Annual Report 2020 3
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YUEXIU REIT 2005–2020 CONTENTS Profile of Yuexiu REIT 2 Connected Party Transactions 103 Unitholders Calendar 3 Investor Relations Report 120 Distribution 4 Property Valuation Report 122 Performance Summary 5 Independent Auditor’s Report 165 Chairman’s Statement 6 Consolidated Statement of Comprehensive Income 171 2020 Business Review and Future Prospects 17 Consolidated Balance Sheet 173 Financial Review 28 Distribution Statement 175 Environmental, Social and Governance 36 Consolidated Statement of Net Assets Attributable 177 Report Summary to Unitholders and Changes in Equity Property Portfolio 37 Consolidated Statement of Cash Flows 178 Report of the Trustee 80 Notes to the Consolidated Financial Statements 179 Directors’ and Senior Executives’ Profiles 81 Performance Table 237 The Leasing Agents 89 Five Year Financial Summary 238 Corporate Governance 91 Corporate and Investor Relations Information 239 2 Yuexiu Real Estate Investment Trust PROFILE OF YUEXIU REIT PROFILE OF YUEXIU REAL ESTATE INVESTMENT TRUST (“YUEXIU REIT”) Yuexiu REIT is a Hong Kong real estate investment trust constituted by a trust deed entered into on 7 December 2005 (“Trust Deed”) between HSBC Institutional Trust Services (Asia) Limited as the trustee (“Trustee”) and Yuexiu REIT Asset Management Limited as the manager of Yuexiu REIT (“Manager”) as modified by the First Supplemental Deed dated 25 March 2008, the Second Supplemental Deed dated 23 July 2010, the Third Supplemental Trust Deed dated 25 July 2012 and the Fourth Supplemental Deed dated 3 April 2020 and made between the same parties. Yuexiu REIT was listed on The Stock Exchange of Hong Kong Limited (“Stock Exchange”) on 21 December 2005 (“Listing Date”). Yuexiu REIT’s property portfolio (“Properties”) consists of five commercial properties located in Guangzhou, one commercial property located in Shanghai, one commercial property located in Wuhan and one commercial property located in Hangzhou. Yuexiu REIT is the first listed real estate investment trust in the world which invests in real properties in the mainland of the People’s Republic of China (“PRC”). Annual Report 2020 3 UNITHOLDERS UNITHOLDERS CALENDAR 2021-2022 CALENDAR MAY 2022 PAYMENT OF FINAL DISTRIBUTION FOR 2021 MARCH 2022 ANNOUNCEMENT OF 2021 ANNUAL RESULTS OCTOBER PAYMENT OF DISTRIBUTION FOR SIX-MONTH PERIOD 2021 ENDED 30 JUNE 2021 AUGUST 2021 PUBLICATION OF 2021 INTERIM REPORT MAY 2021 PAYMENT OF FINAL DISTRIBUTION FOR 2020 AND ANNUAL GENERAL MEETING APRIL 2021 PUBLICATION OF 2020 ANNUAL REPORT 4 Yuexiu Real Estate Investment Trust DISTRIBUTION DISTRIBUTION In accordance with the Trust Deed, Yuexiu REIT is required to distribute no less than 90% of Total Distributable Income to the Unitholders. The Manager also has the discretion under Yuexiu REIT’s trust deed, where there are surplus funds, to distribute amounts in addition to that set out in the trust deed. At the time of announcing the distribution for any particular year, the Manager shall consider whether to exercise such discretion having regard to factors including but not limited to Yuexiu REIT’s funding requirements, its earnings and financial position, its growth strategy, operating and capital requirements, surplus disposal proceeds, compliance with relevant laws, regulations and covenants (including existing limitations on borrowings as prescribed in the REIT Code), other capital management considerations, the overall stability of distributions and prevailing industry practice. In light of the above, the Manager has determined that the final distribution to the Unitholders for the period from 1 July 2020 to 31 December 2020 (“2020 Final Period”) will be approximately RMB0.0999 which is equivalent to HK$0.1199 (2019: RMB0.1051 which is equivalent to HK$0.1172) per Unit. Such final distribution per Unit is subject to adjustment once new units are issued to the Manager (in satisfaction of the Managers fees) prior to the record date for the 2020 Final Period distribution. A further announcement will be made to inform Unitholders of the final Distribution per Unit for the 2020 Final Period. The final distribution for the 2020 Final Period, together with the interim distribution of Yuexiu REIT for the six-month period from 1 January 2020 to 30 June 2020 (“2020 Interim Period”) being approximately RMB0.0986 which is equivalent to HK$0.1094 (2019: RMB0.1355 which is equivalent to HK$0.1540) per Unit, represents a total distribution to each Unitholder for the Reporting Year of approximately RMB0.1985 which is equivalent to HK$0.2293 (2019: approximately RMB0.2406 (which is equivalent to HK$0.2712)). The total distribution amount for the Reporting Year, being RMB648,697,000 (2019: RMB761,240,000), includes an amount of approximately RMB194,000,000 (2019: RMB194,000,000), that is capital in nature. The total distribution amount for the Reporting Year comprises the distributable amount calculated pursuant to the formula set out in the OC (being approximately RMB616,697,000) plus a further distribution of approximately RMB32,000,000 having regard to the abovementioned discretion of the Manager under Yuexiu REIT’s trust deed to distribute excess amounts where it has surplus funds. Further details regarding the breakdown of the total distributable amount are set out in the Distribution Statement. Distributions payable to the Unitholders will be paid in Hong Kong dollars. The exchange rate between the RMB and Hong Kong dollars adopted by the Manager is the central parity rate, as announced by the People’s Bank of China, for the five business days preceding the date of declaration of distributions. Yuexiu REIT aims at providing steady returns to its Unitholders derived from the gross income of its Properties. It has been distributing no less than 100% of Total Distributable Income for 15 consecutive years after listing in 2005. Distribution Yield Disregarding new units to be issued prior to the relevant record date with respect to the Manager’s fees, Distribution per Unit (“DPU”) for the Reporting Year is approximately HK$0.2293 (2019: HK$0.2712), of which approximately HK$0.0686 (2019: HK$0.0439) is attributable to capital items, represents a yield of approximately 6.07% (2019: 5.14%) per Unit based on the closing price of HK$3.78 per Unit as at 31 December 2020 (2019: HK$5.28). CLOSURE OF REGISTER OF UNITHOLDERS The record date for the final distribution will be 16 April 2021. The register of Unitholders will be closed from 16 April 2021 to 19 April 2021, both days inclusive, during which period no transfer of units will be effected. In order to be qualify for the distribution, all unit certificates with completed transfer forms must be lodged with Yuexiu REIT’s unit registrar, Tricor Investor Services Limited, at 54/F, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not later than 4:30 p.m. on 15 April 2021. The final distribution will be paid on 26 May 2021 to the Unitholders whose names appear on the register of Unitholders on 16 April 2021. Annual Report 2020 5 PERFORMANCE SUMMARY The following is a summary of Yuexiu REIT’s audited consolidated results for the year ended 31 December 2020 together with comparative figures for the corresponding period in 2019: (in Renminbi (“RMB”), unless otherwise specified) Financial Financial Year ended Year ended 31 December 31 December Increase/ 2020 2019 (decrease) Gross income (Note a) 1,758,732,000 2,058,112,000 (14.5)% Net property income 1,322,644,000 1,494,740,000 (11.5)% Profit after tax 587,121,000 940,408,000 (37.6)% Earnings per Unit - Basic 0.18 0.28 (35.7)% Portfolio valuation 34,488,000,000 34,961,000,000 (1.4)% Net assets attributable to Unitholders per Unit 4.42 4.55 (2.8)% Net assets attributable to Unitholders per Unit - Equivalent to HK$ 5.25 5.08 3.3% Units issued (units) 3,303,113,665 3,205,856,551 3.0% Total borrowings as a percentage of (0.5) gross assets (Note b) 38.6% 39.1% percentage point Gross liabilities as a percentage of (0.1) gross assets (Note c) 56.5% 56.6% percentage point Distribution Total distribution (including additional items) 648,697,000 761,240,000 (14.8)% Distribution per Unit (HK$) 0.2293 0.2712 (15.4)% Note a: The revenue of Fortune Plaza Carpark Spaces and City Development Plaza Carpark Spaces was recorded since 20 November 2019. Note b: Calculation of Total borrowings is based on bank loan and other borrowings, excluding capitalization of debt-related expenses. Note c: Calculation of Gross liabilities is based on total liabilities, excluding capitalization of debt-related expenses and net assets attributable to Unitholders. 6 Yuexiu Real Estate Investment Trust CHAIRMAN’S STATEMENT Dear Unitholders of Yuexiu REIT, On behalf of the management team of Yuexiu REIT Asset Management Limited (“Manager”), the Manager of Yuexiu Real Estate Investment Trust (“Yuexiu REIT”), I am very pleased to present to you the 2020 annual report of Yuexiu REIT. LIN DELIANG Chairman Annual Report 2020 7 RESULTS AND DISTRIBUTION In 2020, the Novel Coronavirus pneumonia pandemic raged around the world and its impact continued throughout the year. The rise of international unilateralism and the counter-current of economic globalization resulted in the slowdown in economy and the downgrade in consumption. Despite unprecedented pressure and challenges, Yuexiu REIT forged ahead against headwinds and achieved valuable performance under new “dual circulation” landscape, with its portfolio of premium properties and excellent efforts made by all members of the management team. 8 Yuexiu Real Estate Investment Trust CHAIRMAN’S