Chairman Statement

Dear Shareholders,

At Ying Li, we endeavour to become a versatile developer in managing macroeconomic challenges tactfully while driving sustainable value for stakeholders.

On behalf of the Board, I am pleased to present Ying Li International Real Estate Limited’s (“Ying Li” and together with its subsidiaries, the “Group”) annual report for the financial year ended 31 December 2015 (“FY2015”).

2015 Macro Perspectives

2015 was a challenging year for corporations in the People’s Republic of China (“China”). Amidst structural economic reforms to move towards a consumer-driven growth model, the Chinese economy progressed at slower gear with a gross domestic product (“GDP”) growth rate of 6.9% year-on-year (“Y-o-Y”) for 20151.

With a slowing down economy, China’s real estate industry inevitably faced strong headwinds in 2015. However, it showed signs of recovery in late 2015, led by the easing of housing restrictions previously implemented, such as lowering of down-payment for first and second time home buyers, waiver of registration fee for foreign individuals and institutions borrowing domestic and foreign property loans; and reduction of banks’ lending rate and reserve-requirement ratios. As such, housing sales exhibited a nascent turnaround with an increase of 16.6% 2 Y-o-Y across China. This initial pickup was mainly limited to tier-one cities such as Beijing, Shanghai, Shenzhen and Guangzhou.

As the key manufacturing, trade and logistics base for Western China, Chongqing’s economic growth outpaced the country's as it delivered an 11.0%3 Y-o-Y GDP growth. Maintaining double digit growth for a third consecutive year, it is evident that Chongqing, as the focal city of the central government’s Go-West policy, is the fastest growing city in China.

In Chongqing, investor confidence was relatively steady towards its property sector as real estate development investment expanded 3.3%4 Y-o-Y versus 1.0%1 Y-o-Y nationally in 2015. The demand for residential property remained relatively stable due to urbanisation. Admittedly, the office market in certain districts of Chongqing, such as Jiangbeizui, is facing a short-term oversupply situation, and the proliferation of smartphones and internet usage has increased the frequency of online shopping, thereby affecting retail malls all over China. These had added further challenges to commercial real estate developers like us.

FY2015 Performance

Navigating through a challenging economic climate, 2015 was certainly not an easy year for Ying Li. In tandem with the revenue recognition cycle, the Group’s revenue decreased by 40.1% Y-o-Y to RMB616.8 million for FY2015 as a result of lower revenue contribution from our Sales of Properties segment as compared to FY2014. In spite of that, the handover of a portion of the completed units at San Ya Wan Phase 2A ("Lion City Garden") Phase 2A had contributed positively to our top line in 4Q FY2015.

The Group continued to concentrate its efforts to build a diversified portfolio of properties. Occupancy rate improvement, tenant profile adjustment and ongoing revitalisation of our malls aided the rise in rental income as it grew 17.8% Y-o-Y to RMB210.8 million in FY2015. This initial improvement is a testament to our strategic shareholder, China Everbright Limited’s (“CEL”) strong mall management expertise after six months of repositioning to our newly rebranded IMIX Park malls. This is in addition to the capital and clout that they have brought to our strategic partnership.

Overall, net profit attributable to shareholders dropped 50.7% Y-o-Y to RMB126.2 million for FY2015.

Versatility towards Changes, Opportunities and Risks

Adapting to changes, seizing opportunities and managing risks are hallmarks of a successful and stable organisation, particularly during precarious times. At Ying Li, we endeavour to become a versatile developer in managing macroeconomic challenges tactfully while driving sustainable value for stakeholders. To that end, several key strategies were implemented during the year to sharpen our competitive edge.

In adapting to changes, we recognised that the historical lumpy revenue profile had created volatility in the Group’s revenue. To address that, we have introduced a phased approach for the projects undertaken, and complement it with a balanced mix of various sized projects. By doing so, the Group aims to deliver a more stable revenue on an annual basis. In addition, the Group will continue to increase the recurring revenue base by further improving the occupancy and rental rates through continual adjustments to our tenant mix to cater to changing consumer preferences.

Turning challenges into opportunities, we have repositioned an office tower at our upcoming project, the Ying Li International Commercial Centre (“ICC”), to a futuristic SOHO tower. Through this strategy, we navigate away from the short-term oversupply situation in Chongqing’s office market, and at the same time address the underserved SOHO segment in Chongqing’s Jiefangbei CBD area. The Group is also enhancing the value proposition of its product offerings by incorporating an innovative smart SOHO concept, where customers can control their household appliances remotely through their mobile phones, as well as monitor the air and water quality within their homes to ensure a healthy living environment.

The Group has always been wellpositioned to tap on new opportunities arising from development plans enacted by the municipal government. A case in point is our latest project - Ying Li International Hardware and Electrical Centre ("IEC") which is a build-to-order project to support the government’s plans to relocate the tradition hardware and electrical distribution industry from within urban city to suburban region. The Group is also benefitting from an opportunity brought forth by CEL, supported by the central goverment's 12th Five-Year Plan to develope Beijing Tongzhou as Beijing's second CBD. Our investment in the Future Beijing project which is our maiden expansion outside Chongqing is a definitive example. This project had started pre-sales activities within the first year of our investment and the result so far has been very encouraging.

For our risk management, the Group has diversified from the high-end commercial and integrated projects by branching into other property segments. Apart from the traditional commercial, residential and retail projects, we have established a fourth segment - bespoke development, a low-risk build-to-order model customisable to customers’ needs. Collectively, these four strategies will gradually create a well-balanced property portfolio and reduce the overall risks assumed by the Group.

Strong Project Pipeline and Pre-Sales Interest

The Group is currently embarking on three mixed-development projects, namely the Lion City Garden, IEC and ICC projects. Construction for these projects is on track for completion and handover in various phases and subphases from end-2015 to 2019.

During the year, we have successfully launched the Lion City Garden Phase 2A and 2B. Units launched in these two phases achieved robust pre-sales of 84% and 68% respectively as of 31 December 2015. The handover of Phase 2A commenced in 4Q 2015 while the handover of Phase 2B will be in phases throughout 2016. Spurred by the positive demand, we have started launching selective units under Lion City Garden Phase 2C. Similarly, we have also started pre-sales of IEC Phase 1A in Jan 2016.

Over at Beijing, the highly-anticipated Future Beijing SOHO Tower 1 was fully taken-up on the first day of launch in December 2015. To address the strong demand, Tower 2 had been launched ahead of schedule.

Outlook For 2016

We expect the tough operating conditions to persist in 2016, given China’s slowing economic growth, margin pressures and high inventory levels in low-tier cities. Although the property supply glut remains a concern, majority of the unsold apartments are in third and fourth tier cities. China’s central government is also likely to introduce more measures gradually to overcome the arduous inventory issue.

On a brighter note, as a linchpin of China’s “One Belt, One Road” initiative, Chongqing’s vast prospects paved way for the third government-to-government project between Singapore and China, namely the China- Singapore (Chongqing) Demonstration Initiative on Strategic Connectivity (“Chongqing-SG”). This project aims to enhance modern connectivity and services in Western China through collaboration in four priority areasfinancial services, aviation, transport and logistics, and information and communication technology. Favourable policies and resources from the central government in support of the Chongqing-SG collaboration will benefit the Group directly or indirectly. Optimistically, we envisage Chongqing’s continual high economic growth to prompt multinational companies to establish or expand their presence in the city, thereby increasing the demand for office spaces in Chongqing. The rising disposable income could possibly spur retail consumption and increase demand for service apartments, and residential properties. The recent reduction in the interest rates will also augur well for the Group.

In view of the present macro uncertainties and market volatility, we will keep a watchful eye on the risks as we stay on course while taking measured steps when presented with viable opportunities.

Acknowledgments

On behalf of the Group, I would like to extend my utmost appreciation to our shareholders for their unwavering support and confidence in us throughout the years. I would like to urge the shareholders to continue their support as the Group navigates through this challenging period. I would also like to thank the Board of Directors for the guidance and trust that they have placed in us. The diligence and commitment of the management and employees continue to spur my dedication in delivering results for the Group.

I am confident that with the continued support of the shareholders, customers and business partners,the Group would be able to rise up to the numerous challenges to deliver stronger performances in the coming years.

Yours sincerely,

Fang Ming
Executive Chairman & Group CEO

(1) National Bureau of Statistics China - China’s Economy Realized a Moderate but Stable and Sound Growth in 2015
(2) National Bureau of Statistics China - National Real Estate Development and Sales in 2015
(3) Chongqing Statistics Bureau - 2015 Economic Performance of Chongqing
(4) Chongqing Statistics Bureau - 2015 Economic Performance of Chongqing