LIMITED ANNUAL REPORT 2016 Stock Code 272 STRENGTH

Our asset-light strategy gives us the strength to weather the considerable global economic and political uncertainty that characterises the market. The asset-light strategy generates an increased asset turnover rate and a robust income stream and cash flow. We have reduced our debt gearing and bolstered our balance sheet, putting us in a strong position to capitalise on new opportunities in the coming year. BALANCE WE STRIVE FOR BALANCE BETWEEN LONG AND SHORT TERM GOALS

The Group continues to strike a good

balance between our long and short term

goals as well as between profits generated by

our record property sales and the recurring

income from our solid rental portfolio. We are

balancing our asset-light strategy with plans

for future capital investments. PERFORMANCE

OUR FINANCIAL PERFORMANCE TO BE DRIVEN BY STRONG AND EFFICIENT MANAGEMENT

We aim to continuously enhance our

performance in management efficiency and

decision-making, which will result in better

financial return and increased profitability.

Being proactive and taking firm action

is particularly important in these times

of uncertainty. INNOVATIVE PROPERTY DEVELOPER IN

Established in 2004 and listed on The Stock Exchange of (Stock Code: 272) in October 2006, Shui On Land Limited is the Shui On Group’s flagship property development company in the Chinese Mainland. Headquartered in , Shui On Land has established a solid foundation in the Chinese Mainland and has a proven track record in developing mixed-use, sustainable communities.

Shui On Land develops and operates high-quality residential, office, retail, entertainment and cultural properties in the Chinese Mainland. Shui On Land applies its hallmark approach of master-planning to all projects to ensure that developments are fully consistent with government objectives in economic development and urban planning while simultaneously incorporating local historical and cultural characteristics into our designs and planning. Manifesting the “Total Community” concept, our projects provide a unique environment enabling life enrichment of “Live-Work-Play”.

Shui On Land’s landbank stood at 10.8 million sq.m. (8.6 million sq.m. of leasable and saleable GFA, and 2.2 million sq.m. of clubhouses, car parking spaces and other facilities). Its eight projects, in various stages of development, are all situated in prime locations within the key cities of Shanghai, , , and .

OUR COMMITMENT TO

INVESTORS COMMUNITY EMPLOYEES We are committed to providing We continually look for innovative Shui On Land believes that care attractive and sustainable returns for ways to build and contribute to for our employees and for the our investors based on a well-planned, the community. development of their talents is long-term growth trajectory and crucial to the long-term success strategic direction. of the Group. ENVIRONMENT As an experienced and socially CUSTOMERS responsible property developer, Shui The expectations of our customers are On Land considers respect for the always at the forefront of our thinking environment to be a key ingredient and planning, enabling us to provide high for the long-term development of the quality and add value to all our projects. communities in which we are involved.

WE SUSTAIN OUR VISION BY INTEGRATING QUALITY INTO VISION ALL OF OUR OPERATIONS AND TO BE THE PREMIER AND MOST INNOVATIVE PROPERTY DEVELOPER IN CHINA ASPIRING TO WORLD-CLASS STANDARDS OF EXCELLENCE BRAND PROMISE INNOVATION • QUALITY • EXCELLENCE IN MANAGEMENT, PLANNING, EXECUTION AND CORPORATE SHUI ON SPIRIT GOVERNANCE. INTEGRITY • DEDICATION • INNOVATION • EXCELLENCE CONTENTS

2 Financial Highlights 121 Independent Auditor’s Report

4 Achievement Highlights 128 Consolidated Statement of Profit or Loss

6 Chairman’s Statement 129 Consolidated Statement of Profit or Loss and Other Comprehensive Income 9 Market Updates and Project Profiles 130 Consolidated Statement of 45 Business Review Financial Position 56 Landbank 132 Consolidated Statement of 58 Financial Review Changes in Equity

63 Market Outlook 134 Consolidated Statement of Cash Flows

65 Corporate Governance Report 136 Notes to the Consolidated Financial Statements 77 Risk Management Report 223 Financial Summary 79 Corporate Social Responsibilities 224 Corporate Information 102 Biographies of Directors and Senior Management

108 Directors’ Report FINANCIAL HIGHLIGHTS

OPERATING RESULTS for the Year Ended 31 December 2016 2015 2016 2015 HKD’million HKD’million RMB’million RMB’million Turnover 20,539 8,038 17,600 6,472 Represented by: Property development 18,210 5,440 15,604 4,380 Property investment 2,002 2,002 1,716 1,612 Construction 259 527 222 424 Others 68 69 58 56 Gross profit 6,891 2,098 5,905 1,689 Increase in fair value of the remaining investment properties 1,372 3,689 1,176 2,970 Profit attributable to shareholders 1,270 979 1,088 788 Core earnings of the Group 2,098 3,009 1,798 2,423 Basic earnings per share HKD0.16 HKD0.12 RMB0.14 RMB0.10 Dividend per share Interim paid HKD0.011 HKD0.022 HKD0.011 HKD0.022 Proposed final HKD0.039 HKD0.028 HKD0.039 HKD0.028 Full year HKD0.05 HKD0.05 HKD0.05 HKD0.05

Note: Except for dividend per share that is originally denominated in HK dollar, all of the HK dollar figures presented above are shown for reference only and have been arrived at based on the exchange rate of RMB1.000 to HK$1.167 for 2016 and RMB1.000 to HK$1.242 for 2015 being the average exchange rates that prevailed during the respective years.

FINANCIAL POSITION as of 31 December 2016 2015 RMB’million RMB’million Total bank balances and cash 15,567 10,614 Total assets 122,213 117,170 Total equity 46,256 46,118 Total debt 47,123 47,992 Bank and other borrowings 29,811 33,337 Senior notes 17,312 14,655 Net gearing ratio* 68% 81%

* Calculated on the basis of the excess of the sum of bank and other borrowings and senior notes over the sum of bank balances and cash by total equity.

2 Shui On Land Limited (HKD/share) SHARE D (%) PROFIT MARGIN GROSS (RMB’million) DISPOSAL S C PercentagesarecalculatedbasedonattributableGFA * LANDBANK ALES &OTHER IVIDEND ONTRACTED P 2015 2016 2015 2016 2015 ia Final Final 36% 29% 0.028 26% 21,513

2016 BY USAGE PER 0.039 34% 22,975 GFA*

5% ROPERTY ASSETS as of31December2016 30%

(RMB’million) TO SHAREHOLDERS PROFIT ATTRIBUTABLE (RMB’million) TURNOVER (RMB’million) ASSETS TOTAL 052016 2015 2016 2015 052016 2015 0.5 Serviced Apartments Hotel/ Retail Office Residential Attributable GFA and saleableGFA Total leasable 117,170 788 6,472

122,213 1,088 17,600

million sq.m. 2.4 3.2 2.5 6.5 8.6

(RMB’million) RELATED R (%) RATIO NET GEARING (RMB/share) PER SHARE BASIC EARNINGS 16% ENTAL 052016 2015 2016 2015 2016 2015 21% 81% 0.10 1,612 AND

68% 0.14 1,716 INCOME BY CITY

GFA*

22% 28% 13% (RMB’million) G (RMB’million) AND CASH TOTAL BANKBALANCES (RMB/share) EQUITY PERSHARE SHAREHOLDERS’ Annual Report 2016 ROSS P 052016 2015 2016 2015 2016 2015 Dalian Foshan Chongqing Wuhan Shanghai 10,614 4.57 1,689 Attributable GFA and saleableGFA Total leasable ROFIT 15,567 4.68 5,905

million sq.m.

3 2.8 1.0 1.5 1.0 2.3 6.5 8.6 ACHIEVEMENT HIGHLIGHTS

THE GROUP RECEIVED LEADERSHIP IN ENERGY AND MULTIPLE PROFESSIONAL ENVIRONMENTAL DESIGN (LEED) CERTIFICATIONS FROM THE U.S. • Three office buildings GREEN BUILDING COUNCIL AND in the north of Parcel 311 in Knowledge and MINISTRY OF HOUSING AND Innovation Community URBAN-RURAL DEVELOPMENT (KIC) was certified OF THE PEOPLE’S REPUBLIC OF LEED for Core & Shell – Platinum In January. CHINA, INCLUDING:

THE GROUP’S 2015 ANNUAL The Group was conferred the CSR Contribution Award at the CSR REPORT WON MULTIPLE Excellence Awards 2016 “Green AWARDS FROM PROFESSIONAL Development for a Shared Future” ORGANISATIONS: jointly organised by Jiefang Daily, Shanghai Daily, and eastday.com. Won the 2015 Vision Award – Bronze by League of American Communications Professionals (LACP).

rd Won the following awards conferred The Group was listed by Standard Ranking as 3 of 2016 Top 10 by the 2016 International ARC China Green Property Developers – Commercial Category and th Awards in August: Cover Photo/ 9 of 2016 Top 30 China Green Property Developers. Design – Honors in the “Real Estate NOVEMBER Development/Service: Various & Multi-Use” category; Traditional The Group was listed as 6th of 2016 Top 30 Most Competitive Annual Report – Silver in the “Real Green Property Developers, one of the 2016 Top 10 China Estate Development/Service: Various Green Property Developers, and 10th of 2016 Green Property & Multi-Use” category; and Interior Operations in the Top China Green Property Developers Design – Gold in the “Real Estate Ranking List, jointly conferred by China Real Estate Business, Development/Service: Various & CIHAF Organizing Committee, and China Green Building Multi-Use” category. Industry Development Alliance. DECEMBER Received Citation for Design in The Group was conferred the The Hong Kong Management Contribution to National Strategy Association’s Best Annual Reports Award at the 2016 Best CSR Practices Awards 2016, and won Silver in of Foreign Invested Enterprises in China, Annual Reports – Print (“Property organised by China Association of Development” category) in the 2016 Enterprises with Foreign Investment. Galaxy Awards. The Group was selected for the ”Value THE GROUP Co-Creation” 2016 Outstanding CSR Practices, jointly awarded by Fudan JULY University School of Management, CIIC Guanaitong, etc. The Group was conferred the Most Valuable Case Award in the 2016 China Learning & Development Value Award by HR Excellence Centre.

4 Shui On Land Limited • Towers A and B, Rui Hong CHINESE GREEN BUILDING Xin Cheng Lot 10 – Commercial was pre- EVALUATION LABEL certified LEED for Core & • Rui Hong Xin Cheng Lot 4 obtained a 2-star Shell – Gold in March. certification by the Chinese Green Building Evaluation Label in April. • Ruihong Tiandi – Hall of the Moon was certified • Rui Hong Xin Cheng Lot 6 LEED for Core & Shell – obtained a 2-star certification Gold in September. by the Chinese Green Building Evaluation Label in August.

SUBSIDIARIES AND PROJECTS Rui Hong Xin Cheng • The Gallery received multiple awards for its outstanding market Projects managed by Feng Cheng transactions in the reporting year, including Property Management were “2016 Shanghai Luxury Residences with awarded the following honors in Potential” by Jones Lang LaSalle. the reporting year. 5 Corporate Avenue was named “2016 THE HUB won the Commercial and Office Shanghai Property Management Project Gold Award and Interior Category Gold Award Excellent Model Project” by The conferred by the Real Estate Design China Award. It was also Trade Association of Shanghai Property Management; and named 2016 Ideal Shanghai Best Gourmet Landmark by Wuhan Ping An Financial Centre was named “2016 Wuhan Shanghai Daily. Property Management Model Building” by Wuhan Association of Real Property Management. KIC won the Commercial Project Gold Award conferred by the Real Estate Design China Award and Gold Award – Best Mixed Use Development by the MIPIM Asia Awards.

Wuhan Tiandi won a series of awards in the reporting year. Wuhan Tiandi Site A was selected as the Tall Building Award Winner – Urban Habitat Award 2016 by the Council of Tall Buildings and Urban Habitat; Wuhan Tiandi was selected as one of two Excellent Units of International Community Development at the International Community Review convened by the Wuhan Shanghai Taipingqiao was awarded multiple awards in the municipal government. reporting year. Shanghai Xintiandi was named a “Famous Trademark of Shanghai” by Shanghai Administration for Chongqing Tiandi Lake Ville Lots B6/03 & B9/03 were listed Industry and Commerce. It was selected as Top 20 Cultural as two of the 2015 Top 10 Safe Construction Sites and 2015 Landmarks All Over the World by Forbes and a Classic Case Top 10 Good Dust Control Construction Sites by the Yuzhong of Urban Renewal in the World by the World Bank. Xintiandi District Development and Transport Committee in Chongqing. Style shopping centre was awarded “2016 City Weekend Most Popular Shopping Centre” and “TimeOut Best Shopping Dalian Tiandi Splendid Bay was awarded 2016 Excellent Destination of the Year”. HUBINDAO was awarded “TimeOut Residential Property in the Dalian City Area by Oriental Vision. Top Family-Friendly Mall”. THE HOUSE was featured in the 2016 Shanghai WOW! Shanghai Terrace Festival. Foshan Lingnan Tiandi Commercial District was conferred Commercial and Office Project Gold Award by the Real Estate Ruihong Tiandi – Hall of the Moon had its soft opening in Design China Award. December. With “Life, Music, Home” as its brand concept, Hall of the Moon created an innovative “musical entertainment” label that attracted many creative and influential new-concept brands, which have proved to be very popular with shoppers.

Annual Report 2016 5 CHAIRMAN’S STATEMENT

The strength of Shui On Land helped it weather the considerable global economic and political uncertainty. Our increased asset turnover rate generated a robust income stream and cash flow, reduced our debt gearing and strengthened our balance sheet.

The Group continues to strike a good balance between long and short term goals as well as between property sales and recurrent income from our solid rental portfolio. We are balancing our asset-light strategy with plans for future capital investments.

We aim to continuously enhance performance in management efficiency and decision-making which will result in better financial return and profitability.

FINANCIAL HIGHLIGHTS During the year under review, turnover increased by 172% to RMB17,600 million, as property sales recognised as turnover substantially increased by 256% to RMB15,604 million. In addition to the property sales recognised as turnover, the Group completed RMB5,700 million of asset disposals recognised under disposal of subsidiaries (the disposal of Corporate Avenue 3 at Shanghai Taipingqiao).

Rental and related income increased by 6% to RMB1,716 million. The increase was a result of continued leasing progress made at newly completed properties as well as The asset-light strategy we adopted three years ago was higher occupancies and rental growth from the existing key to our Group’s performance in 2016. Despite growing investment property portfolio. market uncertainties we were able to unlock the value of our portfolio, seek new partnerships and enhance returns from Gross profit increased by 250% to RMB5,905 million in 2016, our long-term master-planned development projects. while operating profit surged by 427% to RMB5,272 million. Meanwhile, gross profit margin increased by 8 percentage This refined strategy has made us a nimble company that is points to 34% in 2016. better positioned to seize new growth opportunities. It has Profit attributable to shareholders was RMB1,088 million in put us in a strong position going into 2017, when Shui On 2016, representing a 38% increase compared to RMB788 Land will focus on Strength, Balance and Performance amid a million in 2015. The increase reflected our strong sales during rapidly changing and challenging market environment. the year, and a decline in minority and convertible perpetual securities ownership interests.

6 Shui On Land Limited COMPLEMENTARY TO OUR ASSET-LIGHT APPROACH, WE WILL ALSO PARTNER WITH OTHER INVESTORS, LANDOWNERS OR DEVELOPERS IN NEW AND