Stock Code : 683 (Incorporated in Bermuda with limited liability) ANNUAL REPORT 2013 Kerry Properties Limited (“KPL”) is a world-class property company with significant investments throughout Asia. The Company is known for its property development activities in the People's Republic of China (the “PRC”) and Hong Kong. In both markets, KPL focuses on investing in premium quality property developments in prime locations. The Company has developed a successful business model for doing this over many years and has considerable experience as a developer and manager of quality properties. We act on principles of fairness and integrity, and we value the many relationships we have developed over our long history with staff, suppliers, partners, government agencies, and other key stakeholders. Image on Front Cover Jing An Kerry Centre, Shanghai, PRC CORPORATE INFORMATION & KEY DATES BOARD OF DIRECTORS REGISTERED OFFICE Executive Directors Canon’s Court, 22 Victoria Street Mr WONG Siu Kong, Chairman Hamilton HM12, Bermuda Mr HO Shut Kan, Co-Managing Director Mr QIAN Shaohua, Co-Managing Director HEAD OFFICE AND PRINCIPAL PLACE OF Mr CHAN Wai Ming, William BUSINESS Mr Bryan Pallop GAW 25/F, Kerry Centre, 683 King’s Road Quarry Bay, Hong Kong Independent Non-executive Directors Mr LAU Ling Fai, Herald PRINCIPAL SHARE REGISTRAR AND Mr KU Moon Lun TRANSFER OFFICE Ms WONG Yu Pok, Marina, JP MUFG Fund Services (Bermuda) Limited Mr CHANG Tso Tung, Stephen 26 Burnaby Street, Hamilton HM11, Bermuda AUDIT AND CORPORATE GOVERNANCE HONG KONG BRANCH SHARE REGISTRAR AND COMMITTEE TRANSFER OFFICE Mr LAU Ling Fai, Herald, Chairman Tricor Abacus Limited Mr KU Moon Lun Level 22, Hopewell Centre, 183 Queen’s Road East Ms WONG Yu Pok, Marina, JP Hong Kong Mr CHANG Tso Tung, Stephen CORPORATE COMMUNICATION DEPARTMENT REMUNERATION COMMITTEE Kerry Properties Limited Mr LAU Ling Fai, Herald, Chairman 25/F, Kerry Centre, 683 King’s Road Mr WONG Siu Kong Quarry Bay, Hong Kong Mr KU Moon Lun Telephone: (852) 2967 2200 Ms WONG Yu Pok, Marina, JP Facsimile: (852) 2967 2900 Mr CHANG Tso Tung, Stephen Email: [email protected] nomination COMMITTEE INVESTOR RELATIONS DEPARTMENT Mr WONG Siu Kong, Chairman Kerry Properties Limited Mr LAU Ling Fai, Herald 25/F, Kerry Centre, 683 King’s Road Mr KU Moon Lun Quarry Bay, Hong Kong Ms Wong Yu Pok, Marina, JP Telephone: (852) 2967 2200 Mr CHANG Tso Tung, Stephen Facsimile: (852) 2967 2900 Email: [email protected] FINANCE COMMITTEE Mr WONG Siu Kong WEBSITE Mr HO Shut Kan www.kerryprops.com EXECUTIVE COMMITTEE STOCK CODES Mr WONG Siu Kong Stock Exchange of Hong Kong: 683 Mr HO Shut Kan Bloomberg: 683 HK Mr QIAN Shaohua Reuters: 683.HK Mr CHAN Wai Ming, William Mr Bryan Pallop GAW KEY DATES Annual General Meeting COMPANY SECRETARY 5 May 2014 Ms LI Siu Ching, Liz Closure of Registers of Members AUDITOR 2 May 2014 to 5 May 2014 and 12 May 2014 PricewaterhouseCoopers Proposed Payment of Final Dividend 20 May 2014 2 KERRY PROPERTIES LIMITED ANNUAL REPORT 2013 CONTENTS 4 Financial Highlights 7 Chairman’s Statement 10 Management Discussion & Analysis 10 Overall Results 12 Review of Property Business 31 Financial Review 32 Particulars of Properties Held 42 Corporate Social Responsibility Report 51 Awards and Citations 55 Corporate Governance Report 65 Audit and Corporate Governance Committee Report 67 Remuneration Committee Report 68 Nomination Committee Report 69 Internal Controls 70 Directors and Senior Management 73 Report of Directors 85 Independent Auditor’s Report 87 Consolidated Income Statement 88 Consolidated Statement of Comprehensive Income 89 Consolidated Statement of Financial Position 91 Statement of Financial Position 92 Consolidated Statement of Cash Flows 93 Consolidated Statement of Changes in Equity 95 Notes to The Financial Statements 200 Five-Year Financial Summary ANNUAL REPORT 2013 KERRY PROPERTIES LIMITED 3 FINANCIAL HIGHLIGHTS Two-year Overview FY 2013 FY 2012 % Change Turnover (HK$M) Continuing operations 13,970 15,218 -8% Discontinued operations 19,188 19,295 -1% Total 33,158 34,513 -4% Gross profit (HK$M) Continuing operations 6,057 6,103 -1% Discontinued operations 2,897 2,686 +8% Total 8,954 8,789 +2% Gross profit margin (%) Continuing operations 43.4 40.1 Discontinued operations 15.1 13.9 Total 27.0 25.5 Operating profit (HK$M) Continuing operations 11,745 7,812 +50% Discontinued operations 1,918 1,520 +26% Total 13,663 9,332 +46% Operating profit margin (%) Continuing operations 84.1 51.3 Discontinued operations 10.0 7.9 Total 41.2 27.0 Profit attributable to shareholders (HK$M) – before fair value change of properties and spin-off gain 4,413 4,696 -6% – after fair value change of properties and spin-off gain 13,154 6,961 +89% Net profit margin (%) – before fair value change of properties and spin-off gain 13.3 13.6 – after fair value change of properties and spin-off gain 39.7 20.2 Earnings per share (HK$) – before fair value change of properties and spin-off gain 3.06 3.26 -6% – after fair value change of properties and spin-off gain 9.13 4.84 +89% Shareholders’ equity (HK$M) 75,755 70,752 +7% Net borrowings (HK$M) 23,482 15,867 +48% Net asset value per share (HK$) 52.45 49.16 +7% Share price as at 31 December (HK$) 26.90 40.25 -33% Price earnings ratio# (times) – before fair value change of properties and spin-off gain 8.8 12.3 – after fair value change of properties and spin-off gain 2.9 8.3 Market capitalization as at 31 December# (HK$M) 38,851 57,925 -33% Dividend per share (HK$) 0.90 0.95 -5% Dividend payout ratio (%) – before fair value change of properties and spin-off gain 29.4 29.1 – after fair value change of properties and spin-off gain 9.9 19.6 Dividend cover (times) – before fair value change of properties and spin-off gain 3.4 3.4 – after fair value change of properties and spin-off gain 10.1 5.1 Dividend yield# (%) 3.3 2.4 Return on shareholders’ equity (%) – before fair value change of properties and spin-off gain 5.8 6.6 – after fair value change of properties and spin-off gain 17.4 9.8 Gearing (%) 31.0 22.4 Interest cover – excluding discontinued operations (times) – before fair value change of properties 5.8 7.0 – after fair value change of properties 13.4 10.5 Current ratio (times) 1.7 2.2 Liquidity ratio (times) 1.0 1.5 Discount to net asset value# (%) (48.7) (18.1) # Based on share prices as at 31 December 2013 and 31 December 2012, respectively. 4 KERRY PROPERTIES LIMITED ANNUAL REPORT 2013 BreakdownBreakdown of Total Turnover of Total Turnover Breakdown of Recurrent Income HK$ million HK$ million 36,000 34,513 24,000 33,158 21,893 33,000 22,000 21,409 30,000 20,000 17,948 27,000 18,000 56% 24,000 16,000 58% 21,226 20,660 21,000 14,000 12,709 88% 18,000 12,000 90% 51% 15,000 10,000 9,385 89% 12,938 12,000 78% 8,000 86% 9,000 59% 38% 34% 6,000 82% 6,000 40% 4,000 28% 3,000 13% 2,000 10% 5% 6% 9% 11% 8% 8% 15% 12% 10% 2% 1% 1% 1% 2% 3% 2% 1% 1% 2% FY2009 FY2010 FY2011 FY2012 FY2013 FY2009 FY2010 FY2011 FY2012 FY2013 Proceeds from sales of properties Rental and others Rental and others Hotel revenue Hotel revenue Logistics income – Discontinued operations Logistics income – Discontinued operations The Group recorded a 4% decrease in total turnover (including discontinued operations) for FY 2013 to HK$33,158 million (2012: HK$34,513 million). Net Profit Net Profit Profit Attributable to Shareholders Total Recurrent before fair after fair Turnover Income value change value change HK$ million (including (including of properties of properties discontinued discontinued and spin-off and spin-off 16,000 operations) operations) % gain gain HK$ Million HK$ Million Weighting HK$ Million HK$ Million 14,000 13,154 12,000 FY 2009 12,938 9,385 73% 2,163 4,635 10,000 FY 2010 21,226 12,709 60% 3,419 6,703 8,000 6,961 6,703 FY 2011 20,660 17,948 87% 3,657 5,348 6,000 5,348 4,635 FY 2012 34,513 21,409 62% 4,696 6,961 4,000 2,000 FY 2013 33,158 21,893 66% 4,413 13,154 FY2009 FY2010 FY2011 FY2012 FY2013 The Group’s net profit attributable to shareholders for FY 2013 increased by 89% to HK$13,154 million (2012: HK$6,961 million). ANNUAL REPORT 2013 KERRY PROPERTIES LIMITED 5 Financial Highlights Earnings per Share Earnings per Share (before fair value change of properties and spin-off gain) (after fair value change of properties and spin-off gain) HK$ HK$ 4.0 10 9.13 9 3.5 3.26 3.06 8 3.0 2.54 7 2.39 2.5 6 2.0 5 4.68 4.84 1.51 4 3.72 1.5 3.25 3 1.0 2 0.5 1 FY2009 FY2010 FY2011 FY2012 FY2013 FY2009 FY2010 FY2011 FY2012 FY2013 Gross Asset Value of Properties HK$98,536 Million HK$90,104 Million 2% 11% 2% 1% 10% 3% 2% PRC 10% Hong Kong Residential Hong Kong Commercial 33% FY 2013 FY 2012 48% Macau 52% Overseas 26% Warehouses & Logistics Centres 6 KERRY PROPERTIES LIMITED ANNUAL REPORT 2013 Chairman’s STATEMENT Mr Wong Siu Kong Chairman Dear Shareholders, On behalf of the Board, I am delighted to report the annual results of the Group for the year ended 31 December 2013.