notes 5,440,228 5,413,177 2,911,604 3,027,132 1,916,309 1,941,494
COMPANY
Financial Liabilities Senior notes ––– – 1,916,309 1,941,494
The Group’s and the Company’s senior notes at the end of the reporting period were under Level 2 fair value hierarchy.
— F-149 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISK MANAGEMENT (Cont’d)
(d) Capital risk management policies and objectives
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance.
The Group monitors capital on the basis of the net debt to equity ratio. This ratio is calculated as total debt less cash and cash equivalents divided by equity. Total debt include bank and other borrowings, senior notes and certain non-trade amounts due to non-controlling shareholders of subsidiaries and ultimate holding company. Equity for this purpose comprises equity attributable to owners of the Company, comprising issued capital, reserves and accumulated profits, as well as non-controlling interests as shown in the consolidated statement of financial position.
The net debt to equity ratios as at the end of the reporting period were as follows:
GROUP December 31, December 31, January 1, 2018 2017 2017 RMB’000 RMB’000 RMB’000 Total debt 42,135,198 34,398,647 23,675,021 119 Cash and cash equivalents (10,317,374) (17,798,313) (17,583,383) Net debt 31,817,824 16,600,334 6,091,638 Annual Report Equity 32,878,618 32,702,811 30,009,556 2018
Net debt to equity ratio 96.8% 50.8% 20.3%
The Group’s overall strategy remains unchanged from 2017. In addition, the Group also specifically monitors the financial ratios of its debt covenants stated in the agreements in respect of senior notes issued by the Company and its subsidiary and borrowings with the financial institutions providing the facilities to the Group.
5. ULTIMATE HOLDING COMPANY AND RELATED COMPANY TRANSACTIONS
The Company is a subsidiary of Yanlord Holdings Pte. Ltd., incorporated in the Republic of Singapore, which is also the Company’s ultimate holding company. Related companies in these financial statements refer to members of the ultimate holding company’s group of companies.
Transactions between the Company and its subsidiaries, which are related companies of the Company, have been eliminated on consolidation and are not disclosed in this note. The intercompany balances are unsecured, interest- free and repayable on demand unless otherwise stated.
During the year, the Group and the Company entered into the following transactions with its ultimate holding company:
GROUP AND COMPANY 2018 2017 RMB’000 RMB’000
Interest expense to ultimate holding company (Note 27) – 1,025
As at January 1, 2017, non-trade amount due to the ultimate holding company amounting to RMB422 million and RMB250 million bore floating interest rates at the bank’s cost of funds or swap offer rate plus 1.5% per annum, and the bank’s cost of funds or swap offer rate plus 1.1% per annum respectively. The balance was unsecured and repayable on demand.
— F-150 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
6. OTHER RELATED PARTY TRANSACTIONS
Some of the Group’s transactions and arrangements are with related parties and the effect of these on the basis determined between the parties is reflected in these financial statements. The balances with related parties (including non-trade amounts due from associates, joint ventures and other related parties and non-trade amounts due to associates, joint ventures, ultimate holding company, directors and other related parties) are unsecured, interest-free and repayable on demand unless otherwise stated.
During the year, the Group entered into the following transactions with related parties:
GROUP 2018 2017 RMB’000 RMB’000
Sales of properties to key management personnel and close members of their families 30,057 46,467 Interest income from associates 25,522 35,262 Interest income from joint ventures 289,839 95,544 Other income from associates 6,721 6,306 Other income from joint ventures 51,171 10,756 Interest expense to an associate 342 – 120 Interest expense to a joint venture 5,446 –
Yanlord Rental expenses to a director and a company in which the director has Land Group control over 11,798 9,998 Limited At the end of the reporting period, the Group has outstanding commitments of RMB27 million (December 31, 2017 : RMB30 million, January 1, 2017 : RMB13 million) to a director and a company in which the director has control over, under non-cancellable operating leases in respect of land and buildings for its office premises and staff accommodation.
At the end of the reporting period, the Group has pre-sales of properties totaling RMB189 million (December 31, 2017 : RMB200 million, January 1, 2017 : RMB47 million) to key management and close members of their families. As at December 31, 2018, advances amounting to RMB45 million (December 31, 2017 : RMB55 million, January 1, 2017 : RMB47 million) have been received from key management and close members of their families in relation to the pre-sales of properties.
As at January 1, 2017, a bank loan of the Company amounting to RMB203 million drawn for general working capital of the Group was secured by a legal charge extended by the Company’s ultimate holding company and a personal guarantee from a director.
Compensation of directors and key management personnel
The remuneration of directors and other members of key management during the year was as follows:
GROUP 2018 2017 RMB’000 RMB’000
Short-term benefits 93,833 93,913 Post-employment benefits 1,535 1,104 95,368 95,017
— F-151 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
7. PROPERTY, PLANT AND EQUIPMENT
Leasehold Furniture, land and Motor fixtures and Construction- buildings vehicles equipment in-progress Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
GROUP
Cost: At January 1, 2017 324,310 80,551 164,888 1,510,020 2,079,769 Additions 176,455 15,092 14,352 854,395 1,060,294 Disposals – (7,124) (4,041) – (11,165) Acquisition of a subsidiary (Note 33) – 9 41 – 50 Change of control from subsidiaries to joint ventures (Note 34) – – (207) – (207) Exchange difference – 372 (73) – 299 At December 31, 2017 500,765 88,900 174,960 2,364,415 3,129,040 Additions 14,168 17,985 65,885 327,351 425,389 Disposals (658) (10,724) (3,969) – (15,351) Transfers 2,543,850 – – (2,543,850) – 121 Acquisition of subsidiaries (Note 33) 54 1,125 638 1,817 Exchange difference – 43 36 – 79 Annual At December 31, 2018 3,058,179 97,329 237,550 147,916 3,540,974 Report 2018 Accumulated depreciation: At January 1, 2017 68,397 59,152 132,753 – 260,302 Depreciation for the year 17,601 7,410 10,140 – 35,151 Eliminated on disposals – (5,562) (3,632) – (9,194) Change of control from subsidiaries to joint ventures (Note 34) – – (11) – (11) Exchange difference – (32) (39) – (71) At December 31, 2017 85,998 60,968 139,211 – 286,177 Depreciation for the year 65,819 10,417 14,539 – 90,775 Eliminated on disposals (658) (9,800) (3,241) – (13,699) Exchange difference – 29 29 – 58 At December 31, 2018 151,159 61,614 150,538 – 363,311
Carrying amount: At December 31, 2018 2,907,020 35,715 87,012 147,916 3,177,663
At December 31, 2017 414,767 27,932 35,749 2,364,415 2,842,863
At January 1, 2017 255,913 21,399 32,135 1,510,020 1,819,467
In 2018, depreciation for the year includes an amount of RMB3 million (2017 : RMB2 million) capitalised in the Group’s properties for development and properties under development for sale. The carrying amounts of leasehold land and buildings as well as construction-in-progress pledged to banks and other lenders to secure bank and other borrowings are disclosed in Note 21.
— F-152 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
8. INVESTMENT PROPERTIES
GROUP 2018 2017 RMB’000 RMB’000
At fair value: Balance as at beginning of year 13,986,380 13,694,556 Additions 190,921 152,557 Change in fair value 391,372 148,321 Disposals (1,033) (9,054) Balance as at end of year 14,567,640 13,986,380
The fair value of investment properties at December 31, 2018, December 31, 2017 and January 1, 2017 have been determined on the basis of valuations carried out at the respective year end dates by independent valuers having recognised professional qualification and recent experience in the location and category of the properties being valued, and not related to the Group.
The fair value was determined based on the direct comparison approach that reflects recent transaction prices or current asking prices for similar properties, the income capitalisation approach where the market rentals of all lettable units of the properties are assessed by reference to the rentals achieved in the lettable units as well as other lettings of 122 similar properties in the neighbourhood and the residual approach whereby the fair value is determined by taking into consideration the projected total development value, costs incurred, expected cost to completion and developer’s profit. Yanlord The capitalisation rate adopted is made by reference to the yield rates observed by the valuers for similar properties Land Group Limited in the locality and adjusted based on the valuers’ knowledge of the factors specific to the respective properties. In estimating the fair value of the properties, the highest and best use of the properties is their current use. There has been no change to the valuation technique during the year, other than for investment properties under construction.
The Group’s investment properties at the end of the reporting period were under Level 3 fair value hierarchy. There were no transfers into or out of Level 3 during the year.
The following table shows the significant unobservable inputs used in the valuation model:
Significant Fair value as at Valuation unobservable Description RMB’000 technique(s) input(s) Range
December 31, 2018 Completed investment 12,028,100 (1) Direct comparison price per RMB44,057 properties approach square meter (2) Income market rent per RMB20 – RMB398 capitalisation square meter per approach month (2) capitalisation rate (3) 3.0% – 8.0% Car parking spaces 519,540 Direct comparison price per unit (2) RMB110,000 – approach RMB260,000 Investment properties 2,020,000 (1) Direct comparison price per RMB33,180 under construction approach square meter (2) Income capitalisation market rent per square RMB139 approach meter per month (2) capitalisation rate (3) 5.0% 14,567,640
— F-153 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
8. INVESTMENT PROPERTIES (Cont’d)
Significant Fair value as at Valuation unobservable Description RMB’000 technique(s) input(s) Range
December 31, 2017
Completed investment 11,550,800 (1) Direct comparison price per RMB13,884 – properties approach square meter (2) RMB54,747
Income market rent per RMB28 – RMB448 capitalisation square meter per approach month (2)
capitalisation rate (3) 3.8% – 9.0%
Car parking spaces 550,980 Direct comparison price per unit (2) RMB70,000 – approach RMB260,000
Investment properties 1,884,600 Residual approach price per RMB26,846 – under construction square meter (2) RMB41,045 13,986,380 123
January 1, 2017 Annual Report Completed investment 11,404,700 (1) Direct comparison price per RMB14,643 – 2018 properties approach square meter (2) RMB47,543
Income market rent per RMB30 – RMB412 capitalisation square meter per approach month (2)
capitalisation rate (3) 3.8% – 9.0%
Car parking spaces 551,856 Direct comparison price per unit (2) RMB66,190 – approach RMB256,000
Investment properties 1,738,000 Residual approach price per RMB27,053 – under construction square meter (2) RMB42,184 13,694,556
(1) Some of the properties were based on either the Direct Comparison Approach (“DCA”), or the Income Capitalisation Approach (“ICA”), and the other properties were based on the combined approach of DCA and ICA. (2) Any significant isolated increases (decreases) in these inputs would result in a significantly higher (lower) fair value measurement. (3) Any significant isolated increases (decreases) in these inputs would result in a significantly lower (higher) fair value measurement.
The carrying amounts of investment properties pledged to banks and other lenders to secure the bank and other borrowings granted to the Group are disclosed in Note 21.
The rental income earned by the Group from its investment properties amounted to RMB382 million (2017 : RMB343 million). Direct operating expenses arising on the investment properties in the year amounted to RMB4 million (2017 : RMB4 million).
— F-154 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
9. PROPERTIES FOR DEVELOPMENT / COMPLETED PROPERTIES FOR SALE / PROPERTIES UNDER DEVELOPMENT FOR SALE
GROUP December 31, December 31, January 1, 2018 2017 2017 RMB’000 RMB’000 RMB’000
At cost: Properties for development (Non-current assets) 16,940,162 15,079,352 2,792,938 Completed properties for sale (Current assets) 5,957,456 8,487,306 4,704,316 Properties under development for sale (Current assets) 21,124,992 25,587,718 38,214,800 44,022,610 49,154,376 45,712,054
Properties for development, completed properties for sale and properties under development for sale are located in the PRC.
Up to the end of the reporting period, total interest capitalised is as follows:
GROUP 124 December 31, December 31, January 1, 2018 2017 2017 Yanlord RMB’000 RMB’000 RMB’000 Land Group Limited Properties for development 1,456,945 664,983 301,986
Completed properties for sale 412,139 459,053 269,961
Properties under development for sale 1,764,093 1,619,595 2,100,562
The carrying amounts of properties pledged to banks and other lenders to secure bank and other borrowings granted to the Group are disclosed in Note 21.
10. INVESTMENTS IN SUBSIDIARIES
COMPANY December 31, December 31, January 1, 2018 2017 2017 RMB’000 RMB’000 RMB’000
Unquoted equity shares, at cost 13,523,060 3,390,836 2,473,274
— F-155 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
10. INVESTMENTS IN SUBSIDIARIES (Cont’d)
Details of the Company’s significant subsidiaries are as follows:
Country of incorporation Proportion of ownership Name of subsidiary (or residence) interest and voting power held Principal activities Dec 31, Dec 31, Jan 1, 2018 2017 2017 %%%
Held by the Company
Yanlord Commercial Property Singapore 100 100 100 Investment holding Investments Pte. Ltd. (a) ➋䛎㉁⚌㖑❡䫏餴剣ꣳⰖ
Yanlord Land Pte. Ltd. (a) Singapore 100 100 100 Investment holding ➋䛎縨㖑剣ꣳⰖ
Yanlord Land (HK) Co., Limited (b) Hong Kong 100 100 100 Management services ➋䛎㖑❡ 껺度 剣ꣳⰖ 125 Held by Yanlord Commercial Property Investments Pte. Ltd. Annual (b) Report Yanlord Singapore Office Pte. Ltd. Singapore 100 100 – Investment holding 2018 Yanlord Singapore Retail Pte. Ltd. (b) Singapore 100 100 – Investment holding
Held by Yanlord Land Pte. Ltd. and its subsidiaries
Palovale Pte Ltd (a) Singapore 67 67 67 Investment holding 厣륫㪭剣ꣳⰖ
Yanlord Property Pte. Ltd. (a) Singapore 100 60 60 Investment holding ➋䛎㖑❡剣ꣳⰖ
Yanlord Real Estate Pte. Ltd. (a) Singapore 95 95 95 Investment holding ➋䛎縨⚌〄㾝剣ꣳⰖ
Yanlord Singapore Residential Singapore 100 100 – Investment holding Pte. Ltd. (b)
East Hero Investment Limited (b) Hong Kong 100 100 100 Investment holding ⚎❣䫏餴剣ꣳⰖ
Flourish Fair Limited (1) (b) Hong Kong 80 – – Investment holding 薲蒌剣ꣳⰖ
Successful Global Consultancy Hong Kong 100 100 100 Management services Co., Limited (b) 䧭곡梠椕ㅐ霧剣ꣳⰖ
Greens Investments Ltd. (b) British Virgin 100 100 – Investment holding 綁蒀䫏餴剣ꣳⰖ Islands
— F-156 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
10. INVESTMENTS IN SUBSIDIARIES (Cont’d)
Country of incorporation Proportion of ownership Name of subsidiary (or residence) interest and voting power held Principal activities Dec 31, Dec 31, Jan 1, 2018 2017 2017 %%%
Held by Yanlord Land Pte. Ltd. and its subsidiaries (Cont’d)
Chengdu Everrising Asset Management PRC 51 51 51 Property development Co., Ltd. (b) and investment 䧭鿪䋑䛎⚌⚎⼮餴❡絑蠒盗椚 剣ꣳⰖ
Chengdu Yanlord Investment PRC 100 100 100 Management services Management Co., Ltd. (b) and investment 䧭鿪➋䛎䫏餴盗椚剣ꣳⰖ
Chengdu Yanlord Property PRC 100 100 100 Property management 126 Management Co., Ltd. (b) 䧭鿪➋䛎暟⚌盗椚剣ꣳⰖ
Yanlord (b) Land Group Xinfu Trade (Chengdu) Co., Ltd. PRC 100 100 100 Investment holding Limited ⥌㺢㉁館 䧭鿪 剣ꣳⰖ
Yanlord Hotel Management (Chengdu) PRC 100 100 100 Hotel and serviced Co., Ltd. (b) apartment management ➋䛎ꂊ䏅盗椚 䧭鿪 剣ꣳⰖ
Yanlord Land (Chengdu) Co., Ltd. (b) PRC 100 100 100 Property development ➋䛎縨㖑 䧭鿪 剣ꣳⰖ
Yanlord Real Estate (Chengdu) PRC 70 70 70 Property development Co., Ltd. (b) and management ➋䛎縨⚌ 䧭鿪 剣ꣳⰖ
Chongzhou Yanlord Land Co., Ltd. (b) PRC 80 80 – Property development 牠䊜➋䛎縨㖑剣ꣳⰖ
Guiyang Yanlord Property Management PRC 100 100 100 Property management Co., Ltd. (b) 餥➋䛎暟⚌盗椚剣ꣳⰖ
Hainan Jinzhonghong Industrial PRC 51 – – Property development Development Co., Ltd. (1) (b) 嵳⽂ꆄ⚥뚡㹊⚌〄㾝剣ꣳⰖ
Hainan Yanlord Luqiao Investment PRC 51 51 – Property development Co., Ltd. (b) 嵳⽂➋䛎꣣⣪䫏餴剣ꣳⰖ
Yanlord Land (Hainan) Co., Ltd. (2) (b) PRC 100 – – Investment holding ➋䛎縨㖑 嵳⽂ 剣ꣳⰖ
— F-157 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
10. INVESTMENTS IN SUBSIDIARIES (Cont’d)
Country of incorporation Proportion of ownership Name of subsidiary (or residence) interest and voting power held Principal activities Dec 31, Dec 31, Jan 1, 2018 2017 2017 %%%
Held by Yanlord Land Pte. Ltd. and its subsidiaries (Cont’d)
Hangzhou Renan Property Co., Ltd. (2) (b) PRC 100 – – Property development 匆䊜➋㸝䨻㖑❡剣ꣳⰖ
Hangzhou Renhang Property PRC 100 – – Property management Management Co., Ltd. (2) (b) 匆䊜➋匆暟⚌盗椚剣ꣳⰖ
Hangzhou Renrui Property Development PRC 100 – – Property development Co., Ltd. (2) (b) 匆䊜➋潇䨻㖑❡䒓〄剣ꣳⰖ
Jinan Yanlord Heyuan Real Estate PRC 100 100 – Property development 127 Co., Ltd. (b) Annual 崸⽂➋䛎ㄤꤎ縨⚌剣ꣳⰖ Report 2018 Jinan Yanlord Real Estate Co., Ltd. (b) PRC 100 100 – Investment holding 崸⽂➋䛎縨⚌剣ꣳⰖ
Lhasa Xinfu Trading Co., Ltd. (b) PRC 100 100 100 Trading of building 䬘蠖⥌㺢㉁館剣ꣳⰖ materials and hardware
Nanjing Daji Real Estate Development PRC 51 51 51 Property development Co., Ltd. (b) ⽂❩㣐し䨻㖑❡䒓〄剣ꣳⰖ
Nanjing Renbei Property Development PRC 100 100 – Property development Co., Ltd. (b) ⽂❩➋⻌䨻㖑❡䒓〄剣ꣳⰖ
Nanjing Renyuan Investment Co., Ltd. (b) PRC 100 100 100 Management services ⽂❩➋鵴䫏餴剣ꣳⰖ and investment
Nanjing Yanlord Commercial PRC 100 60 60 Property development Management Co., Ltd. (b) and investment ⽂❩➋䛎㉁⚌盗椚剣ꣳⰖ
Nanjing Yanlord Cultural Tourism PRC 100 100 100 Tourism investment and Industry Development Co., Ltd. (b) asset management ⽂❩➋䛎俒⻊假康❡⚌〄㾝 剣ꣳⰖ
Nanjing Yanlord Hotel Management PRC 100 100 100 Hotel and serviced Co., Ltd. (b) apartment management ⽂❩➋䛎ꂊ䏅盗椚剣ꣳⰖ
— F-158 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
10. INVESTMENTS IN SUBSIDIARIES (Cont’d)
Country of incorporation Proportion of ownership Name of subsidiary (or residence) interest and voting power held Principal activities Dec 31, Dec 31, Jan 1, 2018 2017 2017 %%%
Held by Yanlord Land Pte. Ltd. and its subsidiaries (Cont’d)
Nanjing Yanlord Information PRC 100 – – Information technology Technology Co., Ltd. (2) (b) ⽂❩➋䛎⥌䜂䪮助剣ꣳⰖ
Nanjing Yanlord Jiangdao Real Estate PRC – – 100 Property development Co., Ltd. (b) ⽂❩➋䛎寐䀙縨⚌剣ꣳⰖ
Nanjing Yanlord Jiangzhou Property PRC 100 100 100 Property development Development Co., Ltd. (b) and management 128 ⽂❩➋䛎寐崍䨻㖑❡䒓〄剣ꣳⰖ Nanjing Yanlord Property Management PRC 100 100 100 Property management Yanlord (b) Land Group Co., Ltd. Limited ⽂❩➋䛎暟⚌盗椚剣ꣳⰖ
Nanjing Yanlord Real Estate Co., Ltd. (b) PRC 100 60 60 Property development ⽂❩➋䛎縨⚌剣ꣳⰖ
Nanjing Yu Dian Landscape PRC 80 100 100 Landscaping and Development Co., Ltd. (b) gardening ⽂❩䖵Ⱙ㔩卌〄㾝剣ꣳⰖ
Yanlord Investment (Nanjing) Co., Ltd. (b) PRC 100 100 100 Investment holding ➋䛎䫏餴 ⽂❩ 剣ꣳⰖ
Nantong Yanlord Intelligent PRC 100 – – Construction engineering Construction Hi-Tech Co., Ltd. (2) (b) ⽂鸑➋䛎兰䢴䒊瘰猰䪮剣ꣳⰖ
Yanlord Land (Nantong) Co., Ltd. (b) PRC 60 60 60 Property development ➋䛎縨㖑 ⽂鸑 剣ꣳⰖ
Shenzhen Bantian Yanlord Investment PRC 100 – – Property development and Development Co., Ltd. (2) (b) 帿㖕䋑㖪歊➋䛎䫏餴〄㾝剣ꣳⰖ
Shenzhen Dongguan Shengtai PRC 65 65 – Property development Investment Co., Ltd. (b) 帿㖕䋑⚎Ⱒ渿岲䫏餴剣ꣳⰖ
Shenzhen Hengming Commercial PRC 100 100 100 Property development Co., Ltd. (b) 帿㖕䋑䛎僈㉁⚌剣ꣳⰖ
— F-159 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
10. INVESTMENTS IN SUBSIDIARIES (Cont’d)
Country of incorporation Proportion of ownership Name of subsidiary (or residence) interest and voting power held Principal activities Dec 31, Dec 31, Jan 1, 2018 2017 2017 %%%
Held by Yanlord Land Pte. Ltd. and its subsidiaries (Cont’d)
Shenzhen Huarong Innovation PRC 100 100 100 Property development Investment Co., Ltd. (b) 帿㖕䋑⼶輑倝䫏餴肅⟧剣ꣳⰖ
Shenzhen Long Wei Xin Investment PRC 95 95 75 Property development Co., Ltd. (b) 帿㖕䋑륫㪭⥌䫏餴㹊⚌剣ꣳⰖ
Shenzhen Yanlord City Re-development PRC 100 100 – City redevelopment Co., Ltd. (b) 帿㖕䋑➋䛎㙹䋑刿倝〄㾝剣ꣳⰖ 129 Shenzhen Yanlord Commercial PRC 100 – – Management services (2) (b) Annual Management Co., Ltd. Report 帿㖕䋑➋䛎㉁⚌盗椚剣ꣳⰖ 2018
Shenzhen Yanlord Home Coffee PRC 100 100 – Food and beverage Co., Ltd. (b) services 帿㖕䋑➋䛎㹻ㄳ㉰剣ꣳⰖ
Shenzhen Yanlord Property PRC 100 100 100 Property development Management Co., Ltd. (b) 帿㖕䋑➋䛎暟⚌盗椚剣ꣳⰖ
Xingheng (Shenzhen) Investment PRC 100 100 100 Investment holding Management Co., Ltd. (b) Ⱓ䛎 帿㖕 䫏餴㹊⚌剣ꣳⰖ
Yanlord Land (Shenzhen) Co., Ltd. (b) PRC 100 100 100 Property development ➋䛎縨㖑 帿㖕 剣ꣳⰖ and management
Yanlord (Shenzhen) Hotel Management PRC 100 100 100 Hotel management Co., Ltd. (b) ➋䛎 帿㖕 ꂊ䏅盗椚剣ꣳⰖ
Yanlord (Shenzhen) Investment PRC 100 100 100 Investment holding Management Co., Ltd. (b) ➋䛎 帿㖕 䫏餴㹊⚌剣ꣳⰖ
Shanghai Gusheng Construction PRC 100 100 60 Construction engineering Intelligent Engineering Co., Ltd. (b) ♳嵳㔿渿䒊瘰兰腊⻊䊨玐剣ꣳⰖ
— F-160 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
10. INVESTMENTS IN SUBSIDIARIES (Cont’d)
Country of incorporation Proportion of ownership Name of subsidiary (or residence) interest and voting power held Principal activities Dec 31, Dec 31, Jan 1, 2018 2017 2017 %%%
Held by Yanlord Land Pte. Ltd. and its subsidiaries (Cont’d)
Shanghai Hong Ming Ge Food & PRC 60 60 60 Restaurant operation Beverage Service Management Co., Ltd. (b) ♳嵳㸪ぜꢏ귬껏剪⸉盗椚剣ꣳⰖ
Shanghai Pudong New District Private PRC 50 50 50 Kindergarten operation Yanlord Kindergarten (3) (b) ♳嵳䋑嵙⚎倝⼓字⸅➋䛎䎓⯄㔩
Shanghai Renan Property Development PRC 100 100 100 Property development 130 Co., Ltd. (b) ♳嵳➋㸝䨻㖑❡䒓〄剣ꣳⰖ Yanlord Land Group Shanghai Renhang Real Estate PRC 100 100 – Property development Limited Co., Ltd. (b) and management ♳嵳➋匆縨⚌剣ꣳⰖ
Shanghai Renjie Hebin Garden PRC 51 51 51 Property development Property Co., Ltd. (b) ♳嵳➋匊屎忡㔩䨻㖑❡剣ꣳⰖ
Shanghai Renpin Property Development PRC 50 50 50 Property development Co., Ltd. (4) (b) and management ♳嵳➋ㅷ䨻㖑❡䒓〄剣ꣳⰖ
Shanghai Renrui Real Estate PRC 100 100 – Property development Co., Ltd. (b) and management ♳嵳➋潇縨⚌剣ꣳⰖ
Shanghai Rensheng Real Estate PRC 100 100 – Property development Co., Ltd. (b) and management ♳嵳➋允縨⚌剣ꣳⰖ
Shanghai Yanlord Education Training PRC 100 100 100 Education and training Co., Ltd. (b) ♳嵳➋䛎侅肫㛆雲剣ꣳⰖ
Shanghai Yanlord Elevator Co., Ltd. (b) PRC 100 100 100 Sale, installation, repair ♳嵳➋䛎歏唑剣ꣳⰖ and maintenance of elevators
Shanghai Yanlord Entertainment PRC 100 100 100 Cultural and art Development Co., Ltd. (b) performance ♳嵳➋䛎怵蒌〄㾝剣ꣳⰖ
— F-161 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
10. INVESTMENTS IN SUBSIDIARIES (Cont’d)
Country of incorporation Proportion of ownership Name of subsidiary (or residence) interest and voting power held Principal activities Dec 31, Dec 31, Jan 1, 2018 2017 2017 %%%
Held by Yanlord Land Pte. Ltd. and its subsidiaries (Cont’d)
Shanghai Yanlord Gaoqiao Property PRC 50 50 50 Property development Co., Ltd. (3) (b) ♳嵳➋䛎넞⛠䨻㖑❡剣ꣳⰖ
Shanghai Yanlord Hongqiao Property PRC 60 60 60 Property development Co., Ltd. (b) and management ♳嵳➋䛎赙咕䨻㖑❡剣ꣳⰖ
Shanghai Yanlord Industrial PRC 100 100 100 Management services Development Co., Ltd. (b) and investment ♳嵳➋䛎㹊⚌〄㾝剣ꣳⰖ 131 Shanghai Yanlord Investment PRC 100 100 100 Management services (b) Annual Management Co., Ltd. and investment Report ♳嵳➋䛎䫏餴盗椚剣ꣳⰖ 2018
Shanghai Yanlord Land Property PRC 100 100 100 Property management Management services Co., Ltd. (b) ♳嵳➋䛎縨㖑暟⚌剪⸉盗椚 剣ꣳⰖ
Shanghai Yanlord Property Co., Ltd. (b) PRC 67 67 67 Property development ♳嵳➋䛎䨻㖑❡剣ꣳⰖ
Shanghai Yanlord Property PRC 67 67 67 Property management Management Co., Ltd. (b) ♳嵳➋䛎暟⚌盗椚剣ꣳⰖ
Shanghai Yanlord Real Estate PRC 57 57 57 Property development Co., Ltd. (b) ♳嵳➋䛎縨⚌〄㾝剣ꣳⰖ
Shanghai Yanlord Senlan Real Estate PRC 100 60 60 Property development Co., Ltd. (b) ♳嵳➋䛎啿Ⱎ縨⚌剣ꣳⰖ
Shanghai Yanlord Xing Tang Real Estate PRC 100 100 100 Property development Co., Ltd. (b) and management ♳嵳➋䛎Ⱓ縨⚌剣ꣳⰖ
Shanghai Yanlord Yangpu Property PRC 100 100 100 Property development Co., Ltd. (b) ♳嵳➋䛎勿嵙䨻㖑❡剣ꣳⰖ
— F-162 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
10. INVESTMENTS IN SUBSIDIARIES (Cont’d)
Country of incorporation Proportion of ownership Name of subsidiary (or residence) interest and voting power held Principal activities Dec 31, Dec 31, Jan 1, 2018 2017 2017 %%%
Held by Yanlord Land Pte. Ltd. and its subsidiaries (Cont’d)
Shanghai Zhongting Property PRC 100 100 100 Property development Development Co., Ltd. (b) ♳嵳⚥䏭䨻㖑❡䒓〄剣ꣳⰖ
Yanlord Equity Investment Management PRC 100 100 100 Investment management (Shanghai) Co., Ltd. (b) ➋䛎肅勉䫏餴盗椚 ♳嵳 剣ꣳⰖ
Yanlord Land Investment Management PRC 100 100 100 Management services (Shanghai) Co., Ltd. (b) 132 ➋䛎縨㖑䫏餴盗椚 ♳嵳 剣ꣳⰖ Yanlord Property Service Management PRC 100 100 100 Property and investment Yanlord (b) Land Group (China) Co., Ltd. management Limited ➋䛎暟⚌剪⸉盗椚 ⚥㕂 剣ꣳⰖ
Hainan Yanlord Beautycrown Cultural PRC 60 60 – Tourism investment and Tourism Development Co., Ltd. (b) asset management 嵳⽂➋䛎繠⚽⛓ⱟ俒⻊假康〄㾝 剣ꣳⰖ
Sanya Yanlord Real Estate Co., Ltd. (b) PRC 100 100 100 Property development ♲❇➋䛎縨⚌剣ꣳⰖ and management
Sanya Yanlord Travel Service Co., Ltd. (b) PRC 100 100 100 Tourism and travel ♲❇➋䛎假遤爢剣ꣳⰖ services
Suzhou Gusheng Fitness Services PRC 100 100 – Fitness services Co., Ltd. (b) 蔼䊜㔿渿⨴魧剪⸉剣ꣳⰖ
Suzhou Peninsula Yanlord Real Estate PRC 100 100 100 Property development Co., Ltd. (b) 蔼䊜僤䀙➋䛎縨⚌剣ꣳⰖ
Suzhou Renan Real Estate Co., Ltd. (4) (b) PRC 100 – – Property development 蔼䊜➋㸝縨⚌剣ꣳⰖ
Suzhou Rendao Enterprise PRC 100 – – Business consultancy Management Co., Ltd. (2) (b) 蔼䊜䋑➋䀙⟱⚌盗椚剣ꣳⰖ
Suzhou Renyuan Real Estate Co., Ltd. (b) PRC 100 100 100 Property development 蔼䊜➋鵴縨⚌剣ꣳⰖ
— F-163 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
10. INVESTMENTS IN SUBSIDIARIES (Cont’d)
Country of incorporation Proportion of ownership Name of subsidiary (or residence) interest and voting power held Principal activities Dec 31, Dec 31, Jan 1, 2018 2017 2017 %%%
Held by Yanlord Land Pte. Ltd. and its subsidiaries (Cont’d)
Suzhou Yinghan Property Development PRC 100 100 100 Property development Co., Ltd. (b) 蔼䊜뛒宪䨻㖑❡䒓〄剣ꣳⰖ
Suzhou Zhonghui Property PRC 100 100 100 Property development Development Co., Ltd. (b) 蔼䊜⚥鳋䨻㖑❡䒓〄剣ꣳⰖ
Yanlord Property Development PRC 100 100 100 Property development (Suzhou) Co., Ltd. (b) and management ➋䛎縨⚌ 蔼䊜 剣ꣳⰖ 133 Yanlord Property (Suzhou) Co., Ltd. (b) PRC 100 60 60 Property development Annual ➋䛎㖑❡ 蔼䊜 剣ꣳⰖ Report 2018 Tangshan Yanlord Property PRC 100 100 100 Property management Management Co., Ltd. (b) 㿋➋䛎暟⚌剪⸉剣ꣳⰖ
Tianjin Yanlord Beiyang Real Estate PRC 60 60 60 Property development Co., Ltd. (b) and management 㣔峸➋䛎⻌峕縨⚌剣ꣳⰖ
Tianjin Yanlord Fitness Services PRC 100 100 100 Leisure and fitness Co., Ltd. (b) 㣔峸➋䛎⨴魧剪⸉剣ꣳⰖ
Tianjin Yanlord Garden Co., Ltd. (5) (b) PRC 80 100 100 Landscaping and 㣔峸蒌㹃㔩卌剣ꣳⰖ gardening
Tianjin Yanlord Haihe Development PRC 80 80 80 Property development Co., Ltd. (b) 㣔峸➋䛎嵳屎䒓〄剣ꣳⰖ
Tianjin Yanlord Hehai Real Estate PRC – – 100 Property development Co., Ltd. (b) 㣔峸➋䛎ㄤ嵳縨⚌剣ꣳⰖ
Tianjin Yanlord Property Management PRC 100 100 100 Property management Co., Ltd. (b) 㣔峸➋䛎暟⚌剪⸉剣ꣳⰖ
— F-164 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
10. INVESTMENTS IN SUBSIDIARIES (Cont’d)
Country of incorporation Proportion of ownership Name of subsidiary (or residence) interest and voting power held Principal activities Dec 31, Dec 31, Jan 1, 2018 2017 2017 %%%
Held by Yanlord Land Pte. Ltd. and its subsidiaries (Cont’d)
Yanlord Development (Tianjin) PRC 100 100 100 Property development Co., Ltd. (b) ➋䛎〄㾝 㣔峸 剣ꣳⰖ
Wuhan Yanlord Zhuyeshan Real Estate PRC 55 1 – Property development Co., Ltd. (1) (b) 娀宪➋䛎畾〽㿋縨⚌剣ꣳⰖ
Yanlord Land (Wuhan) Co., Ltd. (2) (b) PRC 100 – – Property development ➋䛎縨㖑 娀宪 剣ꣳⰖ
134 Zhuhai Maokai Eco Hi-tech Co., Ltd. (1) (b) PRC 80 – – Landscaping and 棟嵳薲Ⳮ欰䙖猰䪮剣ꣳⰖ gardening Yanlord Land Group (b) Limited Zhuhai Renyuan Investment Co., Ltd. PRC 100 90 90 Management services 棟嵳➋鵴䫏餴剣ꣳⰖ and investment
Zhuhai Renyuan Land Co., Ltd. (b) PRC 100 100 100 Property development 棟嵳䋑➋鵴縨㖑剣ꣳⰖ
Zhuhai Renyuan Real Estate Co., Ltd. (2) (b) PRC 100 – – City redevelopment 棟嵳➋鵴縨⚌剣ꣳⰖ
Zhuhai Yanlord Commercial Operation PRC 90 90 90 Management services and Management Co., Ltd. (b) and investment 棟嵳➋䛎㉁⚌絑蠒盗椚剣ꣳⰖ
Zhuhai Yanlord Heyou Land Co., Ltd. (b) PRC 57 57 57 Property development 棟嵳➋䛎ㄤ歋縨㖑剣ꣳⰖ and management
Zhuhai Yanlord Heyuan Land Co., Ltd. (b) PRC 57 57 – Property development 棟嵳➋䛎ㄤ鵴縨㖑剣ꣳⰖ
Zhuhai Yanlord Industrial Ltd. (b) PRC 95 95 95 Property development 棟嵳➋䛎㹊⚌剣ꣳⰖ
Zhuhai Yanlord Property Management PRC 100 100 100 Property management Co., Ltd. (b) 棟嵳➋䛎暟⚌盗椚剣ꣳⰖ
— F-165 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
10. INVESTMENTS IN SUBSIDIARIES (Cont’d)
Country of incorporation Proportion of ownership Name of subsidiary (or residence) interest and voting power held Principal activities Dec 31, Dec 31, Jan 1, 2018 2017 2017 %%%
Held by Yanlord Land Pte. Ltd. and its subsidiaries (Cont’d)
Zhuhai Yanlord Real Estate PRC 90 90 90 Property development Development Co., Ltd. (b) 棟嵳➋䛎縨⚌〄㾝剣ꣳⰖ
Zhongshan Renyuan Investment PRC 100 100 100 Investment holding Co., Ltd. (b) ⚥㿋➋鵴䫏餴剣ꣳⰖ
Zhongshan Renyuan Real Estate PRC 100 100 100 Investment holding Co., Ltd. (b) ⚥㿋➋鵴縨⚌剣ꣳⰖ 135 (1) Acquired during 2018 (Note 33). Annual (2) Incorporated during 2018. Report 2018 (3) The proportion of ownership interest and voting power held by the Group is 50.2%. (4) Although the Group does not effectively own more than 50% of the equity shares of these entities, it has sufficiently dominant voting right and power to direct the relevant activities of these entities and therefore the Group has unilateral control over these entities and hence regards these entities as subsidiaries.
(5) Formerly known as Tianjin Yanlord Garden Co., Ltd. 㣔峸➋䛎㔩卌剣ꣳⰖ.
Notes on auditors (a) Audited by Deloitte & Touche LLP, Singapore. (b) Audited by Deloitte Touche Tohmatsu Certified Public Accountants LLP, Shanghai, PRC for consolidation purposes.
— F-166 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
10. INVESTMENTS IN SUBSIDIARIES (Cont’d)
The following schedule shows the effects of changes in the Group’s ownership interest in subsidiaries that did not result in change of control, on the equity attributable to owners of the parent:
GROUP 2018 2017 RMB’000 RMB’000
Amount paid on change of interest in subsidiaries 1,900,988 1,653,360 Non-controlling interests acquired (2,032,104) (123,312) Difference recognised in statutory and other reserve (131,116) 1,530,048
Details of non wholly-owned subsidiaries that have material non-controlling interests to the Group are disclosed below:
Place of Proportion of incorporation ownership interest (Loss) Profit and principal and voting rights held by attributable to Accumulated Name of subsidiary place of business non-controlling interests non-controlling interests non-controlling interests Dec 31, Dec 31, Jan 1, Dec 31, Dec 31, Jan 1, 2018 2017 2017 2018 2017 2018 2017 2017 136 % % % RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Nanjing Yanlord PRC – 40 40 (136) 372,732 – 1,274,872 902,140 Yanlord Real Estate Co., Ltd. Land Group Limited ⽂❩➋䛎縨⚌剣ꣳⰖ
Shanghai Renpin Property PRC 50 50 50 965,060 1,368,936 2,964,629 1,999,569 1,630,633 Development Co., Ltd. ♳嵳➋ㅷ䨻㖑❡䒓〄 剣ꣳⰖ
Shanghai Yanlord Hongqiao PRC 40 40 40 350,038 428,639 2,046,209 2,056,171 1,760,586 Property Co., Ltd. ♳嵳➋䛎赙咕䨻㖑❡ 剣ꣳⰖ
Individually immaterial subsidiaries with non-controlling interests 535,918 233,520 2,837,676 4,641,675 4,669,403 1,850,880 2,403,827 7,848,514 9,972,287 8,962,762
— F-167 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
10. INVESTMENTS IN SUBSIDIARIES (Cont’d)
Summarised financial information in respect of each of the Group’s subsidiaries that has material non-controlling interests is set out below. The summarised financial information below represents amounts before intragroup eliminations.
Nanjing Yanlord Real Shanghai Renpin Property Shanghai Yanlord Hongqiao Estate Co., Ltd. Development Co., Ltd. Property Co., Ltd. ⽂❩➋䛎縨⚌剣ꣳⰖ ♳嵳➋ㅷ䨻㖑❡䒓〄剣ꣳⰖ ♳嵳➋䛎赙咕䨻㖑❡剣ꣳⰖ December 31, December 31, January 1, December 31, December 31, January 1, December 31, December 31, January 1, 2018 2017 2017 2018 2017 2017 2018 2017 2017 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Non-current assets 1,557 2,713 3,901 88,463 336 16,336 45,658 57,033 43,326 Current assets 2,496,767 3,784,591 6,590,099 7,554,232 10,091,172 8,482,502 6,599,830 6,657,051 6,266,416 Current liabilities (1,137,444) (600,124) (4,338,650) (2,613,437) (6,992,370) (5,237,572) (1,529,965) (1,573,656) (1,908,276) Total equity 1,360,880 3,187,180 2,255,350 5,029,258 3,099,138 3,261,266 5,115,523 5,140,428 4,401,466
Equity attributable to: Owners of the Company 1,360,880 1,912,308 1,353,210 2,064,629 1,099,569 1,630,633 3,069,314 3,084,257 2,640,880 Non-controlling interests – 1,274,872 902,140 2,964,629 1,999,569 1,630,633 2,046,209 2,056,171 1,760,586
Nanjing Yanlord Real Shanghai Renpin Property Shanghai Yanlord Hongqiao Estate Co., Ltd. Development Co., Ltd. Property Co., Ltd. 137 ⽂❩➋䛎縨⚌剣ꣳⰖ ♳嵳➋ㅷ䨻㖑❡䒓〄剣ꣳⰖ ♳嵳➋䛎赙咕䨻㖑❡剣ꣳⰖ Annual 2018 2017 2018 2017 2018 2017 Report RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 2018
Revenue 8,673 2,908,342 5,953,875 5,911,715 2,816,609 3,907,680 (Loss) Profit for the year, representing total comprehensive (expense) income for the year (41,978) 931,829 1,930,120 1,837,872 875,095 1,071,598
Total comprehensive (expense) income attributable to: Owners of the Company (41,842) 559,097 965,060 468,936 525,057 642,959 Non-controlling interests (136) 372,732 965,060 1,368,936 350,038 428,639
Net cash (outflow) inflow from: – Operating activities 866,169 (2,079,846) (67,235) 5,265,051 1,557,930 2,394,840 – Investing activities 702,785 1,738,164 226,247 (2,495,181) (2,124,346) (1,530,455) – Financing activities (1) (1,784,321) – 199,998 (2,032,215) (360,000) (426,352) Net cash (outflow) inflow (215,367) (341,682) 359,010 737,655 (926,416) 438,033
(1) Including dividend paid to non-controlling interests – – – – (342,000) (163,888)
— F-168 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
11. INVESTMENTS IN ASSOCIATES / NON-TRADE AMOUNTS DUE FROM / TO ASSOCIATES
GROUP December 31, December 31, January 1, 2018 2017 2017 RMB’000 RMB’000 RMB’000
Cost of investments in associates 1,430,816 630,076 630,076 Share of post-acquisition profit (loss), net of dividend received 21,779 (22,345) (14,231) Group’s share of unrealised income from associates (34,002) (22,850) (5,482) 1,418,593 584,881 610,363
Non-trade amounts due from associates (Current assets) (Note 6) 1,201,290 1,283,682 1,176,327 Non-trade amounts due to associates (Current liabilities) (Note 6) 257,596 ––
Amounts due from associates are interest-free, unsecured and repayable on demand except for the following:
(a) As at December 31, 2018, amount of RMB188 million (December 31, 2017 : RMB1.199 billion, January 1, 138 2017 : RMB1.145 billion) which bears interest at 4.35% (December 31, 2017 : 4.35%, January 1, 2017 : 4.35%) per annum, is unsecured and repayable within 1 year from the end of the reporting period. Yanlord Land Group Limited (b) As at December 31, 2018, amount of RMB5 million which bears interest at 12.0% per annum, is unsecured and repayable within 1 year from the end of the reporting period.
(c) As at December 31, 2018, amount of RMB884 million which bears interest at 9.0% per annum, is unsecured and repayable within 1 year from the end of reporting period.
Amounts due to associates are interest-free, unsecured and repayable on demand except for the following:
(d) As at December 31, 2018, amount of RMB30 million which bears interests at 8.0% per annum, is unsecured and repayable within 1 year from the end of the reporting period.
Aggregate information of the Group’s associates that are not individually material
GROUP 2018 2017 RMB’000 RMB’000
Group’s share of loss from continuing operations, representing its share of total comprehensive expenses for the year 12,689 8,114 Group’s share of unrecognised loss of an associate for the year – 179
GROUP December 31, December 31, January 1, 2018 2017 2017 RMB’000 RMB’000 RMB’000
Cumulative unrecognised share of loss of an associate – 582 403 Aggregate carrying amount of the Group’s interests in associates 1,418,593 584,881 610,363
— F-169 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
12. INVESTMENTS IN JOINT VENTURES / NON-TRADE AMOUNTS DUE FROM / TO JOINT VENTURES
GROUP December 31, December 31, January 1, 2018 2017 2017 RMB’000 RMB’000 RMB’000
Cost of investments in joint ventures 5,387,165 4,111,290 1,119,836 Share of post-acquisition profit and other comprehensive income 509,997 430,743 80,363 5,897,162 4,542,033 1,200,199
Non-trade amounts due from joint ventures – Non-current assets (Note 6) 5,914,815 2,696,774 1,202,561 – Current assets (Note 6) 9,833,539 2,849,514 207,750
Non-trade amounts due to joint ventures (Note 6) – Non-current liabilities (Note 6) 805,377 –– – Current liabilities (Note 6) 674,391 – 365
Amounts due from joint ventures are interest-free, unsecured and repayable on demand except for the following:
(a) As at December 31, 2018, amount of RMB217 million (December 31, 2017 : RMB217 million, January 1, 139
2017 : RMB217 million) which bears interest at 6.25% (December 31, 2017 : 6.25%, January 1, 2017 : Annual 6.25%) per annum, is unsecured and repayable within 3 years (December 31, 2017 : 4 years, January 1, 2017 Report : 5 years) from the end of the reporting period. 2018
(b) As at January 1, 2017, amount of RMB197 million which bore interest at 9.0% per annum, was unsecured and repayable within 1 year from the end of the reporting period. The amount had been fully collected in 2017.
(c) As at December 31, 2018, amount of RMB736 million (December 31, 2017 : RMB736 million, January 1, 2017 : RMB736 million) which bears interest at 9.0% (December 31, 2017 : 9.0%, January 1, 2017 : 9.0%) per annum, is unsecured and repayable within 1 year (December 31, 2017 : 2 years, January 1, 2017 : 3 years) from the end of the reporting period.
(d) As at December 31, 2018, amount of RMB350 million (December 31, 2017 : RMB350 million, January 1, 2017 : RMB200 million) which bears interest at 9.0% (December 31, 2017 : 9.0%, January 1, 2017 : 9.0%) per annum, is unsecured and repayable within 1 year (December 31, 2017 : 1 year, January 1, 2017 : 2 years) from the end of the reporting period.
(e) As at December 31, 2018, amount of RMB664 million (December 31, 2017 : RMB1.038 billion) which bears interest at 8.0% (December 31, 2017 : 8.0%) per annum, is unsecured and repayable within 2 years (December 31, 2017 : 3 years) from the end of the reporting period.
(f) As at December 31, 2018, amount of RMB664 million (December 31, 2017 : RMB486 million) which bears interest at 8.0% (December 31, 2017 : 8.0%) per annum, is unsecured and repayable within 1 year (December 31, 2017 : 2 years) from the end of the reporting period.
(g) As at December 31, 2018, amount of RMB486 million which bears interest at 8.0% per annum, is unsecured and repayable within 2 years from the end of the reporting period.
(h) As at December 31, 2018, amount of RMB3.761 billion (December 31, 2017 : RMB1.017 billion) which bears interest at 4.35% (December 31, 2017 : 4.35%) per annum, is unsecured and repayable within 1 year (December 31, 2017 : 1 year) from the end of the reporting period.
— F-170 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
12. INVESTMENTS IN JOINT VENTURES / NON-TRADE AMOUNTS DUE FROM / TO JOINT VENTURES (Cont’d)
(i) As at December 31, 2017, amount of RMB20 million which bore interest at 8.0% per annum, is unsecured and repayable within 1 year from the end of the reporting period. The amount had been fully collected in 2018.
(j) As at December 31, 2018, amount of RMB557 million (December 31, 2017 : RMB554 million) which bears interest at 4.35% (December 31, 2017 : 4.35%) per annum, is unsecured and repayable within 1 year (December 31, 2017 : 1 year) from the end of the reporting period.
(k) As at December 31, 2018, amount of RMB327 million (December 31, 2017 : RMB313 million) which bears interest at 4.35% (December 31, 2017 : 4.35%) per annum, is unsecured and repayable within 1 year (December 31, 2017 : 1 year) from the end of the reporting period.
(l) As at December 31, 2017, amount of RMB150 million which bore interest at 9.0% per annum, was unsecured and repayable within 1 year from the end of the reporting period. The amount had been fully collected in 2018.
(m) As at December 31, 2018, amount of RMB34 million (December 31, 2017 : RMB18 million) which bears interest at 4.35% (December 31, 2017 : 4.35%) per annum, is unsecured and repayable within 1 year (December 31, 2017 : 1 year) from the end of the reporting period. 140 (n) As at December 31, 2018, amount of RMB380 million which bears interest at 7.0% per annum, is unsecured and repayable within 1 year from the end of the reporting period. Yanlord Land Group (o) As at December 31, 2018, amount of RMB1.522 billion which bears interest at 8.0% per annum, is unsecured Limited and repayable within 2 years from the end of the reporting period.
(p) As at December 31, 2018, amount of RMB1.435 billion which bears interest at 6.0% per annum, is unsecured and repayable within 3 years from the end of reporting period.
(q) As at December 31, 2018, amount of RMB380 million which bears interest at 9.0% per annum, is unsecured and repayable within 1 year from the end of the reporting period.
(r) As at December 31, 2018, amount of RMB765 million which bears interest at 7.0% per annum, is unsecured and repayable within 1 year from the end of the reporting period.
(s) As at December 31, 2018, amount of RMB4 million which bears interest at 4.75% per annum, is unsecured and repayable within 1 year from the end of the reporting period.
(t) As at December 31, 2018, amount of RMB550 million which bears interest at 9.0% per annum, is unsecured and repayable within 3 years from the end of the reporting period.
(u) As at December 31, 2018, amount of RMB310 million which bears interest at 8.0% per annum, is unsecured and repayable within 1 year from the end of the reporting period.
(v) As at December 31, 2018, amount of RMB464 million which bears interest at 8.0% per annum, is unsecured and repayable within 1 year from the end of the reporting period.
(w) As at December 31, 2018, amount of RMB750 million which bears interest at 8.0% per annum, is unsecured and repayable within 1 year from the end of the reporting period.
— F-171 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
12. INVESTMENTS IN JOINT VENTURES / NON-TRADE AMOUNTS DUE FROM / TO JOINT VENTURES (Cont’d)
Amounts due to joint ventures are interest-free, unsecured and repayable on demand except for the following:
(x) As at December 31, 2018, amount of RMB400 million which bears interest at 5.7% per annum, is unsecured and repayable within 2 years from the end of the reporting period.
(y) As at December 31, 2018, amount of RMB200 million which bears interest at 3.42% per annum, is unsecured and repayable within 2 years from the end of the reporting period.
Aggregate information of the Group’s joint ventures that are not individually material
GROUP 2018 2017 RMB’000 RMB’000
Group’s share of profit from continuing operations 74,123 346,008 Group’s share of other comprehensive income 5,131 4,372 Group’s share of total comprehensive income 79,254 350,380 141
GROUP Annual December 31, December 31, January 1, Report 2018 2018 2017 2017 RMB’000 RMB’000 RMB’000
Aggregate carrying amount of the Group’s interests in these joint ventures 5,897,162 4,542,033 1,200,199
13. NON-TRADE AMOUNTS DUE FROM / TO NON-CONTROLLING SHAREHOLDERS OF SUBSIDIARIES
Amounts due from non-controlling shareholders of subsidiaries are interest-free, unsecured and repayable on demand except for the following:
(a) As at December 31, 2018, amount of RMB34 million (December 31, 2017 : RMB17 million and RMB34 million, January 1, 2017 : RMB60 million and RMB33 million) which bears interest at 4.35% (December 31, 2017 : 5.0% and 4.35%, January 1, 2017 : 5.0% and 4.35%) per annum respectively and are secured by the non-controlling shareholder’s shares in a subsidiary and undistributed retained earnings of a subsidiary yet to be distributed as dividends to the non-controlling shareholder of that subsidiary. The amount is repayable on demand in 2018 and 2017.
(b) As at January 1, 2017, amount of RMB253 million which bore interest at 10.625% per annum was secured by expected future earnings that would be distributed by a subsidiary to the non-controlling shareholders of that subsidiary and repayable on demand. The amount had been fully waived during 2017 in exchange for partial settlement of consideration in respect of acquisition of additional equity interests in the subsidiary.
— F-172 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
13. NON-TRADE AMOUNTS DUE FROM / TO NON-CONTROLLING SHAREHOLDERS OF SUBSIDIARIES (Cont’d)
(c) As at December 31, 2018, amount of RMB200 million (December 31, 2017 : RMB200 million, January 1, 2017 : RMB200 million) which bears interest at the People’s Bank of China’s benchmark rate is unsecured and repayable within 2 years (December 31, 2017 : 3 years, January 1, 2017 : 4 years) from the end of the reporting period.
(d) As at January 1, 2017, amount of RMB150 million which bore interest at 7.0% per annum, was unsecured and repayable within 1 year from the end of the reporting period. The amount had been fully collected during 2017.
(e) As at December 31, 2018, amount of RMB250 million (December 31, 2017 : RMB250 million) which bears interest at 1.5% (December 31, 2017 : 1.5%) per annum, is unsecured and repayable within 1 year (December 31, 2017 : 1 year) from the end of the reporting period.
(f) As at December 31, 2018, amount of RMB803 million (December 31, 2017 : RMB803 million, January 1, 2017 : RMB803 million) which bears interest at the People’s Bank of China’s benchmark rate, is secured by the non-controlling shareholder’s share in a subsidiary, guarantee provided by a related party of the non-controlling shareholder of that subsidiary and the land use right owned by the related party of the 142 non-controlling shareholder of that subsidiary and repayable within 1 year (December 31, 2017 : 1 year, January 1, 2017 : 1 year) from the end of the reporting period. Yanlord Land Group Limited (g) As at December 31, 2018, amount of RMB20 million which bears interest at 4.35% per annum, is unsecured and repayable within 1 year from the end of the reporting period.
(h) As at December 31, 2018, amount of RMB300 million which bears interest at 8.0% per annum, is unsecured and repayable within 1 year from the end of the reporting period.
Amounts due to non-controlling shareholders of subsidiaries are interest-free, unsecured and repayable on demand except for the following:
(i) As at December 31, 2017, amounts of RMB693 million and RMB519 million (January 1, 2017 : RMB337 million and RMB Nil) which bore interest at 7.0% and 7.0% (January 1, 2017 : 10% and Nil%) per annum, were unsecured and repayable within 2 years (January 1, 2017 : 3 years) from the end of the reporting period respectively. The amounts have been repaid during 2018.
(j) As at December 31, 2018, amounts of RMB32 million and RMB21 million (December 31, 2017 : RMB32 million and RMB21 million) which bear interest at 9.5% (December 31, 2017 : Nil%) per annum, are unsecured and repayable within 1 year (December 31, 2017 : 4 years) from the end of the reporting period.
(k) As at December 31, 2018, amount of RMB320 million which bears interest at 6.0% per annum, is unsecured and repayable within 1 year from the end of the reporting period.
(l) As at December 31, 2018, amount of RMB30 million which bears interest at 8.0% per annum, is unsecured and repayable within 1 year from the end of the reporting period.
— F-173 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
14. OTHER RECEIVABLES AND DEPOSITS
GROUP COMPANY December 31, December 31, January 1, December 31, December 31, January 1, 2018 2017 2017 2018 2017 2017 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Advances to suppliers 70,411 37,373 86,901 – –– Deposits for projects 1,643,786 3,353,260 3,871,844 – –– Staff loans 10,855 12,850 11,708 – –– Prepayments 16,746 6,991 5,998 1 34 Value added tax (“VAT”) prepayment 500,515 403,098 246,183 – –– Sales-related tax prepayment 42,703 95,042 559,444 – –– Interest receivables 62,714 30,526 6,466 – –– Payments for resettlement (1) 600,319 600,319 600,319 – –– Loan receivables 1,768,805 1,540,441 200,001 – –– Other receivables 250,622 245,924 188,224 – 1– 4,967,476 6,325,824 5,777,088 1 44
Analysed as: 143 Current 1,853,358 3,923,692 4,903,935 1 44 Non-current 3,114,118 2,402,132 873,153 – –– Annual Report 4,967,476 6,325,824 5,777,088 1 44 2018
(1) This relates to payments for resettlement of land parcel in Chengdu.
The management considers the credit risk on other receivables and deposits to be limited because the counterparties are government agents or third parties with long business relationships with the Group.
15. INTANGIBLE ASSETS
GROUP December 31, December 31, January 1, 2018 2017 2017 RMB’000 RMB’000 RMB’000
Club memberships 2,092 812 613
At December 31, 2018 and 2017 and January 1, 2017, the management assessed the marketable value of the club membership and determined that it was in excess of its carrying amount.
— F-174 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
16. DEFERRED TAXATION
GROUP December 31, December 31, January 1, 2018 2017 2017 RMB’000 RMB’000 RMB’000
Deferred tax assets 472,281 445,184 444,061 Deferred tax liabilities (2,831,594) (2,607,761) (2,243,610) (2,359,313) (2,162,577) (1,799,549)
The following are the deferred tax assets and liabilities recognised by the Group and movements thereon during the current and prior reporting year.
Accelerated tax depreciation Unpaid Revaluation and excess of development of investment tax deductible Withholding costs and properties expenses tax Tax losses others Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
144 GROUP
Yanlord Land Group At January 1, 2017 (1,925,649) 93,213 (317,961) 249,451 101,397 (1,799,549) Limited (Charge) Credit to profit or loss for the year (Note 28) (85,189) (10,745) (320,691) (81,577) 31,168 (467,034) Transfer to (from) income tax payable – 71,905 41,729 – (8,215) 105,419 Exchange difference – – – (1,413) – (1,413) At December 31, 2017 (2,010,838) 154,373 (596,923) 166,461 124,350 (2,162,577) (Charge) Credit to profit or loss for the year (Note 28) (151,689) (40,943) (222,862) 2,633 153,563 (259,298) Transfer (from) to income tax payable – (89,384) 150,718 – – 61,334 Exchange difference –– – 1,228 – 1,228 At December 31, 2018 (2,162,527) 24,046 (669,067) 170,322 277,913 (2,359,313)
Pursuant to PRC and Hong Kong tax regulations, at the end of the reporting period, the Group has unutilised tax losses of RMB1.240 billion (December 31, 2017 : RMB1.072 billion, January 1, 2017 : RMB1.249 million) available for offset against future profits. A deferred tax asset of RMB170 million (2017 : RMB166 million) has been recognised in respect of RMB682 million (2017 : RMB707 million) of such losses at the tax rates range from 10% to 25%. No deferred tax asset has been recognised in respect of the remaining tax losses of RMB558 million (2017 : RMB365 million) due to the unpredictability of future profit streams. Tax losses may be carried forward for 5 years from the year after the losses are incurred, subject to the conditions imposed by law including the retention of majority shareholders as defined.
— F-175 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
17. PLEDGED BANK DEPOSITS AND CASH AND CASH EQUIVALENTS
GROUP COMPANY December 31, December 31, January 1, December 31, December 31, January 1, 2018 2017 2017 2018 2017 2017 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Pledged bank deposits 331,048 40,029 520,680 – ––
Cash on hand 1,564 1,461 2,030 7 717 Cash at bank 9,651,123 16,695,749 17,002,320 9,397 2,643 21,885 Fixed deposits 664,687 1,101,103 579,033 – –– Cash and cash equivalents 10,317,374 17,798,313 17,583,383 9,404 2,650 21,902
Pledged bank deposits represent deposits pledged to banks to secure the bank and other borrowings, trade payables, certain mortgage loans provided by banks to customers for the purchase of the Group’s development properties and as security for construction contracts required by the PRC local authority.
18. PUT LIABILITY TO ACQUIRE NON-CONTROLLING INTERESTS 145
This represents the fair value of the put liability to acquire non-controlling interests as part of the share purchase Annual agreement of a subsidiary. The obligation amount of RMB Nil (December 31, 2017 : RMB1.334 billion, January Report 2018 1, 2017 : RMB1.422 billion) is recorded herewith as “non-current liabilities” as at December 31, 2018, as the earliest dates for the non-controlling shareholders to exercise the non-cancellable rights to put back their shares to the Group are expected be more than one year, while the obligation amount of RMB1.321 billion (December 31, 2017 : RMB Nil, January 1, 2017 : RMB Nil) is recorded herewith as “current liabilities” as the earliest dates for the non-controlling shareholders to exercise the non-cancellable rights to put back their shares to the Group are expected within one year.
— F-176 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
19. SHARE CAPITAL
GROUP AND COMPANY 2018 2017 2018 2017 ’000 ’000 RMB’000 RMB’000 Number of ordinary shares
Issued and paid up: At beginning and end of year 1,948,736 1,948,736 7,261,726 7,261,726
Fully paid up ordinary shares, which have no par value, carry one vote per share and a right to dividends as and when declared by the Company.
20. TREASURY SHARES
GROUP AND COMPANY 2018 2017 2018 2017 ’000 ’000 RMB’000 RMB’000 Number of ordinary shares 146 At January 1 17,201 7,151 132,309 47,006 Yanlord Repurchased during the year – 10,050 – 85,303 Land Group At December 31 17,201 17,201 132,309 132,309 Limited In 2017, the Company acquired 10,050,500 of its own shares through purchases on the Singapore Exchange and the total amount paid to acquire the shares was RMB85 million, which had been deducted from shareholders’ equity. The shares are held as “treasury shares”.
— F-177 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
21. BANK AND OTHER BORROWINGS
GROUP COMPANY December 31, December 31, January 1, December 31, December 31, January 1, 2018 2017 2017 2018 2017 2017 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
The bank and other borrowings are repayable as follows:
On demand or within one year 8,293,294 2,557,063 8,311,176 639,509 79,201 495,221 More than one year but not exceeding two years 14,610,239 6,525,841 3,252,987 – 639,509 282,545 More than two years but not exceeding five years 5,514,504 14,082,514 7,871,992 – – 639,709 More than five years 7,873,435 7,056,000 1,313,500 – –– 36,291,472 30,221,418 20,749,655 639,509 718,710 1,417,475
Less: Amount due for settlement 147 within 12 Annual months (shown Report under current 2018 liabilities) (8,293,294) (2,557,063) (8,311,176) (639,509) (79,201) (495,221) Amount due for settlement after 12 months 27,998,178 27,664,355 12,438,479 – 639,509 922,254
Secured: – Current 4,144,658 1,958,600 3,612,220 – – 416,220 – Non-current 12,148,502 11,746,336 7,466,436 – –– 16,293,160 13,704,936 11,078,656 – – 416,220
Unsecured: – Current 4,148,636 598,463 4,698,956 639,509 79,201 79,001 – Non-current 15,849,676 15,918,019 4,972,043 – 639,509 922,254 19,998,312 16,516,482 9,670,999 639,509 718,710 1,001,255
36,291,472 30,221,418 20,749,655 639,509 718,710 1,417,475
— F-178 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
21. BANK AND OTHER BORROWINGS (Cont’d)
The following assets are pledged for the above secured bank and other borrowings and undrawn loan facilities:
GROUP December 31, December 31, January 1, 2018 2017 2017 RMB’000 RMB’000 RMB’000
Properties for development 14,491,578 11,795,630 1,211,774 Completed properties for sale 259,371 –– Properties under development for sale 10,258,694 7,087,353 16,163,346 Investment properties 8,160,500 7,250,000 7,398,000 Leasehold land and buildings 1,009,209 –– Construction-in-progress 20,000 2,225,105 1,505,654 Bank deposits – – 482,000
Reconciliation of liabilities arising from financing activities 148 The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows Yanlord will be, classified in the Group’s consolidated statement of cash flows as cash flows from financing activities. Land Group Limited Non-cash changes Change of control from Deferred Foreign January 1, Financing Acquisition of subsidiaries to finance exchange Dividend Other December 31, 2017 cash flow a subsidiary joint ventures charge movement declared changes 2017 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Bank and other borrowings 20,749,655 16,183,949 (1) – (6,568,300) 68,033 (211,919) – – 30,221,418 Senior notes 1,916,309 1,110,426 (2) – – – (164,512) – 49,381 2,911,604 Non-trade amount due to a joint venture 365 (365) (7) ––––––– Non-trade amount due to ultimate holding company 672,486 (672,418) (8) – – – 488 – (556) – Non-trade amounts due to directors 42,418 6,056 (3) – – – 1,402 – (213) 49,663 Non-trade amounts due to non- controlling shareholders of subsidiaries 634,474 863,091 (5) 78,400 249,000 – – 177,870 (48,637) 1,954,198 Non-trade amounts due to other related parties 47,630 8,046 (4) – – –– – – 55,676 Dividend payable – (415,855) (6) – – – – 415,855 – – Total 24,063,337 17,082,930 78,400 (6,319,300) 68,033 (374,541) 593,725 (25) 35,192,559
— F-179 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
21. BANK AND OTHER BORROWINGS (Cont’d)
Non-cash changes Deferred Foreign January 1, Financing finance exchange Dividend Other December 31, 2018 cash flow charge movement declared changes 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Bank and other borrowings 30,221,418 5,731,792 (1) 62,516 275,746 – – 36,291,472 Senior notes 2,911,604 2,178,613 (2) – 299,315 – 50,696 5,440,228 Non-trade amounts due to associates – 30,343 (9) – – – 227,253 257,596 Non-trade amounts due to joint ventures – 1,174,391 (7) – – – 305,377 1,479,768 Non–trade amounts due to directors 49,663 5,590 (3) – 1,062 – – 56,315 Non-trade amounts due to non-controlling shareholders of subsidiaries 1,954,198 (2,311,086) (5) – – 1,496,287 (434,260) 705,139 Non-trade amounts due to other related parties 55,676 (10,868) (4) – – – – 44,808 Dividend payable – (630,453) (6) – – 630,453 – – Total 35,192,559 6,168,322 62,516 576,123 2,126,740 149,066 44,275,326
(1) The cash flows make up the net amount of proceeds from bank and other borrowings and repayment of bank and other borrowings in the consolidated statement of cash flows. (2) The cash flows make up the net amount of net proceeds on issue of senior notes and redemption of senior notes in the consolidated statement of cash flows. (3) The cash flows represent advance from directors in the consolidated statement of cash flows. (4) The cash flows make up the net amount of advance from other related parties and repayment to other related parties in the consolidated 149 statements of cash flows. Annual (5) The cash flows make up the net amount of dividends paid to non-controlling shareholders of subsidiaries, advance from non-controlling Report shareholders of subsidiaries and repayment to non-controlling shareholders of subsidiaries in the consolidated statements of cash flows. 2018 (6) The cash flows represent dividends paid in the consolidated statements of cash flows. (7) The cash flows make up the net amount of advance from joint ventures and repayment to joint ventures in the consolidated statements of cash flows. (8) The cash flows make up the net amount of advance from ultimate holding company and repayment to ultimate holding company in the consolidated statements of cash flows. (9) The cash flows represent advance from associates in the consolidated statement of cash flows.
— F-180 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
22. SENIOR NOTES
The senior notes comprise notes issued in 2014, 2017 and 2018.
Notes 2017
The senior notes amounting to S$400 million (equivalent to RMB1.856 billion) were issued by the Company on May 8, 2014 (“Notes 2017”) for a term of three years with maturity date on May 8, 2017, bore interest at 6.2% per annum with interest payable on May 8 and November 8 of each year, commencing on November 8, 2014. The senior notes were denominated in SG dollars. During the year ended December 31, 2017, the cumulative interests accrued on Notes 2017 were calculated by applying effective interest rates of 6.8% per annum. In 2017, the Company fully redeemed the Notes 2017 in accordance with the terms. Six of its subsidiaries had provided a joint guarantee in respect of Notes 2017.
Notes 2022
The senior notes amounting to US$450 million (equivalent to RMB2.940 billion) were issued by a wholly-owned subsidiary of the Company on January 23, 2017 (“Notes 2022”) for a term of five years with maturity date on January 23, 2022, bears interest at 5.875% per annum with interest payable on January 23 and July 23 of each year, commencing on July 23, 2017. The senior notes are denominated in US dollars. During the year ended 150 December 31, 2018, the cumulative interests accrued on Notes 2022 were calculated by applying effective interest rates of 6.2% (December 31, 2017 : 6.2%) per annum. The Company and five of its subsidiaries have provided a Yanlord joint guarantee in respect of Notes 2022. The joint guarantee approximates RMB3.088 billion as at December 31, Land Group Limited 2018. Additionally, shares in five of its subsidiaries are charged in favour of the global security agent and trustee of Notes 2022.
Notes 2023
The senior notes amounting to US$350 million (equivalent to RMB2.402 billion) were issued by a wholly-owned subsidiary of the Company on April 23, 2018 (“Notes 2023”) for a term of five years with maturity date on April 23, 2023, bears interest at 6.75% per annum with interest payable on April 23 and October 23 of each year, commencing on October 23, 2018. The senior notes are denominated in US dollars. During the year ended December 31, 2018, the cumulative interests accrued on Notes 2023 were calculated by applying effective interest rates of 7.2% per annum. The Company and five of its subsidiaries have provided a joint guarantee in respect of Notes 2023. The joint guarantee approximates RMB2.402 billion as at December 31, 2018. Additionally, shares in five of its subsidiaries are charged in favour of the global security agent and trustee of Notes 2023.
— F-181 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
22. SENIOR NOTES (Cont’d)
GROUP COMPANY December 31, December 31, January 1, December 31, December 31, January 1, 2018 2017 2017 2018 2017 2017 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Nominal value of senior notes issued 5,490,560 4,893,630 6,387,511 – 1,953,240 4,387,511 Transaction costs (1) (66,713) (59,517) (101,169) – (25,016) (71,033) At date of issue (2) 5,423,847 4,834,113 6,286,342 – 1,928,224 4,316,478 Cumulative interest accrued 479,882 556,554 2,184,536 – 388,651 1,832,223 Cumulative interest paid (353,239) (450,006) (2,001,064) – (363,635) (1,678,270) Repurchase and redemption – (1,953,240) (4,660,221) – (1,953,240) (2,660,838) Exchange difference – – 124,326 – – 124,326 Total 5,550,490 2,987,421 1,933,919 – – 1,933,919 Interest payable within one year included in other payables 151 (Note 24) (110,262) (75,817) (17,610) – – (17,610) Liability at end of year 5,440,228 2,911,604 1,916,309 – – 1,916,309 Annual Report 2018 Analysed as : Current – – 1,916,309 – – 1,916,309 Non–current 5,440,228 2,911,604 – – –– 5,440,228 2,911,604 1,916,309 – – 1,916,309
(1) Transaction costs included non-audit fees of RMB2 million (December 31, 2017 : RMB3 million, January 1, 2017 : RMB5 million) paid to the auditors of the Company in connection with the issuance of senior notes by the Group (Note 29). (2) Changes in amount at date of issue relative to the preceding year’s amount include the effect of translation to the presentation currency and have been included in the currency translation reserve.
The management estimates the fair values of senior notes as at December 31, 2018 to be approximately RMB5.413 billion (December 31, 2017 : RMB3.027 billion, January 1, 2017 : RMB1.941 billion). These fair values are based on the prices obtained from banks’ publications.
23. TRADE PAYABLES
GROUP December 31, December 31, January 1, 2018 2017 2017 RMB’000 RMB’000 RMB’000
Non-controlling shareholder of a subsidiary 1,202,086 182,857 909,328 Outside parties 7,044,895 7,124,387 7,017,666 8,246,981 7,307,244 7,926,994
The average credit period for trade payables is 163 days (2017 : 159 days).
— F-182 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
24. OTHER PAYABLES
GROUP COMPANY December 31, December 31, January 1, December 31, December 31, January 1, 2018 2017 2017 2018 2017 2017 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Advances received from customers 511,170 401,787 655,389 – –– Accrued expenses 91,827 65,014 64,256 3,837 3,457 3,380 VAT payable 69,668 102,521 54,587 – –– Sales-related tax payable 21,161 23,559 15,812 – –– Interest payable on senior notes 110,262 75,817 17,610 – – 17,610 Other interest payable 47,879 30,569 28,407 – – 747 Other payables 601,386 663,100 458,579 – 210 – 1,453,353 1,362,367 1,294,640 3,837 3,667 21,737
25. REVENUE AND CONTRACT LIABILITIES 152 GROUP Yanlord 2018 2017 Land Group RMB’000 RMB’000 Limited Types of goods or services Income from property development – sales of properties 23,678,500 24,759,095 Income from hotel operations 137,744 – Income from others 660,329 520,888 24,476,573 25,279,983
Income from property investment – lease of properties 411,468 358,424 Total 24,888,041 25,638,407
Timing of revenue recognition A point in time 23,678,500 24,759,095 Over time 798,073 520,888 Total 24,476,573 25,279,983
The transaction price allocated to the remaining performance obligations (unsatisfied or partially unsatisfied) related to sales of properties as at the end of the reporting period and the expected timing of recognising revenue are as follows:
GROUP December 31, December 31, January 1, 2018 2017 2017 RMB’000 RMB’000 RMB’000
Revenue expected to be recognised within one year 12,881,736 19,196,860 20,300,465 Revenue expected to be recognised after one year – 4,065,433 6,187,640 12,881,736 23,262,293 26,488,105
— F-183 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
25. REVENUE AND CONTRACT LIABILITIES (Cont’d)
For contracts other than sales of properties, the Group elected to apply the practical expedient by recognising revenue in the amount to which the Group has right to invoice. As permitted under SFRS(I) 15, the transaction price allocated to these unsatisfied contracts is not disclosed.
GROUP December 31, December 31, January 1, 2018 2017 2017 RMB’000 RMB’000 RMB’000
Contract liabilities 9,857,831 20,689,297 22,794,308
The Group receives payments from customers based on billing schedule as established in contracts. Payments are usually received in advance of the performance under the contracts which are mainly from sales of properties.
There were no significant changes in the contract liability balances in 2017. The significant change in 2018 was mainly due to decrease in cash received net of the amounts recognised as revenue during the year.
The amount of revenue recognised that was included in the contract liabilities at the beginning of the year is as follows: 153 GROUP 2018 2017 Annual RMB’000 RMB’000 Report 2018
Revenue recognised from sales of properties 16,787,962 17,643,766
26. OTHER OPERATING INCOME AND OTHER GAINS
GROUP 2018 2017 RMB’000 RMB’000
Dividend income from other financial asset 347 – Fair value gain on financial asset at FVTPL 142 – Fair value gain from put liability to acquire non-controlling interests 13,411 87,554 Interest income 551,080 359,168 Net gain on disposal of property, plant and equipment 447 192 Net gain on disposal of investment properties 1,009 5,002 Net foreign exchange gain 102,119 – Government subsidies 7,789 10,216 Others 38,243 10,147 Total 714,587 472,279
— F-184 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
27. FINANCE COST
GROUP 2018 2017 RMB’000 RMB’000
Interest on bank and other borrowings 1,920,519 1,436,609 Interest on senior notes 306,104 218,735 Interest to ultimate holding company (Note 5) – 1,025 Interest to an associate 342 – Interest to a joint venture 5,446 – Interest to non-controlling shareholders of subsidiaries 40,414 93,903 Total borrowing costs 2,272,825 1,750,272 Less: Interest capitalised in – investment properties (16,312) – – properties for development (807,772) (401,239) – properties under development for sale (754,747) (864,343) Net 693,994 484,690
154 28. INCOME TAX
Yanlord GROUP Land Group Limited 2018 2017 RMB’000 RMB’000
Current 2,086,768 2,268,228 Deferred income tax (Note 16) 36,436 146,343 Deferred withholding tax (Note 16) 222,862 320,691 Land appreciation tax (“LAT”) 2,840,119 2,987,630 (Over) Under provision in prior years (39,978) 19,065 Total 5,146,207 5,741,957
No provision for Singapore taxation has been made as the majority of the Group’s income neither arises in, nor is derived from Singapore.
In 2018 and 2017, most of the taxation arising in the PRC is calculated at the prevailing rate of 25%.
— F-185 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
28. INCOME TAX (Cont’d)
The income tax expense varied from the amount of income tax expense determined by applying the above income tax rate to profit before income tax as a result of the following differences:
GROUP 2018 2017 RMB’000 RMB’000
Profit before income tax 10,541,657 11,362,224
Income tax expense at PRC applicable tax rate of 25% * 2,635,414 2,840,556 Non-deductible items 94,776 307,746 Non-taxable items (17,763) (79,416) Effect of unutilised tax losses not recognised as deferred tax assets 70,147 67,877 Effect of different tax rates for certain subsidiaries 6,300 4,649 LAT 2,840,119 2,987,630 Effect of tax deduction on LAT (710,030) (746,907) Withholding tax incurred 222,862 320,691 (Over) Under provision in prior years (39,978) 19,065 Others 44,360 20,066 155 Total income tax expense 5,146,207 5,741,957 Annual * These are the applicable tax rates for most of the Group’s taxable profits. Report 2018 Income tax for overseas subsidiaries is calculated at the rates prevailing in the respective jurisdiction.
According to a PRC tax circular of State Administration of Taxation, Guoshuihan (2008) No.112, dividend distributed out of the profits generated since January 1, 2008 held by the PRC entity to non-resident investors shall be subject to PRC withholding income tax. Deferred tax liability of RMB223 million (2017 : RMB321 million) in respect of PRC withholding tax on the undistributed earnings of the PRC subsidiaries has been charged to the consolidated statement of profit or loss of the year.
— F-186 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
28. INCOME TAX (Cont’d)
LAT
As disclosed in the prior years’ audited consolidated financial statements, provision for the LAT with respect to properties sold in Shanghai Pudong New District prior to October 1, 2006 were not made as the directors of the Company, after taking into account legal advice received and consultation with the local Shanghai Pudong Tax Bureau, were of the opinion that the relevant tax authority is not likely to impose any LAT on a retrospective basis.
As at December 31, 2014, the tax settlement process for a completed project and a phase of a project with properties sold in Shanghai Pudong New District prior to October 1, 2006 had been completed, with additional LAT payments made by the Group. For the projects with properties sold in Shanghai Pudong New District subsequent to October 1, 2006, the tax settlement amount determined by the tax authorities for a phase of a project which has commenced the tax settlement process was lower than what the Group has previously provided for based on the tax laws. Management has assessed and considers that the provision for LAT made by the Group relating to the above projects for which the tax settlement process had commenced or completed was adequate to meet the tax settlement amount determined by the tax authorities.
Management is of the view that it is not probable that the tax authority will impose further LAT tax payments on the above projects located in Shanghai Pudong New District in excess of the provision previously made by the Group. 156 The additional LAT tax exposure in the event of future re-assessment by the tax authorities has been estimated by management to be approximately RMB597 million (2017 : RMB597 million) (before effects of deductibility Yanlord for income tax assessment purpose and adjustment for non-controlling interests) as at December 31, 2018. The Land Group Limited amount has been disclosed as part of the Group’s contingent liabilities in accordance with SFRS(I) 1-37 Provisions, Contingent Liabilities and Contingent Assets (Note 38).
The actual Group’s LAT liabilities are subject to the determination by the tax authorities upon completion of the property development projects.
— F-187 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
29. PROFIT FOR THE YEAR
Profit for the year has been arrived at after charging (crediting):
GROUP 2018 2017 RMB’000 RMB’000
Allowance for doubtful debts and bad debts written off 3,782 43 Depreciation of property, plant and equipment 87,521 33,207
Employee benefits expense (including directors’ remuneration):
Retirement benefit scheme contributions 100,365 82,950 Salaries and other short-term benefits 975,472 786,411 Total employee benefits expense 1,075,837 869,361
Directors’ fees 1,962 1,792 Directors’ remuneration recorded in: – the Company 54,492 49,581 – the subsidiaries 6,095 7,716 157 60,587 57,297 Annual Report Net foreign exchange (gain) loss (102,119) 177,180 2018 Cost of completed properties for sale recognised as expenses 12,724,529 13,074,418
Audit fees: – paid to auditors of the Company 4,951 4,273 – paid to other auditors of the subsidiaries 3,193 2,333 Total audit fees 8,144 6,606
Non-audit fees: – paid to auditors of the Company (1) 1,050 426 – paid to other auditors of the subsidiaries 1,147 446 Total non-audit fees 2,197 872
Aggregate amount of fees paid to auditors 10,341 7,478
(1) In 2018, total non-audit fees paid to auditors of the Company in connection with the issuance of senior notes by the Group have been capitalised in the carrying amount of the senior notes (Note 22).
— F-188 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
30. EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share attributable to the ordinary owners of the Company is based on the following data:
GROUP 2018 2017 RMB’000 RMB’000
Earnings
Earnings for the purposes of basic and diluted earnings per share (profit for the year attributable to owners of the Company) 3,544,570 3,216,440
GROUP 2018 2017 ’000 ’000
Number of shares 158 Weighted average number of ordinary shares for the Yanlord purposes of basic and diluted earnings per share 1,931,535 1,936,226 Land Group Limited
GROUP 2018 2017
Earnings per share (Renminbi cents): Basic and diluted 183.51 166.12
There is no potential dilutive ordinary share in 2018 and 2017.
31. DIVIDENDS
In 2018, approximately RMB630 million of dividends was paid in respect of a first and final one-tier tax exempt dividend of 6.80 Singapore cents (equivalent to 32.64 Renminbi cents) per ordinary share declared for the financial year ended December 31, 2017.
In 2017, approximately RMB416 million of dividends was paid in respect of a first and final one-tier tax exempt dividend of 4.35 Singapore cents (equivalent to 21.47 Renminbi cents) per ordinary share declared for the financial year ended December 31, 2016.
In respect of the current year, the directors proposed a first and final one-tier tax exempt dividend of 6.80 Singapore cents (equivalent to 33.33 Renminbi cents) per ordinary share amounting to approximately RMB644 million. The dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.
— F-189 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
32. SEGMENT INFORMATION
The Group’s reportable operating segments are as follows:
(i) Property development: Development of residential, commercial and other properties.
(ii) Property investment and hotel operations: Leasing of properties to generate rental income and to gain from the appreciation in the value of the properties in the long term and operating hotels to generate accommodation service and related income.
(iii) Others: Provision of property management, ancillary services and others.
Information regarding the operations of each reportable segments are included below. The management monitors the operating results of each operating segment for the purpose of making decisions on resource allocation and performance assessment.
The Group’s operations are located in the PRC, hence no analysis by geographical area of operations is provided.
Segment revenue and results
The following is an analysis of the Group’s revenue and results by reportable segment: 159
GROUP Annual Report Profit (Loss) 2018 Revenue before income tax 2018 2017 2018 2017 RMB’000 RMB’000 RMB’000 RMB’000
Property development 23,678,500 24,759,095 10,446,235 11,627,907 Property investment and hotel operations 549,212 358,424 443,861 225,608 Others 660,329 520,888 (348,439) (491,291) Total 24,888,041 25,638,407 10,541,657 11,362,224
Segment profit represents the profit earned by each segment as determined using the Group’s accounting policy. This is the measure reported to the chief operating decision maker for the purposes of resources allocation and assessment of segment performance.
Segment assets
GROUP 2018 2017 RMB’000 RMB’000
Property development 69,522,884 77,543,598 Property investment and hotel operations 17,782,805 16,489,833 Others 19,375,090 12,167,927 Total assets 106,680,779 106,201,358
All assets are allocated to reportable segments. Liabilities are not allocated as they are not monitored by the chief operating decision maker for the purposes of resource allocation and assessment of segment performance.
— F-190 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
32. SEGMENT INFORMATION (Cont’d)
Other segment information
GROUP Additions to Depreciation non-current assets 2018 2017 2018 2017 RMB’000 RMB’000 RMB’000 RMB’000
Property development 19,514 19,137 3,038,242 12,198,623 Property investment and hotel operations 70,122 7,426 558,208 741,807 Others 1,139 8,588 16,148 8,333 Total 90,775 35,151 3,612,598 12,948,763
33. ACQUISITION OF SUBSIDIARIES
In 2018 and 2017, there were acquisition of subsidiaries as follows: 160 (a) On May 17, 2017, the Group acquired 100% equity interest in Greens Investments Ltd. (“BV GI”) for a cash Yanlord consideration of RMB600 million. BV GI holds interests in a joint venture. The joint venture has ownership over Land Group a golf course and an amusement park, which are both situated in Zhuhai and are operational at the date of Limited acquisition. The joint venture also holds 90% shareholding interest in a property management company.
(b) On July 18, 2017, the Group acquired 60% of the issued share capital of Hainan Yanlord Beautycrown Cultural Tourism Development Co., Ltd. for a cash consideration of RMB60 million.
(c) On October 20, 2017, the Group acquired 80% of the issued share capital of Chongzhou Yanlord Land Co., Ltd. (“CD CZ”) for a consideration of RMB321 million, which comprise of cash consideration of RMB107 million payable to the original shareholders and assignment of loan due from CD CZ to the original shareholders and other third parties of RMB214 million.
(d) On December 8, 2017, the Group acquired 65% of the issued share capital of Shenzhen Dongguan Shengtai Investment Co., Ltd. for a cash consideration of RMB95 million and concession of profits of RMB293 million.
(e) On February 9, 2018, the Group acquired 51% of the issued share capital of Hainan Jinzhonghong Industrial Development Co., Ltd. for a cash consideration of RMB10 million and a capital injection of RMB22 million.
(f) On November 15, 2018, the Group acquired an additional interest of 54% in Wuhan Yanlord Zhuyeshan Real Estate Co., Ltd. (“WH ZR”) for an amount of RMB331 million, comprising a share capital of RMB160 million and a capital reserve of RMB171 million, which was fully paid. Following the transaction, the Group’s interest in WH ZR has increased from 1% to 55%. The details on this change of control from a joint venture to a subsidiary is presented in Note 35.
The Group’s intention was to acquire the land and vacated properties or interest in a joint venture held by the above mentioned companies and the Group did not take over any management or operational process from the vendors as it intends to develop and sell the properties. The acquisitions were accounted for as acquisition of assets and were out of scope of SFRS(I) 3 Business Combinations.
— F-191 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
33. ACQUISITION OF SUBSIDIARIES (Cont’d)
In third quarter of 2018, the Group acquired 80% equity interest in Flourish Fair Limited (“HK FF”), which in turn owns a wholly-owned subsidiary namely, Zhuhai Maokai Eco Hi-tech Co., Ltd. (“ZH MK”) by way of an increase in share capital of HK FF for an amount of HK$80. For purposes of management efficiency of gardening related businesses of the Group, the Group transferred its 100% effective interest each in Nanjing Yu Dian Landscape Development Co., Ltd. and Tianjin Yanlord Garden Co., Ltd., two wholly-owned subsidiaries of the Group to ZH MK at the time of the acquisition. Following the above transfers, the Group’s effective interest in each of the two subsidiaries, held through ZH MK, decreased from 100% to 80%.
The fair value of identifiable net assets acquired is HK$80. Accordingly, no goodwill has been recognised on acquisition.
Had the business combination during the year been effected at January 1, 2018, management estimated that there would be no significant changes to the Group’s revenue and profit for 2018.
The following summarises the recognised amounts of assets acquired and liabilities assumed at the acquisition dates:
GROUP 2018 2017 RMB’000 RMB’000 161 Property, plant and equipment (Note 7) 1,817 50 Properties for development 801,212 1,022,744 Annual Report Investments in joint ventures – 600,000 2018 Inventories 4,122 – Trade receivables 467 – Other receivables 12,391 97,052 Non-trade amount due from a non-controlling shareholder of a subsidiary 23,216 – Financial asset at FVTPL 10,769 – Cash and cash equivalents 11,548 52,997 Bank and other borrowings – (258,596) Non-trade amounts due to non-controlling shareholders of subsidiaries – (78,400) Trade payables (1,014) (57) Other payables (251,166) (5,000) Net assets at date of acquisition 613,362 1,430,790 Non-controlling interests (270,089) (275,696) Net assets acquired 343,273 1,155,094 Shareholders’ loans assumed – 214,490 Total consideration 343,273 1,369,584 Consideration payable – (674,584) Cash consideration paid in previous year (333,273) (60,000) Cash consideration paid in current year for the acquisition in previous year 420,093 – Cash acquired (11,548) (52,997) Net cash outflow arising on acquisition 418,545 582,003
— F-192 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
34. CHANGE OF CONTROL FROM SUBSIDIARIES TO JOINT VENTURES
The Group lost control and power over Tianjin Yanlord Hehai Real Estate Co., Ltd. (“Tianjin Hehai”), as a result of changes in the article of association of Tianjin Hehai with effect from December 4, 2017. Accordingly, Tianjin Hehai ceased to be a subsidiary of the Group and is classified as a joint venture. The Group’s effective interest in the Tianjin Hehai is 60%. Consequently, Tianjin Hehai was deconsolidated and is equity accounted for in the consolidated financial statement.
On August 28, 2017, the Group entered into cooperation agreement with the joint venture partners, and the Group lost control and power over Yanlord Eco Island Investments Pte. Ltd. (“YEII”) and its wholly-owned subsidiary, Nanjing Yanlord Jiangdao Real Estate Co., Ltd. (collectively, the “Sino-Singapore Companies”), as a result of the capital injections by the joint venture partners with effect from August 28, 2017. Accordingly, the Sino-Singapore Companies ceased to be subsidiaries of the Group and are classified as joint ventures. The Group’s effective interest in the Sino- Singapore Companies reduced to 51%. Consequently, the Sino-Singapore Companies were deconsolidated and are equity accounted for in the consolidated financial statement.
The following summarises the details of the change of control:
GROUP RMB’000 162 Property, plant and equipment (Note 7) 196 Yanlord Properties for development 8,419,775 Land Group Limited Properties under development for sale 2,292,349 Other receivables and deposits 432,140 Cash and cash equivalents 85,879 Bank and other borrowings (6,319,300) Trade and other payables (66,932) Amounts due to immediate holding company and fellow subsidiaries (4,562,462) Amount due to non-controlling shareholder of a subsidiary (249,000) Net assets at date of change of control 32,645 Non-controlling interests (9,517) Net assets derecognised 23,128
Gain (Loss) on change of control Consideration received – Net asset derecognised (23,128) Fair value of retained interest 23,128 –
Net cash outflow arising from change of control Consideration received – Cash and cash equivalents derecognised (85,879) (85,879)
— F-193 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
35. CHANGE OF CONTROL FROM A JOINT VENTURE TO A SUBSIDIARY
In last quarter of 2018, the Group acquired an additional interest of 54% in WH ZR for an amount of approximately RMB331 million which was fully paid. Following the transaction, the Group’s interest in WH ZR increased from 1% to 55%.
Based on the cooperation agreement, upon obtaining 55% interest in WH ZR, all matters, other than protective rights such as changing of articles of association, capital injection and reduction of WH ZR and merger and separation, only require a simple majority vote from the shareholders. Consequently, the Group reclassified WH ZR from a joint venture to a subsidiary. As the acquisition of WH ZR was assessed by management to be an acquisition of an asset, no goodwill is recognised upon consolidation. Instead, the difference between the consideration and the carrying amount of net assets acquired has been included in properties for development.
The following summarises the details of the change of control:
GROUP RMB’000
Property, plant and equipment (Note 7) 1,066 Properties for development 762,689 Other receivables 11,647 Non-trade amount due from a non-controlling shareholder of a subsidiary 23,216 163
Cash and cash equivalents 11,345 Annual Trade payables (1,014) Report Other payables (3,234) 2018 Amounts due to immediate holding company and a fellow subsidiary (199,764) Net assets at date of change of control 605,951 Non-controlling interests (272,678) Net assets recognised 333,273
Gain (Loss) on change of control Consideration paid for additional 54% interest 330,726 Consideration paid for original 1% interest 2,547 Fair value of acquired interest (333,273) ˊ
The assets acquired and liabilities assumed as at the date of change of control shown above are included in the summary table as presented under Note 33.
— F-194 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
36. OPERATING LEASE ARRANGEMENTS
The Group as lessee
GROUP 2018 2017 RMB’000 RMB’000
Minimum lease payments under operating leases recognised as an expense in the year 27,409 19,442
At the end of the reporting period, the Group has outstanding commitments under non-cancellable operating leases, which fall due as follows:
GROUP 2018 2017 RMB’000 RMB’000
Within one year 28,353 18,565 In the second to fifth year inclusive 61,033 37,628 164 More than five years 17,145 14,218 106,531 70,411 Yanlord Land Group Limited Operating lease payments substantially represent rental payables by the Group in respect of land and buildings for its office premises and staff accommodation. Leases are negotiated for an average term of less than 3 years (2017 : less than 2 years).
The Group as lessor
The Group rents out its investment properties and certain completed properties for sale in the PRC under operating leases. Property rental income earned during the year was RMB403 million (2017 : RMB347 million).
At the end of the reporting period, the Group has contracted with tenants for the following future minimum lease receipts:
GROUP 2018 2017 RMB’000 RMB’000
Within one year 270,190 291,295 In the second to fifth year inclusive 561,831 654,895 More than five years 84,670 507,096 916,691 1,453,286
37. CAPITAL EXPENDITURE COMMITMENTS
Amounts committed for future capital expenditure but not provided for in the financial statements:
GROUP 2018 2017 RMB’000 RMB’000
Investment properties 18,978 58,686 Investments in joint ventures 239,000 – 257,978 58,686
— F-195 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
38. CONTINGENCIES AND GUARANTEES
As at December 31, 2018, the Group has provided guarantees of approximately RMB5.065 billion (2017 : RMB7.508 billion) to banks for the benefit of its customers in respect of mortgage loans provided by the banks to these customers for the purchase of the Group’s development properties. Should such guarantees be called upon, there would be an outflow of cash (previously collected by the Group) from the Group to the banks to discharge the obligations. The management has made enquiries with the banks and considered the profile of customers who bought the Group’s properties and concluded that the likelihood of these guarantees being called upon is low. These guarantees provided by the Group to the banks would be released upon receiving the building ownership certificate of the respective properties by the banks from the customers as security for the mortgage loan granted.
As described in Note 28, the additional LAT tax exposure in the event of future re-assessment by the tax authorities has been estimated by management to be approximately RMB597 million (2017 : RMB597 million) (before effects of deductibility for income tax assessment purpose and adjustment for non-controlling interests) as at December 31, 2018.
As at December 31, 2018, the Company has provided a joint guarantee limited to the Group’s corresponding shareholding to a bank in respect of a loan facility granted to a joint venture amounting to S$539 million (equivalent to RMB2.698 billion) (2017 : S$539 million (equivalent to RMB2.632 billion)) for a remaining term of less than one year up to July 12, 2019 (2017 : less than one year up to July 12, 2018). The Company’s contingent liability as at December 31, 2018 for this joint guarantee is limited to an amount of S$193 million (equivalent to RMB966 million) (2017 : S$159 million (equivalent to RMB776 million)). 165
As at December 31, 2018, a subsidiary of the Company has provided a guarantee to a bank in respect of a loan Annual facility granted to a joint venture amounting to RMB600 million for a remaining term of less than three years up to Report March 30, 2021. The subsidiary’s contingent liability as at December 31, 2018 for this guarantee is limited to an 2018 amount of RMB400 million.
As at December 31, 2018, a subsidiary of the Company has provided a joint guarantee to a lender in respect of a loan facility granted to a joint venture amounting to RMB599 million for a remaining term of less than two years up to August 10, 2020. The subsidiary’s contingent liability as at December 31, 2018 for this joint guarantee is limited to an amount of RMB380 million.
As at December 31, 2018, a subsidiary of the Company has provided a joint guarantee to a bank in respect of a loan facility granted to a joint venture amounting to RMB600 million (2017 : RMB600 million) for a remaining term of less than four years up to March 19, 2022. The subsidiary’s contingent liability as at December 31, 2018 for this joint guarantee is limited to an amount of RMB237 million (2017 : RMB203 million).
As at December 31, 2018, a subsidiary of the Company has provided a joint guarantee to banks in respect of a loan facility granted to a joint venture amounting to RMB236 million (2017 : RMB236 million) for a remaining term of less than four years up to August 20, 2022. The subsidiary’s contingent liability as at December 31, 2018 for this joint guarantee is limited to an amount of RMB119 million (2017 : RMB60 million).
— F-196 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
38. CONTINGENCIES AND GUARANTEES (Cont’d)
A subsidiary of the Company has provided joint guarantees to banks in respect of the following loan facilities granted to a wholly-owned subsidiary of Sino-Singapore Nanjing Eco Hi-tech Island Development Co., Ltd. (“SSNEHID”), a joint venture of the Group:
• A loan facility for a remaining term of less than two years up to January 15, 2020. The loan facility was fully drawn down as at December 31, 2018 and 2017. The subsidiary’s contingent liability as at December 31, 2018 for this joint guarantee is limited to an amount of RMB182 million (2017 : RMB285 million).
• A loan facility for a remaining term of less than two years up to July 1, 2020. The loan facility was fully drawn down as at December 31, 2018 and 2017. The subsidiary’s contingent liability as at December 31, 2018 for this joint guarantee is limited to an amount of RMB185 million (2017 : RMB278 million).
• A loan facility up to September 25, 2018. The loan facility was fully drawn down as at December 31, 2017. The subsidiary’s contingent liability as at December 31, 2017 for this joint guarantee was limited to an amount of RMB109 million. On September 25, 2018, the loan and interest payable were fully repaid and the loan facility was cancelled accordingly.
As at December 31, 2018, a subsidiary of the Company has provided a guarantee to a bank in respect of a loan facility granted to a third party amounting to RMB1.750 billion for a remaining term of less than four years up to 166 December 22, 2022. The subsidiary’s contingent liability as at December 31, 2018 for this guarantee is limited to
Yanlord an amount of RMB1.710 billion. Land Group Limited The management is of the view that the fair value of the financial guarantees provided by the Group and the Company are not significant.
39. ADOPTION OF A NEW FINANCIAL REPORTING FRAMEWORK
The Group and the Company adopted the new financial reporting framework – SFRS(I) for the first time for financial year ended December 31, 2018 and SFRS(I) 1 First-time Adoption of Singapore Financial Reporting Standards (International) has been applied in the first set of SFRS(I) financial statements. SFRS(I) is identical to the International Financial Reporting Standards as issued by the International Accounting Standards Board.
As a first time adopter of SFRS(I), the Group and Company have applied retrospectively, accounting polices based on each SFRS(I) effective as at end of the first SFRS(I) reporting period (December 31, 2018), except for areas of exceptions and optional exemptions set out in SFRS(I) 1. In the first set of SFRS(I) financial statements for the financial year ended December 31, 2018, an additional opening statement of financial position as at date of transition (January 1, 2017) is presented, together with related notes.
Management has performed a detailed analysis of the transition options and other requirements of SFRS(I) and has determined that there has been no change to the Group’s and Company’s current accounting policies under FRSs or material adjustments on the initial transition to the new financial reporting framework, other than those arising from the applications of SFRS(I) 9 and SFRS(I) 15, which are effective at the same time.
— F-197 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
39. ADOPTION OF A NEW FINANCIAL REPORTING FRAMEWORK (Cont’d)
Management has elected the following transition exemption:
• As permitted under SFRS(I) 1, the transaction price allocated to (partially) unsatisfied performance obligations as of December 31, 2017 is not disclosed using the transition provisions of SFRS(I) 15.
• The Group has elected to apply the short-term exemption to adopt SFRS(I) 9 on January 1, 2018. Accordingly, the requirements of FRS 39 Financial Instruments: Recognition and Measurement are applied to financial instruments up to the financial year ended December 31, 2017. The Group is also exempted from complying with SFRS(I) 7 Financial Instruments: Disclosure to the extent that the disclosure required by SFRS(I) 7 relate to the items within scope of SFRS(I) 9.
As a result, the requirements under FRS are applied in place of the requirements under SFRS(I) 7 and SFRS(I) 9 to comparative information about items within scope of SFRS(I) 9.
Summary of effects arising from initial application of SFRS(I) 9
The table below illustrates the classification and measurement of the Group’s financial assets under SFRS(I) 9 and FRS 39 at the date of initial application, January 1, 2018. 167 Original carrying New carrying Original measurement New measurement amount under amount under Annual category under category under FRS 39 SFRS(I) 9 Report FRS 39 SFRS(I) 9 RMB’000 RMB’000 2018
Trade receivables Loans and receivables Financial assets at 26,298 26,298 amortised cost Other receivables Loans and receivables Financial assets at 2,530,060 2,530,060 amortised cost Non-trade amounts due Loans and receivables Financial assets at 1,283,682 1,283,682 from associates amortised cost Non-trade amounts due Loans and receivables Financial assets at 5,546,288 5,546,288 from joint ventures amortised cost Non-trade amounts due Loans and receivables Financial assets at 2,736,464 2,736,464 from non-controlling amortised cost shareholders of subsidiaries Non-trade amounts due Loans and receivables Financial assets at 584 584 from other related amortised cost parties Investment in unlisted Available-for-sale Financial assets at 2,990 2,990 company as other investment FVTOCI financial asset Pledged bank deposits Loans and receivables Financial assets at 40,029 40,029 amortised cost Cash and cash Loans and receivables Financial assets at 17,798,313 17,798,313 equivalents amortised cost
— F-198 — NOTES TO FINANCIAL STATEMENTS December 31, 2018
39. ADOPTION OF A NEW FINANCIAL REPORTING FRAMEWORK (Cont’d)
Summary of effects arising from initial application of SFRS(I) 15
Impact on the Group’s statement of financial position as at December 31, 2017 (end of last period reported under FRS):
As previously Initial application As adjusted reported under FRS of SFRS(I) 15 under SFRS(I) RMB’000 RMB’000 Note RMB’000
Other payables 22,051,664 (20,689,297) (a) 1,362,367 Contract liabilities – 20,689,297 (a) 20,689,297
Impact on the Group’s statement of financial position as at January 1, 2017 (date of transition to SFRS(I)):
As previously Initial application As adjusted reported under FRS of SFRS(I) 15 under SFRS(I) RMB’000 RMB’000 Note RMB’000
Other payables 24,088,948 (22,794,308) (a) 1,294,640 168 Contract liabilities – 22,794,308 (a) 22,794,308
Yanlord Note Land Group Limited (a) The contract liabilities balance was reclassified from advances received from customers. This had no impact on the statement of profit or loss.
— F-199 — ISSUER
Yanlord Land (HK) Co., Limited 38/F Far East Finance Centre 16 Harcourt Road Hong Kong
COMPANY
Yanlord Land Group Limited 9 Temasek Boulevard #36-02 Suntec Tower Two Singapore 038989
TRUSTEE AND GLOBAL SECURITY AGENT
Citicorp International Limited 20/F Citi Tower, One Bay East 83 Hoi Bun Road, Kwun Tong Kowloon Hong Kong
PRINCIPAL PAYING AND TRANSFER AGENT AND REGISTRAR
Citibank, N.A., London Branch c/o Citibank, N.A., Dublin Branch One North Wall Quay Dublin 1 Ireland
LEGAL ADVISORS TO THE ISSUER
as to United States law and as to Singapore law Hong Kong law
Allen & Overy Shook Lin & Bok LLP 9th Floor, Three Exchange Square 1RobinsonRoad Hong Kong #18-00 AIA Tower Singapore 048542
LEGAL ADVISORS TO THE INITIAL PURCHASERS
as to United States law as to PRC law
Davis Polk & Wardwell Yuan Tai Law Offices 18th Floor, The Hong Kong Club Building 14/F, Hua Xia Bank Plaza 3A Chater Road, Central 256 South Pudong Road Hong Kong Shanghai 200120 People’s Republic of China
INDEPENDENT AUDITORS
Deloitte & Touche LLP Certified Public Accountants 6 Shenton Way, OUE Downtown 2 #33-00 Singapore 068809