2020 Full Year Financial Results Announcement

The board of directors of ARA Asset Management (Fortune) Limited, as the manager of Fortune REIT (the "Manager") is pleased to announce the audited results of Fortune REIT for the year ended 31 December 2020 (the "Reporting Year" or "FY2020") as follows:

FINANCIAL HIGHLIGHTS

Note:

1. Gearing ratio is defined as total borrowings as a percentage of gross assets.

DISTRIBUTION

Subsequent to the voluntary delisting of Fortune REIT from the Singapore Exchange Securities Trading Limited in October 2019 and the corresponding Trust Deed amendments, Fortune REIT's distribution policy is to distribute no less than 90% of its audited annual net income after tax (before transactions with unitholders) for the relevant financial period adjusted to eliminate the effects of certain adjustments set out in the Trust Deed.

FINANCIAL REVIEW

Amid the disruptions by COVID-19 to Fortune REIT's portfolio of retail properties, revenue was down by 5.9% year-on-year to HK$1,843.8 million (2019: HK$1,959.7 million) for the financial year ended 31 December 2020. This was attributable to negative rental reversions, lower carpark income and certain rental concession granted to tenants.

Total property operating expenses (excluding the Manager's performance fee) decreased by 1.8% year-on-year to HK$425.1 million (2019: HK$433.0 million), due to lower leasing commissions and utility costs, but partly offset by higher advertising and promotion expenses and an allowance for credit losses. As a result, net property income decreased by 7.1% year-on-year to HK$1,376.1 million (2019: HK$1,480.9 million), while cost-to-revenue ratio was 23.1% for the Reporting Year.

Finance costs (excluding change in fair value of derivative financial instruments) decreased by 7.9% year-on-year to HK$245.8 million (2019: HK$266.9 million), attributable to lower HIBOR during the second half of 2020. Effective borrowing cost for the Reporting Year was 2.80% (2019: 3.12%).

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Income available for distribution for the Reporting Year was HK$970.4 million (2019: HK$993.8 million), representing a year-on-year decrease of 2.4%. With a 95% distribution payout ratio for the Reporting Year, the DPU amounted to 47.16 HK cents (2019: 51.28 HK cents), representing a yield of 6.4% based on the closing unit price of HK$7.39 as at 31 December 2020.

The final DPU of 24.56 HK cents for the year ended 31 December 2020 will be paid on 18 March 2021 to Unitholders on the registers of Unitholders of Fortune REIT as at 24 February 2021.

Capital Management

As at 31 December 2020, Fortune REIT's total committed loan facilities amounted to HK$9,200 million (2019: HK$8,900 million). Gearing ratio increased to 22.4% (2019: 19.8%), mainly due to lower property valuations. Gross liability as a percentage of its gross assets increased to 27.2% as at 31 December 2020 (2019: 24.2%).

In October 2020, Fortune REIT secured new loans amounted to HK$4,000 million for the purpose of refinancing and other general corporate use. The new facilities consist of (i) a HK$1,500 million three-year term loan; (ii) a HK$1,500 million five-year term loan; and (iii) a HK$1,000 million five-yearsustainability-linked term loan. The refinancing not only extended the average maturity of the loan portfolio, the remaining secured property also became unsecured, which led to greater financial flexibility going forward.

Fortune REIT currently possesses sufficient financial resources to satisfy its financial commitment and working capital requirements. As at 31 December 2020, available liquidity stood at HK$877.2 million (2019: HK$530.4 million), comprising committed but undrawn facilities of HK$700.0 million (2019: HK$394.0 million) and cash and deposit of HK$177.2 million (2019: HK$136.4 million).

As at 31 December 2020, interest cost for approximately 50% (2019: 53%) of Fortune REIT's outstanding debts was hedged through interest rate swaps.

Net asset value per unit amounted to HK$14.62 as at 31 December 2020, down 13.0% from HK$16.81 at the end of 2019.

Portfolio Valuation

Fortune REIT's portfolio of 16 retail properties was appraised at HK$39,075 million as at 31 December 2020, down by 8.7% from the valuation as at 31 December 2019. This drop was attributable to lower rental projection adopted on the back of a softer retail environment. Jones Lang Lasalle Limited, the principal valuer, has adopted the valuation methodology of an income capitalization approach and cross-referenced with direct comparison approach. The average capitalization rate remained the same at 4.3%. The lower valuation has resulted in a revaluation loss of HK$3,799.9 million for the Reporting Year.

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