Hang Lung Properties Limited STOCK CODE: 00101 Hang Lung Group Limited STOCK CODE: 00010 Hang Lung Properties Limited STOCK CODE: 00101 The annual reports of Hang Lung Properties Limited (Stock Code: 00101) and Hang Lung Group Limited (Stock Code: 00010) for the 2019 financial year both embody the Group’s Five Overarching Strategies that are integral in driving sustainable business development: Be Customer Centric, Build Hang Lung Branded Experience, Embrace Technology, Disciplined Execution and Uphold Hang Lung Core Values. The cover images of both reports feature a twinning effect that showcases our two major projects for 2019 – the newly opened Spring City 66 in Kunming, and Peak Galleria in Hong Kong, which was reopened following the completion of its Asset Enhancement Initiative. These are projects that underline the Group’s development strategy, both in mainland China and Hong Kong, and the cover designs highlight the symbiotic relationship between beautiful, unique architecture and the people who use it. World-class properties such as these, designed, built and managed by Hang Lung, show our Five Strategies in action, and enable the Group to fulfil and exceed customers’ expectations. The reports are exquisitely designed, and detail Hang Lung’s concerted effort to strive for excellence and create value for shareholders and stakeholders. CORPORATE PROFILE Hang Lung Properties Limited (stock code: 00101) is the property arm of Hang Lung Group Limited (stock code: 00010), which, in 2020, is celebrating the 60th anniversary of its founding. We are a top-tier property developer in Hong Kong and on the Mainland with a diversified portfolio of properties spanning Hong Kong and nine cities on the Mainland including Shanghai, Shenyang, Jinan, Wuxi, Tianjin, Dalian, Kunming, Wuhan, and Hangzhou, with all the Mainland projects carrying the “66” brand. Our vision is to develop into a highly admired national commercial property developer, expanding our footprint on the Mainland while continuing to invest in our home base in Hong Kong. We strive to acquire the best sites in the cities with growth potential and employ only the top architectural firms to achieve the highest design quality and develop the best properties. HANG LUNG GROUP ANNIVERSARY Guided by our Five Overarching Strategies, we put customer-centricity at the heart of our operations. By embracing the advantages of advancing technology, and with disciplined execution, we are taking the customer experience of the Hang Lung brand to a new level. Exemplary corporate governance remains the cornerstone of our beliefs. We make sure integrity and an ethical approach are deeply ingrained in our corporate culture – not only at the very highest levels, but also throughout our day-to-day operations. Building on the solid foundation of our parent company, we will continue to work closely with our shareholders and stakeholders in building a sustainable future for our Company and for every community we serve. Contents 6 Financial Highlights 113 Risk Management 160 Financial Statements 8 2019 Highlights 117 Corporate Governance Report 226 Ten-Year Financial Summary 16 Chairman’s Letter to Shareholders 139 Profile of the Directors 228 Glossary 46 Review of Operations 145 Profile of Key Executives 230 Corporate Information 89 Financial Review 148 Report of the Directors 231 Financial Calendar 102 Sustainable Development 155 Independent Auditor’s Report 232 Listing Information Achieving Sustainable Growth through Our Five Be Customer Centric Overarching Strat egies Build Hang Lung Branded Experience Embrace Technology Our Five Disciplined Overarching Execution Strat egies Uphold Hang Lung Core Values 6 FINANCIAL HIGHLIGHTS Results For the year ended December 31 in HK$ Million (unless otherwise stated) 2019 2018 Revenue Property leasing 8,556 8,181 Mainland China 4,544 4,244 Hong Kong 4,012 3,937 Property sales 296 1,227 Total revenue 8,852 9,408 Net profit attributable to shareholders 6,172 8,078 Property leasing 6,036 7,346 Property sales 136 732 Dividends 3,418 3,374 Shareholders' equity 138,669 137,561 Per share data Earnings $1.37 $1.80 Dividends Total $0.76 $0.75 Interim $0.17 $0.17 Final $0.59 $0.58 Net assets attributable to shareholders $30.8 $30.6 Financial ratio Payout ratio Total 55% 42% Property leasing 57% 46% Net debt to equity ratio 17.8% 10.4% Debt to equity ratio 20.1% 19.0% Underlying Results For the year ended December 31 in HK$ Million (unless otherwise stated) 2019 2018 Underlying net profit attributable to shareholders 4,474 4,093 Property leasing 4,338 3,361 Property sales 136 732 Earnings per share (Note 1) $0.99 $0.91 Payout ratio (Note 1) Total 76% 82% Property leasing 79% 100% Note: 1. The relevant calculations are based on the underlying net profit attributable to shareholders. Hang Lung Properties Limited 7 Property Leasing Revenue Underlying Net Profit Overall +5% HK$ Million HK$ Million HK$8,556 Million +9% 9,000 8,000 8,000 7,000 HK$4,474 Million 7,000 6,000 6,000 5,000 5,000 4,000 4,000 3,000 3,000 Property 2,000 2,000 Leasing 1,000 1,000 Property Sales 0 0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Mainland China Net Assets Attributable to Shareholders per Share +7% HK$ Million HK$ +1% 5,000 HK$4,544 Million 35 HK$30.8 4,500 30 4,000 3,500 25 3,000 20 2,500 2,000 15 1,500 10 1,000 5 500 0 0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Hong Kong Dividends per Share +1% HK$ Million HK$ +2% HK$0.76 5,000 0.8 HK$ Million 4,500 4,012 0.7 4,000 0.6 3,500 3,000 0.5 2,500 0.4 2,000 0.3 1,500 0.2 1,000 Final 500 0.1 0 0 Interim 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2019 Annual Report 8 2019 HIGHLIGHTS Major Property Developments Spring City 66, Kunming Peak Galleria The mall and office tower of the project The mall reopened in August 2019 opened for business in August 2019 following the completion of a two-year Asset Enhancement Initiative Center 66, Wuxi Office Tower 2 opened for business in August 2019 Forum 66, Shenyang Westlake 66, Conrad Shenyang, Hang Lung Properties’ first hotel project, opened Hangzhou for business in September 2019 A ground-breaking ceremony was held in September 2019, marking the commencement of the construction of Hang Lung’s 11th large-scale commercial project on the Mainland Hang Lung Properties Limited 9 Customer Service and Experience Plaza 66, Shanghai Forum 66, Shenyang The star-studded Home to Luxury Party was held in November A luxurious Luminous Winter Party was 2019, attracting close to 3,000 guests and members of its held in December 2019 to celebrate the prestigious customer relationship program, HOUSE 66, and mall’s anniversary, drawing over 1,000 achieving record high daily retail sales business partners, government officials, tenants, and customers Hang Lung Style Lab, Dining Together and YAO Music Festival The launch of three cross-portfolio promotional events resulted in a significant increase in retail sales Riverside 66, Tianjin Now the location of the Starbucks Reserve Riverside 66 Tianjin flagship store, where we restored, preserved and integrated most of the original interior architectural features of the historical landmark, Zhejiang Xingye Bank Building, and blended them with a modern customer experience 2019 Annual Report 10 2019 HIGHLIGHTS Recognizing Our Employees Hang Lung CEO Award A newly launched award scheme to recognize outstanding projects that demonstrate the four attributes of Hang Lung corporate culture while promoting teamwork and cross- team collaboration at the same time Hang Lung Emerald Award 2019 An annual award, in its 5th year, promoting customer-centricity and a “Go the Extra Mile” spirit by recognizing outstanding customer services offered by our frontline staff Community Partnership Hang Lung As One Volunteer Team 104 volunteer activities were organized, devoting over 13,500 volunteer hours to causes in Hong Kong and mainland China Hang Lung Young Architects Program 2019–2020 A new cohort of 330 students from 66 secondary schools was recruited to take part in the journey to become young architects over the course of the academic year Hang Lung Properties Limited 11 Awards and Recognition Hang Seng Corporate Dow Jones Sustainability Global Real Estate Sustainability Sustainability Index Indices Benchmark (GRESB) We were listed as a constituent We were included as a member A 3-star performance rating and an of the HSCSI and Hang Seng of the Dow Jones Sustainability A-grade disclosure rating under the (Mainland and Hong Kong) Corporate Indices (DJSI) Asia Pacific Index Global Real Estate Sustainability Sustainability Index with an AA rating for the 3rd consecutive year Benchmark was received for the 10th consecutive year HR Asia Award (China Edition) – Best Companies to Work for in Asia 2019 An award presented by the authoritative human resources magazine HR Asia to companies with high levels of employee engagement and excellent workplace cultures Platinum Award – The Asset ESG Corporate Awards 2019 An award scheme organized by The Assets that recognized excellence in corporate governance, corporate social responsibility and investor relations among the region’s listed companies Best Investor Relations Company (Large Cap) Award The 5th IR Awards, presented by the Hong Kong Investor Relations Association 2019 Annual Report Peak Galleria BE CUSTOMER CENTRIC Plaza 66, Shanghai Grand Gateway 66, Shanghai 16 CHAIRMAN’S LETTER TO SHAREHOLDERS Ronnie C. Chan Chairman Hang Lung Properties Limited 17 Results and Dividend Understandably, most investors on the other hand are predominantly occupied by short-term – and in some For the year ended December 31, 2019, revenue cases, very short-term – considerations, namely the decreased 6% to HK$8,852 million because we almost return on investment which comprises share price did not sell any Hong Kong residential units.