Annual Report 2011 Corporate Information

CHINA 中國 KOWLOON DEVELOPMENT COMPANY LIMITED HONG KONG 香港 MACAU 九龍建業有限公司澳門 Kowloon Development Company Limited (Stock Code: 34) has been pursuing a three-tier development strategy in the Greater China region, with its core property business in the Hong Kong and Mainland China markets, and carrying out its Macau property business through its 73.4%-owned listed subsidiary, Polytec Asset Holdings Limited (Stock Code: 208). The Group is now well positioned in all three markets, with its attributable landbank exceeding 5 million sq m. It is committed to enhance its competitive advantages and to become one of the few listed companies in Hong Kong to have capacity to grow significantly in all three markets. 九龍建業有限公司（股份代號：34）在大中華地區奉行三線發展策略，核心業務為香港及中國內地市場之地產業務，並通過其擁有73.4%權益之上市附屬公司保利達資產控股有限公司（股份代號：208）經營澳門地產業務。本集團目前在區內三大市場作出卓越部署，其應佔土地儲備逾五百萬平方米，並致力提升本身之競爭優勢，目標成為少數能夠在三大市場取得顯著增長之香港上市公司之一。 CONTENTS 002 Corporate Information 004 Highlights 005 Group’s Business Structure 006 Five-Year Financial Summary 010 Chairman’s Statement 016 Review of Operations 038 Financial Review 040 Profile of Directors 042 Corporate Governance Report 050 Report of the Directors 059 Independent Auditor’s Report 060 Consolidated Income Statement 061 Consolidated Statement of Comprehensive Income 062 Consolidated Balance Sheet 064 Balance Sheet 065 Consolidated Statement of Changes in Equity 066 Consolidated Cash Flow Statement 067 Notes on the Accounts 127 Particulars of Properties KOWLOON DEVELOPMENT COMPANY LIMITED CORPORATE INFORMATION BOARD OF DIRECTORS AND COMMITTEES CORPORATE AND SHAREHOLDERS’ INFORMATION Board of Directors Company Secretary Executive Directors Lee Kuen Chiu Or Wai Sheun (Chairman) Ng Chi Man Independent Auditors Lai Ka Fai KPMG Or Pui Kwan Certified Public Accountants Non-executive Directors Authorised Representatives Keith Alan Holman (Deputy Chairman) Lai Ka Fai Tam Hee Chung Lee Kuen Chiu Yeung Kwok Kwong Legal Advisers Independent Non-executive Directors Sidley Austin Li Kwok Sing, Aubrey Lok Kung Chin, Hardy Share Registrars Seto Gin Chung, John Computershare Hong Kong Investor Services Limited David John Shaw Rooms 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong Committees Executive Committee Registered Office Or Wai Sheun (Chairman) 23rd Floor, Pioneer Centre, 750 Nathan Road, Ng Chi Man Kowloon, Hong Kong Lai Ka Fai Telephone : (852) 2396 2112 Or Pui Kwan Facsimile : (852) 2789 1370 Yeung Kwok Kwong Website : www.kdc.com.hk E-mail : [email protected] Audit Committee Li Kwok Sing, Aubrey (Chairman) Lok Kung Chin, Hardy Seto Gin Chung, John Yeung Kwok Kwong Remuneration Committee Seto Gin Chung, John (Chairman) Lai Ka Fai Li Kwok Sing, Aubrey Lok Kung Chin, Hardy Nomination Committee Or Wai Sheun (Chairman) Lok Kung Chin, Hardy David John Shaw 002 ANNUAL REPORT 2011 CORPORATE INFORMATION CORPORATE AND SHAREHOLDERS’ INFORMATION (Continued) Stock Code Financial Calendar for 2011 The Stock Exchange of Hong Kong Limited: 34 Interim results announcement 29 August 2011 Interim dividend paid 14 October 2011 Principal Bankers Annual results announcement 29 March 2012 Bank of China Annual general meeting 28 June 2012 Bank of Communications Ex-dividend date for 5 July 2012 Bank of East Asia final dividend China Citic Bank Closure of register of members 9 July 2012–10 July 2012 Chong Hing Bank (both days inclusive) Dah Sing Bank Final dividend payable 19 July 2012 Hang Seng Bank Industrial and Commercial Bank of China Standard Chartered Bank 003 KOWLOON DEVELOPMENT COMPANY LIMITED HIGHLIGHTS Excluding revaluation gains from its investment properties, the Group’s underlying net profi t rises to HK$807 million, an increase of 16.8% over 2010. The underlying earnings per share amount to HK$0.70 in 2011 compared to HK$0.60 in 2010. Full year dividend per share for 2011 amounts to HK$0.54, an increase of 3.8% over 2010, with a fi nal dividend per share of HK$0.33. Over the past few years, the Group has built a sizeable and quality development landbank across the Greater China region, Hong Kong, Mainland China and Macau, at a relatively competitive cost, with the attributable GFA exceeding 5 million sq m. We will strive to expedite the development of our landbank, with the aim of achieving consistent earnings growth in the coming years. 004 ANNUAL REPORT 2011 GROUP'S BUSINESS STRUCTURE KOWLOON DEVELOPMENT COMPANY LIMITED (A member of the Polytec Group) Stock Code: 34 POLYTEC MAINLAND ASSET HONG KONG CHINA HOLDINGS PROPERTY PROPERTY LIMITED Stock Code: 208 73.4% Property Development Property Development Major development projects: Major development projects: • Gardenia • Le Cove City (Shenyang) • Macpherson Stadium 江灣城(瀋陽) Project • The Gardenia (Shenyang) • Belcher’s Street Project 翠堤灣(瀋陽) • Pok Fu Lam Project • Le Cove City (Wuxi) MACAU ENERGY OTHERS • Hung Hom Project 江灣城(無錫) PROPERTY BUSINESS • Clear Water Bay Road • Galaxy Heights (Zhongshan) Project 星際豪庭(中山) Development Landbank: • The Lake (Foshan) 274,000 sq m 山語湖(佛山) • Hedong Project (Tianjin) Property Development Oil Ice & Cold Storage ( ) Property Investment 河東項目天津 Major development projects: Production and exploration The Hong Kong Ice and Flagship investment property: Development Landbank: • Pearl Horizon, Lote P of oil in Kazakhstan Cold Storage Co. Ltd. • Pioneer Centre 4,225,000 sq m • Lotes T + T1 is one of the largest ice making distributors Investment Landbank: Development Landbank: in Hong Kong 58,000 sq m 526,000 sq m Property Management Property Investment Major investment property: Properties under • The Macau Square management 1,198,000 sq m Investment Landbank: 13,000 sq m 005 KOWLOON DEVELOPMENT COMPANY LIMITED FIVE-YEAR FINANCIAL SUMMARY Shareholders’ Equity Profit/(Loss) Attributable to Shareholders (HK$ million) (HK$ million) 19,772 18,588 17,709 2,128 16,738 16,872 1,992 1,526 1,228 (508) 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 Net Asset Value per Share Dividends per Share (HK$) (HK$) 17.18 0.65 16.15 15.39 14.55 14.66 0.52 0.52 0.54 0.39 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 006 ANNUAL REPORT 2011 FIVE-YEAR FINANCIAL SUMMARY KEY CONSOLIDATED INCOME STATEMENT DATA (HK$ million) 2007 2008 2009 2010 2011 Turnover 10,384 8,793 1,985 1,269 1,755 Profit/(Loss) from Operations 2,427 (1,944) 1,550 2,072 1,499 Profit/(Loss) Attributable to Shareholders 1,992 (508) 1,228 2,128 1,526 Earnings/(Loss) per Share (HK$) 1.80 (0.44) 1.07 1.85 1.33 Underlying Profit/(Loss) Attributable to Shareholders (Note 2) 1,502 (1,381) 1,160 691 807 Underlying Earnings/(Loss) per Share (HK$) 1.36 (1.21) 1.01 0.60 0.70 (Note 2) Dividends 748 449 598 598 621 Dividends per Share (HK$) 0.65 0.39 0.52 0.52 0.54 KEY CONSOLIDATED BALANCE SHEET DATA (HK$ million) 2007 2008 2009 2010 2011 Non-Current Assets 18,585 17,914 19,156 22,311 24,706 Current Assets 11,058 11,881 8,157 8,686 13,343 Total Assets 29,643 29,795 27,313 30,997 38,049 Current Liabilities (2,958) (4,749) (5,220) (5,982) (4,064) Non-Current Liabilities (4,257) (5,212) (2,264) (3,535) (11,169) Net Assets 22,428 19,834 19,829 21,480 22,816 Share Capital 115 115 115 115 115 Reserves 17,594 16,623 16,757 18,473 19,657 Shareholders’ Equity 17,709 16,738 16,872 18,588 19,772 Non-controlling Interests 4,719 3,096 2,957 2,892 3,044 Total Equity 22,428 19,834 19,829 21,480 22,816 Net Asset Value per Share (HK$) 15.39 14.55 14.66 16.15 17.18 Gearing Ratio (%) (Note 3) 12.73 31.19 30.97 34.00 55.44 Notes: 1. The financial information in this summary is extracted from the published accounts for the last five years, restated where appropriate to be in accordance with the current accounting policies of the Group. 2. Underlying profit/(loss) excludes revaluation gain/(loss) of investment properties. 3. Gearing ratio represents bank borrowings, loan from and amount payable to ultimate holding company and net of cash and cash equivalents over equity attributable to shareholders of the Company. 007 KOWLOON DEVELOPMENT COMPANY LIMITED BUILDING A SOLID FOUNDATION THE GARDENIA (SHENYANG) 翠堤灣(瀋陽) The Gardenia, the Group’s wholly- owned mega residential and commercial project, is located in the Shenhe District, one of the five main central districts in Shenyang, with a planned gross floor area of approximately 2,000,000 sq m. 008 ANNUAL REPORT 2011 009 KOWLOON DEVELOPMENT COMPANY LIMITED CHAIRMAN’S STATEMENT The Group pursues a three-tier development strategy with exposure in three major markets of the Greater China region. GROUP RESULTS AND DIVIDENDS During 2011, the Group continued to replenish its landbank in Mainland China and Hong Kong to further strengthen its For the year ended 31 December 2011, net profit attributable solid foundation, with the existing development landbank to shareholders of the Company amounted to HK$1,526 attributable to the Group exceeding 5 million sq m of gross million compared to HK$2,128 million in 2010. Excluding floor area (“GFA”). revaluation gains from its investment properties, the Group’s underlying net profit for 2011 amounted to HK$807 million, In Mainland China, the Group completed an acquisition an increase of 16.8% over 2010. The underlying net earnings of an 80% stake in a sizeable residential and commercial per share for 2011 were HK$0.70 compared to HK$0.60 in development project in a central business district of Wuxi, 2010. Mainland China in the third quarter of 2011, with total site area amounting to 68,800 sq m. This site is located in Chong The Board of Directors recommends the payment of a final An District and is intended to be developed by phases into a dividend of HK$0.33 per share (2010: HK$0.32) for the year residential, commercial, hotel and office complex, with GFA ended 31 December 2011.

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