COVER ILLUSTRATION 2 4 6 8 1 3 7 9 5 On cover: On back cover: 1. Jing An Kerry Centre, Shanghai 6. Kerry Parkside, Shanghai 2. Beijing Kerry Centre, Beijing 7. Shenzhen Kerry Plaza, Shenzhen 3. Kerry Centre, Hong Kong 8. Shenyang Kerry Centre, Shenyang 4. Qianhai Kerry Centre, Shenzhen 9. MegaBox, Hong Kong 5. Hangzhou Kerry Centre, Hangzhou Kerry Properties Limited (“KPL”) is a world-class property company with significant investments in Asia. The Company is known for its property development activities in mainland China 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. Kerry Centre, Hong Kong ANNUAL REPORT 2020 3 CORPORATE INFORMATION & KEY DATES BOARD OF DIRECTORS PRINCIPAL SHARE REGISTRAR AND Executive Directors TRANSFER OFFICE Mr Wong Siu Kong, Chairman MUFG Fund Services (Bermuda) Limited Mr Kuok Khoon Hua, Vice Chairman and 4th floor North, Cedar House, 41 Cedar Avenue Chief Executive Officer Hamilton HM 12, Bermuda Mr Bryan Pallop Gaw Mr Wong Chi Kong, Louis, Senior Vice President HONG KONG BRANCH SHARE REGISTRAR AND of the CEO Office TRANSFER OFFICE Tricor Abacus Limited ’ Independent Non-executive Directors Level 54, Hopewell Centre, 183 Queen s Road East Hong Kong Ms Wong Yu Pok, Marina, JP Mr Chang Tso Tung, Stephen CORPORATE COMMUNICATION DEPARTMENT Mr Hui Chun Yue, David Kerry Properties Limited 25/F, Kerry Centre, 683 King’s Road AUDIT AND CORPORATE GOVERNANCE Quarry Bay, Hong Kong COMMITTEE Telephone: (852) 2967 2200 Ms Wong Yu Pok, Marina, JP, Chairman Facsimile: (852) 2967 2900 Mr Chang Tso Tung, Stephen Email: [email protected] Mr Hui Chun Yue, David INVESTOR RELATIONS DEPARTMENT REMUNERATION COMMITTEE Kerry Properties Limited Ms Wong Yu Pok, Marina, JP, Chairman 25/F, Kerry Centre, 683 King’s Road Mr Wong Siu Kong Quarry Bay, Hong Kong Mr Kuok Khoon Hua Telephone: (852) 2967 2200 Mr Chang Tso Tung, Stephen Facsimile: (852) 2967 2900 Mr Hui Chun Yue, David Email: [email protected] NOMINATION COMMITTEE THE OMBUDSPERSON OF KERRY PROPERTIES Mr Wong Siu Kong, Chairman LIMITED Mr Kuok Khoon Hua (For receipt of all whistleblowing/complaints reports) Hong Kong Ms Wong Yu Pok, Marina, JP Kerry Properties Limited Mr Chang Tso Tung, Stephen 25/F, Kerry Centre, 683 King’s Road Mr Hui Chun Yue, David Quarry Bay, Hong Kong FINANCE COMMITTEE Mainland Mr Wong Siu Kong Kerry Properties Development Management Mr Wong Chi Kong, Louis (Shanghai) Co., Ltd. 5/F, Tower 1, Kerry Everbright City EXECUTIVE COMMITTEE 218 Tian Mu Road West Mr Wong Siu Kong Shanghai, China 200070 Mr Kuok Khoon Hua Mr Bryan Pallop Gaw Email Mr Wong Chi Kong, Louis [email protected] COMPANY SECRETARY WEBSITE Ms Li Siu Ching, Liz www.kerryprops.com AUDITOR STOCK CODES PricewaterhouseCoopers Stock Exchange of Hong Kong: 683 Certified Public Accountants and Bloomberg: 683 HK Registered Public Interest Entity Auditor Reuters: 683.HK REGISTERED OFFICE KEY DATES Annual General Meeting Victoria Place, 5th Floor 27 May 2021 31 Victoria Street Hamilton HM 10, Bermuda Closure of Registers of Members 24 to 27 May and 2 June 2021 HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS 25/F, Kerry Centre, 683 King’s Road Proposed Payment of Final Dividend Quarry Bay, Hong Kong 11 June 2021 4 KERRY PROPERTIES LIMITED CONTENTS 5 Financial Highlights 8 Chairman’s Statement 10 CEO’s Message 12 Management Discussion & Analysis 12 Overall Results 14 Review of Property Business 38 Financial Review 39 Particulars of Properties Held 50 Sustainable Development and CSR Activities 60 Awards and Citations 76 Corporate Governance Report 85 Audit and Corporate Governance Committee Report 87 Remuneration Committee Report 88 Nomination Committee Report 90 Risk Management and Internal Controls Report 93 Directors and Senior Management 97 Chief Financial Officer 98 Report of Directors 109 Independent Auditor’s Report 115 Consolidated Income Statement 116 Consolidated Statement of Comprehensive Income 117 Consolidated Statement of Financial Position 119 Consolidated Statement of Cash Flows 121 Consolidated Statement of Changes in Equity 123 Notes to the Financial Statements 212 Five-Year Financial Summary Scan and download this report: ANNUAL REPORT 2020 5 FINANCIAL HIGHLIGHTS Two-year Overview FY 2020 FY 2019 % Change Revenue (HK$M) 14,526 18,025 -19% Gross profit (HK$M) 8,387 8,984 -7% Gross profit margin (%) 57.7 49.8 Operating profit (HK$M) 7,572 8,451 -10% Operating profit margin (%) 52.1 46.9 EBITDA* (HK$M) 7,351 8,038 -9% Profit attributable to shareholders (HK$M) – before fair value change of investment properties 4,233 5,396 -22% – after fair value change of investment properties 5,403 6,897 -22% Net profit margin (%) – before fair value change of investment properties 29.1 29.9 – after fair value change of investment properties 37.2 38.3 Earnings per share (HK$) – before fair value change of investment properties 2.91 3.71 -22% – after fair value change of investment properties 3.71 4.74 -22% Shareholders’ equity (HK$M) 109,873 101,705 +8% Net borrowings (HK$M) 27,539 27,286 +1% Net asset value per share (HK$) 75.44 69.83 +8% Share price as at 31 December (HK$) 19.64 24.75 Price earnings ratio# (times) – before fair value change of investment properties 6.7 6.7 – after fair value change of investment properties 5.3 5.2 Market capitalisation as at 31 December# (HK$M) 28,606 36,048 Dividend per share (HK$) 1.35 1.35 Dividend payout ratio (%) – before fair value change of investment properties 46.4 36.4 – after fair value change of investment properties 36.4 28.5 Dividend cover (times) – before fair value change of investment properties 2.2 2.7 – after fair value change of investment properties 2.7 3.5 Dividend yield# (%) 6.9 5.5 Return on shareholders’ equity (%) – before fair value change of investment properties 3.9 5.3 – after fair value change of investment properties 4.9 6.8 Gearing (%) 25.1 26.8 Interest cover (times) – before fair value change of investment properties 11.6 13.5 – after fair value change of investment properties 13.3 15.4 Current ratio (times) 2.3 1.5 Liquidity ratio (times) 0.9 0.7 Discount to net asset value# (%) (74.0) (64.6) * Being earnings before interest, tax, depreciation and amortisation, fair value change of investment properties and certain non-recurring items. # Based on share prices as at 31 December 2020 and 31 December 2019, respectively. 6 KERRY PROPERTIES LIMITED FINANCIAL HIGHLIGHTS Profit Attributable Revenue Gross Profit to Shareholders HK$14.5B HK$8.4B HK$5.4B 19% YoY 7% YoY 22% YoY Margin 58% 8% YoY Property Sales 24% YoY Property Sales 3% YoY Underlying Prot HK$4.2B 22% YoY Property Rental 2% YoY Property Rental 2% YoY Earnings Per Share* HK$2.91 22% YoY Hotel Operations 40% YoY Hotel Operations 49% YoY Land Appreciation Tax 182% YoY Full Year Dividend Contracted Sales Maintained YoY Surpassed target by 61% HK$1.35/SHARE HK$12.9B 46.4% Payout ratio* 45% YoY Interim HK$0.40 Hong Kong HK$5.6B Final HK$0.95 Mainland HK$7.3B Net Assets Gearing Cash and Bank (Net Debt to Net Assets Attributable to Deposits Attributable to Shareholders) Shareholders HK$17.0B 25.1% HK$75.44/ 39% YoY 1.7% YoY SHARE 8% YoY Undrawn HK$16.1B 28% YoY bank loan facilities * Based on Underlying Prot. ANNUAL REPORT 2020 7 Revenue by Principal Activities Revenue by Principal Markets HK$ million HK$ million 40000 40000 35,548 35,548 35000 35000 30000 30000 39% 25000 25000 21,433 21,433 20000 82% 18,025 20000 18,025 14,526 14,526 15000 12,991 68% 15000 12,991 62% 62% 65% 59% 10000 56% 10000 61% 69% 88% 27% 5000 13% 22% 5000 38% 31% 33% 35% 31% 5% 10% 11% 12% 0 13% 8% 0 FY2016 FY2017 FY2018 FY2019 FY2020 FY2016 FY2017 FY2018 FY2019 FY2020 Property Property Hotel Mainland Hong Kong Sales Rental Operations Gross Profit Contracted Sales HK$ million HK$ million 12000 30000 26,449 10,159 10000 9,468 25000 8,984 8,387 8000 20000 54% 57% 16,949 6,355 51% 49% 15,097 51% 6000 15000 12,880 39% 45% 44% 8,866 4000 10000 57% 26% 40% 35% 42% 50% 46% 44% 55% 2000 5000 56% 74% 43% 11% 8% 9% 9% 0 5% 0 FY2016 FY2017 FY2018 FY2019 FY2020 FY2016 FY2017 FY2018 FY2019 FY2020 Property Property Hotel Mainland Hong Kong Sales Rental Operations Profit Attributable to Shareholders Earnings per Share*, Dividend per Share and Dividend Payout Ratio* HK$ million HK$ 10,000 9,242 5 32.5% 8,000 7,499 4 4.61 6,897 36.4% 6,537 3.71 6,000 46.4% 5,403 3 43.3% 58.7% 2.91 2.54 4,000 2 2.30 1.50 1.35 1.35 1.35 1.10 2,000 1 0 0 FY2016 FY2017 FY2018 FY2019 FY2020 FY2016 FY2017 FY2018 FY2019 FY2020 Earnings Dividend Dividend per Share per Share Payout Ratio * Before fair value change of investment properties. 8 KERRY PROPERTIES LIMITED CHAIrman’s STATEMENT Mr Wong Siu Kong – Chairman Dear Shareholders, On behalf of the Board, I am pleased to present the annual results of the Group for the year ended 31 December 2020.