CHINA SCE PROPERTY HOLDINGS LIMITED 中駿置業控股有限公司 (Incorporated in the Cayman Islands with Limited Liability) (Stock Code: 1966)

NOT FOR DISTRIBUTION IN THE UNITED STATES

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

This announcement is for information purposes only and does not constitute an invitation or a solicitation of an offer to acquire, purchase or subscribe for securities or an invitation to enter into an agreement to do any such things, nor is it calculated to invite any offer to acquire, purchase or subscribe for any securities.

This announcement is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from registration. Any public offering of securities to be made in the United States will be made by means of a prospectus that may be obtained from the Company and will contain detailed information about the Company and management, as well as financial statements. The Company has not registered and does not intend to register any of the Notes in the United States.

CHINA SCE PROPERTY HOLDINGS LIMITED 中駿置業控股有限公司 (Incorporated in the Cayman Islands with limited liability) (Stock Code: 1966)

OVERSEAS REGULATORY ANNOUNCEMENT

This overseas regulatory announcement is issued pursuant to Rule 13.09(2) of the Rules Governing the Listing of Securities (the “Listing Rules”) on the Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

Reference is made to the announcements of China SCE Property Holdings Limited (the “Company”) dated 4 January 2011, 5 January 2011 and 9 January 2011, respectively, in relation to the Notes Issue (the “Announcements”). Unless otherwise defined, all terms used herein shall have the same meanings as those defined in the Announcements.

The board of directors (“Board”) of the Company is pleased to announce that all the conditions precedent under the Purchase Agreement have been fulfilled and the Notes Issue has been completed on 14 January 2011.

—1— Please refer to the attached offering memorandum in relation to the Notes (the “Offering Memorandum”), which has been published on the website of the Singapore Exchange Securities Trading Limited on 17 January 2011. The Singapore Exchange Securities Trading Limited assumes no responsibility for the correctness of any of the statements made or opinions expressed or reports contained therein. The posting of the Offering Memorandum on the website of the Stock Exchange is only for the purpose of facilitating equal dissemination of information to investors in Hong Kong and compliance with Rule 13.09(2) of the Listing Rules, and not for any other purpose.

The Offering Memorandum does not constitute a prospectus, notice, circular, brochure, advertisement or document offering to sell any securities to the public in any jurisdiction, nor is it an invitation or solicitation to the public to make offers to acquire, subscribe for or purchase any securities, nor is it calculated to invite or solicit offers by the public to acquire, subscribe for or purchase any securities. The Offering Memorandum must not be regarded as an inducement to subscribe for or purchase any securities of the Company, and no such inducement is intended. No investment decision should be based on the information contained in the Offering Memorandum.

By order of the Board China SCE Property Holdings Limited Wong Chiu Yeung Chairman

Hong Kong, 17 January 2011

As at the date of this announcement, the executive directors of the Company are Mr. Wong Chiu Yeung, Mr. Chen Yuanlai, Mr. Cheng Hiu Lok and Mr. Li Wei, the non-executive director of the Company is Mr. Fung Ka Pun and the independent non-executive directors of the Company are Mr. Ting Leung Huel Stephen, Mr. Lu Hong Te and Mr. Dai Yiyi.

—2— IMPORTANT NOTICE

THIS OFFERING IS AVAILABLE ONLY TO INVESTORS WHO ARE EITHER (1) QIBs (AS DEFINED BELOW) UNDER RULE 144A OR (2) PERSONS OR ADDRESSEES OUTSIDE OF THE U.S.

IMPORTANT: You must read the following before continuing. The following applies to the offering memorandum following this page, and you are therefore advised to read this carefully before reading, accessing or making any other use of the offering memorandum. In accessing the offering memorandum, you agree to be bound by the following terms and conditions, including any modifications to them any time you receive any information from us as a result of such access.

NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION AND THE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES, EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIES LAWS.

THE FOLLOWING OFFERING MEMORANDUM MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORIZED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. IF YOU HAVE GAINED ACCESS TO THIS TRANSMISSION CONTRARY TO ANY OF THE FOREGOING RESTRICTIONS, YOU ARE NOT AUTHORIZED AND WILL NOT BE ABLE TO PURCHASE ANY OF THE SECURITIES DESCRIBED THEREIN.

Confirmation and your representation: In order to be eligible to view this offering memorandum or make an investment decision with respect to the securities, investors must be either (1) qualified institutional buyers (“QIBs”) (within the meaning of Rule 144A under the Securities Act) or (2) persons outside the United States (as defined under Regulation S under the Securities Act). By accepting the transmission and accessing this offering memorandum, you shall be deemed to have represented to us that (1) you and any customers you represent are either (a) QIBs or (b) persons outside the United States and that the electronic mail address that you gave us and to which this transmission has been delivered is not located in the United States and (2) that you consent to delivery of such offering memorandum and any amendments or supplements thereto by electronic transmission.

This offering memorandum is being furnished in connection with an offering exempt from registration under the Securities Act solely for the purpose of enabling a prospective investor to consider the purchase of the securities described in this offering memorandum. You are reminded that the information in the attached offering memorandum is not complete and may be changed.

You are reminded that this offering memorandum has been delivered to you on the basis that you are a person into whose possession this offering memorandum may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located. You may not, nor are you authorized to, deliver or disclose the contents of this offering memorandum to any other person.

The materials relating to the offering do not constitute, and may not be used in connection with, an offer or solicitation in any place where offers or solicitations are not permitted by law. If a jurisdiction requires that the offering be made by a licensed broker or dealer and the initial purchasers or any affiliate of the initial purchasers is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by the initial purchasers or such affiliate on behalf of the issuer in such jurisdiction. This offering memorandum has been sent to you in electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently, none of the Company, Deutsche Bank AG, Singapore Branch or The Hongkong and Shanghai Banking Corporation Limited, any person who controls any of them, any director, officer, employee or agent of any of them or affiliate of any such person accepts any liability or responsibility whatsoever in respect of any difference between the offering memorandum distributed to you in electronic format and the hard copy version available to you on request from the Joint Bookrunners.

You are responsible for protecting against viruses and other destructive items. Your use of this transmission is at your own risk and it is your responsibility to take precautions to ensure that it is free from viruses and other items of a destructive nature. Offering Memorandum Strictly confidential

CHINA SCE PROPERTY HOLDINGS LIMITED (incorporated with limited liability under the laws of the Cayman Islands) RMB2,000,000,000 US$ Settled 10.5% Senior Notes due 2016 Issue Price: 100% plus, in each case, accrued interest, if any, from the issue date

The US$ settled 10.5% Senior Notes due 2016 (the “Notes”) will bear interest from January 14, 2011 at the rate set forth above, payable semi-annually in arrears, on January 14 and July 14 of each year, commencing July 14, 2011. The Notes will mature on January 14, 2016 if not redeemed earlier. The Notes are senior obligations of China SCE Property Holdings Limited (the “Issuer”), guaranteed (the “Subsidiary Guarantees”) by our existing subsidiaries (the “Subsidiary Guarantors”) other than (1) those subsidiaries organized under the laws of the People’s Republic of China (the “PRC”) and (2) certain other subsidiaries specified in “Description of the Notes” (together, the “Non-Guarantor Subsidiaries”). Under certain circumstances and subject to certain conditions, a Subsidiary Guarantee required to be provided by a subsidiary of the Issuer may be replaced by a limited-recourse guarantee (“JV Subsidiary Guarantee”). We refer to the subsidiaries providing a JV Subsidiary Guarantee as “JV Subsidiary Guarantors.” The Notes are denominated in Renminbi and will be settled in U.S. dollars. The settlement amount payable with respect to a Note with face value of RMB1,000,000 is, based on an issue price of 100% and an exchange rate of RMB6.6341 to US$1.00, US$150,736.34706. Interest on the Notes will be paid in U.S. dollars in the U.S. Dollar Settlement Amount (as defined in the “Description of the Notes” herein) calculated as of the relevant Rate Calculation Date (as defined in the “Description of the Notes” herein). Upon maturity of the Notes on January 14, 2016, we will pay to each holder of the Notes the aggregate principal amount of the Notes held by such holder (plus accrued and unpaid interest, if any) in U.S. dollars in the U.S. Dollar Settlement Amount calculated as of the relevant Rate Calculation Date. We may at our option redeem the Notes, in whole or in part, at any time and from time to time on or after January 14, 2014, at the redemption prices set forth in this offering memorandum plus accrued and unpaid interest (if any) to (but not including) the redemption date in U.S. dollars in the U.S. Dollar Settlement Amount calculated as of the relevant Rate Calculation Date. At any time prior to January 14, 2014, we may at our option redeem the Notes, in whole but not in part, at a redemption price equal to the U.S. Dollar Settlement Amount (calculated as of the relevant Rate Calculation Date) of 100% of the principal amount of the Notes, plus the applicable premium set forth in this offering memorandum as of, and accrued and unpaid interest (if any) to (but not including), the redemption date. We may redeem all but not part of the Notes at the principal amount, plus accrued and unpaid interest (if any) in the U.S. Dollar Settlement Amount calculated as of the Relevant Calculation Date upon certain changes in tax law. In addition, at any time and from time to time prior to January 14, 2014, we may redeem up to 35% in aggregate principal amount of the Notes with the net cash proceeds from sales of certain kinds of capital stock, at a redemption price equal to the U.S. Dollar Settlement Amount (calculated as of the relevant Rate Calculation Date) of 110.5% of the principal amount of the Notes, plus accrued and unpaid interest (if any) to (but not including) the redemption date. Upon the occurrence of a Change of Control Triggering Event (as defined herein), we must make an offer to repurchase all Notes outstanding at a purchase price equal to the U.S. Dollar Settlement Amount (calculated as of the relevant Rate Calculation Date) of 101% of their principal amount, plus accrued and unpaid interest (if any) to (but not including) the date of repurchase. The Notes will (1) rank at least pari passu with all our other unsecured, unsubordinated indebtedness (subject to any priority rights pursuant to applicable law), (2) rank senior in right of payment to any existing and future obligations of the Company expressly subordinated in right of payment to the Notes, (3) be effectively subordinated to all existing and future obligations of the Non-Guarantor Subsidiaries, and (4) be effectively subordinated to our secured obligations and secured obligations of the Subsidiary Guarantors and the JV Subsidiary Guarantors (if any), to the extent of the assets serving as security therefor. The Notes and the Subsidiary Guarantees will be secured by first priority liens over the capital stock of the Subsidiary Guarantors and the JV Subsidiary Guarantors (if any). In addition, applicable law may limit the enforceability of the Subsidiary Guarantees and the JV Subsidiary Guarantees (if any) and the pledge of any collateral. See “Risk Factors — Risks relating to the Subsidiary Guarantees, JV Subsidiary Guarantees and the Collateral.” For a more detailed description of the Notes, see “Description of the Notes” beginning on page 190. Investing in the Notes involves risks. See “Risk Factors” beginning on page 17. Approval in-principle has been received for the Notes to be listed on the Official List of the Singapore Exchange Securities Trading Limited (the “SGX-ST”). The SGX-ST assumes no responsibility for the correctness of any of the statements made, opinions expressed or reports contained in this offering memorandum. Admission of the Notes to the Official List of the SGX-ST and quotation of the Notes on the SGX-ST is not to be taken as an indication of the merits of China SCE Property Holdings Limited, the Subsidiary Guarantors, the JV Subsidiary Guarantors (if any), their associated companies or the Notes. The Notes, the Subsidiary Guarantees and the JV Subsidiary Guarantees (if any) have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”) and may not be offered or sold within the United States of America (the “United States” or the “U.S.”) except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. Accordingly, the Notes are being offered and sold only (1) to qualified institutional buyers in reliance on the exemption from the registration requirements of the Securities Act provided by Rule 144A (“Rule 144A”) and (2) outside the United States in accordance with Regulation S under the Securities Act (“Regulation S”). It is expected that delivery of the Notes will be made to investors in book entry form through the facilities of The Depository Trust Company on or about January 14, 2011 against payment therefor in immediately available funds.

Joint Bookrunners and Joint Lead Managers Deutsche Bank HSBC

The date of this offering memorandum is January 7, 2011 TABLE OF CONTENTS

Page Summary ...... 1 Risk Factors...... 17 Use of Proceeds ...... 55 Exchange Rate Information...... 56 Capitalization ...... 58 Selected Consolidated Financial and Other Data ...... 59 Management’s Discussion and Analysis of Financial Condition and Results of Operations ...... 61 Industry Overview ...... 96 Corporate Structure ...... 112 Business...... 115 Regulation ...... 141 Management ...... 177 Principal Shareholders ...... 184 Related Party Transactions ...... 185 Description of Other Material Indebtedness ...... 187 Description of the Notes ...... 190 Taxation ...... 263 Plan of Distribution ...... 270 Transfer Restrictions ...... 275 Ratings ...... 277 Legal Matters ...... 277 Independent Accountants ...... 277 General Information ...... 278 Summary of Certain Differences between HKFRS and U.S. GAAP ...... 279 Index to Financial Information ...... F-1

—i— This offering memorandum does not constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make the offer or solicitation in such jurisdiction.

IN CONNECTION WITH THE ISSUE OF NOTES, THE INITIAL PURCHASERS (AS DEFINED UNDER “PLAN OF DISTRIBUTION”), OR ANY PERSON ACTING FOR THE INITIAL PURCHASERS, MAY PURCHASE AND SELL THE NOTES IN THE OPEN MARKET. THESE TRANSACTIONS MAY, TO THE EXTENT PERMITTED BY APPLICABLE LAWS AND REGULATIONS, INCLUDE SHORT SALES, STABILIZING TRANSACTIONS AND PURCHASES TO COVER POSITIONS CREATED BY SHORT SALES. THESE ACTIVITIES MAY STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF THE NOTES. AS A RESULT, THE PRICE OF THE NOTES MAY BE HIGHER THAN THE PRICE THAT OTHERWISE MIGHT EXIST IN THE OPEN MARKET. HOWEVER, THERE IS NO ASSURANCE THAT THE INITIAL PURCHASERS (OR PERSONS ACTING ON THEIR BEHALF) WILL UNDERTAKE ANY STABILIZATION ACTION. ANY STABILIZATION ACTION MAY BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE PUBLIC DISCLOSURE OF THE OFFER OF THE NOTES IS MADE AND, IF BEGUN, MAY BE ENDED AT ANY TIME. ANY STABILIZATION ACTION OR OVER-ALLOTMENT MUST BE CONDUCTED BY THE INITIAL PURCHASERS (OR ANY PERSONS ACTING ON THEIR BEHALF) IN ACCORDANCE WITH ALL APPLICABLE LAWS, REGULATIONS AND RULES. THESE ACTIVITIES WILL BE UNDERTAKEN SOLELY FOR THE ACCOUNT OF THE INITIAL PURCHASERS, AND NOT FOR OR ON OUR BEHALF.

This offering memorandum is highly confidential. We are providing it solely for the purpose of enabling you to consider a purchase of the Notes. You should read this offering memorandum before making a decision whether to purchase the Notes. You must not use this offering memorandum for any other purpose, or disclose any information in this offering memorandum to any other person. This offering memorandum is personal to each offeree and does not constitute an offer to any other person or to the public generally to subscribe for or otherwise acquire securities. You may not reproduce or distribute this offering memorandum, in whole or in part, and you may not disclose any of the contents of this offering memorandum or use any information herein for any purpose other than considering an investment in the Notes. Distribution of this offering memorandum to any other person other than the prospective investor and any person retained to advise such prospective investor with respect to its purchase is unauthorized, and any disclosure of any of its contents, without our prior written consent, is prohibited. You agree to the foregoing by accepting delivery of this offering memorandum.

Notwithstanding anything to the contrary contained herein, a prospective investor (and each employee, representative or other agent of a prospective investor) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions described in this offering memorandum and all materials of any kind that are provided to the prospective investor relating to such tax treatment and tax structure (as such terms are defined in United States Treasury Regulation Section 1.6011-4). This authorization of tax disclosure is retroactively effective to the commencement of discussions with prospective investors regarding the transactions contemplated herein.

We have prepared this offering memorandum, and we are solely responsible for its contents. You are responsible for making your own examination of us and your own assessment of the merits and risks of investing in the Notes. By purchasing the Notes, you will be deemed to have acknowledged that you have made certain acknowledgements, representations and agreements as set forth under “Transfer Restrictions.”

—ii— No representation or warranty, express or implied, is made by the Initial Purchasers or any of their affiliates or advisors or the Trustee, Paying Agent, Registrar and Shared Security Trustee as to the accuracy or completeness of the information set forth herein and you should not rely on anything contained in this offering memorandum as a promise or representation by the Initial Purchasers. The Initial Purchasers, the Trustee, Paying Agent, Registrar and Shared Security Trustee have not independently verified the information contained herein (financial, legal or otherwise) and, to the fullest extent permitted by law, assume no responsibility for the contents, accuracy or completeness of any such information or for any other statement, made or purported to be made by any Initial Purchaser or on its behalf in connection with the Issuer, the Subsidiary Guarantors, the JV Subsidiary Guarantors (if any), the Restricted Subsidiaries (as defined under “Description of the Notes — Definitions”), or the issue and offering of the Notes. The Initial Purchasers, the Trustee, Paying Agent, Registrar and Shared Security Trustee accordingly disclaim all and any liability whether arising in tort or contract or otherwise which they might otherwise have in respect of this offering memorandum or any such statement.

Prospective investors in the Notes should rely only on the information contained in this offering memorandum. Neither we nor the Initial Purchasers have authorized the provision of information different from that contained in this offering memorandum, to give any information or to make any representation not contained in or not consistent with this offering memorandum or any other information supplied in connection with the offering of the Notes and, if given or made, such information or representation must not be relied upon as having been authorized by us or any of the Initial Purchasers. The information contained in this offering memorandum is accurate in all material respects only as of the date of this offering memorandum, regardless of the time of delivery of this offering memorandum or of any sale of the Notes. Neither the delivery of this offering memorandum nor any sale made hereunder shall under any circumstances imply that there has not been a change in our affairs and those of each of our respective subsidiaries or that the information set forth herein is correct in all material respects as of any date subsequent to the date hereof. The Initial Purchasers expressly do not undertake to review our financial condition or affairs during the life of the Notes or to advise any investor in the Notes of any information coming to their attention.

Each person receiving this offering memorandum acknowledges that: (i) such person has been afforded an opportunity to request from us and to review, and has received, all additional information considered by it to be necessary to verify the accuracy of, or to supplement, the information contained herein; (ii) such person has not relied on the Initial Purchasers or any person affiliated with the Initial Purchasers in connection with any investigation of the accuracy or completeness of such information or its investment decision; and (iii) no person has been authorized to give any information or to make any representation concerning us, our subsidiaries and affiliates, the Notes, the Subsidiary Guarantees or the JV Subsidiary Guarantees (if any) (other than as contained herein and information given by our duly authorized officers and employees in connection with prospective investors’ examination of us and the terms of the Notes) and, if given or made, any such other information or representation should not be relied upon as having been authorized by us or the Initial Purchasers.

The Notes, the Subsidiary Guarantees and the JV Subsidiary Guarantees (if any) have not been approved or disapproved by the United States Securities and Exchange Commission, any state securities commission in the United States or any other United States regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of the offering or the accuracy or adequacy of this offering memorandum. Any representation to the contrary is a criminal offense in the United States.

Prospective purchasers are hereby notified that sellers of the securities (the Notes, the Subsidiary Guarantees and the JV Subsidiary Guarantees) may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. We are not, and the Initial Purchasers are not, making an offer to sell the Notes in any jurisdiction except where

— iii — an offer or sale is permitted. The distribution of this offering memorandum and the offering of the Notes may in certain jurisdictions be restricted by law. We and the Initial Purchasers do not represent that this offering memorandum may be lawfully distributed, or that the Notes may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering. In particular, no action has been taken by us or the Initial Purchasers which is intended to permit a public offering of the Notes or the distribution of this offering memorandum in any jurisdiction where action for that purpose is required. Accordingly, no Notes may be offered or sold, directly or indirectly, and neither this offering memorandum nor any advertisement or other offering material may be distributed or published in any jurisdiction, except under circumstances that will result in compliance with any applicable laws and regulations. Persons into whose possession this offering memorandum comes are required by us and the Initial Purchasers to inform themselves about and to observe any such restrictions. For a description of the restrictions on offers, sales and resales of the Notes and distribution of this offering memorandum, see “Transfer Restrictions” and “Plan of Distribution.”

Neither this offering memorandum nor any other information supplied in connection with the offering of the Notes (a) is intended to provide the basis of any credit or other evaluation or (b) should be considered as a recommendation by us or any of the Initial Purchasers that any recipient of this offering memorandum, or any other information supplied in connection with the offering of the Notes, should purchase the Notes. In making an investment decision, you must rely on your own independent examination of us and the terms of the offering, including the merits and risks involved. None of us, the Initial Purchasers, or any of our or their respective affiliates or representatives is or are making any representation to you regarding the legality of an investment in the Notes by you under any legal, investment or similar laws or regulations. You should not consider any information in this offering memorandum to be legal, business or tax advice. You should consult your own attorney, business adviser and tax adviser for legal, business and tax advice regarding an investment in the Notes.

Each purchaser of the Notes must comply with all applicable laws and regulations in force in each jurisdiction in which it purchases, offers or sells such Notes or possesses or distributes this offering memorandum and must obtain any consent, approval, or permission required by it for the purchase, offer or sale by it of such Notes under the laws and regulations in force in any jurisdictions to which it is subject or in which it makes such purchases, offers or sales and none of us, the Initial Purchasers, the Trustee, Paying Agent, Registrar and Shared Security Trustee shall have any responsibility therefore. We reserve the right to withdraw the offering of Notes at any time, and the Initial Purchasers reserve the right to reject any commitment to subscribe for the Notes in whole or in part and to allot to any prospective purchaser less than the full amount of the Notes sought by such purchaser. The Initial Purchasers and certain of their related entities may acquire a portion of the Notes for their own account.

We reserve the right to withdraw the offering of Notes at any time, and the Initial Purchasers reserve the right to reject any commitment to subscribe for the Notes in whole or in part and to allot to any prospective purchaser less than the full amount of the Notes sought by such purchaser. The Initial Purchasers and certain related entities may acquire for their own account a portion of the Notes.

NOTICE TO NEW HAMPSHIRE RESIDENTS

NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES ANNOTATED 1955, AS AMENDED (“RSA”), WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED

—iv— UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

FORWARD-LOOKING STATEMENTS

This offering memorandum includes “Forward-looking Statements.” All statements other than statements of historical fact contained in this offering memorandum, including, without limitation, those regarding our future financial position and results of operations, strategy, plans, objectives, goals and targets, future developments in the markets where we participate or are seeking to participate, and any statements preceded by, followed by or that include the words ‘believe,” “expect,” “aim,” “intend,” “will,” “may,” “anticipate,” “seek,” “should,” “estimate” or similar expressions or the negative thereof, are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond our control, which may cause our actual results, performance or achievements, or industry results to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These forward-looking statements are based on numerous assumptions regarding our present and future business strategies and the environment in which we will operate in the future. Important factors that could cause our actual results, performance or achievements to differ materially from those in the forward-looking statements include, among others, the following:

• our business and operating strategies and our ability to implement such strategies;

• our ability to manage our property development plans;

• the potential for future development and expansion of our business;

• the availability and costs of bank loans and other forms of financing;

• our dividend policy;

• our ability to further develop our projects as planned;

• significant delay in obtaining the occupation permits, proper legal titles or approvals for our properties under development or held for future development;

• the timely repayments by our purchasers of mortgage loans guaranteed by us;

• the performance of the obligations and undertakings of the independent contractors under various construction, building, interior decoration and installation contracts;

• the timely settlement of amounts owed to us by our debtors;

• changes to regulatory and operating conditions in and the general regulatory environment of the industry and markets in which we operate;

• the performance and future developments of the real estate market in Fujian Province and other areas of the PRC in which we engage and may engage in property development;

—v— • the real estate industry outlook in the PRC generally;

• general economic conditions;

• future developments, trends and conditions in the industry and markets in which we operate;

• changes in political, economic, legal and social conditions in the PRC, including the specific policies of the PRC government and the local authorities in the regions where we operate, which affect land supply, availability and cost of financing, pre-sale, pricing and volume of our property development projects;

• changes in competitive conditions and our ability to compete under these conditions;

• capital market developments;

• our operations and business prospects;

• business opportunities that we may pursue;

• the interpretation and implementation of the existing rules and regulations relating to LAT and any future changes to LAT;

• changes in currency exchange rates, fluctuations and restrictions; and

• other factors beyond our control.

Additional factors that could cause actual results, performance or achievements to differ materially include, but are not limited to, those discussed under “Risk Factors” and elsewhere in this offering memorandum. We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date of this offering memorandum. Subject to the requirements of applicable laws, rules and regulations, we do not have any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. As a result of these and other risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this offering memorandum might not occur in the way we expect, or at all.

AVAILABLE INFORMATION

To permit compliance with Rule 144A under the Securities Act in connection with resales of the Notes, we are required to furnish upon request of a holder of the Notes and a prospective purchaser designated by such holder the information required to be delivered under Rule 144A(d)(4) if at the time of such request we are neither a reporting company under Section 13 or Section 15(d) of the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor exempt from reporting pursuant to Rule 12g3-2(b) thereunder. So long as any of the Notes remain outstanding, we will provide to the Trustee for forwarding to the holders of the Notes our semi-annual and annual financial statements.

ENFORCEMENT OF CIVIL LIABILITIES

We are an exempted company incorporated under the laws of the Cayman Islands with limited liability, and each Subsidiary Guarantor and each JV Subsidiary Guarantor (if any) is also incorporated outside the United States. The Cayman Islands has a different body of securities laws from the United States, and protections for investors may differ.

—vi— All of our assets and the assets of the Subsidiary Guarantors and the JV Subsidiary Guarantors (if any) are located outside the United States. All of our operating subsidiaries are incorporated in and operate principally in the PRC and all or a substantial portion of our assets are located in the PRC. In addition, all of our directors and officers and the Subsidiary Guarantors’ directors and officers are nationals or residents of countries other than the United States (principally, the PRC), and all or a substantial portion of such persons’ assets are located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon us, any of the Subsidiary Guarantors and the JV Subsidiary Guarantors (if any) or such persons or to enforce against us or any of the Subsidiary Guarantors and the JV Subsidiary Guarantors (if any) or such persons judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof.

We and each of the Subsidiary Guarantors and JV Subsidiary Guarantors (if any) expect to appoint Corporation Service Company as our and their respective agent to receive service of process with respect to any action brought against us, the Subsidiary Guarantors or JV Subsidiary Guarantors (if any) in the United States federal courts located in the Borough of Manhattan, The City of New York under the federal securities laws of the United States or of any state of the United States or any action brought against us or the Subsidiary Guarantors in the courts of the State of New York in the Borough of Manhattan, The City of New York under the securities laws of the State of New York.

Maples and Calder, our counsel as to Cayman Islands law, has advised us that the courts of the Cayman Islands would recognize as a valid judgment, a final and conclusive judgment in personam obtained in the federal or state courts in the United States under which a sum of money is payable (other than a sum of money payable in respect of multiple damages, taxes or other charges of a like nature or in respect of a fine or other penalty) and would give a judgment based thereon provided such judgment:

(a) is given by a foreign court of competent jurisdiction;

(b) imposes on the judgment debtor a liability to pay a liquidated sum for which the judgment has been given;

(d) is not in respect of taxes, a fine or a penalty; and

(e) was not obtained in a manner and is not of a kind the enforcement of which is contrary to natural justice or the public policy of the Cayman Islands.

We have been advised by Paul, Hastings, Janofsky & Walker, our counsel as to Hong Kong law, that Hong Kong has no arrangement for the reciprocal enforcement of judgments with the United States.

There is therefore doubt as to the enforceability in Hong Kong in original actions or in actions for enforcement of judgments of United States courts, of civil liabilities predicated solely upon the federal securities laws of the United States or the securities laws of any State or territory within the United States.

Furthermore, we have been advised by Jingtian & Gongcheng Attorneys at Law, our counsel as to PRC law and Maples and Calder, our counsel as to Cayman Islands law, that there is uncertainty as to whether the courts of the PRC or the Cayman Islands, respectively, would (a) recognize or enforce judgments of the U.S. courts obtained against us or our directors and officers predicated upon the civil liability provisions of the federal securities laws of the United States or the securities laws of any state or territory within the United States or (b) entertain original actions brought in the courts of the PRC and the Cayman Islands, respectively, against us or our directors and officers predicated upon the federal securities laws of the United States or the securities laws of any state or territory within the United States.

— vii — PRESENTATION OF FINANCIAL INFORMATION

Our financial statements are prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRS”), which differ in certain material respects from generally accepted accounting principles in the United States (“U.S. GAAP”). For a discussion of these differences, see “Summary of Certain Differences between HKFRS and U.S. GAAP.” Our reporting currency is the Renminbi.

CERTAIN DEFINITIONS, CONVENTIONS AND CURRENCY PRESENTATION

We have prepared this offering memorandum using a number of conventions, which you should consider when reading the information contained herein. When we use the terms “we,” “us,” “our,” the “Group,” the “Company” and words of similar import, we are referring to China SCE Property Holdings Limited itself, or to China SCE Property Holdings Limited and its consolidated subsidiaries, as the context requires.

Market data and certain industry forecasts and statistics in this offering memorandum have been obtained from both public and private sources, including market research, publicly available information and industry publications. Although we believe this information to be reliable, it has not been independently verified by us or the Initial Purchasers or our or their respective directors, employees and advisors, and neither we, the Initial Purchasers nor our or their respective directors, employees and advisors make any representation as to the accuracy or completeness of that information. Such information may not be consistent with other information compiled within or outside the PRC. In addition, third-party information providers may have obtained information from market participants and such information may not have been independently verified. This offering memorandum summarizes certain documents and other information, and investors should refer to them for a more complete understanding of what is discussed in those documents. In making an investment decision, each investor must rely on its own examination of us and the terms of the offering and the Notes, including the merits and risks involved.

In this offering memorandum, all references to “US$” and “U.S. dollars” are to United States dollars, the currency of the United States; all references to “HK$” and “H.K. dollars” are to Hong Kong dollars, the currency of the Hong Kong Special Administrative Region of the PRC (“Hong Kong” or “HK”); all references to “S$” are to Singapore dollars, the currency of Singapore; and all references to “RMB” or “Renminbi” are to the Renminbi, the currency of the People’s Republic of China.

We record and publish our financial statements in Renminbi. Unless otherwise stated in this offering memorandum, all translations from Renminbi amounts to U.S. dollar amounts were made at the rate of RMB6.6905 to US$1.00 and all translations from H.K. dollars into U.S. dollars were made at the rate of HK$7.7599 to US$1.00, the exchange rates as set forth in the H.10 statistical release of the U.S. Federal Reserve Board for September 30, 2010. All such translations in this offering memorandum are provided solely for your convenience and no representation is made that the amounts referred to herein have been, could have been or could be converted into U.S. at any particular rate or at all. For further information relating to the exchange rates, see “Exchange Rate Information.”

References to “the PRC” and “China” are to the People’s Republic of China and, for the purposes of this offering memorandum, except where the context otherwise requires, do not include Hong Kong, the Macau Special Administrative Region of the PRC or Taiwan. “PRC government” or the “State” means the central government of the PRC, including all political subdivisions (including provincial, municipal and other regional or local governmental entities) and instrumentalities thereof, or, where the context requires, any of them.

— viii — In this offering memorandum, where information has been presented in thousands or millions of units, amounts may have been rounded up or down. Accordingly, totals of columns or rows of numbers in tables may not be equal to the apparent total of the individual items and actual numbers may differ from those contained herein due to rounding.

The English names of PRC nationals, entities, departments, facilities, laws, regulations, certificates, titles and the like are translations of their Chinese names and are included for identification purpose only. In the event of any inconsistency, the Chinese name prevails.

A property is considered sold after we have executed the purchase contract with a customer and have delivered the property to the customer. All site area and GFA information presented in this offering memorandum represent the site area and GFA of the entire project, including those attributable to the non-controlling interests of non-wholly-owned project companies included in our consolidated financial statements.

Additional terms used in this offering memorandum are defined below.

Term Definition

“commodity properties” ...... Residential properties, commercial properties and other buildings that are developed by real estate developers for the purposes of sale or lease after their completion.

“GFA” ...... Gross floor area.

“IPO” ...... Our initial public offering in February 2010.

“land grant contract” ...... An agreement between a real estate developer and a PRC land authority in respect of the grant of the state-owned land use rights of a parcel of land to such real estate developer.

“land use rights certificate” ...... A certificate issued by a local property and land resources bureau in the PRC with respect to land use rights.

“LAT” ...... Land Appreciation Tax as described in “Regulation.”

“pre-sale” ...... Sales of properties prior to the completion of their construction, after the satisfaction of certain conditions under PRC laws and regulations.

“Reorganization” ...... The corporate reorganization we underwent shortly before our IPO.

“sq.m.” ...... Square meter(s).

“urbanization rate” ...... The percentage of a given population of a defined area that lives in an urban area.

—ix— SUMMARY

This summary does not contain all the information that may be important to you in deciding to invest in the Notes. You should read the entire offering memorandum, including the section entitled “Risk Factors” and the financial statements and related notes thereto, before making an investment decision. To understand the terms of the Notes, you should carefully read the section of this offering memorandum entitled “Description of the Notes.”

OVERVIEW

We are one of the leading real estate developers in Fujian Province and were honored as one of the “China Top 100 Real Estate Developers” (中國房地產百強企業) and one of the “Star Developers Among the China Top 100 Real Estate Developers” (中國房地產百強企業 — 百強之星) in each of the years from 2008 to 2010 according to the China Real Estate Top 10 Research Team1. Headquartered in Xiamen, we primarily focus on the development of high quality, mid-end to high-end residential real estate projects in the more prosperous regions of Fujian Province, which is located in the centre of the Western Taiwan Strait Economic Zone. Leveraging our experience in Fujian Province, we have expanded into, and expect to continue to consolidate our market position in selected areas in the Bohai Economic Rim, such as Beijing and other economically developed cities.

As of September 30, 2010, we had a land bank with an aggregate GFA of approximately 8,810,000 sq.m. (including approximately 6,400,000 sq.m. of GFA attributable to us on the basis of our effective interest in the relevant parcels of land) comprising:

(i) (a) completed projects held for investment with an aggregate GFA of approximately 39,000 sq.m.;

(b) projects under development with an aggregate planned GFA of approximately 1,750,000 sq.m.; and

(c) projects held for future development with an aggregate planned GFA of approximately 3,514,000 sq.m., for which we have obtained the relevant land use rights certificates;

(ii) projects with an aggregate planned GFA of approximately 2,059,000 sq.m. for which we had entered into land use rights grant contracts or for which we had successfully tendered for the land but had not yet obtained land use rights certificates as of September 30, 2010, among which we obtained land use rights certificates for approximately 143,000 sq.m. planned GFA in October 2010; and

(iii) projects with an aggregate planned GFA of approximately 1,448,000 sq.m. for which we had entered into master agreements with local governments but had not concluded the public tender process and/or entered into land grant contracts.

1 China Real Estate Top 10 Research Team is an independent research team established in 2003 that consists of 27 core members including the Enterprise Research Institute of Development Research Center of the State Council of China, the Institute of Real Estate Studies of Tsinghua University, the China Index Academy and the China Real Estate Association.

—1— attributable to us) is located in Fujian Province. The remainder of our land bank is located in Beijing, Linfen, Tangshan and Anshan in the Bohai Economic Rim and in Shenzhen. Our property development projects are generally situated in prime locations of major cities, as well as areas with natural scenic surroundings and convenient access to transportation.

In 2009 and the nine months ended September 30, 2010, our revenue was RMB586.5 million (US$87.7 million) and RMB2,102.7 million (US$314.3 million), respectively. For the same periods, our EBITDA (as defined herein) was RMB204.2 million (US$30.5 million) and RMB1,009.4 million (US$150.9 million), respectively. Our shares have been listed on The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”) since February 5, 2010 under stock code 1966.HK. Our market capitalization as of January 7, 2011 was HK$6.4 billion.

COMPETITIVE STRENGTHS

We believe we have the following competitive strengths:

Leading real estate developer in Fujian Province with a growing presence in the Bohai Economic Rim

We are one of the leading real estate developers in Fujian Province according to the China Real Estate Top 10 Research Team based on a combination of factors including scale, profitability and growth rate. Building on our experience in Fujian Province, which is located in the centre of the Western Taiwan Strait Economic Zone, we have expanded into and expect to strengthen our market position in selected areas in the Bohai Economic Rim, such as Beijing and other economically developed cities. In particular, we believe that our World City project in Beijing, which has received wide recognition in the industry, has demonstrated our ability to draw on and apply our experience in Fujian Province to other key strategic locations.

As of September 30, 2010, we had delivered 11 property development projects in Fujian Province with an aggregate GFA of approximately 843,000 sq.m. and one development project in the Bohai Economic Rim with an aggregate GFA of approximately 119,000 sq.m.

Sufficient land bank in strategic locations acquired at relatively low cost to support our future development

Relying on the in-depth industry experience of our management team and our thorough research and analysis before each land acquisition, we believe we have been able to acquire land bank with significant appreciation potential at reasonable cost. In 2009 and the nine months ended September 30, 2010, our average unit land acquisition cost based on GFA represented approximately 15.4% and 11.8%, respectively, of our average unit selling price based on GFA.

We primarily focus on developing high quality, mid-end to high-end residential properties which are located in prime locations of major cities, as well as areas with natural scenic surroundings and convenient access to transportation. We believe our operating flexibility as to the size and location of the land that we can develop enables us to take greater advantage of opportunities to acquire land at low cost. We conduct comprehensive research and analysis and try to identify the future growth potential of a land site for each property development. Such approach to land selection and evaluation has also contributed to our ability to acquire land at relatively low cost. We believe our ability to acquire land bank at relatively low cost allows us to use our working capital more efficiently, maintain a healthy profit margin and respond more effectively to changing market conditions.

—2— Strong brand recognition and a reputation for high quality properties which allow us to enjoy premium pricing

We believe that we have established a reputable brand in Fujian Province and the Bohai Economic Rim for developing high quality residential properties and providing premium pre- and post-sales services to our customers. In recognition of our strong brand, we were honored as one of the “Leading China Real Estate Developers From Fujian Province” (中國地產閩商領軍企業) in 2009. We were honored as one of the “China Top 100 Real Estate Developers” (中國房地產百强企業) and one of the “Star Developers Among the China Top 100 Real Estate Developers” (中國房地產百强企業—百强之星) in each of the years from 2008 to 2010. We were also recognized as one of the “2010 China Most Influential Real Estate Developers” (2010中國最具影響力地產企業). Furthermore, our brand was recognized as a “Famous Trademark in Fujian Province” in 2010.

We believe that our commitment to offer high quality properties and services to our customers enhances the inherent value of our brand, and enables us to price our projects at a premium compared to many other real estate projects in similar locations.

We also have a long-term working relationship with reputable construction and landscape designers such as Belt Collins International (HK) Limited and RTKL Associates Inc. We believe these relationships have enabled us to offer high quality properties to our customers, as evidenced by a number of quality-related awards we have received, including the “Provincial Landscape Model Enterprise” (省級綠化模範單位榮譽稱號) in 2010 for our Sapphire Peninsula (Quanzhou) project, the “China Real Estate Golden Key-2010 High-End Townhouse Habitat Model” (中國地產金鑰匙獎—2010高端城市別墅人居典範) in 2010 for our Sapphire Boomtown project, the “2010 China Most Influential Property Development Project” (2010中國最具影響力樓盤) for our Fortune Plaza project and the “2010 China Top Ten Stylish Property Development Project” (2010年度中國十大風尚樓盤) for The Regent project.

Detail-oriented and comprehensive project management system and a commitment to high quality properties and effective cost control

We utilize a project management system that helps us to maintain the high quality standards of our properties, minimize any deviation from pre-approved budgets and identify and resolve potential problems as early as possible in the process of the project development cycle. Our project management system comprises a set of detailed policies and guidelines in relation to property development such as the Key Performance Indicator system, or KPI, management principles that are Specific, Measurable, Attainable, Realistic and Time-Based, or SMART Principles and detailed business-flow control procedures. These policies and guidelines emphasize delivery of high quality properties and effective cost control and are further complemented by substantial input from, and monitoring and supervision by, our various departments in each stage of the project development. We believe such detail-oriented and comprehensive project management system enables us to effectively control costs and minimize execution risks in the development process while maintaining the high quality of our property development projects.

Experienced and professional management team and dedicated work-force

Our management team has extensive experience in the PRC real estate industry. Over the past five years, our key management members have remained substantially unchanged.

—3— Our Chairman, Mr. Wong Chiu Yeung, who plays a pivotal role in managing our daily operations and formulating our business strategies, has more than 14 years of experience in the property development industry. Through his business experience with leading Japanese joint venture partners (Sumitomo (S.H.I.) Construction Machinery Co., Ltd. and IHI Construction Machinery Limited), Mr. Wong has accumulated abundant experience in developing and maintaining a professional and detail-oriented management culture and applies that culture to our management. Mr. Wong was named as one of the “Leading China Real Estate Figures from Fujian Province” (“中國地產閩商領軍人物”) in 2010 and one of the “CIHAF(1) China Real Estate Top 10 New Leading Figures” (“中國住交會— 中國房地產十大新領軍人物”) in 2009. Other members of our management team are also highly experienced based on their previous roles with internationally renowned enterprises, state-owned enterprises in the PRC or renowned real estate developers.

Our management team is supported by well-trained and highly motivated professionals and staff. We are selective in our hiring process and endeavor to recruit and train employees who have the potential to become long-term and effective management staff. We have implemented an incentive scheme combining a performance-based bonus system with a career development platform. In addition, our practice of recruiting and retaining top talent with local knowledge and overseas experience has also enabled us to capitalize on their collective expertise to develop our business.

BUSINESS STRATEGIES

We utilize the following key business strategies:

Strengthen our leading position in Fujian Province and further penetrate the Bohai Economic Rim market

We plan to continue to strengthen our leading position in Fujian Province by expanding into additional economically developed cities in Fujian Province. We also intend to build on our experience in Fujian Province to further penetrate the Bohai Economic Rim market by selectively expanding our operations into selected cities and by recruiting and retaining top talent with local knowledge.

Our strategy is in line with several key macro-economic and government policies. For example, in May 2009, the State Council adopted policies to promote the economic development of the Western Taiwan Strait Economic Zone, and on June 29, 2010, Mainland China and Taiwan entered into the “Economic Cooperation Framework Agreement” (“ECFA”) which we believe will further contribute to economic development in Fujian Province and create greater demand for properties.

To capitalize on the economic development in Fujian Province, particularly in the greater metropolitan areas of Xiamen, Quanzhou, Zhangzhou and Fuzhou, we intend to continue to leverage our strong brand and leading market position to increase our land bank and property development projects in these areas in order to further strengthen our leading position and increase our market share.

Continue to expand our land bank prudently through multiple channels

(1) CIHAF is the China International Real Estate and Architectural Technology Fair (中國國際房地產與建築科技展覧會).

—4— strategy of gradual and prudent land bank expansion and to make investment decisions based on thorough research and analysis after balancing a number of important factors, including our financial capacity, the expected return of the project and the future growth prospects of the project land.

Enhance our brand recognition and distinguish ourselves from our competitors

We believe we have established a reputable brand in the market that is associated with high quality products enabling us to enjoy a competitive advantage over our competitors in terms of pricing. We intend to continue to commit ourselves to developing high quality and innovative real estate projects, such as landmark properties in prime locations, in order to further enhance our brand recognition. We also plan to continue to actively participate in the selection of construction materials used in our projects in order to achieve desired quality levels and to maintain a cohesive brand image for our properties.

We also recognize that customer loyalty is critical to our success. We intend to continue to provide highly professional property management services to our customers in order to enhance the long-term value of our property developments and our brand recognition. As part of this strategy, we intend to provide professional property management services to all of our future property developments.

Continue to focus primarily on residential property development while seeking to expand into the commercial real estate market

The residential property development business has been, and will continue to be, our core business segment. However, in view of the steady and recurring revenue that may be generated by commercial real estate projects, we have begun to diversify our project portfolio by expanding into the commercial real estate market. We believe that such business diversification will enable us to capture recurring rental income through our retention and operation of commercial properties and enhance our ability to respond effectively to newly introduced regulatory measures.

Further optimize our capital and financing structure

Our business is capital-intensive in nature. We aim to continue to optimize our capital and financing structure to secure sufficient financing for our future property development projects on favorable terms by increasing our retained earnings and utilizing our access, as a Hong Kong listed company, to the equity and debt markets. We intend to continue to implement prudent business development and financial management strategies to deploy our capital efficiently and maximize returns.

General Information

We were incorporated in the Cayman Islands on November 30, 2007, as an exempted company with limited liability. Our principal place of business in the PRC is at SCE Building, No.208, Nanwu Road, Gaoqi, Xiamen, Fujian Province, 361006, PRC. Our place of business in Hong Kong is at Room 1606, Nanyang Plaza, No.57 Hung To Road, Kwun Tong, Kowloon, Hong Kong. Our registered office is at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands. Our website is www.sce-re.com. Information contained on our website does not constitute part of this offering memorandum.

—5— THE OFFERING

The following is a brief summary of the terms of this offering and is qualified in its entirety by the remainder of this offering memorandum. Terms used in this summary and not otherwise defined shall have the meanings given to them in “Description of the Notes.”

Issuer...... China SCE Property Holdings Limited (the “Company”).

Notes Offered ...... RMB2,000,000,000 aggregate principal amount of US$ settled 10.5% Senior Notes due 2016 (the “Notes”).

Offering Price ...... 100% of the principal amount of the Notes, settled in US$, at an exchange rate of RMB6.6341 to US$1.00, resulting in a US$ offering price of US$150,736.34706 per RMB1,000,000 in principal amount of the Notes.

Maturity Date ...... January 14, 2016.

Interest ...... The Notes will bear interest from and including January 14, 2011 at the rate of 10.5% per annum, payable semi-annually in arrears.

Interest Payment Dates ...... January 14 and July 14 of each year, commencing July 14, 2011.

U.S. Dollar Settlement ...... All amounts due under, and all claims arising out of or pursuant to, the Notes, the indenture governing the Notes, the Subsidiary Guarantees and/or the JV Subsidiary Guarantees (if any) from or against the Issuer, the Subsidiary Guarantors or the JV Subsidiary Guarantors (if any) shall be payable and settled in U.S. dollars only.

Ranking of the Notes ...... The Notes are:

• general obligations of the Company;

• senior in right of payment to any existing and future obligations of the Company expressly subordinated in right of payment to the Notes;

• at least pari passu in right of payment with all other unsecured, unsubordinated Indebtedness of the Company (subject to any priority rights of such unsubordinated Indebtedness pursuant to applicable law);

• guaranteed by the Subsidiary Guarantors and the JV Subsidiary Guarantors (if any) on a senior basis, subject to the limitations described below under “The Subsidiary Guarantees” and in “Risk Factors — Risks relating to the Subsidiary Guarantees, the JV Subsidiary Guarantees and the Collateral”;

—6— • effectively subordinated to any other secured obligations, if any (other than Permitted Pari Passu Secured Indebtedness) of the Company, the Subsidiary Guarantors and the JV Subsidiary Guarantors, to the extent of the assets serving as security therefor; and

• effectively subordinated to all existing and future obligations of the Non-Guarantor Subsidiaries.

In addition, on the Original Issue Date, subject to the limitations described in “Risk Factors — Risks relating to the Subsidiary Guarantees, the JV Subsidiary Guarantees and the Collateral,” the Notes will be secured by a pledge of the Collateral and entry into the Intercreditor Agreement as described below under the caption “— Security” and will:

• be entitled to a first priority lien on the Collateral (subject to any Permitted Liens) shared on a pari passu basis with (i) the lender of the Hang Seng Loan and (ii) any holders of Permitted Pari Passu Secured Indebtedness; and

• rank effectively senior in right of payment to unsecured obligations of the Company with respect to the value of the Collateral pledged by the Company securing the Notes (subject to any priority rights of such unsecured obligations pursuant to applicable law).

Subsidiary Guarantees ...... Each of the Subsidiary Guarantors and the JV Subsidiary Guarantors (if any) will, jointly and severally, guarantee the due and punctual payment of the principal, premium, if any, interest, and all other amounts payable under, the Notes in the applicable U.S. Dollar Settlement Amount.

A Subsidiary Guarantee given by a Subsidiary Guarantor and a JV Subsidiary Guarantee given by a JV Subsidiary Guarantor may be released in certain circumstances. See “Description of the Notes — The Subsidiary Guarantees — Release of the Subsidiary Guarantees.”

The initial Subsidiary Guarantors that will execute the Indenture on the Original Issue Date will consist of all of the Company’s Restricted Subsidiaries, as defined under “Description of the Notes — Definitions,” other than the Non-Guarantor Subsidiaries (defined below). All of the Subsidiary Guarantors and the JV Subsidiary Guarantors (if any) are holding companies that do not have significant operations.

—7— The following Restricted Subsidiaries will not provide a Subsidiary Guarantee or a JV Subsidiary Guarantee on the Original Issue Date:

• Restricted Subsidiaries organized under the laws of the PRC (collectively, the “PRC Non-Guarantor Subsidiaries”);

• Pacific Prestige Property Limited, Pacific Prestige Ltd., and China Strait Investments Group Limited (the “Permanent Offshore Non-Guarantor Subsidiaries”); and

• Good Concept Consultancy Limited, Polytic (China) Properties Investment Holdings Limited, Splendid Park Design Limited and Wai Cheong Enterprises Limited (the “Existing Offshore Non-Guarantor Subsidiaries”).

In addition, the Company may designate any Offshore Subsidiary as a Designated Offshore Non-Guarantor Subsidiary (each, a “Designated Offshore Non-Guarantor Subsidiary” and, together with the Existing Offshore Non-Guarantor Subsidiaries, the “Offshore Non-Guarantor Subsidiaries”), subject to the limitations described below under “Offshore Non-Guarantor Subsidiaries.” The Offshore Non-Guarantor Subsidiaries, together with the PRC Restricted Subsidiaries and the Permanent Offshore Non-Guarantor Subsidiaries, are referred to as the “Non-Guarantor Subsidiaries.”

The PRC Non-Guarantor Subsidiaries and Permanent Offshore Non-Guarantor Subsidiaries will not at any time in the future provide a Subsidiary Guarantee or a JV Subsidiary Guarantee. See “Risk Factors — Risks relating to the Subsidiary Guarantees, the JV Subsidiary Guarantees and the Collateral — Our initial Subsidiary Guarantors do not currently have significant operations.”

Any future Restricted Subsidiary (other than any Non-Guarantor Subsidiary) will provide a guarantee of the Notes immediately upon becoming a Restricted Subsidiary.

Ranking of Subsidiary The Subsidiary Guarantee of each Subsidiary Guarantees ...... Guarantor:

• is a general obligation of such Subsidiary Guarantor;

• is effectively subordinated to secured obligations of such Subsidiary Guarantor, to the extent of the value of the assets serving as security therefor;

—8— • is senior in right of payment to all future obligations of such Subsidiary Guarantor expressly subordinated in right of payment to such Subsidiary Guarantee; and

• ranks at least pari passu with all other unsecured, unsubordinated Indebtedness of such Subsidiary Guarantor (subject to any priority rights of such unsubordinated Indebtedness pursuant to applicable law).

Subject to the limitations described in “Risk Factors — Risks relating to the Subsidiary Guarantees, the JV Subsidiary Guarantees and the Collateral,” the Subsidiary Guarantees of each Subsidiary Guarantor Pledgor:

• will be entitled to a Lien on the Collateral (subject to any Permitted Liens) shared pari passu with the (i) the lender of the Hang Seng Loan and (ii) any holders of Permitted Pari Passu Secured Indebtedness pledged by such Subsidiary Guarantor Pledgor, as described below under “— Security”; and

• will rank effectively senior in right of payment to the unsecured obligations of such Subsidiary Guarantor Pledgor with respect to the value of the Collateral securing such Subsidiary Guarantee (subject to any priority rights of such unsecured obligations pursuant to applicable law).

Ranking of JV Subsidiary Guarantees ...... If any is provided, the JV Subsidiary Guarantee of each JV Subsidiary Guarantor:

• will be a general obligation of such JV Subsidiary Guarantor;

• will be enforceable only up to the JV Entitlement Amount;

• will be effectively subordinated to secured obligations of such JV Subsidiary Guarantor, to the extent of the value of the assets serving as security therefor;

• will be limited to the JV Entitlement Amount and will be senior in right of payment to all future obligations of such JV Subsidiary Guarantor expressly subordinated in right of payment to such JV Subsidiary Guarantee; and

—9— • will be limited to the JV Entitlement Amount, and will rank at least pari passu with all other unsecured, unsubordinated Indebtedness of such JV Subsidiary Guarantor (subject to any priority rights of such unsubordinated indebtedness pursuant to applicable law).

The JV Subsidiary Guarantees of each JV Subsidiary Guarantor will not be secured.

Offshore Non-Guarantor Subsidiaries ...... A future Offshore Subsidiary that is a Restricted Subsidiary need not provide a Subsidiary Guarantee or JV Subsidiary Guarantee if it is designated by the Board of Directors as a Designated Offshore Non-Guarantor Subsidiary. The Board of Directors may designate any Offshore Subsidiary to be a Designated Offshore Non-Guarantor Subsidiary if:

(1) at any time of determination, the total consolidated assets of all Offshore Non- Guarantor Subsidiaries would not exceed 10.0% of Total Assets; and

(2) such designation would not cause a Default.

Security ...... The Company has agreed, for the benefit of the Holders to pledge, or cause the initial Subsidiary Guarantor Pledgors to pledge, as the case may be, to the Shared Security Trustee, the Capital Stock of the initial Subsidiary Guarantors (subject to Permitted Liens and the pari passu sharing described below) on the Original Issue Date (collectively, the “Collateral”) in order to secure the obligations of the Company under the Notes and the Indenture and of such Initial Subsidiary Guarantor Pledgor under its Subsidiary Guarantee.

The Collateral will be shared on a pari passu basis by (i) the Holders of the Notes, (ii) the lender under the Hang Seng Loan and (iii) the holders of any Permitted Pari Passu Secured Indebtedness.

If any JV Subsidiary Guarantor is established, the Capital Stock of such JV Subsidiary Guarantor owned by the Company or any Subsidiary Guarantor will be pledged to the Shared Security Trustee to secure the obligations of the Company under the Notes and the Indenture, and of such Subsidiary Guarantor under its Subsidiary Guarantee, as the case may be, in the manner described above. However, none of the JV Subsidiary Guarantors will pledge the Capital Stock of its direct or indirect Subsidiaries as security in favor of the Shared Security Trustee.

—10— None of the Capital Stock of the Non-Guarantor Subsidiaries will be pledged as Collateral.

The Collateral securing the Notes and the Subsidiary Guarantees may be released or reduced in the event of certain asset sales and certain other circumstances. See “Description of the Notes — Security.”

Intercreditor Agreement ...... The Company, the initial Subsidiary Guarantor Pledgors, Deutsche Bank Trust Company Americas (the “Shared Security Trustee”), Hang Seng Bank Limited as the lender under the Hang Seng Loan and the Trustee, will enter into an intercreditor agreement (as such may be amended, supplemented or modified from time to time, the “Intercreditor Agreement”) on the Original Issue Date, which will specify that (1) the Holders, the lender under the Hang Seng Loan and the holders of Permitted Pari Passu Secured Indebtedness shall share equal priority and pro rata entitlement in and to the Collateral, (2) the Collateral shall only be substituted or released and Liens shall only be granted on the Collateral to the extent permitted under both the Indenture and the documents governing other Permitted Pari Passu Secured Indebtedness; and (3) the parties thereto shall enforce their rights with respect to the Collateral and the Indebtedness secured thereby as described in “Description of the Notes— Enforcement of Security.”

Use of Proceeds ...... We intend to use the net proceeds from this offering to finance new and existing projects (including construction costs and land costs) and for general corporate purposes.

Optional Redemption ...... At any time and from time to time on or after January 14, 2014, the Company may at its option redeem the Notes, in whole or in part, at a redemption price equal to the U.S. Dollar Settlement Amount (calculated as of the relevant Rate Calculation Date) of the percentage of principal amount set forth below plus accrued and unpaid interest, if any, to (but not including) the redemption date if redeemed during the twelve-month period beginning on January 14 of each of the years indicated below.

Period Redemption Price

2014 ...... 105.250% 2015 and thereafter ...... 102.625%

At any time prior to January 14, 2014, the Company may at its option redeem the Notes, in whole but not in part, at a redemption price equal to the U.S. Dollar Settlement Amount (calculated as of the relevant Rate Calculation Date) of 100% of the principal amount of the Notes plus the Applicable Premium as of, and accrued and unpaid interest (if any) to (but not including), the redemption date.

—11— At any time and from time to time prior to January 14, 2014, the Company may redeem up to 35% in aggregate principal amount of the Notes with the Net Cash Proceeds of one or more sales of Common Stock of the Company in an Equity Offering at a redemption price equal to the U.S. Dollar Settlement Amount (calculated as of the relevant Rate Calculation Date) of 110.5% of the principal amount of the Notes, plus accrued and unpaid interest, if any, to (but not including) the redemption date; provided that at least 65.0% in aggregate principal amount of the Notes remains outstanding after each such redemption and any such redemption takes place within 60 days after the closing of the related Equity Offering.

The Company will give not less than 30 days’ nor more than 60 days’ notice of any redemption.

Repurchase of Notes Upon a Change of Control Triggering Event ...... Not later than 30 days following a Change of Control Triggering Event, the Company will make an Offer to Purchase all outstanding Notes at a purchase price equal to the U.S. Dollar Settlement Amount (calculated as of the relevant Rate Calculation Date) of 101% of their principal amount plus accrued and unpaid interest, if any, to (but not including) the Offer to Purchase Payment Date.

Redemption for Taxation Reasons...... Subject to certain exceptions and as more fully described herein, the Notes may be redeemed, at the option of the Company or a Surviving Person with respect to the Company, as a whole but not in part, upon giving not less than 30 days’ nor more than 60 days’ notice to the Holders and the Trustee (which notice shall be irrevocable), at a redemption price equal to the U.S. Dollar Settlement Amount (calculated as of the relevant Rate Calculation Date) of 100% of the principal amount thereof, together with accrued and unpaid interest (including any Additional Amounts), if any, to the date fixed by the Company or the Surviving Person for redemption, if the Company, a Surviving Person, a Subsidiary Guarantor or a JV Subsidiary Guarantor (if any) would become obligated to pay certain additional amounts as a result of certain changes in specified tax laws or certain other circumstances. See “Description of the Notes — Redemption for Taxation Reasons.”

—12— Covenants ...... The Notes, the Indenture governing the Notes, the Subsidiary Guarantees and the JV Subsidiary Guarantees (if any) will limit the Company’s ability and the ability of its Restricted Subsidiaries to, among other things:

• incur additional indebtedness and issue disqualified or preferred stock;

• declare dividends on its capital stock or purchase or redeem capital stock;

• make investments or other specified restricted payments;

• issue or sell capital stock of Restricted Subsidiaries;

• guarantee indebtedness of Restricted Subsidiaries;

• sell assets;

• create liens;

• enter into sale and leaseback transactions

• enter into agreements that restrict the Restricted Subsidiaries’ ability to pay dividends, transfer assets or make intercompany loans;

• enter into transactions with stakeholders or affiliates; and

• effect a consolidation or merger.

These covenants are subject to a number of important qualifications and exceptions described in “Description of the Notes — Certain Covenants.”

Transfer Restrictions ...... The Notes, the Subsidiary Guarantees and the JV Subsidiary Guarantees (if any) will not be registered under the Securities Act or under any state securities laws of the United States and will be subject to customary restrictions on transfer and resale. See “Transfer Restrictions.”

Form, Denomination and Registration...... The Notes will be issued only in fully registered form, without coupons, in minimum denominations of RMB1,000,000 and integral multiples of RMB10,000 in excess thereof and will be initially represented by one or more global notes registered in the name of a nominee of The Depository Trust Company.

—13— Book-entry Only ...... The Notes will be issued in book-entry form through the facilities of The Depository Trust Company for the accounts of its participants, including Euroclear and Clearstream. For a description of certain factors relating to clearance and settlement, see “Description of the Notes — Book-entry; delivery and form.”

Delivery of the Notes ...... The Company expects to make delivery of the Notes, against payment in same-day funds on or about January 14, 2011, which the Company expects will be the fifth business day following the date of this offering memorandum referred to as “T+5.” You should note that initial trading of the Notes may be affected by the “T+5” settlement. See “Plan of Distribution.”

Trustee ...... Deutsche Bank Trust Company Americas

Paying Agent and Registrar ...... Deutsche Bank Trust Company Americas

Shared Security Trustee ...... Deutsche Bank Trust Company Americas

Listing and Trading ...... Approval in-principle has been received for the Notes to be listed on the Official List of the SGX-ST. The Notes will be traded on the SGX-ST in a minimum board lot size of S$200,000 (or its equivalent in foreign currencies) so long as the Notes are listed on the SGX-ST.

Ratings ...... The Notes are expected to be rated “B” with a stable outlook by Standard and Poor’s Rating Services and “B2” with a positive outlook by Moody’s Investors Service. A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency.

Security Codes ...... CUSIP ISIN

Rule 144A Global Note ...... 16950YAA9 US16950YAA91 Regulation S Global Note ...... G21189AA6 USG21189AA66

Governing Law ...... The Notes, the Subsidiary Guarantees and the Indenture will be governed by and will be construed in accordance with the laws of the State of New York. The Intercreditor Agreement will be governed by and will be construed in accordance with the laws of Hong Kong.

Risk Factors ...... For a discussion of certain factors that should be considered in evaluating an investment in the Notes, see “Risk Factors.”

—14— SUMMARY CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA

The following tables present our summary consolidated financial and other data. The summary consolidated financial information and other data as of and for each of the fiscal years ended December 31, 2007, 2008 and 2009 and as of and for the nine months ended September 30, 2009 (except for EBITDA data) are derived from our audited consolidated financial statements included elsewhere in this offering memorandum. The summary consolidated financial information and other data as of and for the nine months ended September 30, 2010 (except for EBITDA data) are derived from our unaudited interim financial information reviewed in accordance with Hong Kong Standard on Review Engagements 2410 included elsewhere in this offering memorandum. Results of interim periods are not indicative of results for the full year.

The financial information has been prepared and presented in accordance with HKFRS, which differ in certain material respects from U.S. GAAP. For a discussion of these differences, see “Summary of Certain Differences between HKFRS and U.S. GAAP.” The summary financial data below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial information and the related notes included elsewhere in this offering memorandum.

Selected Consolidated Statements of Comprehensive Income and Other Financial Data

Year ended December 31, Nine months ended September 30, 2007 2008 2009 2009 2010 RMB’000 RMB’000 RMB’000 US$’000 RMB’000 RMB’000 US$’000 Revenue ...... 371,694 331,179 586,463 87,656 550,102 2,102,663 314,276 Cost of sales ...... (242,727) (203,335) (292,804) (43,764) (284,642) (1,084,626) (162,114) Gross profit ...... 128,967 127,844 293,659 43,892 265,460 1,018,037 152,162 Other income and gains ...... 43,476 6,962 16,039 2,397 13,739 15,172 2,268 Changes in fair value of investment properties(1) ...... 168,247 211,366 371,613 55,543 222,836 15,000 2,242 Selling and marketing expenses ...... (46,268) (27,143) (38,955) (5,822) (22,846) (58,771) (8,784) Administrative expenses ...... (57,650) (64,883) (91,197) (13,630) (53,891) (132,884) (19,862) Other expenses ...... (589) (247) (137) (20) — — — Finance costs ...... (1,376) (3,324) (5,642) (843) (2,368) (4,026) (602) Share of profits and losses of: Jointly-controlled entities ...... (3,261) (4,697) (1,598) (239) 2,002 87,791 13,122 Associates ...... (888) (4,413) (3,095) (463) (3,317) 34,465 5,151 Profit before tax ...... 230,658 241,465 540,687 80,815 421,615 974,784 145,697 Income tax expense ...... (70,581) (75,606) (178,996) (26,754) (147,883) (402,032) (60,090) Profit for the year/period ...... 160,077 165,859 361,691 54,061 273,732 572,752 85,607 Other comprehensive income/(loss): Share of other comprehensive income of jointly-controlled entities and associates ...... 569 649 12 2 5 2,427 362 Exchange differences on translation of foreign operations ...... 35,166 34,637 (5,793) (866) (6,975) (3,722) (556) Other comprehensive income/(loss) for the year/period ...... 35,735 35,286 (5,781) (864) (6,970) (1,295) (194) Total comprehensive income for the year/period ...... 195,812 201,145 355,910 53,197 266,762 571,457 85,413 Profit/(loss) attributable to: Owners of the parent ...... 159,206 168,458 373,434 55,816 276,994 603,923 90,266 Non-controlling interests ...... 871 (2,599) (11,743) (1,755) (3,262) (31,171) (4,659) 160,077 165,859 361,691 54,061 273,732 572,752 85,607 Total comprehensive income/(loss) attributable to: Owners of the parent ...... 187,418 199,135 367,653 54,952 270,055 599,802 89,650 Non-controlling interests ...... 8,394 2,010 (11,743) (1,755) (3,293) (28,345) (4,237) 195,812 201,145 355,910 53,197 266,762 571,457 85,413 Other financial data EBITDA(2) ...... 67,844 50,118 204,155 30,514 219,443 1,009,393 150,870 EBITDA Margin(3) ...... 18.3% 15.1% 34.8% 34.8% 39.9% 48.0% 48.0%

—15— Notes: (1) In the years ended December 31, 2007, 2008 and 2009, and the nine months ended September 30, 2010, we recorded upward changes in fair value of our investment properties, representing 72.9%, 87.5%, 68.7% and 1.5%, respectively, of our profit before tax in such periods. See “Risk Factors — Risks relating to our business — Our profitability may fluctuate substantially due to the periodic reassessment of fair value gains or losses on our investment properties.” (2) EBITDA consists of profit for the year/period plus finance costs, income tax expense, depreciation and amortization minus changes in fair value of investment properties. EBITDA is not a standard measure under U.S. GAAP or HKFRS. EBITDA is a widely used financial indicator of a company’s ability to service and incur debt. EBITDA should not be considered in isolation or construed as an alternative to cash flows, net income or any other measure of performance or as an indicator of our operating performance, liquidity, profitability or cash flows generated by operating, investing or financing activities. In evaluating EBITDA, we believe that investors should consider, among other things, the components of EBITDA such as sales and operating expenses and the amount by which EBITDA exceeds capital expenditures and other charges. Investors should not compare our EBITDA to EBITDA presented by other companies because not all companies use the same definition. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures” for a reconciliation of our net profit under HKFRS to our definition of EBITDA. Investors should also note that EBITDA as presented herein may be calculated differently from Consolidated EBITDA as defined and used in the Indenture governing the Notes. See “Description of the Notes — Definitions” for a description of the manner in which Consolidated EBITDA is defined for purposes of the Indenture governing the Notes. (3) EBITDA margin is calculated by dividing EBITDA by revenue.

Selected Consolidated Statements of Financial Position Data

As of December 31, As of September 30,

2007 2008 2009 2010

RMB’000 RMB’000 RMB’000 US$’000 RMB’000 US$’000 ASSETS Current assets ...... 1,535,203 2,680,853 4,403,634 658,192 5,902,525 882,225 Non-current assets...... 2,640,352 2,685,915 4,301,860 642,980 5,187,682 775,380

Total assets...... 4,175,555 5,366,768 8,705,494 1,301,172 11,090,207 1,657,605

LIABILITIES AND EQUITY Current liabilities ...... 3,083,834 4,359,644 4,661,702 696,764 4,822,568 720,808 Non-current liabilities ...... 715,613 433,197 1,731,566 258,810 1,934,425 289,130

Total liabilities ...... 3,799,447 4,792,841 6,393,268 955,574 6,756,993 1,009,938

Attributable to owners of the parent . . 258,368 457,503 1,509,375 225,600 3,311,899 495,015 Attributable to non-controlling interests ...... 117,740 116,424 802,851 119,998 1,021,315 152,652

Total equity ...... 376,108 573,927 2,312,226 345,598 4,333,214 647,667

Total liabilities and equity ...... 4,175,555 5,366,768 8,705,494 1,301,172 11,090,207 1,657,605

—16— RISK FACTORS

You should carefully consider the following risk factors, together with all other information contained in this offering memorandum, before purchasing the Notes. The risks and uncertainties described below may not be the only ones that we face. Additional risks and uncertainties of which we are not aware or that we currently believe are immaterial may also adversely affect our business, financial condition or results of operations. If any of the possible events described below occurs, our business, financial condition or results of operations could be materially and adversely affected. In such case, we may not be able to satisfy our obligations under the Notes, and you could lose all or part of your investment.

RISKS RELATING TO OUR BUSINESS

Our business is heavily dependent on the performance of the real estate market in the PRC, particularly in Fujian Province and the Bohai Economic Rim

We are heavily dependent on the performance of the real estate markets in Fujian Province and the Bohai Economic Rim. As of September 30, 2010, 66.6% of our land bank was located in Fujian Province. In particular, 57.6% of our land bank is located in Quanzhou in Fujian Province. In addition, 28.6% of our land bank is located in the Bohai Economic Rim. Our financial condition, results of operations and profitability may be materially and adversely affected by the performance of the real estate market in the PRC and particularly, any adverse development in the demand for, or price of, real estate in Fujian Province, in particular Quanzhou, and the Bohai Economic Rim. Policies, measures and regulations that have been introduced and may be introduced by the PRC government may lead to changes in market conditions, including price instability and an imbalance between the supply of, and demand for, properties in the PRC. We cannot assure you that significant declines in both demand and price will not take place in the real estate markets of Fujian Province, the Bohai Economic Rim or the rest of the PRC, in the future. Demand for properties in the PRC, particularly in Fujian Province and the Bohai Economic Rim, has grown in recent years, but such growth is often coupled with volatility in market conditions and fluctuations in real estate prices. In addition, demand for properties has been affected and will continue to be affected by the macro-economic control measures implemented by the PRC government from time to time. In the past few years, the PRC government has announced a series of measures designed to stabilize the development of the real estate market, to a more sustainable level. For a detailed discussion of policy or other government measures that may affect our business, see “— Risks relating to the real estate sector in the PRC — The restrictive measures adopted from time to time by the PRC government to curtail the overheating of, and foreign investment in, the PRC real estate market could slow the industry’s rate of growth or cause the real estate market to decline.” Furthermore, we cannot assure you that the PRC government will not implement additional measures to restrict the growth or curb the overheating of the PRC real estate market, or that there will not be material adverse changes in the PRC economy and the PRC real estate market as a result of such policies, measures and/or regulations. Any such changes could have a material adverse effect on our business, financial condition and results of operations.

We face intense competition from other real estate developers

In recent years, an increasing number of real estate developers, including a number of leading Hong Kong and foreign real estate developers, have entered the PRC property development market including in Fujian Province and the Bohai Economic Rim. Some of such developers may have better track records, greater financial, land or other resources, broader name recognition or greater economies of scale than we do. In addition, the PRC government may periodically introduce various policies and measures to limit the growth and to prevent the overheating of the real estate market, which may further increase competition for land among real estate developers. For further details on some of these policies, and measures, please

—17— see “— Risks relating to the real estate sector in the PRC — The restrictive measures adopted from time to time by the PRC government to curtail the overheating of, and foreign investment in, the PRC real estate market could slow the industry’s rate of growth or cause the real estate market to decline.”

Enhanced competition among real estate developers may result in increases in costs for land acquisition and labor. It may also result in an oversupply of properties, decreases in real estate prices, the inability to sell such properties or a more restrictive approach to approval of new property developments by PRC authorities. The occurrence of any of such events may adversely affect our business, financial position and results of operations. If we cannot compete effectively against our competitors, our business, financial position and results of operations may be materially and adversely affected.

We may not be able to obtain adequate funding for our property developments

Our business is capital intensive. We generally fund our property development projects through bank and other borrowings, pre-sale proceeds of our properties and equity and debt issuances. There can be no assurance that we will always have sufficient funds available, or available on acceptable terms, or at all, to fund our current and future property developments.

Our ability to arrange adequate bank financing for our property developments on acceptable terms may depend on a number of factors, including general economic conditions, our financial strength and performance, the availability of credit from financial institutions, the value of security provided and monetary policies in the PRC.

The PRC government has in recent years adopted a number of policies to further tighten lending to real estate developers, which, among other things:

• prohibit PRC commercial banks from extending loans to real estate developers to finance land premiums;

• restrict PRC commercial banks from extending loans to develop luxury residential properties;

• restrict the grant or extension of revolving credit facilities to real estate developers that hold a significant amount of idle land and vacant commodity properties;

• prohibit commercial banks from accepting properties that have been vacant for more than three years as collateral for mortgage loans;

• prohibit property developers from using borrowings obtained from any local banks to fund property developments outside that local region; and

• restrict the level of debt financing for real estate projects.

For more information regarding such policies, please see “Regulation — Legal supervision relating to real estate sector in the PRC.”

In addition, the People’s Bank of China (“PBOC”) raised the deposit reserve ratio of commercial banks several times from 8.0% in July 2006 to 17.5% in June 2008. The reserve ratio was adjusted down to 15.5% in December 2008, but was raised again several times from 15.5% to, most recently, 19.0% in December 2010. Such regulations may limit the amount commercial banks may lend to us and may thereby adversely affect our ability to obtain financing from or renew existing credit facilities granted by financial institutions.

Proceeds from pre-sales of our properties also serve as an important source of financing for our property developments. There can be no assurance that we will receive sufficient

—18— proceeds from the pre-sales of properties to fund our current and future property developments. On August 5, 2005, PBOC proposed in a report to discontinue the practice of pre-selling uncompleted properties, on the grounds that pre-sales create significant market risks and generate transactional irregularities. While such proposal has not been adopted by any PRC government authorities and has no mandatory effect, we cannot assure you that the PRC government will not ban or impose material limitations on pre-sales of uncompleted properties in the future. Future implementation of any restrictions on our ability to pre-sell our properties, including any requirements to increase the amount of up-front expenditure we must incur prior to obtaining the pre-sale permit, would extend the time required for recovery of our capital outlay and would force us to seek alternative means to finance the various stages of our property developments. This, in turn, could have a material and adverse effect on our business, financial condition and results of operations.

Our business depends on our ability to identify and acquire suitable sites with long-term appreciation potential for property development

We believe our in-depth understanding of the real estate market dynamics in areas where we operate has enabled us to identify and capitalize on land acquisition opportunities with quality development potential. We, however, cannot assure you that the parcels of land we have acquired will appreciate in value in the future or that we will continue to be able to identify or capitalize on similar land acquisition opportunities or that we will be able to successfully acquire attractive land sites. In addition, the PRC government controls the availability of land in China. As a result, the PRC government’s policies have a direct impact on our ability to acquire land use rights and our costs of land acquisition. In recent years, the PRC central and local governments have implemented various measures to regulate the means by which real estate developers may obtain land. The PRC government also controls land supply through zoning, land usage regulations and other measures. All these measures further intensify the competition for land in China among real estate developers and may limit our ability to acquire suitable land for our development or increase land acquisition costs significantly. Any inability to identify, acquire and capitalize on sufficient attractive land sites for our land reserves could result in uncertainties in our future development costs and schedules, which in turn could have a material adverse effect on our future growth prospects, profitability and profit margins.

We may not be able to obtain land use rights certificates with respect to certain parcels of land in which we currently have interests

We hold certain parcels of land for development for which we have not yet obtained the land use rights certificates from the PRC government. In particular, as of September 30, 2010, we had entered into land grant contracts to acquire parcels of land with an aggregate GFA of approximately 2,059,000 sq.m., for which the land use rights certificates had not been obtained. As of September 30, 2010, we had also entered into master agreements with several local governments with respect to certain parcels of land with an aggregate GFA approximately of 1,448,000 sq.m. but had not concluded the public tender process and/or entered into relevant land grant contracts. After signing the master agreement, in order to obtain the land use rights certificates with respect to these parcels of land, we are required by PRC laws and regulations to go through a process which may involve competitive bidding, public auction or listing-for-sale, and, if successful, enter into a land grant contract and pay the land premium. If we fail to obtain the land use rights certificates with respect to such parcels of land in a timely manner, or at all, or if we are required to pay higher land premium to secure the land use rights certificates or fail to recover the costs that we have incurred in connection with performing our obligations under such master agreements, our business, financial condition and results of operations may be materially and adversely affected.

—19— Our results of operations may fluctuate from period to period, which makes it difficult to predict our future performance

Substantially all of our revenue is derived from the sale of our self- or jointly-developed residential and commercial properties. Our results of operations may fluctuate in the future due to a combination of factors, including the overall development schedule of our property development projects, the level of acceptance of our properties by prospective customers, the proposed timing for completion and sale of our developed properties, our revenue recognition policies, land acquisition costs and price volatility in construction-related and development expenses. Most of our property development projects require several years to complete and must be undertaken in phases. Selling prices of developed properties are often higher closer to completion, due in part to the more established community available to prospective purchasers. Furthermore, according to our accounting policy for revenue recognition, we recognize revenue from the sale of properties only upon the delivery of completed properties to purchasers. A time gap ranging from several months to several years may pass between the date on which we commence pre-sales and the date on which completed properties are delivered to purchasers. Accordingly, our results of operations may vary significantly from period to period depending, in part, on the GFA sold and the timetable for the completion of pre-sold properties. Historically, periods in which we completed more GFA have often generated a higher level of revenue. Periods in which we pre-sell a considerable amount of aggregate GFA, however, may not necessarily generate a higher level of revenue if such pre-sold properties are not completed within the same period. Our results of operations are also affected by the limitation that during any particular period of time, we can only undertake a limited number of projects due to the substantial capital requirements for land acquisitions and construction costs and the limited supply of land. Our ability to complete projects may also be affected by seasonal factors, such as heavy winter rainfall and typhoons, which could hinder the construction, and in turn, the completion of our property development projects. Our revenue and profits, recognized upon the delivery of properties, may also be affected by such seasonal effects.

Our business may be adversely affected by future increases in interest rates

We rely on borrowing to finance a significant part of our project developments. Currently, our borrowings primarily consist of loans from commercial banks in China, with interest rates linked to benchmark lending rates published by PBOC. PBOC’s benchmark interest rate was relatively stable in the decade preceding 2004. However, in October 2004, PBOC began to raise its one-year benchmark lending rates until it peaked at 7.47% in December 2007. PBOC then left interest rates unchanged until September 2008, when it took action to reduce interest rates in the wake of the global financial crisis. PBOC cut rates four times in the last quarter of 2008, as a result reducing the one-year benchmark lending rate by a total of 189 basis points. By the end of 2008, the one-year benchmark lending rate was 5.31% which was increased to 5.56% on October 20, 2010. Our finance costs before capitalization incurred in the years ended December 31, 2007, 2008 and 2009, and the nine months ended September 30, 2010 were RMB61.7 million, RMB84.6 million, RMB104.6 million and RMB94.9 million, respectively, while the total amount of interest capitalized in 2007, 2008 and 2009 and the nine months ended September 30, 2010 was RMB60.3 million, RMB81.3 million, RMB99.0 million and RMB90.9 million, respectively.

Our cost of borrowing may increase as a result of an interest rate increase, which, in turn could adversely affect our results of operations. Any increases in interest rates introduced by

—20— PBOC will also make mortgage financing more expensive for potential purchasers of our properties, which would adversely affect our ability to generate cash through pre-sales and affect our sales revenue.

We may not be able to complete our development projects on time, within budget or at all

Property development projects require substantial capital expenditure prior to and during the construction period. It may take more than a year from the commencement of construction before a project generates positive cash flows through pre-sales or sales of properties. The progress and costs of a property development project may be materially and adversely affected by many factors, including:

• delays in obtaining necessary licences, permits or approvals from PRC government agencies or authorities;

• changes in real estate market conditions;

• changes in PRC government policies, regulations and/or measures;

• relocation of existing residents and/or demolition of existing structures;

• shortages or increased costs of materials, equipment, contractors and skilled labor;

• labor disputes;

• construction accidents;

• natural disasters or catastrophes; and

• adverse weather conditions.

Construction delays or failure to complete the construction of a property development project according to its planned specifications, schedule or budget as a result of the above or any other factors may have a material adverse effect on our business, financial condition and results of operations and may result in reputational damage to us. We cannot assure you that we will not experience any significant delays in completion or delivery of any of our property development projects or that we will not be subject to any liabilities for any such delays.

We may not be successful in expanding into geographic areas where we have not historically operated

While we have in the past primarily focused our business in Fujian Province, we have recently expanded into markets in other regions such as Beijing, Shanxi Province, Guangdong Province, Liaoning Province and Hebei Province. Markets in other regions may differ from markets in which we currently have operations in terms of the level of economic development, real estate market trends and regulatory practices. In addition, as we enter new markets, we may not have the same level of familiarity with local contractors, business practices, customs and customer tastes, behavior and preferences and other market dynamics as compared to the areas in which we currently have operations. Therefore, we may not be able to successfully leverage our experience in the areas in which we currently have operations in other markets. Our expansion, and the need to integrate operations arising from our expansion into new markets, may place a significant strain on our managerial, operational and financial resources and may further increase our financing requirements. In addition, we may encounter intense competition from other real estate developers with more experience or better established presences in those areas. Any failure to leverage our experience or to understand the local

—21— real estate markets that we target for expansion may have a material adverse effect on our business, financial condition and results of operations. Furthermore, if we are unsuccessful in our strategy to expand beyond the areas in which we currently have operations, our development and growth prospects may be adversely affected.

Our business strategies, plans for expansion to new business sectors, and new products may not be successful

We have historically focused on residential properties. We have begun to diversify our project portfolio by expanding into commercial real estate in the PRC. For further details of our expansion plan, please see “Business — Our Business Strategies — Continue to focus primarily on residential property development while seeking to expand into the commercial real estate market.” There can be no assurance that we will be able to develop new businesses successfully or at all, and we may not be able to leverage our experience in the residential properties sector into new business areas. If expansion into new business sectors is not successful, our development, growth prospects and results of operations may be adversely affected.

Volatility in the prices of construction materials could adversely affect our business and financial performance

Our results of operations and financial performance are affected by volatility in the prices of construction materials. The cost of construction materials constitutes a substantial proportion of our construction costs. The cost of raw materials, including cement, iron, steel and other key building materials increased significantly during the period from the beginning of 2006 to September 2008, just before raw material prices slumped due to the global economic crisis. Although, as part of our cost control measures, we typically cap the prices of such materials in our construction contracts with our contractors, we are still subject to long-term movements in the prices of construction materials as the capped price may be subject to adjustment in the event of a substantial increase or decrease in the cost of construction materials. We cannot assure you that the prices of raw materials will stabilize in the near future or that the prices of raw materials will be or remain at a relatively low level. In addition, despite the efficiencies and pricing advantages of our bulk purchases when we purchase ancillary construction materials directly from suppliers, any increase in the cost of any construction materials will impact our overall construction costs and cost of sales. If our cost of raw materials were to increase without our being compensated for such an increase or if we cannot pass any or all of the increased costs on to our customers, our profitability may be materially and adversely affected.

Our profitability may fluctuate substantially due to the periodic reassessment of fair value gains or losses on our investment properties

The Hong Kong Accounting Standard for investment properties issued by the Hong Kong Institute of Certified Public Accountants, HKAS40, provides that investment properties, including investment properties under construction, may be recognized by using either the fair value model or the cost model. We have chosen to recognize investment properties as non-current assets at their fair value, as determined by an independent property valuer, as of each reporting date. Accordingly, any gains or losses arising from changes in the fair value of our investment properties are included in our statement of comprehensive income in the period or year in which they arise. DTZ Debenham Tie Leung Limited (“DTZ”), an independent property valuer, revalued our investment properties as of December 31, 2007, 2008 and 2009 and September 30, 2010, respectively, and such appraised value may be different from the actual value, if any, we realize upon disposal of the property. Based on such valuations, we recognized the aggregate fair market value of our investment properties in our consolidated statements of financial position, and we recognized the fair value gains (or losses) and the relevant deferred tax on investment properties in our consolidated statements of comprehensive income.

—22— In the years ended December 31, 2007, 2008, 2009 and the nine months ended September 30, 2010, the changes in fair value of our investment properties was RMB168.2 million, RMB211.4 million, RMB371.6 million and RMB 15.0 million (US$2.2 million), respectively, representing 72.9%, 87.5%, 68.7% and 1.5%, respectively, of our profit before tax. Our profit for the period, excluding the changes in fair value of our investment properties (net of deferred tax), was approximately RMB33.9 million, RMB7.3 million, RMB83.0 million and RMB561.5 million respectively, for the same periods. Fluctuations in the fair market value of our investment properties during the relevant period were primarily due to the addition and completion of new investment properties, as well as their overall appreciation. These upward revaluation adjustments of our investment properties reflect unrealized capital gains relating to our investment properties at the relevant reporting dates and do not generate any cash inflow to us unless and until such investment properties have been disposed of. The amount of the revaluation adjustments has been, and may continue to be, significantly affected by prevailing real estate market conditions and may be subject to market fluctuations. Consequently, we cannot assure you that changes in the fair value of our investment properties will give rise to the previous or any levels of percentage contribution to our profits, or that any such contribution will not decrease in the future or reflect a loss. In particular, the fair value of our investment properties could decrease in the event that the market for comparable properties in the PRC experiences a downturn as a result of general economic conditions or PRC government policies, or otherwise. Any such decrease in the fair value of our investment properties could have a material adverse effect on our financial position and results of operations.

Our indebtedness could have an adverse effect on our financial condition, make it more difficult for us to raise additional capital to fund our operations and reduce our ability to explore business opportunities

We maintain a certain level of indebtedness to finance our operations. As of September 30, 2010, the outstanding balance of our total bank and other borrowings amounted to RMB2,410.7 million. Our indebtedness described above could have an adverse effect on us, such as:

• requiring us to dedicate a large portion of our cash flow from operations to fund repayments on our debt, thereby reducing the availability of our cash flow to expand our business;

• increasing our vulnerability to adverse general economic or industry conditions;

• limiting our flexibility in planning for, or reacting to, changes in our business or the industry in which we operate;

• limiting our ability to raise additional debt or equity capital in the future or increasing the cost of such financing;

• restricting us from making strategic acquisitions or exploring potential business opportunities; and

• making it more difficult for us to satisfy our obligations with respect to our debt.

We have incurred and will continue to incur a significant amount of finance costs in relation to our indebtedness. A significant portion of our finance costs are capitalized rather than being expensed at the time they are incurred to the extent such costs are directly attributable to project construction.

—23— In addition, as our indebtedness will require us to maintain an adequate level of cash flow from operations to satisfy our debt obligations as they become due, any decrease in our cash flow from operations in the future may have a material adverse effect on our financial condition.

We may not have sufficient cash resources to support our expansion and property developments and are dependent on future cash flows generated from our business and obtaining additional financing We have cash requirements both for ongoing operating expenses, working capital, general corporate purposes and for interest and principal payments on our outstanding indebtedness. As of September 30, 2010, we had cash and cash equivalents of RMB1,067.3 million and net current assets of RMB1,080.0 million. Our cash used in operations principally comprises amounts that we pay for our property development activities including the acquisition of land parcels for which land use rights certificates have not been obtained. For the years ended December 31, 2007 and 2008, we recorded net cash flows used in operating activities of RMB72.5 million and RMB379.2 million, respectively. For the year ended December 31, 2009, we recorded net cash flows from operating activities of RMB744.9 million. For the nine months ended September 30, 2010, we recorded net cash flows used in operating activities of approximately RMB980.8 million. We cannot assure you that we will be able to generate sufficient net cash inflow from our operations in the future. If we are unable to generate sufficient cash from our operations or secure additional financing to meet our obligations, we may be forced to reduce our capital expenditures or may not be able to continue as a going concern. Reduction of our capital expenditures could have a negative impact on our business and would make it more difficult for us to execute our strategies, including our expansion plans, in accordance with our expectations.

We face uncertainties when obtaining land sites through the acquisition of project companies As of the date of this offering memorandum, in addition to increasing our land bank through competitive bidding, public auction and listing-for-sale, we have obtained land sites for some of our projects through acquisition of project companies that held the land use rights. We may continue to obtain land sites through such acquisitions in the future. We cannot assure you that we have discovered, or will be able to discover, all existing or potential liabilities of the target project companies. In addition, the government may change the permitted use of the land for which such project companies own the land use rights after our acquisitions, rendering the land sites unsuitable for our property development purposes. If any of the undiscovered existing or potential liabilities of the acquired project companies are found to be material, of if we are unable to develop properties on the land sites to which the acquired project companies have the land use rights, our business, financial conditions and results of operations may be materially and adversely affected. In addition, we may acquire such a project company for an amount that is less than its fair market value, resulting in gains recognized on our consolidated statements of comprehensive income. However, such gains do not give rise to any change to our cash position and therefore we may experience constraints on our liquidity even though our profitability is increased.

We face contractual risks relating to the pre-sale of properties, including the risk that property developments cannot be completed, or cannot be completed on time We face contractual risks relating to the pre-sales of properties. Failure to timely complete and/or deliver a pre-sold property may cause us to be liable to the relevant purchasers for losses suffered by them. Our failure to complete property developments in the time required by pre-sale contracts may entitle purchasers to claim damages under the pre-sale contracts, and in the event that such failure causes a delay that extends beyond any grace period stipulated in the pre-sale contracts, purchasers may be entitled to terminate the

—24— pre-sale contracts, claim damages and request a refund of their purchase amount together with interest. We cannot assure you that we will not experience any delays in completion or delivery of our properties or that we will not be subject to any liabilities for such delays in the future.

We guarantee mortgage loans of our pre-sale customers, and we may become liable to the mortgagee banks if our customers default; any changes in laws and regulations governing such guarantees may affect our business

Commercial banks in China which provide residential mortgage loans typically require us to guarantee loans for pre-sale customers until the construction and the development of the relevant properties have been completed and the property ownership certificates are delivered to the mortgagee banks. Such guarantees generally last from six months to one year before we deliver possession of and title to the relevant properties to the customers and the property ownership certificates to the mortgagee banks at which time such guarantees are released. We do not conduct independent credit checks on our customers but rely instead on the credit checks conducted by the mortgagee banks when providing this guarantee. If a purchaser defaults on a mortgage payment, we may have to repay the outstanding principal together with the accrued interest and penalties owed by the defaulting purchaser to the banks. If we fail to do so, the mortgagee bank may dispose of the underlying property and recover any additional amount outstanding from us as the guarantor for the mortgage loan. We cannot assure you that no purchaser of our properties will default on the mortgage payment in the future. If substantial defaults occur and we are called upon to perform our guarantees, our financial condition and results of operations could be materially and adversely affected.

In addition, if there are changes in laws, regulations, policies and practices that have the effect of prohibiting real estate developers from providing guarantees to banks in respect of mortgage loans offered to purchasers and these banks do not accept guarantees provided by other third parties, or if no third party is available in the market to provide such guarantees, property purchasers may have more difficulties in obtaining mortgage loans from banks during pre-sales. Such difficulties could result in a substantially lower rate of pre-sales of our properties, which could in turn adversely affect our business, financial condition and results of operations.

We are subject to legal and business risks if we fail to maintain qualification certificates

Real estate developers like us must maintain formal qualification certificates in order to carry out property development business in China. For further details, please see “Regulation — Legal supervision relating to real estate sector in the PRC.” Certain qualification certificates are subject to review and renewal on an annual basis. In reviewing an application to renew a qualification certificate, government authorities may consider factors such as the property developer’s registered capital, property development investments, history of property development, quality of real estate construction, expertise of management, and whether the developer has conducted any illegal or inappropriate operations. We cannot assure you that all of our operations are in strict compliance with the relevant laws and regulations and the local authorities will not deny our renewal requests on such grounds. For example, if the total GFA constructed exceeds the GFA originally authorized in the relevant land grant contract or government permit, or if the completed property contains built areas that do not conform with the plan as set forth in the relevant government permits, we may be required to pay additional amounts or take remedial actions in relation to such non-compliant GFA before we are able to obtain the relevant qualification certificate. Any finding that a substantial portion of such GFA does not comply with the relevant contracts or permits could have a material adverse effect on our business, financial condition, results of operations and prospects.

—25— For each of our World City and Seashore Suite No.1 projects, the total planned GFA exceeded the maximum GFA that may be constructed as permitted under the relevant qualification certificates. Our PRC legal advisor has advised us that under the relevant PRC laws and regulations, the local authorities will normally grant a project company a grace period to rectify such non-compliance, subject to payment of a one-off penalty of between RMB50,000 and RMB100,000. Failure to rectify the non-compliance within the specified time frame could result in revocation of the qualification certificate and the business licence of the project company.

In addition, certain of our PRC subsidiaries are applying for the renewal of their expired qualification certificates and we cannot assure you that the qualification certificates of all of our existing projects will continue to be renewed. If our project companies fail to obtain, renew or maintain qualification certificates in the future or their qualification certificates become revoked, our property development business may be limited and our business and financial condition may be materially and adversely affected.

Our operations may be affected if the land use rights relating to the SCE Building are revoked due to inconsistent land use purposes

Our corporate headquarters are located at Phase 1 of the SCE Building, and we have been leasing out certain office units in that building to third parties. SCE Building (Phase 2) which is also planned for office use is under development. For details of the SCE Building, see “Business — Our property development business — Description of our property development projects.” However, the use of the SCE Building for commercial purposes is inconsistent with the use prescribed in its land grant contract, which is specified for storage purposes. Our PRC legal advisor has advised us that we may be subject to a penalty for such inconsistent land use and that the PRC government may require us to pay an additional land premium to change the permitted use specified in the land use rights certificate or even issue an order to revoke the grant of land use right. We estimate that the penalty that may be imposed on us for such inconsistent land use will not exceed approximately RMB410,000. Our PRC legal advisor has also advised us that in the event an order to revoke the land use rights certificate is issued, we may be forced to terminate lease agreements with tenants in the SCE Building and indemnify losses suffered by such tenants as a result of early termination of such lease agreements. In the event that the relevant PRC authority in charge of land administration revokes the land use right granted to us for the SCE Building, our corporate headquarters may have to be relocated and we cannot assure you we can identify proper premises for our headquarters or do so with reasonable costs. If any of the above events occur, our business and financial condition could be adversely affected.

The relevant PRC tax authorities may challenge the basis on which we calculate our LAT obligations

Real estate developers are subject to land appreciation tax, or LAT on the appreciation in the value of their land and the improvements on the land under relevant PRC tax laws and regulations. See “Regulation — Legal supervision relating to real estate sector in the PRC — Major taxes applicable to real estate developers — (c) Land appreciation tax.”

We estimate and make provision for the amount of applicable LAT at the time the relevant property sales revenue is recognized and recorded in our books, but actual LAT payment will only be made at the time specified by the relevant PRC tax laws and regulations. We cannot assure you that the local tax authorities will agree with the basis on which we calculate our LAT obligations during the relevant periods. In addition, we cannot assure you that the applicable

—26— tax rate for LAT will not increase, or that the PRC government or local tax authorities will not abolish the authorized taxation method, or that we will be able to obtain approval in the future to use the authorized taxation method. If the relevant tax authorities determine that a higher amount of LAT should be paid, our profits could be materially and adversely affected. Furthermore, relevant notices issued by the PRC government relating to the settlement of LAT allow provincial tax authorities to formulate their own implementation rules according to the local situation. If the implementation rules promulgated in the provinces in which our projects are located require us to settle all unpaid LAT at the same time, or impose other conditions, our cash flows may be materially and adversely affected.

Our success depends significantly on our ability to retain our senior management team and our ability to attract additional qualified management and other personnel Our future success depends significantly on the continued services and performance of our management and in particular, our Chairman, Mr. Wong. In addition, we depend on the continued service of members of our senior management team (see “Management”) who possess extensive experience in the PRC property development industry and, in particular, in the real estate market in Fujian Province. If one or more of our senior executives or other key personnel are unable or unwilling to continue in their present position, we may not be able to replace them easily or at all, and our business may be disrupted and our financial condition and results of operations may be materially and adversely affected. In addition, we believe our ability to attract and retain skilled staff is critical to our continued growth and successful implementation of our strategies. If we cannot attract and retain suitable human resources, our business and future growth will be materially and adversely affected.

Our Controlling Shareholders may exert substantial influence over us and may not act in the best interests of holder of the Notes As of September 30, 2010, Newup Holdings Limited (“Newup”), which is wholly owned by Mr. Wong, our Chairman, is our largest shareholder owning an approximately 57.51% equity interest in our Company. The interests of Mr. Wong and Newup may differ from the interests of the holders of the Notes. Mr. Wong and Newup will be in a position to exert significant influence over our affairs and in determining the outcome of any corporate action or other matters submitted to the shareholders for approval, including mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. In addition, Mr. Wong and Newup will also have the power to prevent or cause a change in control of our Company. Without the consent of Mr. Wong and Newup, we may be prevented from entering into transactions that could be beneficial to us and the holders of the Notes. We cannot assure you that Mr. Wong and Newup will act completely in the interests of the holders of the Notes or that possible conflicts of interest will be resolved in favor of the holders of the Notes.

We rely on our trade name and trademarks, and any infringement upon or inappropriate use of our trade name or trademarks may be detrimental to our reputation and profitability We believe that our logo, trade name and trademarks form an integral basis for our strong brand recognition and are important to our business. As of September 30, 2010, we were the registrant of 19 registered trademarks in the PRC and Hong Kong including our “ ,” “ ” and “ ” trademarks in a number of classes (including those for our property development businesses) and we had applied for the registration of 26 trademarks in the PRC, including “ ,” “ ” and “ ” in a number of other classes. We have the sole and exclusive ownership of our logo, trade name and trademarks for the classes in which they are registered.

—27— We are not aware of any material violations, infringements upon or unauthorized use of our logo, trade name or trademarks. We are also not aware of any infringement of any third parties’ intellectual property rights through our use of our logo, trade name and trademarks. However, we cannot assure you that our trade name or trademarks will not be subject to any infringement in the future. Any unauthorized or inappropriate use of our logo, trade name or trademarks could harm our market image and reputation, which may materially and adversely affect our financial condition and results of operations. In particular, Fujian Quanzhou Transformer Manufacturing Company Limited (福建省泉州變壓器製造有限公司) (“Quanzhou Transformer”) a company controlled by Mr. Wong, has registered the trademarks “ ,” “ ” and “ ” in the PRC in the areas of manufacturing of transformers and other electric machinery. We do not have any control over the use of these trademarks by Quanzhou Transformer in such areas, and any negative publicity concerning such use by Quanzhou Transformer, even without merit, may have an adverse impact on our image and brand recognition. Any litigation or dispute in relation to our logo, trade name or trademarks could result in substantial costs and the diversion of resources and attention of our management, and may materially and adversely affect our business and results of operations.

If the value of our brand or image diminishes, our business and results of operation may be materially and adversely affected.

Our reliance on independent contractors for completion of our projects may result in substantial costs and delays

We engage independent contractors to provide substantially all construction services relating to our projects, including but not limited to, pile setting, foundation digging, general, construction, equipment installation, internal decoration, electromechanical engineering, pipeline engineering and utilities installation. We assess and select independent contractors mainly through tender based on their reputation for reliability, timeliness, quality, track record and references, and we supervise the construction progress once a contract is awarded. We cannot guarantee that any of our independent contractors will provide satisfactory services that meet our quality standards, or follow applicable laws, rules and regulations in performing their contractual obligations. In addition, the independent contractors may undertake projects from other developers, engage in risky undertakings or otherwise encounter financial or other difficulties, which may delay the completion of our real estate projects or impose additional costs on us. If we need to terminate the engagement of a contractor, we may not be able to find a replacement contractor on suitable terms, if at all, and the timetable for completing projects could be affected. Each of these factors could materially and adversely affect our reputation, financial position and business operations.

Disputes with our project development partners may adversely affect our business

We carry out some of our business through joint ventures with our project development partners. Such joint venture arrangements involve a number of risks, including but not limited to:

• disputes may arise with project development partners in connection with the performance of their obligations under the relevant project or joint venture agreements;

• disputes may also arise as to the scope of each party’s responsibilities under these arrangements;

• financial difficulties encountered by a project development partner may affect its ability to perform its obligations under the relevant project or joint venture agreements; and

—28— • conflicts may exist between the policies or objectives adopted by the project development partners and those adopted by us.

Any of the above and other factors may adversely affect our ability to complete jointly developed projects on a timely basis or within budget, which would affect our reputation, financial position and business operations.

Resettlement negotiations may add costs or cause delays in completion of our development projects

Under PRC laws and regulations, when we are responsible for the demolition of existing properties on a site for development and relocation of existing residents, we will be required to pay resettlement costs to those residents.

Currently, we do not have any land reserves in relation to which we are responsible for the demolition of existing buildings or resettlement of original residents. However, as we expand our business operations, we may engage in property development involving demolition of existing buildings or resettlement of original residents. In such circumstance, it is likely that we will be required to compensate owners and residents of demolished buildings for their relocation and resettlement in accordance with the PRC urban housing demolition and relocation regulations. The compensation we will have to pay is calculated in accordance with formulae published by the relevant local authorities. These formulae take into account the location, type of building subject to demolition, local income level and many other factors. We cannot assure you, however, that these local authorities will not change or adjust their formulae from time to time with or without sufficient advance notice. If they do so, the land costs may be subject to substantial increases, which can adversely affect our cash flow, results of operations and financial position. In addition, if we fail to reach an agreement over the amount of compensation with any existing owner or resident, either we or such owner or resident may apply to the relevant authorities for a ruling on the amount of compensation. Dissenting owners and residents may also refuse to relocate. Such administrative process or such resistance or refusal to relocate may delay the timetable of our development projects or, in extreme cases, prevent their completion, and an unfavorable final ruling may result in us paying more than the amount the formulae call for. Any of these events could have a material adverse effect on our business, results of operations and financial position.

We rely heavily on dividend payments from our subsidiaries and jointly-controlled entities for funding

We are a holding company established in the Cayman Islands and conduct substantially all of our operations through our subsidiaries and jointly-controlled entities that are established and operate in the PRC. Most of our assets are held by, and substantially all of our earnings and cash flows are attributable to, our subsidiaries and jointly-controlled entities. As such, the availability of funds from which we are able to service our indebtedness depends upon dividends received from these subsidiaries and jointly-controlled entities. PRC laws and regulations require that dividends be paid only out of the net profit calculated according to the Accounting Standards for Business Enterprises issued by The Ministry of Finance of the PRC (中國財政部) (“MOF”), which differ in many aspects from HKFRS. PRC laws and regulations also require all companies in the PRC, including foreign-invested enterprises, such as some of our subsidiaries or jointly-controlled entities in the PRC, to set aside 10% of their net profit as statutory reserves, which are not available for distribution as cash dividends. We cannot assure you that our subsidiaries and jointly-controlled entities will generate sufficient earnings and cash flows to pay dividends or otherwise distribute sufficient funds to enable us to meet our financial obligations, including making interest payments. If the distributable dividends from our subsidiaries and jointly-controlled entities decline for any reason, our earnings and cash flows will be materially and adversely affected and our ability to service our indebtedness would be restricted.

—29— Acts of God and other disasters could affect our business Natural disasters, epidemics, acts of God and other events and disasters that are beyond our control may materially and adversely affect the economy, infrastructure and livelihoods of the people in the PRC. Some cities in the PRC are under the threat of flood, typhoon, earthquake or drought. For example, in the past, Fujian Province has been hit by typhoons from time to time. Our business, financial condition and results of operations may be materially and adversely affected if natural disasters or other above events occur.

Our remittance of offshore funds into the PRC is subject to approval by the PRC government, as a result of which we may encounter delays in respect of the use of, or may not be able to use for our intended purposes, the net proceeds from this offering Under the relevant PRC rules and regulations, we may remit offshore funds to our PRC subsidiaries by way of shareholder loans or equity contributions. However, on July 10, 2007, the State Administration of Foreign Exchange of the PRC (中國國家外匯管理局) (“SAFE”) issued the “Notice Regarding the Publication of the List of the First Batch of Property Development Projects with Foreign Investment That Have Properly Registered with MOFCOM”《國家外匯管理局綜合司關於下發第一批通過商務部備案的外商投資房地產項目名 ( 單的通知》), which effectively prohibits us from injecting funds into our PRC project companies by way of shareholder loans. In addition, equity contributions by us and our non-PRC subsidiaries to our PRC subsidiaries will require approvals from the commerce department of the local government and registration with the Ministry of Commerce of the PRC (中國商務部) (“MOFCOM”), which may take considerable time and delay the actual contribution to the PRC subsidiaries. This may adversely affect the financial condition of the PRC subsidiaries and may cause delays to the development undertaken by such PRC subsidiaries. We cannot assure you that we have obtained or will obtain in a timely manner all relevant necessary approval certificates or registration for all our operating subsidiaries in the PRC to comply with this regulation. Further, we cannot assure you that the PRC government will not introduce new policies that further restrict our ability to deploy in the PRC, or that prevent us from deploying in the PRC, the funds raised outside China. Therefore, we may not be able to use all or any funds that we may raise outside China to finance our projects in a timely manner or at all.

Potential liability for non-compliance with environmental laws and regulations could result in substantial costs We are subject to certain laws and regulations concerning the protection of the environment. The particular environmental laws and regulations that apply to each of our property development projects vary according to its location, the environmental issues associated with such development, the manner of its construction and/or operations and the current and future use of the land and the properties. If the PRC government strengthens its environmental regulations or enforcement, our projects may be more strictly reviewed and inspected, and approval processes for future projects or any alteration to existing projects may be prolonged. Compliance with environmental laws and conditions may result in delays, cause us to incur substantial compliance and other costs and prohibit or severely restrict our activity in environmentally-sensitive regions or areas. For instance, we are required to submit an environmental impact assessment report to the relevant government authorities for approval before commencing construction of a project. When there is a material change in respect of the construction site, or in the scale or nature of a given project, or if the project is commenced after 5 years of obtaining the environmental assessment approval, a new environmental impact assessment report must be submitted for approval. Failure to comply with such requirements may lead to suspension of the construction of the project or a fine of RMB50,000 to RMB200,000 in respect of such project. We currently have two projects under construction for which we have not completed the required environmental assessment procedures. We cannot

—30— assure you that the relevant environmental authorities will not order us to suspend construction of these projects or will not impose a fine on us. In the event that there is a suspension of construction or imposition of a fine, this may adversely affect our business and financial condition.

We cannot assure you that future environmental investigations will not reveal material environmental liabilities. Also, we cannot assure you that the PRC government will not change existing laws and regulations or impose additional or stricter laws or regulations, compliance with which may cause us to incur significant costs. lf we are unable to effectively comply with these changes, we may incur significant costs and may be subject to fines or be forced to suspend or shut down certain operations or property development, which could have a material and adverse effect on our operations.

We may suffer losses and claims arising from uninsured risks

Other than such types of insurance as are mandatorily required under the PRC law and which are generally maintained by real estate developers in the PRC, we do not maintain insurance coverage against potential losses, destruction or damage with respect to our properties developed for sale before their delivery to customers, nor do we maintain insurance coverage against liability from tortious acts or other construction-related personal injuries on our project sites or environmental damage arising from our operations. Under PRC laws, construction companies bear primary civil liability for personal injuries of their employees arising out of their construction work. The owner of a property under construction may also bear liability supplementary to the liability of the construction company if the latter is not able to fully compensate the injured. We cannot assure you that we will not be sued or held liable for damages due to any tortious acts. In addition, there are certain types of losses for which insurance is not generally available on commercially practical terms, such as losses suffered due to business interruption, earthquake, flooding or other natural disaster, war or civil disorder. Therefore, while we believe that our insurance practice is in line with general practice in the PRC property development industry, there may be instances when we will have to internalize losses, damage and liabilities because of our lack of insurance coverage. If we suffer any losses, damages or liabilities in the course of our business operations, we may not have sufficient funds to cover them or to replace any property under development that has been destroyed. In addition, any payment we make to cover any such losses, damages or liabilities could have a material adverse effect on our business, results of operations and financial condition.

The global economic slowdown and financial crisis have negatively impacted, and may continue to adversely affect our business, liquidity, financial condition, results of operations and prospects

The global economic slowdown and turmoil in the global financial markets beginning in the second half of 2008 have had a negative impact on the PRC economy, which in turn has affected the PRC real estate market. For example:

• the economic slowdown and tightened credit have resulted in lower demand for residential and commercial properties and declining real estate prices;

• the economic slowdown has adversely impacted home owners and potential real estate purchasers, which may lead to a further decline in the general demand for real estate products and a further erosion of their selling prices; and

• the tightening of credit has negatively impacted the ability of real estate developers and potential real estate purchasers to obtain financings.

—31— Although certain parts of the PRC real estate market showed signs of recovery in the second half of 2009 and the first three quarters of 2010 due in large part to stimulus measures adopted by the PRC government, we cannot assure you that the real estate market will continue to grow or that its growth will occur in geographical regions or economic sectors from which we benefit, nor can we assure you that a financial crisis similar to the financial turmoil in the second half of 2008 and the first half of 2009 will not re-occur. If we encounter a similar global economic downturn and financial market crisis in the future on a sustained basis, or any general downturn in the PRC’s economic conditions, our business operations, financial position and results of operations will be materially and adversely affected.

RISKS RELATING TO THE REAL ESTATE SECTOR IN THE PRC

The restrictive measures adopted from time to time by the PRC government to curtail the overheating of, and foreign investment in, the PRC real estate market could slow the industry’s rate of growth or cause the real estate market to decline From 2004 to the first half of 2008, in response to concerns over the scale of the increase in real estate investment and the overheating of the real estate sector in the PRC over the past few years, the PRC government has introduced a number of policies, including the following, to control the growth and curtail the overheating of, and to control foreign investment in, the PRC real estate sector:

• suspending or restricting land grants and development approvals for villas and larger-sized units;

• charging an idle land fee for land which has not been developed within one year of the commencement date stipulated in the land use rights grant contract and canceling land use rights for land which has not been developed within two years or more;

• prohibiting any onward transfer of pre-sold properties before the ownership certificate is obtained;

• requiring that at least 70% of the land supply approved by a local government for residential property development for any given year be used for developing low to medium-cost housing, small to medium-size units and low-cost rental properties;

• requiring that at least 70% of residential projects approved or constructed on or after June 1, 2006 consist of units with floor areas of less than 90 sq.m. per unit, and that projects which have received project approvals prior to this date but have not obtained construction permits adjust their construction plan in order to be in compliance with this new requirement, with the exception of municipalities under direct administration of the PRC central government, provincial capitals and certain cities which may deviate from this ratio under special circumstances upon the approval by the Ministry of Construction;

• tightening availability of bank loans to real estate developers and purchasers of developed properties and increasing the reserve requirements for commercial banks;

• imposing or increasing taxes on short-term gains from second-hand property sales; and

• restricting foreign investment in the real estate sector by, among other things, increasing registered capital and other requirements for establishing foreign-invested real estate enterprises, tightening foreign exchange control and imposing restrictions on purchases of properties in China by foreign persons.

—32— Beginning in the second half of 2008, in order to mitigate the impact of the global economic slowdown, the PRC government has adopted measures to encourage domestic consumption in the residential real estate market and support property development. We cannot assure you that such economic recovery measures will continue to be implemented. These policies may not necessarily have a positive effect on our operations and our future business development; and the PRC government may revise or terminate such favorable policies according to changes in market conditions.

Starting from the second half of 2009, the residential real estate prices in certain cities in China rose rapidly. In order to reduce the risk of the overheating of the real estate market and possible formation of a speculative bubble, the PRC government introduced a series of regulatory measures in an effort to stabilize the real estate market and facilitate its sustainable development. Prominent measures and policies, among others, include:

• Require the minimum down-payment of the land premium. In November 2009, the PRC government introduced new rules which provide for a minimum down-payment of 50% of the land premium relating to land purchases from the PRC government and forbid local governments from giving discounts to developers or allowing developers to delay payments except as stipulated by the State Council. In March 2010, the PRC government further tightened this requirement by setting the minimum price for land grant to be equal to at least 70% of the benchmark price for land in the surrounding locality and the bidding deposit to be equal to at least 20% of the applicable minimum land grant price.

• Raise the down-payment ratio and residential mortgage loan interest rate. In April 2010, the State Council promulgated a new directive which raised the down-payment ratio for purchases of first homes and second homes from 20% to 30% and from 40% to 50%, respectively. The same directive also raised the interest rate applicable to mortgage loans for second home purchasers to 1.1 times the benchmark lending rate. In addition, as one of the most potent measures under the directive, mortgage loans for third home purchases have been suspended in some municipalities and cities.

• Limit the number of houses that can be purchased. Starting from April 2010, certain municipalities and cities adopted local measures limiting the number of houses that a single household can purchase. As of November 1, 2010, 14 municipalities and cities, such as Beijing, Shenzhen and Guangzhou, have promulgated such measures. The government of Xiamen also promulgated similar measures, but restricted its validity period to the end of 2010.

• Increase the supply of public housing. In its Proposed Twelfth Five-year Development Plan, the PRC central government has set as its long-term policy to provide affordable housing to low- and middle-income families and increase the supply of public housing to targeted populations.

Further details of the above regulations and other regulations intended to curtail the overheating of, and foreign investment in, the PRC real estate market are set out in “Regulation.”

The PRC government’s restrictive measures to control the industry’s rate of growth could limit our access to capital resources, reduce market demand and increase our operating costs. The PRC government may adopt additional and more stringent measures in the future, which could further slow the development of the construction and property development industries

—33— and materially and adversely affect our business and results of operations. In particular, any additional or more stringent measures imposed by the PRC government in the future to curb high-end residential real estate projects may materially and adversely affect our business and results of operations.

The property development industry in the PRC is still in a relatively early stage of development and lacks adequate infrastructure support

Private ownership of real estate in the PRC is still in a relatively early stage of development. It is extremely difficult to predict how much demand will develop and when, as many social, political, economic, legal and other factors beyond our control may affect the development of the market. The level of uncertainty is increased by the limited availability of accurate financial and market information as well as the overall low level of transparency in the PRC.

The lack of a liquid secondary market for residential and commercial properties may discourage investors from acquiring new properties because resale can be a difficult, long and costly process. The relatively limited amount of real estate mortgage financing available to PRC individuals, compounded by the lack of security of legal title and enforceability of proprietary rights, may further inhibit demand for residential developments.

In addition, the PRC real estate market is volatile and may experience under-supply or over-supply and real estate price fluctuations. The PRC government has in the past adjusted monetary and other economic policies on a frequent basis in order to stimulate the PRC economy or to prevent or curtail the overheating of the PRC and local economies, and such economic adjustments have affected the real estate market in the PRC. The PRC government may, from time to time, continue to make policy adjustments and adopt new regulatory measures in order to encourage or control the development of the real estate market in the PRC. Such policies may lead to further changes in market conditions, including price instability and imbalance of supply and demand in respect of residential and commercial properties, which may materially and adversely affect our business, financial condition and results of operations. We cannot assure you that there will not be over-development in the real estate sector in the PRC in the future. Any future over-development in the real estate sector in the PRC may result in an over-supply of properties and a decrease in real estate prices, as well as an under-supply of available sites for future development and an increase in the cost of acquiring land in our target real estate markets, which may adversely affect our business, financial condition and results of operations. Because changes in the real estate markets are difficult to predict, and because of the long lead times necessary to develop projects from planning through construction to completion, we may not be able to respond to fluctuations in the market quickly enough to prevent losses.

The PRC real estate market has been cyclical and our property development activities are susceptible to significant fluctuations

Historically, the PRC real estate market has been cyclical. The rapid expansion of the real estate market in certain major provinces and cities in China, including Guangdong Province, in the early 1990s culminated in an over-supply in the mid-1990s and a corresponding fall in real estate values and rentals in the second half of the decade. Since the late 1990s, private residential real estate prices and the number of residential property development projects have increased in major cities as a result of an increase in demand driven by domestic economic growth. In particular, prices of residential properties in certain major PRC provinces and cities such as Beijing, Shanghai, Shenzhen and Guangzhou have experienced rapid and significant growth. In recent years however, risk of real estate over-supply is increasing in parts of China, where real estate investment, trading and speculation have become overly active. In the event of actual or perceived over-supply, together with the effect of the PRC government policies to curtail the overheating of the real estate market, real estate prices may fall significantly and our revenue and results of operations will be adversely affected. We

—34— cannot assure you that the problems of over-supply and falling real estate prices that occurred in the mid-1990s will not recur in the PRC real estate market and the recurrence of such problems could adversely affect our business and financial condition. The PRC real estate market is also susceptible to the volatility of global economic conditions.

The cyclical nature of the real estate market in the PRC affects the optimal timing for the acquisition of sites, pace of development as well as the sale of properties. This cyclicality, combined with the lead time required for completion of projects and the sale of properties, means that our results of operations relating to property development activities may be susceptible to significant fluctuations from year to year.

The PRC government may reclaim our land and impose other penalties on us if we fail to comply with the terms of the relevant land grant contracts

Under PRC laws and regulations, if a real estate developer fails to develop the land according to the terms of the land grant contract, including the designated use of the land and the time frame for commencement and completion of the property development, the PRC government may issue a warning or impose a penalty on the developer or, in the worst possible scenario, reclaim the land. Specifically, according to the land grant contracts applicable to our projects, if we fail to pay any outstanding land premium by the stipulated deadline, we may be subject to a late payment penalty of 0.05% to 0.1% of the unpaid land premium per day. If we fail to commence development by one year from the commencement date as stipulated in the land grant contract, the government authority may serve a warning notice on us and impose an idle land fee up to 20% of the land premium and require us to pay land appreciation fees. If we fail to commence development by two years from the relevant commencement date, the land resources bureau may reclaim the land without giving us any compensation. If the construction works have not started after two years from the date stipulated under the relevant land grant contract, the government authority may reclaim the site without any compensation unless the delay in commencement of construction is caused by force majeure or acts of government or indispensable preliminary work before commencement of construction. In the Notice on Promoting the Saving and Intensification of Use of Land《國務院關於促進集約節約 ( 用地的通知》) promulgated by the State Council on January 3, 2008, this policy was reinforced. This notice states, among other things, that the Ministry of Land and Resources (中國國土資源部) (“MLR”) and other authorities are required to research and commence the drafting of implementation rules concerning the levy of land appreciation fees on idle land. Furthermore, MLR issued a Notice on Restricting the Administration of Construction Land and Promoting the Use of Approved Land《關於嚴格建設用地管理促進批而未用土地利用的通知》 ( )in August 2009, which reiterates the current rules on idle land. We cannot assure you that circumstances leading to reclamation or significant delays in development schedule will not arise in the future.

In addition, notwithstanding that the commencement of the land development is in compliance with the timeframe set out in the land grant contract, the land may be treated as idle land and be subject to reclamation if the developed GFA on the land is less than one-third of the total planned GFA of the project or the total capital invested is less than one-quarter of the total investment of the project, and the period of suspension of the development of the land exceeds one year.

We cannot assure you that circumstances leading to payment of idle land fees and additional land premium, reclamation of land or significant delays in development schedules may not arise with respect to one or more properties developed or acquired by us. If any of our land is reclaimed, we may lose the opportunity to develop our real estate projects on such land, and we may also lose all of our past investments in such land, including land premiums paid and development costs incurred, which could adversely affect our business, results of operations and financial condition.

—35— We are subject to legal and business risks for the non-registration of our leases

The lease agreements for all the properties that we rented from third parties and all the properties that we leased to third parties have not been registered. Our PRC legal advisor has advised us that the requirement for the leases to be registered is an administrative measure, the non-compliance of which may result in an administrative penalty but does not affect the validity of the leases, however, we may face the risk of being determined by the relevant court of not being able to challenge any bona fide third party. We cannot assure you that the relevant administrative authorities will not impose a fine on us and bona fide third party will not challenge our leases.

Our allocated land may be reclaimed

In December 1996, the People’s Government of Fujian Province granted the relevant approval on the allocated land on which the 18-hole golf course currently owned by SCE Golf Course (a company in which we are a passive investor) is located. The nature of the land use rights of the piece of land held by SCE Golf Course which is currently being used as an 18-hole golf course is allocated land for entertainment purposes, which cannot be allocated by the relevant PRC government authority. Our PRC legal advisor has advised us that in order for the land to be used for a golf course, the land should have been granted to us as granted land, as opposed to allocated land, at the time we obtained the land, and therefore the current use of the land by SCE Golf Course is not in compliance with relevant laws and regulations. As a result, there is a possibility that the land may be reclaimed by the relevant land administration department.

RISKS RELATING TO CONDUCTING OPERATIONS IN THE PRC

Substantially all of our assets, business and operations are located in the PRC and all of our revenue is derived from the PRC. Accordingly, our business, financial condition, results of operations and prospects are subject to a significant degree to economic, political and legal developments in the PRC.

Changes in the economic and political environment in the PRC and policies adopted by the PRC government to regulate its economy may adversely affect our business, operating results and financial condition

Prior to 1978, the PRC’s economy was a planned economy. Since 1978, the PRC government has been pursuing economic reform policies that encourage the utilization of market forces and greater economic decentralization, with an increasing level of freedom and autonomy in areas such as allocation of resources, production and management and a gradual shift in emphasis to a “market economy” and enterprise reform. Although our directors believe the economic reform policies will have a positive effect on the PRC’s overall long-term development, our operations and financial results could be adversely affected by changes in political, economic and social conditions or the relevant policies of the PRC government, such as changes in laws and regulations (or the interpretations thereof), measures which might be introduced to control inflation, changes in the rate or method of taxation, imposition of additional foreign exchange controls and restrictions on currency conversion and the imposition of additional import restrictions. Moreover, even if new policies may benefit real estate developers in the long run, we cannot assure you that we will be able to successfully adjust to such policies.

As a result of these economic reform policies, China’s GDP has grown at a rapid rate in the past three decades. In 2009, China’s nominal GDP grew at approximately 8.4% year-on-year to RMB34,050.7 billion, compared to RMB31,404.5 billion in 2008. However, we cannot assure you that such growth will continue, or that China’s GDP will not shrink in the future. The PRC economy differs from the economies of most developed countries in many aspects, including but not limited to, its structure, level of development, economic growth rate,

—36— foreign exchange control, allocation of resources and balance of payment position. If there is a slowdown in the economic growth of the PRC or if its economy experiences a recession, demand for real estate may also decrease and our business, financial condition and results of operations may be materially and adversely affected. In addition, our operations may be affected by a variety of factors, some of which may be beyond our control, including:

• political instability or changes in social conditions within the PRC;

• changes in laws and regulations or the interpretation of laws and regulations;

• implementation or abolition of any preferential policies;

• measures which may be introduced to control inflation or deflation;

• changes in the rate or method of taxation; and

• the imposition of additional restrictions on currency conversion and remittances abroad.

Any significant changes in relation to any of these factors may materially and adversely affect our business, financial condition and results of operations.

The treatment of our companies for PRC enterprise income tax purposes is unclear The Enterprise Income Tax Law (“EIT Law”) and its relevant implementing rules became effective on January 1, 2008. Pursuant to the EIT Law, as amended, foreign enterprises with de facto management located in the PRC are considered resident enterprises, with their worldwide income normally being subject to the PRC enterprise income tax (“EIT”) at an applicable tax rate of 25%. In April 2009, SAT further specified certain criteria for the determination of “de facto management” of foreign enterprises that are controlled by PRC enterprises, but no official implementation rules have been issued regarding the determination of the “de facto management” for foreign enterprises that are not controlled by PRC enterprises. Therefore, it remains unclear how the PRC tax authorities will treat an overseas enterprise controlled by another overseas enterprise and ultimately controlled by PRC individual residents. Since some members of our management are located in the PRC, we cannot assure you that we will not be considered a PRC “resident enterprise” by the PRC tax authorities and that we will not be subject to EIT at a tax rate of 25% on our worldwide income accordingly. If we were a PRC “resident enterprise,” we would be obligated to withhold PRC income tax of up to 7% on payments of interest and certain other amounts on the Notes to investors that are non-resident enterprises located in Hong Kong, if such Hong Kong investor is a beneficial owner under the tax treaty between Hong Kong and mainland or 10% on payments of interest and other amounts on the Notes to investors that are non-resident enterprises located outside Hong Kong, because the interest and other amounts would be regarded as being derived from sources within the PRC. If we failed to do so, we could be subject to fines and other penalties. In addition, if we are required under the Enterprise Income Tax Law to withhold PRC tax on our interest payable to our non-resident noteholders who are “non-resident enterprises,” we will be required to pay such additional amounts as will result in receipt by a holder of a Note of such amounts as would have been received by the holder had no such withholding been required. The requirement to pay additional amounts will increase the cost of servicing interest payments on the Notes, and could have a material adverse effect on our ability to pay interest on, and repay the principal amount of, the Notes, as well as our profitability and cash flow. Similarly, any gain realized by such non-resident enterprise, from the transfer of the Notes would be regarded as being derived from sources within the PRC and accordingly would be subject to a 10% PRC tax. If we are treated as such a PRC resident enterprise under PRC tax laws, we could face adverse tax consequences.

—37— Pursuant to the EIT Law and the Notice on Issues Regarding Tax Credit for Enterprises Foreign Income (Cai Shui 2009 No.125)《關於企業境外所得稅收抵免有關問題的通知》 ( ) jointly issued by MOF and SAT on December 25, 2009 which became retroactively effective as of January 1, 2008, part of EIT may be relieved if the “resident enterprise” has already paid foreign tax with an enterprise income tax nature. In addition, enterprises that previously enjoyed a preferential tax rate will gradually transition to the new tax rate over the five years beginning January 1, 2008. Other tax benefits, such as fixed periods of EIT exemption or reduction, will continue until the expiry of the prescribed period. For a preferential tax treatment which has not commenced due to lack of profit, such preferential treatment will be deemed to have commenced on January 1, 2008. It is currently unclear how the relevant PRC tax authorities will implement or enforce the above circular and whether such income tax treatment will be subject to further change. In case we are required by the relevant PRC tax authorities to pay income tax, our tax liability may increase and our net profits and cash flow may be affected.

Furthermore, in connection with the EIT Law, MOF and SAT jointly issued, on April 30, 2009, the Circular on Issues Concerning Process of EIT in Enterprise Restructuring Business (Cai Shui 2009 No.59)《關於企業重組業務企業所得稅處理若干問題的通知》 ( ), which became retroactively effective as of January 1, 2008. During the year ended December 31, 2009, in preparation for the IPO, we and our subsidiaries underwent the Reorganization. Under the circular, the transfer of equity interests in certain PRC subsidiaries held by our offshore subsidiaries to our other offshore subsidiaries is subject to an income tax of 10% on capital gains which may be determined as the difference between the fair value of the equity interests transferred and the cost of investment. It is currently unclear how the relevant PRC tax authorities will implement or enforce the above circular and whether such income tax on capital gains treatment will be subject to further change. If we are required by the relevant PRC tax authorities to pay income tax on capital gains, our tax liability will increase and our net profits and cash flow will be affected.

Fluctuation of the Renminbi may adversely affect our operations and financial results

All of our sale proceeds and expenses are denominated in Renminbi, a currency not freely convertible into other currencies. The value of the Renminbi depends, to a large extent, on domestic and international economic, financial and political developments and China’s governmental policies, as well as supply and demand in the local and international markets. From 1999 until 2005, the conversion of the Renminbi into foreign currencies, including the U.S. dollar and the Hong Kong dollar, was based on exchange rates set and published daily by PBOC in light of the previous day’s inter-bank foreign exchange market rates in China and the then current exchange rates on the global financial markets. The official exchange rate for the conversion of the Renminbi into U.S. dollars was largely stable until July 2005. On July 21, 2005, PBOC revalued the Renminbi by reference to a basket of foreign currencies, including the U.S. dollar. As a result, the value of the Renminbi appreciated by more than 2% on that day. Since then, PBOC has allowed the official Renminbi exchange rate to float against a basket of foreign currencies. Further, from May 18, 2007, PBOC enlarged the floating band for the trading prices in the inter-bank foreign exchange market of the Renminbi against the U.S. dollar from 0.3% to 0.5% around the central parity rate, effective on May 21, 2007. This allows the Renminbi to fluctuate against the U.S. dollar by up to 0.5% above or below the central parity rate published by PBOC. On June 19, 2010, PBOC announced its intention to proceed with the reform of the Renminbi exchange rate regime to increase the Chinese currency’s exchange rate flexibility. These changes in currency policy resulted in the Renminbi appreciating against the U.S. dollar by approximately 23.7% from July 21, 2005 to September 30, 2010. The Renminbi exchange rate could fluctuate widely against the U.S. dollar or any other foreign currency in the future. Since our income and profits are primarily denominated in Renminbi, any appreciation of the Renminbi will increase the value of dividends and other distributions payable by our PRC subsidiaries in foreign currency terms. Conversely, any depreciation of the Renminbi will decrease the value of dividends and other distributions

—38— payable by our PRC subsidiaries in foreign currency terms. Fluctuation of the value of the Renminbi will also affect the amount of our foreign debt service in Renminbi terms, since we have to convert the Renminbi into foreign currencies to service our indebtedness in foreign currency.

There are limited hedging instruments available in China to reduce our exposure to exchange rate fluctuations between the Renminbi and other currencies. To date, we have not entered into any hedging transactions to reduce our exposure to such risks. The Initial Purchasers and their affiliates may enter into such hedging agreements permitted under the Indenture governing the Notes.

Any hedging obligation entered into or to be entered into by us or our subsidiaries, may contain terms and conditions that may result in the early termination, in whole or in part, of such hedging obligation upon the occurrence of certain termination or analogous events or conditions (howsoever described), including such events relating to us and/or any of our subsidiaries, and the terms and conditions of such hedging obligation(s) may provide that, in respect of any such early termination, limited or no payments may be due and payable to, or that certain payments may be due and payable by, us and/or any of our subsidiaries (as relevant) in respect of any such early termination. Any such early termination, in whole or in part, of any such hedging obligation(s), and the payment and any other consequences and effects of such early termination(s), may be material to our financial condition and/or any of our subsidiaries and may be material in relation to the performance of our or their respective obligations under or in relation to the Notes (if applicable), any indebtedness or any other present or future obligations and commitments.

We are subject to PRC government controls on currency conversion

We receive substantially all of our revenue in Renminbi which is currently not a freely convertible currency. A portion of our revenue must be converted into other currencies in order to meet our foreign currency obligations including payment of declared dividends to our shareholders.

Subject to certain procedural requirements under existing foreign exchange regulations in the PRC, our Company and our PRC subsidiaries are generally able to undertake current account foreign exchange transactions without prior approval from SAFE. However, the PRC government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiaries to remit sufficient foreign currency to pay dividends (which would be funded by Renminbi but paid in Hong Kong dollars) or other payments to us, or otherwise satisfy their foreign currency denominated obligations, and we, in turn, may be unable to pay dividends to our shareholders. In addition, the PRC government may, at its discretion, take further measures to restrict access to foreign currencies for current account transactions in the future and any such change may also adversely affect our ability, as well as the ability of our PRC subsidiaries, to pay dividends or satisfy other foreign exchange requirements.

Further, approval from appropriate PRC government authorities is required when Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of indebtedness denominated in foreign currencies. In addition, restrictions on foreign exchange transactions under capital accounts could also affect our subsidiaries’ ability to obtain foreign exchange through debt or equity financing, including by means of loans or capital contribution from us. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our shareholders.

—39— The implementation of the new labor contract law and the potential increase in labor costs in the PRC may adversely affect our business and profitability A new labor contract law became effective in the PRC on January 1, 2008. It imposes more stringent requirements on employers in relation to entering into employment contracts with no fixed term, hiring of temporary employees and dismissing employees. In addition, under the newly promulgated Regulations on Paid Annual Leave for Employees (職工帶薪年休假條例), which came into effect on the same date, employees who have continuously worked for more than one year are entitled to a paid holiday ranging from five to 15 days, depending on their length of service. Employees who agree to waive part or all of their holiday entitlement at the request of their employers must be compensated with three times their normal daily salaries for each day of holiday entitlement being waived. As a result of the new law and regulations, our labor costs may increase. We cannot assure you that any disputes, work stoppages or strikes will not arise in the future. Increases in our labor costs and future labor or other disputes with our employees could have a material adverse effect on our business, financial condition or results of operations.

The PRC legal system is less developed than legal systems in certain other jurisdictions and embodies inherent uncertainties that could limit the legal protection available to us and to holders of the Notes As all of our operations are conducted, and substantially all of our assets are located, in the PRC, our business is generally affected by and subject to the PRC legal system and PRC laws and regulations. The PRC legal system is based, in part, on written statutes. Prior court decisions may be cited for reference but have limited precedential value. Since 1979, the PRC government has been developing a comprehensive system of commercial laws, and considerable progress has been made in introducing laws and regulations dealing with economic matters such as foreign investment, corporate organization and governance, commerce, taxation and trade. However, due to the reason that these laws and regulations have not been fully developed, and due to the limited number of published cases and the non-binding nature of prior court decisions, interpretation and enforcement of these PRC laws and regulations involve uncertainties. Interpretations of laws and regulations may differ depending on the way an application or case is presented to a PRC government agent, as well as to which PRC government agent such application or case is being presented. We cannot assure you that we will receive the same, or more favorable, interpretations of laws and regulations as our competitors. In addition, the PRC legal system is based, in part, on government policies and internal rules (some of which are not published on a timely basis or at all) that may have a retroactive effect. Further, the PRC legal system includes restrictions on and penalties, including criminal liability, relating to various activities that may not have appeared to violate any policies or rules at the time such activities were undertaken, or which may cause us to be deemed in violation of certain policies or rules based on the actions of our counterparties in various transactions, even if we were not aware of whether our counterparties were acting in compliance with applicable PRC laws and regulations. As a result, we may not be aware of actual or deemed violations of such policies and rules until some time after such violations take place. Furthermore, any litigation we undertake in the PRC, regardless of its outcome, may be protracted and result in substantial cost to us and diversion of both our resources and management attention.

It may be difficult to effect service of process upon us or our directors or senior officers who reside in China or to enforce against us or them in China any judgments obtained from non-PRC courts A significant portion of our assets and our subsidiaries are located in the PRC. In addition, most of our directors and officers reside in the PRC, and the assets of our directors and officers may also be located in the PRC. As a result, it may be difficult or impossible to effect service of process outside the PRC upon us or our directors and officers, including with

—40— respect to matters arising under applicable securities laws. A judgment of a court of another jurisdiction may be reciprocally recognized or enforced in the PRC if that jurisdiction has a treaty with the PRC or if judgments of the PRC courts have been recognized before in that jurisdiction, subject to the satisfaction of some other requirements. Our PRC legal advisor has advised us that the PRC does not have treaties providing for the reciprocal acknowledgement and enforcement of judgments of courts with Japan, the United Kingdom, the United States or most other Western countries. In addition, Hong Kong has no arrangement for the reciprocal enforcement of judgments with the United States. As a result, the prospects for the recognition and enforcement in the PRC or Hong Kong of judgments of a court in non-PRC jurisdictions are uncertain.

RISKS RELATING TO THE NOTES

We are a holding company, and payments with respect to the Notes are structurally subordinated to liabilities, contingent liabilities and obligations of our subsidiaries

We are a holding company with no material operations. We conduct our operations primarily through our PRC subsidiaries. The Notes will not be guaranteed by any current or future PRC subsidiaries. Moreover, the Notes will not be guaranteed by certain existing Offshore Subsidiaries and under the terms of the Indenture, subject to certain conditions, the Company may designate any Offshore Subsidiary (including a Subsidiary Guarantor) as a Designated Offshore Non-Guarantor Subsidiary which would allow, in the case of a Subsidiary Guarantor, for the Subsidiary Guarantee to be released, or in the case of a new offshore Restricted Subsidiary, such Restricted Subsidiary not to provide a Subsidiary Guarantee or JV Subsidiary Guarantee. Our primary assets are ownership interests in our PRC subsidiaries, which are held through the Subsidiary Guarantors, the Permanent Offshore Non-Guarantor Subsidiaries and certain Existing Offshore Non-Guarantor Subsidiaries and may be held by JV Subsidiary Guarantors or Designated Offshore Non-Guarantor Subsidiaries in the future. Although the percentage of our total consolidated assets that can be held by Offshore Non-Guarantor Subsidiaries is limited as described under “Description of the Notes — Offshore Non-Guarantor Subsidiaries,” the Permanent Offshore Non-Guarantor Subsidiaries are not required to provide a Subsidiary Guarantee or JV Subsidiary Guarantee at any time in the future and the percentage of our total consolidated assets that can be held by such Permanent Offshore Non-Guarantor Subsidiaries is not limited and could increase over time and represent a significant portion of our total consolidated assets. The Subsidiary Guarantors and the JV Subsidiary Guarantors (if any) do not have material operations. Accordingly, our ability to pay principal and interest on the Notes and the ability of the Subsidiary Guarantors and the JV Subsidiary Guarantors (if any) to satisfy their obligations under the Subsidiary Guarantees or the JV Subsidiary Guarantees (if any), as the case may be, will depend upon our receipt of dividends from our subsidiaries.

Creditors, including trade creditors of our Non-Guarantor Subsidiaries and any holders of preferred shares in such entities, will have a claim on the Non-Guarantor Subsidiaries’ assets prior to the claims of the holders of the Notes. As a result, our payment obligations under the Notes will be effectively subordinated to all existing and future obligations of our Non-Guarantor Subsidiaries (including obligations of our Non-Guarantor Subsidiaries under guarantees issued in connection with our business), and all claims of creditors of our Non-Guarantor Subsidiaries will have priority as to the assets of such entities over our claims and those of our creditors, including holders of the Notes. As of September 30, 2010, indebtedness of our Non-Guarantor Subsidiaries constituted substantially all of our total borrowings as described under “Description of other Material Indebtedness.” The Notes and the Indenture do not restrict the ability of our subsidiaries to incur certain categories of indebtedness. In addition, our secured creditors and those of the Subsidiary Guarantors and the JV Subsidiary Guarantors (if any) have priority as to our assets and the assets of the Subsidiary Guarantors and the JV Subsidiary Guarantors (if any) securing the related obligations over claims of the holders of the Notes.

—41— Moreover, under the terms of the Notes, a Subsidiary Guarantee required to be provided by a subsidiary of the Company under the terms of the Notes may be replaced by a limited-recourse guarantee (a “JV Subsidiary Guarantee”) following the sale or issuance to a third party of a 20% to 49.9% equity interest in such subsidiary or its direct or indirect majority shareholders (subject to the satisfaction of certain conditions). Recovery under a JV Subsidiary Guarantee is limited to an amount equal to our proportional interest in the issued share capital of such Subsidiary Guarantor multiplied by the fair market value of the total assets in such JV Subsidiary Guarantor and its subsidiaries, on a consolidated basis, as of the date of the last fiscal year end of the Company. As a result, the amount that may be recovered by the Trustee pursuant to a JV Subsidiary Guarantee (compared to a Subsidiary Guarantee) is reduced, which in turn may affect your ability to recover any amounts due under the Notes.

We have substantial indebtedness and may incur substantial additional indebtedness in the future, which could adversely affect our financial health and our ability to generate sufficient cash to satisfy our outstanding and future debt obligations

We now have, and will continue to have after the offering of the Notes, a substantial amount of indebtedness. Our total bank and other borrowings, including both current and non-current borrowings, as of December 31, 2007, 2008 and 2009 and as of September 30, 2010 were RMB722.7 million, RMB1,353.9 million, RMB2,106.1 million and RMB2,410.7 million, respectively.

Our substantial indebtedness could have important consequences to you. For example, it could:

• limit our ability to satisfy our obligations under the Notes and other debt;

• increase our vulnerability to adverse general economic and industry conditions;

• require us to dedicate a substantial portion of our cash flow from operations to servicing and repaying our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes;

• limit our flexibility in planning for or reacting to changes in our businesses and the industry in which we operate;

• place us at a competitive disadvantage compared to our competitors that have less debt;

• limit, along with the financial and other restrictive covenants of our indebtedness, among other things, our ability to borrow additional funds; and

• increase the cost of additional financing.

In the future, we may from time to time incur substantial additional indebtedness and contingent liabilities. Although the Indenture governing the Notes restricts us and our Restricted Subsidiaries from incurring additional debt and contingent liabilities, these restrictions are subject to important exceptions and qualifications. If we or our subsidiaries incur additional debt, the risks that we face as a result of our already substantial indebtedness and leverage could intensify.

Our ability to generate sufficient cash to satisfy our outstanding and future debt obligations will depend upon our future operating performance, which will be affected by

—42— prevailing economic conditions and financial, business and other factors, many of which are beyond our control. We anticipate that our operating cash flow will be sufficient to meet our anticipated operating expenses and to service our debt obligations as they become due. However, we may not generate sufficient cash flow for these purposes.

In addition, the terms of the Indenture governing the Notes prohibit us from incurring additional indebtedness unless we are able to satisfy certain financial ratios, and contain other restrictions. Our ability to meet our financial ratios may be affected by events beyond our control. We cannot assure you that we will be able to meet these ratios. Certain of our financing arrangements also impose operating and financial restrictions on our business. See “Description of other Material Indebtedness.” Such restrictions in the Notes and our other financing arrangements may negatively affect our ability to react to changes in market conditions, take advantage of business opportunities we believe to be desirable, obtain future financing, fund needed capital expenditures, or withstand a continuing or future downturn in our business. Any of these factors could materially and adversely affect our ability to satisfy our obligations under the Notes and other debt.

Our subsidiaries are subject to restrictions on the payment of dividends and the repayment to us and our subsidiaries As a holding company, if we cannot obtain financing, we depend on the receipt of dividends from our subsidiaries, including our PRC subsidiaries, to satisfy our obligations, including our obligations under the Notes. The ability of our subsidiaries to pay dividends to their shareholders is subject to, among other things, distributable earnings, cash flow conditions, restrictions contained in the articles of association of our subsidiaries, applicable laws and restrictions contained in the loans or debt instruments of such subsidiaries. In addition, if any of our subsidiaries raises capital by issuing equity securities to third parties, dividends declared and paid with respect to such shares would not be available to us to make payments on the Notes. Further, certain loan agreements in relation to project loans obtained by our PRC subsidiaries from PRC lender banks contain provisions that restrict or prohibit the payment or declaration of dividends or distributions. Although such project loans typically do not require requisite consent or notice from the lender bank, these restrictions could have a negative impact on the calculation of our Consolidated EBITDA and could also reduce the amounts that we receive from our subsidiaries, which would restrict our ability to meet our payment obligations under the Notes, the Subsidiary Guarantees and the JV Subsidiary Guarantees (if any). PRC laws and regulations permit payment of dividends only out of net profits as determined in accordance with PRC accounting standards and regulations. Such profits differ from profits determined in accordance with HKFRS in certain significant respects, including the use of different bases of recognition of revenue and expenses. Our PRC subsidiaries are required to set aside a portion of their after-tax profits according to PRC accounting standards and regulations to fund certain reserve funds that are not distributable as cash dividends. In practice, our PRC subsidiaries may pay dividends once a year at the end of each financial year. Some of our PRC subsidiaries are also subject to certain restrictions on dividend distribution under their loan agreements with certain PRC banks. In addition, dividends paid by our PRC subsidiaries to their non-PRC parent companies are subject to a 10% withholding tax, unless there is a tax treaty between the PRC and the jurisdiction in which the overseas parent company is incorporated that specifically exempts or reduces such withholding tax. Currently, there is no such treaty between the PRC and the British Virgin Islands, where substantially all of our non-PRC subsidiaries are incorporated. Pursuant to an avoidance of double taxation arrangement between Hong Kong and the PRC, if the non-PRC parent company is a Hong Kong resident and a beneficial owner holding a 25% or more interest in the PRC enterprise directly, such withholding tax rate may be lowered to 5%. However, according to a Circular from SAT dated October 27, 2009, tax treaty benefits will be denied to “conduit” or shell companies without business substance. Therefore, it is unclear whether dividend payments made by our PRC subsidiaries to our Hong Kong subsidiaries, which hold the equity interests

—43— in our PRC subsidiaries, will continue to enjoy the 5% PRC tax rate. As a result of such limitations, dividend payments from our PRC subsidiaries may not be sufficient to meet our payment obligations under the Notes or to satisfy the obligations of the Subsidiary Guarantors and the JV Subsidiary Guarantors (if any) under the Subsidiary Guarantees and the JV Subsidiary Guarantees (if any), as the case may be, and there could be limitations on our ability to repay the principal of the Notes at maturity or upon any early redemption.

As a result of the foregoing, we cannot assure you that we will have sufficient cash flow from dividends from our subsidiaries to satisfy our obligations under the Notes or the obligations of the Subsidiary Guarantors and the JV Subsidiary Guarantors (if any) under the Subsidiary Guarantees and the JV Subsidiary Guarantees (if any), as the case may be.

Under PRC regulations, we may not be able to transfer to our PRC subsidiaries the proceeds of this Notes offering in the form of a loan, which could impair our ability to make timely payments of interest, or even principal, under the Notes

On July 10, 2007, SAFE issued a circular indicating that it would not process for foreign investment enterprises in the real estate sector any foreign debt registration or conversion of foreign debt that was approved by the local MOFCOM and registered with MOFCOM after June 1, 2007. As PRC companies cannot repay any loans or interest with respect to foreign debt under the PRC foreign exchange control system to persons outside the PRC without registration of the foreign debt with SAFE, this new circular effectively prohibits our ability to fund our PRC subsidiaries in the form of loans. Therefore, the proceeds of the current offering that will be used for land acquisitions and developments in China can only be transferred to our PRC subsidiaries as equity investments and not as loans. Without having the flexibility to transfer funds to PRC subsidiaries as loans, we cannot assure you that the dividend payments from our PRC subsidiaries will be available on each interest payment date to pay the interest due and payable under the Notes, or on the maturity date or any redemption date to pay the principal of the outstanding Notes.

We and holders of the Notes may be subject to risks presented by fluctuations in exchange rates between the Renminbi and other currencies, particularly U.S. dollars

The Notes are denominated in Renminbi but settled in U.S. dollars. Holders of the Notes are required to pay the offer price for their Notes in U.S. dollars based on the exchange rate between Renminbi and the U.S. dollar fixed on the pricing date of the Notes. Although substantially all of our turnover is generated by our PRC operating subsidiaries and is denominated in Renminbi, we are required to settle all amounts due under the Notes (including principal, premium, interest and redemption payments) in U.S. dollars, at the prevailing exchange rate between Renminbi and the U.S. dollars at the time of payment. Pursuant to reforms of the exchange rates system announced by the PBOC on July 21, 2005, Renminbi-to-foreign currency exchange rates are allowed to fluctuate within a narrow and managed band against a basket of foreign currencies, rather than being effectively linked to the U.S. dollar. Further, from May 18, 2007, PBOC enlarged the floating band for the trading prices in the inter-bank foreign exchange market of Renminbi against the U.S. dollar from 0.3% to 0.5% around the central parity rate, effective on May 21, 2007. This allows Renminbi to fluctuate against the U.S. dollar by up to 0.5% above or below the central parity rate published by PBOC. On June 19, 2010 the PBOC announced its intention to proceed with the reform of the Renminbi exchange rate regime to increase the Chinese currency’s exchange rate flexibility. These changes in currency policy resulted in Renminbi appreciating against the U.S. dollar by approximately 21% from July 21, 2005 to November 30, 2010.

The PRC government may adopt further reforms of its exchange rate system, including making the Renminbi freely convertible in the future. If such reforms were implemented, it is possible that they may result in a devaluation of the Renminbi against the U.S. dollar, in which

—44— case our financial condition and results of operations could be adversely affected because of our U.S. dollar and H.K. dollar denominated indebtedness and other obligations. Such devaluation could also adversely affect the value, translated or converted to U.S. dollars or otherwise, of our earnings and our ability to satisfy our obligations under the Notes.

The U.S. dollar return on the Notes, or yield to maturity, will depend on the principal amount, the coupon and the premium converted into U.S. dollars at the prevailing exchange rate at the time of the relevant payments. Any volatility of the exchange rate between Renminbi and the U.S. dollar during the term of the Notes will affect the return on the Notes in U.S. dollar. In particular, any devaluation of the Renminbi against the U.S. dollar during the term of the Notes will decrease the U.S. dollar return on the Notes and will result in the yield to maturity of the Notes in U.S. dollars being less then the stated yield to maturity thereof, which is calculated in Renminbi. In the event of a material devaluation of the Renminbi against the U.S. dollar, holders of the Notes may not receive the full U.S. dollar subscription money upon maturity or redemption of the Notes.

We may not be able to repurchase the Notes upon a Change of Control Triggering Event

We must offer to purchase the Notes upon the occurrence of a Change of Control Triggering Event, at a purchase price equal to the U.S. Dollar Settlement Amount of 101% of the principal amount of the Notes plus accrued and unpaid interest. See “Description of the Notes.”

The source of funds for any such purchase would be our available cash or third-party financing. However, we may not have enough available funds at the time of the occurrence of any Change of Control Triggering Event to make purchases of outstanding Notes. Our failure to make the offer to purchase or purchase the outstanding Notes would constitute an Event of Default under the Notes. The Event of Default may, in turn, constitute an event of default under other indebtedness, any of which could cause the related debt to be accelerated after any applicable notice or grace periods.

In addition, the definition of Change of Control Triggering Event for purposes of the Indenture governing the Notes does not necessarily afford protection for the holders of the Notes in the event of some highly leveraged transactions, including certain acquisitions, mergers, refinancings, restructurings or other recapitalizations, although these types of transactions could increase our indebtedness or otherwise affect our capital structure or credit ratings. The definition of Change of Control Triggering Event for purposes of the Indenture governing the Notes also includes a phrase relating to the sale of “all or substantially all” of our assets. Although there is a limited body of case law interpreting the phrase “substantially all,” there is no precise established definition under applicable law. Accordingly, our obligation to make an offer to purchase the Notes, and the ability of a holder of the Notes to require us to purchase its Notes pursuant to the offer as a result of a highly-leveraged transaction or a sale of less than all of our assets, may be uncertain.

We may be able to redeem the Notes in whole at a redemption price equal to the U.S. Dollar Settlement Amount of 100% of the principal amount plus accrued and unpaid interest in the event we are required to pay additional amounts because we are treated as a PRC “resident enterprise”

In the event we are treated as a PRC “resident enterprise” under the PRC EIT Law, we may be required to withhold PRC income tax on interest payable to certain of our non-resident investors. In such case, we will, subject to certain exceptions, be required to pay such Additional Amounts as will result in receipt by a holder of a Note of such amounts as would have been received by the holder had no such withholding been required. As described under “Description of the Notes—Redemption for Taxation Reasons,” in the event we are required to pay Additional Amounts as a result of certain changes in or interpretations of tax law, including

—45— any change or interpretation that results in our being required to withhold tax on interest payments as a result of our being treated as a PRC “resident enterprise,” we may redeem the Notes in whole at a redemption price equal to the U.S. Dollar Settlement Amount of 100% of the principal amount plus accrued and unpaid interest and any Additional Amounts.

The insolvency laws of the Cayman Islands and other local insolvency laws may differ from U.S. bankruptcy laws or those of other jurisdictions

Because we are incorporated under the laws of the Cayman Islands, an insolvency proceeding relating to us, even if brought in the United States, may involve Cayman Islands insolvency laws, the procedural and substantive provisions of which may differ from comparable provisions of United States bankruptcy law. In addition, the Subsidiary Guarantors and the JV Subsidiary Guarantors (if any) are incorporated in the British Virgin Islands and Hong Kong and the insolvency laws of the British Virgin Islands and Hong Kong may also differ from the bankruptcy laws of the United States or other jurisdictions with which the holder of the Notes are familiar.

We may be unable to obtain and remit foreign exchange

Our ability to satisfy our obligations under the Notes depends solely upon the ability of our subsidiaries in the PRC to obtain and remit sufficient foreign currency to pay dividends to us. Our PRC subsidiaries receive substantially all of their revenues in Renminbi. Our PRC subsidiaries must present certain documents to SAFE, its authorized branch, or the designated foreign exchange bank, for approval before they can obtain and remit foreign currencies out of the PRC (including, in the case of dividends, evidence that the relevant PRC taxes have been paid). Pursuant to the EIT Law, which became effective in January 1, 2008, dividends distributed by our PRC subsidiaries to the Company or our non-PRC subsidiaries would be subject to a withholding tax of 5% for enterprises incorporated in Hong Kong and 10% for enterprises incorporated outside of Hong Kong if we or our non-PRC subsidiaries, as the case may be were deemed to be a “non-resident enterprise.” Although under a regulation issued on July 10, 2007, we can no longer make shareholder loans to our PRC subsidiaries, we have in the past made shareholder loans to certain PRC subsidiaries to finance their operation. If any such PRC subsidiary for any reason fails to satisfy any of the PRC legal requirements for remitting foreign currency, including any failure to obtain the approval of SAFE of the registration of the relevant intercompany loans or the payments under such loans, such PRC subsidiary would be unable to pay us interest and principal, when due, on the relevant intercompany loans, which could affect our ability to satisfy our obligations under the Notes.

If we are unable to comply with the restrictions and covenants in our debt agreements or the Indenture governing the Notes, there could be a default under the terms of these agreements or the Indenture governing the Notes, which could cause repayment of our debt to be accelerated

If we are unable to comply with the restrictions and covenants in the Indenture governing the Notes, or our current or future debt and other agreements, there could be a default under the terms of these agreements. In the event of a default under these agreements, the holders of the debt could terminate their commitments to lend to us, accelerate the debt and declare all amounts borrowed due and payable or terminate the agreements, as the case may be. Furthermore, some of our debt agreements, including the Indenture governing the Notes, contain cross-acceleration or cross-default provisions. As a result, our default under one debt agreement may cause the acceleration of debt, including the Notes, or result in a default under our other debt agreements, including the Indenture governing the Notes. If any of these events occur, we cannot assure you that our assets and cash flow would be sufficient to repay in full all of our indebtedness, or that we would be able to find alternative financing. Even if we could obtain alternative financing, we cannot assure you that it would be on terms that are favorable or acceptable to us.

—46— Our operations are restricted by the terms of the Notes, which could limit our ability to plan for or to react to market conditions or meet our capital needs, which could increase your credit risk

The Indenture governing the Notes includes a number of significant restrictive covenants. These covenants restrict, among other things, our ability, and the ability of our restricted subsidiaries, to:

• incur additional indebtedness and issue disqualified or preferred stock;

• declare dividends on capital stock or purchase or redeem capital stock;

• make investments or other specified restricted payments;

• issue or sell capital stock of Restricted Subsidiaries;

• guarantee indebtedness of Restricted Subsidiaries;

• sell assets;

• create liens;

• enter into sale and leaseback transactions;

• enter into agreements that restrict the Restricted Subsidiaries’ ability to pay dividends, transfer assets or make intercompany loans;

• enter into transactions with shareholders or affiliates; and

• effect a consolidation or merger.

These covenants could limit our ability to plan for or react to market conditions or to meet our capital needs. Our ability to comply with these covenants may be affected by events beyond our control, and we may have to curtail some of our operations and growth plans to maintain compliance.

A trading market for the Notes may not develop, and there are restrictions on resales of the Notes

The Notes are a new issue of securities for which there is currently no trading market. Although approval in-principle has been received for the listing and quotation of the Notes on the Official List of the SGX-ST, we cannot assure you that we will obtain or be able to maintain a listing on the SGX-ST, or that, if listed, a liquid trading market will develop. We have been advised that the Initial Purchasers intend to make a market in the Notes, but the Initial Purchasers are not obligated to do so and may discontinue such market making activity at any time without notice. In addition, the Notes are being offered pursuant to exemptions from registration under the Securities Act and, as a result, you will only be able to resell your Notes in transactions that have been registered under the Securities Act or in transactions not subject to or exempt from registration under the Securities Act. See “Transfer Restrictions.” We cannot predict whether an active trading market for the Notes will develop or be sustained.

—47— The ratings assigned to the Notes may be lowered or withdrawn in the future

The Notes have been provisionally assigned a rating of “B” with a stable outlook by Standard and Poor’s Ratings Services and “B2” with a positive outlook by Moody’s Investors Service. The ratings address our ability to perform our obligations under the terms of the Notes and credit risks in determining the likelihood that payments will be made when due under the Notes. A rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time. We cannot assure you that a rating will remain for any given period of time or that a rating will not be lowered or withdrawn entirely by the relevant rating agency if in its judgment circumstances in the future so warrant. We have no obligation to inform holders of the Notes of any such revision, downgrade or withdrawal. A suspension, reduction or withdrawal at any time of the rating assigned to the Notes may adversely affect the market price of the Notes.

Certain transactions that constitute “connected transactions” under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (“Listing Rules”) will not be subject to the “Limitation on Transactions with Shareholders and Affiliates” covenant

Our shares are listed on the Hong Kong Stock Exchange and we are required to comply with the Listing Rules, which provide, among other things, that any transaction between a listed company or any of its subsidiaries, on the one hand, and a “connected person” of such listed company, on the other hand, is a “connected transaction” that, if the value of such transaction exceeds the applicable de minimis thresholds, will require the prior approval of the independent shareholders of such listed company. The definition of “connected person” to a listed company includes, among others, any 10% or more shareholder of (i) such listed company or (ii) any subsidiary of such listed company. The concept of “connected person” also captures “associates,” which include, among others, (a) any subsidiary of such “connected person,” (b) any holding company of such “connected person” and any subsidiary of such holding company, and (c) any company in which such entity or entities mentioned in (a) and (b) above taken together has/have the power to exercise control, directly or indirectly, of 30% or more of the voting power of such company.

The “Limitation on Transactions with Shareholders and Affiliates” covenant in the Notes only applies to transactions between the Company or any Restricted Subsidiary, on the one hand, and (x) any holder (or any Affiliate of such holder) of 10% or more of the shares of the Company or (y) any Affiliate of the Company, on the other hand. As such, transactions between the Company or any Restricted Subsidiary, on the one hand, and an Affiliate of any Restricted Subsidiary, on the other hand, will not be captured by such covenant, even though they may be connected transactions under the Listing Rules and subject to any requirements under the Listing Rules to obtain approval from independent shareholders. As a result, we are not required by the terms of the Notes to ensure that any such transactions are on terms that are fair and reasonable, and we will not need to deliver officers’ certificates or procure the delivery of fairness opinions of accounting, appraisal or investment banking firms to the trustee of the Notes for any such transactions.

The liquidity and price of the Notes following the offering may be volatile

The price and trading volume of the Notes may be highly volatile. Factors such as variations in our revenues, earnings and cash flows and proposals of new investments, strategic alliances or acquisitions, interest rates and fluctuations in prices for comparable companies could cause the price of the Notes to change. Any such developments may result in large and sudden changes in the volume and price at which the Notes will trade. We cannot assure you that these developments will not occur in the future.

—48— Certain facts and statistics are derived from publications not independently verified by us, the Initial Purchasers or our respective advisors

Facts and statistics in this offering memorandum relating to China’s economy and the real estate industry are derived from publicly available sources. While we have taken reasonable care to ensure that the facts and statistics presented are accurately reproduced from such sources, they have not been independently verified by us, the Initial Purchasers or our or their respective advisors and, therefore, we make no representation as to the accuracy of such facts and statistics, which may not be consistent with other information compiled within or outside China. Due to possibly flawed or ineffective calculation and collection methods and other problems, the facts and statistics herein may be inaccurate or may not be comparable to facts and statistics produced for other economies and should not be unduly relied upon. Further, we cannot assure you that the facts and statistics herein are stated or compiled on the same basis or with the same degree of accuracy as may be the case elsewhere.

There may be less publicly available information about us than is available in certain other jurisdictions

There may be less publicly available information about companies listed in Hong Kong than is regularly made available by public companies in certain other countries. In addition, our financial statements are prepared and presented in accordance with HKFRS, which differ in certain significant respects from U.S. GAAP. See “Summary of Certain Differences between HKFRS and U.S. GAAP.”

We will follow the applicable corporate disclosure standards for debt securities listed on the SGX-ST, which standards may be different from those applicable to debt securities listed in certain other countries

We will be subject to reporting obligations in respect of the Notes to be listed on the SGX-ST. The disclosure standards imposed by the SGX-ST may be different than those imposed by securities exchanges in other countries or regions such as the United States or Hong Kong. As a result, the level of information that is available may not correspond to what investors in the Notes are accustomed to.

RISKS RELATING TO THE SUBSIDIARY GUARANTEES, JV SUBSIDIARY GUARANTEES AND THE COLLATERAL

Our initial Subsidiary Guarantors do not currently have significant operations

None of our current PRC subsidiaries will provide a Subsidiary Guarantee or a JV Subsidiary Guarantee either upon issuance of the Notes or at any time thereafter. Moreover, no subsidiaries that may be organized in the future under the laws of the PRC will provide a Subsidiary Guarantee or a JV Subsidiary Guarantee at any time in the future. Moreover, the Notes will not be guaranteed by certain existing Offshore Subsidiaries and under the terms of the Indenture, subject to certain conditions, the Company may designate any Offshore Subsidiary (including a Subsidiary Guarantor) as a Designated Offshore Non-Guarantor Subsidiary which would allow, in the case of a Subsidiary Guarantor, for the Subsidiary Guarantee to be released, or in the case of a new offshore Restricted Subsidiary, such Restricted Subsidiary not to provide a Subsidiary Guarantee or JV Subsidiary Guarantee, subject to certain conditions. As a result, the Notes will be effectively subordinated to all the debt and other obligations, including contingent obligations and trade payables, of the PRC subsidiaries and all Non-Guarantor Subsidiaries. In addition, the Collateral will not include the capital stock of our existing or future PRC subsidiaries. Moreover, the Collateral will not include the capital stock of our existing or future PRC subsidiaries and Non-Guarantor Subsidiaries.

—49— The initial Subsidiary Guarantors that will guarantee the Notes do not have significant operations. We cannot assure you that the initial Subsidiary Guarantors, the JV Subsidiary Guarantors (if any) or any subsidiaries that may become Subsidiary Guarantors or JV Subsidiary Guarantors in the future would have the funds necessary to satisfy our financial obligations under the Notes if we are unable to do so.

Under the terms of the Notes, the Company may designate any Offshore Subsidiary (including a Subsidiary Guarantor) as a Designated Offshore Non-Guarantor Subsidiary which would allow, in the case of a Subsidiary Guarantor, for the Subsidiary Guarantee to be released, or in the case of a new offshore Restricted Subsidiary, such Restricted Subsidiary not to provide a Subsidiary Guarantee or JV Subsidiary Guarantee, if at any time of determination, the total consolidated assets of all Offshore Non-Guarantor Subsidiaries would not exceed 10.0% of Total Assets, and such designation would not cause a Default.

Moreover, under the terms of the Notes, a Subsidiary Guarantee required to be provided by a subsidiary of the Company under the terms of the Notes may be replaced by a limited-recourse JV Subsidiary Guarantee following the sale or issuance to a third party of a 20% to 49.9% equity interest in such subsidiary or its direct or indirect majority shareholders (subject to the satisfaction of certain conditions). Recovery under a JV Subsidiary Guarantee is limited to an amount equal to our proportional interest in the issued share capital of such Subsidiary Guarantor multiplied by the fair market value of the total assets in such JV Subsidiary Guarantor and its subsidiaries, on a consolidated basis, as of the date of the last fiscal year end of the Company. As a result, the amount that may be recovered by the Trustee pursuant to a JV Subsidiary Guarantee (compared to a Subsidiary Guarantee) is reduced, which in turn may affect your ability to recover any amounts due under the Notes.

The Subsidiary Guarantees or JV Subsidiary Guarantees may be challenged under applicable bankruptcy, insolvency or fraudulent transfer laws, which could impair the enforceability of the Subsidiary Guarantees or JV Subsidiary Guarantees

Under bankruptcy laws, fraudulent transfer laws and insolvency laws in the British Virgin Islands, Hong Kong and other jurisdictions where future Subsidiary Guarantors or JV Subsidiary Guarantors may be established, a guarantee could be voided, or claims in respect of a guarantee could be subordinated to all other debts of that guarantor if, among other things, the guarantor, at the time it incurred the indebtedness evidenced by, or when it gives, its guarantee:

(1) incurred the debt with the intent to defraud creditors (whenever the transaction took place, and irrespective of insolvency);

(2) put the beneficiary of the guarantee in a position which, in the event of the guarantor’s insolvency, would be better than the position the beneficiary would have been in had the guarantee not been given; or

(3) received no consideration, or received consideration in money or money’s worth that is significantly less than the consideration supplied by the guarantor.

In the case of (2) and (3) above, a guarantee will only be voidable if it was entered into at a time when the guarantor was insolvent, or if it became insolvent as a consequence of doing so. Insolvency in this context under British Virgin Islands law means generally that the guarantor is unable to pay its debts as they fall due. Additionally, a guarantee will only be voidable if it is given within the six-month period preceding the commencement of liquidation or within the two-year period, if the guarantor and the beneficiary are connected entities.

—50— The measure of insolvency for purposes of the foregoing will vary depending on the laws of the jurisdiction which are being applied. Generally, however, a guarantor would be considered insolvent at a particular time if it were unable to pay its debts as they fall due or if the sum of its debts was then greater than all of its property at a fair valuation or if the present fair saleable value of its assets was then less than the amount that would be required to pay its probable liabilities on its existing debt as they became absolute and matured.

In addition, a guarantee may be subject to review under applicable insolvency or fraudulent transfer laws in certain jurisdictions or subject to a lawsuit by or on behalf of creditors of the guarantors. In such case, the analysis set forth above would generally apply, except that the guarantee could also be subject to the claim that, since the guarantee was not incurred for the benefit of the guarantor, the obligations of the guarantor thereunder were incurred for less than reasonably equivalent value or fair consideration.

In an attempt to limit the applicability of insolvency and fraudulent transfer laws in certain jurisdictions, the obligations of the Subsidiary Guarantors or the JV Subsidiary Guarantors (if any) under the Subsidiary Guarantees or the JV Subsidiary Guarantees (if any), as the case may be, will be limited to the maximum amount that can be guaranteed by the applicable Subsidiary Guarantor or the JV Subsidiary Guarantors (if any) without rendering the guarantee, as it relates to such Subsidiary Guarantor or JV Subsidiary Guarantor, as the case may be, voidable under such applicable insolvency or fraudulent transfer laws. We cannot assure you that such limitation will be effective in preserving the enforceability of any of the Subsidiary Guarantees or JV Subsidiary Guarantees.

If a court voided a Subsidiary Guarantee or a JV Subsidiary Guarantee, subordinated such guarantee to other indebtedness of the Subsidiary Guarantor or the JV Subsidiary Guarantor, as the case may be, or held the Subsidiary Guarantee or the JV Subsidiary Guarantee unenforceable for any other reason, holders of the Notes would cease to have a claim against that Subsidiary Guarantor or JV Subsidiary Guarantor, as the case may be, based upon such guarantee, would be subject to the prior payment of all liabilities (including trade payables) of such Subsidiary Guarantor or JV Subsidiary Guarantor, as the case may be, and would solely be creditors of us and any Subsidiary Guarantor or JV Subsidiary Guarantor, as the case may be, whose guarantee was not voided or held unenforceable. We cannot assure you that, after providing for all prior claims, there would be sufficient assets to satisfy the claims of the holders of the Notes.

The charge of certain Collateral may in certain circumstances be voidable

The charge of the Collateral may be voidable as a preference under insolvency or fraudulent transfer or similar laws of Hong Kong, the Cayman Islands and the British Virgin Islands at any time within six months of the creation of the charge or, under some circumstances, within a longer period. Charges of capital stock of future Subsidiary Guarantors or JV Subsidiary Guarantors (if any) may also be voidable as a preference under relevant insolvency or fraudulent transfer or similar laws. In addition, the charge of certain Collateral may be voided based on the analysis set forth under “— The Subsidiary Guarantees or JV Subsidiary Guarantees may be challenged under applicable bankruptcy, insolvency or fraudulent transfer laws, which could impair the enforceability of the Subsidiary Guarantees or JV Subsidiary Guarantees.”

If the charges of the Collateral were to be voided for any reason, holders of the Notes would have only an unsecured claim against us.

—51— The value of the Collateral will likely not be sufficient to satisfy our obligations under the Notes

The Collateral will consist only of the capital stock of the Subsidiary Guarantors. The security interest in respect of certain Collateral may be released upon the disposition of such Collateral and the net proceeds from such disposition may be applied, prior to repaying any amounts due under the Notes, to repay other debt or to make investments in properties and assets that will not be charged as additional Collateral.

The ability of the Trustee or the Shared Security Trustee, on behalf of the holders of the Notes, to foreclose on the Collateral upon the occurrence of an Event of Default or otherwise, will be subject in certain instances to perfection and priority issues. Although procedures will be undertaken to support the validity and enforceability of the security interests, we cannot assure you that the Trustee, the Shared Security Trustee or holders of the Notes will be able to enforce the security interest.

Efforts to foreclose on the Collateral may encounter legal challenges in multiple jurisdictions, which may result in delayed enforcement or which may render enforcement unreasonably expensive under the circumstances. If the Trustee, the Shared Security Trustee or the holders of Notes do successfully foreclose on the Collateral, they will obtain control over the Subsidiary Guarantors and, by implication, indirect control over persons controlled by the Subsidiary Guarantors, including our PRC subsidiaries. Nevertheless, as a practical matter it may prove difficult for the Trustee, the Shared Security Trustee or the holders of Notes to successfully replace the managers and directors of, cause the direction of the management, affairs or policies of, or otherwise exert control over, our PRC subsidiaries following enforcement of the Collateral.

The value of the Collateral in the event of a liquidation will depend upon market and economic conditions, the availability of buyers and similar factors. No independent appraisals of any of the Collateral have been prepared by or on behalf of us in connection with this offering of the Notes. Accordingly, we cannot assure you that the proceeds of any sale of the Collateral following an acceleration of the Notes would be sufficient to satisfy, or would not be substantially less than, amounts due and payable on the Notes. By their nature, some or all of the Collateral, in particular, the capital stock of the existing or any future Subsidiary Guarantor, may be illiquid and may have no readily ascertainable market value. Likewise, we cannot assure you that the Collateral will be saleable or, if saleable, that there will not be substantial delays in its liquidation.

The Collateral will be shared on a pari passu basis by the holders of the Notes and the lender of the Hang Seng Loan, and with the holders of any other Permitted Pari Passu Secured Indebtedness. Accordingly, in the event of a default on the Notes, the Hang Seng Loan, or any other Permitted Pari Passu Secured Indebtedness and a foreclosure on the Collateral, any foreclosure proceeds would be shared by the parties to the Intercreditor Agreement in proportion to each party’s share of indebtedness under the Intercreditor Agreement at the time of such foreclosure. The value of the Collateral securing the Notes and the Subsidiary Guarantees of the Subsidiary Guarantor Pledgors is unlikely to be sufficient to satisfy the Company’s and each of the Subsidiary Guarantor’s obligations under the Notes and the Subsidiary Guarantees of the Subsidiary Guarantors, and the Collateral securing the Notes and such Subsidiary Guarantees may be reduced or diluted under certain circumstances, including the issuance of Additional Notes and the disposition of assets comprising the Collateral, subject to the terms of the Indenture.

—52— The pledge of certain Collateral may be released under certain circumstances

In the event the conditions applicable to the replacement of a Subsidiary Guarantee with a JV Subsidiary Guarantee are satisfied, we are permitted to release the pledge of the shares granted by such Subsidiary Guarantor, as well as the pledge of the shares granted by the subsidiaries of such Subsidiary Guarantor. We are only required to deliver a replacement share pledge for the shares that we continue to hold in such JV Subsidiary Guarantor (but not the subsidiaries of such JV Subsidiary Guarantor) following the sale of the equity interests in such Subsidiary Guarantor. As a result, in the event we sell non-controlling interests in our Subsidiary Guarantors or otherwise create JV Subsidiary Guarantors in accordance with the terms of the Indenture, the Collateral will be reduced in value and scope, and holders of the Notes would be subject to increased risks.

The Intercreditor Agreement may impair the ability of the Company, the Subsidiary Guarantors and the JV Subsidiary Guarantors to pay amounts due under the Notes, the Subsidiary Guarantees and the JV Subsidiary Guarantees and the Intercreditor Agreement may limited the rights of the Noteholders to the Collateral

The Shared Security Trustee is required to take action to enforce the Collateral in accordance with the instructions of the secured creditors given under Intercreditor Agreement. Any enforcement action taken by the Shared Security Trustee will adversely affect our entitlement to receive proceeds from the Collateral, which will, in turn, have an adverse impact on the Company’s ability to fulfill its payment obligations under the Notes. Further, our ability to pay under the Subsidiary Guarantees will be adversely affected.

The ability of the Noteholders to enforce the Collateral is restricted under the Intercreditor Agreement, as only the Shared Security Trustee is permitted to take enforcement actions. If an event of default occurs under the Notes, the holders of the Notes holding 25% of the outstanding amount of the Notes must decide whether to take any enforcement action and thereafter, through the Trustee, may instruct the Shared Security Trustee to take such enforcement action. In addition, by virtue of the instructions given to the Shared Security Trustee described above, actions may be taken in respect of the Collateral that may be adverse to you. In such event, the only remedy available to the Noteholders would be to sue for payment on the Notes, the Subsidiary Guarantees, the JV Guarantees and the Collateral. For a description on the Intercreditor Agreement, see “Description of the Notes — Security — Intercreditor Agreement.”

Security over the Collateral will not be granted directly to the holders of the Notes, and the Collateral will generally be shared with creditors under certain other financings

Security over the Collateral for the obligations of the Company under the Notes and the Indenture will not be granted directly to the holders of the Notes but will be granted only in favor of the Shared Security Trustee on behalf of the Trustee and the holders of other secured obligations (or their representatives) that are party to the Intercreditor Agreement. As a consequence, holders of the Notes will not have direct security and will not be entitled to take enforcement action in respect of the security for the Notes, except through the Shared Security Trustee, which has agreed to apply any proceeds of enforcement on such security towards the obligations under the Notes and such other secured obligations.

In addition, the Indenture provides that the Collateral will be shared equally and ratably with the lender under the Hang Seng Loan, and all obligations of the Company and the Subsidiary Guarantors under all other future Permitted Pari Passu Secured Indebtedness. For a further discussion of the Intercreditor Agreement, see “Description of the Notes — Security — Intercreditor Agreement.” Because the Collateral will be shared equally and ratably with creditors under other financings, the full value of the Collateral will not be available to satisfy the Noteholders’ claims.

—53— The Indenture also permits us to enter into certain future financings, and creditors under those future financings may share the Collateral pari passu with the holders of the Notes. See “Description of the Notes — Security — Permitted Pari Passu Secured Indebtedness’’ for a further discussion of the sharing of the Collateral with future financings. If creditors under future financings opt to share the Collateral under the Intercreditor Agreement, a smaller portion of the proceeds from the Collateral will be available to satisfy the Noteholders’ claims, which could have a material adverse effect on the ability of the Noteholders to recover sufficient proceeds to satisfy their claims under the Notes.

—54— USE OF PROCEEDS

We estimate that the net proceeds from this offering, after deducting the underwriting discount and commissions and other estimated expenses payable in connection with this offering, will be approximately US$294 million. We intend to use the net proceeds to finance new and existing projects (including construction costs and land costs) and for general corporate purposes.

We may adjust our acquisition and development plans in response to changing market conditions and circumstances, and thus, reallocate the use of the net proceeds.

—55— EXCHANGE RATE INFORMATION

PRC PBOC sets and publishes daily a base exchange rate with reference primarily to the supply and demand of Renminbi against a basket of currencies in the market during the prior day. PBOC also takes into account other factors, such as the general conditions existing in the international foreign exchange markets. Since 1994, the conversion of Renminbi into foreign currencies, including Hong Kong dollars and U.S. dollars, has been based on rates set by PBOC, which are set daily based on the previous day’s interbank foreign exchange market rates and current exchange rates in the world financial markets. From 1994 to July 20, 2005, the official exchange rate for the conversion of Renminbi to U.S. dollars was generally stable. Although Chinese government policies were introduced in 1996 to reduce restrictions on the convertibility of Renminbi into foreign currency for current account items, conversion of Renminbi into foreign exchange for capital items, such as foreign direct investment, loans or securities, requires the approval of SAFE and other relevant authorities. On July 21, 2005, the PRC government introduced a managed floating exchange rate system to allow the value of the Renminbi to fluctuate within a regulated band based on market supply and demand and by reference to a basket of currencies. On the same day, the value of the Renminbi appreciated by 2% against the U.S. dollar. Since then and up to September 30, 2010, the Renminbi has appreciated approximately 23.7% against the U.S. dollar. The PRC government has since made and in the future may make further adjustments to the exchange rate system. PBOC announces the closing price of a foreign currency traded against the Renminbi in the interbank foreign exchange market after the closing of the market on each working day, and makes it the central parity for the trading against the Renminbi on the following working day. On May 18, 2007, PBOC enlarged the floating band for the trading prices in the interbank foreign exchange market of the Renminbi against the U.S. dollar from 0.3% to 0.5% around the central parity rate, effective on May 21, 2007. This allows the Renminbi to fluctuate against the U.S. dollar by up to 0.5% above or below the central parity rate published by PBOC. The following table sets forth the exchange rates between Renminbi and U.S. dollars as set forth in the H.10 statistical release of the U.S. Federal Reserve Board for the periods indicated:

Exchange Rate

Period Period End Average(1) Low High

(RMB per US$1.00) 2005 ...... 8.0702 8.1936 8.0702 8.2765 2006 ...... 7.8041 7.9723 7.8041 8.0702 2007 ...... 7.2946 7.6058 7.2946 7.8127 2008 ...... 6.8225 6.9477 6.7800 7.2946 2009 ...... 6.8259 6.8307 6.8176 6.8470 2010 ...... 6.6000 6.7696 6.6000 6.8330 January ...... 6.8268 6.8269 6.8258 6.8295 February ...... 6.8258 6.8285 6.8258 6.8330 March ...... 6.8258 6.8262 6.8254 6.8270 April...... 6.8247 6.8256 6.8229 6.8275 May...... 6.8305 6.8275 6.8245 6.8310 June ...... 6.7815 6.8184 6.7815 6.8323 July ...... 6.7735 6.7762 6.7709 6.7807 August...... 6.8069 6.7873 6.7670 6.8069 September ...... 6.6905 6.7396 6.6869 6.8102 October ...... 6.6705 6.6675 6.6397 6.6912 November ...... 6.6670 6.6538 6.6330 6.6892 December ...... 6.6000 6.6497 6.6000 6.6745

Note: (1) Annual averages were calculated by using the average of the exchange rates on the last day of each month during the relevant year. Monthly averages were calculated by using the average of the daily rates during the relevant month.

—56— Unless otherwise noted, all translations from Renminbi to U.S. dollars and from U.S. dollars to Renminbi in this offering memorandum were made at a rate of RMB6.6905 to US$1.00, the exchange rate as set forth in the H.10 statistical release of the U.S. Federal Reserve Board for September 30, 2010.

Hong Kong The H.K. dollar is freely convertible into the U.S. dollar. Since 1983, the H.K. dollar has been linked to the U.S. dollar at the rate of HK$7.80 to US$1.00. The Basic Law of Hong Kong (the “Basic Law”), which came into effect on July 1, 1997, provides that no foreign exchange control policies shall be applied in Hong Kong. The market exchange rate of the H.K. dollar against the U.S. dollar continues to be determined by the forces of supply and demand in the foreign exchange market. However, against the background of the fixed rate system which applies to the issuance and withdrawal of Hong Kong currency in circulation, the market exchange rate has not deviated significantly from the level of HK$7.80 to US$1.00. The Hong Kong government has indicated its intention to maintain the link at that rate. Under the Basic Law, the H.K. dollar will continue to circulate and remain freely convertible. The Hong Kong government has also stated that it has no intention of imposing exchange controls in Hong Kong and that the H.K. dollar will remain freely convertible into other currencies, including the U.S. dollar. However, we cannot assure you that the Hong Kong government will maintain the link at HK$7.80 to US$1.00 or at all. The following table sets forth the exchange rates between H.K. dollars and U.S. dollars as set forth in the H.10 statistical release of the U.S. Federal Reserve Board for the periods indicated:

Exchange Rate

Period Period End Average(1) Low High

(HK$ per US$1.00) 2005 ...... 7.7533 7.7775 7.7514 7.7999 2006 ...... 7.7771 7.7681 7.7506 7.7928 2007 ...... 7.7984 7.8016 7.7497 7.8289 2008 ...... 7.7499 7.7862 7.7497 7.8159 2009 ...... 7.7536 7.7514 7.7495 7.7618 2010 ...... 7.7810 7.7687 7.7501 7.8040 January ...... 7.7665 7.7624 7.7539 7.7752 February ...... 7.7619 7.7670 7.7619 7.7716 March ...... 7.7647 7.7612 7.7574 7.7648 April...... 7.7637 7.7627 7.7565 7.7675 May...... 7.7850 7.7856 7.7626 7.8030 June ...... 7.7865 7.7880 7.7690 7.8040 July ...... 7.7672 7.7753 7.7651 7.7962 August...... 7.7781 7.7702 7.7605 7.7788 September ...... 7.7599 7.7643 7.7561 7.7738 October ...... 7.7513 7.7580 7.7513 7.7642 November ...... 7.7649 7.7546 7.7501 7.7656 December ...... 7.7810 7.7736 7.7612 7.7833

Unless otherwise noted, all translations from H.K. dollars to U.S. dollars and from U.S. dollars to Renminbi in this offering memorandum were made at a rate of HK$7.7599 to US$1.00, the exchange rate as set forth in the H.10 statistical release of the U.S. Federal Reserve Board for September 30, 2010.

—57— CAPITALIZATION

The following table sets forth on an actual basis our consolidated cash and cash equivalents, short-term borrowings, long-term borrowings and capitalization as of September 30, 2010, and on an adjusted basis after giving effect to the Notes now being issued and the proceeds therefrom before deducting the underwriting discount and other expenses relating to this offering. The following table should be read in conjunction with the selected consolidated financial and other data and the audited and unaudited consolidated financial statements and related notes included elsewhere in this offering memorandum.

As of September 30, 2010

Actual As Adjusted

RMB’000 US$’000 RMB’000 US$’000 Cash and cash equivalents(1) ...... 1,067,294 159,524 3,067,294 458,455 Short-term borrowings(2)(4) Bank loans-secured ...... 639,249 95,545 639,249 95,545 Total short-term borrowings ...... 639,249 95,545 639,249 95,545 Long-term borrowings(3)(4) ...... Bank loans-secured ...... 1,727,077 258,138 1,727,077 258,138 Other long-term borrowings-secured . . 44,400 6,636 44,400 6,636 Notes to be issued ...... — — 2,000,000 298,931 Total long-term borrowings ...... 1,771,477 264,774 3,771,477 563,705

Total equity Issued capital (HK$0.10 par value per share, 2,853,200,000 shares issued and fully paid) Issued capital ...... 250,683 37,469 250,683 37,469 Reserves ...... 3,061,216 457,546 3,061,216 457,546 3,311,899 495,015 3,311,899 495,015 Non-controlling interests ...... 1,021,315 152,652 1,021,315 152,652 Total equity ...... 4,333,214 647,667 4,333,214 647,667 Total capitalization(5) ...... 6,104,691 912,441 8,104,691 1,211,372

Notes: (1) Cash and cash equivalents exclude restricted cash of RMB118 million. (2) Short-term borrowings include the current portion of long-term borrowings. (3) Long-term borrowings exclude the current portion of long-term borrowings. (4) See “Description of other Material Indebtedness.” (5) Total capitalization equals total long-term borrowings plus total equity.

—58— SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

The financial statements have been prepared and presented in accordance with HKFRS, which differ in certain material respects from U.S. GAAP. For a discussion of these differences, see “Summary of Certain Differences between HKFRS and U.S. GAAP.” The summary financial data below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes included elsewhere in this offering memorandum.

Selected Consolidated Statements of Comprehensive Income and Other Financial Data

Year ended December 31, Nine months ended September 30, 2007 2008 2009 2009 2010 RMB’000 RMB’000 RMB’000 US$’000 RMB’000 RMB’000 US$’000 Revenue ...... 371,694 331,179 586,463 87,656 550,102 2,102,663 314,276 Cost of sales ...... (242,727) (203,335) (292,804) (43,764) (284,642) (1,084,626) (162,114) Gross profit ...... 128,967 127,844 293,659 43,892 265,460 1,018,037 152,162 Other income and gains ...... 43,476 6,962 16,039 2,397 13,739 15,172 2,268 Changes in fair value of investment properties (1) ...... 168,247 211,366 371,613 55,543 222,836 15,000 2,242 Selling and marketing expenses ...... (46,268) (27,143) (38,955) (5,822) (22,846) (58,771) (8,784) Administrative expenses ...... (57,650) (64,883) (91,197) (13,630) (53,891) (132,884) (19,862) Other expenses ...... (589) (247) (137) (20) — — — Finance costs ...... (1,376) (3,324) (5,642) (843) (2,368) (4,026) (602) Share of profits and losses of: Jointly-controlled entities ...... (3,261) (4,697) (1,598) (239) 2,002 87,791 13,122 Associates ...... (888) (4,413) (3,095) (463) (3,317) 34,465 5,151 Profit before tax ...... 230,658 241,465 540,687 80,815 421,615 974,784 145,697 Income tax expense ...... (70,581) (75,606) (178,996) (26,754) (147,883) (402,032) (60,090) Profit for the year/period ...... 160,077 165,859 361,691 54,061 273,732 572,752 85,607 Other comprehensive income/(loss): Share of other comprehensive income of jointly-controlled entities and associates ...... 569 649 12 2 5 2,427 362 Exchange differences on translation of foreign operations ...... 35,166 34,637 (5,793) (866) (6,975) (3,722) (556) Other comprehensive income/(loss) for the year/period ...... 35,735 35,286 (5,781) (864) (6,970) (1,295) (194) Total comprehensive income for the year/period ...... 195,812 201,145 355,910 53,197 266,762 571,457 85,413 Profit/(loss) attributable to: Owners of the parent ...... 159,206 168,458 373,434 55,816 276,994 603,923 90,266 Non-controlling interests ...... 871 (2,599) (11,743) (1,755) (3,262) (31,171) (4,659) 160,077 165,859 361,691 54,061 273,732 572,752 85,607 Total comprehensive income/(loss) attributable to: Owners of the parent ...... 187,418 199,135 367,653 54,952 270,055 599,802 89,650 Non-controlling interests ...... 8,394 2,010 (11,743) (1,755) (3,293) (28,345) (4,237) 195,812 201,145 355,910 53,197 266,762 571,457 85,413 Other financial data EBITDA (2) ...... 67,844 50,118 204,155 30,514 219,443 1,009,393 150,870 EBITDA Margin (3) ...... 18.3% 15.1% 34.8% 34.8% 39.9% 48.0% 48.0%

—59— Notes: (1) In the years ended December 31, 2007, 2008 and 2009, and the nine months ended September 30, 2010, we recorded upward changes in fair value of our investment properties, representing 72.9%, 87.5%, 68.7% and 1.5%, respectively, of our profit before tax in such periods. See “Risk Factors — Risks relating to our business — Our profitability may fluctuate substantially due to the periodic reassessment of fair value gains or losses on our investment properties.” (2) EBITDA consists of profit for the year/period plus finance costs, income tax expense, depreciation and amortization minus changes in fair value of investment properties. EBITDA is not a standard measure under U.S. GAAP or HKFRS. EBITDA is a widely used financial indicator of a company’s ability to service and incur debt. EBITDA should not be considered in isolation or construed as an alternative to cash flows, net income or any other measure of performance or as an indicator of our operating performance, liquidity, profitability or cash flows generated by operating, investing or financing activities. In evaluating EBITDA, we believe that investors should consider, among other things, the components of EBITDA such as sales and operating expenses and the amount by which EBITDA exceeds capital expenditures and other charges. Investors should not compare our EBITDA to EBITDA presented by other companies because not all companies use the same definition. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures” for a reconciliation of our net profit under HKFRS to our definition of EBITDA. Investors should also note that EBITDA as presented herein may be calculated differently from Consolidated EBITDA as defined and used in the Indenture governing the Notes. See “Description of the Notes — Definitions” for a description of the manner in which Consolidated EBITDA is defined for purposes of the Indenture governing the Notes. (3) EBITDA margin is calculated by dividing EBITDA by revenue.

Selected Consolidated Statements of Financial Position Data

As of December 31, As of September 30,

2007 2008 2009 2010

Total assets...... 4,175,555 5,366,768 8,705,494 1,301,172 11,090,207 1,657,605

LIABILITIES AND EQUITY Current liabilities ...... 3,083,834 4,359,644 4,661,702 696,764 4,822,568 720,808 Non-current liabilities ...... 715,613 433,197 1,731,566 258,810 1,934,425 289,130

Total liabilities ...... 3,799,447 4,792,841 6,393,268 955,574 6,756,993 1,009,938

Attributable to owners of the parent . . 258,368 457,503 1,509,375 225,600 3,311,899 495,015 Attributable to non-controlling interests ...... 117,740 116,424 802,851 119,998 1,021,315 152,652

Total equity ...... 376,108 573,927 2,312,226 345,598 4,333,214 647,667

Total liabilities and equity ...... 4,175,555 5,366,768 8,705,494 1,301,172 11,090,207 1,657,605

—60— MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with “Selected Consolidated Financial and Other Data” and our consolidated financial statements together with the accompanying notes included elsewhere in this offering memorandum. Our consolidated financial statements were prepared in accordance with HKFRS, which differ in certain material respects from U.S. GAAP. See “Summary of Certain Differences between HKFRS and U.S. GAAP.”

Unless the context otherwise requires, references to “2007,” “2008” and “2009” in this offering memorandum are to our financial years ended December 31, 2007, 2008 and 2009, respectively. References to “associate” or “associates” in this section are to associates as defined in HKFRS.

OVERVIEW

We are one of the leading real estate developers in Fujian Province and were honored as one of the “China Top 100 Real Estate Developers” (中國房地產百強企業) and one of the “Star Developers Among the China Top 100 Real Estate Developers” (中國房地產百強企業 — 百強之星) in each of the years from 2008 to 2010 according to the China Real Estate Top 10 Research Team. Headquartered in Xiamen, we primarily focus on the development of high quality, mid-end to high-end residential real estate projects in the more prosperous regions of Fujian Province, which is located in the centre of the Western Taiwan Strait Economic Zone. Leveraging our experience in Fujian Province, we have expanded into, and expect to continue to consolidate our market position in selected areas in the Bohai Economic Rim, such as Beijing and other economically developed cities.

(i) (a) completed projects held for investment with an aggregate GFA of approximately 39,000 sq.m.;

(b) projects under development with an aggregate planned GFA of approximately 1,750,000 sq.m.; and

(c) projects held for future development with an aggregate planned GFA of approximately 3,514,000 sq.m., for which we have obtained the relevant land use rights certificates;

—61— attributable to us) is located in Fujian Province. The remainder of our land bank is located in Beijing, Linfen, Tangshan and Anshan in the Bohai Economic Rim and in Shenzhen. Our property development projects are generally situated in prime locations of major cities, as well as areas with natural scenic surroundings and convenient access to transportation.

In 2009 and the nine months ended September 30, 2010, our revenue was RMB586.5 million (US$87.7 million) and RMB2,102.7 million (US$314.3 million), respectively. For the same periods, our EBITDA was RMB204.2 million (US$30.5 million) and RMB1,009.4 million (US$150.9 million), respectively. Our shares have been listed on the Hong Kong Stock Exchange since February 5, 2010 under stock code 1966.HK. Our market capitalization as of January 7, 2011 was HK$6.4 billion.

We have financed our projects primarily through proceeds from bank and other borrowings, pre-sale proceeds of our properties, and equity and debt issuances. We typically follow a financing model under which our start-up cost is mainly financed by bank and other borrowings as well as contributions and advances from our shareholders and business partners. This financing model supports our projects until the pre-sales stage, when we are able to repay our borrowings with pre-sale proceeds. The following points summarize our main sources of funds for our projects.

• Bank and other borrowings. As of September 30, 2010, we had total bank and other borrowings of RMB2,410.7 million (US$360.3 million). We have obtained project-specific and general bank and other borrowings to finance our projects. Certain of our bank and other borrowing are secured by our buildings, investment properties, prepaid land lease payments, properties under development and completed properties held for sale with an aggregate net book value of approximately RMB5,812.0 million (US$868.7 million) as of September 30, 2010. We usually repay such borrowings using a portion of the pre-sale proceeds from our properties that relate to the particular loan.

• Pre-sale proceeds of properties. Pre-sale proceeds are proceeds we receive when we enter into contracts to sell properties prior to their completion.

• Proceeds from Pre-IPO Placing. We, Mr. Wong and Newup entered into a subscription agreement with certain financial investors (collectively the “Financial Investors”) on August 21, 2009, pursuant to which the Financial Investors agreed to subscribe for an aggregate of 12,660 shares (representing 8.87% of the enlarged share capital of the Company immediately after completion of IPO) for a total consideration of HK$775.4 million (US$99.9 million).

• Capital contributions from shareholders. Prior to our IPO, we relied in part on capital contributions and advances from our shareholders to finance our projects.

• Contributions from business partners of our project companies. Our non-wholly-owned projects are financed in part through capital contributions and advances from our business partners.

• IPO Proceeds. In February 2010, we received approximately RMB1,322.0 million (US$197.6 million) in net proceeds from our IPO to fund our project development projects (including the acquisition and development of new projects) and for general corporate purposes.

Going forward, we expect to fund our projects by using a combination of sources, including internally generated cash flow, bank and other borrowings, capital contributions and advances from the business partners of our project companies and proceeds from the Notes and other funds raised from the capital markets from time to time. Our access to funds may be affected by various factors, including the factors discussed under “Risk Factors” and “— Key Factors Affecting Our Results of Operations.”

—62— BASIS OF PRESENTATION OF FINANCIAL INFORMATION

Our Company was incorporated as an exempted company with limited liability in the Cayman Islands on November 30, 2007. Pursuant to the Reorganization, our Company became the holding company of the entities now comprising the Group. Since our Company and our subsidiaries were, and are, ultimately controlled by Mr. Wong both before and after the completion of the Reorganization, the Reorganization was treated as a business combination under common control for accounting purposes, and the financial information of our Group for the three years ended December 31, 2007, 2008 and 2009 and the nine months ended September 30, 2009 and 2010 has been prepared using the principles of merger accounting.

For more information on the basis of presentation of the financial information included herein, please refer to Note 2.1 to the accountants’ report beginning on page F-1 of this offering memorandum.

KEY FACTORS AFFECTING OUR RESULTS OF OPERATIONS

Our business, results of operations and financial condition are affected by a number of factors, many of which are beyond our control, including those set forth below.

General Economic Conditions in the PRC and Government Regulation

We believe that demand for our properties is driven in large part by the overall economic development, the rising level of wages and the standard of living in the PRC. Since the second half of 2008, the global economic slowdown and turmoil in the global financial markets have resulted in an adverse impact on the overall economy of the PRC, including the PRC real estate market, from which our entire revenues are generated. The economic conditions and volatility of real estate prices in the PRC may continue to impact our business and results of operations. At the current stage of economic development in the PRC, while the real estate industry is regarded by the PRC government as one of the pillar industries in the PRC, the real estate industry is significantly dependent on the overall economic growth and the resultant consumer demand for residential properties.

PRC governmental policies and measures on property development and related industries have a direct impact on our business and results of operations. From time to time, the PRC central government adjusts its macro-economic control policies to encourage or restrict development in the private real estate sector through regulating, among other things, land supply, pre-sale of properties, land usage, plot ratio, bank financing and taxation. Local government authorities in different areas of the PRC also promulgate local policies with respect to the property development in their jurisdictions. Prior to the second half of 2008, the PRC government had implemented a series of measures to slow down the growth of the economy, including the real estate markets. In the second half of 2008 and in 2009, in view of the economic downturn, the PRC government adopted measures to encourage consumption in the residential real estate market and support real estate developers. More recently since November 2009, in response to the rise in property prices across the country, the PRC government announced new policies and adopted new measures to curtail speculation in the real estate market and imposed more stringent requirements on the payment of land premiums by real estate developers. PRC regulatory measures in the real estate industry will continue to impact our business and results of operations. See “Industry Overview — Macro-Economic Conditions of the PRC — Key real estate reforms in the PRC” and “Regulation” for more details of the relevant PRC regulations.

—63— As a result of the foregoing, our results of operations are subject to general political, economic, legal and social developments in the PRC, including:

• the performance of China’s real estate market, in particular, the supply and demand for private properties, market pricing trends, standard of living, level of disposable income and demographic changes in the PRC;

• the regulatory environment of the PRC, including land grant policies, pre-sale policies, financing policies and tax policies; and

• the political and economic policies of the PRC in general.

See “Risk Factors — Risks relating to the real estate sector in the PRC” and “Risk Factors — Risks Relating to the PRC” in this offering memorandum for further discussions of these risks and uncertainties.

Land Acquisition Costs

Our continuing growth will depend in large part on our ability to secure quality land at prices that can yield reasonable returns. One of the key components of our cost of sales is land acquisition costs. In recent years, land acquisition costs have risen as a result of increased demand for properties as well as increasingly intense competition among market participants.

In November 2007, the PRC government introduced regulations to increase the transparency related to the grant of state-owned land use rights for residential or commercial property developments through competitive processes, including competitive bidding, public auction or listing-for-sale, administered by local governments. Under such regulations, land use rights certificates are no longer separately issued according to the proportion of the land premium paid and, instead, no land use rights certificates will be issued before the land premium has been fully paid up pursuant to the land grant contract. Furthermore, in November 2009, the PRC government raised the minimum down-payment of land premium to 50% and now requires the land premium to be fully paid within one year after the signing of a land grant contract, subject to limited exceptions. We cannot assure you that the PRC government will not introduce new regulatory measures to further tighten the payment requirements of land premiums or otherwise make it more difficult for us to acquire desirable land. Such change of policy may materially and adversely affect our cash flow and our ability to acquire suitable land for our operations.

Construction Costs

Another key component of our cost of sales is construction costs, which consist of all costs for the design and construction of a project, including primarily payments to contractors who are generally responsible for the procurement of construction materials (including cement and steel). Construction costs of our projects vary not only according to the floor area and height of the buildings, but also according to the geology of the construction site. Historically, construction material costs incurred by our contractors have been the principal driver of the construction costs of our property developments. Construction costs fluctuate as a result of changes in prices of key construction materials such as steel and cement.

As part of our cost control measures, we typically cap the prices of such materials in our construction contracts with our contractors. As a result, we have generally passed on the risk of short-term price fluctuations of our construction materials to our contractors. However, in some cases, the capped price may be subject to adjustment by mutual agreement between us and our contractors due to a substantial price increase or decrease in construction materials; for example, some of our contracts allow price adjustments if the cost of certain construction materials fluctuates by more than a pre-determined percentage. Despite these measures, we are still subject to long-term movements in the prices of construction materials, and our

—64— profitability may suffer if we cannot pass on such increased costs to our contractors or customers. Further, we typically pre-sell our properties prior to their completion and we are not able to pass on any increased costs to our customers if construction costs increase subsequent to such pre-sales.

Access to Capital and Cost of Financing Property development requires substantial capital investment for land acquisition and construction, and it may take many months or years before positive cash flows can be generated from a project. During the three years ended December 31, 2009 and the nine months ended September 30, 2010, we financed our operations primarily through internally generated cash flows (including proceeds from the pre-sale and sale of our projects) bank and other borrowings, contributions from shareholders and business partners and proceeds from capital raisings, including our IPO. Our access to capital and cost of financing are also affected by restrictions imposed from time to time by the PRC government on bank lending for property development. Please see “Risk Factors” and “Regulation.”

Tax

Enterprise Income Tax (EIT) Through our PRC subsidiaries, we are subject to EIT in China. Prior to January 1, 2008, our subsidiaries incorporated in Shenzhen and Xiamen were entitled to a preferential EIT rate of 15% and all our other PRC subsidiaries were subject to EIT at a statutory rate of 33%. Under the new EIT Law, a uniform tax rate of 25% is applied to all enterprises operating in the PRC with effect from January 1, 2008, including foreign-invested enterprises. For our subsidiaries incorporated in Shenzhen and Xiamen, which had previously enjoyed a preferential tax rate, a new tax rate of 18% has been applied with effect from January 1, 2008 and such rate will gradually transition to the new uniform tax rate of 25% over the five-year period beginning January 1, 2008. Our subsidiaries made EIT provision in accordance with the relevant laws and regulations. Under the EIT Law, enterprises established outside of China whose “de facto management bodies” are located in China are considered “resident enterprises” and will generally be subject to the unified 25% EIT rate on their global income. In April 2009, the State Administration of Taxation (“SAT”) further specified certain criteria for the determination of “de facto management” of foreign enterprises that are not controlled by PRC enterprises, but the interpretation of the term “de facto management” of foreign enterprises that are controlled by PRC enterprises is unclear. Since some members of our management are PRC residents, we may be considered a PRC “resident enterprise” in which case we would be subject to EIT at a tax rate of 25% on our worldwide income. According to the tax treaty between Hong Kong and mainland, dividends distributed by our PRC subsidiaries to the Company or our non-PRC subsidiaries would be subject to a withholding tax of 5% for enterprises incorporated in Hong Kong if such enterprises is a beneficial owner holding more than 25% of the share of the PRC subsidiary and 10% for enterprises incorporated outside of Hong Kong if we or our non-PRC subsidiaries, as the case may be, are “non-resident enterprises.” Please also refer to the sections headed “Risk Factors — Risks relating to conducting operations in the PRC — The treatment of our companies for PRC EIT purposes is unclear” and “Regulation” of this offering memorandum.

Land Appreciation Tax (LAT) Our properties in the PRC are subject to LAT on the appreciation in the value of land and the improvements on land we hold in relation to our property development sold or pre-sold after January 1, 2006. According to relevant laws and regulations, all income from our sale or transfer of state-owned land use rights, and buildings and their attached facilities in the PRC, is subject to LAT at progressive rates ranging from 30% to 60% on the appreciation in value as defined by the relevant tax regulations. We may enjoy certain exemptions from payment of

—65— LAT for our ordinary residential properties if the appreciation in value does not exceed 20% of the total deductible items. However, because the PRC tax authorities have not strictly enforced the LAT regulations, and because local provincial tax authorities can formulate their own implementation rules for LAT according to local situations, the regulatory standards for the treatment and calculation of our final LAT is uncertain. SAT issued the Circular on Relevant Issues on LAT Settlement《關於土地增值稅清算有關問題的通知》 ( ) on May 19, 2010, and the Circular on Strengthening the Administration Work in relation to the Collection of LAT《關於 ( 加強土地增值稅徵管工作的通知》) on May 25, 2010 respectively. The circulars detailed certain items that could be deducted for calculation of the amount of tax due, and idle land fees cannot be deducted from tax. According to the circulars, local governments should adjust the current prepaid LAT rates, and except for indemnificatory housing, the prepaid LAT rate shall not be lower than 2% in eastern provinces, 1.5% in central and northeastern provinces, and 1% in western provinces respectively. For details of the LAT regulations, please refer to “Regulation.”

We made LAT payments totaling RMB11.7 million, RMB35.5 million, RMB22.3 million and RMB33.0 million, respectively, for each of 2007, 2008 and 2009 and the nine months ended September 30, 2010, to the relevant PRC government authorities. We will estimate and make provision for what we believe to be the full amount of LAT for which we expect to be liable in accordance with relevant PRC tax laws and regulations in the period when the revenue from the related properties has been recognized. The actual LAT liabilities are subject to the determination by the tax authorities upon the completion of the property development projects. As of the date of this offering memorandum, we have not finalized our LAT calculation and payments with any local tax authorities in the PRC for our properties under development or for our unsold completed properties. Although we believe our provisions are made in material compliance with LAT laws and regulations, it may or may not be sufficient to cover future LAT payments. Please also refer to “Risk Factors — Risks relating to our business — The relevant PRC tax authorities may challenge the basis on which we calculate our LAT obligations.”

Valuation of our Investment Properties

Investment properties are properties held for long-term yields or for capital appreciation or both and are not occupied by us, and consist of land held under operating leases and buildings developed by us. Our investment properties mainly comprise retail shops, carpark spaces, storage and office spaces. In accordance with HKAS40 Investment Property issued by the Hong Kong Institute of Certified Public Accountants, investment properties, including investment properties under construction, may be recognized by using either the fair value model or the cost model. We have chosen to recognize investment properties, including investment properties under construction, as non-current assets at their fair value, as determined by an independent property valuer, as of each reporting date. We are of the view that periodic fair value adjustments in accordance with prevailing market conditions provide a more up-to-date picture of the value of our investment properties.

During the three years ended December 31, 2009 and for the nine months ended September 30, 2010, properties that were completed and held by us for investment in the PRC were valued by DTZ, an independent valuer. For such completed investment properties, DTZ has adopted an income approach which takes into account the expected rental income of the properties derived from the existing leases or achievable in the existing market with due allowance for the reversionary income potential of the leases, which have then been capitalized to determine the market value at an appropriate capitalization rate. Where appropriate, DTZ has made reference to comparable sale transactions as available in the relevant market.

DTZ has valued investment properties under construction on the basis that each such property will be developed and completed in accordance with the Group’s latest development proposals. In arriving at the market value, DTZ has adopted a direct comparison approach by making reference to comparable sales evidence as available in the relevant market and has

—66— also taken into account the expended construction costs and the costs that will be expended to complete the properties to reflect the quality of the completed properties. Prospective investors should be aware that such appraised value may be different from the actual realizable value, if any, and is subject to change.

Any gain or loss arising from changes in the fair value of investment properties, including investment properties under construction, is recognized in our statement of comprehensive income in the period in which the gain or loss arises. Such fair value gain or loss is calculated based on the difference between (i) the fair value as of each reporting date as determined by the independent valuer and (ii) the total additional costs incurred by us during the relevant reporting period plus the fair value as of the prior reporting date. In the years ended December 31, 2007, 2008 and 2009, and the nine months ended September 30, 2010, we recorded fair value gains on our investment properties, amounting to approximately RMB168.2 million, RMB211.4 million, RMB371.6 million (US$55.5 million) and RMB15.0 million (US$2.2 million), respectively, in our consolidated statements of comprehensive income, representing 72.9%, 87.5%, 68.7% and 1.5%, respectively, of our profit before tax in the same period. The fluctuations in the fair market value of our investment properties in such periods were primarily due to the addition and completion of new investment properties, as well as their overall appreciation.

There can be no assurance that we will continue to record fair value gains in the future. Please see “Risk Factors — Risks relating to our business — Our profitability may fluctuate substantially due to the periodic reassessment of fair value gains or losses on our investment properties.” In the future we do not expect our fair value gains, if any, to contribute as significant a percentage of our profit before tax as they did during the years 2007 to 2009.

Nature and Timing of our Property Development

The number of property developments that a developer can undertake during any particular period is limited due to the substantial amount of capital required to fund costs of land acquisition and construction, as well as its limited management resources. Property development may take months, or possibly years, before any pre-sale take place. While the pre-sale of a property generates positive cash flows for us in the period in which it is made, according to our accounting policy, we only recognize revenue upon delivery of our properties, which normally takes place from 6 to 24 months after the commencement of pre-sale of our properties. Because the delivery of our properties varies according to our construction timetable, our results of operations may vary significantly from period to period depending on the GFA and timing for delivery of the properties that we sell. In addition, effective management of our revenue stream depends on our ability to gauge, at the launch of a particular project, the expected demand in the market at the anticipated time of completion of such project. As a result, our results of operations may fluctuate in the future. Please also refer to the sections headed “Risk Factors — Risks Relating to Our Business — Because we derive our revenue principally from the sale of our completed projects, our results of operations may vary significantly from period to period” and “Business” in this offering memorandum.

—67— CRITICAL ACCOUNTING POLICIES

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements for 2007, 2008 and 2009, and the nine months ended September 30, 2009 and September 30, 2010, which have been prepared in accordance with HKFRS. Our reported financial condition and results of operations are sensitive to accounting policies and assumptions and estimates that underlie the preparation of the financial statements. We continually evaluate our estimates and assumptions and base them on historical experience and on various other factors that our directors believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results typically differ from these estimates. The estimates and assumptions that may have a significant effect on the carrying amounts of assets and liabilities mainly include those related to property development activities.

The selection of critical accounting policies and the sensitivity of reported results to changes in conditions and assumptions are factors that should be considered when reviewing our financial statements. We believe the following critical accounting policies are among those that involve the most significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

Revenue is recognized when it is probable that the economic benefits will flow to the Group and when the revenue can be measured reliably, on the following basis:

(a) from the sale of completed properties, when the significant risks and rewards of ownership of the properties are transferred to the purchasers, that is when the construction of the relevant properties has been completed and the properties have been delivered to the purchasers pursuant to the sales agreement, and the collectability of related receivables is reasonably assured;

(b) from the rendering of services, when the services have been rendered;

(d) interest income, on an accrual basis using the effective interest method by applying the rate that discounts the estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset; and

(e) facilities rental income on a time proportion basis over the lease terms.

Cost of Sales

We recognize the cost of sales of our properties for a given period to the extent that revenue from such properties has been recognized in such period. Prior to the recognition of revenue, completed properties held for sale are included in our statement of financial position at the lower of cost and net realizable value. Cost of sales for each property that we sell mainly comprises the cost of completed properties sold and other levies and surcharges.

Cost of sales for each property that we sell includes the specific construction cost of each property, including land acquisition costs, capitalized borrowing costs and common development and related costs (both incurred and estimated to be incurred), but excludes selling and marketing expenses and administrative expenses.

—68— Properties under Development and Completed Properties Held for Sale

Properties under development are stated at the lower of cost and net realizable value and comprise land costs, construction costs, borrowing costs, professional fees and other costs directly attributable to such properties incurred during the development period. Properties under development are classified as current assets unless the construction period of the relevant property development project is expected to complete beyond the normal operating cycle. On completion, the properties are transferred to completed properties held for sale.

Revenue is only recognized upon completion of the development. Sales deposits or installments received and receivable from purchasers in respect of pre-sale of properties under development prior to completion of the development are included in current liabilities.

Completed properties held for sale are stated at the lower of cost and net realizable value. Cost is determined by an apportionment of total land and building costs attributable to the unsold properties. Net realizable value is determined by reference to the sales proceeds of comparable properties sold in the ordinary course of business, less applicable variable selling expenses, or by management estimates based on prevailing market conditions.

Investment Properties

Investment properties include both completed investment properties and investment properties under construction.

Completed investment properties are interests in land and buildings held to earn rental income and/or for capital appreciation, rather than for use in the production or supply of goods or services or for administrative purposes; or for sale in the ordinary course of business. Such properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the end of the reporting period.

Investment properties under construction or development for future use as investment properties are classified as investment properties under construction. Such properties under construction are measured initially at cost, including transaction cost, and stated at fair value, subsequent to initial recognition, at the end of the reporting period when fair value can be determined reliably.

Gains or losses arising from changes in the fair values of completed investment properties and investment properties under construction are included in profit or loss of the statement of comprehensive income in the year in which they arise.

Any gains or losses on the retirement or disposal of a completed investment property or an investment property under construction are recognized in profit or loss of the statement of comprehensive income in the year of the retirement or disposal.

Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, i.e., assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalized as part of the cost of those assets. The capitalization of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs capitalized. All other borrowing costs are expensed in the period in which they are incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

—69— Tax

EIT

Prior to January 1, 2008, our subsidiaries incorporated in Shenzhen and Xiamen were entitled to a preferential EIT rate of 15% and all other PRC subsidiaries were subject to EIT at the statutory rate of 33%. Effective from January 1, 2008, all enterprises with operations in China, including our PRC subsidiaries, are subject to a standard income tax rate of 25%. For our subsidiaries incorporated in Shenzhen and Xiamen, which had previously enjoyed a preferential tax rate, a tax rate of 18% has been applied with effect from January 1, 2008 and such rate will gradually transition to the new uniform tax rate of 25% over the five-year period beginning January 1, 2008. Significant judgment is required in determining the provision for income tax. If the final tax outcome of these matters is different from the amounts that were initially recorded, such difference will impact the income tax and deferred tax provision in the period in which such determination is made.

LAT

Under PRC tax laws and regulations, all income from our sale or transfer of state-owned land use rights, and buildings and their attached facilities in the PRC is subject to LAT at progressive rates ranging from 30% to 60% on the appreciation in land value, calculated as the sale proceeds of properties less deductible expenditures, including borrowing costs and all property development expenditures. Because at the time we deliver a property we may not have completed the entire phase of a project or the project as a whole, our estimate of LAT provisions at that time requires us to use significant judgment with respect to, among other things, the anticipated total proceeds to be derived from the sale of the entire phase of the project or the entire project, the total appreciation of the value of land, buildings and attached facilities and the various deductible items. The provision for LAT is made based on management’s best estimates according to the understanding of the requirements set forth in the relevant PRC tax laws and regulations. The actual LAT liabilities are subject to the determination by the tax authorities upon the completion of the property development projects and could be different from the amounts that were initially recorded, and any such differences will impact our profits after tax and deferred tax provision in the periods in which such taxes are finalized with the relevant tax authorities.

Deferred tax

Deferred tax is provided, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax is determined using the tax rates that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred tax asset is realized or the deferred tax liability is settled. Deferred tax assets are recognized to the extent that our management believes it is probable that future taxable profit will be available against which the temporary differences can be utilized. Deferred tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference can be controlled by us, and it is probable that the temporary difference will not be reversed in the foreseeable future. Significant management estimation is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable profits together with future tax planning strategies.

—70— DESCRIPTION OF CERTAIN ITEMS OF THE STATEMENT OF COMPREHENSIVE INCOME

Revenue

Revenue represents the gross proceeds, net of business tax and other sales related taxes, from the sale of properties; gross rental income received and receivable from investment properties; and property management fee income, net of business tax, received and receivable during the three years ended December 31, 2009 and during the nine months ended September 30, 2009 and 2010, respectively.

The following table sets forth our revenue by source for each of 2007, 2008 and 2009 and for the nine months ended September 30, 2009 and 2010, respectively.

Nine Months Ended Year Ended December 31, September 30,

2007 2008 2009 2009 2010

RMB’000 RMB’000 RMB’000 US$’000 RMB’000 RMB’000 US$’000 Revenue Sales of properties .... 367,974 325,217 564,993 84,447 535,778 2,063,949 308,490 Property management fees ...... 2,824 4,240 8,737 1,306 6,102 17,046 2,548 Gross rental income . . . 896 1,722 12,733 1,903 8,222 21,668 3,238

Total ...... 371,694 331,179 586,463 87,656 550,102 2,102,663 314,276

As we derive substantially all of our revenue from property development, our results of operations for a given period are dependent upon the type and GFA of properties we have completed and delivered during that period, the market demand for those properties and the price we obtain from the pre-sale or sale of the properties. Conditions in the real estate markets in which we operate change from period to period and are affected significantly by the general economic, political and regulatory developments in the PRC. For further details of the effect these factors have on our results of operations, please refer to “Risk Factors.”

The table below sets forth, for the periods and the type of properties indicated, the aggregate GFA that we delivered and the average selling price per sq.m. for each type, which is calculated by dividing the revenue attributable to the properties sold by type by the GFA of that type sold:

Year Ended December 31, Nine Months Ended September 30,

2007 2008 2009 2009 2010

Average Average Average Selling Selling Selling Price Price Average Selling Price Average Selling GFA (per GFA (per GFA Price (per GFA (per GFA Price (per sold sq.m.) sold sq.m.) sold sq.m.) sold sq.m.) sold sq.m.)

(sq.m.) (RMB) (sq.m.) (RMB) (sq.m.) (RMB) US$ (sq.m.) (RMB) (sq.m.) (RMB) US$ Residential (GFA)..... 63,872 5,200 46,769 6,215 22,004 25,576 3,823 20,964 25,491 128,173 15,297 2,286 Commercial (GFA)..... 3,672 9,602 1,152 9,547 —————2,283 13,113 1,960 Other (GFA). . . 184 3,105 12,381 1,900 1,503 1,481 221 1,503 922 12,383 5,927 886

Total ...... 67,728 60,302 23,507 22,467 142,839

—71— Consistent with industry practice in the PRC, after satisfying the conditions for pre-sales set forth in PRC laws and regulations, we often enter into pre-sale contracts with customers while the relevant properties are still under development. Typically there is a time gap of several months to 24 months between the time we commence pre-sale of the properties under development and the completion of the properties. We do not recognize any revenue from the pre-sale of our properties until the development of such properties is complete (upon receipt of the completion certificate) and the relevant property has been delivered to the purchaser, even though the purchase price for a property is usually paid prior to the completion and delivery of the property. Before the completion and delivery of pre-sold properties, deposits and purchase prices or portions thereof received from our customers are recorded as receipts in advance, which is a current liability on our consolidated statements of financial position.

Our property management income represents recurring revenue from management fees we charge in connection with our completed properties.

Our rental income represents recurring revenue from our investment properties, which has been historically generated from retail shops, carparks and office spaces developed by us, was generally recognized in our statement of comprehensive income on a time proportion basis over the periods covered by the respective lease terms over the three years ended December 31, 2009 and during the nine months ended September 30, 2009 and 2010, respectively.

Cost of Sales

The principal component of cost of sales is the cost of completed properties delivered, which consists of direct costs of construction, land acquisition costs and capitalized borrowing costs on related borrowed funds during the period of construction. We recognize the cost of completed properties delivered for a given period to the extent that revenue from such properties has been recognized in such period.

The table below sets forth information relating to cost of completed properties delivered for the three years ended December 31, 2009 and during the nine months ended September 30, 2009 and 2010, respectively.

Year Ended December 31, Nine Months Ended September 30,

2007 2008 2009 2009 2010

RMB’000 % RMB’000 % RMB’000 % US$’000 RMB’000 % RMB’000 % US$’000 Construction costs. 166,780 68.7% 146,862 72.2% 178,220 60.8% 26,637 181,258 63.7% 744,661 68.7% 111,301 Land acquisition costs ...... 56,024 23.1% 40,009 19.7% 87,135 29.8% 13,024 83,011 29.2% 243,212 22.4% 36,352 Capitalized borrowing costs ...... 17,586 7.2% 12,617 6.2% 18,726 6.4% 2,799 16,076 5.6% 81,519 7.5% 12,184

Cost of completed properties sold . 240,390 99.0% 199,488 98.1% 284,081 97.0% 42,460 280,345 98.5% 1,069,392 98.6% 159,837 Others ...... 2,337 1.0% 3,847 1.9% 8,723 3.0% 1,304 4,297 1.5% 15,234 1.4% 2,277

Cost of sales . . . 242,727 100.0% 203,335 100.0% 292,804 100.0% 43,764 284,642 100.0% 1,084,626 100.0% 162,114

Cost per sq.m. of GFA sold (in RMB/US$) . 3,549 3,308 12,085 1,806 12,478 7,487 1,119

—72— Construction costs

Construction costs represent costs for the design and construction of a project, consisting primarily of fees paid to our contractors, including contractors responsible for civil engineering, landscaping, equipment installation and interior decoration, as well as infrastructure construction costs, design costs and certain government surcharges. Our construction costs are affected by a number of factors such as price movements of construction materials, location and types of properties, choices of materials and investments in ancillary facilities. Cost of materials is a particularly significant component of our construction costs. Construction costs fluctuate as a result of changes in prices of key construction materials, including cement, steel and other key building materials. Despite our cost control measures, we are still subject to general increases in prices of construction materials, which in turn will increase our construction costs. Please see “Risk Factors — Risks relating to our business — Volatility in the prices of construction materials could adversely affect our business and financial performance.”

Land acquisition costs

Land acquisition costs include costs relating to the acquisition of rights to occupy, use and develop land, including land premiums (which are incurred in connection with a land grant from the PRC government or land obtained in the secondary market by transfer, cooperative arrangement or corporate acquisition), the applicable deed tax associated with the acquisition of land, and other land-related taxes and government surcharges. Our land acquisition costs are influenced by a number of factors, including the location of the property, real estate conditions, the project’s plot ratios, the approved use of the land and our method of acquisition, namely whether through PRC government-organized competitive bidding, public auctions, listings-for-sale, private sale transactions or the acquisition of other companies that hold land use rights. Land acquisition costs are also affected by changes in PRC regulations. For details of PRC regulations and measures affecting the PRC real estate market, please refer to “Regulation.”

Capitalized borrowing costs

We capitalize a portion of our cost of borrowing to the extent that such costs are directly attributable to the construction of a particular project. In general, we capitalize finance costs incurred from the commencement of the planning and design of a project, which predates the receipt of a permit for commencement of construction work, until the physical completion of construction. For any given project, the finance costs incurred after completing the construction of a project are not capitalized but are instead accounted for in our consolidated statements of comprehensive income as finance costs in the period in which they are incurred. Where the duration of a loan is longer than the time of completion of the project, we are unable to capitalize the total interest costs related to the project for the period after completion. Fluctuations in the amount and timing of capitalization from period to period may affect our finance costs.

Other Income and Gains

Other income and gains consists primarily of bank interest income, consultancy fee income, gain on disposal of investment properties, gain on disposal of jointly-controlled entities, gain on disposal of subsidiaries, gain on disposal of financial assets at fair value through profit or loss, net exchange gains, excess over the cost of business combination and others.

—73— Selling and Marketing Expenses

Selling and marketing expenses primarily include advertising and promotional expenses relating to the sale of properties (including television, newspaper, magazine, billboard advertisements and certain other promotional events), sales and marketing staff costs, showrooms and other selling and marketing expenses. In addition, as part of our marketing strategy, we have provided qualifying members of SCE Customers Club with certain discounts.

Administrative Expenses

Administrative expenses primarily consist of employees’ salaries and benefits, office expenses, traveling expenses, entertainment expenses, telephone charges, vehicle expenses and maintenance fees, advisory and consulting fees (including audit fees, legal fees and other professional fees) and insurance costs, as well as amortization of the land use rights of undeveloped land.

Changes in Fair Value of Investment Properties

We recognize changes in the fair value of our investment properties, including investment properties under construction, on our consolidated statements of comprehensive income. For 2007, 2008 and 2009 and the nine months ended September 30, 2010, we recorded fair value gains on our investment properties amounting to RMB168.2 million, RMB211.4 million, RMB371.6 million (US$55.5 million) and RMB15.0 million (US$2.2 million), respectively, and the relevant deferred tax for these fair value gains charged under income tax expenses on our consolidated statements of comprehensive income was RMB42.1 million, RMB52.9 million, RMB92.9 million (US$13.9 million) and RMB3.8 million (US$0.6 million), respectively. Accordingly, the changes in fair value of our investment properties (net of deferred tax) was RMB126.1 million, RMB158.5 million, RMB278.7 million (US$41.7 million) and RMB11.2 million (US$1.7 million) and represented approximately 78.8%, 95.6%, 77.1% and 2.0% of the profit for the years 2007, 2008 and 2009 and the nine months ended September 30, 2010, respectively.

Finance Costs

Finance costs primarily consist of interest costs net of capitalized interest relating to properties under development and acquisition of land. Not all of the interest costs related to a project can be capitalized. As a result, our finance costs may fluctuate from period to period depending on the level of interest costs that are capitalized within the reporting period as well as changes in the amount of outstanding principal and interest rates. The total amount of interest capitalized in 2007, 2008 and 2009 and the nine months ended September 30, 2010 was RMB60.3 million, RMB81.3 million, RMB99.0 million (US$14.8 million) and RMB90.9 million (US$13.6 million), respectively.

Income Tax

Our income tax expenses for a given year include provisions made for Hong Kong profits tax, EIT, LAT and deferred tax during the year.

Hong Kong and Cayman Islands profits tax

Hong Kong profits tax has been provided at the rate of 17.5% on the estimated assessable profits arising in Hong Kong for 2007. No provision for Hong Kong profits tax has been made for the years or periods during the two years ended December 31, 2008 and 2009 or the nine months ended September 30, 2010 as our Group did not generate any assessable profits arising in Hong Kong. Furthermore, the Cayman Islands currently levy no income taxes on individuals or corporations.

—74— EIT

Please see “Key factors affecting our results of operations — Tax — Enterprise Income Tax (EIT)” and “Critical Accounting Policies — Tax — EIT” above. For the three years ended December 31, 2007, 2008 and 2009 and the nine months ended September 30, 2010, our effective EIT rate was 21.7%, 24.4%, 22.9% and 17.4%, respectively. The increase in this effective tax rate during the three years ended December 31, 2007, 2008 and 2009 was mainly attributable to (i) the increase in non-deductible expenses in 2008 and 2009, such as expenses incurred for our Reorganization and (ii) the increase in the associated deferred tax charges to reflect the adjustment in the EIT rate from the preferential EIT rate of 15% for our subsidiaries incorporated in Shenzhen and Xiamen to the new standard EIT rate of 25% over the five-year period from January 1, 2008, when the new PRC Enterprise Tax Law became effective.

LAT

Please see “Key Factors Affecting Our Results of Operations — Tax — Land Appreciation Tax (LAT)” and “Critical Accounting Policies — Tax — LAT” above.

Deferred tax

Please see “Critical Accounting Policies — Tax — Deferred tax” above.

The carrying value of deferred tax assets relating to recognized tax losses were RMB22.9 million, RMB31.9 million, RMB62.1 million (US$9.28 million) and RMB82.3 million (US$12.3 million) as of December 31, 2007, 2008 and 2009, and the nine months ended September 30, 2010, respectively.

Exchange differences on translation of foreign operations

The functional currencies of certain of our overseas subsidiaries and jointly-controlled entities and associates are currencies other than RMB. As at each of the reporting dates, the assets and liabilities of these entities are translated into the presentation currency of the Company at the exchange rates prevailing at the relevant reporting date, and their statement of comprehensive incomes are translated into RMB at the weighted average exchange rates for the year. The resulting exchange differences are included in the exchange fluctuation reserve. On disposal of a foreign entity, the deferred cumulative amount recognized in equity relating to that particular foreign operation is recognized in the statement of comprehensive income.

—75— CONSOLIDATED RESULTS OF OPERATIONS

The following table shows the line items of our consolidated statements of comprehensive income, expressed in absolute figures and as a percentage of revenue for the three years ended December 31, 2007, 2008 and 2009 and the nine months ended September 30, 2009 and September 30, 2010:

Year ended December 31, Nine months ended September 30,

2007 2008 2009 2009 2010

(RMB’000) (% of revenue) (RMB’000) (% of revenue) (RMB’000) (% of revenue) (RMB’000) (% of revenue) (RMB’000) (% of revenue) Revenue ...... 371,694 100.0 331,179 100.0 586,463 100.0 550,102 100.0 2,102,663 100.0 Cost of sales ...... (242,727) (65.3) (203,335) (61.4) (292,804) (49.9) (284,642) (51.7) (1,084,626) (51.6)

Gross profit ...... 128,967 34.7 127,844 38.6 293,659 50.1 265,460 48.3 1,018,037 48.4 Other income and gains . . . 43,476 11.7 6,962 2.1 16,039 2.7 13,739 2.5 15,172 0.7 Changes in fair value of investment properties . . 168,247 45.3 211,366 63.8 371,613 63.4 222,836 40.5 15,000 0.7 Selling and marketing expenses ...... (46,268) (12.4) (27,143) (8.2) (38,955) (6.6) (22,846) (4.2) (58,771) (2.8) Administrative expenses . . . (57,650) (15.5) (64,883) (19.6) (91,197) (15.6) (53,891) (9.8) (132,884) (6.3) Other expenses ...... (589) (0.2) (247) (0.1) (137) 0.0 — — — — Finance costs ...... (1,376) (0.4) (3,324) (1.0) (5,642) (1.0) (2,368) (0.4) (4,026) (0.2) Share of profits and losses of: Jointly-controlled entities . (3,261) (0.9) (4,697) (1.4) (1,598) (0.3) 2,002 0.4 87,791 4.2 Associates ...... (888) (0.2) (4,413) (1.3) (3,095) (0.5) (3,317) (0.6) 34,465 1.7

Profit before tax ...... 230,658 62.1 241,465 72.9 540,687 92.2 421,615 76.7 974,784 46.4 Income tax expense ..... (70,581) (19.0) (75,606) (22.8) (178,996) (30.5) (147,883) (26.9) (402,032) (19.1)

Profit for the year/period . . 160,077 43.1 165,859 50.1 361,691 61.7 273,732 49.8 572,752 27.3

Other comprehensive income/(loss): Share of other comprehensive income of jointly-controlled entities . 569 0.1 649 0.2 12 0.0 5 0.0 123 0 Share of other comprehensive income of associates . . — — — — — — — — 2,304 0.1 Exchange differences on translation of foreign operations ...... 35,166 9.5 34,637 10.4 (5,793) (1.0) (6,975) (1.3) (3,722) (0.2)

Other comprehensive income/(loss) for the year/period...... 35,735 9.6 35,286 10.6 (5,781) (1.0) (6,970) (1.3) (1,295) (0.1)

Total comprehensive income for the year/period . . . 195,812 52.7 201,145 60.7 355,910 60.7 266,762 48.5 571,457 27.2

Profit attributable to: Owners of the parent. . . 159,206 42.8 168,458 50.9 373,434 63.7 276,994 50.4 603,923 28.7 Non-controlling interests . 871 0.3 (2,599) (0.8) (11,743) (2.0) (3,262) (0.6) (31,171) (1.4)

160,077 43.1 165,859 50.1 361,691 61.7 273,732 49.8 572,752 27.3

Total comprehensive income attributable to: Owners of the parent. . . 187,418 50.4 199,135 60.1 367,653 62.7 270,055 49.1 599,802 28.5 Non-controlling interests . 8,394 2.3 2,010 0.6 (11,743) (2.0) (3,293) (0.6) (28,345) (1.3)

195,812 52.7 201,145 60.7 355,910 60.7 266,762 48.5 571,457 27.2

Other financial data Net cash from/(used in) operating activities . . . (72,497) (379,217) 744,935 459,038 (980,750)

—76— The Nine Months Ended September 30, 2010 Compared to the Nine Months Ended September 30, 2009

Revenue

Our revenue increased by RMB1,552.6 million (US$232.1 million), or 282.2%, to RMB2,102.7 million (US$314.3 million) for the nine months ended September 30, 2010 from RMB550.1 million for the nine months ended September 30, 2009. This increase was due to the 285.2% increase in revenue from property sales, 163.5% increase in gross rental income and 179.4% increase in property management income for the nine months ended September 30, 2010, as compared to the nine months ended September 30, 2009. Revenue from property sales increased primarily due to the increase in delivered GFA from 22,467 sq.m. for the nine months ended September 30, 2009 to 142,839 sq.m. for the same period in 2010. The increase in our rental income was mainly due to the increased occupancy of retail shops in World City during the nine months ended September 30, 2010 and our property management income increased primarily due to the increase in the number and GFA of our properties under management during the nine months ended September 30, 2010.

Set forth in the table below is the revenue generated from each of our projects in which we delivered properties and the percentage of our total revenue from property sales in this period represented by each project.

September 30, 2009 September 30, 2010

Percentage Percentage of total of total revenue revenue from from property property Project Revenue sales Revenue sales Revenue

RMB’000 (%) RMB’000 (%) US$’000 Sapphire Peninsula (Xiamen) ...... 1,386 0.3 — — — World City ...... 534,392 99.7 1,183,557 57.3 176,901 Seashore Suite No.1 ...... — — 880,392 42.7 131,589

Total ...... 535,778 100.0 2,063,949 100.0 308,490

—77— The table below sets forth, for the periods and the types of properties in each of the projects indicated, the aggregate GFA that we sold and the average selling price per sq.m. for each type of the projects, calculated by dividing the revenue attributable to the properties sold by type by the GFA of that type sold:

September 30, 2009 September 30, 2010

Average Selling Price Average Selling Price Project GFA sold (per sq.m.) GFA sold (per sq.m.)

(sq.m.) RMB (sq.m.) RMB US$ Sapphire Peninsula (Xiamen) — Phase II Residential ...... ————— Commercial ...... ————— Others ...... 1,503 922 — — —

Total ...... 1,503 —

World City Residential ...... 20,964 25,491 39,040 29,487 4,407 Commercial ...... ————— Others ...... — — 2,458 13,177 1,970

Total ...... 20,964 41,498

Seashore Suite No.1 Residential ...... — — 89,133 9,081 1,357 Commercial ...... — — 2,283 13,113 1,960 Others ...... — — 9,925 4,131 617

Total ...... — 101,341

Cost of sales

Our cost of sales increased by RMB800.0 million (US$119.6 million), or 281.1%, to RMB1,084.6 million (US$162.1 million) in the nine months ended September 30, 2010 from RMB284.6 million in the nine months ended September 30, 2009. This increase was primarily due to the increase in GFA delivered during the nine months ended September 30, 2010.

Gross profit

As a result of the above, our gross profit increased by RMB752.5 million (US$112.5 million), or 283.4%, to RMB1,018.0 million (US$152.2 million) in the nine months ended September 30, 2010 from RMB265.5 million in the nine months ended September 30, 2009. Our gross profit margin increased slightly from 48.3% for the nine months ended September 30, 2009 to 48.4% for the nine months ended September 30, 2010.

Other income and gains

Our other income and gains increased by RMB1.5 million (US$0.2 million), or 10.9%, to RMB15.2 million (US$2.3 million) in the nine months ended September 30, 2010 from RMB13.7 million in the nine months ended September 30, 2009. This increase was primarily due to the increase in bank interest income received in the nine months ended September 30, 2010.

Changes in fair value of investment properties

Our changes in fair value of investment properties decreased by RMB207.8 million (US$31.1 million), or 93.3%, to RMB15.0 million (US$2.2 million) in the nine months ended

—78— September 30, 2010 from RMB222.8 million in the nine months ended September 30, 2009. The decrease in our changes in fair value of investment properties was mainly attributable to the fact that the market value of our investment properties remained relatively stable in the nine months ended September 30, 2010 while the market value of our investment properties rose significantly in the nine months ended September 30, 2009.

Selling and marketing expenses

Our selling and marketing expenses increased by RMB36.0 million (US$5.4 million), or 157.9%, to RMB58.8 million (US$8.8 million) in the nine months ended September 30, 2010 from RMB22.8 million in the nine months ended September 30, 2009. This increase was primarily due to increased advertising and promotional expenses incurred for marketing of our projects rolled out for pre-sale in Quanzhou, Linfen, Xiamen and Zhangzhou.

Administrative expenses

Our administrative expenses increased by RMB79.0 million (US$11.8 million), or 146.6%, to RMB132.9 million (US$19.9 million) in the nine months ended September 30, 2010 from RMB53.9 million in the nine months ended September 30, 2009. This increase was mainly attributable to the employment of additional management personnel to cope with the needs of business expansion and an increase in amortization of prepaid land lease payments during the nine month period ended September 30, 2010.

Finance costs

Our finance costs increased by RMB1.6 million (US$0.2 million), or 66.7%, to RMB4.0 million (US$0.6 million) in the nine months ended September 30, 2010 from RMB2.4 million in the nine months ended September 30, 2009. This increase was primarily attributable to the increase in our bank and other borrowings for our general working capital purposes.

Share of profits and losses of jointly-controlled entities and associates

Our share of profits of jointly-controlled entities and associates was RMB122.3 million (US$18.3 million) in the nine months ended September 30, 2010 while share of losses of jointly-controlled entities and associates in the nine months ended September 30, 2009 was RMB1.3 million. This increase was mainly due to the increase in GFA delivered by our jointly-controlled entities and associates in the nine months ended September 30, 2010.

Profit before tax

As a result of the above, our profit before tax increased by RMB553.2 million (US$82.7 million), or 131.2%, to RMB974.8 million (US$145.7 million) in the nine months ended September 30, 2010 from RMB421.6 million in the nine months ended September 30, 2009.

Income Tax

Our income tax increased by RMB254.1 million (US$38.0 million), or 171.8%, to RMB402.0 million (US$60.1 million) in the nine months ended September 30, 2010 from RMB147.9 million in the nine months ended September 30, 2009. This increase was primarily due to the increase in EIT and LAT charged on the sales of our properties in World City in Beijing and Seashore Suite No.1 in Xiamen, which were delivered to respective customers in the nine months ended September 30, 2010.

Profit for the period

As a result of the above, our profit for the period increased by RMB299.1 million (US$44.7 million), or 109.3%, to RMB572.8 million (US$85.6 million) in the nine months ended September 30, 2010 from RMB273.7 million in the nine months ended September 30, 2009.

—79— Other comprehensive income/(loss)

Our other comprehensive loss decreased by RMB5.7 million (US$0.9 million), or 81.4%, to a loss of RMB1.3 million (US$0.2 million) in the nine months ended September 30, 2010 from a loss of RMB7.0 million in the nine months ended September 30, 2009. This decrease was primarily due to the decrease in exchange differences on translation of foreign operations attributable to further appreciation in the Renminbi in the first nine months of 2010, thereby creating a loss from the translation of the financial statements of our overseas subsidiaries and jointly-controlled entities and associates that use Hong Kong dollars as their functional currencies into Renminbi.

Non-controlling interests

Our loss attributable to non-controlling interests increased by RMB27.9 million (US$4.2 million), or 845.5%, to RMB31.2 million (US$4.7 million) in the nine months ended September 30, 2010 from RMB3.3 million in the nine months ended September 30, 2009. This increase was primarily due to losses incurred by our non-wholly-owned subsidiaries who incurred additional administrative expenses during the start-up phase of their operations and developments. No revenue had been incurred by these non-wholly-owned subsidiaries as no properties held by them were sold or delivered.

2009 Compared to 2008

Revenue

Our revenue increased by RMB255.3 million (US$38.2 million), or 77.1%, to RMB586.5 million (US$87.7 million) in 2009 from RMB331.2 million in 2008. This increase was primarily due to the delivery of part of our properties in World City in Beijing in 2009 as well as increased rental income attributable to the leasing of a certain portion of retail shops in World City which commenced in the second half of 2009. World City is located in the central business district of Beijing and contains luxurious interior fittings. During 2009, the average selling price per sq.m. for World City was RMB25,576 (US$3,823). In 2008, we sold and delivered properties in the remaining six blocks in Sapphire Peninsula, resulting in a total GFA sold and delivered in 2008 of 60,302 sq.m.

Set forth in the table below is the revenue generated from each of our projects in which we sold properties and the percentage of our total revenue from property sales in these years represented by each project.

2008 2009

Percentage Percentage of total of total revenue revenue from from property property Project Revenue sales Revenue sales Revenue

RMB’000 (%) RMB’000 (%) US$’000 Sapphire Peninsula (Xiamen) .... 325,217 100 2,226 0.4 333 WorldCity...... — — 562,767 99.6 84,114 Total ...... 325,217 100.0 564,993 100.0 84,447

—80— The table below sets forth, for the periods and the types of properties in each of the projects indicated, the aggregate GFA that we sold and the average selling price per sq.m. for each type of the projects, calculated by dividing the revenue attributable to the properties sold by type by the GFA of that type sold:

2008 2009

Average Selling Price Average Selling Price Project GFA sold (per sq.m.) GFA sold (per sq.m.)

(sq.m.) RMB (sq.m.) RMB US$ Sapphire Peninsula (Xiamen) — Phase I Residential ...... 18,869 6,328 — — — Commercial ...... ————— Others ...... 7,524 1,595 — — — Total...... 26,393 —

Sapphire Peninsula (Xiamen) — Phase II Residential ...... 27,900 6,139 — — — Commercial ...... 1,152 9,547 — — — Others ...... 4,857 2,373 1,503 1,481 221 Total...... 33,909 1,503

World City Residential ...... — — 22,004 25,576 3,823 Commercial ...... ————— Others ...... ————— Total...... — 22,004

Cost of sales

Our cost of sales increased by RMB89.5 million (US$13.4 million), or 44.0%, to RMB292.8 million (US$43.8 million) in 2009 from RMB203.3 million in 2008. This increase was primarily due to the relatively higher land acquisition cost per sq.m. of the GFA of the World City for its prime location in the central business district of Beijing and its luxurious interior fittings.

Gross profit

As a result of the above, our gross profit increased by RMB165.9 million (US$24.8 million), or 129.8%, to RMB293.7 million (US$43.9 million) in 2009 from RMB127.8 million in 2008. Our gross profit margin increased from 38.6% in 2008 to 50.1% in 2009. The increase in gross profit margin was principally driven by the increase in the selling price per sq.m. of the sold GFA which was higher than the increase in the construction cost per sq.m. of the sold GFA.

Other income and gains

Our other income and gains increased by RMB9.0 million (US$1.3 million), or 128.6%, to RMB16.0 million (US$2.4 million) in 2009 from RMB 7.0 million in 2008. This increase was mainly attributable to the realization of exchange fluctuation reserve upon the de-registration of a wholly-owned subsidiary of the Group.

—81— Changes in fair value of investment properties

Our changes in fair value of investment properties increased by RMB160.2 million (US$23.9 million), or 75.8%, to RMB371.6 million (US$55.5 million) in 2009 from RMB211.4 million in 2008. This increase in fair value of investment properties in 2009 was primarily attributable to the value appreciation of commercial properties at World City on revaluation.

Selling and marketing expenses

Our selling and marketing expenses increased by RMB11.9 million (US$1.8 million), or 43.9%, to RMB39.0 million (US$5.8 million) in 2009 from RMB27.1 million in 2008. This increase was primarily due to an increase in the number of projects rolled out for pre-sale.

Administrative expenses

Our administrative expenses increased by RMB26.3 million (US$3.9 million), or 40.5%, to RMB91.2 million (US$13.6 million) in 2009 from RMB64.9 million in 2008. The increase was mainly attributable to the increase in expenses in connection with the preparation of the IPO, the amortization of prepaid land lease payments for the newly acquired subsidiary, Fujian Straits West-Coast Investment Co., Ltd. and the increase in number of employees of the Group in 2009.

Finance costs

Our finance costs increased by RMB2.3 million (US$0.3 million), or 69.7%, to RMB5.6 million (US$0.8 million) in 2009 from RMB3.3 million in 2008. This increase was primarily due to the interest expense incurred by the newly acquired subsidiary, Fujian Straits West-Coast Investment Co., Ltd.

Share of profits and losses of jointly-controlled entities and associates

Our share of losses of jointly-controlled entities and associates decreased by RMB4.4 million (US$0.7 million), or 48.4%, to RMB4.7 million (US$0.7 million) in 2009 from RMB9.1 million in 2008. This reduction in losses was mainly due to the increase in profit recorded by one of our jointly-controlled entities.

Profit before tax

As a result of the above, our profit before tax increased by RMB299.2 million (US$44.7 million), or 123.9%, to RMB540.7 million (US$80.8 million) in 2009 from RMB241.5 million in 2008.

Income tax

Our income tax increased by RMB103.4 million (US$15.5 million), or 136.8%, to RMB179.0 million (US$26.8 million) in 2009 from RMB75.6 million in 2008. This increase was primarily due to an increase in EIT and LAT levied on the sale of properties of our World City project and deferred tax liability arising from changes in fair value of our investment properties in 2009. The increase in EIT and LAT was due to the higher average selling price of the sold properties of World City which in turn increased the revenue and the land appreciation value.

Profit for the year

As a result of the above, our profit for the year increased by RMB195.8 million (US$29.3 million), or 118.0%, to RMB361.7 million (US$54.1 million) in 2009 from RMB165.9 million in 2008.

—82— Other comprehensive income

Our other comprehensive income decreased to a loss of RMB5.8 million (US$0.9 million) in 2009 from a profit of RMB35.3 million in 2008. The decrease was mainly due to the exchange differences on translation of foreign operations attributable from the appreciation in the Renminbi in 2009, thereby creating a loss from the translation of the financial statements of our overseas subsidiaries and jointly-controlled entities and associates that use Hong Kong dollars as their functional currencies into Renminbi.

Non-controlling interests

Our loss attributable to non-controlling interests increased by RMB9.1 million (US$1.4 million) to RMB11.7 million (US$1.7 million) in 2009 from RMB2.6 million in 2008. This was primarily due to the increase in the losses incurred by our non-wholly-owned subsidiaries, namely SCE International Community, SCE Fortune Plaza, SCE Sapphire Hill and SCE Sapphire Uptown.

2008 Compared to 2007

Revenue

Our revenue decreased by RMB40.5 million, or 10.9%, to RMB331.2 million in 2008 from RMB371.7 million in 2007. This decrease was primarily due to a decrease in the number of properties and the total GFA delivered to purchasers in 2008. In 2007, we completed the sale and delivery of all our properties in Green Lake Mansion and Jade Lakefront Manor and properties in nine out of 15 blocks in Sapphire Peninsula, and the total GFA sold and delivered in 2007 was 67,728 sq.m. In 2008, we sold and delivered properties in the remaining six blocks in Sapphire Peninsula, resulting in a total GFA sold and delivered in 2008 of 60,302 sq.m. The overall average selling price remained comparable with that of 2007 due to the delivery of properties of similar types and locations.

2007 2008

Percentage of Percentage of total revenue total revenue from property from property Project Revenue sales Revenue sales

RMB’000 (%) RMB’000 (%) Green Lake Mansion ...... 5,355 1.4 — — Jade Lakefront Manor ...... 9,119 2.5 — — Sapphire Peninsula (Xiamen) ...... 353,500 96.1 325,217 100.0 Total ...... 367,974 100.0 325,217 100.0

—83— The table below sets forth, for the periods and the types of properties in each of the projects indicated, the aggregate GFA that we sold and the average selling price per sq.m. for each type of the projects, calculated by dividing the revenue attributable to the properties sold by type by the GFA of that type sold:

2007 2008

Average Average Selling Price Selling Price Project GFA sold (per sq.m.) GFA sold (per sq.m.)

(sq.m.) RMB (sq.m.) RMB Green Lake Mansion Residential ...... 177 5,483 — — Commercial ...... 187 20,438 — — Others ...... 184 3,105 — — Total...... 548 —

Jade Lakefront Manor Residential ...... ———— Commercial ...... 908 10,043 — — Others ...... ———— Total...... 908 —

Sapphire Peninsula (Xiamen) — Phase I Residential ...... 63,695 5,199 18,869 6,328 Commercial ...... 2,577 8,662 — — Others ...... — — 7,524 1,595 Total...... 66,272 26,393

Sapphire Peninsula (Xiamen) — Phase II Residential ...... — — 27,900 6,139 Commercial ...... — — 1,152 9,547 Others ...... — — 4,857 2,373 Total...... — 33,909

Cost of sales

Our cost of sales decreased by RMB39.4 million, or 16.2%, to RMB203.3 million in 2008 from RMB242.7 million in 2007. This decrease was primarily due to the corresponding decrease in the aggregate number of properties delivered in 2008, thereby decreasing the aggregate costs recognized in connection with such sale and delivery. It is also attributable to the lower land acquisition costs and the decrease in the amount of capitalized interest costs in relation to the Sapphire Peninsula (Xiamen) in 2008.

Gross profit

As a result of the above, our gross profit decreased by RMB1.2 million, or 0.9%, to RMB127.8 million in 2008 from RMB129.0 million in 2007. Our gross profit margin increased from 34.7% in 2007 to 38.6% in 2008. The increase in gross profit margin was principally driven by a decrease in average construction costs per sq.m. of GFA sold while the overall average selling price per sq.m. of GFA sold remained comparable with that of 2007.

—84— Other income and gains

Our other income and gains decreased by RMB36.5 million, or 83.9%, to RMB7.0 million in 2008 from RMB43.5 million in 2007. This decrease was primarily due to our realization of the non-recurring gain on disposal of our jointly-controlled entity, Chongqing Chuangquan Real Estate Development Co., Ltd., of RMB34.9 million in 2007.

Changes in fair value of investment properties

Our changes in fair value of investment properties increased by RMB43.2 million, or 25.7%, to RMB211.4 million in 2008 from RMB168.2 million in 2007. This increase in fair value of investment properties in 2008 was primarily attributable to (i) additional construction costs incurred for completing the World City development in 2008 of approximately RMB138.2 million and (ii) the appreciation in value of the investment properties in World City in Beijing as a result of completion of construction for the investment properties in, as well as the infrastructure surrounding the neighbourhood of, this development in 2008 of approximately RMB359 million. In contrast, these investment properties were under construction in 2007, which generally would result in a relatively lower fair value being recorded. Based on the valuation performed by the independent property valuer, such a substantial increase in fair value as a result of the completion of construction of the investment properties in World City in Beijing offset the depreciation in fair market value of our investment properties of approximately RMB165 million as a result of the global economic downturn in the fourth quarter of 2008.

Selling and marketing expenses

Our selling and marketing expenses decreased by RMB19.2 million, or 41.5%, to RMB27.1 million in 2008 from RMB46.3 million in 2007. This decrease was primarily due to the completion of the promotional and advertising campaign of approximately RMB11.6 million in relation to World City in the home stadium of the Houston Rockets, a US National Basketball Association (NBA) team, carried out in 2007. It is also attributable to the overall lower level of marketing activities carried out in 2008 and the relatively lower marketing costs incurred for the publication of advertisement in domestic newspapers and magazines in the same year.

Administrative expenses

Our administrative expenses increased by RMB7.2 million, or 12.5%, to RMB64.9 million in 2008 from RMB57.7 million in 2007. The increase was mainly attributable to the increase in amortization of prepaid land premium of approximately RMB10.0 million, which was partially offset by the decrease in reorganization expenses in 2008 as a result of the substantial completion of our Reorganization in 2007 and the decrease in donations previously made by us in 2008.

Other expenses

Our other expenses decreased by RMB0.4 million to RMB0.2 million in 2008 from RMB0.6 million in 2007. Other expenses for 2008 mainly comprised the loss on disposal of our subsidiary, Xiamen Hengjun Property Co., Ltd. Other expenses for 2007 mainly comprised the amount of office equipment disposed and written-off following the move and renovation of our headquarters in Xiamen to the SCE Building in 2007.

Finance costs

Our finance costs increased by RMB1.9 million to RMB3.3 million in 2008 from RMB1.4 million in 2007. This increase was primarily due to interest costs in association with the loan obtained in relation to the development of SCE Building was no longer capitalized in 2008 due to its completion of construction. It was also attributable to the increase in other borrowings obtained for general working capital purposes.

—85— Share of profits and losses of jointly-controlled entities and associates

Our share of losses of jointly-controlled entities and associates increased by RMB5.0 million to RMB9.1 million in 2008 from RMB4.1 million in 2007. This increase was primarily due to the increase in share of loss in our jointly-controlled entity, SCE Purple Lake International, and the share of loss in our associate, Grand Richy Investments Limited, which we established in 2008.

Profit before tax

Our profit before tax increased by RMB10.8 million, or 4.7%, to RMB241.5 million in 2008 from RMB230.7 million in 2007.

Income tax

Our income tax increased by RMB5.0 million, or 7.1%, to RMB75.6 million in 2008 from RMB70.6 million in 2007. This increase was primarily due to an increase in deferred tax of RMB12.2 million, mainly arising from the increase in changes in fair value of our investment properties in 2008. This was partially offset by a decrease in total tax charge for 2008 of RMB7.2 million, which was mainly attributable to the decrease in Hong Kong profits tax of RMB6.7 million in 2008 as compared to that of 2007, the year in which one of our Hong Kong subsidiaries recognized a non-recurring gain on disposal of jointly-controlled entities and financial assets at fair value through profit or loss.

Profit for the year

As a result of the above, our profit for the year increased by RMB5.8 million, or 3.6%, to RMB165.9 million in 2008 from RMB160.1 million in 2007.

Other comprehensive income

Our other comprehensive income for 2008 remained fairly consistent with 2007, with a slight decrease of RMB0.4 million, or 1.1%, to RMB35.3 million in 2008 from RMB35.7 million in 2007. The other comprehensive income mainly includes exchange differences on translation of foreign operations, which primarily represent the gain arising from the translation of the financial statements of our overseas subsidiaries and jointly-controlled entities and associates that use Hong Kong dollars as their functional currencies into Renminbi.

Non-controlling interests

Our non-controlling interests decreased by RMB3.5 million to a loss attributable to non-controlling interests of RMB2.6 million in 2008 from a profit attributable to non-controlling interests of RMB0.9 million in 2007. This decrease was primarily due to the losses incurred by our non-wholly-owned subsidiaries, namely SCE Sapphire Hill and SCE International Community. These losses were mainly attributable to high administrative expenses recognized during the start up phase of their operations and developments. No revenue had been incurred by these two non-wholly-owned subsidiaries in 2008, as no properties held by them were sold or delivered.

LIQUIDITY AND CAPITAL RESOURCES

Overview

We operate in a capital-intensive industry and have historically financed our working capital, capital expenditure and other capital requirements through bank and other borrowings, pre-sale proceeds of our properties, and equity and debt issuances. Our short-term liquidity requirements relate to servicing our debt and funding our working capital requirements, and our sources of short-term liquidity include cash balances, proceeds from pre-sales and sales

—86— of properties and new loans. Our long-term liquidity requirements relate to funding of the development of our new property projects and repayment of our long-term debt, and our sources of long-term liquidity include loans, capital contributions from shareholders and proceeds from the Notes offering and additional offerings of equity or other securities.

Cash Flow

The table below summarizes our consolidated cash flow for the periods indicated:

For the nine months ended For the year ended December 31, September 30,

2007 2008 2009 2009 2010

RMB’000 RMB’000 RMB’000 US$’000 RMB’000 RMB’000 US$’000 Selected cash flow statement data Net cash inflow from/(used in) operating activities . (72,497) (379,217) 744,935 111,342 459,038 (980,750) (146,588) Net cash flows used in investing activities. . (197,769) (427,780) (1,128,334) (168,647) (765,830) (242,837) (36,296) Net cash flows from financing activities. . 152,083 788,789 813,203 121,546 652,696 1,803,813 269,608 Net increase/(decrease) in cash and cash equivalents ...... (118,183) (18,208) 429,804 64,241 345,904 580,226 86,724

Net cash flow from/(used in) operating activities

Our cash used in operations principally comprises payments for our property development activities and land acquisitions. Our cash from operations is generated principally from proceeds received from pre-sales and sales of our properties and rental income. Our cash flows for a given period are also supplemented by increases in trade payables and other payables and accruals, which have been accrued but are not yet due. Our property development business experienced net operating cash outflows during 2007 and 2008, particularly when imbalances occurred between the timing of our cash inflows relating to the pre-sale and sale of properties and our cash outflows relating to the construction and development of properties and the acquisition of land parcels. We expanded our property development business, including the acquisition of land parcels and construction of projects, and incurred cash outflows at a more rapid rate than cash return from pre-sales and sales of our projects that were eligible for pre-sales or sales during 2007 and 2008. For the year ended December 31, 2009, we experienced net operating cash inflows.

For the nine months ended September 30, 2010, our net cash flows used in from operating activities was RMB980.8 million, which was primarily attributable to (i) a significant increase in properties under development, (ii) an increase in prepaid land premiums in respect of land acquisitions for the Anshan Project, the Tangshan Project and Provence Town; and (iii) a decrease in receipts in advance from our customers. These were partially offset by cash inflow and an increase in completed properties held for sale.

In 2009, our net cash flows from operating activities was RMB744.9 million, which consisted primarily of (i) a decrease in prepayments, deposits and other receivables in the amount of RMB690.2 million, and (ii) an increase in receipts in advance in the amount of RMB1,096.5 million, which mainly represented proceeds received from the pre-sale of our properties in World City, Seashore Suite No. 1 and West Lake No. 1. These were partially

—87— offset by (i) additions to prepaid land lease payments in the amount of RMB815.9 million that we made for Fortune Plaza, (ii) an increase in completed properties held for sale in the amount of RMB299.1 million, (iii) a decrease in payables of RMB131.4 million; and (iv) interest payment of RMB104.6 million.

In 2008, our net cash flows used in operating activities was RMB379.2 million, which consisted primarily of (i) an increase in completed properties held for sale in the amount of RMB593.0 million, in particular, related to the additional costs associated with completing properties in World City and SCE Building and (ii) an increase in prepaid land lease payments of RMB145.1 million that we made for the land acquired for SCE International Community. There were partially offset by (i) an increase in receipts in advance in the amount of RMB210.7 million, which mainly represented proceeds received from the pre-sale of our properties in World City, Seashore Suite No.1 and West Lake No.1 and (ii) a decrease in properties under development of RMB198.0 million, which indicates a decrease in payments for associated development costs.

In 2007, our net cash flows used in operating activities was RMB72.5 million. The cash flows used in operating activities in 2007 consisted primarily of (i) an increase in prepaid land lease payments of RMB688.2 million, which included prepayments we made for the land acquired for West Lake No. 1, Sapphire Uptown and Sapphire Boomtown, (ii) an increase in properties under development in the amount of RMB151.7 million, which mainly related to additional payments made for developing our properties in World City and (iii) an increase in completed properties held for sale in the amount of RMB206.4 million, which included additional costs associated with completing properties in Sapphire Peninsula (Xiamen). These were partially offset by cash inflows generated primarily from proceeds from the pre-sale of our properties, including those in World City in Beijing, recorded as receipts in advance of RMB1,056.7 million and due to an increase in working capital funding received in the form of other payables.

Net cash flows used in investing activities

Our cash flows used in investing activities primarily reflects the acquisition of property and equipment and acquisition of property project companies. Our cash inflow from investing activities primarily reflects the disposal of jointly-controlled entities.

For the nine months ended September 30, 2010, our net cash flows used in investing activities was RMB242.8 million, which was primarily attributable to the consideration paid for the acquisition of certain subsidiaries, including the subsidiary holding the Beijing Project and a non-controlling interest in SCE International Community.

In 2009, our net cash flows used in investing activities was RMB1,128.3 million, which primarily represented (i) the consideration paid for the acquisition of subsidiaries of RMB857.1 million, relating to the acquisition of a 58% equity interest in Fujian Straits West-Coast Investment Co., Ltd., (ii) additions to investment properties in the amount of RMB42.4 million and (iii) a decrease in consideration payable for the acquisition of subsidiaries and associates of RMB236.7 million, which mainly represented our settlement of outstanding payment for the consideration of Sapphire Boomtown.

In 2008, our net cash flows used in investing activities was RMB427.8 million, which primarily represented our cash used in (i) purchasing property and equipment, which mainly includes furniture, fixtures and office equipment for our new offices in Xiamen, Quanzhou and Shanxi, as well as leasehold improvements for our Xiamen headquarters and Hong Kong office of RMB18.0 million and (ii) additions to investment properties in the amount of RMB138.6 million, in particular, relating to additional costs associated with investment properties in World City in Beijing and SCE Building in Xiamen, (iii) the acquisition of our jointly-controlled entity, SCE Wuyi Oasis, at a consideration of approximately RMB62.0 million, (iv) a decrease in consideration payable for the acquisition of subsidiaries and associates of RMB98.0 million,

—88— which mainly represented our settlement of outstanding payments and (v) the increase in restricted cash of RMB46.7 million, which mainly comprised guarantee deposits required to be placed in specific bank accounts for public maintenance funds or the use of the loan proceeds.

In 2007, our net cash flows used in investing activities was RMB197.8 million. The cash flows used in investing activities in 2007 was mainly attributable to (i) the acquisition of jointly-controlled entities, of RMB68.8 million, which included the establishment of SCE Purple Lake International and our acquisition of Well China International Investment Holdings Limited, (ii) additions to our investment properties in the amount of RMB157.8 million, which includes development costs incurred for the development of our properties in World City in Beijing and SCE Building in Xiamen and (iii) the payment for the acquisition of subsidiaries of RMB132.0 million, including the acquisition of SCE International Community and SCE Sapphire Boomtown. These were partially offset by (i) cash generated from proceeds received from the disposal of Chongqing Chuangquan Real Estate Development Co., Ltd., our jointly-controlled entity, of RMB131.5 million and (ii) the repayment from jointly-controlled entities and associates of their balances due to us totaling RMB33.3 million.

Net cash flows from financing activities

Our cash flows from financing activities are mainly generated from new bank loans, advances from non-controlling interests of certain of our subsidiaries and contributions from non-controlling interests. Our cash outflow from financing activities reflects repayment of bank loans.

In the nine months ended September 30, 2010, our net cash flows from financing activities was RMB1,803.8 million, which was primarily attributable to (i) the IPO proceeds (ii) a net increase in bank and other borrowings; and (iii) a capital contribution from non-controlling interests.

In 2009, our net cash flows from financing activities was RMB813.2 million, which was primarily attributable to (i) increase in bank and other borrowings in the amount of RMB1,824.2 million for property development and (ii) net proceeds from Pre-IPO placing of RMB682.0 million. There were partially offset by our repayment of bank loans and other borrowings of RMB1,502.1 million.

In 2008, our net cash flows from financing activities was RMB788.8 million, which was primarily attributable to (i) new bank and other borrowings in the amount of RMB710.2 million for property development in Quanzhou, in particular, West Lake No. 1, and general working capital purposes and (ii) an increase in net amounts due to related parties of RMB152.0 million, the amount mainly resulted from the decrease in amount due from companies controlled by Mr. Wong of RMB116.0 million. This was partially offset by our repayment of bank loans and other borrowings of RMB79.0 million.

In 2007, our net cash flows from financing activities was RMB152.1 million. The cash flows from financing activities in 2007 was mainly attributable to (i) new bank and other borrowings in the amount of RMB373.9 million, which primarily included loans obtained for our World City project and (ii) the contributions from non-controlling interests of RMB60.5 million, which mainly represented contributions from non-controlling interests of SCE International Community and SCE Sapphire Uptown, our indirect non-wholly-owned subsidiaries. This was partially offset by our repayment of bank loans and other borrowings of RMB301.9 million.

Cash and Bank Balances

As at December 31, 2007, 2008 and 2009 and September 30, 2010, our cash and cash equivalents (excluding restricted cash) amounted to RMB81.1 million, RMB59.7 million, RMB489.5 million and RMB1,067.3 million, respectively.

Pursuant to the relevant regulations in the PRC, we are required to place certain amounts of pre-sales proceeds and other funds into designated bank accounts for guarantee purposes. As of December 31, 2007, 2008 and 2009, and September 30, 2010, such restricted cash amounted to RMB36.7 million, RMB83.4 million, RMB115.3 million and RMB118.3 million, respectively.

—89— Indebtedness

Interest bearing bank and other borrowings

The following table sets forth our outstanding borrowings as of December 31, 2007, 2008 and 2009, and as of September 30, 2010:

As of December 31, As of September 30,

2007 2008 2009 2010

RMB’000 RMB’000 RMB’000 US$’000 RMB’000 US$’000 Current — Bank loans - secured . . 40,000 793,500 555,000 82,953 610,101 91,189 — Current portion of long-term bank loans - secured ..... 7,612 15,318 12,037 1,799 29,148 4,357 — Loan from companies controlled by Mr.Wong ...... — 200,607 ————

47,612 1,009,425 567,037 84,752 639,249 95,546

Non-current — Bank loans - secured . . 675,125 344,493 1,539,028 230,032 1,727,077 258,139 — Other loans - secured . . ————44,4006,636 675,125 344,493 1,539,028 230,032 1,771,477 264,775 Total ...... 722,737 1,353,918 2,106,065 314,784 2,410,726 360,321

As of September 30, 2010, we had obtained credit facilities from banks of approximately RMB11,000 million, of which RMB1,949 million had been utilized and approximately RMB9,051 million had not been utilized.

Our outstanding bank and other borrowings amounted to RMB722.7 million, RMB1,353.9 million, RMB2,106.1 million and RMB2,410.7 million as of December 31, 2007, 2008, 2009, and September 30, 2010, respectively. All of our outstanding bank loans as of September 30, 2010 are secured.

Except for secured bank loans of RMB8.7 million, RMB8.4 million and RMB51.1 million as of December 31, 2008, December 31, 2009 and September 30, 2010, respectively, and other loans of RMB8.8 million as of December 31, 2008, which are denominated in Hong Kong dollars, all of our secured and unsecured borrowings are denominated in RMB.

Except for the RMB40.0 million, RMB195.0 million and RMB545.0 million of short-term bank loans as of December 31, 2007, 2008 and 2009, respectively, other short-term loans of RMB15.0 million as of December 31, 2008, and other non-current secured loans of RMB44.4 million as of September 30, 2010 that bear interest at a fixed interest rate, all of our bank and other borrowings bear interest at floating rates. For the three years ended December 31, 2007, 2008, 2009 and the nine months ended September 30, 2010, the average interest rate was 8.5%, 6.2%, 5.0% and 3.9%, respectively, for our interest-bearing bank and other borrowings. The carrying amounts of our bank and other borrowings approximate their fair values.

Our net gearing ratio was 160.9%, 211.0%, 64.9% and 28.3% as of December 31, 2007, 2008, 2009 and as of September 30, 2010, respectively. The net gearing ratio was calculated by dividing the net amount of loans (interest-bearing bank and other loans after deduction of cash and cash equivalents and restricted cash) by total equity.

—90— The table below sets forth the maturity profiles of our bank and other borrowings as of the dates indicated:

As of December 31, As of September 30,

2007 2008 2009 2010

RMB’000 RMB’000 RMB’000 US$’000 RMB’000 US$’000 Bank and other loans repayable

Within one year or on demand ...... 47,612 808,818 567,037 84,753 639,249 95,546 In the second year...... 643,050 14,123 360,330 53,857 806,000 120,469 In the third to fifth years, inclusive ...... 21,200 318,132 1,171,059 175,033 921,000 137,658 Beyond five years ...... 10,875 12,238 7,639 1,142 77 11 Sub-total ...... 722,737 1,153,311 2,106,065 314,785 2,366,326 353,684 Loans from companies controlled by Mr. Wong and repayable within one year ...... — 200,607 ———— Other borrowings repayable in the second year ...... ————44,400 6,636 Total ...... 722,737 1,353,918 2,106,065 314,785 2,410,726 360,320

Pledge of assets

Our bank borrowings listed above were secured by certain investment properties, properties under development and prepaid land lease payments, the details of which are set forth below.

As of December 31, As of September 30,

2007 2008 2009 2010

RMB’000 RMB’000 RMB’000 US$’000 RMB’000 US$’000 Property and equipment . . 6,177 28,310 52,454 7,840 55,705 8,326 Investment properties .... 456,672 838,672 1,296,000 193,707 1,311,000 195,949 Prepaid land lease payments ...... 12,963 230,385 1,132,399 169,255 916,334 136,960 Properties under development ...... 506,106 674,896 1,928,086 288,183 3,528,931 527,454 Completed properties held for sale ...... — 607,862 3,488 521 — — Total ...... 981,918 2,380,125 4,412,427 659,506 5,811,970 868,689

—91— Contingent liabilities

The table below sets forth the financial guarantees as of the dates indicated:

As of December 31, As of September 30, 2007 2008 2009 2010 RMB’000 RMB’000 RMB’000 US$’000 RMB’000 US$’000 Guarantees in respect of mortgage facilities for certain purchasers of our properties(1) ...... 688,347 504,211 879,213 131,412 1,164,062 173,990 Guarantees given to bank in connection with facilities granted to companies controlled by Mr. Wong . . . 170,000 255,500 ————

Note: (1) As of December 31, 2007, 2008 and 2009 and September 30, 2010, we provided guarantees in respect of mortgage facilities granted by certain banks relating to the mortgage loans arranged for certain purchasers of our properties. Pursuant to the terms of the guarantees, upon default on mortgage payments by these purchasers before the expiry of the guarantees, we are responsible for repaying the outstanding mortgage principals together with the accrued interest and penalties owed by the defaulted purchasers to the banks. Under the above arrangement, the related properties were pledged to the banks as collateral for the mortgage loans, upon default on mortgage repayments by these purchasers, the banks are entitled to take over legal title and will realize the pledged properties through public auction. We are responsible for repaying the banks when the proceeds from the public auction of the properties cannot cover the outstanding mortgage principals together with the accrued interest and penalties. Our guarantee period starts from the date of the grant of the relevant mortgage loans and ends upon the submission of property ownership certificates to the mortgagee banks, which will generally be available within one to two years after the purchasers take possession of the relevant properties. The fair value of the guarantees is not significant and our directors consider that in the case of default on payments, the net realizable value of the related properties can cover the repayment of the outstanding mortgage principals together with the accrued interest and penalties and therefore no provision has been made for the guarantees.

Commitments

We had the following capital commitments as of the dates indicated:

As of December 31, As of September 30, 2007 2008 2009 2010 RMB’000 RMB’000 RMB’000 US$’000 RMB’000 US$’000 Contracted, but not provided for: - Capital expenditure for properties under development, completed properties held for sale and construction of investment and owner-occupied properties in the PRC .... 532,638 1,110,644 1,332,476 199,159 1,139,865 170,371 - Capital expenditure for acquisition of property and equipment ...... 3,609 ————— - Acquisition of jointly-controlled entities . . 14,668 ————— Total ...... 550,915 1,110,644 1,332,476 199,159 1,139,865 170,371

—92— In addition, our share of the jointly-controlled entities’ own capital commitments which are not included in the above, is as follows:

As of December 31, As of September 30,

2007 2008 2009 2010

RMB’000 RMB’000 RMB’000 US$’000 RMB’000 US$’000 Contracted, but not provided for: Capital expenditure for jointly- controlled entities’ properties under development ...... 13,958 52,205 9,564 1,429 76,136 11,380 Capital expenditure for associates’ properties under development .... 25,200 14,689 ————

MARKET RISKS Market risk is the risk of loss related to adverse changes in market prices, including interest rates and foreign exchange rates, of financial instruments. We are exposed to various types of market risk in the ordinary course of business. We maintain our accounting records and prepare our financial statements in Renminbi. Our assets are predominantly in the form of prepaid land lease payments, investment properties, properties under development and completed properties held for sale. In the event of a severe downturn in the real estate market, these assets may not be readily realized.

Commodities Risk We are exposed to fluctuations in the prices of raw materials for our property developments, primarily steel and cement. We purchase most of our supplies of steel and cement at market prices. Such purchase costs are generally accounted for as part of contractors’ fees pursuant to our arrangements with the relevant contractors. Rising prices for construction materials will therefore affect our construction costs in the form of increased fees payable to our contractors. As a result, fluctuations in the prices of our construction materials could have a significant impact on our results of operations.

Interest Rate Risk Our income and operating cash flows are substantially independent of changes in market interest rates. Other than deposits held at banks, we do not have significant interest-bearing assets. Restricted deposits were held at banks in the PRC at the same savings rate as unrestricted deposits throughout the three years ended December 31, 2007, 2008 and 2009 and the nine months ended September 30, 2010. Our exposure to the risk of changes in interest rates relates to our bank deposits and bank borrowings with floating interest rates. We have not used any interest rate swaps to hedge our exposure to interest rate risk, but will consider hedging significant interest rate risk should the need arise. Please see “Risk Factors — Risks relating to our business — Our business may be adversely affected by future increases in interest rates.”

Foreign Currency Risk All of our turnover and substantially all of our operating expenses are denominated in RMB, which is currently not a freely convertible currency. The PRC government imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currency out of China. Shortages in the availability of foreign currencies may restrict the ability of our PRC subsidiaries to remit sufficient foreign currencies to pay dividends or other amounts to shareholders.

—93— Under existing PRC foreign exchange regulations, payments of current account items, including dividends, trade and service-related foreign exchange transactions can be made in foreign currencies without prior approval from the State Administration for Foreign Exchange Bureau by complying with certain procedural requirements. However, approval from appropriate PRC governmental authorities is required where RMB is to be converted into a foreign currency and remitted out of China to pay capital account items, such as the repayment of bank loans denominated in foreign currencies.

Currently, our PRC subsidiaries may purchase foreign exchange for settlement of current account transactions, including payment of dividends to our Company, without prior approval of the State Administration for Foreign Exchange Bureau. Our PRC subsidiaries may also retain foreign currencies in their current accounts to satisfy foreign currency liabilities or to pay dividends. Since foreign currency transactions on the capital account are still subject to limitations and require approval from the State Administration for Foreign Exchange Bureau, this could affect our subsidiaries’ ability to obtain required foreign exchange through debt or equity financing, including by means of loans or capital contributions from shareholders. Please refer to the sections headed “Risk Factors” in this offering memorandum.

Our financial assets and liabilities including certain amounts due from/(to) related parties denominated in Hong Kong dollars and certain short term deposits denominated in Hong Kong dollars and United States dollars are subject to foreign currency risk. Therefore, the fluctuations in the exchange rates of RMB against foreign currencies could affect our results of operations.

There are limited hedging instruments available in the PRC to reduce our exposure to exchange rate fluctuations between the RMB and other currencies. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risks. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to hedge our exposure successfully, or at all.

Credit Risk

It is our policy that all customers are required to pay deposits in advance of the purchase of properties. In addition, we do not have any significant credit risk as the credit given to any individual or corporate entity is not significant. We do not have significant concentration of credit risk.

The credit risk of our other financial assets, which mainly comprise of cash and short term deposits, other receivables and amounts due from related parties, arises from default of the counterparty, with a maximum exposure equal to the carrying amounts of these instruments.

Inflation

China has not experienced significant inflation or deflation in recent years. According to the National Bureau of Statistics of China, China’s overall national inflation rate, as measured by the general consumer price index, was approximately 4.8% in 2007, 5.9% in 2008 and -0.7% in 2009. Inflation in the past did not materially affect our business. Deflation could negatively affect our business as it might be a disincentive for prospective purchasers to make a purchase.

NON-GAAP FINANCIAL MEASURES

We use EBITDA and EBITDA margin to provide additional information about our operating performance. EBITDA refers to our profit for the period plus finance costs, income tax expense, depreciation and amortization and minus changes in fair value of investment properties. EBITDA margin is calculated by dividing EBITDA by revenue.

—94— EBITDA is not a standard measure under either HKFRS or U.S. GAAP. As the property development business is capital intensive, capital expenditure requirements and levels of debt and interest expenses may have a significant impact on the profit for the period of companies with similar operating results. Therefore, we believe the investor community commonly uses this type of financial measure to assess the operating performance of companies in our market sector.

As a measure of our operating performance, we believe that the most directly comparable HKFRS and U.S. GAAP measure to EBITDA is net profit for the period/year. We use EBITDA in addition to profit before income tax because profit before income tax includes many accounting items associated with capital expenditures, such as depreciation, as well as non-operating items, such as amortization of land use rights. These accounting items may vary between companies depending on the method of accounting adopted by a company. By minimizing differences in capital expenditures and the associated depreciation expenses as well as land use rights amortization, EBITDA provides further information about our operating performance and an additional measure for comparing our operating performance with other companies’ results. Funds depicted by this measure may not be available for debt service due to covenant restrictions, capital expenditure requirements and other commitments.

The following table reconciles our profit before income tax under HKFRS to our definition of EBITDA for the periods indicated:

For the nine months ended For the year ended December 31, September 30, 2007 2008 2009 2009 2010 RMB’000 RMB’000 RMB’000 US$’000 RMB’000 RMB’000 US$’000 Profit for the year/period . . 160,077 165,859 361,691 54,060 273,732 572,752 85,607 Adjustments Income tax expense .... 70,581 75,606 178,996 26,754 147,883 402,032 60,090 Finance costs ...... 1,376 3,324 5,642 843 2,368 4,026 602 Depreciation ...... 3,073 5,272 7,157 1,070 5,725 7,013 1,048 Amortization...... 984 11,423 22,282 3,330 12,571 38,570 5,765 Changes in fair value of investment properties . (168,247) (211,366) (371,613) (55,543) (222,836) (15,000) (2,242) EBITDA...... 67,844 50,118 204,155 30,514 219,443 1,009,393 150,870

You should not consider our definition of EBITDA in isolation or construe it as an alternative to operating profit or as an indicator of operating performance or any other standard measure under HKFRS or U.S. GAAP. Our definition of EBITDA does not account for taxes and other non-operating cash expenses. Our EBITDA measures may not be comparable to similarly titled measures used by other companies. You should also note that EBITDA as presented herein may be calculated differently from Consolidated EBITDA as defined and used in the Indenture governing the Notes. See “Description of the Notes — Definitions” for a description of the manner in which EBITDA is defined for purposes of the Indenture governing the Notes.

—95— INDUSTRY OVERVIEW

The information in the section below has been derived, in part, from various government publications unless otherwise indicated. This information has not been independently verified by us or the Initial Purchasers or any of our or their respective affiliates or advisors. The information may not be consistent with other information compiled within or outside the PRC.

MACRO-ECONOMIC CONDITIONS OF THE PRC

Since China’s adoption of the open door policy in 1978, it has experienced significant economic growth, which has been driven further by its accession to the World Trade Organization in 2001. China’s nominal GDP increased from RMB15,987.8 billion in 2004 to RMB34,050.7 billion in 2009, representing a compound annual growth rate (CAGR) of 16.3% and making China one of the fastest growing economies in the world. In line with its GDP growth, China’s per capita GDP also rose from RMB12,335.6 in 2004 to RMB25,575.5 in 2009, representing a CAGR of 15.7%. Amidst strong GDP growth, per capita annual urban disposable income in China grew rapidly during the period from RMB9,421.6 in 2004 to RMB17,174.7 in 2009, reflecting a nationwide CAGR of 12.8% during this period and implying increased purchasing power for urban households throughout China.

The table below sets forth selected economic statistics of China for the years indicated:

CAGR 2004 2005 2006 2007 2008 2009 04-09

Population (millions) ...... 1,299.9 1,307.6 1,314.5 1,321.3 1,328.0 1,334.7 0.5% Urban population (millions) ...... 542.8 562.1 577.1 593.8 606.7 621.9 2.8% Nominal GDP (RMB in billions) . . . 15,987.8 18,493.7 21,631.4 26,581.0 31,404.5 34,050.7 16.3% Real GDP growth (%) ...... 10.1 11.3 12.7 14.2 9.6 9.1 N/A Per capita GDP (RMB)...... 12,335.6 14,185.4 16,499.7 20,169.5 23,707.7 25,575.5 15.7% CPI growth (%)...... 3.9 1.8 1.5 4.8 5.9 -0.7 N/A Urbanization (%)...... 41.8 43.0 43.9 44.9 45.7 46.6 N/A Unemployment rate (%) ...... 4.2 4.2 4.1 4.0 4.2 4.3 N/A Per capita annual urban disposable income (RMB)...... 9,421.6 10,493.0 11,759.5 13,785.8 15,780.8 17,174.7 12.8% Consumption expenditure per capita (RMB) ...... 7,182.1 7,942.9 8,696.6 9,997.5 11,242.9 12,264.6 11.3% Retail sales of consumer goods (RMB in billions) ...... 5,950.1 6,835.3 7,914.5 9,357.2 11,483.0 13,267.8 17.4% Foreign direct investment (US$ in billions) ...... 60.6 72.4 72.7 83.5 108.3 94.1 9.2% Fixed asset investment (RMB in billions) ...... 7,047.7 8,877.4 10,999.8 13,732.4 17,282.8 22,459.9 26.1% Real estate investment in China (RMB in billions) ...... 1,315.8 1,590.9 1,942.3 2,528.9 3,120.3 3,624.2 22.5%

Sources: China Ethnic International Economic Cooperation Co. Data Company Ltd (“CEIC”) and Economic Intelligence Unit

Key real estate reforms in the PRC

The property development industry in the PRC is extremely competitive and heavily restricted by governmental policies, regulations and laws. These barriers include obtaining qualification certificates related to property development, the demand for continuously increasing, or at least replenishing, land bank and maintaining adequate working capital for projects. Many of these requirements form a part of China’s attempts to reform the market. Prior to the reform of the PRC real estate market in the 1990s, the PRC real estate

—96— development industry was part of the nation’s centrally planned economy. In the 1990s, the PRC government initiated a number of real estate reforms and, as a result, China’s real estate sector began its transition to a market-based system. A brief timeline of key real estate reforms is set out below:

1988 — National constitution amended by the PRC government to permit the transfer of state-owned land use rights

1991 — Commencement of employer/employee-funded housing fund

1992 — Commencement of public housing sales in major cities

1994 — Establishment of an all-round employer/employee-funded housing fund

1995 — Regulations regarding sales and pre-sales of real estate issued by the PRC government, establishing a regulatory framework for property sales

1998 — State-allocated housing policy abolished by the PRC government

1999 — The PRC government extended maximum mortgage term to 30 years and increased maximum mortgage financing from 70% to 80% of the total purchase price of the property

2000 — Regulations to standardize the quality of construction projects issued by the PRC government, establishing a framework to administer construction quality

2001 — Regulations relating to sales of commodity housing issued by the PRC government

2002 — New rules promulgated by the PRC government requiring that land use rights for the purposes of commercial use, tourism, entertainment, commodity residential properties and other operational purposes can only be granted by the PRC government through competitive bidding, public auction or listing-for-sale

— Dual system for domestic and overseas home buyers was eliminated

2003 — Regulations relating to property management issued by the PRC government

— The PRC government promulgated rules for more stringent administration of real estate loans with a view to reducing the credit and systemic risks associated with such loans

— The State Council issued a notice for sustained and healthy development of the real estate market

2004 — The State Council issued a notice requiring that, with respect to property development projects (excluding affordable housing), the proportion of financing from capital funds of real estate developers should be increased from 20% to 35% of the total projected capital outlay

— The Ministry of Housing and Urban Rural Development of the PRC (中國住房和城鄉建設部) (“MOHURD”) amended and supplemented the Administrative Measures on the Pre-sale of Commercial Housing imposing more restrictive requirements on the pre-sale of commodity housing in cities

—97— — The China Banking Regulatory Commission (中國銀行業監督管理委員會) (“CBRC”) issued the Guidelines for Commercial Banks on Risks Management of Real Estate Loan to further strengthen the risk control of commercial banks over real estate loans and financing

2005 — The PRC government instituted additional measures to discourage speculation in certain regional markets including, among others, eliminating the preferential mortgage interest rate for residential housing, imposing a business tax of 5% on the proceeds from sales that occur within two years of purchase, and prohibiting resale of unfinished properties

2006 — The PRC government implemented additional land supply, bank financing and other measures to curtail fast increases in real estate prices, to encourage the development of middle to low-end housing and to promote the healthy development of the PRC real estate industry

— MOHURD issued a guideline requiring, among others, that the total GFA of units with area below 90 sq.m. must not be less than 70% of total GFA of newly approved or newly constructed projects, the minimum required down-payment shall be increased to 30% of the total purchase price for units larger than 90 sq.m. and banks are not permitted to provide loans to a real estate developer with an internal capital ratio of less than 35%

— MOHURD, MOFCOM, the National Development and Reform Commission of the PRC (中國國家發展和改革委員會) (“NDRC”), PBOC, the State Administration for Industry and Commerce of the PRC (中國國家工商行政管理總局) (“SAIC”) and SAFE jointly issued new regulations with the aim of regulating foreign investment in the domestic real estate market and to restrict the abilities of certain offshore entities and foreign individuals to purchase commercial and residential properties in China

2007 — Regulations were issued to increase the annual land use tax, and to impose these land use taxes on foreign invested enterprises

— MLR issued regulations requiring land use rights certificates not to be issued unless and until the land premiums have been paid with respect to all of the land use rights under a land grant contract, which effectively stopped the practice of issuing these certificates in installments

2008 — The State Council issued a notice reinforcing that not less than 70% of any residential land development project must be used for developing low-cost rental units, small to medium-sized units, low to medium-cost units and units with a GFA of less than 90 sq.m. The notice also imposes an additional land premium surcharge on idle land

— The State Council implemented several tax related policies, including shortening the business tax exemption term for the transfer of ordinary residential housing from five years to two years and unifying the urban real estate tax applicable to foreign-invested and non-foreign-invested companies

— MOF and SAT adjusted real estate related tax rates for property sale or purchase by individuals, including temporarily lowering the deed tax rate to 1% for the purchase by individuals of their first residential unit with a GFA of no more than 90 sq.m., suspending stamp duty and LAT for sale of residential houses and suspending stamp duty for purchase of residential houses

— PBOC adjusted the lower limit of the lending rate and the minimum down-payment for commercial individual residential house

—98— 2009 — The State Council issued a notice lowering the minimum capital ratio for property development projects

2010 — MOF and SAT adjusted the business tax exemption term for the transfer of ordinary residential house from two years to five years

— The State Council issued a notice to further reinforce the administration of land supply and sales of commercial buildings

— MOHURD issued a notice requiring real estate developers of residential projects to publicize all licensed housing and price of each unit within 10 days of obtaining the pre-sale license

— MLR and MOHURD issued a notice requiring that the plot ratio of residential land must be over 1 and in accordance with the land-use-rights contract for housing construction projects, construction must be commenced within one year upon the delivery of land and be completed within three years after the date of commencement

— The State Council issued a notice stipulating that for families (including the borrower, spouse and underage children) who purchase their first residential unit for self-use with a GFA of over 90 sq.m., the down-payment ratio of the loan shall not be lower than 30%; the down-payment ratio of the loan for purchase of a second residential unit shall not be lower than 50%, and the interest rate on the loan shall not be lower than 1.1 times the benchmark interest rate. The down-payment and interest rate shall be raised substantially for loans to buy any additional residential units after the second unit

— PBOC and CBRC issued a notice requiring commercial banks to stop providing housing loans to local residents whose family members already own two or more residential units, and to non-local residents who cannot provide evidence showing that they have paid taxes or social insurance contribution for more than one year. The down-payment ratio for loans to buy residential units has been adjusted to no less than 30%; for any family that uses loans to buy a second residential unit, the down-payment ratio shall not be lower than 50% and the loan interest rate shall not be lower than 1.1 times the benchmark loan interest rate

— MOF, SAT and MOHURD adjusted the preferential policies on deed tax and individual income tax for property sales and purchases by individuals. Adjustments include cutting the deed tax rate of individuals by half for first-time purchases of residential units and to 1% for residential units with a GFA of no more than 90 sq.m., as well as cancelling preferential policies on individual income taxes for those who sells his/her residential unit and purchases another unit within one year

— MOHURD, MOF, PBOC and CBRC jointly issued a notice to stop providing housing provident fund loans to families that are purchasing a third residential unit or more. The down-payment for loans to purchase the first residential unit with a GFA of no more than 90 sq.m., shall not be lower than 20%, and for units with a GFA of more than 90 sq.m., the loan down-payment shall not be lower than 30%

—99— Regulatory measures affecting the real estate market in the PRC

Reform of the PRC real estate market did not commence until the 1990s. Prior to such reform, the PRC property development industry was part of the nation’s centrally planned economy. In the 1990s, the PRC government initiated the housing reform and, as a result, the real estate and housing sector of China began its transition to a market-based system.

In 1988, the PRC government amended the national constitution to permit the transfer of state-owned land use rights and, in 1992, sales of former public housing commenced in major cities. Two years later, in 1994, the PRC government implemented further reforms and established an employer/employee-funded housing fund and issued a regulation regarding pre-sale of commodity housing in cities. In 1995, the PRC government issued regulations regarding the transfer of real estate, established a regulatory framework for property sales and subsequently abolished the state-allocated housing policy in 1998. In 1999, the PRC government extended the maximum mortgage term to 30 years and formalized procedures for the sale of real estate in the secondary market.

The PRC government issued regulations to standardize the quality of construction projects in 2000, establishing a framework for administering construction quality. In 2002, the PRC government promulgated rules to require that state-owned land use rights be granted by way of competitive bidding, public auction and listing-for-sale and eliminated the dual system for domestic and overseas home buyers in China. In 2003, the PRC government promulgated rules to require more stringent administration of real estate financing for the purpose of reducing credit and systemic risks associated with such financing.

From 2004 to the first half of 2008, in order to prevent the overheating of the PRC economy and to achieve balanced and sustainable economic growth, the PRC government took measures to control money supply, credit availability and fixed assets investment. Since early 2001, the PRC government has also taken measures to discourage speculation in the residential real estate market and to increase the supply of affordable housing rather than high-end residential properties. In response to concerns over the scale of the increase in real estate investment, the PRC government introduced policies and measures to restrict such increases as explained in “Regulation” of this offering memorandum.

Regulatory measures adopted by Fujian Provincial Government

On May 14, 2001, the Fujian Provincial Government issued the Administration Measures Regarding the Grant of State-owned Land Use Rights by Way of Competitive Bidding, Public Auction and Listing-for-sale in Fujian Province (Fujian Government No. 64) requiring that land use rights for properties for commercial use, tourism, entertainment and commodity residential purposes can only be granted through competitive bidding, public auction or listing-for-sale in Fujian Province.

On December 28, 2005, the Construction Department of Fujian Province issued the Notice of revising the Implementation Provision on Administration of Qualification of Real Estate Development Enterprise in Fujian Province (Min Jian Fa 2005 No. 85). Under this notice, property development enterprises in Fujian Province are categorized into four classes with reference to their qualification obtained from and as approved by different levels of government authorities, with the attainment of class 1 qualification being subject to the approval from the MOHURD, class 2 from the relevant provincial construction authority, class 3 from prefecture city construction authority and class 4 from the relevant local city or county construction authority. The scope and scale of property development that a real estate developer may engage in is dependent on its qualification classification.

— 100 — On February 14, 2009, the General Office of the Fujian Province Government issued the Opinions on Facilitating Healthy Development of Real Estate Market (Min Zheng Ban 2009 No. 25) which provides that:

— the standards for ordinary commodity housing will be revised;

— the minimum lending interest rates for mortgage loans to first-time homebuyers of ordinary housing may be lowered to 70% of the benchmark lending rate and the minimum down-payment required be lowered to 20% of the total purchase price;

— stamp duty and LAT will be temporarily exempted for the sale and/or purchase of real estate;

— the local and municipal government may revise and loosen regulations and policies governing the procedures for applying for urban residence certificates by non-local residents who purchase commercial and second-hand houses;

— the deadline for payment of land grant fees regarding commercial land use rights newly granted through competitive bidding, public auction or listing-for-sale may be extended to 12 months and further extended to a maximum of 18 months for high-priced and large-scale land parcels. For land granted after January 1, 2007, if the transferee cannot commence construction in time, the deadline for completion of the construction of a project development may be extended to up to one year and the time extension shall be determined with reference to the scale of the relevant land; and

— LAT may be levied in stages or suspended to be levied on real estate developers with high credit rating, no records of non-payment of tax and proper construction planning.

On January 18, 2010, the General Office of the Fujian Province Government issued the Opinions on Promoting Stable and Healthy Development of Real Estate Markets (Min Zheng Ban 2010 No. 7) which provides that:

— for families (including the borrower, spouse and underage children) that have already purchased a residential unit backed with loans, the down-payment ratio of the loan for a second residential unit purchase or above shall not be lower than 40%;

— as of January 1, 2010, business tax is imposed on the full amount of the sales income upon the transfer of a non-ordinary residence by an individual within five years from the purchase date. For the transfer of a non-ordinary residence which is more than five years (inclusive) from the purchase date and an ordinary residence which is within five years of the purchase date, business tax is to be levied on the difference between the sales income and the purchase price. In the case of an ordinary residence, business tax is exempted if the transfer occurs after five years from the purchase date;

— the pre-sales permit for projects which meet the pre-sales conditions shall be conducted for the whole building in one batch rather than for each floor or unit.

On June 16, 2010, the Fujian Province Government issued The Notice of the State Council on Firmly Preventing Overly Fast Growth of Real Property Prices in Certain Cities (Min Zheng Wen 2010 No. 203) which provides that:

— unreasonable housing demands will be restrained;

— 101 — — major clearing and auditing will be conducted on property development projects that are overpriced and whose prices rise too fast;

— the construction of affordable security housing project will be sped up;

— real estate market regulation will be strengthened; and

— For additional information on housing reforms and recent regulatory developments, please see “Regulation” of this offering memorandum.

Development of the Western Taiwan Strait Economic Zone

On May 6, 2009, the State Council promulgated the Several Opinions in relation to Supporting Fujian Province to Accelerate the Development of the Western Taiwan Strait Economic Zone pursuant to which the PRC government intends to accelerate the development of the Western Taiwan Strait Economic Zone in order to boost the nation’s coastal economy as a whole, channel overseas capital to western and central China and to forge stronger economic cooperation with Taiwan.

We believe Fujian Province is the key constituent of the Western Taiwan Strait Economic Zone and will act as the hub of the economic zone as it directly faces Taiwan across the Straits and links the Pearl River Delta region with the Yangtze River Delta region, two major economic hubs in the PRC. According to the measures mentioned above, Fujian Province is the key area for future development of the Western Taiwan Strait Economic Zone.

Fujian Province boasts geographic proximity to Taiwan, and shares the same ancestral origins, languages, folk customs and cultural traditions with Taiwan. In August 2005, Fujian Province became the first mainland province to import zero-tariff fruit from Taiwan. Fujian Province has been one of the largest markets for investment from Taiwan since the 1980s, when Taiwan residents started to invest and operate businesses in the PRC. Since then, according to statistics from the Office of Taiwan Affairs in Fujian Province, Fujian Province has attracted more than RMB160 billion in investment from Taiwan and Taiwan has become the second largest offshore investor in Fujian Province in 2009, following Hong Kong.

On July 29, 2009, the 8th Commission of Fujian Communist Party issued implementation rules for the proposed measures mentioned above in order to strictly implement and adopt the proposed development plans for Fujian Province. On January 30, 2010, the third Session of the 11th People’s Congress of Fujian Province approved the Outline on the Construction of Western Taiwan Straits Economic Zone by Fujian Province (revised version) in order to accelerate the development of the Western Taiwan Straits Economic Zone. Pursuant to the implementation rules and the Outline, the PRC government intends to promote scientific development and adopt the reform and open door policy in Fujian Province, with the target that the GDP of Fujian Province will reach RMB4 trillion by 2020. In addition, the PRC government plans to further promote foreign investments in Fujian Province by, among others, (i) loosening restrictions on investment by Taiwan investors in specific regions in Xiamen, Quanzhou, Fuzhou and Zhangzhou and introducing preferential investment policies for Taiwan investors, such as providing preferential tax treatment and exemptions for Taiwan investments, (ii) promoting exports to, and free trade with, Taiwan and expanding certain ports in China’s western coastal cities, and (iii) encouraging employment and secondment of Taiwanese employees to China and offering student exchange programs with Taiwan.

— 102 — Pursuant to the implementation rules, the PRC government will also focus on the acceleration of urbanization in cities such as Fuzhou, Xiamen and Quanzhou with an aim of transforming such cities into centers for financial, logistics and convention services. The PRC government also aims to strengthen the infrastructure of cities such as Zhangzhou. In 2009, key infrastructure and development projects in Fujian Province totalled RMB148.0 billion, representing a year-on-year growth of 22.3%. We believe those will contribute to rapid economic growth in Fujian Province and will help consolidate its position as one of the more developed provinces within the PRC. As a result, we believe that the real estate market in Fujian Province will benefit from the implementation of such measures.

Growth of real estate markets in China

We believe the economic growth of China, the increase in disposable income, the emergence of the mortgage lending market and the increase in the urbanization rate are key factors in sustaining the growth of China’s real estate market. Government housing reforms continue to encourage private ownership, and it is expected that an increasing proportion of urban residents will own private properties in the near future.

The average selling price of real estate in China reached a CAGR of 11.3% between 2004 and 2009. In 2009, the average price of residential real estate was RMB4,459.0 per sq.m., an increase of 24.7% from RMB3,576.0 per sq.m. in 2008.

From 2004 to 2009, there was an increasing trend in the GFA of residential real estate completed and sold in China. Even though the economic downturn of 2008 led to a dip in overall residential sales for that year, sales volume recovered strongly in 2009, with the GFA of residential sales outpacing residential completion. The year-on-year increase in sales from 2008 to 2009 was 45.4%, reaching a total GFA sold of 861.8 million sq.m. in 2009, reflecting that residential real estate demand in China is resilient and can quickly rebound from economic downturns. High growth in residential sales over the six years is reflected in a CAGR of 16.8%.

The table below sets out the residential GFA completed and sold, as well as the average selling price of real estate in China for the years indicated:

CAGR China Overall 2004 2005 2006 2007 2008 2009 04-09

Residential GFA completed (’000 sq.m.) ...... 426,197.2 436,828.5 454,717.5 498,313.5 543,341.0 596,290.0 6.9% Residential GFA sold (’000 sq.m.) . 397,226.8 495,878.3 554,229.5 701,358.8 592,803.5 861,848.9 16.8% Residential average selling price (RMB per sq.m.) ...... 2,608.0 2,937.0 3,119.3 3,645.2 3,576.0 4,459.0 11.3%

Source: CEIC

Fujian Province

Fujian Province is situated in the southeastern coastal area of China and is estimated to be the place of origin of more than 10 million overseas Chinese. Due to the close proximity of Fujian Province and Taiwan, business and trade between the two places has developed rapidly in recent years. In 2009, Fujian Province contributed 3.6% to China’s nominal GDP while comprising only 2.7% of the national population. In line with the overall GDP growth of China, Fujian Province’s nominal GDP reached RMB1,223.7 billion in 2009, representing a CAGR of 16.3% for the period from 2004 to 2009.

— 103 — Between 2004 and 2009, per capita GDP in Fujian Province grew at a CAGR of 15.5% and almost doubled in absolute terms from RMB16,469.0 in 2004 to RMB33,840.0 in 2009. Per capita GDP in Fujian Province also exceeded that of China’s average for each of these six years. Per capita annual urban disposable income in Fujian Province increased from RMB11,175.4 in 2004 to RMB19,576.8 in 2009, reflecting a CAGR of 11.9%. In absolute terms, the per capita disposable income in Fujian Province exceeded that of the national average for every year from 2004 to 2009.

CAGR Fujian Province 2004 2005 2006 2007 2008 2009 04-09

Nominal GDP (RMB in billions) . . . 576.3 656.9 761.5 924.9 1,082.3 1,223.7 16.3% Per capita GDP (RMB)...... 16,469.0 18,605.0 21,384.0 25,906.0 30,122.0 33,840.0 15.5% Per capita annual urban disposable income (RMB)...... 11,175.4 12,321.3 13,753.3 15,506.1 17,961.5 19,576.8 11.9%

Source: CEIC and Fujian Statistical Yearbook

The real estate market in Fujian Province

The real estate market in Fujian Province grew rapidly from 2004 to 2009, with total investment in real estate increasing from RMB67.6 billion in 2004 to RMB193.8 billion in 2009, reflecting a CAGR of 23.5%. Following a dip in real estate investment in 2008 caused by the global economic crisis, total investment rebounded in 2009 with a year-on-year increase of 35.8%. Based on the statistics set out in the table below, fixed assets investments are mainly funded by domestic loans, self-raised funds and other loans and borrowings.

Source of funds of Fujian Fixed Assets Investments (RMB millions) 2004 2005 2006 2007 2008 2009

Domestic loans ...... 10,013.1 15,685.0 29,235.8 46,410.2 31,356.4 39,464.5 Foreign investment ...... 1,551.1 1,481.2 1,447.0 2,277.0 4,101.9 1,385.6 Self-raised funds ...... 19,633.7 21,715.4 31,187.3 47,600.2 42,550.3 45,817.1 Others ...... 36,356.0 41,511.2 64,223.4 82,653.1 64,644.4 107,102.1 Total funds ...... 67,553.9 80,392.8 126,093.5 178,940.5 142,653.0 193,769.3

Sources: National Bureau of Statistics

The annual total GFA of residential properties completed in Fujian Province grew from 14.2 million sq.m. in 2008 to 16.9 million sq.m. in 2009, representing a year-on-year growth of 18.8%. After a dip in residential sales in Fujian Province as a result of the global economic crisis of 2008, residential GFA sold regained momentum and almost doubled in 2009, increasing from 12.6 million sq.m. in 2008 to 24.2 million sq.m. in 2009. The average selling price for residential properties in Fujian Province has exceeded that of the national average since 2006, resulting in a CAGR of 18.1% from 2004 to 2009.

CAGR Fujian Province 2004 2005 2006 2007 2008 2009 04-09

Residential GFA completed (’000 sq.m.) ...... 12,605.5 13,048.5 11,285.9 13,444.2 14,228.3 16,908.5 6.0% Residential GFA sold (’000 sq.m.) . 12,246.1 17,205.6 17,433.9 20,963.9 12,550.0 24,208.0 14.6% Residential average selling price (RMB per sq.m.) ...... 2,332.0 2,800.9 3,655.7 4,476.0 4,498.0 5,366.0 18.1%

Source: CEIC

— 104 — The following descriptions introduce the economy and real estate markets of Xiamen, Quanzhou, and Zhangzhou, which are major cities in Fujian Province and where our businesses principally operate. Total nominal GDP of the aforementioned three cities accounted for over 46.9% of Fujian Province’s nominal GDP for each of the years between 2004 and 2009. The combined average per capita GDP and annual urban disposable income of these three cities surpassed the average of Fujian Province for each of the years from 2004 to 2009, demonstrating that the local economies of the cities where our developments are primarily focused generally outperformed other cities in Fujian Province.

Xiamen

Xiamen was one of China’s earliest special economic zones in the 1980s and is a coastal sub-provincial city in southeastern Fujian Province. It covers a total area of 1,565.1 million sq.m. and had a population of 2.5 million in 2009. Xiamen’s nominal GDP in 2009 was RMB162.3 billion, and the city’s nominal GDP and per capita GDP from 2004 to 2009 grew at a CAGR of 12.9% and 9.9%, from 2004 to 2009 respectively. Per capita GDP reached RMB64,413.0 in 2009, which is almost double the per capita GDP of Fujian Province for the same year.

Xiamen’s per capita annual disposable income for urban households exceeded the average per capita annual disposable income of Fujian Province for the six years from 2004 to 2009. Xiamen’s per capita annual disposable income for urban households amounted to RMB26,130.6 in 2009, which is 33.5% higher than the average of Fujian Province in the same year. According to the Bulletin of Xiamen Economic and Social Statistics in 2009, the amount of foreign direct investment in Xiamen also increased significantly from US$570.2 million in 2004 to US$1,687.0 million in 2009, reflecting a CAGR of 24.2% and accounting for 29.4% of the total foreign direct investment in Fujian Province in 2009.

CAGR Xiamen 2004 2005 2006 2007 2008 2009 04-09

Nominal GDP (RMB in billions) . . . 88.3 100.7 116.8 138.8 156.0 162.3 12.9% Per capita GDP (RMB)...... 40,147.0 44,737.0 50,130.0 56,188.0 62,651.0 64,413.0 9.9% Per capita annual urban disposable income (RMB)...... 14,447.0 16,404.9 18,509.5 21,502.8 23,947.6 26,130.6 12.6%

Source: CEIC

The real estate market in Xiamen

The total GFA of residential properties completed showed a steady growth trend over the six years from 2004 to 2009, increasing from 2.8 million sq.m. in 2004 to 4.8 million sq.m. in 2009. After a sales dip caused by the global economic crisis in 2008, the residential market rebounded the next year, selling 4.0 million sq.m. of residential GFA in 2009, more than double the GFA sold in 2008. The average selling price of residential properties in Xiamen remained higher than that of Fujian Province in every year from 2004 to 2009, and grew at a CAGR of 18.8% during the period to reach RMB8,935.0 per sq.m. in 2009, more than double the national residential average selling price during the same period.

Xiamen 2004 2005 2006 2007 2008 2009

Residential GFA completed (’000 sq.m.) ..... 2,815.6 2,767.6 2,109.5 2,413.6 3,679.8 4,756.2 Residential GFA sold (’000 sq.m.) ...... 2,550.5 2,723.2 3,173.9 3,695.6 1,502.1 4,013.0 Residential average selling price (RMB per sq.m.)...... 3,768.0 4,744.0 6,600.7 8,907.0 8,940.0 8,935.0

Source: CEIC

— 105 — Quanzhou

Quanzhou is a prefecture-level city on the southeastern coast of Fujian Province and faces the Taiwan Strait. It covers a total area of 11,015 million sq.m. and had a population of 7.8 million in 2009. Due to its close relationship with overseas Chinese and Taiwan compatriots, Quanzhou’s economy has, to a large extent, been driven by foreign direct investments made by these diasporas. Total foreign direct investment in Quanzhou has accounted for over a quarter of the total dollar amount of foreign direct investments in Fujian Province over the past five years. For instance, foreign direct investment in Quanzhou totalled US$1,720.0 million in 2009, which represented 30.0% of the total dollar amount of foreign direct investments in Fujian Province.

Quanzhou’s nominal GDP in 2009 was RMB300.2 billion, which is 24.5% of the total nominal GDP in Fujian Province and achieved a CAGR of 13.4% from 2004 to 2009. Quanzhou’s per capita GDP was also above the average of Fujian Province for the six years and was RMB38,368.0 in 2009, achieving a CAGR of 12.5% from 2004 to 2009. The growth in per capita annual urban disposable income in Quanzhou reflected a CAGR of 12.5% from 2004 to 2009, and reached RMB22,912.8 in 2009, well above Fujian Province’s average of RMB19,576.8.

CAGR Quanzhou 2004 2005 2006 2007 2008 2009 04-09

Nominal GDP (RMB in billions) . . . 160.3 162.6 190.1 228.4 270.5 300.2 13.4% Per capita GDP (RMB)...... 21,259.6 21,426.9 24,847.0 29,601.0 34,840.0 38,368.0 12.5% Per capita annual urban disposable income (RMB)...... 12,699.0 14,209.0 15,972.0 18,097.0 20,420.0 22,912.8 12.5%

Source: CEIC

The real estate market in Quanzhou

A total GFA of 2.2 million sq.m. was sold in Quanzhou in 2008. Compared to other cities in Fujian Province, Quanzhou weathered the global economic crisis relatively well, showing its resilience with only a small dip in residential GFA sold in 2008 as compared to 2007. The average selling price of residential properties also grew steadily, increasing from RMB2,255.0 per sq.m. in 2005 to RMB3,839.0 per sq.m. in 2008.

Quanzhou 2004 2005 2006 2007 2008 2009

Residential GFA sold (’000 sq.m.) ...... N/A 982.1 1,612.6 2,550.4 2,199.2 N/A Residential average selling price (RMB per sq.m.)...... N/A 2,255.0 N/A 3,224.0 3,839.0 N/A

Source: CEIC

— 106 — Zhangzhou

Zhangzhou is located in the southern region of Fujian Province, west of Xiamen. It covers a total area of 12,607 million sq.m., with a total population of 4.7 million. Zhangzhou’s nominal GDP reached RMB111.4 billion in 2009, while per capita GDP was RMB23,264.0 in 2009. Per capita annual urban disposable income in Zhangzhou reached RMB16,616.0 in 2009, reflecting a CAGR of 10.4% for the period from 2004 to 2009.

CAGR Zhangzhou 2004 2005 2006 2007 2008 2009 04-09

Nominal GDP (RMB in billions) . . . 70.2 62.9 71.7 85.5 100.2 111.4 9.7% Per capita GDP (RMB)...... 15,394.0 13,402.0 15,221.0 18,072.0 21,073.0 23,264.0 8.6% Per capita annual urban disposable income (RMB)...... 10,118.0 11,241.0 12,511.0 14,153.0 16,023.0 16,616.0 10.4%

Source: CEIC

The real estate market in Zhangzhou

Sales of residential property in Zhangzhou achieved a CAGR of 17.2% from 2005 to 2009. A total GFA of 2.8 million sq.m. was sold in Zhangzhou in 2009, representing a 73.2% year-on-year increase. The average selling price of residential properties in Zhangzhou increased 58.3% from 2005 to 2008.

Zhangzhou 2004 2005 2006 2007 2008 2009

Residential GFA sold (’000 sq.m.) ...... N/A 1,467.2 1,456.2 2,446.6 1,596.8 2,765.9 Residential average selling price (RMB per sq.m.)...... N/A 1,882.0 N/A 2,900.0 2,979.0 N/A

Source: CEIC and Zhangzhou Statistical Bureau

Beijing

Beijing, the capital city of China, has been experiencing fast economic growth in the past few decades and has gradually developed into a relatively mature economy. Beijing is not only the political center of China but also one of the main international trade and financial centers of the country. In 2009, Beijing reached a nominal GDP of RMB1,215.3 billion, representing a CAGR of 15.0% from 2004 to 2009. In absolute terms, per capita GDP in Beijing reached RMB70,452.3 in 2009, more than double the national average of RMB25,575.5. Annual disposable income per capita for urban households in Beijing also grew to RMB26,738.5 in 2009, well exceeding the national average of RMB17,174.7, and achieved a CAGR of 11.3% for the six years from 2004 to 2009.

CAGR Beijing 2004 2005 2006 2007 2008 2009 04-09

Nominal GDP (RMB in billions) . . . 603.3 697.0 811.8 984.7 1,111.5 1,215.3 15.0% Per capita GDP (RMB)...... 40,915.6 45,992.8 52,053.7 61,274.5 66,796.9 70,452.3 11.5% Per capita annual urban disposable income (RMB)...... 15,637.8 17,653.0 19,977.5 21,988.7 24,724.9 26,738.5 11.3%

Source: CEIC

— 107 — The real estate market in Beijing

Residential GFA completed for Beijing reached 16.1 million sq.m. in 2009, representing a 15.3% year-on-year growth, while residential GFA sold achieved a 82.3% year-on-year growth, selling 18.8 million sq.m. in 2009. The average selling price of residential properties in Beijing reached RMB13,224.0 per sq.m. in 2009, almost three times the national average and representing a CAGR of 21.6% from 2004 to 2009.

CAGR Beijing 2004 2005 2006 2007 2008 2009 04-09

Residential GFA completed (’000 sq.m.) ...... 26,670.4 28,414.2 21,933.2 18,539.5 13,993.0 16,132.0 N/A Residential GFA sold (’000 sq.m.) . 25,525.9 28,236.5 22,050.3 17,314.8 10,314.3 18,804.0 N/A Residential average selling price (RMB per sq.m.) ...... 4,972.0 6,162.1 7,375.4 10,661.2 11,648.0 13,224.0 21.6%

Source: CEIC

Shenzhen

Shenzhen is situated in southern China’s Guangdong Province, immediately north of Hong Kong. It is China’s first, as well as one of the most successful, Special Economic Zones, enjoying favorable economic policies that stimulate growth and development. Shenzhen has developed to become one of the main economic and trade centers of China, reaching a nominal GDP of RMB820.1 billion in 2009, representing a CAGR of 19.1% from 2004 to 2009, well exceeding the national average CAGR of 16.3% for the same period. Shenzhen’s per capita GDP also enjoyed consistent growth across the six years, and was more than three times the national average, reaching RMB92,771.0 in 2009. Per capita annual urban disposable income was at RMB29,244.5 in 2009, also much higher than the national average.

CAGR Shenzhen 2004 2005 2006 2007 2008 2009 04-09

Nominal GDP (RMB in billions) . . . 342.3 495.1 581.4 680.2 780.7 820.1 19.1% Per capita GDP (RMB)...... 59,271.0 60,801.0 69,450.0 79,645.0 89,814.0 92,771.0 9.4% Per capita annual urban disposable income (RMB)...... 27,896.0 28,665.0 32,567.1 33,592.8 26,729.3 29,244.5 0.9%

Source: CEIC

— 108 — The real estate market in Shenzhen

The residential real estate market in Shenzhen has seen consistent growth in average selling price since 2004, achieving a CAGR of 17.6% between 2004 and 2009, well exceeding the national average of 11.3% for the same period. In absolute terms, Shenzhen’s residential average selling price has also been much higher than national average between 2004 to 2009, reaching an average selling price of RMB14,389.0 per sq.m. in 2009, which is more than three times higher than the national average.

CAGR Shenzhen 2004 2005 2006 2007 2008 2009 04-09

Residential GFA completed (’000 sq.m.) ...... 5,300.6 7,044.4 5,818.7 4,371.4 4,437.7 2,695.4 N/A Residential GFA sold (’000 sq.m.) . 3,430.2 10,198.1 6,861.8 5,003.5 4,136.5 7,173.9 15.9% Residential average selling price (RMB per sq.m.) ...... 6,385.0 6,996.3 8,848.0 13,369.6 12,823.0 14,389.0 17.6%

Source: CEIC

Shanxi Province

Shanxi Province is situated in the center of the Yellow River valley. Shanxi Province experienced substantial GDP growth in the past six years, where nominal GDP doubled from RMB357.1 billion in 2004 to RMB735.0 billion in 2009, representing a CAGR of 15.5% from 2004 to 2009. Per capita GDP increased from RMB10,742.0 in 2004 to RMB21,522.0 in 2009, achieving a CAGR of 14.9% for the period. In 2009, Shanxi Province’s annual disposable income per capita for urban households reached RMB 13,996.6, with a CAGR from 2004 to 2009 of 12.1%.

CAGR Shanxi Province 2004 2005 2006 2007 2008 2009 04-09

Nominal GDP (RMB in billions) . . . 357.1 418.0 475.3 573.3 693.9 735.0 15.5% Per capita GDP (RMB)...... 10,742.0 12,647.0 14,497.0 17,805.0 21,506.0 21,522.0 14.9% Per capita annual urban disposable income (RMB)...... 7,902.9 8,913.9 10,027.7 11,565.0 13,119.1 13,996.6 12.1%

Source: CEIC

The real estate market in Shanxi Province

The residential real estate market in Shanxi Province began to develop and expand in early 2000. Total GFA completed in Shanxi Province reached 7.0 million sq.m. in 2009, while the total GFA sold reached 9.6 million sq.m. GFA sales growth has been outpacing the national average, with Shanxi Province’s CAGR achieving 18.5% from 2004 to 2009, as compared to the national average of 16.8% for the same period. The average selling price for residential properties in Shanxi Province increased from RMB1,534.0 per sq.m. in 2004 to RMB2,552.0 per sq.m. in 2009.

CAGR Shanxi Province 2004 2005 2006 2007 2008 2009 04-09 Residential GFA completed (’000 sq.m.) ...... 4,566.8 5,573.8 5,926.1 6,863.7 7,812.0 6,979.4 8.9% Residential GFA sold (’000 sq.m.) . 4,133.8 6,198.6 7,407.3 8,465.0 8,931.0 9,640.5 18.5% Residential average selling price (RMB per sq.m.) ...... 1,534.0 1,876.4 1,805.5 2,052.4 2,253.0 2,552.0 10.7%

Source: CEIC

— 109 — Hebei Province

Hebei Province is located in the northern part of China adjacent to Beijing and Tianjin. Hebei Province’s nominal GDP reached RMB1,723.5 billion in 2009, representing a CAGR of 15.2% from 2004 to 2009. Growth in per capita GDP for Hebei Province reached a CAGR of 14.5%. Hebei Province’s annual urban disposable income reached RMB14,718.3 in 2009 and achieved a CAGR of 13.1% from 2004 to 2009, outpacing the national growth rate for the same period.

CAGR Hebei Province 2004 2005 2006 2007 2008 2009 04-09 Nominal GDP (RMB in billions) . . . 847.8 1,009.6 1,166.0 1,371.0 1,618.9 1,723.5 15.2% Per capita GDP (RMB)...... 12,487.0 14,659.0 16,682.0 19,662.0 22,986.0 24,581.0 14.5% Per capita annual urban disposable income (RMB)...... 7,951.3 9,107.1 10,304.6 11,690.5 13,441.1 14,718.3 13.1%

Source: CEIC

The real estate market in Hebei Province

The GFA completed in Hebei Province achieved steady growth, increasing from 13.2 million sq.m. in 2004 to 16.4 million sq.m. in 2009. The market showed its resilience during the global economic crisis of 2008 by continuing to increase the amount of GFA sold, having grown 8.1% between 2007 and 2008, and 32.5% between 2008 and 2009. Hebei Province achieved a CAGR of 17.2% for GFA sold from 2004 to 2009, exceeding the national average of the same period, while selling 28.2 million sq.m. of residential GFA in 2009. The average residential selling price also experienced steady growth, doubling from RMB1,482.0 per sq.m. in 2004 to RMB3,210.0 per sq.m. in 2009, representing a CAGR of 16.7% and well exceeding the national average of 11.3%.

CAGR Hebei Province 2004 2005 2006 2007 2008 2009 04-09 Residential GFA completed (’000 sq.m.) ...... 13,185.8 10,217.9 12,457.6 12,089.6 15,014.2 16,394.4 4.5% Residential GFA sold (’000 sq.m.) . 12,747.4 13,223.2 16,924.2 19,691.2 21,288.6 28,197.7 17.2% Residential average selling price (RMB per sq.m.) ...... 1,482.0 1,777.5 2,028.4 2,505.0 2,743.0 3,210.0 16.7%

Source: CEIC

—110— Liaoning Province

Liaoning Province is located in the northeastern part of China. It is a fast growing region with CAGR in nominal GDP, per capita GDP, and annual urban disposable income of 17.9%, 17.3% and 14.5% respectively from 2004 to 2009, all of which have exceeded the growth rates of China’s national average of the same period. Nominal GDP in Liaoning Province increased from RMB 667.2 billion in 2004 to RMB 1,521.2 billion in 2009, with per capita GDP rising from RMB 15,835.0 in 2004 to RMB 35,239.0 in 2009. For each year since 2005, Liaoning Province achieved a higher per capita GDP than the national average.

CAGR Liaoning Province 2004 2005 2006 2007 2008 2009 04-09

Nominal GDP (RMB in billions) . . . 667.2 800.9 925.1 1,102.3 1,346.2 1,521.2 17.9% Per capita GDP (RMB)...... 15,835.0 19,074.0 21,914.0 26,054.0 31,736.0 35,239.0 17.3% Per capita annual urban disposable income (RMB)...... 8,007.6 9,107.6 10,369.6 12,300.4 14,392.7 15,761.4 14.5%

Source: CEIC

The real estate market in Liaoning Province

Liaoning Province achieved a CAGR from 2004 to 2009 for GFA completed and sold of 12.5% and 22.0% respectively, well above the national average. Total GFA completed in Liaoning Province reached 34.0 million sq.m. in 2009, while the total GFA sold reached 48.6 million sq.m. Residential average selling price achieved consistent growth over the six years, achieving an average price of RMB3,872.0 per sq.m. in 2009.

CAGR Liaoning Province 2004 2005 2006 2007 2008 2009 04-09

Residential GFA completed (’000 sq.m.) ...... 18,918.0 21,277.9 24,464.0 26,851.3 32,646.8 34,040.1 12.5% Residential GFA sold (’000 sq.m.) . 17,984.2 23,403.6 27,307.4 35,455.5 37,311.9 48,642.5 22.0% Residential average selling price (RMB per sq.m.) ...... 2,316.0 2,651.7 2,883.6 3,354.6 3,575.0 3,872.0 10.8%

Source: CEIC

— 111 — CORPORATE STRUCTURE The following chart shows our corporate structure as of September 30, 2010. —112—

Note 1: Pursuant to a binding supplemental agreement signed by the shareholders of SCE Provence Town, the registered capital of SCE Provence Town would be increased after obtaining the land use right. The interest of SCE Provence Town attributable to us raised from 51% to 90% after the completion of the capital increase on November 3, 2010 Notes:

“SCE Beijing Junhuada” Beijing Junhuada Real Estate Development Co., Ltd. (北京駿華達房地產開發有限公司)

“SCE Beijing Property Management” Beijing Cippon Tai Wo Property Management Co., Ltd. (北京世邦泰和物業管理有限公司)

“SCE Century” Xiamen Zhongjun Century Real Estate Co., Ltd. (廈門中駿世紀房地產有限公司)

“SCE Construction Design” Xiamen Rundi Architectural Design Co., Ltd. (廈門潤地建築設計有限公司)

“SCE Decoration” Xiamen Lucky Star Decoration Engineering Co., Ltd. (廈門福斯達裝修工程有限公司)

“SCE Fortune Plaza” Fujian Straits West-Coast Investment Co., Ltd (福建省海峽西岸投資有限公司)

“SCE Golden Coast” South Fujian Gold Coast Resort Co., Ltd. Shishi (石獅市閩南黃金海岸渡假村有限公司)

“SCE Golf Course” COSCO Jinjiang Development Co., Ltd. Quanzhou (泉州市晋江中遠發展有限公司)

“SCE International Community” Shanxi Yuanhong Real Estate Co., Ltd. (山西源宏房地產開發有限公司)

“SCE Noble Mansion” Quanzhou Baoxing Real Estate Development Co., Ltd. (泉州寶興房地產開發有限公司)

“SCE Provence Town” Xiamen Junxianghexin Real Estate Co., Ltd. (廈門駿翔和信房地產有限公司)

“SCE Property Agency” Xiamen Dayoufu Property Consultation Co., Ltd. (廈門大友富置業顧問有限公司)

“SCE Purple Lake International” Quanzhou Yuanhang Real Estate Development Co., Ltd. (泉州遠航房地產開發有限公司)

“SCE Quanzhou Property Management” Quanzhou Cippon Property Management Co., Ltd. (泉州世邦物業管理有限公司) “SCE Quanzhou Sapphire Peninsula” Zhongjun (Quanzhou) Real Estate Development Co., Ltd. (中駿(泉州)房地產開發有限公司)

“SCE Regent” Xiamen Zhongjun Tianfeng Real Estate Co., Ltd. (廈門中駿天峰房地產有限公司) “SCE Sapphire Boomtown” Zhangzhou Long Wen Hua Gang Real Estate Development Co., Ltd. (漳州龍文華港房地產開發有限公司)

“SCE Sapphire Hill” Shenzhen Pacific Prestige Real Estate Development Limited (深圳泛亞房地產開發有限公司)

“SCE Sapphire Uptown” Nan’an Junxin Real Estate Development Co., Ltd. (南安駿信房地產開發有限公司)

“SCE Seashore Suite No. 1” Tianxia Estate (Xiamen) Develop Co., Ltd. (天下房地產（廈門）開發有限公司)

”SCE Sports Center” Quanzhou Straits Sports Center Co., Ltd. (泉州市海峽體育中心有限公司)

”SCE Strait Green Boomtown” Fujian SCE Gulf Construction and Development Co., Ltd (福建中駿海灣建設開發有限公司)

”SCE Sunshine Home” Nan’an Junjie Real Estate Development Co., Ltd. (南安駿傑房地產開發有限公司)

”SCE Sunshine Town” Nan’an Huajing Real Estate Development Co., Ltd. (南安市華景房地產開發有限公司)

”SCE West Lake No. 1” Quanzhou Junjing Real Estate Corp., Ltd. (泉州駿景房地產開發有限公司)

—113— ”SCE World City” Beijing Jinghui Real Estate Development Co., Ltd. (北京京匯房地產開發有限公司)

”SCE World City Management” Beijing World City Property Management Co., Ltd. (北京世界城物業管理有限公司)

”SCE Wuyi Oasis” Fuzhou Wuyi Oasis Real Estate Co., Ltd. (福州武夷綠洲房地產開發有限公司)

”SCE Xiamen” Xiamen Zhongjun Industrial Co., Ltd. (廈門中駿集團有限公司)

”SCE Xiamen Property Management” Xiamen Cippon Tai Wo Property Management Co., Ltd. (廈門世邦泰和物業管理有限公司)

”SCE Xiamen Sapphire Peninsula” Xiamen Jinmen Seaview Manor Real Estate Co., Ltd. (廈門金門海景山莊房地產開發有限公司)

—114— BUSINESS

OVERVIEW

We are one of the leading real estate developers in Fujian Province and were honored as one of the “China Top 100 Real Estate Developers” (中國房地產百強企業) and one of the “Star Developers Among the China Top 100 Real Estate Developers” (中國房地產百強企業 — 百強之星) in each of the years from 2008 to 2010 according to the China Real Estate Top 10 Research Team. Headquartered in Xiamen, we primarily focus on the development of high quality, mid-end to high-end residential real estate projects in the more prosperous regions of Fujian Province, which is located in the centre of the Western Taiwan Strait Economic Zone. Leveraging our experience in Fujian Province, we have expanded into, and expect to continue to consolidate our market position in selected areas in the Bohai Economic Rim, such as Beijing and other economically developed cities.

(i) (a) completed projects held for investment with an aggregate GFA of approximately 39,000 sq.m.;

(b) projects under development with an aggregate planned GFA of approximately 1,750,000 sq.m.; and

(c) projects held for future development with an aggregate planned GFA of approximately 3,514,000 sq.m., for which we have obtained the relevant land use rights certificates;

Approximately 5,869,000 sq.m. of our GFA (including approximately 4,276,000 sq.m. attributable to us on the basis of our effective interest in the relevant parcels of land), representing approximately 66.6% of our aggregate GFA (or 66.8% of the aggregate GFA attributable to us) is located in Fujian Province. The remainder of our land bank is located in Beijing, Linfen, Tangshan and Anshan in the Bohai Economic Rim and in Shenzhen. Our property development projects are generally situated in prime locations of major cities, as well as areas with natural scenic surroundings and convenient access to transportation.

In 2009 and the nine months ended September 30, 2010, our revenue was RMB586.5 million (US$87.7 million) and RMB2,102.7 million (US$314.3 million), respectively. For the same periods, our EBITDA was RMB204.2 million (US$30.5 million) and RMB1,009.4 million (US$150.9 million), respectively. Our shares have been listed on the Hong Kong Stock Exchange since February 5, 2010 under stock code 1966.HK. Our market capitalization as of January 7, 2011 was HK$6.4 billion.

—115— OUR COMPETITIVE STRENGTHS

We believe we have the following competitive strengths:

Leading real estate developer in Fujian Province with a growing presence in the Bohai Economic Rim

We are one of the leading real estate developers in Fujian Province according to the China Real Estate Top 10 Research Team based on a combination of factors including scale, profitability and growth rate. Building on our experience in Fujian Province, which is located in the centre of the Western Taiwan Strait Economic Zone, we have expanded into and expect to strengthen our market position in selected areas in the Bohai Economic Rim, such as Beijing and other economically developed cities. In particular, we believe that our World City project in Beijing, which has received wide recognition in the industry has demonstrated our ability to draw on and apply our experience in Fujian Province to other key strategic locations.

Sufficient land bank in strategic locations acquired at relatively low cost to support our future development

Strong brand recognition and a reputation for high quality properties which allow us to enjoy premium pricing

We believe that we have established a reputable brand in Fujian Province and the Bohai Economic Rim for developing high quality residential properties and providing premium pre- and post-sales services to our customers. In recognition of our strong brand, we were honored as one of the “Leading China Real Estate Developers From Fujian Province” (中國地產閩商領軍企業) in 2009. We were honored as one of the “China Top 100 Real Estate Developers” (中國房地產百強企業) and one of the “Star Developers Among the China Top 100 Real Estate Developers” (中國房地產百強企業一百強之星) in each of the years from 2008 to 2010. We were also recognized as one of the “2010 China Most Influential Real Estate Developers” (2010中國最具影響力地產企業). Furthermore, our brand was recognized as a “Famous Trademark in Fujian Province” in 2010.

We believe that our commitment to offer high quality properties and services to our customers, enhances the inherent value of our brand, and enables us to price our projects at a premium compared to many other real estate projects in similar locations.

—116— We also have a long-term working relationship with reputable construction and landscape designers such as Belt Collins International (HK) Limited and RTKL Associates Inc. We believe these relationships have enabled us to offer high quality properties to our customers, as evidenced by a number of quality-related awards we have received, including the “Provincial Landscape Model Enterprise” (省級綠化模範單位榮譽稱號) in 2010 for our Sapphire Peninsula (Quanzhou) project, the “China Real Estate Golden Key-2010 High-End Townhouse Habitat Model “(中國地產金鑰匙獎—2010高端城市別墅人居典範) in 2010 for our Sapphire Boomtown project, the “2010 China Most Influential Property Development Project ” (2010中國最具影響力樓盤) for our Fortune Plaza project and the “2010 China Top Ten Stylish Property Development Project” (2010年度中國十大風尚樓盤) for The Regent project.

Detail-oriented and comprehensive project management system and a commitment to high quality properties and effective cost control

Experienced and professional management team and dedicated work-force

Our management team has extensive experience in the PRC real estate industry. Over the past five years, our key management members have remained substantially unchanged.

Our Chairman, Mr. Wong Chiu Yeung, who plays a pivotal role in managing our daily operations and in formulating our business strategies, has more than 14 years of experience in the property development industry. Through his business experience with leading Japanese joint venture partners (Sumitomo (S.H.I.) Construction Machinery Co., Ltd. and IHI Construction Machinery Limited), Mr. Wong has accumulated abundant experience in developing and maintaining a professional and detail-oriented management culture and applies that culture to our management. Mr. Wong was named as one of the “Leading China Real Estate Figures from Fujian Province” (“中國地產閩商領軍人物”) in 2010 and one of the CIHAF “China Real Estate Top 10 New Leading Figures” (“中國住交會 — 中國房地產十大新領軍人物”) in 2009. Other members of our management team are also highly experienced based on their previous roles with internationally renowned enterprises, state-owned enterprises in the PRC or renowned real estate developers.

—117— OUR BUSINESS STRATEGIES

We utilize the following key business strategies:

Strengthen our leading position in Fujian Province and further penetrate the Bohai Economic Rim market

Our strategy is in line with several key macro-economic and government policies. For example, in May 2009, the State Council adopted policies to promote the economic development of the Western Taiwan Strait Economic Zone, and on June 29, 2010, Mainland China and Taiwan entered into the ECFA which we believe will further contribute to economic development in Fujian Province and create greater demand for properties.

Continue to expand our land bank prudently through multiple channels

We intend to continue to expand our land bank in strategic locations through a variety of channels including participating in open tenders, selectively acquiring project companies that have access to suitable sites, establishing joint ventures with other real estate developers and participating in urban redevelopment projects. In doing so, we intend to continue to employ a strategy of gradual and prudent land bank expansion and to make investment decisions based on thorough research and analysis after balancing a number of important factors, including our financial capacity, the expected return of the project and the future growth prospects of the project land.

Enhance our brand recognition and distinguish ourselves from our competitors

Continue to focus primarily on residential property development while seeking to expand into the commercial real estate market

—118— by expanding into the commercial real estate market. We believe that such business diversification will enable us to capture recurring rental income through our retention and operation of commercial properties and enhance our ability to respond effectively to newly introduced regulatory measures.

Further optimize our capital and financing structure

OUR PROPERTY DEVELOPMENT BUSINESS

Overview

As of September 30, 2010, we had a total of 20 property development projects in various stages of development. Of the 20 property development projects, 14 are located in Fujian Province and the remaining 6 are located in Beijing, Linfen in Shanxi Province, Anshan in Liaoning Province, Tangshan in Hebei Province and Shenzhen in Guangdong Province.

—119— The following map shows the geographic locations of our 20 property development projects that comprise our land bank as of September 30, 2010:

Linfen Beijing Anshan

Project GFA (sq.m.) Project GFA (sq.m.) Project GFA (sq.m.) SCE International 568,687 World City 30,899 Anshan Project 1,813,868 Community Beijing Project 38,195 Total 1,813,868 Total 568,687 Total 69,094

Tangshan

Project GFA (sq.m.) Anshan Tangshan Project 64,911 Beijing Total 64,911 Tangshan Linfen 2 — 120 — Zhangzhou

Project GFA (sq.m.) Sapphire Boomtown 520,299 Total 520,299

Quanzhou Xiamen Shenzhen Zhangzhou Quanzhou Western Taiwan Strait Economic Zone Project GFA (sq.m.) Bohai Economic Rim Zone West Lake No.1 198,782 Fortune Plaza 1,367,655 Purple Lake International 123,199 Xiamen Sunshine Town 432,926 Project GFA (sq.m.) Sapphire Peninsula 267,676 Shenzhen SCE Building 42,970 Sapphire Uptown 105,623 The Regent 85,192 Golden Coast 1,256,400 Project GFA (sq.m.) Provence Town 142,930 Sunshine Home 300,641 Sapphire Hill 424,098 Green Lake Mansion 937 Nan’an Convention Center 1,023,785 Total 424,098 Total 272,029 Total 5,076,687 Most of our property development projects are developed in multiple phases and at any point in time each phase may be in a different stage of development. As of September 30, 2010, our land bank comprised 20 property development projects at various stages of development, which are classified into the following five categories:

Completed projects held for sale or investment — we consider that a property development project is completed and held for sale or investment if we have received the completion and acceptance certificate for the property from the government authorities but have not yet delivered the property.

Projects under development — we consider that a property development project is under development after the construction commencement permit has been issued by the government authorities but the completion and acceptance certificate has not been issued.

Projects held for future development — we consider that a property development project is held for future development if the relevant land use rights certificates have been obtained from the government authorities but the construction commencement permit has not yet been issued.

Projects contracted to be acquired — we consider that a property development project is contracted to be acquired when we have entered into the land grant contract or have successfully tendered for the parcel of land for the project but have not yet obtained the land use rights certificate from the government authorities.

Projects to be acquired for future development — we consider that a property development project is to be acquired for future development when we have entered into a master agreement with the local government but have not yet entered into a land grant contract. The master agreements are legally binding, but after signing such master agreements, in order to obtain the land use rights certificate, we are still required by relevant PRC laws and regulations to go through a process which may involve a competitive bidding, public auction or listing-for-sale, and, if successful, enter into a land grant contract and pay the relevant land premiums before we can obtain the land use rights certificate. We have not paid any consideration in connection with entering into these master agreements although we may be required to incur certain costs (such as land compensation fees, relocation fees and design fees) pursuant to the master agreements which, depending on the terms of such agreements, may not be recoverable in the event that we fail to win the bid for the relevant land in the subsequent competitive bidding, public auction or listing-for-sale process or to obtain the relevant government approvals. By entering into these master agreements, we are entitled to participate in the preliminary discussion of urban redevelopment or regional planning and therefore gain both further insights into the local real estate market and a better understanding of the demand for and availability of land, which in turn may provide us with an advantageous position in winning future tenders.

As of September 30, 2010, our land bank had an aggregate GFA of approximately 8,810,000 sq.m. Among this, our completed projects held for investment had a total GFA of approximately 39,000 sq.m., our projects under development had a total planned GFA of approximately 1,750,000 sq.m., our projects held for future development had a total planned GFA of approximately 3,514,000 sq.m., our projects contracted to be acquired had a total planned GFA of approximately 2,059,000 sq.m. and our projects to be acquired for future development had a total planned GFA of approximately 1,448,000 sq.m.

— 121 — The following tables set out details of our property development projects as of September 30, 2010 in accordance with the classifications above: Land Bank

GFA pre-sold and Total saleable/leasable unsold GFA (sq.m.) Construction undelivered commencement/ Construction as of 30 Expected date of completion/ Pre-sales Interest Total GFA September Others construction Expected commencement attributable to us Project name City (sq.m.) 2010 (sq.m.) Residential Retail Carpark Office Hotel (sq.m.) commencement completion time day (%)

Investment properties SCE Building (Phase 1) ...... Xiamen 6,637 — — — 1,716 4,922 — — — Completed — 100% WorldCity...... Beijing 30,899 — — 30,277 622 — — — — Completed — 100% Green Lake Mansion ...... Xiamen 937 — — 937 ———— —Completed — 100%

Sub-total ...... 38,473 — — 31,214 2,338 4,922 — —

Projects under development West Lake No.1 ...... Quanzhou 198,782 160,363 4,212 1,843 3,829 — — 28,535 January 2008 December 2010 April 2008 100% Sapphire Uptown ...... Nan’an, Quanzhou 105,623 67,940 8,859 — 550 — — 28,274 October 2008 December 2010 November 2009 51% Fortune Plaza (Phase 1) ...... Quanzhou 300,398 87,589 163,518 — 43,727 — — 5,564 November 2008 2011 May 2010 58% Sunshine Town (Phase 1 Blocks 1-8) ...... Nan’an, Quanzhou 60,063 54,370 114 3,121 — — — 2,458 May 2009 December 2010 November 2009 100% Sapphire Peninsula (Phase 1) ...... Quanzhou 141,213 — 97,939 3,549 35,155 — — 4,570 July 2009 2012 — 100% SCE International Community (Phase 1) ...... Linfen 82,809 28,167 42,360 4,893 7,389 — — — November 2009 2011 July 2010 80% Sunshine Town (Phase 1 Blocks 9-17) ...... Nan’an, Quanzhou 152,634 79,024 63,477 368 2,964 — — 6,800 February 2010 2011 March 2010 100% The Regent ...... Xiamen 85,192 — 61,488 — 11,751 — — 11,953 June 2010 2011 - 2012 November 2010 60% Sapphire Peninsula (Quanzhou) (Phase 2) ..... Quanzhou 126,463 — 90,233 10,730 20,500 — — 5,000 June 2010 2012 — 100% Purple Lake International (Phase 1) ...... Jinjiang, Quanzhou 62,217 — 39,140 ————23,077July2010 2011 — 49% Fortune Plaza (Phase 2) ...... Quanzhou 249,436 — 187,722 — 35,120 — — 26,594 August 2010 2011 - 2012 — 58% Sapphire Boomtown (Phase 1) ...... Zhangzhou 148,578 — 92,718 7,504 19,505 — — 28,851 August 2010 2011 — 80%

2 — 122 — SCE Building (Phase 2) ...... Xiamen 36,333 ————36,333——September 2010 2011 — 100%

Sub-total ...... 1,749,741 477,454 851,780 32,009 180,489 36,333 — 171,676

Projects held for future development Sunshine Home ...... Nan’an, Quanzhou 300,641 — 237,469 20,117 36,340 — — 6,715 2010 2012 2011 80% Provence Town ...... Xiamen 142,930 — 105,424 2,680 18,307 — — 16,519 2010 2012 2011 90% (Note 2) Purple Lake International (Phase 2) ...... Jinjiang, Quanzhou 60,982 — 44,482 ————16,500— — — 49% Anshan Project ...... Anshan 1,813,868 — 1,405,108 138,000 85,472 20,000 50,000 115,288 — — — 70% Golden Coast ...... Shishi,Quanzhou 1,256,400 — 852,570 109,530 — — 120,300 174,000 — — — 45% SCE International Community (Phase2&3) .... Linfen 485,878 — 353,845 55,991 74,882 — — 1,160 — — — 80% Sapphire Boomtown (Phase 2,3&4) ...... Zhangzhou 371,721 — 278,708 35,556 51,647 — — 5,810 — — — 80% Fortune Plaza (Phase3&4) ...... Quanzhou 817,821 — 190,800 178,095 230,748 95,000 123,178 — — — — 58% Tangshan Project ...... Tangshan 64,911 — 56,680 3,639 — — — 4,592 — — — 100% Beijing Project ...... Beijing 38,195 — 23,495 5,000 9,700 — — — — — — 100% Sunshine Town (Phase 2) ...... Nan’an, Quanzhou 220,229 — 193,263 2,283 23,367 — — 1,316 — — — 100%

Sub-total ...... 5,573,576 — 3,741,844 550,891 530,463 115,000 293,478 341,900

Total ...... 7,361,790 477,454 4,593,624 614,114 713,290 156,255 293,478 513,576

Projects to be acquired for future development (Note 1) Sapphire Hill ...... Shenzhen 424,098 — 424,098 ————— — — — 63% Nan’an Convention Center ...... Nan’an, Quanzhou 1,023,785 — 1,023,785 ————— — — — 100%

Sub-total 1,447,883 — 1,447,883 —————

Total ...... 8,809,673 477,454 6,041,507 614,114 713,290 156,255 293,478 513,576

Notes: 1. Only framework agreements had been entered into with local governments but no public tender process had been concluded and/or land grant contracts had been entered into. 2. Pursuant to a binding supplemental agreement signed by the shareholders of SCE Provence Town, the registered capital of SCE Provence Town would be increased after obtaining the land use right. The interest of SCE Provence Town attributable to us raised from 51% to 90% after the completion of the capital increase on November 3, 2010 In this offering memorandum, we calculate the figures for completed GFA based on figures provided in the relevant documents issued by government authorities, and determine the construction period for the completed phases of our property development projects based on the relevant documents issued by government authorities or our own internal records, as applicable. “Saleable GFA” represents the GFA of a property which we intend to sell and does not exceed the result of the site area multiplied by the maximum plot ratio as specified in the relevant land grant contracts or other approval documents from the local governments relating to a project. “Non-saleable GFA” represents the GFA of a property that is not for sale, which typically consists of GFA for ancillary facilities.

The following information that appears in this offering memorandum is based on our internal estimates, internal records or current business plans: (a) figures for planned GFA, saleable GFA, saleable GFA that has been pre-sold, planned saleable GFA, and planned leasable GFA; and (b) information regarding average selling price, total development costs incurred, estimated further development costs to complete the project and planned construction period. The actual figures and construction schedules may differ in material respects from our current estimates.

For completed projects held for sale or investment, projects under development and projects held for future development, as all the land premiums have been paid in full, information regarding total development costs incurred includes the land premiums paid for the land sites we acquired. For projects contracted to be acquired, as the land premiums have not been paid, the information regarding estimated further development costs to complete the project includes the estimated land premiums to be paid. With respect to projects which are developed by jointly-controlled or associated companies of us, information regarding total development costs incurred and the estimated further development costs to complete the project represents the total costs incurred or to be incurred for such projects.

A property is considered to be sold after we have executed the sales contract, completed the development of the property and delivered the property to the customer. A property is considered to be pre-sold after we have executed the sales contract but have not yet delivered the property to the customer. A property is considered to have been delivered to the customer when the customer has signed the written confirmation of the delivery of the property.

Description of our property development projects

We set out below a detailed description of each of our property development projects as of September 30, 2010 (including completed projects which we have delivered in the past and in which we no longer retain any further interest).

Completed projects held for investment

SCE Building (Phase 1) (中駿集團大廈第一期)

We are holding Phase 1 of the SCE Building for self-use and as an investment property. As of September 30, 2010, we occupied approximately 7,636 sq.m. of Phase 1 of the SCE Building as our headquarters in Xiamen, and the remaining GFA of 6,637 sq.m. was leased, or held for lease to, tenants. A more detailed description of the SCE Building is set out in “— Selected completed projects.”

— 123 — World City (世界城)

We have retained the shopping mall retail units and car parking spaces of our World City project with a total GFA of 30,899 sq.m. for leasing to third parties. See “— Selected completed projects.”

Green Lake Mansion (碧湖豪庭)

We have retained six retail units of this project with an aggregate GFA of 937 sq.m. for leasing purposes. See “— Selected completed projects.”

Projects under development

West Lake No.1 (西湖一號)

West Lake No. 1 is a large-scale residential community development comprising 31 lakefront multi-story townhouses, 14 high-rise buildings and retail store fronts located at the western side of West Lake Park and at the waterfront of West Lake in Quanzhou. West Lake No.1 also overlooks Qing Yuan Mountain (清源山), a national 4A tourist area and is within walking distance of the Quanzhou Museum and the China Museum for Fujian-Taiwan Kinship.

The project occupies a total site area of 66,687 sq.m. with a total planned GFA of approximately 198,782 sq.m. We acquired the land use rights to the site through public tender in 2006. There is no outstanding land premium. We are developing this project through our wholly-owned subsidiary, SCE West Lake No.1.

We expect to deliver this project in the last quarter in 2010.

Further details of West Lake No. 1 as of September 30, 2010 are as follows:

Planned construction period ...... January 2008 to December 2010

Residential Retail Carpark Total planned saleable GFA (sq.m.) ...... 151,184 8,263 10,800 Total pre-sold GFA (sq.m.) ...... 146,972 6,420 6,971

Sapphire Uptown (藍灣上城)

Sapphire Uptown is a residential development comprising ten high-rise buildings, 32 low-rise buildings and retail units located in the west end of Round City West Road at Ximei Street in Nan’an.

The project occupies a total site area of 34,853 sq.m. with a total planned GFA of approximately 105,623 sq.m. We acquired the land use rights to the site through public tender in 2007. There is no outstanding land premium. We are developing this project through our subsidiary, SCE Sapphire Uptown, in which we hold a 51.0% interest. The remaining 49.0% interest in SCE Sapphire Uptown is held by an Independent Third Party.

— 124 — We expect to deliver this project in the last quarter in 2010.

Further details of Sapphire Uptown as of September 30, 2010 are as follows:

Planned construction period ...... October 2008 to December 2010

Residential Retail Carpark Total planned saleable GFA (sq.m.) ...... 68,116 5,795 3,438 Total pre-sold GFA (sq.m.) ...... 59,257 5,795 2,888

Fortune Plaza (Phases 1 and 2) (財富中心第一及第二期)

Fortune Plaza is a large-scale integrated urban complex that is expected to comprise a high-end residential community, office buildings, large-scale commercial centre and a hotel. The Fortune Plaza project is located in the core area of the central district of Quanzhou new town and sits next to the Quanzhou Haixia Sports Center (海峽體育中心) and is surrounded by schools and a hospital which currently are under construction.

We are developing Fortune Plaza in four phases. As of September 30, 2010, we were in the process of developing Phases 1 and 2 of Fortune Plaza, and Phases 3 and 4 were in the planning phase and held for future development.

The project occupies a total site area of 442,409 sq.m. with a total planned GFA of approximately 1,367,655 sq.m. We acquired our interest in the site through our investment in SCE Fortune Plaza, the company that held the site on which Phase 1 of the Fortune Plaza project is being developed. There is no outstanding land premium. We are developing this project through SCE Fortune Plaza, a subsidiary in which we hold a 58% interest with the remaining 42% interest being held by three Independent Third Parties.

Phase 1 of this project occupies a total site area of 75,947 sq.m. with a total planned GFA of approximately 300,398 sq.m. and will comprise 18 high-rise buildings.

Further details of Phase 1 as of September 30, 2010 are as follows:

Planned construction period ...... November 2008 to 2011

Residential Retail Carpark Total planned saleable GFA (sq.m.) ...... 237,353 9,404 48,077 Total pre-sold GFA (sq.m.) ...... 73,835 9,404 4,350

Phase 2 of this project occupies a total site area of 109,850 sq.m. with a total planned GFA of approximately 249,436 sq.m. and will comprise 13 high-rise buildings and 48 townhouses.

Further details of Phase 2 as of September 30, 2010 are as follows:

Planned construction period ...... August 2010 to 2012

Residential Carpark Total planned saleable GFA (sq.m.) ...... 187,722 35,120

— 125 — Sunshine Town (Phase 1) (四季康城第一期)

Sunshine Town is a large-scale integrated residential and commercial complex which comprises high-rise residential buildings with retail store fronts located at the boundary of the Quanzhou urban area and Nan’an and between the No. 308 Provincial Highway and Jianzhong Road near the Jiang Nan High Tech Industrial Zone. The project is located 200 meters from the entrance of the Quansan Expressway and is opposite from the Quanzhou Flower City.

The project occupies a total site area of 86,908 sq.m. with a planned total GFA of approximately 432,926 sq.m. We acquired the land use rights to the site through a land grant contract with an Independent Third Party privately negotiated in 2003. There is no outstanding land premium. We are developing this project through our wholly-owned subsidiary, SCE Sunshine Town.

We are planning to develop Sunshine Town in two phases. As of September 30, 2010, we were developing Phase 1 and Phase 2 was in the planning stage and was being held for future development.

Phase 1 of this project occupies a total site area of 43,867 sq.m. with a total planned GFA of approximately 212,697 sq.m. and will comprise eight 18-story buildings and nine 33-story buildings. Further details of Phase 1 of Sunshine Town as of September 30, 2010 are as follows:

Planned construction period ...... May2009 to 2011

Residential Retail Carpark Total planned saleable GFA (sq.m.) ...... 192,108 7,527 3,804 Total pre-sold GFA (sq.m.) ...... 128,517 4,038 840

Sapphire Peninsula (Quanzhou) (泉州•藍灣半島)

Sapphire Peninsula (Quanzhou) is a large-scale residential and commercial complex comprising 21 high-rise buildings and retail and commercial facilities located in the Qiao Nan Pian District within the Bin Jiang Commercial District in Quanzhou. Sapphire Peninsula (Quanzhou) is conveniently situated on the eastern side of China National Highway 324 (G324) with Jin Jiang (晉江) to the east, Zi Mao Mountain Scenic Area (紫帽山風景區) and Xing Yan East Road to the west, and Quanzhou Convention and Exhibition Center to the north. The project is within seven kilometers from the entrance of the Fuxia Expressway. It is currently planned that a clubhouse, a commercial district complex, a kindergarten and other ancillary facilities will be constructed in the surrounding area.

The project occupies a total site area of 80,904 sq.m. with a total planned GFA of approximately 267,676 sq.m. We acquired the land use rights to the site through public tender in 2007. There is no outstanding land premium. We are developing this project through our wholly-owned subsidiary, SCE Quanzhou Sapphire Peninsula.

Further details of Sapphire Peninsula (Quanzhou) as of September 30, 2010 are as follows:

Planned construction period ...... July 2009 to 2012

Residential Retail Carpark Total planned saleable GFA (sq.m.) ...... 188,172 14,279 55,655

— 126 — SCE International Community (Phase 1) (中駿國際社區第一期)

SCE International Community is a large-scale integrated residential and commercial project that is expected to comprise high-rise residential buildings, numerous retail store fronts stretching one kilometer along a commercial street, and a kindergarten located at the intersection of Banxia Street and Gu Lou North Street in Linfen, Shanxi Province.

The project occupies a total site area of 161,602 sq.m. with a total planned GFA of approximately 568,687 sq.m. We acquired land use rights to the site through the acquisition of SCE International Community, the project company that held the land use rights to the site at the time of our investment. There is no outstanding land premium. We are developing this project through our subsidiary, SCE International Community, in which we hold 80% interest. The remaining 20% interest in SCE International Community is held by an Independent Third Party.

We are planning to develop SCE International Community in three phases. As of September 30, 2010, only Phase 1 of SCE International Community was under development and the remaining two phases were at the planning stage and were being held for future development.

Phase 1 of this project occupies a total site area of 23,359 sq.m. with a total planned GFA of approximately 82,809 sq.m. comprising 12 high-rise buildings.

Further details of Phase 1 of SCE International Community as of September 30, 2010 were as follows:

Planned construction period ...... November 2009 to 2011

Residential Retail Carpark Total planned saleable GFA (sq.m.) ...... 69,877 4,893 8,039 Total pre-sold GFA (sq.m.) ...... 27,517 — 650

The Regent (天峰)

The Regent is a high-end residential development comprising five high-rise buildings and ten townhouses located at the intersection of Haicang Avenue and Jiao Song Road in the Haicang Investment Zone in Xiamen with unobstructed sea views. The Regent sits next to our Seashore Suite No.1 project and is also located on the first row of the Xihai waterfront adjacent to the Haicang Lake and next to the Haicang Bay Waterfront park.

The project occupies a total site area of 25,092 sq.m. with a total planned GFA of approximately 85,192 sq.m. We acquired the land use rights to the site through public tender in 2009. There is no outstanding land premium. We are developing this project through our subsidiary, SCE Regent, in which we currently hold a 60.0% interest. The remaining 40% interest in SCE Regent is held by an Independent Third Party.

Further details of The Regent as of September 30, 2010 are as follows:

Planned construction period ...... June 2010 to 2012

Residential Carpark Total planned saleable GFA (sq.m.) ...... 61,488 11,751

— 127 — Purple Lake International Phase 1（紫湖國際第一期)

Purple Lake International is a high-end low-density residential development that is expected to comprise townhouses and a 2,500 sq.m. clubhouse located inside the Quanzhou Golf Club, the only golf club in Quanzhou. The project is situated in an unique location with Zi Mao Mountain Scenic Area to the north, Zi Hu Reservoir to the west and the Quanzhou Golf Club to the south and will be designed by the internationally renowned design institute, Dahlin Group.

The project occupies a total site area of 180,000 sq.m. with a planned total GFA of approximately 123,199 sq.m. We acquired our interest in the site through our passive investment in SCE Purple Lake International, the company that held land use rights. There is no outstanding land premium. The project is to be developed through SCE Purple Lake International, a company in which we hold 49.0% interest. The remaining 51.0% interest in SCE Purple Lake International is held by an Independent Third Party.

It will be developed in two phases. We are developing Phase 1 and Phase 2 was at the planning stage and being held for future development.

Phase 1 of this project occupies a total site area of 107,987 sq.m. with a total planned GFA of 62,217 sq.m. and will comprise 80 townhouses. Further details of Phase 1 of Purple Lake International as of September 30, 2010 are as follows:

Planned construction period ...... July 2010 to 2012

Residential Total planned saleable GFA (sq.m.) ...... 39,140

Sapphire Boomtown Phase 1 (藍灣香郡第一期)

Sapphire Boomtown is a large-scale high-end residential development that is expected to comprise high-rise residential buildings, townhouses and retail units located on the south side of Shuixian Street and the east side of No. 7 Road in the new Long Wen District of Zhangzhou.

The project occupies a total site area of 239,786 sq.m. with a planned total GFA of approximately 520,299 sq.m. We acquired our interest in the site through our acquisition of SCE Sapphire Boomtown, the company that held the land use rights to the site. There is no outstanding land premium. We are developing this project through our subsidiary, SCE Sapphire Boomtown, in which we currently hold an 80.0% interest. The remaining 20.0% interest in SCE Sapphire Boomtown is held by Independent Third Parties.

We are developing Sapphire Boomtown in four phases. As of September 30, 2010, Phase 1 was under development and the other three phases were at the planning stage and were being held for future development.

Phase 1

Based on our current project plans, Phase 1 of Sapphire Boomtown will comprise two high-rise buildings, 14 low-rise buildings and 46 villas and townhouses. Phase 1 occupies a total site area of 116,759 sq.m. with a planned total GFA of approximately 148,578 sq.m.

— 128 — Further details of Phase 1 of Sapphire Boomtown as of September 30, 2010 are as follows:

Planned construction period ...... August 2010 to 2011

Residential Retail Carpark Total planned saleable GFA (sq.m.) ...... 92,718 7,504 19,505

SCE Building (Phase 2) (中駿集團大廈第二期)

Based on our current project plans, Phase 2 of SCE Building is expected to comprise two office buildings.

Further details of Phase 2 of SCE Building as of September 30, 2010 are as follows:

Planned construction period ...... September 2010 to 2011

Office Total planned saleable/leasable GFA for future development (sq.m.) ...... 36,333

For a general overview of the SCE Building, please refer to the description on page 134 of this offering memorandum.

Projects held for future development

Sunshine Home (四季家園)

Sunshine Home is an integrated, residential and commercial complex that is expected to comprise high-rise buildings and other retail and commercial facilities. The project is located in the urban area of Nan’an, Quanzhou and is surrounded by schools and a kindergarten which currently is under construction.

The project occupies a total site area of 64,632 sq.m. with a total planned GFA of approximately 300,641 sq.m. We acquired the land use rights to the site through public tender in 2010. There is no outstanding land premium. We are developing this project through our subsidiary, SCE Sunshine Home, in which we currently hold an 80.0% interest. The remaining 20% interest in SCE Sunshine Home is held by an Independent Third Party.

Further details of Sunshine Home as of September 30, 2010 are as follows:

Residential Retail Carpark Total planned saleable GFA (sq.m.) ...... 237,469 20,117 36,340

Provence Town (藍灣尚都)

Provence Town is a mid- to high-end residential development comprising high-rise buildings and townhouses. The project is located in the Xiang’an District in Xiamen in Fujian Province within ten kilometers from the Xiang’an underground tunnel which links to the urban areas of Xiamen. It is currently proposed that a kindergarten and other ancillary facilities will be constructed.

The project occupies a total site area of 56,948 sq.m. with a total planned GFA of approximately 142,930 sq.m. We acquired the land use rights to the site through a land grant contract with a joint venture partner in 2010. There is no outstanding land premium. We are developing this project through our subsidiary, SCE Provence Town, in which we currently hold a 90.0% interest.

— 129 — Further details of Provence Town as of September 30, 2010 are as follows:

Residential Retail Carpark Total planned saleable GFA (sq.m.) ...... 105,424 2,680 18,307

Sapphire Boomtown Phases 2, 3 and 4 (藍灣香郡第二、三及四期)

Phases 2, 3 and 4

Phases 2, 3 and 4 occupy a total site area of 123,026 sq.m. with a total planned GFA of approximately 371,721 sq.m.

Further details of Phases 2, 3 and 4 of Sapphire Boomtown as of September 30, 2010 are as follows:

Residential Retail Carpark Total planned saleable GFA (sq.m.) ...... 278,708 35,556 51,647

For a general overview of Sapphire Boomtown, please refer to the description on page 128 of this offering memorandum.

Golden Coast (黃金海岸)

Golden Coast is a large-scale residential and resort development that is expected to comprise high-rise buildings, townhouses, hotels, retail facilities and other recreational facilities located on the waterfront of Yongning Town of Shishi in Fujian Province with a coastline covering three kilometers. The surrounding area contains a number of tourist attractions, including Luo Jia Temple (珞珈寺), an oceanworld themepark and a fisherman’s wharf.

The project occupies a total site area of 1,196,614 sq.m. with a planned total GFA of approximately 1,256,400 sq.m. We acquired our interest in the site through our investment in SCE Golden Coast, the company that held that site at the time of our investment. There is no outstanding land premium. The project is to be developed through SCE Golden Coast, a company in which we hold a 45% interest. The remaining 55% interest is held by Independent Third Parties.

As of September 30, 2010, both phases were at the planning stage and were being held for future development. Further details of Golden Coast as of September 30, 2010 are as follows:

Residential Retail Hotel Total planned saleable/leasable GFA (sq.m.) ...... 852,570 109,530 120,300

Purple Lake International Phase 2 (紫湖國際第二期)

Phase 2 of this project occupies a total site area of 72,013 sq.m. with a total planned GFA of approximately 60,982 sq.m. Further details of Phase 2 of Purple Lake International as of September 30, 2010 are as follows:

Residential Total planned saleable GFA (sq.m.) ...... 44,482

For a general overview of Purple Lake International, please refer to the description on page 128 of this offering memorandum.

— 130 — Anshan Project Anshan Project is a large-scale integrated urban complex that is expected to comprise a residential community, office buildings, a commercial centre and a luxury hotel. The project is located in the Qianshan District in Anshan, Liaoning Province and sits near Tanggangzi Spring, a well-known hot spring in north east China. We are developing Anshan Project in five phases. The project occupies a total site area of 603,562 sq.m. with a total planned GFA of approximately 1,813,868 sq.m. We acquired the land use rights to the site through public tender in 2010. There is no outstanding land premium. We are developing this project through our subsidiaries, Anshan Junda Construction and Development Co. Ltd. and Anshan SCE Estate Development Co. Ltd., in each of which we currently hold a 70.0% interest. Further details of Anshan Project as of September 30, 2010 are as follows:

Residential Retail Office Hotel Carpark Total planned saleable GFA (sq.m.) . . 1,405,108 138,000 20,000 50,000 85,472

SCE International Community (Phases 2 and 3) (中駿國際社區第二至第三期) Phases 2 and 3 have a total planned GFA of approximately 485,878 sq.m. Further details of Phases 2 and 3 of SCE International Community as of September 30, 2010 are as follows:

Residential Retail Carpark Total planned saleable GFA (sq.m.) ...... 353,845 55,991 74,882 For a general overview of SCE International Community, please refer to the description on page 127 of this offering memorandum.

Fortune Plaza (Phases 3 and 4) (財富中心第三及第四期) Phases 3 and 4 of Fortune Plaza occupies a total site area of 256,612 sq.m. with a total planned GFA of approximately 817,821 sq.m. and is expected to comprise serviced apartments, a shopping mall and a hotel. Further details of Phase 3 of Fortune Plaza as of September 30, 2010 are as follows:

Residential Retail Office Hotel Carpark Total planned saleable GFA (sq.m.) . . 190,800 178,095 95,000 123,178 230,748 For a general overview of Fortune Plaza, please refer to the description on page 125 of this offering memorandum.

Tangshan Project Tangshan Project is a high-end low density residential development that is expected to comprise townhouses and other retail facilities located in the Tangshan, Hebei Province. The project is situated in the northwest part of the Nanhu Ecological Park (南湖生態公園). The site is easily accessed and surrounded by natural scenic surroundings. We are planning to develop Tangshan Project in 2 phases. The project occupies a total site area of 113,292 sq.m. with a total planned GFA of approximately 64,911 sq.m. We acquired the land use rights to the site through public tender in 2010. Approximately RMB89 million of the land premium is outstanding. We intend to develop this project through our wholly-owned subsidiary, Tangshan SCE Real Estate Development Co., Ltd. Further details of Tangshan Project are as follows:

Residential Retail Total planned saleable GFA (sq.m.) ...... 56,680 3,639

— 131 — Beijing Project

Beijing Project is a high-end residential development that is expected to comprise high-rise buildings of luxury mansions and retail shops located at No.8 Desheng Street within the central business district inside the North No. 2 Ring Road of Beijing.

The project occupies a total site area of 5,799 sq.m. with a total planned GFA of approximately 38,195 sq.m. We acquired the land use rights to the site through acquisition of Beijing Dushishengjing Real Estate Development Co., Ltd. There is no outstanding land premium.

Further details of Beijing Project are as follows:

Residential Retail Carpark Total planned saleable GFA (sq.m.) ...... 23,495 5,000 9,700

Sunshine Town (Phase 2) (四季康城第二期)

Phase 2 of Sunshine Town has a total planned GFA of approximately 220,229 sq.m. Further details of Phase 2 of Sunshine Town as of September 30, 2010 are as follows:

Residential Retail Carpark Total planned saleable GFA (sq.m.) ...... 193,263 2,283 23,367

For a general overview of Sunshine Town, please refer to the description on page 126 of this offering memorandum.

Projects to be acquired for future development

Sapphire Hill (藍灣翠嶺)

Sapphire Hill is a large-scale residential community development that is expected to comprise high-rise residential buildings and retail stores located along the boundary of the Long Jiang Old City District in Shenzhen near the entrance of the Shenzhen-Shantou Expressway. The project will feature convenient access to public transportation, such as Line No. 3 of the Shenzhen Metro and Shenzhen East Railway Station, which are under construction or being planned by the local government.

The project is expected to occupy a total site area of 251,749 sq.m. with a total planned GFA of approximately 424,098 sq.m. We plan to develop this project through our subsidiary, SCE Sapphire Hill, in which we hold an indirect interest of approximately 63.2%. The remaining 36.8% interest in SCE Sapphire Hill is held by Independent Third Parties.

We are planning to develop Sapphire Hill in four phases. We entered into a master agreement with the local government in relation to the Sapphire Hill project in July 2006. Under the master agreement, we are responsible for the relocation and the resettlement work for the land site. Approval from local government and relocation and resettlement works are in progress. As of September 30, 2010, we still need to successfully tender for the project, sign a land grant contract and pay the land premium before we can obtain the land use rights certificate.

Nan’an Convention Center (南安會展中心)

Nan’an Convention Center is an integrated urban complex that is expected to comprise a convention center, residential apartments, commercial facilities and a hotel located on the southern shore of the Xixi river on the east side of Nan’an in Fujian Province. The project is situated opposite Phoenix Mountain (鳳凰山).

— 132 — The project is expected to occupy a total site area of 558,000 sq.m. with a total planned GFA of approximately 1,023,785 sq.m. We plan to develop this project through a wholly-owned subsidiary to be established.

We entered into a master agreement with the local government in relation to the Nan’an Convention Center project in March 2008. Under the master agreement, we are responsible for the formulation of the project planning and design and the local government is responsible for the relocation and resettlement work for the land site. As of September 30, 2010 we still need to go through the competitive bidding process, sign the land grant contract and pay the land premium before we can get the land use rights certificate.

Selected completed projects

Jade Lakefront Manor (翠湖莊園)

Jade Lakefront Manor is a high-end residential development comprising 123 villas and four apartment buildings with retail units located at the intersection of Island Ring Road and Jinshang Avenue in Xiamen in Fujian Province and is situated along the waterfront of the Dai Liao Reservoir (埭遼水庫). Jade Lakefront Manor is conveniently located near the Xiamen International Airport, the Ji Mei Bridge (集美大橋), the Wu Yuan Bay Commercial District (五緣灣商業圈) and Cheng Gong Avenue, the main road of Xiamen and is only seven kilometers from Wu Tong pier (五通碼頭). There is also a large-scale residents’ clubhouse and other recreational and sporting facilities within Jade Lakefront Manor. The project was completed in January 2006.

The project occupies a total site area of 48,126 sq.m. with a total GFA of approximately 72,768 sq.m.

Green Lake Mansion (碧湖豪庭)

Green Lake Mansion is a high-end residential community comprising one low-rise building, four high-rise buildings and one office building with retail store fronts located and within the Fu Shan Business Circle (富山商圈) at the intersection of Hu Ming Road and Bin Lang Road in Xiamen in Fujian Province and situated at the waterfront of the Yundang Lake (篔簹湖), the largest lake in Xiamen’s main city district. Green Lake Mansion is surrounded by commercial and educational facilities. It is within close proximity to the Bin Bei CBD (濱北中央商務區) and Bin Lang Road (濱榔路), a popular entertainment hub in Xiamen with numerous pubs, bars and restaurants. The development was completed in July 2006.

The project occupies a total site area of 9,117 sq.m. with a total GFA of approximately 43,211 sq.m.

Sapphire Peninsula (Xiamen) (廈門●藍灣半島)

Sapphire Peninsula (Xiamen) is a high-end residential development comprising 15 high-rise buildings with retail store fronts located at the intersection of Haicang Avenue and Canghong Road in the Haicang Port District within the Haicang Investment Zone in Fujian Province. Sapphire Peninsula (Xiamen) sits next to our Seashore Suite No. 1 development project and also is located on the first row of the Xihai waterfront next to the Binhai Park and is situated within 20 minutes from the Xiamen International Airport. The development was completed in January 2008.

The project occupies a total site area of 45,917 sq.m. with a total GFA of approximately 135,747 sq.m.

— 133 — SCE Building (Phase 1) (中駿集團大廈第一期)

The SCE Building is an office building located to the east of the intersection of Dailiao Road and Fangzhong Road in Xiamen in Fujian Province and adjacent to both the Jinshang Avenue Economic Zone and the Wu Yuan Bay Commercial District (五緣灣商業圈).

The project occupies a total site area of 13,644 sq.m. with a total GFA of 44,358 sq.m. We acquired the site from the local government in 2006.

The SCE Building is being developed in two phases. Construction of Phase 1 is complete and comprises an 11-story office building with a total GFA of 14,274 sq.m. We are holding Phase 1 of the SCE Building for self-use and as an investment property.

World City (世界城)

World City is a high-end integrated residential and commercial community comprising two buildings of serviced apartments, one of which consists of luxury mansions and over 30,000 sq.m. of retail shops located at No.8-9 Jinhui (金匯) Road in the Chaoyang District of Beijing. The project is situated in the heart of the central business district of Beijing within the East No.3 Ring Road and at the junction of the Chao Wai Business Circle, Jian Guo Men Business Circle and the World Trade Center Business Circle.

The project occupies a total site area of 14,344 sq.m. with a total GFA of 118,848 sq.m.

Seashore Suite No. 1 (海岸一號)

Seashore Suite No.1 is a residential development with sea views that comprises five 29 to 33-story high-rise buildings and retail store fronts located at the intersection of Haicang Avenue and Binhu North Road in the Haicang Port District within the Haicang Investment Zone in Fujian Province, the largest investment zone established by the PRC Government for investments from Taiwan residents. Seashore Suite No.1 is located on the first row of the Xihai waterfront adjacent to the Haicang Weilai Lake and next to the Haicang Bay Waterfront Park, which possesses six kilometers of shoreline. It is also situated within 20 minutes from the Xiamen International Airport.

The project occupies a total site area of 24,083 sq.m. with a total GFA of 105,401 sq.m.

OUR PROPERTY DEVELOPMENT PROCESS

Project Management System and Procedures

We attach great importance to our property development process. As such, we have developed a set of detailed and standardized operating procedures to which we strictly adhere when conducting each of our project development processes. These processes are managed, coordinated and supervised centrally by our senior management at our headquarters in Xiamen and implemented by the dedicated departments of our regional offices and project companies. These operating procedures feature substantial input from, and undergo constant monitoring and supervision by, different departments in each stage of our development process. Those procedures are also designed to enable real-time monitoring and supervision of each stage of our development process in order to help us identify and resolve potential problems as early as possible during the project cycle. We then are able to minimize material deviations from pre-approved budgets at each stage of our development process and better maintain quality standards across all of our projects.

— 134 — Overview of the Development Process

Although the nature and sequence of specific planning and execution activities may vary from project to project, we have summarized below the core elements of the typical project development process for our properties:

We typically establish a separate project company to undertake the development of each project and to facilitate the project management.

Feasibility Study and Land Acquisition

Performing a feasibility study is the first step of our property development process. Our strategic development department and sales management department conduct feasibility studies based on factors such as the supply and demand in the relevant real estate market, potential market growth, local urban planning and development policies, geographical location of the development sites, and the estimated cost of development. Other departments, including the audit and legal department, the design management department, financial management department and construction management department work closely together with our strategic development department and provide input based on their respective expertise. The strategic development department then prepares a feasibility study report for consideration and approval by our board.

Upon approval by our board, we will seek to acquire the site for the property development project. We generally acquire the land through participating in the competitive bidding, public auction or listing-for-sale process or acquiring project companies from other developers. For certain projects, we establish joint ventures with third parties who hold the relevant land use rights to the site.

Obtaining Permits and Certificates

Real estate developers like us are only allowed to commence construction of a property development project upon obtaining the construction works commencement permit, which is issued only when the land use rights certificate, the construction land planning permit and the construction works planning permit are obtained. Further details of such certificates and permits are set out below:

• land use rights certificate — a certificate evidencing the right of a party to use a parcel of land;

• construction land planning permit — a permit authorizing a developer to begin the survey, planning and design of a parcel of land;

• construction works planning permit — a permit evidencing government approval for a developer’s overall planning and design of the project and allowing a developer to apply for a construction works commencement permit; and

— 135 — • construction works commencement permit — a permit required for commencement of construction work.

As of September 30, 2010, we had entered into land use rights grant contracts or tendered for the land for projects with an aggregate planned GFA of approximately 2,059,000 sq.m. but had not yet obtained the land use rights certificates. We obtained land use rights certificate for approximately 143,000 sq.m. of this planned GFA in October 2010.

Financing We have financed our projects primarily through bank and other borrowings, pre-sale proceeds of our properties, and equity and debt issuances. Although the financing sources vary from project to project, we are required under relevant PRC regulations to finance at least 20% of the total project costs with our own funds when we develop ordinary commodity housing and finance at least 30% of the total project costs with our own funds when we develop other real estate projects. Bank loans have been one of the primary sources of funding for our property development projects. As of September 30, 2010, our outstanding bank and other borrowings amounted to RMB2,410.7 million. For details of our banking facilities, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Indebtedness — Bank and other borrowings.” It is one of our strategies to optimize our capital and financing structure to secure sufficient financing for our future property development projects, which we intend to achieve through a combination of cash flow from operations and issuance of debt and equity securities.

Design Our design management department is responsible for coordinating all design-related aspects of a project. By working closely with our external architectural, interior, landscaping and gardening design contractors, as well as our internal construction management department and sales and marketing department, our design management department seeks to ensure that we consistently develop high quality projects with innovative designs that appeal to potential purchasers.

Construction After obtaining the land use rights to a parcel of land, our in-house construction management team will start to prepare the land for construction and development, including, arranging for the fencing of the site. Our construction management department arranges for the selection of construction contractors through a tender process. We typically conduct comprehensive due diligence on our contractors before inviting them to participate in the tender process, and the successful bidder is selected based on a variety of factors including its proposed fee, the proposed construction schedule, the quality of its construction works, the construction plan, proposed allocation of manpower, construction safety measures and standards, equipment and facilities proposed to be applied, and the industry experience of the project manager. Depending on the complexity and the scale of our project, some factors may outweigh others in determining the contractor that we select for a particular project. Our construction contracts generally provide for payments to be made upon the achievement of specific milestones throughout the construction process. We also generally retain 5% of the contract price for a period of one to two years after completion of the construction works and will apply such retained amount against any expense incurred by us to rectify any defects of the construction should the contractor fail to rectify such defects when called upon to do so. Equipment and construction materials required for our construction works are generally procured by our contractors at a pre-agreed price. In the event that the final

— 136 — purchase price of the equipment and construction materials procured increases or decreases by more than a pre-determined percentage from the pre-agreed price, payments to our contractors will be adjusted accordingly to reflect any such difference. Certain equipment, such as elevators and air-conditioning units, are procured centrally through our procurement department at our headquarters from pre-selected suppliers, which typically provide favorable price arrangements for our bulk purchases. We are not responsible for any labor-related liabilities of our contractors. Under our construction contracts, the contractors are required to make an upfront payment of 5% of the contract price to guarantee the performance of their obligations under the contracts and we are entitled to apply such amount against any liability incurred by us as a result of any non-compliance by the contractors with applicable PRC laws and regulations concerning environmental protections, labor and safety issues.

Quality Control and Supervision We place a strong emphasis on quality control to attempt to ensure that our property development projects not only comply with relevant regulations but also meet very high standards. We have standardized and detailed quality control procedures in place for our various functional departments. We have also established stringent internal quality control procedures which apply to the design construction of, and quality of materials used in, our property development projects. Quality control procedures are managed, coordinated and supervised in a centralized manner by our senior management and are implemented by each functional department through on-site inspections and supervision on a daily basis. In addition, we engage independent and certified engineering supervisory companies to conduct quality and safety control checks on all building materials, equipment and construction in accordance with relevant PRC regulations. We are of the view that our commitment to quality control and developing high quality properties are widely recognized and we have received various awards in recognition of the quality of our properties, including the “Provincial Landscape Model Enterprise” ( 省級綠化模範單位榮譽稱號) in 2010 for our Sapphire Peninsula (Quanzhou) project, the “China Real Estate Golden Key-2010 High-End Townhouse Habitat Model” (中國地產金鑰匙獎—2010高端城市別墅人居典範) in 2010 for our Sapphire Boomtown project, the “2010 China Most Influential Property Development Project” (2010中國最具影響力樓盤) for our Fortune Plaza project and the “2010 China Top Ten Stylish Property Development Project” (2010年度中國十大風尚樓盤) for The Regent project.

Sales and Marketing Our sales and marketing department is based at our headquarters in Xiamen and is responsible for conducting market research, determining our marketing strategy, and formulating specific marketing plans for each property development project. Each of our project companies also has its own sales and marketing team to implement highly customized strategies for individual projects. The sales and marketing strategy varies from project to project and is formulated after taking into account a wide range of factors, including market conditions, the phase and location of the project, positioning of the project, targeted customer group and sales progress. We generally market our property development projects through advertisements in newspapers and on billboards. We also set up on-site reception centers and showroom offices at each of our project sites to display information relating to, and promote the sales of, the relevant project. In 2008, we established the SCE Customers Club, which serves as a platform for us to communicate with our customers, handle customer inquiries and enhance customer loyalty,

— 137 — and as a medium to promote sales of our properties to existing customers or potential purchasers. All purchasers of our properties will, upon joining the SCE Customers Club, be entered into priority services. In addition, potential customers can also apply to become a member of the SCE Customers Club.

Pre-sales and Sales

The sales process of our property development projects typically occurs phase by phase and will generally commence prior to the completion of their construction. The proceeds from the pre-sales are an important source of financing for our property developments.

Payment and End-user Financing

Our customers are required to make payment for the properties in one lump sum. Most customers make their payments by mortgage loans from banks and other financial institutions.

In line with market practice, we cooperate with various banks for the provision of mortgage loans to our customers and provide guarantees for these mortgages generally until completion of the construction and delivery of the relevant property ownership certificates to the mortgagee banks. As of December 31, 2007, 2008 and 2009 and September 30, 2010, the amount of our outstanding guarantees for such mortgage loans was RMB688.3 million, RMB504.2 million, RMB879.2 million and RMB1,164.1 million, respectively.

Delivery of Properties Once a property development project has passed the requisite government inspections and is ready for delivery, we will notify the purchaser and deliver the properties to complete the sales process. Our pre-sale and sale contracts stipulate the time frame for delivery and we are required to make penalty payments to our customers for any delay in delivery. Please refer to “Risk Factors — Risks Relating to Our Business — We face contractual risks relating to the pre-sale of properties, including the risk that property developments cannot be completed, or cannot be completed on time.”

Property Management and Post-Sales Services

We currently provide property management services to a number of projects that we have developed but we intend to provide property management services for each of the properties we develop in the future. Our property management services are provided through our wholly-owned subsidiaries, SCE Xiamen Property Management, SCE Quanzhou Property Management and SCE Beijing Property Management under the “世邦泰和” brand. We also occasionally engage the services of external property management consultants such as DTZ and Savills to provide property management advice, which we believe will allow us to offer high quality services to residents of our properties.

Our property management services generally include security, maintenance of common facilities, gardening and landscaping. The property management contract with owners of the properties sets out the scope and standard of the services to be provided by our property management companies.

COMPETITION

Competition within the real estate industry in the PRC is highly intense. Our major competitors include large domestic state-owned, private real estate developers and foreign-funded real estate developers who focus on developing residential properties in the PRC. We compete on the basis of size of land bank, geographical location, quality of real estate offered, brand recognition, ability to secure financing, pricing and design. A number of our competitors have greater financial, marketing, land bank and other resources than we do, as well as greater economies of scale, broader name recognition, a better track record and more established status in the real estate markets where we operate.

— 138 — For more information on competition, please see “Risk Factors — Risks relating to our business — We face intense competition from other real estate developers.”

EMPLOYEES

As of September 30, 2010, we had 627 full-time employees. Set out below is a breakdown of the number of our full-time employees by function:

Departments Number of Employees Management ...... 8 General office ...... 8 Administration and human resources ...... 28 Financial management ...... 11 Sales and marketing ...... 26 Design management ...... 29 Engineering management ...... 11 Commercial property ...... 11 Sub-total ...... 132 Project companies ...... 495 Total ...... 627

We offer competitive remuneration packages to our employees, including basic salaries and bonuses to qualified employees. We also provide technical as well as operational training to all new employees and on-going training for all existing employees. Since our inception, we have not experienced any significant turnover of staff nor any disruption to our business operations due to labor disputes. We believe we have maintained excellent relationships with our employees. This is evidenced by the fact that we received the “10 Best Employer in Xiamen in 2008” and the “Best Employer for Female Employees in Xiamen in 2008” awards from zhaopin.com, a leading online recruitment portal in China.

INSURANCE

Real estate developers like us are not required under PRC laws and regulations to maintain insurance coverage in respect of their property development operations. In line with industry practice, we do not maintain insurance coverage on our properties developed for sale except for those developments for which we are required to maintain insurance coverage under the financing documents. In addition, we generally do not take out insurance against personal injuries that may occur during the construction of our properties. According to relevant PRC laws and regulations, the general contractors and construction companies are responsible for safety control during the course of construction and are required to maintain accident insurance for their construction workers. The general contractors and construction companies will also bear the risks and liabilities arising from tortious acts committed on work sites under the terms of our construction contracts.

We carry social insurance for our employees and maintain, on a voluntary basis, personal accident insurance and supplementary commercial insurance.

We believe that the insurance coverage taken out by us is typical and in line with the industry practice for similar operations. However, there is a risk that we do not have sufficient insurance coverage for losses, damages and liabilities that may arise from our business operations. Please refer to “Risk Factors — Risks relating to our business — We may suffer losses and claims arising from uninsured risks.”

SOCIAL, HEALTH AND SAFETY MATTERS

Under PRC laws and regulations, an enterprise is required to execute employment contracts with its employees according to the relevant laws and regulations and shall not

— 139 — rescind the employment contract without cause. Employees are entitled to breaks and take annual leave based on the law and provisions as stipulated in their employment contracts. An enterprise is also required to have health and safety policies and provide health and safety training to its staff. It is also required to provide its staff with a safe and hygienic working environment as well as necessary protective equipment. In addition, an enterprise is required to purchase basic medical insurance, pension insurance, maternity insurance, unemployment insurance, and personal injury insurance for its staff and pay the relevant insurance premiums in accordance with relevant laws and regulations.

We believe that by protecting the interests of our employees, we can enhance employee morale and improve our long-term retention of quality personnel.

In order to comply with the relevant laws and regulations, we participate in various defined retirement contribution plans organised by the PRC provincial and municipal governments for our employees. We pay on behalf of our employees a monthly social insurance premium covering pension insurance, medical insurance, unemployment insurance, personal injury insurance and housing provident fund. Our human resources department personnel are responsible for our social, health and safety issues.

INTELLECTUAL PROPERTY RIGHTS

We conduct our property development business under the “ ,” “ ” and the “ ” trademarks, all of which are registered in the PRC and owned by us, and our property management business under the “ ” trademark, for which we have filed the applications for registration with relevant authorities in the PRC. We are also the registered owner of the domain name “www.sce-re.com.”

Quanzhou Transformer, a company controlled by Mr. Wong, has registered the trademarks “ ,” “ ” and “ ” in the PRC in the areas of manufacturing of transformers and other electric machinery.

ENVIRONMENTAL AND SAFETY MATTERS

We are subject to certain laws and regulations of the PRC concerning environmental protection. Pursuant to these laws and regulations, we are required to undergo environmental assessments with respect to each property development project. An environmental assessment report is required to be prepared by qualified independent experts and submitted by a real estate developer before the relevant authorities will grant a permit for commencement of construction works. Upon completion of the property development, the relevant environmental authorities will inspect the property to ensure compliance with applicable environmental standards and regulations before the property is delivered to the purchaser. Save for the fee paid to independent experts for the preparation of environmental assessment report as mentioned above, we were not required to pay, nor did we incur, any cost of compliance with applicable environmental laws and regulations during the three years ended December 31, 2007, 2008 and 2009 and the nine months ended September 30, 2010. In addition, we do not expect to incur any material cost of compliance with applicable environmental laws and regulations in the future.

LEGAL PROCEEDINGS

In the ordinary course of business, we have occasionally been involved in legal proceedings, the nature of which are primarily contractual disputes with customers and contractors, which is common in our industry. However, we are not aware of any litigation, arbitration or claim pending or threatened against us which would have a material adverse effect on the results of our operations or financial condition.

— 140 — REGULATION

LEGAL SUPERVISION RELATING TO REAL ESTATE SECTOR IN THE PRC

A. Establishment of a property development enterprise Pursuant to the “Law of the People’s Republic of China on Administration of Urban Real Estate” (the “Urban Real Estate Law”)《中華人民共和國城市房地產管理法》 ( ) enacted by the Standing Committee of the National People’s Congress on July 5, 1994, effective on January 1, 1995 and amended on August 30, 2007, a real estate developer is defined as “an enterprise which engages in the development and sale of property for the purposes of making profits.” Under the “Regulations on Administration of Development of Urban Real Estate” (the “Development Regulations”)《城市房地產開發經營管理條例》 ( ) enacted by the State Council and effective on July 20, 1998, a property development enterprise must satisfy the following requirements: (a) have a registered capital of not less than RMB1 million and (b) have four or more full-time professional property/construction technicians and two or more full-time accounting officers with the relevant qualifications. The Development Regulations also stipulates that the People’s government of the provinces, autonomous regions or municipalities directly under the central government may impose more stringent requirements regarding the registered capital and qualifications of professional personnel of a property development enterprise according to the local circumstances. Pursuant to the Development Regulations, applications for registration of a property development enterprise have to be submitted to the department of administration of industry and commerce. The applicant must file a record with the property development authority in the location of the registration authority within 30 days of the receipt of its business license. The minimum internal capital ratio for real estate projects (excluding economically affordable housing projects) was 35% under the “Notice on Adjusting the Portion of Capital Fund for Fixed Assets Investment of Certain Industries”《關於調整部分行業固定資產投資項目 ( 資本金比例的通知》) issued by the State Council on April 26, 2004. In May 2009, the State Council issued a “Notice on Adjusting the Percentage of Capital Fund for Investment Projects in Fixed Assets”《關於調整固定資產投資項目資本金比例的通知》 ( ) and reduced such ratio to 20% for ordinary commodity housing projects and affordable housing projects, and 30% for other real estate projects.

B. Foreign-invested real estate enterprises Pursuant to the “Foreign Investment Industrial Guidance Catalog” (the “Guidance Catalog”)《外商投資產業指導目錄》 ( ) jointly enacted by MOFCOM and NDRC on November 30, 2004 and effective on January 1, 2005, the development and construction of ordinary residential units fall within the category of “encouraged industry”; the development of an entire land lot operated by Sino-foreign equity joint ventures or Sino-foreign co-operative joint ventures, and the construction and operation of high-end hotels, villas, premium office buildings, international conference centers and large theme parks fall within the category of “restricted industry”; and other types of property development fall within the category of “permitted industry.” MOFCOM and NDRC amended the Guidance Catalog in October 2007, which provides that, effective from December 1, 2007, foreign-invested property development business falls within the category of “permitted industry,” except that foreign investment in the development of whole land lots which shall be operated only by Sino-foreign equity joint ventures or Sino-foreign cooperative joint ventures, the construction and operation of high-end hotels, villas, premium office buildings, cinema and large theme parks, international conference centers, real estate transactions in the secondary market and real estate intermediaries fall within the category of industries in which foreign investment is subject to restrictions, and the construction and operation of golf courses falls within the category of industries in which foreign investment is subject to prohibitions. Foreign-invested real estate enterprises can be established in the form of a Sino-foreign equity joint venture, Sino-foreign cooperative joint venture or wholly-owned foreign enterprise according to the Guidance Catalog and other laws and administrative regulations relating to foreign-invested enterprises. Prior to the application for registration to the department of administration of industry and commerce, the enterprise must be approved by the authorities of commerce and obtain an approval certificate for a foreign-invested enterprise.

— 141 — On July 11, 2006, the Ministry of Construction, MOFCOM, NDRC, PBOC, SAIC and SAFE jointly enacted the “Circular on Standardizing the Admittance and Administration of Foreign Capital in the Real Estate Market” (Jianzhufang 2006 No. 171)《關於規範房地產市場外資准入 ( 和管理的意見》). According to this circular, foreign investment in real estate market must comply with the following requirements:

(a) foreign institutions or individuals purchasing real estate in China which is not for their own residential use shall follow the principle of commercial existence and apply for the establishment of foreign-invested enterprises under the regulations of foreign investment in real estate. Foreign institutions and individuals can only carry on their business pursuant to the approved business scope after obtaining the approvals from relevant authorities and upon completion of the relevant registrations;

(b) if the total investment of a foreign-invested property development enterprise exceeds or equals US$10 million, the registered capital must not be less than 50% of the total investment. If the total investment is less than US$10 million, the amount of the registered capital shall follow the existing regulations;

(c) the commerce authorities and the department of administration of industry and commerce are in charge of granting approval for establishing and effecting the registration of foreign-invested real estate enterprises and issuing approval certificates for foreign-invested enterprises and business licenses which are only effective for one year. After paying for the land use right, the enterprises should apply for the land use rights certificate by presenting the above-mentioned approval certificates and business licenses. With the land use rights certificate, the enterprises will receive an official approval certificate for a foreign-invested enterprise from the commerce authorities, and shall replace the business license with one that has the same operational term as the formal approval certificate for foreign-invested enterprises in the department of administration of industry and commerce, and then apply for tax registration with the tax authorities;

(d) transfers of projects of or shares in foreign-invested real estate enterprises, and the acquisitions of domestic real estate enterprises by foreign investors should strictly follow the relevant laws, regulations and policies to obtain approvals. Foreign investors should submit: (i) the guarantee letters for the performance of the State-owned Land Use Rights Grant Contracts, the Construction Land Planning Permit and the Construction Work Planning Permit; (ii) the Certificate of Land Use Rights; (iii) the certification on alteration of archive files issued by construction authorities; and (iv) the certification on the payment of tax issued by the relevant tax authorities; and

(e) when acquiring domestic real estate enterprises by way of share transfer or otherwise, or purchasing shares from Chinese parties in Sino-foreign equity joint ventures, foreign investors should make proper arrangements for the employees, settle bank loans and pay the consideration in one single payment using internal funds. Foreign investors with irregular financial track records shall not be allowed to conduct any of the aforementioned activities.

— 142 — On August 14, 2006, the General Office of MOFCOM enacted the “Notice on Relevant Issues concerning the Carrying out the Opinions on Regulating the Access and Management of Foreign Capital in the Real Estate Market”《關於貫徹落實〈關于規範房地產市場外資准入和 ( 管理的意見》〉有關問題的通知). According to this notice, if the total investment of a foreign-invested property development enterprise exceeds US$3 million, the registered capital must be no less than 50% of the total estimated investment; if the total investment is less than or equal to US$3 million, the registered capital must be no less than 70% of the total estimated investment. When a foreign investor who merges with a domestic property development enterprise by transferring equity or by other means or by purchasing equity from other Chinese shareholders of a foreign-invested property development enterprise, proper arrangements must be made for the original employees of the merged companies, bank debts must be settled and the entire consideration for the transfer must be paid off within three months after the date of the issue of the business license or the effective day of the equity transfer agreement.

On May 23, 2007, MOFCOM and SAFE jointly issued the “Notice on Further Strengthening and Regulating the Approval and Supervision on Foreign Investment in the Real Estate Sector in the PRC”《關於進一步加強、規範外商直接投資房地產業審批和監管的通知》 ( ), which stipulates the following requirements for the approval and supervision of foreign investment in the real estate sector:

(i) foreign investment in the PRC real estate sector relating to luxury properties should be strictly controlled;

(ii) before obtaining approval for the establishment of real estate entities with foreign investment, (a) both the land use rights certificates and housing ownership right certificates should have been obtained, or (b) contracts for obtaining land use rights or housing ownership rights should be entered into;

(iii) entities which have been set up with foreign investment need to obtain approval before they expand their business operations into property development, and entities which have been set up for property development operations need to obtain new approval in order to expand their real estate business operations;

(iv) acquisitions of real estate entities and foreign investment in the real estate sector by way of “round-trip” investment (返程投資) should be strictly regulated. Foreign investors should not avoid approval procedures by changing actual controlling persons;

(v) parties with interests in real estate entities with foreign investment should not in any way guarantee a fixed investment return;

(vi) registration shall be immediately effected according to applicable laws with MOFCOM regarding the set-up of real estate entities with foreign investment approved by local PRC governmental authorities;

(vii) foreign exchange administration authorities and banks authorized to conduct foreign exchange business should not effect foreign exchange settlements regarding capital account items to those who fail to file with MOFCOM or fail to pass the annual reviews; and

(viii) for those real estate entities who are wrongfully approved by local authorities for establishment set ups, (a) MOFCOM should carry out investigations and order punishment and rectification, and (b) foreign exchange administrative authorities should not carry out foreign exchange registrations for them.

— 143 — On July 10, 2007, the General Affairs Department of SAFE issued the “Notice Regarding the Publication of the List of the First Batch of Property Development Projects with Foreign Investment that have Properly Registered with MOFCOM”《關於下發第一批通過商務部備案的 ( 外商投資房地產專案名單的通知》) (“Notice No. 130”). This new regulation restricts the ability of foreign-invested real estate companies to raise funds offshore for the purposes of injecting such funds into the companies either through a capital increase or by way of shareholder loans. Notice No. 130 stipulates, among other things, that:

(A) SAFE will no longer process foreign debt registrations or applications for purchase of foreign exchange submitted by real estate enterprises with foreign investment that obtained authorization certificates from and registered with MOFCOM on or after June 1, 2007; and

(B) SAFE will no longer process foreign exchange registrations (or change of such registrations) or applications for sale and purchase of foreign exchanges submitted by real estate enterprises with foreign investment that obtained approval certificates from local government commerce departments on or after June 1, 2007 but that have not registered with MOFCOM.

In June 2008, MOFCOM issued the “Notice Regarding Completing the Registration of Foreign Investment in the Real Estate Sector”《關於做好外商投資房地產業備案工作的通知》 ( ) (“Notice No. 23”). According to Notice No. 23, when a foreign-invested real estate enterprise is established, increases its registered capital, transfers its shares, merges with or acquires another enterprise, the provincial level MOFCOM is required to verify all records regarding such foreign-invested real estate enterprise. Notice No. 23 also requires that each foreign-invested real estate enterprise undertake only one approved real estate project.

On August 29, 2008, SAFE issued the “Circular on the Relevant Operating Issues Concerning Improving the Administration of Payment and Settlement of Foreign Exchange Capital of Foreign-Invested Enterprises”《關於完善外商投資企業外匯資本金支付結匯管理有關 ( 業務操作問題的通知》)” (“Circular No. 142”). Pursuant to Circular No. 142, Renminbi amounts from the settlement of foreign currency capital of a foreign-invested enterprise must be used within the business scope of the enterprise as approved by the examination and approval department of the government, and cannot be used for domestic equity investment unless it is otherwise provided for in other regulations.

According to the “Interim Provisions on Approving Foreign-Invested Projects”《外商投資 ( 項目核准暫行管理辦法》) promulgated by the NDRC in October 2004, local authorities may examine and approve (i) foreign-invested projects with total investment less than US$100 million within the category of encouraged or permitted foreign investments and (ii) foreign-invested projects with total investment less than US$50 million within the category of foreign investments subject to restrictions. Approval from the NDRC is required for foreign-invested projects with total investment of US$100 million or more within the category of encouraged or permitted foreign investments and those with total investment of US$50 million or more within the category of foreign investments subject to restrictions. Further, apart from examination by the NDRC, approval from the State Council is required for foreign-invested projects with total investment of US$500 million or more within the category of encouraged or permitted foreign investments and those with total investment of US$100 million or more within the category of foreign investments subject to restrictions. Additional approval from the development and reform authority at provincial level is required for projects that are subject to restrictions. In July 2008, the NDRC issued the “Notice on Further Reinforcing and Regulating the Administration of Foreign-Invested Projects,”《關於進一步加強 ( 和規範外商投資項目管理的通知》) which requires that any capital increase and reinvestment in projects by foreign-invested enterprises should obtain approval from the NDRC or its local counterpart.

— 144 — On July 16, 2004, the State Council issued the Decision of the State Council on Reforming the Investment System《國務院關于投資體制改革的决定》 ( ) and Catalog of Investment Projects Approved by the Government (2004)《政府核准的投資項目目錄》 ( (2004年)) (the “Decision and Catalog”). According to the Decision and Catalog, as to foreign investment projects, encouraged or permitted projects with a total investment (including increased capital) of US$100 million or above and restricted projects with a total investment (including increased capital) of US$50 million or above as prescribed in the Guidance Catalog are subject to the approval of NDRC. Issues in relation to the establishment and alteration of foreign investment enterprises involving the administration on quota and license, the total investment of which is above the State-prescribed quotas and in which the investment is restricted; and the material changes (including increase and decrease of capital, transfer of shares and mergers) as prescribed by the contract and/or articles of association of a large foreign-invested project and laws, are subject to the examination and approval of MOFCOM. Foreign-invested projects other than the aforesaid projects are subject to the examination and approval of local governments in accordance with relevant regulations.

On April 6, 2010, the State Council released the “Several Opinions of the State Council on Further doing a Good Job in the Utilization of Foreign Investment”《國務院關於進一步做好 ( 利用外資工作的若干意見》), under which, foreign-invested projects with a total investment (including increased registered capital) less than US$300 million within the category of encouraged or permitted foreign investment, other than the projects required by the Category of Investment Projects Examined and Approved by the Government to be examined and approved by relevant departments under the State Council, can be examined and approved by the relevant local authorities. Except for approvals from the relevant departments under the State Council that are explicitly specified by laws and regulations, the aforementioned departments can shift the authority of approval to the relevant local authority, in the context of strengthened supervision.

On May 4, 2010, the NDRC issued the “Circular of NDRC on Doing a Good Job in Delegating the Power to Verify Foreign-invested Projects”《國家發展改革委關於做好外商投資 ( 項目下放核准權限工作的通知》). According to this circular, foreign-invested projects with a total investment of less than US$300 million within the category of encouraged or permitted foreign investment, which was previously examined and approved by NDRC, except for the projects required by the Category of Investment Projects Examined and Approved by the Government to be examined and approved by relevant departments under the State Council, can be examined and approved by the provincial development and reform committee. The authority of approving the projects within the category of foreign investment subject to restrictions is not delegated and special regulations in respect of the approval of projects stipulated in other laws and regulations or State Council documents should be complied with.

On June 10, 2010, MOFCOM issued the “Circular of MOFCOM on Issues Concerning Delegating the Examination and Approval Authority for the Foreign Investment” (《商務部關于下放外商投資審批權限有關問題的通知》). According to this circular, commercial departments of provinces, autonomous regions, municipalities directly under the Central Government, cities specifically designated in the state plan, Xinjiang Production Construction Corps and sub-provincial cities (including Harbin, Changchun, Shenyang, Jinan, Nanjing, Hangzhou, Guangzhou, Wuhan, Chengdu, and Xian) are in charge of the examination, approval and management of the issues relating to establishment and changes of foreign-invested enterprises which fall within the category of encouraged or permitted investment with a total investment less than US$300 million or restricted investment with a total investment less than US$50 million as prescribed in the Guidance Catalog. Issues relating to increases of capital where the increment is less than the State-prescribed quotas are subject to the examination, approval and management of the local authority.

— 145 — C. Qualifications of a real estate developer

(a) Classifications and assessment of a property development enterprise’s qualification

Under the “Provisions on Administration of Qualifications of Real Estate Developers” (the “Provisions on Administration of Qualifications”)《房地產開發企業資質管理規定》 ( ) promulgated by the Ministry of Construction in March 2000, a real estate developer shall apply for registration of its qualifications in accordance with the Provisions on Administration of Qualifications. An enterprise may not engage in the development and sale of property without a qualification classification certificate for property development.

In accordance with the Provisions on Administration of Qualifications, real estate developers are classified into four classes. Developers with class 1 qualifications shall be subject to preliminary examination and approval by the construction authority under the People’s government of the relevant province, autonomous region or municipality directly under the central government and then final approval by the construction authority under the State Council. Procedures for approval of developers with class 2 or lower qualifications shall be formulated by the construction authority under the People’s government of the relevant province, autonomous region or municipality directly under the central government. A developer that passes the qualification examination will be issued a qualification certificate of the relevant class by the qualification examination authority. After a newly established real estate developer reports its establishment to the property development authority, the latter shall issue a provisional qualification certificate to the eligible developer within 30 days of receipt of the report. The provisional qualification certificate shall be effective for one year from the date of its issuance. The real estate development authority can extend the validity period for not more than two years after considering the actual business condition of the enterprise. The real estate developer shall apply for a qualification classification by the property development authority within one month before the expiry of the provisional qualification certificate.

On December 28, 2000, the Construction Department of Fujian Province issued the Notice of revising the Implementation Provision on Administration of Qualification of Real Estate Development Enterprise in Fujian Province (Min Jian Fa 2005 No. 85) (the “Fujian Real Estate Developers Provisions”)《福建省 ( <房地產開發企業資質管理規定>實施細則》), a property developer must register with the local property development authorities within 30 days after receiving its business license. The latter must issue a Provisional Qualification Certificate to the eligible developers within 20 days after receiving application filings. The Provisional Qualification Certificate will be effective for one year from the date of its issuance. The property development authority may extend the validity to a period of no more than two years due to the situation of the property developers.

According to the Fujian Real Estate Developers Provisions, the property development enterprises in Fujian Province shall be classified into four classes according to the specific situation of the enterprises. The class 1 qualification is preliminarily examined by the provincial construction authority for submission to MOHURD for approval. The class 2 qualification is preliminarily examined by the city and county construction authority for submission to the provincial construction authority for approval. The class 3 qualification is preliminarily examined by the county (city) construction authority for submission to the prefecture construction authority for approval. The class 4 qualification is examined and approved by the city and county construction authority. After obtaining the qualification the property development enterprises can engage in the development of real estate of a certain scale according to their qualification classification.

— 146 — (b) Business scope of a real estate developer

Under the Provisions on Administration of Qualifications, a developer of any qualification classification may only engage in the development and sale of real estate within its approved scope of business and may not engage in business which is limited to another classification. A class 1 real estate developer is not restricted as to the scale of a real estate project to be developed and may undertake a property development project anywhere in the country. A class 2 real estate developer or lower may undertake a project with a GFA of less than 250,000 sq.m. and the specific scope of business shall be as confirmed by the construction authority under the People’s government of the relevant province, autonomous region or municipality.

Under the Fujian Real Estate Developers Provisions, a property developer must, after obtaining its qualification certificate, only engage in the development of the property according to its qualification classification: (i) the construction scale of a property development project undertaken by a real estate developer with class 1 qualification is not subject to restriction; (ii) a real estate developer with class 2 qualification may undertake any real estate development project with a gross floor area of 250,000 sq.m. or less; (iii) a property developer with class 3 qualification may undertake any property development project with a gross floor area of 200,000 sq.m. or less; and (iv) a real estate developer with class 4 qualification may undertake any property development project with a gross floor area of 100,000 sq.m. or less.

Pursuant to the Provisions on Administration of Qualifications, the qualification of a real estate developer shall be inspected annually. The construction authority under the State Council or its authorized institution is responsible for the annual inspection of a class 1 real estate developer’s qualification. Procedures for annual inspection of developers of a class 2 or lower qualification shall be formulated by the construction authority under the People’s government of the relevant province, autonomous region or municipality.

D. Development of a real estate project

(a) Land for property development

Under the “Interim Regulations of the People’s Republic of China on Assignment and Transfer of the Right to Use State-owned Land in Urban Areas” (the “Interim Regulations on Assignment and Transfer”)《中華人民共和國城鎮國有土地使用權出讓和轉讓暫行條例》 ( ) promulgated and enforced by the State Council on May 19, 1990, a system of grant and transfer of the right to use state-owned land is adopted. A land user shall pay a premium to the state as consideration for the grant of the land use rights within a certain term, and the land user may transfer, lease, mortgage or otherwise commercially use the land use rights within the term of use. Under the Interim Regulations on Assignment and Transfer and the Urban Real Estate Law, the land administration authority under the local government of the relevant city or county shall enter into a land grant contract with the land user for the grant of the land use rights. The land user shall pay the land premium as provided for by the land grant contract. After payment in full of the land premium, the land user shall register with the land administration authority and obtain a land use rights certificate evidencing the acquisition of land use rights. The Development Regulations provide that land use rights for a site intended for property development shall be obtained through government grant, except for land use rights which may be obtained through allocation pursuant to PRC laws or the stipulations of the State Council.

— 147 — Under the “Regulations on the Assignment of State-owned Land Use Rights through Competitive Bidding, Auction and Listing-for-Sale”《招標拍賣掛牌出讓國有土地使用權規定》 ( ) enacted by MLR on May 9, 2002 and enforced on July 1, 2002, land for commercial use, tourism, entertainment and commodity housing development is assigned by way of competitive bidding, public auction or listing-for-sale. The procedures are as follows:

(i) the land authority under the People’s government of the city and county (the “assignor”) shall make an announcement at least 20 days prior to the date of the proposed competitive bidding, public auction or listing-for-sale. The announcement should include basic particulars such as land parcel, the qualification requirement of the bidder and auction applicants, methods and criteria on confirming the winning tender or winning bidder, and other conditions such as the deposit for the bid;

(ii) the assignor shall conduct a qualification verification of the bidding applicants and auction applicants, inform the applicants who satisfy the requirements set out in the announcement and invite them to attend the competitive bidding, public auction or listing-for-sale;

(iii) after determining the winning tender or the winning bidder by either competitive bidding, public auction or listing-for-sale, the assignor and the winning tender or winning bidder shall then enter into a confirmation. The assignor should return the bidding or tender deposits to other bidding or auction applicants;

(iv) the assignor and the winning tender or winning bidder shall enter into a contract for the grant of state-owned land use rights according to the time and venue set out in the confirmation. The deposit of the bid paid by the winning tender or winning bidder will be used to set off part of the land premium for the grant of the state-owned land use rights; and

(v) the winning tender or winning bidder should apply for the land registration after paying off the land grant premium in accordance with the state-owned land use rights grant contract. The People’s government above the city and county level should issue the “Land Use Permit for State-owned Land.”

On December 30, 2007, MLR issued the Measures for Land Registration,《土地登記辦 ( 法》) which specifies detailed provisions relating to the procedure of the land registration and materials required for such registration.

According to the “Notice of MLR on Strengthening the Administration of Land Supply and Promoting the Sustainable Sound Development of Real Estate Market”《關於加強土地供應管 ( 理促進房地產市場持續健康發展的通知》) enacted by MLR on September 4, 2003, land use for luxurious commodity houses shall be stringently controlled and applications for land use for building villas will not be accepted.

On March 21, 2004, MLR together with the Ministry of Supervision issued the “Notice in Respect of Enforcing and Supervising the Transfer of Operative Land Use Rights Through Tenders, Bidding and Public Auction”《關于繼續開展經營性土地使用權招標拍賣挂牌情况執法監 ( 察工作的通知》), which expressly required that after August 31, 2004, no land use rights transfer in the form of agreement by the excuse of historical difficulties will be allowed.

— 148 — On May 30, 2006, MLR issued the “Urgent Notice of Further Strengthening the Administration of the Land” (the “Urgent Notice”)《關於當前進一步從嚴土地管理的緊急通知》 ( ) stipulating that land for property development must be assigned by way of competitive bidding, public auction or listing-for-sale, development projects for villas should not be permitted, and all supply of land for such purposes and the handling of related land use procedure will be ceased from the issuance date of the notice.

Under the Urgent Notice, the land authority should rigidly apply the “Model Text of the State- owned Land Use Rights Assignment Contract”《國有土地使用權出讓合同示範文本》 ( ) and “Model Text of the State-owned Land Use Rights Assignment Supplementary Agreement (for Trial Implementation)”《國有土地使用權出讓合同補充協議示範文本 ( (試行)》) jointly enacted by MLR and SAIC. The document of the land grant should ascertain the requirement of planning, construction and land use such as the restriction of the dwelling size, plot ratio and the time limit of starting and completion. All these should be agreed in the land use rights grant contract. On May 30, 2008, MLR and SAIC jointly issued the Notice on Distribution of Model Text of the State-owned Land for Construction Use Rights Assignment Contract (“Model Text of Contract”)《關於發佈 ( 《國有建設用地使用權出讓合同》示範文本的通知》). The Notice replaces the Model Text of the State-owned Land Use Right Assignment Contract and Model Text of the State-owned Land Use Rights Assignment Supplementary Agreement (for Trail Implementation) aforesaid with the new Model Text of Contract enclosed in the Notice.

Under the “Regulations on the Assignment of State-owned Land for Construction Use Rights through Competitive Bidding, Auction and Listing-for-Sale”《招標拍賣掛牌出讓國有建設 ( 用地使用權規定》) enacted by MLR on September 28, 2007, and enforced on November 1, 2007, land for industrial use (including land for warehouses, but not including land for mining), commercial use, tourism, entertainment and commodity housing development or more than two competing users on one piece of land shall be assigned by way of competitive bidding, public auction or listing-for-sale. The assignee should obtain the land use rights certificate after paying off the total premium. The relevant land use rights certificates will not be issued prior to full payment of the appropriate land premium, and no land use rights certificates will be issued pro rata based on partial payment received.

In November 2009, MLR issued a Circular on the Distribution of the Catalog for Restricted Land Use Projects (2006 Version Supplement) and the Catalog for Prohibited Land Use Projects (2006 Version Supplement)《關於印發〈限制用地項目目錄 ( (2006年本增補本)〉和〈禁止用地項目目錄(2006年本增補本)〉的通知》). In this circular, MLR set forth a ceiling for the land granted by local governments for the development of commodity housing as follows: seven hectares for small cities and towns, 14 hectares for medium-sized cities and 20 hectares for large cities.

In November 2009, MOF, MLR, PBOC, the PRC Ministry of Supervision and the PRC National Audit Office jointly promulgated the Notice on Further Enhancing the Revenue and Expenditure Control over Land Grant《關於進一步加強土地出讓收支管理的通知》 ( ). The notice raises the minimum down-payment on land premiums to 50% of the total premium and requires the land premium to be fully paid within one year after the signing of a land grant contract, subject to limited exceptions.

On March 8, 2010, MLR promulgated the Circular on Strengthening Real Estate Land Supply and Supervision (the “Circular”)《關於加強房地產用地供應和監管有關問題的通知》 ( ). Under the Circular, the price for a given land grant is required to be at least 70% of the benchmark price for land in the surrounding locality and the bidding deposit for such land grant is required to be equal to at least 20% of the applicable minimum land premium. The Circular has made further strict provisions on land grant contract administration. The land grant

— 149 — contract shall be entered into within 10 working days after the land grant deal being closed, the down-payment of 50% of the land premium (taking into account any deposits previously paid) shall be paid within one month as of the date of land grant contract, and the remaining fee shall be paid within one year, in accordance with provisions of the land grant contract.

(b) Real estate project development

i. Commencement of a real estate project and the idle land When carrying out the feasibility study for a construction project, a construction company shall make a preliminary application for construction on the relevant site to the land administration authority of the same level as the project approval authority, in accordance with the “Measures for Administration of Examination and Approval for Construction Sites”(《建設用地審查報批管理辦法》) promulgated by MLR in March 1999 and the “Measures for Administration of Preliminary Examination of Construction Project Sites”《建設項目用地預審管 ( 理辦法》) promulgated by MLR in July 2001 and as amended in October 2004 and November, 2008, respectively. After receiving the preliminary application, the land administration authority shall carry out preliminary approval of various matters relating to the construction project in compliance with the overall zoning plans and land supply policy of the government, and shall the issue a preliminary approval report in respect of the project site. The land administration authority under the government of the relevant city or county shall sign a land grant contract with the land user and issue an approval for construction site to the construction company. Under the Urban Real Estate Law, those who have obtained the land use rights through an assignment must develop the land in accordance with the terms of use and within the period of commencement prescribed in the land use rights assignment contract. According to the “Measures on Disposing Idle Land”《閒置土地處置辦法》 ( ) enacted and enforced by MLR on April 28, 1999, land can be defined as idle land under any of the following circumstances:

(A) where development and construction of the land has not commenced within the prescribed time limit without consent from the People’s government who approved the use of the land;

(B) where the “Contract on Paid Use of the Right to Use State-owned Land” or the “Approval Letter on Land Used for Construction” has not prescribed the date for commencing the development and construction, the development and construction of the land has not commenced with one year of the date when the “Contract on Paid Use of the Right to Use State-owned Land” became effective or when the administrative department of land issued the “Approval Letter on Land Used for Construction”;

(C) where the development and construction of the land has commenced but the area of the development and construction that has commenced is less than one-third of the total area to be developed and constructed or the invested amount is less than 25% of the total amount of investment, and the development and construction has been suspended for a continuous period of one year or more without an approval; or

(D) other circumstances prescribed by laws and regulations.

After a piece of land has been determined to be idle land, the relevant municipal authority will notify the concerned land user and draft a proposal on methods of disposing the idle land, including, but not limited to, extending the time period for development and construction (provided that the extension shall be no longer than one year), changing the use of the land, arranging for temporary use and ascertaining a new land user by competitive bidding or public auction. The administrative department of land under the People’s government at the city or county level shall, after the proposal on disposal has been approved by the original People’s government who approved the use of the land, arrange for implementation of the proposal. For

— 150 — land which is obtained by assignment and which is within the scope of city planning, if the work has not commenced after one year from the prescribed date for commencement, a surcharge on idle land equivalent to a maximum of 20% of the assignment price may be levied; if the work has not commenced after two years from the prescribed date for commencement, the land can be confiscated without any compensation. However, the preceding stipulations shall not apply if the delay is caused by force majeure, acts of government or acts of other relevant departments under the government, or by the indispensable preliminary work.

On January 3, 2008, the State Council reiterated the above-mentioned policies in the “Notice on Enhancing the Economical and Intensive Use of Land”《關於促進節約用地的通知》 ( ). This notice states, among other things, that (i) policies in relation to the forfeiture of land use rights without compensation for land which has remained idle for more than two years shall be strictly implemented; (ii) if any land remains idle for one year, an idle land fee of 20% of the relevant land premium shall be levied; (iii) the prohibition of land supply for villa projects shall continue; (iv) MLR and other authorities are required to research and commence the drafting of implementation rules concerning the levy of land added price (增值地價) on idle land; (v) in relation to the supply of residential land, planning conditions such as plot ratio limits and the number and type of flats that can be constructed shall be taken into account in land grant contracts and allocation decisions to ensure that at least 70% of the total land grant for residential development will consist of low rental housing, economy housing, limited pricing housing and units of less than 90 sq.m. in size; and (vi) financial institutions are required to exercise caution when approving financing for any real estate developer who, after one year from the commencement date stipulated in the land grant contract, fails to complete at least one-third of the development of their project or provide at least 25% of the total investment in the project.

ii. Planning of a real estate project According to the “Urban and Rural Planning Law of the People’s Republic of China” (replacing the previous “City Planning Law of the People’s Republic of China”《中華人民共和 ( 國城市規劃法》) since January 2008)《中華人民共和國城鄉規劃法》 ( ), the “Administrative Measures on Planning of Grant and Transfer of Urban State-owned Land Use Rights”《城市 ( 國有土地使用權出讓轉讓規劃管理辦法》) enacted by the Ministry of Construction on December 4, 1992 and effective on January 1, 1993 and the “Notice of the Ministry of Construction on Strengthening the Planning Administration of Grant of State-owned Land Use Rights”《關於 ( 加強國有土地使用權出讓規劃管理工作的通知》) enacted by the Ministry of Construction and effective on December 26, 2002, after signing an assignment contract, a real estate developer shall apply for an Opinion on Construction Project’s Site Selection if the land was obtained through government allocation and a Permit for Construction Site Planning from the city and county planning authority with the assignment contract. After obtaining a Permit for Construction Site Planning, a real estate developer shall organize the necessary planning and design work with regard to planning and design requirements, and apply for a Permit for Construction Work Planning from the city planning authority with the relevant approval documents.

iii. Construction of a real estate project According to the “Regulations for the Administration of Demolition and Removal of Urban Housing”《城市房屋拆遷管理條例》 ( ), promulgated by the State Council in June 2001, if the demolition and removal of housing needs to proceed before the commencement of construction of the real estate project contemplated, upon obtaining approvals for a construction project, construction plan and state-owned land use rights, a real estate developer may apply to the municipal, district or county government of the place where the real estate is situated for a permit to demolish the existing buildings and remove the debris (a “demolition and removal permit”). Upon granting an approval and issuing a demolition and removal permit, the real estate administration department shall issue a notice to the residents of the buildings to be demolished. The real estate developer undertaking the demolition and

— 151 — removal shall implement the demolition and removal within the area and time period specified in the demolition and removal permit. If the real estate developer undertaking the demolition and removal fails to complete the demolition and removal within the specified time period, it shall, within 15 days prior to the expiry of the permit, apply to the original government department approving such demolition and removal for an extension.

During the demolition and removal period, the real estate developer undertaking the demolition and removal and the residents of the buildings to be demolished shall enter into a written agreement for compensation and resettlement in respect of the demolition and removal. If the parties involved cannot reach an agreement, any concerned party may apply to the original government department approving the demolition and removal for a ruling. Such ruling shall be rendered within 30 days of the application. If any party disagrees with the ruling, it may initiate proceedings in a court within three months after the ruling. Pursuant to PRC laws and regulations, if the real estate developer undertaking the demolition and removal has provided monetary compensation or housing to the residents whose residences were demolished or the owner of the real estate to be demolished has provided monetary compensation or housing to a lessee, the demolition and removal shall not be suspended during the course of the legal proceeding.

Compensation for housing demolition and removal may be effected by way of monetary compensation or exchange for property rights. If the monetary compensation method is used, the amount of compensation shall be assessed based on the real estate market price determined by the location, uses and the gross area of the housing to be demolished. If property right exchange is used, the real estate developer undertaking the demolition and removal and the residents of the buildings to be demolished shall, on the basis of the location, usage and the gross area of the housing to be demolished, calculate the amount of compensation which shall be made for the housing to be demolished, the real estate price of the housing to be exchanged for the housing to be demolished, and work out the difference between the two.

In addition to paying the demolition and removal compensation, the real estate developer undertaking the demolition and removal shall pay a removal allowance to the residents of the buildings to be demolished.

On November 17, 2007, the General Office of the State Council issued the Circular of on Strengthening and Regulating the Administration on Newly-commenced Projects（Guo Ban Fa 2007 No.64）（《國務院辦公廳關於加強和規範新開工項目管理的通知》）, which set forth the conditions that shall be met by various investment projects when they are commenced:

1. the projects are subject to the industrial policies, development and construction plans, land supply policies and market-access criteria of the State;

2. the formalities of approval, ratification or filing of the projects must have been completed;

3. the location and distribution of the projects within the planning area must be in line with urban and rural planning, and relevant planning approval formalities for the projects have gone through in accordance with urban and rural planning law;

4. the approval of use of the land, which is subject to application, must be obtained, the contract of compensated use of the state-owned land shall have been signed or the decision on the allocation of the state-owned land has been obtained, and the land for the construction of profit-making investment projects shall be gained by means of competitive bidding, public auction or listing-for-sale in accordance with relevant provisions;

— 152 — 5. the examination and approval of environmental impact assessment must have been completed in accordance with the provisions on the category administration of environmental impact assessment as well as examinations and approval of environmental impact assessment at different levels;

6. the energy-saving appraisal and examination of the fixed asset investment projects must have been completed in accordance with relevant provisions;

7. the construction unit must have, prior to the commencement of the construction projects, acquired the construction permit or work-start report in accordance with relevant provisions of the Construction Law, and taken specific measures which can guarantee the quality and safety of the construction projects; and

8. the projects must meet other relevant requirements as specified by the laws and regulations of the State.

After obtaining the Permit for Construction Work Planning, a real estate developer shall apply for a Construction Permit from the construction authority above the county level according to the “Measures for the Administration of Construction Permits for Construction Projects”《建築工程施工許可管理辦法》 ( ) enacted by the Ministry of Construction on October 15, 1999 and revised and effective on July 4, 2001.

iv. Completion of a real estate project

According to the Development Regulation, the “Regulation on the Quality Management of Construction Projects”《建設工程質量管理條例》 ( ) enacted and enforced by the State Council on January 30, 2000, the “Administrative Measures for Reporting Details Regarding Acceptance Examination Upon Completion of Buildings and Municipal Infrastructure”《房屋建 ( 築和市政基礎設施工程竣工驗收備案管理辦法》) enacted by the Ministry of Construction in April 2000 and amended on October 19, 2009 and the “Interim Provisions on Acceptance Examination Upon Completion of Buildings and Municipal Infrastructure”《房屋建築工程和市 ( 政基礎設施工程竣工驗收暫行規定》) enacted by the Ministry of Construction and effective on June 30, 2000, after completion of work for a project, a real estate developer shall apply for the acceptance examination to the property development authority under the People’s government on or above the county level and report details of the acceptance examination, upon which the “Record of acceptance examination upon project completion” is issued. For a housing estate or other building complex project, an acceptance examination shall be conducted upon completion of the whole project and where such a project is developed in phases, separate acceptance examinations may be carried out for each completed phase.

E. Real estate transactions

(a) Transfer of real estate

According to the Urban Real Estate Law and the “Provisions on Administration of Transfer of Urban Real Estate”《城市房地產轉讓管理規定》 ( ) enacted by the Ministry of Construction on August 7, 1995 and revised on August 15, 2001, a property owner may sell, give or otherwise legally transfer a property to another person or legal entity. When transferring a building, the ownership of the building and the land use rights attached to the site on which the building is situated are transferred simultaneously. The parties to a transfer shall enter into a property transfer contract in writing and register the transfer with the property administration authority having jurisdiction over the location of the property within 90 days of the execution of the transfer contract.

— 153 — Where the land use rights were originally obtained by assignment, the real property may only be transferred on the condition that: (i) the assignment price has been paid in full for the assignment of the land use rights as provided by the assignment contract and a land use rights certificate has been obtained; and (ii) if development is to be carried out according to the assignment contract and is a project in which buildings are being developed, development representing more than 25% of the total investment has been completed or in case of a whole land lot development project, construction work has been carried out as planned, water supply, sewerage, electricity supply, heat supply, access roads, telecommunications and other infrastructure or utilities have been made available, and the site has been leveled and made ready for industrial or other construction purposes. In addition, if the construction of the real property has been completed, the real property should be transferred after the certificate of the housing title is obtained.

If the land use rights were originally obtained by assignment, the term of the land use rights after transfer of the property shall be the remaining portion of the original term provided by the land use rights assignment contract after deducting the time that has been used by the former land users. In the event that the transferee intends to change the use of the land provided in the original assignment contract, consent shall first be obtained from the original assignor and the planning administration authority under the local government of the relevant city or county and an agreement to amend the land use rights assignment contract or a new land use rights assignment contract shall be signed in order to, inter alia, adjust the land use rights assignment price accordingly.

If the land use rights were originally obtained by allocation, transfer of the real property shall be subject to the approval of the government vested with the necessary power of approval as required under the regulations of the State Council. If the People’s government vested with the necessary power of approval approves such a transfer, the transferee shall complete the formalities for transfer of the land use rights, unless the relevant statutes require no transfer formalities, and pay the transfer price according to the relevant statutes.

(b) Sale of commodity properties

Under the “Regulatory Measures on the Sale of Commodity Properties”《商品房銷售管理 ( 辦法》) enacted by the Ministry of Construction on April 4, 2001 and effective June 1, 2001, sale of commodity properties can include both pre-completion and post-completion sales.

i. Permit of Pre-completion sale of commodity properties

According to the Development Regulations and the “Measures for Administration of Pre-completion Sale of Commodity Properties” (the “Pre-completion Sale Measures”)《城市商 ( 品房預售管理辦法》) enacted by the Ministry of Construction on November 15, 1994 and revised on August 15, 2001 and July 20, 2004, respectively, the pre-completion sale of commodity properties shall be subject to a permit system, under which a real estate developer intending to sell a commodity building before its completion shall make the necessary pre-completion sale registration with the property development authority of the relevant city or county to obtain a permit of pre-completion sale of commodity properties. A commodity building may only be sold before completion provided that: (A) the assignment price has been paid in full for the assignment of the concerned land use rights and a land use rights certificate has been issued; (B) a Permit for Construction Work Planning and a Permit for Construction of Work have been obtained; (C) the funds invested in the development of the commodity properties put to pre-completion sale represent 25% or more of the total investment in the project and the progress of work and the completion and delivery dates have been ascertained; and (D) the pre-completion sale has been registered and a Permit for Pre-completion Sale of Commodity Properties has been obtained. In addition, regulations of certain local governments, such as Guangdong and Tianjin, have set forth additional conditions to be satisfied in connection with the application for a pre-completion sale permit.

— 154 — According to the “Administrative Provisional Measures on the Pre-sale of Commercial Housing in Fujian Province” (the “Pre-sale Measures in Fujian”) (《福建省商品房預售管理暫行辦法》) promulgated by the Fujian Provincial Department of Construction on December 14, 2005 and effective on January 1, 2006, the following conditions shall be fulfilled for the pre-sale of commodity properties in Fujian Province: (i) land premium has been paid in full and State-owned land use rights certificates have been issued; (ii) construction work planning permit and Permit for Construction Work have been obtained; and (iii) the funds invested in the development of the commodity properties put to pre-sale represent 25% or more of the total investment in the project (more than 20% of the total GFA has been completed in line with the design) and the progress of work and delivery dates have been ascertained.

ii. Management of pre-completion sale proceeds of commodity properties

According to the Pre-completion Sale Measures, the proceeds obtained by a real estate developer from the advance sale of commodity housing must be used for the construction of the relevant projects. The specific measures for the supervision on proceeds from the advance sale of commodity properties shall be formulated by the property administration departments.

iii. Conditions of the sale of post-completion commodity properties

Under the “Regulatory Measures on the Sale of Commodity Properties《商品房銷售管理 ( 辦法》),” commodity properties may be put to post-completion sale only when the following preconditions have been satisfied: (A) the property development enterprise offering to sell the post-completion properties shall have an enterprise legal person business license and a qualification certificate of a real estate developer; (B) the enterprise has obtained a land use rights certificate or other approval documents of land use; (C) the enterprise has the permit for construction project planning and the permit for construction; (D) the commodity properties have been completed and been inspected and accepted as qualified; (E) the relocation of the original residents has been well settled; (f) the supplementary essential facilities for supplying water, electricity, heating, gas, communication, etc., have been made ready for use, and other supplementary essential facilities and public facilities have been made ready for use, or the schedule for construction and delivery date thereof have been specified; and (G) the property management plan has been completed.

Before the post-completion sale of a commodity building, a real estate developer must submit the Real Estate Development Project Manual and other documents showing that the preconditions for post-completion sale have been fulfilled to the property development authority, for its records.

iv. Regulations on sale of commodity properties

According to the Development Regulations and the Pre-completion Sale Measures, for the pre-completion sale of a commodity property, the developer shall sign a contract on the pre-sale of the commodity property with the purchaser. The developer shall, within 30 days after signing the contract, apply for registration and recording of the contract for pre-completion sale of commodity property to the relevant administrative departments governing the property and the land administration department of the city or county governments. The property administration departments are supposed to take the initiative to apply network information technology to gradually implement web-based registration of pre-sale contracts.

— 155 — Pursuant to the “Circular of the General Office of the State Council on Forwarding the Opinion of the Ministry of Construction and Other Department on Doing a Good Job of Stabilizing House Prices”《國務院辦公廳轉發建設部與關於做好穩定住房價格工作意見的通知》 ( ) on May 9, 2005, there are several regulations concerning sales of commodity properties:

• the buyer of a commodity building is prohibited from conducting any transfer of the pre-sale of the commodity building that he has bought but is still under construction. Before completion and delivery of an advance sale commodity building to the advance buyer, and before the advance buyer obtains the individual property ownership certificate, the property administration department shall not handle any transfer of the commodity building. If there are any discrepancies in the name of the applicant for property ownership and the name of the advance buyer in the advance sales contract, the property ownership registration administration shall not record the application of real estate ownership; and

• a real-name system for house purchases should be applied; and an immediate archival filing network system should be carried out for the pre-sale contracts for commodity properties.

On July 6, 2006, the Ministry of Construction NDRC and SAIC jointly enacted a “Notice on Reorganizing and Regulating Order in the Real Estate Transactions”《關於進一步整頓規範 ( 房地產交易秩序的通知》), the details of which are as follows:

• the developer should start to sell the commodity properties within 10 days after receiving a “Permit for Pre-completion Sale of Commodity Properties.” Without this permit, the pre-completion sale of commodity properties, as well as subscription (including reservation, registration and number-selecting) and acceptance of any kind of pre-sale payments, is forbidden;

• the property administration authority should establish an immediate network system for pre-sale contracts for commodity properties and a system for the publication of property transaction information. The basic information of the commodity building, the schedule of the sale and the ownership status should be duly, truly and fully published in the network system and on the locale of sale. The advance buyer of a commodity building is prohibited from conducting any transfer of the advance sale of the commodity building that he has bought but is still under construction;

• without the “Permit for Pre-completion Sale of Commodity Properties,” no advertisement of the pre-completion sale of commodity properties can be published;

• real estate enterprises with a record of serious irregularity or enterprises which do not satisfy the requirements of pre-completion sale of commodity properties are not allowed to take part in sale activities; and

• the property administration authority should strictly carry out the regulations for the pre-completion sale contract registration and records and apply the real name system for property purchase.

In April 2010, MOHURD issued the Notice on Issues Relating to the Further Strengthening of Real Estate Market Regulation and Improvement of the Pre-selling System for Commodity Housing《關於進一步加強房地產用地供應和監管有關問題的通知》 ( ), which stipulates: (i) a real estate developer should disclose, within 10 days of the receipt of a pre-sale permit, all the properties approved for pre-sale and the price of each unit, and should sell the properties at prices which are the same as the prices submitted in the pre-sale proposal; and (ii) the plan for pre-completion sale of commodity properties submitted by the real estate developer with

— 156 — provisional qualification certificate when applying for the Permit for Pre-completion Sale of Commodity Properties should identify a body bearing all responsibilities relating to the qualification of the commodity property after the bankruptcy, and such body should submit a letter of guarantee.

Under the Urban Real Estate Law and the “The Security Law of the People’s Republic of China”（《中華人民共和國擔保法》) enacted by the Standing Committee of the National People’s Congress on June 30, 1995 and effective on October 1, 1995, and the “Measures on the Administration of Mortgage of Buildings in Urban Areas”《城市房地產抵押管理辦法》 ( ) enacted by the Ministry of Construction in May 1997 and revised on August 15, 2001, mortgage refers to the act of a debtor, or a third party, who, without transferring the occupancy of the properties, charge those properties as security for the creditor’s rights. When the debtor fails to pay his debt, the creditor has a right to obtain compensation, in accordance with the stipulations of this law, by converting the properties into money or seek preferential payments from the proceeds of the public auction or listing-for-sale of the concerned properties. The mortgage shall not exceed the value of the properties mortgaged. After being mortgaged, the balance of value of the properties that exceeded the creditor’s rights can be mortgaged for a second time, but the sum of the mortgage shall not exceed the value of the balance. When a mortgage is created on the ownership of a building on state-owned land legally obtained, a mortgage shall be simultaneously created on the land use rights of the land on which the building is erected. When the land use rights of state-owned land acquired through means of assignment is mortgaged, the buildings on the land shall also be mortgaged at the same time. The land use rights of town and village enterprises cannot be mortgaged individually. When the buildings of the town and village enterprises are mortgaged, the land use rights occupied by the buildings shall also be mortgaged at the same time. The mortgagor and the mortgagee shall sign a mortgage contract in writing. Within 30 days after a property mortgage contract has been signed, the parties to the mortgage shall register the mortgage with the property administration authority at the location where the real estate is situated. A real estate mortgage contract shall become effective on the date of conclusion of the real estate mortgage contract. If a mortgage is created on real estate in respect of which a property ownership certificate has been legally obtained, the registration authority shall make an entry under the “third party rights” item on the original real estate ownership certificate and then issue a Certificate of Third Party Rights to Real Estate to the mortgagee. If a mortgage is created on the commodity building put to pre-completion sale or under construction, the registration authority shall record the details on the mortgage contract. If construction of a real property is completed during the term of a mortgage, the parties involved shall re-register the mortgage of the real property after the issuance of the certificates evidencing the ownership of the property.

(d) Lease of buildings

Under the Urban Real Estate Law and the “Measures for Administration of Leases of Buildings in Urban Areas”《城市房屋租賃管理辦法》 ( ) enacted by the Ministry of Construction on May 9, 1995 and enforced on June 1, 1995, the parties to a lease of a building shall enter into a lease contract in writing. A system has been adopted for registering leases of buildings. When a lease contract is signed, amended or terminated, the parties shall register the details with the property administration authority under the local government of the city or county in which the building is situated.

— 157 — F. Real Estate Financing

According to the “Notice of PBOC on Regulating Home Financing Business”《中國人民 ( 銀行關於規範住房金融業務的通知》) promulgated by PBOC in June 2001, all banks must comply with the following requirements before granting residential development loans, individual home mortgage loans or individual commercial flat loans:

• housing development loans from banks shall only be granted to real estate developers with adequate development assets and sufficiently high credit ratings. Such loans shall be offered to residential projects with good market potential. While the borrowing enterprise must have an amount of capital no less than 30% of the total investment required of the project, the project itself must have been issued with a land use rights certificate, construction land planning permit, construction works planning permit and construction works commencement permit;

• in respect of the grant of individual home mortgage loans, the ratio between the loan amount and actual value of the security (the “Mortgage Ratio”) shall never exceed 80%. Where an individual applies for a home loan for pre-sale, such real estate must have achieved the stage of “topping-out of the main structure completed” for multi-story buildings and “two-thirds of the total investment completed” for high-rise buildings; and

• in respect of the grant of individual commercial flat loans, the Mortgage Ratio under the application for commercial flat loans shall not exceed 60% with a maximum loan period of 10 years and the relevant commercial flat must have already been completed.

PBOC issued the “Circular on Further Strengthening the Management of Loans for Property Business”《關於進一步加強房地產信貸業務管理的通知》 ( ) on June 5, 2003 to specify the requirements for banks to provide loans for the purposes of property development and individual home mortgage as follows:

(a) the real estate loan by commercial banks to real estate enterprises shall be granted only under the title of “property development loan” and it is strictly forbidden to extend such loans as current capital loan for a property development project or other loan item. No lending of any type shall be granted to enterprises which have not obtained the land use rights certificates, construction land planning permit, construction works planning permit and work commencement permit;

(b) commercial banks shall not grant loans to real estate developers to pay off land premiums;

(c) commercial banks shall not advance current capital loans to real estate developers; commercial banks shall not advance loans to real estate developers of which capital is less than 30% of the total investment of the project; and

(d) commercial banks may only provide mortgage loans to individual buyers when the main structural buildings have been topped out. When a borrower applies for individual home loans for his first residential unit, the down-payment remains at 20%. In respect of his loan application for the additional purchase of residential unit(s), the percentage of the first installment shall be increased.

Pursuant to the “Guidance on Risk Management of Property Loans of Commercial Banks”《商業銀行房地產貸款風險管理指引》 ( ) issued by CBRC on September 2, 2004, any real estate developer applying for property development loans shall have at least 35% of the capital funds required for the development.

— 158 — According to the “Notice of PBOC on the Adjustment of Commercial Bank Housing Loan Policies and the Interest Rate of Excess Reserve Deposit,”《中國人民銀行關於調整商業銀行住 ( 房信貸政策和超額儲備金存款利率的通知》) enacted by PBOC on March 16, 2005, effective from March 17, 2005, the down-payment for individual homes increased from 20% to 30% in cities and areas where real estate prices grow too quickly. The commercial banks can independently determine scope of such real estate price rise according to specific situations in different cities or areas.

On May 24, 2006, the State Council passed the “Opinion of the Ministry of Construction and Other Departments on Adjusting the Housing Supply Control Structure and Stabilizing the Property Prices”《關於調整住房供應結構穩定住房價格的意見》 ( ). The regulations provide the following:

(a) the tightening of the control of advancing loan facilities. Commercial banks are not allowed to advance their loan facilities to real estate developers who do not have the required 35% or more of the total capital for the construction projects. The commercial banks should be prudent in granting loan facilities and revolving credit facilities in any form to the real estate developers who have a large number of idle land and unsold commodity properties. Banks should not accept mortgages of commodity properties remaining unsold for three years or longer; and

(b) from June 1, 2006, purchasers need to pay a minimum of 30% of the purchase price as down-payment, except for apartments with a floor area of 90 sq.m. or less for residential purposes, for which the existing requirement of 20% of the purchase price as down-payment remains unchanged.

On July 22, 2006, CBRC promulgated a Notice on Further Strengthening the Administration of Real Estate Credit （《關於進一步加強房地產信貸管理的通知》). The notice requests (i) improving the credit risk classification system for all kinds of real estate loans; (ii) prohibiting providing loans to disqualified real estate developers whose own capital is less than 35% of the total capital required for the projects (not including affordable housing), or who have not obtained the “four certificates”; (iii) setting the loan term appropriately, and not allowing the provision of working capital loans in the name of property development loans; (iv) strictly restricting new loans for those developers who hoard land or housing and disturb market order; (v) preventing developers from obtaining loans by project split-up or rolling-ahead development strategies; and (vi) enhancing management after providing loans. All financial institutions must provide loans strictly in accordance with the real estate project progress and strengthen overall supervision of the whole process of loan utilization by developers. According to the Circular on Standardizing the Admittance and Administration of Foreign Capital in the Real Estate Market, foreign-invested real estate enterprises which have not fully paid up their registered capital, or failed to obtain a land use rights certificate, or with under 35% of the capital for the project, will not be allowed to obtain a loan in or outside China, and foreign exchange administration departments will not approve any settlement of foreign loans by such enterprises.

On July 10, 2007, SAFE issued a circular indicating that, for foreign-invested enterprises in the real estate sector, it would not process any foreign debt registration or conversion of foreign debt that was approved by the local MOFCOM and filed with MOFCOM after June 1, 2007. See “— B. Foreign-invested real estate enterprises.”

— 159 — On September 27, 2007, PBOC and CBRC issued the “Circular on Strengthening the Credit Management for Commercial Real Property”《關於加強商業性房地產信貸管理的通知》 ( ), with a supplement issued in December 2007. The circular aims to tighten the control over real estate loans from commercial banks to prevent excessive credit granting. The measures adopted include:

• for a first time home buyer, increasing the minimum amount to 30% of the purchase price as down-payment where the property has a unit floor area of 90 sq.m. or more and the purchaser is buying the property for their own residence;

• for a second time home buyer, increasing (i) the minimum amount of down-payment to 40% of the purchase price and (ii) the minimum mortgage loan interest rate to 110% of the relevant PBOC benchmark bank lending interest rate. If a member of a family (including the buyer, his/her spouse and their children under 18) finances the purchase of a residential unit, any member of the family that buys another residential unit with loans from banks will be regarded as a second time home buyer;

• for a commercial real estate buyer, (i) requiring banks not to finance any purchase of pre- sold properties, (ii) increasing the minimum amount of down-payment to 50% of the purchase price, (iii) increasing the minimum mortgage loan interest rate to 110% of the relevant PBOC benchmark bank lending interest rate and (iv) limiting the terms of such bank loans to no more than 10 years, although commercial banks are allowed flexibility based on its risk assessment;

• for a buyer of commercial/residential dual-purpose properties, increasing the minimum amount of down-payment to 45% of the purchase price, with the other terms to be decided by reference to commercial properties; and

• prohibiting commercial banks from providing loans to real estate developers who have been found by relevant government authorities to be holding excessive amounts of land and properties.

In addition, commercial banks are also prohibited from providing loans to projects that have less than 35% of capital funds (proprietary interests), or where there is failure to obtain land use rights certificates, construction land planning permits, construction works planning permits and construction permits. Commercial banks are also prohibited from accepting commercial premises that have been vacant for more than three years as collateral for loans. In principle, property development loans provided by commercial banks should only be used for projects in areas where the commercial bank is located. Commercial banks may not provide loans to real estate developers to finance the payment of land use rights grant fees.

On July 29, 2008, PBOC and CBRC issued the “Notice on Promoting Economization of Land Use in Finance” （Yin Fa 2008 No. 214）《關於金融促進節約集約用地的通知》( ), under which, commercial banks are prohibited from providing loans (i) for projects that fall within the Catalog for Prohibited Land Use Project (and, if extended, any such loan must be withdrawn gradually); (ii) to real estate developers to finance the payment of land use right grant fees; (iii) to real estate developers that hold idle land for two years and prohibited commercial banks from extending other loans (including asset management business) secured by such idle land to the real estate developers.

In addition, commercial banks are required to be prudent when extending loans for restricted land use projects and when extending loans to the real estate developers where the development and construction of the land has not commenced within the prescribed time in the

— 160 — land grant contract or where the development and construction of the land has commenced but the area of the development and construction that has commenced is less than one-third of the total area to be developed and constructed or the invested amount is less than 25% of the total amount of investment.

According to the notice on “Issues on Enlarging the Floating Range of the Downward Movement of Interest Rates for Individual Mortgage Loans”《關於擴大商業性個人住房貸款利率 ( 下浮幅度等有關問題的通知》) issued by PBOC on October 22, 2008 and effective on October 27, 2008, the PRC government lowered the minimum interest rate for individual mortgage loans to 70% of the corresponding PBOC benchmark bank lending rates. Further, the minimum down-payment ratio of residential properties was lowered to 20%.

In January 2010, the General Office of the State Council issued a Circular on Facilitating the Stable and Healthy Development of Property Market《關於促進房地產市場平穩健康發展的 ( 通知》), adopting a series of measures to strengthen and improve the regulation of the real estate market, stabilize market expectations and facilitate the stable and healthy development of the real estate market. These include, among others, measures to increase the supply of affordable housing and ordinary commodity housing, provide guidance for the purchase of real estate, restrain speculation of real estate, and strengthen risk prevention and market supervision. Additionally, it explicitly requires a family (including a borrower, his or her spouse and children under 18), that has already purchased a residence through mortgage financing and has applied to purchase a second or additional residences through mortgage financing, to pay a minimum down-payment of 40% of the purchase price. In April 2010, the State Council issued the circular on Restraining the Housing Price from Increasing Rapidly for Some Cities (《關於堅決遏制部分城市房價過快上漲的通知》) which provides the following:

• a household (including the borrower, his or her spouse and any minor children) that borrows a mortgage loan for the purchase of its first residential property, of which the building area is more than 90 sq.m., must make a down-payment of not less than 30% of the purchase price;

• a household that borrows a mortgage loan for the purchase of its second residential property must make a down-payment of not less than 50% of the purchase price and pay a mortgage rate which is not lower than 110% of the benchmark interest rate;

• the down-payment proportion and mortgage rate applicable to the purchase of a household’s third residential property or beyond shall be significantly increased at the sole discretion of the commercial banks according to their risk controlling principles;

• in regions where commodity housing prices are too high, have increased too rapidly or where commodity housing is in short supply, commercial banks may suspend the grant of mortgage loans to any third-time (or beyond) home buyers if they deem it appropriate according to the risks involved, and may suspend the grant of mortgage loans to any non-local home buyers who are unable to provide proof of payment of local taxes or social security contributions covering a period of one year or more. Local governments may, based on the circumstances, impose temporary restrictions during a certain period of time on the number of properties that can be purchased; and

• commercial banks are prohibited from providing loans for new development projects to real estate developers who have been found to be leaving their land idle and speculating on land.

Three authorities, including MOHURD, PBOC and CBRC, jointly released the “Circular on Regulating the Criteria for Identifying the Second Residential Property in Connection with

— 161 — Commercial Mortgage Loans”《關於規範商業性個人住房貸款中第二套住房認定標準的通知》 ( )on May 26, 2010, so as to regulate applicants for commercial housing loans for second houses (hereinafter referred to as the loan applicants). Under the Circular, the number of houses owned by a family in the commercial housing loans for individuals shall be calculated according to number of houses which are actually owned by members (including the loan applicant and his/her spouse and under-age children) of the family who plans to purchase a house. The Circular also stipulated that house purchasers shall check the house registration records of the family via the house registration system, and shall provide the results in writing. The loan applicant shall provide the credit guarantee in written to prove the actual number of houses owned by his/her family.

G. Insurance of a real estate project

There are no mandatory provisions in PRC law, regulations and government rules which require a real estate developer to take out insurance policies for its real estate projects.

In light of the “Construction Law of the People’s Republic of China”《中華人民共和國建 ( 築法》) enacted by the Standing Committee of the National People’s Congress on November 1, 1997 and enforced on March 1, 1998, construction enterprises must maintain accident and casualty insurance for workers engaged in dangerous operations. In the “Opinions of the Ministry of Construction on Strengthening the Insurance of Accidental Injury in the Construction Work”（《關於加強建築意外傷害保險工作的指導意見》）enacted by the Ministry of Construction on May 23, 2003, the Ministry of Construction further emphasized the importance of insurance to cover accidental injury in construction work and put forward detailed guidance.

Construction companies shall pay the insurance premium at their own costs and take out various types of insurance to cover their liabilities, such as real estate risks, third party liability risk, performance guarantee in the course of construction and all-risks associated with the construction and installation work throughout the construction period. The requirements for insurance for all the aforementioned risks shall cease immediately after the completion and acceptance upon inspection of construction.

H. Major taxes applicable to real estate developers

(a) Income tax

According to the “Income Tax Law of The People’s Republic of China for Enterprises with Foreign Investment and Foreign Enterprises”《中華人民共和國外商投資企業和外國企業所得稅 ( 法》) enacted by National People’s Congress on April 9, 1991 and effective on July 1, 1991 and its detailed rules enacted by the State Council on June 30, 1991, the rate of EIT for foreign-invested enterprises and EIT for entities and premises engaged in production and operation by foreign enterprises in China is 30%, and the rate of local income tax is 3%.

Pursuant to the “Provisional Regulations of the People’s Republic of China on EIT” ( 中華人民共和國企業所得稅暫行條例》) issued by the State Council on December 13, 1993 and enforced on January 1, 1994 and its Implementation Rules enacted by MOF on February 4, 1994, the income tax rate applicable to Chinese enterprises other than foreign-invested enterprises and foreign enterprises is 33%.

According to the EIT Law《中華人民共和國企業所得稅法》 ( ) enacted by the National People’s Congress on March 16, 2007 and effective from January 1, 2008 onwards, a uniform income tax rate of 25% will be applied towards foreign-invested enterprises and foreign enterprises which have set up production and operation facilities in the PRC as well as PRC enterprises.

Furthermore, unlike the Income Tax Law of the People’s Republic of China for Enterprise with Foreign investment and Foreign Enterprise currently in effect, which specifically exempts withholding tax on any dividends payable to non-PRC investors, the PRC Enterprise Income

— 162 — Tax Law and its implementation provide that an income tax rate of 10% will normally be applicable to dividends payable to non-PRC enterprise investors which are derived from sources within the PRC, unless there exists a tax treaty between the PRC and the relevant jurisdictions in which such non-PRC enterprise shareholders reside, whereupon the relevant tax may be reduced or exempted.

(b) Business tax

Pursuant to the “Interim Regulations of the People’s Republic of China on Business Tax” enacted by the State Council on December 13, 1993 and effective on January 1, 1994 as amended on November 10, 2008 and its “Detailed Implementation Rules on the Provisional Regulations of The People’s Republic of China on Business Tax” issued by MOF on December 25, 1993 and as amended on December 18, 2008, the tax rate on transfer of immovable properties, their superstructures and attachments is 5%.

According to the requirements of the “Provisional Regulations of The People’s Republic of China on LAT” (the “Land Appreciation Provisional Regulations”)《中華人民共和國土地增值 ( 稅暫行條例》) which was enacted on December 13, 1993 and became effective on January 1, 1994, and the “Detailed Implementation Rules on the Provisional Regulations of The People’s Republic of China on LAT” (the “Land Appreciation Detailed Implementation Rules”) ( 《中華人民共和國土地增值稅暫行條例實施細則》) which was enacted and effective on January 27, 1995, any appreciation gained from taxpayer’s transfer of real estate shall be subject to LAT. LAT is set at four different rates: 30% on appreciation not exceeding 50% of the sum of deductible items; 40% on appreciation exceeding 50% but not exceeding 100% of the sum of deductible items; 50% on appreciation exceeding 100% but not exceeding 200% of the sum of deductible items; and 60% on appreciation exceeding 200% of the sum of deductible items. The deductible items include the following:

• amount paid for obtaining the land use rights;

• costs and expenses for development of land;

• costs and expenses of new buildings and ancillary facilities, or estimated prices of old buildings and constructions;

• related tax payable for transfer of real estate; and

• other deductible items as specified by the MOF.

According to the requirements of the Land Appreciation Provisional Regulations, the Land Appreciation Detailed Implementation Rules and the Notice issued by the MOF in respect of the “Levy and Exemption of LAT for Development and Transfer Contracts Signed before January 1, 1994”《關於對 ( 1994年1月1日前簽訂開發及轉讓合同的房地產徵免土地增值稅的通知》) which was announced by MOF and SAT on January 27, 1995, LAT shall be exempted under any one of the following circumstances:

• for ordinary standard residential properties (i.e. residential properties built in accordance with the local standard for general civilian residential properties and not deluxe apartments, villas, resorts etc. where the appreciation amount does not exceed 20% of the sum of deductible items;

• where property taken over and repossessed according to laws due to the construction requirements of the State;

— 163 — • due to individuals who relocate as a result of redeployment of work or improvement of living standards from originally self-used residential property, but only where they have been living for five years or more, and after obtaining tax authorities’ approval;

• for real estate transfer contracts which were signed before January 1, 1994, whenever the properties are transferred, LAT shall be exempted; and

• if the property development contracts (房地產開發合同) were signed before January 1, 1994 or the project proposal has been approved and that capital was injected for development in accordance with the conditions agreed, LAT shall be exempted if the properties are transferred for the first time within five years after January 1, 1994. The date of signing the contract shall be the date of signing the sale and purchase agreement. For particular real estate projects approved by the government for the development of the entire piece of land and long-term development, if the properties are transferred for the first time after the five-year tax-free period, after auditing by the local financial and tax authorities, and approval by MOF and SAT, the tax-free period would be appropriately prolonged.

On December 24, 1999, MOF and SAT issued the “Notice in respect of the Extension of the Period for the LAT Exemption Policy《關於土地增值稅優惠政策延期的通知》 ( ),” extending the period for the LAT exemption policy as mentioned in the last bullet above to the end of 2000.

After the issuance of the Land Appreciation Provisional Regulations and the Land Appreciation Detailed Implementation Rules, due to the relatively long period required for property development and transfer, many districts, while they were implementing the regulations and rules, did not mandatorily require the real estate enterprises to declare and pay LAT. Therefore, in order to assist the local tax authorities in the collection of LAT, MOF, SAT, the Ministry of Construction and MLR had separately and jointly issued several notices to restate the following: after the assignments are signed, the taxpayers should declare the tax to the local tax authorities where the real estate located, and pay LAT in accordance with the amount as calculated by the tax authority and within the specified time limit. For those who fail to acquire proof of tax payment or tax exemption from the tax authorities, the property administration authority shall not process the relevant title change procedures, and shall not issue the property title certificate.

SAT also issued the “Notice issued by SAT in respect of the Serious Handling of Administration Work in relation to the Collection of LAT”《關於認真做好土地增值稅徵收管理工 ( 作的通知》) on July 10, 2002 to request local tax authorities to modify the management system of LAT collection and operation procedures, to build up a proper tax return system for LAT, to improve the methods of pre-levying for the pre-sale of real estate. That notice also pointed out that the preferential policy of LAT exemption for first time transfer of properties under property development contracts signed before January 1, 1994 or project proposal that has been approved and for which capital was injected for development is expired, and that such tax shall be levied again.

SAT issued the “Notice of SAT in respect of the Strengthening of Administration Work in relation to the Collection of LAT”《關於加強土地增值稅管理工作的通知》 ( ) on August 2, 2004 and the “Notice of SAT in respect of the Further Strengthening of Administration Work in relation to the Collection of LAT and Land Use Tax in Cities and Towns”《關於進一步加強城鎮 ( 土地使用稅和稅徵收管理工作的通知》) on August 5, 2004. The aforesaid notices point out that the administration work in relation to the collection of LAT should be further strengthened. The preferential policy of LAT exemption for the first time transfer of properties under property development contracts signed before January 1, 1994 expire and such tax shall be levied again. Where such taxes were still not levied, the situation should be immediately rectified. Also, the notice required that the system of tax declaration and tax sources registration in relation to LAT should be further improved and perfected.

— 164 — On March 2, 2006, MOF and SAT issued the “Notice of Certain Issues Regarding LAT.” （《關於土地增值稅若干問題的通知》）The notice clarifies the relevant issues regarding LAT as follows:

(a) Tax Collection and Exemption in the Sale of Ordinary Standard Residential Properties

The notice sets out the recognized standards for ordinary standard residential properties. Where any developers build ordinary standard residential properties or commercial properties, the value of land appreciation shall be assessed individually. No retroactive adjustment will be made in respect of ordinary standard residential properties for which application for tax exemption has been filed before the notice is issued and for which LAT exemption has been granted by the tax authority on the basis of the standards of ordinary residential properties originally set down by the People’s government of the province, autonomous region or municipality directly under the central government.

(b) Advance Collection and Settlement of LAT

• All regions shall further improve the measures for the advance collection of LAT, and decide the advance collection rate in a scientific and reasonable manner, and adjust it at a proper time according to the level of value appreciation in the real estate industry and market conditions within the region and on the basis of the specific property categories, namely, ordinary standard residential properties, non-ordinary standard residential properties and commercial properties. After a project is completed, the relevant settlement shall be handled in a timely manner, with any overpayment refunded or any underpayment being made up.

• If any tax pre-payment is not paid within the advance collection period, overdue fines will apply as at the day following the expiration of the prescribed advance collection period.

• As to any real estate project that has been completed and gone through the acceptance procedure, where the floor area of the real estate as transferred makes up 85% or more in the saleable floor area, the tax authority may require the relevant taxpayer to conduct the settlement of LAT on the transferred real estate according to the matching principles regarding the proportion between the income generated from the transfer of real estate and the deductible items. The specific method of settlement shall be prescribed by the local tax authority.

On December 28, 2006, SAT issued the “Notice on the Administration of the Settlement of LAT of Property Development Enterprises”《關於房地產開發企業土地增值稅清算管理有關問 ( 題的通知》) which came into effect on February 1, 2007. The notice sets out further provisions concerning the settlement of LAT by real estate developers by clarifying issues on responsibility for the settlement of LAT, requirements, materials to be submitted, auditing and verification, recognition of revenue of indirect sale and self-use properties, deductible items and the handling of transfer after tax is imposed and settled, etc. Local provincial tax authorities can formulate their own implementation rules according to the notice and local situation.

— 165 — Pursuant to the notice, a real estate developer shall settle and clear the LAT payment of its development projects that meet certain criteria with the tax authorities in accordance with the applicable LAT tax rates. The LAT shall be settled for projects approved by the competent authorities; and for projects developed in different stages, the LAT shall be settled in stages. LAT must be settled if (i) the property development project has been completed and fully sold; (ii) the real estate developer transfers the whole incomplete development project; or (iii) the land use rights with respect to the project is transferred. In addition, the relevant tax authorities may require the developer to settle the LAT if either of the following criteria is met: (a) for completed property development projects, the transferred GFA represents more than 85% of total salable GFA, or the proportion represented is less than 85%, but the remaining salable GFA has been leased out or used by the developer; (b) the project has not been sold out for more than three years after obtaining the sale or pre-sale permit; (c) the developer applies for cancellation of the tax registration without having settled the relevant LAT; or (d) other conditions stipulated by the tax authorities.

The notice also indicates that if a real estate developer satisfies any of the following circumstances, the tax authorities will levy and collect LAT as per the levying rate no lower than the pre-payment rate with reference to the bearing rate of LAT of local enterprises with a similar development scale and income level: (i) failure to maintain account book as required by law or administrative regulation; (ii) destroying the account book without authorization or refusing to provide taxation information; (iii) the accounts are disorganized or illegible, or cost materials, income vouchers and cost vouchers are damaged and incomplete, making it difficult to determine transferred income or amount of deductible items; (iv) failure to go through LAT settlement within the prescribed period without being remedied within the period required by the relevant tax authorities; (v) the basis for tax calculation as submitted is obviously low without justifiable cause. Local provincial tax authorities can formulate their own implementation rules according to the notice and local situation.

To further strengthen LAT collection, in May 2009, SAT released the Rules on the Administration of the Settlement of LAT《土地增值稅清算管理規程》 ( ), which became effective on June 1, 2009. The rules reiterated the circumstances under which the LAT must be settled, the criteria that are to be met for relevant tax authorities to require the settlement of LAT and the circumstances under which the tax authorities shall levy and collect LAT as prescribed by the Notice. The rules further stipulate detailed procedures for the examination and verification of settlement of LAT to be carried out by relevant tax authorities.

On May 19, 2010, SAT issued the “Circular on Issues Concerning Settlement of LAT”《關 ( 於土地增值稅清算有關問題的通知》) which clarifies the revenue recognition in the settlement of land value-added tax and other relevant issues. According to the Circular, in the settlement of land value-added tax, if the sales invoices of commodity houses are issued in full, the revenue shall be recognized based on the amount indicated in the invoices; if the sales invoices of commodity houses are not issued or are issued in part, the revenue shall be recognized based on the purchase price indicated in the sales contract as well as other income. If the area of a commodity house specified in a sales contract is inconsistent with the result obtained by the relevant authorities after on-site survey and the purchase price is made up or returned before the settlement of land value-added tax, adjustments shall be made in the calculation of land value-added tax. The Circular provides that the deed tax paid by a property development enterprise for land use right shall be treated as the “relevant fees paid in accordance with the uniform regulations of the state” and be deducted from the “amount paid for land use right.”

On May 25, 2010, SAT issued the “Notice on Strengthening of Administration work with respect to the Collection of LAT”《關於加強土地增值稅徵管工作的通知》 ( ) which specifies the advance collection rate of LAT in different regions in China. According to this circular, except for low-income housing, the advance collection rate of LAT should not be less than 2% in

— 166 — provinces of China’s eastern region, 1.5% in provinces of China’s central and northeastern regions, and 1% in provinces of China’s western region. The local government should apply the proper advance collection rate on the basis of the specific property category (regions should be divided in accordance with the relevant documents of the State Council).

According to the “Notice on further strengthening Administration of LAT of Real Estate Development Enterprise in Our Province” (Min Di Shui Fa 2008 No. 64)《關於進一步加强我省 ( 房地產開發企業土地增值稅管理的通知》) issued by the Fujian Provincial Local Tax Bureau, which provides that: (i) LAT liabilities are based on a fixed rate, which ranges from 1% to 5% of the proceeds from pre-sales of the properties, depending on the different types of property development project. Regarding the property development which has obviously higher LAT rate, LAT liability will be independently calculated and shall not be less than the average rate; (ii) the settlement project shall be separately levied as ordinary houses, non-ordinary houses and non-residential houses. In addition the taxpayer who violates the rules will be punished accordingly and the settlement projects which shall be settled under the “Notice of SAT on the Administration of the Settlement of LAT of Property Development Enterprises (Guo Shui Fa 2006 No. 187) shall be settled in required period; and (iii) projects which have been completed and sold but with LAT obligations not settled before January 1, 2006, shall be subject to tax according to the pre-levied rate in the appropriate period. Completed projects which have been sold but with LAT obligations not settled before June 30, 2008, shall be subject to tax on 3% of the sale amount. From July 1, 2008, LAT shall be levied on 5% of the sale amount or on the independent pre-levied rate verified by the local tax authority.

(d) Deed tax

Pursuant to the “Interim Regulations of the People’s Republic of China on Deed Tax” （《中華人民共和國契稅暫行條例》) enacted by the State Council on July 7, 1997 and enforced on October 1, 1997, the transferee, whether an entity or individual, of the title to land or building in the PRC shall pay deed tax. The rate of deed tax is 3% to 5%. Provincial, regional or municipal governments directly under the central government may, within the aforesaid range, determine and report their effective tax rates to MOF and SAT for their record.

Pursuant to the “Implementation Measures on’ Interim Regulations of the People’s Republic of China on Deed Tax’ in Fujian Province”(《福建省貫徹〈中華人民共和國契稅暫行條例〉實施辦法》) promulgated by the People’s Government of Fujian on November 8, 1997, effective on October 1, 1997 and amended on November 7, 2003, the rate of deed tax in Fujian is 3%.

(e) Urban land use tax

Pursuant to the “Provisional Regulations of the People’s Republic of China Governing Land Use Tax in Cities and Towns”《中華人民共和國城鎮土地使用稅暫行條例》 ( ) enacted by the State Council on September 27, 1988 and revised on December 31, 2006, the land use tax in respect of urban land is levied according to the area of the relevant land. The annual tax as January 1, 2007 shall be between RMB0.6 and RMB30.0 per sq.m. of urban land, calculated according to the tax rate determined by local tax authorities.

(f) Buildings tax

Under the “Interim Regulations of the People’s Republic of China on Buildings Tax”《中 ( 華人民共和國房產稅暫行條例》) enacted by the State Council on September 15, 1986 and enforced on October 1, 1986, buildings tax is 1.2% if it is calculated on the basis of the residual value of a building, and 12% if it is calculated on the basis of the rental.

— 167 — (g) Farmland Use Tax

Pursuant to the “Tentative Provisions on the Farmland Use Tax of the People’s Republic of China” (Order of the State Council 2007 No.511)( 《中華人民共和國耕地佔用稅暫行條例》) (“Provisions of Farmland Use Tax”) enacted by the State Council on December 1, 2007, and the “Detailed Rules for the Implementation of the Tentative Regulations of the People’s Republic on Farmland Use Taxes” (Order of MOF and SAT 2008 No. 49)《中華人民共和國耕 ( 地佔用稅暫行條例實施細則》) (“Detailed Rules of Farmland Use Taxes”) enacted by MOF and SAT on February 26, 2008, farmland use tax is levied according to the actual area occupied by the taxpayer. The average tax rate for farmland use taxation in the various provinces, autonomous regions, and municipalities directly under the central government, shall be determined according to the average tax rate for farmland use set out in the Detailed Rules of Farmland Use Taxes and the applicable tax rates for county-level administrative districts shall be determined according to the Provisions of Farmland Use Tax, the Detailed Rules of Farmland Use Taxes, and the rulings of the People’s governments of the various provinces, autonomous regions, and municipalities directly under the central government.

(h) Stamp duty

Under the “Interim Regulations of the People’s Republic of China on Stamp Duty”《中華 ( 人民共和國印花稅暫行條例》) enacted by the State Council on August 6, 1988 and effective on October 1, 1988, for property rights transfer instruments, including those in respect of property ownership transfer, the rate of stamp duty is 0.05% of the amount stated therein; for permits and certificates relating to rights, including property title certificates and land use rights certificates, stamp duty is levied at RMB5 per item.

(i) Municipal maintenance tax

Under the “Interim Regulations of the People’s Republic of China on Municipal Maintenance Tax”《中華人民共和國城市維護建設稅暫行條例》 ( ) enacted by the State Council on February 8, 1985, any taxpayer, whether an entity or individual, of product tax, value-added tax or business tax is required to pay municipal maintenance tax. The tax rate shall be 7% for a taxpayer whose domicile is in an urban area, 5% for a taxpayer whose domicile is in a county or a town, and 1% for a taxpayer whose domicile is not in any urban area or county or town. Under the “Circular Concerning Temporary Exemption from Municipal Maintenance Tax and Education Surcharge For Enterprises with Foreign Investment and Foreign Enterprises”《關 ( 於外商投資企業和外國企業暫不徵收城市維護建設稅和教育費附加的通知》) and the “Approval on Exemption of Municipal Maintenance Tax and Education Surcharge in Foreign Invested Freightage Enterprises”《關於外資投資貨物運輸企業徵免城市維護建設稅和教育費附加問題的批 ( 覆》) issued by SAT on February 25, 1994 and on September 14, 2005, respectively, whether foreign-invested enterprises are subject to municipal maintenance tax will be determined in accordance with notices issued by the State Council; and such tax is not applicable to enterprises with foreign investment before December 1, 2010. According to the circular issued by the State Council on October 18, 2010 regarding the Unification of Municipal Maintenance Tax and Education Surcharge towards Foreign and Domestic Enterprises and Individuals 《國務院關於統一內外資企業和個人城市維護建設稅和教育費附加制度的通知》, the Interim Regulations of the PRC on Municipal Maintenance Tax also applies to foreign investment, foreign enterprises and foreign individuals from December 1, 2010.

(j) Education surcharge

Under the “Interim Provisions on Imposition of Education Surcharge”《徵收教育費附加的 ( 暫行規定》) enacted by the State Council on April 28, 1986 and revised on June 7, 1990 and August 20, 2005, a taxpayer, whether an entity or individual, of product tax, value-added tax or business tax is required to pay an education surcharge, unless such taxpayer is instead

— 168 — required to pay a rural area education surcharge as provided by the “Notice of the State Council on Raising Funds for Schools in Rural Areas”《國務院關於籌措農村學校辦學經費的通 ( 知》). Under the “Supplementary Notice Concerning Imposition of Education Surcharge”《國 ( 務院關於教育費附加徵收問題的補充通知》) issued by the State Council on October 12, 1994, the Circular Concerning Temporary Exemption from Municipal Maintenance Tax and Education Surcharge For Enterprises with Foreign Investment and Foreign Enterprises and the Approval on Exemption of Municipal Maintenance Tax and Education Surcharge in Foreign Invested Freightage Enterprises, whether foreign-invested enterprises are subject to the education surcharge will be determined in accordance with notices issued by the State Council; and such tax is not applicable to enterprises with foreign investment before December 1, 2010. According to the circular issued by the State Council on October 18, 2010 regarding the Unification of Municipal Maintenance Tax and Education Surcharge towards Foreign and Domestic Enterprises and Individuals《國務院關於統一內外資企業和個人城市維護建設稅和教育費附加制度的通知》, the Interim Provisions on Imposition of Education Surcharge also applies to foreign investment, foreign enterprises and foreign individuals from December 1, 2010.

I. Measures on adjusting the structure of housing supply and stabilizing housing price

The General Office of the State Council enacted the “Circular on Stabilizing Housing Price”《關於切實穩定住房價格的通知》 ( ) on March 26, 2005, requires measures to be taken to restrain the housing price from increasing too fast and to promote the healthy development of the real estate market.

On May 9, 2005, the General Office of the State Council revised the Opinion of the Ministry of Construction and other Departments on Doing a Good Job of Stabilizing House Prices, the opinion provides:

(a) Intensifying the planning and control and improving the supply structure of houses

Where the housing price is growing excessively and where the supply of ordinary commodity houses in the medium or low price range, and economical houses are insufficient, construction of residential properties should mainly involve projects of ordinary commodity houses in the medium or low price range and economical houses. The construction of low-density, upmarket houses shall be strictly controlled. With respect to construction projects of medium- or low-price ordinary commodity houses, before any grant of land, the municipal planning authority shall, according to the level of control required, set out conditions for planning and design, such as the height of buildings, plot ratio and green space. The property authority shall, in collaboration with other relevant authorities, set forth such controlling requirements as sale price, type and apartment sizes. Such conditions and requirements will be set out as preconditions of land assignment to ensure an effective supply of small or medium-sized houses at moderate and low prices. The local government must intensify the supervision of planning permits for property development projects. Housing projects that have not commenced within two years must be examined again, and those that turn out to not be in compliance with the planning permits will be revoked.

(b) Intensifying the control over the supply of land and rigorously enforcing the administration of land

Where the price of land for residential use and residential properties grows too rapidly, the proportion of land for residential use to the total land supply should be appropriately raised, and the land supply for the construction of ordinary commodity houses in the medium- or low-price range and economical house should be increased. Land supply for villa construction continues to be suspended, and land supply for high-end housing real estate construction is strictly restricted.

— 169 — (c) Adjusting the policies of business tax on residential property transfer and strictly regulating the collection and administration of tax

From June 1, 2005, the business tax on transfer of a residential property by an individual within two years of the purchase will be levied on the basis of the full amount of the sale proceeds. Transfer of an ordinary residential property by an individual who sells two years or more after the purchase is exempted for business tax. For transfer of a house other than ordinary residential property by an individual two years or more after the purchase, the business tax will be levied on the basis of the balance between the proceeds from selling the property and the purchase price.

(d) Rectifying and regulating for an orderly market

The buyer of a pre-completion commodity property is prohibited from conducting any transfer of the pre-sale commodity property that he has bought that is still under construction. A real name system for property purchase should be applied, and an immediate archival filing network system for advance sales contracts of commodity properties should be carried out.

On May 24, 2006, the State Council forwarded the “Opinion on Adjusting the Housing Supply Structure and Stabilizing Property Prices《關於調整住房供應結構穩定住房價格的意 ( 見》)” (the “Opinion”) of the Ministry of Construction and other relevant government authorities. The opinion provides the following:

(1) Adjusting the Housing Supply Structure

• Developers must focus on providing small- to medium-sized ordinary commodity properties at low- to mid-level prices to cater to the demands of local residents.

• As at June 1, 2006, newly approved and newly commenced building construction projects must have at least 70% of the total construction work area designated for small apartments with floor areas of 90 sq.m. or below (including economically affordable apartments). If municipalities directly under the central government, cities listed on state plans (計劃單列市) or provincial capital cities (省會城市) have special reasons to adjust such prescribed ratio, they must obtain special approval from the Ministry of Construction. Construction projects that have been approved but have not yet obtained a construction permit must follow the prescribed ratio.

(2) Further adjustments by tax, loan and land policies

• From June 1, 2006, business tax will be levied on the full amount of the sale proceeds on conveyance of residential properties within a period of five years from the date of purchase. If an individual sells his ordinary standard apartment after five or more years from the date of purchase, business tax will normally be exempted. If an individual sells his non-ordinary apartment after five or more years from the date of purchase, business tax will be levied on the balance between the selling price and the purchase price.

• Commercial banks are not allowed to advance loan facilities to real estate developers who do not have the required 35% minimum of the total capital for the construction projects. Commercial banks should be prudent in granting loan facilities and/or revolving credit facilities in any form to the real estate developers who have a lot of idle land and unsold commodity apartments. Banks shall not accept mortgages of commodity apartments remaining unsold for three years or more.

• At least 70% of the total land supply for residential property development must be used for developing small-to-medium-sized low-cost public housing. Based on the restrictions of residential property size ratio and residential real estate price, land

— 170 — supply will be granted by way of public auction to the real estate developer who offers the highest bid. Land supply for villa construction will continue to be suspended, and land supply for low-density and large-area property construction will be restricted.

• The relevant authorities will levy a higher surcharge against those real estate developers who have not commenced construction work for longer than one year from the commencement date stipulated in the construction contract and will order them to set a date for commencing the construction work and a date of completion. The relevant authorities will confiscate, without compensation, the land from those real estate developers who have not commenced construction work beyond two years from the commencement date stipulated in construction contract without proper reasons. The relevant authorities will dispose of idle land of those real estate developers who have suspended construction work for one year without approval, who have invested less than one-quarter of the total proposed investment and who have developed less than one-third of the total proposed construction area.

(3) Reasonably Monitoring the Scope and Progress of Demolition of Urban Housing

• The management and reasonable control of the scope and progress of the demolition of urban housing should be strengthened to halt “excessive real estate growth triggered by passive means” (被動性住房需求的過快增長).

(4) Further Rectifying and Regulating the Order of the Real Estate Market

• In order to ensure that the prescribed ratio regarding types and sizes is followed, the relevant authorities will need to re-examine the approval of those construction projects which have been granted planning permits but have not been commenced. The relevant authorities will ensure that no planning permit (規劃許可證), construction permit (施工許可證) or permit for pre-sale of commodity properties (商品房預售許可證) are issued to those construction projects which do not satisfy the regulatory requirements, in particular, the prescribed ratio requirement. If the real estate developers, without an approval, alter the architectural design, the construction items, and exceed the prescribed ratio, the relevant authorities have the power to dispose of commodity properties (住房) and to confiscate the land in accordance with the law.

• The property administration authority and the administration of industry and commerce will investigate illegal dealings, such as contract fraud cases in accordance with the law. The illegal conduct of pre-completion sale of commodity apartments without satisfying all the conditions is prohibited and an administrative penalty will be imposed on offenders in accordance with the law. For real estate developers who deliberately manipulate the supply of commodity housing, the relevant authorities will impose substantial administrative penalties, including revoking the business licenses of serious offenders and pursuing personal liability for individuals concerned.

(5) Gradually relieving the housing demands for low-income families

• To expedite the establishment of low-cost public housing supply system in various cities and counties; to monitor and regulate the construction of economically affordable apartments; to aggressively develop the second-hand property market and property rental market.

— 171 — (6) Improving information disclosure system and system for collecting real estate statistics On May 30, 2006, MLR published an urgent notice to tighten land administration (《關於當前進一步從嚴土地管理的通知》). In this notice, MLR stressed the local governments should strictly restrict the supply of land for low-density and large-size housing and suspend the supply of land for new villa projects. On July 6, 2006, the Ministry of Construction promulgated a supplemental Opinion on Carrying Out the Residential Property Size Ratio in Newly-Built Residential Buildings (Jianzhufang 2006 No. 165)《關於落實新建住房結構比例要求的若干意見》 ( ) (the “Supplemental Opinion”). The Supplemental Opinion provides the following:

• as at June 1, 2006, of the newly approved and newly commenced construction projects in different cities, including town and counties, at least 70% of the total construction area must be used for building small apartments a with unit floor area of 90 sq.m. or below (including economically affordable apartments). The relevant authorities in different localities must strictly follow the prescribed ratio requirement in their respective locality; and

• The relevant authorities must ensure the conditions of newly built commodity apartments including the planning and the design, and must ensure that the property size ratio is adhered to. If a real estate developer has not followed the ratio requirement without providing proper reasons, the town planning authorities will not issue a planning permit. If the real estate developer has not followed the requirements of the planning permit, the relevant authority reviewing the planning documents will not issue a certification, the construction authority will not issue a construction permit, and the property authority will not issue a permit for pre-completion sale of the commodity apartments.

In the case of construction projects that were granted approval before June 1, 2006, but that were not granted a construction work permit by that date, the relevant local governments in different localities should ascertain the details of the projects and ensure that the prescribed residential property size ratio requirement is complied with.

On September 27, 2007, PBOC and CBRC further tightened mortgage lending by PRC banks, by increasing the amount of down-payment a property purchase must make before seeking mortgage financing. See “ — Legal supervision relating to real estate sector in the PRC — Real estate financing.”

(e) Implementing restrictions on the payment terms for land use rights On September 28, 2007, MLR issued a regulation, which reiterated that real estate developers must fully pay the land premium for the entire parcel under the land grant contract before they can receive a land use rights certificate or commence development on the land, effective November 1, 2007. In November 2009, MOF, MLR, PBOC, the PRC Ministry of Supervision and the PRC National Audit Office jointly promulgated the Notice on Further Enhancing the Revenue and Expenditure Control over Land Grant《關於進一步加強土地出讓 ( 收支管理的通知》). The notice raises the minimum down-payment for land premium to 50% and requires the land premium to be fully paid within one year after the signing of a land grant contract, subject to limited exceptions. In March 2010, MLR published the Notice on Increasing the Supply of Land for Real Estate Development and the Tightening of Regulation《關於加強房地產供應和監管有關問題的 ( 通知》), which requires: (i) that the minimum land premium payable shall not be less than 70% of the benchmark price for land of the same grade as that of the lot to be granted; (ii) that the competitive bid bond shall not be less than 20% of the minimum land premium; and (iii) that 50% of the total land premium must be paid within one month of the signing of the contract as

— 172 — down-payment with the remainder to be paid by the time agreed in the contract, but in any event no later than one year after the signing of the contract. If a real estate developer fails to pay the land premium when due or is found to be leaving the land idle, hoarding or speculating on land, or to have undertaken land development beyond its capacity or failed to perform its obligations under the land use contract, the relevant municipal or county administrative authority shall prohibit it from participating in any competitive bidding for land within a certain period of time. Pursuant to the notice on Enlarging the Floating Range of the Downward Movement of Interest Rates for Individual Mortgage Loans, the PRC government lowered the minimum interest rate for individual mortgage loans to 70% of the corresponding PBOC benchmark bank lending rates. Further, the minimum down-payment ratio of residential properties was lowered to 20%. On October 22, 2008, MOF and SAT issued the “Notice on the Adjustments to Taxation on Real Property Transactions”《關於調整房地產交易環節稅收政策的通知》 ( ), pursuant to which, from November 1, 2008, the rate of deed tax has been reduced to 1% for a first time home buyer of an ordinary residence with a unit floor area less than 90 sq.m., individuals who are to sell or purchase residential properties are temporarily exempted from stamp duty and individuals who are to sell residential properties are temporarily exempted from land value added tax. On December 20, 2008, the General Office of the State Council issued the “Several Opinions on Facilitating the Healthy Development of the Real Estate Market”《關於促進房地 ( 產市場健康發展的若干意見》) which aims to, among other things, encourage the consumption of ordinary residential units and support real estate developers in changing market conditions. Pursuant to the opinion, in order to encourage the consumption of ordinary residential units, from January 1, 2009 to December 31, 2009, (i) business tax will be imposed on the full amount of the sale price, upon the transfer of a non-ordinary residential unit by an individual within two years from the purchase date; (ii) for the transfer of a non-ordinary residential unit which has been held by the purchaser for more than two years from the purchase date and a ordinary residential unit which has been held by the purchaser for two years or less from the purchase date, the business tax is to be levied on the difference between the sale price and the purchase price; (iii) and in the case of an ordinary residential unit, business tax is fully exempted if that transfer occurs after two years from the purchase date. Furthermore, individuals with an existing ordinary residential unit that is smaller than the average size for their locality may buy a second ordinary residential unit under favorable loan terms similar to first-time buyers. In addition, support for real estate developers to deal with the changing market is to be provided by increasing credit financing services to ‘‘low- to medium-level price’’ or ‘‘small- to medium-sized’’ ordinary commercial housing projects, particularly those under construction, and providing financial support and other related services to real estate developers with good credit standing for merger and acquisition activities. On December 29, 2008, MOF and SAT issued the “Notice on the Policy of Business Tax on Re-sale of Personal Residential Properties,”《關於個人住房轉讓營業稅政策的通知》 ( ) which reiterates the measures regarding business tax set forth in the above-mentioned Several Opinions on Facilitating the Healthy Development of the Real Estate Market. On February 14, 2009, the General Office of the Fujian Province Government issued the Several Opinions on Facilitating Healthy Development of Real Estate Market（Min Zheng Ban (2009) No. 25）（《關於促進房地產市場健康發展的若干意見》). These Opinions include: (i) revising the standard of ordinary commercial house;（ii）regarding the mortgages for first time purchases of self-use residences, the lower limit of lending rates can be 70% of benchmark lending rates and the minimum down-payment of the total purchase price can be 20%; (iii) the stamp duty will be temporarily exempted for the selling and purchasing real estate by individual and LAT will be temporarily exempted for the selling real estate by individual. The city and county government may revise and loosen the policy facilitating that the outlanders who purchase the commercial houses and second hand houses apply the local urban residence certificate; (iv) the payment period of land grant fee regarding commercial land use right newly granted through, competitive bidding, public auction or listing-for-sale can be extended to 12

— 173 — months. With respect to some high-price and large-scale land the payment period may be extended to maximum 18 months. In case regarding the land granted after January 1, 2007 the transferee cannot commerce the construction in time, the period of commencement and completion of construction for project can be extended to extra one year according to the scale of land; (v) the tax relating to development project can be levied by stages or suspended to be levied.

In December 2009, the State Council terminated the policy on preferential treatment relating to business taxes payable upon transfers of residential properties by property owners as previously adopted in December 2008 by the PRC government in response to the global economic slowdown, and MOF and SAT jointly issued the “Notice on Adjusting the Policy of Business Tax on Re-sale of Personal Residential Properties”《關於調整個人住房轉讓營業稅政 ( 策的通知》) to curtail speculation in the real estate market in response to the real estate price rises across the country. Pursuant to the notice, effective from January 1, 2010, business tax is imposed on the full amount of the sale income upon the transfer of non-ordinary residence by an individual within five years, instead of two years, from the purchase date. For the transfer of non-ordinary residence which is more than five years from the purchase date and ordinary residence which is within five years of the purchase date, the business tax is to be levied on the difference between the sale income and the purchase prices. In the case of an ordinary residence, the business tax is exempted if that transfer occurs after five years from the purchase date.

In January 2010, the General Office of the State Council issued the “Circular on Facilitating the Stable and Healthy Development of Property Market”《關於促進房地產市場平 ( 穩健康發展的通知》), adopted a series of measures to strengthen and improve the regulation of the real estate market, stabilize market expectation and facilitate the stable and healthy development of the real estate market. These include, among others, measures to increase the supply of affordable housing and ordinary commodity housing, provide guidance for the purchase of real estate, curb speculation of properties, and strengthen risk prevention and market supervision. Additionally, it explicitly requires a family (including a borrower, his or her spouse and children under 18), which has already purchased a residence through mortgage financing and has applied to purchase a second or more residences through mortgage financing, to pay a minimum down-payment of 40% of the purchase price.

On April 17, 2010, the State Council issued the “Notice on Resolutely Curbing the Rapid Rising of the House Price in Certain Cities”《國務院關于堅决遏制部分城市房價過快上漲的通 ( 知》) which stipulated that down-payment for the first property that is larger than 90 sq.m. shall not be less than 30% of the purchase price; down-payment for the second property bought with mortgage loans shall be not less than 50% of the purchase price and the loan interest rate shall be not less than 1.1 times the benchmark lending rate published by the PBOC. In addition, the down-payment and interest rate shall significantly increase for the third or further properties bought with mortgage loans.

Three authorities, including MOHURD, PBOC and CBRC, jointly released the “Circular on Regulating the Criteria for Identifying the Second Residential Property in Connection with Commercial Mortgage Loans”《關於規範商業性個人住房貸款中第二套住房認定標準的通知》 ( )on May 26, 2010, so as to regulate applicants for commercial housing loans for second properties (hereinafter referred to as the loan applicants). Under the Circular, number of houses owned by a family in the commercial housing loans for individuals shall be calculated according to number of houses which are actually owned by members (including the loan applicant and his/her spouse and under-age children) of the family who plans to purchase a house. The Circular also stipulated that house purchasers shall check the house registration records of the family via the house registration system, and shall provide the results in writing. The loan applicant shall provide the credit guarantee in written to prove the actual number of houses owned by his/her family.

— 174 — Legal supervision relating to the property management sector in the PRC

A. Foreign-invested real estate management enterprises

According to the Guidance Catalog, property management falls within the category of permitted foreign-invested industries. According to the Guidance Catalog and the relevant requirements set out under the laws and the administrative regulations on foreign-invested enterprises, a foreign-invested real estate management enterprise can be set up in the form of a Sino-foreign equity joint venture, a Sino-foreign cooperative joint venture or a wholly foreign owned enterprise. Before the administration of Industry and Commerce registers a foreign-invested enterprise as a foreign-invested real estate management enterprise, the foreign-invested real estate management enterprise should obtain an approval from the relevant department of commerce and receive a “foreign-invested enterprise approval certificate.”

B. Qualifications of a real estate management enterprise

According to the “Regulation on Real Estate Management”《物業管理條例》 ( ) enacted by the State Council on June 8, 2003 and effective on September 1, 2003, as amended on August 26, 2007 and effective on October 1, 2007, the state implements a qualification scheme system in monitoring the real estate management enterprises. According to the “Measures for Administration of Qualifications of Real Estate Service Enterprises”《物業服務企業資質管理辦 ( 法》) enacted by the Ministry of Construction on March 17, 2004 and effective on May 1, 2004, as amended on November 26, 2007, a newly established real estate service enterprise shall, within 30 days of receiving its business license, apply to the relevant local bureau in charge of the property management under the local government or to the municipalities directly under the central government for a grading assessment. The departments of qualification examination and approval will check and issue a “real estate service qualification certificate” corresponding to their grading assessment results.

According to the Measures for the Administration on Qualifications of Real Estate Service Enterprises, real estate service enterprise shall be classified as either class one, class two or class three. The competent construction department of the State Council is responsible for the issuance and administration of the qualification certificate for class one real estate service enterprises. The competent construction departments of the relevant provincial and regional government is responsible for issuing and administering the qualification certificate for class two real estate service enterprises, and the competent realty departments of the relevant municipal government is responsible for issuing and administering the qualification certificate for class two and three real estate service enterprises. The competent realty departments of the People’s government of the cities divided into districts shall be responsible for the issuance and administration of the qualification certificate of the class three real estate service enterprises.

The real estate service enterprises with class one qualifications may undertake various property service projects. The real estate service enterprises with class two qualifications may undertake the property service business of residential management projects of less than 300,000 sq.m. and non-residential management projects of less than 80,000 sq.m. The real estate service enterprises with class three qualification may undertake the property service business of residential projects of less than 200,000 sq.m. and non-residential projects under 50,000 sq.m.

According to the “Regulation on Real Estate Management”《物業管理條例》 ( ), the general meeting of owners in a property can appoint or dismiss the property management service provider with affirmative votes of more than half of the owners who in the aggregate hold more than 50% of the total private area of the property. Before the formal appointment of a property service enterprise by the general meeting of the owners, a written temporary service contract should be signed by the construction institutions (for example, a developer) and a property service enterprise.

— 175 — C. Employment of a real estate service enterprise

According to the Regulation on Real Estate Management, owners may engage or dismiss a property management company with the consent of more than half of the owners who, in aggregate, hold more than 50% of the total private area of the building. If, before the formal employment of a property management by the owners or the general meeting, the construction unit is to employ a real estate management enterprise, it shall enter into a preparation stage property services contract in writing with the real estate management enterprise.

Regulation on foreign exchange registration of offshore investment by PRC residents

Pursuant to the “SAFE’s Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents to Engage in Financing and Inbound Investment via Overseas Special Purpose Vehicles”《國家外匯管理局關於境內居民通過境外特殊目的公司融資 ( 及返程投資外匯管理有關問題的通知》), issued on May 2007, or Circular No. 75 and its implementation rules, issued on October 21, 2005 (“Circular No. 106”), (a) a PRC resident, including a PRC resident natural person or a PRC company, shall register with the local branch of SAFE before it establishes or controls an overseas special purpose vehicle, or SPV, for the purpose of overseas equity financing with domestic enterprises assets or equity held by it (including convertible debt financing); (b) when a PRC resident contributes the assets of or its equity interests in a domestic enterprise into a SPV, or engages in overseas financing after contributing assets or equity interests into a SPV, such PRC resident shall register his or her interest in the SPV and the change thereof with the local branch of SAFE; and (c) when the SPV undergoes a material event which is not related to “round-trip” investment (且不涉及返程投資的) outside the PRC, such as change in share capital or merger and acquisition, the PRC resident shall, within 30 days of the occurrence of such event, register such change with the local branch of SAFE. Under Circular No. 75, failure to comply with the registration procedures set forth above may result in penalties, including restrictions on the PRC subsidiary’s foreign exchange activities and its ability to distribute dividends to the SPV.

As a result, under Circular No. 75, if the PRC resident or the SPV described above engages in an overseas offering or otherwise undergoes a material event outside the PRC, such PRC resident and SPV are required to register such change with the local branch of SAFE within 30 days from the occurrence of such offering or event.

— 176 — MANAGEMENT

The following table sets forth certain information with respect to our directors and senior management as of the date of this offering memorandum.

Name Age Position Directors Wong Chiu Yeung ...... 44 Chairman of our board and President Chen Yuanlai ...... 44 ViceChairman of our board and Executive Director Cheng Hiu Lok ...... 46 ViceChairman of our board and Executive Director LiWei...... 40 Executive Director and Executive Vice President Fung Ka Pun ...... 65 Non-Executive Director Ting Leung Huel Stephen ...... 57 Independent Non-Executive Director Lu Hong Te...... 50 Independent Non-Executive Director DaiYiyi...... 43 Independent Non-Executive Director

Senior Management Liu Zhijie ...... 53 VicePresident and General Manager of engineering management department Huang Youquan ...... 42 VicePresident Huang Jing Song ...... 41 VicePresident Bian Yinghua ...... 36 Assistant President LiSiuPo...... 42 Financial Controller and Company Secretary Tang Xiaojuan ...... 37 General Manager of sales and marketing management department Zheng Quanlou ...... 39 General Manager of design management department Zhang Haitao ...... 42 General Manager of president office

BOARD OF DIRECTORS

Our board consists of eight directors, comprising four executive directors, one non-executive director and three independent non-executive directors.

Executive Directors

Mr. Wong Chiu Yeung (黃朝陽), aged 44, is one of our founders and the Chairman of our board and President of as well as the Chairman of the Remuneration Committee. He was appointed as our Executive Director on November 30, 2007. He is responsible for formulating business development strategies for our Company and managing the commercial property development and supervising the administration of human resources, financial management, sales and marketing management and design management department of our Company. Since the development of our first real estate project in 1996 (namely Junda Center), Mr. Wong has been involved in all of the projects developed by us, and has 14 years of experience in property development. Mr. Wong is also a member of the National Committee of Chinese People’s Political Consultative Conference (中國人民政治協商會議全國委員會), the vice chairman of Hong Kong Association for the Promotion of Peaceful Reunification of China (中國和平統一促進會香港總會), the guest professor of Nanchang University (南昌大學), the vice chairman of the board of directors of Quanzhou Normal University (泉州師範學院), the chairman of the board of directors of Nan’an Overseas Chinese Middle School (南安華僑中學). Mr. Wong is currently pursuing his EMBA at Xiamen University.

— 177 — Mr. Chen Yuanlai (陳元來), aged 44, is one of our founders and the Vice Chairman of our board. He was appointed as our Executive Director on August 12, 2009. He is in charge of our project management for all projects in the southern China region. Since the development of our first project in 1996 (namely Junda Center), he has been involved in all of the projects developed by us, and has 14 years of experience in property development. Mr. Chen also has extensive experience in investment management and project management through his involvement in all projects developed by us. He is the director of Fujian Provincial Young Entrepreneurs Association (福建省青年企業家協會) and a member of Fujian Provincial Youth Federation (福建省青年聯合委員會). Mr. Chen was a representative of the Second Session of the People’s Congress of Fengze District in Quanzhou (泉州市豐澤區第二屆人民代表大會). Mr. Chen completed the Executive Management Program in Business Administration of Commercial Real Estate Development and Funding, a one year program jointly offered by School of Professional and Continuing Education of Hong Kong University and Fudan University, Shanghai, in May 2008.

Mr. Cheng Hiu Lok (鄭曉樂), aged 46, is one of our founders and the Vice Chairman of our board and the Chairman of Nomination Committee. He was appointed as our Executive Director on August 12, 2009, and is in charge of project management for all projects in northern China region and supervising our construction management. Since the development of our first project in 1996 (namely Junda Center), he has been involved in all of the projects developed by us. Mr. Cheng has 14 years of experience in property development and also has extensive experience in investment management, project management and construction management. Mr. Cheng completed his college education at Fujian Normal University (福建省師範大學) in 1987.

Mr.LiWei(李維), aged 40, is an Executive Director and the Executive Vice President of our Company, as well as a member of the Nomination Committee. He was appointed as our Executive Director on August 12, 2009. Mr. Li is responsible for the daily operational management and operation plan of our Company, including office of president development, administration and human resources department, management of property management company. Mr. Li was the general manager of the operations department and the credit department of the Xiamen Branch of China Construction Bank before he joined our Company in June 2006. Mr. Li graduated and obtained his bachelor’s degree in economics from the Faculty of Banking and Finance of Xiamen University in 1992.

Non-Executive Director

Mr. Fung Ka Pun (馮家彬), aged 65, was appointed as a Non-Executive Director of our Company on January 6, 2010. Mr. Fung is a member of the Association of International Accountants and a member of the Institute of Chartered Secretaries & Administrators. Mr. Fung is also an executive director and vice-chairman of the board of Hao Tian Resources Group Limited (0474) and an independent non-executive director of each of Samling Global Limited (3938), GZI Transport Limited (1052) and Lee Hing Development Co., Ltd (0068). From March 2004 to March 2008, Mr. Fung also acted as an independent non-executive director of Lei Shing Hong Limited, a company previously listed on the Hong Kong Stock Exchange and was privatized by way of a scheme of arrangement in March 2008. Mr. Fung is the founder and chairman of Goodwill International (Holdings) Limited. Mr. Fung has over 30 years of experience in finance, securities and corporate finance business. Mr. Fung is also a director of Mateland Holdings Limited, a joint venture partner of the Regent Project of our Company.

— 178 — Independent Non-Executive Directors

Mr. Ting Leung Huel Stephen (丁良輝), aged 57, MH, FCCA, FCPA (Practising), CTA, ACA, FHKIoD, was appointed as an Independent Non-Executive Director of our Company on January 6, 2010. He is also the Chairman of our Audit Committee and a member of our Remuneration Committee. Mr. Ting is an accountant in public practice and has more than 30 years of experience in this field. Currently, he is the managing partner of Ting Ho Kwan & Chan, Certified Public Accountants (Practising). Mr. Ting is also a member of the 9th and 10th Chinese People’s Political Consultative Conference, Fujian. Mr. Ting is a non-executive director of Chow Sang Sang Holdings International Limited (0116) and an independent non-executive director of seven other listed companies in Hong Kong, namely Tong Ren Tang Technologies Company Limited (1666), Tongda Group Holdings Limited (0698), Minmetals Resources Limited (1208), JLF Investment Company Limited (0472), Computer and Technologies Holdings Limited (0046), Texhong Textile Group Limited (2678) and Dongyue Group Limited (0189).

Dr. Lu Hong Te (呂鴻德), aged 50, was appointed as an Independent Non-Executive Director of our Company on January 6, 2010, and is also a member of our Audit Committee and Nomination Committee. Dr. Lu obtained a bachelor’s degree in industrial management science from National Cheng Kung University in 1983, and a master’s degree and a doctoral degree in marketing from the Graduate Institute of Business Administration of the College of Management of National Taiwan University in 1985 and 1992, respectively. Dr. Lu is a professor at the department of business administration of Chung Yuan Christian University in Taiwan, specializing in sales management and business competitive strategies. He also serves as a visiting professor at institutions including SGP International Management Academy, Nanyang Technological University’s EMBA Center and Xiamen University’s EMBA Center. Dr. Lu is an independent non-executive director of Capxon International Electronic Company Limited (0469), ANTA Sports Products Limited (2020) and China Lilang Limited (1234), the shares of which are listed on the Hong Kong Stock Exchange. He is also an independent director of four companies in Taiwan, namely Everlight Chemical Industrial Corporation (1711) and Aiptek International Inc. (6225) which are listed on the Taiwan Stock Exchange and Firich Enterprises Co., Ltd (8076) and Lanner Electronics Inc. (6245), the shares of which are traded in the Gre Tai Securities Market in Taiwan.

Dr. Dai Yiyi (戴亦一), aged 43, was appointed as an Independent Non-Executive Director of our Company on January 6, 2010, and is also a member of our Audit Committee and Remuneration Committee. Dr. Dai is the vice dean and a full-time professor of the Executive Master of Business Administration program of the School of Management of Xiamen University and also serves as an adjunct professor for real estate CEO programs hosted by Tsinghua University and Peking University. From 1997 to 2001, Dr. Dai served as the research secretary, assistant to the dean and vice dean of the Planning and Statistics Department at the School of Economics of Xiamen University. From 2003 to 2007, Dr. Dai served as the deputy head and then the head of the Executive Master of Business Administration program for senior management personnel held by the School of Management of Xiamen University. Dr. Dai was a senior visiting scholar at the School of Management of McGill University (Canada) in 2002 and a senior visiting scholar at Northwestern University (USA) from 2007 to 2008. Dr. Dai has been a consultant with the Fujian Real Estate Association since 2005. Dr. Dai is an independent non-executive director of Mingfa Group (International) Company Limited (0846), a company listed on the Hong Kong Stock Exchange, and is an independent director of Xiamen C&D Inc. and Xiamen International Trade Group Corp., Ltd., which are listed on the Shanghai Stock Exchange, and Fujian Septwolves Industry Co., Ltd. and Guangdong Shirongzhaoye Co., Ltd., which are listed on the Shenzhen Stock Exchange. Dr. Dai graduated from Xiamen University with a bachelor’s degree in economics in 1989, and received a doctoral degree in economics from Xiamen University in 1999. He also completed training at the 6th Ford Program of the Sino-American Economics Training Centre of Renmin University of China. Dr. Dai was awarded a certificate as a PRC certified property valuer in 1997.

— 179 — SENIOR MANAGEMENT

Mr. Liu Zhijie (劉志傑), aged 53, is the Vice President of our Company and the General Manager of our construction department. He joined us in 1998 and is responsible for the engineering management of our Company. Mr. Liu completed his college education in civil engineering at Fujian College of Architecture and Civil Engineering (福建省建築高等專科學校) in 1981. Mr. Liu possesses extensive experience in engineering and construction and cost management.

Mr. Huang Youquan (黃攸權), aged 42, is the Vice President of our Company. He is responsible for the financial management of our Company. Before joining us in 2003, Mr. Huang was the audit manager and assistant to the head of the Xiamen office of Fujian Hongshen Accounting Firm (福建弘審會計師事務所有限公司廈門分公司). Mr. Huang graduated with a bachelor’s degree in science from the Faculty of Mathematics of Xiamen University in 1991. He is pursuing his EMBA at the Xiamen University since September 2009. Mr. Huang is a PRC Certified Public Accountant and a member of the Fujian Institute of Certified Public Accountants.

Mr. Huang Jing Song (黃勁松), aged 41, is the Vice President of our Company. He is responsible for managing our commercial properties related work. Before joining our Company in 2010, Mr. Huang was the deputy general manager of Xiamen International Trade Group Corp., Ltd. (廈門國貿集團股份有限公司) and the general manager of Xiamen International Motors Co., Ltd. (廈門國貿汽車股份有限公司). Mr. Huang graduated from the Faculty of International Trade in Xiamen University and obtained his master’s degree of business administration from the Singapore National University in 2002. Mr. Huang has more than 19 years of experience in enterprises management.

Mr. Bian Yinghua (卞應華), aged 36, is the Assistant President of our Company and the General Manager of Xiamen Branch. Before joining our Company in September 2007, Mr. Bian was the deputy head of the strategic development department of China Ocean Shipping (Group) Company. Mr. Bian graduated with a bachelor’s degree in engineering from the Faculty of Civil Engineering of Dalian University of Technology (大連理工大學) in 1996.

Mr. Li Siu Po (李少波), aged 42, is our Financial Controller and Company Secretary. He is responsible for the financial reporting, investor relations and company secretarial work of our Company. Before joining our Company in January 2008, Mr. Li was once a manager at one of the leading international accounting firms. Mr. Li graduated from Hong Kong Polytechnic University with a bachelor’s degree in accounting in 1994. Mr. Li is a member of the Hong Kong Institute of Certified Public Accountants and a fellow member of the Association of Chartered Certified Accountants. Mr. Li has extensive experience in financial management and auditing.

Ms. Tang Xiaojuan (湯筱娟), aged 37, is the General Manager of our marketing department and the General Manager of commercial property management company. She is responsible for managing the sales and marketing functions of our Company, as well as for customer services and commercial property management related work. Prior to joining our Company in 2002, Ms. Tang served as the office manager of Xiamen Yong Hong Ji Real Estate Development Company Limited (廈門永宏基房地產開發有限公司). Ms. Tang graduated and obtained a bachelor’s degree in economics from Jiangxi University of Finance and Economics (江西財經學院) in1994.

Mr. Zheng Quanlou (鄭全樓), aged 39, is the General Manager of our design department. He is responsible for design management related work. Before joining our Company in November 1998, Mr. Zheng was the on-site manager of Quanzhou Dong Hai Development Company Limited (泉州市東海開發有限公司). Mr. Zheng completed his college education in construction engineering at Fujian College of Architecture and Civil Engineering (福建省建築高等專科學校) in 1992 and obtained his bachelor’s degree from Faculty of Civil

— 180 — Engineering of Fujian Agriculture and Forestry University in 2009. Mr. Zheng is a PRC Registered Cost Engineer, and serves as an expert of bid evaluation of construction project in Quanzhou since 2006. Mr. Zheng is currently attending an Executive Master of Business Administration course in Xiamen University.

Ms. Zhang Haitao (張海濤), aged 42, is the General Manager of our president office. She is responsible for audit functions, legal affairs, and strategic development of our Company. Before joining our Company in January 2007, Ms. Zhang was a senior manager of Xiamen Tianjian Huatian Accounting Firm (廈門天健華天會計師事務所). Ms. Zhang graduated with a bachelor’s degree in economics from the Faculty of Accounting of Xiamen University in 1990. Ms. Zhang is a PRC Certified Public Accountant and a senior accountant with extensive auditing experience.

COMPANY SECRETARY

Mr. Li Siu Po (李少波), a member of our senior management, is the Financial Controller and Company Secretary of our Company. Detailed information of Mr. Li is set forth in “— Senior Management.”

BOARD COMMITTEES

Audit Committee

We have established an audit committee pursuant to a resolution of our directors passed on January 6, 2010. The audit committee consists of three Independent Non-Executive Directors, namely Ting Leung Huel Stephen, an Independent Non-Executive Director with the appropriate professional qualifications who shall serve as chairman of the committee, Lu Hong Te and Dai Yiyi. The primary duties of the audit committee are to assist our board in providing an independent view of the effectiveness of our financial reporting process, internal control and risk management systems, to oversee the audit process and to perform other duties and responsibilities as assigned by our board.

Remuneration Committee

We have established a remuneration committee pursuant to a resolution of our directors passed on January 6, 2010. The remuneration committee consists of two Independent Non-Executive Directors, namely Ting Leung Huel Stephen and Dai Yiyi, and one Executive Director, namely Wong Chiu Yeung, who is the chairman of the remuneration committee. The primary duties of the remuneration committee are to evaluate the performance and make recommendations on the remuneration package of our directors and senior management and evaluate and make recommendations on employee benefit arrangements.

Nomination Committee

We have established a nomination committee pursuant to a resolution of our directors passed on January 6, 2010. The nomination committee consists of one Independent Non-Executive Director, namely Lu Hong Te, and two Executive Directors, namely Cheng Hiu Lok, who is the chairman of the nomination committee, and Li Wei. The primary function of the nomination committee is to make recommendations to our board on the appointment and removal of directors of our Company.

— 181 — DIRECTORS’ INTERESTS IN SHARES, UNDERLYING SHARES AND DEBENTURES

As at September 30, 2010, the interests and short positions of the directors or chief executives in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the “SFO”)) as recorded in the register required to be kept under Section 352 of the SFO, or as otherwise notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies were as follows:

Long positions in ordinary shares of the Company:

Interest in shares

Approximate Interest of percentage of the Personal controlled Number of Company’s issue Name of director interest corporation shares held share capital Mr. Wong Chiu Yeung 1,000,000 1,640,000,000(1) 1,641,000,000 57.51 (“Mr. Wong”) ...... Mr. Chen Yuanlai (“Mr. — 120,000,000(2) 120,000,000 4.21 Chen”) ...... Mr. Cheng Hiu Lok — 120,000,000(3) 120,000,000 4.21 (“Mr. Cheng”) ...... Mr. Fung Ka Pun (“Mr. — 12,380,000(4) 12,380,000 0.43 Fung”) ......

Notes: (1) These 1,640,000,000 shares are registered in the name of Newup. Mr. Wong holds 100% of the entire issued share capital of Newup and is deemed to be interested in the 1,640,000,000 shares held by Newup pursuant to the SFO. (2) These 120,000,000 shares are registered in the name of Rising Trade Holdings Limited. Mr. Chen holds 100% of the entire issued share capital of Rising Trade Holdings Limited and is deemed to be interested in the 120,000,000 shares held by Rising Trade Holdings Limited pursuant to the SFO. (3) These 120,000,000 shares are registered in the name of Wealthy Gate Holdings Limited. Mr. Cheng holds 100% of the entire issued share capital of Wealthy Gate Holdings Limited and is deemed to be interested in the 120,000,000 shares held by Wealthy Gate Holdings Limited pursuant to the SFO. (4) These 12,380,000 shares are registered in the name of Goodwill International (Holdings) Limited of which 2,600,000 shares are held in trust of the K P Fung Family Trust, a discretionary trust set up by Mr. Fung. 19% and 25.44% of the entire issued share capital of Goodwill International (Holdings) Limited is directly and indirectly owned by Mr. Fung, respectively. As such, he is deemed to be interested in all these shares held by Goodwill International (Holdings) Limited, as to 9,780,000 shares as interest of controlled corporation and as to 2,600,000 shares as founder of a discretionary trust.

Save as disclosed above, as at September 30, 2010, none of the directors or chief executives had registered an interest or short position in the shares, underlying shares or debentures of the Company or any of its associated corporations that was required to be recorded pursuant to Section 352 of the SFO, or as otherwise notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies.

— 182 — SHARE OPTION SCHEME

We have conditionally adopted a share option scheme on January 6, 2010 (“Share Option Scheme”). The purpose of the Share Option Scheme is to provide incentives to our employees including our Executive Directors and Non-Executive Directors and Independent Non-Executive Directors (each a “Participant”). Our board of directors may, at any time within 10 years after the date of adoption of the Share Option Scheme, make an offer to any participant. The subscription price for shares granted pursuant to the Share Option Scheme is the highest of:

• the closing price of the shares of the Company on the Hong Kong Stock Exchange on the business day on which an offer is made to a participant;

• the average of the closing prices of the shares on the Hong Kong Stock Exchange for the five business days immediately preceding the date on which such offer is made; and

• the nominal value of the shares of the Company.

The total number of shares which may be issued upon exercise of all options granted under the Share Option Scheme must not, in aggregate, exceed 10% of the issued share capital of the Company at the date of approval of the Share Option Scheme. The maximum number of unexercised share options currently permitted to be granted under the Share Option Scheme is an amount equivalent, upon their exercise, to 30% of the shares of the Company in issue at any time.

The total number of shares issued and to be issued upon exercise of all options granted under the Share Option Scheme to each Participant (including both exercised and outstanding options) in any 12-month period shall not exceed 1% of the total number of issued shares of the Company. If shares issued and to be issued upon exercise of all options granted under the Share Option Scheme (including both exercised, cancelled and outstanding) to a Participant who is a substantial shareholder or an independent non-executive director of the Company in any 12-month period, (i) represent in aggregate over 0.1% of the total number of shares in issue and (ii) have an aggregate value, based on the closing price of the shares of the Company at the date of each grant, in excess of HK$5 million (or such higher amount as may from time to time be specified by the Hong Kong Stock Exchange), the proposed grant of option must be approved by our shareholders in poll in a general meeting.

The exercise period of any option granted under the Share Option Scheme shall not be longer than 10 years from the date of grant of the relevant option. At the time of grant of the options, our Company may specify any minimum period(s) for which an option must be held before it can be exercised.

As at the date of this offering memorandum, no share options have been granted under the Share Option Scheme.

— 183 — PRINCIPAL SHAREHOLDERS

The register of substantial shareholders required to be kept by the Company under Section 336 of Part XV of the SFO shows that as at September 30, 2010, the Company had been notified of the following substantial shareholders’ interests and short positions in the shares of the Company, being interests of 5% or more, in addition to those disclosed above in respect of the directors and chief executive of the Company.

Percentage in the Company’s Long/short Number of ordinary issued share Name of shareholders Capacity position shares held capital Newup Limited(1) ...... Beneficial owner Long 1,640,000,000 57.5%

Note: (1) Newup is wholly-owned and controlled by Mr. Wong; accordingly, Mr. Wong is deemed to be interested in the shares held by Newup. Mr. Wong is the sole director of Newup.

Save as disclosed above, as at September 30, 2010, no person or corporation had any interest in the share capital of the Company as recorded in the register required to be kept by the Company under Section 336 of the SFO as having an interest in 5% or more of, or any short position in, the issued share capital of the Company.

— 184 — RELATED PARTY TRANSACTIONS

The following is a summary of significant related party balances and transactions entered into in the ordinary course of business between our members and its related parties during the two years ended December 31, 2008 and 2009 and the nine months ended September 30, 2010.

(a) Material transactions with related parties:

Nine months ended Year ended December 31, September 30,

2008 2009 2010

RMB ’000 RMB ’000 RMB ’000 Sale of properties to: Directors(1) ...... — 1,171 3,246 Family members of the directors(1) . . . 4,319 3,910 12,337 Rental income from companies controlled by Mr. Wong(2) ...... 1,283 1,633 1,320 Property management fee income from companies controlled by Mr. Wong(2) . 220 246 185 Interest expenses on loans from companies controlled by Mr. Wong(3) . 16,890 25,021 — Sales agency fees paid to an associate(4) ...... — 13,267 4,753

Notes: (1) The properties were sold at prices mutually agreed by both parties. (2) Terms on the rental and management fee income of office premises were mutually agreed between both parties. (3) The interest expenses were charged at rates ranging from 2.68% to 5.40% (2008: from 2.36% to 8.22%) per annum. (4) The sale agency fees were charged at rates ranging from 1.1% to 1.3% of the selling price of the relevant properties sold.

(b) During the year ended December 31, 2009, we provided financial guarantees with an aggregate amount of RMB75 million (2008: RMB135.5 million) to certain banks for securing the loan facilities granted to certain companies controlled by Mr. Wong.

— 185 — (c) Due from / to related parties

As of As of December 31, September 30,

2008 2009 2010

RMB’000 RMB’000 RMB’000 Due from related parties: Directors: Mr. Cheng ...... 30,231 — — Mr. Chen ...... 2,593 589 — Companies controlled by: Mr.Wong...... 20,606 2,688 1,519 Mr. Chen ...... 676 — — Mr. Cheng ...... 22 — — Jointly-controlled entities ...... 11,719 11,728 11,489 An associate ...... 60,222 157,804 191,603 Due from the immediate holding company ...... — — — 126,069 172,809 204,611 Due to related parties

Directors: Mr.Wong...... 258,960 196 — Companies controlled by Mr. Wong . . 79,480 — — Jointly-controlled entities ...... — 142,975 83,336 An associate ...... 30,000 88,095 15,369 368,440 231,266 98,705

The balances are non-trade in nature, unsecured, interest free and are repayable on demand. The carrying amounts of the amounts due from / to related parties approximate to their fair values.

Further details of the compensation of our key management personnel are set out in note 9 to the financial statements.

— 186 — DESCRIPTION OF OTHER MATERIAL INDEBTEDNESS

To fund our existing real estate projects and to finance our working capital requirements, we have borrowed money from various banks and other third parties. As of September 30, 2010, our total borrowings were RMB2,410.7 million in outstanding principal amount. We set forth below a summary of the material terms and conditions of these loans and other material indebtedness.

PRC Bank Loan Agreements

Certain of our PRC subsidiaries have entered into loan agreements with various PRC banks, primarily China Construction Bank and Agricultural Bank of China. These loans are typically secured project or secured working capital loans to finance the construction of our projects and generally have terms ranging from 1 year to 3 years, which, in the case of project loans, generally correspond to the construction periods of the particular projects. The Notes, the Subsidiary Guarantees and the JV Subsidiary Guarantees (if any) will be structurally subordinated to these loans and any other indebtedness incurred by our PRC Subsidiaries. As of September 30, 2010, the balance of our PRC bank loans was RMB2,359.6 million.

Interest

The principal amounts outstanding under the loans generally bear interest at floating rates calculated by reference to PBOC’s benchmark interest rate per annum. Floating interest rates generally are subject to periodic review by the banks. Interest payments generally are payable either monthly or quarterly and must be made on each payment date as provided in the particular loan agreement.

Covenants

Under these loans, many of our subsidiary borrowers have agreed, among other things, to restrictions on taking the following actions without first obtaining the lenders’ prior consent:

• creating encumbrances on their properties or assets;

• granting guarantees to third parties;

• making major changes to their corporate structures, such as entering into joint ventures, mergers or acquisitions and reorganizations or making other changes to the company’s status, such as by liquidation or dissolution;

• altering the nature or scope of their business operations in any material respect;

• transferring part or all of the liabilities under the loans to a third party;

• prepaying the loans;

• selling or disposing of assets;

• incurring other indebtedness; and

• paying dividends.

— 187 — Guarantee and security

Certain of our PRC subsidiaries have entered into guarantee agreements with the PRC banks in connection with some of the PRC bank loans pursuant to which these subsidiaries and associates have guaranteed all liabilities of the subsidiary borrowers under these loans. Our obligations under the loan agreements are typically secured by mortgages over the land use rights for the projects.

Certain of our PRC subsidiaries have entered into guarantee agreements with the PRC banks creating mortgages on our real estate.

2010 Hang Seng Term Loan Facility

On January 18, 2010, our wholly owned subsidiary, Bohai International Investment Limited (“BIIL”), entered into a facility agreement with Hang Seng Bank Limited (“HSB”) that provides for a HK$50 million term loan. The proceeds of the facility are to be used for working capital purposes.

Interest

Interest for each interest period accrues at a rate of 2.5% per annum over the Hong Kong Interbank Offered Rate or the London Interbank Offered Rate as selected by BIIL.

Maturity and Prepayment

The term loan is repayable in 5 half-yearly installments with January 21, 2013 as the final maturity date, subject to the bank’s right to request repayment on demand. BIIL has the right to prepay all or part of the loans, with a prepayment fee of 0.5% on the amount prepaid on 30 business days’ notice.

Guarantee and Security

Certain of our subsidiaries have entered into guarantee agreements with HSB guaranteeing BIIL’s performance of its obligations under the facility agreement.

The following share mortgage and share pledge were entered to secure repayment of the term loan:

● our subsidiary, Dragon Tale Investments Limited entered into share mortgage over the entire issued share capital of BIIL in favor of HSB.

● BIIL entered into share pledge over the entire issued share capital of Beijing Jinghui Real Estate Development Co., Ltd. in favor of HSB.

Upon execution of the Intercreditor Agreement and issuance of the Notes, the share mortgage created by Dragon Tale Investments Limited will be released.

Covenants

Pursuant to the facility agreement, we agreed to the following financial covenants:

● the Company shall maintain consolidated equity with the bank of not less than RMB1,200 million.

● the ratio of “Total Interest Bearing Debt minus Cash” to “Total Equity plus Non-Redeemable Preference Shares and Minority Interest” shall not at any time be more than 1:1.

— 188 — Events of Default

The share mortgage and share pledge contain certain customary events of default, including non-payment, cross default, insolvency and breaches of the terms of the security documents. Upon the occurrence of an event of default, all amounts (including principal and interest) due or owing to HSB shall, without any demand, become immediately due and payable.

2009 Hang Seng Bank (China) Limited, Beijing Branch Term Loan Facility

On September 28, 2009, our wholly owned subsidiary, Beijing Jinghui Real Estate Development Co. Ltd. entered into a facility agreement with Hang Seng Bank (China) Limited, Beijing Branch that provides for a RMB315 million term loan. The proceeds of the facility are to be used for repayment of another loan.

Interest

The principal amount outstanding under the loan bears interest at floating rates calculated by reference to PBOC’s benchmark interest rate for three to five years’ loan per annum.

Maturity and Prepayment

The term loan is repayable in 17 quarterly installments with the first installment due the first anniversary of the facility agreement. The borrower has the right to prepay all or part of the loan on 30 days’ notice and with a prepayment fee of (a) 0.5% on the amount prepaid if prepayment is made within three years; or (b) 0.3% if prepayment is made within four years, from the date of the facility agreement.

Guarantee, Security and Covenants

We and our subsidiary, Dragon Tale Investments Limited, have entered into guarantee agreements with Hang Seng Bank (China) Limited, Beijing Branch guaranteeing the borrower’s performance of its obligations under the facility agreement. The borrower’s obligations are further secured by mortgages over our real estates. In addition, the borrower is prohibited from paying any dividends while the loan is outstanding unless getting written consent from the lender.

Customer Guarantees

In line with industry practice, we provide guarantees to mortgagee banks in respect of mortgage loans taken out by purchasers of our properties. Such guarantee obligations typically terminate upon the delivery of the relevant property ownership certificates on the underlying property to the bank. As of September 30, 2010, the aggregate outstanding amount guaranteed was RMB1,164.1 million.

— 189 — DESCRIPTION OF THE NOTES

For purposes of this “Description of the Notes,” the term “Company” refers only to China SCE Property Holdings Limited, and any successor obligor on the Notes, and not to any of its subsidiaries. Each Subsidiary of the Company which guarantees the Notes is referred to as a “Subsidiary Guarantor,” and each such guarantee is referred to as a “Subsidiary Guarantee.” Each Subsidiary of the Company that in the future provides a JV Subsidiary Guarantee (as defined herein) is referred to as a “JV Subsidiary Guarantor.”

The Notes are to be issued under an indenture (the “Indenture”), to be dated as of the Original Issue Date, among the Company, the Subsidiary Guarantors, as guarantors, and Deutsche Bank Trust Company Americas, as trustee (the “Trustee”).

The following is a summary of certain provisions of the Indenture, the Notes, the Subsidiary Guarantees, the JV Subsidiary Guarantees and the Intercreditor Agreement (as defined below). This summary does not purport to be complete and is qualified in its entirety by reference to all of the provisions of the Indenture, the Notes, the Subsidiary Guarantees, the JV Subsidiary Guarantees and the Intercreditor Agreement. It does not restate those agreements in their entirety. Whenever particular sections or defined terms of the Indenture not otherwise defined herein are referred to, such sections or defined terms are incorporated herein by reference. Copies of the Indenture will be available on or after the Original Issue Date at the corporate trust office of the Trustee at 60 Wall Street, Mailstop NYC60-2710, New York, New York, 10005, U.S.A.

Brief Description of the Notes

The Notes are:

• general obligations of the Company;

• senior in right of payment to any existing and future obligations of the Company expressly subordinated in right of payment to the Notes;

• guaranteed by the Subsidiary Guarantors and the JV Subsidiary Guarantors (if any) on a senior basis, subject to the limitations described below under the caption “— The Subsidiary Guarantees” and in “Risk Factors — Risks Relating to the Subsidiary Guarantees, the JV Subsidiary Guarantees and the Collateral”;

• effectively subordinated to the other secured obligations, if any (other than Permitted Pari Passu Secured Indebtedness) of the Company, the Subsidiary Guarantors and the JV Subsidiary Guarantors, to the extent of the value of the assets serving as security therefor; and

• effectively subordinated to all existing and future obligations of the Non-Guarantor Subsidiaries (as defined below).

— 190 — In addition, on the Original Issue Date, subject to the limitations described in “Risk Factors — Risks Relating to the Subsidiary Guarantees, the JV Subsidiary Guarantees, and the Collateral,” the Notes will be secured by a pledge of the Collateral as described below under the caption “— Security” and will:

• be entitled to a first priority lien on the Collateral (subject to any Permitted Liens and shared on a pari passu basis with (i) the lender of the Hang Seng Loan and (ii) any holders of Permitted Pari Passu Secured Indebtedness); and

The Notes will mature on January 14, 2016, unless earlier redeemed pursuant to the term thereof and the Indenture.

The Notes will bear interest at 10.5% per annum from the Original Issue Date or from the most recent interest payment date to which interest has been paid or duly provided for, payable semi-annually in arrears in the applicable U.S. Dollar Settlement Amount on January 14 and July 14 of each year (each an “Interest Payment Date”), commencing July 14, 2011. Interest on the Notes will be paid to Holders of record at the close of business on December 30 or June 29 immediately preceding an Interest Payment Date (each, a “Record Date”), notwithstanding any transfer, exchange or cancellation thereof after a Record Date and prior to the immediately following Interest Payment Date. Interest on the Notes will be calculated on the basis of a 360-day year comprised of twelve 30-day months.

Except as described under “Optional Redemption,” “Redemption for Taxation Reasons,” and otherwise provided in the Indenture, the Notes may not be redeemed prior to maturity (unless they have been repurchased by the Company).

In any case in which the date of the payment of principal of, premium on or interest on the Notes is not a Business Day in the relevant place of payment or in the place of business of the Paying Agent, then payment of such principal, premium or interest need not be made on such date but may be made on the next succeeding Business Day. Any payment made on such Business Day shall have the same force and effect as if made on the date on which such payment is due and no interest on the Notes shall accrue for the period after such date.

The Indenture allows additional Notes to be issued from time to time (the “Additional Notes”), subject to certain limitations described under “— Further Issues.” Unless the context requires otherwise, references to the “Notes” for all purposes of the Indenture and this “Description of the Notes” include any Additional Notes that are actually issued.

The Notes will be issued only in fully registered form, without coupons, in denominations of RMB1,000,000 and integral multiples of RMB10,000 in excess thereof. No service charge will be made for any registration of transfer or exchange of Notes, but the Company may require payment of a sum sufficient to cover any transfer tax or other similar governmental charge payable in connection therewith.

All payments on the Notes will be made in U.S. dollars by the Company at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York (which initially will be the corporate trust administration office of the Trustee, currently located at 60 Wall Street, Mailstop NYC60-2710, New York, New York, 10005, U.S.A.), and the Notes may be presented for registration of transfer or exchange at such office

— 191 — or agency; provided that, at the option of the Company, payment of interest may be made by check mailed to the address of the Holders as such address appears in the Note register. Interest payable on the Notes held through DTC will be available to DTC participants (as defined herein) on the Business Day following payment thereof.

The Subsidiary Guarantees

The initial Subsidiary Guarantors that will execute the Indenture on the Original Issue Date will consist of all of the Company’s Restricted Subsidiaries other than the Non-Guarantor Subsidiaries (as defined below). The Subsidiary Guarantors are holding companies that do not have significant operations.

None of the existing Restricted Subsidiaries organized under the laws of the PRC will provide a Subsidiary Guarantee or JV Subsidiary Guarantee on the Original Issue Date or at any time in the future and no future Restricted Subsidiaries organized under the laws of the PRC will provide a Subsidiary Guarantee or JV Subsidiary Guarantee at any time in the future (together, the “PRC Restricted Subsidiaries”). None of Pacific Prestige Property Limited, Pacific Prestige Ltd. and China Strait Investments Group Limited (the “Permanent Offshore Non-Guarantor Subsidiaries”) will provide a Subsidiary Guarantee or JV Subsidiary Guarantee on the Original Issue Date or at any time in the future. None of Good Concept Consultancy Limited, Polytic (China) Properties Investment Holdings Limited, Splendid Park Design Limited and Wai Cheong Enterprises Limited (the “Existing Offshore Non-Guarantor Subsidiaries”) will provide a Subsidiary Guarantee or JV Subsidiary Guarantee on the Original Issue Date. In addition, the Company may designate any Offshore Subsidiary as a Designated Offshore Non-Guarantor Subsidiary (each, a “Designated Offshore Non-Guarantor Subsidiary” and, together with the Existing Offshore Non-Guarantor Subsidiaries, the “Offshore Non-Guarantor Subsidiaries”), subject to the limitations described below under “Offshore Non-Guarantor Subsidiaries.” The Offshore Non-Guarantor Subsidiaries, together with the PRC Restricted Subsidiaries and Permanent Offshore Non-Guarantor Subsidiaries are referred to as the “Non-Guarantor Subsidiaries.”) Although the Indenture contains limitations on the amount of additional Indebtedness that Restricted Subsidiaries may incur, the amount of such additional Indebtedness could be substantial. In the event of a bankruptcy, liquidation or reorganization of any Non-Guarantor Subsidiary, the Non-Guarantor Subsidiaries will pay the holders of their debt and their trade creditors before they will be able to distribute any of their assets to the Company.

The Company will cause each of its future Restricted Subsidiaries (other than the Non-Guarantor Subsidiaries) promptly and in any event within 30 days of becoming a Restricted Subsidiary, to execute and deliver to the Trustee a supplemental indenture to the Indenture pursuant to which such Restricted Subsidiary will guarantee the payment of the Notes as either a Subsidiary Guarantor or a JV Subsidiary Guarantor.

As of the date of the Indenture, all of the Company’s Subsidiaries will be “Restricted Subsidiaries.” However, under the circumstances described below under the caption “— Certain Covenants — Designation of Restricted and Unrestricted Subsidiaries,” the Company will be permitted to designate certain of its Subsidiaries as “Unrestricted Subsidiaries.” The Company’s Unrestricted Subsidiaries will generally not be subject to the restrictive covenants in the Indenture. The Company’s Unrestricted Subsidiaries will not Guarantee the Notes.

Each Restricted Subsidiary that guarantees the Notes after the Original Issue Date other than a JV Subsidiary Guarantor is referred to as a “Future Subsidiary Guarantor” and upon execution of the applicable supplemental indenture to the Indenture will be a “Subsidiary Guarantor.”

— 192 — Offshore Non-Guarantor Subsidiaries

An Offshore Subsidiary that is a Restricted Subsidiary need not provide a Subsidiary Guarantee or JV Subsidiary Guarantee if it is designated by the Board of Directors as a Designated Offshore Non-Guarantor Subsidiary. The Board of Directors may designate any Offshore Subsidiary to be a Designated Offshore Non-Guarantor Subsidiary if:

(1) at any time of determination, the total Non-Guaranteed Portion would not exceed 10.0% of Total Assets; and

(2) such designation would not cause a Default.

The Board of Directors may at any time remove the designation of any Offshore Non-Guarantor Subsidiary (including, for the avoidance of doubt, any Existing Offshore Non-Guarantor Subsidiary) as such, and unless such Offshore Subsidiary is designated an Unrestricted Subsidiary, it will become a Subsidiary Guarantor or JV Subsidiary Guarantor and execute a supplemental indenture pursuant to which it will Guarantee the Notes under a Subsidiary Guarantee or a JV Subsidiary Guarantee in accordance with the provisions of the Indenture, within 30 days of the date on which its designation as an Offshore Non-Guarantor Subsidiary was removed. Simultaneously, the Company will cause all of the Capital Stock in such Offshore Subsidiary (unless it is the Subsidiary of a JV Subsidiary Guarantor) owned by the Company and its Restricted Subsidiaries to be pledged to secure the Notes, the Subsidiary Guarantees and any Permitted Pari Passu Secured Indebtedness, within 30 days of the date on which its designation as an Offshore Non-Guarantor Subsidiary was removed.

Any designation of an Offshore Subsidiary as an Offshore Non-Guarantor Subsidiary will be evidenced to the Trustee by filing with the Trustee a certified copy of a resolution of the Board of Directors giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the preceding conditions.

If, at any time, the Non-Guaranteed Portion exceeds 10.0% of Total Assets, the Company must remove the designation of one or more Offshore Non-Guarantor Subsidiaries and cause such Offshore Subsidiaries to provide a Subsidiary Guarantee or JV Subsidiary Guarantee such that the Non-Guaranteed Portion would not exceed 10.0% of Total Assets. This removal of designation must be made within 30 days from the date consolidated financial statements of the Company for the most recent fiscal quarter (which the Company must use its reasonable best efforts to compile on a timely basis) become available (which may be internal consolidated financial statements).

The JV Subsidiary Guarantees

In the case of a Restricted Subsidiary (i) that is organized in any jurisdiction other than the PRC, (ii) that is not an Offshore Non-Guarantor Subsidiary and (iii) in respect of which the Company or any of its Restricted Subsidiaries (x) is proposing to sell, whether through the sale of existing shares or the issuance of new shares, no less than 20.0% and no more than 49.9% of the Capital Stock of such Restricted Subsidiary or (y) is proposing to purchase no less than 50.1% and no more than 80.0% of the Capital Stock of an Independent Third Party and designate such entity as a Restricted Subsidiary, the Company may, concurrently with the consummation of such sale or purchase, provide a JV Subsidiary Guarantee instead of a Subsidiary Guarantee for (a) such Restricted Subsidiary and (b) the Restricted Subsidiaries of such Restricted Subsidiary that are organized in any jurisdiction other than the PRC, if the following conditions, in the case of both (a) and (b), are satisfied:

• as of the date of execution of the JV Subsidiary Guarantee, no document exists that is binding on the Company or any of the Restricted Subsidiaries that would have the effect of (a) prohibiting the Company or any of the Restricted Subsidiaries from

— 193 — providing such JV Subsidiary Guarantee or (b) requiring the Company or any of the Restricted Subsidiaries to deliver or keep in place a guarantee on terms that are more favorable to the recipients of such guarantee than the JV Subsidiary Guarantee;

• such sale or issuance of Capital Stock is made to, or such purchase of Capital Stock is purchased from, an Independent Third Party at a consideration that is not less than the appraised value of such Capital Stock by an independent appraisal firm of recognized international standing appointed by the Company;

• concurrently with providing the JV Subsidiary Guarantee, the Company shall or shall cause such JV Subsidiary Guarantor to deliver to the Trustee:

(i) (A) a duly executed JV Subsidiary Guarantee of such JV Subsidiary Guarantor (the “JV Subsidiary Guarantee”) and each Restricted Subsidiary of such JV Subsidiary Guarantor that is not organized under the laws of the PRC, and (B) a duly executed supplemental indenture to the Indenture pursuant to which such JV Subsidiary Guarantor will guarantee the payment of the Notes, each of which provides, among other things, that the aggregate claims of the Trustee under such JV Subsidiary Guarantee and all JV Subsidiary Guarantees provided by the Restricted Subsidiaries and shareholders of such JV Subsidiary Guarantor will be limited to the JV Entitlement Amount;

(ii) a duly executed Security Document that pledges in favor of the Shared Security Trustee the Capital Stock of such JV Subsidiary Guarantor held by the Company or any Subsidiary Guarantor, but not the Capital Stock of the direct or indirect Subsidiaries of such JV Subsidiary Guarantor;

(iii) an Officers’ Certificate certifying a copy of the Board Resolution to the effect that such JV Subsidiary Guarantee has been approved by a majority of the disinterested members of the Board of Directors; and

(iv) a legal opinion by a law firm of recognized international standing confirming that under New York law such JV Subsidiary Guarantees are valid, binding and enforceable against the JV Subsidiary Guarantors providing such JV Subsidiary Guarantees (subject to customary qualifications and assumptions).

As of September 30, 2010, the Company and its consolidated subsidiaries had total consolidated indebtedness of approximately RMB2,410.7 million (US$360.3 million) of which approximately RMB2,410.7 million (US$360.3 million) was secured.

As of September 30, 2010, the Non-Guarantor Subsidiaries had total liabilities of approximately RMB6,595.1 million (US$985.8 million) and the Non-Guarantor Subsidiaries had capital commitments of approximately RMB1,044.4 million (US$156.1 million) and contingent liabilities of approximately RMB1,164.1 million (US$174.0 million).

The Subsidiary Guarantee of each Subsidiary Guarantor:

• is a general obligation of such Subsidiary Guarantor;

• is effectively subordinated to secured obligations of such Subsidiary Guarantor, to the extent of the value of the assets serving as security therefor;

• is senior in right of payment to all future obligations of such Subsidiary Guarantor expressly subordinated in right of payment to such Subsidiary Guarantee; and

— 194 — • ranks at least pari passu with all other unsecured, unsubordinated Indebtedness of such Subsidiary Guarantor (subject to any priority rights of such unsubordinated Indebtedness pursuant to applicable law).

If any is provided, the JV Subsidiary Guarantee of each JV Subsidiary Guarantor:

• will be a general obligation of such JV Subsidiary Guarantor;

• will be enforceable only up to the JV Entitlement Amount;

• will be effectively subordinated to secured obligations of such JV Subsidiary Guarantor, to the extent of the value of the assets serving as security therefor;

• will be limited to the JV Entitlement Amount, and will be senior in right of payment to all future obligations of such JV Subsidiary Guarantor expressly subordinated in right of payment to such JV Subsidiary Guarantee; and

• will be limited to the JV Entitlement Amount, and will rank at least pari passu with all other unsecured, unsubordinated Indebtedness of such JV Subsidiary Guarantor (subject to any priority rights of such unsubordinated Indebtedness pursuant to applicable law).

In addition, subject to the limitations described in “Risk Factors — Risks Relating to the Subsidiary Guarantees, the JV Subsidiary Guarantees and the Collateral,” the Subsidiary Guarantee of each Subsidiary Guarantor Pledgor:

• will be entitled to a first ranking security interest in the Collateral (subject to any Permitted Liens and shared on a pari passu basis with any holders of Permitted Pari Passu Secured Indebtedness) pledged by such Subsidiary Guarantor Pledgor, as described below under the caption “— Security” and

The JV Subsidiary Guarantee of each JV Subsidiary Guarantor will not be secured.

Under the Indenture, and any supplemental indenture to the Indenture, as applicable, each of the Subsidiary Guarantors and JV Subsidiary Guarantors (if any) will jointly and severally guarantee the due and punctual payment of the principal of, premium, if any, and interest on, and all other amounts payable under, the Notes in the applicable U.S. Dollar Settlement Amount; provided that any JV Subsidiary Guarantee will be limited to the JV Entitlement Amount. The Subsidiary Guarantors and JV Subsidiary Guarantors will (1) agree that their respective obligations under the Subsidiary Guarantees and JV Subsidiary Guarantees, as the case may be, will be enforceable irrespective of any invalidity, irregularity or unenforceability of the Notes or the Indenture and (2) waive their right to require the Trustee to pursue or exhaust its legal or equitable remedies against the Company prior to exercising its rights under the Subsidiary Guarantees and the JV Subsidiary Guarantees, as the case may be. Moreover, if at any time any amount paid under a Note or the Indenture is rescinded or must otherwise be restored, the rights of the Holders under the Subsidiary Guarantees and the JV Subsidiary Guarantees, as the case may be, will be reinstated with respect to such payments as though such payment had not been made. All payments under the Subsidiary Guarantees and the JV Subsidiary Guarantees, as the case may be, are required to be made in U.S. dollars.

— 195 — Under the Indenture, and any supplemental indenture to the Indenture, as applicable,

• each Subsidiary Guarantee will be limited to an amount not to exceed the maximum amount that can be guaranteed by the applicable Subsidiary Guarantor without rendering the Subsidiary Guarantee, as it relates to such Subsidiary Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally; and

• each JV Subsidiary Guarantee will be limited to an amount which is the lower of (i) the JV Entitlement Amount and (ii) an amount not to exceed the maximum amount that can be guaranteed by the applicable JV Subsidiary Guarantor without rendering the JV Subsidiary Guarantee, as it relates to such JV Subsidiary Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally.

If a Subsidiary Guarantee or JV Subsidiary Guarantee were to be rendered voidable, it could be subordinated by a court to all other Indebtedness (including guarantees and other contingent liabilities) of the applicable Subsidiary Guarantor or JV Subsidiary Guarantor, as the case may be, and, depending on the amount of such Indebtedness, a Subsidiary Guarantor’s liability on its Subsidiary Guarantee or a JV Subsidiary Guarantor’s liability on its JV Subsidiary Guarantee, as the case may be, could in each case be reduced to zero.

The obligations of each Subsidiary Guarantor under its Subsidiary Guarantee and the enforceability of the Collateral granted in respect of the Subsidiary Guarantees of the Subsidiary Guarantor Pledgors may be limited, or possibly invalid, under applicable laws. Similarly, the obligations of each JV Subsidiary Guarantor under its JV Subsidiary Guarantee may be limited, or possibly invalid, under applicable laws. See “Risk Factors — Risks Relating to the Subsidiary Guarantees, the JV Subsidiary Guarantees and the Collateral — The Subsidiary Guarantees or JV Subsidiary Guarantees may be challenged under applicable insolvency or fraudulent transfer laws, which could impair the enforceability of the Subsidiary Guarantees or JV Subsidiary Guarantees.”

Release of the Subsidiary Guarantees and JV Subsidiary Guarantees A Subsidiary Guarantee given by a Subsidiary Guarantor and a JV Subsidiary Guarantee given by a JV Subsidiary Guarantor may be released in certain circumstances, including:

• upon repayment in full of the Notes;

• upon a defeasance as described under “— Defeasance — Defeasance and Discharge;”

• upon the designation by the Company of a Subsidiary Guarantor or a JV Subsidiary Guarantor, as the case may be, as an Unrestricted Subsidiary or an Offshore Non-Guarantor Subsidiary in compliance with the terms of the Indenture;

• upon the sale of a Subsidiary Guarantor or a JV Subsidiary Guarantor, as the case may be, in compliance with the terms of the Indenture (including the covenants under the captions “— Certain Covenants — Limitation on Sales and Issuances of Capital Stock in Restricted Subsidiaries,” “— Certain Covenants — Limitation on Asset Sales” and “— Consolidation, Merger and Sale of Assets”) resulting in such Subsidiary Guarantor or JV Subsidiary Guarantor, as the case may be, no longer being a Restricted Subsidiary, so long as (1) such Subsidiary Guarantor or JV Subsidiary Guarantor, as the case may be, is simultaneously released from its obligations in respect of any of the Company’s other Indebtedness or any Indebtedness of any other Restricted Subsidiary and (2) the proceeds from such sale or disposition are used for the purposes permitted or required by the Indenture; or

— 196 — • in the case of a Subsidiary Guarantee, upon the replacement of a Subsidiary Guarantee with a JV Subsidiary Guarantee.

No release of a Subsidiary Guarantor from its Subsidiary Guarantee or a JV Subsidiary Guarantor from its JV Subsidiary Guarantee shall be effective against the Trustee or the Holders until the Company has delivered to the Trustee an Officers’ Certificate stating that all requirements relating to such release have been complied with and such release is authorized and permitted by the terms of the Indenture.

Replacement of Subsidiary Guarantees with JV Subsidiary Guarantees A Subsidiary Guarantee given by a Subsidiary Guarantor may be released following the sale or issuance by the Company or any of its Restricted Subsidiaries of Capital Stock in (a) such Subsidiary Guarantor or (b) any other Subsidiary Guarantor that, directly or indirectly, owns a majority of the Capital Stock of such Subsidiary Guarantor, in each case where such sale or issuance, whether through the sale of existing shares or the issuance of new shares, is for no less than 20.0% and no more than 49.9% of the issued Capital Stock of the relevant Subsidiary Guarantor, provided that the following conditions are satisfied or complied with:

• as of the date of such proposed release, no document exists that is binding on the Company or any of the Restricted Subsidiaries that would have the effect of (a) prohibiting the Company or any of the Restricted Subsidiaries from releasing such Subsidiary Guarantee, (b) prohibiting the Company or any of the Restricted Subsidiaries from providing such JV Subsidiary Guarantee, or (c) requiring the Company or any of the Restricted Subsidiaries to deliver or keep in force a replacement guarantee on terms that are more favorable to the recipients of such guarantee than the JV Subsidiary Guarantee;

• such sale or issuance is made to an Independent Third Party at a consideration that is not less than the appraised value of such Capital Stock by an independent appraisal firm of recognized international standing appointed by the Company;

• concurrently with the release of such Subsidiary Guarantee, the Company shall or shall cause such JV Subsidiary Guarantor to deliver to the Trustee:

(i) (A) a duly executed JV Subsidiary Guarantee of such JV Subsidiary Guarantor and each Restricted Subsidiary of such JV Subsidiary Guarantor that is not organized under the laws of the PRC and (B) a duly executed supplemental indenture to the Indenture pursuant to which such JV Subsidiary Guarantor will guarantee the payment of the Notes, each of which provides, among other things, that the aggregate claims of the Trustee under such JV Subsidiary Guarantee and all JV Subsidiary Guarantees provided by the Restricted Subsidiaries and shareholders of such JV Subsidiary Guarantor will be limited to the JV Entitlement Amount;

(iii) an Officers’ Certificate certifying a copy of a Board Resolution to the effect that such JV Subsidiary Guarantee has been approved by a majority of the disinterested members of the Board of Directors; and

(iv) a legal opinion by a law firm of recognized international standing confirming that under New York law such JV Subsidiary Guarantee is valid, binding and enforceable against the JV Subsidiary Guarantor providing such JV Subsidiary Guarantee (subject to customary qualifications and assumptions).

— 197 — Notwithstanding the foregoing paragraph, any such sale or issuance of the Capital Stock of the relevant Subsidiary Guarantor (including where such sale results in the relevant Subsidiary Guarantor ceasing to be a Restricted Subsidiary) will need to comply with the other covenants set forth in the Indenture, including, without limitation, the “Limitation on Asset Sales” and “Limitation on Restricted Payments” covenants.

Any Net Cash Proceeds from the sale of such Capital Stock shall be applied by the Company (or any Restricted Subsidiary) in accordance with the “Limitation on Asset Sales” covenant.

Security The Company has agreed, for the benefit of the holders of the Notes, to pledge, or cause the initial Subsidiary Guarantor Pledgors to pledge, as the case may be, the Capital Stock of all of the initial Subsidiary Guarantors (the “Collateral”) owned by the Company or the Subsidiary Guarantor Pledgors on a first priority basis (subject to Permitted Liens and the pari passu sharing described below) on the Original Issue Date in order to secure the obligations of the Company under the Notes and the Indenture and of such initial Subsidiary Guarantor Pledgor under its Subsidiary Guarantee. The Company and the initial Subsidiary Guarantor Pledgors have agreed to:

(a) execute one or more Security Documents granting to the Shared Security Trustee, for the benefit of the Holders, first priority Liens (subject to any Permitted Liens and pari passu sharing as described below) (collectively, the “First Priority Lien”) on relevant Collateral, substantially in the form attached to the Indenture;

(b) take all requisite steps under applicable laws and undertake other customary procedures in connection with the granting and perfection (if relevant) of the First Priority Lien on relevant Collateral (subject to any Permitted Liens); and

(c) promptly deliver to the Trustee an Opinion of Counsel and Officers’ Certificate relating to each such pledge in form and substance as set forth in the Indenture.

The initial Subsidiary Guarantor Pledgors are Affluent Way International Limited, Ally Health Investments Limited, Bonder Global Investment Limited, Dragon Tale Investments Limited, Harbour Full Investments Limited, New Sky Investments Limited, Onwealth Investments Limited, Precise Profit Investments Limited, Sourceup International Limited, Sunsonic Investments Limited and Wealth Grow Investments Ltd.

None of the Capital Stock of the Non-Guarantor Subsidiaries will be pledged on the Original Issue Date or at any time in the future. In addition, none of the Capital Stock of any future Restricted Subsidiary that may be organized under the laws of the PRC will be pledged at any time in the future. If any JV Subsidiary Guarantor is established, the Capital Stock of such JV Subsidiary Guarantor owned by the Company or any Subsidiary Guarantor will be pledged to secure the obligations of the Company under the Notes and the Indenture, and of such Subsidiary Guarantor under its Subsidiary Guarantee, as the case may be, in the manner described above. However, none of the JV Subsidiary Guarantors will provide a Security Document pledging the Capital Stock of its direct or indirect Subsidiaries as security in favor of the Shared Security Trustee.

The Company has also agreed, for the benefit of the Holders, to pledge, or cause each Subsidiary Guarantor (other than a JV Subsidiary Guarantor, if any) to pledge, the Capital Stock owned by the Company or such Subsidiary Guarantor of any Person that becomes a Restricted Subsidiary (other than the Non-Guarantor Subsidiaries) after the Original Issue Date, immediately upon such Person becoming a Restricted Subsidiary, to secure the obligations of the Company under the Notes and the Indenture, and of such Subsidiary Guarantor under its Subsidiary Guarantee, in the manner described above.

— 198 — Each Subsidiary Guarantor that pledges capital stock of a Restricted Subsidiary after the Original Issue Date is referred to as a “Future Subsidiary Guarantor Pledgor” and, upon giving such pledge, will be a “Subsidiary Guarantor Pledgor.”

The Collateral will be shared on a pari passu basis by the holders of the Notes, the lender under the Hang Seng Loan and any holders of Permitted Pari Passu Secured Indebtedness pursuant to the Intercreditor Agreement (as defined below). As of the date of this offering memorandum, the aggregate principal amount outstanding under the Hang Seng Loan is HK$50 million. Accordingly, in the event of a default on the Notes, the Hang Seng Loan or any Permitted Pari Passu Secured Indebtedness and a foreclosure on the Collateral, any foreclosure proceeds would be shared by the Holders with holders of such other secured indebtedness in proportion to the outstanding amounts of each such class of indebtedness. The proceeds realizable from the Collateral securing the Notes and the Subsidiary Guarantees (as reduced by the obligations to share such proceeds pro rata with the other secured creditors under the Intercreditor Agreement) are unlikely to be sufficient to satisfy the Company’s and each of the Subsidiary Guarantor Pledgors’ obligations under the Notes and the Subsidiary Guarantees of the Subsidiary Guarantor Pledgors, and the Collateral securing the Notes and such Subsidiary Guarantee may be reduced or diluted under certain circumstances, including the issuance of Additional Notes and other Permitted Pari Passu Secured Indebtedness and the disposition of assets comprising the Collateral, subject to the terms of the Indenture. See “— Release of Security” and “Risk Factors — Risks Relating to the Subsidiary Guarantees, the JV Subsidiary Guarantees and the Collateral — The value of the Collateral will likely not be sufficient to satisfy our obligations under the Notes.”

No appraisals of the Collateral have been prepared in connection with this offering of the Notes. There can be no assurance that the proceeds of any sale of the Collateral, in whole or in part, pursuant to the Indenture and the Security Documents following an Event of Default, would be sufficient to satisfy amounts due on the Notes or the Subsidiary Guarantees of the Subsidiary Guarantor Pledgors. By its nature, some or all of the Collateral will be illiquid and may have no readily ascertainable market value. Accordingly, there can be no assurance that the Collateral would be sold in a timely manner or at all.

So long as no Payment Default has occurred and is continuing, and subject to the terms of the Security Documents and the Indenture, the Company and the Subsidiary Guarantor Pledgors, as the case may be, will be entitled to exercise any and all voting rights and to receive, retain and use any and all cash dividends, stock dividends, liquidating dividends, non-cash dividends, shares or stock resulting from stock splits or reclassifications, rights issues, warrants, options and other distributions (whether similar or dissimilar to the foregoing) in respect of Capital Stock constituting Collateral.

Permitted Pari Passu Secured Indebtedness

On or after the Original Issue Date, the Company and each Subsidiary Guarantor Pledgor may create Liens on the Collateral pari passu with the Lien for the benefit of the Holders to secure Indebtedness of the Company (including Additional Notes) and any Pari Passu Subsidiary Guarantee of a Subsidiary Guarantor Pledgor with respect to such Indebtedness (such Indebtedness of the Company and any such Pari Passu Subsidiary Guarantee, “Permitted Pari Passu Secured Indebtedness”); provided that (1) the Company or such Subsidiary Guarantor Pledgor was permitted to Incur such Indebtedness under the covenant under the caption “— Limitation on Indebtedness and Preferred Stock”, (2) the holders of such Indebtedness (other than Additional Notes) (or their representative) become party to the Intercreditor Agreement referred to below; and (3) the Company and such Subsidiary Guarantor Pledgor deliver to the Trustee an Opinion of Counsel and Officers’ Certificate with respect to corporate and collateral matters in connection with the Security Documents, in form and substance as set forth in the Security Documents. The Trustee or the Shared Security Trustee, as the case may be, will be permitted and authorized, without the consent of any

— 199 — Holder, to enter into any amendment to the Security Documents or the Indenture and take any other action necessary to permit the creation and registration of Liens on the Collateral to secure Permitted Pari Passu Secured Indebtedness in accordance with this paragraph and the terms of the Indenture (including, without limitation, the appointment of any collateral agent under the Intercreditor Agreement referred to below to hold the Collateral on behalf of the Holders and the holders of Permitted Pari Passu Secured Indebtedness).

Except for certain Permitted Liens and the Permitted Pari Passu Secured Indebtedness, the Company and its Restricted Subsidiaries will not be permitted to issue or Incur any other Indebtedness secured by all or any portion of the Collateral without the consent of each Holder of the Notes then outstanding.

Intercreditor Agreement

The Company, the initial Subsidiary Guarantor Pledgors, Deutsche Bank Trust Company Americas (the “Shared Security Trustee”), Hang Seng Bank Limited as the lender under the Hang Seng Loan and the Trustee, will enter into an intercreditor agreement (as such may be amended, supplemented or modified from time to time), the “Intercreditor Agreement”) on the Original Issue Date, pursuant to which Hang Seng Bank Limited and the Trustee agree, among other things, that (1) the Holders, the lender under the Hang Seng Loan and the holders of Permitted Pari Passu Secured Indebtedness shall share equal priority and pro rata entitlement in and to the Collateral, (2) the Collateral shall only be substituted or released and Liens shall only be granted on the Collateral to the extent permitted under both the Indenture and the documents governing other Permitted Pari Passu Secured Indebtedness; and (3) the parties thereto shall enforce their rights with respect to the Collateral and the Indebtedness secured thereby as described in “— Enforcement of Security” below.

In order to be treated as Permitted Pari Passu Secured Indebtedness, the holders of any future Indebtedness that the Company wishes to treat as Permitted Pari Passu Secured Indebtedness (other than Additional Notes), or their representative, must first accede to the Intercreditor Agreement to join the holders of such Permitted Pari Passu Secured Indebtedness or their representative as parties to the Intercreditor Agreement.

By accepting the Notes, each Holder shall be deemed to have consented to the execution of the Intercreditor Agreement, any amendments or modifications thereto, any accession thereto by any holder of Permitted Pari Passu Secured Indebtedness and any future intercreditor agreement required under the Indenture.

Enforcement of Security

The first priority Liens (subject to Permitted Liens) securing the Notes and the Subsidiary Guarantees of the Subsidiary Guarantor Pledgors, will be granted to the Shared Security Trustee, subject to the Intercreditor Agreement. The Shared Security Trustee will hold such liens and security interests in the Collateral granted pursuant to the Security Documents with sole authority as directed by the written instruction of any secured party to the Intercreditor Agreement to exercise remedies under the Security Documents in accordance with the terms of the Intercreditor Agreement. The Shared Security Trustee has agreed to act as secured party under the applicable Security Documents on behalf of the Trustee (for the benefit of the Holders) and on behalf of the other secured parties to the Intercreditor Agreement, to follow the instructions provided to it under the Intercreditor Agreement and the Security Documents and to carry out certain other duties.

The Indenture and/or the Security Documents principally provide that, at any time while the Notes are outstanding, the Shared Security Trustee has the right to manage, perform and enforce the terms of the Security Documents relating to the Collateral and to exercise and enforce all privileges, rights and remedies thereunder according to directions given by the

— 200 — secured parties to the Intercreditor Agreement, including to take or retake control or possession of such Collateral and to hold, prepare for sale, process, lease, dispose of or liquidate such Collateral, including, without limitation, following the occurrence of an Event of Default under the Indenture.

All payments received and all amounts held by the Shared Security Trustee in respect of the Collateral under the Security Documents will be applied as follows:

first, to the Shared Security Trustee for any unpaid fees, costs and expenses incurred under the Intercreditor Agreement or the Security Documents;

second, pro rata to each of the Trustee, the Lender and any agent or representative of any series of Permitted Pari Passu Secured Indebtedness and any attorney or agent appointed under the Shared Security Documents for any unpaid fees, costs and expenses under the applicable secured party document;

third, in or towards payment to the secured parties, on a pro rata basis, of the outstanding obligations under the Hang Seng Loan, the Notes and any Permitted Passu Secured Indebtedness and the principal, interest and premium thereon and for the benefit of the holders of each thereof in accordance with the terms of the relevant secured party document; and

fourth, any surplus remaining after such payments will be paid to the Company or the Subsidiary Guarantor Pledgors or to whomever may be lawfully entitled thereto.

The Shared Security Trustee may decline to foreclose on the Collateral or exercise remedies available if it does not receive indemnification and/or security to its satisfaction. In addition, the Shared Security Trustee’s ability to foreclose on the Collateral may be subject to lack of perfection, the consent of third parties, prior Liens and practical problems associated with the realization of the Shared Security Trustee’s Liens on the Collateral. Neither the Trustee, the Shared Security Trustee nor any of its officers, directors, employees, attorneys or agents will be responsible or liable for the existence, genuineness, value or protection of any Collateral securing the Notes, for the legality, enforceability, effectiveness or sufficiency of the Security Documents, for the creation, perfection, continuation, priority, sufficiency or protection of any of the Liens, or for any defect or deficiency as to any such matters, or for any failure to demand, collect, foreclose or realize upon or otherwise enforce any of the Liens or Security Documents or any delay in doing so.

The Security Documents provide that the Company and the Subsidiary Guarantor Pledgors will indemnify the Shared Security Trustee for all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind imposed against the Shared Security Trustee arising out of the Security Documents except to the extent that any of the foregoing are finally judicially determined to have resulted from the gross negligence or willful misconduct of the Shared Security Trustee.

This section, “— Enforcement of Security,” shall be subject to any amendments to the Security Documents or the Indenture to permit the creation of Liens on the Collateral to secure Permitted Pari Passu Secured Indebtedness in accordance with “— Permitted Pari Passu Secured Indebtedness” above.

Release of Security

The security created in respect of the Collateral granted under the Security Documents may be released in certain circumstances, including:

• upon repayment in full of the Notes;

— 201 — • upon defeasance and discharge of the Notes as provided below under the caption “— Defeasance — Defeasance and Discharge;”

• upon certain dispositions of the Collateral in compliance with the covenants under the captions “— Limitation on Sales and Issuances of Capital Stock in Restricted Subsidiaries” or “— Limitation on Asset Sales” or in accordance with the provision under the caption “— Consolidation, Merger and Sale of Assets;”

• with respect to security granted by a Subsidiary Guarantor Pledgor, upon the release of the Subsidiary Guarantee of such Subsidiary Guarantor Pledgor in accordance with the terms of the Indenture; and

• in connection with and upon execution of a JV Subsidiary Guarantee to replace a Subsidiary Guarantee, with respect to all pledges of Capital Stock granted by such JV Subsidiary Guarantor in its direct and indirect Subsidiaries, and in accordance with the terms of the Indenture.

Payments

All payments due under, and all claims arising out of or pursuant to, the Notes, any Subsidiary Guarantee, any JV Subsidiary Guarantee and/or the Indenture from or against the Company, any Subsidiary Guarantor or any JV Subsidiary Guarantor shall be payable and settled in U.S. dollars only, in the applicable U.S. Dollar Settlement Amount.

“U.S. Dollar Settlement Amount” means, in respect of a Renminbi-denominated amount that, but for this section “—Payments,” would be due under the Notes (including any Subsidiary Guarantee or JV Subsidiary Guarantee) or the Indenture in Renminbi, the Renminbi amount converted into U.S. dollars using the Spot Rate for the applicable Rate Calculation Date.

For the above purposes:

“Forex Business Day” means a day (other than a Saturday or Sunday) on which commercial banks are open for general business (including dealings in foreign exchange) in Beijing and in New York City.

“Independent Investment Bank” means an independent investment bank of international repute (acting as an expert) selected by the Company before the occurrence of an Event of Default that is continuing or by the Trustee after the occurrence of an Event of Default that is continuing.

“Rate Calculation Date” means the day which is two Forex Business Days before the due date of the relevant amount pursuant to the provisions of the Notes, any Subsidiary Guarantee, any JV Subsidiary Guarantee or the Indenture.

“Reference Dealers” means four leading dealers engaged in the foreign exchange market of Renminbi selected by the Company.

“Spot Rate,” for each Rate Calculation Date in respect of the U.S. Dollar Settlement Amount of a Renminbi-denominated amount, means a rate determined by the Company in good faith as follows (a) the RMB/US dollar official fixing rate, expressed as the amount of Renminbi per one U.S. dollar, reported by the People’s Bank of China which appears on the Reuters Screen “SAEC” Page (or any successor page) opposite the symbol “USDCNY” page (or any successor page) at or about 9:15 a.m. (Beijing time) on the Rate Calculation Date, (b) if no such rate is available under sub-paragraph (a), the spot rate determined by the Company in good faith on the basis of at least two quotations of the specified exchange rate for the Rate Calculation Date provided after requesting such rate from the Reference Dealers, as obtained in accordance with the provisions in the immediately following paragraph, and (c) if fewer than two quotations are provided under sub-paragraph (b), the exchange rate for the Rate Calculation Date as shall be determined by an Independent Investment Bank in good faith.

— 202 — In determining the spot rate under sub-paragraph (b), the Company will request the Beijing office of each of the Reference Dealers to provide a quotation for the conversion of Renminbi into U.S. dollars on the Rate Calculation Date. Such quotations will be requested at 10:00 a.m. (Beijing time) on such Rate Calculation Date or as soon as practicable after it is determined that the specified screen rate was not available.

If four quotations are provided, the rate for a Rate Calculation Date will be the arithmetic mean of the rates, without regard to the rates having the highest and lowest value. For this purpose, if more than one quotation has the same highest value or lowest value, then the rate of only one of such quotations shall be disregarded. If two or three quotations are provided, the rate for a Rate Calculation Date will be the arithmetic mean of the rates provided.

All notifications, opinions, determinations, certificates, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions of this section “—Payment,” whether by the Reference Dealers (or any of them), the Company or the Independent Investment Bank, will (in the absence of willful default, bad faith or manifest error) be binding on the Company, the Subsidiary Guarantors, the JV Subsidiary Guarantors, the Trustee, the Agents and all Holders.

Further Issues

Subject to the covenants described below and in accordance with the terms of the Indenture, the Company may, from time to time, without notice to or the consent of the Holders, create and issue Additional Notes having the same terms and conditions as the Notes (including the benefit of the Subsidiary Guarantees and JV Subsidiary Guarantees) in all respects (or in all respects except for the issue date, issue price and the date of the first payment of interest on them and, to the extent necessary, certain temporary securities law transfer restrictions) (a “Further Issue”) so that such Additional Notes may be consolidated and form a single class with the previously outstanding Notes and vote together as one class on all matters with respect to the Notes; provided that the issuance of any such Additional Notes shall then be permitted under the first paragraph of the “Limitation on Indebtedness and Preferred Stock” covenant described below; provided further that any Additional Notes that are consolidated and form a single class with the previously outstanding Notes must be fungible with the previously outstanding Notes for U.S. federal income tax purposes.

Optional Redemption

At any time and from time to time on or after January 14, 2014, the Company may at its option redeem the Notes, in whole or in part, at a redemption price equal to the U.S. Dollar Settlement Amount of the percentage of principal amount set forth below plus accrued and unpaid interest, if any, to (but not including) the redemption date if redeemed during the twelve-month period beginning on January 14 of each of the years indicated below.

Redemption Period Price 2014 ...... 105.250% 2015 and thereafter ...... 102.625%

At any time prior to January 14, 2014, the Company may at its option redeem the Notes, in whole but not in part, at a redemption price equal to the U.S. Dollar Settlement Amount of 100.0% of the principal amount of the Notes plus the Applicable Premium as of, and accrued and unpaid interest, if any, to (but not including) the redemption date. The Company will give not less than 30 days’ nor more than 60 days’ notice of any redemption.

— 203 — At any time and from time to time prior to January 14, 2014, the Company may redeem up to 35.0% of the aggregate principal amount of the Notes with the Net Cash Proceeds of one or more sales of Common Stock of the Company in an Equity Offering at a redemption price of the U.S. Dollar Settlement Amount of 110.5% of the principal amount of the Notes, plus accrued and unpaid interest, if any, to (but not including) the redemption date; provided that at least 65.0% of the aggregate principal amount of the Notes remain outstanding after each such redemption and any such redemption takes place within 60 days after the closing of the related Equity Offering.

Selection and Notice The Company will give not less than 30 days’ nor more than 60 days’ notice of any redemption to the Holders and the Trustee. If less than all of the Notes are to be redeemed at any time, the Trustee will select Notes for redemption as follows:

(1) if the Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Notes are listed; or

(2) if the Notes are not listed on any national securities exchange, on a pro rata basis, by lot or by such method as the Trustee deems fair and appropriate and is otherwise in accordance with the procedures of the depositary.

A Note of RMB1,000,000 in principal amount or less shall not be redeemed in part. If any Note is to be redeemed in part only, the notice of redemption relating to such Note will state the portion of the principal amount to be redeemed. A new Note in principal amount equal to the unredeemed portion will be issued upon cancellation of the original Note. On and after the redemption date, interest will cease to accrue on Notes or portions of them called for redemption.

Repurchase of Notes Upon a Change of Control Triggering Event Not later than 30 days following a Change of Control Triggering Event, the Company will make an Offer to Purchase all outstanding Notes (a “Change of Control Offer”) at a purchase price equal to the U.S. Dollar Settlement Amount of 101.0% of the principal amount thereof plus accrued and unpaid interest, if any, to (but not including) the Offer to Purchase Payment Date. The Company has agreed in the Indenture that it will timely repay all Indebtedness or obtain consents as necessary under, or terminate, agreements or instruments that would otherwise prohibit a Change of Control Offer required to be made pursuant to the Indenture. Notwithstanding this agreement of the Company, it is important to note that if the Company is unable to repay (or cause to be repaid) all of the Indebtedness, if any, that would prohibit repurchase of the Notes or is unable to obtain the requisite consents of the holders of such Indebtedness, or terminate any agreements or instruments that would otherwise prohibit a Change of Control Offer, it would continue to be prohibited from purchasing the Notes. In that case, the Company’s failure to purchase tendered Notes would constitute an Event of Default under the Indenture. Certain of the events constituting a Change of Control Triggering Event under the Notes will also constitute an event of default under certain debt instruments of the Company and its Subsidiaries. Future debt of the Company may also (1) prohibit the Company from purchasing Notes in the event of a Change of Control Triggering Event; (2) provide that a Change of Control Triggering Event is a default; or (3) require repurchase of such debt upon a Change of Control Triggering Event. Moreover, the exercise by the Holders of their right to require the Company to purchase the Notes could cause a default under other Indebtedness, even if the Change of Control Triggering Event itself does not, due to the financial effect of the purchase on the Company. The Company’s ability to pay cash to the Holders following the occurrence

— 204 — of a Change of Control Triggering Event may be limited by the Company’s, the Subsidiary Guarantor’s and the JV Subsidiary Guarantor’s then-existing financial resources. There can be no assurance that sufficient funds will be available when necessary to make the required purchase of the Notes. See “Risk Factors — Risks Relating to the Notes — We may not be able to repurchase the Notes upon a Change of Control Triggering Event.” The phrase “all or substantially all”, as used with respect to the assets of the Company in the definition of “Change of Control,” will likely be interpreted under applicable law of the relevant jurisdictions and will be dependent upon particular facts and circumstances. As a result, there may be a degree of uncertainty in ascertaining whether a sale or transfer of “all or substantially all” the assets of the Company has occurred. Except as described above with respect to a Change of Control Triggering Event, the Indenture does not contain provisions that permit the Holders to require that the Company purchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction.

No Mandatory Redemption or Sinking Fund There will be no mandatory redemption or sinking fund payments for the Notes.

Additional Amounts All payments of principal, premium (if any) and interest on the Notes or under the Subsidiary Guarantees and JV Subsidiary Guarantees will be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or within any jurisdiction in which the Company, a Surviving Person (as defined under the caption “— Consolidation, Merger and Sale of Assets”) or an applicable Subsidiary Guarantor or JV Subsidiary Guarantor is organized or resident for tax purposes (or any political subdivision or taxing authority thereof or therein), including, without limitation, if applicable, the PRC (each, as applicable, a “Relevant Taxing Jurisdiction”), or any jurisdiction through which payments are made (together with each Relevant Taxing Jurisdiction, a “Relevant Jurisdiction”), unless such withholding or deduction is required by law or by regulation or governmental policy having the force of law. In the event that any such withholding or deduction is so required, the Company, a Surviving Person or applicable Subsidiary Guarantor or JV Subsidiary Guarantor, as the case may be, will pay such additional amounts (“Additional Amounts”) as will result in receipt by the Holder of each Note, the Subsidiary Guarantees or the JV Subsidiary Guarantees, as the case may be, of such amounts as would have been received by such Holder had no such withholding or deduction been required, except that no Additional Amounts shall be payable:

(1) for or on account of:

(a) any tax, duty, assessment or other governmental charge that would not have been imposed but for:

(i) the existence of any present or former connection between the Holder or beneficial owner of such Note, and the Relevant Jurisdiction other than merely holding such Note or the receipt of payments thereunder or under a Subsidiary Guarantee or JV Subsidiary Guarantee, including, without limitation, such Holder or beneficial owner being or having been a national, domiciliary or resident of such Relevant Jurisdiction or treated as a resident thereof or being or having been physically present or engaged in a trade or business therein or having or having had a permanent establishment therein;

(ii) the presentation of such Note (in cases in which presentation is required) more than 30 days after the later of the date on which the payment of the

— 205 — principal of, premium, if any, and interest on, such Note became due and payable pursuant to the terms thereof or was made or duly provided for, except to the extent that the Holder thereof would have been entitled to such Additional Amounts if it had presented such Note for payment on any date within such 30-day period;

(iii) the failure of the Holder or beneficial owner to comply with a timely request of the Company, a Surviving Person, Subsidiary Guarantor or JV Subsidiary Guarantor addressed to the Holder or beneficial owner, as the case may be, to provide information concerning such Holder’s or beneficial owner’s nationality, residence, identity or connection with any Relevant Jurisdiction, if and to the extent that due and timely compliance with such request would have reduced or eliminated any withholding or deduction as to which Additional Amounts would have otherwise been payable to such Holder; or

(iv) the presentation of such Note (in cases in which presentation is required) for payment in the Relevant Jurisdiction, unless such Note could not have been presented for payment elsewhere;

(b) any estate, inheritance, gift, sale, transfer, personal property or similar tax, assessment or other governmental charge;

(c) any withholding or deduction that is imposed or levied on a payment to an individual and is required to be made pursuant to European Council Directive 2003/48/EC or any other Directive implementing the conclusions of the ECOFIN Council meeting of November 26-27, 2000 on the taxation of savings income or any law implementing or complying with, or introduced in order to conform to, such Directives; or

(d) any combination of taxes, duties, assessments or other governmental charges referred to in the preceding clauses (a), (b) and (c); or

(2) to a Holder that is a fiduciary, partnership or person other than the sole beneficial owner of any payment to the extent that such payment would be required to be included in the income under the laws of a Relevant Jurisdiction, for tax purposes, of a beneficiary or settlor with respect to the fiduciary, or a member of that partnership or a beneficial owner who would not have been entitled to such Additional Amounts had that beneficiary, settlor, partner or beneficial owner been the Holder thereof.

Whenever there is mentioned in any context the payment of principal of, and any premium or interest on, any Note or under any Subsidiary Guarantee or JV Subsidiary Guarantee, such mention shall be deemed to include payment of Additional Amounts provided for in the Indenture to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof.

— 206 — Redemption for Taxation Reasons

The Notes may be redeemed, at the option of the Company or a Surviving Person with respect to the Company, as a whole but not in part, upon giving not less than 30 days’ nor more than 60 days’ notice to the Holders and the Trustee (which notice shall be irrevocable), at a redemption price equal to the U.S. Dollar Settlement Amount of 100.0% of the principal amount thereof, together with accrued and unpaid interest (including any Additional Amounts), if any, to the date fixed by the Company or the Surviving Person, as the case may be, for redemption (the “Tax Redemption Date”) if, as a result of:

(1) any change in, or amendment to, the laws (or any regulations or rulings promulgated thereunder) of a Relevant Taxing Jurisdiction affecting taxation; or

(2) any change in the existing official position or the stating of an official position regarding the application or interpretation of such laws, regulations or rulings (including a holding, judgment or order by a court of competent jurisdiction), which change or amendment is proposed and becomes effective (i) with respect to the Company or any initial Subsidiary Guarantor, on or after the Original Issue Date, or (ii) with respect to any Future Subsidiary Guarantor, JV Subsidiary Guarantor or Surviving Person, on or after the date such Future Subsidiary Guarantor, JV Subsidiary Guarantor or Surviving Person becomes a Subsidiary Guarantor, JV Subsidiary Guarantor or Surviving Person, with respect to any payment due or to become due under the Notes or the Indenture, the Company, a Surviving Person or a Subsidiary Guarantor or JV Subsidiary Guarantor, as the case may be, is, or on the next Interest Payment Date would be, required to pay Additional Amounts, and such requirement cannot be avoided by the taking of reasonable measures by the Company, a Surviving Person, a Subsidiary Guarantor or JV Subsidiary Guarantor, as the case may be; provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Company, a Surviving Person, a Subsidiary Guarantor or a JV Subsidiary Guarantor, as the case may be, would be obligated to pay such Additional Amounts if a payment in respect of the Notes were then due.

Prior to the mailing of any notice of redemption of the Notes pursuant to the foregoing, the Company, a Surviving Person, a Subsidiary Guarantor or a JV Subsidiary Guarantor, as the case may be, will deliver to the Trustee at least 30 days but not more than 60 days before a redemption date:

(1) an Officers’ Certificate stating that such change or amendment referred to in the prior paragraph has occurred, describing the facts related thereto and stating that such requirement cannot be avoided by the Company, a Surviving Person or a Subsidiary Guarantor or JV Subsidiary Guarantor, as the case may be, taking reasonable measures available to it; and

(2) an Opinion of Counsel or an opinion of a tax consultant, in either case of recognized standing with respect to tax matters of the Relevant Taxing Jurisdiction, stating that the requirement to pay such Additional Amounts results from such change or amendment referred to in the prior paragraph.

The Trustee shall accept such certificate and opinion as sufficient evidence of the satisfaction of the conditions precedent described above, in which event it shall be conclusive and binding on the Holders.

Any Notes that are redeemed will be cancelled.

— 207 — Certain Covenants Set forth below are summaries of certain covenants contained in the Indenture.

Limitation on Indebtedness and Preferred Stock

(1) The Company will not, and will not permit any Restricted Subsidiary to, Incur any Indebtedness (including Acquired Indebtedness), and the Company will not permit any Restricted Subsidiary to issue Preferred Stock, provided that the Company may Incur Indebtedness (including Acquired Indebtedness) and any Restricted Subsidiary may Incur Permitted Subsidiary Indebtedness if, after giving effect to the Incurrence of such Indebtedness and the receipt and application of the proceeds therefrom, (x) no Default has occurred and is continuing and (y) the Fixed Charge Coverage Ratio would be not less than 3.0 to 1.0 with respect to any Incurrence of Indebtedness on or prior to December 31, 2012 and 3.25 to 1.0 with respect to any Incurrence of Indebtedness thereafter. Notwithstanding the foregoing, the Company will not permit any Restricted Subsidiary to Incur any Disqualified Stock (other than Disqualified Stock held by the Company or a Subsidiary Guarantor, so long as it is so held).

(2) Notwithstanding the foregoing, the Company and, to the extent provided below, any Restricted Subsidiary may Incur each and all of the following (“Permitted Indebtedness”):

(a) Indebtedness under the Notes (excluding any Additional Notes and any Permitted Pari Passu Secured Indebtedness of the Company) and each Subsidiary Guarantee and JV Subsidiary Guarantee;

(b) any Pari Passu Subsidiary Guarantees by any Subsidiary Guarantor or any JV Subsidiary Guarantor;

(c) Indebtedness of the Company or any Restricted Subsidiary outstanding on the Original Issue Date excluding Indebtedness permitted under clause (d); provided that such Indebtedness of Restricted Subsidiaries shall be included in the calculation of Permitted Subsidiary Indebtedness;

(d) Indebtedness of the Company or any Restricted Subsidiary owed to the Company or any Restricted Subsidiary; provided that (i) any event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of such Indebtedness (other than to the Company or any Restricted Subsidiary) shall be deemed, in each case, to constitute an Incurrence of such Indebtedness not permitted by this clause (d) and (ii) if the Company is the obligor on such Indebtedness, such Indebtedness must be unsecured and expressly be subordinated in right of payment to the Notes, and if a Subsidiary Guarantor or a JV Subsidiary Guarantor is the obligor on such Indebtedness and the Company is not the obligee, such Indebtedness must be unsecured and expressly be subordinated in right of payment to the Subsidiary Guarantee of such Subsidiary Guarantor or the JV Subsidiary Guarantee of such JV Subsidiary Guarantor, as the case may be;

(e) Indebtedness (“Permitted Refinancing Indebtedness”) issued in exchange for, or the net proceeds of which are used to refinance or refund, replace, exchange, renew, repay, defease, discharge or extend (collectively, “refinance” and “refinances” and “refinanced” shall have a correlative meaning), then outstanding Indebtedness Incurred under the immediately preceding paragraph (1) or clauses (a), (b), (c), (h), (p), (q), (r) or (s) of this paragraph (2) and any refinancings thereof in an amount not to exceed the amount so refinanced or

— 208 — refunded (plus premiums, accrued interest, fees and expenses); provided that (i) Indebtedness the proceeds of which are used to refinance or refund the Notes or Indebtedness that is pari passu with, or subordinated in right of payment to, the Notes or a Subsidiary Guarantee or a JV Subsidiary Guarantee shall only be permitted under this clause (e) if (A) in case the Notes are refinanced in part or the Indebtedness to be refinanced is pari passu with the Notes or a Subsidiary Guarantee or a JV Subsidiary Guarantee, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is outstanding, is expressly made pari passu with, or subordinate in right of payment to, the remaining Notes or such Subsidiary Guarantee or such JV Subsidiary Guarantee, as the case may be, or (B) in case the Indebtedness to be refinanced is subordinated in right of payment to the Notes or a Subsidiary Guarantee or a JV Subsidiary Guarantee, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is issued or remains outstanding, is expressly made subordinate in right of payment to the Notes or such Subsidiary Guarantee or such JV Subsidiary Guarantee, as the case may be, at least to the extent that the Indebtedness to be refinanced is subordinated to the Notes or such Subsidiary Guarantee or such JV Subsidiary Guarantee, (ii) such new Indebtedness, determined as of the date of Incurrence of such new Indebtedness, does not mature prior to the Stated Maturity of the Indebtedness to be refinanced or refunded, and the Average Life of such new Indebtedness is at least equal to the remaining Average Life of the Indebtedness to be refinanced or refunded, (iii) in no event may Indebtedness of the Company, any Subsidiary Guarantor or any JV Subsidiary Guarantor be refinanced pursuant to this clause by means of any Indebtedness of any Restricted Subsidiary that is not a Subsidiary Guarantor or a JV Subsidiary Guarantor, and (iv) in no event may Indebtedness of the Company or any Subsidiary Guarantor be refinanced pursuant to this clause by means of any Indebtedness of any JV Subsidiary Guarantor;

(f) Indebtedness Incurred by the Company or any Restricted Subsidiary pursuant to Hedging Obligations entered into in the ordinary course of business and designed solely to protect the Company or any of its Restricted Subsidiaries from fluctuations in interest rates, currencies or the price of commodities and not for speculation;

(g) Pre-Registration Mortgage Guarantees by the Company or any Restricted Subsidiary;

(h) Indebtedness Incurred by the Company or any Restricted Subsidiary for the purpose of financing (x) all or any part of the purchase price of assets, real or personal property (including the lease purchase price of land use rights) or equipment to be used in the ordinary course of business by the Company or a Restricted Subsidiary in the Permitted Business, including any such purchase through the acquisition of Capital Stock of any Person that owns such real or personal property or equipment which will, upon acquisition, become a Restricted Subsidiary, or (y) all or any part of the purchase price or the cost of development, construction or improvement of real or personal property (including the lease purchase price of land use rights) or equipment to be used in the ordinary course of business by the Company or such Restricted Subsidiary in a Permitted Business; provided that in the case of clauses (x) and (y), (A) the aggregate principal amount of such Indebtedness shall not exceed such purchase price or cost, (B) such Indebtedness shall be Incurred no later than 180 days after the acquisition of such property or completion of such development, construction or improvement and (C) on the date of the

— 209 — Incurrence of such Indebtedness and after giving effect thereto, the sum of (1) the aggregate principal amount outstanding of all such Indebtedness permitted by this clause (h) (together with refinancings thereof, but excluding any Contractor Guarantee Incurred under this clause (h) to the extent the amount of such Contractor Guarantee is otherwise reflected in such aggregate principal amount) plus (2) the aggregate principal amount outstanding of all Indebtedness Incurred under clauses (p), (q) or (r) below (together with any refinancings thereof, but excluding any Contractor Guarantee or Guarantees Incurred under clauses (p), (q) or (r) to the extent the amount of such Contractor Guarantee or Guarantees Incurred are reflected in such aggregate principal amount) does not exceed an amount equal to 20.0% of Total Assets;

(i) Indebtedness Incurred by the Company or any Restricted Subsidiary constituting reimbursement obligations with respect to workers’ compensation claims or self-insurance obligations or bid, performance or surety bonds (in each case other than for an obligation for borrowed money);

(j) Indebtedness Incurred by the Company or any Restricted Subsidiary constituting reimbursement obligations with respect to letters of credit or trade guarantees issued in the ordinary course of business to the extent that such letters of credit or trade guarantees are not drawn upon or, if drawn upon, to the extent such drawing is reimbursed no later than the 30 days following receipt by the Company or such Restricted Subsidiary of a demand for reimbursement;

(k) Indebtedness arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from Guarantees or letters of credit, surety bonds or performance bonds securing any obligation of the Company or any Restricted Subsidiary pursuant to such agreements, in any case, Incurred in connection with the disposition of any business, assets or Restricted Subsidiary, other than Guarantees of Indebtedness Incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiary for the purpose of financing such acquisition; provided that the maximum aggregate liability in respect of all such Indebtedness in the nature of such Guarantee shall at no time exceed the gross proceeds actually received from the sale of such business, assets or Restricted Subsidiary;

(l) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business provided, however, that such Indebtedness is extinguished within five Business Days of Incurrence;

(m) (i) Guarantees by the Company or any Subsidiary Guarantor of Indebtedness of the Company or any Restricted Subsidiary that was permitted to be Incurred by another provision of this covenant or, (ii) Guarantees by any Restricted Subsidiary of Indebtedness of another Restricted Subsidiary that was permitted to be Incurred under clause (f) or (h) above or clause (n) below, (iii) Guarantees by any PRC Restricted Subsidiary of Indebtedness of another PRC Restricted Subsidiary that was permitted to be Incurred by another provision of this covenant, or (iv) Guarantees by any JV Subsidiary Guarantor of Indebtedness of any other JV Subsidiary Guarantor that is a direct or indirect Subsidiary or parent of such JV Subsidiary Guarantor, which Indebtedness was permitted to be Incurred by another provision of this covenant, or;

— 210 — (n) Indebtedness of the Company or any Restricted Subsidiary maturing within one year; provided that the aggregate principal amount of Indebtedness permitted by this clause (n) at any time outstanding does not exceed US$30.0 million (or the Dollar Equivalent thereof);

(o) Indebtedness of the Company or any Restricted Subsidiary constituting an obligation to pay the deferred purchase price of Capital Stock in a Restricted Subsidiary pursuant to a Staged Acquisition Agreement, to the extent that such deferred purchase price is paid within 18 months after the date the Company or such Restricted Subsidiary enters into such Staged Acquisition Agreement;

(p) Indebtedness Incurred by the Company or any Restricted Subsidiary arising from any Investment made by a Trust Company Investor in a PRC Project Company; provided that on the date of the Incurrence of such Indebtedness and after giving effect thereto, the sum of (1) the aggregate principal amount outstanding of all such Indebtedness Incurred pursuant to this clause (p) (together with any refinancings thereof, but excluding any Contractor Guarantees or Guarantees Incurred under this clause (p) to the extent the amount of such Contractor Guarantees or Guarantees is otherwise reflected in such aggregate principal amount) plus (2) the aggregate principal amount outstanding of all such Indebtedness Incurred under clause (h) above or (q) or (r) below (together with any refinancings thereof, but excluding any Contractor Guarantees or Guarantees Incurred under clauses (h) above or (q) or (r) below to the extent the amount of such Contractor Guarantees or Guarantees is otherwise reflected in such aggregate principal amount), does not exceed an amount equal to 20.0% of Total Assets;

(q) Bank Deposit Secured Indebtedness Incurred by the Company or any Restricted Subsidiary; provided that on the date of the Incurrence of such Indebtedness and after giving effect thereto, the sum of (1) the aggregate principal amount outstanding of all such Indebtedness Incurred pursuant to this clause (q) (together with any refinancings thereof, but excluding any Guarantees Incurred under this clause (q) to the extent the amount of such Guarantees is otherwise reflected in such aggregate principal amount), plus (2) the aggregate principal amount outstanding of all such Indebtedness Incurred pursuant to clauses (h) or (p) above or (r) below (together with any refinancings thereof, but excluding any Contractor Guarantees or Guarantees Incurred under clauses (h), (p) or (r) to the extent the amount of such Contractor Guarantees or Guarantees is otherwise reflected in such aggregate principal amount), does not exceed an amount equal to 20.0% of Total Assets;

(r) Indebtedness Incurred by any PRC Restricted Subsidiary which is secured by Investment Properties, and Guarantees thereof by the Company or any PRC Restricted Subsidiary; provided that on the date of the Incurrence of such Indebtedness and after giving effect thereto, the sum of (1) the aggregate principal amount outstanding of all such Indebtedness Incurred pursuant to this clause (r) (together with any refinancings thereof, but excluding any Guarantees Incurred under this clause (r) to the extent the amount of such Guarantees is otherwise reflected in such aggregate principal amount), plus (2) the aggregate principal amount outstanding of all such Indebtedness Incurred pursuant to clauses (h), (p) or (q) above (together with any refinancings thereof, but excluding any Contractor Guarantees or Guarantees Incurred under clauses (h), (p) or (q) to the extent the amount of such Contractor Guarantees or Guarantees is otherwise reflected in such aggregate principal amount), does not exceed an amount equal to 20.0% of Total Assets;

—211— (s) Indebtedness of the Company or any Restricted Subsidiary in an aggregate principal amount outstanding at any time (together with refinancings thereof) not to exceed US$20.0 million (or the Dollar Equivalent thereof);

(t) Indebtedness Incurred by a Finance Subsidiary that is guaranteed by the Company to the extent the Company is permitted to Incur such Indebtedness under this covenant; and

(u) Indebtedness Incurred by the Company or a Restricted Subsidiary constituting a Subordinated Shareholder Loan.

(3) For purposes of determining compliance with this “Limitation on Indebtedness and Preferred Stock” covenant, in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described above, including under the proviso in the first paragraph of part (1), the Company, in its sole discretion, shall classify, and from time to time may reclassify, such item of Indebtedness and only be required to include the amount of such Indebtedness as one of such types.

(4) Notwithstanding any other provision of the Indenture, the maximum amount of Indebtedness that may be Incurred pursuant to this covenant will not be deemed to be exceeded with respect to any outstanding Indebtedness due solely to the result of fluctuations in the exchange rates of currencies.

Limitation on Restricted Payments

The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly (the payments or any other actions described in clauses (1) through (4) below being collectively referred to as “Restricted Payments”):

(1) declare or pay any dividend or make any distribution on or with respect to the Company’s or any of its Restricted Subsidiaries’ Capital Stock (other than dividends or distributions payable solely in shares of the Company’s or any of its Restricted Subsidiaries’ Capital Stock (other than Disqualified Stock or Preferred Stock) or in options, warrants or other rights to acquire shares of such Capital Stock) held by Persons other than the Company or any Wholly Owned Restricted Subsidiary;

(2) purchase, call for redemption or redeem, retire or otherwise acquire for value any shares of Capital Stock of the Company or any Restricted Subsidiary (including options, warrants or other rights to acquire such shares of Capital Stock) or any direct or indirect parent of the Company held by any Person other than the Company or any Wholly Owned Restricted Subsidiary other than the purchase of Capital Stock of a Restricted Subsidiary pursuant to a Staged Acquisition Agreement permitted to be entered into under the Indenture;

(3) make any voluntary or optional principal payment, or voluntary or optional redemption, repurchase, defeasance, or other acquisition or retirement for value, of Indebtedness that is subordinated in right of payment to the Notes or any of the Subsidiary Guarantees or any of the JV Subsidiary Guarantees (excluding any intercompany Indebtedness between or among the Company and any of its Wholly Owned Restricted Subsidiaries); or

— 212 — (4) make any Investment, other than a Permitted Investment;

if, at the time of, and after giving effect to, the proposed Restricted Payment:

(a) a Default has occurred and is continuing or would occur as a result of such Restricted Payment;

(b) the Company could not Incur at least US$1.00 of Indebtedness under the proviso in the first paragraph of part (1) of the covenant under the caption “— Limitation on Indebtedness and Preferred Stock;” or

(c) such Restricted Payment, together with the aggregate amount of all Restricted Payments made by the Company and its Restricted Subsidiaries after the Original Issue Date, shall exceed the sum of:

(i) 50.0% of the aggregate amount of the Consolidated Net Income of the Company (or, if the Consolidated Net Income is a loss, minus 100.0% of the amount of such loss) accrued on a cumulative basis during the period (taken as one accounting period) beginning on the first day of the fiscal quarter during which the Notes are issued and ending on the last day of the Company’s most recently ended fiscal quarter for which consolidated financial statements of the Company (which the Company shall use its reasonable best efforts to compile in a timely manner) are available (which may include internal consolidated financial statements); plus

(ii) 100.0% of the aggregate Net Cash Proceeds received by the Company after the Original Issue Date as a capital contribution to its common equity or from the issuance and sale of its Capital Stock (other than Disqualified Stock) to a Person who is not a Subsidiary of the Company, including any such Net Cash Proceeds received upon (A) the conversion of any Indebtedness (other than Subordinated Indebtedness) of the Company into Capital Stock (other than Disqualified Stock) of the Company, or (B) the exercise by a Person who is not a Subsidiary of the Company of any options, warrants or other rights to acquire Capital Stock of the Company (other than Disqualified Stock) in each case excluding the amount of any such Net Cash Proceeds used to redeem, repurchase, defease or otherwise acquire or retire for value any Subordinated Indebtedness or Capital Stock of the Company; plus

(iii) the amount by which Indebtedness of the Company or any of its Restricted Subsidiaries is reduced on the Company’s consolidated balance sheet upon the conversion or exchange (other than by a Subsidiary of the Company) subsequent to the Original Issue Date of any Indebtedness of the Company or any of its Restricted Subsidiaries convertible or exchangeable into Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash, or the Fair Market Value of any other property, distributed by the Company upon such conversion or exchange); plus

(iv) an amount equal to the net reduction in Investments (other than reductions in Permitted Investments) that were made after the Original Issue Date in any Person resulting from (A) payments of interest on Indebtedness, dividends or repayments of loans or advances by such Person, in each case to the Company or any Restricted Subsidiary (except, in each case, to the extent any such payment or proceeds are included in the calculation of Consolidated Net Income) after the Original Issue Date, (B) the

— 213 — unconditional release of a Guarantee provided by the Company or a Restricted Subsidiary after the Original Issue Date of an obligation of another Person, (C) to the extent that an Investment made after the Original Issue Date was, after such date, or is sold or otherwise liquidated or repaid for cash, the lesser of (x) cash return of capital with respect to such Investment (less the cost of disposition, if any) and (y) the initial amount of such Investment, or (D) from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries, not to exceed, in each case, the amount of Investments (other than Permitted Investments) made by the Company or a Restricted Subsidiary after the Original Issue Date in any such Person; plus

(v) US$25.0 million (or the Dollar Equivalent thereof).

The foregoing provision shall not be violated by reason of:

(1) the payment of any dividend or redemption of any Capital Stock within 60 days after the related date of declaration or call for redemption if, at said date of declaration or call for redemption, such payment or redemption would comply with the preceding paragraph;

(2) the redemption, repurchase, defeasance or other acquisition or retirement for value of Subordinated Indebtedness of the Company or any of the Subsidiary Guarantors or JV Subsidiary Guarantors with the Net Cash Proceeds of, or in exchange for, a substantially concurrent Incurrence of Permitted Refinancing Indebtedness;

(3) the redemption, repurchase or other acquisition of Capital Stock of the Company or any Subsidiary Guarantor or JV Subsidiary Guarantor (or options, warrants or other rights to acquire such Capital Stock) in exchange for, or out of the Net Cash Proceeds of a substantially concurrent capital contribution or a sale (other than to a Subsidiary of the Company) of, shares of the Capital Stock (other than Disqualified Stock) of the Company or any Subsidiary Guarantor (or options, warrants or other rights to acquire such Capital Stock); provided that the amount of any such Net Cash Proceeds that are utilized for any such Restricted Payment will be excluded from clause (c)(ii) of the preceding paragraph, provided however that any item that has been excluded pursuant to clause (c)(ii) of the preceding paragraph will not be excluded again as a result of the proviso in this clause (3);

(4) the redemption, repurchase, defeasance or other acquisition or retirement for value of Subordinated Indebtedness of the Company or any of the Subsidiary Guarantors or JV Subsidiary Guarantors in exchange for, or out of the Net Cash Proceeds of, a substantially concurrent capital contribution or sale (other than to a Subsidiary of the Company) of, shares of Capital Stock (other than Disqualified Stock) of the Company or any of the Subsidiary Guarantors or JV Subsidiary Guarantors (or options, warrants or other rights to acquire such Capital Stock); provided that the amount of any such Net Cash Proceeds that are utilized for any such Restricted Payment will be excluded from clause (c)(ii) of the preceding paragraph, provided however that any item that has been excluded pursuant to clause (c)(ii) of the preceding paragraph will not be excluded again as a result of the proviso in this clause (4);

(5) the payment of any dividends or distributions declared, paid or made by a Restricted Subsidiary payable, on a pro rata basis or on a basis more favorable to the Company, to all holders of any class of Capital Stock of such Restricted Subsidiary, a majority of which is held, directly or indirectly through Restricted Subsidiaries, by the Company;

— 214 — (6) dividends paid to, or the purchase of Capital Stock of any PRC Project Company held by, any Trust Company Investor in respect of any Indebtedness outstanding on the Original Issue Date or permitted to be Incurred under paragraph (2)(p) of the “Limitation on Indebtedness and Preferred Stock” covenant;

(7) the declaration and payment of dividends by the Company in an aggregate amount not to exceed 25.0% of the profit for the year attributable to owners of the parent (or the Dollar Equivalent thereof) with respect to the fiscal year ended December 31, 2010; or

(8) payments made under a Staged Acquisition Agreement to acquire the Capital Stock of a Person provided that such Person becomes a Restricted Subsidiary on or before the last date in the period stipulated in such Staged Acquisition Agreement for which the purchase price can be made (such date not to exceed 18 months from the date the Staged Acquisition Agreement was entered into) (the “Deadline Date”); provided further that in the event such Person does not become a Restricted Subsidiary on or before the Deadline Date, all payments previously made under this clause (8) shall be aggregated and constitute Restricted Payments made on the Deadline Date and such Restricted Payments must satisfy the other conditions under this “Limitations on Restricted Payments” covenant; provided that, in the case of clause (2), (3) or (4) of the preceding paragraph, no Default shall have occurred and be continuing or would occur as a consequence of the actions or payments set forth therein.

Each Restricted Payment permitted pursuant to clause (1) of the preceding paragraph shall be included in calculating whether the conditions of clause (c) of the first paragraph of this “Limitation on Restricted Payments” covenant have been met with respect to any subsequent Restricted Payments.

The amount of any Restricted Payments (other than cash) will be the Fair Market Value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or the Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The value of any assets or securities that are required to be valued by this covenant will be their Fair Market Value. The Board of Directors’ determination of the Fair Market Value of a Restricted Payment or any such assets or securities must be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of recognized international standing if the Fair Market Value exceeds US$10.0 million (or the Dollar Equivalent thereof).

Not later than the date of making any Restricted Payment in excess of US$10.0 million (or the Dollar Equivalent thereof), the Company will deliver to the Trustee an Officers’ Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this “— Limitation on Restricted Payments” covenant were computed, together with a copy of any fairness opinion or appraisal required by the Indenture.

Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries

(1) Except as provided below, the Company will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to:

(a) pay dividends or make any other distribution on any Capital Stock of such Restricted Subsidiary owned by the Company or any other Restricted Subsidiary;

— 215 — (b) pay any Indebtedness or other obligation owed to the Company or any other Restricted Subsidiary;

(d) sell, lease or transfer any of its property or assets to the Company or any other Restricted Subsidiary.

(2) The provisions of paragraph (1) do not apply to any encumbrances or restrictions:

(a) existing in agreements as in effect on the Original Issue Date, or in the Notes, the Subsidiary Guarantees, the JV Subsidiary Guarantees, the Indenture, the Security Documents, or under any Permitted Pari Passu Secured Indebtedness of the Company or any Subsidiary Guarantor Pledgor or Pari Passu Subsidiary Guarantee of any Subsidiary Guarantor or any JV Subsidiary Guarantor, and any extensions, refinancings, renewals or replacements of any of the foregoing agreements; provided that the encumbrances and restrictions in any such extension, refinancing, renewal or replacement, taken as a whole, are no more restrictive in any material respect to the Holders than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed or replaced;

(b) existing under or by reason of applicable law, rule, regulation or order;

(c) existing with respect to any Person or the property or assets of such Person acquired by the Company or any Restricted Subsidiary, at the time of such acquisition and not Incurred in contemplation thereof, which encumbrances or restrictions are not applicable to any Person or the property or assets of any Person other than such Person or the property or assets of such Person so acquired, and any extensions, refinancings, renewals or replacements thereof; provided that the encumbrances and restrictions in any such extension, refinancing, renewal or replacement, taken as a whole, are no more restrictive in any material respect to the Holders than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed or replaced;

(d) that otherwise would be prohibited by the provision described in clause (1)(d) of this covenant if they arise, or are agreed to, in the ordinary course of business and, that (i) restrict in a customary manner the subletting, assignment or transfer of any property or asset that is subject to a lease or license, or (ii) exist by virtue of any Lien on, or agreement to transfer, option or similar right with respect to any property or assets of the Company or any Restricted Subsidiary not otherwise prohibited by the Indenture or (iii) do not relate to any Indebtedness, and that do not, individually or in the aggregate, detract from the value of property or assets of the Company or any Restricted Subsidiary in any manner material to the Company or any Restricted Subsidiary;

(e) with respect to a Restricted Subsidiary and imposed pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock of, or property and assets of, such Restricted Subsidiary that is permitted by the “— Limitation on Sales and Issuances of Capital Stock in Restricted Subsidiaries,” “— Limitation on Indebtedness and Preferred Stock” and “— Limitation on Asset Sales” covenants; or

(f) with respect to any Restricted Subsidiary and imposed pursuant to an agreement that has been entered into for the Incurrence of Indebtedness of the

— 216 — type described under clause (2)(h), (2)(n), 2(o), (2)(p), (2)(q), (2)(r) or (2)(s) of the “Limitation on Indebtedness and Preferred Stock” covenant if, as determined by the Board of Directors, the encumbrances or restrictions are (i) customary for such types of agreements and (ii) would not, at the time agreed to, be expected to materially and adversely affect the ability of the Company to make required payment on the Notes and any extensions, refinancings, renewals or replacements of any of the foregoing agreements; provided that the encumbrances and restrictions in any such extension, refinancing, renewal or replacement, taken as a whole, are no more restrictive in any material respect to the Holders than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed or replaced.

Limitation on Sales and Issuances of Capital Stock in Restricted Subsidiaries

The Company will not sell, and will not permit any Restricted Subsidiary, directly or indirectly, to issue or sell any shares of Capital Stock of a Restricted Subsidiary (including options, warrants or other rights to purchase shares of such Capital Stock) except:

(1) to the Company or a Wholly Owned Restricted Subsidiary, or in the case of a Restricted Subsidiary that is not Wholly Owned, pro rata to its shareholders or incorporators;

(2) to the extent such Capital Stock represents director’s qualifying shares or is required by applicable law to be held by a Person other than the Company or a Wholly Owned Restricted Subsidiary;

(3) the sale or issuance of Capital Stock of a Restricted Subsidiary if, immediately after giving effect to such sale or issuance, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any remaining Investment in such Person would have been permitted to be made under the “Limitation on Restricted Payments” covenant if made on the date of such sale or issuance and provided that the Company complies with the “— Limitation on Asset Sales” covenant; or

(4) the sale or issuance of Capital Stock of a Restricted Subsidiary (which remains a Restricted Subsidiary after any such sale or issuance); provided that the Company or such Restricted Subsidiary applies the Net Cash Proceeds of such sale or issuance in accordance with the “— Limitation on Asset Sales” covenant.

Limitation on Issuances of Guarantees by Restricted Subsidiaries

The Company will not permit any Restricted Subsidiary which is not a Subsidiary Guarantor or a JV Subsidiary Guarantor, directly or indirectly, to Guarantee any Indebtedness (“Guaranteed Indebtedness”) of the Company or any other Restricted Subsidiary, unless (1) (a) such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture to the Indenture providing for an unsubordinated Subsidiary Guarantee (in the case of a Subsidiary Guarantor) or JV Subsidiary Guarantee (in the case of a JV Subsidiary Guarantor) of payment of the Notes by such Restricted Subsidiary and (b) such Restricted Subsidiary waives and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Company or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Subsidiary Guarantee or JV Subsidiary Guarantee, as the case may be, until the Notes have been paid in full or (2) such Guarantee is permitted by clauses (2)(c), (d), (m)(ii) or 2(m)(iii) (other than, in the case of clause 2(m)(ii), a Guarantee by a PRC Restricted Subsidiary of the Indebtedness of a non-PRC Restricted Subsidiary), under the caption “— Limitation on Indebtedness and Preferred Stock.”

— 217 — If the Guaranteed Indebtedness (1) ranks pari passu in right of payment with the Notes, any Subsidiary Guarantee or any JV Subsidiary Guarantee, then the Guarantee of such Guaranteed Indebtedness shall rank pari passu in right of payment with, or subordinated to, the Subsidiary Guarantee or the JV Subsidiary Guarantee, as the case may be, or (2) is subordinated in right of payment to the Notes, any Subsidiary Guarantee or any JV Subsidiary Guarantee, then the Guarantee of such Guaranteed Indebtedness shall be subordinated in right of payment to the Subsidiary Guarantee or the JV Subsidiary Guarantee, as the case may be, at least to the extent that the Guaranteed Indebtedness is subordinated to the Notes, the Subsidiary Guarantee or the JV Subsidiary Guarantee.

The Company will not permit any JV Subsidiary Guarantor, directly or indirectly, to guarantee any Indebtedness of the Company or any other Restricted Subsidiary unless the aggregate claims of the creditor under such guarantee will be limited to the JV Entitlement Amount. If any JV Subsidiary Guarantor guarantees any Indebtedness of the Company or any other Restricted Subsidiary where the aggregate claims of the creditor under such guarantee exceeds the JV Entitlement Amount, such JV Subsidiary Guarantee shall be replaced with a Subsidiary Guarantee given by a Subsidiary Guarantor

Limitation on Transactions with Shareholders and Affiliates

The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into, renew or extend any transaction or arrangement (including, without limitation, the purchase, sale, lease or exchange of property or assets, or the rendering of any service) with (x) any holder (or any Affiliate of such holder) of 10.0% or more of any class of Capital Stock of the Company or (y) any Affiliate of the Company (each an “Affiliate Transaction”), unless:

(1) the Affiliate Transaction is on fair and reasonable terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or the relevant Restricted Subsidiary with a Person that is not an Affiliate of the Company; and

(2) the Company delivers to the Trustee:

(a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of US$5.0 million (or the Dollar Equivalent thereof), a Board Resolution set forth in an Officers’ Certificate certifying that such Affiliate Transaction complies with this covenant and such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors; and

(b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of US$10.0 million (or the Dollar Equivalent thereof), in addition to the Board Resolution required in clause 2(a) above, an opinion as to the fairness to the Company or the relevant Restricted Subsidiary of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of recognized international standing.

The foregoing limitation does not limit, and shall not apply to:

(1) the payment of reasonable and customary regular fees to directors of the Company who are not employees of the Company;

(2) transactions between or among the Company and any of its Wholly Owned Restricted Subsidiaries or between or among Wholly Owned Restricted Subsidiaries;

— 218 — (3) any Restricted Payment of the type described in clauses (1) or (2) of the first paragraph of the covenant described above under the caption “— Limitation on Restricted Payments” if permitted by that covenant;

(4) any sale of Capital Stock (other than Disqualified Stock) of the Company;

(5) the payment of compensation to officers and directors of the Company or any Restricted Subsidiary pursuant to an employee benefit, share option or similar schemes, for so long as such scheme is in compliance with the listing rules of the Hong Kong Stock Exchange, which as of the Original Issue Date require majority shareholder approval of any such scheme;

(6) loans or advances to employees, officers or directors in the ordinary course of business not to exceed US$3.0 million in the aggregate at any one time outstanding;

(7) any employment, consulting, service or termination agreement, or reasonable and customary indemnification arrangements, entered into by the Company or any of its Restricted Subsidiaries with directors, officers, employees and consultants in the ordinary course of business and the payment of compensation pursuant thereto; and

(8) any sale of apartment units by the Company or a Restricted Subsidiary in the ordinary course of business to employees, officers, directors or their respective family members at a discount from the listed price not greater that that applicable generally to all employees of the Company and its Subsidiaries with respect to those apartment units; provided that (x) revenues from all such sales in any fiscal year shall not exceed 1.5% of the revenues for that year as shown in the consolidated financial statements of the Company for that period in accordance with GAAP, and (y) any such discount shall not be in excess of 15.0% to the Fair Market Value of the relevant apartment unit.

In addition, the requirements of clause (2) of the first paragraph of this covenant shall not apply to (i) Investments (other than Permitted Investments) not prohibited by the “Limitation on Restricted Payments” covenant, (ii) transactions pursuant to agreements in effect on the Original Issue Date and described in this offering memorandum, or any amendment or modification or replacement thereof, so long as such amendment, modification or replacement is not more disadvantageous to the Company and its Restricted Subsidiaries than the original agreement in effect on the Original Issue Date and (iii) any transaction between or among any of the Company, any Wholly Owned Restricted Subsidiary and any Restricted Subsidiary that is not a Wholly Owned Restricted Subsidiary or between or among Restricted Subsidiaries that are not Wholly Owned Restricted Subsidiaries; provided that in the case of clause (iii) (a) such transaction is entered into in the ordinary course of business and (b) none of the minority shareholders or minority partners of or in such Restricted Subsidiary that is not a Wholly Owned Subsidiary Guarantor is a Person described in clauses (x) or (y) of the first paragraph of this covenant (other than by reason of such minority shareholder or minority partner being an officer or director of such Restricted Subsidiary).

Limitation on Liens The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, incur, assume or permit to exist any Lien on the Collateral (other than Permitted Liens). The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, incur, assume or permit to exist any Lien of any nature whatsoever on any of its assets or properties of any kind (other than the Collateral), whether owned at the Original Issue Date or thereafter acquired, except Permitted Liens, unless the Notes are equally and ratably secured by such Lien.

— 219 — Limitation on Sale and Leaseback Transactions

The Company will not, and will not permit any of its Restricted Subsidiaries to, enter into any Sale and Leaseback Transaction; provided that the Company may enter into a Sale and Leaseback Transaction if:

(1) the Company could have (a) Incurred Indebtedness in an amount equal to the Attributable Indebtedness relating to such Sale and Leaseback Transaction under the first paragraph of the covenant described above under “— Limitation on Indebtedness and Preferred Stock” and (b) incurred a Lien to secure such Indebtedness pursuant to the covenant described above under the caption “— Limitation on Liens,” in which case, the corresponding Indebtedness and Lien will be deemed incurred pursuant to those provisions;

(2) the gross cash proceeds of that Sale and Leaseback Transaction are at least equal to the Fair Market Value of the property that is the subject of such Sale and Leaseback Transaction; and

(3) the transfer of assets in that Sale and Leaseback Transaction is permitted by, and the Company applies the proceeds of such transaction in compliance with, the covenant described below under the caption “— Limitation on Asset Sales.”

Limitation on Asset Sales

The Company will not, and will not permit any Restricted Subsidiary to, consummate any Asset Sale, unless:

(1) no Default shall have occurred and be continuing or would occur as a result of such Asset Sale;

(2) the consideration received by the Company or such Restricted Subsidiary, as the case may be, is at least equal to the Fair Market Value of the assets sold or disposed of;

(3) in the case of an Asset Sale that constitutes an Asset Disposition, the Company could Incur at least US$1.00 of Indebtedness under the proviso in the first paragraph of part (1) of the covenant under the caption “— Limitation on Indebtedness and Preferred Stock” after giving pro forma effect to such Asset Disposition; and

(4) at least 75.0% of the consideration received consists of cash, Temporary Cash Investments or Replacement Assets; provided that in the case of an Asset Sale in which the Company or such Restricted Subsidiary receives Replacement Assets involving aggregate consideration in excess of US$15.0 million (or the Dollar Equivalent thereof), the Company shall deliver to the Trustee an opinion as to the fairness to the Company or such Restricted Subsidiary of such Asset Sale from a financial point of view issued by an accounting, appraisal or investment banking firm of international standing. For purposes of this provision, each of the following will be deemed to be cash:

(a) any liabilities, as shown on the Company’s most recent consolidated balance sheet, of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes, any Subsidiary Guarantee or any JV Subsidiary Guarantee) that are assumed by the transferee of any such assets pursuant to a customary assumption, assignment, novation or similar agreement that releases the Company or such Restricted Subsidiary from further liability; and

— 220 — (b) any securities, notes or other obligations received by the Company or any Restricted Subsidiary from such transferee that are promptly, but in any event within 30 days of closing, converted by the Company or such Restricted Subsidiary into cash, to the extent of the cash received in that conversion;

Within 360 days after the receipt of any Net Cash Proceeds from an Asset Sale, the Company (or the applicable Restricted Subsidiary, as the case may be) may apply such Net Cash Proceeds to:

(1) permanently repay Senior Indebtedness of the Company or a Subsidiary Guarantor or any Indebtedness of a Restricted Subsidiary that is not a Subsidiary Guarantor (and, if such Senior Indebtedness repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto) in each case owing to a Person other than the Company or a Restricted Subsidiary; or

(2) acquire properties and assets that replace the properties and assets that were the subject of such Asset Sale or properties or assets (other than current assets) that will be used in the Permitted Businesses (“Replacement Assets”).

Any Net Cash Proceeds from Asset Sales that are not applied or invested as provided in clauses (1) and (2) in the immediately preceding paragraph will constitute “Excess Proceeds.” Excess Proceeds of less than US$10.0 million (or the Dollar Equivalent thereof) will be carried forward and accumulated. When accumulated Excess Proceeds exceeds US$10.0 million (or the Dollar Equivalent thereof), within 10 days thereof, the Company must make an Offer to Purchase Notes having a principal amount equal to:

(1) accumulated Excess Proceeds, multiplied by

(2) a fraction (x) the numerator of which is equal to the Dollar Equivalent of the outstanding principal amount of the Notes and (y) the denominator of which is equal to the Dollar Equivalent of the outstanding principal amount of the Notes and all pari passu Indebtedness similarly required to be repaid, redeemed or tendered for in connection with the related Asset Sale,

rounded down to the nearest RMB10,000.

The offer price in any Offer to Purchase will be equal to the U.S. Dollar Settlement Amount of 100.0% of the principal amount plus accrued and unpaid interest to the date of purchase, and will be payable in cash.

If any Excess Proceeds remain after consummation of an Offer to Purchase, the Company may use those Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes (and any other pari passu Indebtedness) tendered in such Offer to Purchase exceeds the amount of Excess Proceeds, the Trustee will select the Notes (and such other pari passu Indebtedness) to be purchased on a pro rata basis. Upon completion of each Offer to Purchase, the amount of Excess Proceeds will be reset at zero.

Limitation on the Company’s Business Activities

The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, engage in any business other than Permitted Businesses; provided, however, that the Company or any Restricted Subsidiary may own Capital Stock of an Unrestricted Subsidiary or joint venture or other entity that is engaged in a business other than Permitted Businesses as long as any Investment therein was not prohibited when made by the covenant under the caption “— Limitation on Restricted Payments.”

— 221 — Use of Proceeds The Company will not, and will not permit any Restricted Subsidiary to, use the net proceeds from the sale of the Notes, in any amount, for any purpose other than (1) in the approximate amounts and for the purposes specified, including any adjustment in response to changes in acquisition or development plans as contemplated, under the caption “Use of Proceeds” in this offering memorandum and (2) pending the application of all of such net proceeds in such manner, to invest the portion of such net proceeds not yet so applied in Temporary Cash Investments.

Designation of Restricted and Unrestricted Subsidiaries The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary; provided that (1) no Default shall have occurred and be continuing at the time of or after giving effect to such designation; (2) neither the Company nor any Restricted Subsidiary provides credit support for the Indebtedness of such Restricted Subsidiary; (3) such Restricted Subsidiary has no outstanding Indebtedness that could trigger a cross-default to the Indebtedness of the Company; (4) such Restricted Subsidiary does not own any Disqualified Stock of the Company or Disqualified or Preferred Stock of another Restricted Subsidiary or hold any Indebtedness of, or any Lien on any property of, the Company or any Restricted Subsidiary, if such Disqualified or Preferred Stock or Indebtedness could not be Incurred under the covenant described under the caption “— Limitation on Indebtedness and Preferred Stock” or such Lien would violate the covenant described under the caption “— Limitation on Liens;” (5) such Restricted Subsidiary does not own any Voting Stock of another Restricted Subsidiary, and all of its Subsidiaries are Unrestricted Subsidiaries or are being concurrently designated to be Unrestricted Subsidiaries in accordance with this paragraph; and (6) the Investment deemed to have been made thereby in such newly-designated Unrestricted Subsidiary and each other newly-designated Unrestricted Subsidiary being concurrently redesignated would be permitted to be made by the covenant described under “— Limitation on Restricted Payments.” The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that (1) no Default shall have occurred and be continuing at the time of or after giving effect to such designation; (2) any Indebtedness of such Unrestricted Subsidiary outstanding at the time of such designation which will be deemed to have been Incurred by such newly-designated Restricted Subsidiary as a result of such designation would be permitted to be Incurred by the covenant described under the caption “— Limitation on Indebtedness and Preferred Stock;” (3) any Lien on the property of such Unrestricted Subsidiary at the time of such designation which will be deemed to have been incurred by such newly-designated Restricted Subsidiary as a result of such designation would be permitted to be incurred by the covenant described under the caption “— Limitation on Liens;” (4) such Unrestricted Subsidiary is not a Subsidiary of another Unrestricted Subsidiary (that is not concurrently being designated as a Restricted Subsidiary); (5) if such Restricted Subsidiary is not organized under the laws of the PRC and is not an Offshore Non-Guarantor Subsidiary, such Restricted Subsidiary shall upon such designation execute and deliver to the Trustee a supplemental indenture to the Indenture by which such Restricted Subsidiary shall become a Subsidiary Guarantor or a JV Subsidiary Guarantor; and (6) if such Restricted Subsidiary is not organized under the laws of the PRC and is not an Offshore Non-Guarantor Subsidiary or a Subsidiary of a JV Subsidiary Guarantor, all Capital Stock of such Restricted Subsidiary owned by the Company or any other Restricted Subsidiary shall be pledged as required under “— Security.”

Government Approvals and Licenses; Compliance with Law The Company will, and will cause each Restricted Subsidiary to, (1) obtain and maintain in full force and effect all governmental approvals, authorizations, consents, permits, concessions and licenses as are necessary to engage in the Permitted Businesses; (2) preserve and maintain good and valid title to its properties and assets (including land-use

— 222 — rights) free and clear of any Liens other than Permitted Liens; and (3) comply with all laws, regulations, orders, judgments and decrees of any governmental body, except to the extent that failure so to obtain, maintain, preserve and comply would not reasonably be expected to have a material adverse effect on (a) the business, results of operations or prospects of the Company and its Restricted Subsidiaries, taken as a whole, or (b) the ability of the Company, any Subsidiary Guarantor or any JV Subsidiary Guarantor to perform its obligations under the Notes, the relevant Subsidiary Guarantee, the relevant JV Subsidiary Guarantee or the Indenture.

Anti-Layering The Company will not Incur, and will not permit any Subsidiary Guarantor or JV Subsidiary Guarantor to Incur, any Indebtedness if such Indebtedness is contractually subordinated in right of payment to any other Indebtedness of the Company, such Subsidiary Guarantor or such JV Subsidiary Guarantor, as the case may be, unless such Indebtedness is also contractually subordinated in right of payment to the Notes, the applicable Subsidiary Guarantee or the applicable JV Subsidiary Guarantee, on substantially identical terms. This does not apply to distinctions between categories of Indebtedness that exist by reason of any Liens or Guarantees securing or in favor of some but not all of such Indebtedness.

Suspension of Certain Covenants If, on any date following the date of the Indenture, the Notes have a rating of Investment Grade from both of the Rating Agencies and no Default has occurred and is continuing (a “Suspension Event”), then, beginning on that day and continuing until such time, if any, at which the Notes cease to have a rating of Investment Grade from either of the Rating Agencies, the provisions of the Indenture summarized under the following captions will be suspended:

(1) “— Certain Covenants — Limitation on Indebtedness and Preferred Stock”;

(2) “— Certain Covenants — Limitation on Restricted Payments”;

(3) “— Certain Covenants — Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries”;

(4) “— Certain Covenants — Limitation on Sales and Issuances of Capital Stock in Restricted Subsidiaries”;

(5) “— Certain Covenants — Limitation on Issuances of Guarantees by Restricted Subsidiaries”;

(6) “— Certain Covenants — Limitation on the Company’s Business Activities”;

(7) “— Certain Covenants — Limitation on Sale and Leaseback Transactions”; and

(8) “— Certain Covenants — Limitation on Asset Sales”.

During any period that the foregoing covenants have been suspended, the Board of Directors may not designate any of the Restricted Subsidiaries as Unrestricted Subsidiaries pursuant to the covenant summarized under the caption “— Certain Covenants — Designation of Restricted and Unrestricted Subsidiaries” or the definition of “Unrestricted Subsidiary.”

Such covenants will be reinstituted and apply according to their terms as of and from the first day on which a Suspension Event ceases to be in effect. Such covenants will not, however, be of any effect with regard to actions of the Company or any Restricted Subsidiary properly taken in compliance with the provisions of the Indenture during the continuance of the

— 223 — Suspension Event, and following reinstatement the calculations under the covenant summarized under “— Certain Covenants — Limitation on Restricted Payments” will be made as if such covenant had been in effect since the date of the Indenture except that no Default will be deemed to have occurred solely by reason of a Restricted Payment made while that covenant was suspended. There can be no assurance that the Notes will ever achieve a rating of Investment Grade or that any such rating will be maintained.

Provision of Financial Statements and Reports

(1) So long as any of the Notes remain outstanding, the Company will file with the Trustee and furnish to the Holders upon request, as soon as they are available but in any event not more than 10 calendar days after they are filed with The Stock Exchange of Hong Kong Limited or any other recognized exchange on which the Company’s common shares are at any time listed for trading, true and correct copies of any financial or other report in the English language filed with such exchange; provided that if at any time the Common Stock of the Company ceases to be listed for trading on a recognized stock exchange, the Company will file with the Trustee and furnish to the Holders:

(a) as soon as they are available, but in any event within 90 calendar days after the end of the fiscal year of the Company, copies of its financial statements (on a consolidated basis) in respect of such financial year (including a statement of income, balance sheet and cash flow statement) audited by a member firm of an internationally-recognized firm of independent accountants;

(b) as soon as they are available, but in any event within 45 calendar days after the end of the second financial quarter of the Company, copies of its financial statements (on a consolidated basis) in respect of such half-year period (including a statement of income, balance sheet and cash flow statement) reviewed by a member firm of an internationally-recognized firm of independent accountants; and

(c) as soon as they are available, but in any event within 45 calendar days after the end of each of the first and third financial quarter of the Company, copies of its unaudited financial statements (on a consolidated basis), including a statement of income, balance sheet and cash flow statement, prepared on a basis consistent with the audited financial statements of the Company together with a certificate signed by the person then authorized to sign financial statements on behalf of the Company to the effect that such financial statements are true in all material respects and present fairly the financial position of the Company as at the end of, and the results of its operations for, the relevant quarterly period.

(2) In addition, so long as any of the Notes remain outstanding, the Company will provide to the Trustee (a) within 120 days after the close of each fiscal year, an Officers’ Certificate stating the Fixed Charge Coverage Ratio with respect to the two most recent fiscal semi-annual periods and showing in reasonable detail the calculation of the Fixed Charge Coverage Ratio, including the arithmetic computations of each component of the Fixed Charge Coverage Ratio, with a certificate from the Company’s external auditors verifying the accuracy and correctness of the calculation and arithmetic computation; and (b) as soon as possible and in any event within 30 days after the Company becomes aware or should reasonably become aware of the occurrence of a Default, an Officers’ Certificate setting forth the details of the Default, and the action which the Company proposes to take with respect thereto.

— 224 — Further, the Company and each Subsidiary Guarantor and each JV Subsidiary Guarantor have agreed that, for as long as any Notes are “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act, during any period in which the Company or such Subsidiary Guarantor or JV Subsidiary Guarantor is neither subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor exempt from reporting pursuant to Rule 12g3-2(b) thereunder, the Company or such Subsidiary Guarantor or JV Subsidiary Guarantor, as the case may be, shall supply to (i) any Holder or beneficial owner of a Note or (ii) a prospective purchaser of a Note or a beneficial interest therein designated by such Holder or beneficial owner, the information specified in, and meeting the requirements of Rule 144A(d)(4) under the Securities Act upon the request of any Holder or beneficial owner of a Note.

Events of Default

The following events will be defined as “Events of Default” in the Indenture:

(1) default in the payment of principal of (or premium, if any, on) the Notes when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise;

(2) default in the payment of interest on any Note when the same becomes due and payable, and such default continues for a period of 30 days;

(3) default in the performance or breach of the provisions of the covenant described under “— Consolidation, Merger and Sale of Assets,” the failure by the Company to make or consummate an Offer to Purchase in the manner described under the captions “— Repurchase of Notes upon a Change of Control Triggering Event” or “— Limitation on Asset Sales,” or the failure by the Company to create, or cause its Restricted Subsidiaries to create, a first priority Lien on the Collateral (subject to any Permitted Liens) in accordance with the covenant described under the caption “— Security;”

(4) the Company or any Restricted Subsidiary defaults in the performance of or breaches any other covenant or agreement in the Indenture or under the Notes (other than a default specified in clause (1), (2) or (3) above) and such default or breach continues for a period of 30 consecutive days after written notice by the Trustee or the Holders of 25.0% or more in aggregate principal amount of the Notes;

(5) there occurs with respect to any Indebtedness of the Company or any Restricted Subsidiary having an outstanding principal amount of US$7.5 million (or the Dollar Equivalent thereof) or more in the aggregate for all such Indebtedness of all such Persons, whether such Indebtedness now exists or shall hereafter be created, (a) an event of default that has caused the holder thereof to declare such Indebtedness to be due and payable prior to its Stated Maturity and/or (b) the failure to make a payment of principal when due and payable;

(6) one or more final judgments or orders for the payment of money are rendered against the Company or any of its Restricted Subsidiaries and are not paid or discharged, and there is a period of 60 consecutive days following entry of the final judgment or order that causes the aggregate amount for all such final judgments or orders outstanding and not paid or discharged against all such Persons to exceed US$7.5 million (or the Dollar Equivalent thereof) (in excess of amounts that the Company’s insurance carriers have agreed to pay under applicable policies) during which a stay of enforcement, by reason of a pending appeal or otherwise, is not in effect;

— 225 — (7) an involuntary case or other proceeding is commenced against the Company or any Restricted Subsidiary with respect to it or its debts under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect seeking the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any Restricted Subsidiary or for any substantial part of the property and assets of the Company or any Restricted Subsidiary and such involuntary case or other proceeding remains undismissed and unstayed for a period of 60 consecutive days; or an order for relief is entered against the Company or any Restricted Subsidiary under any applicable bankruptcy, insolvency or other similar law as now or hereafter in effect;

(8) the Company or any Restricted Subsidiary (a) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (b) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any Restricted Subsidiary or for all or substantially all of the property and assets of the Company or any Restricted Subsidiary or (c) effects any general assignment for the benefit of creditors;

(9) any Subsidiary Guarantor or JV Subsidiary Guarantor denies or disaffirms its obligations under its Subsidiary Guarantee or JV Subsidiary Guarantee or, except as permitted by the Indenture, any Subsidiary Guarantee or JV Subsidiary Guarantee is determined to be unenforceable or invalid or shall for any reason cease to be in full force and effect;

(10) any default by the Company or any Subsidiary Guarantor Pledgor in the performance of any of its obligations under the Security Documents, which adversely affects the enforceability, validity, perfection or priority of the applicable Lien on the Collateral or which adversely affects the condition or value of the Collateral, taken as a whole, in any material respect; or

(11) the Company or any Subsidiary Guarantor Pledgor denies or disaffirms its obligations under any Security Document or, other than in accordance with the Indenture and the Security Documents, any Security Document ceases to be or is not in full force and effect or the Shared Security Trustee ceases to have a first priority security interest in the Collateral (subject to any Permitted Liens and pari passu sharing).

If an Event of Default (other than an Event of Default specified in clause (7) or (8) above) occurs and is continuing under the Indenture, the Trustee or the Holders of at least 25.0% in aggregate principal amount of the Notes then outstanding, by written notice to the Company (and to the Trustee if such notice is given by the Holders), may, and the Trustee at the request of such Holders shall, declare the principal of, premium, if any, and accrued and unpaid interest on the Notes to be immediately due and payable. Upon a declaration of acceleration, such principal of, premium, if any, and accrued and unpaid interest shall be immediately due and payable. If an Event of Default specified in clause (7) or (8) above occurs with respect to the Company or any Restricted Subsidiary, the principal of, premium, if any, and accrued and unpaid interest on the Notes then outstanding shall automatically become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder.

The Holders of at least a majority in principal amount of the outstanding Notes by written notice to the Company and to the Trustee may on behalf of the Holders waive all past defaults and rescind and annul a declaration of acceleration and its consequences if:

(1) all existing Events of Default, other than the nonpayment of the principal of, premium, if any, and interest on the Notes that have become due solely by such declaration of acceleration, have been cured or waived, and

— 226 — (2) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction.

Upon such waiver, the Default will cease to exist, and any Event of Default arising therefrom will be deemed to have been cured, but no such waiver will extend to any subsequent or other Default or impair any right consequent thereon.

If an Event of Default occurs and is continuing, the Trustee may pursue, in its own name or as trustee of an express trust, any available remedy by proceeding at law or in equity to collect the payment of principal of and interest on the Notes or to enforce the performance of any provision of the Notes or the Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. In addition, if an Event of Default occurs and is continuing, the Trustee may, and shall upon request of Holders of at least 25.0% in aggregate principal amount of outstanding Notes, (i) give the Shared Security Trustee a written notice of the occurrence of such continuing Event of Default and (ii) instruct the Shared Security Trustee in accordance with the terms of the Intercreditor Agreement to foreclose on the Collateral in accordance with the terms of the Security Documents and take such further action on behalf of the Holders of the Notes with respect to the Collateral as the Trustee deems appropriate. See “— Security.”

The Holders of at least a majority in aggregate principal amount of the outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or the Indenture, that may involve the Trustee in personal liability, or that the Trustee determines in good faith may be unduly prejudicial to the rights of Holders not joining in the giving of such direction and may take any other action it deems proper that is not inconsistent with any such direction received from Holders.

A Holder may not institute any proceeding, judicial or otherwise, with respect to the Indenture or the Notes, or for the appointment of a receiver or trustee, or for any other remedy under the Indenture or the Notes, unless:

(1) the Holder has previously given the Trustee written notice of a continuing Event of Default;

(2) the Holders of at least 25.0% in aggregate principal amount of outstanding Notes make a written request to the Trustee to pursue the remedy;

(3) such Holder or Holders offer the Trustee indemnity and/or security reasonably satisfactory to the Trustee against any costs, liability or expense to be incurred in compliance with such request;

(4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and

(5) during such 60-day period, the Holders of a majority in aggregate principal amount of the outstanding Notes do not give the Trustee a direction that is inconsistent with the request.

However, such limitations do not apply to the right of any Holder to receive payment of the principal of, premium, if any, or interest on, such Note, or to bring suit for the enforcement of any such payment, on or after the due date expressed in the Notes, which right shall not be impaired or affected without the consent of the Holder.

— 227 — Officers of the Company must certify, on or before a date not more than 120 days after the end of each fiscal year, that a review has been conducted of the activities of the Company and its Restricted Subsidiaries and the Company’s and its Restricted Subsidiaries” performance under the Indenture and that the Company has fulfilled all obligations thereunder, or, if there has been a default in the fulfillment of any such obligation, specifying each such default and the nature and status thereof. The Company will also be obligated to notify the Trustee of any default or defaults in the performance of any covenants or agreements under the Indenture. See “— Provision of Financial Statements and Reports.”

Consolidation, Merger and Sale of Assets

The Company will not consolidate with, merge with or into another Person, permit any Person to merge with or into it, or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its and its Restricted Subsidiaries’ properties and assets (computed on a consolidated basis) (as an entirety or substantially an entirety in one transaction or a series of related transactions), unless:

(1) the Company shall be the continuing Person, or the Person (if other than it) formed by such consolidation or merger or that acquired or leased such property and assets (the “Surviving Person”) shall be a corporation organized and validly existing under the laws of the Cayman Islands, Hong Kong or the British Virgin Islands and shall expressly assume, by a supplemental indenture to the Indenture, executed and delivered to the Trustee, all the obligations of the Company under the Indenture, the Notes and the Security Documents, as the case may be, including the obligation to pay Additional Amounts with respect to any jurisdiction in which it is organized or resident for tax purposes or through which it makes payments, and the Indenture, the Notes and the Security Documents, as the case may be, shall remain in full force and effect;

(2) immediately after giving effect to such transaction, no Default shall have occurred and be continuing;

(3) immediately after giving effect to such transaction on a pro forma basis, the Company or the Surviving Person, as the case may be, shall have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Company immediately prior to such transaction;

(4) immediately after giving effect to such transaction on a pro forma basis the Company or the Surviving Person, as the case may be, could Incur at least US$1.00 of Indebtedness under the first paragraph of the covenant under the caption “— Limitation on Indebtedness and Preferred Stock;”

(5) the Company delivers to the Trustee (x) an Officers’ Certificate (attaching the arithmetic computations to demonstrate compliance with clauses (3) and (4)) and (y) an Opinion of Counsel, in each case stating that such consolidation, merger or transfer and the relevant supplemental indenture complies with this provision and that all conditions precedent provided for in the Indenture relating to such transaction have been complied with;

(6) each Subsidiary Guarantor and JV Subsidiary Guarantor, unless such Subsidiary Guarantor or JV Subsidiary Guarantor is the Person with which the Company has entered into a transaction described under the caption “— Consolidation, Merger and Sale of Assets,” shall execute and deliver a supplemental indenture to the Indenture confirming that its Subsidiary Guarantee or JV Subsidiary Guarantee, as applicable, shall apply to the obligations of the Company or the Surviving Person in accordance with the Notes and the Indenture; and

— 228 — (7) no Rating Decline shall have occurred.

No Subsidiary Guarantor or JV Subsidiary Guarantor will consolidate with, merge with or into another Person, permit any Person to merge with or into it, or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its and its Restricted Subsidiaries’ properties and assets (computed on a consolidated basis) (as an entirety or substantially an entirety in one transaction or a series of related transactions) to another Person (other than the Company or another Subsidiary Guarantor or, in the case of a JV Subsidiary Guarantor, other than to another JV Subsidiary Guarantor, the Company or a Subsidiary Guarantor), unless:

(1) such Subsidiary Guarantor or JV Subsidiary Guarantor shall be the continuing Person, or the Person (if other than it) formed by such consolidation or merger or that acquired or leased such property and assets shall be the Company, another Subsidiary Guarantor or shall become a Subsidiary Guarantor concurrently with the transaction (or, in the case of a JV Subsidiary Guarantor, another JV Subsidiary Guarantor, the Company or a Subsidiary Guarantor); and shall expressly assume, by a supplemental indenture to the Indenture, executed and delivered to the Trustee, all the obligations of such Subsidiary Guarantor or JV Subsidiary Guarantor under the Indenture, the Notes and the Security Documents, as the case may be, including the obligation to pay Additional Amounts with respect to any jurisdiction in which it is organized or resident for tax purposes or through which it makes payments, and the Indenture, the Notes and the Security Documents, as the case may be, shall remain in full force and effect;

(2) immediately after giving effect to such transaction, no Default shall have occurred and be continuing;

(3) immediately after giving effect to such transaction on a pro forma basis, the Company shall have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Company immediately prior to such transaction;

(4) immediately after giving effect to such transaction on a pro forma basis, the Company could Incur at least US$1.00 of Indebtedness under the first paragraph of the covenant under the caption “— Limitation on Indebtedness and Preferred Stock;”

(6) no Rating Decline shall have occurred; provided that this paragraph shall not apply to any sale or other disposition that complies with the “— Limitation on Asset Sales” covenant or any Subsidiary Guarantor or JV Subsidiary Guarantor whose Subsidiary Guarantee or JV Subsidiary Guarantee, as the case may be, is unconditionally released in accordance with the provisions described under “— The Subsidiary Guarantees — Release of the Subsidiary Guarantees.”

Although there is a limited body of case law interpreting the phrase “substantially all,” there is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve “all or substantially all” of the property or assets of a Person.

— 229 — The foregoing requirements shall not apply to a consolidation or merger of any Subsidiary Guarantor or JV Subsidiary Guarantor with and into the Company or any other Subsidiary Guarantor or JV Subsidiary Guarantor, so long as the Company or such Subsidiary Guarantor or JV Subsidiary Guarantor survives such consolidation or merger.

The foregoing provisions would not necessarily afford Holders protection in the event of highly-leveraged or other transactions involving the Company that may adversely affect Holders.

No Payments for Consents The Company will not, and shall not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture or the Notes unless such consideration is offered to be paid or is paid to all Holders that consent, waive or agree to amend such term or provision within the time period set forth in the solicitation documents relating to such consent, waiver or amendment.

Defeasance

Defeasance and Discharge The Indenture will provide that the Company will be deemed to have paid and will be discharged from any and all obligations in respect of the Notes on the 183rd day after the deposit referred to below, and the provisions of the Indenture and the Security Documents will no longer be in effect with respect to the Notes (except for, among other matters, certain obligations to register the transfer or exchange of the Notes, to replace stolen, lost or mutilated Notes, to maintain paying agencies, to hold monies for payment in trust and to pay Additional Amounts) if, among other things:

(1) the Company (a) has deposited with the Trustee (or its agent), in trust, money in an amount sufficient to pay the principal of, premium, if any, and accrued interest on the Notes on the Stated Maturity for such payments in accordance with the terms of the Indenture and the Notes and (b) delivers to the Trustee an Opinion of Counsel or a certificate of an internationally-recognized firm of independent accountants to the effect that the amount deposited by the Company is sufficient to provide payment for the principal of, premium, if any, and accrued interest on, the Notes on the Stated Maturity for such payment in accordance with the terms of the Indenture;

(2) the Company has delivered to the Trustee (a) either (i) an Opinion of Counsel of recognized international standing with respect to U.S. federal income tax matters which is based on a change in applicable U.S. federal income tax law occurring after the Original Issue Date to the effect that beneficial owners will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to U.S. federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred or (ii) a ruling directed to the Trustee received from the U.S. Internal Revenue Service to the same effect as the aforementioned Opinion of Counsel and (b) an Opinion of Counsel of recognized international standing to the effect that the creation of the defeasance trust does not violate the U.S. Investment Company Act of 1940, as amended, and after the passage of 123 days following the deposit, the trust fund will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law; and

(3) immediately after giving effect to such deposit on a pro forma basis, no Event of Default, or event that after the giving of notice or lapse of time or both would become

— 230 — an Event of Default, shall have occurred and be continuing on the date of such deposit or during the period ending on the 183rd day after the date of such deposit, and such defeasance shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Company or any of its Restricted Subsidiaries is a party or by which the Company or any of its Restricted Subsidiaries is bound.

In the case of either discharge or defeasance of the Notes, the Subsidiary Guarantees and JV Subsidiary Guarantees will terminate.

Defeasance of Certain Covenants The Indenture further will provide that the provisions of the Indenture applicable to the Notes will no longer be in effect with respect to clauses (3), (4), (5)(x) and (7) under the first paragraph, and clauses (3), (4), (5)(x) and (6) under the second paragraph under “— Consolidation, Merger and Sale of Assets” and all the covenants described herein under “— Certain Covenants,” other than as described under “— Certain Covenants-Government Approvals and Licenses; Compliance with Law” and “— Certain Covenants-Anti-Layering,” clause (3) under “Events of Default” with respect to clauses (3), (4), (5)(x) and (7) under the first paragraph, and clauses (3), (4), (5)(x) and (6) under the second paragraph under “Consolidation, Merger and Sale of Assets” and with respect to the other events set forth in such clause, clause (4) under “Events of Default” with respect to such other covenants and clauses (5) and (6) under “Events of Default” shall be deemed not to be Events of Default upon, among other things, the deposit with the Trustee (or its agent), in trust, of money in an amount sufficient to pay the principal of, premium, if any, and accrued interest on the Notes on the Stated Maturity of such payments in accordance with the terms of the Indenture and the Notes, the satisfaction of the provisions described in clause (2)(b) of the preceding paragraph and the delivery by the Company to the Trustee of an Opinion of Counsel of recognized international standing with respect to U.S. federal income tax matters to the effect that beneficial owners of the Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such deposit and defeasance of certain covenants and Events of Default and will be subject to U.S. federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred.

Amendments and Waiver

Amendments Without Consent of Holders The Indenture, the Intercreditor Agreement or any Security Document, may be amended, without the consent of any Holder, to:

(1) cure any ambiguity, defect, omission or inconsistency in the Indenture, the Notes, the Intercreditor Agreement or any Security Document which does not adversely affect the interest of the Holders in any material respect;

(2) comply with the provisions described under “— Consolidation, Merger and Sale of Assets;”

(3) evidence and provide for the acceptance of appointment by a successor Trustee;

(4) add any Subsidiary Guarantor or JV Subsidiary Guarantor, or any Subsidiary Guarantee or JV Subsidiary Guarantee, or release any Subsidiary Guarantor or JV Subsidiary Guarantor from any Subsidiary Guarantee or JV Subsidiary Guarantee, as the case may be, as provided or permitted by the terms of the Indenture;

(5) provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture;

— 231 — (6) add any Subsidiary Guarantor Pledgor or release any Subsidiary Guarantor Pledgor as provided or permitted by the terms of the Indenture;

(7) add additional Collateral to secure the Notes, any Subsidiary Guarantee or any JV Subsidiary Guarantee;

(8) in any other case where a supplemental indenture to the Indenture is required or permitted to be entered into pursuant to the provisions of the Indenture without the consent of any Holder;

(9) effect any changes to the Indenture in a manner necessary to comply with the procedures of DTC;

(10) permit Permitted Pari Passu Secured Indebtedness (including, without limitation, permitting the Trustee and the Shared Security Trustee to enter into the Intercreditor Agreement, or any amendments to the Intercreditor Agreement, the Security Documents or the Indenture, or any accession to the Intercreditor Agreement by the holders of Permitted Pari Passu Secured Indebtedness (or their representative) and take any other action necessary to permit the creation and registration of Liens on the Collateral to secure Permitted Pari Passu Secured Indebtedness, in accordance with the Indenture);

(11) make any other change that does not materially and adversely affect the rights of any Holder; or

(12) conform the text of the Indenture, the Notes, the Subsidiary Guarantees or the JV Subsidiary Guarantees to any provision of this “Description of the Notes” to the extent that such provision in this “Description of the Notes” was intended to be a verbatim recitation of a provision in the Indenture, the Notes, the Subsidiary Guarantees or the JV Subsidiary Guarantees.

Amendments With Consent of Holders

The Indenture, the Intercreditor Agreement or any Security Document may be amended with the consent of the Holders of not less than a majority in aggregate principal amount of the outstanding Notes and the Agents may amend or waive future compliance by the Company with any provision thereof; provided, however, that no such modification, amendment or waiver may, without the consent of each Holder affected thereby:

(1) change the Stated Maturity of the principal of, or any installment of interest on, any Note;

(2) reduce the principal amount of, or premium, if any, or interest on, any Note;

(3) change the place, currency or time of payment of principal of, or premium, if any, or interest on or U.S. Dollar Settlement Amount payable on, any Note or change the method of calculation of the U.S. Dollar Settlement Amount, that would result in the reduction of the U.S. Dollar Settlement Amount of such principal, premium, if any, or interest;

(4) impair the right to institute suit for the enforcement of any payment on or after the Stated Maturity (or, in the case of a redemption, on or after the redemption date) of any Note any Subsidiary Guarantee or any JV Subsidiary Guarantee;

(5) reduce the above-stated percentage of outstanding Notes the consent of whose Holders is necessary to modify or amend the Indenture;

— 232 — (6) waive a default in the payment of principal of, premium, if any, or interest on the Notes;

(7) release any Subsidiary Guarantor or JV Subsidiary Guarantor from its Subsidiary Guarantee or JV Subsidiary Guarantee, as the case may be, except as provided in the Indenture;

(8) release any Collateral, except as provided in the Intercreditor Agreement, the Indenture and the Security Documents;

(9) reduce the percentage or aggregate principal amount of outstanding Notes the consent of whose Holders is necessary for waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults;

(10) amend, change or modify any Subsidiary Guarantee or JV Subsidiary Guarantee in a manner that adversely affects the Holders;

(11) amend, change or modify any provision of the Intercreditor Agreement, any Security Document or the Indenture relating to the Collateral, in a manner that adversely affects the Holders, except in accordance with the other provisions of the Indenture;

(12) reduce the amount payable upon a Change of Control Offer or an Offer to Purchase with the Excess Proceeds from any Asset Sale or, change the time or manner by which a Change of Control Offer or an Offer to Purchase with the Excess Proceeds or other proceeds from any Asset Sale may be made or by which the Notes must be repurchased pursuant to a Change of Control Offer or an Offer to Purchase with the Excess Proceeds or other proceeds from any Asset Sale;

(13) change the redemption date or the redemption price of the Notes from that stated under the captions “— Optional Redemption” or “— Redemption for Taxation Reasons;”

(14) amend, change or modify the obligation of the Company or any Subsidiary Guarantor or any JV Subsidiary Guarantor to pay Additional Amounts; or

(15) amend, change or modify any provision of the Indenture or the related definition affecting the ranking of the Notes, any Subsidiary Guarantee or any JV Subsidiary Guarantee in a manner which adversely affects the Holders.

Unclaimed Money

Claims against the Company for the payment of principal of, premium, if any, or interest, on the Notes will become void unless presentation for payment is made as required in the Indenture within a period of six years.

No Personal Liability of Incorporators, Stockholders, Officers, Directors or Employees

No recourse for the payment of the principal of, premium, if any, or interest on any of the Notes or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company, any of the Subsidiary Guarantors or any of the JV Subsidiary Guarantors in the Indenture, or in any of the Notes, the Subsidiary Guarantees or the JV Subsidiary Guarantees, or because of the creation of any Indebtedness represented thereby, shall be had against any incorporator, stockholder, officer, director, employee or controlling person of the Company, any of the Subsidiary Guarantors or JV Subsidiary Guarantors, or of any successor Person thereof. Each Holder, by accepting the

— 233 — Notes, waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes, the Subsidiary Guarantees and the JV Subsidiary Guarantees. Such waiver may not be effective to waive liabilities under the federal securities laws.

Concerning the Trustee, Shared Security Trustee and the Paying Agent

Deutsche Bank Trust Company Americas, has been appointed as Trustee under the Indenture and as registrar and paying agent (the “Paying Agent”) with regard to the Notes. Except during the continuance of a Default, the Trustee will not be liable, except for the performance of such duties as are specifically set forth in the Indenture. If an Event of Default has occurred and is continuing, the Trustee will use the same degree of care and skill in its exercise of the rights and powers vested in it under the Indenture as a prudent person would exercise under the circumstances in the conduct of such person’s own affairs.

The Indenture contains limitations on the rights of the Trustee, should it become a creditor of the Company or any of the Subsidiary Guarantors, to obtain payment of claims in certain cases or to realize on certain property received by it in respect of any such claims, as security or otherwise. The Trustee is permitted to engage in other transactions, including normal banking and trustee relationships, with the Company and its Affiliates; provided, however, that if it acquires any conflicting interest, it must eliminate such conflict or resign.

If the Company maintains a paying agent with respect to the Notes in a member state of the European Union, such paying agent will be located in a member state of the European Union that is not obligated to withhold or deduct tax pursuant to European Council Directive 2003/48/EC or any other directive implementing the conclusions of ECOFIN Council meeting of November 26—27, 2000 on the taxation of savings income, or any law implementing or complying with, or introduced in order to conform to, such Directive or such other directive.

Deutsche Bank Trust Company Americas, will initially act as the Shared Security Trustee under the Security Documents in respect of the security over the Collateral. The Shared Security Trustee, acting in its capacity as such, shall have such duties with respect to the Collateral pledged, assigned or granted pursuant to the Security Documents as are set forth in the Intercreditor Agreement and the Security Documents. Under certain circumstances, the Shared Security Trustee may have obligations under the Security Documents or the Intercreditor Agreement that are in conflict with the interests of the Trustee, the Holders, the lender of the Hang Seng Loan and the holders (or their representatives) of Permitted Pari Passu Secured Indebtedness (if any). Neither the Trustee nor the Shared Security Trustee will be under any obligation to exercise any rights or powers conferred under the Intercreditor Agreement, the Indenture or any of the Security Documents for the benefit of the Holders, the lender of the Hang Seng Loan or the holders (or their representatives) of Permitted Pari Passu Secured Indebtedness (if any), unless such Holders, the lender of the Hang Seng Loan and/or the holders (or their representatives) of Permitted Pari Passu Secured Indebtedness (if any) have offered to the Trustee and/or the Shared Security Trustee indemnity and/or security satisfactory to it against any loss, liability or expense. Furthermore, each Holder, by accepting the Notes will agree, for the benefit of the Trustee and the Shared Security Trustee, that it is solely responsible for its own independent appraisal of and investigation into all risks arising under or in connection with the Security Documents and has not relied on and will not at any time rely on the Trustee or the Shared Security Trustee in respect of such risks.

Book-Entry; Delivery and Form

The certificates representing the Notes will be issued in fully registered form without interest coupons. Notes sold in offshore transactions in reliance on Regulation S under the Securities Act will initially be represented by one or more permanent global notes in definitive, fully registered form without interest coupons (each a “Regulation S Global Note”) and will be deposited with Deutsche Bank Trust Company Americas as custodian for, and registered in the name of a nominee of, DTC for the accounts of Euroclear and Clearstream.

— 234 — Notes sold in reliance on Rule 144A will be represented by one or more permanent global notes in definitive, fully registered form without interest coupons (each a “Restricted Global Note;” and together with the Regulation S Global Notes, the “Global Notes”) and will be deposited with Deutsche Bank Trust Company Americas as custodian for, and registered in the name of a nominee of, DTC.

Each Global Note (and any Notes issued for exchange therefor) will be subject to certain restrictions on transfer set forth therein as described under “Transfer Restrictions.”

Ownership of beneficial interests in a Global Note will be limited to persons who have accounts with DTC (“participants”) or persons who hold interests through participants. Ownership of beneficial interests in a Global Note will be shown on, and the transfer of that ownership will be effected only through, records maintained by DTC or its nominee (with respect to interests of participants) and the records of participants (with respect to interests of persons other than participants). Qualified institutional buyers may hold their interests in a Restricted Global Note directly through DTC if they are participants in such system, or indirectly through organizations which are participants in such system.

Investors may hold their interests in a Regulation S Global Note directly through Euroclear or Clearstream, if they are participants in such systems, or indirectly through organizations that are participants in such system. Euroclear and Clearstream will hold interests in the Regulation S Global Notes on behalf of their participants through DTC.

So long as DTC, or its nominee, is the registered owner or holder of a Global Note, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the Notes represented by such Global Note for all purposes under the Indenture and the Notes. No beneficial owner of an interest in a Global Note will be able to transfer that interest except in accordance with DTC’s applicable procedures, in addition to those provided for under the Indenture and, if applicable, those of Euroclear and Clearstream.

Payments of the principal of, and interest on, a Global Note will be made to DTC or its nominee, as the case may be, as the registered owner thereof. Neither the Company, nor any of the Guarantors, the Trustee nor any Paying Agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a Global Note or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

The Company expects that DTC or its nominee, upon receipt of any payment of principal or interest in respect of a Global Note, will credit participants’ accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Global Note as shown on the records of DTC or its nominee. The Company also expects that payments by participants to owners of beneficial interests in such Global Note held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in the names of nominees for such customers. Such payments will be the responsibility of such participants.

Transfers between participants in DTC will be effected in the ordinary way in accordance with DTC rules and will be settled in same-day funds. Transfers between participants in Euroclear and Clearstream will be effected in the ordinary way in accordance with their respective rules and operating procedures.

The Company expects that DTC will take any action permitted to be taken by a holder of Notes (including the presentation of Notes for exchange as described below) only at the direction of one or more participants to whose account the DTC interests in a Global Note is credited and only in respect of such portion of the aggregate principal amount of Notes as to which such participant or participants has or have given such direction. However, if there is an Event of Default under the Notes, DTC will exchange the applicable Global Note for Certificated Notes, which it will distribute to its participants and which may be legended as set forth under the heading “Transfer Restrictions.”

— 235 — The Company understands that: DTC is a limited purpose trust company organized under the laws of the State of New York, a “banking organization” within the meaning of New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the Uniform Commercial Code and a “Clearing Agency” registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participants and to facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of securities certificates. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies and certain other organizations that clear through or maintain a custodial relationship with a participant, either directly or indirectly (“indirect participants”).

Although DTC, Euroclear and Clearstream are expected to follow the foregoing procedures in order to facilitate transfers of interests in a Global Note among participants of DTC, Euroclear and Clearstream, they are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. None of the Company, any of the Subsidiary Guarantors, the Trustee or any Paying Agent will have any responsibility for the performance by DTC, Euroclear or Clearstream or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations.

If DTC is at any time unwilling or unable to continue as a depository for the Global Notes and a successor depositary is not appointed by the Company within 90 days, the Company will issue Certificated Notes in registered form, which may bear the legend referred to under “Transfer Restrictions,” in exchange for the Global Notes. Holders of an interest in a Global Note may receive Certificated Notes, which may bear the legend referred to under “Transfer Restrictions,” in accordance with the DTC’s rules and procedures in addition to those provided for under the Indenture.

The Clearing Systems

General

DTC, Euroclear and Clearstream have advised the Company as follows:

DTC. DTC is a limited-purpose trust company organized under the laws of the State of New York, a “banking organization” within the meaning of New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities of its participants and to facilitate the clearance and settlement of securities transactions among its participants in such securities through electronic book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of securities certificates. DTC’s participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations, some of whom own DTC, and may include the Initial Purchasers. Indirect access to the DTC system is also available to others that clear through or maintain a custodial relationship with a DTC participant, either directly or indirectly. Transfers of ownership or other interests in Notes in DTC may be made only through DTC participants. In addition, beneficial owners of Notes in DTC will receive all distributions of principal of and interest on the Notes from the Trustee through such DTC participant.

Euroclear and Clearstream. Euroclear and Clearstream hold securities for participating organizations and facilitate the clearance and settlement of securities transactions between their respective participants through electronic book-entry changes in accounts of such participants. Euroclear and Clearstream provide to their participants, among other things, services for safekeeping, administration, clearance and settlement of internationally-traded securities and securities lending and borrowing. Euroclear and Clearstream interface with domestic securities markets. Euroclear and Clearstream participants are financial institutions

— 236 — such as underwriters, securities brokers and dealers, banks, trust companies and certain other organizations. Indirect access to Euroclear or Clearstream is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Euroclear or Clearstream participant, either directly or indirectly.

Initial Settlement

Initial settlement for the Notes will be made in immediately available funds in U.S. dollars. All Notes issued in the form of global notes will be deposited with Deutsche Bank Trust Company Americas, as custodian for DTC. Investors’ interests in Notes held in book-entry form by DTC will be represented through financial institutions acting on their behalf as direct and indirect participants in DTC. As a result, Euroclear and Clearstream will initially hold positions on behalf of their participants through DTC.

Investors electing to hold their Notes through DTC (other than through accounts at Euroclear or Clearstream) must follow the settlement practices applicable to United States corporate debt obligations. The securities custody accounts of investors will be credited with their holdings against payment in same day funds on the settlement date.

Investors electing to hold their Notes through Euroclear or Clearstream accounts will follow the settlement procedures applicable to conventional Eurobonds in registered form. Notes will be credited to the securities custody accounts of Euroclear Holders and of Clearstream Holders on the business day following the settlement date against payment for value on the settlement date.

Secondary Market Trading

Because the purchaser determines the place of delivery, it is important to establish at the time of trading of any Notes where both the purchaser’s and seller’s accounts are located to ensure that settlement can be made on the desired value date.

Trading between DTC Participants. Secondary market trading between DTC participants will occur in the ordinary way in accordance with DTC rules and will be settled using the procedures applicable to United States corporate debt obligations in same-day funds using DTC’s Same Day Funds Settlement System.

Trading between Euroclear and Clearstream Participants. Secondary market trading between Euroclear participants and Clearstream participants will occur in the ordinary way in accordance with the applicable rules and operating procedures of Clearstream and Euroclear and will be settled using the procedures applicable to conventional Eurobonds in same-day funds.

Trading between DTC Seller and Euroclear or Clearstream Purchaser. When Notes are to be transferred from the account of a DTC participant to the account of a Euroclear participant or a Clearstream participant, the purchaser must send instructions to Euroclear or Clearstream through a participant at least one business day prior to settlement. Euroclear or Clearstream, as the case may be, will receive the Notes against payment. Payment will then be made to the DTC participant’s account against delivery of the Notes. Payment will include interest accrued on the Notes from and including the last interest payment date to and excluding the settlement date, on the basis of a calendar year consisting of twelve 30-day calendar months. For transactions settling on the 31st day of the month, payment will include interest accrued to and excluding the first day of the following month. Payment will then be made to the DTC participant’s account against delivery of the Notes. After settlement has been completed, the Notes will be credited to the respective clearing system and by the clearing system, in accordance with its usual procedures, to the Euroclear participant’s or Clearstream participant’s account. Credit for the Notes will appear on the next day (European time) and

— 237 — cash debit will be back-valued to, and the interest on the Notes will accrue from, the value date (which would be the preceding day when settlement occurs in New York). If settlement is not completed on the intended value date (i.e., the trade date fails), the Euroclear or Clearstream cash debit will be valued instead as of the actual settlement date. Euroclear participants or Clearstream participants will need to make available to the respective clearing systems the funds necessary to process same-day funds settlement. The most direct means of doing so is to pre-position funds for settlement, either from cash on hand or existing lines of credit, as they would for any settlement occurring within Euroclear or Clearstream. Under this approach, they may take on credit exposure to Euroclear or Clearstream until the Notes are credited to their accounts one day later. As an alternative, if Euroclear or Clearstream has extended a line of credit to them, participants can elect not to pre-position funds and allow that credit line to be drawn upon to finance settlement. Under this procedure, Euroclear participants or Clearstream participants purchasing Notes would incur overdraft charges for one day, assuming they cleared the overdraft when the Notes were credited to their accounts. However, interest on the Notes would accrue from the value date. Therefore, in many cases, the investment income on Notes earned during that one-day period may substantially reduce or offset the amount of such overdraft charges, although this result will depend on each participant’s particular cost of funds. The sale proceeds will be available to the DTC seller on the settlement date. Thus, to the DTC participant, a cross-market transaction will settle no differently than a trade between two DTC participants. Finally, day traders that use Euroclear or Clearstream and that purchase Notes from DTC participants for credit to Euroclear participants or Clearstream participants should note that these trades will automatically fail on the sale side unless affirmative action is taken. At least three techniques should be readily available to eliminate this potential problem:

(1) borrowing through Euroclear or Clearstream for one day (until the purchase side of the day trade is reflected in their Euroclear account or Clearstream account) in accordance with the clearing system’s customary procedures;

(2) borrowing the Notes in the United States from a DTC participant no later than one day prior to settlement, which would give the Notes sufficient time to be reflected in the borrower’s Euroclear account or Clearstream account in order to settle the sale side of the trade; or

(3) staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC participant is at least one day prior to the value date for the sale to the Euroclear participants or Clearstream participants.

Trading between Euroclear or Clearstream Seller and DTC Purchaser. Due to the time zone differences in their favor, Euroclear participants or Clearstream participants may employ their customary procedures for transactions in which Notes are to be transferred by the respective clearing system to another DTC participant. The seller must send instructions to Euroclear or Clearstream through a participant at least one business day prior to settlement. In these cases, Euroclear or Clearstream will credit the Notes to the DTC participant’s account against payment. Payment will include interest accrued on the Notes from and including the last interest payment date to and excluding the settlement date, on the basis of a calendar year consisting of twelve 30-day calendar months. For transactions settling on the 31st day of the month, payment will include interest accrued to the Notes excluding the first day of the following month. Payment will then be made to the DTC participant’s account against delivery of the Notes. The payment will then be reflected in the account of the Euroclear participant or Clearstream participant the following day, and receipt of the cash proceeds in the Euroclear or Clearstream participant’s account will be back-valued to the value date (which would be the

— 238 — preceding day when settlement occurs in New York). If the Euroclear participant or Clearstream participant has a line of credit with its respective clearing system and elects to draw on such line of credit in anticipation of receipt of the sale proceeds in its account, the back-valuation may substantially reduce or offset any overdraft charges incurred over the one-day period. If settlement is not completed on the intended value date (i.e., the trade fails), receipt of the cash proceeds in the Euroclear or Clearstream participant’s account would instead be valued as of the actual settlement date.

As in the case with respect to sales by a DTC participant to a Euroclear or Clearstream participant, participants in Euroclear and Clearstream will have their accounts credited the day after their settlement date. See “— Trading between DTC Seller and Euroclear or Clearstream Purchaser” above.

None of the Company, any Subsidiary Guarantor, any JV Subsidiary Guarantor, the Trustee or any Paying and Transfer Agent will have any responsibility for the performance by DTC, Euroclear or Clearstream or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations.

Notices

All notices or demands required or permitted by the terms of the Notes or the Indenture to be given to or by the Holders are required to be in writing and may be given or served by being sent by prepaid courier or by being deposited, first-class postage prepaid, in the United States mails (if intended for the Company or any Subsidiary Guarantor or the Trustee) addressed to the Company, such Subsidiary Guarantor or the Trustee, as the case may be, at the corporate trust office of the Trustee; and (if intended for any Holder) addressed to such Holder at such Holder’s last address as it appears in the Note register.

Any such notice or demand will be deemed to have been sufficiently given or served when so sent or deposited and, if to the Holders, when delivered in accordance with the applicable rules and procedures of DTC. Any such notice shall be deemed to have been delivered on the day such notice is delivered to DTC or if by mail, when so sent or deposited.

Consent to Jurisdiction; Service of Process

The Company and each of the Subsidiary Guarantors will irrevocably (1) submit to the non exclusive jurisdiction of any U.S. federal or New York state court located in the Borough of Manhattan, The City of New York in connection with any suit, action or proceeding arising out of, or relating to, the Notes, any Subsidiary Guarantee, any JV Subsidiary Guarantee, the Indenture or any transaction contemplated thereby; and (2) designate and appoint Corporation Service Company for receipt of service of process in any such suit, action or proceeding.

Governing Law

Each of the Notes, the Subsidiary Guarantees, the JV Subsidiary Guarantees and the Indenture provides that such instrument will be governed by, and construed in accordance with, the laws of the State of New York without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby. The relevant Security Documents will be governed under the laws of the jurisdiction in which the relevant Subsidiary Guarantor whose shares are pledged is incorporated. The Intercreditor Agreement will be governed by Hong Kong law.

Definitions

Set forth below are defined terms used in the covenants and other provisions of the Indenture. Reference is made to the Indenture for other capitalized terms used in this “Description of the Notes” for which no definition is provided.

— 239 — “Acquired Indebtedness” means Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary or Indebtedness of a Restricted Subsidiary assumed in connection with an Asset Acquisition by such Restricted Subsidiary whether or not Incurred in connection with, or in contemplation of, the Person merging with or into or becoming a Restricted Subsidiary.

“Affiliate” means, with respect to any Person, any other Person (1) directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person; (2) who is a director or officer of such Person or any Subsidiary of such Person or of any Person referred to in clause (1) of this definition; or (3) who is a spouse or any person cohabiting as a spouse, child or step-child, parent or step-parent, brother, sister, step-brother or step-sister, parent-in-law, grandchild, grandparent, uncle, aunt, nephew or niece of a Person described in clause (1) or (2). For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

“Applicable Premium” means with respect to any Note at any redemption date, the greater of (1) 1.00% of the principal amount of such Note and (2) the excess of (A) the present value at such redemption date of (x) the redemption price of such Note on January 14, 2014 (such redemption price being set forth in the table appearing above under the caption “— Optional Redemption”), plus (y) all required remaining scheduled interest payments due on such Note through January 14, 2014 (but excluding accrued and unpaid interest to the redemption date), computed using a discount rate equal to 2.5%, over (B) the principal amount of such Note on such redemption date.

“Asset Acquisition” means (1) an investment by the Company or any of its Restricted Subsidiaries in any other Person pursuant to which such Person shall become a Restricted Subsidiary or shall be merged into or consolidated with the Company or any of its Restricted Subsidiaries; or (2) an acquisition by the Company or any of its Restricted Subsidiaries of the property and assets of any Person other than the Company or any of its Restricted Subsidiaries that constitute substantially all of a division or line of business of such Person.

“Asset Disposition” means the sale or other disposition by the Company or any of its Restricted Subsidiaries (other than to the Company or another Restricted Subsidiary) of (1) all or substantially all of the Capital Stock of any Restricted Subsidiary; or (2) all or substantially all of the assets that constitute a division or line of business of the Company or any of its Restricted Subsidiaries.

“Asset Sale” means any sale, transfer or other disposition (including by way of merger, consolidation or Sale and Leaseback Transaction) of any of its property or assets (including any sale of Capital Stock of a Subsidiary or issuance of Capital Stock by a Restricted Subsidiary) in one transaction or a series of related transactions by the Company or any of its Restricted Subsidiaries to any Person; provided that “Asset Sale” shall not include:

(1) sales or other dispositions of inventory, receivables and other current assets (including properties under development for sale and completed properties for sale) in the ordinary course of business;

(2) sales, transfers or other dispositions of assets constituting a Permitted Investment or Restricted Payment permitted to be made under the “— Limitation on Restricted Payments” covenant;

(3) sales, transfers or other dispositions of assets with a Fair Market Value not in excess of US$1.0 million (or the Dollar Equivalent thereof) in any transaction or series of related transactions;

— 240 — (4) any sale, transfer, assignment or other disposition of any property, or equipment that has become damaged, worn out, obsolete or otherwise unsuitable for use in connection with the business of the Company or its Restricted Subsidiaries;

(5) any transfer, assignment or other disposition deemed to occur in connection with creating or granting any Permitted Lien;

(6) a transaction covered by the covenant under the caption “— Consolidation, Merger and Sale of Assets;” and

(7) any sale, transfer or other disposition by the Company or any of its Restricted Subsidiaries, including the sale or issuance by the Company or any Restricted Subsidiary of any Capital Stock of any Restricted Subsidiary, to the Company or any Restricted Subsidiary.

“Attributable Indebtedness” means, in respect of a Sale and Leaseback Transaction, the present value, discounted at the interest rate implicit in the Sale and Leaseback Transaction, of the total obligations of the lessee for rental payments during the remaining term of the lease in the Sale and Leaseback Transaction.

“Average Life” means, at any date of determination with respect to any Indebtedness, the quotient obtained by dividing (1) the sum of the products of (a) the number of years from such date of determination to the dates of each successive scheduled principal payment of such Indebtedness and (b) the amount of such principal payment by (2) the sum of all such principal payments.

“Bank Deposit Secured Indebtedness” means Indebtedness of the Company or any Restricted Subsidiary that is secured by a pledge of one or more bank accounts of the Company or a Restricted Subsidiary and is used by the Company and its Restricted Subsidiaries to in effect exchange U.S. dollars or Hong Kong dollars into Renminbi or vice versa; provided, however, that the total deposits in such pledged bank accounts shall not at any time exceed an amount equal to 110% of the aggregate outstanding principal amount of such Indebtedness (or the Dollar Equivalent thereof).

“Board of Directors” means the board of directors elected or appointed by the stockholders of the Company to manage the business of the Company or any committee of such board duly authorized to take the action purported to be taken by such committee.

“Board Resolution” means any resolution of the Board of Directors taking an action which it is authorized to take and adopted at a meeting duly called and held at which a quorum of disinterested members (if so required) was present and acting throughout or adopted by written resolution executed by every member of the Board of Directors.

“Business Day” means any day which is not a Saturday, Sunday, legal holiday or other day on which banking institutions or trust companies in The City of New York, London or Hong Kong (or in any other place in which payments on the Notes are to be made) are authorized by law or governmental regulation to close.

“Capitalized Lease” means, with respect to any Person, any lease of any property (whether real, personal or mixed) which, in conformity with GAAP, is required to be capitalized on the balance sheet of such Person.

“Capitalized Lease Obligations” means the discounted present value of the rental obligations under a Capitalized Lease.

— 241 — “Capital Stock” means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) in equity of such Person, whether outstanding on the Original Issue Date or issued thereafter, including, without limitation, all Common Stock and Preferred Stock.

“Change of Control” means the occurrence of one or more of the following events:

(1) the merger, amalgamation or consolidation of the Company with or into another Person or the merger or amalgamation of another Person with or into the Company, or the sale of all or substantially all the assets of the Company to another Person;

(2) the Permitted Holders are the beneficial owners of less than 50.0% of the total voting power of the Voting Stock of the Company;

(3) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as such term is used in Rule 13d-3 of the Exchange Act), directly or indirectly, of total voting power of the Voting Stock of the Company greater than such total voting power held beneficially by the Permitted Holders;

(4) individuals who on the Original Issue Date constituted the board of directors of the Company, together with any new directors whose election by the board of directors was approved by a vote of at least two-thirds of the directors then still in office who were either directors or whose election was previously so approved, cease for any reason to constitute a majority of the board of directors of the Company then in office; or

(5) the adoption of a plan relating to the liquidation or dissolution of the Company.

“Change of Control Triggering Event” means the occurrence of both a Change of Control and a Rating Decline.

“Clearstream” means Clearstream Banking, société anonyme, Luxembourg.

“Collateral” means all collateral securing, or purported to be securing, directly or indirectly, the Notes, any Subsidiary Guarantee or any JV Subsidiary Guarantee pursuant to the Security Documents, and shall initially consist of the Capital Stock of the initial Subsidiary Guarantors.

“Commodity Hedging Agreement” means any spot, forward or option commodity price protection agreements or other similar agreement or arrangement designed to protect against fluctuations in commodity prices.

“Common Stock” means, with respect to any Person, any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person’s common stock or ordinary shares, whether or not outstanding at the date of the Indenture, and include, without limitation, all series and classes of such common stock or ordinary shares.

— 242 — “Consolidated EBITDA” means, for any period, Consolidated Net Income for such period plus, to the extent such amount was deducted in calculating such Consolidated Net Income:

(1) Consolidated Interest Expense,

(2) income taxes (other than income taxes attributable to extraordinary and non-recurring gains (or losses) or sales of assets) including, without limitation, land appreciation tax, and

(3) depreciation expense, amortization expense and all other non-cash items reducing Consolidated Net Income (other than non-cash items in a period which reflect cash expenses paid or to be paid in another period), less all non-cash items increasing Consolidated Net Income (other than accrual of revenue in the ordinary course), all as determined on a consolidated basis for the Company and its Restricted Subsidiaries in conformity with GAAP; provided that (1) if any Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated EBITDA shall be reduced (to the extent not otherwise reduced in accordance with GAAP) by an amount equal to (A) the amount of the Consolidated Net Income attributable to such Restricted Subsidiary multiplied by (B) the percentage ownership interest in the income of such Restricted Subsidiary not owned on the last day of such period by the Company or any of its Restricted Subsidiaries and (2) in the case of any future PRC CJV (consolidated in accordance with GAAP), Consolidated EBITDA shall be reduced (to the extent not already reduced in accordance with GAAP) by any payments, distributions or amounts (including the Fair Market Value of any non-cash payments, distributions or amounts) required to be made or paid by such PRC CJV to the PRC CJV Partner, or to which the PRC CJV Partner otherwise has a right or is entitled, pursuant to the joint venture agreement governing such PRC CJV.

“Consolidated Fixed Charges” means, for any period, the sum (without duplication) of (1) Consolidated Interest Expense for such period and (2) all cash and non-cash dividends paid, declared, accrued or accumulated during such period on any Disqualified Stock or Preferred Stock of the Company or any Restricted Subsidiary held by Persons other than the Company or any Wholly Owned Restricted Subsidiary, except for dividends payable in the Company’s Capital Stock (other than Disqualified Stock) or paid to the Company or to a Wholly Owned Restricted Subsidiary.

“Consolidated Interest Expense” means, for any period, the amount that would be included in gross interest expense on a consolidated income statement prepared in accordance with GAAP for such period of the Company and its Restricted Subsidiaries, plus, to the extent not included in such gross interest expense, and to the extent incurred, accrued or payable during such period by the Company and its Restricted Subsidiaries, without duplication, (1) interest expense attributable to Capitalized Lease Obligations, (2) amortization of debt issuance costs and original issue discount expense and non-cash interest payments in respect of any Indebtedness, (3) the interest portion of any deferred payment obligation, (4) all commissions, discounts and other fees and charges with respect to letters of credit or similar instruments issued for financing purposes or in respect of any Indebtedness, (5) the net costs associated with Hedging Obligations (including the amortization of fees), (6) interest accruing on Indebtedness of any other Person that is Guaranteed by, or secured by a Lien on any asset of, the Company or any Restricted Subsidiary (other than Pre-Registration Mortgage Guarantees) and (7) any capitalized interest, provided that interest expense attributable to interest on any Indebtedness bearing a floating interest rate will be computed on a pro forma basis as if the rate in effect on the date of determination had been the applicable rate for the entire relevant period.

— 243 — “Consolidated Net Income” means, with respect to any specified Person for any period, the aggregate of the net income (or loss) of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in conformity with GAAP; provided that the following items shall be excluded in computing Consolidated Net Income (without duplication):

(1) the net income (or loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting except that:

(a) subject to the exclusion contained in clause (5) below, the Company’s equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to a Restricted Subsidiary, to the limitations contained in clause (3) below); and

(b) the Company’s equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income to the extent funded with cash or other assets of the Company or Restricted Subsidiaries;

(2) the net income (or loss) of any Person accrued prior to the date it becomes a Restricted Subsidiary or is merged into or consolidated with the Company or any of its Restricted Subsidiaries or all or substantially all of the property and assets of such Person are acquired by the Company or any of its Restricted Subsidiaries;

(3) the net income (but not loss) of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of such net income is not at the time permitted by the operation of the terms of its charter, articles of association or other similar constitutive documents, or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Restricted Subsidiary;

(4) the cumulative effect of a change in accounting principles;

(5) any net after tax gains realized on the sale or other disposition of (a) any property or assets of the Company or any Restricted Subsidiary which is not sold in the ordinary course of its business or (b) any Capital Stock of any Person (including any gains by the Company realized on sales of Capital Stock of the Company or other Restricted Subsidiaries);

(6) any translation gains and losses due solely to fluctuations in currency values and related tax effects; and

(7) any net after-tax extraordinary or non-recurring gains.

“Consolidated Net Worth” means, at any date of determination, stockholders’ equity as set forth on the most recently available semi-annual or annual consolidated balance sheet of the Company and its Restricted Subsidiaries, plus, to the extent not included, any Preferred Stock of the Company, less any amounts attributable to Disqualified Stock or any equity security convertible into or exchangeable for Indebtedness, the cost of treasury stock and the principal amount of any promissory notes receivable from the sale of the Capital Stock of the Company or any of its Restricted Subsidiaries, each item to be determined in conformity with GAAP.

“Contractor Guarantees” means any Guarantee by the Company or any Restricted Subsidiary of Indebtedness of any contractor, builder or other similar Person engaged by the

— 244 — Company or such Restricted Subsidiary in connection with the development, construction or improvement of real or personal property or equipment to be used in a Permitted Business by the Company or any Restricted Subsidiary in the ordinary course of business, which Indebtedness was Incurred by such contractor, builder or other similar Person to finance the cost of such development, construction or improvement.

“Currency Agreement” means any foreign exchange forward contract, currency swap agreement or other similar agreement or arrangement designed to protect against fluctuations in foreign exchange rates.

“Default” means any event that is, or after notice or passage of time or both would be, an Event of Default.

“Disqualified Stock” means any class or series of Capital Stock of any Person that by its terms or otherwise is (1) required to be redeemed prior to the date that is 183 days after the Stated Maturity of the Notes, (2) redeemable at the option of the holder of such class or series of Capital Stock at any time prior to the date that is 183 days after the Stated Maturity of the Notes or (3) convertible into or exchangeable for Capital Stock referred to in clause (1) or (2) above or Indebtedness having a scheduled maturity prior to the Stated Maturity of the Notes; provided that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an “asset sale” or “change of control” occurring prior to the Stated Maturity of the Notes shall not constitute Disqualified Stock if the “asset sale” or “change of control” provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in the “— Limitation on Asset Sales” and “— Repurchase of Notes upon a Change of Control Triggering Event” covenants and such Capital Stock specifically provides that such Person will not repurchase or redeem any such stock pursuant to such provision prior to the Company’s repurchase of such Notes as are required to be repurchased pursuant to the “— Limitation on Asset Sales” and “— Repurchase of Notes upon a Change of Control Triggering Event” covenants.

“Dollar Equivalent” means, with respect to any monetary amount in a currency other than U.S. dollars, at any time for the determination thereof, the amount of U.S. dollars obtained by converting such foreign currency involved in such computation into U.S. dollars at the base rate for the purchase of U.S. dollars with the applicable foreign currency as quoted by the Federal Reserve Bank of New York on the date of determination.

“DTC” means The Depository Trust Company and its successors.

“Entrusted Loans” means borrowings by a PRC Restricted Subsidiary from a bank that are secured by a pledge of deposits made by another PRC Restricted Subsidiary to the lending banks as security for such borrowings, provided that such borrowings are not reflected on the consolidated balance sheet of the Company.

“Equity Offering” means (i) any underwritten primary public offering or private placement of Common Stock of the Company after the Original Issue Date or (ii) any underwritten secondary public offering or secondary private placement of Common Stock of the Company beneficially owned by a Permitted Holder, after the Original Issue Date, to the extent that a Permitted Holder or a company controlled by a Permitted Holder concurrently with such public offering or private placement purchases in cash an equal amount of Common Stock from the Company at the same price as the public offering or private placing price; provided that any offering or placing referred to in (A) clause (i), (B) clause (ii), or (C) a combination of clauses (i) and (ii) result in the aggregate gross cash proceeds received by the Company being no less than US$20.0 million (or the Dollar Equivalent thereof).

“Euroclear” means Euroclear Bank S.A./N.V., as operator of the Euroclear System.

— 245 — “Fair Market Value” means the price that would be paid in an arm’s-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy, as determined in good faith by the Board of Directors, whose determination shall be conclusive if evidenced by a Board Resolution, except in the case of a determination of Fair Market Value of total assets for the purposes of determining a JV Entitlement Amount, in which case such price shall be determined by an accounting, appraisal or investment banking firm of recognized international standing appointed by the Company.

“Finance Subsidiary” means any Person who is Wholly Owned by the Company and who does not engage in any business activity except (1) the incurrence of Indebtedness the entire proceeds of which are on-lent to the Company, (2) the Guarantee of the Indebtedness of the Company permitted to be incurred under the Indenture, (3) activity related to the establishment or maintenance of that Person’s corporate existence, and (4) any other activity in connection with or incidental to activities referred to in clauses (1) through (3).

“Fixed Charge Coverage Ratio” means, on any Transaction Date, the ratio of (1) the aggregate amount of Consolidated EBITDA for the then most recent period of four fiscal quarters prior to such Transaction Date for which consolidated financial statements of the Company (which the Company shall use its reasonable best efforts to compile in a timely manner) are available (which may be internal consolidated financial statements) (the “Four Quarter Period”) to (2) the aggregate Consolidated Fixed Charges during such Four Quarter Period. In making the foregoing calculation:

(a) pro forma effect shall be given to any Indebtedness, Disqualified Stock or Preferred Stock Incurred, repaid or redeemed during the period (the “Reference Period”) commencing on and including the first day of the Four Quarter Period and ending on and including the Transaction Date (other than Indebtedness Incurred or repaid under a revolving credit or similar arrangement (or under any predecessor revolving credit or similar arrangement) in effect on the last day of such Four Quarter Period), in each case as if such Indebtedness, Disqualified Stock or Preferred Stock had been Incurred, repaid or redeemed on the first day of such Reference Period; provided that, in the event of any such repayment or redemption, Consolidated EBITDA for such period shall be calculated as if the Company or such Restricted Subsidiary had not earned any interest income actually earned during such period in respect of the funds used to repay or redeem such Indebtedness, Disqualified Stock or Preferred Stock;

(b) Consolidated Interest Expense attributable to interest on any Indebtedness (whether existing or being Incurred) computed on a pro forma basis and bearing a floating interest rate shall be computed as if the rate in effect on the Transaction Date (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months or, if shorter, at least equal to the remaining term of such Indebtedness) had been the applicable rate for the entire period;

(c) pro forma effect shall be given to the creation, designation or redesignation of Restricted and Unrestricted Subsidiaries as if such creation, designation or redesignation had occurred on the first day of such Reference Period;

(d) pro forma effect shall be given to Asset Dispositions and Asset Acquisitions (including giving pro forma effect to the application of proceeds of any Asset Disposition) that occur during such Reference Period as if they had occurred and such proceeds had been applied on the first day of such Reference Period; and

— 246 — (e) pro forma effect shall be given to asset dispositions and asset acquisitions (including giving pro forma effect to the application of proceeds of any asset disposition) that have been made by any Person that has become a Restricted Subsidiary or has been merged with or into the Company or any Restricted Subsidiary during such Reference Period and that would have constituted Asset Dispositions or Asset Acquisitions had such transactions occurred when such Person was a Restricted Subsidiary as if such asset dispositions or asset acquisitions were Asset Dispositions or Asset Acquisitions that occurred on the first day of such Reference Period; provided that to the extent that clause (d) or (e) of this sentence requires that pro forma effect be given to an Asset Acquisition or Asset Disposition (or asset acquisition or asset disposition), such pro forma calculation shall be based upon the two full fiscal semi-annual periods immediately preceding the Transaction Date of the Person, or division or line of business of the Person, that is acquired or disposed for which financial information is available.

“GAAP” means generally accepted accounting principles in Hong Kong as in effect from time to time.

“Guarantee” means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The term “Guarantee” used as a verb has a corresponding meaning.

“Hang Seng Loan” means the HK$50,000,000 term loan facility dated January 18, 2010 between Bohai International Investment Limited and Hang Seng Bank Limited as guaranteed by the Company, Affluent Way International Limited, Beijing Jinghui Real Estate Development Co., Ltd., and Dragon Tale Investments Limited.

“Hedging Obligation” of any Person means the obligations of such Person pursuant to any Commodity Hedging Agreement, Currency Agreement or Interest Rate Agreement.

“Holder” means the Person in whose name a Note is registered in the Note register.

“Incur” means, with respect to any Indebtedness or Capital Stock, to incur, create, issue, assume, Guarantee or otherwise become liable for or with respect to, or become responsible for, the payment of, contingently or otherwise, such Indebtedness or Capital Stock; provided that (1) any Indebtedness and Capital Stock of a Person existing at the time such Person becomes a Restricted Subsidiary (or fails to meet the qualifications necessary to remain an Unrestricted Subsidiary) will be deemed to be Incurred by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary and (2) the accretion of original issue discount shall not be considered an Incurrence of Indebtedness. The terms “Incurrence,” “Incurred” and “Incurring” have meanings correlative with the foregoing.

“Indebtedness” means, with respect to any Person at any date of determination (without duplication):

(1) all indebtedness of such Person for borrowed money;

— 247 — (2) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;

(3) all obligations of such Person in respect of letters of credit, bankers’ acceptances or other similar instruments;

(4) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, except Trade Payables;

(5) all Capitalized Lease Obligations and Attributable Indebtedness;

(6) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided that the amount of such Indebtedness shall be the lesser of (a) the Fair Market Value of such asset at such date of determination and (b) the amount of such Indebtedness;

(7) all Indebtedness of other Persons Guaranteed by such Person to the extent such Indebtedness is Guaranteed by such Person;

(8) to the extent not otherwise included in this definition, Hedging Obligations; and

(9) all Disqualified Stock issued by such Person valued at the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price plus accrued dividends.

For the avoidance of doubt, a mandatory put option granted to a Person that obligates the Company or any Restricted Subsidiary to repurchase the Capital Stock of any Restricted Subsidiary or any other Person shall be deemed to be “Indebtedness.”

Notwithstanding the foregoing, Indebtedness shall not include any capital commitments, deferred payment obligation or similar obligations Incurred in the ordinary course of business in connection with the acquisition, development, construction or improvement of real or personal property (including land use rights) to be used in a Permitted Business; provided that such Indebtedness is not reflected on the balance sheet of the Company or any Restricted Subsidiary (contingent obligations and commitments referred to in a footnote to financial statements and not otherwise reflected as borrowings on the balance sheet will not be deemed to be reflected on such balance sheet).

The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation; provided

(1) that the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with GAAP,

(2) that money borrowed and set aside at the time of the Incurrence of any Indebtedness in order to prefund the payment of the interest on such Indebtedness shall not be deemed to be “Indebtedness” so long as such money is held to secure the payment of such interest, and

(3) that the amount of Indebtedness with respect to any Hedging Obligation shall be: (i) zero if Incurred pursuant to paragraph (2)(f) under the “Limitation on Indebtedness and Preferred Stock” covenant, and (ii) equal to the net amount payable if such Hedging Obligation terminated at that time due to default by such Person if not Incurred pursuant to such paragraph.

— 248 — “Independent Third Party” means any Person that is not an Affiliate of the Company.

“Intercreditor Agreement” has the meaning set forth under “— Security.”

“Interest Rate Agreement” means any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement, option or future contract or other similar agreement or arrangement designed to protect against fluctuations in interest rates.

“Investment” means:

(1) any direct or indirect advance, loan or other extension of credit to another Person;

(2) any capital contribution to another Person (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others);

(3) any purchase or acquisition of Capital Stock, Indebtedness, bonds, notes, debentures or other similar instruments or securities issued by another Person; or

(4) any Guarantee of any obligation of another Person.

For the purposes of the provisions of the “Designation of Restricted and Unrestricted Subsidiaries” and “Limitation on Restricted Payments” covenants: (1) the Company will be deemed to have made an Investment in an Unrestricted Subsidiary in an amount equal to the Company’s proportional interest in the Fair Market Value of the assets (net of the Company’s proportionate interest in the liabilities owed to any Person other than the Company or a Restricted Subsidiary and that are not Guaranteed by the Company or a Restricted Subsidiary) of a Restricted Subsidiary that is designated an Unrestricted Subsidiary at the time of such designation, and (2) any property transferred to or from any Person shall be valued at its Fair Market Value at the time of such transfer, as determined in good faith by the Board of Directors.

“Investment Grade” means a rating of “AAA,” “AA,” “A” or “BBB,” as modified by a “+” or “-” indication, or an equivalent rating representing one of the four highest rating categories, by S&P or any of its successors or assigns or a rating of “Aaa,” or “Aa,” “A” or “Baa,” as modified by a “1,” “2” or “3” indication, or an equivalent rating representing one of the four highest rating categories, by Moody’s, or any of its successors or assigns or the equivalent ratings of any internationally recognized rating agency or agencies, as the case may be, which shall have been designated by the Company as having been substituted for S&P or Moody’s or both, as the case may be.

“Investment Property” means any property that is owned and held by any PRC Restricted Subsidiary primarily for long-term rental yield or for capital appreciation or both, or any hotel owned by the Company or any Restricted Subsidiary from which the Company or any Restricted Subsidiary derives or expects to derive operating income.

“JV Entitlement Amount” means, with respect to any JV Subsidiary Guarantor and its Subsidiaries, an amount that is equal to the product of (i) the Fair Market Value of the total assets of such JV Subsidiary and its Subsidiaries, on a consolidated basis (without deducting any Indebtedness or other liabilities of such JV Subsidiary Guarantor and its subsidiaries) as of the date of the last fiscal year end of the Company; and (ii) a percentage equal to the direct equity ownership percentage of the Company and/or its Restricted Subsidiaries in the Capital Stock of such JV Subsidiary Guarantor and its Subsidiaries.

— 249 — “JV Subsidiary Guarantee” has the meaning set forth under the caption “— The Subsidiary Guarantees.”

“JV Subsidiary Guarantor” means a Restricted Subsidiary that executes a JV Subsidiary Guarantee, provided that the Company and/or its Restricted Subsidiaries owns no less than 50.1% and no more than 80.0% of the Capital Stock of such Restricted Subsidiary.

“Lien” means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof or any agreement to create any mortgage, pledge, security interest, lien, charge, easement or encumbrance of any kind).

“Moody’s” means Moody’s Investors Service, Inc. and its successors.

“Net Cash Proceeds” means:

(1) with respect to any Asset Sale, the proceeds of such Asset Sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents and proceeds from the conversion of other property received when converted to cash or cash equivalents, net of:

(a) brokerage commissions and other fees and expenses (including fees and expenses of counsel and investment bankers) related to such Asset Sale;

(b) provisions for all taxes (whether or not such taxes will actually be paid or are payable) as a result of such Asset Sale without regard to the consolidated results of operations of the Company and its Restricted Subsidiaries, taken as a whole;

(c) payments made to repay Indebtedness or any other obligation outstanding at the time of such Asset Sale that either (x) is secured by a Lien on the property or assets sold or (y) is required to be paid as a result of such sale;

(d) appropriate amounts to be provided by the Company or any Restricted Subsidiary as a reserve against any liabilities associated with such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as determined in conformity with GAAP; and

(2) with respect to any sale or issuance of Capital Stock, the proceeds of such sale or issuance in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents and proceeds from the conversion of other property received when converted to cash or cash equivalents, net of attorneys’ fees, accountants’ fees, underwriters’ or placement agents’ fees, discounts or commissions and brokerage, consultant and other fees incurred in connection with such sale or issuance and net of taxes paid or payable as a result thereof.

“Non-Guaranteed Portion” means, at any time of determination, the total consolidated assets of all Offshore Non-Guarantor Subsidiaries as shown on the balance sheet of such Offshore Non-Guarantor Subsidiaries for the most recently ended full fiscal quarter for which financial statements (which the Company shall use its reasonable best efforts to compile in a

— 250 — timely manner) are available (which may be internal consolidated financial statements of the Offshore Non-Guarantor Subsidiaries); provided that, when calculating the Non-Guaranteed Portion, pro forma effect shall be given to (i) any designation of an Offshore Subsidiary as an Offshore Non-Guarantor Subsidiary (or any designation of an Offshore Non-Guarantor Subsidiary as a Subsidiary Guarantor or JV Subsidiary Guarantor) giving rise to the calculation of the Non-Guaranteed Portion and (ii) any other Offshore Subsidiary that was designated an Offshore Non-Guarantor Subsidiary (or Offshore Non-Guarantor Subsidiary that was designated as a Subsidiary Guarantor or JV Subsidiary Guarantor) after the end of such fiscal quarter.

“Offer to Purchase” means an offer to purchase Notes by the Company from the Holders commenced by the Company mailing a notice by first class mail, postage prepaid, to the Trustee, the Paying and Transfer Agent and each Holder at its last address appearing in the Note register stating:

(1) the covenant pursuant to which the offer is being made and that all Notes validly tendered will be accepted for payment on a pro rata basis;

(2) the purchase price, the date of purchase (which shall be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the “Offer to Purchase Payment Date”) and the applicable Rate Calculation Date;

(3) that any Note not tendered will continue to accrue interest pursuant to its terms;

(4) that, unless the Company defaults in the payment of the purchase price, any Note accepted for payment pursuant to the Offer to Purchase shall cease to accrue interest on and after the Offer to Purchase Payment Date;

(5) that Holders electing to have a Note purchased pursuant to the Offer to Purchase will be required to surrender the Note, together with the form entitled “Option of the Holder to Elect Purchase” on the reverse side of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day immediately preceding the Offer to Purchase Payment Date;

(6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the third Business Day immediately preceding the Offer to Purchase Payment Date, a facsimile transmission or letter setting forth the name of such Holder, the principal amount of Notes delivered for purchase and a statement that such Holder is withdrawing his election to have such Notes purchased; and

(7) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of RMB1,000,000 and integral multiples of RMB10,000 in excess thereof.

On the Offer to Purchase Payment Date, the Company shall (a) accept for payment on a pro rata basis Notes or portions thereof tendered pursuant to an Offer to Purchase; (b) deposit with the Paying Agent money sufficient to pay the purchase price of all Notes or portions thereof so accepted; and (c) deliver, or cause to be delivered, to the Trustee all Notes or portions thereof so accepted together with an Officers’ Certificate specifying the Notes or portions thereof accepted for payment by the Company. The Paying Agent shall promptly mail to the Holders of Notes so accepted payment in the U.S. Dollar Settlement Amount of an amount equal to the purchase price, and the Trustee or an authenticating agent shall promptly authenticate and mail to such Holders a new Note equal in principal amount to any unpurchased portion of the Note surrendered; provided that each Note purchased and each

— 251 — new Note issued shall be in a principal amount of RMB1,000,000 and integral multiples of RMB10,000 in excess thereof. The Company will publicly announce the results of an Offer to Purchase as soon as practicable after the Offer to Purchase Payment Date. The Company will comply with Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable, in the event that the Company is required to repurchase Notes pursuant to an Offer to Purchase.

The offer is required to contain or incorporate by reference information concerning the business of the Company and its Subsidiaries which the Company in good faith believes will assist such Holders to make an informed decision with respect to the Offer to Purchase, including a brief description of the events requiring the Company to make the Offer to Purchase, and any other information required by applicable law to be included therein. The offer is required to contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Offer to Purchase.

“Officer” means one of the executive officers of the Company or, in the case of a Subsidiary Guarantor or JV Subsidiary Guarantor, one of the directors or officers of such Subsidiary Guarantor or JV Subsidiary Guarantor, as the case may be.

“Officers’ Certificate” means a certificate signed by two Officers.

“Offshore Non-Guarantor Subsidiary” means any Offshore Subsidiary of the Company that does not provide a Subsidiary Guarantee or a JV Subsidiary Guarantee and that is designated by the Board of Directors as an Offshore Non-Guarantor Subsidiary in accordance with the provisions of the Indenture, which for the avoidance of doubt, includes the Existing Offshore Non-Guarantor Subsidiaries but excludes the Permanent Offshore Non-Guarantor Subsidiaries.

“Offshore Subsidiary” means any Subsidiary of the Company that is incorporated in any jurisdiction other than the PRC.

“Opinion of Counsel” means a written opinion from legal counsel who is reasonably acceptable to the Trustee.

“Original Issue Date” means the date on which the Notes are originally issued under the Indenture.

“Pari Passu Subsidiary Guarantee” means a guarantee by any Subsidiary Guarantor or any JV Subsidiary Guarantor of Indebtedness of the Company (including Additional Notes); provided that (1) the Company was permitted to Incur such Indebtedness under the covenant under the caption “— Limitation on Indebtedness and Preferred Stock” and (2) such guarantee ranks pari passu with any outstanding Subsidiary Guarantee of such Subsidiary Guarantor, or with any outstanding JV Subsidiary Guarantee of such JV Subsidiary Guarantor, as the case may be.

“Payment Default” means (1) any default in the payment of interest on any Note when the same becomes due and payable, (2) any default in the payment of principal of (or premium, if any, on) the Notes when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise, (3) the failure by the Company to make or consummate a Change of Control Offer in the manner described under the caption “— Repurchase of Notes upon a Change of Control Triggering Event,” or an Offer to Purchase in the manner described under the caption “— Limitation on Asset Sales” or (4) any Event of Default specified in clause (4) of the definition of Events of Default.

“Permitted Businesses” means any business which is the same as or related, ancillary or complementary to any of the businesses of the Company and its Restricted Subsidiaries on the

— 252 — Original Issue Date, including, without limitation real estate acquisition, development, leasing and management, hotel acquisition, development, operation and management, and the acquisition, development, management and operation of leisure facilities and other infrastructure, in each case associated with real estate projects acquired, developed or managed, or intended in good faith to be acquired, developed or managed, by the Company or any Restricted Subsidiary.

“Permitted Holders” means any or all of the following:

(1) Wong Chiu Yeung;

(2) any Affiliate (other than an Affiliate as defined in clause (2) or (3) of the definition of Affiliate) of the Person specified in clause (1); and

(3) any Person both the Capital Stock and the Voting Stock of which (or in the case of a trust, the beneficial interests in which) are owned 80.0% by Persons specified in clauses (1) and (2).

“Permitted Investment” means:

(1) any Investment in the Company or a Restricted Subsidiary that is primarily engaged in a Permitted Business or a Person which will, upon the making of such Investment, become a Restricted Subsidiary that is primarily engaged in a Permitted Business or be merged or consolidated with or into or transfer or convey all or substantially all its assets to, the Company or a Restricted Subsidiary that is primarily engaged in a Permitted Business;

(2) Temporary Cash Investments;

(3) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses in accordance with GAAP;

(4) stock, obligations or securities received in satisfaction of judgments;

(5) an Investment in an Unrestricted Subsidiary consisting solely of an Investment in another Unrestricted Subsidiary;

(6) any Investment pursuant to a Hedging Obligation designed solely to protect the Company or any Restricted Subsidiary against fluctuations in commodity prices, interest rates or foreign currency exchange rates;

(7) receivables owing to the Company or any Restricted Subsidiary, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms;

(8) Investments made by the Company or any Restricted Subsidiary consisting of consideration received in connection with an Asset Sale made in compliance with the covenant under the caption “— Limitation on Asset Sales.”

(9) pledges or deposits (x) with respect to leases or utilities provided to third parties in the ordinary course of business or (y) otherwise described in the definition of “Permitted Liens” or made in connection with Liens permitted under the covenant described under “— Limitation on Liens”;

(10) any Investment pursuant to Pre-Registration Mortgage Guarantees or Contractor Guarantees by the Company or any Restricted Subsidiary otherwise permitted to be Incurred under the Indenture;

— 253 — (11) Investments in securities of trade creditors, trade debtors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditor, trade debtor or customer;

(12) advances to contractors and suppliers for the acquisition of assets or consumables or services in the ordinary course of business that are recorded as deposits or prepaid expenses on the Company’s consolidated balance sheet;

(13) deposits of pre-sale proceeds made in order to secure the completion and delivery of pre-sold properties and issuance of the related land use title in the ordinary course of business;

(14) deposits made in order to comply with statutory or regulatory obligations to maintain deposits for workers compensation claims and other purposes specified by statute or regulation from time to time in the ordinary course of business; and

(15) deposits made in order to secure the performance of the Company or any of its Restricted Subsidiaries and prepayments made in connection with the acquisition of real property or land use rights by the Company or any of its Restricted Subsidiaries, in each case in the ordinary course of business.

“Permitted Liens” means:

(1) Liens for taxes, assessments, governmental charges or claims that are being contested in good faith by appropriate legal or administrative proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made;

(2) statutory and common law Liens of landlords and carriers, warehousemen, mechanics, suppliers, repairmen or other similar Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate legal or administrative proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made;

(3) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory or regulatory obligations, bankers’ acceptances, surety and appeal bonds, government contracts, performance and return-of-money bonds and other obligations of a similar nature incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money);

(4) leases or subleases granted to others that do not materially interfere with the ordinary course of business of the Company and its Restricted Subsidiaries, taken as a whole;

(5) Liens encumbering property or assets under construction arising from progress or partial payments by a customer of the Company or its Restricted Subsidiaries relating to such property or assets;

(6) Liens on property of, or on shares of Capital Stock or Indebtedness of, any Person existing at the time such Person becomes, or becomes a part of, any Restricted Subsidiary; provided that such Liens do not extend to or cover any property or assets of the Company or any Restricted Subsidiary other than the property or assets acquired; provided further that such Liens were not created in contemplation of or in connection with the transactions or series of transactions pursuant to which such Person became a Restricted Subsidiary;

— 254 — (7) Liens in favor of the Company or any Restricted Subsidiary;

(8) Liens arising from the rendering of a final judgment or order against the Company or any Restricted Subsidiary that does not give rise to an Event of Default;

(9) Liens securing reimbursement obligations with respect to letters of credit that encumber documents and other property relating to such letters of credit and the products and proceeds thereof;

(10) Liens encumbering customary initial deposits and margin deposits, and other Liens that are within the general parameters customary in the industry and incurred in the ordinary course of business, in each case, securing Indebtedness under Hedging Obligations permitted by clause (f) of the second paragraph of the covenant under the caption “— Limitation on Indebtedness and Preferred Stock”;

(11) Liens existing on the Original Issue Date;

(12) Liens securing Indebtedness which is Incurred to refinance secured Indebtedness which is permitted to be Incurred under clause (e) of the second paragraph of the covenant described under the caption entitled “— Limitation on Indebtedness and Preferred Stock”; provided that such Liens do not extend to or cover any property or assets of the Company or any Restricted Subsidiary other than the property or assets securing the Indebtedness being refinanced;

(13) Liens under the Security Documents;

(14) Liens securing any Permitted Pari Passu Secured Indebtedness that complies with each of the requirements set forth under “— Security — Permitted Pari Passu Secured Indebtedness”;

(15) any interest or title of a lessor in the property subject to any operating lease;

(16) Liens securing Indebtedness of the Company or any Restricted Subsidiary under any Pre-Registration Mortgage Guarantee which is permitted to be Incurred under clause (g) of the second paragraph of the covenant under the caption “— Limitation on Indebtedness and Preferred Stock”;

(17) easements, rights-of-way, municipal and zoning ordinances or other restrictions as to the use of properties in favor of governmental agencies or utility companies that do not materially adversely affect the value of such properties or materially impair the use for the purposes of which such properties are held by the Company or any Restricted Subsidiary;

(18) Liens (including extensions and renewals thereof) upon real or personal property acquired after the Original Issue Date; provided that, (a) such Lien is created solely for the purpose of securing Indebtedness of the type described under clause (2)(h) of the covenant under the caption entitled “— Certain Covenants — Limitation on Indebtedness and Preferred Stock” and such Lien is created prior to, at the time of or within 180 days after the later of the acquisition or the completion of development, construction or improvement of such property, (b) the principal amount of the Indebtedness secured by such Lien does not exceed 100.0% of the cost of such property, development, construction or improvement and (c) such Lien shall not extend to or cover any property or assets other than such item of property and any improvements on such item; provided that, in the case of clauses (b) and (c), such Lien may cover other property or assets (instead of or in addition to such item of property or improvements) and the principal amount of Indebtedness secured by

— 255 — such Lien may exceed 100.0% of such cost if (x) such Lien is incurred in the ordinary course of business and (y) the aggregate book value of property or assets (as reflected in the most recent available consolidated financial statements of the Company (which may be internal consolidated financial statements) or, if any such property or assets have been acquired since the date of such financial statements, the cost of such property or assets) subject to Liens incurred pursuant to this clause (18) does not exceed 130.0% of the aggregate principal amount of Indebtedness secured by such Liens;

(19) Liens on deposits of pre-sale proceeds made in order to secure the completion and delivery of pre-sold properties and issuance of the related land use title made in the ordinary course of business and not securing Indebtedness of the Company or any Restricted Subsidiary;

(20) Liens on deposits made in order to comply with statutory obligations to maintain deposits for workers compensation claims and other purposes specified by statute made in the ordinary course of business and not securing Indebtedness of the Company or any Restricted Subsidiary;

(21) Liens on deposits made in order to secure the performance of the Company or any of its Restricted Subsidiaries in connection with the acquisition of real property or land use rights by the Company or any of its Restricted Subsidiaries in the ordinary course of business and not securing Indebtedness of the Company or any Restricted Subsidiary;

(22) Liens on the Capital Stock of a PRC Project Company granted by the Company or any PRC Restricted Subsidiary in favor of any Trust Company Investor in respect of, and to secure, Indebtedness of the type permitted to be Incurred under clause (2)(p) of the covenant described under “— Limitation on Indebtedness and Preferred Stock”;

(23) Liens incurred on one or more bank accounts to secure Bank Deposit Secured Indebtedness;

(24) Liens on Investment Properties securing Indebtedness of the Company or any PRC Restricted Subsidiary of the type described under clause (2)(r) of the covenant described under “— Limitation on Indebtedness and Preferred Stock”;

(25) Liens incurred or deposits made to secure Entrusted Loans;

(26) Liens on current assets securing Indebtedness which is permitted to be Incurred under clause (2)(n) of the covenant described under “— Limitation on Indebtedness and Preferred Stock”;

(27) Liens on the Capital Stock of the Person that is to be acquired under the relevant Staged Acquisition Agreement securing Indebtedness which is permitted to be Incurred under clause (2)(o) of the covenant described under “— Limitation on Indebtedness and Preferred Stock”;

(28) Liens securing Indebtedness of Restricted Subsidiaries (other than Subsidiary Guarantors or JV Subsidiary Guarantors) Incurred pursuant to clause (2)(s) of the covenant described under “— Limitation on Indebtedness and Preferred Stock”; and

(29) Liens incurred in the ordinary course of business of the Company or any Restricted Subsidiary of the Company with respect to obligations that do not exceed US$5.0 million at any one time outstanding;

— 256 — provided that, with respect to the Collateral, “Permitted Liens” shall only refer to the Liens described in clauses (1), (6), (11), (13) and (14) of this definition.

“Permitted Pari Passu Secured Indebtedness” has the meaning set forth under “— Security — Permitted Pari Passu Secured Indebtedness.”

“Permitted Subsidiary Indebtedness” means Indebtedness of, and all Preferred Stock issued by, the Restricted Subsidiaries, taken as a whole; provided that, on the date of the Incurrence of such Indebtedness and after giving effect thereto and the application of the proceeds thereof, the aggregate principal amount outstanding of all such Indebtedness (excluding any Public Indebtedness and any Indebtedness of any Restricted Subsidiary permitted under clauses 2(a), (b), (d), (f), (g), (t) and (u) of the covenant described under “— Certain Covenants — Limitation on Indebtedness and Preferred Stock”) does not exceed an amount equal to 15.0% of the Total Assets.

“Person” means any individual, corporation, partnership, limited liability company, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof.

“Pre-Registration Mortgage Guarantee” means any Indebtedness of the Company or any Restricted Subsidiary consisting of a guarantee in favor of any bank or other similar financial institutions in the ordinary course of business of secured loans of purchasers of individual units of properties from the Company or any Restricted Subsidiary; provided that, any such guarantee shall be released in full on or before the perfection of a security interest in such properties under applicable law in favor of the relevant lender.

“Preferred Stock” as applied to the Capital Stock of any Person means Capital Stock of any class or classes that by its term is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person.

“PRC” means the People’s Republic of China, excluding Hong Kong Special Administrative Region, Macau and Taiwan.

“PRC CJV” means any Subsidiary that is a Sino-foreign cooperative joint venture enterprise with limited liability, established in the PRC pursuant to the Law of the People’s Republic of China on Sino-foreign Cooperative Joint Ventures adopted on April 13, 1988 (as most recently amended on October 13, 2000) and the Detailed Rules for the Implementation of the Law of the People’s Republic of China on Sino-foreign Cooperative Joint Ventures promulgated on September 4, 1995, as such laws may be amended.

“PRC CJV Partner” means with respect to a PRC CJV, the other party to the joint venture agreement relating to such PRC CJV with the Company or any Restricted Subsidiary.

“PRC Project Company” means any Restricted Subsidiary organized under the laws of the PRC primarily engaged in a Permitted Business.

“PRC Restricted Subsidiary” means a Restricted Subsidiary organized under the laws of the PRC.

“Public Indebtedness” means any bonds, debentures, notes or similar debt securities issued in a public offering or a private placement (other than the Notes) to institutional investors.

— 257 — “Rating Agencies” means (1) S&P and (2) Moody’s and (3) if S&P or Moody’s or both shall not make a rating of the Notes publicly available, a nationally recognized securities rating agency or agencies, as the case may be, selected by the Company, which shall be substituted for S&P or Moody’s or both, as the case may be.

“Rating Category” means (1) with respect to S&P, any of the following categories: “BB,” “B,” “CCC,” “CC,” “C” and “D” (or equivalent successor categories); (2) with respect to Moody’s, any of the following categories: “Ba,” “B,” “Caa,” “Ca,” “C” and “D” (or equivalent successor categories); and (3) the equivalent of any such category of S&P or Moody’s used by another Rating Agency. In determining whether the rating of the Notes has decreased by one or more gradations, gradations within Rating Categories (“+” and “-” for S&P; “1”, “2” and “3” for Moody’s; or the equivalent gradations for another Rating Agency) shall be taken into account (e.g., with respect to S&P, a decline in a rating from “BB+” to “BB,” as well as from “B-” to “B+”, will constitute a decrease of one gradation).

“Rating Date” means (1) in connection with a Change of Control Triggering Event, that date which is 90 days prior to the earlier of (x) a Change of Control and (y) a public notice of the occurrence of a Change of Control or of the intention by the Company or any other Person or Persons to effect a Change of Control or (2) in connection with actions contemplated under the caption “— Consolidation, Merger and Sale of Assets”, that date which is 90 days prior to the earlier of (x) the occurrence of any such actions as set forth therein and (y) a public notice of the occurrence of any such actions.

“Rating Decline” means (1) in connection with a Change of Control Triggering Event, the occurrence on, or within six months after, the date, or public notice of the occurrence of, a Change of Control or the intention by the Company or any other Person or Persons to effect a Change of Control (which period shall be extended so long as the rating of the Notes is under publicly announced consideration for possible downgrade by any of the Rating Agencies) of any of the events listed below, or (2) in connection with actions contemplated under the caption “— Consolidation, Merger and Sale of Assets”, the notification by any of the Rating Agencies that such proposed actions will result in any of the events listed below:

(a) in the event the Notes are rated by both Moody’s and S&P on the Rating Date as Investment Grade, the rating of the Notes by either Rating Agency shall be below Investment Grade;

(b) in the event the Notes are rated by either, but not both, of the Rating Agencies on the Rating Date as Investment Grade, the rating of the Notes by such Rating Agency shall be below Investment Grade; or

(c) in the event the Notes are rated below Investment Grade by both Rating Agencies on the Rating Date, the rating of the Notes by either Rating Agency shall be decreased by one or more gradations (including gradations within Rating Categories as well as between Rating Categories).

“Renminbi” or RMB” means yuan, the lawful currency of the PRC.

“Replacement Assets” means, on any date, property or assets (other than current assets) of a nature or type or that are used in a Permitted Business.

“Restricted Subsidiary” means any Subsidiary of the Company other than an Unrestricted Subsidiary.

“S&P” means Standard & Poor’s Ratings Services and its affiliates.

— 258 — “Sale and Leaseback Transaction” means any direct or indirect arrangement relating to property (whether real, personal or mixed), now owned or hereafter acquired whereby the Company or any Restricted Subsidiary transfers such property to another Person and the Company or any Restricted Subsidiary leases it from such Person.

“Security Documents” means, collectively, the pledge agreements and any other agreements or instruments that may evidence or create any security interest in favor of the Shared Security Trustee and/or any Holders in any or all of the Collateral.

“Senior Indebtedness” of the Company or a Restricted Subsidiary, as the case may be, means all Indebtedness of the Company or the Restricted Subsidiary, as relevant, whether outstanding on the Original Issue Date or thereafter created, except for Indebtedness which, in the instrument creating or evidencing the same, is expressly stated to be subordinated in right of payment to (a) in respect of the Company, the Notes, (b) in respect of any Restricted Subsidiary that is a Subsidiary Guarantor, its Subsidiary Guarantee, or (c) in respect of any Restricted Subsidiary that is a JV Subsidiary Guarantor, its JV Subsidiary Guarantee; provided that Senior Indebtedness does not include (1) any obligation to the Company or any Restricted Subsidiary, (2) trade payables or (3) Indebtedness Incurred in violation of the Indenture.

“Staged Acquisition Agreement” means an agreement between the Company or a Restricted Subsidiary and an Independent Third Party (x) pursuant to which the Company or such Restricted Subsidiary agrees to acquire 50% or more of the Capital Stock of a Person for a consideration that is not more than the Fair Market Value of such Capital Stock of such Person at the time the Company or such Restricted Subsidiary enters into such agreement and (y) which provides that the payment of the purchase price for such Capital Stock is made in more than one installment over a period of time not to exceed 18 months from the date the Company or such Restricted Subsidiary enters into such Staged Acquisition Agreement.

“Stated Maturity” means, (1) with respect to any Indebtedness, the date specified in such debt security as the fixed date on which the final installment of principal of such Indebtedness is due and payable as set forth in the documentation governing such Indebtedness and (2) with respect to any scheduled installment of principal of or interest on any Indebtedness, the date specified as the fixed date on which such installment is due and payable as set forth in the documentation governing such Indebtedness.

“Subordinated Indebtedness” means any Indebtedness of the Company, any Subsidiary Guarantor or any JV Subsidiary Guarantor which is contractually subordinated or junior in right of payment to the Notes, any Subsidiary Guarantee or any JV Subsidiary Guarantee, as applicable, pursuant to a written agreement to such effect.

“Subordinated Shareholder Loan” means unsecured Indebtedness Incurred by the Company or any Restricted Subsidiary from but only for long as such Indebtedness is owed to, any Permitted Holder (other than the Company or any Restricted Subsidiary) as to which (a) the payment of principal of (and premium, if any) and interest and other payment obligations in respect of such Indebtedness is, by its terms or by the terms of any agreement or instrument pursuant to which such Indebtedness is issued or remains outstanding and an agreement (the “Subordination Agreement”) to be entered into among the holders of such Indebtedness (or trustees or agents therefor) and the Trustee, is expressly made subordinate to the prior payment in full of the Notes to at least the following extent: (i) no payments of principal of (or premium, if any) or interest on or otherwise due in respect of such Indebtedness may be permitted for so long as any Default exists; (ii) such Indebtedness may not (x) provide for payments of principal of such Indebtedness at the Stated Maturity thereof or by way of a sinking fund applicable thereto or by way of any mandatory redemption, defeasance, retirement or repurchase thereof by the Company or such Subsidiary Guarantor (including any redemption, retirement or repurchase which is contingent upon events or circumstances), in each case prior to the final Stated Maturity of the Notes or (y) permit redemption or other

— 259 — retirement (including pursuant to an offer to purchase made by the Company or any Restricted Subsidiary) of such other Indebtedness at the option of the holder thereof prior to the final Stated Maturity of the Notes, except to the extent such redemption or other retirement is permitted under the covenant described under the caption “— Certain Covenants — Limitation on Restricted Payments” on the date of such redemption or other retirement, (iii) the Subordination Agreement will prevent the holders of such Indebtedness (or trustees or agents therefor) from pursuing remedies against the Company or any of the Restricted Subsidiaries or their respective assets or properties in an insolvency proceeding or in respect of a default under such Indebtedness and (iv) the Subordination Agreement will provide in the event that any payment is received by the holders of such Indebtedness (or any trustee or agent therefor) in respect of such Indebtedness where such payment is prohibited by one or more of the subordination provisions described in this definition, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the Trustee on behalf of the Holders of the Notes, and (b) the terms thereof provide that interest (and premium, if any) thereon is paid solely in the form of (i) pay-in-kind, or PIK, payments constituting additional Subordinated Shareholder Loans or (ii) cash (to the extent provided for when such Subordinated Shareholder Loan was originally Incurred) if such cash interest (or premium, if any) payment would be permitted to be made under the covenant described under the caption “— Certain Covenants — Limitation on Restricted Payments” on the date of such payment.

“Subsidiary” means, with respect to any Person, any corporation, association or other business entity of which more than 50.0% of the voting power of the outstanding Voting Stock is owned, directly or indirectly, by such Person and one or more other Subsidiaries of such Person.

“Subsidiary Guarantee” means any Guarantee of the obligations of the Company under the Indenture and the Notes by any Subsidiary Guarantor.

“Subsidiary Guarantor” means any initial Subsidiary Guarantor named herein and any other Restricted Subsidiary which guarantees the payment of the Notes pursuant to the Indenture and the Notes; provided that Subsidiary Guarantor will not include (a) any Person whose Subsidiary Guarantee has been released in accordance with the Indenture and the Notes or (b) any JV Subsidiary Guarantor.

“Subsidiary Guarantor Pledgor” means any initial Subsidiary Guarantor Pledgor named herein and any other Subsidiary Guarantor which pledges Collateral to secure the obligations of the Company under the Notes and the Indenture and of such Subsidiary Guarantor under its Subsidiary Guarantee; provided that a Subsidiary Guarantor Pledgor will not include any person whose pledge under the Security Documents has been released in accordance with the Security Documents, the Indenture and the Notes.

“Temporary Cash Investment” means any of the following:

(1) direct obligations of the United States of America, any state of the European Economic Area, the People’s Republic of China and Hong Kong or any agency of any of the foregoing or obligations fully and unconditionally Guaranteed by the United States of America, any state of the European Economic Area, the People’s Republic of China and Hong Kong or any agency of any of the foregoing, in each case maturing within one year;

(2) demand or time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any state thereof, any state of the European Economic Area or Hong Kong, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of US$100.0 million (or the Dollar Equivalent thereof) and has outstanding

— 260 — debt which is rated “A” (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money market fund sponsored by a registered broker dealer or mutual fund distributor;

(3) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (1) above entered into with a bank or trust company meeting the qualifications described in clause (2) above;

(4) commercial paper, maturing not more than 180 days after the date of acquisition thereof, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of “P-1” (or higher) according to Moody’s or “A-1” (or higher) according to S&P;

(5) securities, maturing within one year of the date of acquisition thereof, issued or fully and unconditionally Guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least “A” by S&P or Moody’s;

(6) any money market fund that has at least 95.0% of its assets continuously invested in investments of the types described in clauses (1) through (5) above; and

(7) time deposit accounts, certificates of deposit, overnight or call deposits and money market deposits with (i) Agricultural Bank of China, Bank of Beijing, Bank of China, Bank of Communications Limited, Bank of East Asia Limited, Bank of Quanzhou, China CITIC Bank, China Construction Bank, China Everbright Bank, China Merchants Bank, China Minsheng Bank, Hang Seng Bank Limited, The Hongkong and Shanghai Banking Corporation Limited, Huaxia Bank, Industrial and Commercial Bank of China, Mizuho Corporation Bank, Nanyang Commercial Bank, Shanghai Pudong Development Bank, Xiamen Bank, Xiamen International Bank and Xingye Bank, (ii) any other bank or trust company organized under the laws of the PRC whose long-term debt is rated as high or higher than any of those banks described in clause (i) of this paragraph or (iii) any other bank organized under the laws of the PRC; provided that, in the case of clause (iii), such deposits do not exceed US$10.0 million (or the Dollar Equivalent thereof) with any single bank or US$30.0 million (or the Dollar Equivalent thereof) in the aggregate, at any date of determination thereafter.

“Total Assets” means, as of any date, the total consolidated assets of the Company and its Restricted Subsidiaries measured in accordance with GAAP as of the last day of the most recent full fiscal quarter for which consolidated financial statements of the Company (which the Company shall use its reasonable best efforts to compile on a timely manner) are available (which may be internal consolidated financial statements); provided that only with respect to clause (2)(h) of “— Certain Covenants — Limitation on Indebtedness and Preferred Stock” covenant and the definition of “Permitted Subsidiary Indebtedness,” Total Assets shall be calculated after giving pro forma effect to include the cumulative value of all of the real or personal property or equipment the acquisition, development, construction or improvement of which requires or required the Incurrence of Indebtedness and calculation of Total Assets thereunder, as measured by the purchase price or cost therefor or budgeted cost provided in good faith by the Company or any of its Restricted Subsidiaries to the bank or other similar financial institutional lender providing such Indebtedness.

— 261 — “Trade Payables” means, with respect to any Person, any accounts payable or any other indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by such Person or any of its Subsidiaries arising in the ordinary course of business in connection with the acquisition of goods or services.

“Transaction Date” means, with respect to the Incurrence of any Indebtedness, the date such Indebtedness is to be Incurred and, with respect to any Restricted Payment, the date such Restricted Payment is to be made.

“Trust Company Investor” means an Independent Third Party that is a financial institution or an insurance company organized under the laws of the PRC, or an Affiliate thereof, that invests in any Capital Stock of a PRC Project Company.

“Unrestricted Subsidiary” means (1) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided in the Indenture; and (2) any Subsidiary of an Unrestricted Subsidiary.

“Voting Stock” means, with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person.

“Wholly Owned” means, with respect to any Subsidiary of any Person, the ownership of all of the outstanding Capital Stock of such Subsidiary (other than any director’s qualifying shares or Investments by foreign nationals mandated by applicable law) by such Person or one or more Wholly Owned Subsidiaries of such Person; provided that Subsidiaries that are PRC CJVs shall not be considered Wholly Owned Subsidiaries unless such Person or one or more Wholly Owned Subsidiaries of such Person is entitled to 95.0% or more of the economic benefits distributable by such Subsidiary.

— 262 — TAXATION

The following summary of certain Cayman Islands, British Virgin Islands, Hong Kong, PRC and United States tax consequences of the purchase, ownership and disposition of Notes is based upon applicable laws, regulations, rulings and decisions as of the date of this offering memorandum, all of which are subject to change (possibly with retroactive effect). This discussion does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase, own or dispose of the Notes and does not purport to deal with consequences applicable to all categories of investors, some of which may be subject to special rules. Persons considering the purchase of Notes should consult their own tax advisors concerning the tax consequences of the purchase, ownership and disposition of Notes.

Cayman Islands Taxation

Pursuant to section 6 of the Tax Concessions Law (1999 Revision) of the Cayman Islands, the Company has obtained an undertaking from the Governor in Cabinet:

(a) that no law which is thereafter enacted in the Cayman Islands imposing any tax to be levied on profits or income or gains or appreciations shall apply to the Company or its operations; and

(b) in addition, that no tax is to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax shall be payable by the Company:

(i) on or in respect of the shares, debentures or other obligations of the Company; or

(ii) by way of withholding in whole or in part of any relevant payment as defined in Section 6(3) of the Tax Concession Law (1999 Revision).

The undertaking is for a period of 20 years from December 19, 2006.

The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciations and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to the Company levied by the government of the Cayman Islands save certain stamp duties which may be applicable, from time to time, on certain instruments executed in or brought within the jurisdiction of the Cayman Islands. The Cayman Islands is not a party to any double tax treaties.

No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands companies except those which hold interests in land in the Cayman Islands. We do not hold, and do not intend to hold, any interest in land in the Cayman Islands.

British Virgin Islands

There is no income or other tax of the British Virgin Islands imposed by withholding or otherwise on any payment to be made to or by the Subsidiary Guarantors or the JV Subsidiary Guarantors (if any) pursuant to the execution, delivery, performance or enforcement of the Subsidiary Guarantees or the JV Subsidiary Guarantees (if any).

— 263 — Hong Kong

Withholding tax No withholding tax in Hong Kong is payable on payments of principal (including any premium payable on redemption of the Notes) or interest in respect of the Notes.

Profits tax Hong Kong profits tax is charged on every person carrying on a trade, profession or business in Hong Kong in respect of assessable profits arising in or derived from Hong Kong from such trade, profession or business. Under the Inland Revenue Ordinance (Chapter 112 of the Laws of Hong Kong) (the “Inland Revenue Ordinance”) as it is currently applied, Hong Kong profits tax may be charged on revenue profits arising on the sale, disposal or redemption of the Notes where such sale, disposal or redemption is or forms part of a trade, profession or business carried on in Hong Kong. Interest on the Notes will be subject to Hong Kong profits tax where such interest has a Hong Kong source, and is received by or accrues to:

• a financial institution (as defined in the Inland Revenue Ordinance) and arises through or from the carrying on by the financial institution of its business in Hong Kong; or

• a corporation carrying on a trade, profession or business in Hong Kong; or

• a person, other than a corporation, carrying on a trade, profession or business in Hong Kong and such interest is in respect of the funds of the trade, profession or business.

Although no tax is imposed in Hong Kong in respect of capital gains, Hong Kong profits tax may be chargeable on trading gains arising on the sale or disposal of the Notes where such transactions are or form part of a trade, profession or business carried on in Hong Kong.

Stamp duty No Hong Kong stamp duty will be chargeable upon the issue or transfer of a Note.

PRC Taxation The following summary of certain PRC tax consequences of the purchase, ownership and disposition of Notes is based upon applicable laws, rules and regulations in effect as of the date of this offering memorandum, all of which are subject to change (possibly with retroactive effect). This discussion does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase, own or dispose of the Notes and does not purport to deal with consequences applicable to all categories of investors, some of which may be subject to special rules. Persons considering the purchase of Notes should consult their own tax advisors concerning the tax consequences of the purchase, ownership and disposition of Notes, including such possible consequences under the laws of their country of citizenship, residence or domicile.

Taxation on Interest and Capital Gains Under the PRC EIT Law and implementation regulations issued by the State Council, if we are treated as a PRC “resident enterprise,” as described under “Risk Factors — Risks relating to conducting operations in the PRC — The treatment of our companies for PRC enterprise income tax purposes in unclear”), PRC income tax at the rate of 10% (or lower treaty rate, if any) is applicable to interest payable to investors that are “non-resident enterprises” and that

— 264 — do not have an establishment or place of business in the PRC, or that have such establishment or place of business but the relevant interest income is not effectively connected with the establishment or place of business, to the extent such interest is derived from sources within the PRC. Similarly, any gain realized on the transfer of the Notes by such investors is also subject to a 10% (or lower treaty rate, if any) PRC income tax if such gain is regarded as income derived from sources within the PRC. As advised by our PRC legal counsel, there is uncertainty as to whether we will be treated as a PRC “resident enterprise” for the purpose of the EIT Law. If we are treated as a PRC “resident enterprise,” the interest we pay in respect of the Notes, and the gain any investor may realize from the transfer of the Notes, would be treated as income derived from sources within the PRC and may be subject to PRC tax, which may materially and adversely affect the value of investment in the Notes.

No PRC stamp tax will be chargeable upon the issue or transfer of a Note (if the documents in respect of the issue and the transfer (a) will not be executed within the PRC; and (b) will not be governed or interpreted under PRC law.

U.S. Federal Income Taxation

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following discussion is a summary of certain material United States federal income tax considerations relating to the purchase, ownership and disposition of the Notes. This discussion is based upon the Internal Revenue Code of 1986 as amended (the “Code”), existing and proposed Treasury Regulations, and judicial decisions and administrative interpretations thereunder, as of the date hereof, all of which are subject to change, possibly with retroactive effect, or different interpretations. We cannot assure you that the Internal Revenue Service (the “IRS”) will not challenge one or more of the tax consequences described herein, and we have not obtained, nor do we intend to obtain, a ruling from the IRS or an opinion of counsel with respect to the United States federal tax considerations resulting from acquiring, holding or disposing of the Notes. This summary does not address all of the tax consequences that may be relevant to you in light of your personal circumstances, or to certain types of holders subject to special tax treatment, including, without limitation:

• certain financial institutions;

• brokers, dealers or traders in securities or commodities;

• insurance companies;

• “S” corporations;

• partnerships and other pass-through entities;

• regulated investment companies;

• real estate investment trusts;

• tax exempt organizations;

• persons who are subject to alternative minimum tax;

• persons who hold the Notes as a position in a “straddle” or as part of a “hedging” or “conversion” transaction;

• persons that have a functional currency other than the United States dollar; and

• certain expatriates, former citizens or former residents of the United States.

— 265 — This discussion addresses only U.S. Holders (as defined below) who purchase the Notes at their “issue price,” which will be the first price at which a substantial amount of the Notes is sold to the public (not including bond houses, brokers or similar persons or organization acting in the capacity of underwriters, placement agents or wholesalers) for money and who hold the Notes as capital assets within the meaning of Section 1221 of the Code. This discussion also does not address the tax considerations arising under the laws of any foreign, state or local jurisdiction and does not consider any aspects of U.S. federal tax law other than income taxation.

AS REQUIRED BY U.S. TREASURY REGULATIONS GOVERNING TAX PRACTICE, YOU ARE HEREBY ADVISED THAT ANY WRITTEN TAX ADVICE CONTAINED HEREIN WAS NOT WRITTEN OR INTENDED TO BE USED (AND CANNOT BE USED) BY ANY TAXPAYER FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER THE CODE; THE ADVICE WAS PREPARED TO SUPPORT THE PROMOTION OR MARKETING OF THE NOTES; AND YOU ARE URGED TO CONSULT YOUR TAX ADVISORS AS TO THE PARTICULAR TAX CONSIDERATIONS TO YOU OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING THE EFFECT AND APPLICABILITY OF STATE, LOCAL, FOREIGN OR OTHER TAX LAWS.

You are a “U.S. Holder” if you hold the Notes as the beneficial owner and you are for U.S. federal income tax purposes:

(1) a citizen or resident of the United States;

(2) a corporation (or an entity treated as a corporation) created or organized in the United States or under the laws of the United States, any state thereof, or the District of Columbia;

(3) an estate, the income of which is subject to United States federal income tax regardless of its source; or

(4) a trust, if a United States court can exercise primary supervision over the administration of the trust and one or more United States persons can control all substantial decisions of the trust or, in the case of a trust that was treated as a domestic trust under the law in effect prior to August 21, 1996, a valid election is in place under applicable Treasury Regulations to treat such trust as a domestic trust.

In addition, if a holder is an entity treated as a partnership for United States federal income tax purposes, the tax treatment of each partner of such partnership will generally depend upon the status of the partner and upon the activities of the partnership. Partnerships and partners in partnerships which hold Notes should consult their tax advisors.

Taxation of Interest

General. The gross amount of stated interest received by a U.S. Holder (including any foreign tax withheld) with respect to the Notes will generally be includible in taxable income as ordinary interest income at the time it accrues or is received in accordance with the U.S. Holder’s method of tax accounting. In addition, if the Notes are issued with original issue discount (“OID”), a U.S. Holder (including a cash basis U.S. Holder) must include the OID in income as ordinary interest for U.S. federal income tax purposes as it accrues on a constant yield to maturity basis in advance of receipt of cash payments attributable to such income, regardless of such U.S. Holder’s regular method of tax accounting. Generally, a Note will have OID to the extent that its stated redemption price at maturity exceeds its issue price. However, the Notes will not have OID if the stated redemption price at maturity exceeds its issue price by less than 1/4 of 1% of the Notes’ stated redemption price at maturity multiplied by the number of complete years to maturity (“de minimis OID”).

— 266 — The stated redemption price at maturity of the Notes is the total of all payments due on the Notes other than payments of “qualified stated interest.” In general, “qualified stated interest” is interest that is unconditionally payable at least annually at a single fixed rate. Interest payable on the Notes will be qualified stated interest.

A U.S. Holder may elect to recognize all of the interest and discount on the Notes (including de minimis OID) using a constant yield method. The constant yield election generally will apply only to the Notes with respect to which it is made and may not be revoked without the consent of the IRS.

Cash Method U.S. Holder. The amount of income recognized by a cash basis U.S. Holder with respected to stated interest will be the U.S. dollar amount of the interest payment. As described above, if the Notes are issued with OID, a cash method U.S. Holder must include the OID in income as ordinary interest as it accrues on a constant yield to maturity basis in advance of receipt of cash payments attributable to such income. The amount of OID for each accrual period will be determined in RMB and then translated in U.S. dollar under rules similar to the rules described in “—Accrual Method U.S. Holders” below.

Accrual Method U.S. Holder. An accrual basis U.S. Holder may determine the amount of income recognized with respect to stated interest in accordance with either of two methods. Under the first method, the amount of income accrued will be the amount of interest denominated in RMB, translated in U.S. dollars based on the average exchange rate in effect during the interest accrual period (or, in the case of an accrual period that spans two taxable years of a U.S. Holder, the part of the period within the taxable year).

Under the second method, the U.S. Holder may elect to determine the amount of income accrued on the basis of the RMB-US$ exchange rate in effect on the last day of the accrual period (or, in the case of an accrual period that spans two taxable years, the RMB-US$ exchange rate in effect on the last day of the part of the period within the taxable year). Additionally, if a payment of interest is actually received within five business days of the last day of the accrual period, an electing accrual basis U.S. Holder may instead translate the accrued interest into U.S. dollars at the RMB-US$ exchange rate in effect on the day of actual receipt. Any such election will apply to all debt instruments held by the U.S. Holder at the beginning of the first taxable year to which the election applies or thereafter acquired by the U.S. Holder, and will be irrevocable without the consent of the IRS.

If the Notes are issued with OID, the amount of OID for each accrual period will be determined in RMB and then translated into U.S. dollars under the rules similar to the rules described in the preceding paragraph.

Upon receipt of the interest payment (including a payment attributable to accrued but unpaid interest upon the sale or retirement of a Note), the U.S. Holder will recognize U.S. source exchange gain or loss (taxable as ordinary income or loss) equal to the difference between the amount received and the amount previously accrued.

For foreign tax credit purposes, interest payments and OID received or accrued on the Notes will generally be income from foreign sources and will generally be treated as “passive category income” or, in certain cases, “general category income.” Subject to applicable limitations, foreign income taxes withheld from payments in respect of the Notes, if any, will be creditable against U.S. Holder’s federal income tax liability. The foreign tax credit rules are extremely complex. U.S. Holders should consult their tax advisors regarding the availability of foreign tax credits and the application of the foreign tax credit rules to their particular situation.

— 267 — Taxation on the Sale, Exchange, Redemption or Retirement

Upon the sale, exchange, redemption or retirement of Notes, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between the amount realized on the sale, exchange, redemption or retirement (less any accrued but unpaid interest, which will be taxable as interest income, as described above) and the U.S. Holder’s adjusted tax basis in the Notes. A U.S. Holder’s adjusted tax basis in the Notes will generally equal its U.S. dollar cost (as defined below) increased by any OID included in the U.S. Holder’s income with respect to the Notes and reduced by any payments, other than qualified stated interest payments, previously received by the U.S. Holder.

The U.S. dollar cost of a Note will generally be the U.S. dollar value of the purchase price on the date of purchase or, in the case of Notes traded on an established securities market, as defined in the applicable Treasury Regulations, that are purchased by a cash basis U.S. Holder (or an accrual basis U.S. Holder that so elects), on the settlement date for the purchase.

The amount realized on a sale or retirement will be the U.S. dollar value of the amount received on the date of sale or retirement or, in the case of Notes traded on an established securities market, as defined in the applicable Treasury Regulations, sold by a cash basis U.S. Holder (or an accrual basis U.S. Holder that so elects), on the settlement date for the sale. Such an election by an accrual basis U.S. Holder must be applied consistently from year to year and cannot be revoked without the consent of the IRS. A U.S. Holder will generally recognize U.S. source exchange rate gain or loss (taxable as ordinary income or loss) on the sale or retirement of a Note equal to the difference, if any, between the U.S. dollar values of the U.S. Holder’s purchase price for the Note (i) on the date of sale or retirement and (ii) the date on which the U.S. Holder acquired the Note. Any such exchange rate gain or loss will be realized only to the extent of total gain or loss realized on the sale or retirement.

Gain or loss recognized by a U.S. Holder generally will be long-term capital gain or loss if the U.S. Holder has held the Notes for more than one year at the time of disposition. Certain non-corporate U.S. Holders (including individuals) may qualify for preferential rates for federal income taxation in respect of long-term capital gains. The deductibility of capital losses is subject to certain limitations.

Gain or loss realized by a U.S. Holder on the sale, exchange, redemption or retirement of Notes generally will be treated for foreign tax credit purposes as gain or loss arising from sources within the United States. However, with respect to a U.S. Holder that is eligible for the benefits of the United States-PRC Income Tax Convention, if we are deemed to be a PRC resident enterprise and gain from the disposition of a Note is taxed under the EIT Law, such gain may be treated as arising from sources within the PRC. See “Taxation — PRC Taxation.” Prospective purchasers are urged to consult their tax advisors regarding the tax consequences if a foreign tax is imposed on the disposition of the Notes, including the availability of the foreign tax credit under the investor’s particular circumstances.

Information Reporting and Backup Withholding

Payments of interest, principal, Additional Amounts or proceeds from the disposition of the Notes and the accrual of OID may be subject to information reporting and to backup withholding unless (i) a holder is an exempt recipient or (ii) in the case of backup withholding, the holder provides a correct taxpayer identification number and certifies that it is not subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against the U.S. Holder’s federal income tax liability, provided the required information is timely furnished to the IRS.

— 268 — Recently enacted legislation requires certain U.S. Holders to report information with respect to their investment in Notes not held through a custodial account with a U.S. financial institution to the IRS. Investors who fail to report required information could become subject to substantial penalties. Prospective investors are encouraged to consult with their own tax advisors regarding the possible implications of this new legislation on their investment in the Notes.

— 269 — PLAN OF DISTRIBUTION

Deutsche Bank AG, Singapore Branch and The Hongkong and Shanghai Banking Corporation Limited are acting as joint book-running managers of the offering. Subject to the terms and conditions stated in the purchase agreement dated the date of this offering memorandum, each Initial Purchaser named below has severally agreed to purchase, and we have agreed to sell to that Initial Purchaser, the principal amount of the Notes set forth opposite the Initial Purchaser’s name.

Initial Purchaser Principal Amount of Notes Deutsche Bank AG, Singapore Branch...... RMB1,100,000,000 The Hongkong and Shanghai Banking Corporation Limited ...... RMB 900,000,000 Total...... RMB2,000,000,000

The purchase agreement provides that the obligations of the Initial Purchasers to purchase the Notes are subject to approval of legal matters by counsel and to other conditions. The Initial Purchasers must purchase all the Notes if they purchase any of the Notes.

The Initial Purchasers propose to resell the Notes at the offering price set forth on the cover page of this offering memorandum within the United States to qualified institutional buyers (as defined in Rule 144A) (“QIBs”) in reliance on Rule 144A and outside the United States in reliance on Regulation S. See “Transfer Restrictions.” The price at which the Notes are offered may be changed at any time without notice.

We have agreed that, for a period of 90 days from the date on which the Notes are issued, we will not, without the prior written consent of the Initial Purchasers, offer, sell or contract to sell, or otherwise dispose of, directly or indirectly, or announce the offering of, any debt securities issued or guaranteed by us. The Initial Purchasers in their sole discretion may release any of the securities subject to these lock-up agreements at any time without notice.

The Notes will constitute a new class of securities with no established trading market. Approval in-principle has been received for the listing and quotation of the Notes on the Official List of the SGX-ST. However, we cannot assure you that the prices at which the Notes will sell in the market after this offering will not be lower than the initial offering price or that an active trading market for the Notes will develop and continue after this offering. The Initial Purchasers have advised us that they currently intend to make a market in the Notes. However, they are not obligated to do so and they may discontinue any market-making activities with respect to the Notes at any time without notice. Accordingly, we cannot assure you as to the liquidity of, or the trading market for, the Notes.

Deutsche Bank AG, Singapore Branch (or its affiliates) may engage in over-allotment, stabilizing transactions, syndicate covering transactions and penalty bids to the extent permitted by applicable laws and regulations. Over-allotment involves sales in excess of the offering size, which creates a short position. Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. Covering transactions involve purchase of the Notes in the open market after the distribution has been completed in order to cover short positions. Penalty bids permit Deutsche Bank AG, Singapore Branch (as stabilizing manager) to reclaim a selling concession from a dealer when the Notes originally sold by such dealer are purchased in a stabilizing transaction or a covering transaction to cover short positions. Neither the Company nor the Initial Purchasers make any representation or prediction as to the direction or magnitude of any effect that the transactions

— 270 — described above may have on the price of the Notes. In addition, neither the Company nor the Initial Purchasers makes any representation that Deutsche Bank AG, Singapore Branch (as stabilizing manager) will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

We expect to deliver the Notes against payment for the Notes on or about the date specified in the last paragraph of the cover page of this offering memorandum, which will be the fifth business day following the date of the pricing of the Notes. Under Rule 15c6-1 of the Exchange Act, trades in the secondary market generally settle in three business days, purchasers who wish to trade Notes on the date of pricing or the next succeeding business day will be required, by virtue of the fact that the Notes initially will settle in T+5, to specify alternative settlement arrangements to prevent a failed settlement. Purchasers of the Notes who wish to trade the Notes on the date of pricing or the next succeeding business day should consult their own advisor.

The Initial Purchasers or its affiliates have performed commercial banking, investment banking or advisory services for us from time to time for which they have received customary fees and reimbursement of expenses. The Initial Purchasers or its affiliates may, from time to time, engage in transactions with and perform services for us in the ordinary course of business for which they may receive customary fees and reimbursement of expenses.

We and the Subsidiary Guarantors have agreed to indemnify the Initial Purchasers against certain liabilities, including liabilities under the U.S. Securities Act, or to contribute to payments that the Initial Purchasers may be required to make because of any of those liabilities.

Selling Restrictions

General

No action has been taken or will be taken in any jurisdiction by the Company or the Initial Purchasers that would permit a public offering of the Notes, or the possession, circulation or distribution of this offering memorandum or any other material relating to the Notes or this offering, in any jurisdiction where action for that purpose is required. Accordingly, the Notes may not be offered or sold, directly or indirectly, and neither this offering memorandum nor such other material may be distributed or published, in or from any country or jurisdiction except in compliance with any applicable rules and regulations of such country or jurisdiction.

United States

The Notes, the Subsidiary Guarantees and the JV Subsidiary Guarantee (if any) have not been and will not be registered under the Securities Act or any state securities laws and may not be offered or sold within the United States except in transactions exempt from, or not subject to, the registration requirements of the Securities Act and applicable state securities laws. In addition, until 40 days after the commencement of this offering, an offer or sale of Notes within the United States by a dealer (whether or not participating in this offering) may violate the registration requirements of the Securities Act if such offer or sale is made otherwise than in accordance with Rule 144A or another exemption from registration under the Securities Act.

The Initial Purchasers, through their affiliates, acting as selling agents where applicable, propose to offer the Notes to certain persons in offshore transactions in reliance on Regulation S and in accordance with applicable law and propose to offer the Notes to QIBs in the United States pursuant to Rule 144A. Except as permitted under the purchase agreement, the Notes

— 271 — will not be offered, sold or delivered within the United States. Any offer or sale of the Notes in the United States in reliance on Rule 144A will be made by broker-dealer affiliates who are registered as such under the Exchange Act. Terms used in this paragraph have the meanings given to them by Regulation S.

United Kingdom

No invitation or inducement to engage in investment activity (within the meanings of Section 21 of the Financial Services and Markets Act 2000 (the “FSMA”) received by the Initial Purchasers in connection with the issue or sale of the Notes may be communicated or caused to be communicated except in circumstances in which Section 21(1) of the FSMA does not apply to the Initial Purchasers. All applicable provisions of the FSMA must be complied with respect to anything done or to be done by the Initial Purchasers in relation to any Notes in, from or otherwise involving the United Kingdom.

Hong Kong

This offering memorandum has not been and will not be registered with the Registrar of Companies in Hong Kong. Accordingly, except as mentioned below, this offering memorandum may not be issued, circulated or distributed in Hong Kong. A copy of this offering memorandum may, however, be issued to a limited number of prospective applicants for the Notes in Hong Kong in a manner which does not constitute an offer of the Notes to the public in Hong Kong or an issue, circulation or distribution in Hong Kong of a prospectus for the purposes of the Companies Ordinance (Cap. 32 of the Laws of Hong Kong). No advertisement, invitation or document relating to the Notes may be issued or may be in the possession of any person other than with respect to the Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571. Laws of Hong Kong) and any rules made thereunder.

Japan

The Notes have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948) (as amended) (the “FIEL”), and disclosure under the FIEL has not been made with respect to the Notes. Accordingly, the Notes may not be offered or sold, directly or indirectly in Japan or to, or for the account of, any resident of Japan, or to others for re-offering or re-sale, directly or indirectly in Japan or to, or for the benefit of, any resident of Japan, except pursuant to any exemption from the registration requirements of the FIEL and otherwise in compliance with the FIEL and other applicable provisions of Japanese laws and regulations. As used in this paragraph, “resident of Japan” means any person residing in Japan. including any corporation or other entity organized under the laws of Japan.

Singapore

This offering memorandum has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this offering memorandum and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Notes may not be circulated or distributed, nor may the Notes be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to compliance with conditions set forth in the SFA.

— 272 — Where the Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

• a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

• a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the Notes pursuant to an offer made under Section 275 of the SFA except:

• to an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms that such shares, debentures and units of shares and debentures of that corporation or such rights and interest in that trust are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further for corporations, in accordance with the conditions specified in Section 275 of the SFA;

• where no consideration is or will be given for the transfer; or

• where the transfer is by operation of law.

Where the Notes are initially acquired in reliance of an exemption under Section 274 or Section 275 of the SFA, the Notes shall not be sold within the period of six months from the date of the initial acquisition of the Notes, except to any of the following persons:

• an institutional investor (as defined in Section 4A of the SFA);

• a relevant person (as defined in Section 275(2) of the SFA); or

• any person pursuant to an offer referred to in Section 275(1A) of the SFA, unless the securities acquired are of the same class as our other securities:

• an offer of which has previously been made in or accompanied by a prospectus: and

• which are listed for quotation on a securities exchange.

PRC

This offering memorandum does not constitute a public offer of the Notes, whether by sale of by subscription, in the PRC. The Notes will not be offered or sold within the PRC by means of this offering memorandum or any other document.

— 273 — Cayman Islands

No Notes will be offered or sold to the public in the Cayman Islands.

British Virgin Islands

No invitation will be made directly or indirectly to any person resident in the British Virgin Islands to subscribe for any of the Notes.

— 274 — TRANSFER RESTRICTIONS

Because of the following restrictions, purchasers are advised to consult their legal counsel prior to making any offer sale, resale, charge or other transfer of the Notes.

United States The Notes have not been and will not be registered under the U.S. Securities Act and may not be offered, sold or delivered within the United States (as defined in Regulation S under the U.S. Securities Act) except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act. Accordingly, the Notes are being offered and sold only (1) to QIBs in compliance with Rule 144A and (2) outside the United States in offshore transactions in reliance on Regulation S under the U.S. Securities Act. By its purchase of the Notes, each purchaser of the Notes will be deemed to:

1. represent that it is purchasing the Notes for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is: (i) a QIB, and is aware that the sale to it is being made in reliance on Rule 144A; or (ii) a purchaser that is outside the United States;

2. acknowledge that the Notes have not been and will not be registered under the U.S. Securities Act and may not be offered or sold within the United State except as set forth below;

3. agree that if it is a purchaser other than a purchaser outside the United States and if it should resell or otherwise transfer the Notes, it will do so only: (a) if such purchaser is an initial investor, (i) to us or any subsidiary thereof; (ii) inside the United States to a QIB in compliance with Rule 144A; (iii) outside the United States in an offshore transaction in compliance with Rule 904 under the U.S. Securities Act (if available); or (iv) pursuant to an exemption from registration under the U.S. Securities Act provided by Rule 144 (if available), in each case in accordance with any applicable securities law of any State of the United States or (b) pursuant to an effective registration statement under the U.S. Securities Act;

4. agree that it will inform each person to whom it transfers the Notes of any restrictions on transfer of such Notes;

5. understand that if it is a purchaser outside the United States, the Notes will be represented by the Regulation S Global Note and that transfers thereto are restricted as described under “Description of the Notes — Book-Entry; Delivery and Form.” If it is a QIB, it understands that the Notes offered in reliance on Rule 144A will be represented by the Restricted Global Note. Before any interest in the Restricted Global Note may be offered, sold, charged or otherwise transferred to a person who is not a QIB, the transferee will be required to provide the Trustee with a written certification (the form of which certification can be obtained from the Trustee) as to compliance with the transfer restriction referred to above;

6. understand that each Note sold within the United States will bear a legend to the following effect unless otherwise agreed by us and the holder thereof (unless such Note has been sold pursuant to a registration statement that has been declared effective under the U.S. Securities Act):

THIS NOTE, THE SUBSIDIARY GUARANTEES AND THE JV SUBSIDIARY GUARANTEES (IF ANY) RELATED TO THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND ACCORDINGLY, THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR

— 275 — OTHERWISE TRANSFERRED EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN THE TIME PERIOD REFERRED TO IN RULE 144(d) UNDER THE SECURITIES ACT AS IN EFFECT WITH RESPECT TO SUCH TRANSFER, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) IF SUCH PURCHASER IS AN INITIAL INVESTOR, (I) TO CHINA SCE PROPERTY HOLDINGS LIMITED; (II) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT; (III) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT; (IV) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE); (B) IF SUCH PURCHASER IS A SUBSEQUENT INVESTOR OF AN INTEREST IN THE RESTRICTED GLOBAL NOTE, AS SET FORTH IN (A) ABOVE AND, IN ADDITION, PURSUANT TO ANY AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT (PROVIDED THAT AS A CONDITION TO THE REGISTRATION OF TRANSFER OF ANY NOTES OTHERWISE THAN AS DESCRIBED IN (A)(I), (A)(II) OR (A)(III) ABOVE OR (C) BELOW, THE COMPANY, THE SUBSIDIARY GUARANTORS, THE JV SUBSIDIARY GUARANTORS (IF ANY), THE TRUSTEE OR THE PAYING AGENT AND NOTE REGISTRAR MAY, IN CIRCUMSTANCES THAT ANY OF THEM DEEMS APPROPRIATE, REQUIRE EVIDENCE AS TO COMPLIANCE WITH ANY SUCH EXEMPTION); OR (C) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION” AND “UNITED STATES” HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE AND THE PAYING AND TRANSFER AGENT TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS; and

7. acknowledge that we, the Paying and Transfer Agent, the Initial Purchasers and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations and agreements, and agree that if any of the acknowledgements, representations or agreements deemed to have been made by its purchase of the Notes are no longer accurate, it shall promptly notify us, the Paying and Transfer Agent and the Initial Purchasers. If it is acquiring any Notes as a fiduciary or agent for one or more investor accounts, it represents that it has sole investment discretion with respect to each such account and it has full power to make the foregoing acknowledgements, representations and agreements on behalf of each such account.

— 276 — RATINGS

The Notes have been provisionally assigned a rating of “B” with a stable outlook by Standard & Poor’s Ratings Services and “B2” with a positive outlook by Moody’s Investors Service. The ratings reflect the rating agencies’ assessment of the likelihood of timely payment of the principal of and interest on the Notes. The ratings do not address the payment of any Additional Amounts and do not constitute recommendations to purchase, hold or sell the Notes inasmuch as such ratings do not comment as to market price or suitability for a particular investor. We cannot assure you that the ratings will remain in effect for any given period or that the ratings will not be revised by such rating agencies in the future if in their judgment circumstances so warrant. Each such rating should be evaluated independently of any other rating on the Notes, on other of our securities, or on us.

LEGAL MATTERS

Certain legal matters with respect to the Notes will be passed upon for us by Maples and Calder as to matters of Cayman Islands law and British Virgin Islands law, Paul, Hastings, Janofsky & Walker as to matters of United States federal and New York law and Hong Kong law and Jingtian & Gongcheng Attorneys at Law as to matters of PRC law. Certain legal matters will be passed upon for the Initial Purchasers by Davis Polk & Wardwell LLP as to matters of United States federal and New York law and Jun He Law Offices as to matters of PRC law.

INDEPENDENT ACCOUNTANTS

The consolidated financial statements of China SCE Property Holdings Limited as of and for the fiscal years ended December 31, 2006, 2007 and 2008 and as of and for the nine months ended September 30, 2009 included in this offering memorandum have been audited by Ernst & Young, Certified Public Accountants, as stated in their report dated January 25, 2010.

The consolidated financial statements of China SCE Property Holdings Limited as of and for the fiscal year ended December 31, 2009 included in this offering memorandum have been audited by Ernst & Young, Certified Public Accountants, as stated in their report dated April 15, 2010.

— 277 — GENERAL INFORMATION

Documents Available

For so long as any of the Notes are outstanding, copies of the Indenture may be inspected free of charge during normal business hours on any weekday (except public holidays) at the specified offices of the paying agents.

For so long as any of the Notes are outstanding, copies of our audited financial statements for the last two financial years may be obtained during normal business hours on any weekday (except public holidays) at the specified offices of the paying agents.

Auditors

The audited consolidated financial statements as of and for the years ended December 31, 2007, 2008 and 2009 included in this offering memorandum have been audited by Ernst & Young. Ernst & Young has delivered unqualified reports in respect of our audited financial statements included in this offering memorandum, which reports are all included herein.

Clearing System and Settlement

The Notes have been accepted for clearance through the facilities of Euroclear, Clearstream and DTC. Certain trading information with respect to the Notes is set forth below:

CUSIP ISIN Rule 144A Global Note ...... 16950YAA9 US16950YAA91 Regulation S Global Note ...... G21189AA6 USG21189AA66

Only Notes evidenced by either a Rule 144A Global Note or a Regulation S Global Note have been accepted for clearance through Euroclear, Clearstream and DTC.

Listing of the Notes

Approval in-principle has been received for the Notes to be listed on the Official List of the SGX-ST. The SGX-ST assumes no responsibility for the correctness of any of the statements made or opinions or reports contained in this offering memorandum. Admission of the Notes to the Official List of the SGX-ST is not to be taken as an indication of the merits of us, our subsidiaries or associated companies or the Notes. The Notes will be traded on the SGX-ST in a minimum board lot size of S$200,000 (or its equivalent in foreign currencies) so long as any of the Notes are listed on the SGX-ST.

So long as the Notes are listed on the SGX-ST and the rules of the SGX-ST so require, we shall appoint and maintain a paying agent in Singapore, where the Notes may be presented or surrendered for payment or redemption, in the event that a Global Note is exchanged for Notes in definitive form. In addition, in the event that a Global Note is exchanged for Notes in definitive form, announcement of such exchange shall be made by us or on our behalf through the SGX-ST and such announcement will include all material information with respect to the delivery of the Notes in definitive form, including details of the paying agent in Singapore.

— 278 — SUMMARY OF CERTAIN DIFFERENCES BETWEEN HKFRS AND U.S. GAAP

Our audited consolidated financial statements for the years ended December 31, 2007, 2008 and 2009 included elsewhere in this offering memorandum has been prepared and presented in accordance with HKFRS. Certain differences exist between HKFRS and U.S. GAAP, which might be material to the financial information herein.

The matters described below summarize certain differences between HKFRS and U.S. GAAP that may be material to our consolidated financial information. We are responsible for preparing the summary below. Such summary should not be construed to be exhaustive. We have not prepared a complete reconciliation of the financial information and related footnote disclosure between HKFRS and U.S. GAAP and have not quantified such differences. Accordingly, no assurance is provided that the following summary of differences between HKFRS and U.S. GAAP is complete. Had we undertaken any such quantification or reconciliation, other potential significant accounting and disclosure differences may have come to our attention which are not identified below.

Furthermore, no attempt has been made to identify all disclosure, presentation or classification differences that would affect the manner in which transactions or events are presented in the audited consolidated financial information or footnotes thereto. Additionally, no attempt has been made to identify future differences between HKFRS and U.S. GAAP as a result of prescribed changes in accounting standards. Regulatory bodies that promulgate HKFRS and U.S. GAAP have significant projects ongoing that could affect future comparisons such as this one. Finally, no attempt has been made to identify future differences between HKFRS and U.S. GAAP that may affect the financial information as a result of transactions or events that may occur in the future.

In making an investment decision, you must rely upon your own examination of us, the terms of the offering and the financial information. You should consult your own professional advisors for an understanding of the differences between HKFRS and U.S. GAAP, and how those differences might affect the financial information included herein.

Accounting for Real Estate Property Assets

Under HKFRS, properties under development for sale and completed properties held for sale are stated at the lower of cost or net realizable value. A write down of properties under development for sale to the lower of cost or the net realizable value at the close of a fiscal period is a valuation allowance that can be subsequently reversed if the underlying facts and circumstances change.

Properties under construction and held for operational purposes upon completion are carried at cost less any accumulated impairment losses on completion. Properties held for long-term rental yield or for capital appreciation or both (completed or under development) are classified as investment properties and are carried at fair value with changes in fair value being recognized in the income statement under the fair value model. The carrying amounts are not depreciated.

Under U.S. GAAP, the properties held for sale (completed or under development) are stated at the lower of cost or market (lower of the replacement cost and net realizable value minus normal profit margin). A write down of properties under development for sale to the lower of cost or market creates a new cost basis that subsequently cannot be marked up based on changes in underlying facts and circumstances.

— 279 — Properties held for long-term rental yields or for capital appreciation or internal use are measured at cost less accumulated depreciation and any reduction in value due to impairment. Periodic upward revaluations are not permitted under U.S. GAAP.

The periodic depreciation expenses under HKFRS and U.S. GAAP would differ as a result of the difference in the accounting for investment properties under the two accounting standards.

Borrowing costs

Under HKFRS, borrowing costs incurred for the construction of any qualifying asset are capitalized during the period of time that is required to complete and prepare the asset for its intended use. Other borrowing costs are expensed. To the extent the funds are borrowed specifically for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalization on the asset shall be determined as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings. To the extent that funds are borrowed generally and used for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalization shall be determined by applying a weighted average capitalization rate to the expenditures on that asset. Borrowing costs are capitalized to the extent that such costs are directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to prepare for its intended use or sale. Borrowing costs cease to be capitalized when substantially all the activities necessary to prepare the asset for its intended use or sale are completed. Borrowing costs may include exchange differences that arise from foreign currency borrowings if they are regarded as an adjustment to interest costs.

The approach is similar under U.S. GAAP, except that the exchange differences from foreign currency borrowings are not capitalized and interest earned on funds borrowed to finance the production of the asset would not be netted against the borrowing costs.

Impairment of Assets

Under HKFRS, assets that are subject to depreciation and amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. An impairment of long-lived assets is charged to the income statement as an expense. An impairment loss recognized in prior periods for an asset other than goodwill shall be reversed if, and only if, the circumstances and events which led to the write down ceased to exist and there is persuasive evidence that the new circumstances and events will persist in the foreseeable future.

U.S. GAAP requires an impairment loss to be recognized for long-lived assets, including property, plant and equipment and certain identifiable intangibles where a triggering event occurs and the carrying amount of the asset may not be recoverable. An estimate of the future undiscounted cash flows expected to result from use and eventual disposal of such assets, or the group of assets, is compared to the carrying value to determine whether impairment exists. If it is determined that the asset is impaired, the impairment loss recognized is the difference between the carrying amount of the asset and its fair value, being either the quoted market value less selling costs, (if available), or determined using various valuation techniques, including the sum of future discounted cash flows and fundamental analysis. Once such impairments have been recorded, subsequent reversal of impairment charges are not allowed.

Leases

Under HKFRS, leases where substantially all the risks and rewards of ownership of assets are transferred to leasee are accounted for as finance leases.

— 280 — Under U.S. GAAP, categorization of leases is more prescriptive in nature. A lease is classified as a capital lease, comparable to HKFRS definition of finance lease, when any of the criteria as specified in FASB Accounting Standards Codification 840 “Leases” is met:

• Transfer of ownership to lessee by the end of the lease term;

• Existence of bargain purchase option;

• Lease term is equal to 75% or more of estimated economic life of leased property; and

• Present value of minimum lease payments is equal to or more than 90% of the excess of fair value over any related investment tax credit.

Revenue Recognition

Under HKFRS, revenue from sales of properties is recognized upon completion of sale agreements, which refers to the time when the relevant properties have been delivered to the purchasers where risk and rewards are transferred.

Under U.S. GAAP, for real estate sales other than retail land sale, profit is recognized in full on using the full accrual method if (1) a sale is consummated; (2) the buyer’s initial and continuing investments are adequate to demonstrate a commitment to pay for the property; (3) the seller’s receivable is not subject to future subordination; and (4) the seller has transferred to the buyer the usual risks and rewards of ownership in a transaction that is in substance a sale and does not have a substantial continuing involvement with the property. Where the buyer’s initial or continuing investment is inadequate, profit should be recognized by the installment method, the cost recovery method, the reduced profit method, or deposit method upon meeting certain recognition criteria prescribed by U.S. GAAP. Where real estate transactions cannot be considered a sale as a result of the seller’s continuing involvement, financing, leasing or profit sharing (or co-venture) method of revenue recognition should be used based on meeting certain criteria.

Deferred Income Taxes

Under HKFRS, deferred tax assets and liabilities are required to be provided in full using the liability method on carry forward of unused tax losses and temporary differences arising between the tax base of an asset or a liability and its carrying amount in the financial statements, including temporary differences associated with investments in subsidiaries and associates. For investments in subsidiaries and associates, the deferred tax liabilities are not recognized where the timing of the reversal of the temporary difference can be controlled by the parent and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Deferred tax liabilities are provided in full on all taxable temporary differences while deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

Under U.S. GAAP, deferred tax assets and liabilities are recognized for the lax consequences of carry forward of unused tax losses and temporary differences by applying enacted statutory rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities (including investment in a subsidiary and equity affiliates). However, deferred tax may not be recognized in relation to an investment in a foreign subsidiary or foreign corporate joint venture, if the undistributed earnings of such investment are invested or will be invested indefinitely, or if the

— 281 — parent can remit the earnings in a tax-free liquidation. A valuation allowance is provided to reduce the amount of deferred tax assets if, in the opinion of management, it is considered more likely than not that some portion of, or all of, the deferred tax asset will not be realized in the future.

Uncertain Tax Positions Under HKFRS, the general measurement guidance is contained in HKAS 12 “Income taxes” which requires current tax liabilities (assets) for current and prior periods to be measured at the amount to be expected to be paid to (recovered from) the taxation authorities using the tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. An entity may choose to consider tax uncertainties at the level of the individual uncertainty or group of related uncertainties. It may also choose to consider tax uncertainties at the level of its total tax liability to each taxing authority. The amount of provision for uncertain tax positions is measured using either a single best estimate of the most likely outcome or using an expected value (weighted average probability) approach. These provisions are generally classified as part of the current tax liability and presented as non-current if the entity has an unconditional right to defer payment for more than 12 months. Under U.S. GAAP, FASB Accounting Standards Codification 740 “Income taxes” prescribes the recognition threshold and measurement attribute for the financial statement recognition of a tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures and transition. The tax benefit from an uncertain tax position may be recognized only if it is more likely than not that the tax position will be sustained based on technical merits upon examination by tax authorities. The uncertain tax position is measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. The provisions are measured using cumulative probability of the range of possible outcomes. Provisions for uncertain tax positions are classified as a long-term liability except for those amounts management expects to require actual cash payment within the next 12 months.

Financial Guarantee Under HKFRS, the loan guarantees provided by us to property purchasers on borrowings from banks are recognized initially at fair value plus directly attributable transaction costs. Subsequently such liabilities are measured at the higher of the present value of the best estimate of the expenditure required to settle the present obligation or the amount initially recognized less accumulated amortization. Under U.S. GAAP, FASB Accounting Standards Codification 460 “Guarantees” requires a guarantor to recognize, at the inception of a guarantee, a liability for the obligations it has undertaken in issuing the guarantee, including its ongoing obligation to stand ready to perform over the term of the guarantee in the event that the specified triggering events or conditions occur.

Cash Flow Statement As permitted under HKFRS, interest paid is classified as cash flow from operating activities while interest received is classified as cash flows from investing activities. U.S. GAAP requires interest paid and received be classified as operating activities.

Presentation of Debt Origination Costs Under HKFRS, the unamortized portion of the direct costs related to procuring debts is netted from the related borrowings. Under U.S. GAAP, cost of issuing debt should be deferred as an asset and amortized using the interest method over the life of the debt.

— 282 — INDEX TO FINANCIAL INFORMATION

Page

• Accountants’ Report on Our Consolidated Financial Information as of and for the Three Years Ended December 31, 2006, 2007 and 2008 and the Nine Months Ended September 30, 2008 and 2009 Consolidated Statements of Comprehensive Income ...... F-5 Consolidated Statements of Financial Position ...... F-6 Statements of Financial Position of the Company ...... F-8 Consolidated Statements of Changes in Equity ...... F-9 Consolidated Statements of Cash Flows ...... F-11 Notes to the Financial Information ...... F-14

• Our Consolidated Financial Statements as of and for the Year Ended December 31, 2009 Independent Auditors’ Report ...... F-73 Consolidated Statement of Comprehensive Income ...... F-75 Consolidated Statement of Financial Position ...... F-76 Consolidated Statement of Changes in Equity ...... F-78 Consolidated Statement of Cash Flows ...... F-79 Statement of Financial Position ...... F-81 Notes to the Financial Statements ...... F-82

• Our Unaudited Condensed Consolidated Interim Financial Information as of and for the Nine Months Ended September 30, 2010 Report on Review of Interim Financial Statements ...... F-126 Condensed Consolidated Statement of Comprehensive Income ...... F-127 Condensed Consolidated Statement of Financial Position ...... F-128 Condensed Consolidated Statement of Changes in Equity ...... F-129 Condensed Consolidated Statement of Cash Flows ...... F-131 Notes to the Condensed Consolidated Interim Financial Statements ...... F-132

— F-1 — The following is the reproduction of the accountants’ report from Ernst & Young, Certified App1A-4 App1A-9(3) Public Accountants, Hong Kong prepared for the purpose of incorporation in the prospectus of App1A-37 3rd Sch-21 the Company dated January 25, 2010, in connection with the initial public offering and listing 3rd Sch-29 3rd Sch-31 of the Company’s shares on the Main Board of The Stock Exchange of Hong Kong Limited, 3rd Sch-42 which has not been specifically prepared for inclusion in this offering circular.

18th Floor Two International Finance Centre 8 Finance Street Central Hong Kong

25 January 2010

The Directors China SCE Property Holdings Limited Deutsche Bank AG, Hong Kong Branch

Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) of China SCE Property Holdings Limited (the “Company”) and its subsidiaries (collectively the “Group”) for each of the three years ended 31 December 2006, 2007 and 2008 and the nine months ended 30 September 2009 (collectively the “Track Record Periods”) and comparative financial information (the “Comparative Financial Information”) of the Group for the nine months ended 30 September 2008, prepared on the basis set out in note 2 of Section II below, for inclusion in the prospectus of the Company dated 25 January 2010 (the “Prospectus”) in connection with the listing of the shares of the Company on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

The Company was incorporated as an exempted company with limited liability in the Cayman Islands on 30 November 2007 under the Companies Law, Cap 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands. Pursuant to the group reorganisation (the “Reorganisation”) as detailed in note 1 of Section II below, the Company became the holding company of the subsidiaries now comprising the Group. Details of the Company’s interests in its principal subsidiaries as at the date of this report are set out in note 1 of Section II below. The Group is principally engaged in property development, property investment and property management in Mainland China.

All companies now comprising the Group and the Group’s jointly-controlled entities and associates have adopted 31 December as their financial year end date. No audited financial statements have been prepared for the Company and the subsidiaries incorporated in the British Virgin Islands and the Republic of Mauritius since their respective dates of incorporation as there are no statutory requirements for these companies to prepare audited financial statements. The statutory audited financial statements or management accounts of the Group’s subsidiaries, jointly-controlled entities and associates were prepared in accordance with the relevant accounting principles applicable to these companies in their respective jurisdictions and all of which were not audited by us.

For the purpose of this report, the directors of the Company have prepared the consolidated financial statements (the “Underlying Financial Statements”) of the Company for the Track Record Periods and the nine months ended 30 September 2008 in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

Accountant’s Report — I-1

— F-2 — The directors of the Company are responsible for the preparation and the true and fair presentation of the Underlying Financial Statements, the Financial Information and the Comparative Financial Information in accordance with HKFRSs issued by the HKICPA, and for the contents of the Prospectus in which this report is included. The directors of the respective companies of the Group are responsible for the preparation and true and fair presentation of the respective financial statements and, where appropriate, management accounts in accordance with the relevant accounting principles and financial regulations applicable to these companies.

In preparing the Financial Information and the Comparative Financial Information, it is fundamental that appropriate accounting policies are selected and applied consistently, and that judgements and estimates made are prudent and reasonable. It is our responsibility to form an independent opinion and a review conclusion, based on our audit and review, on the Financial Information and the Comparative Financial Information, respectively, and to report our opinion and review conclusion thereon to you.

Procedures performed in respect of the Financial Information

The Financial Information has been prepared based on the Underlying Financial Statements and in accordance with the basis set out in note 2 of Section II below. For the purpose of this report, we have carried out an independent audit on the Financial Information in accordance with Hong Kong Standards on Auditing issued by the HKICPA, and such additional procedures we considered necessary in accordance with Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA. No adjustments were considered necessary to adjust the Underlying Financial Statements of the Group for the Track Record Periods to conform to the Financial Information.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and true and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Procedures performed in respect of the Comparative Financial Information

For the purpose of this report, we have also performed a review of the Comparative Financial Information in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA. A review consists principally of making enquiries of management and applying analytical procedures to the financial information and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets and liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an opinion on the Comparative Financial Information.

Accountant’s Report — I-2

— F-3 — Opinion in respect of the Financial Information

In our opinion, for the purpose of this report and on the bases of presentation and preparation set out in note 2 of Section II below, the Financial Information gives a true and fair view of the state of affairs of the Group and the Company (where applicable) as at 31 December 2006, 2007 and 2008 and 30 September 2009 and of the consolidated results and cash flows of the Group for each of the Track Record Periods.

Review conclusion in respect of the Comparative Financial Information

Based on our review which does not constitute an audit, for the purpose of this report, nothing has come to our attention that causes us to believe that the Comparative Financial Information does not give a true and fair view of the consolidated results and cash flows of the Group for the nine months ended 30 September 2008.

Accountant’s Report — I-3

— F-4 — I. FINANCIAL INFORMATION

(a) Consolidated Statements of Comprehensive Income

Nine months ended Year ended 31 December 30 September Notes 2006 2007 2008 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) REVENUE 6 327,396 371,694 331,179 329,698 550,102 Cost of sales ...... (261,244) (242,727) (203,335) (202,459) (284,642) Gross profit...... 66,152 128,967 127,844 127,239 265,460 Other income and gains ...... 6 8,231 43,476 6,962 6,245 13,739 Changes in fair value of investment properties ...... 15 38,145 168,247 211,366 176,187 222,836 Selling and marketing expenses...... (21,751) (46,268) (27,143) (23,046) (22,846) Administrative expenses...... (23,801) (57,650) (64,883) (51,189) (53,891) Other expenses...... (3) (589) (247) (247) — Finance costs ...... 7 (240) (1,376) (3,324) (2,397) (2,368) Share of profits and losses of: Jointly-controlled entities .. (1,416) (3,261) (4,697) (5,808) 2,002 Associates...... (112) (888) (4,413) (2,996) (3,317) PROFIT BEFORE TAX ...... 8 65,205 230,658 241,465 223,988 421,615 Tax ...... 11 (13,418) (70,581) (75,606) (68,867) (147,883) PROFIT FOR THE YEAR/PERIOD ...... 51,787 160,077 165,859 155,121 273,732 Other comprehensive income/(loss): Share of other comprehensive income of jointly-controlled entities .. 1,532 569 649 645 5 Exchange differences on translation of foreign operations ...... 13,737 35,166 34,637 33,838 (6,975) Other comprehensive income/(loss) for the year/period ...... 15,269 35,735 35,286 34,483 (6,970) TOTAL COMPREHENSIVE INCOME FOR THE YEAR/PERIOD ...... 67,056 195,812 201,145 189,604 266,762

Profit/(loss) attributable to: Equity holders of the Company ...... 50,607 159,206 168,458 156,930 276,994 Minority interests ...... 1,180 871 (2,599) (1,809) (3,262) 51,787 160,077 165,859 155,121 273,732

Total comprehensive income/(loss) attributable to: Equity holders of the Company ...... 64,639 187,418 199,135 186,905 270,055 Minority interests ...... 2,417 8,394 2,010 2,699 (3,293) 67,056 195,812 201,145 189,604 266,762

Accountant’s Report — I-4

— F-5 — (b) Consolidated Statements of Financial Position

As at As at 31 December 30 September

Notes 2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 NON-CURRENT ASSETS Property and equipment ...... 14 22,841 59,344 71,500 76,160 Investment properties...... 15 209,560 533,200 882,000 1,144,523 Prepaid land lease payments...... 16 12,990 1,306,112 760,388 1,873,961 Intangible asset ...... 17 — — — 4,861 Properties under development...... 18 78,084 292,366 308,496 578,381 Interests in jointly-controlled entities ...... 20 101,429 65,202 123,194 159,002 Interests in associates ...... 21 5,887 15,748 11,489 8,371 Prepayments...... 24 287,000 356,070 508,040 438,414 Deferred tax assets...... 32 7,661 12,310 20,808 60,412

Total non-current assets ..... 725,452 2,640,352 2,685,915 4,344,085 CURRENT ASSETS Properties under development...... 18 752,820 826,850 1,370,435 1,652,863 Completed properties held for sale...... 22 4,237 210,633 803,671 1,135,069 Trade receivables...... 23 3,822 676 4,597 17,368 Prepayments, deposits and other receivables ...... 24 105,068 179,459 142,639 332,160 Due from related parties...... 25 150,179 142,776 126,069 122,570 Tax recoverable ...... 26(a) 19,029 57,047 90,353 73,339 Restricted cash ...... 27 65,950 36,703 83,410 503,000 Cash and cash equivalents ... 27 201,520 81,059 59,679 405,580 Total current assets ...... 1,302,625 1,535,203 2,680,853 4,241,949 CURRENT LIABILITIES Trade payables ...... 28 233,237 364,257 436,578 359,567 Receipts in advance...... 29 630,616 1,687,269 1,898,011 2,436,352 Other payables and accruals . 30 132,243 659,613 618,142 1,293,789 Interest-bearing bank and other borrowings...... 31 100,000 47,612 1,009,425 513,651 Due to related parties ...... 25 281,582 285,404 368,440 260,747 Tax payable ...... 26(b) 11,740 39,679 29,048 58,963 Total current liabilities ...... 1,389,418 3,083,834 4,359,644 4,923,069 NET CURRENT LIABILITIES...... (86,793) (1,548,631) (1,678,791) (681,120) TOTAL ASSETS LESS CURRENT LIABILITIES..... 638,659 1,091,721 1,007,124 3,662,965

Accountant’s Report — I-5

— F-6 — As at As at 31 December 30 September

Notes 2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 NON-CURRENT LIABILITIES Other payables ...... 30 2,960 2,720 2,479 2,240 Interest-bearing bank and other borrowings...... 31 556,500 675,125 344,493 1,284,293 Deferred tax liabilities ...... 32 5,610 37,768 86,225 150,166 Provision for major overhauls ...... 33 — — — 2,888

Total non-current liabilities. 565,070 715,613 433,197 1,439,587

Net assets ...... 73,589 376,108 573,927 2,223,378

EQUITY Equity attributable to equity holders of the Company Share capital ...... 34 — 10 10 11 Reserves ...... 35(a) 67,477 258,358 457,493 1,412,066 67,477 258,368 457,503 1,412,077 Minority interests ...... 6,112 117,740 116,424 811,301 Total equity...... 73,589 376,108 573,927 2,223,378

Accountant’s Report — I-6

— F-7 — (c) Statements of Financial Position of the Company

As at As at 31 December 30 September

Notes 2007 2008 2009

RMB’000 RMB’000 RMB’000 NON-CURRENT ASSET Investment in a subsidiary...... 19 — — —

CURRENT ASSETS Prepayments ...... 24 — 21 2,766 Due from the immediate holding company ...... 25 10 9 — Due from subsidiaries...... 19 — — 666,804

Total current assets ...... 10 30 669,570

CURRENT LIABILITIES Due to a subsidiary ...... 19 4,725 7,327 — Accruals...... 30 3,168 176 —

Total current liabilities ...... 7,893 7,503 —

NET CURRENT ASSETS/(LIABILITIES)...... (7,883) (7,473) 669,570 Net assets/(liabilities)...... (7,883) (7,473) 669,570

EQUITY Issued capital...... 34 10 10 11 Reserves...... 35(e) (7,893) (7,483) 669,559 Total equity/(net deficiency of assets)...... (7,883) (7,473) 669,570

Accountant’s Report — I-7

— F-8 — (d) Consolidated Statements of Changes in Equity

Attributable to equity holders of the Company Retained Share Statutory Exchange profits/ Share premium Capital surplus Merger Other fluctuation (accumulated Minority Total capital account reserve reserve reserve reserves reserve losses) Total interests equity RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (note 34) (note 34) (note 35(b)) (note 35(c)) (note 35(d)) At 1 January 2006...... — — — 5,089 30 749 5,715 (8,745) 2,838 1,919 4,757 Total comprehensive income for the year...... —————1,53212,500 50,607 64,639 2,417 67,056 Capital contribution from a minority shareholder ...... ——————— ——1,776 1,776 Transfer to statutory surplus reserve ...... — — — 6,852 — — — (6,852) — — — At 31 December 2006 and 1 January 2007 ..... — —* —* 11,941* 30* 2,281* 18,215* 35,010* 67,477 6,112 73,589 Total comprehensive income for the year...... —————56927,643 159,206 187,418 8,394 195,812 Issue of shares ...... 10 —————— —10—10 Capital contribution from minority - — F-9 — shareholders...... ——————— ——60,500 60,500 Acquisition of minority interests...... — — 3,463 ———— —3,463 (7,415) (3,952) Transfer to statutory surplus reserve ...... — — — 19,168 — — — (19,168) — — — Acquisition of a subsidiary that is not a business...... ——————— ——50,000 50,000 Disposal of subsidiaries (note 36(b)) ...... ——————— ——149149 At 31 December 2007 and 1 January 2008 ..... 10 —* 3,463* 31,109* 30* 2,850* 45,858* 175,048* 258,368 117,740 376,108 Total comprehensive income for the year...... —————64930,028 168,458 199,135 2,010 201,145 Transfer to statutory surplus reserve ...... — — — 23,026 — — — (23,026) — — — Acquisition of minority interests...... ——————— ——(3,326) (3,326) At 31 December 2008 and 1 January 2009 ..... 10 —* 3,463* 54,135* 30* 3,499* 75,886* 320,480* 457,503 116,424 573,927 Total comprehensive income for the period..... ————— 5(6,944) 276,994 270,055 (3,293) 266,762 Issue of shares ...... 1 682,288 ————— —682,289 — 682,289 Deregistration of subsidiaries ...... — — — (10,270) — — — 10,270 — — — Acquisition of subsidiaries that are not a business...... ——————— ——622,300 622,300 Partial disposal of an interest in a subsidiary.. — — 2,230 ———— —2,230 75,870 78,100 At 30 September 2009 ...... 11 682,288* 5,693* 43,865* 30* 3,504* 68,942* 607,744* 1,412,077 811,301 2,223,378 Attributable to equity holders of the Company

Statutory Exchange Share Capital surplus Merger Other fluctuation Retained Minority Total capital reserve reserve reserve reserves reserve profits Total interests equity

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (note 34) (note 35(b)) (note 35(c)) (note 35(d)) At 1 January 2008...... 10 3,463 31,109 30 2,850 45,858 175,048 258,368 117,740 376,108 Total comprehensive income for the period (unaudited)...... ————64529,330 156,930 186,905 2,699 189,604 Acquisition of minority interests (unaudited)...... ——————— —(3,326) (3,326)

At 30 September 2008 (unaudited) ...... 10 3,463 31,109 30 3,495 75,188 331,978 445,273 117,113 562,386

* These reserve accounts comprise the consolidated reserves of RMB67,477,000, RMB258,358,000, RMB457,493,000 and RMB1,412,066,000 in the consolidated statements of financial position as at 31 December 2006, 2007 and 2008, and 30 September 2009, respectively. -0— F-10 — (e) Consolidated Statements of Cash Flows

Nine months ended Year ended 31 December 30 September

Notes 2006 2007 2008 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax ...... 65,205 230,658 241,465 223,988 421,615 Adjustments for: Finance costs ...... 7 240 1,376 3,324 2,397 2,368 Share of profits and losses of: Jointly-controlled entities 1,416 3,261 4,697 5,808 (2,002) Associates ...... 112 888 4,413 2,996 3,317 Interest income...... 6 (1,924) (4,096) (2,144) (1,669) (1,881) Gain on disposal of jointly-controlled entities. 6 — (34,886) — — — Write-off of items of property and equipment.. 8 3 241 89 89 — Loss/(gain) on disposal of subsidiaries...... 6, 8 — (448) 158 158 — Loss/(gain) on disposal of items of property and equipment, net ...... 6, 8 — 348 — — (5) Gain on disposal of investment properties ..... 6 (122) (120) — — — Excess over the cost of a business combination ..... 6 — — (4,527) (4,527) — Gain on disposal of financial assets at fair value through profit or loss ...... 6 (15) (3,181) — — — Depreciation ...... 8 2,401 3,073 5,272 3,983 5,725 Amortisation of prepaid land lease payments ...... 8 137 984 11,423 8,535 12,571 Changes in fair value of investment properties ..... 15 (38,145) (168,247) (211,366) (176,187) (222,836) Operating profit before working capital changes..... 29,308 29,851 52,804 65,571 218,872 Additions to prepaid land lease payments ...... (9,842) (688,193) (145,071) (145,071) (460,040) Decrease/(increase) in properties under development...... (330,552) (151,748) 198,006 (474,120) 240,756 Decrease/(increase) in completed properties held for sale...... 76,408 (206,396) (593,038) 245,743 (304,542) Decrease/(increase) in trade receivables ...... (2,556) 3,146 (4,295) (6,198) (12,771) Decrease/(increase) in prepayments, deposits and other receivables ...... (313,419) (180,369) (65,922) (52,917) 391,777

Accountant’s Report — I-10

— F-11 — Nine months ended Year ended 31 December 30 September

Notes 2006 2007 2008 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) Decrease/(increase) in amounts due from related parties...... (2,487) 3,370 (3,103) — (884) Increase/(decrease) in trade payables...... 166,612 130,619 72,321 (22,166) (79,354) Increase in receipts in advance ...... 297,682 1,056,653 210,742 150,223 538,161 Increase/(decrease) in other payables and accruals ...... 18,655 40,701 59,905 76,545 34,995

Cash generated from/(used in) operations ...... (70,191) 37,634 (217,651) (162,390) 566,970 Interest received ...... 1,924 4,096 2,144 1,669 1,881 Interest paid ...... (24,494) (61,673) (84,605) (55,450) (65,333) PRC corporate income tax paid...... (10,558) (40,859) (43,612) (38,834) (25,358) PRC land appreciation tax paid...... (3,680) (11,695) (35,493) (28,511) (19,122) Net cash inflow/(outflow) from operating activities..... (106,999) (72,497) (379,217) (283,516) 459,038 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of items of property and equipment ..... (12,030) (40,289) (17,962) (13,706) (2,079) Additions to investment properties ...... (128,356) (157,753) (138,634) (102,813) (39,687) Proceeds from disposal of items of property and equipment ...... — 304 241 241 430 Proceeds from disposal of investment properties ...... 1,322 2,480 400 400 — Proceeds from disposal of jointly-controlled entities .... — 131,463 — — 5,752 Acquisition of associates...... (2) — — — — Acquisition of jointly-controlled entities .... (10) (68,782) (62,040) (62,040) — Investments in jointly-controlled entities .... — — — — (58,800) Dividend received from jointly-controlled entities .... — — — — 25,000 Purchase of financial assets at fair value through profit or loss...... — (7,277) — — — Proceeds from disposal of financial assets at fair value through profit or loss 217 10,458 — — — Acquisition of subsidiaries..... 36(a) — 2,182 (584) (584) — Disposal of subsidiaries ...... 36(b) — (169) 1,850 1,850 — Acquisition of subsidiaries that are not a business ...... 36(c) — (131,980) — — (167,707)

Accountant’s Report — I-11

— F-12 — Nine months ended Year ended 31 December 30 September

Notes 2006 2007 2008 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) Decrease in consideration payable for the acquisition of subsidiaries and associates ...... — — (98,000) (93,000) (234,280) Decrease in an amount due to a minority shareholder of certain subsidiaries ...... (12,548) (1,000) — — (2,876) Decrease/(increase) in amounts due from jointly-controlled entities and associates ...... (21,966) 33,347 (66,344) (66,445) (44,152) Decrease/(increase) in restricted cash ...... (63,897) 29,247 (46,707) (39,814) (247,431) Net cash outflow from investing activities ...... (237,270) (197,769) (427,780) (375,911) (765,830) CASH FLOWS FROM FINANCING ACTIVITIES Issue of new shares...... — 10 — — 682,289 New bank and other borrowings...... 632,500 373,880 710,157 659,437 998,212 Repayment of bank and other borrowings...... (280,000) (301,943) (79,029) (74,775) (984,195) Contributions from minority shareholders...... 1,776 60,500 — — — Advances from minority shareholders of certain subsidiaries ...... 101,056 20,473 5,701 5,795 15,755 Increase/(decrease) in amounts due from/to related parties, net ...... 53,852 (837) 151,960 100,858 (59,365) Net cash inflow from financing activities ...... 509,184 152,083 788,789 691,315 652,696 NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS ...... 164,915 (118,183) (18,208) 31,888 345,904 Cash and cash equivalents at beginning of year/period ...... 36,868 201,520 81,059 81,059 59,679 Effect of foreign exchange rate changes, net...... (263) (2,278) (3,172) (3,075) (3) CASH AND CASH EQUIVALENTS AT END OF YEAR/PERIOD ...... 201,520 81,059 59,679 109,872 405,580

ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances ...... 27 201,520 81,059 59,679 109,872 405,580

Accountant’s Report — I-12

— F-13 — II. NOTES TO FINANCIAL INFORMATION

1. CORPORATE INFORMATION AND REORGANISATION

China SCE Property Holdings Limited (the “Company”) was incorporated as an exempted company with limited liability in the Cayman Islands on 30 November 2007. The registered office of the Company is located at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands.

The Company and its subsidiaries (collectively the “Group”) were principally engaged in property development, property investment and property management (collectively referred to as the “Relevant Businesses”) in the People’s Republic of China (the “PRC”) during the three years ended 31 December 2008 and the nine months ended 30 September 2009 (the “Track Record Periods”).

In the opinion of the directors of the Company, the ultimate holding company of the Company is Newup Holdings Limited, which is incorporated in the British Virgin Islands (the “BVI”) and is wholly owned by Mr. Wong Chiu Yeung (the “Founder”).

Prior to the incorporation of the Company, the Relevant Businesses were carried out by certain subsidiaries (the “Relevant Subsidiaries”) now comprising the Group, which were majority owned and controlled by the Founder.

In order to rationalise the current corporate structure of the Group, the following principal steps were undertaken to transfer the interests in the Relevant Subsidiaries owned by the Founder to the Company (the “Reorganisation”):

(a) The Company was incorporated on 30 November 2007;

(b) On 30 November 2007, the Company subscribed for the entire share capital of each of Affluent Way International Limited (“Affluent Way”), Harbour Full Investments Limited (“Harbour Full”), New Sky Investments Limited (“New Sky”), Ally Health Investments Limited (“Ally Health”), Dragon Tale Investments Limited (“Dragon Tale”) and Sunsonic Investments Limited (“Sunsonic”), which were all incorporated in the BVI, to act as intermediate holding companies of the Relevant Subsidiaries; and

(c) On 31 December 2007, the Founder transferred its entire interests in Flash Ruby International Limited, Sunny Fond Investment Limited, South China Group (H.K.) Limited and South China Property International Limited (“SCP International”) to Harbour Full, New Sky, Ally Health and Dragon Tale, respectively, for an aggregate consideration of HK$6.

The Reorganisation was completed on 31 December 2007 and further details of the Reorganisation are set out in the paragraph headed “Our Reorganisation” in the section “History, Reorganisation and Group Structure” of the prospectus of the Company dated 25 January 2010.

Particulars of the principal subsidiaries are set out below:

Place and date of incorporation/ Nominal value Percentage of establishment and of registered/ equity attributable Principal Company name operations paid-up capital to the Company activities

Direct Indirect

Affluent Way International BVI US$1 100% — Investment Limited(1) 15 August 2007 holding Harbour Full Investments BVI US$1 — 100% Investment Limited(1) 23 October 2007 holding New Sky Investments BVI US$1 — 100% Investment Limited(1) 25 October 2007 holding Ally Health Investments BVI US$1 — 100% Investment Limited(1) 18 October 2007 holding Dragon Tale Investments BVI US$1 — 100% Investment Limited(1) 26 September 2007 holding Sunsonic Investments BVI US$1 — 100% Investment Limited(1) 23 October 2007 holding Pacific Prestige Property BVI US$10,000 — 66.5% Investment Limited(1) 15 March 2006 holding Accountant’s Report — I-13

— F-14 — Place and date of incorporation/ Nominal value Percentage of establishment and of registered/ equity attributable Principal Company name operations paid-up capital to the Company activities

Direct Indirect

Wai Cheong Enterprises BVI US$1 — 100% Investment Limited(1) 20 March 2002 holding Polytic (China) Properties BVI US$50,000 — 100% Investment Investment Holdings 15 May 2002 holding Limited(1) Flash Ruby International Hong Kong HK$10,000 — 100% Investment Limited(2) 18 July 2003 holding Sunny Fond Investment Ltd.(3) Hong Kong HK$10,000 — 100% Investment 8 January 2003 holding South China Group (H.K.) Hong Kong HK$100 — 100% Investment Limited(3) 23 March 1995 holding South China Property Hong Kong HK$10,000 — 100% Investment International Limited(3) 29 April 1998 holding Pacific Prestige Limited(4) Hong Kong HK$100 — 95% Investment 24 March 2006 holding Xiamen Zhongjun Industrial PRC RMB177,000,000 — 100% Investment Co., Ltd.** (5) 28 January 2003 holding and (廈門中駿集團有限公司#) trading of construction materials Xiamen Cippon Tai Wo PRC HK$15,000,000 — 100% Property Property Management Co., 4 November 2002 management Ltd.** (5) (廈門世邦泰和物業管理有限公司#) Xiamen Rundi Architectural PRC HK$23,000,000 — 100% Construction Design Co., Ltd.** (5) 9 December 2005 and interior (廈門潤地建築設計有限公司#) design Xiamen Guanjun Aviation PRC RMB40,000,000 — 95%@ Property Storage Services Co., 10 May 2005 investment Ltd.*(5) (廈門冠駿航空倉儲服務有限公司#) Xiamen Lucky Star Decoration PRC RMB5,000,000 — 100% Interior Engineering Co., Ltd.*** (5) 9 December 2005 design and (廈門福斯達裝修工程有限公司) decoration Xiamen Jinmen Seaview PRC HK$20,000,000 — 100% Property Manor Real Estate Co., 13 January 2004 development Ltd.** (6) (廈門金門海景山莊房地產開發有限公司#) Tianxia Estate (Xiamen) PRC US$7,000,000 — 100% Property Develop Co., Ltd.** (6) 10 August 1999 development (天下房地產(廈門)開發有限公司#) Beijing World City Property PRC RMB50,000,000 — 100% Property Management Co., Ltd.** (7) 27 June 2007 management (北京世界城物業管理有限公司#) Zhangzhou Long Wen Hua PRC RMB30,000,000 — 80% Property Gang Real Estate 27 March 2003 development Development Co., Ltd.** (8) (漳州龍文華港房地產開發有限公司#)

Accountant’s Report — I-14

— F-15 — Place and date of incorporation/ Nominal value Percentage of establishment and of registered/ equity attributable Principal Company name operations paid-up capital to the Company activities

Direct Indirect

Xiamen Guanyu Real Estate PRC RMB50,000,000 — 100% Property Development Co., Ltd.*** (9) 29 August 1997 development (廈門冠宇房地產開發有限公司) Xiamen Hongqiao Real Estate PRC RMB7,000,000 — 100% Property Development Co., Ltd.* (10) 23 January 2006 development (廈門虹橋房地產開發有限公司#) Xiamen Aite Real Estate PRC RMB10,000,000 — 80%@ Property Co., Ltd.* (11) (20) 2 May 1996 development (廈門艾特房地產開發有限公司#) Beijing Jinghui Real Estate PRC RMB100,000,000 — 100% Property Development Co., Ltd.*** (12) 27 August 2004 development (北京京匯房地產開發有限公司#) Quanzhou Junjing Real Estate PRC RMB100,000,000 — 100% Property Development Co., Ltd.* (13) 22 January 2007 development (泉州駿景房地產開發有限公司#) Quanzhou Donghaian PRC RMB20,000,000 — 100% Property Construction Co., Ltd.* (13) 26 November 2007 development (泉州東海岸建設有限公司#) Nanan Junxin Real Estate PRC RMB50,000,000 — 51% Property Development Co., Ltd.* (13) 31 July 2007 development (南安駿信房地產開發有限公司) Zhongjun (Quanzhou) Real PRC RMB315,000,000 — 100% Property Estate Development Co., 13 August 2007 development Ltd.* (13) (中駿(泉州)房地產開發有限公司) Nanan Huajing Real Estate PRC RMB70,000,000 — 100% Property Development Co., Ltd.* (14) 1 June 2001 development (南安華景房地產開發有限公司#) Shenzhen Fanya Real Estate PRC HK$160,000,000 — 63.2% Property Development Co., Ltd.** (15) 2 June 2006 development (深圳泛亞房地產開發有限公司#) Shanxi Yuanhong Real Estate PRC RMB100,000,000 — 60% Property Co., Ltd.* (16) 15 December 2003 development (山西源宏房地產開發有限公司#) Xiamen Zhongjun Shiji Real PRC RMB1,000,000,000 — 100% Property Estate Co., Ltd.* 1 September 2009 development (廈門中駿世紀房地產有限公司#) Fujian Straits West-Coast PRC RMB730,000,000 — 58% Property Investment Co., Ltd.* (17) 22 August 2005 development (福建省海峽西岸投資發展有限公司#) Quanzhou Straits Sports PRC RMB300,000,000 — 58% Operation and Center Co., Ltd*(18) 12 January 2006 management (泉州市海峽體育中心有限公司#) of sports and recreation facilities

* Registered as limited liability companies under PRC law. ** Registered as wholly-foreign-owned entities under PRC law. *** Registered as Sino-foreign joint ventures under PRC law. # The English names of these companies represent the best effort made by management of the Company to directly translate their Chinese names as they do not register any official English names. @ Pursuant to the relevant subcontracting and share transfer agreements between the Group and the minority shareholder of these subsidiaries, the Group is entitled to all the results and assets and obligated Accountant’s Report — I-15

— F-16 — to all liabilities of these subsidiaries effective from the date of the relevant agreements by paying the minority shareholder a subcontracting fee and a consideration for the capital contributed by the minority shareholder for each of the relevant subsidiaries. The legal ownership of the relevant minority interests will be transferred to the Group by the minority shareholder when the Group settles all the subcontracting fees and considerations. Accordingly, the relevant minority interests were considered as being acquired by the Group at the date of the relevant agreements and the relevant minority interests were held by the minority shareholder to secure the payment of the outstanding subcontracting fees and considerations. (1) No statutory audited financial statements have been prepared for these companies since their respective dates of incorporation as they were incorporated in the country where there is no statutory audit requirement. (2) The statutory financial statements of this company for the year ended 31 December 2006 and the two years ended 31 December 2008 were audited byHKWan,Practising CPA (“H K Wan”), and RIW C.P.A. Limited (“RIW”), respectively. BothHKWanandRIWareregistered in Hong Kong. (3) The statutory financial statements of these companies for the year ended 31 March 2007 were audited by H K Wan and the statutory financial statements for the period from 1 April 2007 to 31 December 2007 and the year ended 31 December 2008 were audited by RIW. (4) The statutory financial statements of this company for the period from 24 March 2006 (date of incorporation) to 31 December 2006 and the two years ended 31 December 2008 were audited by H K Wan and RIW, respectively. (5) The statutory financial statements of these companies for the year ended 31 December 2006 and the two years ended 31 December 2008 were audited by Xiamen Anderxin Certified Public Accountants Co., Ltd. (廈門安德信會計師事務所有限公司) (“Xiamen Anderxin”) and Xiamen PuHe Certified Public Accountants (廈門普和會計師事務所有限公司) (“Xiamen PuHe”), respectively. (6) The statutory financial statements of these companies for the years ended 31 December 2006, 31 December 2007 and 31 December 2008 were audited by China Audit Certified Public Accountants Xiamen Branch (中審會計師事務所有限公司) (“China Audit”), Xiamen Anderxin and Xiamen PuHe, respectively. (7) The statutory financial statements of this company for the period from 27 June 2007 (date of incorporation) to 31 December 2007 and the year ended 31 December 2008 were audited by HuaQing Certified Public Accountants Co., Ltd. (華清會計師事務所有限公司) (“HuaQing”). (8) The statutory financial statements of this company for the two years ended 31 December 2008 were audited by Xiamen PuHe. (9) The statutory financial statements of this company for the year ended 31 December 2006 were audited by Xiamen Anderxin. No statutory financial statements for the two years ended 31 December 2008 have been prepared for this company as it has commenced the process of deregistration. (10) The statutory financial statements of this company for the period from 23 January 2006 (date of incorporation) to 31 December 2006 and the two years ended 31 December 2007 and the year ended 31 December 2008 were audited by Xiamen Anderxin and Xiamen PuHe, respectively. (11) The statutory financial statements of this company for the year ended 31 December 2006 were audited by China Audit. No statutory financial statements for the two years ended 31 December 2008 have been prepared for this company as it has commenced the process of deregistration. (12) The statutory financial statements of this company for the three years ended 31 December 2008 were audited by HuaQing. (13) The statutory financial statements of these companies for the period from their respective dates of incorporation to 31 December 2007 and the year ended 31 December 2008 were audited by Xiamen Anderxin and Xiamen PuHe, respectively. (14) The statutory financial statements of this company for the years ended 31 December 2006, 31 December 2007 and 31 December 2008 were audited by Quanzhou ZhiCheng Certified Public Accountants Co., Ltd. (泉州志成會計師事務所有限公司, formerly known as 福建志成會計師事務所有限公司) (“QZ ZhiCheng”), Xiamen Anderxin and Xiamen PuHe, respectively. (15) The statutory financial statements of this company for the period from 2 June 2006 (date of incorporation) to 31 December 2006, the years ended 31 December 2007 and 31 December 2008 were audited by Shenzhen Baolong Certified Public Accountants Co., Ltd. (深圳保龍會計師事務所有限公司) (“Shenzhen Baolong”), Shenzhen AnHui Certified Public Accountants Co., Ltd. (深圳安匯會計師事務所有限公司) (“Shenzhen AnHui”) and Shenzhen Caian Certified Accountants Co., Ltd. (深圳市財安合夥會計師事務所有限公司) (“Shenzhen Caian”), respectively. (16) The statutory financial statements of this company for the two years ended 31 December 2008 were audited by Lin Fen Huaxing Certified Public Accountants (臨汾華興會計師事務所) (“Huaxing”). (17) The statutory financial statements of this company for each of the three years ended 31 December 2008 were audited by QZ ZhiCheng. (18) No statutory financial statements have been prepared for this company for the period from 12 January 2006 to 31 December 2006. The statutory financial statements of this company for each of the two years ended 31 December 2008 were audited by Quanzhou Hongcheng Accountants Office Co., Ltd. (泉州洪城會計師事務所有限公司) (“QZ Hongcheng”) and Xiamen Dashan Certified Public Accountants Co., Ltd. (廈門達山會計師事務所有限公司) (“Xiamen Dashan”), respectively. Accountant’s Report — I-16

— F-17 — (19) Xiamen Anderxin, Xiamen PuHe, China Audit, HuaQing, Shenzhen Baolong, Shenzhen AnHui, Shenzhen Caian, Huaxing, QZ ZhiCheng, QZ Hongcheng and Xiamen Dashan are all registered in the PRC. (20) Deregistered in 2009.

Details of business combinations that were effected and subsidiaries disposed of during the Track Record Periods are set out in notes 36(a) and 36(b) to the Financial Information, respectively.

The above table lists the subsidiaries of the Company which, in the opinion of the directors, principally affected the results for the Track Record Periods or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

2.1 BASIS OF PRESENTATION

Pursuant to the Reorganisation, the Company became the holding company of the companies now comprising the Group. Since the Company and the Relevant Subsidiaries were and are ultimately controlled by the Founder both before and after the completion of the Reorganisation, the Reorganisation is considered as a business combination under common control and the financial information (the “Financial Information”) of the Group for the Track Record Periods has been prepared using the principles of merger accounting.

The consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows of the Group for each of the Track Record Periods include the results and changes in equity and cash flows of all companies now comprising the Group, as if the current structure had been in existence throughout the Track Record Periods, or since their respective dates of acquisition, incorporation or establishment, where this is a shorter period. The consolidated statements of financial position of the Group as at 31 December 2006, 2007 and 2008 and 30 September 2009 have been prepared to present the state of affairs of the Group as if the current structure had been in existence and in accordance with the respective equity interests and/or the power to exercise control over the individual companies attributable to the Founder and/or the Company as at the respective dates.

2.2 BASIS OF PREPARATION

The Financial Information has been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) (which include all Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“HKASs”) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”), accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. All HKFRSs effective for the accounting periods commencing from 1 January 2006, 2007, 2008 and 2009, together with the relevant transitional provisions, have been early adopted by the Group in the preparation of the Financial Information throughout the Track Record Periods.

The Financial Information has been prepared under the historical cost convention, except for investment properties and certain financial assets, which have been measured at fair value. It is presented in Renminbi (“RMB”) and all values are rounded to the nearest thousand (“RMB’000”) except when otherwise indicated.

2.3 NET CURRENT LIABILITIES

As at 30 September 2009, the current liabilities of the Group exceeded its current assets by approximately RMB681 million. The Group finances its property development projects by obtaining credit terms from contractors, proceeds from pre-sales of its on-going property development projects and interest-bearing bank and other borrowings.

As at 30 September 2009, the Group had unutilised credit facilities from banks of approximately RMB1,770 million. Moreover, the Group has obtained new credit facilities of approximately RMB9,800 million from certain PRC banks and successfully obtained or renewed approximately RMB806 million interest-bearing bank borrowings subsequent to 30 September 2009.

The directors of the Company are of the opinion that, taking into account the presently available banking facilities, the continual renewal of bank loans upon maturity and internal financial resources of the Group (mainly proceeds from the pre-sale of its ongoing property development projects), the Group has sufficient working capital for its present requirements. Hence, the Financial Information has been prepared on a going concern basis.

Accountant’s Report — I-17

— F-18 — 2.4 IMPACT OF ISSUED BUT NOT YET EFFECTIVE HKFRSs

The Group has not applied the following new and revised HKFRSs, that have been issued but are not yet effective, in this Financial Information:

HKFRS 1 (Revised) First-time Adoption of HKFRSs1 HKFRS 2 Amendments Amendments to HKFRS 2 Group Cash-settled Share-based Payment Transactions3 HKFRS 3 (Revised) Business Combinations1 HKFRS 9 Financial Instruments4 HKAS 24 (Revised) Related Party Disclosures3 HKAS 27 (Revised) Consolidated and Separate Financial Statements1 HKAS 39 Amendment Amendment to HKAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged Items1 HK(IFRIC)-Int 17 Distributions of Non-cash Assets to Owners1 HK(IFRIC)-Int 19 Extinguishing Financial Liabilities with Equity Instruments5

Apart from the above, the HKICPA has issued Improvements to HKFRSs which sets out amendments to a number of HKFRSs primarily with a view to removing inconsistencies and clarifying wording. Improvements to HKFRSs issued in May 2009 contains amendments to HKFRS 2, HKFRS 5, HKFRS 8, HKAS 1, HKAS 7, HKAS 17, Appendix to HKAS 18, HKAS 36, HKAS 38, HKAS 39, HK(IFRIC)-Int 9 and HK(IFRIC)-Int 16. Except for the amendments to HKFRS 2, HKAS 38, HK(IFRIC)-Int 9 and HK(IFRIC)-Int 16 which are effective for annual periods beginning on or after 1 July 2009 and the amendment to Appendix to HKAS 18 which has no transitional provisions specified, other amendments are effective for annual periods beginning on or after 1 January 2010 although there are separate transitional provisions for each standard.

1 Effective for annual periods beginning on or after 1 July 2009 2 Effective for annual periods beginning on or after 1 January 2010 3 Effective for annual periods beginning on or after 1 January 2011 4 Effective for annual periods beginning on or after 1 January 2013 5 Effective for annual periods beginning on or after 1 July 2010

The Group is in the process of making an assessment of the impact of these new and revised HKFRSs upon initial application. So far, it has concluded that the adoption of HKFRS 3 (Revised) and HKAS 27 (Revised) may result in changes in accounting policies, other new and revised HKFRSs are unlikely to have a significant impact on the Group’s results of operations and financial position.

3. SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidation

The Financial Information incorporates the financial statements of the Company and its subsidiaries for the Track Record Periods. As explained in note 2.1 above, the acquisition of subsidiaries under common control has been accounted for using the merger method of accounting. The purchase method of accounting is used to account for the acquisitions of subsidiaries not under common control.

The merger method of accounting involves incorporating the financial statement items of the combining entities or businesses in which the common control combination occurs as if they had been combined from the date when the combining entities or businesses first came under the control of the controlling party. The net assets of the combining entities or businesses are combined using the existing book values from the controlling party’s perspective. No amount is recognised in respect of goodwill or excess of acquirers’ interest in the net fair value of acquirees’ identifiable assets, liabilities and contingent liabilities over cost at the time of common control combination, to the extent of the continuation of the controlling party’s interest. The consolidated statements of comprehensive income include the results of each of the combining entities or businesses from the earliest date presented or since the date when the combining entities or businesses first came under common control, where this is a shorter period, regardless of the date of the common control combination.

The purchase method of accounting involves allocating the cost of the business combinations to the fair value of the identifiable assets acquired, and liabilities and contingent liabilities assumed at the date of acquisition. The cost of acquisition is measured at the aggregate fair value of the assets given and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Under the purchase method of accounting, the results of subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date such control ceases. Accountant’s Report — I-18

— F-19 — All income, expenses, and unrealised gains and losses resulting from intercompany transactions and intercompany balances within the Group are eliminated on consolidation in full.

Minority interests represent the interests of outside shareholders not held by the Group in the results and net assets of the Group’s subsidiaries. When the Group acquires or disposes of minority interests of its subsidiaries, the difference between the amounts of consideration and carrying values of minority interests are recognised as a reserve movement.

Subsidiaries

A subsidiary is an entity whose financial and operating policies the Company controls, directly or indirectly, so as to obtain benefits from its activities.

The results of a subsidiary are included in the Company’s statement of comprehensive income to the extent of dividends received and receivable. The Company’s investment in a subsidiary is stated at cost less any impairment losses.

Joint ventures

A joint venture is an entity set up by contractual arrangement, whereby the Group and other parties undertake an economic activity. The joint venture operates as a separate entity in which the Group and the other parties have an interest.

The joint venture agreement between the venturers stipulates the capital contributions of the joint venture parties, the duration of the joint venture entity and the basis on which the assets are to be realised upon its dissolution. The profits and losses from the joint venture’s operations and any distributions of surplus assets are shared by the venturers, either in proportion to their respective capital contributions, or in accordance with the terms of the joint venture agreement.

A joint venture is treated as:

(a) a subsidiary, if the Group/Company has unilateral control, directly or indirectly, over the joint venture;

(b) a jointly-controlled entity, if the Group does not have unilateral control, but has joint control, directly or indirectly, over the joint venture;

(c) an associate, if the Group does not have unilateral or joint control, but holds, directly or indirectly, generally not less than 20% of the joint venture’s registered capital and is in a position to exercise significant influence over the joint venture; or

(d) an equity investment accounted for in accordance with HKAS 39, if the Group holds, directly or indirectly, less than 20% of the joint venture’s registered capital and has neither joint control of, nor is in a position to exercise significant influence over, the joint venture.

Jointly-controlled entities

A jointly-controlled entity is a joint venture that is subject to joint control, resulting in none of the participating parties having unilateral control over the economic activity of the jointly-controlled entity.

The Group’s interests in jointly-controlled entities are stated in the consolidated statements of financial position at the Group’s share of net assets under the equity method of accounting, less any impairment losses. The Group’s share of the post-acquisition results and reserves of jointly-controlled entities is included in the consolidated statements of comprehensive income and consolidated reserves, respectively. Unrealised gains and losses resulting from transactions between the Group and its jointly-controlled entities are eliminated to the extent of the Group’s interests in the jointly-controlled entities, except where unrealised losses provide evidence of an impairment of the asset transferred.

Associates

An associate is an entity, not being a subsidiary or a jointly-controlled entity, in which the Group has a long term interest of generally not less than 20% of the equity voting rights and over which it is in a position to exercise significant influence.

The Group’s interests in associates are stated in the consolidated statements of financial position at the Group’s share of net assets under the equity method of accounting, less any impairment losses. The Group’s share of the post-acquisition results and reserves of associates is included in the consolidated statements of comprehensive income and consolidated reserves, respectively. Unrealised gains and losses resulting from transactions between the Group and its associates are eliminated to the extent of the Group’s interests in the associates, except where unrealised losses provide evidence of an impairment of the asset transferred. Accountant’s Report — I-19

— F-20 — Goodwill

Goodwill arising on the acquisition of subsidiaries and jointly-controlled entities represents the excess of the cost of the business combination over the Group’s interest in the net fair value of the acquirees’ identifiable assets acquired, and liabilities and contingent liabilities assumed as at the date of acquisition.

Goodwill arising on acquisition is initially recognised in the consolidated statement of financial position as an asset, initially measured at cost and subsequently at cost less any accumulated impairment losses. In the case of jointly-controlled entities, goodwill is included in the carrying amount thereof, rather than as a separately identified asset on the consolidated statement of financial position.

The carrying amount of goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. The Group performs its annual impairment test of goodwill as at 31 December.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units.

Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash-generating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognised. An impairment loss recognised for goodwill is not reversed in a subsequent period.

Where goodwill forms part of a cash-generating unit (group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Excess over the cost of business combinations

Any excess of the Group’s interest in the net fair value of the acquirees’ identifiable assets, liabilities and contingent liabilities over the cost of acquisition of subsidiaries and jointly-controlled entities (previously referred to as negative goodwill), after reassessment, is recognised immediately in the statement of comprehensive income.

Impairment of non-financial assets other than goodwill

Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than completed properties held for sale, inventories, deferred tax assets, financial assets and investment properties), the asset’s recoverable amount is estimated. An asset’s recoverable amount is calculated as the higher of the asset’s or cash-generating unit’s value in use and its fair value less costs to sell, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to the statement of comprehensive income in the period in which it arises, unless the asset is carried at a revalued amount, in which case the reversal of the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset is reversed only if there has been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in prior years. A reversal of such an impairment loss is credited to the statement of comprehensive income in the period in which it arises, unless the asset is carried at a revalued amount, in which case the reversal of the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset. Accountant’s Report — I-20

— F-21 — Related parties

A party is considered to be related to the Group if:

(a) the party, directly or indirectly through one or more intermediaries, (i) controls, is controlled by, or is under common control with, the Group; (ii) has an interest in the Group that gives it significant influence over the Group; or (iii) has joint control over the Group;

(b) the party is an associate;

(d) the party is a member of the key management personnel of the Group;

(e) the party is a close member of the family of any individual referred to in (a) or (d);

(f) the party is an entity that is controlled, jointly-controlled or significantly influenced by or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (d) or (e); or

(g) the party is a post-employment benefit plan for the benefit of the employees of the Group, or any entity that is a related party of the Group.

Property and equipment and depreciation

Property and equipment, other than construction in progress, are stated at cost less accumulated depreciation and any impairment losses. The cost of an item of property and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after items of property and equipment have been put into operation, such as repairs and maintenance, is normally charged to the statement of comprehensive income in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of an item of property and equipment, and where the cost of the item can be measured reliably, the expenditure is capitalised as an additional cost of that asset or as a replacement.

Depreciation is calculated on the straight-line basis to write off the cost of each item of property and equipment to its residual value over its estimated useful life. The principal annual rates used for this purpose are as follows:

Buildings 2% Leasehold improvements over the shorter of the lease terms and 20% Furniture, fixtures and office equipment 19% to 25% Motor vehicles 15% to 25%

Where parts of an item of property and equipment have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is depreciated separately.

Residual values, useful lives and the depreciation method are reviewed, and adjusted if appropriate, at least at each reporting date.

An item of property and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognised in the statement of comprehensive income in the year the asset is derecognised is the difference between the net sales proceeds and the carrying amount of the relevant asset.

Construction in progress represents a building under construction, which is stated at cost less any impairment losses, and is not depreciated. Cost comprises the direct costs of construction and capitalised borrowing costs on related borrowing funds during the period of construction. Construction in progress is reclassified to the appropriate category of property and equipment when completed and ready for use.

Service concession arrangement

The Group has entered into a service concession arrangement with a government body in Quanzhou, the PRC, for the operation and management of certain sports and recreation facilities. The transactions related to such service concession arrangement are accounted for by the Group as follows: Accountant’s Report — I-21

— F-22 — Consideration paid by the Group

An intangible asset (operating concession) is recognised to the extent that the Group receives a right to charge users of the public services. The intangible asset (operating concession) is accounted for in accordance with the policy set out for “Intangible asset (other than goodwill)” below.

Operating services

Revenue relating to operating services is accounted for in accordance with the policy for “Revenue recognition” below.

Contractual obligations to restore the sports and recreation facilities to a specified level of serviceability

The Group has contractual obligations which it must fulfil as a condition of its licence. The obligations are (a) to maintain the sports and recreation facilities it operates to a specified level of serviceability and (b) to restore the sports and recreation facilities to a specified condition before they are handed over to the grantor at the end of the service concession arrangement. These contractual obligations to maintain or restore the sports and recreation facilities, except for upgrade element, are recognised and measured in accordance with the policy set out for “Provisions” below.

Intangible asset (other than goodwill)

The useful life of an intangible asset is assessed to be either finite or indefinite. Intangible asset with finite life is amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each reporting date.

Intangible asset with indefinite useful life is tested for impairment annually either individually or at the cash-generating unit level. Such intangible asset is not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is accounted for on a prospective basis.

An intangible asset is derecognised on disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognised in the statement of comprehensive income in the period the intangible asset is derecognised is the difference between the net sales proceeds and the carrying amount of the relevant intangible asset.

Operating concession

Operating concession represents the right to operate certain sports and recreation facilities and is stated at cost less accumulated amortisation and any accumulated impairment losses. Amortisation is provided on the straight-line basis over the period of the operating concession granted to the Group of 30 years.

Investment properties

Investment properties include both completed investment properties and investment properties under construction.

Investment properties under construction or development for future use as investment properties are classified as investment properties under construction. Such properties under construction are measured initially at cost, including transaction cost, and stated at fair value, subsequent to initial recognition, at each reporting date when fair value can be determined reliably.

Gains or losses arising from changes in the fair values of completed investment properties and investment properties under construction are included in the statement of comprehensive income in the year in which they arise.

Any gains or losses on the retirement or disposal of a completed investment property or an investment property under construction are recognised in the statement of comprehensive income in the year of the retirement or disposal. Accountant’s Report — I-22

— F-23 — Operating leases

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Where the Group is the lessor, assets leased by the Group under operating leases are included in non-current assets, and rentals receivable under the operating leases are credited to the statement of comprehensive income on the straight-line basis over the lease terms. Where the Group is the lessee, rentals payable under the operating leases are charged to the statement of comprehensive income on the straight-line basis over the lease terms.

Prepaid land lease payments under operating leases are initially stated at cost and subsequently recognised on the straight-line basis over the lease terms.

Properties under development

Properties under development are stated at the lower of cost and net realisable value and comprise land costs, construction costs, borrowing costs, professional fees and other costs directly attributable to such properties incurred during the development period.

Properties under development are classified as current assets unless the construction period of the relevant property development project is expected to complete beyond the normal operating cycle. On completion, the properties are transferred to completed properties held for sale.

Completed properties held for sale

Completed properties held for sale are stated at the lower of cost and net realisable value.

Cost of completed properties held for sale is determined by an apportionment of total land and building costs attributable to the unsold properties. Net realisable value is determined by reference to the sales proceeds of properties sold in the ordinary course of business, less applicable variable selling expenses, or by management estimates based on prevailing market conditions.

Investments and other financial assets

Financial assets of the Group in the scope of HKAS 39 are classified as financial assets at fair value through profit or loss and loans and receivables, as appropriate. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

The Group assesses whether a contract contains an embedded derivative when the Group first becomes a party to it and assesses whether an embedded derivative is required to be separated from the host contract when the analysis shows that the economic characteristics and risks of the embedded derivative are not closely related to those of the host contract. Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required under the contract.

The Group determines the classification of its financial assets after initial recognition and, where allowed and appropriate, re-evaluates this designation at the reporting date.

All regular way purchases and sales of financial assets are recognised on the trade date, that is, the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading. Financial assets are classified as held for trading if they are acquired for the purpose of sale in the near term. Gains or losses on investments held for trading are recognised in the statement of comprehensive income. The net fair value gain or loss recognised in the statement of comprehensive income does not include any dividends on these financial assets, which are recognised in accordance with the policy set out for “Revenue Recognition” below.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are subsequently carried at amortised cost using the effective interest method less any allowance for impairment. Amortised cost is calculated taking into account any discount or premium on acquisition and includes fees that are an integral part of the effective interest rate and transaction costs. Gains and losses are recognised in the statement of comprehensive income when the loans and receivables are derecognised or impaired, as well as through the amortisation process. Accountant’s Report — I-23

— F-24 — Fair value

The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business at the reporting date. For investments where there is no active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s length market transactions; reference to the current market value of another instrument which is substantially the same; and a discounted cash flow analysis.

Impairment of financial assets

The Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired.

Assets carried at amortised cost

If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly or through the use of an allowance account. The amount of the impairment loss is recognised in the statement of comprehensive income. Loans and receivables together with any associated allowance are written off when there is no realistic prospect of future recovery.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed by adjusting the allowance amount. Any subsequent reversal of an impairment loss is recognised in the statement of comprehensive income, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

In relation to trade and other receivables, a provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor and significant changes in technological, market economic or legal environment that have an adverse effect on the debtor) that the Group will not be able to collect all of the amounts due under the original terms of an invoice. The carrying amount of the receivables is reduced through the use of an allowance account. Impaired debts are derecognised when they are assessed as uncollectible.

Derecognition of financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised where:

• the rights to receive cash flows from the asset have expired;

• the Group retains the rights to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a “pass-through” arrangement; or

• the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Where the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Where continuing involvement takes the form of a written and/or purchased option (including a cash-settled option or similar provision) on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that the Group may repurchase, except in the case of a written put option (including a cash-settled option or similar provision) on an asset measured at fair value, where the extent of the Group’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price. Accountant’s Report — I-24

— F-25 — Financial liabilities at amortised cost (including interest-bearing bank and other borrowings)

Financial liabilities including trade and other payables, amounts due to related parties and interest-bearing bank and other borrowings are initially stated at fair value less directly attributable transaction costs and are subsequently measured at amortised cost, using the effective interest method unless the effect of discounting would be immaterial, in which case they are stated at cost. The related interest expense is recognised within “finance costs” in the statement of comprehensive income.

Gains and losses are recognised in the statement of comprehensive income when the liabilities are derecognised as well as through the amortisation process.

Financial guarantee contracts

Financial guarantee contracts in the scope of HKAS 39 are accounted for as financial liabilities. A financial guarantee contract is recognised initially at its fair value less transaction costs that are directly attributable to the acquisition or issue of the financial guarantee contract, except when such contract is recognised at fair value through profit or loss. Subsequent to initial recognition, the Group measures the financial guarantee contract at the higher of (i) the amount of the best estimate of the expenditure required to settle the present obligation at the reporting date; and (ii) the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with HKAS 18 Revenue.

Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in the statement of comprehensive income.

Cash and cash equivalents

For the purpose of the consolidated statements of cash flows, cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments that are readily convertible into known amounts of cash, and which are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Group’s cash management.

For the purpose of the consolidated statements of financial position, cash and cash equivalents comprise cash on hand and at banks, including term deposits, which are not restricted as to use.

Provisions

A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation.

When the effect of discounting is material, the amount recognised for a provision is the present value at the reporting date of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in “finance costs” in the statement of comprehensive income.

Income tax

Income tax comprises current and deferred tax. Income tax is recognised in the statement of comprehensive income, or in equity if it relates to items that are recognised in the same or a different period directly in equity.

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities.

Deferred tax is provided, using the liability method, on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

• where the deferred tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and Accountant’s Report — I-25

— F-26 — • in respect of taxable temporary differences associated with investments in subsidiaries, jointly-controlled entities and associates, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carryforward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax credits and unused tax losses can be utilised, except:

• where the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of deductible temporary differences associated with investments in subsidiaries, jointly-controlled entities and associates, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Conversely, previously unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue can be measured reliably, on the following bases:

(b) from the rendering of services, when the services have been rendered;

(e) facilities rental income, on a time proportion basis over the lease terms.

Retirement benefit schemes

The Group operates a defined contribution Mandatory Provident Fund retirement benefit scheme (the “MPF Scheme”) under the Mandatory Provident Fund Schemes Ordinance for those employees who are eligible to participate in the MPF Scheme. Contributions are made based on a percentage of the employees’ basic salaries and are charged to the statement of comprehensive income as they become payable in accordance with the rules of the MPF Scheme. The assets of the MPF Scheme are held separately from those of the Group in an independently administered fund. The Group’s employer contributions vest fully with the employees when contributed into the MPF Scheme.

— F-27 — contribute certain percentages of their payroll costs to the Pension Scheme. The only obligation of the Group with respect to the Pension Scheme is to pay the ongoing contributions under the Pension Scheme. The contributions are charged to the statement of comprehensive income as they become payable in accordance with the rules of the Pension Scheme.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, i.e., assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. The capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs capitalised.

Foreign currencies

The Financial Information is presented in RMB, which is the Group’s presentation currency. The functional currency of the Company is the Hong Kong dollar while RMB is used as the presentation currency of the financial information of the Company for the purpose of aligning with the presentation currency of the Group. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Foreign currency transactions are initially recorded using the functional currency rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rates of exchange ruling at the reporting date. All differences are taken to the statements of comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

The functional currencies of certain subsidiaries, jointly-controlled entities and associates operating outside the PRC are currencies other than RMB. As at the reporting date, the assets and liabilities of these entities are translated into the presentation currency of the Company at the exchange rates ruling at the reporting date, and their statements of comprehensive income are translated into RMB at the weighted average exchange rates for the year. The resulting exchange differences are included in the exchange fluctuation reserve. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in profit and loss in the statement of comprehensive income.

For the purpose of the consolidated statements of cash flows, the cash flows of non-PRC entities are translated into RMB at the exchange rates ruling at the dates of the cash flows. Frequently recurring cash flows of non-PRC entities which arise throughout the year are translated into RMB at the weighted average exchange rates for the year.

4. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

The preparation of the Financial Information requires the management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amounts of the assets or liabilities affected in the future.

Judgements

In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the Financial Information:

Operating lease commitments - Group as lessor

The Group has entered into commercial property leases on its investment property portfolio. The Group has determined that it retains all the significant risks and rewards of ownership of these properties which are leased out on operating leases.

Classification between investment properties and owner-occupied properties

The Group determines whether a property qualifies as an investment property, and has developed criteria in making that judgement. Investment property is a property held to earn rentals or for capital appreciation or both. Therefore, the Group considers whether a property generates cash flows largely independently of the other assets held by the Group. Accountant’s Report — I-27

— F-28 — Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. If these portions could be sold separately (or leased out separately under a finance lease), the Group accounts for these portions separately. If the portions could not be sold separately, the property is an investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes.

Judgement is made on an individual property basis to determine whether ancillary services are so significant that a property does not qualify as an investment property.

Classification between investment properties and properties held for sale

The Group develops properties held for sale and properties held to earn rentals and/or for capital appreciation. Judgement is made by management on determining whether a property is designated as an investment property or a property held for sale. The Group considers its intention for holding the properties at the early development stage of the related properties. During the course of construction, the related properties under construction are accounted for as properties under development included in current assets if the properties are intended for sale after its completion, whereas, the properties are accounted for as investment properties under construction included in investment properties if the properties are intended to be held to earn rentals and/or for capital appreciation. Upon completion of the properties, the properties held for sale are transferred to completed properties held for sale and are stated at cost, while the properties held to earn rentals and/or for capital appreciation are transferred to completed investment properties. Investment properties, both under construction and completed, are subject to revaluation at each reporting date.

Valuation of properties under development and completed properties held for sale

Properties under development and completed properties held for sale are stated at the lower of cost and net realisable value. The cost of each unit in each phase of development is determined using the weighted average method. The estimated net realisable value is the estimated selling price less selling expenses and the estimated cost of completion (if any), which are estimated based on the best available information.

If there is an increase in costs to completion or a decrease in net sales value, the net realisable value will decrease and this may result in a provision for properties under development and completed properties held for sale. Such provision requires the use of judgement and estimates. Where the expectation is different from the original estimate, the carrying value and provision for properties in the periods in which such estimate is changed will be adjusted accordingly.

Allocation of construction cost on properties under development

When developing properties, the Group typically divides the development projects into phases. Costs directly related to the development of a phase are recorded as the cost of such phase. Costs that are common to each phase are allocated to each phase based on the saleable floor area of each phase as a percentage of the total saleable floor area of the entire project. The cost of the unit sold is determined by the floor area in square metre sold during the year multiplies by the average cost per square metre of that particular phase of the project.

Estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Estimation of fair value of investment properties

Investment properties, including completed investment properties and investment properties under construction, were revalued at each reporting date during the Track Record Periods based on the appraised market value provided by independent professional valuers. Such valuations were based on certain assumptions, which are subject to uncertainty and might materially differ from the actual results. In making the estimation, the Group considers information from current prices in an active market for similar properties and uses assumptions that are mainly based on market conditions existing at each reporting date.

PRC corporate income tax (“CIT”)

— F-29 — currently enacted tax laws, regulations and other related policies are required in determining the provision for income taxes to be made. Where the final tax outcome of these matters is different from the amounts originally recorded, the differences will impact on the income tax and tax provisions in the period in which the differences realise.

PRC land appreciation tax (“LAT”)

The Group is subject to LAT in the PRC. The provision for LAT is based on management’s best estimates according to the understanding of the requirements set forth in the relevant PRC tax laws and regulations. The actual LAT liabilities are subject to the determination by the tax authorities upon the completion of the property development projects. The Group has not finalised its LAT calculation and payments with the tax authorities for certain of its property development projects. The final outcome could be different from the amounts that were initially recorded.

Useful lives and impairment of property and equipment

The Group’s management determines the estimated useful lives and related depreciation charges for its items of property and equipment. This estimate is based on the historical experience of the actual useful lives of items of property and equipment of similar nature and functions. It could change significantly as a result of technical innovations and its competitor’s actions. Management will increase the depreciation charge where useful lives are less than previously estimates, or it will write-off or write down technically obsolete assets that have been abandoned.

The carrying value of an item of property and equipment is reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable in accordance with the accounting policy as disclosed in the relevant part of this section. The recoverable amount of an item of property and equipment is calculated as the higher of its fair value less costs to sell and value in use, the calculations of which involve the use of estimates.

Deferred tax assets

Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies.

Allowance on trade and other receivables

The provision policy for doubtful debts of the Group is based on the ongoing evaluation of the collectability and ageing analysis of the outstanding receivables and on management’s estimation. A considerable amount of judgement is required in assessing the ultimate realisation of these receivables, including the creditworthiness and the past collection history of each customer. If the financial conditions of the customers of the Group were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Impairment of non-financial assets

The Group assesses whether there are any indicators of impairment of all non-financial assets at each reporting date. Indefinite life intangible assets are tested for impairment annually and at other times when such indicator exists. Other non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable. When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows.

Provision for major overhauls

The Group has contractual obligations which it must fulfil as a condition of the operating concession granted by the grantor, that are (a) to maintain the sports and recreation facilities it operates to a specified level of serviceability and (b) to restore the sports and recreation facilities to a specified condition before they are handed over to the grantor at the end of the service concession arrangement. These contractual obligations to maintain or restore the sports and recreation facilities, except for upgrade element, are recognised and measured in accordance with HKAS 37 Provisions, Contingent Liabilities and Contingent Assets, i.e., at the best estimate of the expenditure that would be required to settle the present obligation at the reporting date. The estimation of the expenditure requires the Group to estimate the expected future cash outlays on major overhauls of the facilities over the service concession period and also to choose a suitable discount rate in order to calculate the present value of those cash flows. Accountant’s Report — I-29

— F-30 — 5. SEGMENT INFORMATION

The Group is principally engaged in the businesses of property development, property investment and property management. For management purposes, the property development and property investment businesses are monitored as one operating segment on a project basis to allocate resources and assess performance. For financial reporting purposes, the property management segment combines with the property development and investment segment as its reported revenue, reported results and assets are less than 10% of the consolidated revenue, consolidated profit or consolidated loss, and consolidated assets of the Group.

The Group’s revenue from external customers from each product or service is set out in note 6 to the Financial Information.

The Group’s revenue from external customers is derived solely from its operations in the PRC, and the non-current assets of the Group are substantially located in the PRC.

During the Track Record Periods, no revenue from transactions with a single external customer amounted to 10% or more of the Group’s total revenue.

6. REVENUE, OTHER INCOME AND GAINS

Revenue, which is also the Group’s turnover, represents the gross proceeds, net of business tax, and other sales related taxes from the sale of properties; gross rental income received and receivable from investment properties, and property management fee income, net of business tax, received and receivable during the Track Record Periods.

An analysis of the Group’s revenue, other income and gains is as follows:

Nine months ended Year ended 31 December 30 September

2006 2007 2008 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) Revenue Sale of properties ...... 325,779 367,974 325,217 325,217 535,778 Property management fees ...... 1,505 2,824 4,240 3,397 6,102 Gross rental income ...... 112 896 1,722 1,084 8,222

327,396 371,694 331,179 329,698 550,102

Other income and gains Bank interest income ...... 1,497 4,096 1,741 1,669 1,881 Interest income on other receivables ...... 427 — 403 — — Consultancy service fee income.. 2,514 ———— Gain on disposal of items of property and equipment ...... ———— 5 Gain on disposal of investment properties ...... 122 120 — — — Gain on disposal of jointly-controlled entities ...... — 34,886 — — — Gain on disposal of subsidiaries (note 36(b)) ...... — 448 — — — Gain on disposal of financial assets at fair value through profit or loss ...... 15 3,181 — — — Excess over the cost of a business combination (note 36(a)) ...... — — 4,527 4,527 — Foreign exchange gain, net...... 3,216 — — — 7,738 Others...... 440 745 291 49 4,115

8,231 43,476 6,962 6,245 13,739

Accountant’s Report — I-30

— F-31 — 7. FINANCE COSTS

Nine months ended Year ended 31 December 30 September

2006 2007 2008 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) Interest on bank loans wholly repayable within five years...... 24,063 54,478 66,557 41,543 55,666 Interest on bank loans repayable beyond five years ...... 238 321 1,158 5,734 533 Interest on loans from companies controlled by the Founder (note 41(a)(iv)) ...... 193 6,874 16,890 8,173 9,134

Total interest on financial liabilities not at fair value through profit or loss ...... 24,494 61,673 84,605 55,450 65,333 Less: Interest capitalised ...... (24,254) (60,297) (81,281) (53,053) (62,965)

240 1,376 3,324 2,397 2,368

Accountant’s Report — I-31

— F-32 — 8. PROFIT BEFORE TAX

The Group’s profit before tax is arrived at after charging/(crediting):

Nine months ended Year ended 31 December 30 September

Notes 2006 2007 2008 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) Cost of properties sold...... 259,407 240,390 199,488 199,488 280,345 Cost of services provided...... 1,837 2,337 3,847 2,971 4,297 Depreciation ...... 14 2,401 3,073 5,272 3,983 5,725 Amortisation of prepaid land lease payments ...... 16 137 984 11,423 8,535 12,571 Minimum lease payments under operating leases for land and buildings ...... 1,972 2,711 2,871 2,201 1,645 Direct operating expenses (including repairs and maintenance) arising on rental-earning investment properties ...... 7 5 13 4 70 Auditors’ remuneration ...... 279 505 666 622 811 Employee benefit expense (including directors’ remuneration (note 9)): Salaries and other staff costs .... 9,402 23,552 23,965 15,775 15,728 Retirement benefit scheme contributions ...... 376 557 700 615 663 Less: Amount capitalised...... (2,666) (8,421) (10,377) (6,694) (3,766)

7,112 15,688 14,288 9,696 12,625

Foreign exchange differences, net. (3,216) 3,808 1,263 1,677 (7,738) Write-off of items of property and equipment* ...... 14 3 241 89 89 — Gain on disposal of items of property and equipment...... — — — — (5) Loss on disposal of items of property and equipment* ...... — 348 — — — Loss on disposal of a subsidiary* .. 36(b) — — 158 158 —

* These items are included in “Other expenses” on the face of the consolidated statements of comprehensive income of the Group during the Track Record Periods.

Accountant’s Report — I-32

— F-33 — 9. DIRECTORS’ REMUNERATION

Directors’ remuneration for the Track Record Periods, disclosed pursuant to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and Section 161 of the Hong Kong Companies Ordinance, is as follows:

Nine months ended Year ended 31 December 30 September

2006 2007 2008 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) Fees...... —————

Other emoluments: Salaries, allowances and benefits in kind ..... 814 1,256 1,397 1,049 864 Retirement benefit scheme contributions ...... 14 15 18 13 13

828 1,271 1,415 1,062 877

(a) Non-executive directors and independent non-executive directors

There were no fees and other emoluments payable to non-executive directors and independent non-executive directors during the Track Record Periods.

Accountant’s Report — I-33

— F-34 — (b) The remuneration of the executive directors for each of the Track Record Periods is set out below:

Salaries, Retirement allowances benefit and benefits scheme Fees in kind contributions Total

RMB’000 RMB’000 RMB’000 RMB’000 Year ended 31 December 2006 The Founder ...... ———— Mr. Chen Yuanlai (“Mr. Chen”) ...... — 549 12 561 Mr. Cheng Hiu Lok (“Mr. Cheng”) ...... — 180 — 180 Mr. Li Wei ...... — 85 2 87

— 814 14 828

Year ended 31 December 2007 The Founder ...... — 180 — 180 Mr. Chen ...... — 576 12 588 Mr. Cheng ...... — 285 — 285 Mr. Li Wei ...... — 215 3 218

— 1,256 15 1,271

Year ended 31 December 2008 The Founder ...... — 360 — 360 Mr. Chen ...... — 322 11 333 Mr. Cheng ...... — 423 — 423 Mr. Li Wei ...... — 292 7 299

— 1,397 18 1,415

Nine months ended 30 September 2008 (unaudited) The Founder ...... — 270 — 270 Mr. Chen ...... — 242 8 250 Mr. Cheng ...... — 318 — 318 Mr. Li Wei ...... — 219 5 224

— 1,049 13 1,062

Nine months ended 30 September 2009 The Founder ...... — 234 — 234 Mr. Chen ...... — 206 8 214 Mr. Cheng ...... — 236 — 236 Mr. Li Wei ...... — 188 5 193

— 864 13 877

There was no arrangement under which a director waived or agreed to waive any remuneration during the Track Record Periods.

Accountant’s Report — I-34

— F-35 — 10. FIVE HIGHEST PAID INDIVIDUALS

During the years ended 31 December 2006 and 2007, two of the five highest paid individuals were directors of the Company. During the year ended 31 December 2008 and the nine months ended 30 September 2008 and 2009, three of the five highest paid individuals were directors of the Company.

Details of the remuneration of the remaining non-director, highest paid individuals for the Track Record Periods are as follows:

Nine months ended Year ended 31 December 30 September

2006 2007 2008 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) Salaries, allowances and benefits in kind ...... 792 991 1,434 1,083 948 Retirement benefit scheme contributions...... 28 23 11 8 8

820 1,014 1,445 1,091 956

The number of non-director, highest paid employees whose remuneration fell within the following bands is as follows:

Number of employees

Nine months ended Year ended 31 December 30 September

2006 2007 2008 2008 2009

(unaudited) Nil to RMB500,000 ...... 33111 RMB500,001 to RMB1,000,000 ..... — — — 1 1 RMB1,000,001 to RMB1,500,000 .. — — 1 — —

33222

11. TAX

Nine months ended Year ended 31 December 30 September

2006 2007 2008 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) Current: Hong Kong profits tax ...... — 6,685 — — — PRC CIT...... 12,227 15,664 18,952 19,921 36,565 PRC LAT ...... 183 20,434 16,653 14,840 51,919

12,410 42,783 35,605 34,761 88,484

Deferred (note 32): Current year ...... 1,008 26,715 40,001 34,106 59,399 Effect of change in tax rates ... — 1,083 — — —

1,008 27,798 40,001 34,106 59,399

Total tax charge for the year/period ...... 13,418 70,581 75,606 68,867 147,883

Accountant’s Report — I-35

— F-36 — Hong Kong profits tax

Hong Kong profits tax has been provided at the rate of 17.5% on the estimated assessable profits arising in Hong Kong for the year ended 31 December 2007. No provision for Hong Kong profits tax has been made for other years/periods during the Track Record Periods as the Group did not generate any assessable profits arising in Hong Kong during these years/periods.

CIT

The income tax provision of the Group in respect of operations in Mainland China has been calculated at the applicable tax rate on the estimated assessable profits for each of the Track Record Periods, based on the existing legislation, interpretations and practices in respect thereof.

Prior to 1 January 2008, the Group’s subsidiaries in Shenzhen and Xiamen are entitled to a preferential CIT rate of 15% and all other subsidiaries located in other cities in the PRC are subject to CIT at the statutory rate of 33%. For each of the PRC subsidiaries of the Group, CIT is provided at the applicable rate of the profits for the purpose of the PRC statutory financial reporting, adjusted for those items which are not assessable or deductible.

On 16 March 2007, the National People’s Congress approved the PRC Corporate Income Tax Law (the “New CIT Law”), which became effective on 1 January 2008. The New CIT Law introduces a wide range of changes which include, but are not limited to, the unification of the income tax rates for domestic-invested and foreign-invested enterprises at 25%. Pursuant to “Guo Fa 2007 No. 39” promulgated on 26 December 2007, for the Group’s subsidiaries in Xiamen and Shenzhen which enjoyed a preferential tax rate of 15% prior to 1 January 2008, the tax rate will be transitioned to 25% over five years at rates of 18% in 2008, 20% in 2009, 22% in 2010, 24% in 2011 and 25% in 2012.

LAT

According to the requirements of the Provisional Regulations of the PRC on LAT (中華人民共和國土地增值稅暫行條例) effective from 1 January 1994, and the Details Implementation Rules on the Provisional Regulations of the PRC on LAT (中華人民共和國土地增值稅暫行條例實施細則) effective from 27 January 1995 (collectively the “LAT Regulations”), all gains arising from the sale or transfer of real estate in Mainland China with effect from 1 January 1994 are subject to LAT at progressive rates ranging from 30% to 60% on the appreciation of land value, being the proceeds from the sale of properties less deductible expenditures including borrowing costs and all property development expenditures.

During the Track Record Periods, the land appreciation values of certain of the Group’s subsidiaries in Xiamen were not charged with LAT at the relevant progressive rates according to the LAT Regulations because, in the opinion of the directors, the relevant subsidiaries had obtained approval for tax deregistration from the relevant local tax bureau before the formal implementation of the LAT Regulations in Xiamen on 1 August 2007.

Accountant’s Report — I-36

— F-37 — A reconciliation of the tax charge applicable to profit before tax using the statutory/applicable rates for the jurisdiction in which the Company and the majority of its subsidiaries are domiciled to the tax charge at the effective tax rates is as follows:

Nine months ended Year ended 31 December 30 September

2006 2007 2008 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) Profit before tax...... 65,205 230,658 241,465 223,988 421,615

At the statutory/applicable income tax rates ... 21,484 74,211 61,928 57,049 105,505 Higher/(lower) tax rate for specific cities ...... (11,119) (14,525) (9,793) (9,606) 1,016 Effect of change in tax rates used for the recognition of deferred taxes ...... — (12,920) — — (215) Effect on deferred tax due to change in tax rates...... — 1,083 — — — Profits and losses attributable to jointly-controlled entities and associates ... 272 702 1,902 1,737 426 Income not subject to tax...... (1,056) (1,213) (1,589) (1,995) (235) Expenses not deductible for tax ...... 1,291 6,351 5,339 4,587 5,763 Tax losses utilised from previous periods ...... (28) (670) (166) (1) (163) Tax losses not recognised...... 122 174 286 3 1,609 Tax effect on unrealised profits arising from transactions within the Group ...... 2,210 (111) 4,681 3,708 (4,160) LAT ...... 183 20,434 16,653 14,840 51,919 Tax effect of LAT ...... (27) (3,065) (2,998) (1,455) (13,582) Others ...... 86 130 (637) — —

Tax charge at the Group’s effective rates ...... 13,418 70,581 75,606 68,867 147,883

The share of tax credit/(charge) attributable to jointly-controlled entities amounting to RMB3,595,000, RMB11,413,000, RMB10,267,000 (unaudited) and RMB(9,912,000) for the years ended 31 December 2007 and 2008 and the nine months ended 30 September 2008 and 2009, respectively, is included in “Share of profits and losses of jointly-controlled entities” on the face of the consolidated statements of comprehensive income.

The share of tax credit attributable to associates amounting to RMB53,000, RMB193,000, RMB559,000, RMB396,000 (unaudited) and RMB299,000 for the years ended 31 December 2006, 2007 and 2008 and the nine months ended 30 September 2008 and 2009, respectively, is included in “Share of profits and losses of associates” on the face of the consolidated statements of comprehensive income.

12. DIVIDENDS

No dividend has been declared by the Company since its incorporation to 30 September 2009.

13. EARNINGS PER SHARE

Earnings per share information is not presented as its inclusion, for the purpose of this report, is not considered meaningful due to the Reorganisation.

Accountant’s Report — I-37

— F-38 — 14. PROPERTY AND EQUIPMENT

Furniture, fixtures Leasehold and office Motor Construction Buildings improvements equipment vehicles in progress Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 At 1 January 2006, net of accumulated depreciation ...... 3,404 1,749 1,398 4,433 2,070 13,054 Additions...... 311 380 1,905 2,779 6,655 12,030 Transfer from completed properties held for sale ...... 398 — — — — 398 Depreciation...... (171) (445) (670) (1,115) — (2,401) Write-off ...... — — (3) — — (3) Exchange realignment ...... (243) — 6 — — (237)

At 31 December 2006 and 1 January 2007, net of accumulated depreciation ...... 3,699 1,684 2,636 6,097 8,725 22,841 Additions...... 3,488 322 3,400 3,124 29,955 40,289 Acquisition of subsidiaries (note 36(a)) . — — 129 — — 129 Acquisition of subsidiaries that are not a business (note 36(c)) ...... — — 17 88 — 105 Transfer from construction in progress .. 32,503 — — — (32,503) — Depreciation...... (210) (524) (754) (1,585) — (3,073) Disposals ...... — — — (652) — (652) Write-off ...... — — (223) (18) — (241) Exchange realignment ...... (43) — (16) 5 — (54)

At 31 December 2007 and 1 January 2008, net of accumulated depreciation ...... 39,437 1,482 5,189 7,059 6,177 59,344 Additions...... 8,765 3,121 928 790 4,358 17,962 Acquisition of subsidiaries (note 36(a)) . — — 16 — — 16 Depreciation...... (1,087) (863) (1,487) (1,835) — (5,272) Disposals ...... — — (33) (208) — (241) Write-off ...... — — (89) — — (89) Exchange realignment ...... (198) — — (22) — (220)

At 31 December 2008 and 1 January 2009, net of accumulated depreciation ...... 46,917 3,740 4,524 5,784 10,535 71,500 Additions...... 70 — 512 257 1,240 2,079 Acquisition of subsidiaries that are not a business (note 36(c)) ...... — 5,677 1,795 1,257 — 8,729 Transfer ...... 11,775 — — — (11,775) — Depreciation...... (1,976) (698) (1,438) (1,613) — (5,725) Disposals ...... — — (40) (385) — (425) Exchange realignment ...... 1 1 — — — 2

At 30 September 2009, net of accumulated depreciation...... 56,787 8,720 5,353 5,300 — 76,160

At 1 January 2006: Cost...... 3,555 2,159 1,900 7,533 2,070 17,217 Accumulated depreciation...... (151) (410) (502) (3,100) — (4,163)

Net carrying value...... 3,404 1,749 1,398 4,433 2,070 13,054

Accountant’s Report — I-38

— F-39 — Furniture, fixtures Leasehold and office Motor Construction Buildings improvements equipment vehicles in progress Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 At 31 December 2006 and 1 January 2007: Cost...... 4,016 2,539 3,767 9,834 8,725 28,881 Accumulated depreciation...... (317) (855) (1,131) (3,737) — (6,040)

Net carrying value...... 3,699 1,684 2,636 6,097 8,725 22,841

At 31 December 2007 and 1 January 2008: Cost...... 39,953 2,861 6,478 11,452 6,177 66,921 Accumulated depreciation...... (516) (1,379) (1,289) (4,393) — (7,577)

Net carrying value...... 39,437 1,482 5,189 7,059 6,177 59,344

At 31 December 2008 and 1 January 2009: Cost...... 48,518 5,982 7,116 10,704 10,535 82,855 Accumulated depreciation...... (1,601) (2,242) (2,592) (4,920) — (11,355)

Net carrying value...... 46,917 3,740 4,524 5,784 10,535 71,500

At 30 September 2009: Cost...... 59,058 11,661 9,347 10,760 — 90,826 Accumulated depreciation...... (2,271) (2,941) (3,994) (5,460) — (14,666)

Net carrying value...... 56,787 8,720 5,353 5,300 — 76,160

Certain of the Group’s property and equipment with carrying amounts of RMB1,928,000, RMB6,177,000, RMB28,310,000 and RMB39,892,000 as at 31 December 2006, 2007 and 2008 and 30 September 2009, respectively, were pledged to banks to secure the bank loans granted to the Group (note 38).

Accountant’s Report — I-39

— F-40 — 15. INVESTMENT PROPERTIES

Under Completed construction Total

RMB’000 RMB’000 RMB’000 At 1 January 2006...... 4,400 — 4,400 Additions...... 548 127,808 128,356 Transfer from properties under development ...... — 34,552 34,552 Transfer from completed properties held for sale ...... 3,635 — 3,635 Transfer from prepaid land lease payments (note 16)...... — 1,672 1,672 Disposals during the year ...... (1,200) — (1,200) Net gains from fair value adjustment...... 19,577 18,568 38,145

At 31 December 2006 and 1 January 2007 ...... 26,960 182,600 209,560 Additions...... 636 157,117 157,753 Transfer ...... 33,610 (33,610) — Disposals during the year ...... (2,360) — (2,360) Net gains from fair value adjustment...... 19,354 148,893 168,247

At 31 December 2007 and 1 January 2008 ...... 78,200 455,000 533,200 Additions...... 456 138,178 138,634 Transfer ...... 593,178 (593,178) — Disposals during the year ...... (400) — (400) Disposal of a subsidiary (note 36(b)) ...... (800) — (800) Net gains from fair value adjustment...... 211,366 — 211,366

At 31 December 2008 and 1 January 2009 ...... 882,000 — 882,000 Additions...... 39,687 — 39,687 Net gains from fair value adjustment...... 222,836 — 222,836

At 30 September 2009...... 1,144,523 — 1,144,523

The Group’s investment properties are situated in Mainland China under the following lease terms:

As at As at 31 December 30 September

2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 Long term leases ...... 20,404 50,836 67,015 77,509 Medium term leases ...... 189,156 482,364 814,985 1,067,014

209,560 533,200 882,000 1,144,523

The Group’s investment properties were revalued on 31 December 2006, 2007 and 2008 and 30 September 2009 by DTZ Debenham Tie Leung, independent professionally qualified valuers, at RMB209,560,000, RMB533,200,000, RMB882,000,000 and RMB1,144,523,000, respectively.

The fair value of completed investment properties was based on either capitalisation of net income derived from the existing tenancies with allowance for the reversionary income potential of the properties, or by making reference to comparable market transactions. The fair value of investment properties under construction is determined on the basis of the residual method. However, using residual method to value investment properties under construction also requires considering the significant risks which are relevant to the development process, including but not limited to construction and letting risks.

Certain of the Group’s investment properties with carrying amounts of RMB173,672,000, RMB456,672,000, RMB838,672,000 and RMB74,000,000 as at 31 December 2006, 2007 and 2008 and 30 September 2009, respectively, were pledged to secure the bank loans granted to the Group (note 38).

The Group’s investment properties are leased to third parties and companies controlled by the Founder under operating leases, further summary details of which are included in note 39(a).

Accountant’s Report — I-40

— F-41 — 16. PREPAID LAND LEASE PAYMENTS

As at As at 31 December 30 September

2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 At beginning of year/period ...... 1,237 13,197 1,315,426 771,940 Additions...... 9,842 688,193 145,071 460,040 Acquisition of subsidiaries that are not a business (note 36(c))...... — 615,031 — 1,153,107 Transferred from completed properties held for sale...... 60 — — — Transfer to investment properties (note 15) ..... (1,672) — — — Transfer from/(to) properties under development...... 3,872 — (676,594) (457,374) Amortisation recognised during the year/period...... (137) (984) (11,423) (12,571) Exchange realignment ...... (5) (11) (540) 3

At end of year/period...... 13,197 1,315,426 771,940 1,915,145 Current portion included in prepayments, deposits and other receivables ...... (207) (9,314) (11,552) (41,184)

Non-current portion ...... 12,990 1,306,112 760,388 1,873,961

The Group’s leasehold land is situated in Hong Kong and Mainland China and is held under the following lease terms:

As at As at 31 December 30 September

2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 Long term leases: Mainland China ...... 1,264 1,294,322 751,713 742,063

Medium term leases: Hong Kong ...... — 9,204 8,487 8,360 Mainland China ...... 11,933 11,900 11,740 1,164,722

11,933 21,104 20,227 1,173,082

13,197 1,315,426 771,940 1,915,145

Certain of the Group’s land use rights with carrying amounts of RMB11,933,000, RMB12,963,000, RMB230,385,000 and RMB785,982,000 as at 31 December 2006, 2007 and 2008 and 30 September 2009, respectively, were pledged to banks to secure the bank loans granted to the Group (note 38).

Accountant’s Report — I-41

— F-42 — 17. INTANGIBLE ASSET

Operating concession

As at As at 31 December 30 September

2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 At beginning of year/period ...... — — — — Acquisition of subsidiaries that are not a business (note 36(c))...... — — — 4,861

At end of year/period...... — — — 4,861

Cost...... — — — 4,861 Accumulated amortisation...... — — — —

Net carrying amount...... — — — 4,861

On 28 March 2006, Quanzhou Straits Sports Centre Co., Ltd (the “Straits Sports Centre”) entered into an operating right concession agreement (the “Operating Right Agreement”) with Quanzhou Sports Bureau (the “Sports Bureau”), a local government body in Quanzhou, the PRC, at a cash consideration of RMB5,000,000. Pursuant to the Operating Right Agreement, the Straits Sports Centre is granted an operating concession (the “Operating Concession”) to operate and manage certain sports and recreation facilities (the “Facilities”) in Quanzhou for a period of 30 years (the “Operating Period”).

This service concession arrangement involves the Group as operator (i) paying a specific amount as consideration to obtain the Operating Concession of the Facilities; (ii) operating and maintaining the Facilities at a specified level of serviceability on behalf of the Sports Bureau for the Operating Period; and (iii) receiving a right to charge users using the Facilities. The Group is entitled to operate and manage the Facilities, and is entitled to all the income associated with the operation of the Facilities. However, the relevant government bodies as grantors will control and regulate the scope of services provided and the prices charged by the Group during the Operating Period, retain ownership, and to be entitled to any residual interest in the Facilities at the end of the Operating Period.

The cost of the Operating Concession is being amortised over the Operating Period.

18. PROPERTIES UNDER DEVELOPMENT

As at As at 31 December 30 September

2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 Properties under development expected to be completed: Within normal operating cycle included under current assets...... 752,820 826,850 1,370,435 1,652,863 Beyond normal operating cycle included under non-current assets ...... 78,084 292,366 308,496 578,381

830,904 1,119,216 1,678,931 2,231,244

Properties under development expected to be completed within normal operating cycle and recovered: Within one year ...... 298,009 251,462 414,276 971,285 After one year ...... 454,811 575,388 956,159 681,578

752,820 826,850 1,370,435 1,652,863

All the Group’s properties under development are located in Mainland China and are held under long term leases.

Accountant’s Report — I-42

— F-43 — Certain of the Group’s properties under development, including the relevant land use rights, with carrying amounts of RMB528,689,000, RMB506,106,000, RMB674,896,000 and RMB1,808,222,000 as at 31 December 2006, 2007 and 2008 and 30 September 2009, respectively, were pledged to banks to secure the bank loans granted to the Group (note 38).

19. INVESTMENT IN A SUBSIDIARY

Company:

As at As at 31 December 30 September

2007 2008 2009

RMB RMB RMB Unlisted investment, at cost ...... 8 8 8

The amounts due from/to subsidiaries are unsecured, interest-free and are repayable on demand. The carrying amounts of such balances approximate to their fair values.

20. INTERESTS IN JOINTLY-CONTROLLED ENTITIES

As at As at 31 December 30 September

2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 Share of net assets...... 101,429 65,202 123,194 159,002

Particulars of the jointly-controlled entities are as follows:

Percentage of ownership attributable to the Group Nominal value Place of As at 30 As at 31 December of registered/ incorporation/ September Principal Name paid-up capital registration 2006 2007 2008 2009 activities

Well China International Ordinary shares Hong Kong — 49%(1) 49%(1) 49%(1) Investment Investment Holdings of holding Limited HK$110,000,000

Quanzhou Yuanhang Registered PRC — 49%(1) 49%(1) 49%(1) Property Real Estate capital of development Development Co., RMB90,000,000 and Ltd.* investment (泉州遠航房地產發展有限公司#)

Elite Land Development Ordinary shares Hong Kong 50% — — — Investment Limited@ of HK$10,000 holding

Chongqing Chuangquan Registered PRC 50% — — — Property Real Estate capital of development Development Co., US$11,000,000 Ltd.** @ (重慶創冠房地產發展有限公司#)

Poly-Wuyi (Hong Kong) Ordinary share Hong Kong — — 50% 50% Investment Development Limited of US$10,000 holding

Accountant’s Report — I-43

— F-44 — Percentage of ownership attributable to the Group Nominal value Place of As at 30 As at 31 December of registered/ incorporation/ September Principal Name paid-up capital registration 2006 2007 2008 2009 activities

Fuzhou Wuyi Oasis Registered PRC — — 50% 50% Property Real Estate Co., capital of development Ltd.** (福州武夷綠州 RMB40,000,000 房地產開發有限公司#)

* Registered as limited liability company under the PRC law.

** Registered as wholly-foreign-owned entities under the PRC law.

# The English names of these companies represent the best effort made by management of the Company to directly translate their Chinese names as they do not register any official English names.

@ Disposed of in May 2007.

(1) Pursuant to the relevant shareholders’ agreements, the Group is entitled to a 50% voting right in the boards of directors of these entities.

The following tables illustrate the summarised financial information of the Group’s jointly-controlled entities:

As at As at 31 December 30 September

2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 Share of the jointly-controlled entities’ assets and liabilities: Non-current assets...... 104,441 74,782 122,618 120,919 Current assets ...... 80,988 22,312 264,380 608,059 Current liabilities ...... (84,000) (5,710) (166,783) (546,928) Non-current liabilities ...... — (26,182) (97,021) (23,048)

Net assets ...... 101,429 65,202 123,194 159,002

Nine months ended Year ended 31 December 30 September

2006 2007 2008 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) Share of the jointly-controlled entities’ results: Revenue...... — 3,923 75,470 60,298 59,391 Other income...... 39 138 111 103 669

39 4,061 75,581 60,401 60,060 Total expenses ...... (1,455) (10,917) (91,691) (76,476) (48,146) Tax...... — 3,595 11,413 10,267 (9,912)

Profit/(loss) after tax...... (1,416) (3,261) (4,697) (5,808) 2,002

Accountant’s Report — I-44

— F-45 — 21. INTERESTS IN ASSOCIATES

As at As at 31 December 30 September

2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 Share of net assets...... 5,887 15,748 11,489 8,371

Particulars of the associates are as follows:

Quanzhou Baoxing Registered PRC 12.75%(1) 30% 30% 30% Property Real Estate capital of development Development Co., RMB48,000,000 Ltd.* (泉州寶興房地產開發有限公司#)

China Bright Ordinary share Hong Kong — — — 20% Investment Investments Limited of HK$100 holding

Grand Richy Ordinary share BVI — — 45% 45% Investment Investments Limited of US$100 holding

Shishi Minnan Goal Registered PRC — — 45% 45% Property Coast Resort Co., capital of development Ltd.** RMB10,500,000 (石獅市閩南黃金海岸度假村有限公司#)

* Registered as limited liability company under the PRC law.

** Registered as wholly-foreign-owned entity under the PRC law.

# The English names of these companies represent the best effort made by management of the Company to directly translate their Chinese names as they do not register any official English names.

(1) Although the Group holds less than 20% of the voting power of Quanzhou Baoxing Real Estate Development Co., Ltd. (“QZ Baoxing”), in the opinion of the directors, the Group is in a position to exercise significant influence over QZ Baoxing through its representative director on the board of directors which consists of five members, and its participation in the policy-making processes of QZ Baoxing.

The Group’s shareholdings in all associates are held indirectly by subsidiaries of the Company.

All associates have been accounted for using the equity method in the Financial Information and their financial year end date is coterminous with that of the Group.

The following table illustrates the summarised financial information, on a 100% basis, of the Group’s associates extracted from their financial statements:

As at As at 31 December 30 September

2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 Assets ...... 95,723 207,859 636,857 937,919 Liabilities ...... (49,569) (164,662) (606,764) (913,107)

Accountant’s Report — I-45

— F-46 — Nine months ended Year ended 31 December 30 September

2006 2007 2008 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) Revenue ...... 295 577 2,425 1,430 9,576 Loss ...... (1,120) (3,502) (12,360) (8,905) (6,226)

22. COMPLETED PROPERTIES HELD FOR SALE

All the Group’s completed properties held for sale are located in Mainland China and are held under long term leases. All the completed properties held for sale are stated at cost.

Certain of the Group’s completed properties held for sale with carrying amounts of RMB607,862,000 and RMB3,412,000 as at 31 December 2008 and 30 September 2009 were pledged to banks to secure the bank loans granted to the Group (note 38).

23. TRADE RECEIVABLES

The Group’s trade receivables arise from the sale of properties. Consideration in respect of properties is payable by the purchasers in accordance with the terms of the related sale and purchase agreements. Since the Group’s trade receivables related to a number of diversified customers, there is no significant concentration of credit risk. All trade receivables are non-interest-bearing.

The aged analysis of the trade receivables that are not considered to be impaired are as follows:

As at As at 31 December 30 September

2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 Neither past due nor impaired ...... — — — 12,826 1 to 6 months past due ...... 3,060 296 220 2,695 7 to 12 months past due ...... 58 — 3,949 — Over 1 year past due ...... 704 380 428 1,847

3,822 676 4,597 17,368

Receivables that were past due but not impaired relate to a number of diversified customers for whom there was no recent history of default and have a good track record with the Group. Based on past experience, the directors of the Company are of the opinion that no provision for impairment is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. The Group does not hold any collateral or other credit enhancements over these balances.

Included in the Group’s trade receivables as at 31 December 2006 were amounts due from a shareholder and a family member of the Founder aggregating to RMB2,515,000, which were unsecured, interest-free and are repayable on demand.

The carrying amounts of the trade receivables approximate to their fair values.

Accountant’s Report — I-46

— F-47 — 24. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES

Group:

As at As at 31 December 30 September

Notes 2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 Prepayments ...... (i)&(ii) 322,902 455,235 620,322 613,023 Deposits ...... 10,788 53,640 9,123 39,901 Proceeds from the disposal of jointly-controlled entities ...... — 5,752 5,752 — Other receivables ...... 58,378 20,902 15,482 117,650

392,068 535,529 650,679 770,574 Non-current portion ...... (287,000) (356,070) (508,040) (438,414)

Current portion ...... 105,068 179,459 142,639 332,160

Company:

As at As at 31 December 30 September

2007 2008 2009

RMB’000 RMB’000 RMB’000 Prepayments...... — 21 2,766

Notes: (i) The balances included prepayments for the acquisition of land use rights in Mainland China amounting to approximately RMB287,000,000, RMB297,359,000, RMB508,040,000 and RMB438,414,000 as at 31 December 2006, 2007 and 2008 and 30 September 2009, respectively. (ii) The balance as at 31 December 2007 included a prepayment for the acquisition of jointly-controlled entities amounting to approximately RMB58,711,000.

None of the above assets is either past due or impaired. The financial assets included in the above balances relate to receivables for which there was no recent history of default.

Accountant’s Report — I-47

— F-48 — 25. DUE FROM/TO RELATED PARTIES

An analysis of the balances with related parties is as follows:

Group:

As at As at 31 December 30 September

2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 Due from related parties: Directors: Mr. Cheng ...... 2,361 — 30,231 — Mr. Chen ...... 3,745 — 2,593 4,175 Family members of the Founder ...... 569 7 — — Companies controlled by: The Founder ...... 102,030 136,588 20,606 2,302 Mr. Chen ...... 2,530 569 676 — Mr. Cheng ...... — 15 22 — Jointly-controlled entities...... 37,184 — 11,719 11,724 An associate ...... 1,760 5,597 60,222 104,369

150,179 142,776 126,069 122,570

Due to related parties: Directors: The Founder ...... 281,564 244,297 258,960 39,951 Mr. Cheng ...... — 1,112 — — Companies controlled by the Founder...... 18 39,995 79,480 — A jointly-controlled entity ...... — — — 142,975 An associate ...... — — 30,000 77,821

281,582 285,404 368,440 260,747

Company:

As at As at 31 December 30 September

2007 2008 2009

RMB’000 RMB’000 RMB’000 Due from the immediate holding company ...... 10 9 —

The balances are non-trade in nature, unsecured, interest-free and are repayable on demand. The carrying amounts of the amounts due from/to related parties approximate to their fair values.

None of the amounts due from related parties is either past due or impaired. The financial assets included in the above balances relate to receivables for which there was no recent history of default.

Accountant’s Report — I-48

— F-49 — 26. TAX RECOVERABLE/TAX PAYABLE

(A) Tax recoverable

As at As at 31 December 30 September

2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 Prepaid PRC CIT ...... 15,532 44,621 68,442 52,987 Prepaid PRC LAT...... 3,497 12,426 21,911 20,352

19,029 57,047 90,353 73,339

(b) Tax payable

As at As at 31 December 30 September

2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 Hong Kong profits tax ...... — 6,417 6,039 6,041 PRC CIT ...... 11,740 15,594 14,696 13,371 PRC LAT ...... — 17,668 8,313 39,551

11,740 39,679 29,048 58,963

27. CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

As at As at 31 December 30 September

2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 Cash and bank balances ...... 267,470 117,762 143,089 908,580 Less: Restricted cash (notes) ...... (65,950) (36,703) (83,410) (503,000)

Cash and cash equivalents...... 201,520 81,059 59,679 405,580

Notes: (a) Pursuant to relevant regulations in the PRC, certain property development companies of the Group are required to place in designated bank accounts certain amounts of pre-sale proceeds of properties as guarantee deposits for the construction of the related properties. The deposits can only be used for purchases of construction materials and payments of the construction fees of the relevant property projects when approval from relevant local government authorities is obtained. At 31 December 2006, 2007 and 2008 and 30 September 2009, such guarantee deposits amounted to RMB65,308,000, RMB10,189,000, RMB1,459,000 and RMB3,964,000, respectively. (b) According to the relevant loan facility agreement signed by a subsidiary of the Group with its bank, the subsidiary is required to place the pre-sale proceeds of its properties in specific bank accounts. The deposits can only be used for the payment of property development costs incurred by the subsidiary and the repayment of the respective loan. As at 31 December 2007 and 2008, such deposits amounted to RMB23,910,000 and RMB6,837,000, respectively. (c) According to the relevant mortgage facility agreements signed by certain subsidiaries of the Group with their banks, the subsidiaries are required to place at designated bank accounts certain amounts as deposits for potential default of mortgage loans advanced to property purchasers. Such guarantee deposits will be released after the property ownership certificate of the relevant property has been passed to the bank. As at 31 December 2007 and 2008 and 30 September 2009, such deposits amounted to RMB1,800,000, RMB9,829,000 and RMB7,851,000, respectively. Accountant’s Report — I-49

— F-50 — (d) Pursuant to a management agreement entered into between the Sports Bureau and Straits Sports Center, the fund advanced by the Sports Bureau and deposited in a designated bank account can only be used for the payments of construction costs and expenditure incurred for the construction of the Facilities. As at 30 September 2009, such deposit amounted to RMB10,071,000. (e) In addition to the restrictions as detailed in notes (a), (b), (c) and (d), certain subsidiaries of the Group are also required to place certain amounts as guarantee deposits for public maintenance fund or the use of the loan proceeds which deposited in specific bank accounts are restricted. As at 31 December 2006, 2007 and 2008 and 30 September 2009, the aggregate amounts of such deposits amounted to RMB642,000, RMB804,000, RMB65,285,000 and RMB481,114,000, respectively.

At 31 December 2006, 2007 and 2008 and 30 September 2009, the cash and bank balances of the Group denominated in RMB amounted to RMB233,305,000, RMB65,509,000, RMB138,161,000 and RMB656,289,000, respectively. The RMB is not freely convertible into other currencies, however, under Mainland China’s Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, the Group is permitted to exchange RMB for other currencies through banks authorised to conduct foreign exchange business.

Cash at banks earns interest at floating rates based on daily bank deposit rates. All the bank balances and restricted deposits are deposited with creditworthy banks with no recent history of default. The carrying amounts of the cash and cash equivalents approximate to their fair values.

28. TRADE PAYABLES

An aged analysis of the trade payables as at each of the reporting dates during the Track Record Periods is as follows:

Group:

As at As at 31 December 30 September

2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 Within 1 year ...... 229,812 358,646 351,960 219,477 Over 1 year...... 3,425 5,611 84,618 140,090

233,237 364,257 436,578 359,567

The trade payables are non-interest-bearing and repayable within the normal operating cycle or on demand.

29. RECEIPTS IN ADVANCE

Receipts in advance represent sales proceeds received from buyers in connection with the Group’s pre-sale of properties during the Track Record Periods.

Accountant’s Report — I-50

— F-51 — 30. OTHER PAYABLES AND ACCRUALS

Group:

As at As at 31 December 30 September

Notes 2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 Deposits received...... 8,068 139,405 163,499 146,984 Accruals...... 4,556 12,010 2,636 1,635 Due to a minority shareholder of certain subsidiaries ...... (a) 7,316 6,316 6,316 3,440 Advances from minority shareholders of certain subsidiaries...... (b) 101,056 121,529 127,230 269,809 Considerations payable for the acquisition of subsidiaries and associates ...... — 334,745 236,745 691,865 Other payables...... 14,207 48,328 84,195 182,296

135,203 662,333 620,621 1,296,029 Non-current portion ...... (2,960) (2,720) (2,479) (2,240)

Current portion...... 132,243 659,613 618,142 1,293,789

Company:

As at As at 31 December 30 September

2007 2008 2009

RMB’000 RMB’000 RMB’000 Accruals ...... 3,168 176 —

Notes: (a) The balances are secured by certain equity interests of the Group’s subsidiaries. The balances bear interest at 5.31% per annum, except for RMB3,440,000 as at each of 31 December 2006, 2007 and 2008 and 30 September 2009, which were interest-free and are repayable in accordance with the terms of the relevant subcontracting and share transfer agreements. (b) The balances are unsecured, interest-free and repayable on demand.

The carrying amounts of other liabilities and the balances with minority shareholders of certain subsidiaries approximate to their fair values.

Accountant’s Report — I-51

— F-52 — 31. INTEREST-BEARING BANK AND OTHER BORROWINGS

As at 31 December As at 30 September

2006 2007 2008 2009

Contractual Contractual Contractual Contractual interest interest interest interest rate (%) rate (%) rate (%) rate (%) per per per per annum Maturity RMB’000 annum Maturity RMB’000 annum Maturity RMB’000 annum Maturity RMB’000

Current Bank loans - secured...... 6.03-6.30 2007 26,000 7.02-7.29 2008 40,000 6.62-10.00 2009 793,500 5.31-5.84 2010 444,000 Current portion of long term bank loans - secured ...... 6.34-6.93 2007 74,000 7.23-7.79 2008 7,612 2.50-8.32 2009 15,318 2.5-6.53 2010 13,448 Loans from companies controlled by the Founder - unsecured .... — — 2.95-8.22 2009 200,607 5.31 2010 56,203 -3— F-53 — 100,000 47,612 1,009,425 513,651

Non-current Bank loans - secured...... 6.03-6.73 2008-2012 536,500 5.85-7.79 2009-2017 675,125 2.50-8.75 2010-2028 344,493 2.5-6.53 2010-2028 1,284,293 Bank loans - unsecured ...... 6.03 2008 20,000 — — —

556,500 675,125 344,493 1,284,293

656,500 722,737 1,353,918 1,797,944 As at As at 31 December 30 September

2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 Analysed into: Bank loans repayable: Within one year or on demand ...... 100,000 47,612 808,818 457,448 In the second year...... 48,000 643,050 14,123 399,489 In the third to fifth years, inclusive...... 500,000 21,200 318,132 873,792 In the sixth to tenth years, inclusive...... 8,500 10,875 12,238 11,012

656,500 722,737 1,153,311 1,741,741

Loans from companies controlled by the Founder and repayable with one year ..... — — 200,607 56,203

Notes: (a) Certain of the Group’s bank loans are secured by the Group’s property and equipment, investment properties, prepaid land lease payments, properties under development and completed properties held for sale, details of which are disclosed in note 38. (b) The Founder, the Founder’s family member and a company controlled by Mr. Chen provided guarantees aggregating to RMB282,500,000, RMB237,500,000, RMB226,304,000 and RMB17,814,000 in respect of the Group’s bank loans as at 31 December 2006, 2007 and 2008 and 30 September 2009, respectively. (c) Except for secured bank loans of RMB8,683,000 and RMB8,459,000 as at 31 December 2008 and 30 September 2009, respectively, and other loans of RMB8,804,000 as at 31 December 2008, which are denominated in Hong Kong dollars, all of the Group’s secured and unsecured borrowings are denominated in RMB. (d) Except for the short term bank loans of RMB20,000,000, RMB40,000,000, RMB195,000,000 and RMB444,000,000 as at 31 December 2006, 2007 and 2008 and 30 September 2009, respectively, and short term other loans of RMB15,000,000 as at 31 December 2008, the interest rates of which were fixed in nature, all borrowings bear interest at floating interest rates. The carrying amounts of the Group’s bank and other borrowings approximate to their fair values.

— F-54 — 32. DEFERRED TAX

The movements in deferred tax liabilities and assets during the Track Record Periods are as follows:

Deferred tax liabilities

Revaluation on investment properties

RMB’000 At 1 January 2006...... 102 Charged to the consolidated statement of comprehensive income during the year...... 9,033

Gross deferred tax liabilities at 31 December 2006 and 1 January 2007...... 9,135 Effect of change in tax rates...... 453 Charged to the consolidated statement of comprehensive income during the year...... 41,957

Gross deferred tax liabilities at 31 December 2007 and 1 January 2008...... 51,545 Disposal of a subsidiary (note 36(b)) ...... (42) Charged to the consolidated statement of comprehensive income during the year...... 52,841

Gross deferred tax liabilities at 31 December 2008 and 1 January 2009...... 104,344 Charged to the consolidated statement of comprehensive income during the period ...... 55,709

Gross deferred tax liabilities at 30 September 2009 ...... 160,053

— F-55 — Deferred tax assets

Unrealised profits arising from intra-group Provision of transactions LAT Tax losses Total

RMB’000 RMB’000 RMB’000 RMB’000 At 1 January 2006 ...... — — 3,161 3,161 Credited to the consolidated statement of comprehensive income during the year ...... — — 8,025 8,025

Gross deferred tax assets at 31 December 2006 and 1 January 2007 ...... — — 11,186 11,186 Effect of change in tax rates...... — — (630) (630) Acquisition of subsidiary that is not a business (note 36(c)) ...... — — 289 289 Credited to the consolidated statement of comprehensive income during the year ...... — 3,180 12,062 15,242

Gross deferred tax assets at 31 December 2007 and 1 January 2008 ...... — 3,180 22,907 26,087 Credited/(charged) to the consolidated statement of comprehensive income during the year ...... 6,928 (3,115) 9,027 12,840

Gross deferred tax assets at 31 December 2008 and 1 January 2009 ...... 6,928 65 31,934 38,927 Acquisition of subsidiaries that are not a business (note 36(c)) ...... — — 35,062 35,062 Credited/(charged) to the consolidated statement of comprehensive income during the period ...... (1,930) 9,823 (11,583) (3,690)

Gross deferred tax assets at 30 September 2009...... 4,998 9,888 55,413 70,299

For the purpose of the presentation of the consolidated statements of financial position, certain deferred tax assets and liabilities have been offset. The following is an analysis of the deferred tax balances of the Group for financial reporting purposes:

As at As at 31 December 30 September

2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 Net deferred tax assets recognised in the consolidated statements of financial position 7,661 12,310 20,808 60,412

Net deferred tax liabilities recognised in the consolidated statements of financial position 5,610 37,768 86,225 150,166

The Group has unutilised tax losses arising in the PRC of RMB49,996,000, RMB101,117,000, RMB149,492,000 and RMB251,011,000 at 31 December 2006, 2007 and 2008 and 30 September 2009, respectively, that can be carried forward for five years from the year in which the losses arose for offsetting against future taxable profits of the tax entity in which the losses arose. Deferred tax assets are recognised for tax losses carried forward only to the extent that the realisation of the related benefits through the future taxable profits is probable. The Group did not recognise deferred tax assets arising in the PRC in respect of unutilised tax losses of RMB1,075,000, RMB2,486,000, RMB17,294,000 and RMB25,789,000 as at 31 December 2006, 2007 and 2008 and 30 September 2009, respectively, due to the unpredictability of future profit streams.

— F-56 — Pursuant to the New CIT Law, a 10% withholding tax is levied on dividends declared to foreign investors from the foreign investment enterprises established in the PRC. The requirement became effective from 1 January 2008 and applies to earnings after 31 December 2007. A lower withholding tax rate may be applied if there is a tax treaty between China and the jurisdiction of the foreign investors. For the Group, the applicable rate is 5% or 10%. The Group is therefore liable to withholding taxes on dividends distributed by those subsidiaries and jointly-controlled entities established in the PRC in respect of earnings generated from 1 January 2008.

At 31 December 2008 and 30 September 2009, no deferred tax has been recognised for withholding taxes that would be payable on the unremitted earnings that are subject to withholding taxes of the Group’s subsidiaries and jointly-controlled entities established in the PRC. In the opinion of the directors, it is not probable that these subsidiaries and jointly-controlled entities will distribute such earnings in the foreseeable future. The aggregate amounts of temporary differences associated with investments in subsidiaries and jointly-controlled entities in the PRC for which deferred tax liabilities have not been recognised totaled RMB11,778,000 and RMB26,806,000 at 31 December 2008 and 30 September 2009, respectively.

33. PROVISION FOR MAJOR OVERHAULS

Pursuant to the Operating Right Agreement, the Group has contractual obligations which it must fulfil as a condition of the Operating Concession. The obligations are (a) to maintain the Facilities it operates to a specified level of serviceability and (b) to restore the Facilities to a specified condition before they are handed over to the Sports Bureau at the end of the Operating Concession. These contractual obligations to maintain or restore the sports and recreation facilities, except for upgrade element, are recognised and measured in accordance with HKAS 37 Provisions, Contingent Liabilities and Contingent Assets, i.e., at the best estimate of the expenditure that would be required to settle the present obligation at the reporting date. The future expenditure on these maintenance and restoration costs is collectively referred to as “major overhauls.” The estimation basis is reviewed on an ongoing basis, and revised where appropriate.

The movements in the provision for the major overhauls of the Facilities for the Track Record Periods are as follows:

As at As at 31 December 30 September

2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 At beginning of year/period ...... — — — — Acquisition of subsidiaries that are not a business (note 36(c))...... — — — 2,888

At end of year/period...... — — — 2,888

34. SHARE CAPITAL

Number of Notes shares Amounts

HK$ Authorised ordinary shares of HK$0.1 each: At 31 December 2006...... (a) — — At 31 December 2007, 31 December 2008 and 30 September 2009...... (b) 3,000,000 300,000

Issued and fully paid ordinary shares of HK$0.1 each: At 31 December 2006...... (a) — — At 31 December 2007, 31 December 2008 ...... (b) 100,000 10,000 At 30 September 2009...... (c) 112,660 11,266

— F-57 — The movements in the Company’s issued ordinary share capital during the Track Record Periods are as follows:

Number of Issued Share shares in share premium Equivalent Notes issue capital account Total to

HK$’000 HK$’000 HK$’000 RMB’000 At 1 January 2006, 31 December 2006 and 1 January 2007 ...... (a) ————— Issue of shares...... (b) 100,000 10 — 10 10

At 31 December 2007, 1 January 2008, 31 December 2008, 1 January 2009 ...... 100,000 10 — 10 10 Issue of shares...... (c) 12,660 1 774,602 774,603 682,289

At 30 September 2009...... 112,660 11 774,602 774,613 682,299

Notes: (a) There was no authorised and issued capital on 1 January 2006, 31 December 2006 and 1 January 2007 since the Company was not yet incorporated. (b) On 30 November 2007, the Company was incorporated with an authorised share capital of HK$300,000 divided into 3,000,000 ordinary shares of HK$0.1 each and 100,000 of which were issued and fully paid at par. (c) On 21 August 2009, the Company entered into a subscription agreement (the “Subscription Agreement”) with certain investors for the subscription of 12,660 ordinary shares of the Company, representing 11.237% of the entire share capital of the Company on a fully diluted basis immediately following the completion of the Subscription Agreement, for an aggregate consideration of approximately HK$775 million (equivalent to approximately RMB682 million). The Subscription Agreement was completed on 28 August 2009.

35. RESERVES

(A) Group

The amounts of the Group’s reserves and the movements therein for the Track Record Periods are presented in the consolidated statements of changes in equity.

(b) Capital reserve

Capital reserve represents the difference between the amounts of consideration and the carrying values of minority interests acquired or disposed of.

Transfers from retained profits to the statutory surplus reserve were made in accordance with the relevant PRC rules and regulations and the articles of association of the Company’s subsidiaries established in the PRC and were approved by the respective boards of directors.

For the entity concerned, the statutory surplus reserve can be used to cover previous years’ losses, if any, and may be converted into capital in proportion to equity holders’ existing equity holdings, provided that the balance after such conversion is not less than 25% of their registered capital.

(d) Merger reserve

The merger reserve represents the difference between the Company’s share of the nominal value of the paid-up capital of the subsidiaries acquired over the Company’s cost of acquisition of the subsidiaries under common control upon the Reorganisation as detailed in note 1.

— F-58 — (e) Company

Share Exchange premium fluctuation Accumulated account reserve losses Total

RMB’000 RMB’000 RMB’000 RMB’000 At 30 November 2007 (date of incorporation)...... — — — — Total comprehensive income/(loss) for the period ...... — 329 (8,222) (7,893)

At 31 December 2007 and 1 January 2008 ...... — 329 (8,222) (7,893) Total comprehensive income/(loss) for the year ...... — 466 (56) 410

At 31 December 2008 and 1 January 2009 ...... — 795 (8,278) (7,483) Total comprehensive loss for the period.. — (1) (5,245) (5,246) Issue of shares ...... 682,288 — — 682,288

At 30 September 2009 ...... 682,288 794 (13,523) 669,559

At 1 January 2008...... — 329 (8,222) (7,893) Total comprehensive income/(loss) for the period (unaudited) ...... — 455 (46) 409

At 30 September 2008 (unaudited) ...... — 784 (8,268) (7,484)

36. NOTES TO STATEMENTS OF CASH FLOWS

(A) Business combinations

Year ended 31 December 2007

(i) On 31 December 2007, Sunsonic acquired the entire share capital of each of New Bright Construction and Landscape Design Limited (“New Bright”) and Royal Dragon International Advertising Limited (“Royal Dragon”) from Mr. Huang at a total consideration of HK$200, being the aggregate net assets value of New Bright and Royal Dragon. The acquisition was completed on 31 December 2007 and New Bright and Royal Dragon then became a wholly-owned subsidiary of the Group. New Bright and Royal Dragon are principally engaged in the provision of construction design services and advertising services.

(ii) On 12 September 2007, Bonder Global Investment Limited, a wholly-owned subsidiary of the Group, acquired Xiamen Lucky Star Decoration Engineering Co., Ltd. (“Lucky Star”) through the acquisition of an additional 80% equity interest of its parent, Sea Base Investment Limited (“Sea Base”), at a consideration of HK$8,000. The acquisition was completed on 12 September 2007 and Sea Base and Lucky Star (collectively the “Sea Base Group”) then became wholly-owned subsidiaries of the Group.

— F-59 — The aggregated fair values of the identifiable assets and liabilities of New Bright, Royal Dragon and the Sea Base Group as at the dates of acquisition approximated to their corresponding carrying amounts immediately before the acquisition and were as follows:

Fair value Previous recognised on carrying acquisition amount

RMB’000 RMB’000 Property and equipment (note 14)...... 129 129 Prepayments, deposits and other receivables...... 4,608 4,608 Due from related parties ...... 8 8 Cash and bank balances ...... 2,190 2,190 Trade payables...... (22) (22) Other payables and accruals ...... (47) (47) Due to related parties...... (6,833) (6,833)

33 33

Satisfied by: Cash ...... 8 Interests in associates ...... 25

An analysis of the net inflow of cash and cash equivalents in respect of the acquisition of subsidiaries is as follows:

RMB’000

Cash and bank balances acquired ...... 2,190 Cash consideration paid ...... (8)

Net inflow of cash and cash equivalents in respect of the acquisition of subsidiaries .. 2,182

The results of these subsidiaries acquired in the year ended 31 December 2007 had no significant impact on the Group’s consolidated turnover or profit for that year.

Year ended 31 December 2008

(i) On 21 August 2008, Affluent Way acquired the entire share capital of Sourceup International Limited (“Sourceup”) from Mr. Huang at a consideration of US$100. The acquisition was completed on 21 August 2008 and Sourceup then became a wholly-owned subsidiary of the Group. Sourceup and its subsidiaries (collectively the “Sourceup Group”) are principally engaged in the provision of property management services in Beijing.

(ii) On 4 August 2008, Xiamen Cippon Tai Wo Property Management Co., Ltd. acquired the entire equity interest of Quanzhou Cippon Property Management Co., Ltd. (“Quanzhou Cippon”) from an independent third party at a cash consideration of RMB1,000,000. The acquisition was completed on 22 August 2008 and Quanzhou Cippon then became a wholly-owned subsidiary of the Group. Quanzhou Cippon is principally engaged in the provision of property management services.

— F-60 — The fair values of the identifiable assets and liabilities of Sourceup Group and Quanzhou Cippon as at the dates of acquisition approximated to their corresponding carrying amounts immediately before the acquisition and were as follows:

Fair value Previous recognised on carrying acquisition amount

RMB’000 RMB’000 Property and equipment (note 14) ...... 16 16 Prepayments, deposits and other receivables...... 50,420 50,420 Due from related parties ...... 597 597 Due to a director ...... (45,452) (45,452) Cash and bank balances...... 417 417 Other payables and accruals...... (451) (451) Tax payable ...... (19) (19)

5,528 5,528

Excess over the cost of business combination recognised in the statement of comprehensive income...... (4,527)

Satisfied by cash ...... 1,001

An analysis of the net outflow of cash and cash equivalents in respect of the acquisition of subsidiaries is as follows:

RMB’000

Cash and bank balances acquired ...... 417 Cash consideration paid ...... (1,001)

Net outflow of cash and cash equivalents in respect of the acquisition of subsidiaries ..... (584)

The results of the subsidiaries acquired in the year ended 31 December 2008 had no significant impact on the Group’s consolidated turnover or profit for that year.

(b) Disposal of subsidiaries

Year ended 31 December 2007

On 18 December 2007, Pacific Prestige Property Limited (“Pacific Prestige”), a 66.5%-owned subsidiary of the Group, entered into two share transfer agreements (the “Transfer Agreements”) with Pacific Prestige Inc., an independent third party, for the disposal of Metrogold Holdings Limited (“Metrogold”) and Wealth Pacific Limited. (“Wealth Pacific”), both are 75%-owned subsidiaries of the Pacific Prestige, for a total consideration of HK$74,108,000 and of which HK$74,108,000 was used to settle the amounts of HK$35,890,000 and HK$38,218,000 due to Pacific Prestige by Metrogold and Wealth Pacific, respectively. The above disposals were completed on 27 December 2007.

— F-61 — Details of the net assets disposed of under the Transfer Agreements and their financial impacts are summarised below:

RMB’000 Net assets disposed of: Prepayments, deposits and other receivables...... 69,037 Due from related parties ...... 5,251 Cash and bank balances ...... 169 Other payables and accruals ...... (16) Interest-bearing bank borrowings ...... (5,700) Minority interests...... 149

68,890 Gain on disposal of subsidiaries ...... 448

Satisfied by other payables ...... 69,338

An analysis of the net outflow of cash and cash equivalents in respect of the disposals of these subsidiaries is as follows:

RMB’000 Cash consideration...... — Cash and bank balances disposed of...... (169)

Net outflow of cash and cash equivalents in respect of the disposals of subsidiaries ...... (169)

Year ended 31 December 2008

On 9 July 2008, SCP International, entered into a share transfer agreement with an independent third party, for the disposal of Xiamen Hengjun Property Co., Ltd. (“Hengjun”), a wholly-owned subsidiary of the Group, for a consideration of RMB2,288,000. Hongjun is principally engaged in property investment and management businesses. The disposal was completed on 9 July 2008.

Details of the net assets disposed of under the above share transfer agreement and their financial impacts are summarised below:

RMB’000 Net assets disposed of: Investment properties (note 15) ...... 800 Prepayments, deposits and other receivables...... 29 Trade receivables...... 374 Due from related parties...... 1,000 Cash and bank balances ...... 438 Other payables and accruals ...... (108) Tax payable...... (45) Deferred tax liabilities (note 32)...... (42)

2,446 Loss on disposal ...... (158)

Satisfied by cash...... 2,288

An analysis of the net inflow of cash and cash equivalents in respect of the disposal of this subsidiary is as follows:

RMB’000

Cash consideration...... 2,288 Cash and bank balances disposed of...... (438)

Net inflow of cash and cash equivalents in respect of the disposal of a subsidiary ...... 1,850

— F-62 — (c) Acquisition of subsidiaries that are not a business

Year ended 31 December 2007

(i) On 11 August 2007, the Group entered into a share transfer agreement with an independent third party for the acquisition of a 60% equity interest in Shanxi Yuanhong Real Estate Co., Ltd. (“Yuanhong”) at a cash consideration of RMB75,000,000. Up to the date of acquisition, Yuanhong has not carried out any significant business transactions except for securing the rights to acquire certain parcels of land in Shanxi, the PRC. The acquisition was completed on 26 September 2007 and Yuanhong become a 60%-owned subsidiary of the Group.

(ii) On 26 November 2007, the Group entered into two agreements with certain independent third parties for the acquisition of the entire equity interest in Zhangzhou Long Wen Hua Gang Real Estate Development Co., Ltd. (“Zhangzhou LWHG”) at a total cash consideration of RMB390,000,000. Up to the date of acquisition, Zhangzhou LWHG has not carried out any significant business transactions except for the acquisition of certain parcels of land in Zhangzhou, the PRC. The acquisition was completed on 25 December 2007 and Zhangzhou LWHG became a wholly-owned subsidiary of the Group.

Both of the above acquisitions have been accounted for by the Group as acquisitions of assets as the entities acquired by the Group do not constitute a business.

The aggregate net assets acquired by the Group in the above transactions are as follows:

RMB’000 Net assets acquired: Property and equipment (note 14)...... 105 Prepaid land lease payments (note 16) ...... 615,031 Properties under development ...... 8,967 Deferred tax assets (note 32) ...... 289 Prepayments, deposits and other receivables...... 16,822 Cash and bank balances ...... 5,020 Trade and other payables ...... (131,234)

Net assets ...... 515,000 Minority interests...... (50,000)

465,000

Total consideration satisfied by: Cash ...... 137,000 Other payables...... 328,000

465,000

Net cash outflow arising from these acquisitions: Cash and bank balances acquired ...... 5,020 Cash consideration paid ...... (137,000)

(131,980)

Nine-months ended 30 September 2009

On 15 September 2009, the Group entered into a share transfer agreement with the then existing shareholders of Fujian Straits West-Coast Investment Co., Ltd. (“Haixi Investment”) who were independent third parties, for the acquisition of a 58% equity interest in Haixi Investment at a total consideration of RMB859,400,000. This acquisition has been accounted for as an acquisition of assets as the major assets of Haixi Investment and its subsidiary (collectively the “Haixi Group”) are five parcels of land in Quanzhou, the PRC, and no properties development and pre-sale activities were being carried out by the Haixi Group at the date of acquisition. The acquisition was completed on 22 September 2009.

This acquisition has been accounted for by the Group as an acquisition of assets as the entities acquired by the Group do not constitute a business.

— F-63 — The aggregate net assets acquired by the Group in the above transactions are as follows:

RMB’000 Net assets acquired: Property and equipment (note 14)...... 8,729 Prepaid land lease payments (note 16) ...... 1,153,107 Property under development ...... 299,784 Intangible asset (note 17)...... 4,861 Deferred tax assets (note 32) ...... 35,062 Prepayments, deposits and other receivables...... 487,789 Restricted cash ...... 172,159 Cash and bank balances ...... 2,293 Trade and other payables ...... (246,274) Tax payable...... (2,922) Interest-bearing bank loans ...... (430,000) Provision for major overhauls (note 33) ...... (2,888)

Net assets ...... 1,481,700 Minority interests...... (622,300)

859,400

Total consideration satisfied by: Cash ...... 170,000 Other payables...... 689,400

859,400

Net cash outflow arising on acquisition: Cash and bank balances acquired ...... 2,293 Cash consideration paid ...... (170,000)

(167,707)

37. CONTINGENT LIABILITIES

The Group had the following financial guarantees as at each of the reporting dates during the Track Record Periods:

As at As at 31 December 30 September

Notes 2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 Guarantees in respect of mortgage facilities for certain purchasers of the Group’s properties ...... (a) 238,032 688,347 504,211 764,211

Guarantees given to bank in connection with facilities granted to companies controlled by the Founder ...... (b) — 170,000 255,500 210,500

Notes: (a) At 31 December 2006, 2007 and 2008 and 30 September 2009, the Group provided guarantees in respect of mortgage facilities granted by certain banks relating to the mortgage loans arranged for certain purchasers of the Group’s properties. Pursuant to the terms of the guarantees, upon default on mortgage payments by these purchasers before the expiry of the guarantees, the Group is responsible for repaying the outstanding mortgage principals together with the accrued interest and penalties owed by the defaulted purchasers to the banks.

— F-64 — Under the above arrangement, the related properties were pledged to the banks as collaterals for the mortgage loans, upon default on mortgage repayments by these purchasers, the banks are entitled to take over the legal titles and will realise the pledged properties through open auction. The Group is responsible for repaying the banks when the proceeds from the auction of the properties cannot cover the outstanding mortgage principals together with the accrued interest and penalties.

The Group’s guarantee period starts from the dates of grant of the relevant mortgage loans and ends upon the issuance of real estate ownership certificates to the purchasers, which will generally be available within one to two years after the purchasers take possession of the relevant properties.

The fair value of the guarantees is not significant and the directors consider that in the case of default on payments, the net realisable value of the related properties can cover the repayment of the outstanding mortgage principals together with the accrued interest and penalties and therefore no provision has been made in the Financial Information for the guarantees.

(b) The fair value of the guarantees is not significant and the directors of the Company consider that the risk of default in payment is remote, and therefore no provision for the guarantees has been made in the Financial Information.

(c) As at 31 December 2006, 2007 and 2008 and 30 September 2009, the Company did not have any significant contingent liabilities.

In addition, the Group’s share of the jointly-controlled entities’ and associates’ own financial guarantees which are not included in the above, is as follows:

As at As at 31 December 30 September

2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 Guarantees in respect of mortgage facilities for certain purchasers of the jointly-controlled entities’ properties ...... — — 59,614 350,168

Guarantees in respect of mortgage facilities for certain purchasers of the associates’ properties — — — 27,030

38. PLEDGE OF ASSETS

At each of the reporting dates, the following assets of the Group were pledged to certain banks for securing the loans granted to the Group:

As at As at 31 December 30 September

2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 Property and equipment (note 14) ...... 1,928 6,177 28,310 39,892 Investment properties (note 15) ...... 173,672 456,672 838,672 74,000 Prepaid land lease payments (note 16)...... 11,933 12,963 230,385 785,982 Properties under development (note 18) ...... 528,689 506,106 674,896 1,808,222 Completed properties held for sale (note 22) ... — — 607,862 3,412

716,222 981,918 2,380,125 2,711,508

— F-65 — 39. OPERATING LEASE ARRANGEMENTS

(a) As lessor

The Group leases its investment properties (note 15) under operating lease arrangements, with leases negotiated for terms ranging from one to ten years. The terms of the leases generally also require the tenants to pay security deposits and provide for periodic rent adjustments according to the then prevailing market conditions.

At each of the reporting dates, the Group had total future minimum lease receivables under non-cancellable operating leases with its tenants falling due as follows:

As at As at 31 December 30 September

2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 Within one year...... 215 728 1,458 8,351 In the second to fifth years, inclusive ..... — 134 134 134 In the sixth to tenth years, inclusive ...... — 152 118 92

215 1,014 1,710 8,577

(b) As lessee

The Group leases certain of its office properties under operating lease arrangements. Leases for properties are negotiated for terms ranging from one to ten years.

At each of the reporting dates, the Group had total future minimum lease payments under non-cancellable operating leases falling due as follows:

As at As at 31 December 30 September

2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 Within one year...... 960 899 695 1,491 In the second to fifth years, inclusive ..... 258 385 — 3,119 In the sixth to tenth years, inclusive ...... — — — 1,624

1,218 1,284 695 6,234

40. COMMITMENTS

In addition to the operating lease commitments detailed in note 39(b) above, the Group had the following capital commitments at the reporting date:

As at As at 31 December 30 September

2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 Contracted, but not provided for: Capital expenditure for properties under development, completed properties held for sales and construction of investment and owner-occupied properties in Mainland China ...... 1,008,423 532,638 1,110,644 1,395,270 Capital expenditure for acquisition of property and equipment ...... — 3,609 — — Acquisition of jointly-controlled entities ...... — 14,668 — —

1,008,423 550,915 1,110,644 1,395,270

— F-66 — In addition, the Group’s share of the jointly-controlled entities’ and associates’ own capital commitments which are not included in the above, are as follows:

As at As at 31 December 30 September

2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 Contracted, but not provided for: Capital expenditure for jointly controlled entities’ properties under development .... — 13,958 52,205 19,835

Capital expenditure for associates’ properties under development ...... — 25,200 14,689 12,105

37. CONTINGENT LIABILITIES

The Group had the following financial guarantees as at each of the reporting dates during the Track Record Periods:

As at As at 31 December 30 September

Notes 2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 Guarantees in respect of mortgage facilities for certain purchasers of the Group’s properties ...... (a) 238,032 688,347 504,211 764,211

Guarantees given to bank in connection with facilities granted to companies controlled by the Founder ...... (b) — 170,000 255,500 210,500

Under the above arrangement, the related properties were pledged to the banks as collaterals for the mortgage loans, upon default on mortgage repayments by these purchasers, the banks are entitled to take over the legal titles and will realise the pledged properties through open auction. The Group is responsible for repaying the banks when the proceeds from the auction of the properties cannot cover the outstanding mortgage principals together with the accrued interest and penalties.

(c) As at 31 December 2006, 2007 and 2008 and 30 September 2009, the Company did not have any significant contingent liabilities.

— F-67 — In addition, the Group’s share of the jointly-controlled entities’ and associates’ own financial guarantees which are not included in the above, is as follows:

As at As at 31 December 30 September

2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 Guarantees in respect of mortgage facilities for certain purchasers of the jointly-controlled entities’ properties ...... — — 59,614 350,168

Guarantees in respect of mortgage facilities for certain purchasers of the associates’ properties — — — 27,030

38. PLEDGE OF ASSETS

At each of the reporting dates, the following assets of the Group were pledged to certain banks for securing the loans granted to the Group:

As at As at 31 December 30 September

2006 2007 2008 2009

716,222 981,918 2,380,125 2,711,508

39. OPERATING LEASE ARRANGEMENTS

(a) As lessor

At each of the reporting dates, the Group had total future minimum lease receivables under non-cancellable operating leases with its tenants falling due as follows:

As at As at 31 December 30 September

2006 2007 2008 2009

215 1,014 1,710 8,577

(b) As lessee

The Group leases certain of its office properties under operating lease arrangements. Leases for properties are negotiated for terms ranging from one to ten years.

— F-68 — At each of the reporting dates, the Group had total future minimum lease payments under non-cancellable operating leases falling due as follows:

As at As at 31 December 30 September

2006 2007 2008 2009

1,218 1,284 695 6,234

40. COMMITMENTS

In addition to the operating lease commitments detailed in note 39(b) above, the Group had the following capital commitments at the reporting date:

As at As at 31 December 30 September

2006 2007 2008 2009

1,008,423 550,915 1,110,644 1,395,270

In addition, the Group’s share of the jointly-controlled entities’ and associates’ own capital commitments which are not included in the above, are as follows:

As at As at 31 December 30 September

2006 2007 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 Contracted, but not provided for: Capital expenditure for jointly controlled entities’ properties under development .... — 13,958 52,205 19,835

Capital expenditure for associates’ properties under development ...... — 25,200 14,689 12,105

— F-69 — 41. RELATED PARTY TRANSACTIONS

(a) In addition to the transactions and balances detailed in notes 23, 25, 30 and 31 to the Financial Information, the Group had the following material transactions with related parties during the Track Record Periods:

Nine months ended Year ended 31 December 30 September

Notes 2006 2007 2008 2008 2009

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) Sale of properties to: Directors ...... (i) 3,753 1,124 — — 1,171 Family members of the directors ...... (i) — 3,000 4,319 4,319 1,998 Disposal of a motor vehicle to a director...... (i) — 256 — — — Rental income from companies controlled by the Founder ...... (ii) — 54 1,283 1,009 1,255 Property management fee income from companies controlled by the Founder (ii) — — 220 180 173 Commission income on trading of machinery received from companies controlled by the Founder (iii) 67 362 — — — Interest expenses on loans from companies controlled by the Founder ...... (iv) 193 6,874 16,890 8,173 9,134 Sales agency fees paid to an associate...... (v) ————6,421

Notes: (i) The properties were sold at prices mutually agreed by both parties.

(ii) Terms on the rental and management fee income of office premises were mutually agreed between both parties.

(iii) The commission income was based on 0.1% to 0.8% of the selling prices of the machinery traded.

(iv) The interest expenses were charged at rates ranging from 2.36% to 8.22% per annum.

(v) The sales agency fees were charged at rates ranging from 1.1% to 1.3% of the selling price of the relevant properties sold.

In the opinion of the directors of the Company, the transactions between the Group and the aforementioned related parties were conducted in the ordinary and usual course of business and on terms and conditions similar to those entered into with unrelated parties. The directors of the Company also confirmed that except for the rental income and management fee income receivable from companies controlled by the Founder set out in note (ii) above, all the above transactions will not continue after the listing of the Company’s shares on the Main Board of the Stock Exchange.

(b) During the years ended 31 December 2007 and 2008 and the nine months ended 30 September 2009, the Group provided financial guarantees with aggregate amounts of RMB170,000,000, RMB255,500,000 and RMB210,500,000, respectively, to certain banks for securing the loan facilities granted to certain companies controlled by the Founder. Further details of the financial guarantees provided to related parties as at each of the reporting dates are disclosed in note 37 to the Financial Information.

— F-70 — (c) In the opinion of the directors, the directors of the Company represent the key management personnel of the Group. Further details of the compensation of key management personnel of the Group are set out in note 9 to the Financial Information.

42. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s principal financial instruments comprise interest-bearing bank and other loans, amounts due from/to related parties, and cash and short term deposits. The main purpose of these financial instruments is to raise finance for the Group’s operations. The Group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.

It is, and has been throughout the Track Record Periods under review, the Group’s policy that no trading in financial instruments shall be undertaken.

The main risks arising from the Group’s financial instruments are market risk, interest rate risk, foreign currency risk, credit risk and liquidity risk. The directors review and agree policies for managing each of these risks and they are summarised below.

Market risk

The Group’s assets are predominantly in the form of prepaid land lease payments, investment properties, properties under development and completed properties held for sale. In the event of a severe downturn in the property market, these assets may not be readily realised.

Interest rate risk

The Group’s income and operating cash flows are substantially independent of changes in market interest rates. Other than deposits held at banks, the Group does not have significant interest-bearing assets. Restricted deposits were held at banks in the PRC at the same saving rate of unrestricted deposits throughout the Track Record Periods. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s bank borrowings with floating interest rates. The Group has not used any interest rate swaps to hedge its exposure to interest rate risk, and will consider hedging significant interest rate risk should the need arise.

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group’s profit before tax. There is no material impact on other components of the Group’s equity.

Increase/ (decrease) in Effect on profit basis points before tax

RMB’000 Year ended 31 December 2006 RMB...... 150 (9,069) RMB...... (150) 9,069 Year ended 31 December 2007 RMB...... 150 (10,190) RMB...... (150) 10,190 Year ended 31 December 2008 RMB...... 150 (12,986) HK$...... 150 (260) RMB...... (150) 12,986 HK$...... (150) 260 Period ended 30 September 2009 RMB...... 150 (20,241) HK$...... 150 (211) RMB...... (150) 20,241 HK$...... (150) 211

— F-71 — Foreign currency risk

All of the Group’s turnover and substantially all of the Group’s operating expenses are denominated in RMB, which is currently not a freely convertible currency. The PRC Government imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currency out of Mainland China. Shortages in the availability of foreign currencies may restrict the ability of the Group’s PRC subsidiaries to remit sufficient foreign currencies to pay dividends or other amounts to the Group.

Under existing PRC foreign exchange regulations, payments of current account items, including dividends, trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from the State Administration for Foreign Exchange Bureau by complying with certain procedural requirements. However, approval from appropriate PRC governmental authorities is required where RMB is to be converted into a foreign currency and remitted out of China to pay capital account items, such as the repayment of bank loans denominated in foreign currencies.

Currently, the Group’s PRC subsidiaries may purchase foreign exchange for settlement of current account transactions, including payment of dividends to the Company, without prior approval of the State Administration for Foreign Exchange Bureau. The Group’s PRC subsidiaries may also retain foreign currencies in their current accounts to satisfy foreign currency liabilities or to pay dividends. Since foreign currency transactions on the capital account are still subject to limitations and require approval from the State Administration for Foreign Exchange Bureau, this could affect the Group’s subsidiaries’ ability to obtain required foreign currency through debt or equity financing, including by means of loans or capital contributions from the shareholders.

The Group’s financial assets and liabilities including certain amounts due from/(to) related parties denominated in Hong Kong dollars (“HK$”) and certain short term deposits denominated in HK$ and United States dollars (“US$”) are subject to foreign currency risk. Therefore, the fluctuations in the exchange rates of RMB against foreign currencies could affect the Group’s results of operations.

There are limited hedging instruments available in the PRC to reduce the Group’s exposure to exchange rate fluctuations between the RMB and other currencies. To date, the Group has not entered into any hedging transactions in an effort to reduce the Group’s exposure to foreign currency exchange risks. While the Group may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and the Group may not be able to hedge the Group’s exposure successfully, or at all.

The following table demonstrates the sensitivity to a reasonably possible change in RMB exchange rates against HK$ and US$, with all other variables held constant, of the Group’s profit before tax.

Increase/ (decrease) in Effect on profit exchange rate before tax

RMB’000 Year ended 31 December 2006 If US$ weakens against RMB...... 10% (1,095) If US$ strengthens against RMB ...... (10%) 1,095 Year ended 31 December 2007 If US$ weakens against RMB...... 10% (1,492) If US$ strengthens against RMB ...... (10%) 1,492 Year ended 31 December 2008 If US$ weakens against RMB...... 10% (36) If US$ strengthens against RMB ...... (10%) 36 Period ended 30 September 2009 If HK$ weakens against RMB...... 10% (6,402) If HK$ strengthens against RMB ...... (10%) 6,402

Credit risk

— F-72 — The following is the reproduction of the Company’s audited consolidated financial statements together with the independent auditor’s report in the Company’s 2009 Annual Report. References to page number refer to the original page number of the 2009 Annual Report.

Independent Auditors’ Report

To the shareholders of China SCE Property Holdings Limited (Incorporated in the Cayman Islands with limited liability)

We have audited the financial statements of China SCE Property Holdings Limited set out on pages 45 to 122, which comprise the consolidated and company statements of financial position as at 31 December 2009, and the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.

DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

The directors of the Company are responsible for the preparation and the true and fair presentation of these financial statements in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the Hong Kong Companies Ordinance. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

AUDITORS’ RESPONSIBILITY

Our responsibility is to express an opinion on these financial statements based on our audit. Our report is made solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement.

— F-73 — We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINION

In our opinion, the financial statements give a true and fair view of the state of affairs of the Company and the Group as at 31 December 2009 and of the Group’s profit and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the Hong Kong Companies Ordinance.

Ernst & Young Certified Public Accountants 18th Floor, Two International Finance Centre 8 Finance Street, Central Hong Kong

15 April 2010

Annual Report 2009 — 70

— F-74 — CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Year ended 31 December 2009

Notes 2009 2008

RMB’000 RMB’000 REVENUE ...... 6 586,463 331,179 Cost of sales ...... (292,804) (203,335)

Gross profit ...... 293,659 127,844 Other income and gains ...... 6 16,039 6,962 Changes in fair value of investment properties ...... 16 371,613 211,366 Selling and marketing expenses ...... (38,955) (27,143) Administrative expenses...... (91,197) (64,883) Other expenses ...... (137) (247) Finance costs ...... 7 (5,642) (3,324) Share of profits and losses of: Jointly-controlled entities ...... (1,598) (4,697) Associates...... (3,095) (4,413)

PROFIT BEFORE TAX...... 8 540,687 241,465 Income tax expense...... 11 (178,996) (75,606) PROFIT FOR THE YEAR ...... 361,691 165,859

OTHER COMPREHENSIVE INCOME/(LOSS): Share of other comprehensive income of jointly-controlled entities ...... 12 649 Exchange differences on translation of foreign operations ...... (5,793) 34,637 OTHER COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR...... (5,781) 35,286 TOTAL COMPREHENSIVE INCOME FOR THE YEAR ...... 355,910 201,145

Profit/(loss) attributable to: Owners of the parent...... 12 373,434 168,458 Minority interests...... (11,743) (2,599) 361,691 165,859

Total comprehensive income/(loss) attributable to: Owners of the parent...... 367,653 199,135 Minority interests...... (11,743) 2,010 355,910 201,145

EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT...... 14

RMB RMB Basic and diluted...... 17.9 cents 8.4 cents

Annual Report 2009 — 71

— F-75 — CONSOLIDATED STATEMENT OF FINANCIAL POSITION 31 December 2009

Notes 2009 2008

RMB’000 RMB’000 NON-CURRENT ASSETS Property and equipment ...... 15 76,279 71,500 Investment properties...... 16 1,296,000 882,000 Prepaid land lease payments ...... 17 2,170,371 760,388 Intangible asset ...... 18 4,819 — Properties under development...... 19 354,620 308,496 Interests in jointly-controlled entities ...... 21 156,218 123,194 Interests in associates ...... 22 6,128 11,489 Prepayments...... 25 154,976 508,040 Deferred tax assets...... 32 82,449 20,808

Total non-current assets...... 4,301,860 2,685,915

CURRENT ASSETS Properties under development...... 19 2,052,276 1,370,435 Completed properties held for sale...... 23 1,131,664 803,671 Trade receivables ...... 24 22,144 4,597 Prepayments, deposits and other receivables ...... 25 326,140 142,639 Due from related parties ...... 26 172,809 126,069 Tax recoverable ...... 93,796 90,353 Restricted cash...... 27 115,325 83,410 Cash and cash equivalents ...... 27 489,480 59,679 Total current assets ...... 4,403,634 2,680,853 CURRENT LIABILITIES Trade payables ...... 28 307,534 436,578 Receipts in advance...... 29 2,994,693 1,898,011 Other payables and accruals...... 30 487,097 618,142 Interest-bearing bank and other borrowings...... 31 567,037 1,009,425 Due to related parties ...... 26 231,266 368,440 Tax payable ...... 74,075 29,048 Total current liabilities ...... 4,661,702 4,359,644 NET CURRENT LIABILITIES ...... (258,068) (1,678,791)

Annual Report 2009 — 72

— F-76 — CONSOLIDATED STATEMENT OF FINANCIAL POSITION (continued) 31 December 2009

Notes 2009 2008

RMB’000 RMB’000 TOTAL ASSETS LESS CURRENT LIABILITIES ...... 4,043,792 1,007,124

NON-CURRENT LIABILITIES Other payables ...... 30 2,240 2,479 Interest-bearing bank and other borrowings...... 31 1,539,028 344,493 Deferred tax liabilities ...... 32 186,498 86,225 Provision for major overhauls...... 33 3,800 —

Total non-current liabilities...... 1,731,566 433,197

Net assets ...... 2,312,226 573,927

EQUITY Equity attributable to owners of the parent Issued capital ...... 34 11 10 Reserves ...... 35(a) 1,509,364 457,493

1,509,375 457,503 Minority interests ...... 802,851 116,424 Total equity ...... 2,312,226 573,927

Wong Chiu Yeung Li Wei Director Director

Annual Report 2009 — 73

— F-77 — CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Year ended 31 December 2009

Attributable to owners of the parent

Share Statutory Exchange Issued premium Capital surplus Merger Other fluctuation Retained Minority Total capital account reserve reserve reserve reserve reserve profits Total interests equity

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (note 34) (note 34) (note 35(b)) (note 35(c)) (note 35(d)) At 1 January 2008 ...... 10 — 3,463 31,109 30 2,850 45,858 175,048 258,368 117,740 376,108 Total comprehensive income for the year .... —————64930,028 168,458 199,135 2,010 201,145 Transfer to statutory surplus reserve ...... — — — 23,026 — — — (23,026) — — — Acquisition of minority interests...... —————————(3,326) (3,326)

At 31 December 2008 and 1 January 2009 ... 10 —* 3,463* 54,135* 30* 3,499* 75,886* 320,480* 457,503 116,424 573,927 Total comprehensive income for the year .... —————12(5,793) 373,434 367,653 (11,743) 355,910 Issue of shares...... 1 682,675 ——————682,676 — 682,676 Share issue expenses...... — (687) ——————(687) — (687) Deregistration of subsidiaries...... — — — (10,270) — — — 10,270 — — — Transfer to statutory surplus reserve ...... — — — 28,894 — — — (28,894) — — — Acquisition of subsidiaries that are not a business ...... —————————622,300 622,300 Partial disposal of an interest in a subsidiary ...... — — 2,230 —————2,230 75,870 78,100

At 31 December 2009 ...... 11 681,988* 5,693* 72,759* 30* 3,511* 70,093* 675,290* 1,509,375 802,851 2,312,226

* These reserve accounts comprise the consolidated reserves of RMB1,509,364,000 (2008: RMB457,493,000) in the consolidated statement of financial position.

Annual Report 2009 — 74

— F-78 — CONSOLIDATED STATEMENT OF CASH FLOWS Year ended 31 December 2009

Notes 2009 2008

RMB’000 RMB’000 CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax...... 540,687 241,465 Adjustments for: Finance costs...... 7 5,642 3,324 Share of profits and losses of: Jointly-controlled entities...... 1,598 4,697 Associates ...... 3,095 4,413 Interest income...... 6 (2,778) (2,144) Write-off of items of property and equipment...... 8 11 89 Loss on disposal of a subsidiary ...... 8 — 158 Loss on disposal of items of property and equipment, net ... 8 126 — Excess over the cost of a business combination ...... 6 — (4,527) Depreciation ...... 8 7,157 5,272 Amortisation of prepaid land lease payments ...... 8 22,240 11,423 Changes in fair value of investment properties...... 16 (371,613) (211,366) Amortisation of an intangible asset ...... 8 42 — 206,207 52,804 Additions to prepaid land lease payments...... 17 (815,933) (145,071) Decrease in properties under development...... 139,946 198,006 Increase in completed properties held for sale...... (299,127) (593,038) Increase in trade receivables ...... (17,547) (4,295) Decrease/(increase) in prepayments, deposits and other receivables...... 690,204 (65,922) Decrease/(increase) in amounts due from related parties...... 2,702 (3,103) Increase/(decrease) in trade payables ...... (131,387) 72,321 Increase in receipts in advance...... 1,096,502 210,742 Increase in other payables and accruals...... 40,935 59,905 Increase in provision for major overhauls ...... 33 880 — Cash generated from/(used in) operations ...... 913,382 (217,651) Interest received ...... 2,778 2,144 Interest paid ...... (104,582) (84,605) PRC corporate income tax paid...... (44,389) (43,612) PRC land appreciation tax paid ...... (22,254) (35,493)

Net cash flows from/(used in) operating activities ...... 744,935 (379,217)

Annual Report 2009 — 75

— F-79 — CONSOLIDATED STATEMENT OF CASH FLOWS (continued) Year ended 31 December 2009

Notes 2009 2008

RMB’000 RMB’000 Net cash flows from/(used in) operating activities ...... 744,935 (379,217)

CASH FLOWS FROM INVESTING ACTIVITIES Purchases of items of property and equipment ...... (3,879) (17,962) Additions to investment properties...... (42,387) (138,634) Proceeds from disposal of items of property and equipment ... 535 241 Proceeds from disposal of investment properties ...... — 400 Proceeds from disposal of jointly-controlled entities...... 5,752 — Acquisition of jointly-controlled entities...... — (62,040) Investments in jointly-controlled entities ...... (58,800) — Dividend received from jointly-controlled entities ...... 25,000 — Acquisition of subsidiaries...... 36(b) — (584) Disposal of subsidiaries ...... 36(c) — 1,850 Acquisition of subsidiaries that are not a business ...... 36(a) (857,107) — Decrease in considerations payable for the acquisition of subsidiaries and associates ...... (236,745) (98,000) Decrease in an amount due to a minority shareholder of certain subsidiaries...... (3,356) — Increase in amounts due from jointly-controlled entities and associates ...... (97,591) (66,344) Decrease/(increase) in restricted cash...... 140,244 (46,707) Net cash flows used in investing activities...... (1,128,334) (427,780) CASH FLOWS FROM FINANCING ACTIVITIES Issue of new shares...... 681,989 — New bank and other borrowings ...... 1,824,219 710,157 Repayment of bank and other borrowings...... (1,502,082) (79,029) Increase/(decrease) in advances from minority shareholders of certain subsidiaries...... (101,692) 5,701 Increase/(decrease) in amounts due from/to related parties, net ...... (89,231) 151,960 Net cash flows from financing activities ...... 813,203 788,789 NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS...... 429,804 (18,208) Cash and cash equivalents at beginning of year...... 59,679 81,059 Effect of foreign exchange rate changes, net...... (3) (3,172) CASH AND CASH EQUIVALENTS AT END OF YEAR ...... 489,480 59,679

ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances...... 27 489,480 59,679

Annual Report 2009 — 76

— F-80 — STATEMENT OF FINANCIAL POSITION 31 December 2009

Notes 2009 2008

RMB’000 RMB’000 NON-CURRENT ASSET Investment in a subsidiary...... 20 — —

CURRENT ASSETS Prepayments...... 25 8,137 21 Due from the immediate holding company ...... 26 — 9 Due from subsidiaries ...... 20 659,840 — Cash and cash equivalents ...... 18 —

Total current assets ...... 667,995 30

CURRENT LIABILITIES Due to a subsidiary...... 20 — 7,327 Other payables and accruals...... 30 5,580 176

Total current liabilities ...... 5,580 7,503

NET CURRENT ASSETS/(LIABILITIES) 662,415 (7,473) Net assets/(liabilities)...... 662,415 (7,473)

EQUITY Issued capital ...... 34 11 10 Reserves ...... 35(e) 662,404 (7,483) Total equity/(net deficiency of assets)...... 662,415 (7,473)

Wong Chiu Yeung Li Wei Director Director

Annual Report 2009 — 77

— F-81 — NOTES TO FINANCIAL STATEMENTS 31 December 2009

1. CORPORATE INFORMATION

China SCE Property Holdings Limited (the “Company”) is incorporated in the Cayman Islands as an exempted company with limited liability. The registered office of the Company is located at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands.

The Company and its subsidiaries (collectively referred to as the “Group”) were principally engaged in property development, property investment and property management in the People’s Republic of China (the “PRC”) during the year.

The ordinary shares of the Company were listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) on 5 February 2010.

In the opinion of the directors of the Company, the ultimate holding company of the Company is Newup Holdings Limited, which is incorporated in the British Virgin Islands (the “BVI”).

2.1 BASIS OF PREPARATION

These financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) (which include all Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“HKASs”) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”), accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. They have been prepared under the historical cost convention, except for investment properties, which have been measured at fair value. These financial statements are presented in Renminbi (“RMB”) and all values are rounded to the nearest thousand (“RMB’000”) except when otherwise indicated.

Basis of consolidation

The consolidated financial statements include the financial statements of the Group for the year ended 31 December 2009. The results of subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. All income, expenses and unrealised gains and losses resulting from intercompany transactions and intercompany balances within the Group are eliminated on consolidation in full.

The acquisition of subsidiaries during the year has been accounted for using the purchase method of accounting. This method involves allocating the cost of the business combinations to the fair value of the identifiable assets acquired, and liabilities and contingent liabilities assumed at the date of acquisition. The cost of the acquisition is measured at the aggregate of the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.

Minority interests represent the interests of outside shareholders not held by the Group in the results and net assets of the Company’s subsidiaries. An acquisition or a disposal of minority interests is accounted for using the entity concept method whereby the difference between the consideration and the book value of the share of the net assets acquired or disposed of is recognised as an equity transaction.

2.2 NET CURRENT LIABILITIES

As at 31 December 2009, the current liabilities of the Group exceeded its current assets by approximately RMB258 million. The Group finances its property development projects by obtaining credit terms from contractors, proceeds from pre-sales of its on-going property development projects and interest-bearing bank and other borrowings.

As at 31 December 2009, the Group had unutilised credit facilities from banks of approximately RMB11,155 million. Moreover, the Group has successfully obtained approximately RMB270 million interest-bearing bank borrowings subsequent to the year end. In addition, on 5 February 2010, the Company completed its global offering of 600 million ordinary shares of HK$0.10 each at an offer price of HK$2.6 per share and raised total net proceeds of approximately RMB1,322 million.

The directors of the Company are of the opinion that, taking into account the presently available banking facilities, the net proceeds from the Company’s global offering, the continual renewal of bank loans upon maturity and internal financial resources of the Group (mainly proceeds from the pre-sale of its ongoing property development projects), the Group has sufficient working capital for its present requirements. Hence, the financial statements have been prepared on a going concern basis. Annual Report 2009 — 78

— F-82 — 2.3 ISSUED BUT NOT YET EFFECTIVE HKFRSs

The Group has not applied the following new and revised HKFRSs, that have been issued but are not yet effective, in these financial statements.

HKFRS 1 (Revised) First-time Adoption of Hong Kong Financial Reporting Standards1

HKFRS 1 Amendments Amendments to HKFRS 1 First-time Adoption of Hong Kong Financial Reporting Standards - Additional Exemptions for First-time Adopters2

HKFRS 1 Amendment Amendment to HKFRS 1 First-time Adoption of Hong Kong Financial Reporting Standards - Limited Exemption from Comparative HKFRS 7 Disclosures for First-time Adopters4

HKFRS 2 Amendments Amendments to HKFRS 2 Share-based Payment - Group Cash-settled Share-based Payment Transactions2

HKFRS 3 (Revised) Business Combinations1

HKFRS 9 Financial Instruments6

HKAS 24 (Revised) Related Party Disclosures5

HKAS 27 (Revised) Consolidated and Separate Financial Statements1

HKAS 32 Amendment Amendment to HKAS 32 Financial Instruments: Presentation - Classification of Rights Issues3

HKAS 39 Amendment Amendment to HKAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged Items1

HK (IFRIC)-Int 14 Amendments to HK(IFRIC)-Int14 Prepayments of a Minimum Funding Amendments Requirment5

HK(IFRIC)-Int 17 Distributions of Non-cash Assets to Owners1

HK(IFRIC)-Int 19 Extinguishing Financial Liabilities with Equity Instruments4

Amendments to HKFRS 5 Amendments to HKFRS 5 Non-current Assets Held for Sale and included in Improvements Discontinued Operations - Plan to sell the controlling interest in a to HKFRSs issued in subsidiary1 October 2008

HK Interpretation 4 (Revised Leases - Determination of the Length of Lease Term in respect of Hong in December 2009) Kong Land Leases2

Apart from the above, the HKICPA has issued Improvements to HKFRSs 2009 which sets out amendments to a number of HKFRSs primarily with a view to removing inconsistencies and clarifying wording. The amendments to HKFRS 2, HKAS 38, HK(IFRIC)-Int 9 and HK(IFRIC)-Int 16 are effective for annual periods beginning on or after 1 July 2009 while the amendments to HKFRS 5, HKFRS 8, HKAS 1, HKAS 7, HKAS 17, HKAS 36 and HKAS 39 are effective for annual periods beginning on or after 1 January 2010 although there are separate transitional provisions for each standard or interpretation.

1 Effective for annual periods beginning on or after 1 July 2009

2 Effective for annual periods beginning on or after 1 January 2010

3 Effective for annual periods beginning on or after 1 February 2010

4 Effective for annual periods beginning on or after 1 July 2010

5 Effective for annual periods beginning on or after 1 January 2011

6 Effective for annual periods beginning on or after 1 January 2013

The Group is in the process of making an assessment of the impact of these new and revised HKFRSs upon initial application. So far, the Group considers that except for the adoption of HKFRS 3 (Revised), HKFRS 9 and HKAS 27 (Revised) may result in changes in accounting policies, these new and revised HKFRSs are unlikely to have a significant impact on the Group’s results of operations and financial position.

Annual Report 2009 — 79

— F-83 — 3. SIGNIFICANT ACCOUNTING POLICIES

Subsidiaries

A subsidiary is an entity whose financial and operating policies the Company controls, directly or indirectly, so as to obtain benefits from its activities.

Joint ventures

A joint venture is treated as:

(a) a subsidiary, if the Group/Company has unilateral control, directly or indirectly, over the joint venture;

(b) a jointly-controlled entity, if the Group does not have unilateral control, but has joint control, directly or indirectly, over the joint venture;

Jointly-controlled entities

The Group’s interests in jointly-controlled entities are stated in the consolidated statement of financial position at the Group’s share of net assets under the equity method of accounting, less any impairment losses. The Group’s share of the post-acquisition results and reserves of jointly-controlled entities is included in profit or loss and other comprehensive income of the consolidated statement of comprehensive income, respectively. Unrealised gains and losses resulting from transactions between the Group and its jointly-controlled entities are eliminated to the extent of the Group’s interests in the jointly-controlled entities, except where unrealised losses provide evidence of an impairment of the asset transferred.

Associates

The Group’s interests in associates are stated in the consolidated statement of financial position at the Group’s share of net assets under the equity method of accounting, less any impairment losses. The Group’s share of the post-acquisition results and reserves of associates is included in the consolidated statement of comprehensive income and consolidated reserves, respectively.

Unrealised gains and losses resulting from transactions between the Group and its associates are eliminated to the extent of the Group’s interests in the associates, except where unrealised losses provide evidence of an impairment of the asset transferred. Annual Report 2009 — 80

— F-84 — Goodwill

Excess over the cost of business combinations

Impairment of non-financial assets other than goodwill

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to profit or loss of the statement of comprehensive income in the period in which it arises, unless the asset is carried at a revalued amount, in which case the reversal of the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

An assessment is made at the end of each reporting period as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset is reversed only if there has been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in prior years. A reversal of such an impairment loss is credited to profit or loss of the statement of comprehensive income in the period in which it arises, unless the asset is carried at a revalued amount, in which case the reversal of the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset. Annual Report 2009 — 81

— F-85 — Related parties

A party is considered to be related to the Group if:

(b) the party is an associate;

(d) the party is a member of the key management personnel of the Group;

(e) the party is a close member of the family of any individual referred to in (a) or (d);

(f) the party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (d) or (e); or

(g) the party is a post-employment benefit plan for the benefit of the employees of the Group, or any entity that is a related party of the Group.

Property and equipment and depreciation

Property and equipment, other than construction in progress, are stated at cost less accumulated depreciation and any impairment losses. The cost of an item of property and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after items of property and equipment have been put into operation, such as repairs and maintenance, is normally charged to profit or loss of the statement of comprehensive income in the period in which it is incurred. In situations where the recognition criteria are satisfied, the expenditure is capitalised in the carrying amount of the asset as a replacement.

Buildings over the lease terms Leasehold improvements over the shorter of the lease terms and 20% Furniture, fixtures and office equipment 19% to 25% Motor vehicles 15% to 25%

Where parts of an item of property and equipment have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is depreciated separately.

Residual values, useful lives and the depreciation method are reviewed, and adjusted if appropriate, at least at each financial year end.

An item of property and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognised in profit or loss of the statement of comprehensive income in the year the asset is derecognised is the difference between the net sales proceeds and the carrying amount of the relevant asset.

Annual Report 2009 — 82

— F-86 — Service concession arrangement

Consideration paid by the Group

Operating services

Revenue relating to operating services is accounted for in accordance with the policy for “Revenue recognition” below.

Contractual obligations to restore the sports and recreation facilities to a specified level of serviceability

Intangible asset (other than goodwill)

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is the fair value as at the date of acquisition.

The useful life of an intangible asset is assessed to be either finite or indefinite. Intangible asset with finite life is subsequently amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year end.

An intangible asset is derecognised on disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognised in profit or loss of the statement of comprehensive income in the period the intangible asset is derecognised is the difference between the net sales proceeds and the carrying amount of the relevant intangible asset.

Operating concession

Investment properties

Investment properties include both completed investment properties and investment properties under construction.

Investment properties under construction or development for future use as investment properties are classified as investment properties under construction. Such properties under construction are measured initially at cost, including transaction cost, and stated at fair value, subsequent to initial recognition, at end of the reporting period when fair value can be determined reliably. Annual Report 2009 — 83

— F-87 — Gains or losses arising from changes in the fair values of completed investment properties and investment properties under construction are included in profit or loss of the statement of comprehensive income in the year in which they arise.

Any gains or losses on the retirement or disposal of a completed investment property or an investment property under construction are recognised in profit or loss of the statement of comprehensive income in the year of the retirement or disposal.

Operating leases

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Where the Group is the lessor, assets leased by the Group under operating leases are included in non-current assets, and rentals receivable under the operating leases are credited to profit or loss of the statement of comprehensive income on the straight-line basis over the lease terms. Where the Group is the lessee, rentals payable under the operating leases are charged to profit or loss of the statement of comprehensive income on the straight-line basis over the lease terms.

Prepaid land lease payments under operating leases are initially stated at cost and subsequently recognised on the straight-line basis over the lease terms.

Properties under development

Revenue is only recognised upon completion of the development. Sales deposits/installments received and receivable from purchasers in respect of pre-sale of properties under development prior to completion of the development are included in current liabilities.

Completed properties held for sale

Completed properties held for sale are stated at the lower of cost and net realisable value. Cost is determined by an apportionment of total land and building costs attributable to the unsold properties. Net realisable value is determined by reference to the sales proceeds of properties sold in the ordinary course of business, less applicable variable selling expenses, or by management estimates based on prevailing market conditions.

Investments and other financial assets

Financial assets within the scope of HKAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables and available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial assets at initial recognition. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

The Group’s financial assets include cash and bank balances, amounts due from related parties and trade and other receivables and are classified and accounted for as loans and receivables.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such assets are subsequently measured at amortised cost using the effective interest rate method less any allowance for impairment. Amortised cost is calculated taking into account any discount or premium on acquisition and includes fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in finance income in profit or loss of the statement of comprehensive income. The loss arising from impairment is recognised in profit or loss of the statement of comprehensive income. Annual Report 2009 — 84

— F-88 — Derecognition of financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised where:

• the rights to receive cash flows from the asset have expired;

• the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Impairment of financial assets

The Group assesses at the end of each reporting period whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred “loss event”) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that a debtor or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial assets carried at amortised cost

For financial assets carried at amortised cost, the Group first assesses individually whether objective evidence of impairment exists for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate (i.e., the effective interest rate computed at initial recognition). If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate.

The carrying amount of the asset is reduced either directly or through the use of an allowance account and the amount of the loss is recognised in profit or loss of the statement of comprehensive income. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Loans and receivables together with any associated allowance are written off when there is no realistic prospect of future recovery.

If, in a subsequent period, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to profit or loss of the statement of comprehensive income. Annual Report 2009 — 85

— F-89 — Financial liabilities

Initial recognition and measurement

Financial liabilities within the scope of HKAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognised initially at fair value and in the case of loans and borrowings, plus directly attributable transaction costs.

The Group’s financial liabilities include trade and other payables, financial guarantee contracts, amounts due to related parties and interest-bearing bank and other borrowings.

Subsequent measurement

The measurement of financial liabilities depends on their classification as follows:

Loans and borrowings

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost, using the effective interest rate method unless the effect of discounting would be immaterial, in which case they are stated at cost. Gains and losses are recognised in profit or loss of the statement of comprehensive income when the liabilities are derecognised as well as through the effective interest rate method amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in finance costs in profit or loss of the statement of comprehensive income.

Financial guarantee contracts

Financial guarantee contracts issued by the Group are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. A financial guarantee contract is recognised initially as a liability at its fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequent to initial recognition, the Group measures the financial guarantee contract at the higher of: (i) the amount of the best estimate of the expenditure required to settle the present obligation at the end of the reporting period; and (ii) the amount initially recognised less, when appropriate, cumulative amortisation.

Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires.

Cash and cash equivalents

For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments that are readily convertible into known amounts of cash, and which are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Group’s cash management.

For the purpose of the statement of financial position, cash and cash equivalents comprise cash on hand and at banks, including term deposits, which are not restricted as to use.

Provisions

When the effect of discounting is material, the amount recognised for a provision is the present value at the end of the reporting period of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in finance costs in profit or loss of the statement of comprehensive income. Annual Report 2009 — 86

— F-90 — Income tax

Income tax comprises current and deferred tax. Income tax relating to items recognised outside profit or loss is recognised outside profit or loss, either in other comprehensive income or directly in equity.

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period, taking into consideration interpretations and practices prevailing in the countries in which the Group operates.

Deferred tax is provided, using the liability method, on all temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

• in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

• in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each reporting period and are recognised to the extent that it has become probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be recovered.

Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue can be measured reliably, on the following bases:

(b) from the rendering of services, when the services have been rendered;

— F-91 — (e) facilities rental income, on a time proportion basis over the lease terms.

Other employee benefits

Pension schemes

The Group operates a defined contribution Mandatory Provident Fund retirement benefit scheme (the “MPF Scheme”) under the Mandatory Provident Fund Schemes Ordinance for those employees who are eligible to participate in the MPF Scheme. Contributions are made based on a percentage of the employees’ basic salaries and are charged to profit or loss of the statement of comprehensive income as they become payable in accordance with the rules of the MPF Scheme. The assets of the MPF Scheme are held separately from those of the Group in an independently administered fund. The Group’s employer contributions vest fully with the employees when contributed into the MPF Scheme.

The employees of the Group’s subsidiaries in Mainland China are required to participate in a central pension scheme (the “Pension Scheme”) operated by the local municipal government. The subsidiaries are required to contribute certain percentages of their payroll costs to the Pension Scheme. The only obligation of the Group with respect to the Pension Scheme is to pay the ongoing contributions under the Pension Scheme. The contributions are charged to profit or loss of the statement of comprehensive income as they become payable in accordance with the rules of the Pension Scheme.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, i.e., assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. The capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs capitalised. All other borrowing costs are expensed in the period in which they are incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

Foreign currencies

The financial statements are presented in RMB, which is the Group’s presentation currency. The functional currency of the Company is Hong Kong dollar while RMB is used as the presentation currency of the financial statements of the Company for the purpose of aligning with the presentation currency of the Group. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Foreign currency transactions recorded by the entities in the Group are initially recorded using their respective functional currency rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rates of exchange ruling at the end of the reporting period. All differences are taken to profit or loss of the statement of comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

The functional currencies of certain subsidiaries, jointly-controlled entities and associates operating outside the PRC are currencies other than RMB. As at the end of the reporting period, the assets and liabilities of these entities are translated into the presentation currency of the Company at the exchange rates ruling at the end of the reporting period, and their profit or loss of the statement of comprehensive income are translated into RMB at the weighted average exchange rates for the year. The resulting exchange differences are recognised in other comprehensive income and accumulated in the exchange fluctuation reserve. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in profit or loss of the statement of comprehensive income.

For the purpose of the consolidated statement of cash flows, the cash flows of non-PRC entities are translated into RMB at the exchange rates ruling at the dates of the cash flows. Frequently recurring cash flows of non-PRC entities which arise throughout the year are translated into RMB at the weighted average exchange rates for the year.

Annual Report 2009 — 88

— F-92 — 4. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amounts of the assets or liabilities affected in the future.

Judgements

Operating lease commitments - Group as lessor

Classification between investment properties and owner-occupied properties

Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. If these portions could be sold separately (or leased out separately under a finance lease), the Group accounts for these portions separately. If the portions could not be sold separately, the property is an investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes.

Judgement is made on an individual property basis to determine whether ancillary services are so significant that a property does not qualify as an investment property.

Classification between investment properties and properties held for sale

Valuation of properties under development and completed properties held for sale

— F-93 — Allocation of construction cost on properties under development

Estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Estimation of fair value of investment properties

Investment properties, including completed investment properties and investment properties under construction, were revalued at each reporting date during the year based on the appraised market value provided by independent professional valuers. Such valuations were based on certain assumptions, which are subject to uncertainty and might materially differ from the actual results. In making the estimation, the Group considers information from current prices in an active market for similar properties and uses assumptions that are mainly based on market conditions existing at each reporting date.

PRC corporate income tax (“CIT”)

The Group is subject to income taxes in the PRC. As a result of the fact that certain matters relating to the income taxes have not been confirmed by the local tax bureau, objective estimate and judgement based on currently enacted tax laws, regulations and other related policies are required in determining the provision for income taxes to be made. Where the final tax outcome of these matters is different from the amounts originally recorded, the differences will impact on the income tax and tax provisions in the period in which the differences realise.

PRC land appreciation tax (“LAT”)

Useful lives and impairment of property and equipment

The Group’s management determines the estimated useful lives and related depreciation charges for its items of property and equipment. This estimate is based on the historical experience of the actual useful lives of items of property and equipment of similar nature and functions. It could change significantly as a result of technical innovations and its competitor’s actions. Management will increase the depreciation charge where useful lives are less than previously estimates, or it will write off or write down technically obsolete assets that have been abandoned.

Deferred tax assets

— F-94 — Allowance on trade and other receivables

The provision policy for doubtful debts of the Group is based on the ongoing evaluation of the collectability and aged analysis of the outstanding receivables and on management’s estimation. A considerable amount of judgement is required in assessing the ultimate realisation of these receivables, including the creditworthiness and the past collection history of each customer. If the financial conditions of the customers of the Group were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Impairment of non-financial assets

The Group assesses whether there are any indicators of impairment of all non-financial assets at each reporting period. Indefinite life intangible assets are tested for impairment annually and at other times when such indicator exists. Other non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable. An impairment exists when the carrying value of an asset or a cash-generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The calculation of the fair value less costs to sell is based on available data from binding sales transactions in an arm’s length transaction of similar assets or observable market prices less incremental costs for disposing of the asset.

When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows.

Provision for major overhauls

The Group has contractual obligations which it must fulfil as a condition of the operating concession granted by the grantor, that are (a) to maintain the sports and recreation facilities it operates to a specified level of serviceability and (b) to restore the sports and recreation facilities to a specified condition before they are handed over to the grantor at the end of the service concession arrangement. These contractual obligations to maintain or restore the sports and recreation facilities, except for upgrade element, are recognised and measured in accordance with HKAS 37 Provisions, Contingent Liabilities and Contingent Assets, i.e., at the best estimate of the expenditure that would be required to settle the present obligation at the end of the reporting period. The estimation of the expenditure requires the Group to estimate the expected future cash outlays on major overhauls of the facilities over the service concession period and also to choose a suitable discount rate in order to calculate the present value of those cash flows.

5. SEGMENT INFORMATION

The Group’s revenue from external customers from each product or service is set out in note 6 to the financial statements.

The Group’s revenue from external customers is derived solely from its operations in the PRC, and the non-current assets of the Group are substantially located in the PRC.

During the year, no revenue from transactions with a single external customer amounted to 10% or more of the Group’s total revenue.

Annual Report 2009 — 91

— F-95 — 6. REVENUE, OTHER INCOME AND GAINS

An analysis of the Group’s revenue, other income and gains is as follows:

2009 2008

RMB’000 RMB’000 Revenue Sale of properties ...... 564,993 325,217 Property management fees ...... 8,737 4,240 Gross rental income ...... 12,733 1,722

586,463 331,179

Other income and gains Bank interest income ...... 2,778 1,741 Interest income on other receivables...... — 403 Excess over the cost of a business combination...... — 4,527 Foreign exchange gains, net...... 7,523 — Others...... 5,738 291

16,039 6,962

7. FINANCE COSTS

An analysis of finance costs is as follows:

2009 2008

RMB’000 RMB’000 Interest on bank loans wholly repayable within five years...... 78,714 66,557 Interest on bank loans repayable beyond five years ...... 847 1,158 Interest on loans from companies controlled by Mr. Wong Chiu Yeung (“Mr. Wong”) (note 41(a)(iii)) ...... 25,021 16,890 Increase in a discounted amount of provision for major overhauls arising from the passage of time (note 33) ...... 32 —

Total interest expense on financial liabilities not at fair value through profit or loss ...... 104,614 84,605 Less: Interest capitalised ...... (98,972) (81,281)

5,642 3,324

Annual Report 2009 — 92

— F-96 — 8. PROFIT BEFORE TAX

The Group’s profit before tax is arrived at after charging/(crediting):

Notes 2009 2008

RMB’000 RMB’000 Cost of properties sold ...... 284,081 199,488 Cost of services provided ...... 8,723 3,847 Depreciation...... 15 7,157 5,272 Amortisation of prepaid land lease payments ...... 17 22,240 11,423 Amortisation of an intangible asset*...... 18 42 — Provision for major overhauls ...... 33 3,800 — Minimum lease payments under operating leases for land and buildings ...... 2,853 2,871 Direct operating expenses (including repairs and maintenance) arising on rental-earning investment properties ...... 217 13 Auditors’ remuneration...... 1,851 666 Employee benefit expense (including directors’ remuneration (note 9)): Salaries and other staff costs ...... 31,480 23,965 Pension scheme contributions...... 1,461 700 Less: Amount capitalised ...... (5,562) (10,377)

27,379 14,288

Foreign exchange differences, net** ...... (7,523) 1,263 Write-off of items of property and equipment***...... 15 11 89 Loss on disposal of items of property and equipment*** ...... 126 — Loss on disposal of a subsidiary***...... — 158

* The amortisation of an intangible asset for the year is included in “Cost of sales” in the consolidated statement of comprehensive income. ** The amount for the year ended 31 December 2009 included RMB6,852,000 foreign exchange gain released from exchange fluctuation reserve upon the deregistration of a subsidiary during the year. *** These items are included in “Other expenses” on the face of the consolidated statement of comprehensive income of the Group during the year.

9. DIRECTORS’ REMUNERATION

Directors’ remuneration for the year, disclosed pursuant to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and Section 161 of the Hong Kong Companies Ordinance, is as follows:

2009 2008

RMB’000 RMB’000 Fees...... — —

Other emoluments: ...... Salaries, allowances and benefits in kind ...... 1,193 1,397 Discretionary performance related bonuses ...... 2,162 — Pension scheme contributions...... 22 18

3,377 1,415

Annual Report 2009 — 93

— F-97 — (a) Independent non-executive directors

No fee and other emoluments were paid to the independent non-executive directors for the years ended 31 December 2009 and 2008 as they were appointed subsequent to 31 December 2009.

(b) Executive directors and a non-executive director

Salaries Discretionary Retirement allowances performance benefit and benefits related scheme Fees in kind bonuses contributions Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 2009 Executive directors: Mr. Wong...... — 324 705 — 1,029 Mr. Chen Yuanlai (“Mr. Chen”)...... — 285 485 11 781 Mr. Cheng Hiu Lok (“Mr. Cheng”) ...... — 324 487 — 811 Mr. Li Wei (“Mr. Li”) ...... — 260 485 11 756

— 1,193 2,162 22 3,377

Salaries Discretionary Retirement allowances performance benefit and benefits related scheme Fees in kind bonuses contributions Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 2008 Executive directors: Mr. Wong...... — 360 — — 360 Mr. Chen ...... — 322 — 11 333 Mr. Cheng ...... — 423 — — 423 Mr. Li ...... — 292 — 7 299

— 1,397 — 18 1,415

No fee and other emoluments were paid to the non-executive director for the years ended 31 December 2009 and 2008 as he was appointed subsequent to 31 December 2009.

There was no arrangement under which a director waived or agreed to waive any remuneration during the year.

10. FIVE HIGHEST PAID INDIVIDUALS

The five highest paid employees during the year included four (2008: three) directors, details of whose remuneration are set out in note 9 above. Details of the remuneration of the remaining one (2008: two) non-director, highest paid individual for the year are as follows:

2009 2008

RMB’000 RMB’000 Salaries, allowances and benefits in kind ...... 928 1,434 Discretionary performance related bonuses ...... 258 — Pension scheme contributions...... 11 11

1,197 1,445

Annual Report 2009 — 94

— F-98 — The number of non-director, highest paid employees whose remuneration fell within the following bands is as follows:

2009 2008

RMB’000 RMB’000 Nil to RMB500,000 ...... — 1 RMB500,001 to RMB1,000,000 ...... — — RMB1,000,001 to RMB1,500,000 ...... 1 1

11. INCOME TAX

No provision for Hong Kong profits tax has been made as the Group did not generate any assessable profits arising in Hong Kong during the year (2008: Nil). Taxes on profits assessable in Mainland China have been calculated at the rates of tax prevailing in the cities in which the Group’s subsidiaries operate.

2009 2008

RMB’000 RMB’000 Group: Current charge for the year: PRC CIT ...... 49,934 18,952 PRC LAT ...... 55,368 16,653

105,302 35,605 Deferred (note 32) ...... 73,694 40,001

Total tax charge for the year ...... 178,996 75,606

A reconciliation of the tax expense applicable to profit before tax at the statutory/applicable rates for the jurisdictions in which the Company and the majority of its subsidiaries are domiciled to the tax expense at the effective tax rate is as follows:

2009 2008

RMB’000 RMB’000 Profit before tax...... 540,687 241,465

At the statutory/applicable income tax rates of different jurisdictions...... 136,456 61,928 Lower tax rate for specific cities ...... (648) (9,793) Effect of change in tax rates used for the recognition of deferred taxes...... (446) — Profits and losses attributable to jointly-controlled entities and associates ... 986 1,902 Income not subject to tax...... (533) (1,589) Expenses not deductible for tax ...... 7,144 5,339 Tax losses utilised from previous periods ...... (190) (166) Tax losses not recognised...... 3,195 286 Tax effect on unrealised profits arising from transactions within the Group... (7,892) 4,681 LAT ...... 55,368 16,653 Tax effect of LAT ...... (14,444) (2,998) Others...... — (637)

Tax expense at the Group’s effective rate ...... 178,996 75,606

Annual Report 2009 — 95

— F-99 — The share of tax charge in 2009 attributable to jointly-controlled entities and associates amounting to RMB10,412,000 (2008: tax credit of RMB11,413,000) and RMB190,000 (2008: tax credit of RMB559,000), respectively, are included in “Share of profits and losses of jointly-controlled entities and associates” in profit or loss of the consolidated statement of comprehensive income.

12. PROFIT ATTRIBUTABLE TO OWNERS OF THE PARENT

The consolidated profit attributable to owners of the parent for the year ended 31 December 2009 includes a loss of RMB12,113,000 (2008: RMB56,000) which has been dealt with in the financial statements of the Company (note 35(e)).

13. DIVIDEND

The directors do not recommend the payment of any dividend in respect of the current year (2008: Nil).

14. EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT

The calculation of basic earnings per share is based on the profit for the year attributable to owners of the parent, and the weighted average number of ordinary shares of 2,087,406,027 (2008: 2,000,000,000) in issue during the year, as adjusted retrospectively to reflect the capitalisation issue after the reporting period (note 44).

No adjustment has been made to the basic earnings per share amounts presented for the years ended 31 December 2009 and 2008 in respect of a dilution as the Group had no potentially dilutive ordinary shares in issue during those years.

15. PROPERTY AND EQUIPMENT

Furniture, Leasehold fixtures and improve- office Motor Construction Buildings ments equipment vehicles in progress Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 31 December 2009 At 31 December 2008 and 1 January 2009: Cost ...... 48,518 5,982 7,116 10,704 10,535 82,855 Accumulated depreciation ...... (1,601) (2,242) (2,592) (4,920) — (11,355)

Net carrying value...... 46,917 3,740 4,524 5,784 10,535 71,500

At 1 January 2009, net of accumulated depreciation...... 46,917 3,740 4,524 5,784 10,535 71,500 Additions ...... — 28 1,108 1,330 1,413 3,879 Acquisition of subsidiaries that are not a business (note 36(a)) ...... — 5,677 1,795 1,257 — 8,729 Transfer...... 11,948 — — — (11,948) — Depreciation ...... (1,468) (1,505) (2,033) (2,151) — (7,157) Write-off ...... — — (11) — — (11) Disposals...... — — (48) (613) — (661)

At 31 December 2009, net of accumulated depreciation...... 57,397 7,940 5,335 5,607 — 76,279

At 31 December 2009: Cost ...... 60,466 13,424 10,775 12,371 — 97,036 Accumulated depreciation ...... (3,069) (5,484) (5,440) (6,764) — (20,757)

Net carrying value...... 57,397 7,940 5,335 5,607 — 76,279

Annual Report 2009 — 96

— F-100 — Furniture, Leasehold fixtures and improve- office Motor Construction Buildings ments equipment vehicles in progress Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 31 December 2008 At 1 January 2008: Cost ...... 39,953 2,861 6,478 11,452 6,177 66,921 Accumulated depreciation ...... (516) (1,379) (1,289) (4,393) — (7,577)

Net carrying value...... 39,437 1,482 5,189 7,059 6,177 59,344

At 1 January 2008, net of accumulated depreciation...... 39,437 1,482 5,189 7,059 6,177 59,344 Additions ...... 8,765 3,121 928 790 4,358 17,962 Acquisition of subsidiaries (note 36(b)) ...... — — 16 — — 16 Depreciation ...... (1,087) (863) (1,487) (1,835) — (5,272) Disposals...... — — (33) (208) — (241) Write-off ...... — — (89) — — (89) Exchange realignment...... (198) — — (22) — (220)

At 31 December 2008, net of accumulated depreciation...... 46,917 3,740 4,524 5,784 10,535 71,500

At 31 December 2008: Cost ...... 48,518 5,982 7,116 10,704 10,535 82,855 Accumulated depreciation ...... (1,601) (2,242) (2,592) (4,920) — (11,355)

Net carrying value...... 46,917 3,740 4,524 5,784 10,535 71,500

At 31 December 2009, certain of the Group’s buildings with an aggregate carrying amount of RMB52,454,000 (2008: RMB28,310,000) were pledged to banks to secure the bank loans granted to the Group (note 38).

16. INVESTMENT PROPERTIES

Under Completed construction Total

RMB’000 RMB’000 RMB’000 At 1 January 2008 ...... 78,200 455,000 533,200 Additions ...... 456 138,178 138,634 Transfer ...... 593,178 (593,178) — Disposals during the year ...... (400) — (400) Disposal of a subsidiary (note 36(c)) ...... (800) — (800) Net gains from fair value adjustment ...... 211,366 — 211,366

At 31 December 2008 and 1 January 2009 ..... 882,000 — 882,000 Additions ...... 42,387 — 42,387 Net gains from fair value adjustment ...... 371,613 — 371,613

At 31 December 2009 ...... 1,296,000 — 1,296,000

The Group’s investment properties are situated in Mainland China under the following lease terms:

2009 2008

RMB’000 RMB’000 Long term leases ...... 94,000 67,015 Medium term leases ...... 1,202,000 814,985

1,296,000 882,000

Annual Report 2009 — 97

— F-101 — The Group’s investment properties were revalued on 31 December 2009 by DTZ Debenham Tie Leung, independent professionally qualified valuers, at RMB1,296,000,000 (2008: RMB882,000,000).

At 31 December 2009, the Group’s investment properties with an aggregate carrying amount of RMB1,296,000,000 (2008: RMB838,672,000) were pledged to secure the bank loans granted to the Group (note 38).

The Group’s investment properties are leased to third parties and companies controlled by Mr. Wong under operating leases, further summary details of which are included in note 39(a).

17. PREPAID LAND LEASE PAYMENTS

2009 2008

RMB’000 RMB’000 At beginning of year ...... 771,940 1,315,426 Additions ...... 815,933 145,071 Acquisition of subsidiaries that are not a business (note 36(a)) ..... 1,153,107 — Transfer to properties under development ...... (498,219) (676,594) Amortisation recognised during the year ...... (22,240) (11,423) Exchange realignment ...... — (540)

At end of year ...... 2,220,521 771,940 Current portion included in prepayments, deposits and other receivables ...... (50,150) (11,552)

Non-current portion ...... 2,170,371 760,388

The Group’s leasehold land is situated in Hong Kong and Mainland China and is held under the following lease terms:

2009 2008

RMB’000 RMB’000 Long term leases: Mainland China ...... 700,234 751,713

Medium term leases: Hong Kong ...... 8,313 8,487 Mainland China ...... 1,511,974 11,740

1,520,287 20,227

2,220,521 771,940

At 31 December 2009, certain of the Group’s leasehold land with an aggregate carrying amount of RMB1,132,399,000 (2008: RMB230,385,000) were pledged to banks to secure the bank loans granted to the Group (note 38).

Annual Report 2009 — 98

— F-102 — 18. INTANGIBLE ASSET

Operating concession

2009 2008

RMB’000 RMB’000 At beginning of year ...... — — Acquisition of subsidiaries that are not a business (note 36(a)) ..... 4,861 — Amortisation recognised during the year ...... (42) —

At end of year ...... 4,819 —

Cost ...... 4,861 — Accumulated amortisation ...... (42) —

Net carrying amount ...... 4,819 —

The cost of the Operating Concession is being amortised over the Operating Period.

19. PROPERTIES UNDER DEVELOPMENT

2009 2008

RMB’000 RMB’000 Properties under development expected to be completed: Within normal operating cycle included under current assets ..... 2,052,276 1,370,435 Beyond normal operating cycle included under non-current assets . 354,620 308,496

2,406,896 1,678,931

Properties under development expected to be completed within normal operating cycle and recovered: Within one year ...... 1,190,918 414,276 After one year ...... 861,358 956,159

2,052,276 1,370,435

All the Group’s properties under development are located in Mainland China and are held under long term leases.

At 31 December 2009, certain of the Group’s properties under development, including the relevant land use rights, with an aggregate carrying amount of RMB1,928,086,000 (2008: RMB674,896,000) were pledged to banks to secure the bank loans granted to the Group (note 38).

Annual Report 2009 — 99

— F-103 — 20. INVESTMENT IN SUBSIDIARIES

Company

2009 2008

RMB RMB Unlisted investment, at cost ...... 8 8

The amounts due from and to subsidiaries included in the Company’s current assets and current liabilities are unsecured, interest-free and repayable on demand. The carrying amounts of such balances approximate to their fair values.

Particulars of the principal subsidiaries of the Group are set out below:

Place of Percentage of incorporation/ Nominal value of equity attributable registration issued ordinary/ to the Company and registered share Company name operations capital Direct Indirect Principal activities

New Bright Construction & Hong Kong HK$100 — 100 Investment holding Landscape Limited

South China Property Hong Kong HK$10,000 — 100 Investment holding International Limited

Xiamen Zhongjun PRC RMB177,000,000 — 100 Investment holding and Industrial Co., Ltd.** trading of construction (廈門中駿集團有限公司#) materials

Xiamen Cippon Tai Wo PRC HK$1,500,000 — 100 Property management Property Management Co., Ltd.** (廈門世邦泰和物業管理有限公司#)

Xiamen Rundi PRC HK$23,000,000 — 100 Construction and Architectural Design interior design Co., Ltd.** (廈門潤地建築設計有限公司#)

Xiamen Guanjun Aviation PRC RMB40,000,000 — 95 Property investment Storage Services Co., Ltd.* (廈門冠駿航空倉儲服務有限公司#)

Xiamen Lucky Star PRC RMB5,000,000 — 100 Interior design and Decoration Engineering decoration Co., Ltd.*** (廈門福斯達裝修工程有限公司#)

Xiamen Jinmen Seaview PRC HK$20,000,000 — 100 Property development Manor Real Estate Co., Ltd.** (廈門金門海景山莊房地產開發有限公司#)

Tianxia Estate (Xiamen) PRC US$7,000,000 — 100 Property development Develop Co., Ltd.** (天下房地產(厦門)開發有限公司#)

Annual Report 2009 — 100

— F-104 — Place of Percentage of incorporation/ Nominal value of equity attributable registration issued ordinary/ to the Company and registered share Company name operations capital Direct Indirect Principal activities

Beijing World City PRC RMB50,000,000 — 100 Property management Property Management Co., Ltd.** (北京世界城物業管理有限公司#)

Zhangzhou Long Wen Hua PRC RMB30,000,000 — 80 Property development Gang Real Estate Development Co., Ltd.** (漳州龍文華房地產開發有限公司#)

Beijing Jinghui Real PRC RMB100,000,000 — 100 Property development Estate Development Co., Ltd.*** (北京京匯房地產開發有限公司#)

Quanzhou Junjing Real PRC RMB100,000,000 — 100 Property development Estate Development Co., Ltd.* (泉州駿景房地產開發有限公司#)

Nanan Junxin Real Estate PRC RMB50,000,000 — 51 Property development Development Co., Ltd.* (南安駿信房地產開發有限公司#)

Zhongjun (Quanzhou) PRC RMB315,000,000 — 100 Property development Real Estate Development Co., Ltd.* (中駿(泉州)房地產開發有限公司#)

Nanan Huajing Real PRC RMB70,000,000 — 100 Property development Estate Development Co., Ltd.* (南安華景房地產開發有限公司#)

Shenzhen Fanya Real PRC HK$160,000,000 — 63.2 Property development Estate Development Co., Ltd.** (深圳泛亞房地產開發有限公司#)

Shanxi Yuanhong Real PRC RMB100,000,000 — 60 Property development Estate Co., Ltd.* (山西源宏房地產開發有限公司#)

Xiamen Zhongjun Tianfeng PRC RMB144,000,000 — 100 Property development Real Estate Co., Ltd.* (廈門中駿天峰房地產有限公司#)

Fujian Straits West-Coast PRC RMB730,000,000 — 58 Property development Investment Co., Ltd.* (福建省海峽西岸投資發展有限公司#)

Annual Report 2009 — 101

— F-105 — Place of Percentage of incorporation/ Nominal value of equity attributable registration issued ordinary/ to the Company and registered share Company name operations capital Direct Indirect Principal activities

Quanzhou Straits Sports PRC RMB300,000,000 — 58 Operation and Center Co., Ltd* (泉州市 management of sports 海峽體育中心有限公司#) and recreation facilities

* Registered as limited liability companies under PRC law. ** Registered as wholly-foreign-owned entities under PRC law. *** Registered as sino-foreign joint ventures under PRC law. # The English names of these companies represent the best effort made by management of the Company to directly translate their Chinese names as no official English names have been registered.

Details of the subsidiaries acquired during the year are set out in note 36(a) to the financial statements.

The above table lists the subsidiaries of the Company which, in the opinion of the directors, principally affected the results for the year or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

21. INTERESTS IN JOINTLY-CONTROLLED ENTITIES

2009 2008

RMB’000 RMB’000 Share of net assets ...... 169,160 136,136 Due to a jointly-controlled entity ...... (12,942) (12,942)

156,218 123,194

The amount due to a jointly-controlled entity is unsecured, interest-free and has no fixed terms of repayment.

Particulars of the jointly-controlled entities are as follows:

Percentage of ownership Nominal value of Place of interest registered/ incorporation/ attributable to Principal Name paid-up capital registration the Group activities

Well China International Ordinary shares of Hong Kong 49(1) Investment Investment Holdings HK$140,000,000 holding Limited

Quanzhou Yuanhang Real Registered capital PRC 49(1) Property Estate Development Co., of RMB90,000,000 development and Ltd.* (泉州遠航房地產開發 investment 有限公司#)

Poly-Wuyi (Hong Kong) Ordinary shares of Hong Kong 50 Investment Development Limited US$10,000 holding

Fuzhou Wuyi Oasis Real Registered capital PRC 50 Property Estate Co., Ltd.** of RMB40,000,000 development (褔州武夷綠州房地產開發有限公司#)

Annual Report 2009 — 102

— F-106 — * Registered as a limited liability company under the PRC law. ** Registered as a wholly-foreign-owned entity under the PRC law. # The English names of these companies represent the best effort made by management of the Company to directly translate their Chinese names as no official English names have been registered. (1) Pursuant to the relevant shareholders’ agreements, the Group is entitled to a 50% voting right in the boards of directors of these entities.

The following tables illustrate the summarised financial information of the Group’s jointly-controlled entities:

2009 2008

RMB’000 RMB’000 Share of the jointly-controlled entities’ assets and liabilities: Non-current assets ...... 120,132 122,618 Current assets ...... 632,194 277,322 Current liabilities ...... (560,066) (166,783) Non-current liabilities ...... (23,100) (97,021)

Net assets ...... 169,160 136,136

2009 2008

RMB’000 RMB’000 Share of the jointly-controlled entities’ results: Revenue...... 63,602 75,470 Other income...... 738 111

64,340 75,581 Total expenses...... (55,526) (91,691) Tax...... (10,412) 11,413

Loss after tax ...... (1,598) (4,697)

22. INTERESTS IN ASSOCIATES

2009 2008

RMB’000 RMB’000 Share of net assets ...... 6,128 11,489

Particulars of the associates are as follows:

Percentage of ownership Nominal value of Place of interest registered/ incorporation/ attributable to Principal Name paid-up capital registration the Group activities

Quanzhou Baoxing Real Registered capital PRC 30 Property Estate Development Co., of RMB48,000,000 development Ltd.* (泉州寶興房地產開發有限公司#)

China Bright Investments Ordinary shares of Hong Kong 20 Investment Limited HK$100 holding

Grand Richy Investments Ordinary shares of BVI 45 Investment Limited US$100 holding

Shishi Minnan Goal Coast Registered capital PRC 45 Property Resort Co., Ltd.** (石獅市 of RMB10,500,000 development 閩南黃金海岸度假村有限公司#)

Annual Report 2009 — 103

— F-107 — Percentage of ownership Nominal value of Place of interest registered/ incorporation/ attributable to Principal Name paid-up capital registration the Group activities

Xiamen Dayoufu Property Registered capital PRC 20 Property agency Consulting Ltd.** (廈門大 of HK$1,050,000 友富置業顧問有限公司#)

* Registered as a limited liability company under the PRC law. ** Registered as a wholly-foreign-owned entity under the PRC law. # The English names of these companies represent the best effort made by management of the Company to directly translate their Chinese names as no official English names have been registered.

The Group’s shareholdings in all associates are held indirectly by subsidiaries of the Company.

All associates have been accounted for using the equity method in the financial statements and their financial year end date is coterminous with that of the Group.

The following table illustrates the summarised financial information, on a 100% basis, of the Group’s associates extracted from their financial statements:

2009 2008

RMB’000 RMB’000 Assets ...... 971,555 636,857 Liabilities ...... (944,374) (606,764) Revenue ...... 17,562 2,425 Loss ...... (3,743) (12,360)

23. COMPLETED PROPERTIES HELD FOR SALE

All the Group’s completed properties held for sale are located in Mainland China and are held under long term leases. All the completed properties held for sale are stated at cost.

At 31 December 2009, certain of the Group’s completed properties held for sale with an aggregate carrying amount of RMB3,488,000 (2008: RMB607,862,000) were pledged to banks to secure the bank loans granted to the Group (note 38).

24. TRADE RECEIVABLES

The Group’s trade receivables arise from the sale of properties, leasing of investment properties and provision of property management services.

Consideration in respect of properties is payable by the purchasers in accordance with the terms of the related sale and purchase agreements. The Group normally requires its customers to make payment of monthly/quarterly charges in advance in relation to the leasing of investment properties and provision of property management services. The Group generally grants a rent-free period for three months to the lessees of the Group’s investment properties, extending up to six months for major customers.

Since the Group’s trade receivables related to a number of diversified customers, there is no significant concentration of credit risk. All trade receivables are non-interest-bearing.

The aged analysis of the trade receivables that are not considered to be impaired are as follows:

Group

2009 2008

RMB’000 RMB’000 Neither past due nor impaired ...... 17,281 — 1 to 6 months past due ...... 2,319 220 7 to 12 months past due ...... — 3,949 Over 1 year past due ...... 2,544 428

22,144 4,597

Annual Report 2009 — 104

— F-108 — Receivables that were past due but not impaired relate to a number of diversified customers for whom there was no recent history of default and have a good track record with the Group. Based on past experience, the directors of the Company are of the opinion that no provision for impairment is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. The Group does not hold any collateral or other credit enhancements over these balances.

25. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES

Group Company

2009 2008 2009 2008

RMB’000 RMB’000 RMB’000 RMB’000 Prepayments (note) ...... 383,994 620,322 8,137 21 Deposits ...... 39,635 9,123 — — Proceeds receivable from the disposal of jointly-controlled entities ...... — 5,752 — — Other receivables ...... 57,487 15,482 — —

481,116 650,679 8,137 21 Non-current portion ...... (154,976) (508,040) — —

Current portion ...... 326,140 142,639 8,137 21

Note: The balances included prepayments for the acquisition of land use rights in Mainland China amounting to RMB154,976,000 (2008: RMB508,040,000) as at 31 December 2009.

None of the above assets is either past due or impaired. The financial assets included in the above balances relate to receivables for which there was no recent history of default.

26. DUE FROM/TO RELATED PARTIES

An analysis of the balances with related parties is as follows:

Group Company

2009 2008 2009 2008

RMB’000 RMB’000 RMB’000 RMB’000 Due from related parties: Directors: Mr. Cheng...... — 30,231 — — Mr. Chen ...... 589 2,593 — — Companies controlled by: Mr.Wong...... 2,688 20,606 — — Mr. Chen ...... — 676 — — Mr. Cheng...... — 22 — — Jointly-controlled entities...... 11,728 11,719 — — An associate...... 157,804 60,222 — — Due from the immediate holding company. — — — 9

172,809 126,069 — 9

Due to related parties: Director: Mr.Wong...... 196 258,960 — — Companies controlled by Mr. Wong ..... — 79,480 — — Jointly-controlled entities...... 142,975 — — — An associate...... 88,095 30,000 — —

231,266 368,440 — —

The balances are non-trade in nature, unsecured, interest-free and are repayable on demand. The carrying amounts of the amounts due from/to related parties approximate to their fair values. Annual Report 2009 — 105

— F-109 — None of the amounts due from related parties is either past due or impaired. The financial assets included in the above balances relate to receivables for which there was no recent history of default.

27. CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

Group

2009 2008

RMB’000 RMB’000 Cash and bank balances ...... 604,805 143,089 Less: Restricted cash (notes) ...... (115,325) (83,410)

Cash and cash equivalents ...... 489,480 59,679

Notes: (a) Pursuant to relevant regulations in the PRC, certain property development companies of the Group are required to place in designated bank accounts certain amounts of pre-sale proceeds of properties as guarantee deposits for the construction of the related properties. The deposits can only be used for purchases of construction materials and payments of the construction fees of the relevant property projects when approval from relevant local government authorities is obtained. At 31 December 2009, such guarantee deposits amounted to RMB1,196,000 (2008: RMB1,459,000). (b) According to a loan facility agreement signed by a subsidiary of the Group with its bank, the relevant subsidiary was required to place the pre-sale proceeds of its properties in specific bank accounts. The deposits could only be used for the payment of property development costs incurred by that subsidiary and the repayment of the respective loan. The relevant loan was repaid during the year and such deposits amounted to RMB6,837,000 as at 31 December 2008. (c) According to the relevant mortgage facility agreements signed by certain subsidiaries of the Group with their banks, the subsidiaries are required to place at designated bank accounts certain amounts as deposits for potential default of mortgage loans advanced to property purchasers. Such guarantee deposits will be released after the property ownership certificate of the relevant property has been passed to the bank. As at 31 December 2009, such deposits amounted to RMB7,706,000 (2008: RMB9,829,000). (d) Pursuant to a management agreement entered into between the Sports Bureau and Straits Sports Centre, the fund advanced by the Sports Bureau and deposited in a designated bank account can only be used for the payments of construction costs and expenditure incurred for the construction of the Facilities. As at 31 December 2009, such deposit amounted to RMB5,830,000 (2008: Nil). (e) In addition to the restrictions as detailed in notes (a), (b), (c) and (d), certain subsidiaries of the Group are also required to place certain amounts as guarantee deposits for public maintenance fund or the use of the loan proceeds which deposited in specific bank accounts are restricted. As at 31 December 2009, the aggregate amount of such deposits was RMB100,593,000 (2008: RMB65,285,000).

At the end of the reporting period, the cash and bank balances of the Group denominated in RMB amounted to RMB482,982,000 (2008: RMB138,161,000). The RMB is not freely convertible into other currencies, however, under Mainland China’s Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, the Group is permitted to exchange RMB for other currencies through banks authorised to conduct foreign exchange business.

28. TRADE PAYABLES

An aged analysis of the trade payables as at the end of the reporting period is as follows:

Group

2009 2008

RMB’000 RMB’000 Within 1 year ...... 299,075 351,960 Over 1 year ...... 8,459 84,618

307,534 436,578

The trade payables are non-interest-bearing and repayable within the normal operating cycle or on demand. Annual Report 2009 — 106

— F-110 — 29. RECEIPTS IN ADVANCE

Receipts in advance represent sales proceeds received from buyers in connection with the Group’s pre-sale of properties during the year.

30. OTHER PAYABLES AND ACCRUALS

Group Company

Notes 2009 2008 2009 2008

RMB’000 RMB’000 RMB’000 RMB’000

Deposits received ...... 130,737 163,499 — — Accruals ...... 13,553 2,636 3,116 176 Due to a minority shareholder of certain subsidiaries ...... (a) 2,960 6,316 — — Advances from minority shareholders of certain subsidiaries ...... (b) 152,361 127,230 — — Considerations payable for the acquisition of subsidiaries and associates ...... — 236,745 — — Other payables...... 189,726 84,195 2,464 —

489,337 620,621 5,580 176 Non-current portion ...... (2,240) (2,479) — —

Current portion ...... 487,097 618,142 5,580 176

Notes: (a) The balances are secured by certain equity interests of the Group’s subsidiaries. The balances are interest-free, except for an amount of RMB2,960,000 at 31 December 2009 (2008: RMB3,440,000) which bore interest at 5.31% per annum, and are repayable in accordance with the terms of the relevant subcontracting and share transfer agreements. (b) The balances are unsecured, interest-free and repayable on demand.

The carrying amounts of other liabilities and the balances with minority shareholders of certain subsidiaries approximate to their fair values.

31. INTEREST-BEARING BANK AND OTHER BORROWINGS

2009 2008

Contractual Contractual interest interest rate (%) rate (%) per annum Maturity RMB’000 per annum Maturity RMB’000

Current Bank loans - secured...... 5.04-6.05 2010 555,000 6.62-10.00 2009 793,500 Current portion of long term bank loans - secured ...... 2.50-6.53 2010 12,037 2.50-8.32 2009 15,318 Loans from companies controlled by Mr. Wong - unsecured.... — 2.95-8.22 2009 200,607

567,037 1,009,425

Non-current Bank loans - secured...... 2.50-6.53 2011-2028 1,539,028 2.50-8.75 2010-2028 344,493

1,539,028 344,493

2,106,065 1,353,918

Annual Report 2009 — 107

— F-111 — 2009 2008

RMB’000 RMB’000 Analysed into: Bank loans repayable: Within one year or on demand ...... 567,037 808,818 In the second year ...... 360,330 14,123 In the third to fifth years, inclusive ...... 1,171,059 318,132 In the sixth to tenth years, inclusive ...... 7,639 12,238

2,106,065 1,153,311

Loans from companies controlled by Mr. Wong repayable within one year ...... — 200,607

Notes: (a) Certain of the Group’s bank loans are secured by the Group’s buildings, investment properties, prepaid land lease payments, properties under development and completed properties held for sale, details of which are disclosed in note 38. (b) At 31 December 2009, Mr. Wong, a family member of Mr. Wong and a company controlled by Mr. Chen provided guarantees aggregating to RMB17,804,000 (2008: RMB226,304,000) in respect of the Group’s bank loans. (c) Except for certain secured bank loans of RMB8,378,000 (2008: RMB8,683,000) as at 31 December 2009 and certain other loans of RMB8,804,000 as at 31 December 2008, which are denominated in Hong Kong dollars, all of the Group’s secured and unsecured borrowings are denominated in RMB. (d) Except for certain short term bank loans of RMB545,000,000 (2008: RMB180,000,000) as at 31 December 2009 and certain short term other loans of RMB15,000,000 as at 31 December 2008 , the interest rates of which were fixed in nature, all borrowings bear interest at floating interest rates. The carrying amounts of the Group’s bank and other borrowings approximate to their fair values.

32. DEFERRED TAX

The movements in deferred tax liabilities and assets during the year are as follows:

Deferred tax liabilities

Group

Revaluation on investment properties

RMB’000 At 1 January 2008 ...... 51,545 Disposal of a subsidiary (note 36(c)) ...... (42) Deferred tax charged to profit or loss of the consolidated statement of comprehensive income during the year ...... 52,841

At 31 December 2008 and 1 January 2009 ...... 104,344 Deferred tax charged to profit or loss of the consolidated statement of comprehensive income during the year ...... 92,903

At 31 December 2009 ...... 197,247

Annual Report 2009 — 108

— F-112 — Deferred tax assets

Group

Unrealised profits arising from intra-group Provision of transactions LAT Tax losses Total

RMB’000 RMB’000 RMB’000 RMB’000 At 1 January 2008 ...... — 3,180 22,907 26,087 Credited/(charged) to profit or loss of the consolidated statement of comprehensive income during the year ...... 6,928 (3,115) 9,027 12,840

At 31 December 2008 and 1 January 2009 .... 6,928 65 31,934 38,927 Acquisition of subsidiaries that are not a business (note 36(a)) ...... — — 35,062 35,062 Credited/(charged) to profit or loss of the consolidated statement of comprehensive income during the year ...... 13,374 10,684 (4,849) 19,209

At 31 December 2009 ...... 20,302 10,749 62,147 93,198

For presentation purposes, certain deferred tax assets and liabilities have been offset in the consolidated statement of financial position. The following is an analysis of the deferred tax balances of the Group for financial reporting purposes:

2009 2008

RMB’000 RMB’000 Net deferred tax assets recognised in the consolidated statement of financial position ...... 82,449 20,808

Net deferred tax liabilities recognised in the consolidated statement of financial position ...... 186,498 86,225

At 31 December 2009, the Group has unutilised tax losses arising in the PRC of RMB274,755,000 (2008: RMB149,492,000) that can be carried forward for five years from the year in which the losses arose for offsetting against future taxable profits of the tax entity in which the losses arose. Deferred tax assets are recognised for tax losses carried forward only to the extent that the realisation of the related benefits through the future taxable profits is probable. At 31 December 2009, the Group did not recognise deferred tax assets arising in the PRC in respect of unutilised tax losses of RMB35,837,000 (2008: RMB17,294,000) due to the unpredictability of future profit streams.

Pursuant to the New CIT Law, a 10% withholding tax is levied on dividends declared to foreign investors from the foreign investment enterprises established in the PRC. The requirement became effective from 1 January 2008 and applies to earnings after 31 December 2007. A lower withholding tax rate may be applied if there is a tax treaty between Mainland China and the jurisdiction of the foreign investors. The Group is therefore liable to withholding taxes on dividends distributed by those subsidiaries, jointly-controlled entities and associates established in the PRC in respect of earnings generated from 1 January 2008.

At 31 December 2009, no deferred tax has been recognised for withholding taxes that would be payable on the unremitted earnings that are subject to withholding taxes of the Group’s subsidiaries, jointly-controlled entities and associates established in the PRC. In the opinion of the directors, it is not probable that these subsidiaries, jointly-controlled entities and associates will distribute such earnings in the foreseeable future. The aggregate amounts of temporary differences associated with investments in subsidiaries, jointly-controlled entities and associates in the PRC for which deferred tax liabilities have not been recognised totalled RMB62,379,000 at 31 December 2009 (2008: RMB11,778,000).

Annual Report 2009 — 109

— F-113 — 33. PROVISION FOR MAJOR OVERHAULS

The movements in the provision for the major overhauls of the Facilities for the year are as follows:

2009 2008

RMB’000 RMB’000 At beginning of year ...... — — Acquisition of subsidiaries that are not a business (note 36(a)) ..... 2,888 — Additional provisions ...... 880 — Increase in a discounted amount arising from the passage of time (note 7) ...... 32 —

At end of year ...... 3,800 —

34. SHARE CAPITAL

2009 2008

HK$ HK$ Authorised: 3,000,000 (2008: 3,000,000) ordinary shares of HK$0.10 each . . . 300,000 300,000

Issued and fully paid: 112,660 (2008: 100,000) ordinary shares of HK$0.10 each ...... 11,266 10,000

Equivalent to RMB’000 ...... 11 10

On 21 August 2009, the Company entered into a subscription agreement (the “Subscription Agreement”) with certain investors for the subscription of 12,660 ordinary shares of the Company, representing 11.237% of the entire share capital of the Company on a fully diluted basis immediately following the completion of the Subscription Agreement, for an aggregate consideration of approximately HK$775 million (equivalent to approximately RMB683 million). The Subscription Agreement was completed on 28 August 2009.

A summary of the transactions during the year with reference to the above movement in the Company’s issued share capital is as follows:

RMB Equivalent

Number of Share Share shares in Issued premium Issued premium issue capital account Total capital account Total

HK$’000 HK$’000 HK$’000 RMB’000 RMB’000 RMB’000 At 1 January 2008, 31 December 2008, 1 January 2009...... 100,000 10 — 10 10 — 10 Issue of shares ...... 12,660 1 775,382 775,383 1 682,675 682,676

112,660 11 775,382 775,393 11 682,675 682,686 Share issue expenses ...... — — (780) (780) — (687) (687)

At 31 December 2009...... 112,660 11 774,602 774,613 11 681,988 681,999

Annual Report 2009 — 110

— F-114 — Share options

At the special general meeting held on 6 January 2010, the Company adopted a share option scheme (the “Scheme”). Employees (including directors) of the Group are included in the eligible participants under the Scheme. A total of 285,320,000 shares will be available for issue under the Scheme, which represented 10% of the aggregate of the shares in issue on the date the shares of the Company commence trading on the Stock Exchange. Each participant cannot be entitled to more than 1% of the total number of shares in issue in any 12-month period. The option shall expire, in any event, not later than 10 years from the date of grant of the option subject to the provision for early termination set out in the Scheme. The Scheme remains in force until 5 January 2020. No option has been granted under the Scheme since the adoption of the Scheme.

35. RESERVES

(a) Group

The amounts of the Group’s reserves and the movements therein for the year are presented in the consolidated statement of changes in equity on page 48 of the financial statements.

(b) Capital reserve

Capital reserve represents the difference between the amounts of consideration and the carrying values of minority interests acquired or disposed of.

(d) Merger reserve

The merger reserve represents the excess of the Company’s share of the nominal value of the paid-up capital of the subsidiaries acquired over the Company’s cost of acquisition of the subsidiaries under common control upon the group reorganisation completed in December 2007.

(e) Company

Share Exchange premium fluctuation Accumulated Note account reserve losses Total

RMB’000 RMB’000 RMB’000 RMB’000

At 1 January 2008 ...... — 329 (8,222) (7,893) Total comprehensive income/(loss) for the year .... — 466 (56) 410

At 31 December 2008 ...... — 795 (8,278) (7,483)

Total comprehensive income/(loss) for the year .... — 12 (12,113) (12,101) Issue of shares ...... 34 682,675 — — 682,675 Share issue expenses ...... 34 (687) — — (687)

At 31 December 2009 ...... 681,988 807 (20,391) 662,404

Annual Report 2009 — 111

— F-115 — 36. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS

(a) Acquisition of subsidiaries that are not a business

Year ended 31 December 2009

On 15 September 2009, the Group entered into a share transfer agreement with the then existing shareholders of Fujian Straits West-Coast Investment Co., Ltd. (“Haixi Investment”), who were independent third parties, for the acquisition of a 58% equity interest in Haixi Investment at a total consideration of RMB859,400,000. This acquisition has been accounted for as an acquisition of assets as the major assets of Haixi Investment and its subsidiary (collectively the “Haixi Group”) are five parcels of land in Quanzhou, the PRC, and no property development and pre-sale activities were being carried out by the Haixi Group at the date of acquisition. The acquisition was completed on 22 September 2009.

This acquisition has been accounted for by the Group as an acquisition of assets as the entities acquired by the Group do not constitute a business.

The aggregate net assets acquired by the Group in the above transaction, are as follows:

RMB’000

Net assets acquired: Property and equipment (note 15) ...... 8,729 Prepaid land lease payments (note 17) ...... 1,153,107 Properties under development ...... 299,784 Intangible asset (note 18) ...... 4,861 Deferred tax assets (note 32) ...... 35,062 Prepayments, deposits and other receivables ...... 487,789 Restricted cash ...... 172,159 Cash and bank balances ...... 2,293 Trade and other payables ...... (246,274) Tax payable ...... (2,922) Interest-bearing bank loans...... (430,000) Provision for major overhauls (note 33) ...... (2,888)

Net assets ...... 1,481,700 Minority interests ...... (622,300)

859,400

Total consideration satisfied by: Cash ...... 859,400

Net cash outflow arising on acquisition: Cash and bank balances acquired ...... 2,293 Cash consideration paid ...... (859,400)

(857,107)

(b) Business combination

Year ended 31 December 2008

(i) On 21 August 2008, the Group acquired the entire share capital of Sourceup International Limited (“Sourceup”) from Mr. Huang Jiaxi at a consideration of US$100. The acquisition was completed on 21 August 2008 and Sourceup then became a wholly-owned subsidiary of the Group. Sourceup and its subsidiaries (collectively the “Sourceup Group”) are principally engaged in the provision of property management services in Beijing.

(ii) On 4 August 2008, the Group acquired the entire equity interest of Quanzhou Cippon Property Management Co., Ltd. (“Quanzhou Cippon”) from an independent third party at a cash consideration of RMB1,000,000. The acquisition was completed on 22 August 2008 and Quanzhou Cippon then became a wholly-owned subsidiary of the Group. Quanzhou Cippon is principally engaged in the provision of property management services. Annual Report 2009 — 112

— F-116 — The fair values of the identifiable assets and liabilities of the Sourceup Group and Quanzhou Cippon as at the dates of acquisition approximated to their corresponding carrying amounts immediately before the acquisition and were as follows:

Fair value recognised on Previous acquisition carrying amount

RMB’000 RMB’000 Property and equipment (note 15) ...... 16 16 Prepayments, deposits and other receivables ...... 50,420 50,420 Due from related parties ...... 597 597 Due to a director ...... (45,452) (45,452) Cash and bank balances ...... 417 417 Other payables and accruals ...... (451) (451) Tax payable ...... (19) (19)

5,528 5,528

Excess over the cost of business combination recognised in profit or loss of the consolidated statement of comprehensive income ...... (4,527)

Satisfied by cash ...... 1,001

An analysis of the net outflow of cash and cash equivalents in respect of the acquisition of subsidiaries is as follows:

RMB’000

Cash and bank balances acquired ...... 417 Cash consideration paid ...... (1,001)

Net outflow of cash and cash equivalents in respect of the acquisition of subsidiaries ...... (584)

The results of the subsidiaries acquired in the year ended 31 December 2008 had no significant impact on the Group’s consolidated turnover or profit for that year.

Year ended 31 December 2008

On 9 July 2008, the Group entered into a share transfer agreement with an independent third party for the disposal of Xiamen Hengjun Property Co., Ltd. (“Hengjun”), a wholly-owned subsidiary of the Group, for a consideration of RMB2,288,000. Hongjun is principally engaged in property investment and management businesses. The disposal was completed on 9 July 2008.

Annual Report 2009 — 113

— F-117 — Details of the net assets disposed of under the above share transfer agreement and their financial impacts are summarised below:

RMB’000

Net assets disposed of: Investment properties (note 16) ...... 800 Prepayments, deposits and other receivables ...... 29 Trade receivables ...... 374 Due from related parties...... 1,000 Cash and bank balances ...... 438 Other payables and accruals ...... (108) Tax payable ...... (45) Deferred tax liabilities (note 32) ...... (42)

2,446 Loss on disposal ...... (158)

Satisfied by cash ...... 2,288

An analysis of the net inflow of cash and cash equivalents in respect of the disposal of this subsidiary is as follows:

RMB’000

Cash consideration ...... 2,288 Cash and bank balances disposed of ...... (438)

Net inflow of cash and cash equivalents in respect of the disposal of a subsidiary . . 1,850

37. CONTINGENT LIABILITIES

At the end of the reporting period, contingent liabilities not provided for in the financial statements were as follows:

Notes 2009 2008

RMB’000 RMB’000 Guarantees in respect of mortgage facilities provided for certain purchasers of the Group’s properties ...... (a) 879,213 504,211

Guarantees given to banks in connection with facilities granted to companies controlled by Mr. Wong...... (b) — 255,500

Notes: (a) As at 31 December 2009, the Group provided guarantees in respect of mortgage facilities granted by certain banks relating to the mortgage loans arranged for certain purchasers of the Group’s properties. Pursuant to the terms of the guarantees, upon default on mortgage payments by these purchasers before the expiry of the guarantees, the Group is responsible for repaying the outstanding mortgage principals together with the accrued interest and penalties owed by the defaulted purchasers to the banks.

The fair value of the guarantees is not significant and the directors of the Company consider that in the case of default on payments, the net realisable value of the related properties can cover the repayment of the outstanding mortgage principals together with the accrued interest and penalties and therefore no provision has been made in the financial statements for the guarantees. Annual Report 2009 — 114

— F-118 — (b) The fair value of the guarantees is not significant and the directors of the Company consider that the risk of default in payment is remote, and therefore no provision for the guarantees has been made in the financial statements.

In addition, the Group’s share of the jointly-controlled entities’ and associates’ own financial guarantees which are not included in the above, is as follows:

2009 2008

RMB’000 RMB’000 Guarantees in respect of mortgage facilities provided for certain purchasers of the jointly-controlled entities’ properties ...... 339,245 59,614

Guarantees in respect of mortgage facilities provided for certain purchasers of the associates’ properties ...... 27,867 —

38. PLEDGE OF ASSETS

At the end of the reporting period, the following assets of the Group were pledged to certain banks for securing the loans granted to the Group:

2009 2008

RMB’000 RMB’000 Property and equipment (note 15) ...... 52,454 28,310 Investment properties (note 16) ...... 1,296,000 838,672 Prepaid land lease payments (note 17) ...... 1,132,399 230,385 Properties under development (note 19) ...... 1,928,086 674,896 Completed properties held for sale (note 23) ...... 3,488 607,862

4,412,427 2,380,125

39. OPERATING LEASE ARRANGEMENTS

(a) As lessor

The Group leases its investment properties (note 16) under operating lease arrangements, with leases negotiated for terms ranging from one to ten years. The terms of the leases generally also require the tenants to pay security deposits and provide for periodic rent adjustments according to the then prevailing market conditions.

At 31 December 2009, the Group had total future minimum lease receivables under non-cancellable operating leases with its tenants falling due as follows:

2009 2008

RMB’000 RMB’000 Within one year ...... 8,980 1,458 In the second to fifth years, inclusive...... 134 134 After five years ...... 101 118

9,215 1,710

Annual Report 2009 — 115

— F-119 — (b) As lessee

The Group leases certain of its office properties under operating lease arrangements. Leases for properties are negotiated for terms ranging from one to ten years.

At 31 December 2009, the Group had total future minimum lease payments under non-cancellable operating leases falling due as follows:

2009 2008

RMB’000 RMB’000 Within one year ...... 1,115 695 In the second to fifth years, inclusive...... 3,119 — After five years ...... 1,430 —

5,664 695

40. COMMITMENTS

In addition to the operating lease commitments detailed in note 39(b) above, the Group had the following capital commitments at the end of the reporting period:

2009 2008

RMB’000 RMB’000 Contracted, but not provided for: Capital expenditure for properties under development, completed properties held for sale and construction of investment and owner-occupied properties in Mainland China ...... 1,332,476 1,110,644

In addition, the Group’s share of the jointly-controlled entities’ own capital commitments which are not included in the above, is as follows:

2009 2008

RMB’000 RMB’000 Contracted, but not provided for: Capital expenditure for jointly-controlled entities’ properties under development ...... 9,564 52,205

At the end of the reporting period, the Company did not have any significant commitments.

41. RELATED PARTY TRANSACTIONS

(a) In addition to the transactions and balances detailed in notes 26, 30 and 31 to the financial statements, the Group had the following material transactions with related parties during the year:

Notes 2009 2008

RMB’000 RMB’000

Sale of properties to: Directors ...... (i) 1,171 — Family members of the directors...... (i) 3,910 4,319 Rental income from companies controlled by Mr. Wong ...... (ii) 1,633 1,283 Property management fee income from companies controlled by Mr. Wong...... (ii) 246 220 Interest expenses on loans from companies controlled by Mr. Wong ...... (iii) 25,021 16,890 Sales agency fees paid to an associate...... (iv) 13,267 —

Annual Report 2009 — 116

— F-120 — Notes: (i) The properties were sold at prices mutually agreed by both parties.

(ii) Terms on the rental and management fee income of office premises were mutually agreed between both parties.

(iii) The interest expenses were charged at rates ranging from 2.68% to 5.40% (2008: from 2.36% to 8.22%) per annum.

(iv) The sales agency fees were charged at rates ranging from 1.1% to 1.3% of the selling price of the relevant properties sold.

(b) During the year, the Group provided financial guarantees with an aggregate amount of RMB75,000,000 (2008: RMB135,500,000) to certain banks for securing the loan facilities granted to certain companies controlled by Mr. Wong. Further details of the financial guarantees provided to related parties at the end of the reporting period are disclosed in note 37 to the financial statements.

(c) In the opinion of the directors, the directors of the Company represent the key management personnel of the Group. Further details of the compensation of key management personnel of the Group are set out in note 9 to the financial statements.

Except for items (a)(iv) and (c), the above also constitute connected transactions or continuing connected transactions as defined in Chapter 14A of the Listing Rules.

42. FINANCIAL INSTRUMENTS BY CATEGORY

All financial assets and liabilities of the Company and the Group as at 31 December 2009 and 2008 are loans and receivables and financial liabilities stated at amortised cost, respectively.

43. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

It is, and has been throughout the year under review, the Group’s policy that no trading in financial instruments shall be undertaken.

The main risks arising from the Group’s financial instruments are market risk, interest rate risk, foreign currency risk, credit risk and liquidity risk. The board of directors reviews and agrees policies for managing each of these risks and they are summarised below.

Market risk

Interest rate risk

The Group’s income and operating cash flows are substantially independent of changes in market interest rates. Other than deposits held at banks, the Group does not have significant interest-bearing assets. Restricted deposits were held at banks in the PRC at the same saving rate of unrestricted deposits throughout the year. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s bank borrowings with floating interest rates. The Group has not used any interest rate swaps to hedge its exposure to interest rate risk, and will consider hedging significant interest rate risk should the need arise.

Annual Report 2009 — 117

— F-121 — The following table demonstrates the sensitivity at the end of the reporting period to a reasonably possible change in interest rates, with all other variables held constant, of the Group’s profit before tax. There is no material impact on other components of the Group’s equity.

Increase/ (decrease) in Effect on profit basis points before tax

RMB’000 2009 RMB...... 150 (23,263) HK$...... 150 (126) RMB...... (150) 23,263 HK$...... (150) 126 2008 RMB...... 150 (12,986) HK$...... 150 (260) RMB...... (150) 12,986 HK$...... (150) 260

Foreign currency risk

The Group’s financial assets and liabilities including certain amounts due from/(to) related parties denominated in Hong Kong dollars (“HK$”) and certain short term deposits denominated in HK$ and the United States dollars (“US$”) are subject to foreign currency risk. Therefore, the fluctuations in the exchange rates of RMB against foreign currencies could affect the Group’s results of operations.

Annual Report 2009 — 118

— F-122 — The following table demonstrates the sensitivity at the end of the reporting period to a reasonably possible change in RMB exchange rates against HK$ and US$, with all other variables held constant, of the Group’s profit before tax.

Increase/ (decrease) in Effect on profit exchange rate before tax

RMB’000 2009 If US$ weakens against RMB ...... 10% (7,790) If US$ strengthens against RMB ...... (10%) 7,790

2008 If US$ weakens against RMB ...... 10% (36) If US$ strengthens against RMB ...... (10%) 36

Credit risk

It is the Group’s policy that all customers are required to pay deposits in advance of the purchase of properties. In addition, the Group does not have any significant credit risk as the credit given to any individual or corporate entity is not significant. The Group performs appropriate and sufficient credit verification procedures for every credit sale transaction to minimise credit risk. Customers are required to pay for any remaining balance within a three-month-period after the effective date of the sales and purchase agreement. There is no significant concentration of credit risk within the Group.

The Group has arranged bank financing for certain purchasers of property units and provided guarantees to secure obligation of such purchasers for repayments. Detailed disclosure of these guarantees is made in note 37.

The credit risk of the Group’s other financial assets, which mainly comprise cash and short term deposits, other receivables and amounts due from related parties, arises from default of the counterparty, with a maximum exposure equal to the carrying amounts of these instruments.

Liquidity risk

Due to the capital intensive nature of the Group’s business, the Group ensures that it maintains sufficient cash and credit lines to meet its liquidity requirements. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans. In the opinion of the directors of the Company, most of the borrowings that mature within one year are able to renew and the Group expects to have adequate sources of funding to finance the Group and manage the liquidity position.

Annual Report 2009 — 119

— F-123 — The maturity profile of the Group’s financial liabilities as at the end of the reporting period, based on the contractual undiscounted payments, was as follows:

Group

2009

In the In the third sixth to Within one In the to fifth tenth year or on second years, years, demand year inclusive inclusive Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Interest-bearing bank and other borrowings ...... 673,533 439,638 1,230,863 12,936 2,356,970 Trade payables...... 307,319 215 — — 307,534 Financial liabilities included in other payables and accruals ...... 342,807 2,240 — — 345,047 Due to related parties ...... 231,266 — — — 231,266

1,554,925 442,093 1,230,863 12,936 3,240,817

Financial guarantees issued: Maximum amount guaranteed ...... 879,213 — — — 879,213

2008 In the In the third sixth to Within one In the to fifth tenth year or on second years, years, demand year inclusive inclusive Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Interest-bearing bank and other borrowings ...... 1,075,772 36,568 341,365 15,069 1,468,774 Trade payables...... 429,722 6,856 — — 436,578 Financial liabilities included in other payables and accruals ...... 430,300 21,946 2,240 — 454,486 Due to related parties ...... 368,440 — — — 368,440 2,304,234 65,370 343,605 15,069 2,728,278

Financial guarantees issued: Maximum amount guaranteed ...... 759,711 — — — 759,711

Capital management

The primary objectives of the Group’s capital management are to safeguard the Group’s ability to continue as a going concern and to maintain healthy capital ratios in order to provide support to its business and maximise shareholders’ value.

The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. No changes were made in the objectives, policies or processes for managing capital during the years ended 31 December 2009 and 31 December 2008.

The Group monitors capital using a net gearing ratio, which is net debt divided by the total equity. Net debt is calculated as total interest-bearing bank and other borrowings (as shown in the consolidated statement of financial position) less cash and cash equivalents (including restricted cash). Capital comprises all components of equity (i.e., share capital, minority interests and reserves). The Group aims to maintain a healthy and stable net gearing ratio.

Annual Report 2009 — 120

— F-124 — The gearing ratios as at 31 December 2009 and 2008 were as follows:

2009 2008

RMB’000 RMB’000 Interest-bearing bank and other borrowings (note 31) ...... 2,106,065 1,353,918 Less: Cash and bank balances (note 27) ...... (604,805) (143,089)

Net debt ...... 1,501,260 1,210,829

Total equity...... 2,312,226 573,927 Gearing ratio ...... 64.9% 211.0%

44. EVENTS AFTER THE REPORTING PERIOD

(a) Pursuant to a written resolution of shareholders of the Company passed on 6 January 2010, the authorised share capital of the Company was increased from HK$300,000 to HK$1,000,000,000 divided into 10,000,000,000 shares by the creation of 9,997,000,000 additional shares of HK$0.10 each, ranking pari passu in all respects with the existing share capital of the Company and the directors were conditionally authorised to issue and allot 2,253,087,340 shares at par as fully paid to the shareholders whose names appeared on the register of the members of the Company on 1 January 2010 by way of capitalisation of a sum of HK$225,308,734 which was then standing to the credit of the share premium account of the Company.

(b) On 5 February 2010, the Company’s shares were listed on the Stock Exchange and the Company issued 600,000,000 new ordinary shares of HK$0.10 each at HK$2.60 per share, raising gross proceeds of HK$1,560,000,000.

45. APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue of by the board of directors on 15 April 2010.

Annual Report 2009 — 121

— F-125 — REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION To the board of directors of China SCE Property Holdings Limited (Incorporated in the Cayman Islands with limited liability)

Introduction

We have reviewed the interim financial information of China SCE Property Holdings Limited (the “Company”) and its subsidiaries (collectively the “Group”) set out on pages F-127 to F-142, which comprises the condensed consolidated statement of financial position as at 30 September 2010 and the related condensed consolidated statements of comprehensive income, changes in equity and cash flows for the nine-month period then ended and explanatory notes.

The directors are responsible for the preparation and presentation of this interim financial information in accordance with Hong Kong Accounting Standard 34 Interim Financial Reporting (“HKAS 34”) issued by the Hong Kong Institute of Certified Public Accountants. Our responsibility is to express a conclusion on this interim financial information based on our review. Our report is made solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Scope of review

We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Hong Kong Institute of Certified Public Accountants. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing. Consequently, it does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Base on our review, nothing has come to our attention that causes us to believe that the interim financial information is not prepared, in all material respects, in accordance with HKAS 34.

Ernst & Young Certified Public Accountants 18th Floor, Two International Finance Centre 8 Finance Street, Central Hong Kong

7 January 2011

— F-126 — CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the nine months ended 30 September 2010

For the nine months ended 30 September

Notes 2010 2009

(Unaudited) (Audited) RMB’000 RMB’000 REVENUE ...... 4 2,102,663 550,102 Cost of sales ...... (1,084,626) (284,642)

Gross profit ...... 1,018,037 265,460 Other income and gains ...... 4 15,172 13,739 Changes in fair value of investment properties ...... 15,000 222,836 Selling and marketing expenses ...... (58,771) (22,846) Administrative expenses...... (132,884) (53,891) Finance costs ...... 5 (4,026) (2,368) Share of profits and losses of: Jointly-controlled entities ...... 87,791 2,002 Associates...... 34,465 (3,317) PROFIT BEFORE TAX...... 6 974,784 421,615

Income tax expense...... 7 (402,032) (147,883) PROFIT FOR THE PERIOD...... 572,752 273,732

OTHER COMPREHENSIVE INCOME/(LOSS): Share of other comprehensive income of jointly-controlled entities ...... 123 5 Share of other comprehensive income of associates...... 2,304 — Exchange differences on translation of foreign operations ...... (3,722) (6,975) OTHER COMPREHENSIVE LOSS FOR THE PERIOD ...... (1,295) (6,970) TOTAL COMPREHENSIVE INCOME FOR THE PERIOD...... 571,457 266,762

Profit/(loss) attributable to: Owners of the parent...... 603,923 276,994 Non-controlling interests ...... (31,171) (3,262) 572,752 273,732

Total comprehensive income/(loss) attributable to: Owners of the parent...... 599,802 270,055 Non-controlling interests ...... (28,345) (3,293) 571,457 266,762

EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT...... 9 RMB RMB Basic and diluted...... 21.8 cents 15.8 cents

Details of the dividend declared and paid for the period are disclosed in note 8 to the unaudited interim condensed consolidated financial statements.

— F-127 — CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION 30 September 2010

30 September 31 December Notes 2010 2009 (Unaudited) (Audited) RMB’000 RMB’000 NON-CURRENT ASSETS Property and equipment ...... 10 106,220 76,279 Investment properties...... 1,311,000 1,296,000 Prepaid land lease payments ...... 2,199,259 2,170,371 Intangible asset ...... 4,694 4,819 Properties under development...... 10 350,114 354,620 Contract in progress ...... 24,025 — Interests in jointly-controlled entities ...... 133,898 156,218 Interests in associates ...... 42,898 6,128 Prepayments and deposit...... 923,068 154,976 Deferred tax assets...... 92,506 82,449 Total non-current assets...... 5,187,682 4,301,860 CURRENT ASSETS Properties under development...... 10 4,017,453 2,052,276 Completed properties held for sale...... 59,786 1,131,664 Trade receivables ...... 11 25,052 22,144 Prepayments, deposits and other receivables ...... 302,810 326,140 Due from related parties ...... 204,611 172,809 Tax recoverable ...... 107,187 93,796 Restricted cash...... 118,332 115,325 Cash and cash equivalents ...... 1,067,294 489,480 Total current assets ...... 5,902,525 4,403,634 CURRENT LIABILITIES Trade payables ...... 12 457,816 307,534 Receipts in advance...... 2,720,500 2,994,693 Other payables and accruals...... 486,444 487,097 Interest-bearing bank and other borrowings...... 13 639,249 567,037 Due to related parties ...... 98,705 231,266 Tax payable ...... 419,854 74,075 Total current liabilities ...... 4,822,568 4,661,702 NET CURRENT ASSETS/(LIABILITIES) ...... 1,079,957 (258,068) TOTAL ASSETS LESS CURRENT LIABILITIES ...... 6,267,639 4,043,792 NON-CURRENT LIABILITIES Other payables ...... 4,998 2,240 Interest-bearing bank and other borrowings...... 13 1,771,477 1,539,028 Deferred tax liabilities ...... 151,264 186,498 Provision for major overhauls...... 6,686 3,800 Total non-current liabilities ...... 1,934,425 1,731,566 Net assets ...... 4,333,214 2,312,226 EQUITY Equity attributable to owners of the parent Issued capital ...... 14 250,683 11 Reserves ...... 3,061,216 1,509,364 3,311,899 1,509,375 Non-controlling interests ...... 1,021,315 802,851 Total equity ...... 4,333,214 2,312,226

— F-128 — CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the nine months ended 30 September 2010

Attributable to owners of the parent

Share Statutory Exchange Non- Issued premium Capital surplus Merger Other fluctuation Retained controlling Total capital account reserve reserve reserve reserves reserve profits Total interests equity

(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 At 1 January 2010...... 11 681,988* 5,693* 72,759* 30* 3,511* 70,093* 675,290* 1,509,375 802,851 2,312,226 Total comprehensive income for the period...... —————2,427 (6,548) 603,923 599,802 (28,345) 571,457 Capital contribution from non-controlling shareholders . —————————285,832 285,832 Capitalisation of share -2 — F-129 — premium ...... 197,956 (197,956) ————————— Issue of shares ...... 52,716 1,317,900 ——————1,370,616 — 1,370,616 Share issue expenses ...... — (52,233) ——————(52,233) — (52,233) Interim 2010 dividend (Note 8) . ———————(99,814) (99,814) — (99,814) Acquisition of non-controlling interests ...... — — (15,847) —————(15,847) (39,023) (54,870)

At 30 September 2010...... 250,683 1,749,699* (10,154)* 72,759* 30* 5,938* 63,545* 1,179,399* 3,311,899 1,021,315 4,333,214

* These reserve accounts comprise the consolidated reserves of RMB3,061,216,000 (31 December 2009: RMB1,509,364,000) in the condensed consolidated statement of financial position. CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED) For the nine months ended 30 September 2009

Attributable to owners of the parent

(Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 At 1 January 2009...... 10 — 3,463 54,135 30 3,499 75,886 320,480 457,503 116,424 573,927 Total comprehensive income for the period...... ————— 5(6,944) 276,994 270,055 (3,293) 266,762 Issue of shares ...... 1 682,288 ——————682,289 — 682,289 Deregistration of subsidiaries ... — — — (10,270) — — — 10,270 — — —

-3 — F-130 — Acquisition of subsidiaries that are not a business...... —————————622,300 622,300 Partial disposal of an interest in a subsidiary...... — — 2,230 —————2,230 75,870 78,100

At 30 September 2009...... 11 682,288 5,693 43,865 30 3,504 68,942 607,744 1,412,077 811,301 2,223,378 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS For the nine months ended 30 September 2010

For the nine months ended 30 September

2010 2009

(Unaudited) (Audited) RMB’000 RMB’000 NET CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES ...... (980,750) 459,038 NET CASH FLOWS USED IN INVESTING ACTIVITIES...... (242,837) (765,830) NET CASH FLOWS FROM FINANCING ACTIVITIES ...... 1,803,813 652,696

NET INCREASE IN CASH AND CASH EQUIVALENTS ...... 580,226 345,904 Cash and cash equivalents at beginning of period ...... 489,480 59,679 Effect of foreign exchange rate changes, net ...... (2,412) (3)

CASH AND CASH EQUIVALENTS AT END OF PERIOD...... 1,067,294 405,580

— F-131 — NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 30 September 2010

1. CORPORATE INFORMATION

China SCE Property Holdings Limited (the “Company”) was incorporated in the Cayman Islands as an exempted company with limited liability and whose shares are publicly traded on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). The principal activities of the Company and its subsidiaries (collectively the “Group”) are described in note 3 to the unaudited interim condensed consolidated financial statements.

2. PRINCIPAL ACCOUNTING POLICIES

The unaudited interim condensed consolidated financial statements of the Group have been prepared in accordance with Hong Kong Accounting Standard (“HKAS”) 34 Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

The unaudited interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group’s annual financial statements for the year ended 31 December 2009.

The accounting policies and basis of preparation adopted in the preparation of these unaudited interim condensed consolidated financial statements are consistent with those used in the preparation of the Group’s annual financial statements for the year ended 31 December 2009 and in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) (which include all Hong Kong Financial Reporting Standards, HKASs, and Interpretations) issued by the HKICPA, except that the Group has in the current period applied, for the first time, the following new and revised HKFRSs:

HKFRS 1 (Revised) First-time Adoption of Hong Kong Financial Reporting Standards

HKFRS 1 Amendments Amendments to HKFRS 1 First-time Adoption of Hong Kong Financial Reporting Standards - Additional Exemptions for First-time Adopters

HKFRS 2 Amendments Amendments to HKFRS 2 Share-based Payment - Group Cash-settled Share-based Payment Transactions

HKFRS 3 (Revised) Business Combinations

HKAS 27 (Revised) Consolidated and Separate Financial Statements

HKAS 39 Amendment Amendment to HKAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged Items

HK(IFRIC)-Int 17 Distributions of Non-cash Assets to Owners

Amendments to Amendments to HKFRS 5 Non-current Assets Held for Sale and Discontinued HKFRS 5 included in Operations - Plan to sell the controlling interest in a subsidiary Improvements to HKFRSs issued in October 2008

HK Interpretation 4 Leases - Determination of the Length of Lease Term in respect of Hong Kong (Revised in Land Leases December 2009)

Apart from the above, the Group has also adopted Improvements to HKFRSs* issued by the HKICPA which sets out amendments to a number of HKFRSs primarily with a view to removing inconsistencies and clarifying wording.

* Improvements to HKFRSs contain amendments to HKFRS 2, HKFRS 5, HKFRS 8, HKAS 1, HKAS 7, HKAS 17, HKAS 36, HKAS 38, HKAS 39, HK(IFRIC)-Int 9 and HK(IFRIC)-Int 16.

— F-132 — The adoption of these new interpretations and amendments has had no significant financial effect on these unaudited interim condensed consolidated financial statements and there have been no significant changes to the accounting policies applied in these unaudited interim condensed consolidated financial statements, except for the following:

HKFRS 3 (Revised) Business Combinations and HKAS 27 (Revised) Consolidated and Separate Financial Statements

The Group applies the revised standards from 1 January 2010. HKFRS 3 (Revised) introduces significant changes in the accounting for business combinations occurring after this date. Changes affect the valuation of non-controlling interest, the accounting for transaction costs, the initial recognition and subsequent measurement of a contingent consideration and business combinations achieved in stages. These changes will impact the amount of goodwill recognised, the reported results in the period that an acquisition occurs and future reported results.

HKAS 27 (Revised) requires that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as a transaction with owners in their capacity as owners. Therefore, such transactions will no longer give rise to goodwill, nor will they give rise to gains or losses. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary.

The changes by HKFRS 3 (Revised) and HKAS 27 (Revised) affect acquisitions or loss of control of subsidiaries and transactions with non-controlling interests after 1 January 2010. The change in accounting policy was applied prospectively and had no material impact on earnings per share.

The Group has not early adopted any other standard, interpretation or amendment that was issued but is not yet effective.

3. SEGMENT INFORMATION

The Group is principally engaged in the businesses of property development, property investment, property management and construction operations. For management purposes, the property development, property investment businesses and construction operations are monitored as one operating segment on a project basis to allocate resources and assess performance. For financial reporting purposes, the property management segment combines with the property development and investment segment as its reported revenue, reported results and assets are less than 10% of the consolidated revenue, consolidated profit and consolidated assets of the Group.

The Group’s revenue from external customers from each product or service is set out in note 4 to the unaudited interim condensed consolidated financial statements.

The Group’s revenue from external customers is derived solely from its operations in Mainland China, and the non-current assets of the Group are substantially located in Mainland China.

During the period, no revenue from transactions with a single external customer amounted to 10% or more of the Group’s total revenue.

4. REVENUE, OTHER INCOME AND GAINS

An analysis of the Group’s revenue, other income and gains is as follows:

For the nine months ended 30 September 2010 2009 (Unaudited) (Audited) RMB’000 RMB’000 Revenue Sale of properties...... 2,063,949 535,778 Gross rental income ...... 21,668 8,222 Property management fees...... 17,046 6,102 2,102,663 550,102

Other income and gains Bank interest income...... 5,515 1,881 Gain on disposal of items of property and equipment...... — 5 Foreign exchange gains, net ...... 1,745 7,738 Others ...... 7,912 4,115 15,172 13,739

— F-133 — 5. FINANCE COSTS

An analysis of finance costs is as follows:

For the nine months ended 30 September

2010 2009

(Unaudited) (Audited) RMB’000 RMB’000 Interest on bank loans wholly repayable within five years ...... 94,110 55,666 Interest on bank loans repayable beyond five years...... 707 533 Interest on loans from companies controlled by Mr. Wong Chiu Yeung (“Mr. Wong”)...... — 9,134 Increase in a discounted amount of provision for major overhauls arising from the passage of time...... 128 —

Total interest expense on financial liabilities not at fair value through profit or loss...... 94,945 65,333 Less: Interest capitalised ...... (90,919) (62,965)

4,026 2,368

6. PROFIT BEFORE TAX

The Group’s profit before tax is arrived at after charging:

For the nine months ended 30 September

2010 2009

(Unaudited) (Audited) RMB’000 RMB’000 Cost of properties sold ...... 1,069,392 280,345 Cost of services provided ...... 15,234 4,297 Depreciation* ...... 7,013 5,725 Amortisation of prepaid land lease payments*...... 38,445 12,571 Amortisation of an intangible asset*...... 125 — Employee benefit expense (including directors’ remuneration): Salaries and other staff costs ...... 39,655 15,728 Pension scheme contributions ...... 2,104 663 Less: Amount capitalised ...... (6,786) (3,766)

34,973 12,625

Write-off of items of property and equipment ...... 402 —

* These expenses are included in “Administrative expenses” in profit or loss of the condensed consolidated statement of comprehensive income.

— F-134 — 7. INCOME TAX

No provision for Hong Kong profits tax has been made as the Group did not generate any assessable profits arising in Hong Kong during the period (nine months ended 30 September 2009: Nil). Taxes on profits assessable in Mainland China have been calculated at the rates of tax prevailing in the cities in which the Group’s subsidiaries operate.

For the nine months ended 30 September

2010 2009

(Unaudited) (Audited) RMB’000 RMB’000 Group: Current charge for the period: PRC corporate income tax ...... 215,067 36,565 PRC land appreciation tax ...... 232,256 51,919

447,323 88,484 Deferred...... (45,291) 59,399

Total tax charge for the period...... 402,032 147,883

The share of tax charge during the period attributable to jointly-controlled entities and associates amounting to RMB95,411,000 (nine months ended 30 September 2009: RMB9,912,000) and RMB30,282,000 (nine months ended 30 September 2009: tax credit of RMB299,000), respectively, is included in “Share of profits and losses of jointly-controlled entities and associates” in profit or loss of the condensed consolidated statement of comprehensive income.

8. DIVIDEND

For the nine months ended 30 September

2010 2009

(Unaudited) (Audited) RMB’000 RMB’000 Interim dividend, declared and paid of — HK4 cents (nine months ended 30 September 2009: Nil) per ordinary share...... 99,814 —

9. EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT

The calculation of the basic earnings per share amount is based on the profit for the period attributable to owners of the parent, and the weighted average number of ordinary shares of 2,776,276,923 in issue during the period after taking into consideration of the capitalisation issue upon listing on the Stock Exchange. The weighted average number of ordinary shares in issue for the nine months ended 30 September 2009 has been retrospectively adjusted to 2,031,534,066 for comparison.

No adjustment has been made to the basic earnings per share amounts presented for the nine months ended 30 September 2010 and 2009 in respect of a dilution as the Group had no potentially dilutive ordinary shares in issue during those periods.

10. ADDITIONS TO PROPERTY AND EQUIPMENT AND PROPERTIES UNDER DEVELOPMENT

During the nine months ended 30 September 2010, the Group incurred approximately RMB30,479,000 (nine months ended 30 September 2009: RMB2,079,000) on the acquisition of items of property and equipment.

During the nine months ended 30 September 2010, the Group incurred approximately RMB1,910,733,000 (nine months ended 30 September 2009: RMB222,159,000) on the additions to properties under development.

— F-135 — 11. TRADE RECEIVABLES

The Group’s trade receivables arise from the sale of properties, the leasing of investment properties and the provision of property management services.

Considerations in respect of properties are payable by the purchasers in accordance with the terms of the related sale and purchase agreements. The Group normally requires its customers to make monthly/quarterly payments in advance in relation to the leasing of investment properties and the provision of property management services. The Group generally grants a rent-free period of three months to the lessees of the Group’s investment properties, extending up to six months for major customers.

Since the Group’s trade receivables relate to a number of diversified customers, there is no significant concentration of credit risk. All trade receivables are non-interest-bearing.

The aged analysis of the trade receivables that are not considered to be impaired as at the end of the reporting period is as follows:

30 September 31 December 2010 2009

(Unaudited) (Audited) RMB’000 RMB’000 Neither past due nor impaired...... 15,664 17,281 1 to 6 months past due...... 8,714 2,319 7 to 12 months past due ...... 674 — Over 1 year past due...... — 2,544

25,052 22,144

12. TRADE PAYABLES

An aged analysis of the trade payables as at the end of the reporting period is as follows:

30 September 31 December 2010 2009

(Unaudited) (Audited) RMB’000 RMB’000 Within 1 year...... 444,821 299,075 Over 1 year ...... 12,995 8,459

457,816 307,534

The trade payables are non-interest-bearing and repayable within the normal operating cycle or on demand.

— F-136 — 13. INTEREST-BEARING BANK AND OTHER BORROWINGS

30 September 2010 (Unaudited) 31 December 2009 (Audited)

Contractual Contractual interest rate interest rate (%) per (%) per annum Maturity RMB’000 annum Maturity RMB’000

Current Bank loans - secured ...... 2.50-5.84 2010-2011 610,101 5.04-6.05 2010 555,000 Current portion of long term bank loans - secured ...... 2.50-6.05 2010-2011 29,148 2.50-6.53 2010 12,037

639,249 567,037

Non-current Bank loans - secured ...... 2.50-6.05 2011-2014 1,727,077 2.50-6.53 2011-2028 1,539,028 Other loans - secured ...... 10.00 2012 44,400 —

1,771,477 1,539,028

2,410,726 2,106,065

30 September 31 December 2010 2009

(Unaudited) (Audited) RMB’000 RMB’000 Analysed into: Bank loans repayable: Within one year or on demand ...... 639,249 567,037 In the second year ...... 806,000 360,330 In the third to fifth years, inclusive ...... 921,000 1,171,059 Beyond five years ...... 77 7,639

2,366,326 2,106,065 Other borrowings repayable: In the second year ...... 44,400 —

2,410,726 2,106,065

Notes: (a) Certain of the Group’s bank and other borrowings are secured by the Group’s buildings, investment properties, prepaid land lease payments, properties under development and completed properties held for sale, details of which are disclosed in note 17. (b) Certain of the Group’s bank loans were secured by share charges in respect of the equity interests in subsidiaries of the Group. (c) At 31 December 2009, Mr. Wong and a family member of Mr. Wong provided guarantees totaling to RMB17,804,000 in respect of certain of the Group’s bank loans. At 30 September 2010, all the guarantees were released.

— F-137 — 14. SHARE CAPITAL

30 September 31 December 2010 2009

(Unaudited) (Audited) HK$ HK$ Authorised: 10,000,000,000 (2009: 3,000,000) ordinary shares of HK$0.10 each...... 1,000,000,000 300,000

Issued and fully paid: 2,853,200,000 (2009: 112,660) ordinary shares of HK$0.10 each...... 285,320,000 11,266

Equivalent to RMB’000 ...... 250,683 11

Pursuant to a written resolution of shareholders of the Company passed on 6 January 2010, the authorised share capital of the Company was increased from HK$300,000 to HK$1,000,000,000 divided into 10,000,000,000 shares by the creation of 9,997,000,000 additional shares of HK$0.10 each, ranking pari passu in all respects with the existing share capital of the Company and the directors were conditionally authorised to issue and allot 2,253,087,340 shares at par as fully paid to the shareholders whose names appeared on the register of the members of the Company on 1 January 2010 by way of capitalisation of a sum of HK$225,308,734 which was then standing to the credit of the share premium account of the Company.

On 5 February 2010, the Company’s shares were listed on the Stock Exchange and the Company issued 600,000,000 new ordinary shares of HK$0.10 each at HK$2.60 per share, raising gross proceeds of HK$1,560,000,000.

A summary of the transactions during the period with reference to the above movements in the Company’s issued capital is as follows:

RMB equivalent

Number of Share Share shares in Issued premium Issued premium issue capital account Total capital account Total

HK$’000 HK$’000 HK$’000 RMB’000 RMB’000 RMB’000 At 1 January 2010.... 112,660 11 774,602 774,613 11 681,988 681,999 Capitalisation of share premium (unaudited)...... 2,253,087,340 225,309 (225,309) — 197,956 (197,956) — Issue of shares (unaudited)...... 600,000,000 60,000 1,500,000 1,560,000 52,716 1,317,900 1,370,616 Share issue expenses (unaudited)...... — — (59,468) (59,468) — (52,233) (52,233)

At 30 September 2010 (unaudited) .. 2,853,200,000 285,320 1,989,825 2,275,145 250,683 1,749,699 2,000,382

— F-138 — 15. CONTINGENT LIABILITIES

At the end of the reporting period, contingent liabilities not provided for in the financial statements were as follows:

30 September 31 December Note 2010 2009

(Unaudited) (Audited)

RMB’000 RMB’000 Guarantees in respect of mortgage facilities provided for certain purchasers of the Group’s properties ...... (a) 1,164,062 879,213

Notes: (a) As at 30 September 2010, the Group provided guarantees in respect of mortgage facilities granted by certain banks relating to the mortgage loans arranged for certain purchasers of the Group’s properties. Pursuant to the terms of the guarantees, upon default on mortgage payments by these purchasers before the expiry of the guarantees, the Group is responsible for repaying the outstanding mortgage principals together with the accrued interest and penalties owed by the defaulted purchasers to the banks.

(b) At the end of the reporting period, the Company did not have any significant contingent liabilities.

In addition, the Group’s share of the jointly-controlled entities’ and associates’ own financial guarantees which are not included in the above, is as follows:

30 September 31 December 2010 2009

(Unaudited) (Audited)

RMB’000 RMB’000 Guarantees in respect of mortgage facilities provided for certain purchasers of the jointly-controlled entities’ properties ...... 341,701 339,245

Guarantees in respect of mortgage facilities provided for certain purchasers of the associates’ properties ...... 26,260 27,867

— F-139 — 16. COMMITMENTS

The Group had the following capital commitments at the end of the reporting period:

30 September 31 December 2010 2009

(Unaudited) (Audited)

RMB’000 RMB’000 Contracted, but not provided for: Capital expenditure for properties under development, completed properties held for sale, land use rights and construction of owner-occupied properties in Mainland China ...... 1,139,865 1,332,476

In addition, the Group’s share of the jointly-controlled entities’ own capital commitments which are not included in the above, is as follows:

30 September 31 December 2010 2009

(Unaudited) (Audited)

RMB’000 RMB’000 Contracted, but not provided for: Capital expenditure for jointly-controlled entities’ properties under development ...... 76,136 9,564

At the end of the reporting period, the Company did not have any significant commitments.

17. PLEDGE OF ASSETS

At the end of the reporting period, the following assets of the Group were pledged to certain banks and financial institutions for securing the loans granted to the Group:

30 September 31 December 2010 2009

(Unaudited) (Audited) RMB’000 RMB’000 Property and equipment ...... 55,705 52,454 Investment properties ...... 1,311,000 1,296,000 Prepaid land lease payments ...... 916,334 1,132,399 Properties under development...... 3,528,931 1,928,086 Completed properties held for sale...... — 3,488

5,811,970 4,412,427

— F-140 — 18. RELATED PARTY TRANSACTIONS

(a) During the period, the Group entered into transactions with related parties as follows:

For the nine months ended 30 September

Notes 2010 2009

(Unaudited) (Audited) RMB’000 RMB’000 Sale of properties to: Directors ...... (i) 3,246 1,171 Family members of the directors...... (i) 12,337 1,998 Rental income from companies controlled by Mr. Wong.... (ii) 1,320 1,255 Property management fee income from companies controlled by Mr. Wong...... (ii) 185 173 Interest expenses on loans from companies controlled by Mr. Wong ...... (iii) — 9,134 Sales agency fees paid to an associate...... (iv) 4,753 6,421

Notes: (i) The properties were sold at prices mutually agreed by both parties.

(ii) Terms on the rental and management fee income of office premises were mutually agreed between both parties.

(iii) The interest expenses were charged at rates ranging from 2.86% to 5.40% per annum for the nine months ended 30 September 2009.

(iv) The sales agency fees were charged at rates ranging from 1.1% to 1.3% of the selling price of the relevant properties sold.

(b) Compensation of key management personnel of the Group

For the nine months ended 30 September

2010 2009

(Unaudited) (Audited) RMB’000 RMB’000 Short term employee benefits...... 3,980 864 Post-employment benefits ...... 33 13

Total compensation paid to key management personnel ...... 4,013 877

In the opinion of the directors, the directors of the Company represent the key management personnel of the Group.

— F-141 — 19. ACQUISITION OF A SUBSIDIARY THAT IS NOT A BUSINESS

On 7 June 2010, the Group entered into a share transfer agreement with Beijing Dupeng Real Estate Development Co. Ltd., a state-owned enterprise, for the acquisition of the entire equity interest in Beijing Dushishengjing Real Estate Development Co. Ltd. (“BJ Shengjing”) and its shareholder’s loan at a cash consideration of approximately RMB126,680,000. The acquisition was completed on 13 July 2010 and BJ Shengjing became a wholly-owned subsidiary of the Group.

Up to the date of the acquisition, BJ Shengjing has not carried out any significant business activities except for holding one parcel of land in Beijing, the PRC, and no property development and pre-sale activities have been carried out by BJ Shengjing. Therefore, this acquisition has been accounted for by the Group as an acquisition of assets as BJ Shengjing does not operate a business.

The aggregate net assets acquired by the Group in the above transaction, are as follows:

RMB’000

Net assets acquired: Prepaid land lease payments...... 126,636 Cash and bank balances ...... 44

126,680

Total consideration satisfied by: Cash...... 126,680

Net cash outflow arising on acquisition: Cash and bank balances acquired ...... 44 Cash consideration paid ...... (126,680)

(126,636)

20. APPROVAL OF THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

These unaudited interim condensed consolidated financial statements were approved by the board of directors on 31 December 2010.

— F-142 — OUR REGISTERED AND PRINCIPAL OFFICES

Registered Office Principal Place of Business Principal Place of Business Cricket Square in the PRC in Hong Kong Hutchins Drive SCE Building Room 1606 P.O. Box 2681 No.208, Nanwu Road Nanyang Plaza Grand Cayman KY1-1111 Gaoqi, Xiamen No.57 Hung To Road Kwun Tong Cayman Islands Fujian Province Kowloon P. R. China Hong Kong

TRUSTEE, PAYING AGENT, REGISTRAR AND SHARED SECURITY TRUSTEE

Deutsche Bank Trust Company Americas c/o Deutsche Bank National Trust Company Trust and Securities Services 100 Plaza One, MS JCY03-0699 Jersey City, New Jersey 07311-3901, U.S.A.

OUR LEGAL ADVISERS

As to As to As to Hong Kong and United States law: PRC law: Cayman Islands law and British Virgin Islands law

Paul, Hastings, Janofsky Jingtian & Gongcheng Maples and Calder & Walker Attorneys at Law 53/F, The Center 22/F, Bank of China Tower 34/F, Tower 3 99 Queen’s Road 1 Garden Road China Central Place Tower Central Central 77 Jianguo Road, Hong Kong Hong Kong Chaoyang District Avenue Beijing 100025 P. R. China

LEGAL ADVISERS TO THE INITIAL PURCHASERS

As to As to United States law: PRC law:

Davis Polk & Wardwell LLP Jun He Law Offices 18/F, The Hong Kong Club Building 20/F, China Resources Building 3A Chater Road 8 Jianguomenbei Avenue Central Beijing, 100005 Hong Kong P. R. China

INDEPENDENT ACCOUNTANTS

Ernst & Young Certified Public Accountants 18/F, Two International Finance Centre 8 Finance Street Central Hong Kong