China Resources Land Limited

Transcription

1 Corporate Information 56 Ugland House South Church Street Post Office Box 309 George Town Grand Cayman Cayman Island British West Indies Director Executive Director Wang Yin (Chairman) Yan Biao Lau Pak Shing Zhong Yi Chen Ying Chen Kai Tang Yong He Zheng Rong Non-Executive Director Keung Chi Wang, Ralph Paul Wolansky Independent Non-Executive Director Wong Kong Chi Wang Shi Shih Wing Ching Company Secretary Lee Yip Wah, Peter Auditors Deloitte Touche Tohmatsu Share Registrars Standard Registrars Limited G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong Registered Office Ugland House South Church Street Post Office Box 309 George Town Grand Cayman Cayman Island British West Indies Head Office Room 2303, China Resources Building 26 Harbour Road, Wanchai, Hong Kong

2 Contents Group Structure Schedule of Principal Properties Chairman s Statement Biographical Details of Directors and Senior Management Report of the Directors Report of the Auditors Consolidated Income Statement Consolidated Balance Sheet Balance Sheet Consolidated Statement of Changes in Equity Consolidated Cash Flow Statement Notes to the Financial Statements Five Year Financial Summary

3 Group Structure CHINA RESOURCES (HOLDINGS) COMPANY LIMITED 50.43% China Resources Land Ltd 21.5% 100% Strong Foundation Developments Ltd 70.4% 100% 100% China Resources Land (Beijing) Company Ltd China Resources Land (Shanghai) Ltd China Resources Land (Chengdu) Ltd 100% 100% China Resources Land (Wuhan) Ltd China Resources Land (Hefei) Ltd 2 Annual Report 2004

4 Schedule of Principal Properties Properties held for Attributable Beneficial Interest of Approximate Total Gross Investment or Own Use China Resources Land (Beijing) Floor Area (m 2 ) Type Lease Term 100% 36,184 Xidan Cultural Centre C Medium Term Lease Xidan Avenue, Xicheng District, Beijing 50% 54,214 Huawei Centre R/C Medium Term Lease Xidan North Avenue, Xicheng District, Beijing 2.31% 70,058 Huanan Building C/O Medium Term Lease Xidan North Avenue, Xicheng District, Beijing 100% 8,968 Hua Yuan Building O/CP Medium Term 36 Lease No. 36, Nanlishi Road, Xicheng District, Beijing 100% 18,069 Guan Hua Building and O/CP Medium Term Affiliated Facilities Lease 118 No. 118 Xizhimennei Avenue, Xicheng District, Beijing % 4,155 Building 22, Guanyingyuan R/C Medium Term Lease Xinjiekou South Avenue, Xicheng District, Beijing 13.08% Note: China Resources Land Limited has an additional 13.8% indirect interest in Huanan Building held by Strong Foundation Developments Ltd. C Commercial CP Car Park O Office R Residential Annual Report

5 Schedule of Principal Properties Approximate Attributable Beneficial Approximate Unsold Estimated Properties under Interest of China Total Site Gross Floor Date of State of Development Resources Land (Beijing) Area (m 2 ) Area (m 2 ) Type Completion Completion 100% 106,461 23, La Firenze Phase 1 R Dec/04 Completed Daxing District, Beijing 100% 270,700 27, La Firenze Phase 2 R Jul/04 Completed Daxing District, Beijing % 115, , Fortune Island (Daxing Plot 24) R Dec/06 Construction in Progress Daxing District, Beijing 100% 47,900 78, Phoenix City Phase 2 R Aug/05 Construction in Progress San Yuan Qiao, Chaoyang District, Beijing 100% na 46, Phoenix City Phase 2 Car Park CP Aug/05 Construction in Progress San Yuan Qiao, Chaoyang District, Beijing 100% 58, , Phoenix City Phase 3 R Jun/07 Construction in Progress San Yuan Qiao, Chaoyang District, Beijing C Commercial CP Car Park O Office R Residential La Firenze Phase 1 Fortune Island Phoenix City Phase 2 4 Annual Report 2004

6 Schedule of Principal Properties Approximate Attributable Beneficial Approximate Unsold Estimated Properties under Interest of China Total Site Gross Floor Date of State of Development Resources Land (Beijing) Area (m 2 ) Area (m 2 ) Type Completion Completion 100% na 16, Phoenix City Phase 3 Car Park CP Jun/07 Construction in Progress San Yuan Qiao, Chaoyang District, Beijing 100% 124, , Phoenix City Office O/C Jun/08 Planning in Progress San Yuan Qiao, Chaoyang District, Beijing 100% 10,668 9, Top Box O/R Oct/04 Completed Jian Xiang Qiao, Chaoyang District, Beijing 100% na 7, Top Box Car Park CP Oct/04 Completed Jian Xiang Qiao, Chaoyang District, Beijing 100% 14,860 95, Majestic Garden Phase 3 O/C Jun/08 Planning in Progress Jian Xiang Qiao, Chaoyang District, Beijing 100% 11,663 16, U-Space O/R Jun/04 Completed No.1 Shuangjing, Chaoyang District, Beijing C Commercial CP Car Park O Office R Residential U-Space Top Box La Firenze Phase 2 Annual Report

7 Schedule of Principal Properties Approximate Attributable Beneficial Approximate Unsold Estimated Properties under Interest of China Total Site Gross Floor Date of State of Development Resources Land (Beijing) Area (m 2 ) Area (m 2 ) Type Completion Completion 100% na 6, U-Space Car Park CP Jun/04 Completed No.1 Shuangjing, Chaoyang District, Beijing 100% 4,622 25, U-Space Phase 2 O/R Dec/06 Planning in Progress No.1 Shuangjing, Chaoyang District, Beijing 100% 14,300 42, Grand Constellation O/C Jan/05 Completed Piku Alley, Xicheng District, Beijing 100% na 9, Grand Constellation Car Park CP Jan/05 Completed Piku Alley, Xicheng District, Beijing C Commercial CP Car Park O Office R Residential Grand Constellation Phoenix City Phase 3 6 Annual Report 2004

8 Schedule of Principal Properties Approximate Attributable Beneficial Approximate Unsold Estimated Properties under Interest of China Total Site Gross Floor Date of State of Development Resources Land (Shanghai) Area (m 2 ) Area (m 2 ) Type Completion Completion 100% 26,569 85, The Bund Side Phase 1 R/C Jun/07 Construction in Progress Huangpu District, Puxi, Shanghai 100% na 18, The Bund Side Phase 1 Car Park CP Jun/07 Construction in Progress Huangpu District, Puxi, Shanghai 100% 32, , The Bund Side Phase 2 R/C Dec/07 Planning in Progress Huangpu District, Puxi, Shanghai 100% na 19, The Bund Side Phase 2 Car Park CP Dec/07 Planning in Progress Huangpu District, Puxi, Shanghai C Commercial CP Car Park O Office R Residential Shanghai Town Garden Shanghai Town Garden Annual Report

9 Schedule of Principal Properties Approximate Attributable Beneficial Approximate Unsold Estimated Properties under Interest of China Total Site Gross Floor Date of State of Development Resources Land (Chengdu) Area (m 2 ) Area (m 2 ) Type Completion Completion 100% 67,967 4, Chengdu Jade City Phase 1 R/C Dec/04 Completed Jinjiang District, Chengdu 100% na 10, Chengdu Jade City Phase 1 Car Park CP Dec/04 Completed Jinjiang District, Chengdu 100% 80, , Chengdu Jade City Phase 2 R/C Jun/07 Construction in Progress Jinjiang District, Chengdu 100% na 22, Chengdu Jade City Phase 2 Car Park CP Jun/07 Construction in Progress Jinjiang District, Chengdu 100% 239, , Chengdu Jade City Later Phases R/C Dec/09 Planning in Progress Jinjiang District, Chengdu 100% na 100, Chengdu Jade City Later CP Dec/09 Planning Phases Car Park in Progress Jinjiang District, Chengdu C Commercial CP Car Park O Office R Residential Chengdu Jade City Chengdu Jade City 8 Annual Report 2004

10 Schedule of Principal Properties Approximate Attributable Beneficial Approximate Unsold Estimated Properties under Interest of China Total Site Gross Floor Date of State of Development Resources Land (Wuhan) Area (m 2 ) Area (m 2 ) Type Completion Completion 100% 63, , Wuhan Phoenix City R/C Jun/07 Construction in Progress Ji Yu Qiao, Wucheng District, Wuhan 100% na 8, Wuhan Phoenix City Car Park CP Jun/07 Construction in Progress Ji Yu Qiao, Wucheng District, Wuhan C Commercial CP Car Park O Office R Residential Annual Report

11 Schedule of Principal Properties Approximate Attributable Beneficial Approximate Unsold Estimated Properties under Interest of China Total Site Gross Floor Date of State of Development Resources Land (Hefei) Area (m 2 ) Area (m2) Type Completion Completion 100% 144, , Hefei French Annecy R/C Nov/07 Construction in Progress Shu Shan, Gaoxin District, Hefei 100% na 11, Hefei French Annecy Car Park CP Nov/07 Construction in Progress Shu Shan, Gaoxin District, Hefei C Commercial CP Car Park O Office R Residential Hefei French Annecy Phoenix City Phase 3 10 Annual Report 2004

12 Schedule of Principal Properties Approximate Unsold Properties held for Attributable Beneficial Interest of Gross Floor Resettlement/Sales China Resources Land (Beijing) Area (m 2 ) Type Lease Term 100% 27,729 Jing Tong New Town R/C Medium Term Lease Chao Yang Road, Chaoyang District, Beijing 100% 23,175 Leisure Garden Car Park CP Medium Term Lease Haidian District, Beijing 50% 17,000 Woodland Villa R Medium Term Lease Mapo Village, Shunyi County, Beijing 100% 7,963 Xi Luo Yuan R/C Medium Term Lease Fengtai District, Beijing 100% 11,515 Dongguanying Western Area R Medium Term Lease Xinjiekou South Avenue, Xicheng District, Beijing 100% 9,772 Huilongguan R/C Medium Term Lease Changping District, Beijing 2 100% 8,073 Dong Sheng Yuan Phase 2 R/C Medium Term Lease Haidian District, Beijing 100% 6,943 Daxing Residential R Medium Term Lease Daxing District, Beijing 1,0003,751 Note: Properties with gross floor area less than 1,000 square metres, which have an aggregate area of approximately 3,751 square metres, are not listed individually C Commercial CP Car Park O Office R Residential Annual Report

13 Schedule of Principal Properties Approximate Unsold Properties held for Attributable Beneficial Interest of Gross Floor Resettlement/Sales China Resources Land (Beijing) Area (m 2 ) Type Lease Term 100% 2,647 Majestic Garden Phase 1 R/C Medium Term Lease Jian Xiang Qiao, Chaoyang District, Beijing 100% 3,225 Jian Gong Xi Li R Medium Term Lease Xuwu District, Beijing 100% 2,986 Lu Gu New Town R Medium Term Lease Shijingshan District, Beijing 100% 2,800 Wan Ming Si Minor District R Medium Term Lease Fuchengmen, Xicheng District, Beijing 100% 1,269 Hong Lian North Village R Medium Term Lease Xicheng District, Beijing 100% 2,097 Hua Heng Building R/C Medium Term Lease Lixue Alley, Xicheng District, Beijing 100% 25,121 Car Park in Various Locations CP Medium Term Lease 1,0003,751 Note: Properties with gross floor area less than 1,000 square metres, which have an aggregate area of approximately 3,751 square metres, are not listed individually C Commercial CP Car Park O Office R Residential 12 Annual Report 2004

14 Chairman s Statement I am pleased to present to the shareholders my report regarding the operation of the Group % 90.4% % 3, % 367, % % 81% The Group s consolidated turnover and profit attributable to shareholders for financial year 2004 were HK$2.41 billion and HK$150 million respectively, representing an increase of 92.4% and 90.4% as compared to Earnings per share were HK10 cents, increased by 90.4% from that of The Board of Directors recommends a final dividend of HK3 cents per share, making a total dividend of HK3 cents per share for the full year and representing an increase of 11.1% year-on-year. Operation Review in 2004 In 2004, the Group achieved satisfactory sales, driven by the strong organic growth from its Beijing subsidiary and the contribution from the new Chengdu subsidiary. Total sales area were 367,248 square metres in gross floor area (GFA) terms, up 76.7% as compared to Total sales of property development projects were HK$2.14 billion, representing a year-on-year increase of 49.4%. About 81% of the Group s property sales revenues for last year were generated from Beijing while the rest were from Chengdu. 11.9% 2% 2.1% 13.1%13.4% 43.6% The real estate market in China was booming in Despite the intense competition, the potential supply has been restricted as a result of the PRC Government s austerity measures and land supply tightening policy. According to the statistics provided by Beijing Statistical Bureau, new construction area in Beijing dropped 11.9% (2003: up by 2%) year-on-year in 2004 and the total new construction area fell below the total sales area for the first time in five years. Similarly, new construction area in Shanghai and Chengdu only recorded a slight increase of 2.1% (2003: increased 13.1%) and a decrease of 13.4% (2003: increased 43.6%) respectively. 29.1% 10.4% 37.5% 10.1% 37.5% On the other hand, in spite of the tightening of mortgage terms by local banks, the sales area in Beijing still managed to increase by 29.1% (2003: increased 10.4%) with a year-on-year sales revenues growth of 37.5% (2003: 10.1% growth) while the sales area and sales revenues in Shanghai recorded a year-on-year increase of 37.5% and 58.8% respectively, thanks to the rapid economic growth and Annual Report

15 Chairman s Statement 58.8% 6.5% 15.5% 16.4% the desire for better living conditions. With a more balanced demand and supply environment, the average property prices in Beijing, Shanghai and Chengdu rose 6.5%, 15.5% and 16.4% year-on-year respectively The performance of the Group in Beijing was mainly fuelled by the strong sales of the Group s townhouse project, La Firenze, and the successful launch of its downtown project, Phoenix City phase 2. On the back of the high transaction price fetched in a major land auction in the vicinity at the end of 2003 and the cancellation of toll for the Fifth Ring Road connecting the project to downtown, La Firenze attained record sales of over RMB100 million in several months, achieving a full-year sales of RMB612 million. For Phoenix City phase 2, it recorded a total sales of RMB431 million for the full year through organizing successful promotion activities such as The 1st Architectural Biennial Beijing 2004 and promotion tours for US customers. In addition, the U-Space project was basically sold out and construction of the Top Box project, which registered annual sales of RMB291 million, was completed in September last year. During the period, sale prices of most of the Group s projects in Beijing saw increases ,944 1, ,416 In Chengdu, phase 1 of the Group s Jade City project saw overwhelming market response. All of the 983 units put up for sale in the first half of the year, with a GFA of 121,944 square metres, were sold out in just a couple of days at prices that beat management s expectations. Management believes the success of phase 1 of the Jade City project will provide a solid foundation for the subsequent five phases. Planning of Jade City phase 2 is underway and the project is scheduled for launch in the third quarter this year. There will be 1,125 units with a GFA of 139,416 square metres for sale in phase 2 and the sale prices will be at premium to those of phase 1. 30,066 In Shanghai, difficulty in relocation has been a common problem faced by most if not all property developers in Shanghai. Nevertheless, a breakthrough was made for the Group s The Bund Side project. Part of the site was cleared, which allowed phase 1 of the project with a GFA of 30,066 square metres to begin construction 14 Annual Report 2004

16 Chairman s Statement in August last year. Pre-sale is expected to begin in the first half of this year. So far, the market response is very good, hence the sale prices are expected to be satisfactory. The Group s aggressive cost control measures are gradually bearing fruits. The construction costs of development projects like Grand Constellation, Phoenix City phase 2 and Top Box were lower than the initial estimation. The effect of the cost-saving measures will gradually reflect in the results when the above projects are booked. Also, the Group s administrative expenses as a percentage of turnover is lower than most industry players. The Group initiated industry benchmarking in Management believes that the Group has room for further improvement in several aspects, such as profit margins, project operating efficiency, selling expenses control and customer satisfaction. The Group also introduced a new appraisal system based on balanced score card during that year, which allowed its incentive mechanism to be greatly in coherence with the execution of the Group s strategy. 10% The central government promulgated a series of austerity measures in May last year, procuring local banks to tighten the credit granted to property enterprises. However, thanks to its strong financial strength, the Group is still being deemed as a preferred borrower of many banks, therefore the Group not only has easy access to capital but also enjoys the lowest interest rate among developers in China. The interest rates of the Group s newly made Renminbi loans since the second half of last year have been maintaining at a 10% discount to the benchmark borrowing rates. Similarly, owing to the credit tightening policy imposed by local banks, land prices in China have started to soften. For those companies possessing stronger financial strength, it has been a good time to replenish land bank. Last year, the Group successfully acquired at low prices three pieces of land in Beijing, Wuhan and Hefei, respectively (Please refer to the Land Bank section for details). With the recent improvement in the Group s development efficiency, management estimates that the above new projects will be ready for pre-sale within this year. Annual Report

17 Chairman s Statement 8 0 Development Strategy In 2004, management further refined the Group s long-term development strategy. The Group aims at becoming a competitive and leading provider of quality properties and services in the real estate industry in Mainland China to cater for the increasing demand for residential properties from middle-to-high income consumers. The Group s financial goals are to reach an annual turnover of $8 billion five years from now and to attain double-digit return on equity. To achieve the above goals, the Group will continue to expand its business nationwide and penetrate to more cities. To ensure an effective geographical expansion, the Group will continue to focus on developing middle-to-low density projects in the suburban area and high-density projects in the urban area and then replicate these products rapidly throughout the country. The Group s key competitive strategy is differentiation through unique architectural designs, property management services and customer-centric selling processes. The Group will strive to be innovative in these areas through which our brand s sustainable competitive advantages will be based. The Board of Directors believes that the Group s competitive edges lie in its clear and executable development strategy, an incentive mechanism that supports the implementation of such strategies, the solid support from its majority shareholder China Resources Holdings, its in-depth know-how of the local market as well as its competent management team and the operation platform that supports a nationwide business. The Board of Directors is confident that the Group will be able to achieve its goals by adhering to the above development strategy. 16 Annual Report 2004

18 Chairman s Statement 367,248 Details of Property Sales In 2004, the Group s total sales area were 367,248 square metres in GFA terms. The sales progress of all of the Group s development projects being sold is listed below: Average % of Expected Total Accumulated Selling Completion Completion Saleable GFA Sold up GFA Sold Price in up to End Date GFA to End 2004 in (Sqm)* (Sqm) (Sqm) (RMB/Sqm) La Firenze 1 66,684 43,106 16,539 6, % Completed La Firenze 2 187, ,690 85,760 5, % 2H2005 Top Box 58,168 48,490 22,831 12, % Completed U-Space 62,099 56,583 18,450 9, % Completed Jingtong Sunny Uptown 355, ,241 28,055 5, % Completed Grand Constellation 40,589 17,746 7,099 18, % 1H2005 Phoenix City 2 129,616 50,781 38,586 11, % 2H2005 Chengdu Jade City Phase 1 125, , ,944 3, % 1H2005 Other Residential 9,014 3, % Car Park 18,971 3, % * * Total saleable GFA is defined as areas planned for sales less areas retained for long-term investments by the Group. Annual Report

19 Chairman s Statement Property Investment The Group s key investment properties in Beijing City are as follows: Effective Ownership of the Group Total GFA Type (Sqm) Xidan Cultural Centre 70.4% 36,184 Retail Huawei Centre 35.2% 54,214 Retail/Apartment Huanan Building 14.7% 70,058 Retail 15,882 10,830 The facelift project of Xidan Cultural Centre was completed and this underground shopping arcade was re-opened in May last year. Occupancy rate is now close to 100%. The Group plans to boost its rental revenues by means of owning more retail properties. The Group will retain the shopping arcades of the Grand Constellation project and the U-Space project for long-term investment purposes. The former consists of a gross area of 15,882 square metres, scheduled for opening by the end of The latter provides a gross area of 10,830 square metres and is likely to open in the second half year of this year. 18 Annual Report 2004

20 Chairman s Statement Land Bank The Group s policy is to maintain a land bank sufficient for the development for at least 3 years , ,000 Last July, the Group added to its land bank one piece of land in Beijing and, in September, bought another two pieces of land, via tender and listing, in Wuhan and Hefei respectively. Total land costs amounted to more than RMB600 million with total site area of 322,987 square metres and expected total saleable area of more than 450,000 square metres. Meanwhile, the Group has paid the land premium for Phoenix City phase 3 and office project, Majestic Garden project phase 3 and U-Space phase 2 in Beijing in order to secure their development rights. Moreover, management will source new lands in Beijing and other secondary cities pro-actively during the second half of this year to further strengthen the Group s project pipeline. The current land bank of the Group is summarized as follows: Property Property Property held for under held for investment Long-term Location Development Sale or Own Use Land Reserve Total GFA (GFA Sqm) (GFA Sqm) (GFA Sqm) (GFA Sqm) (GFA Sqm) * Beijing* 830, , ,223 35,625 1,106,030 Shanghai 226, ,079 Chengdu 893, ,212 Wuhan 146, ,900 Hefei 186, ,255 Total 2,282, , ,223 35,625 2,558,475 * 70.4% * The Group has a 70.4% attributable interest in land held by its Beijing subsidiary. The above areas refer to gross floor areas. Annual Report

21 Chairman s Statement % 54.2% Borrowings and Financial Leverage As of 31st December, 2004, the Group had consolidated borrowings of HK$3.75 billion. Cash and bank balances were HK$1.54 billion, of which 90% were denominated in Renminbi, and the rest were in US and HK dollars. The Group s net debt to net equity ratio stood at 54.2%. 43.4% 41.2%15.5% 6,500 Of the Group s total borrowings, about 43.4% were denominated in Renminbi, 41.2% in US dollars and 15.5% were in HK dollars. Amongst the US dollar loans, US$65 million were hedged against currency risk so as to control the downside risk of currency fluctuation at a prudent level while leaving a certain degree of upside potential. 51.6% As of 31st December, 2004, about 51.6% of the Group s bank loans were due within one year and the rest were long term in nature. All of the loans matured within this year have been re-financed. 3.5% 1 0% 3.8% By taking advantage of the divergence of interest rates between HK and US dollars loans in last year and by re-negotiating its Renminbi loans, the Group maintains its borrowing cost at low levels. The Group s current borrowing costs for the former two were less than 3.5% per annum and that for the latter stands at 10% below the basis interest rate, which is the lowest level allowed by relevant regulations. At the end of last year, the average cost of debt of the Group was around 3.8% per annum. Given the trend of increasing interest rate, the Group is actively studying the use of interest rate hedging instruments and manages its cash balance in better manner to minimize the adverse effect of interest rate increase. As of 31st December, 2004, all of the Group s Renminbi loans were in fixed rate and the foreign currency loans were in floating rate. 20 Annual Report 2004

22 Chairman s Statement 1,000 Employee and Compensation Policy As of 31st December, 2004, the Group employed approximately 1,000 full time staff in Mainland China and Hong Kong (including its property management and agency subsidiaries). The Group remunerates its employees based on their performance, work experience and the prevailing market wage level. In addition, performance bonuses are granted on a discretionary basis. Other employee benefits include provident fund, insurance and medical coverage as well as share option scheme. Prospects Driven by the clear strategy, the nationwide expansion and the cost control measures, the Group expects its business results to enter into a period of sustainable growth. As such, the Board of Directors is very confident towards the future. 228 Currently, the Group s inventory of 2.28 million square metres in GFA terms has high liquidity and tight development schedule. Those sites represent eight key projects spanning across five booming regional markets. As a result of the implementation of our nationwide development strategy, the risk of property market fluctuation within individual city has been effectively controlled. Meanwhile, all the land under new projects have been appreciated and is expected to yield double-digit internal rate of return on capital, which will enhance the Group s overall return on equity. Furthermore, marketing campaign for some of these projects has commenced and was well-received by potential customers. The management is full of confidence that project sales will go well. Since the rate of growth of supply for the entire property market is lower than that of demand, the Group will enjoy even better profitability if property price further increases. Annual Report

23 Chairman s Statement The Group s key projects on sale during the first half of this year are Phoenix City 2, Grand Constellation and La Firenze in Beijing as well as the The Bund Side Project phase 1 in Shanghai. New projects expected in the second half year include Beijing Phoenix City phase 3, Fortune Island (i.e. the newly acquired land in Beijing s Daxing District last year), Chengdu Jade City phase 2, Wuhan Phoenix City phase 1 and French Annecy Project phase 1 in Hefei City. Projects expected to be completed this year are La Firenze, Grand Constellation and Phoenix City phase 2 in Beijing as well as Chengdu Jade City phase 1. Lastly, on behalf of the Board of Directors and the shareholders, I would like to express my sincere appreciation to all the staff for their hard work in the past financial year. Wang Yin Chairman 7th April, 2005, Hong Kong 22 Annual Report 2004

24 Biographical Details of Directors and Senior Management Executive Directors ( ) MR. Wang Yin, aged 49, was appointed Managing Director in 2001 and Chairman in He is also a Director and Deputy General Manager of China Resources (Holdings) Co. Ltd. and a Director of China Resources National Corp. Mr. Wang has a Bachelor of Economics degree from Shangdong University in China and a Master of Business Administration degree from the University of San Francisco in the United States. Mr. Wang is currently responsible for the overall operations and strategic planning of the Group. He joined China Resources National Corp. in 1984 and was the General Manager of China Resources Construction (Holdings) Co. Ltd., which is principally engaged in building construction in China and Hong Kong. MR. Yan Biao, aged 43, was appointed Executive Director in He is also a Director of China Resources (Holdings) Co. Ltd. and China Resources National Corp. and a Deputy Managing Director of China Resources Enterprises, Ltd. and a Director of China Resources Peoples Telephone Company Ltd. Mr. Yan has a Bachelor of Law degree from Peking University in China and a Master of Business Administration degree from the University of San Francisco in the United States. MR. Lau Pak Shing, aged 55, was appointed Executive Director in He is also an Executive Director of China Resources Enterprises, Ltd. Mr. Lau graduated from The Hong Kong Baptist College (now known as The Hong Kong Baptist University) and is a fellow member of the Association of Chartered Certified Accountants and an associate member of the Hong Kong Society of Accountants. Mr. Lau has over twenty-seven years of experience in auditing, accounting, corporate finance, property, godown and cold storage businesses. Annual Report

25 Biographical Details of Directors and Senior Management MR. Zhong Yi, aged 41, was appointed Executive Director in He is also an Executive Director of China Resources Enterprises, Ltd. Mr. Zhong has a Bachelor of Engineering degree from Sichuan University in China and a Master of Business Administration degree from the University of San Francisco in the United States. MR. Chen Ying, aged 35, was appointed Executive Director in March He is also a Director and the General Manager of China Resources Land (Beijing) Co., Ltd. Mr. Chen has a Bachelor s degree in architectural management from Tsinghua University in China and is a member of the Hong Kong Institute of Construction Managers. He joined China Resources National Corp in 1993 and worked for China Resources Construction (Holdings) Co. Ltd. Mr. Chen has substantial experience in property project management, and business management. MR. Chen Kai, aged 36, was appointed Executive Director in March He is also a Director and the General Manager of China Resources Land (Shanghai) Ltd. and China Resources Land (Wuhan) Ltd. Mr. Chen has a Master s degree in architecture from Zhejiang University in China and is also an Incorporate of the Chartered Institute of Buildings (ICIOB). He joined China Resources National Corp. in 1995 and worked for China Resources Construction (Holdings) Co. Ltd. Mr. Chen has extensive experience in property project management and business management. MR. Tang Yong, aged 34, was appointed Executive Director in March He is also a Director and the General Manager of China Resources Land (Chengdu) Ltd. and China Resources Land (Hefei) Ltd. Mr. Tang has a Bachelor s degree in industrial and electrical automation from Tongji University in China and a Master s degree in business administration from the University of San Francisco in the United States. He joined China Resources National Corp. in 1993 and worked for China Resources Property Ltd. He has experience in project management, property management, as well as business management. 24 Annual Report 2004

26 Biographical Details of Directors and Senior Management MR. He Zhengrong, aged 38, was appointed Executive Director in March He is also a Director and a Deputy General Manager of China Resources Land (Beijing) Co., Ltd. Mr. He has a Bachelor s degree in Arabic language from the University of Foreign Economic and Trade in China and a Master s degree in business administration from the University of Leeds in England and a Master of Science degree in real estate from The Hong Kong University. He joined China Resources National Corp. in 1990 and worked for China Resources (Middle East) Co., Ltd, China Resources (Singapore) Co., Ltd. and China Resources Construction (Holdings) Co. Ltd. He has experience in building materials procurement and business management. Non-Executive Directors () HIT Investments Limited MR. Keung Chi Wang, Ralph, aged 49, is Non-Executive Director of the Company. He is also a Deputy Managing Director of China Resources Enterprises, Ltd. Mr. Keung graduated from the Hong Kong Polytechnic (now known as Hong Kong Polytechnic University) and is a fellow member of the Association of Chartered Certified Accountants and an associate member of the Hong Kong Society of Accountants. He has over twenty years of experience in auditing, accounting and corporate finance. Amherst College MR. Paul Wolansky, aged 49, is a Non-Executive Director of the Company. Mr. Wolansky is also a Director of China Resources Land (Beijing) Co., Ltd. He has a Bachelor s degree from Amherst College and a juris doctor degree from Harvard University. Annual Report

27 Biographical Details of Directors and Senior Management Independent Non-Executive Directors MR. Wang Shi, aged 54, was appointed Independent Non-Executive Director in Mr. Wang is also the Chairman of China Vanke Co., Ltd, which is listed on the Stock Exchange of Shenzhen. He has a Bachelor of Science degree from Lanzhou Railway College in China. MR. Wong Kong Chi, aged 46, was appointed Independent Non-Executive Director in Mr. Wong is a qualified accountant and has experience in merchant banking. MR. Shih Wing Ching, aged 56, was appointed Independent Non-Executive Director in Mr, Shih is also the Chairman of Centaline Group, and has experience in property agency, surveying and valuation. Senior Management MR. Lin Chu Chang, aged 36, is the Chief Financial Officer of the Group. Mr. Lin has a Bachelor s degree in physics from The Hong Kong University and is a Chartered Financial Analyst of the USA. He worked for several well-known investment banks and has over ten years of experience in securities research and investment. He joined the Group in MR. Xu Xiaodong, aged 44, is a Deputy General Manager of China Resources Land (Beijing) Co., Ltd. responsible for project management. Mr. Xu is an engineer in China and has experience in real estate development and project management. He joined the Group in Annual Report 2004

28 Biographical Details of Directors and Senior Management MR. Guo Fengrui, aged 37, is a Deputy General Manager of China Resources Land (Beijing) Co., Ltd., responsible for leasing businesses. Mr. Guo has a Doctorate degree in economics from People s University of China and has experience in real estate development and market research. He joined the Group in MR. Xie Ji, aged 33, is a Deputy General Manager of China Resources Land (Beijing) Co., Ltd. and the General Manager of China Resources Property Agent Co. Ltd. He is responsible for sales management. Mr. Xie has a Bachelor s degree in engineering from Tongji University in China. He joined China Resources National Corp. in 1993 and worked for China Resources Construction (Holdings) Ltd. He has experience in project management. MR. Li Xin, aged 34, is the General Manager of the business development department of China Resources Land Ltd. and the Deputy General Manager of China Resources Land (Hefei) Ltd. He has a Bachelor s degree in investment and economic management from North-eastern Finance University of China. Mr. Li joined China Resources National Corp. in 1994 and worked for China Resources Property Ltd. He has experience in real estate investment and development. MR. Guo Xiaodong, aged 37, is the Chief Architect of China Resources Land (Beijing) Co., Ltd. and is responsible for project planning and design. Mr. Guo has a Bachelor s degree in architecture from Tianjin University in China and a Master s degree in architectural design from Harvard University in the United States. He has worked for several well-known architecture companies in China. He joined the Group in Annual Report

29 Biographical Details of Directors and Senior Management MR. Zhang Baomin, aged 36, is the Chief Engineer of China Resources Land (Beijing) Co., Ltd., responsible for engineering and tendering matters, costing and materials procurement. Mr. Zhang has a Bachelor s degree in civil engineering from Tsinghua University in China. Mr. Zhang has experience in project management. He joined the Group in MR. Cai Hu, aged 34, is the Deputy General Manager of China Resources Land (Wuhan) Ltd. Mr. Cai has a Master of Law degree from People s University in China. Mr. Cai has worked for legal department of China Resources Land (Beijing) Co., Ltd. and has experience in real estate development and legal affairs. 28 Annual Report 2004

30 Report of the Directors The directors have pleasure in submitting to shareholders their report and audited financial statements of the Company and the Group for the year ended 31st December, Principal Activities The principal activity of the Company is investment holding and the activities of its principal subsidiaries and associates are shown on page 92 to , The segment information of the Group is set out in note 5 to the financial statements. Group Profit The consolidated income statement set out on page 51 shows the Group s profit for the year ended 31st December, Dividends The board of directors recommend the declaration of a final dividend of HK 3.0 cents (2003: HK2.7 cents) per share amounting to approximately HK$45.08 million payable on 15th July, 2005 to shareholders whose names appear on the Register of Members of the Company on 21st June, Property, Plant and Equipment Movements in property, plant and equipment during the year are set out in note 14 to the financial statements. Properties A schedule of the principal properties of the Group is set out on pages 3 to 12. Share Capital Movements in share capital during the year are set out in note 27 to the financial statements. Reserves Movements in reserves of the Company and the Group during the year are set out in note 28 to the financial statements. Annual Report

31 Report of the Directors Directors The directors who held office during the year and at the date of this report are: Executive Directors Mr. Wang Yin Mr. Ning Gaoning (Resigned on 30th Dec 2004) Mr. Yan Biao Mr. Lau Pak Shing Mr. Zhong Yi Mr. Chen Ying Mr. Chen Kai Mr. Tang Yong Mr. He Zheng Rong Non-Executive Directors Mr. Keung Chi Wang, Ralph Mr. Paul Wolansky Independent Non-Executive Directors Mr. Wong Kong Chi Mr. Wang Shi Mr. Shih Wing Ching (Appointed on 5th August, 2004) According to Article 99 and Article 116 of the Articles of Association of the Company, Mr. Wang Yin, Mr. Yan Biao, Mr. Keung Chi Wang, Ralph, Mr Chen Ying and Mr. Shih Wing Ching shall retire at the forthcoming annual general meeting, and are eligible and willing to offer themselves for re-election Company has received the Confirmation of Independence from all the independent non-executive directors, and consider that all the independent non-executive directors are independent of the Company. Biographical Details of Directors and Senior Management Biographical details of the Directors and senior management are setout on pages 23 to Annual Report 2004

32 Report of the Directors Share Option Schemes The Company operates share option schemes for the purpose of promoting additional commitment and dedication to the objectives of the Company by the participants. During the period under review, the Company operates two share option schemes, namely the Old Scheme and the New Scheme. The Old Scheme refers to the share option scheme which subsisted until 31st January, 2002 and was terminated on 31st January, Eligible participants of the Old Scheme were the employees of the Company and its subsidiaries (including the directors of the Company). The maximum entitlement of each participant did not exceed the maximum limit as permitted by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited ( Listing Rules ) applicable before 1st September, The exercise prices of the share options were determined at the entire discretion of the board of directors, but did not exceed the maximum discount permitted by the Listing Rules applicable prior to 1st September, The New Scheme refers to the share option scheme which was approved by the shareholders in the extra-ordinary general meeting held on 31st January, 2002 and shall expire on 31st January, The board of directors of the Company may grant options to eligible participants including employees, executive or non-executive directors of the Group, any discretionary object of a discretionary trust established by any employee, executive or non-executive director of the Group, any executive or employee of consultants, professional and other advisors to the Group, chief executive, substantial shareholders of the Company, associated companies of the Group, associates of directors, chief executive and substantial shareholders of the Company, and employees of substantial shareholders. The maximum entitlement of each participant (including options to be granted to the directors, chief executive or substantial shareholders of the Company, or any of their respective associates) is equal to the maximum limit permitted under the prevailing Listing Rules. The exercise prices of the share options are determined pursuant to the requirement of prevailing Listing Rules. Annual Report

33 Report of the Directors 146,589, % As of the date of this report, the total number of shares available for issue under the New Scheme is 146,589,943 shares and represents 9.7% of the issued share capital of the Company. 1 The offer of a grant of share options under both schemes may be accepted within 28 days from the date of the offer upon the payment of a nominal consideration of HK$1 in total by the grantee. 100% 25% Share options disclosed below and granted on or after 31st January, 2002 were issued under the New Scheme while the remaining options were under the Old Scheme. Share options granted under the Old Scheme are exercisable before 27th May, 2007, and those under the New Scheme are are exercisable for a period of 10 years after the date of grant. Those share options are generally either entirely immediately exercisable from the date of grant or 25% of them are exercisable in each calendar year after the date of grant. The directors do not consider it to be appropriate to state the value of the share options granted under the schemes during the period. It is because the generally accepted option pricing models are applicable to options that are transferable but those of the Company are not. In addition, certain parameters for the generally accepted option pricing models are only derivable from previous statistics and the Company is unable to provide sufficient historic information to generate reliable inputs for the valuation of the share options. Based on the above reasons, the Company believes that the valuation of the share options would not be meaningful and may mislead shareholders. Save as disclosed below, no other share options has been granted, exercised, cancelled or lapsed in accordance with the terms of the relevant share option scheme during the year in relation to each of the directors, chief executive, substantial shareholders of the Company or their respective associates and employees of substantial shareholders. 32 Annual Report 2004

34 Report of the Directors (a) Directors As of 31st December, 2004, the following directors had interests in options to subscribe for shares under both of the new and the old share option schemes of the Company: Price of Number of share option Company share For For Exercise Outstanding Granted Exercised Cancelled Lapsed Outstanding option option Date of Price at during during during during at granted exercised Name of director Capacity Grant HK$ 1/1/2004 the year the year the year the year 31/12/2004 HK$ HK$ Ning Gaoning 27/6/ ,500,000 2,500, (Resigned on Beneficial owner 20/7/ ,500,000 2,500, Dec 2004) Mr. Wang Yin 1/3/ ,800,000 4,800,000 Beneficial owner 28/4/ ,500,000 3,500, Mr. Yan Biao 27/6/ ,300,000 2,300,000 Beneficial owner 20/7/ ,400,000 2,400,000 Mr. Keung Chi Wang, 27/6/ ,000,000 2,000,000 Ralph Beneficial owner 20/7/ ,300,000 1,300,000 Mr. Zhong Yi 20/7/ ,000,000 2,000,000 Beneficial owner Mr. Chen Ying 4/3/ , ,000 Beneficial owner 15/4/ ,600,000 1,600,000 28/4/ ,000,000 2,000, Mr. Chen Kai 1/3/ ,200,000 1,200,000 Beneficial owner 28/4/ ,000,000 2,000, Mr. Tang Yong 1/3/ ,200,000 1,200,000 Beneficial owner 28/4/ ,000,000 2,000, Mr. He Zheng Rong 1/3/ ,200,000 1,200,000 Beneficial owner 28/4/ ,000,000 2,000, Annual Report

35 Report of the Directors (b) Employees and other participants Details of options granted to employees (other than directors) of the Group and other participants by the Company are set out below: (i) (i) Employee (other than directors) Number of share option Price of Company share Exercise Reclassify as For option For option Price Outstanding at Director s Granted Exercised Cancelled Lapsed Outstanding at granted exercised Date of Grant HK$ 1/1/2004 resignation during the year during the year during the year during the year 31/12/2004 HK$ HK$ 27/6/ ,149,000 2,400,000 1,274,000 9,275,000 20/7/ ,290,000 1,400, ,000 5,340,000 1/3/ ,800,000 3,800,000 15/4/ ,700, ,000 2,800,000 7/10/ ,250, ,000 9,350,000 28/4/ ,090, ,000 17,140, (ii) (ii) Other participants Number of share option Price of Company share Exercise For option For option Price Outstanding at Granted Exercised Cancelled Lapsed Outstanding at granted exercised Date of Grant HK$ 1/1/2004 during the year during the year during the year during the year 31/12/2004 HK$ HK$ 4/3/ ,050,000 28,050, Annual Report 2004

36 Report of the Directors Directors Interest in Securities X V XV As of 31st December, 2004, the interests and short positions of the directors and chief executive of the Company in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance ( SFO )) which have been notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO, including interests and short positions which the directors and chief executive of the Company are taken or deemed to have under such provisions of the SFO, or which are required to be and are recorded in the register required to be kept pursuant to section 352 of the SFO or as otherwise required to be notified to Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies (the Model Code ) contained in the Listing Rules, were as follows: (a) Interest in issued ordinary shares and underlying shares of the Company (1) (3) Number of Aggregate Long positions/ Number underlying percentage Name of Directors Short positions of Shares shares (1) Capacity of interest (3) 2004 Mr. Ning Gaoning (Resigned 5,000, on 30 Dec 2004) Long position Beneficial Owner Mr. Wang Yin 8,300, Long position Beneficial Owner Mr. Yan Biao 4,700, Long position Beneficial Owner Mr. Keung Chi Wang, Ralph 3,300, Long position Beneficial Owner Mr. Zhong Yi 2,000, Long position Beneficial Owner Mr. Chen Ying 3,720, Long position Beneficial Owner Mr. Chen Kai 3,200, Long position Beneficial Owner Mr. Tang Yong 3,200, Long position Beneficial Owner Mr. He Zheng Rong 3,200, Long position Beneficial Owner Mr. Paul Wolansky 83,972,000 (2) 5.59 Long position Controlled Company s interest (2) Annual Report

37 Report of the Directors (1) (1) This refers to underlying shares of the Company covered by share options granted as detailed above under the section headed Share Option Schemes, such options being unlisted physically settled equity derivatives. (2) The Cathay Investment Fund Ltd 83,972,000 New China Management Corporation 50% 83,972,000 (2) Mr. Paul Wolansky s interests in the Company is attributable to his 50% shareholdings in New China Management Corp., the investment manager to The Cathay Investment Fund Ltd., which in turn holds 83,972,000 shares of the Company. Thus Mr. Paul Wolansky is deemed to be interested in the 83,972,000 shares of the Company. (3) (3) This represents the percentage of the aggregate long positions in shares and underlying shares of the Company to the total issued share capital of the Company as of 31st December, (b) Interests in issued ordinary shares and underlying shares of China Resources Enterprise Limited ( CRE ), an associated corporation of the Company: (1) (2) Number of Aggregate Long positions/ Number of underlying percentage Name of Directors Short positions Shares shares (1) Capacity of interest (2) 2004 Mr. Ning Gaoning (Resigned 1,630,000 4,500, on 30 Dec 2004) Long position Beneficial Owner Mr. Wang Yin 28, Long position Beneficial Owner Mr. Yan Biao 900,000 4,000, Long position Beneficial Owner Mr. Keung Chi Wang, Ralph 2,966, Long position Beneficial Owner Mr. Lau Pak Shing 2,500, Long position Beneficial Owner Mr. Zhong Yi 420,000 1,100, Long position Beneficial Owner Mr. Chen Ying 100, Long position Beneficial Owner (1) (1) This refers to underlying shares of CRE, covered by share option granted under the Share Option Scheme of CRE, such option being being unlisted physically settled equity derivatives. (2) (2) This represents the percentage of the aggregate long positions in shares and underlying shares of CRE to the total issued share capital of the Company as of 31st December, Annual Report 2004