Stock Code: 12 Annual Report 2020 Embracing Innovation for a Sustainable Future Corporate Founded in 1976 by Dr The Honourable Lee Shau Kee, GBM, Henderson Land Development Company Limited is a leading property group with a Profile focus on Hong Kong and mainland China. Its core businesses comprise property development and property investment. In addition, it has direct equity interests in a listed subsidiary, Henderson Investment Limited, and three listed associates, The Hong Kong and China Gas Company Limited (which in turn has equity stakes in a listed subsidiary, Towngas China Company Limited), Hong Kong Ferry (Holdings) Company Limited and Miramar Hotel and Investment Company, Limited. Henderson Land has been listed in Hong Kong since 1981 where it is one of the largest property groups. As at 31 December 2020, Henderson Land had a market capitalisation of HK$146 billion and the combined market capitalisation of the Company, its listed subsidiary and its associates was about HK$375 billion. The Company is vertically integrated, with project management, construction, property management, and financial services supporting its core businesses. In all aspects of its operations, Henderson Land strives to add value for its shareholders, customers and the community through its commitment to excellence in product quality and service delivery as well as a continuous focus on sustainability and the environment. Front cover: Murray Road Project, Hong Kong by Zaha Hadid Architects for Henderson Land Render by PixelFlakes Contents Inside front Corporate Profile 2 Land Bank – Hong Kong and Mainland China 4 Awards & Accolades 6 Group Structure 7 Highlights of 2020 Final Results 10 Chairmen’s Statement Review of Operations Business in Hong Kong 44 Progress of Major Development Projects 58 Major Completed Investment Properties Business in Mainland China 64 Progress of Major Development Projects 77 Major Completed Investment Properties 78 Business Model and Strategic Direction 80 Financial Review 94 Five Year Financial Summary 97 Sustainability 110 Corporate Governance Report 127 Report of the Directors 147 Biographical Details of Directors and Senior Management 157 Financial Statements 158 Report of the Independent Auditor 281 Corporate Information 284 Financial Calendar FORWARD-LOOKING STATEMENTS This annual report contains certain statements that are forward looking or which use certain forward-looking terminologies. These forward-looking statements are based on the current beliefs, assumptions and expectations of the Board of Directors of the Company regarding the industry and markets in which it operates. These forward-looking statements are subject to risks, uncertainties and other factors beyond the Company’s control which may cause actual results or performance to differ materially from those expressed or implied in such forward-looking statements. Land Bank – Hong Kong and Mainland China Heilongjiang Hong Kong Jilin Liaoning 4.45 million sq.ft. New Territories Xinjiang Beijing Inner Mongolia 1.04 million sq.ft. Kowloon Hebei Hong Kong Ningxia Shanxi Island Shandong 5.86 million sq.ft. Qinghai Gansu Shaanxi Jiangsu 3.31 million sq.ft. Henan 6.1million sq.ft. Anhui 0.69 million sq.ft. 2.1million sq.ft. Shanghai million sq.ft. Xizang Hubei 3.39 Sichuan 5.4 million sq.ft. Zhejiang 4.55 million sq.ft. Chongqing Jiangxi Hunan 3.37 million sq.ft. Fujian 0.34 million sq.ft. Guizhou The diagram above provides an overview of the Group’s Taiwan substantial and diverse, yet balanced development land bank in Hong Kong and mainland China as at Yunnan Guangdong 3.10 million sq.ft. 31 December 2020. It illustrates the attributable Guangxi developable gross floor area by location. Henderson Land’s quality land reserve is earmarked for both Hong Kong commercial and residential projects, which are expected to provide handsome returns for the Group during the years to come. Hainan 2 Henderson Land Development Company Limited Annual Report 2020 3 Awards & Accolades The variety of honours awarded to Henderson Land this year are testimony to our continuing position as a leading developer in the industry, as the Group is again recognised for achieving excellence in many aspects of our operations. Murray Road Project Among these, the prestigious international awards and certifications received for our Murray Road Project in the heart of Hong Kong’s central business district are an endorsement of the Group’s leadership in world-class sustainable development. With innovation at the heart of Henderson Land’s approach, the Group has also won accolades for the application of smart technology and original solutions that enhance our operational efficiency and environmental performance. This year’s 11. MIPIM Asia Awards 2020 awards also reflect Henderson Land’s continuing excellence in the functions of product delivery and customer service. Best Futura Project – Silver 11 12 Winner Sustainability Awards 12. China Green Building Design Label 3-Star Rating 13. Asia Property Awards 2020 Best Office Architectural Design (Asia) – 5-Star Winner Best Office Architectural Design (Hong Kong) – Winner Best Office Interior Design (Hong Kong) – Winner 14. BEAM Plus 13 14 (New Buildings) Provisional Platinum Rating 15. Build4Asia Awards 2020 Outstanding Future Project 2 16. Outstanding Property Award London 2020 1 7 Architectural Design – Platinum Winner Interior Design – 3 Platinum Winner Architectural Design/ Commercial, High-Rise – Winner 15 16 6 Other Award Highlights 4 5 8 2020 1. Asia Property Awards 2020 Residential High Rise 6. ESG Leading Enterprise Provisional Bronze Rating Best Mixed Use Development Development Hong Kong – Awards 2020 (206-212 Johnston Road) (China – Hong Kong) – 5-Star Award Winner (The Richmond) ESG Leading Enterprise Award Winner (Aquila • Square Mile) (Category I: Market 8. CAHK STAR Award 2020 4. Leadership in Energy and Best 5G Connected Arena Best Mixed Use Development capitalization over HK$20 9 – Gold Award (Hong Kong) – Winner Environmental Design (LEED) billion) (Aquila • Square Mile) Platinum Certification (Building Operations and Maintenance: 7. BEAM Plus (New Buildings) 9. HKQAA Sustainability 2. China Green Building Existing Buildings) Final Silver Rating (AXIS, Rating Seal 2020-2021 Design Label (World Financial Centre, Beijing) Eden Manor, Park One, AA Rating 3-Star Rating (73 Caine Road) (Henderson 688, Shanghai) South Walk • Aura) 10. Hang Seng Corporate Final Bronze Rating (Parker 33) Sustainability Index Series 3. Asia Pacific Property 5. Build4Asia Awards 2020 Provisional Gold Rating Constituent Company Awards 2020-2021 Outstanding Future Project (73 Caine Road) Best Residential High Rise (25-29 Kok Cheung Street) Provisional Silver Rating Development Hong Kong – Project of the Year (Commercial) 5-Star Winner (73 Caine Road) (2 Tai Cheong Street, 65-71 10 (Harbour East) Main Street Ap Lei Chau) 4 Henderson Land Development Company Limited Annual Report 2020 5 Group Structure Henderson Land Group Structure Market capitalisation as at 31 December 2020 Henderson Land Development Company Limited: HK$146 billion Six listed companies of Henderson Land Group: HK$375 billion Henderson Land Development Company Limited Investment holding, property development and investment in Hong Kong and mainland China, project and property management, construction and provision of finance 33.41% 69.27% 41.53% 49.91% Hong Kong Ferry Henderson The Hong Kong Miramar Hotel (Holdings) Investment and China Gas and Investment Company Limited Limited Company Limited Company, Limited Property development Department store and Production and distribution Hotel and serviced and investment supermarket operations of gas in Hong Kong and apartment, property rental, in Hong Kong mainland China food and beverage, and travel 68.21% Towngas China Company Limited Sale and distribution of liquefied petroleum gas and natural gas in mainland China Note: All attributable interests shown above were figures as of 31 December 2020. 6 Henderson Land Development Company Limited Highlights of 2020 Final Results For the year ended 31 December 2020 2019 Note HK$ million HK$ million Change Property sales – Revenue 1 21,108 17,088 +23.5% – Pre-tax profit contribution 1, 2 9,649 5,888 +63.9% Property leasing – Gross rental income 1 8,603 9,163 -6.1% – Pre-tax net rental income 1 6,467 7,065 -8.5% Profit attributable to equity shareholders – Underlying profit 3 14,899 14,640 +1.8% – Reported profit 10,192 16,994 -40.0% HK$ HK$ Earnings per share – Based on underlying profit 3, 4 3.08 3.02 +2.0% – Based on reported profit 4 2.11 3.51 -40.0% Dividends per share 1.80 1.80 No change At 31 December At 31 December 2020 2019 Note HK$ HK$ Change Net asset value per share 4 67.67 66.28 +2.1% Net debt to shareholders’ equity 26.9% 25.5% +1.4 percentage points Million square feet Million square feet Properties in Hong Kong Land bank (attributable floor area) – Properties held for/under development 5 13.6 13.8 – Unsold units from major launched projects 0.8 0.8 Sub-total: 14.4 14.6 – Completed properties (including hotels) for rental 10.0 9.9 Total: 24.4 24.5 New Territories land (attributable land area) 44.4 44.9 Properties in Mainland China Land bank (attributable floor area) – Properties held for/under development 30.1 31.9 – Completed stock for sale 0.8 0.5 – Completed properties for rental 7.9 6.4 38.8 38.8 Note 1: This amount includes the Group’s attributable share of contributions from subsidiaries, associates and joint ventures (“JVs”). Note 2: If the fair value change of the related properties is excluded, the pre-tax underlying profit contribution for the year ended 31 December 2020 should be HK$9,649 million (2019: HK$5,889 million). Note 3: Excluding the Group’s attributable share of fair value change (net of tax) of the investment properties held by subsidiaries, associates and JVs. Note 4: The earnings per share were calculated based on the weighted average number of shares as adjusted for the effect of the bonus issues under Hong Kong Accounting Standard 33, “Earnings Per Share”.