Building with the times

Transcription

1 2016 Annual Report ASIAN GROWTH PROPERTIES LIMITED (Incorporated in the British Virgin Islands and continued in Bermuda with limited liability) Building with the times

2 Directory Registered Office Clarendon House 2 Church Street Hamilton HM 11 Bermuda Principal Place of Business 25/F., Dah Sing Financial Centre 108 Gloucester Road Wanchai, Hong Kong Telephone: Facsimile: info@asiangrowth.com Directors Richard Öther Prickett * + Lu Wing Chi # Lambert Lu # David Andrew Runciman # Lincoln Lu # Lam Sing Tai Δ John David Orchard Fulton + * Non-executive Chairman # Executive Director Δ Non-executive Director + Independent Non-executive Director Company Secretary SHL Services Limited 18/F., United Centre 95 Queensway Hong Kong Principal Bankers The Hongkong and Shanghai Banking Corporation Limited Bank of China (Hong Kong) Limited Standard Chartered Bank (Hong Kong) Limited Hang Seng Bank Limited Nominated Advisor and Broker Panmure Gordon (UK) Limited One New Change London EC4M 9AF United Kingdom Website Legal Advisor Stephenson Harwood LLP 1 Finsbury Circus London EC2M 7SH United Kingdom Independent Auditor Deloitte Touche Tohmatsu 35/F., One Pacific Place 88 Queensway Hong Kong Share Registrar Computershare Investor Services (Bermuda) Limited 5 Reid Street Hamilton HM 11 Bermuda Telephone: Facsimile: Depositary Computershare Investor Services PLC The Pavilions Bridgwater Road Bristol BS99 6ZZ United Kingdom Telephone: Facsimile: Listing The shares of the Company are admitted for trading on the AIM Market of The London Stock Exchange plc (Stock Code: AGP) The Company is a subsidiary of S E A Holdings Limited whose shares are listed and traded on The Stock Exchange of Hong Kong Limited (Stock Code: 251)

3 CONTENTS Financial Highlights Property Portfolio Location of the Group s Properties/Projects Chairman s Review Executive Directors Review Board of Directors Corporate Governance Report Directors Report Independent Auditor s Report Consolidated Statement of Profit or Loss Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Glossary

4 2 ASIAN GROWTH PROPERTIES LIMITED ANNUAL REPORT 2016 Financial Highlights Results For the year ended 31 December HK$ m HK$ m HK$ m HK$ m HK$ m Revenue Profit for the year before non-controlling interests , ,300.3 Non-controlling interests (0.7) 26.1 Profit for the year attributable to the Company s shareholders , ,326.4 Assets and Liabilities As at 31 December HK$ m HK$ m HK$ m HK$ m HK$ m Total assets 16, , , , ,431.1 Total liabilities (3,927.6) (4,848.2) (4,906.6) (3,858.8) (3,511.7) Non-controlling interests 80.2 (41.6) (55.5) (57.7) (58.0) Equity attributable to the Company s shareholders 12, , , , ,861.4 Net asset value per share attributable to the Company s shareholders (in HK$) Performance Data HK$ HK$ HK$ HK$ HK$ Earnings per share for profit attributable to the Company s shareholders Earnings per share excluding fair value changes on properties net of deferred tax Net cash from/(used in) operating activities (in HK$ m) (282.4) (127.1)

5 ASIAN GROWTH PROPERTIES LIMITED ANNUAL REPORT Financial Highlights Segment Revenue for External Sales 44.5% 1.7% Property Investment 54.8% % 42.5% Property Development Hotel Operation Financial Investment % 13.2% Revenue from External Customers by Geographical Location of Properties 73.4% Hong Kong 67.3% 2016 Mainland China % United Kingdom 32.7% 2.2% Property Assets by Geographical Segment 18.6% 69.4% Hong Kong 50.3% 2016 Mainland China % 31.1% United Kingdom

6 4 ASIAN GROWTH PROPERTIES LIMITED ANNUAL REPORT 2016 Property Portfolio At 31 December 2016 Particulars of Investment Properties Approximate Group s Name Location Lease Expiry Usage Gross Floor Area Interest (square metres) (%) MAINLAND CHINA Plaza Central 8 Shunchengda Street, 6 October 2063 Commercial/ 91,455 (including 100 Yanshikou, Office car parking floors) Jinjiang District, Chengdu, Sichuan Province Commercial podium No. 6 Xi Yu Long Street, 18 May 2063 Commercial 19,261 (including 100 in Zone B and Qingyang District, car parking spaces) car parking spaces Chengdu, on Basements 2 and 3, Sichuan Province New Century Plaza Office Tower, 50 Zhong Shan 7th Road, 23 May 2050 Office 16, Westmin Plaza Li Wan District, Phase II Guangzhou, Guangdong Province UNITED KINGDOM 20 Moorgate, London, 20 Moorgate, London, Leasehold Office 14, EC2R 6DA EC2R 6DA, England Particulars of Hotel Building Approximate Group s Name Location Lease Expiry Usage Gross Floor Area Interest (square metres) (%) HONG KONG Crowne Plaza 8 Leighton Road, 6 November 2049 Hotel 14, Hong Kong Causeway Bay Causeway Bay

7 ASIAN GROWTH PROPERTIES LIMITED ANNUAL REPORT Property Portfolio At 31 December 2016 Particulars of Properties Held for Sale Stage of Approximate Group s Name Location Completion Usage Gross Floor Area Interest (square metres) (%) MAINLAND CHINA Commercial podium, Zhong Shan Completed Commercial 45,984 (including 100 Westmin Plaza 7th Road, car parking floors) Phase II Li Wan District, Guangzhou, Guangdong Province

8 6 ASIAN GROWTH PROPERTIES LIMITED ANNUAL REPORT 2016 Location of the Group s Properties/Projects United Kingdom 1 20 Moorgate, London, EC2R 6DA United Kingdom Hong Kong A Crowne Plaza Hong Kong Causeway Bay 1 Asia Europe Mainland China Hong Kong A Mainland China 1 Plaza Central, Sichuan Province 2 New Century Plaza, Sichuan Province 3 Nanjing Project, Jiangsu Province 4 Westmin Plaza Phase II, Guangdong Province

9 ASIAN GROWTH PROPERTIES LIMITED ANNUAL REPORT Chairman s Review I am pleased to present the audited consolidated financial results of the Group for the 2016 year to the shareholders of the Company. Results AGP reported a profit attributable to the Company s shareholders of HK$425.4 million ( 44.4 million) for the year ended 31 December 2016 (2015: HK$1,336.7 million ( million)). The reported profit included a revaluation deficit on investment properties net of deferred taxation of HK$75.5 million ( 7.9 million) (2015: revaluation surplus of HK$980.8 million ( 85.4 million)). By excluding the net effect of such deficit, the Group s net profit attributable to the Company s shareholders was HK$500.9 million ( 52.3 million) (2015: HK$355.9 million ( 31.0 million)), including a realised gain of HK$611.5 million ( 63.9 million) and HK$127.1 million ( 13.3 million) in relation to the sale of the property of Dah Sing Financial Centre and Chengdu Nova City Project respectively and a realized loss of HK$90.5 million ( 9.5 million) and HK$32.3 million ( 3.4 million) in relation to the sale of the Kaifeng Nova City and Huangshan Projects respectively. As at 31 December 2016, the Group s equity attributable to the Company s shareholders amounted to HK$12,789.5 million ( 1,336.3 million) (31 December 2015: HK$14,218.8 million ( 1,238.1 million)). The net asset value per share attributable to the Company s shareholders as at 31 December 2016 was HK$14.4 (150.5 pence) as compared with HK$16.0 (139.3 pence) as at 31 December Moorgate, London, EC2R 6DA, England The Group s hotel property is stated at cost less accumulated depreciation charges at a carrying value of HK$892.2 million ( 93.2 million), whereas the market value as at 31 December 2016 as determined by an independent professional market valuation carried out by CBRE Limited is HK$3,500.0 million ( million). For the purpose of providing supplementary information, if the carrying value of the Group s hotel property was restated to its market value as at 31 December 2016, the adjusted net asset value and adjusted net asset value per share attributable to the Company s shareholders would be HK$15,397.3 million ( 1,608.7 million) and HK$17.4 (181.8 pence) respectively.

10 8 ASIAN GROWTH PROPERTIES LIMITED ANNUAL REPORT 2016 Chairman s Review Figures in Pounds Sterling are translated from Hong Kong dollars based upon the exchange rates prevailing on the latest practicable business day of the respective accounting years. Operations During the year ended 31 December 2016, the rental income from investment properties situated in Mainland China continue to provide stable returns to the Group. Crowne Plaza Hong Kong Causeway Bay s performance dropped compared to 2015, which was a result in line with the weaker hotel business market, and the one-trip-per-week policy and the depreciation of the renminbi will continue to affect Hong Kong s attractiveness to Mainland China visitors. The Group completed the sale of Dah Sing Financial Centre in May The sale realised a gain on disposal of HK$611.5 million ( 63.9 million) and generated net cash after repayment of bank loans of approximately HK$8,019 million (approximately million). The Board believes that the disposal of Dah Sing Financial Centre provided an optimum opportunity for the Company to realise cash and unlock the value of its investment in the property at fair market value. The Group completed the sale of Kaifeng Nova City Project in April The sale realised a loss on disposal of HK$90.5 million ( 9.5 million) and generated a net cash amount of approximately HK$889.1 million ( 92.9 million) which is available for future investment into the Company s other development and investment projects and other potential real estate projects and as general working capital for the Group. The Group completed the sale of Chengdu Nova City Project in August The sale realised a gain on disposal of HK$127.1 million ( 13.3 million) and will in total generate a net cash amount of approximately Crowne Plaza Hong Kong Causeway Bay, Hong Kong HK$886.9 million ( 92.7 million) which will be available for future investment into its other development and investment projects and other potential real estate projects and as general working capital for the Group, of which HK$445.0 million ( 46.5 million) has been received to date with the balance due in August On 7 November 2016, the Group entered into a sale and purchase agreement in relation to acquire the entire issued units in a trust that owns the property known as 20 Moorgate, London, EC2R 6DA at a total consideration of approximately million. Completion of the acquisition took place on 7 November For details of the Group s operations, please refer to the Executive Directors Review.

11 ASIAN GROWTH PROPERTIES LIMITED ANNUAL REPORT Chairman s Review Outlook The global economy and political environment continue to be clouded with uncertainties and rapid changes, as a result of the decision by Britain to leave the European Union (Brexit), the new president of the United States of America, the recovery pace of the Eurozone economies, the strengthening of US dollar and the upward pressure on US interest rates. It is widely expected that market volatility will increase over time. The Group are closely monitoring the evolving market developments and has equipped itself to face the various challenges ahead by adopting a prudent and effective policy in managing risks. China was able to achieve 6.7% GDP growth rate in 2016 by implementing a proactive fiscal policy and prudent monetary policy, which was within the Central Government s targeted range. Moreover, The Belt and Road initiative has continued to promote development and business co-operation among the participating regions and nations, which should benefit Hong Kong and China. Special Dividend The Board has declared a special cash dividend of HK$2.25 per common share for the year ended 31 December 2016 to shareholders of the Company whose names appear on the register of members of the Company at the close of business on Friday, 31 March The relevant dividend warrants are expected to be despatched on or before Thursday, 13 April Dividend payments will be converted to Pound Sterling at the spot rates sourced from the Hong Kong Association of Banks on the ex-dividend date (i.e. Thursday, 30 March 2017) and paid to the shareholders on the payment date. Shareholders who elect to receive the special dividend in Hong Kong Dollars should notify the Company in writing at least 5 business days prior to the payment date. Crowne Plaza Hong Kong Causeway Bay, Hong Kong

12 10 ASIAN GROWTH PROPERTIES LIMITED ANNUAL REPORT 2016 Chairman s Review Acknowledgement The Board would like to take this opportunity to thank the executive and management team for the execution of the Board s strategy and their ongoing support. Richard Prickett Non-executive Chairman Hong Kong, 17 March 2017

13 ASIAN GROWTH PROPERTIES LIMITED ANNUAL REPORT Executive Directors Review Crowne Plaza Hong Kong Causeway Bay, Hong Kong FINANCIAL SUMMARY Turnover for the year ended 31 December 2016 amounted to HK$539.6 million ( 56.4 million) (2015: HK$715.8 million ( 62.3 million)). The turnover was principally attributable to the recognition of rental income from investment properties, revenue from hotel operation, the sales of residential units in Kaifeng Nova City and the income from financial investment. Profit attributable to the Company s shareholders for the year amounted to HK$425.4 million ( 44.4 million) (2015: HK$1,336.7 million ( million)), equivalent to a basic earnings per share of HK48.0 cents (5.0 pence) (2015: HK150.8 cents (13.1 pence)). The reported profit included a revaluation deficit on investment properties net of deferred taxation of HK$75.5 million ( 7.9 million) (2015: revaluation surplus of HK$980.8 million ( 85.4 million)). By excluding the net effect of such deficit, the Group s net profit attributable to the Company s shareholders was HK$500.9 million ( 52.3 million) (2015: HK$355.9 million ( 31.0 million)), equivalent to HK56.5 cents (5.9 pence) (2015: HK40.2 cents (3.5 pence)) per share. As at 31 December 2016, the Group s equity attributable to the Company s shareholders amounted to HK$12,789.5 million ( 1,336.3 million) (31 December 2015: HK$14,218.8 million ( 1,238.1 million)). The net asset value per share attributable to the Company s shareholders as at 31 December 2016 was HK$14.4 (150.5 pence) as compared with HK$16.0 (139.3 pence) as at 31 December For the Company s shareholders information, figures in Pounds Sterling are translated from Hong Kong dollars based upon the exchange rates prevailing on the latest practicable business day of the respective accounting years and the relevant exchange rates adopted are stated as follows: For 31 December 2016: 1 = HK$9.571 For 31 December 2015: 1 = HK$

14 12 ASIAN GROWTH PROPERTIES LIMITED ANNUAL REPORT 2016 Executive Directors Review BUSINESS REVIEW Property Investment and Development The Group continues to focus on property development and property investment projects. It is the Group s approach to review and optimise the project portfolios from time to time. The Group s core projects located in Hong Kong, United Kingdom and Mainland China are listed below. Following the disposal of certain properties projects as summarized in these results, the Group principally owns one property in Hong Kong (Crowne Plaza Hong Kong Causeway Bay), one property in United Kingdom (20 Moorgate, London) and four properties in Mainland China (three investment properties and one property held for sales). Crowne Plaza Hong Kong Causeway Bay, Hong Kong Hong Kong The Group entered into an agreement in February 2016 to conditionally dispose of its entire interest in companies which beneficially owned the property of Dah Sing Financial Centre, for a consideration of approximately HK$10,000 million (approximately 1,044.8 million), subject to adjustment. The disposal was completed in May 2016 and generated a net cash consideration (after repayment of bank loans) of approximately HK$8,019 million (approximately million). United Kingdom On 7 November 2016, the Group entered into a sale and purchase agreement in relation to acquire the entire issued units in a trust that owns the property known as 20 Moorgate, London, EC2R 6DA at a total consideration of approximately million. The acquisition was funded by a 100 million five year term loan facility secured by a mortgage over the property and its existing cash resources. Completion of the acquisition took place on 7 November The property is a seven-storey office with approximately 154,854 square feet (approximately 14,386.3 square metres) and is fully occupied mostly by the Prudential Regulatory Authority (a regulatory body of the Bank of England) until 30 June The property currently generates a net rental income of 6.8 million (approximately HK$65.1 million) per annum with the net yield of 4.4%. 20 Moorgate, London, EC2R 6DA, England

15 ASIAN GROWTH PROPERTIES LIMITED ANNUAL REPORT Executive Directors Review Mainland China Chengdu, Sichuan Province During the year under review, the occupancy rate for the two 30-storey office towers of Plaza Central remained at a high level and its retail podium with a gross floor area of about 29,000 square metres is fully let principally to Chengdu New World Department Store on a long-term lease. As at 31 December 2016, the aggregate occupancy rate for the two office towers and the retail podium was approximately 79% (31 December 2015: 84%). Leasing activities for the remaining areas of Plaza Central continue. The shopping arcade of New Century Plaza with a gross floor area of about 16,300 square metres is fully let to a hotel on a long-term lease. On 22 August 2016, the Group entered into a sale and purchase agreement in relation to the disposal of Chengdu Nova City Project for a consideration of HK$890 million ( 93.0 million) in cash. Completion of the disposal took place on 29 August 2016, of which HK$445 million ( 46.5 million) has been received to date with the balance due in August Plaza Central, Chengdu Kaifeng, Henan Province On 19 April 2016, the Group entered into a sale and purchase agreement in relation to the disposal of Kaifeng Nova City Project for a consideration of HK$900 million ( 94.0 million) in cash. Completion of the disposal took place on 26 April Guangzhou, Guangdong Province As at 31 December 2016, the occupancy rate of the 14-storey office tower of Westmin Plaza Phase II of about 16,100 square metres was 95% with more than one-third of the total office space being leased to AIA (31 December 2015: 100%). Leasing activities for the 3-storey shopping arcade of Westmin Plaza Phase II with a total gross floor area of about 26,400 square metres are in progress. Westmin Plaza, Guangzhou Huangshan, Anhui Province On 3 August 2016, the Group entered into a sale and purchase agreement with an independent third party to sell the entire interest in companies which beneficially own the properties under development in Huangshan City, Anhui Province, the PRC, for a consideration of HK$2 million ( 0.2 million). The disposal was completed on the same date.

16 14 ASIAN GROWTH PROPERTIES LIMITED ANNUAL REPORT 2016 Executive Directors Review Hotel Operation Crowne Plaza Hong Kong Causeway Bay is a 29-storey five-star hotel comprising 263 guest rooms with ancillary facilities and is managed by the InterContinental Hotels Group. The Group s hotel property is stated at cost less accumulated depreciation charges at carrying value of HK$892.2 million ( 93.2 million), whereas their fair values as at 31 December 2016 based on an independent professional market valuation carried out by CBRE Limited is HK$3,500.0 million ( million). Its performance steadied compared to 2015, which was a result in line with the weakening hotel business market. The hotel will strive to gain further market share and look for cost saving measures in the challenging market conditions. WORKING CAPITAL AND LOAN FACILITIES As at 31 December 2016, the Group s total cash balance was HK$9,778.9 million ( 1,021.7 million) (31 December 2015: HK$3,671.2 million ( million)) and unutilised facilities were HK$627.4 million ( 65.6 million) (31 December 2015: HK$370.2 million ( 32.2 million)). As at 31 December 2016, after netting off bank borrowings of HK$3,458.6 million ( million), the Group had a net cash position of HK$6,320.3 million ( million), compared to a net debt position of HK$342.3 million ( 29.8 million) with gearing ratio of 2.3% as at 31 December As at 31 December 2016, the maturity of the Group s outstanding borrowings was as follows: 31 December December 2015 HK$ million HK$ million Due Within 1 year 1, , years years 1, ,795.8 Over 5 years , ,035.6 Less: Front-end fee (17.4) (22.1) 3, ,013.5 Pledge of Assets For the Company s subsidiaries operating in Hong Kong, United Kingdom and Mainland China, the total bank loans drawn as at 31 December 2016 amounted to HK$3,476.0 million ( million) (31 December 2015: HK$4,035.6 million ( million)) which comprised secured bank loans of HK$3,396.0 million ( million) and unsecured bank loans of HK$80.0 million ( 8.4 million) (31 December 2015: secured bank loans of HK$4,035.6 million ( million)). The secured bank loans were secured by properties valued at HK$3,747.0 million ( million), listed debt securities of HK$882.1 million ( 92.2 million), pledged cash of HK$533.1 million ( 55.7 million) and note receivables of HK$54.3 million ( 5.7 million) (31 December 2015: properties valued at HK$12,237.5 million ( 1,065.6 million) and note receivables of HK$54.3 million ( 4.7 million)).

17 ASIAN GROWTH PROPERTIES LIMITED ANNUAL REPORT Executive Directors Review Treasury Policies The Group adheres to prudent treasury policies. As at 31 December 2016, all of the Group s borrowings were raised through its wholly-owned or substantially controlled subsidiaries on a non-recourse basis. International Financial Reporting Standards ( IFRS ) The Group has adopted IFRS and the audited Consolidated financial statements accompanying this Review have been prepared in accordance with IFRS. OUTLOOK The Hong Kong economy picked up slightly in the third quarter of 2016 with GDP up by 1.9% year-onyear, an improvement relative to the 1.7% year-on-year growth in the preceding quarter. As one of the international financial centers in the world, Hong Kong will inevitably be affected by global economic factors. The growth of the Hong Kong economy will be dominated by Mainland China s policy and performance and the pace of US interest rate hikes. Mainland China buyers were active in Hong Kong s property market in 2016 given ongoing depreciation of the renminbi and shrinking profits in the Mainland, and these buyers are expected to continue to invest in the local Hong Kong property market. We have noted signs of a pick-up in the primary sales market and a sustained increase in residential prices. We therefore expect a highly competitive land sales market in the near term will remain. Amid an uncertain global economy and a strong Hong Kong dollar, the tourism in Hong Kong is expected to remain weak. The one-trip-per-week policy and the depreciation of the yuan will continue to affect the number of Mainland China visitors. With the challenging hotel business environment in Hong Kong, Crown Plaza Causeway Bay was able to maintain the market share among the primary competitors. We will continue to strive for market share, improve hotel operation s efficiency and at the same time look for cost saving measures, so as to maintain the return of the operations. The Group s office properties in Mainland China are facing a challenging environment arising from increasing supply and depreciation of renminbi. Having said that, our office properties in Mainland China have been maintaining a relatively high occupancy rate and rent as compared with the market and provides stable cash flows to the Group. We will continue to build on the strong foundation of our leasing portfolio, execute an effective leasing strategy and add value on our properties through asset enhancement initiative. As for the office market in the UK, despite global political events of the past year with more European elections to come, the attractiveness of properties in London with prime location still remain, given the deprecation of sterling, a low interest rate environment and stable income and cash flows generated from long leases with tenants.

18 16 ASIAN GROWTH PROPERTIES LIMITED ANNUAL REPORT 2016 Executive Directors Review The Group has significant funds for future investments after the disposal of Dah Sing Financial Centre and various Mainland China property development projects in prior year. The Group will remain sceptically proactive and continue to monitor the property markets of Hong Kong, Mainland China and overseas closely in order to identify potential acquisition targets at opportune times. On behalf of the Executive Directors Lu Wing Chi Executive Director Hong Kong, 17 March 2017

19 ASIAN GROWTH PROPERTIES LIMITED ANNUAL REPORT Board of Directors Mr. Prickett, aged 65, joined the Board in January 2006 and became the Non-executive Chairman of the Company in March Mr. Prickett is also the chairman of the Audit, Nomination and Remuneration Committees of the Company. He is a Chartered Accountant in England and Wales and has many years experience in corporate finance. RICHARD ÖTHER PRICKETT Non-executive Chairman and Independent Non-executive Director Mr. Prickett is a finance director of Landore Resources Limited (a company listed on the AIM Market). Furthermore, he is an independent non-executive director of City Natural Resources High Yield Trust Plc (a listed investment trust) and The Pioneer (City) Pub Company Ltd. (a private company incorporated in the United Kingdom). Mr. Lu, aged 70, joined the Board in March He is the chairman and managing director of SEA and a director of various members of the Group. Mr. Lu has over 45 years experience in property investment and development in Hong Kong and throughout the Asia-Pacific region. He is responsible for investment strategies and development direction within the Group. LU WING CHI Executive Director

20 18 ASIAN GROWTH PROPERTIES LIMITED ANNUAL REPORT 2016 Board of Directors Mr. Lu, aged 40, joined the Board in September He is an executive director of SEA and a director of various members of the Group. He is also a member of the Henan Committee of Chinese People s Political Consultative Conference and was previously the vice chairman of The Chamber of Hong Kong Listed Companies. Mr. Lu holds a Bachelor s degree from the University of British Columbia in Canada. LAMBERT LU Executive Director Mr. Runciman, aged 66, joined the Board in January He is a Fellow of the Royal Institution of Chartered Surveyors of the United Kingdom and has spent much of his working career in Asia dealing with all aspects of residential and commercial real estate markets. DAVID ANDREW RUNCIMAN Executive Director Mr. Runciman formerly served as the chairman for Asia Pacific for CBRE, the world s largest property services company. He had worked with Richard Ellis (subsequently CBRE) for 30 years and was instrumental in growing the business from a company comprising just four professionals in 1977 to that with over 2,000 staff operating in 54 offices throughout Asia in In addition, Mr. Runciman is the chief executive officer of Scottish and Oriental Estates which is his own investment company and has been a Hong Kong resident since Mr. Lu, aged 42, joined the Board in March He is an executive director of SEA and a director of various members of the Group. He is also a member of the Sichuan Committee of Chinese People s Political Consultative Conference and an executive member of All-China Federation of Industry and Commerce. Mr. Lu holds a Bachelor of Arts degree from the University of British Columbia in Canada. He is primarily responsible for the Group s hotel and project management operations. LINCOLN LU Executive Director

21 ASIAN GROWTH PROPERTIES LIMITED ANNUAL REPORT Board of Directors Mr. Lam, aged 70, joined the Board in March 2014 and is a member of the Audit and Remuneration Committees of the Company. He is a nonexecutive director of SEA and a director of various members of the Group. Mr. Lam is primarily responsible for the sales and marketing matters of the Group s properties in Hong Kong and Mainland China. He has over 40 years of solid experience in property development and investment. LAM SING TAI Non-executive Director Mr. Fulton, aged 63, joined the Board in July 2014 and is a member of the Audit and Remuneration Committees of the Company. He is a consultant to law firm Anderson Strathern LLP and has been doing business in the Far East since He has over 25 years experience in property work and as an adviser to major landowners and also as a secretary and trustee of registered charities. JOHN DAVID ORCHARD FULTON Independent Non-executive Director Mr. Fulton, a Notary Public and an accredited mediator, is the Chair of the Clark Foundation for Legal Education, and served as treasurer of the Society of Writers to Her Majesty s Signet. He holds a LL.B. degree from the University of Edinburgh in the United Kingdom.

22 20 ASIAN GROWTH PROPERTIES LIMITED ANNUAL REPORT 2016 Corporate Governance Report The Company observes the Corporate Governance Guidelines for AIM Companies published by the Quoted Companies Alliance in the United Kingdom so far as it is reasonably practicable having regard to its size and business nature. To implement the Market Abuse Regulation ( MAR ), which introduces a new regime for market abuse (market manipulation and insider dealing) alongside new rules on disclosure of inside information, insider lists and restrictions on dealings by persons discharging managerial responsibilities and their associated persons and has come into effect from 3 July 2016, the Company has adopted a dealing policy and a policy for disclosure of inside information. The Board The Board currently comprises the following members: Mr. Richard Öther Prickett Mr. Lu Wing Chi Mr. Lambert Lu Mr. David Andrew Runciman Mr. Lincoln Lu Mr. Lam Sing Tai Mr. John David Orchard Fulton (Non-executive Chairman and Independent Non-executive Director) (Executive Director) (Executive Director) (Executive Director) (Executive Director) (Non-executive Director) (Independent Non-executive Director) The Board meets regularly throughout the year. To enable the Board to perform its duties, each Director has full access to all relevant information and the services of the Company Secretary or its delegates. If necessary, the Non-executive Directors may take independent professional advice at the Company s expense. The Board has delegated specific responsibilities to the committees described below. Board Audit Committee Remuneration Committee Nomination Committee (Role undertaken by the Board)

23 ASIAN GROWTH PROPERTIES LIMITED ANNUAL REPORT Corporate Governance Report The Audit Committee The Audit Committee, which comprises Messrs. Prickett, Lam and Fulton and is presently chaired by Mr. Prickett, meets at least twice each year. The committee monitors, in discussion with the external independent auditor, the integrity of the financial statements of the Company and any formal announcements relating to the Company s financial performance. It also reviews regular reports from management and the external independent auditor on accounting and internal control matters. Where appropriate, the committee monitors the progress of action taken in relation to such matters. The Audit Committee also reviews and approves the remuneration and terms of engagement of the external independent auditor, and makes recommendation to the Board in respect of the appointment or re-appointment of them. The Remuneration Committee The Remuneration Committee, which comprises Messrs. Prickett, Lam and Fulton and is presently chaired by Mr. Prickett, meets at least once each year. The committee is responsible for determining with the Board the framework or broad policy for the remuneration of members of executive management and reviewing the performance of the Executive Directors and recommending the level and structure of their remuneration. The Nomination Committee The role of the Nomination Committee is undertaken by the whole Board and is presently chaired by Mr. Prickett. The Committee considers the selection and re-appointment of Directors. It identifies and nominates candidates to fill the Board s vacancies and reviews regularly the structure, size and composition of the Board (including the skills, knowledge and experience of its members) and makes recommendations to the Board with regard to any changes. Share Dealing Code The Company has adopted the Code for the Directors and applicable employees, which is appropriate for a company whose shares are admitted for trading on the AIM Market operated by The London Stock Exchange plc. The Company is also subject to certain legislation of England such as AIM Rules and MAR prohibiting market abuse and insider dealing, on which guidance notes are set out in the Code. The Company takes all reasonable steps to ensure compliance with the Code by its Directors and any relevant employees.

24 22 ASIAN GROWTH PROPERTIES LIMITED ANNUAL REPORT 2016 Directors Report The Directors present their report together with the audited consolidated financial statements for the year ended 31 December Principal Activities The Company was incorporated in the British Virgin Islands on 17 February 2004 and it changed its domicile to Bermuda on 5 December The Group currently carries on the business of property development and investment in Hong Kong, Mainland China and the United Kingdom as well as hotel operation in Hong Kong. During the year, the Company acted as an investment holding company and the activities of its principal subsidiaries are set out in note 43 to the consolidated financial statements. Business Review and Outlook Details of the Group s business development during the year and future outlook are included in the Chairman s Review and the Executive Directors Review on pages 7 to 10 and 11 to 16 of this 2016 annual report respectively. Results The Group recorded a profit before tax of HK$220.9 million (2015: HK$1,321.4 million) and a profit after tax of HK$301.0 million for the year ended 31 December 2016 (2015: HK$1,326.2 million). Profit attributable to the Company s shareholders for the year was HK$425.4 million (2015: HK$1,336.7 million), equivalent to basic earnings per share of HK48.0 cents (2015: HK150.8 cents). By excluding the effect of a revaluation deficit on investment properties net of deferred tax, the Group would report a net profit attributable to the Company s shareholders of HK$500.9 million (2015: HK$355.9 million), equivalent to basic earnings per share of HK56.5 cents (2015: HK40.2 cents). Net asset value per share attributable to the Company s shareholders as at 31 December 2016 was HK$14.4 (2015: HK$16.0). Dividend The Board has declared a special cash dividend of HK$2.25 (2015: HK$1.9) per common share for the year ended 31 December 2016 to shareholders of the Company whose names appear on the register of members of the Company at the close of business on Friday, 31 March The relevant dividend warrants are expected to be despatched on or before Thursday, 13 April Directors The Directors who have served the Company during the year and up to the date of this report are named as follows: Mr. Richard Öther Prickett Mr. Lu Wing Chi Mr. Lambert Lu Mr. David Andrew Runciman Mr. Lincoln Lu Mr. Lam Sing Tai Mr. John David Orchard Fulton

25 ASIAN GROWTH PROPERTIES LIMITED ANNUAL REPORT Directors Report The Company has adopted a set of new Bye-laws following the change of domicile on 5 December In accordance with Bye-laws 24.1 and 24.2 of the Company s Bye-laws, one-third of the existing Directors (or, if the number is not a multiple of three, the number nearest to but not greater than one-third) shall retire from office by rotation at every AGM. As Messrs. Lincoln Lu and Lam Sing Tai have been the longest in office as Directors since their last re-election in 2014, they will retire by rotation and, being eligible, have offered themselves for re-election at the forthcoming AGM. The Company has received from each of the INED an annual confirmation in writing of his independence according to the Corporate Governance Guidelines for AIM Companies published by the Quoted Companies Alliance in the United Kingdom and the Board considers both INED are independent. Although Mr. Prickett has served the Company as INED for more than 9 years, the Board considers that he is independent as it is not aware of any relationships or circumstances which are likely to interfere with the exercise of independent judgement of Mr. Prickett nor any evidence that his service tenure has any impact on his independence. Share Option Scheme and the Share Award Scheme The Company has adopted a share option scheme and a share award scheme in The two schemes were approved by the shareholders of SEA (the holding company of the Company) at a special general meeting held on 27 May 2010 and by the Board on 28 May 2010 but came into effect on 16 August 2010 upon fulfillment of the conditions contained therein. The two schemes provide a flexible means to recognise and acknowledge the performance and/or contribution of the eligible participants (as defined under the schemes). No option/award had been granted since the commencement of the schemes and up to the year ended 31 December Directors Shareholdings As at 17 March 2017, the interests of the Directors and persons connected with them in the issued common share capital of the Company are as follows: Number of common shares Personal interests Corporate Approximate (held as interests % of interest beneficial (held through Total in the issued Name of Directors Notes owner) corporation) interests share capital Richard Öther Prickett Lu Wing Chi 1, 2 & 3 363,238, ,238, Lambert Lu 1, 2 & 4 131,716, ,716, David Andrew Runciman 1 520, , Lincoln Lu 1, 2 & 5 132,749, ,749, Lam Sing Tai 1 & 6 4,088,941 4,088, John David Orchard Fulton

26 24 ASIAN GROWTH PROPERTIES LIMITED ANNUAL REPORT 2016 Directors Report Notes: 1. As at 17 March 2017, SEA was interested in 97.17% of the issued shares of the Company. 2. As at 17 March 2017: (a) (b) (c) JCS has a direct interest of 63.58% in the issued share capital of NLI. NLI has a direct shareholding interest of 65.35% of the issued share capital of SEA. NYH has a direct shareholding interest of 0.61% of the issued share capital of SEA. 3. Mr. Lu Wing Chi has indirect deemed interest in 363,238,328 common shares of the Company by virtue of his shareholding interest in SEA through the following: (a) (b) (c) (d) 1.60% direct shareholding interest in SEA; 30% direct shareholding interest in NLI; 49% direct shareholding interest in JCS; and 100% direct shareholding interest in NYH. 4. Mr. Lambert Lu has indirect deemed interest in 131,716,236 common shares of the Company by virtue of his shareholding interest in SEA through the following: (a) (b) (c) 2.60% direct shareholding interest in SEA; 3.21% direct shareholding interest in NLI; and 25.50% direct shareholding interest in JCS. 5. Mr. Lincoln Lu has indirect deemed interest in 132,749,771 common shares of the Company by virtue of his shareholding interest in SEA through the following: (a) (b) (c) 2.72% direct shareholding interest in SEA; 3.21% direct shareholding interest in NLI; and 25.50% direct shareholding interest in JCS. 6. Mr. Lam Sing Tai has indirect deemed interest in 4,088,941 common shares of the Company through his 0.47% direct shareholding interest in SEA. Save as disclosed above, none of the Directors or any of their respective immediate family members nor any person connected with the Directors had any interest, whether beneficial or non-beneficial, in any share capital of the Company.

27 ASIAN GROWTH PROPERTIES LIMITED ANNUAL REPORT Directors Report Directors Service Arrangements The Company has service arrangements with the following Directors, significant particulars of which are set out below: Annual Name Title Salary Directors Fees Richard Öther Prickett Non-executive Chairman and 40,000 (1) Independent Non-executive Director Lu Wing Chi Executive Director 20,000 Lambert Lu Executive Director 20,000 David Andrew Runciman Executive Director HK$1,440,000 Lincoln Lu Executive Director 20,000 Lam Sing Tai Non-executive Director 20,000 John David Orchard Fulton Independent Non-executive Director 20,000 (1) Mr. Prickett was entitled to a Director s fee of 40,000 per annum for assuming the role of the Non-executive Chairman and chairman of the Audit, Remuneration and Nomination Committees of the Company. Save as disclosed above, there are no existing or proposed service arrangements between any of the Directors and the Company or any member of the Group and there are no existing or proposed service arrangements between any of the Directors and the Company or any member of the Group which provide for benefits upon termination of employment. Significant Shareholdings As at 17 March 2017, the Company has been notified by the shareholders named below of having 3% or more shareholding interests in the Company: Number of Percentage of Name common shares shareholding (%) SEA 861,278,857* Charm Action 668,653, SEA (AGP) 175,094, * Of these shares of the Company, (i) 668,653,817 shares were held by Charm Action, a direct wholly-owned subsidiary of SEA; (ii) 175,094,641 shares were held by SEA (AGP), a direct wholly-owned subsidiary of SEA; and (iii) 17,530,399 shares were held by another two direct wholly-owned subsidiaries of SEA.

28 26 ASIAN GROWTH PROPERTIES LIMITED ANNUAL REPORT 2016 Directors Report Dealing in the Company s Shares During the year ended 31 December 2016, the Company did not redeem any of its listed shares nor did the Company and its subsidiaries purchase or sell any of the Company s listed shares. Related Party Transactions During the year under review, the Company has continued the following related party transaction: Cost-Sharing Agreement On 29 July 2014, the AGP Service Recipients entered into an agreement with SEAI whereby in consideration of SEAI making available its personnel and facilities to the Group, the AGP Service Recipients agreed to pay their proportionate share of the Net Costs for the use of SEAI s personnel and facilities from 1 January The Net Costs is the proportion of staff costs and indirect costs to be borne by the AGP Service Recipients and will be calculated by reference to the time spent by SEAI s personnel on the services to each of the AGP Service Recipients (with a mark-up of 5%), plus the reimbursable costs incurred by SEAI on behalf of the AGP Service Recipients (on a dollar-for-dollar basis). Each of the AGP Service Recipients should bear and pay its proportion of the Net Costs. The amount of the Net Costs paid and payable for the year ended 31 December 2016 was HK$188.2 million (2015: HK$272.6 million)., Messrs. Lu Wing Chi, Lincoln Lu and Lambert Lu, the Executive Directors, have indirect deemed interests in the Company and SEAI by virtue of their shareholding interests in SEA. They are also directors of SEA and SEAI. Independent Auditor Approved by the Board upon the Audit Committee s recommendation, a resolution will be submitted to the forthcoming 2017 AGM to re-appoint Deloitte Touche Tohmatsu as independent auditor of the Company for the ensuing year. On behalf of the Board Richard Prickett Non-executive Chairman and Independent Non-executive Director England, 17 March 2017

29 ASIAN GROWTH PROPERTIES LIMITED ANNUAL REPORT Independent Auditor s Report TO THE members OF ASIAN GROWTH PROPERTIES LIMITED (incorporated in the British Virgin Islands and continued in Bermuda with limited liability) Opinion We have audited the consolidated financial statements of the Group set out on pages 33 to 98, which comprise the consolidated statement of financial position as at 31 December 2016, and the consolidated statement of profit or loss, consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2016, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards ( IFRSs ). Basis for Opinion We conducted our audit in accordance with International Standards on Auditing ( ISAs ). Our responsibilities under those standards are further described in the Auditor s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants ( the Code ), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

30 28 ASIAN GROWTH PROPERTIES LIMITED ANNUAL REPORT 2016 Independent Auditor s Report Key audit matter How our audit addressed the key audit matter Recoverability of other receivables We identified the recoverability of other receivables as a key audit matter as the recoverability assessment is reliant on management s estimation which has a significant impact on the financial results of the Group. As disclosed in note 23 to the consolidated financial statements, the Group had incurred a total amount of RMB321 million, equivalent to HK$359 million, for the tenant relocation arrangements, excavation and infrastructure work on certain pieces of land in Nanjing (the Project ), the People s Republic of China (the PRC ), and a full impairment on the above amount was charged to the profit or loss in the current year by the Group. The determination of the recoverability of other receivables is dependent on whether the relevant piece of land, as mentioned above, is released for auction or not by the local government. Management is of the view that the release of the land for auction and amount to be recovered in the foreseeable future is unlikely, and therefore a full impairment loss has been made for the amounts already incurred. Our procedures in relation to the recoverability of other receivables included: Enquiring of management and obtaining an understanding from the management of the Group on the Project, the Group s investment strategy and the rationale in making full impairment on the amount; Obtaining and reading periodic announcements published by the local government on land available for tender, auction and listing in the same area or location of the Project; and Obtaining and reading the latest government policy announcements on property development in Nanjing.

31 ASIAN GROWTH PROPERTIES LIMITED ANNUAL REPORT Independent Auditor s Report Valuation of investment properties We identified the valuation of investment properties as a key audit matter as the valuation is subject to management estimate and has a significant impact on the financial result and financial position of the Group. Our procedures in relation to the valuation of investment properties included: Evaluating the competence, capabilities and objectivity of the Valuers; As disclosed in note 18 to the consolidated financial statements, the investment properties comprise car park, shop and office units in the PRC and the United Kingdom. The carrying value of investment properties amounted to HK$3,445 million as at 31 December 2016 and the decrease in fair value of the investment properties recorded in the profit for the year was HK$101 million. In estimating the fair value of investment properties, it is the Group s policy to engage independent qualified external valuers (the Valuers ) to perform the valuation. Management work with the Valuers to establish and determine the appropriate valuation technique and inputs to the valuation model. Obtaining an understanding of the valuation process and significant assumptions and critical judgements to assess if the methodologies meet relevant accounting requirements and industry norms; Comparing the capitalisation rate and market value to market data and evaluating the appropriateness of these inputs; and Assessing the reasonableness of the significant data inputs underpinning the investment properties valuation including rental income, tenancy summary, capital expenditures. The Valuers have determined the fair values of the Group s investment properties by the use of different valuation methodologies. The key inputs used in valuing the investment properties was the capitalisation rate and market value as set out in note 18 to the consolidated financial statements.