2014 Annual Report Unfolding a Limitless Panorama BOUNDLESS VISION BOUNDLESS OPPORTUNITIES Shanghai Industrial Urban Development Group Limited (“SIUD”) currently has 22 real estate projects in 12 major cities in China, namely Shanghai, Kunshan, Wuxi, Beijing, Sanhe, Shenyang, Tianjin, Xi’an, Chongqing, Changsha, Shenzhen and Zhuhai. Most of the projects are mid- to high-end residential projects which are under construction at full steam, presenting the Group with an approximately 5.67 million-square-meter land bank and excellent foundation for long term development. CONTENTS 2 Corporate Information 66 Corporate Governance Report 3 Financial Highlights 76 Investor Relations Report 6 Chairman’s Statement 81 Independent Auditor’s Report 9 Investor FAQ 83 Consolidated Statement of Profit or Loss and Other Comprehensive Income 14 Details of Properties 84 Consolidated Statement of Financial 16 Key Project Introduction Position 28 Management Discussion 86 Consolidated Statement of Changes in and Analysis Equity 36 Environmental, Social and 88 Consolidated Statement of Cash Flows Governance Report 90 Notes to the Consolidated Financial 45 Directors’ Report Statements 57 Biographical Details of Directors and 166 Financial Summary Senior Management 167 Glossary of Terms 2 CORPORATE INFORMATION BOARD OF DIRECTORS HONG KONG BRANCH SHARE REGISTRAR Executive Directors AND TRANSFER OFFICE Ji Gang (Chairman & President) (re-designated as Chairman Tricor Secretaries Limited on 2 February 2015) Level 22, Hopewell Centre, Zhou Jun 183 Queen’s Road East, Yang Jianwei Hong Kong. Yang Biao Huang Fei LEGAL ADVISERS Ye Weiqi As to Hong Kong Law Ashurst Hong Kong Independent Non-Executive Directors Doo Wai-Hoi, William, J.P. As to Bermuda Law Wong Ying Ho, Kennedy, BBS, J.P. Conyers Dill & Pearman Fan Ren Da, Anthony Li Ka Fai, David REGISTERED OFFICE Clarendon House, AUTHORIZED REPRESENTATIVES 2 Church Street, Ji Gang (appointed on 2 February 2015) Hamilton, HM11, Chan Kin Chu, Harry Bermuda. BOARD COMMITTEES PRINCIPAL PLACE OF BUSINESS Audit Committee IN HONG KONG Li Ka Fai, David (Committee Chairman) Suites 3003–3007, 30th Floor, Doo Wai-Hoi, William, J.P. Great Eagle Centre, Wong Ying Ho, Kennedy, BBS, J.P. 23 Harbour Road, Fan Ren Da, Anthony Wanchai, Hong Kong. Telephone: (852) 2544 8000 Remuneration Committee Facsimile: (852) 2544 8004 Doo Wai-Hoi, William, J.P. (Committee Chairman) Fan Ren Da, Anthony WEBSITE Ye Weiqi http://www.siud.com Nomination Committee PRINCIPAL BANKERS Wong Ying Ho, Kennedy, BBS, J.P. (Committee Chairman) The Hongkong and Shanghai Banking Corporation Limited Fan Ren Da, Anthony China Development Bank Corporation Ji Gang (appointed on 2 February 2015) Shanghai Pudong Development Bank Company Limited China Construction Bank Corporation Investment Appraisal Committee Agricultural Bank of China Limited Fan Ren Da, Anthony (Committee Chairman) Hua Xia Bank Company Limited Zhou Jun Ye Weiqi AUDITOR Deloitte Touche Tohmatsu COMPANY SECRETARY 35/F., One Pacific Place, Chan Kin Chu, Harry 88 Queensway, Hong Kong. PRINCIPAL SHARE REGISTRAR AND LISTING INFORMATION TRANSFER OFFICE The Stock Exchange of Hong Kong Limited Codan Services Limited Ordinary Shares Clarendon House, (Stock Code: 563) 2 Church Street, Hamilton, HM11, Bermuda. Shanghai Industrial Urban Development Group Limited 3 FINANCIAL HIGHLIGHTS For the year ended For the year ended 31 December 2014 31 December 2013 Change Financial Highlights (HK$’000) Revenue 7,773,636 9,773,547 (20.5)% Gross profit margin 38.0% 15.5% 22.5 p.p. Profit attributable to equity owners of the Company 161,181 143,471 12.3% Financial Information per share (HK cents) Profit – Basic 3.35 2.98 12.4% – Diluted 3.35 2.98 12.4% As at As at 31 December 2014 31 December 2013 Pre-sale proceeds received on sales of properties (HK$’000) 2,400,586 6,496,160 Financial Ratios Net debt to total equity (%) (note) 65.6% 41.3% Current ratio 1.90 1.90 Note: Net debt = total borrowings (including bank and other borrowings and senior notes) – bank balances and cash and restricted and pledged bank deposits. ANALYSIS ON ACCUMULATED PRE-SALE DEBT MATURITY PROFILE RECEIPTS FROM CUSTOMERS HK$ (billion) 13% 2.63 HK$’000 45% 800,000 [9.04] 727,283 39% 700,000 628,577 7.84 594,498 600,000 500,000 400,000 300,000 3% 211,483 0.62 200,000 93,602 101,323 100,000 43,820 Less than one year 39% 0 From first year to second year 3% From second year to fifth year 45% CBE Shanghai Urban Top City West Yoooou.net Others More than five years 13% International Jing Cradle Diaoyutai Peninsula City Annual Report 2014 OPTIMIZE THE LAYOUT FOR THE BEST INVESTMENT EFFICIENCY Frequent trading activities in first-tier cities, including Shanghai, and the establishment of Shanghai Free Trade Zone will continue to benefit the development of investment properties. With a number of commercial complex in Shanghai, SIUD will definitely benefit from this trend in the long run. 6 CHAIRMAN’S STATEMENT In 2014, the Group outperformed its sales target initially set at the beginning of the year by posting contract sales of RMB4.7 billion, albeit the considerable adjustments in China’s real estate industry. The Group’s focus on large-scale high-quality projects with higher margins and its adherence to a steady pace in raising selling prices of its flagship projects contributed to the encouraging results of operations, with a growth in gross profit margin by more than 22 percentage points to 38.0%. Maintaining a strategy of focused development in the Yangtze River Delta region and coastal cities, and backed by a strong portfolio of residential projects of supreme quality and investment properties at prime locations, the Group made timely moves in consolidating and disposing of assets to maximize profit, and stood out from its peers amidst the fierce competition in the real estate market. Whilst dividend distribution to shareholders of SIUD this year is the first time ever, the management looks forward to sharing more fruitful results in future. Shanghai Industrial Urban Development Group Limited 7 CHAIRMAN’S STATEMENT China maintained stable economic growth in 2014 with and fourth-tier cities, striving for profit maximization on its GDP growing at 7.4% year-on-year. In light of the the back of Shanghai’s geographical advantage. new norms in China’s economy, different challenges are encountering the real estate market nowadays. In OPTIMIZED GEOGRAPHICAL DISTRIBUTION the course of considerable adjustments in China’s real EXPEDITED DEVELOPMENT AND CONSTRUCTION estate industry in 2014, the cool-down in the first half of OF KEY PROJECTS the year was followed by a series of favorable policies in Following restructuring and project consolidation in the second half, including the lifting of home purchase recent years, the Group enjoyed robust development restrictions, Shanghai’s introduction of new mortgage in 2014. Construction commenced at Xinzhuang Metro policies, the policy adjustments in respect of the Housing Superstructure Project, which is one of our key office Provident Fund and the interest rate cut by the central and commercial projects. Planning approval is expected bank, all being intended to boost the property market. to be granted and construction to commence shortly for Binjiang U Center, which is a large-scale city complex In response to the new dynamics in the external integrating office, commercial, cultural, recreational and environment, the Group optimized and adjusted the other functional clusters and is expected to become a geographical distribution of its project portfolio. In 2014, new city landmark in the Binjiang neighborhood in Xuhui in furtherance of its existing strategy, SIUD speeded District upon completion. The construction of U Center, up its strategic shifting towards first-tier cities and a city complex in Minhang District with a saleable G.F.A. the Yangtze River Delta region where solid demand for of about 240,000 sq.m., was progressing smoothly and housing products as well as economic development was the project is expected to be available for pre-sale in better secured, and selectively withdrew from third-tier 2015. SIUD’s successful acquisition of a parcel of land in Annual Report 2014 8 CHAIRMAN’S STATEMENT Minhang District of Shanghai and of the ShanghaiMart crowning the best sales volume in Shanghai in June. project in 2014 marked a key step in consolidating the Just like the pine tree quietly gathering what it needs to Group’s strategic layout in Shanghai. The subsequent grow tall and strong in a proverbial poem by the Chinese cooperation with Nan Fung Group, a renowned enterprise Poet Du Xunhe in Tang Dynasty, the Group’s outstanding in Hong Kong, and the goal of raising the overall rental results were attributable to its efforts in conserving its level of ShanghaiMart, testified the Group’s determination assets and its prudence in applying them over the years. in its expansion. The Group’s disposal of Tianjin Beichen Based in Shanghai, SIUD will certainly strengthen its project, in which it held a non-controlled stake, at the end regional advantages to seize value investors’ good graces of the year contributed to the more sufficient cashflow by unleashing its potential asset value. of the Group which would help sharpening the Group’s competitive edges in the Yangtze River Delta region. Taking over the chairmanship of SIUD in February 2015, I will carry on with the existing strategies of the Group In an era that calls for diversified financing channels and steer resources towards developing our businesses for property developers, SIUD achieved the combination in the Yangtze River Delta region and the prosperous of business operations and financing options as it coastal cities. Building upon the solid foundation laid by incorporated Shanghai Guochen Equity Investment the former Chairman Mr. Ni Jianda, I, with over three Management Co., Ltd. in the Shanghai Free Trade Zone decades of experience in the real estate industry, look to raise funds for its projects from both onshore and forward to capitalizing the large-scale residential projects offshore sources.