We are a leading developer, owner and operator of mixed-use, principally commercial properties in Hong Kong and Mainland China, with a well-established record of creating long-term value by Annual Report transforming urban areas. Our business comprises three main areas: 2012 Property Property Hotel Annual Report 2012 Investment Trading Investment INDIGO www.swireproperties.com Stock Code: 1972 Beijing C M Y K SPAR 2012 Cover C M Y K SPAR 2012 Cover check We are a leading developer, owner and operator of mixed-use, principally commercial properties in Hong Kong and Mainland China, with a well-established record of creating long-term value by Annual Report transforming urban areas. Our business comprises three main areas: 2012 Property Property Hotel Annual Report 2012 Investment Trading Investment INDIGO www.swireproperties.com Stock Code: 1972 Beijing C M Y K SPAR 2012 Cover C M Y K SPAR 2012 Cover check 2012 Highlights Listing of Swire Properties by way of introduction on the Main Board of the Stock Exchange of Hong Kong January – Hong Kong details on page 79 Announcement of a new Completion of Completion and mixed-use development, the OPUS HONG KONG, handover of the Brickell CityCentre Frank Gehry’s first residential residential units at project, in Miami, Florida. building in Asia AZURA A ground-breaking ceremony was held later in June February – Miami March – Hong Kong October – Hong Kong details on page 35 details on page 42 details on page 40 Grand opening of INDIGO in Beijing, a retail- led mixed-use development September – Beijing details on page 32 Swire Properties celebrated its 40th anniversary with the “Swire Properties Happy 40th Street Party” December – Hong Kong details on page 87 Contents 2 Company Profile AUDITOR’S REPORT AND ACCOUNTS 3 Financial Highlights 92 Independent Auditor’s Report 4 Ten-Year Financial Summary 93 Consolidated Income Statement 7 Chairman’s Statement 94 Consolidated Statement of Comprehensive Income 12 Key Business Strategies 95 Consolidated Statement of Financial Position 96 Company Statement of Financial Position MANAGEMENT DISCUSSION & 97 Consolidated Statement of Cash Flows ANALYSIS 98 Consolidated Statement of Changes in Equity 16 Review of Operations 99 Notes to the Accounts 48 Financial Review 140 Principal Accounting Policies 55 Financing 149 Principal Subsidiary, Jointly Controlled and Associated Companies CORPORATE GOVERNANCE & SUSTAINABILITY SUPPLEMENTARY INFORMATION 66 Corporate Governance 152 Schedule of Principal Group Properties 77 Directors and Officer 163 Glossary 79 Directors’ Report 164 Financial Calendar and Information for Investors 86 Sustainable Development Company Profile Swire Properties is a leading developer, owner and operator of mixed-use, principally commercial properties in Hong Kong and Mainland China, with a well-established record of creating long-term value by transforming urban areas. Our business comprises three main areas: property investment, property trading and hotel investment. Founded in Hong Kong in 1972, Swire Properties is listed on The Stock Exchange of Hong Kong Limited and, with its subsidiaries, employs more than 4,500 people. In Hong Kong, we have spent over 40 years developing Island East from an industrial area into one of Hong Kong’s largest business districts integrated with extensive road and retail connection and served by a hotel and the largest shopping mall on Hong Kong Island. Pacific Place, built on the former Victoria Barracks site, is now one of Hong Kong’s premier retail and business addresses. In Mainland China, Swire Properties has five major mixed-use projects either in operation or under development in Beijing, Guangzhou, Chengdu and Shanghai. Similar in scale to our developments in Hong Kong, our Mainland China properties are located in commercial districts near transport hubs. Swire Properties continues to expand its activities in the luxury residential market in Hong Kong. Under our Swire Hotels brand, we develop and manage hotels in Hong Kong, Mainland China and the United Kingdom. The Company has a significant presence in Miami, Florida, U.S.A., where it commenced business in 1980. It is in the process of developing Brickell CityCentre, a large-scale mixed-use project in the Brickell financial district in Miami. The Company has an office in Singapore to explore investment opportunities in the city’s commercial and property markets. 2 Swire Properties Annual Report | 2012 Financial Highlights 2012 2011 Change Results Note HK$M HK$M % Turnover 14,052 9,581 +46.7% Operating profit 21,508 26,945 -20.2% Profit attributable to the Company’s shareholders Adjusted Underlying (a), (c) 6,932 4,372 +58.6% Underlying (b), (c) 6,945 12,932 -46.3% Reported 18,763 25,126 -25.3% Cash generated from operations 8,116 7,396 +9.7% Net cash inflow before financing 1,474 17,418 -91.5% HK$ HK$ Earnings per share Adjusted Underlying (d) 1.18 0.77 +53.2% Underlying (d) 1.19 2.27 -47.6% Reported (d) 3.21 4.40 -27.0% Dividends per share Special interim – 1.76 N/A First interim 0.22 0.18 +22.2% Second interim 0.38 – N/A Financial Position HK$M HK$M Total equity (including non-controlling interest) 193,256 176,575 +9.4% Net debt 28,921 27,700 +4.4% Gearing Ratio (b) 15.0% 15.7% -0.7%pt. HK$ HK$ Equity attributable to the Company’s shareholders per share Underlying (b), (c) 34.01 30.90 +10.1% Reported (b) 32.93 30.09 +9.4% Notes: (a) Adjusted underlying profit excludes the impact of changes in the fair value of investment properties and the deferred tax on investment properties, as well as profit from the disposal of investment properties. Refer to glossary on page 163 for definition. (b) Refer to glossary on page 163 for definition. (c) A reconciliation between reported profit, underlying profit and adjusted underlying profit and reported equity and underlying equity attributable to the Company’s shareholders is provided on page 17. (d) Refer to Note 14 in the accounts for the weighted average number of shares. Underlying Prot HK$M 16,000 by Segment 12,932 14,000 100 12,000 10,000 6,945 8,000 8,560 8,560 15 6,000 13 1,834 Property investment 4,000 Property trading 5,083 2,000 4,343 Capital prots less impairments 0 (71) Hotels -2,000 2012 2011 Ten-Year Financial Summary 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 HK$M HK$M HK$M HK$M HK$M HK$M HK$M HK$M HK$M HK$M INCOME STATEMENT Turnover Property investment 4,366 4,060 4,382 4,872 5,663 6,901 7,516 7,953 8,651 9,123 Property trading 2,366 2,506 1,339 554 10 889 643 400 213 4,147 Hotel – – – 27 148 156 172 518 717 782 6,732 6,566 5,721 5,453 5,821 7,946 8,331 8,871 9,581 14,052 Profit Attributable to the Company’s Shareholders Property investment 2,046 1,459 1,917 2,592 3,066 3,336 3,970 4,589 4,656 4,906 Property trading 278 667 264 198 (43) 95 23 87 7 1,659 Hotels 9 80 104 126 175 73 (332) (109) (33) 14 Change in fair value of investment properties (2,688) 15,224 12,365 17,221 19,530 (236) 13,596 21,478 20,496 12,184 (355) 17,430 14,650 20,137 22,728 3,268 17,257 26,045 25,126 18,763 Interim and final dividends for the year 1,254 1,141 2,303 1,532 1,652 2,966 25 2,426 11,067 3,510 Retained profit (1,609) 16,289 12,347 18,605 21,076 302 17,232 23,619 14,059 15,253 STATEMENT OF FINANCIAL POSITION Net Assets Employed Property investment 52,731 71,247 85,965 105,658 133,454 140,510 155,411 183,092 191,273 207,757 Property trading 3,593 1,555 701 1,448 2,762 3,496 3,772 6,303 6,581 7,309 Hotel 644 717 1,037 1,429 3,624 4,037 5,523 5,797 6,421 7,111 56,968 73,519 87,703 108,535 139,840 148,043 164,706 195,192 204,275 222,177 Financed by Equity attributable to the Company’s shareholders 40,237 56,533 70,027 88,229 109,605 110,305 129,815 157,877 176,043 192,614 Non-controlling interests 4,927 6,193 6,185 296 801 1,068 424 479 532 642 Net debt 11,804 10,793 11,491 20,010 29,434 36,670 34,467 36,836 27,700 28,921 56,968 73,519 87,703 108,535 139,840 148,043 164,706 195,192 204,275 222,177 HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ Earnings/(loss) per share (0.06) 3.17 2.67 3.67 4.14 0.60 3.14 4.58 4.40 3.21 Dividends per share 0.23 0.21 0.42 0.28 0.30 0.54 – 0.43 1.94 0.60 Equity attributable to shareholders per share 7.33 10.29 12.75 16.06 19.96 20.08 23.61 27.75 30.09 32.93 RATIOS Return on average equity attributable to the Company’s shareholders -0.9% 36.0% 23.2% 25.4% 23.0% 3.0% 14.4% 18.1% 15.0% 10.2% Gearing ratio 26.14% 17.21% 15.08% 22.60% 26.66% 32.93% 26.46% 23.26% 15.69% 14.97% Interest cover – times 2.13 20.02 23.11 32.16 33.71 4.81 17.57 21.80 18.24 15.73 Dividend cover – times (0.28) 15.28 6.36 13.14 13.76 1.10 N/A 10.74 2.27 5.35 UNDERLYING Profit (HK$M) 2,819 2,617 2,577 3,070 3,303 3,558 3,726 4,782 12,932 6,945 Equity attributable to the Company’s shareholders (HK$M) 41,694 58,064 71,573 90,032 111,640 113,664 133,410 161,651 180,749 198,983 Earnings per share (HK$) 0.51 0.48 0.47 0.56 0.60 0.65 0.68 0.84 2.27 1.19 Equity attributable to shareholders per share (HK$) 7.59 10.57 13.03 16.39 20.33 20.70 24.26 28.41 30.90 34.01 Return on average equity attributable to the Company’s shareholders 6.63% 5.25% 3.98% 3.80% 3.28% 3.16% 3.02% 3.24% 7.55% 3.66% Gearing ratio 25.30% 16.78% 14.78% 22.15% 26.18% 31.94% 25.75% 22.71% 15.28% 14.49% Interest cover – times 7.21 4.25 5.58 6.09 5.95 4.50 4.33 5.38 12.02 7.91 Dividend cover – times 2.25 2.29 1.12 2.00 2.00 1.20 N/A 1.97 1.17 1.98 Notes: 1.