ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 (Summary) Stock Code: 000029, 200029 Stock Name: SPG, SPG-B Announcement No. :2018-065 SHENZHEN SPECIAL ECONOMIC ZONE REAL ESTATE & PROPERTIES (GROUP) CO., LTD. INTERIM REPORT 2018 (SUMMARY) Part I Important Notes This Summary is based on the full text of the 2018 Interim Report of ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. (together with its consolidated subsidiaries, the “Company”, except where the context otherwise requires). In order for a full understanding of the Company’s operating results, financial condition and future development plans, investors should carefully read the aforesaid full text, which has been disclosed together with this Summary on the media designated by the China Securities Regulatory Commission (the “CSRC”). Objections raised by any of the directors, supervisors or senior management against any contents in this Report or its summary: Name Office title Objection and explanation of why Statement of objection: Except for the following directors, all the other directors attended in person the Board meeting for the review of this Report and its summary. Reason for not attending Name Office title Proxy meeting in person Independent auditor’s modified opinion: □ Applicable √ Not applicable Board-approved interim cash and/or stock dividend plan for ordinary shareholders: □ Applicable √ Not applicable The Company has no interim dividend plan, either in the form of cash or stock. Board-approved interim cash and/or stock dividend plan for preferred shareholders: □ Applicable √ Not applicable This Report and its summary have been prepared in both Chinese and English. Should there be any discrepancies or misunderstandings between the two versions, the Chinese versions shall prevail. 1 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 (Summary) Part II Key Corporate Information 1. Stock Profile Stock name SPG, SPG-B Stock code 000029, 200029 Stock exchange for stock listing Shenzhen Stock Exchange Contact information Board Secretary Securities Representative Name Tang Xiaoping Luo Yi 47/F, SPG Plaza, Renmin South Road, 47/F, SPG Plaza, Renmin South Road, Office address Shenzhen, Guangdong, P.R.China Shenzhen, Guangdong, P.R.China Tel. (86 755)82293000-4638 (86 755)82293000-4715 E-mail address tangxiaoping0086@126.com spg@163.net 2. Key Financial Information Indicate by tick mark whether there is any retrospectively restated datum in the table below. □ Yes √ No H1 2018 H1 2017 Change (%) Operating revenue (RMB) 1,317,541,631.35 731,306,982.03 80.16% Net profit attributable to the listed 329,066,084.53 137,226,601.84 139.80% company’s shareholders (RMB) Net profit attributable to the listed company’s shareholders before exceptional 329,143,873.10 137,080,046.11 140.11% items (RMB) Net cash generated from/used in operating 594,728,129.67 -97,700,697.19 708.72% activities (RMB) Basic earnings per share (RMB/share) 0.3253 0.1356 139.90% Diluted earnings per share (RMB/share) 0.3253 0.1356 139.90% Weighted average return on equity (%) 11.00% 5.06% 5.94% 30 June 2018 31 December 2017 Change (%) Total assets (RMB) 4,516,278,981.14 3,989,263,981.96 13.21% Equity attributable to the listed company’s 3,156,821,917.54 2,828,242,120.98 11.62% shareholders (RMB) 3. Shareholders and Their Holdings at Period-End Unit: share Number of preferred Number of ordinary shareholders 76,443 shareholders with resumed 0 voting rights (if any) Top 10 shareholders Nature of Shareholding Restricted Pledged or frozen shares Name of shareholder Number of shares shareholder percentage shares Status Shares Shenzhen Investment Holdings Co., State-owned 63.55% 642,884,262 Ltd legal person Shandong Gold Financial Holding Domestic Capital Management Co., Ltd. - non-state-own 1.02% 10,300,000 Shandong Gold Financial Holding ed legal Sustaining Fund 1 person Lu Zhigao Domestic 0.32% 3,246,949 2 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 (Summary) natural person Domestic Tan Shiqing 0.13% 1,286,701 natural person Domestic Yang Shuilian 0.13% 1,273,700 natural person Domestic Yang Jianxiong 0.12% 1,255,750 natural person Central Huijin Asset Management State-owned 0.12% 1,165,500 Co., Ltd. legal person Domestic Peng Wei 0.11% 1,129,082 natural person Foreign Wu Haoyuan 0.11% 1,109,300 natural person Guotai Junan Securities (Hong Foreign legal 0.10% 1,015,683 Kong) Limited person The Company has found no related parties or acting-in-concert parties as Related or acting-in-concert parties among defined in the Administrative Measures for Shareholding Changes in Listed shareholders above Companies among the shareholders above. The fourth shareholder holds all his shares in the Company in his accounts of Shareholders conducting margin trading (if any) collateral securities for margin trading. And the third shareholder holds some of his shares in the Company in such accounts. 4. Change of Controlling Shareholder or Actual Controller in Reporting Period Change of the controlling shareholder in the Reporting Period: □ Applicable √ Not applicable The controlling shareholder remained the same in the Reporting Period. Change of the actual controller in the Reporting Period: □ Applicable √ Not applicable The actual controller remained the same in the Reporting Period. 5. Number of Preferred Shareholders and Shareholdings of Top 10 of Them □ Applicable √ Not applicable No preferred shareholders in the Reporting Period. 6. Corporate bonds Does the Company have any corporate bonds publicly offered on the stock exchange, which were undue before the date of this Report’s approval or were due but could not be redeemed in full? No. Part III Operating Performance Discussion and Analysis 1. Business Overview of Reporting Period Is the Company subject to any disclosure requirements for special industries? No. 3 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 (Summary) (1) Operating Results of Reporting Period 2018 marks the first year for the nationwide practice of the Spirit of the 19th National Congress of the Communist Party of China, an important year for the Company’s 13th five-year plan for development, as well as a key year for the Company’s major assets restructuring programme. The focus of China’s economic growth is shifting from high speed to high quality. In the first half of the year, great international economic uncertainty, stricter financial regulation and continued domestic government controls weighed on the real estate sector. Under such circumstances, in addition to carrying forward its major assets restructuring programme, the Company adhered to the thinking of “Carefully Draw up Development Strategies, Particularly Focus on Core Business, Strictly Control Costs and Continuously Improve Management Capability” and put greater efforts into promoting project construction and marketing, so as to achieve stable development. In the Reporting Period, the Company made a concerted effort to overcome difficulties and steadily promote project construction. As a result, for this period, the Company achieved operating revenue of RMB1,318 million, up 80.16% compared to the same period of last year; profit before taxation of RMB440 million, representing a year-on-year growth of 138.76%; and net profit attributable to the listed company’s shareholders of RMB329 million, increasing 139.80% from a year earlier. As at 30 June 2018, net assets attributable to the listed company’s shareholders were equal to RMB3,157 million, an 11.62% rise compared to the end of last year. A. Focused on residential property development, the Company has been building a professional and high-quality development team, as well as improving the management mechanism and processes for project development. As a result, the operational capability in the core business of real estate keeps increasing, along with the core competitiveness. During the Reporting Period, the key projects of the Company were mostly located in Shenzhen and Shantou. The Company paid close attention to product quality and progress, and adjusted marketing strategies in a timely manner. As a result, project development and sales progress basically met expectations, and the core business was in good order and health. B. The Company’s main real estate projects under construction and available for sale during the Reporting Period included the Shenzhen-based Cuilinyuan, Chuanqi Jingyuan, and Chuanqi Donghu Mingyuan projects, as well as the Shantou-located Tianyuewan project, etc., with details as follows: The Floor area Completed Expected total Accumulated Locati Site area Project Usage Status Company with plot floor area investment investment on (㎡) ’s stake ratio (㎡) (㎡) (RMB’0,000) (RMB’0,000) Cuilinyuan Shenzh Residen Available 100% 16,424.29 60,450 60,450 57,000 47,777 en tial for sale Chuanqi Shenzh Rental Under 49% 4,243.34 42,412 42,412 24,865 17,904 Jingyuan en construct ion Tianyuewan Shanto Residen Available 100% 31,167.50 153,578.51 153,578.51 79,801 81,047 Phase I u tial for sale Chuanqi Shenzh Residen Under 100% 5,889.7 34,072.60 0 51,000 22,621 Donghu en tial construct Mingyuan ion C. Land bank for future development by the end of the Reporting Period: Project Location Land area(㎡) Floor area with plot ratio (㎡) Tianyuewan Phase II Shantou 33,362 127,661 Xinfeng Building Shantou 5,920 26,640 Total 39,282 154,301 4 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 (Summary) Note: The Company's real estate projects do not involve primary land development. (2) Operation Review for H1 2018 A. The Company’s fundamentals remain positive with a reasonable debt structure and a healthy financial condition. During the Reporting Period, macro-economy was facing downward pressure, and real estate control continued. The Company's real estate development and sales mainly concentrate in Shenzhen and Shantou. The sales revenue and profits in the region of Shenzhen, where overall sales are good, accounted for more than 90%. Thus, the future destocking pressure mainly lies in the Shantou region. B. The major property developments proceed smoothly. The Company has further improved the development and management system, attached importance to construction safety and tightened cost control. During the Reporting Period, the overall progress of the Company’s property developments was in line with the schedule. a. The Chuanqi Shanglin project was sold out, and the Cuilinyuan project has finished filing of completion and acceptance, as well as move-in formalities. b. The Chuanqi Jingyuan project (formerly known as the “Tianju Jingtian Apartment Block” project) has finished filing of completion, is currently being fully furbished and is expected to be ready for sale by the end of this year. c. The Chuanqi Donghu Mingyuan project has the main frame of its Tower A completed to the 27th floor and Tower B roofed. The project is expected to be ready for sale by the end of this year. d. The Shantou-based Tianyuewan Phase I project has finished filing of completion, with homebuyers moving in and the road to the north of the project expected to be completed by the local government at the end of this year. C. Real estate sales basically met expectations. The Company kept an eye on policy and market dynamics, and adjusted marketing strategies based on regulatory policies and market changes. Project sales basically met the expectations. The Chuanqishan project has been almost sold out; the Chuanqi Shanglin project has been sold out; approximately 70% of the Cuilinyuan project has been sold; and the Tianyuewan Phase I project has sold about 20% of its residential units. a. Sales of major real estate projects carried forward to the Reporting Period: Unit: RMB’0,000 Operating Gross profit margin Location Cost of sales Gross profit margin revenue (%) Cuilinyuan Shenzhen 102,558 28,856 73,702 71.86 Tianyuewan Phase Shenzhen 1,224 978 246 20.10 I Yuejing Dongfang Shantou 465 288 177 38.06 Jinyedao Shantou 381 212 169 44.36 Total 104,628 30,334 74,294 71.01 b. Real Estate sales during the Reporting Period: Unit: square meters Floor area The Area actually available for Settled area in No. Project Open time Company’s Location sold in Current sale at Current Period stake Period year-beginning 1 Cuilinyuan June 2017 100% Shenzhen 37,148 21,113 30,475 2 Tianyuewan October 2016 100% Shantou 137,508 9,779 2,232 Phase I 3 Yuejing December 2013 100% Shantou 980 51 621 Dongfang 5 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 (Summary) 4 Jinyedao July 1996 100% Shantou 2,794 26 427 Total 178,430 30,969 33,755 D. Real estate rental of the Company is stable with steadily rising rental prices as well as good occupancy rates and rent collection rates. The major properties for rental are as follows: Unit: square meters Occupan Land Location Name of building Rentable area Rented area Usage The Company’s stake cy rate ownership Shenzhen Real Estate 3,413.88 3,413.88 100% Commerci The Company 100% Mansion al Shenzhen North Block of 4,819.71 4819.71 100% Commerci The Company 100% Guoshang al Mansion Shenzhen Petrel Building 22,475.47 22,475.47 100% Commerci The Company 100% al Shenzhen SPG Plaza 61,005.94 52348.14 89.3% Office The Company 100% SPG Plaza 19,913.30 19913.30 100% Commerci The Company 100% Podium al Shenzhen Wenjin Garden 3,531.60 3,531.60 100% Commerci The Company 100% al Total 115,159.90 106,502.10 E. The assets restructuring programme has been carried forward. The Company’s major assets restructuring plan is subject to further communications and improvements with the regulators. Due diligence material update, additional audit and assessment, etc. are underway. F. The talent team has been enhanced. With great importance attached to building a professional team, the Company has promoted certain young talent as middle management and brought in a group of professionals and university graduates. These moves have ensured a stable talent team during the assets restructuring. (3) Risks Facing the Company and Countermeasures A. Risks Facing the Company: a. Risks from macroeconomic environment. Since this year, Chinese government has been adhering to the general principle of seeking progress while maintaining stability, implementing new development concepts, practicing the requirement of high-quality development and focusing on the supply-side structural reform. Against this background, the economy in the first half of the year maintained an overall stable trend with good momentum. However, given that the Sino-US trading dispute is still going on, and that the global economic situation remains complicated and severe, the downward pressure on the economy is difficult to relieve in a short term. b. Risks from policy on real estate industry. Against the convening of the 19th National Congress of the Communist Party of China, the Chinese government shows a clear attitude that “Houses are for living in, not for speculating on”. The continuous implementation of real estate macro-control policy curbs people’s investment demands at a large degree, and potential customers are increasingly taking a wait-and-see attitude, which generates a certain impact on the development and sales of main business of the Company. c. Risks from development and operation of main business. At present the Company holds limited land reserve for not increasing its land reserve for a long time, which is influenced by the major assets restructuring. Moreover, there is a lag in the sales progress of Shantou Tianyuewan Phase I. d. Potential risks from assets restructuring. The major assets restructuring of the Company is a significant and unprecedented event with complex trading structure for involved in the Shenzhen 6 ShenZhen Special Economic Zone Real Estate & Properties (Group) Co., Ltd. Interim Report 2018 (Summary) State-owned Enterprise Reform and with large-scale assets since the underlying assets it plans to purchase are industrial leading assets. Thus, the trading of its shares has been suspended for almost two years since its start of trading on 14 September 2016. At present, matters such as the renewal of diligence materials in restructuring and supplementary audit as well as evaluation are carried out simultaneously. For the uncertainty of related events, investors are reminded of the investment risks. B. Countermeasures Firstly, the Company will unremittingly pay attention to international and domestic macroeconomic situation and the industrial trend, and then formulate flexible coping strategies. Secondly, the Company will further strengthen its ability to develop main business, raise its management level and make efforts to reinforce the marketing so as to stabilize the fundamental of the Company. Thirdly, the Company will increase its land reserve timely and in an appropriate way to maintain the sustainable development of the Company in the future. Fourthly, the Company will enhance the communication with regulators together with parties involved in the restructuring and make full efforts to promote the process of major assets restructuring. 2. Matters Related to Financial Reporting (1) Changes in Accounting Policies, Accounting Estimates or Measurement Methods Compared to Last Accounting Period □ Applicable √ Not applicable No such changes. (2) Retrospective Restatements due to Correction of Material Accounting Errors in Reporting Period □ Applicable √ Not applicable No such cases. (3) Changes in Scope of Consolidated Financial Statements Compared to Last Accounting Period □ Applicable √ Not applicable No such changes. 7