Corporate Information Ugland House South Church Street Post Office Box 309 George Town Grand Cayman Cayman Island British West Indies Director

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2 Corporate Information Ugland House South Church Street Post Office Box 309 George Town Grand Cayman Cayman Island British West Indies Director Executive Director Song Lin (Chairman) Wang Yin (Managing director) Non-Executive Director Jiang Wei Yan Biao Liu Yan Jie Xie Sheng Xi Paul Wolansky Independent Non-Executive Director Wong Kong Chi Wang Shi Ho Hin Ngai, Bosco Company Secretary Lee Yip Wah, Peter Auditors Deloitte Touche Tohmatsu Share Registrars Standard Registrars Limited 26/F., Tesbury Centre 28 Queen s Road East 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 4301, China Resources Building 26 Harbour Road, Wanchai, Hong Kong

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

4 Group Structure CHINA RESOURCES (HOLDINGS) COMPANY LIMITED 64.89% China Resources Land Limited 100% 100% 100% Strong Foundation Developments Ltd. King Role Limited Boom Go Group Limited 100% 70.4% 21.53% 100% China Resources Land (Shanghai) Ltd. China Resources Land (Beijing) Company Ltd. China Resources Land (Chengdu) Ltd. Beijing China Resources Building Co. Ltd. China Resources (Shanghai) Co. Ltd. China Resources Land (Wuhan) Ltd. China Resources (Shenzhen) Ltd. Beijing China Resources Property Management Co. Ltd. China Resources Land (Hefei) Ltd. Shenzhen China Resources Property Management Co. Ltd. 2 Annual Report 2005

5 Schedule of Principal Properties Properties held for Attributable Beneficial Interest of Approximate Total Gross Investment or Own Use China Resources Land Limited Floor Area (m 2 ) Type Lease Term 100% 65,222 O China Resources Building Medium Term 8 Lease No. 8 Jianguomen North Avenue, Dongcheng District, Beijing 100% 97,139 China Resources Times Square Medium Term Mall 51,190 C Lease Office 36,843 O 500 No. 500 Zhangyang Road, Pudong, Shanghai 100% 229,938 City Crossing Phase 1 Medium Term Mall 133,281 C Lease Office 40,990 O Car Park 55,667 CP No Shennan East Road and No Baoan South Road, Luohu District, Shenzhen 100% 13,789 C Hua Rui Building Medium Term 1001 Lease No Baoan South Road, Luohu District, Shenzhen C Commercial CP Car Park O Office R Residential China Resources Building China Resources Times Square City Crossing Phase I Annual Report

6 Schedule of Principal Properties Properties held for Attributable Beneficial Interest of Approximate Total Gross Investment or Own Use China Resources Land Limited Floor Area (m 2 ) Type Lease Term 91.96% 36,184 C Xidan Cultural Centre Medium Term Lease Xidan Avenue, Xicheng District, Beijing 45.95% 54,214 Huawei Centre R/C Medium Term Lease Xidan North Avenue, Xicheng District, Beijing 15.20% 70,058 Huanan Building C/O Medium Term Lease Xidan North Avenue, Xicheng District, Beijing 91.96% 8,968 Hua Yuan Building O/CP Medium Term 36 Lease No. 36, Nanlishi Road, Xicheng District, Beijing 91.96% 14,105 C Grand Constellation Shopping Mall Medium Term Lease Piku Alley, Xicheng District, Beijing 91.96% 10,685 C U-Space Shopping Mall Medium Term Lease No.1 Shuangjing, Chaoyang District, Beijing 91.96% 17,952 C Jing Tong Shops Medium Term Lease Chao Yang Road, Chaoyang District, Beijing 13.08% 2.31% Note: China Resources Land Limited has 13.08% and 2.31% interests in Huanan Building through Strong Foundation Developments Ltd. and China Resources Land (Beijing) Company Ltd., respectively. C Commercial CP Car Park O Office R Residential 4 Annual Report 2005

7 Schedule of Principal Properties Properties held for Attributable Beneficial Interest of Approximate Total Gross Investment or Own Use China Resources Land Limited Floor Area (m 2 ) Type Lease Term 91.96% 18,069 Guan Hua Building and O/CP Medium Term Affiliated Facilities Lease 118 No. 118 Xizhimennei Avenue, Xicheng District, Beijing 91.96% 7,815 C Majestic Garden Club Medium Term Lease Jian Xiang Qiao, Chaoyang District, Beijing % 4,155 Building 22, Guanyingyuan R/C Medium Term Lease Xinjiekou South Avenue, Xicheng District, Beijing C Commercial CP Car Park O Office R Residential Annual Report

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 Limited Area (m 2 ) Area (m 2 ) Type Completion Completion 91.96% 106,461 10, La Firenze Phase 1 R Dec/04 Completed Daxing District, Beijing 91.96% 270,700 13, La Firenze Phase 2 R Jul/04 Completed Daxing District, Beijing % 115,158 56, Fortune Island (Daxing Plot 24) R Mid 06 Construction in Progress Daxing District, Beijing 91.96% 381, , La Firenze Later Phases R Beyond Planning in 2007 Progress Daxing District, Beijing 91.96% 47,900 28, Phoenix City Phase 2 R Jul/05 Completed San Yuan Qiao, Chaoyang District, Beijing 91.96% na 25, Phoenix City Phase 2 Car Park CP Jul/05 Completed San Yuan Qiao, Chaoyang District, Beijing C Commercial CP Car Park O Office R Residential La Firenze Phoenix City Phase 2 6 Annual Report 2005

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 Limited Area (m 2 ) Area (m 2 ) Type Completion Completion 91.96% 58, , Phoenix City Phase 3 R Jun/07 Construction in Progress San Yuan Qiao, Chaoyang District, Beijing 91.96% na 16, Phoenix City Phase 3 Car Park CP Jun/07 Construction in Progress San Yuan Qiao, Chaoyang District, Beijing 91.96% 50, , Phoenix Plaza O/C Jun/08 Construction in Progress San Yuan Qiao, Chaoyang District, Beijing 91.96% na 8, Phoenix Plaza Car Park CP Jun/08 Construction in Progress San Yuan Qiao, Chaoyang District, Beijing 91.96% 10,668 3, Top Box O/R Oct/04 Completed Jian Xiang Qiao, Chaoyang District, Beijing C Commercial CP Car Park O Office R Residential Phoenix City Phase 3 Phoenix Plaza Annual Report

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 Limited Area (m 2 ) Area (m 2 ) Type Completion Completion 91.96% na 4, Top Box Car Park CP Oct/04 Completed Jian Xiang Qiao, Chaoyang District, Beijing 91.96% 14,860 95, Majestic Garden Phase 3 O/C Apr/08 Planning in Progress Jian Xiang Qiao, Chaoyang District, Beijing 91.96% na 18, Majestic Garden Phase 3 Car Park CP Apr/08 Planning in Progress Jian Xiang Qiao, Chaoyang District, Beijing 91.96% 11,663 5, U-Space O/R Jun/04 Completed No.1 Shuangjing, Chaoyang District, Beijing 91.96% na 1, U-Space Car Park CP Jun/04 Completed No.1 Shuangjing, Chaoyang District, Beijing 91.96% 6,402 33, Inshine International Centre O/R Dec/07 Construction in Progress No.1 Shuangjing, Chaoyang District, Beijing 91.96% na 4, Inshine International Centre Car Park CP Dec/07 Construction in Progress No.1 Shuangjing, Chaoyang District, Beijing 91.96% 14,300 9, Grand Constellation Office O/C Jan/05 Completed Piku Alley, Xicheng District, Beijing C Commercial CP Car Park O Office R Residential 8 Annual Report 2005

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 Limited Area (m 2 ) Area (m 2 ) Type Completion Completion 91.96% na 5, Grand Constellation Car Park CP Jan/05 Completed Piku Alley, Xicheng District, Beijing 46.90% 308, , Oak Bay R Dec/07 Construction in Progress Qinghe, Haidian District, Beijing C Commercial CP Car Park O Office R Residential Oak Bay Annual Report

12 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 Limited Area (m 2 ) Area (m 2 ) Type Completion Completion 100% 26,569 72, The Bund Side Phase 1 R/C Construction in Progress Huangpu District, Puxi, Shanghai 100% na 13, The Bund Side Phase 1 Car Park CP Construction in Progress Huangpu District, Puxi, Shanghai 100% 32, , The Bund Side Phase 2 R/C Beyond 2009 Planning in Progress Huangpu District, Puxi, Shanghai 100% na 17, The Bund Side Phase 2 Car Park CP Beyond 2009 Planning in Progress Huangpu District, Puxi, Shanghai C Commercial CP Car Park O Office R Residential The Bund Side 10 Annual Report 2005

13 Schedule of Principal Properties Approximate Attributable Beneficial Approximate Unsold Estimated Properties under Interest of China Resources Total Site Gross Floor Date of State of Development Land Limited Area (m 2 ) Area (m 2 ) Type Completion Completion 100% 23, , City Crossing Phase 2 R Jun/08 Construction in Progress Baoan Nan Road, Shenzhen 100% 17,695 81, City Crossing Phase 2 C Jun/08 Construction Hotel & Shops in Progress Baoan Nan Road, Shenzhen C Commercial CP Car Park O Office R Residential Annual Report

14 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 Limited Area (m 2 ) Area (m 2 ) Type Completion Completion 100% 80,040 50, Chengdu Jade City Phase 2 R/C Dec/06 Construction in Progress Jinjiang District, Chengdu 100% na 22, Chengdu Jade City Phase 2 Car Park CP Dec/06 Construction in Progress Jinjiang District, Chengdu 100% 239, , Chengdu Jade City Later Phases R/C Planning in Progress Jinjiang District, Chengdu 100% na 123, Chengdu Jade City Later Phases CP Planning Car Park in Progress Jinjiang District, Chengdu C Commercial CP Car Park O Office R Residential Chengdu Jade City 12 Annual Report 2005

15 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 Limited Area (m 2 ) Area (m2) Type Completion Completion 100% 63, , Wuhan Phoenix City R/C Construction in Progress Ji Yu Qiao, Wucheng District, Wuhan 100% na 8, Wuhan Phoenix City Car Park CP Construction in Progress Ji Yu Qiao, Wucheng District, Wuhan C Commercial CP Car Park O Office R Residential Wuhan Phoenix City Annual Report

16 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 Limited Area (m 2 ) Area (m2) Type Completion Completion 100% 144, , Hefei French Annecy R/C Construction in Progress Shu Shan, Gaoxin District, Hefei 100% na 32, Hefei French Annecy Car Park CP Construction in Progress Shu Shan, Gaoxin District, Hefei C Commercial CP Car Park O Office R Residential Hefei French Annecy 14 Annual Report 2005

17 Schedule of Principal Properties Approximate Unsold Properties held for Attributable Beneficial Interest of Gross Floor Resettlement/Sales China Resources Land Limited Area (m 2 ) Type Lease Term 91.96% 25,482 Jing Tong New Town R/C Medium Term Lease Chao Yang Road, Chaoyang District, Beijing 91.96% 7,963 Jing Tong Car Park CP Medium Term Lease Chao Yang Road, Chaoyang District, Beijing 45.98% 17,000 Woodland Villa R Medium Term Lease Mapo Village, Shunyi County, Beijing 91.96% 9,772 Xi Luo Yuan R/C Medium Term Lease Fengtai District, Beijing 91.96% 618 Dongguanying Western Area R Medium Term Lease Xinjiekou South Avenue, Xicheng District, Beijing 91.96% 17,000 Huilongguan R/C Medium Term Lease Changping District, Beijing % 11,092 Dong Sheng Yuan Phase 2 R/C Medium Term Lease Haidian District, Beijing 91.96% 8,073 Daxing Residential R Medium Term Lease Daxing District, Beijing C Commercial CP Car Park O Office R Residential Annual Report

18 Schedule of Principal Properties Approximate Unsold Properties held for Attributable Beneficial Interest of Gross Floor Resettlement/Sales China Resources Land Limited Area (m 2 ) Type Lease Term 91.96% 6,943 Majestic Garden Phase 1 R/C Medium Term Lease Jian Xiang Qiao, Chaoyang District, Beijing 91.96% 5,203 Jian Gong Xi Li R Medium Term Lease Xuwu District, Beijing 91.96% 1,024 Lu Gu New Town R Medium Term Lease Shijingshan District, Beijing 91.96% 3,225 Wan Ming Si Minor District R Medium Term Lease Fuchengmen, Xicheng District, Beijing 91.96% 2,097 Hong Lian North Village R Medium Term Lease Xicheng District, Beijing 91.96% 1,655 Hua Heng Building R/C Medium Term Lease Lixue Alley, Xicheng District, Beijing 91.96% 4,695 Properties in Various Locations R Medium Term in Beijing Lease 91.96% 145 Car Park in Various Locations CP Medium Term in Beijing Lease C Commercial CP Car Park O Office R Residential 16 Annual Report 2005

19 Schedule of Principal Properties Approximate Unsold Properties held for Attributable Beneficial Interest of Gross Floor Resettlement/Sales China Resources Land Limited Area (m 2 ) Type Lease Term 100% 3,288 Chengdu Jade City Phase 1 R/C Medium Term Lease Jinjiang District, Chengdu 100% 18,302 Chengdu Jade City Phase 1 Car Park CP Medium Term Lease Jinjiang District, Chengdu C Commercial CP Car Park O Office R Residential Annual Report

20 主席報告 Chairman s Statement 本集團業務已經進入快速增長階段, 前景一片光明 The Group is in a stage of rapid growth with promising prospects. 本集團二零零五財政年度之綜合營業額及股東應佔溢利分別為港幣 27.1 億元及港幣 3.8 億元, 比二零零四年分別增長 43.2% 及 17 倍 ( 二零零四年依據新會計準則重列數據計算 ), 對比二零零四年按原會計準則編製之相應數據則分別增長 12.4% 及 156.1% 每股盈利為港幣 24.8 仙, 比二零零四年增長 16.7 倍 ( 二零零四年依據新會計準則重列數據計算 ), 對比二零零四年按原會計準則編製之每股盈利則增長 148.2% 董事會建議宣派末期股息每股港幣 3.3 仙, 全年股息亦為港幣 3.3 仙, 同比增長 10% The Group s consolidated turnover and profit attributable to shareholders for financial year 2005 were HK$2.71 billion and HK$384 million respectively, representing an increase of 43.2% and 17 times over 2004 (based on the restated figures for 2004 prepared in accordance with the new accounting standards), and an increase of 12.4% and 156.1% as compared with the reported figures for 2004 prepared in accordance with the original accounting standards. Earnings per share were HK24.8 cents, increased by 16.7 times over 2004 (based on the restated figures for 2004 prepared in accordance with new accounting standards), and an increase of 148% as compared with the earnings per share for 2004 prepared in accordance with the original accounting standards. The Directors recommends a final dividend of HK3.3 cents per share, making a total dividend of HK3.3 cents per share for the full year and representing an increase of 10% year-on-year. 本集團財務報告從二零零五年起採用了若干新會計準則 ( 詳情請參閱綜合財務報表之附註 2) 同時也按照新會計準則要求重列了二零零四年之損益表及二零零四年十二月底之資產負債表等 對本集團賬目影響較大的是關於營業額結算之會計變更, 從二零零五年中期財務報告起, 本集團已採用竣工結算法為營業額結算依據, 而二零零五年以前則採用完工比例法結算 Starting from 2005, the Group adopted certain new accounting standards in its financial reports, details of which are set out in note 2 of the consolidated financial statements. Some of the Group s financial statements, such as income statement for 2004 and the balance sheet as at 31st December, 2004, have been restated in accordance with the new accounting standards. The more apparent impact from the adoption of the new accounting standards mainly relates to the accounting policy for turnover recognition. Starting from the 2005 interim financial reporting period, the Group recognized its turnover using the completion method, instead of the stage of completion method being used prior to 二零零五年度年報 Annual Report 2005

21 Chairman s Statement % 40.6 Major Business Restructuring and Fundraising through Share Placement In order to capture more development opportunities and establish its leadership position in the real estate industry in the PRC, the Group announced the acquisition of a group of premier large scale rental properties, which included Beijing China Resources Building, Shanghai China Resources Times Square, Shenzhen City Crossing Phase 1 and the construction site for its Phase 2 development, from its major shareholder China Resources (Holdings) Company Ltd. (CRH) in November 2005 at a consideration of approximately HK$3.2 billion. The acquisition price represented a discount of approximately 35.7% over the net fair market value of the acquired assets. The gross floor area of the acquired assets amounted to 406,088 square metres. The acquisition enabled the Group to transform its business model from a residential property developer into an integrated real estate company. The Directors believes that the acquisition can bring various commercial benefits to the Group and is in conformity with the aligned interests of the shareholders as a whole. First, through the acquisition, the Group will establish its position as the flagship listed vehicle for real estate operation in the PRC for its parent company CRH, and will therefore have an improved access to resources of CRH for future projects. Second, the acquisition will turn the Group from a residential property developer into an integrated player of a much enlarged scale in the PRC market. This business model is substantially different from other listed real estate companies in China which focus on residential development. Third, with additions of rental-based income stream, the acquisition will enhance the Group s earning stability and cashflow visibility while mitigating its operational risks. Fourth, as the acquired assets are mostly grade A investment properties in premier locations of major cities in the PRC, the Group is better positioned to benefit from long-term potential capital appreciation. Fifth, the acquisition will strengthen the Group s financial position with a significant increase in shareholders funds and a reduction in gearing and thus enhance its capability to fund future development and expansion. In addition, the acquisition will provide an opportunity for the Group to extend its business presence to Shenzhen, and reinforce its established operations in Beijing, Shanghai, Chengdu, Wuhan and Hefei. Annual Report

22 Chairman s Statement As the said restructuring was well received by the capital market, the Group placed 300,000,000 new shares to independent investors at a price of HK$3.725 per share in January 2006 and raised a net proceeds of approximately HK$1.1 billion. Strategy After the business restructuring, management further refined and revised the Group s long-term development strategy. The Group strategically aims at becoming a competitive and leading integrated 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 demand for rental operation premises from brand retailers and the demand for offices from high-end corporations. The Group s financial goals are to reach a leading position in respect of company scale and return on equity. To achieve the above goals, the Group will continue to expand its business nationwide and penetrate to more cities. Also, the Group will engage in both residential development and investment property holding. At the same time, to ensure an effective geographical expansion, the Group will continue to focus on developing middleto-low density projects in the suburban area and high-density projects in the urban area in terms of residential properties, and will focus on developing integrated projects with shopping malls as the core (similar to Shenzhen City Crossing Phase 1) in terms of investment holding, 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. 20 Annual Report 2005

23 Chairman s Statement The Directors believes that the Group s competitive edges lie in its differentiated business model, its clear and executable development strategy, an incentive mechanism that supports the implementation of such strategies, the solid support from its majority shareholder CRH, 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 Directors are confident that the Group will be able to achieve its goals by adhering to the above development strategy. Prospects The Directors believes that the Group is in a stage of rapid growth with promising prospects. Firstly, after the restructuring, the earning base of the Group has diversified from solely relying on property development to property development, rental income and long-term capital appreciation. Given the rapid economic growth in China, the huge demand for residential properties and the appreciation in value of commercial properties, the Directors consider that this earning profile can give the Group the best balance between short term and long term benefits. 480, ,000 1,000,000 Secondly, the nationwide development strategy implemented by the Group is bearing fruit. The nationwide residential property projects of the Group not only achieved satisfactory sales, but also attain rising profit margins. These projects are closing to completion and the results will be reflected in the financial statements through profit booking. The Directors expects that the Group s completed construction area will reach approximately 480,000 square metres in 2006 and will probably reach over 800,000 square metres and nearly 1,000,000 square metres in 2007 and 2008 respectively. Annual Report

24 Chairman s Statement Thirdly, the rental income of the Group should also increase. First of all, the Group s biggest rental income contributor, Shenzhen City Crossing Phase 1, which has been in operation for just over one year, should see an increase in rent through a gradual upgrade in the tenant portfolio. Also, its turnover-rent should rise in tandem with the businesses of the tenants. In addition, as the Grand Constellation and U-Space Shopping malls located in Beijing have only commenced operation since the second half of last year, there is room for an increase in occupancy rates, while the full year rental income of the two projects will be reflected in this year. The occupancy rate of the shopping arcades of the Shanghai China Resources Times Square rose during the second half of last year and the rent relating to the new leases of Beijing China Resources Building also increased. Fourthly, as the flagship of CRH, the Group will seek to acquire more real estate assets from its parent company at the right time with the right means as long as they are in line with the development strategy of the Group. They will become another driving force for the Group s growth. 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. Song Lin Chairman 27th March, 2006 Hong Kong 22 Annual Report 2005

25 管理層討論與分析 Management Discussion and Analysis 重組後, 本集團的盈利來源為物業開發 租金收入 長期資本漲值三足鼎立, 這樣的生意模型能在最大程度上平衡好長 短期利潤增長 After the restructuring, the earnings of the Group come from development profits, rental incomes and long-term capital appreciation. This business model provides the best balance between long and short term profit growth. 二零零五年地產發展業務回顧二零零五年, 在宏觀調控的市場環境下, 本集團在北京加快推出用家為主的近郊低密度項目及受宏觀調控較小的寫字樓項目 ; 同時, 雖然上海樓市受宏觀調控影響很大, 但本集團的上海灘花園項目一期去年九月底開盤後的銷售表現仍然能做到優於同區的競爭樓盤 ; 另外, 本集團去年下半年在成都 武漢 合肥等二線城市開盤的新項目也錄得令人滿意的銷售成果, 因此去年本集團的房屋銷售仍然取得令人滿意的成績 截至十二月底, 銷售房屋合同金額達人民幣 31.6 億元, 對比去年同期增長 38.7%; 銷售面積 421,779 平方米, 同比增長 14.8%, 為本集團未來的利潤結算打下良好的基礎 各城市的具體銷售情況如下 : Review of Property Development Businesses in 2005 In 2005, in view of the adverse market condition under the macroeconomic austerity measures, the Group speeded up sales of end-user focused low density projects in the suburban areas of Beijing and office properties that were relatively unaffected by the austerity measures. At the same time, although the property market in Shanghai was greatly affected by the macro-economic austerity measures, sales of phase 1 of The Bund Side Project of the Group, which was launched at the end of September last year, still recorded better performance than competing projects in the region. In addition, sales of new projects of the Group in the second tier cities such as Chengdu, Wuhan and Hefei in the second half of the last year also achieved satisfactory results. Consequently, last year s sales performance of the Group was still good despite the unfavourable macro backdrop. At the end of December, properties sales of the Group amounted to RMB3.16 billion, representing an increase of 38.7% year on year. And the corresponding sales areas increased by 14.8% year on year to 421,779 square metres. These provided a solid foundation for future profit booking for the Group. Detailed sales breakdown of the cities are as follows: 截至二零零五年十二月三十一日 合同金額 銷售面積 As of 31st December 2005 Contract Value Sales Area 人民幣 '000 % 平方米 % RMB 000 % Square Metres % 北京 Beijing 2,102,440 67% 235,940 56% 上海 Shanghai 283,523 9% 15,360 4% 成都 Chengdu 543,236 17% 119,606 28% 武漢 Wuhan 108,288 3% 24,043 6% 合肥 Hefei 119,859 4% 26,830 6% 總計 Total 3,157, % 421, % 二零零五年度年報 Annual Report

26 Management Discussion and Analysis ,000 In Beijing, the Phoenix City Project, a high density residential project in the urban area, recorded a total contract value of RMB700 million. Although sales of Phase 2 of the Phoenix City Project suffered higher impact by the macro-economic austerity measures, its sales still reached RMB630 million last year, thanks to various sales strategies including the expansion of overseas sales channels. In addition, internal sales for Phase 3 of the same project, organized in last December, registered sales of over RMB70 million. The total annual sales of the La Firenze Project, a low density residential project in the suburb, were RMB539 million. Fortune Island, the fifth phase of the La Firenze Project, was launched right after the introduction of the macro-economic austerity measures in May last year. Encouragingly, since the project mainly targeted at end users, sales reached RMB401 million and the average selling price was higher than those of the earlier phases of La Firenze. The Group also actively promoted office projects during the year and successfully pre-sold two buildings of Phoenix Plaza (40,000 square metres in total) to a big customer in China. At the same time, the Group sold three office buildings of Grand Constellation last year, with the remaining two buildings of the project also disposed in early this year , % % 85.2%2006 In Shanghai, the first batch of phase 1 of The Bund Side Project of the Group, comprising three buildings, was put up for sale at the end of September last year. In spite of the adverse influence of the macro-economic austerity measures on the property market in the region, the Group still managed to sell 114 units (15,360 square metes in total) out of 222 units by the end of the year, translating into a sale ratio of 51.4%, thanks to a loyal customer base and the highly appraised product quality. By the end of February 2006, the Group has already sold 129 units in total and the sale ratio was 58.1%. According to the data provided by The Shanghai City Property Transactions Centre, the sale ratio of this project was the best in the proximity. In addition, the entire construction site for The Bund Side Phase 1 was cleared. The site for phase 2 of the project has also been cleared by 85.2% and resettlement is expected to be completed in Annual Report 2005

27 Management Discussion and Analysis , % % 71% 100,777 In Chengdu, Jade City Project Phase 2, which has an area of 168,000 square metres comprising 1,138 units (including 11 houses) obtained its sale permits in August and October last year. Although the average selling price was raised by 38.5% over that of Phase 1, by leveraging on the established brand name of the previous phase and by employing successful sale strategies, approximately 80% of the 324 units of the phase 2 was sold in the initial launch in August. The two subsequent add-on launches also saw overwhelming market responses. By the end of last year, 71% of the saleable area was sold (the Group reserved part of the project for sale later this year). The corresponding portion of the project that will be booked in 2006 (100,777 square metres in total) was completely sold out. 39, % 40, ,755 In Wuhan, the first batch of the three buildings of Phoenix City Project Phase 1 with an area of 39,390 square metres comprising 316 units were put up for sale in the middle of last November. Through transplanting the Group s matured product design in high density urban projects, it took the Group only 14 months from the purchase of the land to kick-off pre-selling the project. Thanks to the creative concept of building the sales hall into an art gallery, the Group sold over 189 units of the first batch by the end of last year, representing 61% of the saleable area. The second batch of Phoenix City Project Phase 1 with a total area of 40,365 square metres comprising 318 units will be launched in May The total area of 79,755 square metres of phase 1 of the Wuhan Phoenix City Project is expected to be sold out within this year , , % 54,400 In Hefei, the French Annecy Project experienced high construction efficiency through transplanting the Group s matured product design in low density suburban projects. Its average selling price also fetched a premium by taking full advantage of the beautiful surrounding environment of the site. In early December last year, the Group launched 220 units from phase 1 of the project, with a total area of 34,571 square metres, and 163 units were sold in the first day. The project recorded the highest contract value in the first day of project launch in the city since the introduction of the macro-economic austerity measures. And with an average selling price of RMB4,450 per square metres, French Annecy was also the most expensive mid-rise property project in Hefei. By the end of last year, 190 units were sold, representing 77.6% of the total saleable area. Phase 2 of the project with an area of about 54,400 square metres is expected to be launched this May and October. Annual Report

28 Management Discussion and Analysis The table below shows the details of the Group s property sales last year: GFA Average Expected Sold in Price in Location Completion Date Usage Sqm Sqm RMB/Sqm La Firenze Phase 1 9,568 6,392 Beijing Completed Low Density Res La Firenze Phase 2 14,030 5,472 Beijing Completed Low Density Res Fortune Island 59,131 6,786 Beijing Mid 2006 Low Density Res Phoenix City Phase 2 51,829 12,147 Beijing Completed High Density Res Phoenix City Phase 3 5,136 13,988 Beijing High Density Res End 2006 / 2007 Phoenix Plaza 40,000 Beijing Office / Hotel N/A 2007/ 2008 Grand Constellation 16,219 Beijing Completed Office / Hotel N/A Top Box 6,443 9,145 Beijing Completed Office / Res Other Residential 28,296 N/A Beijing Completed Res Car Park 5,288 4,767 Beijing Completed Car Park The Bund Side 1 15,360 18,458 Shanghai End 2006 High Density Res Chengdu Jade City Phase 2 118,673 4,555 Chengdu Low Density Res End 2006/ 2007 Car Park 933 2,824 Chengdu Completed Car Park Wuhan Phoenix City Phase 1 24,043 4,504 Wuhan End 2006 High Density Res Hefei French Annecy Phase 1 26,830 4,467 Hefei End 2006 Low Density Res Total 421, Annual Report 2005

29 Management Discussion and Analysis Information of the Projects Completed in 2005 Details of the breakdown in turnover and the booking of individual projects in 2005 are listed below: Year Ended 31 Dec 2005 (HK$ 000) GFA Turnover '000) Sqm La Firenze 1 11,689 69,504 La Firenze 2 58, ,390 Top Box 6,443 54,160 Grand Constellation 33, ,956 Phoenix City 2 102,610 1,109,559 Beijing Subtotal 205,238 2,067,754 Chengdu Jade City Phase 1 122, ,586 Beijing Car Park 13,993 61,058 Chengdu Car Park 10,676 28,869 Rental Income from Beijing N/A 68,101 Property Management and Related Services Income from Beijing N/A 91,519 Total 352,409 2,706, , , ,000 Review on Property Investment Businesses in 2005 The Group s rental property portfolio expanded substantially in 2005 after acquiring CRH s premier quality investment properties in Beijing, Shanghai and Shenzhen. Total book value of the Group s investment properties substantially increased to HK$6.97 billion by the end of Meanwhile, the corresponding attributable gross floor area also expanded significantly to 539,530 square metres by the end of 2005 from 133,442 square metres a year ago. In addition to that, Shenzhen City Crossing Phase 2, which has an area of approximately 153,000 square metres including The Grand Hyatt Hotel, is under construction and is scheduled to complete in Apart from the substantial expansion in its investment property portfolio, it is particularly important that all of the projects acquired by the Group from the parent are high quality properties situated in premium locations in first tier cities in the PRC with nearly full occupancy. Management believes that the properties have a huge capital appreciation potential in the long run, while they will also contribute considerable and stable rental income in the short term. Annual Report

30 Management Discussion and Analysis The following table sets out the operating performance of the Group s key rental properties during last year. As the acquisition of Beijing China Resources Building, Shanghai China Resources Time Square and Shenzhen City Crossing Phase 1 were completed at the end of last year, their operating results were not included in the consolidated profit and loss account but their corresponding assets and liabilities are fully reflected in the balance sheet of the Group as of the end of '000 Year-end Year Ended 31 Dec 2005 () Turnover * Occupancy Rate 05 Not included in FY05 Accounts Beijing China Resources Building 111,232 93% Shanghai China Resources Times Square 92,737 97% Office Building 97% 87% Shopping Mall 87% Shenzhen City Crossing Phase 1 247,346 98% Office Building 98% 97% The MIXc 97% 05 Included in FY05 Accounts Xidan Cultural Centre 34,424 95% Other Rental Income from Beijing 33,677 70% Total Rental Income 519,121 * * Included property management fee income, if any. Excluded Huawei Centre. 28 Annual Report 2005

31 Management Discussion and Analysis The details of the Group s key investment properties in the PRC are as follow: Total Attributable Location Property Name Interest GFA GFA Use (sq m) (sq m) Shenzhen 100% 229, ,938 City Crossing Phase 1 100% 133, ,281 The MIXc Retail 100% 40,990 40,990 Office Office 100% 55,667 55,667 Car Park Car Park Shenzhen 100% 13,789 13,789 Hua Rui Building (Hotel Kapok) Hotel Shanghai 100% 97,139 97,139 CR Times Square 100% 51,190 51,190 Mall Retail 100% 36,843 36,843 Office Office Beijing 100% 65,222 65,222 China Resources Building Office 92% 36,184 33,253 Xidan Cultural Centre Retail 92% 20,032 18,409 Grand Constellation Shopping Area Retail 92% 10,803 9,928 U-Space Mall Retail 92% 17,952 16,498 Jing Tong Shops Retail 46% 54,214 24,911 Huawei Centre Res/Retail 15% 70,058 10,649 Huanan Building Retail/Office 92% 21,538 19,793 Others Office/Retail Total 636, ,530 Retail 406, ,833 Office 152, ,059 * 153,000 6,752 * Excluding the 153,000 square metres of Shenzhen City Crossing Phase 2 under construction and the 6,752 square metres that are self-occupied. Annual Report

32 Management Discussion and Analysis % 51%49% Land Bank On 1st August 2005, The Group s Beijing subsidiary participated in an auction for a piece of land located at Qinghe, Beijing and secured the right for development at a price of RMB2,565,000,000. The project, now officially named as The Oak Bay, has a total saleable area of over 800,000 square metres and will be mainly for residential purpose (accounting for 73% of total saleable area), with ancillary shopping malls and office buildings. The site is adjacent to the high technology area of Beijing s Zhongguancun, with many highqualification, high-income individuals there being regarded as the potential customers of this project. The Oak Bay Project is expected to be pre-sold in the second half of this year and be completed by Due to the huge scale of the project, the Group established a joint venture with its controlling shareholder China Resources (Holdings) Company Limited for joint development. The Group s Beijing subsidiary owns 51% of the joint venture, while the remaining 49% is held by China Resources (Holdings) Company Limited The Group s current residential land bank amounts to a gross floor area of million square metres. Pty under Property Total Location Development GFA held for Sale GFA GFA (sq m) (sq m) (sq m) * Beijing* 1,551, ,119 1,768,421 Shanghai 207, ,360 Shenzhen 103, ,000 Chengdu 889,791 21, ,288 Wuhan 125, ,807 Hefei 202, ,870 Total 3,080, ,616 3,318,746 * 91.9% * 91.9% effective ownership 30 Annual Report 2005

33 Management Discussion and Analysis % 61% 46.9% 29.5% Borrowings and Financial Leverage As of 31st December, 2005, the Group had consolidated borrowings of HK$5.8 billion. Cash and bank balances were HK$2 billion (HK$3.09 billion after adding the proceeds from the share placement in January this year), of which, 98% were denominated in Renminbi (61% after taken account of the proceeds from the share placing) and the rest were in US and HK dollars. The Group s net debt to net equity ratio stood at 46.9% (29.5% after taken account of the proceeds from the share placing). 60.2% 3.8%36.0% 6,500 Of the Group s total borrowings, about 60.2% were denominated in Renminbi, 3.8% in US dollars and 36.0% 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. 31.8% As of 31st December, 2005, about 31.8% of the Group s bank loans were due within one year and the rest were long term in nature. All of the loans which will be due in this year have been re-financed. 5% 10% 4.94% Although the interest rates for HK and US dollars loans rose during last year, the Group managed to maintain its borrowing cost at low levels by taking advantage of the divergence of interest rates between HK and US dollars loans and by re-negotiating its Renminbi loans. The Group s current borrowing costs for the HK and US dollars loans were less than 5% per annum and that for Renminbi loans stood at 10% below the basis interest rate, which is the lowest level allowed by relevant regulations. At the end of last year, the weighted average interest rate of bank loans was around 4.94% per annum. 10% As of 31st December, 2005, approximately 10% of the Group s loans are based on fixed rate and the rest are on floating rate. Annual Report

34 Management Discussion and Analysis Exchange gain and loss At the end of July last year, the People s Bank of China altered the RMB foreign exchange system. Since then, the exchange rates of Renminbi have appreciated against US and HK dollars The exchange rates adopted by the Group in preparing the accounts were RMB1 to HK$0.94 on 1st January, 2005 and RMB1 to HK$0.961 on 31st December The average exchange rate employed for the year was RMB1 to HK$ ,006 3,435 1,700 Since the funding of the Group s PRC based subsidiaries included certain foreign currencies (in the forms of bank loans and shareholders loans from the Hong Kong listed headquarters of the Group), the Group recorded an exchange gain of HK$70.1 million (HK$34.4 million after deducting taxation and minority interest). Employee and Compensation Policy As of 31st December, 2005, the Group employed approximately 1,700 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. By Order of the Board Wang Yin Managing Director 27th March, 2006 Hong Kong 32 Annual Report 2005

35 Biographical Details of Directors and Senior Management Executive Directors MR. SONG LIN, aged 43, was appointed Chairman of the Company in February He is the President and a Director of China Resources (Holdings) Company Limited and China Resources National Corporation, the Chairman of China Resources Enterprise, Limited as well as the Chairman of China Resources Power Holdings Company Limited. Mr. Song is an Independent Non-Executive Director of Geely Automobile Holdings Limited. Mr. Song has extensive experience in corporate management and is currently responsible for the overall business development and strategic planning of the Group s businesses. Mr. Song holds a Bachelor s degree in Mechanics from the University of Tong Ji in Shanghai, China. He joined China Resources (Holdings) Company Limited in MR. WANG YIN, aged 50, was appointed the Managing Director in He is responsible for the execution of strategies and day-today operation of the Group. He is also a Director and a Deputy President 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. He joined China Resources (Holdings) Company Limited 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. Annual Report

36 Biographical Details of Directors and Senior Management Non-Executive Directors MR. JIANG WEI, aged 43, was appointed Non-Executive Director of the Company in February He is a Director and the Chief Financial Officer of China Resources (Holdings) Company Limited and China Resources National Corporation. Mr. Jiang is a Non- Executive Director of China Resources Enterprise, Limited, China Resources Power Holdings Company Limited, China Resources Cement Holdings Limited and China Assets (Holdings) Limited. Mr. Jiang obtained both his Bachelor s degree in International Trade and Master s degree in International Business and Finance from the University of International Business and Economics in Beijing, China. He joined China Resources (Holdings) Company Limited in MR. YAN BIAO, aged 44, was appointed an Executive Director of the Company in 1996 and was re-designation as a Non-Executive Director in February Mr. Yan is a Director of China Resources (Holdings) Company Limited and China Resources National Corporation. He is also a Non-Executive Director of China Resources Enterprise, Limited. He has a Bachelor of Laws degree from the Peking University, China and an MBA degree from the University of San Francisco in the United States. He joined China Resources (Holdings) Company Limited in MR. LIU YANJIE, aged 49, was appointed Non-Executive Director of the Company in February Mr. Liu is an Assistant President of China Resources (Holdings) Company Limited and General Manager of the personnel department of China Resources (Holdings) Company Limited. He has a Bachelor s degree from Renmin University, China. He joined China Resources (Holdings) Company Limited in Annual Report 2005

37 Biographical Details of Directors and Senior Management MR. XIE SHENGXI, aged 44, was appointed Non-Executive Director of the Company in February Mr. Xie is a Non-Executive Director of China Resources Enterprise, Limited. He is also a Director of Shandong Dong EE Jiao Company, Limited, which is a listed company in China. Mr. Xie has a Bachelor s degree in Economics from Shanxi University of Finance and Economics and a MBA degree from the University of South Australia. He is also a qualified accountant in China. He joined China Resources (Holdings) Company Limited in Amherst College MR. PAUL WOLANSKY, aged 50, was appointed Non-Executive Director of the Company in He has a Bachelor s degree from Amherst College and a juris doctor degree from Harvard University. Independent Non-Executive Directors MR. WANG SHI, aged 55, was appointed Independent Non-Executive Director of the Company 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 47, was appointed Independent Non- Executive Director of the Company in Mr. Wong is a qualified accountant and has experience in merchant banking. MR. HO HIN NGAI, BOSCO, aged 60, was appointed Independent Non-Executive Director of the Company in He is Authorized Person- Architect, Hong Kong, Member of Hong Kong Institute of Architects and Associate of Royal Institute of British Architects. Annual Report

38 Biographical Details of Directors and Senior Management Senior Management MR. WU XIANGDONG, aged 39, is the Senior Vice President of the Company and the General Manager of China Resources (Shenzhen) Co., Ltd. Mr. Wu has a double Bachelor s degree in Architectural Management and Mechanics from Tsinghua University, China and a Master s degree in Business Administration from the University of San Francisco in the United States. Mr. Wu has experience in corporate management and commercial property operation. Mr. Wu joined China Resources (Holdings) Company Limited in 1993 and was the Vice General Manager of China Resources property management limited. MS. BAI HUA, aged 43, is a Vice President of the Company and the General Manager of Beijing China Resources Building Co., Limited. Ms. Bai has a Bachelor s degree in Philosophy from Beijing Normal University, China. Ms. Bai has experience in human resources management and investment property operation. Ms. Bai joined China Resources (Holdings) Company Limited in 1993, and has worked for the research department of China Resources (Holdings) Company Limited. MR. WU DING, aged 40, is a Vice President of the Company and the General Manager of China Resources (Shanghai) Limited. Mr. Wu has a Bachelor s degree in Corporate Management from Shanxi University of Finance and Economics. Mr. Wu has experience in project management and investment property operation. Mr. Wu joined China Resources (Holdings) Company Limited in 1988, and has worked for development and investment department of China Resources (Holdings) Company Limited. 36 Annual Report 2005

39 Biographical Details of Directors and Senior Management MR. CHEN YING, aged 36, is an Assistant Vice President of the Company and the General Manager of China Resources Land (Beijing) Company Limited. Mr. Chen has a Bachelor s degree in Architectural Management from Tsinghua University, China and is a member of the Hong Kong Institute of Construction Managers. Mr. Chen has experience in property management and corporate management. Mr Chen joined China Resources (Holdings) Company Limited in 1993, and has worked for China Resources Construction (Holdings) Co., Ltd. MR. CHEN KAI, aged 37, is an Assistant Vice President of the Company and the General Manager of China Resources Land (Shanghai) Limited and China Resources Land (Wuhan) Limited. Mr. Chen has a Master s degree in Architectural from Zhejiang Universtity, China and is also an Incorporate of the Chartered Institute of Buildings (ICIOB). Mr. Chen has experience in property management and corporate management. Mr Chen joined China Resources (Holdings) Company Limited in 1995, and has worked for China Resources Construction (Holdings) Co., Ltd. MR. TANG YONG, aged 35, is an Assistant Vice President of the Company and the General Manager of China Resources Land (Chengdu) Limited and China Resources Land (Hefei) Limited. Mr. Tang has a Bachelor s degree in Industrial and Electrical Automation from Tongji Universtity, China and a Master s degree in Business Administration from the University of San Francisco in the United States. Mr. Tang has experience in property management and corporate management. Mr. Tang joined China Resources (Holdings) Company Limited in 1993, and has worked for China Resources Property Management Limited. MR. LIN CHU CHANG, aged 37, is the Chief Financial Officer of the Company. 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 fifteen years of experience in securities research and investment. He joined the Company in Annual Report