Healthy, Low-Carbon Lifestyle

(Incorporated in the Cayman Islands with limited liability) HKEx Stock Code: 3883

Building a healthy, low-carbon lifestyle

Annual Report 2009 Group Introduction

China Aoyuan Property Group Limited (“China Aoyuan” or the “Company”) and its subsidiaries (the “Group”) have been developing real estate market for over ten years with innovative idea of composite property, bringing the concept of healthy living concept of low carbon, sports and regimen into residential communities. Thereafter, the Group introduced the Cathay Capital Group, a US investment fund, as one of its substantial shareholders, and the Company was listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) on 9 October 2007 (Stock Code: 3883), which opened the door to the international capital market.

The real estate projects currently held by the Group are mainly located in Guangdong Province (including Panyu, Nansha, Qingyuan and Zhongshan etc), Beijing and Shenyang; the others are located in Chongqing, Guangxi and Jiangxi, etc. The Group’s strategy is to implement regional focus with a strategic deploy embracing fi ve major economical circle within the Mainland, including Pearl River Delta, Yangtze River Delta, Pan Bohai Rim, Beibuwan as well as Central and Western China, as our core regions.

The Group has established its future direction, adhering to its development concept of “building a healthy low-carbon life” while formulating a “low carbon and healthy house” technology supporting system. China Aoyuan will selectively apply such concept in accordance with different features of respective projects and incorporate the brand concept of “low carbon and health” respective its project development and construction, striving to provide our customers with splendid products and create a healthy lifestyle. Contents

Corporate Information 02

Financial Highlights 04

Year in Review 06

Honors and Awards 08

Chairman’s Statement 10

Management Discussion and Analysis 12

Directors and Senior Management 20

Projects Summary 28

Corporate Governance Report 46

Report of the Directors 54

Independent Auditor’s Report 63

Consolidated Statement of Comprehensive Income 65

Consolidated Statement of Financial Position 66

Consolidated Statement of Changes in Equity 68

Consolidated Statement of Cash Flows 69

Notes to the Consolidated Financial Statements 71

Financial Summary 136 Corporate Information

Directors Place of Business in Hong Kong

Executive Directors Room 5105, 51/F, The Center 99 Queen’s Road Central Mr. Guo Zi Wen (chairman and chief executive offi cer) Hong Kong Mr. Guo Zi Ning Mr. Hu Da Wei Mr. Lam Kam Tong Company Website Ms. Xin Zhu

http://aoyuan.com.cn Non-executive Directors

Mr. Wu Jie Si (vice chairman) Mr. Paul Steven Wolansky (vice chairman) Company Secretary Mr. Leung Ping Chung, Hermann (Mr. Leung is also the alternate Director of Mr. Lam Kam Tong Mr. Paul Steven Wolansky)

Independent non-executive Directors Authorized Representatives

Mr. Ma Kwai Yuen Mr. Guo Zi Wen Mr. Song Xian Zhong Mr. Guo Zi Ning Mr. Tsui King Fai

Members of the Audit Committee Registered Offi ce

Mr. Ma Kwai Yuen (chairman) Cricket Square Mr. Song Xian Zhong Hutchins Drive Mr. Tsui King Fai 02 P.O. Box 2681

China Aoyuan Property Group Limited Grand Cayman KY1-1111 Members of the Remuneration Cayman Islands Committee

Principal Place of Business in the PRC Mr. Leung Ping Chung, Hermann (chairman) Mr. Ma Kwai Yuen Mr. Tsui King Fai Nanguo Aoyuan Hanxi Road Zhong Cun Town Panyu

Annual Report 2009 PRC China Aoyuan Property Group Limited Annual Report 2009 03 ce ce Principal Share Registrar and Principal Share Offi Transfer eld Fund Services (Cayman) Limited Butterfi eld House Butterfi 68 Fort Street Box 705 P.O. Grand Cayman KY1-1107 Cayman Islands Registrar Hong Kong Branch Share Offi and Transfer Services Limited Hong Kong Investor Computershare Shops 1712–1716, 17/F Hopewell Centre Road East 183 Queen’s Wanchai Hong Kong (chairman) Agricultural Bank of China Bank of China Limited Bank Co., Ltd. China Merchants Bank of Communications Co., Ltd. Bank of China Limited Industrial and Commercial Bank Limited Nanyang Commercial Principal Bankers Mr. Guo Zi Wen Guo Zi Wen Mr. Members of the Nomination Members of the Committee Leung Ping Chung, Hermann Mr. Ma Kwai Yuen Mr. Song Xian Zhong Mr. King Fai Tsui Mr. Corporate Information (continued) Corporate Financial Highlights

Results Highlights For the year ended 31 December 2009 (RMB‘000)

2009 2008

Revenue 2,364,467 619,941 Gross profi t 439,714 22,777 Net profi t (loss) 326,297 (57,465) Attributable to: – Owners of the Company 320,133 (57,153) – Minority interests 6,164 (312) Earnings (Loss) per share (cents) – Basic 13.23 (2.54) – Diluted 12.66 (6.28)

Revenue Analysis For the year ended 31 December 2009 (RMB’000)

2009 2008

Property development 2,348,145 609,015 Property investment 15,086 9,525 Others 1,236 1,401

Total 2,364,467 619,941

04 China Aoyuan Property Group Limited Annual Report 2009 China Aoyuan Property Group Limited Annual Report 2009 05 2008 Amount 8,348,410 3,459,025 4,889,385 Sales Revenue 7.3 67,017 65.9 420,790 2009 449.6 1,860,338 522.8 2,348,145 5,972,381 5,752,960 11,725,341 (’000 sq.m.) (RMB’000) Delivered Area Delivered 18% 3%

s s e s 79%

s Revenue and Townhou s s ale Villa Commercial propertie Apartment S

Total assets Total As at 31 December 2009 (RMB’000) liabilities Total equity Total Balance Sheet Summary Apartments Villas and townhouses properties Commercial Total Property Sales Revenue Analysis Sales Revenue Property December 2009 For the year ended 31 Financial Highlights (continued) Financial Year in Review

January 2009 February 2009 March 2009

Nanguo Aoyuan Central Green group Chongqing Aoyuan • City of Health International Regimen Residential Group was formally launched with grand Aroma No. 1 group was formally and Shanhailin Residential Group, two opening. launched with grand opening. groups of Nansha Aoyuan were launched with grand opening.

1 3

4 6

5 06 China Aoyuan Property Group Limited

April 2009 May 2009 June 2009

Aoyuan joined force with Guangzhou Shenyang Aoyuan • International Shenyang Aoyuan • International New University of Chinese Medicine and the Animation City formally began its ground- Town held a signing ceremony. signing ceremony for Regimen Center of breaking. Guangzhou University of Chinese Medicine and Nansha Aoyuan was June 2009 ceremoniously held. The Group announced the acquisition of

Annual Report 2009 Aoyuan Zhongshan Plaza. China Aoyuan Property Group Limited Annual Report 2009 07 2009

2009

9 12 Fogang Aoyuan and Qingyuan Aoyuan organized the THANK YOU OWNERS activities. The Group launched an ideal experience The Group Real Estate hall on 2009 Guangzhou brand its Exposition, and introduced concept and demonstrated each project to the general public. December September City of Health Gold • 2009

2009

8 10 October August As at October 2009, the Group As at October 2009, the Group completed its 2009 full-year sales target ahead of schedule. Palme group was launched with grand Palme group opening. Chongqing Aoyuan 2009

Academy Villa was • 2009 9 7 Qingyuan Aoyuan September China Aoyuan Property Group Limited Group China Aoyuan Property of a part of the equity interest acquired in a high-end project “Chang’an Ave”, Beijing. July launched with grand opening. Year in Review (continued) in Year Honors and Awards

3. 4.

08 China Aoyuan Property Group Limited

5. Annual Report 2009 Honors and Awards (continued)

1. Winning “Top 20 Guangdong Property Enterprises with High Credit” title for eight consecutive years

Awarded to: China Aoyuan Property Group Limited Issued by: Bank of China Limited — Guangdong Branch, Industrial and Commercial Bank of China Limited — Guangdong Branch, China Construction Bank Corporation — Guangdong Branch, Agricultural Bank of China — Guangdong Branch, People’s Daily Online

2. 3. Winning “Enterprise of Observing Top 20 Most Competitive Contract and Valuing Credit” title Guangdong Real Estate for ten consecutive years Enterprises

Awarded to: Aoyuan Group Company Limited Awarded to: Aoyuan Group Company Limited Issued by: Guangzhou Contract Management Issued by: Enterprise Management and Decision Association Science Institution of Guangdong Published by: Administration Bureau for Industry and Academy of Social Sciences（廣東省社 Commerce of Guangzhou Municipality 會科學院企業管理與決策科學研究所）, Guangdong Local Situations Research Centre（廣東省省情調查研究中心） 4. 5. Top 10 Guangdong Residential Top 10 Chongqing Integrated Group Brand Contribution Real Estate 09

Enterprises China Aoyuan Property Group Limited

Awarded to: Aoyuan Group Company Limited Awarded to: Chongqing Chuangguan Real Estate Issued by: Guangdong Construction News Offi ce of Development Company Limited（重慶 Yangcheng Evening News Group 創冠房地產開發有限公司） Issued by: Chongqing Daily News Annual Report 2009 Chairman’s Statement

Mr. Guo Zi Wen Chairman 10 China Aoyuan Property Group Limited Annual Report 2009 China Aoyuan Property Group Limited Annual Report 2009 11 t , be

ing ing lating s with ion of mance olders, ur hank yuan will ow- 19 April 2010 Chairman Guo Zi Wen splendid environment and clean air.” Lastly, on behalf of the Board, I would like to express my sincere gratitude to our shareh my sincere I would like to express on behalf of the Board, Lastly, and clean air.” splendid environment dence and investors, business partners, customers and those concerning in the public for their unfailing confi about our Group to take this opportunity to t and wish them have a healthy and fruitful life. Meanwhile, I would also like support on the Group and expertise. members for their professionalism work and all staff for their hard members of the Board Leveraging on the brand concept of “Building a healthy, low-carbon lifestyle”, adhering to the established foundation of perfor low-carbon lifestyle”, adhering Leveraging on the brand concept of “Building a healthy, and mental healthiness and harmony “No matter what the location is, China Aoyuan is always in place for those pursuing physical a series of low carbon and healthy product, providing consumers with a comfortable and ideal living environment as well as bear consumers with a comfortable and ideal living environment providing a series of low carbon and healthy product, to the launch looking forward we are In 2010, and emission reduction. of low carbon, energy saving the social responsibilities in Beijing, Aoyuan Zhongshan Plaza, Aoyuan Plaza and Nansha Aoyuan. Chang’an Ave I believe that China Ao staff, calibre appraisal system in 2009 as well as optimizing the incentive system and training of high the sales target of 2010. strive to realize In 2010, China Aoyuan will adhere to the development notion of “Building a healthy, low-carbon lifestyle”, putting emphasis on low-carbon lifestyle”, putting to the development notion of “Building a healthy, In 2010, China Aoyuan will adhere concept as its major development with the adoption of low carbon and regimen comfort, health, regimen protection, environment concern on construction, while more will energy saving and emission reduction concept. China Aoyuan will insist on low carbon, enhancement in various aspects: the formulation of the “Result is King” appraisal system enabled the Group to accomplish its King” appraisal system enabled the Group aspects: the formulation of the “Result is enhancement in various striking effectivenes mergers and acquisitions strategy showed for the whole year in October 2009; the anticipated sales target mine”, China Aoyuan kept on extending its pursuit of health and established o with a glorious style” and “Ideal life, yours and l With in the future. its brand advocating “Building a healthy, regimen a lifestyle of low carbon, health and theme of creating low-carbon building a healthy, the development path on low carbon and regimen, carbon lifestyle”, China Aoyuan has established development path with differentiation. lifestyle for consumers and formulating a unique sub- to improve of lifestyle. China Aoyuan strives of Chinese people in respect placed on sub-healthiness and aging problem formu consumers in terms of low-carbon and regimen healthy lifestyle to its to offer healthiness of Chinese people and continue 2009 witnessed China Aoyuan’s rapid development, and more importantly, further upgrading was achieved in composite property, further upgrading was achieved in composite property, importantly, rapid development, and more 2009 witnessed China Aoyuan’s Aoyuan has always been a leader of healthy lifestyle, making continuous discuss especially the concept of healthy living. China of many enterprises reached a bottle-neck while China Aoyuan decisively capitalized on this turning bottle-neck while China Aoyuan decisively a of many enterprises reached achieve tremendous point to and Plaza; while the operating capacity of the operation Aoyuan Zhongshan Plaza and Aoyuan Ave, success gained in Chang’an concept of and systematic launch, China Aoyuan’s With standardization management team was continuously strengthened. product operation. cant contribution to the Group’s and made signifi being outstanding was well recognized those well known slogans which Apart from the integration of sports and regimen. and conclusion on healthy lifestyle such as home”, “Liv starts from a healthy lifestyle, such as “Exercise dedication and characters to pursuing demonstrate China Aoyuan’s 2009 was a mixed and volatile year for the PRC and global economy. On the background of global fi nancial crisis, the developmen nancial crisis, global fi of On the background volatile year for the PRC and global economy. 2009 was a mixed and On behalf of the Board of Directors of the Company, I am pleased to present the annual report of the Group for 2009. of the Group the annual report I am pleased to present Company, of the of Directors On behalf of the Board Dear Shareholders, Chairman’s Statement (continued) Statement Chairman’s Management Discussion and Analysis

China Property Market

Looking back to 2009, China real estate market experienced a great change from “cold” to “hot” and went through a year of ups and downs. Under the domestic and international macro-economic environment, the Chinese government decisively adopted a series of economic stimulus measures and bailout policies, the domestic real estate market in 2009 got out of the shadow of the market downturn in 2008, leading the national economy the fi rst to pick up with a performance continuously exceeding expectation. The turnover of property transaction in the second half of the year obviously increased and the property prices in certain core cities raised signifi cantly. The Group seized the opportunity of the investment and M&A of quality projects and rapid return of fundsduring the best time of market conversion, which laid a solid foundation for the sustainable development of the Company.

Looking forward to 2010, this will also be a complex year for domestic and international economic situation. Under the background of economy stabilization and recovery, the national policy in this year will be mainly on stabilization and the prevention of infl ation. With the further decline for the dependence on the real estate from the macro economy, showing solicitude for people’s livelihood and differential regulation will become the main tone of the policy for property market in 2010. It is worth paying close attention to the following fi ve development trends in the real estate industry in 2010: fi rstly, increasing competition in the industry; secondly, the second and third-tier cities in Mainland China will become a new hotspot; thirdly, numerous requirements for subsequent development are added to the government’s land transfer conditions, and combating the practice of land hoarding will become a focus in real estate regulation; fourthly, the scale of transferring the land parcels for commercial and residential uses will gradually reduce, and SMEs will get more opportunities to obtain lands; fi fthly, the government will promulgate more restrictive policies against market speculation and the behavior for investment purchases.

Business Review

The Group continued to deepen our national development strategy of “Regional Focus, Balanced Distribution” in 2009 and achieved a satisfactory sales performance: delivered area amounted to 522,800 square meters, and property sales revenue amounted to approximately RMB2,348.15 million, representing an increase of 285.6% compared with 2008.

12 Project Delivered Area Sales Revenue Amount China Aoyuan Property Group Limited (thousand square meters) (RMB million)

Chongqing Aoyuan • City of Health 304.5 1,130.28 Nansha Aoyuan 87.2 465.07 Panyu Aoyuan 43.8 261.62 Nanguo Aoyuan 38.5 259.16 Qingyuan Aoyuan 20.1 133.71 Others 28.7 98.31

Total 522.8 2,348.15 Annual Report 2009 China Aoyuan Property Group Limited Annual Report 2009 13

t at h th ss ning hed a and e uch the e acterized with “building a sfully declares “healthy house sfully declares ls between the Group and other banks and other non-bank fi nancial banks and other non-bank fi and other ls between the Group nity and achieved a tremendous advancement and improvement in various improvement advancement and nity and achieved a tremendous City of Health also ranked No. 1 in terms of sales area and unit sales for a single site sales area City of Health also ranked No. 1 in terms of • s laid a good foundation for the future operation of the Group. s laid a good foundation for the future nancing channels City of Health was nominated TOP 10 in a monthly ranking for Chongqing single site sales in 2009 City of Health was nominated TOP 10 in a • International New Town, which made our land bank reach approximately 9.0 million square meters in 2009, 9.0 million square approximately our land bank reach which made International New Town, • cant broadening in fi cant broadening bank of only RMB544 per square meter ha bank of only RMB544 per square representing a signifi cant increase compared with the land bank of 5.6 million square meters in 2008. The average cost of the l meters in 2008. The square with the land bank of 5.6 million compared cant increase a signifi representing in Chongqing real estate market in 2009; Qingyuan Aoyuan, First Phase completed the works involving its demonstration area, Aoyuan, First Phase completed the works involving its demonstration area, estate market in 2009; Qingyuan in Chongqing real of development and retur short time, and achieved a good performance launching and returning funds in sales within a relatively funds in the same year. all its strength a high-end “high comfort level” low carbon mansion. Nansha Aoyuan’s fi ve blocks were committed to building a ve blocks were fi a high-end “high comfort level” low carbon mansion. Nansha Aoyuan’s all its strength of on the back of the natural ecological resources with a theme of low carbon, health and regimen luxurious mansion area lake, sea, spring” only distributed in Guangzhou; Aoyuan Zhongshan Plaza succes “mountain, forest, as the chief healthy life city in Zhongshan. devoted to construct this project construction pilot site”, and we are project development and construction. Among which, Beijing project “Chang’an Ave” reached a strategic advisory relationship wit a strategic advisory relationship reached “Chang’an Ave” development and construction. Among which, Beijing project project leading low carbon technologies to build wi — “CIHAF China Home”, using 15 world’s low carbon property the initiator of China’s obtained banking facilities amounting to RMB6.4 billion in aggregate and new loans for the year amounting to approximately loans for the year amounting to approximately and new billion in aggregate obtained banking facilities amounting to RMB6.4 rates, with the effectiv with higher interest loans applied to each bank to adjust the previous have RMB2.0 billion in 2009. We exchange busine nancing capacity and foreign fi cient 6.9% in 2008 to 5.6% in 2009. Highly effi from rate reduced annual interest and made a gre and acquisitions of the Group, development, mergers us a funding security for the project capacity have provided distinctive brand personality More has established its theme distinctive. The Group was more and its personality brand idea became clearer In 2009, the Group’s and a brand personality which is char of a lifestyle of low carbon, health and regimen involving the creation has establis The Group a unique development path with differentiation. and formed low carbon and healthy living” in the future, and development, and selected to apply research of product design system of “low-carbon and healthy house” in respect standard and health” into to their characteristics, incorporating the brand concept of “low carbon according the system to each project Signifi of business channe By continuous development and expansion institutions as well as the planning, design and implementation of the fi nancing programs for the projects of the Group, we hav of the Group, for the projects nancing programs and implementation of the fi institutions as well as the planning, design The operating and management capacity of each project continues to improve, and their self-operation ability are enhanced. For their self-operation ability are and continues to improve, each project The operating and management capacity of and Housing Management of Chongqing of Land Resources cial statistics published by Bureau to the offi instance, according Chongqing Aoyuan Municipality, Continuous improvement in operating capacity of each project in operating Continuous improvement aspects amidst the complex and volatile internationalaspects amidst the complex domestic economic situation in 2009: and quality land bank including Projec same time, we have successfully reserved and Shenyang; at the as Beijing, Guangdong Province of Shenyang Aoyuan contribution for the investment and deploy of the Group. In respect of investment, the M&A strategy has achieved remarkable results. Through M&A, we successfully acquired Chang’an Ave, M&A, we successfully acquired Through results. remarkable of investment, the M&A strategy has achieved In respect Major breakthroughs achieved in investment and M&A achieved in investment Major breakthroughs The performance in 2009 was signifi cantly improved, which was among one of the indicators showing our successes in various one of the indicators showing our successes which was among improved, cantly was signifi The performance in 2009 decisively seized the opportu Group elds of works. The fi Aoyuan Zhongshan Plaza and Aoyuan Plaza, which laid a solid foundation for the future development of the Group. The deploy for The deploy development of the Group. for the future and Aoyuan Plaza, which laid a solid foundation Aoyuan Zhongshan Plaza regions s around and formed a deploy which is centered revealed, cities has been resources-based and rst-tier cities national fi for 10 times. In addition, Chongqing Aoyuan for 10 times. In addition, Chongqing Aoyuan Management Discussion and Analysis (continued) and Discussion Management

”,

iving -end s its orientation, taking hrough the acquisition of equity interests, cooperation with funds, and the acquisition of equity interests, hrough ing management: adhering to the development notion of “creating a low carbon and ing management: adhering to the development notion of “creating cost planning during the whole process, product cost performance improvement planning, improvement cost performance product cost planning during the whole process, Management Discussion and Analysis (continued) and Discussion Management profi t for projects as its goal, coordinating and arranging management to the projects during the whole development cycle, arranging management to the projects and as its goal, coordinating t for projects profi indicator into the daily actual work of each of target plan as well as putting the business resolution achieving the four-class positioning and planning, the new changes in the market, by product division for implementation. In connection with development of comprehensive tability enhance the profi work of marketing objective, etc, which greatly of integrated and systematic supporting the promotion of the projects, and while laying the foundation for rapid growth and future benefi ts of the projects and the Group, we strive and the Group, projects ts of the benefi and future growth and while laying the foundation for rapid of the projects, operating management. an effective Company to a higher grade through put the integrated management level of the the system documentation on design and house, and we continue to improve involving low carbon, health, energy-saving library series, upgrading design maintaining and updating product of the Group, design standards guidance and product to build a new generation of and gathering all efforts ne decoration standard, especially the guide for fi standardization series of the Group. outstanding property healthy lifestyle”, and combining of the Group’s product strategy of “building different series of low carbon and healthy house of “building different strategy product healthy lifestyle”, and combining of the Group’s will endeavour to hold the development opportunities in the second-tier the Group via auction, tender and listing-for-sale, to accumulate quality rst-tier cities including Guangzhou, Beijing and Shenzhen, in order hotspot cities while expanding in fi schemes in involved in old-city redevelopment will be stepped up for getting more In addition, efforts land bank for the Group. the Group will unite and integrate quality resources and customers of various project and closely align brand promotion with brand promotion and closely align and customers of various project will unite and integrate quality resources the Group enhancement in the and contribute to a remarkable marketing campaigns to form a distinctive brand image of the Group measures. brand value by adopting effective Group’s projects respective t amount of the t margin and profi “actual operating performance” in terms of sales, profi whereby approach key personnel will be trained and developed to form a members. High-calibre indicators in appraising our staff will be the core business lines of the companies under the Group. pool of talents serving different the year 2010. talents to adapt our management culture and improve themselves as quickly as possible, we strived to create a good create as quickly as possible, we strived to themselves and improve culture talents to adapt our management them. for communication environment 2. and development: focus is put on conducting the technical research research of design management and product In respect 3. and market of brand promotion In respect In 2010, the Group has established an operating guiding ideology summarized as “taking marketing a has established an operating guiding In 2010, the Group Future Outlook Future 1. overall company: taking the completion of 2010 operation plan and maximizing project of the operation of regional In respect the beginning of the year. We invited a number of high-end talents to join the Group around 2009. In order to enable these high 2009. In order around join the Group invited a number of high-end talents to We the beginning of the year. a whole as its purpose, g Group as projects and the ts for ts as its goal; taking the achieving of maximum benefi economic benefi and appraisal also insist on the implementation of the incentive value as well”. We brand the Group’s consideration to improve and pace in development strategies the project comes First”, and re-examine system summarized as “Result is King, Effectiveness cally in several aspects below: specifi commence our major works We areas. respective In 2009, we established and perfected the incentive and appraisal system, strengthening the concept of “Result is King”, and the concept system, strengthening and perfected the incentive and appraisal In 2009, we established completed its estimated eventually the Group and cost control, positioning of our marketing management together with the right within the budget set at controlled were costs of each project of schedule in October 2009. The lump annual sales targets ahead Improvement of the incentive and appraisal system as well as optimization of personnel structure as well as optimization of personnel the incentive and appraisal system of Improvement 4. will continue to take an incentive and appraisal of team building and incentive-based management: the Group In respect 5. nancing: t investment and fi of land reserve, In respect

Annual Report 2009

China Aoyuan Property Group Limited 14 China Aoyuan Property Group Limited Annual Report 2009 15 ng, t. a y y in a in .98 hich of e ed The , while ntered a ntered uality land bank pproximately 0.35 million square meters. Among which, the Group Among which, the Group meters. 0.35 million square pproximately of approximately 9.0 million square meters, of which the completed 9.0 million square of approximately believe that a low and reasonable land cost is in line with the strategic choice of the Group’s solid and long-term developmen of the Group’s land cost is in line with the strategic choice believe that a low and reasonable We In 2009, the Group still adhered to a prudential and rational land bank strategy. With Focus, Balanc the principle of “Regional and rational land bank strategy. to a prudential still adhered In 2009, the Group Bohai Rim) (such as the Pearl River Delta and Pan focus region its land bank in its existing increased Distribution”, the Group projects. via its existing and raising brand reputation recognition driving product Land Bank In 2010, the Group plans to commence the development of new construction area of approximately 867,000 square meters and 867,000 square of approximately area the development of new construction plans to commence In 2010, the Group meters. square 600,000 completes approximately properties, the properties under construction and the properties held for future development were 0.58 million square meters, 0 0.58 million square development were held for future under construction and the properties the properties properties, As at 31 December 2009, the Group had a total land bank As at 31 December 2009, the Group further enriched the Group’s land bank for future development. land bank for future further enriched the Group’s meters respectively. meters and 7.47 million square million square In 2009, the Group acquired two parcels of land in Shenyang with a total gross fl oor area of approximately 2.84 million square 2.84 million square of approximately oor area fl of land in Shenyang with a total gross two parcels acquired In 2009, the Group w meter, low at only RMB392 per square The acquisition cost was relatively auction, tender and listing-for-sale. meters through the central area of Panyu District, Guangzhou City, with a total gross fl oor area of approximately 0.245 million square meters. 0.245 million square of approximately oor area fl with a total gross of Panyu District, Guangzhou City, the central area and the became wholly-owned by the Group land bank carries a lower cost. Upon the completion of acquisition, the project for development was enhanced. progress In 2009, the Group newly acquired fi ve parcels of land located in four cities, namely, Beijing, Guangzhou, Zhongshan and Shenya of land located in four cities, namely, ve parcels fi newly acquired In 2009, the Group strategicall meters. Such new land banks are 4.03 million square amounting to approximately oor area fl with the new total gross of futur with a high development potential, which laid a solid foundation for the development located in urban centers or areas in Head Win is located interest equity Limited. The project to own the entire RMB258 million, enabling the Group approximately In June 2009, the Group entered into an agreement to acquire 100% equity interest of Earning 100% equity interest Ever Limited (“Earning to acquire Ever”) for into an agreement entered In June 2009, the Group in Head Win completed the acquisition of certain equity interest Limited with a total consideration In October 2009, the Group business and operation of the Group. The Group will insist and remain prudent to hold the golden opportunity to buy, merge and prudent to hold the golden opportunity to buy, will insist and remain The Group business and operation of the Group. the land bank of the Group. lands, so as to increase premium acquire RMB640 million. Earning of consideration of approximately the land use right of a site located in the urban area Ever owns of a with a total site area Guangdong Province Zhongshan City, on will be exempted if repaid rate of 4.5% per annum (interest with interest RMB590 million bank loan obtained an approximately Jianguo Road, Chaoyang of land located at southeast section, intersection of Xidawang Road and t”), which owns a parcel Profi also e time, the Group meters. At the same million square 0.25 of approximately oor area fl District, Beijing with a total gross t capital of Century Profi issued share 11.36% of the entire acquire can further under which, the Group subscription agreement, the Group of the project, million. Upon commencement of cooperation in respect September 2010 with a consideration of RMB296 table and high q a highly profi represents generated earnings project RMB100 million in 2009. This of approximately and this successful acquisition is a milestone in the development history of the Group. In July 2009, the Group completed the acquisition of 41.33% equity interest in Century Profi t Zone Investments Limited (“Centur Profi in Century 41.33% equity interest completed the acquisition of In July 2009, the Group timely basis) by way of entering into a 3-year loan agreement with a bank. loan agreement timely basis) by way of entering into a 3-year Management Discussion and Analysis (continued) and Discussion Management project and commercial residential table of Panyu, highly area profi profi table project table CBD, highly Beijing’s profi interest Strength Group’s Group’s hang’an Ave at a hang’an Ave GFA sq.m. Properties 404,000 100% Low land cost Aggregate Aggregate 2,432,000 100% Low land cost 4,034,000 to be developed Total 703,000 100% High internal rate of return 245,000 100% Located at the core 250,000 40% of area Located at the core development Aggregate GFA (million sq.m.) GFA Aggregate Properties under Properties ) (1) Consideration for the acquisition is RMB 370 million, and the effective is 40% acquired of the project interest 2010 to 51% by (ownership will be increased September Consideration for the acquisition is RMB 822 million Consideration for the acquisition is RMB 289 million properties Completed Consideration for the acquisition is RMB 258 million, and the equity interest is 49%. Upon acquisition, acquired project of holds 100% interest the Group this Consideration for the acquisition is RMB 640 million (a bank provided bank loan of interest-free a three-year invested RMB590 million, and the Group RMB 50 million) Beijing, southeast corner of the intersection between Jianguo Road and Dawang Road West Southern Road, side of Yinxing Sujiatun District, Shenyang South Coast of Hun River, Dongling District, Shenyang, on the western Road side of 107 Provincial Panyu District, Guangzhou Province Western District of Zhongshan, Guangdong International International • • Management Discussion and Analysis (continued) and Discussion Management ed Land bank Portfolio: consideration of RMB 296 million on September 2010. This amount has been settled in 2009. Note 1: Note 1: subscription agreement, under which, the Group can acquire 11% interest of C The Group also entered into a convertible Chang’an Ave No. 86 Jianguo Road, Zhaoyang District, Location for the year ended 31 December 2009: projects Newly acquired Projects of Project Location Consideration for Acquisition Development status and location Guangdong ProvinceShenyangYulinJiangxiChongqingBeijingTotal 0.36 0.58 — 0.21 0.01 — — 2.46 — 0.58 0.01 0.01 0.13 0.25 3.40 3.16 0.98 0.52 — 1.33 — 3.16 7.47 0.54 0.22 1.46 0.25 9.03 Land Bank by Location Diversifi (As at 31 December 2009) Shenyang Aoyuan Total Animation City Animation New Town New

Shenyang Aoyuan Aoyuan Plaza North to Fude Road, South downtown, Aoyuan Zhongshan Plaza Within Guang Feng She Area, Annual Report 2009

China Aoyuan Property Group Limited 16 China Aoyuan Property Group Limited Annual Report 2009 17

in ly

pital % of nities of d to 3.9% from 21.8% in 2008. The total administrative d to 3.9% from t and margin any issued 360 million new shares and placed them to independent investors at HK$1.73 per share in order to enhance the in order at HK$1.73 per share and placed them to independent investors any issued 360 million new shares other cities represented 43%, 48% and 9% respectively. The average price of delivered properties for the year was basically in for the properties The average price of delivered 43%, 48% and 9% respectively. other cities represented returns of projects and strictly control the cost and various expenses. In addition, the Group will continue to explore opportu will continue to explore the cost and various expenses. In addition, the Group and strictly control returns of projects and business expansion of projects of funding for the source another and domestic investors to provide cooperation with foreign The Group expects that income generated from business operations and bank borrowings will continue to be the main sources of will continue to be the main sources business operations and bank borrowings expects that income generated from The Group ciency of ca the effi ow management, improve cash fl will continue to strengthen the Group Therefore, funding in the coming year. the issued share capital of Century Profi t. capital of Century Profi the issued share development. HK$600 million and were used for satisfying the Group’s general working capital requirement as well as the acquisition of 41.33 general working capital requirement used for satisfying the Group’s HK$600 million and were Financial Resources and Liquidity Financial Resources bank and cash from business operations income generated from of fund primarily from derived its sources In 2009, the Group In addition, in July 2009, the used in our business operations and investment in development projects. which were borrowings, Comp approximate from the placement were proceeds bank. The net ow to further enlarge its land fl nancial position and cash fi Group’s The Group’s total assets amounted to approximately RMB11,725.3 million as at 31 December 2009 (as at 31 December 2008: RMB11,725.3 total assets amounted to approximately The Group’s million (as at 31 December 2008: RMB3,459.0 million). RMB5,972.4 approximately RMB8,348.4 million) and total liabilities were ratio was 2.3 as at 31 December 2009 (as at 31 December 2008: 3.5). Current expenses decreased by 38.5% to approximately RMB121.9 million from approximately RMB198.3 million in 2008. It was benefi ted RMB198.3 million in 2008. It was benefi approximately RMB121.9 million from by 38.5% to approximately expenses decreased experienced management costs while appointing more to reduce adopted by the Group marketing approaches effective more from measures. stringent budget control ciency and implement more the operating effi to improve Financial Position Selling and Administrative expenses approximately RMB91.5 million from by 32.4% to approximately selling and distribution costs decreased In 2009, the Group’s cantly decrease ratio signifi RMB135.3 million in 2008. The sales costs Other income approximately income of included an interest RMB70 million, which mainly other income was approximately In 2009, the Group’s RMB30.2 million. accruals of approximately of RMB36.8 million and reversal In 2009, the gross profi t of the Group was approximately RMB439.7 million, representing an increase of 1,828.5% over an increase representing RMB439.7 million, was approximately t of the Group profi In 2009, the gross period of 2008. 3.7% in the corresponding to 18.6% from margin increased RMB22.8 million in 2008; the gross approximately Gross profi Gross In 2009, the Group’s revenue derived from property investment was approximately RMB15.1 million (2008: RMB9.5 million), RMB15.1 investment was approximately property derived from revenue In 2009, the Group’s of 58.9% over 2008. an increase representing In 2009, the Group’s sales revenue generated from property development amounted to approximately RMB2,348.1 million (2008: to approximately development amounted property generated from sales revenue In 2009, the Group’s due to an increase was primarily of sales revenue over 2008. The increase of 285.6% an increase RMB609.0 million), representing the line with 2008. 31 December 2009, the Group’s total revenue was approximately RMB2,364.5 million (2008: RMB619.9 million), representing an representing million (2008: RMB619.9 million), RMB2,364.5 was approximately total revenue Group’s 31 December 2009, the sales. in property to the increase of 281.4% over 2008, which was mainly attributable increase development attributable to Guangzhou, Chongqing property generated from The sales revenue properties. of delivered the area and Revenue investment. For the year ended development and property two business segments: property is primarily generated from The revenue Financial Review Management Discussion and Analysis (continued) and Discussion Management of any in ies 2008 215.0 625.7 374.0 009 ). ties and 1,214.7 the e RMB Million 31 December 2009 743.4 492.7 2,586.4 1,350.3 RMB Million 31 December ly RMB5,081.9 million (as at 31 December Management Discussion and Analysis (continued) and Discussion Management the real estate ownership certifi cate; and (ii) the satisfaction of mortgaged loan by the purchasers of properties. cate; and (ii) the satisfaction of mortgaged loan by the purchasers estate ownership certifi the real Contingent Liabilities of mortgage facili to guarantees in respect relating had the following contingent liabilities As at 31 December 2009, the Group Net Gearing Ratio bank net of cash and cash equivalents and restricted (total borrowings by the net borrowings The gearing ratio is measured As at 31 December 2009, the net gearing ratio of attributable to equity holders. deposits) over the total capital and reserves As at 31 December 2009, the Group had banking facilities of approximately RMB6,373.0 million (as at 31 December 2008: RMB6,373.0 million (as at 31 had banking facilities of approximately As at 31 December 2009, the Group bank loans, of which approximate RMB2,385.0 million) for short-term and long-term The majority of bank borrowings of the Group are variable-rate borrowings. The effective interest rate on bank borrowings for 2 rate on bank borrowings interest effective The variable-rate borrowings. are of the Group The majority of bank borrowings mainly include, among others, rate management policies which has implemented certain interest was 5.6% (2008: 6.9%). The Group entering into new banking facilities when good pricing opportunit and rate movements and replacing close monitoring of interest arise. unutilized. 2008: RMB1,170.3 million) were Convertible Notes in 2007. The issued by a subsidiary of the Group were principal amount of USD60.0 million Convertible notes with an aggregate did not use The Group Rate plus 3.0% payable semi-annually. rate of London Inter Bank Offer convertible notes have an interest nancial instruments for hedging purpose as at 31 December 2009. fi was 15.4% (as at 31 December 2008: 0.8%). Group RMB1,859.3 million (as at 31 December 2008: RMB646.8 million amounting to approximately by bank to purchasers provided to th of mortgage facilities granted by certain banks relating the guarantees in respect The contingent liabilities represented Pursuant to the terms of the guarantees, upon default properties. Group’s of the mortgage loans arranged for certain purchasers mortgage principals together with of outstanding is liable to the repayment the Group mortgage payments by these purchasers, entitled to take over the legal title is Group and the and penalty owed to the banks by defaulted purchasers, accrued interest to be discharged upon the earlier of (i) issuance The amounts as at 31 December 2009 were properties. possession of the related Within one year Repayment Period Bank Borrowings as at 31 December 2009 (as at 31 December 2008: RMB2,586.4 million of approximately had bank borrowings The Group RMB1,214.7 million). Borrowings and Net Gearing Ratio and Borrowings not exceeding two years but than one year, More ve years than two years, but not exceeding fi More As at 31 December 2009, the Group had restricted bank deposits of approximately RMB745.4 million (as at 31 December 2008: RMB745.4 of approximately bank deposits had restricted the Group As at 31 December 2009, RMB135.7 million). Cash Position (as at 31 December 2008: RMB1,283.9 million and cash of approximately had bank balances the Group As at 31 December 2009, RMB1,345.9 million).

Annual Report 2009

China Aoyuan Property Group Limited 18 China Aoyuan Property Group Limited Annual Report 2009 19

s inst e is. ) for at the

r into mium and other insurance premium benefi ts benefi mium and other insurance premium rebound, such acquisition represents a good investment such acquisition represents rebound, denominated in Renminbi. Except for the bank deposits denominated in denominated in Renminbi. Except for the bank As at 31 December 2009, share options in respect of a total of 38,195,145 shares of the Company was granted to certain director of a total of 38,195,145 shares options in respect As at 31 December 2009, share the sam with outstanding performance. At to staff also offered bonuses are year-end and employees. In addition to basic salary, to pay on behalf of the employees a social insurance pre is required time, the Group ts th believes the salaries and benefi national and local government The Group to relevant labor laws and regulations. according competitive in comparison with market rates. are the employees receive Employees and Remuneration has adopted a performance based incentive The Group employed a total of 477 employees. As at 31 December 2009, the Group bas on a regular and such system is subject to review staff its high-calibre system since September 2007 to motivate and retain at 31 December 2008: RMB1,788.0 million). The Group expects to fund these commitments principally from sale proceeds of the sale proceeds expects to fund these commitments principally from The Group at 31 December 2008: RMB1,788.0 million). bank borrowings. and partly from properties to into a framework agreement entered 2010, the Group 2010, on 29 March to our announcement dated 29 March According sq.m. and parts of the parking spaces at a consideration of approximately ce building of 6,586.75 offi a commercial acquire market in the PRC is on property RMB176.5 million. As the recent Subsequent Events As at 31 December 2009, the Group pledged its property held for development and properties under construction of approximately under construction of approximately held for development and properties pledged its property As at 31 December 2009, the Group and general banking loans project RMB1,204.3 million) to various banks to secure RMB1,937.8 million (as at 31 December 2008: facilities granted to the Group. Pledge of assets with Sunrise Partners into an agreement entered to our announcement dated 15 April 2010, on 15 April 2010, the Group According million by the Group. of convertible notes with a principal of USD 60.0 upon the early redemption Limited Partnership to agree Most of the Group’s revenues and operating costs were and operating costs were revenues Most of the Group’s the Group’s HK dollar, the convertible notes denominated in U.S. dollar and the bank loans denominated in currencies, foreign Group did not ente uctuations. The fl exchange rate or liquidity is not subject to any other material direct ow operating cash fl value. in property the anticipated growth ted from will be benefi opportunity and the Group Foreign Currency risks Currency Foreign As at 31 December 2009, the Group has construction cost contracted but not provided for of approximately RMB2,367.0 million (as for of approximately has construction cost contracted but not provided As at 31 December 2009, the Group As at 31 December 2009, the Group had the contingent liabilities relating to guarantees in respect of bank borrowings of of bank borrowings in respect to guarantees liabilities relating had the contingent the Group As at 31 December 2009, t. RMB590 million of Century Profi approximately Commitments a potential acquisition of a company (the “Target”). However, this acquisition agreement was subsequently terminated by the was this acquisition agreement However, of a company (the “Target”). a potential acquisition then claimed aga The Vendor in the Target. shareholding of the Vendor’s because of the uncertainty about the validity Purchaser is remote. to pay the compensation is required likelihood that the subsidiary exchange hedging arrangements as at 31 December 2009. any foreign In 2007, a subsidiary of the Group (the “Purchaser”) entered into an agreement with two independent third parties (the “Vendor” third with two independent into an agreement entered (the “Purchaser”) of the Group In 2007, a subsidiary the Purchaser for compensation of approximately RMB61,096,000. The legal case is in legal proceeding. No provision has been No provision is in legal proceeding. RMB61,096,000. The legal case for compensation of approximately the Purchaser counsel, legal and the Group’s of the Group directors because in the opinion of the executive for this case, however, provided Management Discussion and Analysis (continued) and Discussion Management Directors and Senior Management

8. 7. 6. 9. 10. 11. 5. 1. 2. 3. 4.

1. Mr. Guo Zi Wen, 2. Mr. Guo Zi Ning, 3. Mr. Hu Da Wei, 4. Mr. Lam Kam Tong, 5. Ms. Xin Zhu, 6. Mr. Wu Jie Si, 7. Mr. Paul Steven Wolansky, 8. Mr. Leung Ping Chung, Hermann, 9. Mr. Ma Kwai Yuen, 10. Mr. Song Xian Zhong, 11. Mr. Tsui King Fai

20 China Aoyuan Property Group Limited Annual Report 2009 China Aoyuan Property Group Limited Annual Report 2009 21 ). 廣 ) and (郭梓寧) (郭梓寧) 年十大傑出貢獻中國房地產理論研 ). Except for being a Executive Director 30 ) in the same year. In ) in the same year. 中國房地產特別貢獻獎強領軍人物中國房地產 Guo Zi Ning 30 ). In 2004, Mr. Guo received the Guo received ). In 2004, Mr. 廣東省民營企業投資商會主席 ) and the chairman of the Guangdong ) as one of the Top 10 Persons in Real ) as one of the Top 廣東住宅建設 ) 中國房地產十大傑出企業家中國房地產協會郭梓文中國房地產十大風雲人物 ), the vice chairman of the Guangdong Federation of Industry and ), the vice chairman of the Guangdong Federation 廣東省工商業聯合會副主席 ), and was named one of the Top 10 Outstanding Real Estate 10 Outstanding ), and was named one of the Top ), and was recognized as one of the Top 30 Leaders in the Residential 30 Leaders as one of the Top ), and was recognized Guo Zi Wen, aged 45, is the founder of the Group, and holds a Master’s degree degree a Master’s and holds of the Group, aged 45, is the founder Guo Zi Wen, the and the chairman of He is an executive Director in Business Management. of the cer of the Company and a director the chief executive offi Board, of for the formulation He is primarily responsible subsidiaries of the Group. the project as well as supervising of the Company, development strategies committee member of the a marketing. He is currently planning, designing and ( Guangdong Province in Consultative Conference Political Chinese People’s 東省政協委員 ( Commerce Investment Chamber of Private Enterprises ( Investment Chamber of Private Enterprises Construction of Guangdong ( in any other Guo has not held any directorship Mr. of the Company, Director Mr. of Guo is the brother years. Mr. listed public companies during the past three Guo Zi Ning. In 2001, Mr. Guo was honored by national main stream media and China Real by national main stream Guo was honored In 2001, Mr. Estate Association ( ( National Real Estate Special Contribution Award ( Contribution Award the China Real Estate Theory Research 究貢獻獎人物獎 Estate Industry ( PRC ( in the Entrepreneurs of 10 Outstanding Entrepreneurs as one of the Top Guo was awarded 2008, Mr. Decades in China Real Estate ( the Past Three 1. ( Zi Wen Guo ) 郭梓寧 (郭梓文)

Guo Zi Ning, aged 48, is an executive Director and the executive vice president and the executive vice president Guo Zi Ning, aged 48, is an executive Director and holds a of the subsidiaries of the Group, He is also a director of the Board. in 1998, now the Group in Business Administration. He joined Degree Master’s for administration, investment and business expansion and primarily responsible of Aoyuan Group Guo ceased to be a director Mr. of the Group. legal affairs of Beijing Normal Company Limited during the period of being the vice president Guo was University Nanguo Aoyuan Experimental School. In 2006, Mr. Company Limited. Except for being of Aoyuan Group as a director reappointed in any other Guo has not held any directorship Mr. of the Company, a Director of Mr. Guo is the brother years. Mr. listed public companies during the past three Guo Zi Wen. Guo Zi Wen Executive Director and Chairman of the Board 2. Guo Zi Ning ( Directors and Senior Management (continued) and Senior Management Directors

) 林錦堂 ) from 1988 to 1988 ) from Executive Director Lam Kam Tong ( Lam Kam Tong 廣東省廣州市番禺建築設計院 ) 胡大為 (

Hu Da Wei, aged 47, is an executive Director of the Board and a vice president and a vice president of the Board Director aged 47, is an executive Hu Da Wei, Hu Mr. subsidiaries of the Group. of the He is also a director of the Group. majoring in of Science and Technology Hunan University graduated from Guangdong Guangzhou Panyu and served as a designer in architecture Design Institute ( Architecture and estate development over 10 years of experience in real Hu has 1998. Mr. for project in 1998, primarily responsible the Group management. He joined as well as new projects and Shenyang project management of Beijing project Hu has not held Mr. of the Company, development. Except for being a Director years. during the past three in any other listed public companies any directorship 3. Da Wei Hu ) ) 林錦堂胡大為 (

Directors and Senior Management (continued) and Senior Management Directors Lam Kam Tong, aged 41, is an executive Director of our Board and the Chief of our Board aged 41, is an executive Director Lam Kam Tong, He joined our of the Company. cer and Company Secretary Financial Offi appointed as an executive Company on 1 December 2008 and has been for the Lam is primarily responsible since 25 September 2009. Mr. Director investor law and regulations, of compliance with the relevant enforcement nancing. He has management, merger and acquisition and overseas fi relations audit and is a member of the Hong over 14 years of experience in professional ed Public Accountant and the Association of Chartered Kong Institute of Certifi in Business Degree ed Accountants. He also holds a Bachelor’s Certifi joining our The Chinese University of Hong Kong. Before Management from of another cer and company secretary nancial offi he was the chief fi Company, years. development business for three listed company engaged in PRC property Lam has not held any Mr. of the Company, Except for being a Director years. in any other listed public companies during the past three directorship Hu Da Wei Executive Director 4. ( Lam Kam Tong

Annual Report 2009

China Aoyuan Property Group Limited 22 China Aoyuan Property Group Limited Annual Report 2009 23 (武捷思) Wu Jie Si Wu Vice Chairman of the Board Non-executive Director and the ), ) ”), a non- 合生創展集招商銀行股份 ) 辛珠 ) and GDH Limited 粵海制革有限公司中國水務集團有限公 ) and Silver Base Group ) and Silver Base Group Xin Zhu, aged 41, is an executive Director of the Board and is an executive vice of the Board executive Director Xin Zhu, aged 41, is an has been She joined our Company in July 2008 and of our Company. president 2009. Ms. Xin is since 25 September Director appointed as an executive accounting as well as nance and for overseeing the fi primarily responsible auditing and over 20 years of experience in accounting, nancing. She has fi member of The Chinese Institute of nance management. She is a corporate fi in Australia a member of CPA ed Public Accountants and has become Certifi in Business Administration in Degree January 2010. She also holds a Master’s International The InternationalManagement from of Auckland Institute of College held any Ms. Xin has not of the Company, Studies. Except for being a Director years. in any other listed public companies during the past three directorship ). 中保國際控股有限公司 ). He is currently holding directorships in holding directorships ). He is currently 5. Zhu ( Xin 深圳控股有限公司 ) (formerly known as “China Insurance ), the deputy mayor of the Shenzhen Municipal ), as well as the assistant to the governor of ), China Merchants Bank Co., Ltd. ( ), China Merchants 廣東粵港投資控股有限公司 ) 廣東省省長助理 ), of Guangdong Investment Limited the honorary president ) and Guangdong Tannery Limited ( ) and Guangdong Tannery ) 銀基集團控股有限公司中國工商銀行武捷思深圳市副市長 ), the president of Shenzhen Branch of Industrial and Commercial of Shenzhen Branch of Industrial and Commercial ), the president 辛珠 ) and China Taiping Insurance International Insurance Holdings Company Limited ) and China Taiping 北京控股有限公司 ), Shenzhen Investment Limited ( 廣東控股有限公司粵海投資有限公司中國太平保險控股有限公司 ( Wu Jie Si, aged 58, is an non-executive Director and the vice chairman of the Jie Si, aged 58, is an non-executive Director Wu in the Group in Economics. He joined holds a Doctorate Degree Wu Mr. Board. for overseeing primarily responsible 2008 and acted as executive Director, nancing and mergers fi nancial management, strategic development planning, fi of framework of regulatory and revision and acquisitions, as well as improvement since 24 Director to be a non-executive and was then re-designated the Group, has over 20 years of banking and administrative Wu December 2009. Mr. nancial and corporational management sectors in Mainland experience in fi Gang Investment China. He was appointed as the chairman of Guangdong Yue Holdings Company Limited ( ( Xin Zhu ( Executive Director the managing director of Hopson Development Holdings Limited ( the managing director 團有限公司 Bank of China ( 有限公司 ( 司 Holdings Limited ( Government ( Guangdong Province ( Guangdong Province Exchange, including of the Stock certain companies listed on the Main Board of Beijing Enterprises Holdings being an independent non-executive director Limited ( International Holdings Company Limited ( Limited ( Group Affairs of China Water executive director 6. Jie Si ( Wu Directors and Senior Management (continued) and Senior Management Directors

) ), a ), a 梁秉聰 ( Non-executive Director 華潤置地有限公司 Last Year Photo Last Year 星辰通信國際控股有限公司 ), a company listed on the Shenzhen Stock ), a company listed on the Shenzhen Stock Leung Ping Chung Hermann ), a 無錫小天鵝股份有限公司 ) 無錫小天鵝股份有限公司 Paul Steven Wolansky, aged 54, was appointed as a non-executive Director and Director 54, was appointed as a non-executive aged Paul Steven Wolansky, a Bachelor of Arts on 3 April 2007. He holds Board the vice chairman of the Law Harvard from Doctor degree Amherst College and a Juris from degree and over 19 years of experience in fund management has Wolansky School. Mr. cer of New executive offi He is the chairman and the chief investment. direct The Cathay Inc., the investment manager of China Investment Management the investment and New China Capital Management L.P., Investment Fund, Ltd., II L.P.. and Cathay Capital Holdings manager of Cathay Capital Holdings, L.P. is of the Company, Limited, a substantial shareholder Cathay Sino Property was a non- Wolansky Mr. L.P. wholly owned by Cathay Capital Holdings, Land Limited ( of China Resources executive director of the Stock Exchange. He was also a company listed on the Main Board International Limited and Longtop of China Yuchai non-executive director Stock Exchange, Limited, both listed on the New York Financial Technologies Little Swan Company Inc., a company listed on Nasdaq, and Wuxi CNinsure Limited ( of Centron is a non-executive director Wolansky Mr. Exchange. Currently, International Holding Limited ( Telecom Leung Ping of the Stock Exchange. Mr. company listed on the Main Board Wolansky. Chung, Hermann is the alternate to Mr. Director 梁秉聰 ) and Vinda International Holdings Limited 7. Steven Wolansky Paul ), both listed on the Main Board of the Stock ), both listed on the Main Board 星辰通信國際控股有限公司 Directors and Senior Management (continued) and Senior Management Directors 維達國際控股有限公司 Leung Ping Chung, Hermann, aged 54, was appointed as a non-executive on 3 April 2007. He was nominated by Cathay Sino of the Board Director a He received of the Company. Limited, a substantial shareholder Property The Chinese from degree in social sciences and a Master’s degree Bachelor’s Leung has over 20 years of management and University of Hong Kong. Mr. region, and is an executive c the Asia Pacifi operational experience throughout of New China Capital Management (HK) Ltd. He was a non-executive director Little Swan Company Limited ( of Wuxi director company listed on the Shenzhen Stock Exchange, until January 2010. Currently, company listed on the Shenzhen Stock Exchange, until January 2010. Currently, International Holding Telecom of Centron Leung is a non-executive director Mr. Limited ( Exchange. Mr. Leung is the alternate Director to Mr. Paul Steven Wolansky. Leung is the alternate to Mr. Director Exchange. Mr. ( Paul Steven Wolansky Non-executive Director and the Vice Chairman of the Board 8. Leung Ping Chung Hermann (

Annual Report 2009

China Aoyuan Property Group Limited 24 China Aoyuan Property Group Limited Annual Report 2009 25

), both ) ) and Wang ) and Wang 宋獻中 ) and a consultant of Independent non-executive Director 旺城國際控股集團有限公司弘茂科技控股有限公司 ) since 11 June 2009 and 17 December Song Xian Zhong ( ), 信和置業有限公司 ) and China Shineway Pharmaceutical Group ) and China Shineway Pharmaceutical Group ) 馬桂園 ), a company 中國神威藥業集團有限公司金科數碼國際控股有限公司 Jardine Management Consulting Services Pty., Ltd. Mr. Ma has ceased to be an Ltd. Mr. Management Consulting Services Pty., Jardine International Holdings Limited of Vision Tech independent non-executive director ( Limited ( 2009 respectively. Currently, Mr. Ma is an independent non-executive director of director Ma is an independent non-executive Mr. Currently, 2009 respectively. Holdings Limited ( PacMOS Technologies Sing International Limited ( Holdings Group Ma Kwai Yuen, aged 57, was appointed as an independent non-executive appointed as an independent non-executive aged 57, was Ma Kwai Yuen, Institute of the Chartered 13 September 2007. He is a fellow member on Director of Chartered an associate member of the Institute of Management Accountants, associate member of the Chartered an and Wales), Accountants (England ed Practising Accountants of the Certifi Australia, a fellow member Secretaries ed Public member of the Hong Kong Institute of Certifi Australia, an associate He Directors, member of the Hong Kong Institute of Accountants and a fellow years of and has over 30 University of Wolverhampton from holds a LLM degree nancial management and business experience in accounting, fi professional of a consulting company in an executive director He is currently consultancy. held positions as the corporate planning manager Hong Kong. He has previously of Sino Land Company Limited ( are listed on the Main Board of the Stock Exchange., listed on the Main Board are 廣東冠豪高新技術股份有限公司 9. ( Kwai Yuen Ma ) ) ), with over 20 years of teaching and research ), with over 20 years of teaching and research 廣東九州陽光傳媒股份有限公司宋獻中馬桂園暨南大學 experience in the fi elds of accounting and fi nance, and has published many nance, and has fi elds of accounting and experience in the fi nance management, books and articles on topics such as enterprise fi for business responsible accounting nance and socially fi reorganization of Guangdong China he is an independent director enterprises. Currently, Sunshine Media Co., Ltd. ( Song Xian Zhong, aged 46, was appointed as an independent non-executive Song Xian Zhong, aged 46, was appointed of the on 13 September 2007. He is an executive committee member Director Expert Accounting Society of China, a member of the Accounting Standards Committee of Ministry of Finance, and the vice chairman of the Audit Institute of Song is also the head of the development planning division at Guangzhou. Mr. Jinan University ( listed on the Shenzhen Stock Exchange, and an independent director of listed on the Shenzhen Stock Exchange, and an independent director Co., Ltd. ( Guangdong Guanhao High-Tech a company listed on the Shanghai Stock Exchange. Ma Kwai Yuen ( Ma Kwai Yuen Independent non-executive Director 10. Song Xian Zhong ( Directors and Senior Management (continued) and Senior Management Directors 香 ), Lippo 維達國際控股有力寶有限公司 ), Hongkong Chinese Limited ( ) 力寶華潤有限公司徐景輝 ) and Vinda International Holdings Limited ( ), all listed on the Main Board of the Stock Exchange. of ), all listed on the Main Board Tsui King Fai, aged 60, was appointed as an independent non-executive Director independent non-executive Director King Fai, aged 60, was appointed as an Tsui Institute of He is a fellow member of the Hong Kong on 13 September 2007. of the Institute of Chartered ed Public Accountants, a member Certifi ed of Certifi and a member of the American Institute Accountants in Australia in accounting, has over 30 years of extensive experience Public Accountants. He in Mainland management, particularly in investments nance and investment fi nancial fi and senior consultant of a registered a director is Tsui China. Mr. for two of the “Big Four” audit services company in Hong Kong. He has worked of America and served in various rms in Hong Kong and the United States fi is Tsui Mr. Currently, senior capacity. public listed companies in Hong Kong in a of Lippo Limited ( an independent non-executive director Limited ( China Resources 港華人有限公司限公司 11. Fai ( King Tsui ) 徐景輝 Directors and Senior Management (continued) and Senior Management Directors Tsui King Fai ( Tsui Independent non-executive Director

Annual Report 2009

China Aoyuan Property Group Limited 26 Directors and Senior Management (continued)

Senior Management

1. Yang Zhong (楊忠)

Yang Zhong, age 41, is the chief operating offi cer. He has the qualifi cation of PRC registered real estate appraiser and registered supervision engineer with extensive, comprehensive professional and management experience in the running of real estate groups as well as the business operation of project companies. He served in China Overseas Property Group Co. Limited (中海地產集團有限公司) in 1993, engaging in real estate industry and working as the senior management for years, where he gained experience in managing various major business lines; in 2002, he joined Zovie Real Estate Group Company Limited (中惠熙元房地產集團有限公司) and served as the deputy vice president. He joined the Group in September 2009 and is primarily responsible for the overall coordination and management of the Group’s operational center and the business of various project companies.

2. Li Min (李敏)

Li Min, aged 44, is the deputy operating offi cer. He has the qualifi cation of PRC registered strategist for real estate operation, and has extensive real estate industry experience of real estate project planning and management as well as team management. He had served in Star River Property Holding Limited (星河灣地產控股有限公司) and Zhongshan Jianhua Real Estate Limited (中山市建華房地產發展有限公司). He joined the Group in December 2008 and is primarily responsible for brand marketing of the Group as well as the management and promotion of projects.

3. Wu Chen (吳晨)

Wu Chen, aged 34, is the vice president. He graduated from University of International Business and Economics. He had served in various renowned enterprises in China, including Beijing Lanse Gangwan Limited (北京藍色港灣有限公司) and Beijing Wuzhou Sports Development Limited (北京五洲縱橫體育發展有限公司) and has extensive experience in corporate management. He joined the the Group in September 2008 and is primarily responsible for new project development and investment development.

4. Liang Xiu Lei (梁秀蕾)

Liang Xiu Lei, aged 46, is an assistant to the president. She graduated from Sun Yat-sen University with a Bachelor’s degree. 27 She has extensive experience in marketing, operational management and promotion and had served in Gemdale Group (金地 China Aoyuan Property Group Limited 集團) as the deputy general manager and as the strategic manager in China Land (中地行), a renowned sales and strategy agency in the PRC and the general manager of its Wuchan branch company, etc. She fi rst joined the Group in July 2001 and served as the marketing director of Nanguo Aoyuan and the general manager of Guangzhou Aoyuan. She is now primarily responsible for project management of the Beijing project and business expansion.

5. Liang Ying (梁瑩)

Liang Ying, aged 38, is an assistant to the president. She graduated from University of Stirling in UK with a Master’s Degree in Investment Analysis and had studied in various overseas countries, including New Zealand and Singapore. She has extensive experience in marketing and promotion as well as years of experience in corporate expansion and internal management. She had served in Baker Furniture (Shanghai), a renowned US premier furniture brand, as managing director and as the director and general manager of Malaysia based KL Monorail System Sdn Bhd’s PRC subsidiary, etc. She joined the Group in June 2006 and is now primarily responsible for project management of projects in Shenyang area and business expansion. Annual Report 2009

6. Zhang Lin (張林)

Zhang Lin, aged 47, is an assistant to the president. He holds a Postgraduate degree and a Master degree of Science, with over 20 years of experience in administration, human resources management, marketing planning and practices. He had served in numerous renowned companies such as Suning Universal Group, Junan Securities and Guotai Junan Securities, where he was responsible for the management and control of operation as well as the management of human resources, etc. He joined the Group in June 2007 and is now primarily responsible for human resources management of the Group. Projects Summary

Major Projects:

30 Chang’an Ave 32 Nansha Aoyuan 34 Aoyuan Plaza 36 Aoyuan Zhongshan Plaza 38 Shenyang Aoyuan • International New Town 40 Shenyang Aoyuan • International Animation City 42 Chongqing Aoyuan • City of Health 44 Qingyuan Aoyuan

28 China Aoyuan Property Group Limited Annual Report 2009 China Aoyuan Property Group Limited Annual Report 2009 29 99.4 247.6 166.8 245.3 539.9 sq.m.) (thousand 16 8 Integrated residential communityIntegrated residential property High-rise apartments, commercial 2,432.0 Integrated residential communityIntegrated residential 732.3 Integrated residential community Integrated residential high-rise apartments and villas high-rise apartments high-rise apartments high-rise 15 5 ChongqingShenyang, Liaoning Shenyang, Liaoning property High-rise apartments, commercial Beijing 216.8 Qingyuan, GuangdongQingyuan, Guangdong property Villas, commercial Jiangmen, Guangdong property Villas, commercial Zhongshan, Guangdong community residential Integrated community Villas, integrated residential Ganzhou, Jiangxi 1,333.4 ce, GuangxiYulin, 703.4 offi property, Hotel, commercial 132.7 GuangxiYulin, 188.7 community Integrated residential community Integrated residential 405.8 1,048.9 Panyu, Guangzhou Panyu, GuangzhouPanyu, GuangzhouNansha, Guangzhou property High-rise apartments, commercial community Integrated residential Nansha, Guangzhouce and offi property, Hotel, commercial Nansha, Guangzhou community Integrated residential 44.1 Panyu, Guangzhouce and offi property, Hotel, commercial property Commercial 66.6 178.1 244.8 14 3 City of Health • International International • • City of Health • 12 Shenyang Aoyuan Yulin Aoyuan Yulin Aoyuan Plaza Fogang Aoyuan Qingyuan Aoyuan Jiangmen Aoyuan Aoyuan Zhongshan Plaza Panyu Aoyuan Guo Ao Investment Centre Development Nansha Aoyuan Sea of Aoyuan Territorial International Guangzhou Aoyuan Animation City New Town Beijing Chang’an Ave Shenyang Shenyang Aoyuan Chongqing Chongqing Aoyuan Jiangxi Jiangxi Aoyuan Guangxi Aoyuan Yulin Project NameProject Location of Property Type Bank Land Guangdong Nanguo Aoyuan 17 14 10 11 7 8 9 5 6 3 4 2 18 16 15 12 13 1 1 Project Summary

30 Chang’an China Aoyuan Property Group Limited Ave Annual Report 2009 Project Summary (continued)

Chang’an Ave

The project is situated in the southeast section, intersection of Jianguo Road and Xidawang Road of Chaoyang District, with Dawang Road, the Wealth Avenue under planning, lying in its west and with Jianguo Road and Huamao Center along Chang’an Avenue in the north. The project is in close proximity with CBD center, with SOHO New Town, Wanda Plaza, Gemdale Plaza and Guomao Commercial Circle in the west and the Huamao Business Circle and Shin Kong Place in the north. The project features the sole high-end residential project with a title of 70 years on sale situated in the fi rst row of CBD center in eastern Chang’an Avenue within the Fourth Ring Road. The complimentary facilities in the surroundings are well established and the project is close to the exit of Dawang Road of metro Line 1 with prime location and convenient transportation. The eastern side of the project is the 150,000 sq.m. sport theme park of Huamao Center, while Chengjian Group Daoqiao Company (城建集團道橋公司) is situated in the south with the Tonghui River nearby. With the redevelopment of Dawang Road, construction of Tonghuihe Bei Road and the green zone along Tonghui River, the project will occupy a more superior transportation network and scenery.

The project has a total GFA (including saleable and non-saleable) of approximately 247,000 sq.m., of which, the GFA above ground is approximately 174,000 sq.m.. The project is planned to be a composite one comprising serviced apartments, luxury apartments and commercial properties, with the major structure divided into two towers — north and south tower. Of which, the 40-fl oor high-end apartment of the south tower has approximately 102,000 sq.m., the 43-fl oor north tower comprises of business serviced apartment of approximately 49,000 sq.m., and the 4-fl oor commercial complex has an area of approximately 23,000 sq.m..

The project has comprehensive complimentary facilities and the GFA of a single level of the commercial complex is 31

approximately 5,000 sq.m.. The property is self-owned and unifi ed for renting out for operation. The project is designed China Aoyuan Property Group Limited with two clubhouses, a four-level of approximately 3,900 sq.m. in the north tower and approximately 2,100 sq.m. in the south tower. The underground portion of the project comprises of one level of commercial facilities and three levels of carpark.

Chang’an Ave strives to build the leading apartment with a high degree of comfort and low carbon level in the CBD of Chang’an Avenue. With its contemporary style, the whole construction is a natural integration of classical Chinese culture and contemporary Western design concept. Chang’an Ave uses 15 world’s leading low-carbon technologies and focuses on paving the way to a life with a high degree of comfort and low carbon level, making it the very fi rst high-end property with overall application of advanced low-carbon technologies and system in the CBD of Beijing. Annual Report 2009 Project Summary

32 China Aoyuan Property Group Limited Nansha Aoyuan Annual Report 2009 Project Summary (continued)

Nansha Aoyuan

Nansha Aoyuan is located on Zhujiang Road East of Nansha Economic and Technological Development Zone in Guangzhou, Guangdong Province, within the planned area of “Little Nansha”, which is a key project in the development plan “Exploration to the South” of the Guangzhou government. Surrounded by green hills to the east, west and north, and facing the Nansha Information Technology Park and the Pearl River estuary to the south, Nansha Aoyuan is the only ecological property project in Guangzhou that embraces thousand acres of primitive ecological forest resources and simultaneously enjoys the view of mountain, forest, lake and sea. The project is a residential development which comprises diversifi ed products such as villas, high-rise, multi-rise and low-rise apartment buildings.

For the year ended 31 December 2009, completed properties in Nansha Aoyuan have a GFA (including saleable and non-saleable) of approximately 48,000 sq.m., properties under construction have a GFA (including saleable and non- saleable) of approximately 105,000 sq.m., and properties held for future development have a GFA (including saleable and non-saleable) of approximately 25,000 sq.m..

In April 2009, China Aoyuan Property Group and Traditional Chinese Medicine University of Guangzhou duly signed an agreement to develop the Regimen Center of Guangzhou University of Chinese Medicine and Nansha Aoyuan by leveraging upon the advantages of ecological resources in Nansha Aoyuan which features a regimen themed hotel. Upon completion, the project will become a unique regimen center by targeting customers from the Pearl River Delta region, other parts of Guangdong province as well as Hong Kong and Macau, with the mission of providing a lifestyle of “Gas Station for Life & Guarantee for Health” for the people who enjoy life and care for health. The fi fth district of Nansha Aoyuan is being planned to be a high-end sea view villa community situated on the peak with the theme of “low carbon 33

and regimen”. China Aoyuan Property Group Limited Annual Report 2009 Project Summary

34 China Aoyuan Property Group Limited Aoyuan Plaza Annual Report 2009 Project Summary (continued)

Aoyuan Plaza

The project is situated in Xili Road in Qiaonan in Panyu District, the future commercial and residential center in Panyu District in Guangzhou with Tongcheng Road on the east, Dexian Road on the west, Nanhua Road on the north and Fude Road West on the south, and is opposite to a big park. Surrounded by various large high-end residential communities such as Panyu Aoyuan, the project also features a number of facilities under construction or to be constructed, and gathers the consumer group of about 0.3 million people around Shiqiao, and thus it is in a superior location of great business potential with suffi cient and steady customer fl ow. The project occupies a total land area of approximately 65,000 sq.m. and a total GFA (including saleable and non-saleable) of approximately 245,000 sq.m.. The project is linked with highways, heading to the Old Town Area of Shiqiao and center of Guangzhou to the north and Nansha Industrial Port to the south. The project is also situated near three speedways with connection between the east and west, linking other parts of the Pearl River Delta including Shenzhen and Dongguan which represents a superior location.

Aoyuan Plaza is developed with the objective of becoming the “comprehensive regional shopping mall” and the success of international renowned enterprises is acquired and absorbed throughout the planning and design stage. The project mainly comprises of three components: centralized shopping mall, serviced apartments, and commercial street. Positioned as a regional, comprehensive and fashionable shopping mall with the features of shopping, entertainment/ catering and recreation facilities, the project can be considered as an innovative business model by comprising such comprehensive functions. The commercial street makes use of natural light and scenic structures to create an open urban lifestyle platform with a humanized perspective and an array of interest, which interacts with the shopping mall to build a brand new romantic recreational area. 35 China Aoyuan Property Group Limited Annual Report 2009 Project Summary

36 China Aoyuan Property Group Limited Aoyuan Zhongshan Plaza Annual Report 2009 Project Summary (continued)

Aoyuan Zhongshan Plaza

Aoyuan Zhongshan Plaza is located in Guangfeng Community in West District of Zhongshan City, which was awarded as the “Habitat Scroll of Honor” by the United Nation and named the Garden City of China, City of Harmony of China and National Model City of Environmental Protection. The project occupies a total land area of 350,000 sq.m. and a total GFA (including saleable and non-saleable) of 703,000 sq.m..

With Xingchen Garden (星晨花園) on its eastern side, the project is connected to Guangzhou-Zhuhai Intercity Mass Rapid Transit on the western side and Sha Lang Community on the northern side, while the northern outer ring is located in the its south. Nan Liu Yong, the tributary of Qi Jiang River fl ows through the center of the plaza where people can relax and live by the water along the 1,500-metre long river shore. Served with Shiqi Station of the light transit 1.5 km away, the project is situated in a superior location which belongs to the core area of the Shiqi Station District, Zhongshan City.

Shiqi Station of the Guangzhou-Zhuhai light transit is the sole station within downtown of Zhongshan. The distance among other cities in the Pearl River Delta is thus shortened, with 40-minute travel to the downtown of Guangzhou and just 20 minute away from cities like Zhuhai. According to the development plan of Zhongshan, commercial auxiliaries around light transit stations will be enhanced and thus the project, being a light-transit property, has great potential for appreciation in the future.

The project is planned and divided into different groups for organic separation and combination, which puts emphasis on the harmonious relationship within a healthy community to form an organic community as a whole, including different 37

types of construction such as villas, apartments, commercial facilities and serviced apartments, covering a great variety China Aoyuan Property Group Limited of selection from 30 to 400 sq.m.. The low-rise residence (villa) of Phase I of the project has innovative design and the area ranges from 170 to 350 sq.m..

Adhering to the credo of “composite property”, China Aoyuan strives to make Aoyuan Zhongshan Plaza the chief health city in Zhongshan. Success was gained in declaring Aoyuan Zhongshan Plaza the “Healthy House Construction Pilot Site” (健康住宅建設試點項目), and the residence and living environment engineering and technical center of the Ministry of Construction will guide the construction of the project with its full power to introduce the concept of health and regimen to Aoyuan Zhongshan Plaza. The project is built with comprehensive compliments with various facilities such as school, kindergarten, commercial properties, clinic, integrated market and community service center within the community of the project. Annual Report 2009

In June 2009, the Group entered into an agreement to acquire Aoyuan Zhongshan Plaza by acquiring 100% equity interest of Earning Ever Limited for a consideration of approximately RMB640 million. Among which, the Group obtained an approximately RMB590 million bank loan with interest rate of 4.5% per annum (interest will be exempted if repaid on a timely basis) by way of entering into a 3-year loan agreement with a bank. It is anticipated that the internal rate of return of this project will be quite satisfactory. Project Summary

38 .

China Aoyuan Property Group Limited Shenyang Aoyuan International New Town Annual Report 2009 Project Summary (continued)

Shenyang Aoyuan . International New Town

Shenyang Aoyuan • International New Town is located in new town core area of Hun River linking with the north of Sujiatun District and Shenyang downtown, occupying a total land area of approximately 608,000 sq.m. and a total GFA (including saleable and non-saleable) of approximately 2,432,000 sq.m..

Situated in the new town core area of Hun River, Shenyang Aoyuan • International New Town is in close proximity to Shenyang-Suzhou Expressway and is merely one road next to the International Exhibition Center of Shenyang under construction. The project is surrounded by the planned extended exit of Exhibition Center station of metro line 4, Technology and Industry Park of Northeastern University, Vanke Residence Industry Unifi cation Base and New Shenyang Express-railway Station of Hada Passenger Dedicated Line, while Liaoning Sports Academy and private schools of primary, secondary and tertiary levels lie on the east, enriching the area with an atmosphere of learning and raising the social value. The project is conveniently located, and is about 10 kilometers away from the downtown and only about 10-minute drive from Taoxian International Airport.

The planning of Shenyang Aoyuan • International New Town includes a white gold star grade hotel, serviced apartment, A-grade offi ces, large shopping mall and exotic commercial street, fi ve-star regimen clubhouse, detached villas, small high-rise scenic apartments, high-rise apartments, kindergarten and primary school. The project is planned to be a modern “Regimen city” with the theme of low carbon, health and environment protection, which will be a enormous composite international business city embracing recreation and entertainment, offi ces, high-end residences, serviced apartments with the theme of regimen, SOHO international business apartments as well as education and auxiliary facilities. 39 China Aoyuan Property Group Limited Annual Report 2009 Project Summary

40 .

China Aoyuan Property Group Limited Shenyang Aoyuan International Animation City Annual Report 2009 Project Summary (continued)

Shenyang Aoyuan . International Animation City

Shenyang Aoyuan • International Animation City is located in the south coast of Hun River in Dongling District in Shenyang, specifi cally with Province Road No. 107 in the east, sub-boundary of Gan River in the west, Shenyang- Fushun Expressway in the south and the south coast of Hun River in the north. With a view of Qipan Hill, Shiboyuan and Niao Island in the north, the project is the common city centre of Shenyang and Fushun with superior ecological environment. The project features animation industry, culture industry and animation related industry such as audio, video, electronic entertainment, toys, online game, tourism and education, creating the world’s top base for creative industry.

Shenyang Aoyuan • International Animation City adopts a development mode of composite property, which combines “animation industry + tourism industry + real estate industry”, developing and constructing theme park, creative industry park and auxiliary functions like business, commercial, exhibition, recreation and entertainment as well as culture and tourism. The project is planned to comprise international headquarters, electronic family show room, animation education and training center, animation technology R&D center, animation creative industry center, animation OVA production center, international video creation base, water art salon, creative future education experiencing center, creativity workshop, animation building and artist village, ecological commercial offi ce center, shopping center, international animation exchange center, expert living auxiliary area, river-view apartments as well as animation and media art school. With the combination of animation industry area, animation auxiliary area and animation tourism area, we are committed to promote the effective interaction and cooperation of enterprises within the region and even worldwide via building the industry value chain in respect of research and development, production, business, exhibition, recreation and entertainment as well as culture and tourism, so as to drive and facilitate regional economy and industry 41

upgrading for accomplishing the status of a top creative center and animation city in China. China Aoyuan Property Group Limited

Shenyang Aoyuan • International Animation City will become the new major growing point of Shenyang, which will enhance the strength of the industry potential, speed up the formation of various industries, as well as, lead to the radiation of consumption within the region.

For the year ended 31 December 2009, Shenyang Aoyuan • International Animation City occupies a total land area of approximately 579,000 sq.m. and a total GFA (including saleable and non-saleable) of approximately 732,000 sq.m.. Annual Report 2009 Project Summary

42 Chongqing Aoyuan . China Aoyuan Property Group Limited City of Health Annual Report 2009 Project Summary (continued)

Chongqing Aoyuan . City of Health

Chongqing Aoyuan • City of Health (formerly known as Jiang Wan Yu Jing 江灣御景) , the Group’s fi rst large-scale integrated community in Chongqing, is located in Jiubing Road, the center of Chongqing and occupies the prime conjunctional area of Jiulongpo District and Yuzhong District. The region will become one of the major commercial area in Chongqing’s future development, which will be built as the garden of CBD in Jiefangbei, and as planned by the government, within the “10-minute Central Yuzhong living circle which becomes the hub connecting different area”. The area, now attracts numerous fi rst class developers nationwide and Chongqing, and has a great potential for appreciation.

Chongqing Aoyuan • City of Health is located with Xin Dongfu Garden (新東福花園) in the northern side and Yangtze River in the eastern side with Lishui Mansion (麗水菁苑) in close proximity to its southeastern side . The project enjoys the precious close view of Yangtze River and overlooks two picturesque city parks, namely Jiubin Road Ecological Riverside Park and Huangshaxi Municipal Park. The project is designed with the outlook of Gothic style castle and Mediterranean garden that bring exotic sunshine and romantic atmosphere.

Chongqing Aoyuan • City of Health occupies a total land area of approximately 138,000 sq.m., and has a total GFA (including saleable and non-saleable) of approximately 595,000 sq.m.. As at 31 December 2009, the project has a completed GFA (including saleable and non-saleable) of approximately 204,000 sq.m., GFA of property under construction (including saleable and non-saleable) of approximately 13,000 sq.m.. With high slope area and low level area on both sides, the project is divided into three plots of land namely A, B and C in accordance with different heights of the land and the distinction of city roads. With construction commencing from 2007, the topping all buildings in 43

District A, District B and District C at the same time was achieved in October 2008, and the entire project was China Aoyuan Property Group Limited completed, examined and received smoothly in September 2009, now launching sales of existing units or ready-for- delivery units. The project consists of apartments, small high-rise buildings, high-rise buildings and exotic commercial streets, etc.. The structure ranges from units with a room and a living area to two-level units with an area ranging from 40 to over 200 sq. m., enriching the variety of products with reasonable structure.

Groups such as Oscar No. 9 (奧斯卡9號), Jin Zong Lu (金淙櫚) and Cannes Gold (戛納金像) in District A have achieved satisfactory results since their launches in 2009. According to the statistics released by the Bureau of Land Resources

and Housing Management of Chongqing Municipality, Chongqing Aoyuan • City of Health entered into the monthly TOP

10 single site sales ranking of Chongqing in 2009 for 10 times. In addition, Chongqing Aoyuan • City of Health also

ranked No. 1 in terms of area and units sold for single site as well as total transaction amounts for a single a high-rise Annual Report 2009 site in Chongqing property market in 2009. Project Summary

44 China Aoyuan Property Group Limited Qingyuan Aoyuan Annual Report 2009 Project Summary (continued)

Qingyuan Aoyuan

Qingyuan Aoyuan is located at the Dongcheng new area along the east coast of Bijia River. The district is the future administrative, fi nancial and residential center integrating superior ecological resources, comprehensive public facilities including comprehensive commercial area, high-end residential area, school, ecological park, coastal recreation area as well as dimensional transportation facilities such as cable light rail, railway and bus station, which is built as the central urban living area.

Qingyuan Aoyuan features unrivaled natural resources, including the nearby natural ecological scenic area Bijia Hill, the provincial scenic area Feilai Gorge with renowned scenery in the Southern China and plenty of old relics, the scenic Songsu Hill ecological park which stretched out several kilometers around the whole Dongcheng area. Under such environment, the quality new city area is a green and recreational city surrounded by hills and water.

Upon the running of Wuhan-Guangzhou High-Speed Railway, Qingyuan, being the fi rst station along the line heading to the north, is just 15 minutes from Guangzhou by rail and will be integrated into the 30-minute living circle between Guangzhou and Qingyuan upon the construction and commencement of Guangzhou-Qingyuan light transit. The project is situated conveniently with close proximity to major civic facilities such as Qingyuan Polytechnic, new Qingyuan government offi ce building and new bus terminal.

Professor Wang Shouzhi, a renowned U.S. architect, acts as the consultant of the project. Qingyuan Aoyuan is newly upgraded as a trophy project integrating the advanced and detailed design in its decoration and renovation, which greatly raised the level of comfort indoor. The very fi rst elderly apartment adopts the unique worker’s passage, which highlights the status of the house owner.

The project occupies a total land area of 95,000 sq.m. and a total GFA of 209,000 sq.m.. The 72 fi rst launched units of 45 double attached and 6-attached villas achieved a sale of over RMB100 million on 30 September 2009, the fi rst day of China Aoyuan Property Group Limited launch, which has made the record for the sales results of Qingyuan. For the period ended 31 December 2009, the GFA (including saleable and non-saleable) of the completed properties of Qingyuan Aoyuan is approximately 4,000 sq.m., the GFA (including saleable and non-saleable) of the property under construction is approximately 2,000 sq.m. and the GFA (including saleable and non-saleable) of the property for sustainable future development is approximately 183,000 sq.m.. Annual Report 2009 Corporate Governance Report

The Board of Directors (the “Board”) of the Company is pleased to present this Corporate Governance Report in the Group’s annual report for the year ended 31 December 2009.

The Company focuses on maintaining high standard of corporate governance in order to achieve sustainable development and enhance corporate performance.

The Board strives for adhering to the principles of corporate governance and has adopted sound corporate governance practices to meet the legal and commercial standards, focusing on areas such as internal control, fair disclosure and accountability to all shareholders to ensure the transparency and accountability of all operations of the Company.

Throughout the year under review, the Company has complied with provisions as set out in the Code on Corporate Governance Practices (the “Code”) contained in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) (the “Listing Rules”) except for the deviations as disclosed in this report.

The Board will continue to review and improve the corporate governance practices of the Group from time to time to ensure that the Group is led by an effective Board in order to optimize return for shareholders.

1. The Board of Directors

Responsibilities

The Board’s major roles are to oversee the management, businesses, strategic directions and fi nancial performance of the Group as well as to optimize return for its shareholders. The Board is responsible for the leadership and control of the Company and is collectively responsible for directing and supervising the Company’s affairs. The Board is also fully responsible for the formulation of business plans and strategies in relation to the business operation of the Group, including dividend policy and risk management strategies. The Board has delegated the authority and responsibilities to the senior management for the day-to-day management and operations of the Group. In addition, the Board has also established Board committees 46 and has delegated various responsibilities to these Board committees as set out in their terms of reference respectively. China Aoyuan Property Group Limited All Directors have carried out their duties in good faith and in compliance with the standards of applicable laws and regulations, and have acted in the interests of the Company and its shareholders at all times.

Delegation of Management Functions

The Board reserves its decisions for all major matters of the Company, including the approval and monitoring of all policy matters, overall strategies and budgets, internal control and risk management systems, material transactions in particular those may involve confl ict of interests, fi nancial information, appointment of Directors and other signifi cant fi nancial and operational matters.

All Directors have full and timely access to all relevant information as well as the advice and services of the company secretary, Annual Report 2009 with a view to ensuring that the procedures of the Board and all applicable rules and regulations are followed. Each Director is normally able to seek independent professional advice in appropriate circumstances at the Company’s expense, upon making request to the Board. China Aoyuan Property Group Limited Annual Report 2009 47 cer Chairman and Chief Executive Offi cer should be separated and of chairman and chief executive offi that the roles A.2.1 of the Code provides The provision should not be performed by the same individual. that the Board responsible to ensure He is cer of the Company. acts as the chairman and chief executive offi Guo Zi Wen Mr. business leadership for the running of the Company’s and formulates business strategies. He also provides works effectively as the in his dual capacity Guo Zi Wen believes that Mr. The Board and implementing the policies devised by the Board. and consistent leadership for the development and strong can provide cer of the Company, chairman and chief executive offi and implementation of business decisions and strategies of the Group. cient planning and effi allow for effective The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as by Directors for Securities Transactions The Company has adopted the Model Code The Company has made for securities transactions by Directors. as the standard set out in Appendix 10 of the Listing Rules the year rmed that they have complied with the Model Code throughout confi and all the Directors enquiries of all the Directors ended 31 December 2009. the Model Code (the “Employees Written The Company has also established written guidelines on no less exacting terms than likely to be in possession of unpublished price- employees who are Guidelines”) for securities transactions by the relevant sensitive information of the Company. employees was noted by the Company. Guidelines by the relevant No incident of non-compliance of the Employees Written Compliance with the Model Code for Directors’ Securities Transactions for Directors’ Compliance with the Model Code Board Composition Board 3 non-executive Directors Directors, composed of a total of 11 members, which includes 5 executive is currently The Board annual set out on pages 20 to 26 of this are The biographies of the Directors and 3 independent non-executive Directors. time Company from (by category) is also disclosed in all corporate communications issued by the The list of Directors report. and independent non-executive believes that the non-executive Directors to time pursuant to the Listing Rules. The Board ict strategies, performance, confl Group’s their independent judgment on issues in connection with the have brought Directors Guo Zi Mr. and safeguarded. considered are of all shareholders so that the interests and management process of interests Guo Zi Ning. of Mr. is the brother Wen to the of the Listing Rules relating requirements at all times met the the Board During the year ended 31 December 2009, Director with at least one independent non-executive non-executive Directors independent appointment of at least three nancial management expertise. fi related cations, or accounting or qualifi professional possessing appropriate The senior management of the Company has been delegated the authority and responsibilities by the Board for the day-to- by the Board authority and responsibilities of the Company has been delegated the The senior management systems and control organizational structure, as well as the formulation of operation of the Group day management and has to be Approval periodically reviewed. and work tasks are The delegated functions and processes. internal procedures into by the senior management. cant transactions entered prior to any signifi the Board obtained from Remuneration Committee and Audit the Nomination Committee, committees, namely, has established three The Board are committees of the Company All Board affairs. and Company’s particular aspects of the Board Committee, for overseeing has the full Board request. The upon available to shareholders are which reference ned written terms of established with defi management to discharge its responsibilities. support of the senior Corporate Governance Report (continued) Governance Report Corporate y

ng r and Corporate Governance Report (continued) Governance Report Corporate rotation. a with the Articles to remove accordance at any general meeting convened and held in The members of the Company may, ce notwithstanding anything contrary in the Articles or in any the expiration of his period of offi at any time before Director between the Company and such Director. agreement Each of the executive Directors, non-executive Directors and independent non-executive Directors of the Company has and independent non-executive Directors non-executive Directors Each of the executive Directors, c term. Such term is subject to his for a specifi into a service contract or a letter of appointment with the Company entered The articles of association (the ”Articles“) retirement. by the Company at an annual general meeting (“AGM”) upon re-election ce only shall hold offi ll a casual vacancy in the Board to fi appointed by the Board that any Director of the Company provide re-election at such meeting. of the Company and shall then be eligible for rst general meeting of the members until the fi ce only until the next followi offi shall hold as an addition to the existing Board appointed by the Board Besides, any Director b retirement shall not be taken into account for ll a casual vacancy or as an addition to the Board to fi appointed by the Board Appointment, Re-election and Removal of Directors Appointment, Re-election and Removal Independent Non-Executive Directors Independent Non-Executive their independent judgment and their by virtue of role in the Board cant play a signifi Directors The independent non-executive strategies, view on issues of the Company’s decision. They bring an impartial cant weight in the Board’s views carry signifi performance and control. advice on the Company’s independent can provide Directors also considers that the independent non-executive The Board of the the interests and hence, of shareholders, all interests management so as to safeguard and business strategies, results can be protected. Company and its shareholders they possess to serve the Company and cient time and efforts suffi have offered All independent non-executive Directors experience and have contributed to the Board related management cations and qualifi academic and professional appropriate opinions. with their professional rmed their of the Company had confi independent non-executive Directors For the year ended 31 December 2009, all independent non-executive with the Listing Rules. The Company considers all independence to the Company in accordance guidelines set out in the Listing Rules. with the independence to be independent in accordance Directors AGM of the Company and shall then be eligible for re-election. AGM of the Company and shall then be eligible by rotation (whether executive or non-executive) is subject to retirement of all Directors Pursuant to the Articles, one-third years. A retiring at least once every three shall be subject to retirement that every Director at each AGM provided re-election Any Directo the meeting at which he retires. throughout and continues to act as a Director is eligible for re-election Director

Annual Report 2009

China Aoyuan Property Group Limited 48 China Aoyuan Property Group Limited Annual Report 2009 49 y nged whenever necessary. Board Meetings Board nancial performance of to discuss and formulate the overall strategy as well as the operation and fi meets regularly The Board means of communications. electronic may participate either in person or through Directors the Group. in advance. Board normally made available to Directors of each meeting are Annual meeting schedules and draft agenda each at least 3 days before sent to all Directors are information complete and reliable papers together with all appropriate, nancial position of the apprised of the latest developments and fi meeting or committee meeting to keep the Directors Board also have separate and independent and each Director decisions. The Board Company and to enable them to make informed necessary. access to the senior management whenever rules and that all applicable agenda for meetings and ensures the assists the chairman in preparing The company secretary time after each for comment within a reasonable to Directors circulated normally Draft minutes are followed. are regulations inspection. version is opened for Director’s nal meeting. The fi as soon as practicable after the meeting and approval the meetings and have the opportunit in issue before to the matters materials relating relevant with provided are All Directors Induction and Continuing Development for Directors Induction and Continuing occasion of his rst on the fi induction tailored formal and a comprehensive, receives Director Each newly appointed the Company and of the business and operations of understanding that he has appropriate ensure appointment, so as to requirements. regulatory and relevant and obligations under the Listing Rules of his responsibilities that he is fully aware to and the business and market changes developments, continually updated with legal and regulatory are The Directors will be arra Directors development to professional ngs and briefi Continuing of their responsibilities. facilitate the discharge to include matters in the agenda for Board meetings. to include matters in the agenda for Board meeting. During the year Board notice should be given for a regular A.1.3 stipulates that at least 14 days’ Code provision to suit the tight meetings in order Board ended 31 December 2009, less than 14 days’ notice was given for certain regular and busy schedules of the participants. counted in the quorum at voting and not to be from to abstain Directors requiring contains provisions Articles The Company’s have a material interest. or any of their associates transactions in which such Directors meetings for approving Corporate Governance Report (continued) Governance Report Corporate 4/6 2/6 6/6 2/4 6/6 6/6 6/6 6/6 6/6 5/6 2/2 2/2 4/4 Number of meetings held Number of meetings Number of meetings attended/ Number of meetings (Mr. Leung is also the alternate Leung is also (Mr. (vice chairman) (resigned on 24 September 2009) (appointed on 25 September 2009) (resigned on 24 September 2009) (chairman and chief executive offi cer) offi (chairman and chief executive (vice chairman) (re-designated on 24 December 2009) (vice chairman) (re-designated on 24 December (appointed on 25 September 2009) Corporate Governance Report (continued) Governance Report Corporate Mr. Paul Steven Wolansky Wolansky Paul Steven Mr. Chung, Hermann Leung Ping Mr. Paul Steven Wolansky) Director of Mr. He Jian Bing Mr. Independent non-executive Directors Ma Kwai Yuen Mr. Song Xian Zhong Mr. King Fai Tsui Mr. Executive Directors Guo Zi Wen Mr. During the year ended 31 December 2009, 6 full Board meetings were convened at approximately quarterly intervals for quarterly intervals convened at approximately meetings were 31 December 2009, 6 full Board During the year ended strategies and the overall and approving and operating performance, and considering nancial the fi and approving reviewing meetings is set out below: at these Board of the Directors The attendance policies of the Company. Mr. Guo Zi Ning Mr. Hu Da Wei Mr. Lam Kam Tong Mr. Ms. Xin Zhu Zheng Jian Jun Mr. Non-executive Directors Jie Si Wu Mr. Nomination Committee for considering and nominating suitable candidates to become members The Nomination Committee is primarily responsible on size and composition of the Board the structure, for reviewing The Nomination Committee is also responsible of the Board. for the that it has a balance of expertise, skills and experience appropriate to ensure basis and is required a regular of the business of the Company and assesses the independence of the independent non-executive Directors. requirements Song Mr. Ma Kwai Yuen, Leung Ping Chung, Hermann, Mr. Mr. Guo Zi Wen, The Nomination Committee is comprised of Mr. is the chairman of the said committee. Guo Zi Wen King Fai. Mr. Tsui Xian Zhong and Mr. and all members attended the During the year ended 31 December 2009, the Nomination Committee have held 3 meetings meetings. The Nomination Committee size and composition of the Board. structure, the current The Nomination Committee reviewed appointed as and Ms. Xin Zhu who were Lam Kam Tong on the appointment of Mr. to the Board has made recommendations also made recommendation of the Company on 25 September 2009. The Nomination Committee has the executive Directors of the Company on as the non-executive Director Jie Si who was re-designated Wu of Mr. on the re-designation to the Board Zheng Jian Jun and Mr. of Mr. 24 December 2009. The Nomination Committee has also made discussion on the resignation on 24 September 2009. respectively and non-executive Director as executive Director He Jian Bing who resigned and Ms. Xin Zhu have been appointed as executive Lam Kam Tong Articles, since Mr. with the Company’s In accordance and being eligible, offer Lam and Ms. Xin shall retire during the year 2009, Mr. of the Company by the Board Director Hermann and Leung Ping Chung, Guo Zi Ning, Mr. at the next forthcoming AGM. In addition, Mr. themselves for re-election at the next forthcoming AGM. themselves for re-election and being eligible, offer rotation by Song Xian Zhong shall retire Mr.

Annual Report 2009

China Aoyuan Property Group Limited 50 China Aoyuan Property Group Limited Annual Report 2009 51 Audit Committee of the Listing Rules for the purposes of reviewing with the requirements The Audit Committee was established in accordance responsible for the cant or unusual items raised by staff reports and consider any signifi nancial statements and the fi reporting function, internal nancial audit department or external submission to the Board. auditors before accounting and fi reporting nancial fi supervision over the Group’s and provide to review Besides, the main duties of the Audit Committee are on any material issues to the Board system, internal make recommendation system and risk management system and control on the appointment, to the Board for making recommendation The Audit Committee is also responsible thereto. in relation and terms of engagement of the external of the external the remuneration and removal auditors, approving re-appointment or dismissal of such auditors. The Audit Committee meets whenever auditors and considering any questions of resignation and accounting issues. Their written terms external auditors to discuss the audit process deem necessary with the Company’s in line with the Code provisions. are of reference Song Xian Zhong Mr. Ma Kwai Yuen, namely Mr. independent non-executive Directors The Audit Committee consists of three is the chairman of the said committee. None of the members of the Audit Committee Ma Kwan Yuen King Fai. Mr. Tsui and Mr. existing external auditors. is a former partner of the Company’s The Remuneration Committee is responsible for making recommendations, reviewing and approving the executive Directors’ the executive Directors’ and approving reviewing for making recommendations, is responsible The Remuneration Committee on the to the Board recommendations ts as well as making and other benefi remuneration and senior management’s Besides, the is reasonable. remunerations that the level of their to ensure of non-executive Directors remuneration for structure policy and on the Company’s to the Board for making recommendations Remuneration Committee is responsible for developing such procedures transparent and senior management and establishing of Directors all remuneration will participate in deciding his own or any of his associates no Director that to ensure policy and structure remuneration is comprised The Remuneration Committee in line with the Code provisions. are Their written terms of reference remuneration. Chung, Hermann is the Leung Ping Mr. Ma Kwai Yuen. Mr. King Fai and Tsui Chung, Hermann, Mr. Leung Ping of Mr. chairman of such committee. packages on business needs and industry practice. is to maintain fair and competitive policy on remuneration The Company’s workload and and factors such as each Director’s the market rates the Directors, For determining the level of fees payable to when determining the remuneration considered will be taken into account. The following factors are commitments required packages of executive Directors: — Business needs and company development; — and individual contribution; Responsibilities of the Directors — conditions; uctuations and changes in competitive markets, e.g. supply/demand fl Changes in appropriate — Retention considerations and individual potential. the Remuneration Committee have held 3 meetings and all members attended the During the year ended 31 December 2009, meetings. remuneration and the of the Company, policy and structure the remuneration The Remuneration Committee has reviewed and the senior management. packages of the executive Directors Remuneration Committee The Nomination Committee recommended the re-appointment of the Directors standing for re-election at the next forthcoming standing for re-election of the Directors the re-appointment recommended The Nomination Committee AGM of the Company. standing for re-election. of the Directors 30 April 2010 contains detailed information dated circular The Company’s Corporate Governance Report (continued) Governance Report Corporate

Corporate Governance Report (continued) Governance Report Corporate to the Company was HK$3,659,091. and budget. reporting function, and their training programs nancial accounting and fi its system of internal and for reviewing for maintaining a sound and effective control has overall responsibility The Board and risk management, to safeguard nancial, operational, compliance on fi of the controls particularly in respect effectiveness, assets. investment and the Group’s shareholders’ Internal Control of the of the effectiveness the Audit Committee, has conducted a review through Board, the During the year under review, of the Group’s cations and experience of staff qualifi including the adequacy of resources, internal system of the Group control Deloitte Touche Tohmatsu, the external auditors of the Company, are responsible for providing audit services in connection for providing responsible are the external auditors of the Company, Tohmatsu, Deloitte Touche for the year ended 31 December 2009. nancial statements of the Group with the consolidated fi is set out in the their working scope and responsibilities The statement of the external of the Company regarding auditors Report” on pages 63 to 64 in this annual report. “Independent Auditor’s of its statutory audit services provided in respect Tohmatsu the fee paid to Deloitte Touche During the year 2009 under review, External Auditors’ Remuneration The Board, supported by the fi nance department, is responsible for the preparation of the consolidated fi nancial statements of fi of the consolidated responsible for the preparation nance department, is supported by the fi The Board, nancial statements for the year ended 31 December 2009, International of consolidated fi In the preparation the Group. used and accounting policies have been consistently have been adopted and the appropriate Financial Reporting Standards applied. position and performance, clear and balanced assessment of the Group’s a comprehensive, aims at presenting The Board a timely manner. and announcements in disclosure and make appropriate to the shareholders, in the annual report prospect to make an informed assessment of the explanation and information to enable the Board such The management provides nancial statements for the the fi for preparing acknowledge their responsibilities The Directors the Board. matters put before for the year ended 31 December 2009. Group Financial Reporting During the year ended 31 December 2009, the Audit Committee have held 2 meetings and all members have attended the have held 2 meetings and all members have 31 December 2009, the Audit Committee During the year ended meetings. together with senior management, the internal reviewed, The Audit Committee audit department, the external auditors, the the annual risk management, adopted by the Company, the accounting principles and practices internal system, control of the Group reporting and compliance matters nancial December 2009 and other fi for the year ended 31 reports and results and the Company. 2. and Internal Financial Reporting Control

Annual Report 2009

China Aoyuan Property Group Limited 52 China Aoyuan Property Group Limited Annual Report 2009 53 n

ill To safeguard the shareholders’ interests and rights, separate resolutions are proposed at shareholders’ meetings on each at shareholders’ proposed are and rights, separate resolutions interests the shareholders’ safeguard To substantial issue, including the election of individual Directors. w meeting will be taken by poll pursuant to the Listing Rules and the poll results at a shareholder put forward All resolutions place and functioning as intended. place and functioning internal control performed by the externalDuring the course of audit on the weakness in the Group’s they reported auditors, come to their attention. The internal which had evaluated and audit department reviewed, and accounting procedures to the Audit Committee. and reported to their recommendations in response the follow-up actions monitored operations is one of the key missions of of our corporate strategies and business aware bankers. Keeping the shareholders team. our investor relations oat. fl with a 55.82% public structure ed shareholding As at 31 December 2009, the Company has a diversifi meeting. be posted on the websites of the Company and of the Stock Exchange after the shareholders’ The Group uses various formal channels of communication to ensure fair disclosure and comprehensive and transparent and transparent and comprehensive fair disclosure to ensure uses various formal channels of communication The Group and also posted on the printed and sent to all shareholders are of its performance and activities. Annual reports reporting corporate website. The posted on the Company’s are releases corporate website at http://aoyuan.com.cn. Press Company’s by which enquiries can be put fax number and telephone number postal address, address, email website provides Company’s the website also contains a wide range of additional information of Being constantly updated in a timely manner, to the Board. to maintain a constant dialogue of the program part of the investors relations business activities. As a standard the Group’s with institutional ngs and attend conferences briefi senior executives hold regular performance and objectives, Group’s analysts. nancial investors and fi The and the shareholders. a forum for communication between the Board The general meetings of the Company provide Committee, Remuneration Committee and Audit Committee or, as well as chairmen of the Nomination chairman of the Board shareholders’ available to answer questions at the committees, are in their absence, other members of the respective meetings. least 20 clear business days at The notice of AGM will be sent to shareholders The 2010 AGM will be held on 11 June 2010. the AGM. before liquidity for market lowering cost of capital, improving can contribute towards investor relations believes effective The Board An internal audit department has been established to perform regular fi nancial and operational reviews and conduct audits of reviews and conduct operational nancial and An internal fi established to perform regular audit department has been i subsidiaries. The work carried out by the internalthe Company and its the internal are audit department will ensure controls the Company is committed to maintain a high base. Therefore, stable shareholder and building a more stock the Company’s investors, analysts and information to shareholders, and follow a policy of disclosing relevant level of corporate transparency 4. Shareholders Rights 4. Shareholders 3. and Investor Relations with Shareholders Communications Corporate Governance Report (continued) Governance Report Corporate Report of the Directors

The Directors are pleased to present the annual report together with the audited consolidated fi nancial statements of the Group for the year ended 31 December 2009.

The Company was incorporated and registered as an exempted company with limited liability in the Cayman Islands under the Companies Law (2004 Second Revision) of the Cayman Islands on 6 March 2007.

The shares of the Company were listed on the Stock Exchange on 9 October 2007.

Principal Activities

The Company is an investment holding company. Its subsidiaries are principally engaged in property development and property investment.

An analysis of the Group’s turnover and operating profi t for the year ended 31 December 2009 by principal activities is set out in note 5 to the consolidated fi nancial statements.

Results and Appropriations

The results of the Group for the year ended 31 December 2009 and the state of affairs of the Group as at 31 December 2009 are set out in the consolidated fi nancial statements on pages 65 to 135.

The Directors recommended the payment of a fi nal dividend of RMB3.3 cents per ordinary share and a special dividend of RMB1.7 cents per ordinary share to the shareholders on the register of members on 11 June 2010, amounting to approximately RMB86.2 million and RMB44.4 million respectively and the retention of the remaining profi t for the year of approximately RMB195.7 million (2008: Nil).

54 China Aoyuan Property Group Limited Property, Plant and Equipment

Details of the movements in property, plant and equipment of the Group during the year are set out in note 13 to the consolidated fi nancial statements.

Share Capital

Details of movements during the year in the share capital of the Company are set out in note 30 to the consolidated fi nancial statements. Annual Report 2009 Pre-emptive Rights

There are no provisions for pre-emptive rights under the Company’s memorandum and articles of association, or the laws of Cayman Islands, which would oblige the Company to offer new shares on a pro-rata basis to the existing shareholders. China Aoyuan Property Group Limited Annual Report 2009 55 the . special consolidated fi nancial statements. nancial consolidated fi Financial Summary Group is set out on pages 136. nancial summary of the fi ve-year A fi Reserves of set out in the section “Consolidated Statement of Changes in Equity” during the year are Details of the movement in reserves The register of members of the Company will be closed from 9 June 2010 (Wednesday) to 11 June 2010 (Friday), both days to 11 June 2010 (Friday), 9 June 2010 (Wednesday) of members of the Company will be closed from The register nal dividend and fi to qualify for the proposed In order will be effected. shares inclusive, during which period no transfer of Closure of Register of Members of Register of Closure For the year ended 31 December 2009, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the sold or redeemed the Company nor any of its subsidiaries purchased, For the year ended 31 December 2009, neither listed securities. Company’s Purchase, Sale or Redemption of the Company’s Listed Securities of the Company’s Sale or Redemption Purchase, 2010 Annual General Meeting, all transfer documents accompanied by the relevant dividend and for attending and voting at the Services Hong Kong Investor registrars in Hong Kong, Computershare share cates must be lodged with the Company’s certifi share no later than for registration Hong Kong Road East, Wanchai, Queen’s Hopewell Centre,183 Limited at Shops 1712-1716, 17/F., 4:30 p.m. on 8 June 2010 (Tuesday). On 9 February 2007, a subsidiary of the Company issued convertible notes of an aggregate principal amount of US$140.0 million principal notes of an aggregate a subsidiary of the Company issued convertible On 9 February 2007, million. Details of amount of US$80.0 aggregate convertible notes in the this subsidiary redeemed and on 9 October 2007, nancial statements fi set out in note 27 to the consolidated are year in the convertible notes of the Group movements during the Convertible Notes Report of the Directors (continued) Report of ter a arty iving to Mr. Lam Mr. thcoming (re-designated from an executive Director to a non-executive to a non-executive an executive Director from (re-designated on 24 December 2009) Director (vice chairman) (chairman & chief executive offi cer) offi (chairman & chief executive (vice chairman) Report of the Directors (continued) Report of Mr. Paul Steven Wolansky Paul Steven Mr. Mr. Leung Ping Chung, Hermann Leung Ping Mr. the alternate Director of Leung is also (Mr. Wolansky) Paul Steven Mr. He Jian BingMr. on 24 September 2009) (resigned until terminated by either party thereto giving to the other party not less than three months’ prior notice in writing. giving to the other party not less than three until terminated by either party thereto service contract with the Company for a term of three years with effect from 25 September 2009, and which will continue thereaf from years with effect service contract with the Company for a term of three not less than three months’ prior notice in writing. Mr. Hu Da Wei has entered into a service contract with the Company for an has entered Hu Da Wei months’ prior notice in writing. Mr. not less than three g until terminated by either party thereto 8 April 2008 to 2 April 2010, and which will continue thereafter appointed term from into and Ms. Xin Zhu has entered Lam Kam Tong Mr. months’ prior notice in writing. Each of the other party not less than three Each of Mr. Guo Zi Wen and Mr. Guo Zi Ning has entered into a service contract with the Company for a term of three years into a service contract with the Company for a term of three Guo Zi Ning has entered and Mr. Guo Zi Wen Each of Mr. giving to the other p until terminated by either party thereto 3 April 2007, and which will continue thereafter commencing from Directors’ Service Contracts Directors’ The Company has received, from each of the independent non-executive Directors namely Mr. Ma Kwai Yuen, Mr. Song Xian Zhong Mr. Ma Kwai Yuen, Mr. namely each of the independent non-executive Directors from The Company has received, rmation of his independence pursuant to Rule 3.13 of the Listing Rules. The Company King Fai, an annual confi Tsui and Mr. independent. are considers all of the independent non-executive Directors Kam Tong and Ms. Xin Zhu shall retire from offi ce and, being eligible, offer themselves for re-election as Directors at the for re-election as Directors themselves for ce and, being eligible, offer offi from Zhu shall retire and Ms. Xin Kam Tong AGM. In accordance with the Company’s Articles, Mr. Guo Zi Ning, Mr. Leung Ping Chung, Hermann and Mr. Song Xian Zhong will retire Song Xian Zhong will retire Hermann and Mr. Leung Ping Chung, Guo Zi Ning, Mr. Articles, Mr. with the Company’s In accordance at the forthcoming AGM. In addition, re-election as Directors themselves for rotation and, being eligible, offer ce by offi from Mr. Ma Kwai Yuen Mr. Song Xian Zhong Mr. King Fai Tsui Mr. Independent non-executive Directors Mr. Wu Jie Si Wu Mr. Non-executive Directors Mr. Guo Zi Wen Guo Zi Wen Mr. Guo Zi Ning Mr. Hu Da Wei Mr. Lam Kam TongMr. Ms. Xin Zhu Zheng Jian JunMr. on 25 September 2009) (appointed on 24 September 2009) (resigned on 25 September 2009) (appointed The Directors of the Company during the year and up to the date of this report, were as follows: were during the year and up to the date of this report, of the Company The Directors Executive Directors Directors

Annual Report 2009

China Aoyuan Property Group Limited 56 China Aoyuan Property Group Limited Annual Report 2009 57

its on ses which Group’s future remuneration policy and related strategies, the Remuneration Committee has been advised of the Group’s existing strategies, the Remuneration Committee has been advised of the Group’s policy and related remuneration future Group’s market packages and related policy and succession plan, such as guidelines on designing employees’ remuneration remuneration and information. trends Apart from the foregoing, none of the Directors has a service contract with the Company or any of it subsidiaries which is not has a service contract with the Company or none of the Directors the foregoing, Apart from without payment of compensation, other than statutory compensation. determinable by the Company within one year Emolument Policy Group’s based on the skill, knowledge, involvement in the are The Company‘s policy on determining the emolument payable to Directors remunerati tability of the Company, to the profi together with reference and the performance of each Director, affairs Company’s All the Directors are subject to retirement by rotation and re-election at AGM of the Company pursuant to its Articles. and re-election by rotation subject to retirement are All the Directors Guo Zi Ning and Ms. Jiang Mr. Guo Zi Wen, In compliance with the deed of non-competition signed on 20 September 2007, Mr. make an annual declaration on his/her compliance with the non-competition undertaking. Miner hereby appointed for a specifi c term commencing from 13 September 2007 which may be extended for such period as the Company and which may be extended for such period as the 13 September 2007 from c term commencing appointed for a specifi in writing. may agree the Director or whether directly Company had a material interest, of the and in which a Director holding company or subsidiaries was a party any time during the year. subsisted at the end of the year or at indirectly, in busines or indirect, either direct to have any interest, considered are none of the Directors As at the date of this report, pursuant to the Listing Rules. likely to compete with the businesses of the Group compete or are the Remuneration Committee to give better advice on the enable market conditions. To and prevailing benchmarks in the industry, In order to eliminate competing business with the Group, on 20 September 2007, Mr. Guo Zi Wen, Mr. Guo Zi Ning and Ms. Jiang Guo Zi Ning and Ms. Mr. Guo Zi Wen, on 20 September 2007, Mr. to eliminate competing business with the Group, In order into a deed of non-competition with the Company. entered Guo Zi Wen, Mr. spouse of Miner, Directors’ Interests in Competing Business in Competing Interests Directors’ Directors’ Interests in Contracts Interests Directors’ cance to which the Company, statements, no contract of signifi nancial fi Other than as disclosed in note 10 to the consolidated Each of the independent non-executive Directors of the Company has entered into a letter of appointment with the Company and is a letter of appointment with the Company into the Company has entered of non-executive Directors Each of the independent effect from 24 December 2009, and which may be extended thereafter for such period as the Company and Mr. Wu may agree in may agree Wu for such period as the Company and Mr. may be extended thereafter 24 December 2009, and which from effect writing. Mr. Paul Steven Wolansky and Mr. Leung Ping Chung, Hermann, being the non-executive Directors of the Company have entered have entered of the Company Directors Ping Chung, Hermann, being the non-executive Leung and Mr. Paul Steven Wolansky Mr. may be 3 April 2007 which from c term commencing appointed for a specifi with the Company and are into a letter of appointment as Jie Si, re-designated Wu Mr. in writing. Leung may agree and Mr. Wolansky as the Company and Mr. extended for such period year wit with the Company for a term of one into a letter of appointment has entered Company, of the the non-executive Director Report of the Directors (continued) Report of ich bt to the percentage percentage Approximate Approximate share capital share of the issued 10,000,000 0.38% 303,175,000 11.60% — 293,175,000 11.22% — 1,154,325,000 44.18% (Note 4) (Note 4) (Note 3) 10,000,000 (under equity derivatives of the Company) interest Aggregate Underlying shares Underlying shares Number of shares (Note 2) (Note 1) (Note 2) corporations by controlled by controlled interests held interests Ordinary shares shares Ordinary Report of the Directors (continued) Report of Chief Executive Chen Wu Mr. — 10,000,000 10,000,000 0.38% Mr. Tsui King Fai Tsui Mr. — 300,000 300,000 0.01% Mr. Song Xian ZhongMr. — 300,000 300,000 0.01% Mr. Ma Kwai YuenMr. — 300,000 300,000 0.01% Mr. Lam Kam TongMr. — 6,000,000 6,000,000 0.23% Mr. Guo Zi NingMr. — 10,000,000 Mr. Paul Steven Wolansky Paul Steven Mr. Jie Si Wu Mr. 293,175,000 — 20,000,000 20,000,000 0.77% Mr. Leung Ping Chung, Hermann Leung Ping Chung, Mr. 293,175,000 Director Guo Zi WenMr. 1,154,325,000 Long position in Shares and Underlying Shares under Equity Derivatives of the Company: under Equity Derivatives Underlying Shares and Long position in Shares securities of the Company or any associated corporation (within the meaning of the Securities and Futures Ordinance (“SFO”)) wh Ordinance the meaning of the Securities and Futures or any associated corporation (within securities of the Company As at 31 December 2009, the interests of Directors and chief executives of the Company and their associates in the equity or de and their associates in the equity or and chief executives of the Company of Directors the interests As at 31 December 2009, Directors’ and Chief Executives’ Interests in Securities Interests and Chief Executives’ Directors’ (a) were required to be notifi ed to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO pursuant to Divisions 7 and 8 of Part ed to the Company and the Stock Exchange to be notifi required (a) were or (b) were of the SFO); deemed to have under such provisions taken or which they are and short positions (including interests pursuant required, or (c) were to therein; referred in the register SFO, to be entered pursuant to section 352 of the required, as follows: and the Stock Exchange were ed to the Company Model Code to be notifi Name of Director/ Chief Executive

Annual Report 2009

China Aoyuan Property Group Limited 58 China Aoyuan Property Group Limited Annual Report 2009 59 to on f its the trustee holding r 2009. Paul Steven Wolansky Paul Steven Wolansky Capital Holdings, L.P. Capital Holdings, L.P. Ms. Jiang Miner. stablished under the laws d by Sturgeon Limited, which d by Sturgeon Limited, which Cathay Capital Holdings, L.P. is managed by its general partner, Cathay Master GP, Ltd. which in turn is owned as to 45% by Mr. Ltd. which Master GP, Cathay by its general partner, is managed Cathay Capital Holdings, L.P. Hermann. Leung Ping Chung, wholly-owned by Mr. as trustee and 10% by a company is owned as to 50% by Seletar Limited and 50% by Serangoon Limited, as nominees and trustees for Credit Suisse Trust Limited as and trustees for Credit Suisse Trust Limited and 50% by Serangoon Limited, as nominees is owned as to 50% by Seletar Trust is a discretionary family trust e Jade Trust. The Golden ciaries of The Golden Jade the benefi such interests on trust for and Wen Guo Zi are Mr. Trust Jade ciaries of The Golden As at the date of this report, the benefi and regulations of Singapore. as recorded in the register which were required to be kept by the Company under section 352 of the SFO or as otherwise notifi ed notifi to be kept by the Company under section 352 of the SFO or as otherwise required which were register in the as recorded or of the Company or their spouses to the Model Code. None of the Directors the Company and the Stock Exchange pursuant the equity or debt securities of the Company or any o under the age of 18, had been granted any right to subscribe for children any such right for the year ended 31 December 2009. associated corporations, or had exercised (3) Details of share options held by the Directors are shown in the section of “Share Options”. (4) Leung Ping Chung, Hermann was on 31 Decembe Guo Zi Ning and Mr. The end of exercise period of the share options held by Mr. Save as disclosed above, none of the Directors or chief executives of the Company had or was deemed to have any interests or deemed to have any interests or chief executives of the Company had or was Save as disclosed above, none of the Directors or any of its associated corporati of the Company or debentures underlying shares of the Company, short positions in the shares (2) These 293,175,000 ordinary Ltd., which is wholly-owned by Cathay shares are registered in the name of Cathay Sino Property Notes: (1) is hel ts Limited ts Limited. Ace Rise Profi ordinary These 1,154,325,000 shares are registered in the name of Ace Rise Profi Report of the Directors (continued) Report of of grant of share of share immediate before date before Closing price 5.2 1.73 er 2009. er 2010. HK$ HK$ 1.79 1.73 1.79 1.73 6.55 6.39 1.792.00 1.73 0.66 6.55 6.39 0.90 0.85 1.401.40 1.35 1.40 1.35 1.35 tors of the Company r 2009. 0.638 0.66 share tors of the Company on condition that the on condition that the ts (i.e. 15 April 2008) to Exercise Exercise price per period (Note 2) (Note 2) to end of Exercise Exercise his service 14 Jul 2011 14 Jul 2011 contract with 31 Dec 2009 31 Dec 2009 30 Nov 2011 30 Nov 2011 24 Sep 2012 24 Sep 2012 24 Sep 2012 the Company grant Date of 18 Jul 2008 18 Jul 2008 to 18 Jul 2008 18 Jul 2008 to 2009 (Note 1) (Note 1) As at 31 1,985,600 23 Oct 2007 December year Lapsed (Note 3) during the during the year Granted Number of share options Number of share 2009 As at 3,000,000 — —1,069,000 3,000,000 1 Dec 2008 1 Dec 2008 to — 1,069,000 — 23 Oct 2007 1 January 10,000,000 — — 10,000,000 18 Jul 2008 18 Jul 2008 to 10,000,000 — — 10,000,000 59,551,000 900,000 1,565,400 58,885,600 (former Report of the Directors (continued) Report of 31 December 2008. t forecasts as set by the Board of Direc rmed that the Company has met the 2008 profi Board of Directors of the Company has confi to 31 Decemb ed the requirements of the management of the Company, and that the performance appraisal of the grantee has satisfi t forecasts as set by the Board of Direc rmed that the Company has met the 2009 profi board of directors of the Company has confi to 31 Decemb ed the requirements of the management of the Company, and that the performance appraisal of the grantee has satisfi Director Jie Si Wu Mr. 10,000,000 — — 10,000,000 18 Jul 2008 18 Jul 2008 to On 13 September 2007, the Company adopted a share option scheme (the “Scheme”). Details of the options granted by the option scheme (the “Scheme”). Details the Company adopted a share On 13 September 2007, as follows: 2009 were for the year ended 31 December the Scheme and the options lapsed and outstanding Company pursuant to Share Options Share Mr. Guo Zi NingMr. 10,000,000 — — 10,000,000 (2) to the grantee — from the date the Company announced its 2007 annual resul 20% of the total number of share options granted 50% of the total number of share options granted to the grantee — from the date the Company announces its 2009 annual result, (3) was on 31 December 2008. The end of exercise period of 496,400 share options Notes: (1) Leung Ping Chung, Hermann was on 31 Decembe Guo Zi Ning and Mr. by Mr. The end of exercise period of the share options held No share options were exercised during the year. exercised options were No share 30% of the total number of share options granted to the grantee — from the date the Company announces its 2008 annual result, Mr. Leung Ping Mr. Hermann Chung, Mr. Lam Kam TongMr. 3,000,000 —Chief Executive — Chen Wu Mr. 3,000,000 1 Dec 2008 1 Dec 2008 to Others Employees 10,000,000 — 2,482,000 — 10,000,000 25 Sep 2008 — 25 Sep 2008 496,400 Mr. Ma Kwai YuenMr. Song Xian ZhongMr. King Fai Tsui Mr. Zheng Jian Jun Mr. — executive Director who resigned on 24 September 2009) — 300,000 300,000 — — 300,000 — 300,000 25 Sep 2009 25 Sep 2009 to 300,000 25 Sep 2009 — 25 Sep 2009 to 300,000 25 Sep 2009 25 Sep 2009 to

Annual Report 2009

China Aoyuan Property Group Limited 60 China Aoyuan Property Group Limited Annual Report 2009 61 f an e as es of . Cathay s held by Cathay (approximate) ermann are all , Mr. Selwyn Donald , Mr. Management LLP Voting power (%) Voting tee holding such lansky as trustee, 45% GP, Ltd., the general GP, Partnership. As Trust Partnership. As Trust ings, L.P. Cathay Capital ings, L.P. Jiang Miner. on Limited, which is owned ished under the laws and 1,154,325,0001,154,325,000 44.18% 44.18% Trustee 1,154,325,000 44.18% Trustee 293,175,000 11.22% Benefi cial ownerBenefi 1,154,325,000 44.18% Benefi cial ownerBenefi 293,175,000 11.22% Settlor/Benefi ciary of Settlor/Benefi Settlor/Benefi ciary of Settlor/Benefi Controlled corporationControlled corporationControlled 1,154,325,000 corporationControlled 1,154,325,000 corporationControlled 1,154,325,000 corporationControlled 44.18% corporationControlled 406,363,462 44.18% corporationControlled 383,043,462 44.18% 383,043,462 corporationControlled 15.55% 293,175,000 corporationControlled 14.66% 14.66% 293,175,000 11.22% 293,175,000 11.22% 11.22% The Golden Jade Trust The Golden Jade Trust (2) (3) (3) (2) (2) and (3) (1) (2) (2) (1) (2) (1) (1) (1) (1) (1) as to 50% by Seletar Limited and 50% by Serangoon Limited, as nominees and trustees for Credit Suisse Trust Limited as the trus Trust as to 50% by Seletar Limited and 50% by Serangoon Limited, as nominees and trustees for Credit Suisse Trust is a discretionary family trust establ Trust. The Golden Jade ciaries of The Golden Jade interests on trust for the benefi Wen and Ms. Guo Zi Trust are Mr. ciaries of The Golden Jade regulations of Singapore. As at the date of this report, the benefi Holdings, L.P. is managed by its general partner, Cathay Master GP, Ltd. which in turn is owned as to 45% by Mr. Paul Steven Wo Ltd. which in turn is owned as to 45% by Mr. Cathay Master GP, is managed by its general partner, Holdings, L.P. Leung Ping Chung, Hermann Investment Limited which is wholly owned by Mr. and 10% by Nice Wealth Asset Management LLP. by Trust Chung, H Leung Ping Asset Management LLP and Mr. Trust Paul Steven Wolansky, Cathay Master GP Ltd., Mr. Capital Holdings, L.P., deemed to be interested in the 293,175,000 shares under the SFO. Selwyn Donald Sussman is holding 100% interest in Capital Asset Management, Inc As Mr. partner of Cathay Capital Holdings, L.P. Asset Management LLP are all deemed to be interested in the 293,175,000 share Sussman, Capital Asset Management, Inc. and Trust Sunrise Partners Limited Sino Property Ltd. The remaining 89,868,462 shares are held in the form of convertible notes issued to Asset Inc, Trust Asset Management LLP is the general partner of Sunrise Partners Limited Partnership, Capital Asset Management, Selwyn Donald Sussman are deemed to be interested in the 89,868,462 shares under the SFO. and Mr. Name ts Limited Ace Rise Profi Capacity Number of shares the Directors or the chief executives of the Company, who had interests or short positions in the shares or the underlying shar or short positions in the shares who had interests or the chief executives of the Company, the Directors o of Divisions 2 and 3 in Part XV with the provisions accordance fall to be disclosed to the Company in the Company which would So far as the Directors or the chief executives of the Company are aware of, as at 31 December 2009, the shareholders, other th other 2009, the shareholders, of, as at 31 December aware executives of the Company are or the chief So far as the Directors Substantial Shareholders’ Interests Substantial Shareholders’ the SFO, or which would be required, pursuant to Section 336 of the SFO, to be entered in the register referred to therein, wer to therein, referred in the register of the SFO, to be entered pursuant to Section 336 be required, the SFO, or which would follows: Serangoon Limited Sturgeon Limited Sussman Selwyn Donald Mr. Capital Asset Management, Inc. LLP Asset Management Trust Leung Ping Chung, Hermann Mr. Mr. Guo Zi Wen Mr. Ms. Jiang Miner Seletar Limited Credit Suisse Trust Limited Suisse Trust Credit Notes: (1) ts Limited is held by Sturge ts Limited. Ace Rise Profi name of Ace Rise Profi The 1,154,325,000 shares are registered in the (2) of Cathay Sino Property Ltd. which is wholly-owned by Cathay Capital Hold The 293,175,000 shares are registered in the name (3) Master which has 45% interest in Cathay Asset Management LLP, of Trust Capital Asset Management, Inc is the general partner Mr. Paul Steven Wolansky Mr. Ltd. Cathay Master GP, Ltd. Cathay Sino Property Cathay Capital Holdings, L.P. Report of the Directors (continued) Report of e fi rm fi e issue Report of the Directors (continued) Report of ciency of Public Float Hong Kong, 19 April 2010 The fi nancial statements for the year ended 31 December 2009 have been audited by Deloitte Touche Tohmatsu. A resolution for th A Tohmatsu. Touche for the year ended 31 December 2009 have been audited by Deloitte nancial statements The fi On behalf of the Board GUO Zi Wen cer Chairman and Chief Executive Offi Auditors Based on the information that is publicly available to the Company and within the knowledge of the Directors, the Directors con the Directors to the Company and within the knowledge of the Directors, Based on the information that is publicly available on the Stock Exchange. has been no change of the auditors of the Company since its listing There Suffi by the Listing Rules as at the latest practicable date prior to th required oat as fl that the Company has maintained the public of this annual report. at the forthcoming auditors for the ensuring year will be proposed as the Company’s Tohmatsu of Deloitte Touche re-appointment AGM. Principal corporate governance set out in the Corporate Governance Company are practices adopted by the Report contained in this annual report. Corporate Governance

Annual Report 2009

China Aoyuan Property Group Limited 62 Independent Auditor’s Report

TO THE SHAREHOLDERS OF CHINA AOYUAN PROPERTY GROUP LIMITED 中國奧園地產集團股份有限公司 (incorporated in the Cayman Islands with limited liability)

We have audited the consolidated fi nancial statements of China Aoyuan Property Group Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) set out on pages 65 to 135, which comprise of the consolidated statement of fi nancial 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 fl ows for the year then ended, and a summary of signifi cant accounting policies and other explanatory notes.

Directors’ responsibility for the consolidated fi nancial statements

The directors of the Company are responsible for the preparation and the true and fair presentation of these consolidated fi nancial statements in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board and the disclosure requirements of the Hong Kong Companies Ordinance. This responsibility includes designing, implementing and maintaining internal controls relevant to the preparation and the true and fair presentation of the consolidated fi nancial 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.

Auditor’s responsibility

Our responsibility is to express an opinion on these consolidated fi nancial statements based on our audit and to report our opinion 63 China Aoyuan Property Group Limited 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. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by Hong Kong Institute of Certifi ed 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 consolidated fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the Group’s preparation of the consolidated fi nancial 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 Annual Report 2009 Group’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors of the Company, as well as evaluating the overall presentation of the consolidated fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion. ecember Independent Auditor’s Report (continued) Auditor’s Independent Hong Kong, 19 April 2010 Deloitte Touche Tohmatsu Deloitte Touche ed Public Accountants Certifi Hong Kong 2009 and of the Group’s profi t and cash fl ows for the year then ended in accordance with International with Financial Reporting then ended in accordance ows for the year fl t and cash profi 2009 and of the Group’s Ordinance. of Hong Kong Companies requirements with the disclosure in accordance prepared and have been properly Standards In our opinion, the consolidated fi nancial statements give a true and fair view of the state of affairs of the Group as at 31 D of the Group and fair view of the state of affairs nancial statements give a true fi In our opinion, the consolidated Opinion

China Aoyuan Property Group Limited Annual Report 2009

Consolidated Statement of Comprehensive Income For the year ended 31 December 2009

2009 2008 Notes RMB’000 RMB’000

Revenue 5 2,364,467 619,941 Cost of sales (1,924,753) (597,164)

Gross profi t 439,714 22,777 Other income 6 69,979 79,897 Change in fair value of investment properties 15 (19,557) (34,558) Fair value gain in respect of investment properties transferred from completed properties for sale 22 53,817 88,437 Selling and distribution costs (91,462) (135,276) Administrative expenses (121,878) (198,283) Change in fair value of embedded derivatives component of convertible notes 27 (2,062) 76,145 Finance costs 7 — (5,219) Gain on disposal of subsidiaries 33 — 16,713 Share of result of jointly controlled entities 17 101,344 45

Profi t (loss) before taxation 8 429,895 (89,322) Income tax (expense) credit 9 (103,598) 31,857

Profi t (loss) and total comprehensive income (expense) for the year 326,297 (57,465)

Profi t (loss) and total comprehensive income (expense) attributable to: Owners of the Company 320,133 (57,153) Minority interests 6,164 (312)

326,297 (57,465)

Earnings (loss) per share (cents) Basic 12 13.23 (2.54) 65 China Aoyuan Property Group Limited Diluted 12 12.66 (6.28) Annual Report 2009 Consolidated Statement of Financial Position At 31 December 2009

2009 2008 Notes RMB’000 RMB’000

NON-CURRENT ASSETS Property, plant and equipment 13 144,446 148,646 Prepaid lease payments 14 12,377 18,652 Investment properties 15 791,078 439,890 Interest in jointly controlled entities 17 466,831 326,804 Amount due from a venturer of a jointly controlled entity 18 140,488 — Available-for-sale investments 19 296,000 — Amounts due from jointly controlled entities 20 850,024 60,850 Other property interests 21 86,952 86,952 Restricted bank deposits 24 345,000 — Deferred taxation assets 29 27,636 8,369

3,160,832 1,090,163

CURRENT ASSETS Properties for sales 22 6,123,183 4,530,096 Trade and other receivables 23 745,512 1,240,283 Income tax recoverable 5,190 — Prepaid lease payments 14 6,275 6,275 Restricted bank deposits 24 400,419 135,732 Bank balances and cash 24 1,283,930 1,345,861

8,564,509 7,258,247

CURRENT LIABILITIES Trade and other payables 25 1,719,448 975,783 Sales deposits 552,115 244,208 Amount due to a minority shareholder 26 26,688 — 66 Taxation payable 681,358 653,255 China Aoyuan Property Group Limited Derivative fi nancial instruments 27 5,968 3,906 Secured bank loans 28 743,420 215,000

3,728,997 2,092,152

NET CURRENT ASSETS 4,835,512 5,166,095

TOTAL ASSETS LESS CURRENT LIABILITIES 7,996,344 6,256,258

NON-CURRENT LIABILITIES Secured bank loans 28 1,842,945 999,687 Deferred taxation liabilities 29 74,589 63,053 Convertible notes 27 325,850 304,133

Annual Report 2009 2,243,384 1,366,873

NET ASSETS 5,752,960 4,889,385 Consolidated Statement of Financial Position (continued) At 31 December 2009

2009 2008 Notes RMB’000 RMB’000

CAPITAL AND RESERVES Share capital 30 24,990 21,838 Reserves 5,702,318 4,857,722

Equity attributable to owners of the Company 5,727,308 4,879,560 Minority interests 25,652 9,825

TOTAL EQUITY 5,752,960 4,889,385

The consolidated fi nancial statements on pages 65 to 135 were approved and authorised for issue by the Board of Directors on 19 April 2010 and are signed on its behalf by:

DIRECTOR DIRECTOR Guo Zi Wen Guo Zi Ning

67 China Aoyuan Property Group Limited Annual Report 2009 Consolidated Statement of Changes in Equity For the year ended 31 December 2009

Equity attributable to Owners of the Company PRC Property Share Share Share statutory Special Other revaluation option Retained Minority capital premium reserve reserve reserves reserve reserve profi ts Total interests Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Note 1) (Note 2) (Note 3) (Note 4)

At 1 January 2008 21,838 3,597,879 8,541 357,341 4,500 37,735 11,533 1,004,739 5,044,106 — 5,044,106 Loss and total comprehensive expense for the year — — — — — — — (57,153) (57,153) (312) (57,465) Contribution from minority shareholders — — — — — — — — — 10,137 10,137 Recognition of equity-settled share based payments — — — — — — 16,495 — 16,495 — 16,495 Transfer of share option reserve upon expiry of share options — — — — — — (8,217) 8,217 — — — Dividend paid — — — — — — — (123,888) (123,888) — (123,888) At 31 December 2008 21,838 3,597,879 8,541 357,341 4,500 37,735 19,811 831,915 4,879,560 9,825 4,889,385 Profi t and total comprehensive income for the year — — — — — — — 320,133 320,133 6,164 326,297 Appropriation of statutory reserve — — 16,677 — — — — (16,677) — — — Issue of shares 3,152 542,158 — — — — — — 545,310 — 545,310 Share issue expenses — (18,596) — — — — — — (18,596) — (18,596) Recognition of equity-settled share based payment — — — — — — 901 — 901 — 901 Contribution from a minority shareholder — — — — — — — — — 9,663 9,663 Transfer of share option reserve upon expiry of share options — — — — — — (8,903) 8,903 — — — At 31 December 2009 24,990 4,121,441 25,218 357,341 4,500 37,735 11,809 1,144,274 5,727,308 25,652 5,752,960

Notes:

1. The Articles of Association of certain subsidiaries require the appropriation of 5% to 10% of their profi t after taxation each year to the PRC statutory reserve as determined by their board of directors. The PRC statutory reserve should only be used for making up losses, capitalisation into capital and expansion of the production and operation.

2. Special reserve includes (i) revaluation difference arising from the acquisition of additional interests in a subsidiary which debited to special reserve upon the acquisition date of RMB21,210,400 and (ii) the amount which represents the difference between the aggregate of the nominal value of share capital and share premium of the subsidiaries acquired pursuant to the Group reorganisation and the nominal value of the share capital issued by the Company 68 as consideration for the acquisition of RMB378,551,028. China Aoyuan Property Group Limited 3. Other reserves represent the discount arising from acquisition of additional interest in subsidiaries from a related company in which Mr. Guo Zi Ning is a director.

4. During the year ended 31 December 2007, revaluation surplus arising from transfer of owner-occupied property to investment properties at the date of change in use amounted to RMB50,313,000 net of related deferred taxation liability of RMB12,578,000. Annual Report 2009 Consolidated Statement of Cash Flows For the year ended 31 December 2009

2009 2008 RMB’000 RMB’000

OPERATING ACTIVITIES Profi t (loss) before taxation 429,895 (89,322) Adjustments for: Fair value gain in respect of investment properties transferred from completed properties for sale (53,817) (88,437) Change in fair value of investment properties 19,557 34,558 Change in fair value of embedded derivatives component of convertible notes 2,062 (76,145) Finance costs — 5,219 Share of result of jointly controlled entities (101,344) (45) Gain on disposal of subsidiaries — (16,713) Share-based payments 901 16,495 Depreciation of property, plant and equipment 10,810 11,278 Amortisation of prepaid lease payments 6,275 6,275 Reversal of accruals (30,241) (25,271) Interest income (36,813) (51,506) Loss on disposal of property, plant and equipment 284 360 Unrealised foreign exchange (loss) gain (1,996) 40,329

Operating cash fl ows before movements in working capital 245,573 (232,925) Decrease in inventories — 12 Increase in properties for sales (515,219) (2,183,450) Decrease in trade and other receivables 500,415 617,134 Increase in trade and other payables 710,888 183,872 Increase in sales deposits 307,907 9,318

Cash generated from (used in) operations 1,249,564 (1,606,039) Enterprise income tax paid (89,642) (121,805) 69

Interest paid (114,776) (107,477) China Aoyuan Property Group Limited

NET CASH FROM (USED IN) OPERATING ACTIVITIES 1,045,146 (1,835,321) Annual Report 2009 Consolidated Statement of Cash Flows (continued) For the year ended 31 December 2009

2009 2008 RMB’000 RMB’000

INVESTING ACTIVITIES Interest received 9,091 15,843 Purchases of property, plant and equipment (6,778) (107,496) Payments for investment property (11,909) — Acquisition of subsidiaries (net of cash and cash equivalents acquired) 32 (887,680) — Disposal of subsidiaries (net of cash and cash equivalents disposed of) 33 — (146) Proceeds on disposal of property, plant and equipment 532 58,516 Proceeds on disposal of investment properties 33,154 — Settlement of receivable arising on disposal of investment properties — 80,697 (Advance to) repayment from jointly controlled entities (765,816) 318,360 (Increase) decrease in restricted bank deposits (609,687) 12,514 Advance to a venturer of a jointly controlled entity 18 (130,000) — Acquisition of the convertible note 19 (296,000) — Investment in a jointly controlled entity (376,519) (13,247)

NET CASH (USED IN) FROM INVESTING ACTIVITIES (3,041,612) 365,041

FINANCING ACTIVITIES Proceeds from new share placement 545,310 — Share issue expenses (18,596) — New bank loans raised 2,042,924 800,560 Repayment of bank loans (671,246) (464,889) Contributions from minority shareholders 9,663 10,137 Dividends paid to equity holders of the Company — (123,888) Advance from a minority shareholder 26,688 —

NET CASH FROM FINANCING ACTIVITIES 1,934,743 221,920 70 NET DECREASE IN CASH AND CASH EQUIVALENTS (61,723) (1,248,360) China Aoyuan Property Group Limited

EFFECT OF FOREIGN EXCHANGE RATE CHANGES (208) (63,980)

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 1,345,861 2,658,201

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR, represented by bank balances and cash 1,283,930 1,345,861 Annual Report 2009 Notes to the Consolidated Financial Statements For the year ended 31 December 2009

1. General

The Company was incorporated on 6 March 2007 as an exempted company with limited liability in the Cayman Islands under the Companies Law Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands. The shares of the Company have been listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “SEHK”) since 9 October 2007. The Company’s immediate and ultimate holding company is Ace Rise Profi ts Limited, incorporated in the British Virgin Islands. The addresses of the registered offi ce and the principal place of business of the Company are Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands and Nanguo Aoyuan, Hanxi Road, Zhong Cun Town, Panyu, the People’s Republic of China (the “PRC”), respectively.

The Company acts as an investment holding company. Details of the principal activities of its subsidiaries are set out in note 41.

The consolidated fi nancial statements are presented in Renminbi (“RMB”), which is the same as the functional currency of the Company.

2. Adoption of New and Revised International Financial Reporting Standards (“IFRS”)

In the current year, the Group has applied the following new and revised Standards, Amendments and Interpretations (“new and revised IFRSs”) issued by the International Accounting Standards Board.

IAS 1 (Revised 2007) Presentation of Financial Statements IAS 23 (Revised 2007) Borrowing Costs IAS 32 & 1 (Amendments) Puttable Financial Instruments and Obligations Arising on Liquidation IFRS 1 & IAS 27 (Amendments) Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate IFRS 2 (Amendment) Vesting Conditions and Cancellations 71 IFRS 7 (Amendments) Improving Disclosures about Financial Instruments China Aoyuan Property Group Limited IFRS 8 Operating Segments IFRIC-Int 9 & IAS 39 (Amendments) Embedded Derivatives IFRIC-Int 13 Customer Loyalty Programmes IFRIC-Int 15 Agreements for the Construction of Real Estate IFRIC-Int 16 Hedges of a Net Investment in a Foreign Operation IFRIC-Int 18 Transfer of Assets from Customers IFRSs (Amendments) Improvements to IFRSs issued in 2008, except for the amendment to IFRS 5 that is effective for annual periods beginning on or after 1 July 2009 IFRSs (Amendments) Improvements to IFRSs issued in 2009 in relation to the amendment to paragraph 80 of IAS 39 Annual Report 2009 Except as described below, the adoption of the new and revised IFRSs has had no material effect on the consolidated fi nancial statements of the Group for the current or prior accounting periods.

IAS 1 (Revised 2007) Presentation of Financial Statements

IAS 1 (Revised 2007) has introduced terminology changes (including revised titles for the fi nancial statements) and changes in the format and content of the fi nancial statements. Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

2. Adoption of New and Revised International Financial Reporting Standards (“IFRS”) (continued)

Improving Disclosures about Financial Instruments (Amendments to IFRS 7 Financial Instruments: Disclosures)

The amendments to IFRS 7 expand the disclosures required in relation to fair value measurements in respect of fi nancial instruments which are measured at fair value. The amendments also expand and amend the disclosures required in relation to liquidity risk. The Group has not provided comparative information for the expanded disclosures in accordance with the transitional provision set out in the amendments.

Amendments to IAS 40 Investment Property

As part of Improvements to IFRSs (2008), IAS 40 has been amended to include within its scope properties under construction or development for future use as investment properties and to require such properties to be measured at fair value (where the fair value model is used and the fair values of the properties are reliably determinable). In the past, the leasehold land and building elements of investment properties under construction were accounted for separately. The leasehold land element was accounted for as an operating lease and the building element was carried at cost less accumulated impairment losses, if any. The Group has used the fair value model to account for its investment properties.

The change has been applied prospectively by the Group and the jointly controlled entity from 1 January 2009 in accordance with the relevant transitional provisions, resulting in a recognition of gain in fair value of investment properties under construction as included in share of results of jointly controlled entities of approximately RMB115,979,000 attributable to the Group’s interests in the entities and gain in fair value of the Group’s investment properties under construction of approximately RMB10,101,000 and related deferred tax expenses of approximately RMB2,525,000. At 31 December 2009, the impact has been to increase the Group’s investment property by approximately RMB10,101,000, to increase deferred tax liabilities by approximately RMB2,525,000 and to increase profi t for the year and retained earnings by approximately RMB123,555,000. The impact on basic and diluted earning per share for the year ended 31 December 2009 is to increase by RMB5.11 cent and RMB4.89 cent, respectively. 72 China Aoyuan Property Group Limited The Group has not early applied the following new and revised Standards, Amendments or Interpretations that have been issued but are not yet effective.

IFRSs (Amendments) Amendment to IFRS 5 as part of improvements to IFRSs May 20081 IFRSs (Amendments) Improvements to IFRSs April 20092 IAS 24 (Revised) Related Party Disclosures6 IAS 27 (Revised) Consolidated and Separate Financial Statements1 IAS 32 (Amendments) Classifi cation of Rights Issues4 IAS 39 (Amendment) Eligible Hedged Items1 IFRS 1 (Amendments) Additional Exemptions for First-time Adopters3 IFRS 1 (Amendments) Limited Exemptions from Comparative IFRS 7 Disclosures for First-time Adopters5 Annual Report 2009 IFRS 2 (Amendment) Group Cash-settled Share-based Payment Transactions3 IFRS 3 (Revised) Business Combinations1 IFRS 9 Financial Instruments7 IFRIC 14 (Amendments) Prepayments of a Minimum Funding Requirement6 IFRIC 17 Distributions of Non-cash Assets to Owners1 IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments5 Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

2. Adoption of New and Revised International Financial Reporting Standards (“IFRS”) (continued)

Improving Disclosures about Financial Instruments (Amendments to IFRS 7 Financial Instruments: Disclosures) (continued)

1 Effective for annual periods beginning on or after 1 July 2009 2 Amendments that are effective for annual periods beginning on or after 1 July 2009 and 1 January 2010, as appropriate 3 Effective for annual periods beginning on or after 1 January 2010 4 Effective for annual periods beginning on or after 1 February 2010 5 Effective for annual periods ending on or after 1 July 2010 6 Effective for annual periods beginning on or after 1 January 2011 7 Effective for annual periods beginning on or after 1 January 2013

The adoption of IFRS 3 (Revised) may affect the accounting for business combination for which the acquisition date is on or after 1 January 2010. IAS 27 (Revised) will affect the accounting treatment for changes in parent ownership interest in a subsidiary.

IFRS 9 Financial Instruments introduces new requirements for the classifi cation and measurement of fi nancial assets and will be effective from 1 January 2013, with earlier application permitted. The Standard requires all recognised fi nancial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement to be measured at either amortised cost or fair value. Specifi cally, debt investments that (i) are held within a business model whose objective is to collect the contractual cash fl ows and (ii) have contractual cash fl ows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost. All other debt investments and equity investments are measured at fair value. The application of IFRS 9 might affect the classifi cation and measurement of the Group’s fi nancial assets.

The directors of the Company anticipate that the application of other new and revised Standards, Amendments or Interpretations will have no material impact on the consolidated fi nancial statements.

3. Signifi cant Accounting Policies 73 China Aoyuan Property Group Limited The consolidated fi nancial statements have been prepared on the historical cost basis, except for the investment properties and certain fi nancial instruments which are measured at fair value, and in accordance with IFRSs. In addition, the consolidated fi nancial statements include applicable disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange and by the Hong Kong Companies Ordinance. The principal accounting policies adopted are set out below:

Basis of consolidation

The consolidated fi nancial statements incorporate the fi nancial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the fi nancial and operating policies of an entity so as to obtain benefi ts from its activities. Annual Report 2009 The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from to the effective date of acquisition and up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the fi nancial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation. Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

3. Signifi cant Accounting Policies (continued)

Basis of consolidation (continued)

Minority interests in the net assets of consolidated subsidiaries are presented separately from the Group’s equity therein. Minority interests in the net assets consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority shareholders in excess of the minority interests’ share in the subsidiary’s equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

Business combinations

The acquisition of businesses is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifi able assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS3 “Business Combinations” are recognised at their fair values at the acquisition date.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifi able assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profi t or loss.

The interests of minority shareholders in the acquiree are initially measured at the minority shareholders’ proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

Goodwill

Goodwill arising on an acquisition of a business is carried at cost less any accumulated impairment losses and is presented 74 separately in the consolidated statement of fi nancial position. China Aoyuan Property Group Limited

For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefi t from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. For goodwill arising on an acquisition in a fi nancial year, the cash-generating unit to which goodwill has been allocated is tested for impairment before the end of that fi nancial year. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated fi rst to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profi t or loss. An impairment loss recognised for goodwill is not reversed in a subsequent period.

On subsequent disposal of the relevant cash-generating unit, the attributable amount of goodwill capitalised is included in the

Annual Report 2009 determination of the profi t or loss on disposal. Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

3. Signifi cant Accounting Policies (continued)

Acquisition of additional interest in subsidiaries

On acquisition of additional interests in subsidiaries, the excess of the cost of the acquisition over the fair values of the underlying assets and liabilities attributable to the additional interests in subsidiaries is debited to goodwill, while discount arising on the excess of the fair values of the underlying assets and liabilities attributable to the additional interests in the subsidiaries over the cost of the acquisition is credited to profi t or loss for the period.

The difference between the cost of the acquisition and the goodwill/discount on acquisition and the carrying values of the underlying assets and liabilities attributable to the additional interests in subsidiaries is charged directly to special reserve. On subsequent disposal of the subsidiary, the attributable special reserve is realised in the profi t or loss in the period in which the subsidiary is disposed of.

Property, plant and equipment

Property, plant and equipment, including buildings for administrative purpose, are stated at cost less subsequent accumulated depreciation and accumulated impairment losses.

Depreciation is charged so as to write off the cost of items of property, plant and equipment, over their estimated useful lives and after taking into accounts of their residual value, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis.

An item of property, plant and equipment is transferred to an investment property because its use has changed as evidenced by end of owner-occupation. Any excess of fair value over the carrying amount of that item at the date of transfer is recognised in other comprehensive income and accumulated in property revaluation reserve. On the subsequent sale or retirement of the asset, the relevant revaluation reserve will be transferred directly to retained profi ts.

75 An item of property, plant and equipment is derecognised upon disposal or when no future economic benefi ts are expected to China Aoyuan Property Group Limited arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the profi t or loss in the period in which the item is derecognised.

Investment properties

Investment properties are properties and/or land held to earn rentals and/or for capital appreciation.

On initial recognition, investment properties are measured at cost, including any directly attributable expenditure. Subsequent to initial recognition, investment properties are measured at their fair values using the fair value model. Gains or losses arising from changes in the fair value of investment property are included in profi t or loss for the period in which they arise. Annual Report 2009

Construction costs incurred for investment properties under construction are capitalised as part of the carrying amount of the investment properties under construction. Starting from 1 January 2009, investment properties under construction are measured at fair value at the end of the reporting period. Any difference between the fair value of the investment properties under construction and their carrying amounts is recognised in profi t or loss in the period in which they arise. Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

3. Signifi cant Accounting Policies (continued)

Investment properties (continued)

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefi ts are expected from its disposals. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the profi t or loss in the period in which the item is derecognised.

Interests in jointly controlled entities

Joint venture arrangements that involve the establishment of a separate entity in which the ventures have joint control over the economic activity of the entity are referred to as jointly controlled entities.

The results and assets and liabilities of jointly controlled entities are incorporated in the consolidated fi nancial statements using the equity method of accounting. Under the equity method, investments in jointly controlled entities are carried in the consolidated statement of fi nancial position at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the jointly controlled entities, less any identifi ed impairment loss. When the Group’s share of losses of a jointly controlled entity equals or exceeds its interest in that jointly controlled entity, the Group discontinues recognising its share of further losses. An additional share of losses is provided for and a liability is recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of that jointly controlled entity.

When a group entity transacts with a jointly controlled entity of the Group, profi ts or losses are eliminated to the extent ofthe Group’s interest in the jointly controlled entity.

Impairment of tangible assets

At the end of the reporting period, the Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the 76 asset is estimated in order to determine the extent of the impairment loss, if any. If the recoverable amount of an asset is

China Aoyuan Property Group Limited estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, such that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.

Properties for sales

Completed properties and properties under development for sale are stated at the lower of cost and net realisable value. Cost includes the cost of land, development expenditure, borrowing costs capitalised in accordance with the Group’s accounting Annual Report 2009 policy, and other attributable expenses. Where property for sale is transferred to investment property when there is a change of intention to hold the property to earn rentals or/and for capital appreciation, which is evidenced by the commencement of an operating lease to another party, any difference between the carrying amount and the fair value of that item at the date of transfer is recognised in profi t or loss for the period. For a property for sale transferred to property, plant and equipment sa evidenced by commencement of owner-occupation, the carrying amount of that item is transferred to property, plant and equipment at the date of transfer. Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

3. Signifi cant Accounting Policies (continued)

Other property interests

Other property interests are stated at the lower of cost and net realisable value. Cost comprises both the prepaid lease payments for the land and development cost for the property.

Financial instruments

Financial assets and fi nancial liabilities are recognised in the consolidated statement of fi nancial position when a group entity becomes a party to the contractual provisions of the instrument. Financial assets and fi nancial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of fi nancial assets and fi nancialiabilities l (other than fi nancial assets and fi nancial liabilities at fair value through profi t or loss) are added to or deducted from thefair value of the fi nancial assets or fi nancial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of fi nancial assets or fi nancial liabilities at fair value through profi t or loss are recognised immediately in profi t or loss.

Financial assets The Group’s fi nancial assets are classifi ed into (i) available-for-sales (“AFS”) fi nancial assets and (ii) loans and receivables. All regular way purchases or sales of fi nancial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of fi nancial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. The accounting policies adopted in respect of each category of fi nancial assets are set out below.

Effective interest method The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period to the net carrying 77 amount on initial recognition. China Aoyuan Property Group Limited

Income is recognised on an effective interest basis for debt instruments.

AFS fi nancial assets AFS fi nancial assets are non-derivatives that are either designated or not classifi ed as loans and receivables.

For available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments, they are measured at cost less any identifi ed impairment losses at the end of the reporting period (see the accounting policy in respect of impairment loss on fi nancial assets below). Annual Report 2009 Loans and receivables Loans and receivables are non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market. Loans and receivables (including trade and other receivables, amounts due from jointly controlled entities, amount due from venturer of a jointly controlled entity, restricted bank deposits and bank balances and cash) are measured at amortised cost using the effective interest method, less any impairment (see the accounting policy in respect of impairment loss on fi nancial assets below). Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

3. Signifi cant Accounting Policies (continued)

Financial instruments (continued)

Financial assets (continued) Impairment of fi nancial assets Financial assets, are assessed for indicators of impairment at the end of the reporting period. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the fi nancial assets, the estimated future cash fl ows of the investment have been affected.

For an available-for-sale equity investment, a signifi cant or prolonged decline in the fair value of that investment below itscost is considered to be objective evidence of impairment.

Objective evidence of impairment could include:

• signifi cant fi nancial diffi culty of the issuer or counterparty; or • default or delinquency in interest or principal payments; or • it becoming probable that the borrower will enter bankruptcy or fi nancial re-organisation.

Trade receivables that are assessed not to be impaired individually are assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 60 days, as well as observable changes in national or local economic conditions that correlate with default on receivables.

For fi nancial assets carried at amortised cost, an impairment loss is recognised in profi t or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount and the present value of estimated future cash fl ows, discounted at the fi nancial asset’s original effective interest rate.

78 For fi nancial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s

China Aoyuan Property Group Limited carrying amount and the present value of the estimated future cash fl ows discounted at the current market rate of return for a similar fi nancial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the fi nancial asset is reduced by the impairment loss directly for all fi nancial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profi t or loss.

For fi nancial assets measured at amortised cost, if, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment losses was recognised, the previously

Annual Report 2009 recognised impairment loss is reversed through profi t or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

In respect of AFS equity securities, impairment losses previously recognised in profi t or loss are not reversed through profi ort loss in subsequent periods. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income and accumulated under the heading of investments revaluation reserve. Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

3. Signifi cant Accounting Policies (continued)

Financial instruments (continued) Financial liabilities and equity Debt and equity instruments issued by the group entity are classifi ed as either fi nancial liabilities or as equity in according with the substance of the contractual arrangements and the defi nitions of a fi nancial liability and an equity instrument.

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

Effective interest method The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees paid or received that from an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the fi nancial liability, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

Interest expense is recognised on an effective interest basis.

Other fi nancial liabilities Other fi nancial liabilities (including secured bank loans, trade and other payables and amount due to a minority shareholder) are subsequently measured at amortised cost using the effective interest method.

Convertible notes Conversion option embedded in convertible notes that will be settled other than by the exchange of a fi xed amount of cash or another fi nancial asset for a fi xed number of the Group’s own equity instruments is a conversion option derivative. Such convertible notes issued by the Group containing liability component and conversion option, issuer redemption option (collectively the “embedded derivatives component”) are classifi ed separately into respective items on initial recognition. Atthe date of issue, both the liability and embedded derivatives component are recognised at the fair value. 79 China Aoyuan Property Group Limited In subsequent periods, the liability component of the convertible notes is carried at amortised cost using the effective interest method. The embedded derivatives component is measured at fair value with changes in fair value recognised in profi t or loss.

Transaction costs that relate to the issue of the convertible notes are allocated to the liability and embedded derivatives component in proportion to their relative fair values. Transaction costs relating to the embedded derivatives component is charged to profi t or loss immediately. Transaction costs relating to the liability component are included in the carrying amount of the liability portion and amortised over the period of the convertible loan notes using the effective interest method.

Equity instruments Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. Annual Report 2009 Derivative fi nancial instruments Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of the reporting period.

Embedded derivative Derivatives embedded in non-derivative host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at fair value through profi t or loss (“FVTPL”). Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

3. Signifi cant Accounting Policies (continued)

Financial instruments (continued) Financial guarantee contracts A fi nancial guarantee contract is a contract that requires the issuer to make specifi ed payments to reimburse the holder for a loss it incurs because a specifi ed debtor fails to make payment when due in accordance with the original or modifi ed terms of a debt instrument. A fi nancial guarantee contract issued by the Group not designated at FVTPL is recognised initially at fair value less transaction costs that are directly attributable to the issue of the fi nancial guarantee contract. At the end of the reporting period, the Group measures the fi nancial guarantee contract at the higher of: (i) the amount of the obligation under the contract, as determined in accordance with IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”, and (ii) the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with IAS 18 “Revenue”.

Derecognition Financial assets are derecognised when the rights to receive cash fl ows from the assets expire or, the fi nancial assets are transferred and the Group has transferred substantially all the risks and rewards of ownership of the fi nancial assets. On derecognition of a fi nancial asset, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income is recognised in profi t or loss.

Financial liabilities are derecognised when the obligation specifi ed in the relevant contract is discharged, cancelled or expires. The difference between the carrying amount of the fi nancial liability derecognised and the consideration paid and payable is recognised in profi t or loss.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods sold and services rendered in the normal course of business, net of discounts and sales related taxes.

80 Sales of properties China Aoyuan Property Group Limited Revenue from sales of properties is recognised when the risks and rewards of properties are transferred to the purchasers, which is when the construction of relevant properties has been completed and the possession of the properties have been delivered to the purchasers and collectability of related receivables is reasonably assured.

Deposits received on properties sold prior to the date of revenue recognition are included in the consolidated statement of fi nancial position as sales deposits from customers under current liabilities.

Sales returns of properties sold are recorded as reduction of revenue in the period in which the properties are returned.

Property rentals Rentals receivable under operating leases are recognised and credited to the consolidated statement of comprehensive Annual Report 2009 income on a straight-line basis over the relevant lease term.

Consulting income Consulting income is recognised when services are rendered. Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

3. Signifi cant Accounting Policies (continued)

Revenue recognition (Continued) Interest income Interest income from a fi nancial asset is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the fi nancial asset to that asset’s net carrying amount on initial recognition.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in profi t or loss in the period in which they are incurred.

Leasing

Leases are classifi ed as fi nance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classifi ed as operating leases.

Rentals payable under operating leases are recognised as an expense on a straight-line basis over the term of the relevant lease. Benefi ts received and receivable as an incentive to enter into an operating lease are also recognised as a reduction of rental expense over the lease term on a straight-line basis.

Leasehold land and building The land and building elements of a lease of land and building are considered separately for the purpose of lease classifi cation, unless the lease payments cannot be allocated reliably between the land and building elements, in which case, the entire lease is generally treated as a fi nance lease and accounted for as property, plant and equipment. To the extent the allocation 81

of the lease payments can be made reliably, leasehold interests in land are accounted for as operating leases and amortised China Aoyuan Property Group Limited over the lease term on a straight-line basis, except for those that are classifi ed and accounted for as investment properties under the fair value model.

Sale and leaseback

A sale and leaseback transaction involves the sale of properties and the leasing back of the same assets.

When a sale and leaseback transaction results in an operating lease and is established at fair value, any profi t or loss is recognised immediately. When the sale price of properties is below fair value, any profi t or loss is recognised immediately except that, when the loss is compensated for by future lease payments at below market price, it is deferred and amortised in proportion to the lease payments over the period for which the properties are expected to be leased. When the sale price is Annual Report 2009 above fair value, the excess over fair value is deferred and amortised over the period for which the properties is expected to be leased. Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

3. Signifi cant Accounting Policies (continued)

Taxation

Income tax expense represents the sum of the tax currently payable and deferred taxation.

The tax currently payable is based on taxable profi t for the year. Taxable profi t differs from net profi t as reported in the consolidated statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes profi t or loss items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted by the end of the reporting period.

Deferred taxation is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the fi nancial statements and the corresponding tax bases used in the computation of taxable profi t. Deferred taxation liabilities are generally recognised for all taxable temporary differences, and deferred taxation assets are recognised to the extent that it is probable that taxable profi ts will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profi t nor the accounting profi t.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be suffi cient taxable profi ts against which to utilise the benefi ts of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred taxation assets is reviewed at the end of the reporting period and reduced to the extent that it is no longer probable that suffi cient taxable profi ts will be available to allow all or part of the asset to be recovered. 82

China Aoyuan Property Group Limited Deferred taxation is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised, based on tax rate (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets refl ects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is recognised in profi t or loss, except when it relates to items that are recognised in other comprehensive income or directly in equity, in which case the deferred tax is also recognised in other comprehensive income or directly in equity respectively.

Retirement benefi t costs

Payments to defi ned contribution retirement benefi t plans and state-managed retirement benefi t schemes are charged as an expense when employees have rendered service entitling them to the contributions. Annual Report 2009 Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

3. Signifi cant Accounting Policies (continued)

Foreign currencies

In preparing the fi nancial statements of each individual group entity, transactions in currencies other than the functional currency of the entity (foreign currencies) are recorded at the rates of exchanges prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are re-translated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not re-translated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in profi t or loss in the period in which they arise. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profi t or loss for the period.

Share-based payment transactions Equity-settled share-based payment transactions The fair value of services received determined by reference to the fair value of share options granted at the grant date is expensed on a straight-line basis over the vesting period or is recognised as an expense in full at the grant date when the share options granted vest immediately, with a corresponding increase in share option reserve.

At the end of the reporting period, the Group revises its estimates of the number of options that are expected to ultimately vest. The impact of the revision of the estimates during the vesting period, if any, is recognised in profi t or loss, with a corresponding adjustment to share option reserve.

At the time when the share options are exercised, the amount previously recognised in share option reserve will be transferred to share premium. When the share options are forfeited after the vesting date or are still not exercised at the expiry date, the amount previously recognised in share option reserve will be transferred to retained profi ts. 83 China Aoyuan Property Group Limited

4. Key Sources of Estimation Uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year.

Determination of net realisable value of properties under development for sale and completed properties for sale

Properties under development for sale and completed properties for sale are stated at the lower of the cost and net realisable

value with carrying amount of approximately RMB6,123,183,000 (2008: RMB4,530,096,000). Cost of each unit in each phase Annual Report 2009 of development is determined using the weighted average method. The net realisable value is the estimated selling price less estimated selling expenses and estimated cost of completion (if any), which are estimated based on best available information. Where there is any decrease in the estimated selling price arising from any changes to the property market conditions in the PRC, there may be impairment loss recognised on the properties under development for sale and completed properties for sale. Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

4. Key Sources of Estimation Uncertainty (continued)

Convertible notes

As described in note 27, the Group’s convertible notes contain embedded derivatives with carrying amount of RMB5,968,000 (2008: RMB3,906,000) that are remeasured to fair value through profi t or loss at subsequent reporting dates. The Company engaged an independent appraiser to assist it in determining the fair value of these embedded derivatives. Assumptions are made based on market yields of comparable corporate bonds and return volatility of comparable companies adjusted for specifi c features of the embedded derivatives. Details of the assumptions used are disclosed in note 27.

Land appreciation tax

The Group is subject to land appreciation tax in the PRC. However, the implementation and settlement of the tax varies amongst different tax jurisdictions in various cities of the PRC and certain projects of the Group have not fi nalised their land appreciation tax calculations and payments with any local tax authorities in the PRC. Accordingly, signifi cant judgment is required in determining the amount of land appreciation and its related income tax provisions. The Group recognised the land appreciation tax based on management’s best estimates. The fi nal tax outcome could be different from the amounts that were initially recorded, and these differences will impact the income tax expense and the related income tax provisions in the periods in which such tax is fi nalised with local tax authorities.

5. Revenue

The Group has adopted IFRS 8 Operating Segments with effect from 1 January 2009. IFRS 8 requires operating segments to be identifi ed on the basis of internal reports about components of the Group that are regularly reviewed by the Group’s chief executive offi cer (the chief operating decision maker) in order to allocate resources to segments and to assess their performance. In contrast, the predecessor Standard (IAS 14 Segment Reporting) required an entity to identify two sets of segments (business and geographical), using a risks and returns approach, with the entity’s “system of internal fi nancial reporting to key management personnel” serving only as the starting point for the identifi cation of such segments. In the past, 84 the Group’s primary reporting format was business segments. The application of IFRS 8 has not resulted in a redesignation of China Aoyuan Property Group Limited the Group’s reportable segments as compared with the primary reportable segments determined in accordance with IAS 14. Nor has the adoption of IFRS 8 changed the basis of measurement of segment profi t or loss and segment assets and liabilities.

During the year, the Group is principally engaged in the property development and property investment in the PRC. Information reported to the Group’s management for the purposes of resource allocation and assessment of performance focuses on the type of operation. The Group’s reportable segments under IFRS 8 are as follows:

Property development — developing and selling of properties in the PRC

Property investment — leasing of investment properties in the PRC Annual Report 2009

Others — provisions of consulting services and management operation Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

5. Revenue (continued)

The following is an analysis of the Group’s revenue and results by reportable segments.

Year ended 31 December 2009

Property Property development investment Others Total RMB’000 RMB’000 RMB’000 RMB’000

Segment revenue 2,348,145 15,086 1,236 2,364,467

Segment results 348,190 (11,423) (1,443) 335,324

Other income 66,542 Unallocated corporate expenses (71,253) Change in fair value of embedded derivatives component of convertible notes (2,062) Share of result of a jointly controlled entity 101,344

Profi t before taxation 429,895

Year ended 31 December 2008

Property Property development investment Others Total RMB’000 RMB’000 RMB’000 RMB’000 (Note)

Segment revenue 609,015 9,525 1,401 619,941 85

Segment results (79,916) (25,758) 219 (105,455) China Aoyuan Property Group Limited

Other income 44,234 Unallocated corporate expenses (115,785) Change in fair value of embedded derivatives component of convertible notes 76,145 Finance costs (5,219) Gain on disposal of subsidiaries 16,713 Share of result of a jointly controlled entity 45

Loss before taxation (89,322) Annual Report 2009 Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

5. Revenue (continued)

Note: During the year ended 31 December 2008, two customers settled the outstanding portion of the consideration amounting to approximately RMB338,325,000 for properties they purchased in 2007 by returning to the Group certain properties previously sold to them in 2007.

In addition, the Group purchased certain other properties previously sold to these two customers at a consideration of approximately RMB197,028,000 so as to integrate them with the properties returned by the two customers for further enhancement and selling. The settlement and purchase of properties are recognised as sales returns such that the relevant revenue amounting to approximately RMB597,951,000 (net of business tax) and relevant cost of properties sold amounting to approximately RMB262,346,000 previously recognised in 2007 are now recognised as deductions from revenue and cost of properties sold during the year ended 31 December 2008. Prior to the sales returns, the Group received certain amount of cash from these two customers for settlement of sales consideration. Accordingly, the Group recognised revenue of approximately RMB92,738,000 (net of business tax) to the extent cash is received and retained.

During the year ended 31 December 2008, revenue and segment results attributed to the property development segment amounting to approximately RMB147,572,000 (net of business tax) and RMB86,635,000, respectively, were derived from corporate bulk sales.

During the year ended 31 December 2009, the Group continues to enhance the properties returned by the two customers and plans to complete the enhancement in year 2010.

Revenue reported above represents revenue generated from external customers. There were no inter-segment sales in the year (2008: Nil).

The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 3. Segment result represents the profi t earned or loss incurred by each segment without allocation of central administration costs including directors’ salaries, head offi ce operating expenses, bank interest and other interest income, change in fair value of embedded derivatives component of convertible notes, fi nancial costs, gain on disposal of subsidiaries and share of result of a jointly controlled entity. This is the measure reported to Group’s chief executive offi cer for the purposes of resource allocation and performance assessment.

86 China Aoyuan Property Group Limited Annual Report 2009 Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

5. Revenue (continued)

The following is an analysis of the Group’s assets and liabilities by reportable segments:

Segment assets

2009 2008 RMB’000 RMB’000

Property development 6,893,618 5,768,398 Property investment 797,278 451,034 Other 363 398

Total segment assets 7,691,259 6,219,830 Interests in jointly controlled entities 466,831 326,804 Unallocated assets: Amount due from a venturer of a jointly controlled entity 140,488 — Available-for-sale investments 296,000 — Amounts due from jointly controlled entities 850,024 60,850 Restricted bank deposits 745,419 135,732 Other property interests 86,952 86,952 Deferred taxation assets 27,636 8,369 Income tax recoverable 5,190 — Bank balances and cash 1,283,930 1,345,861 Unallocated assets 131,612 164,012

Consolidated assets 11,725,341 8,348,410

Segment liabilities

2009 2008 87

RMB’000 RMB’000 China Aoyuan Property Group Limited

Property development 2,285,477 1,190,318 Property investment 9,685 476 Other 736 2,556

Total segment liabilities 2,295,898 1,193,350 Unallocated liabilities: Secured bank loans 2,586,365 1,214,687 Derivative fi nancial instruments 5,968 3,906 Taxation payable 681,358 653,255 Deferred taxation liabilities 74,589 63,053

Convertible notes 325,850 304,133 Annual Report 2009 Unallocated liabilities 2,353 26,641

Consolidated liabilities 5,972,381 3,459,025

Note: At 31 December 2009, segment assets amounting to approximately RMB61,110,000 (principal amount is RMB62,464,000) (2008: RMB73,290,000 (principal amount was RMB78,080,000) ) were related to corporate bulk sales recognised during the year ended 31 December 2008. Detail are set out in note 23. Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

5. Revenue (continued)

Segment liabilities (continued)

For the purposes monitoring segment performances and allocating resources between segments:

• all assets are allocated to reportable segments other than interest in jointly controlled entities, available-for-sale investments, amount due from a venturer of a jointly controlled entity, amount due from jointly controlled entities, other property interests, deferred taxation assets, income tax recoverable, restricted bank deposits, bank balances and cash and other assets not attributable to respective segment.

• all liabilities are allocated to reportable segments other than taxation payable, derivative fi nancial instruments, secured bank loans, deferred taxation liabilities, convertible notes and other liabilities not attributable to respective segment.

Other information

Year ended 31 December 2009

Property Property development investment Others Unallocated Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Amounts included in the measure of segment profi t or loss or segment assets: Addition of property plant and equipment 3,378 — 64 3,336 6,778 Addition of investment properties (note) — 403,899 — — 403,899 Depreciation of property, plant and equipment 3,922 23 98 6,767 10,810 88 Amortisation of prepaid lease China Aoyuan Property Group Limited payments — 6,275 — — 6,275 Loss (gain) on disposal of property, plant and equipment 91 — (33) 226 284 Recognition of increase in fair value of completed properties upon transfer to investment properties 53,817 — — — 53,817 Decrease in fair value of investment properties — 19,557 — — 19,557

Note: The addition includes transfer from properties for sales amounting to approximately RMB68,400,000, details of which have been disclosed in notes 15 and 22. Annual Report 2009 Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

5. Revenue (continued)

Other information (continued)

Year ended 31 December 2008

Property Property development investment Others Unallocated Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Amounts included in the measure of segment profi t or loss or segment assets: Addition of property, plant and equipment 7,112 — — 100,384 107,496 Addition of investment properties (note) — 120,698 — — 120,698 Depreciation of property, plant and equipment 5,735 17 93 5,433 11,278 Amortisation of prepaid lease payments — 6,275 — — 6,275 Loss on disposal of property, plant and equipment 360 — — — 360 Recognition of increase in fair value of completed properties upon transfer to investment properties 88,437 — — — 88,437 Decrease in fair value of investment properties — 34,558 — — 34,558

Note: The addition includes transfer from properties for sales amounting to approximately RMB109,568,000 and property, plant and equipment amounting to approximately RMB11,130,000, respectively, details of which have been disclosed in notes 15 and 22.

Information about major customers 89

During the year ended 31 December 2008, revenue from a customer contributing over 10% of the total sales of the Group China Aoyuan Property Group Limited amounted to approximately RMB151,370,000. There is no individual customer who contributed over 10% of the total sales of the Group during the year ended 31 December 2009. Annual Report 2009 Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

6. Other Income

2009 2008 RMB’000 RMB’000

Other income comprises of:

Bank interest income 9,091 15,843 Imputed interest income on trade receivables 3,437 35,663 Interest income from a jointly controlled entity 13,797 — Interest income from venturer of a jointly controlled entity 10,488 — Reversal of accruals 30,241 25,271 Others 2,925 3,120

69,979 79,897

7. Finance Costs

2009 2008 RMB’000 RMB’000

Interest on bank loans wholly repayable within fi ve years 94,501 81,403 Interest on convertible notes 44,196 42,662

138,697 124,065 Less: Amount capitalised in properties under development for sales (138,697) (118,846)

— 5,219

90 Interest capitalised arose on the general borrowing pool of the Group were calculated by applying a capitalisation rate of

China Aoyuan Property Group Limited approximately of 6.9% (2008: 8.4%) to expenditure on the qualifying assets. Annual Report 2009 Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

8. Profi t (Loss) Before Taxation

2009 2008 RMB’000 RMB’000

Profi t before taxation has been arrived at after charging (crediting):

Staff costs including directors’ emoluments 69,788 84,950 Retirement benefi t scheme contributions 2,048 932

Total staff costs 71,836 85,882 Less: Amount capitalised to properties under development for sales (9,425) (12,861)

62,411 73,021 Amortisation of prepaid lease payments 6,275 6,275 Auditor’s remuneration 2,500 2,700 Depreciation of property, plant and equipment 10,810 11,278 Loss on disposal of property, plant and equipment 284 360 Net foreign exchange loss 5,499 40,329 Rental expenses in respect of rented premises under operating leases 10,313 14,776 Rental income in respect of investment properties under operating leases, less direct operating expenses from investment properties that generated rental income during the year of approximately RMB677,000 (2008: RMB725,000) (14,409) (8,800)

Note: As disclosed in note 5, two customers settled the remaining consideration payable to the Group of approximately RMB338,325,000 during the year ended 31 December 2008 by returning to the Group certain properties sold to them in 2007.

9. Income Tax Expense (Credit)

2009 2008 91 China Aoyuan Property Group Limited RMB’000 RMB’000

Income tax expense (credit) recognised comprises of:

Enterprise Income Tax in the PRC 112,639 181,319 Deferred taxation (note 29) (8,957) (165,550) Land appreciation tax: — current year 28,347 — — overprovision in prior year (note) (28,431) (47,626)

Income tax expense (credit) for the year 103,598 (31,857)

Note: Land appreciation tax is calculated on a progressive rate basis where higher rate is applicable for land with higher appreciation. The overprovision Annual Report 2009 of land appreciation tax during the years ended 31 December 2009 and 2008 arose as a result of decrease in the applicable land appreciation tax rates for the projects as a whole calculated on an cumulative land appreciation basis.

The Group’s PRC Enterprise Income Tax is calculated at 25% (2008: 25%) of the estimated assessable profi t for the year. PRC land appreciation tax is levied at progressive rates ranging from 30% to 60% on the appreciation of land value, being the proceeds of sales of properties less deductible expenditures including cost of land use rights and all property development expenditures. Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

9. Income Tax Expense (Credit) (continued)

On 16 March 2007, the People’s Republic of China promulgated the Law of the People’s Republic of China on Enterprise Income Tax (the “New Law”) by Order No. 63 of the President of the People’s Republic of China. According to the New Law, starting from 1 January 2008, withholding income tax will be imposed on dividends relating to profi ts earned in year ended 31 December 2008 onwards to foreign investors for the companies established in the PRC. Deferred taxation has not been provided for in the consolidated fi nancial statements in respect of temporary difference attributable to accumulated profi ts of the PRC subsidiaries amounting to approximately RMB392,446,000 (2008: RMB156,893,000) as the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. The Group has provided deferred taxation amounting to approximately RMB2,500,000 related to the undistributed profi t of PRC subsidiaries based on the Group’s dividend plan.

Hong Kong Profi ts Tax is calculated at 16.5% of the estimated assessable profi t for the year ended 31 December 2009. No provision for Hong Kong Profi ts Tax has been made in the consolidated fi nancial statements for the year ended 31 December 2008.

The income tax expense (credit) for the year can be reconciled to the profi t (loss) before taxation per consolidated statement of comprehensive income as follows:

2009 2008 RMB’000 RMB’000

Profi t (loss) before taxation 429,895 (89,322)

Tax charge (credit) at PRC Enterprise Income Tax rate of 25% 107,474 (22,330) Tax effect of share of result of a jointly controlled entity (25,336) (11) Tax effect of expenses not deductible in determining taxable profi t 30,484 52,211 Tax effect of income that are not taxable in determining taxable profi t — (27,180) Tax effect of tax losses not recognised 611 582 92 Land appreciation tax (84) (47,626) China Aoyuan Property Group Limited Tax effect of utilisation of tax losses previously not recognised (8,947) — Effect of differential tax rate of subsidiaries operating in other jurisdiction (2,302) — Tax effect of land appreciation tax 21 11,907 Withholding tax on undistributed profi t of PRC subsidiaries 2,500 — Others (823) 590

Tax (expenses) credit for the year 103,598 (31,857) Annual Report 2009 Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

10. Directors’ and Employees’ Remuneration

Directors’ emoluments

2009 2008 RMB’000 RMB’000

Fees — — Salaries and allowances 19,708 11,153 Share-based payments 522 13,644

20,230 24,797

Salaries and Share based allowances payments Total RMB’000 RMB’000 RMB’000

Year ended 31 December 2009

Executive director: Guo Zi Wen (郭梓文) 2,645 — 2,645 Guo Zi Ning (郭梓寧) 2,430 — 2,430 Zheng Jian Jun (鄭健軍) (note a) 1,736 — 1,736 Hu Da Wei (胡大為) 2,113 — 2,113 Wu Jie Si (武捷思) 5,285 — 5,285 Lam Kam Tong (林錦堂) (note b) 2,642 — 2,642 Xin Zhu (辛珠) (note b) 2,098 — 2,098

Non-executive director: Leung Ping Chung, Hermann (梁秉聰) 53 — 53 93 Paul S. Wolansky 53 — 53 China Aoyuan Property Group Limited He Jian Bing (何建兵) (note a) 90 — 90

Independent non-executive director: Song Xian Zhong (宋獻中) 159 174 333 Ma Kwai Yuen (馬桂園) 224 174 398 Tsui King Fai (徐景輝) 180 174 354

19,708 522 20,230 Annual Report 2009 Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

10. Directors’ and Employees’ Remuneration (continued)

Directors’ emoluments (continued)

Salaries and Share based allowances payments Total RMB’000 RMB’000 RMB’000

Year ended 31 December 2008

Executive director: Guo Zi Wen (郭梓文) 2,316 — 2,316 Guo Zi Ning (郭梓寧) 2,110 3,528 5,638 Zheng Jian Jun (鄭健軍) 1,662 452 2,114 Hu Da Wei (胡大為) 1,981 — 1,981 Wu Jie Si (武捷思) 2,420 5,821 8,241

Non-executive director: Leung Ping Chung, Hermann (梁秉聰) 53 3,528 3,581 Paul S. Wolansky 53 — 53 He Jian Bing (何建兵) 73 — 73

Independent non-executive director: Song Xian Zhong (宋獻中) 93 105 198 Ma Kwai Yuen (馬桂園) 218 105 323 Tsui King Fai (徐景輝) 174 105 279

11,153 13,644 24,797

94 Notes: China Aoyuan Property Group Limited (a) Director resigned during the reporting period

(b) Directors appointed during the reporting period

Employees’ emoluments

The emoluments for the fi ve individuals with the highest emoluments in the Group included 5 (2008: 4) executive directors whose emoluments are set out above. The emoluments of the remaining one highest paid individual for the year ended 31 December 2008 are as follows:

2009 2008 RMB’000 RMB’000 Annual Report 2009 Salaries and allowances — 2,224

During the year ended 31 December 2009 and 2008, no remuneration was paid by the Group to any of the directors or the highest paid individuals as an inducement to join or upon joining the Group or as compensation for loss of offi ce. None of the directors waived any remuneration for the year ended 31 December 2009 and 2008. Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

11. Dividend

2009 2008 RMB’000 RMB’000

Dividend recognised as distribution during the year:

Final dividend for 2007 of RMB5.5 cent per share — 123,888

12. Earnings (Loss) Per Share

The calculation of the basic and diluted earnings (loss) per share attributable to owners of the Company is based on the following data:

Earnings (loss)

2009 2008 RMB’000 RMB’000

Earning (loss) for the purpose of basic earnings (loss) per share, being profi t (loss) for the year attributable to owners of the Company 320,133 (57,153)

Effect of dilutive potential ordinary shares: Interest on convertible notes charged to consolidated statement of comprehensive income — 5,219 Change in fair value of embedded derivatives component of convertible notes 2,062 (76,145) Exchange difference (2,204) (18,855)

Earnings (loss) for the purpose of diluted earnings per share 319,991 (146,934) 95 China Aoyuan Property Group Limited Number of shares

2009 2008 ’000 ’000

Weighted average number of ordinary shares for the purpose of basic earnings per share 2,419,671 2,252,000

Effect of dilutive potential ordinary shares: — Convertible notes 102,933 89,423 — Share options 5,248 —

Weighted average number of ordinary shares for the purpose of diluted Annual Report 2009 earnings (loss) per share 2,527,852 2,341,423

Note: The computation of diluted earnings per share for the year ended 31 December 2009 has not accounted for the effect of certain share options granted because the exercise price of those options was higher than the average market price of the Company’s shares.

The computation of diluted loss per share for the year ended 31 December 2008 has not accounted for i) the effect of certain share options granted because the exercise price of those options was higher than the average market price of the Company’s shares and ii) the exercise arising from the remaining share options, where the exercise price of those options was lower than the average market price of the Company’s shares, as their exercise would result in a decrease in loss per share. Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

13. Property, Plant and Equipment

Offi ce Motor Leasehold Buildings equipment vehicles improvements Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

COST At 1 January 2008 47,413 17,797 25,437 8,951 99,598 Disposal of subsidiaries (note 33) — (54) — — (54) Transfer to investment properties (12,744) — — — (12,744) Additions 91,025 7,285 5,097 4,089 107,496 Disposals — (661) (1,129) (3,883) (5,673)

At 31 December 2008 125,694 24,367 29,405 9,157 188,623 Acquisition of subsidiaries (note 32) — 207 441 — 648 Additions — 2,695 2,138 1,945 6,778 Disposals — (203) (6,535) — (6,738)

At 31 December 2009 125,694 27,066 25,449 11,102 189,311

DEPRECIATION At 1 January 2008 1,841 11,729 17,796 4,263 35,629 Disposal of subsidiaries (note 33) — (3) — — (3) Eliminated upon transfer to investment properties (1,614) — — — (1,614) Provided for the year 2,935 3,953 3,119 1,271 11,278 Disposals — (510) (920) (3,883) (5,313)

At 31 December 2008 3,162 15,169 19,995 1,651 39,977 Provided for the year 3,347 3,798 2,279 1,386 10,810 Disposals — (95) (5,827) — (5,922) 96

China Aoyuan Property Group Limited At 31 December 2009 6,509 18,872 16,447 3,037 44,865

CARRYING VALUES At 31 December 2009 119,185 8,194 9,002 8,065 144,446

At 31 December 2008 122,532 9,198 9,410 7,506 148,646

The following useful lives are used in the calculation of depreciation:

Buildings 20 years Offi ce equipment 3 to 5 years Motor vehicles 3 to 5 years

Annual Report 2009 Leasehold improvements 3 to 5 years

During the year ended 31 December 2008, buildings of approximately RMB11,130,000 were transferred to investment properties as a result of the change in use of property. No such transfer was made during the year ended 31 December 2009.

At 31 December 2009, buildings of approximately RMB88,840,000 (2008: Nil) were pledged for certain banking facilities granted to the Group. Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

14. Prepaid Lease Payments

The carrying amount of prepaid lease payments represents land use rights held under medium-term lease in the PRC and prepayment for sale and leaseback transaction, and is analysed as follows:

2009 2008 RMB’000 RMB’000

Current asset 6,275 6,275 Non-current asset 12,377 18,652

18,652 24,927

15. Investment Properties

Completed Investment investment properties under properties construction Total RMB’000 RMB’000 RMB’000

At 1 January 2008 353,750 — 353,750 Transfer from properties for sales 109,568 — 109,568 Transfer from property, plant and equipment 11,130 — 11,130 Net change in fair value recognised in the consolidated statement of comprehensive income (34,558) — (34,558)

At 31 December 2008 439,890 — 439,890 Transfer from properties for sales 68,400 — 68,400 Acquisition of a subsidiary (note 32) — 323,590 323,590 Construction cost incurred for investment properties 97 China Aoyuan Property Group Limited under construction — 11,909 11,909 Disposal (33,154) — (33,154) Net change in fair value recognised in the consolidated statement of comprehensive income (29,658) 10,101 (19,557)

At 31 December 2009 445,478 345,600 791,078

The fair values of the Group’s investment properties at the date of transfer and at the end of the reporting period have been arrived at on the basis of a valuation carried out by American Appraisal China Limited, an independent fi rm of professional valuers not connected with the Group, who has appropriate qualifi cations and recent experience in the valuation of similar properties in the relevant locations. The valuation was arrived at on the basis of capitalisation of the net income receivable

amounting to approximately RMB135,078,000 (2008: RMB245,060,000) and by reference to market evidence of recent Annual Report 2009 transaction prices for similar properties amounting to approximately RMB656,000,000 (2008: RMB194,830,000).

At 31 December 2009, investment properties of RMB45,000,000 (2008: Nil) were pledged to secure certain banking facilities granted to the Group. Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

15. Investment Properties (continued)

The carrying value of investment properties shown above comprises:

2009 2008 RMB’000 RMB’000

Properties situated on land with land use rights held under long lease in the PRC 791,078 439,890

16. Goodwill

RMB’000

COST At 1 January 2008, 31 December 2008 and 31 December 2009 8,237

IMPAIRMENT At 1 January 2008, 31 December 2008 and 31 December 2009 8,237

CARRYING VALUES At 31 December 2009 and 2008 —

During the year ended 31 December 2006, the Group acquired additional interest from minority shareholders of certain subsidiaries resulting in a goodwill amounting to RMB8,237,000. These companies were inactive and the Group acquired the additional interests solely for the purpose of rationalisation of the organisation structure. The management assessed the future profi tability of these companies and a full impairment loss was therefore recognised in the year ended 31 December 2006.

98 17. Interest in Jointly Controlled Entities China Aoyuan Property Group Limited

2009 2008 RMB’000 RMB’000

Cost of investment, unlisted 376,519 344,298 Share of post-acquisition results 99,874 45 Unrealised profi ts (9,562) (17,539)

466,831 326,804 Annual Report 2009 Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

17. Interest in Jointly Controlled Entities (continued)

As at 31 December 2009, the Group had interest in the following jointly controlled entities:

Proportion of issued Place of share capital held Name of entity incorporation by the Group Principal activities

Century Profi t Zone Investments Limited Hong Kong 41.33% Investment holding

Beijing Yaohui Real Estate Company PRC 40.02% Property development and investment Limited (“Yaohui”)

As at 31 December 2008, the Group had interest in the following jointly controlled entity:

Proportion of Place of registered capital Name of entity establishment held by the Group Principal activities

Head Win Limited BVI 50% Investment holding of a subsidiary engaged in property development

During the year ended 31 December 2009, the Group entered into a sale and purchase agreement with Hong Da Development & Investment Holding Co. Limited (泓達投資有限公司) (“Hong Da”) for the acquisition of 41.33% issued share capital of Century Profi t Zone Investments Limited (“Century Profi t”) at a consideration of RMB370,000,000 plus related cost of acquisition of approximately RMB6,519,000 and the acquisition was completed in July 2009. Century Profi t has 96.8% equity interest in Yaohui.

Pursuant to certain terms and conditions of the shareholders agreement signed between Hong Da and the Group, the fi nancial and operating policies of Century Profi t require unanimous approval of the two shareholders, Century Profi t was 99 therefore accounted for as a jointly controlled entity. China Aoyuan Property Group Limited

On 9 October 2009, the Group entered into a sale and purchase agreement with MGP Lotus (BVI) Limited (“MGP”), pursuant to which the Group agreed to purchase all the MGP’s interest of the Group’s jointly controlled entity, Head Win Limited, at a consideration of US$5,001 (approximately RMB34,000) and the payment of shareholder loan due to MGP at a consideration of approximately HK$292,909,000 (equivalent to approximately RMB257,760,000). The acquisition was completed in October 2009 and the Group has equity accounted for the result of Head Win Limited up to date when it became a subsidiary of the Group. The acquisition of Head Win Limited is accounted for as acquisition of assets and liabilities because Head Win Limited holds subsidiaries in which the major assets are properties under development, details of the acquisition of additional interests in Head Win Limited are set out in note 32.

As at 31 December 2009, an impairment assessment was performed on the interest in jointly controlled entities with reference Annual Report 2009 to the underlying assets held by the jointly controlled entities and no impairment is considered necessary. Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

17. Interest in Jointly Controlled Entities (continued)

The summarised fi nancial information in respect of the Group’s interest in jointly controlled entities which is accounted for using the equity method is set out below:

2009 2008 RMB’000 RMB’000

Current assets 1,287,674 11,672

Non-current assets 337,012 340,832

Current liabilities (1,086,842) (32,307)

Non-current liabilities (61,451) —

Income 115,979 45

Expense 14,635 —

Result of the year 14,635 —

18. Amount Due from a Venturer of a Jointly Controlled Entity

The amount due from a venturer of a jointly controlled entity includes loan advanced and related accrued interest.

In July 2009, the Group entered into a loan agreement with the venturer of a jointly controlled entity, Hong Da, and granted a loan of RMB130,000,000 to Hong Da which is repayable within two years or the date on which Century Profi t holds less than 62% interest in Yaohui, whichever is earlier, and interest-bearing at a rate of 7% per annum. The loan is secured by shares of Hong Da held by its shareholder and Hong Da’s equity interest in Century Profi t.

100 19. Available-for-sale Investments China Aoyuan Property Group Limited In July 2009, the Group entered into an agreement with Hong Da whereby Hong Da issued a convertible note (“Hong Da Convertible Note”) to the Group with a principal amount of RMB296,000,000. The Hong Da Convertible Note is interest- bearing at 11% per annum and the Group must convert it into shares of Century Profi t in September 2010 unless there is default in repayment of a former shareholder’s loan by Yaohui. In April 2010, Yaohui has fully repaid its former shareholder’s loan. The Hong Da Convertible Note does not confer any voting rights at any meetings of Century Profi t. Upon conversion of the Hong Da Convertible Note, the Group will hold 52.69% interest in Century Profi t.

The Group classifi ed the Hong Da Convertible Note into available-for-sale investment which is stated at cost since it is not practicable to measure the fair value of the equity component, being the most signifi cant component, of the Hong Da Convertible Note on a reliable basis. Annual Report 2009 20. Amounts Due from Jointly Controlled Entities

The amounts due from jointly controlled entities includes loan advanced and related accrued interest of approximately RMB23,359,000. As at 31 December 2009, the Group made the following advances to Century Profi t:

(a) Pursuant to a loan agreement entered into between the Group and Century Profi t, the Group advanced RMB460,000,000 to Century Profi t, which is secured, repayable within two years and interest-bearing at a fi xed rate of 7% per annum. Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

20. Amounts Due from Jointly Controlled Entities (continued)

(b) The Group also advanced approximately RMB90,000,000 and RMB276,000,000 to Century Profi t, which are secured, repayable within two years and interest-bearing at a fi xed rate of 7% to 15% per annum respectively.

The shareholders of Hong Da and Hong Da itself has pledged the shares of Hong Da and Century Profi t, respectively, and the shareholders of Hong Da has provided deeds of guarantee in relation to the above advances made by the Group to the jointly controlled entities.

According to the loan agreements dated 6 July 2009 and 22 July 2009 with Century Profi t and the shareholders’ agreement with Hong Da dated 28 July 2009, the outstanding principal amount of RMB460,000,000 and RMB90,000,000 in (a) and (b) above and related interest thereon out of the total amount at an aggregate amount of approximately RMB850,224,000 due from Century Profi t will be repaid prior to declaring any dividend to Hong Da as a shareholder of Century Profi t.

As at 31 December 2008, the amount due from a jointly controlled entity mainly represented an advance to a jointly controlled entity for settlement of its construction cost which is interest free, unsecured and not expected to be settled within twelve months from the end of the reporting period. The balance has been eliminated upon the acquisition of remaining interest in Head Win Limited during the year ended 31 December 2009.

21. Other Property Interests

Other property interests relate to leasehold land and related development cost in the PRC which is held under long lease. Pursuant to the written Decision Regarding the Reclamation of the Use Right of State-Owned land (Sui Guo Fang Zi [2007] No.1196) (廣州市國土資源和房屋管理局總國房地[2007]1196號收回國有土地使用權決定書) issued by the Bureau of Land Resources and Housing Management of Guangzhou Municipality (”the Bureau of Land Resources”) on 15 December 2006, the subject property will be reverted to the Guangzhou municipal government.

101 On 21 March 2007, the Group submitted the dispute of this decision to the Guangzhou municipal government. On 2 April China Aoyuan Property Group Limited 2007, the Guangzhou municipal government issued its determination in Administrative Review Decision (Sui Fu Fu Zi (2008) No. 67) (穗府覆字 (2008) 67號文—行政覆議決定書), which upheld the decision of the Bureau of Land Resources to reclaim the subject property on public interest grounds. The Bureau of Land Resources has confi rmed that the Group can apply for refund of the land premium and other ancillary expenses the Group paid when the Group fi rst acquired the land use right and the compensation for the expenses the Group incurred during the reclamation process.

During the year ended 31 December 2008, the Bureau of Land Resources issued a notice to the Group (穗府房函(2008) 1751 號) requesting the Group to submit a compensation proposal. According to the Group’s compensation proposal submitted in November 2008, the Group requested the Bureau of Land Resources to withdraw the reclaim decision, otherwise, grant another piece of land to the Group with same value and in same location and area. The executive directors of the Company are of the opinion that the recoverable amount of these property interests would not be less than the carrying amount which Annual Report 2009 represents the historical cost incurred. The relevant procedures of refund and compensation are still under process up to the date when the consolidated fi nancial statements are authorised for issue.

In addition, the controlling shareholder of the Company has agreed to indemnify any loss arising from the reclamation of the land by the Guangzhou municipal government. Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

22. Properties for Sales

2009 2008 RMB’000 RMB’000

Properties for sale comprise of:

Completed properties 1,202,402 1,076,943 Properties under development 4,920,781 3,453,153

6,123,183 4,530,096

Properties for sales of approximately RMB2,537,000,000 (2008: RMB1,920,000,000) are expected to be realized within twelve months.

During the year ended 31 December 2009, completed properties with aggregate carrying amount of approximately RMB14,583,000 (2008: RMB21,131,000) were transferred to investment properties upon commencement of operating leases. The excess of the fair value (as disclosed in note 15) of these properties at the date of transfer over their carrying amount, amounting to approximately RMB53,817,000 (2008: RMB88,437,000), is recognised in the consolidated statement of comprehensive income.

At 31 December 2009, certain of the Group’s properties for sales with carrying value of approximately RMB1,937,760,000 (2008: RMB1,204,316,000) were pledged for certain banking facilities granted to the Group.

102 China Aoyuan Property Group Limited Annual Report 2009 Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

23. Trade and Other Receivables

2009 2008 RMB’000 RMB’000

Trade receivables 294,568 267,891 Other receivables 269,633 291,844 Advances to suppliers 145,914 655,020 Deposits for purchase of land use rights 10,000 20,000 Prepayments and deposits 25,397 5,528

745,512 1,240,283

The following is aged analysis of trade receivables determined based on the date of the properties delivered and sales is recognised:

2009 2008 RMB’000 RMB’000

Age: 0 to 60 days 181,937 151,582 61 to 180 days 15,597 81,719 181 to 365 days 10,862 7,608 1 to 2 years 78,256 9,579 2 to 3 years 7,207 17,403 over 3 years 709 —

294,568 267,891

Trade receivables mainly represent receivable from banks for mortgage sale of properties amounting to approximately 103

RMB160,469,000 (2008: RMB137,500,000) and receivable from corporate bulk sale customers amounting to approximately China Aoyuan Property Group Limited RMB61,110,000 (2008: RMB82,625,000). Normally the average credit period on sale of properties is 60 days. For the corporate bulk sale customers, the average credit period extends to 180 days or two years. Of the trade receivables balance at 31 December 2009, approximately a principal amount of RMB62,464,000 will be received in May 2010 (2008: RMB15,616,000 and RMB62,464,000 will be received in June 2009 and May 2010), according to the corporate bulk sale agreements. Impairment on trade receivables are provided for based on estimated irrecoverable amounts from the sale of properties, determined by reference to past default experience. Considerations under pre-sale contracts will be fully received prior to the delivery of the ownership certifi cate of the properties to the purchasers.

In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the end of the reporting period. Annual Report 2009 Included in other receivables mainly represent payment made in advance for reclamation of land for the Group’s further property development in which no impairment is considered necessary. Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

23. Trade and Other Receivables (continued)

As at 31 December 2009, there were approximately RMB17,146,000 (2008: RMB9,579,000) receivable aged 1 to 2 years and approximately RMB2,913,000 (2008: RMB17,403,000) receivables aged over 2 years that were past due but not impaired. Based on experience, the management of the Company are of the opinion that no provision for impairment is necessary in respect of these receivables as the Group has no history of default for customer with balance past due or balance not past due. As at 31 December 2009, trade receivables of the Group’s largest customer (2008: largest three customers), which is operating in the Guangdong Province and engaged in property, investment or construction businesses, amounted to RMB61,110,000 (2008: RMB93,040,000). The Group has reviewed the subsequent settlement, settlement history and fi nancial position of the customer and no impairment on the receivable is required. Nonetheless, two customers were unable to settle the remaining balance payable to the Group during the year ended 31 December 2008 and therefore settled the remaining balance with the properties previously sold to them (see note 5). There is no other customer who represents more than 5% of the total balance of trade receivables. The concentration of credit risk in the remaining trade receivables is limited due to the customer base being large and unrelated.

24. Restricted Bank Deposits/Bank Balances And Cash

Restricted bank deposits

The deposits amounted to approximately RMB645,000,000 (2008: Nil) are restricted for the loan facility granted from the bank and carry variable interest rate of 0.36% to 2.79% per annum among which approximately RMB345,000,000 is restricted for a loan over than 1 year. The other deposits are restricted for the payment to the construction contractors, carry variable interest rate of 0.36% (2008: 0.36%) per annum, and will be released upon the completion of the development of properties in 2010.

Bank balances and cash

The bank balances carry variable interest rate with an average interest rate of 0.36% (2008: from 0.54% to 1%) per annum. 104 China Aoyuan Property Group Limited Annual Report 2009 Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

25. Trade and Other Payables

2009 2008 RMB’000 RMB’000

Trade payables 1,458,554 802,685 Other payables 193,729 132,982 Other taxes payable 67,165 40,116

1,719,448 975,783

Trade payables principally comprise amounts outstanding for trade purchases and ongoing cash expenses. The average credit period for trade purchases is from 6 months to 1 year. No interest is charged by the suppliers on the trade payables. The management closely monitors the payments of the payable to ensure that all payables are paid within the credit timeframe. Details of the fi nancial risk management policies by the Group are set out in note 31.

The following is an aged analysis of trade payables determined based on the invoice date:

2009 2008 RMB’000 RMB’000

Age: 0 to 60 days 175,256 310,926 61 to 180 days 856,727 188,271 181 to 365 days 205,180 110,705 1 to 2 years 106,796 121,148 2 to 3 years 91,469 33,274 Over 3 years 23,126 38,361

1,458,554 802,685 105 China Aoyuan Property Group Limited At 31 December 2009, the balance of approximately RMB125,491,000 (2008: RMB96,302,000) with age over 1 year mainly represents the retention money of approximately 5% to 10% of the contract prices.

According to the construction contracts, the retention money is interest free, and would be paid to constructors after 1-3 year period from the completion of construction.

26. Amount Due to a Minority Shareholder

The amount is interest-free, unsecured and has no fi xed terms of repayment. Annual Report 2009 Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

27. Convertible Notes/Derivative Financial Instruments

The convertible notes (“Convertible Notes”) issued by a subsidiary of the Company, Add Hero Holding Limited (“Add Hero”) entitles the holder of the Convertible Notes (“Noteholder”) to convert it into the Company’s ordinary shares at any time prior to 13 February 2012 (the “Maturity Date”) at a conversion price as set out in the Note Purchase Agreement entered into on 9 February 2007, subject to certain anti-dilutive adjustments. Add Hero shall on the Maturity Date pay an amount equal to the aggregate principal amount of the Convertible Notes outstanding on the Maturity Date, plus accrued and unpaid interest thereon.

During the period after 18 months following the International Public Offering (“IPO”) of the Company and prior to the Maturity Date, if the weighted average price of the Company’s share has equalled or exceeded 130% of the conversion price in effect on 20 of the last 30 trading days, Add Hero shall have the option to redeem all the Convertible Notes at its principal amount plus accrued and unpaid interest up to the date of redemption in cash.

According to the Note Purchase Agreement, the Convertible Notes is interest-bearing at 6-month London Inter Bank Offer Rate (“LIBOR”) plus 3% per annum.

Convertible Notes contain liability component stated at amortised cost and conversion option and issuer redemption option (collectively the “embedded derivatives component”) which are not closely related to the host contract and are stated at fair value. The embedded derivatives component is presented on a net basis as the terms and conditions of options under the embedded derivatives component are inter-related. The effective interest rate of the liability component is 14.7% (2008: 14.2%) for the year ended 31 December 2009.

The principal amount of Convertible Notes outstanding as at 31 December 2009 is US$60,000,000 (2008: US$60,000,000). The movements of the liability and derivative components of the Convertible Notes are set out as below:

Liability Derivative component components RMB’000 RMB’000 106

China Aoyuan Property Group Limited At 1 January 2008 306,400 80,051 Interest charged 42,662 — Interest paid (26,074) — Change in fair value — (76,145) Exchange difference (18,855) — At 31 December 2008 304,133 3,906 Interest charged 44,196 — Interest paid (20,275) — Change in fair value — 2,062 Exchange difference (2,204) — At 31 December 2009 325,850 5,968

Annual Report 2009 Fair value at 31 December 2009 414,456 5,968 Fair value at 31 December 2008 416,892 3,906 Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

27. Convertible Notes/Derivative Financial Instruments (continued)

The fair value of the embedded derivatives of the Convertible Notes comprises:

(a) The fair value of option of the Noteholder to convert the Convertible Notes into ordinary shares of the Company; and

(b) The fair value of the option of the Company to redeem the Convertible Notes.

Binomial model is used in the valuation of these embedded derivatives. Inputs into the model are as follows:

2008 2009

Conversion Price HK$5.2 HK$4.52 (note c) Risk free rate of interest (note a) 3.15% 1.83% Time to expiration 3.12 years 2.12 years Volatility (note b) 62% 69%

Notes:

(a) The risk free rate of interest adopted was the market yield of government bond as of the end of the reporting period.

(b) The volatility adopted was based on the share price volatility of comparable companies in the past four years.

The fair value of the Company’s redemption option was developed by the difference in fair value of the conversion option with or without the redemption option.

28. Secured Bank Loans

2009 2008 107 China Aoyuan Property Group Limited RMB’000 RMB’000

The secured bank loans are repayable as follows:

Within one year 743,420 215,000 More than one year, but not exceeding two years 492,690 625,687 More than two years, but not exceeding fi ve years 1,350,255 374,000 2,586,365 1,214,687 Less: Amount due within one year shown under current liabilities (743,420) (215,000) 1,842,945 999,687 Annual Report 2009 All the bank borrowings are variable-rate borrowings. As at 31 December 2009, bank borrowings amounting to approximately RMB1,294,425,000 (2008: Nil) bear interest at a range from Hong Kong Interbank Offering Rate (“HIBOR”) plus 1.0% to HIBOR plus 2.74% and bank borrowing amounting to approximately RMB1,291,940,000 (2008:RMB1,214,687,000) bear interest at rate as agreed with the banks at the inception date and subject to negotiation on annual basis with reference to lending rate of the People’s Bank of China.

The weighted average effective interest rates on bank borrowings for the year are 5.60% (2008: 6.92%) per annum. Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

29. Deferred Taxation

The deferred taxation (assets) liabilities recognised by the Group and movements thereon during the year are as follows:

Temporary difference Change in on revenue fair value of recognition Other investment Revaluation and related temporary properties of properties cost of sales Tax losses differences Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

At 1 January 2008 19,557 26,364 173,948 (5,028) 5,393 220,234 (Credit) charge to consolidated statement of comprehensive income (note 9) (8,640) 22,109 (165,427) (3,341) (10,251) (165,550)

At 31 December 2008 10,917 48,473 8,521 (8,369) (4,858) 54,684 Acquisition of subsidiaries (note 32) 1,226 — — — — 1,226 Charge (credit) to consolidated statement of comprehensive income (note 9) (5,968) 8,357 9,374 (8,219) (12,501) (8,957)

At 31 December 2009 6,175 56,830 17,895 (16,588) (17,359) 46,953

Note: Other temporary differences mainly include the withholding tax on undistributed earnings of PRC subsidiaries amounted to approximately RMB2,500,000 (2008: Nil) and deductible temporary difference in PRC subsidiaries amounted to approximately RMB20,039,000 (2008: RMB4,858,000).

108 China Aoyuan Property Group Limited Annual Report 2009 Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

29. Deferred Taxation (continued)

For the purpose of fi nancial statement presentation, certain deferred taxation assets and liabilities have been offset. The following is the analysis of the deferred taxation balances for fi nancial reporting purposes:

2009 2008 RMB’000 RMB’000

Deferred taxation assets (27,636) (8,369) Deferred taxation liabilities 74,589 63,053

46,953 54,684

As at 31 December 2009, the Group had unused tax losses of approximately RMB91,941,000 (2008: RMB49,477,000) available to offset against future profi ts. A deferred taxation asset has been recognised in respect of approximately RMB76,651,000 (2008: RMB33,475,000) of such tax losses. No deferred taxation asset has been recognised in respect of the remaining tax losses of approximately RMB15,290,000 (2008: RMB16,002,000) due to the unpredictability of future profi ts streams. The unrecognised tax losses will expire in the following years:

2009 2008 RMB’000 RMB’000

2009 — 3,156 2010 1,342 1,342 2011 3,457 3,457 2012 5,718 5,718 2013 2,329 2,329 2014 2,444 —

15,290 16,002 109 China Aoyuan Property Group Limited Annual Report 2009 Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

30. Share Capital

Number of shares Amount HK$’000

Ordinary shares of HK$0.01 each

Authorised: At 1 January 2008 and 31 December 2008 and 31 December 2009 100,000,000,000 1,000,000

Issued and fully paid: At 1 January 2008 and 2009 2,252,500,000 22,525 Issue of shares (note) 360,000,000 3,600

At 31 December 2009 2,612,500,000 26,125

2009 2008 RMB’000 RMB’000

Shown in the consolidated fi nancial statements 24,990 21,838

Note: On July 2009, the Company and the ultimate holding company of the Company entered into a placing and subscription agreement (the “Placing and Subscription Agreement”) with certain independent parties (the “Agents”). Pursuant to the Placing and Subscription Agreement, the agent procured purchasers on behalf of the ultimate holding company to purchase 360,000,000 existing ordinary shares of HK$0.01 each of the Company, at a price of HK$1.73 per share (the “Placing Price”), and the ultimate holding company has subscribed for 360,000,000 new shares at the Placing Price. The placement of shares to the placees and the subscription of shares were both completed in July 2009.

31. Financial Instruments

Financial risk management objectives and policies 110

China Aoyuan Property Group Limited The main risks associated with the Group’s fi nancial instruments are market risk (interest rate risk, price risk and foreign currency risk), credit risk and liquidity risk . The policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

The Group does not enter into or trade fi nancial instruments, including derivative fi nancial instruments, for hedging or speculative purpose.

There has been no change to the Group’s exposure to these kinds of risks or the manner in which it manages and measures. Annual Report 2009 Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

31. Financial Instruments (continued)

Financial risk management objectives and policies (continued) (i) Signifi cant accounting policies Details of the signifi cant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of fi nancial asset, fi nancial liability, derivative fi nancial instrument and equity instrument are disclosed in note 3.

(ii) Categories of fi nancial instruments

2009 2008 RMB’000 RMB’000

Financial assets Available-for-sale investments 296,000 — Loans and receivables (including cash and cash equivalents) 3,584,062 2,102,178

Financial liabilities Amortised cost 4,591,186 2,454,487 Financial liabilities through profi t or loss — Derivative fi nancial instruments 5,968 3,906

(iii) Market risk Interest rate risk The Group’s cash fl ow interest rate risk relates primarily to its convertible notes and variable-rate bank borrowings (see note 28 for details of these borrowings). The bank borrowings are for fi nancing development of property projects. The interest rate of the convertible notes is determined by 6 months LIBOR plus 3%. Increase in interest rates would increase interest expenses. The Group currently does not have interest rate hedging policy. However, the management 111

monitors interest rate exposure and will consider hedging signifi cant interest rate exposure should the need arises. China Aoyuan Property Group Limited

The Group’s fair value interest rate risk relates primarily to amounts due from jointly controlled entities and venturer of a jointly controlled entity and available-for-sale investments. The Group currently does not use any derivative contracts to hedge its exposure to interest rate risk. However, the management will consider hedging signifi cant interest rate exposure should the need arises. Annual Report 2009 Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

31. Financial Instruments (continued)

Financial risk management objectives and policies (continued)

(iii) Market risk (continued) Interest rate risk (continued) Interest rate sensitivity The sensitivity analyses below have been determined based on the exposure to interest rates for secured bank loan and convertible notes. The analysis is prepared based on the weighted average amount of secured bank loan and convertible notes during the period year. A 50 (2008: 200) basis point fl uctuation is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the possible change in interest rate.

If interest rates had been 50 (2008: 200) basis points higher/lower and all other variables were held constant, the Group’s post-tax profi t for the year ended 31 December 2009 would decrease/increase by approximately RMB12,760,000 (2008: increase/decrease of post-tax loss of RMB28,238,000).

The Group’s sensitivity to interest rates has increased over the years mainly due to the increase in debt instruments which are exposed to cash fl ow interest rate risk.

Price risk The Group is exposed to price risk in respect of the conversion option and redemption options embedded in the Convertible Notes. The below sensitivity analysis is not representative because of the interdependence of the variable input in the valuation model.

If the volatility to the valuation model had been 5% (2008: 5%) higher/lower while all other variables were held constant, the post-tax profi t for the year would decrease by RMB1,440,000 (2008: increase of post-tax loss of RMB1,176,000) and increase by RMB1,033,000 (2008: decrease of post-tax loss of RMB805,000), respectively. 112

China Aoyuan Property Group Limited If the share price of the Company input in the valuation model had been 5% (2008: 5%) higher/lower while all other input variables of the valuation model were held constant, the post-tax profi t for the year would decrease by RMB781,000 (2008: increase of post-tax loss of RMB722,000) and RMB481,000 (2008: decrease of post-tax loss of RMB89,000), respectively.

Foreign currency risk The Group’s transactions were mainly conducted in RMB, the functional currency of the Company and its subsidiaries, and its major receivables and payables are denominated in RMB. The Group is subject to foreign exchange rate risk arising from recognised assets and liabilities which are denominated in the currency other than the functional currency of the relevant group entity. The majority of the Group’s foreign currency transactions and balances are denominated in Hong Kong dollars and United States dollars. The Group currently does not have a foreign currency hedging policy. The

Annual Report 2009 Group manages its foreign currency risk by closely monitoring the movement of the foreign currency rates. Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

31. Financial Instruments (continued)

Financial risk management objectives and policies (continued)

(iii) Market risk (continued) Foreign currency risk management The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities at the respective end of reporting period are as follows:

2009 2008 RMB’000 RMB’000 Assets Hong Kong dollars 92,475 47,453

Liabilities Hong Kong dollars 1,301,312 20,278 United States dollars 331,817 308,038

Foreign currency sensitivity The Group is mainly exposed to fl uctuation of United States dollars and Hong Kong dollars against RMB. The following table details the Group’s sensitivity to a 2% (2008: 10%) increase and decrease in the RMB against the relevant foreign currencies. The respective percentages are the sensitivity rates used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes Convertible Notes, bank borrowings as well as bank balances denominated in foreign currencies. A positive number below indicates an increase in post-tax profi t (2008: decrease in post-tax loss) for the year where RMB strengthens 2% (2008: 10%) against the relevant currency. For a 2% (2008: 10%) weakening of RMB against the relevant currency, there would be an equal and opposite impact on the post-tax profi t (2008: post-tax loss) for the year.

2009 2008 RMB’000 RMB’000 113 China Aoyuan Property Group Limited United States dollars Profi t or loss for the year 4,977 23,103

Hong Kong Dollars Profi t or loss for the year 18,133 (2,308) Annual Report 2009 Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

31. Financial Instruments (continued)

Financial risk management objectives and policies (continued) (iv) Credit risk As at 31 December 2009, the Group’s maximum exposure to credit risk which will cause a fi nancial loss to the Group due to failure to discharge an obligation by the counterparties and fi nancial guarantees provided by the Group is arising from:

• the carrying amount of the respective recognised fi nancial assets as stated in the consolidated statement of fi nancial position; and

• the amount of contingent liabilities in relation to fi nancial guarantees issued by the Group as disclosed in note 35.

The Group has signifi cant concentration of credit risk since 21% (2008: 35%) of the total trade receivables was due from the Group’s largest customer (2008: largest three customers) as at 31 December 2009.

As at 31 December 2009, the Group’s maximum credit exposure to credit risk also included the fi nancial guarantee provided by the Group as disclosed in note 35.

In order to minimise the credit risk of debts, the management of the Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual debt at the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group’s credit risk is signifi cantly reduced.

The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies or state-owned banks in the PRC and Hong Kong. 114

China Aoyuan Property Group Limited The Group provides guarantees to banks in connection with certain customers’ borrowing of mortgage loans to fi nance their purchase of the properties for an amount up to 70% of the purchase price of the individual property (note 35). If a purchaser defaults on the payment of its mortgage during the period of guarantee, the bank holding the mortgage may demand the Group to repay the outstanding loan and any interest accrued thereon. Under such circumstances, the Group is able to forfeit the sales deposit received and repossess the properties for resale. Therefore, the management considers it would likely recover any loss incurred arising from the guarantee provided by the Group. No such forfeiture and repossession of properties occurred during the year ended 31 December 2009 and 2008.

The Group also exposes to concentration of credit risk in respect of amount due from jointly controlled entities, amount due from a venture of a jointly controlled entity and guarantee given to a jointly controlled entity. This jointly controlled entity borrowed certain bank loan which is jointly and severally guaranteed by the Company and the other venturer of

Annual Report 2009 the jointly controlled entity. The credit risk is considered not signifi cant as the management estimates that the funds generated from the jointly controlled entity will exceed the investment cost and advances in this jointly controlled entity. Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

31. Financial Instruments (continued)

Financial risk management objectives and policies (continued)

(iv) Credit risk (continued) As explained in note 21, the Group can apply for refund of the land premium and other ancillary expenses incurred during the reclamation process of a leasehold land in the PRC from the Bureau of Land Resources. Accordingly, the Group has concentration of credit risk in this regard. The credit risk is considered not signifi cant as the counterparty is a government body in the PRC.

(v) Capital risk management The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity mix.

The capital structure of the Group consists of debt (which includes the Convertible Notes and secured bank loans disclosed in notes 27 and 28, respectively), net of cash and cash equivalents, and equity attributable to owners of the Company, comprising share capital, reserves and retained profi ts.

The directors of the Company review the capital structure periodically. As part of this review, the directors of the Company assess budgets of major projects taking into account of the provision of funding. Based on the operating budgets, the directors of the Company consider the cost of capital and the risks associated with each class of capital and balance its overall capital structure through the payment of dividends, new share issues as well as the issue of new debt or the redemption of existing debt.

The Group’s capital risk management strategy remains unchanged over the years.

115 China Aoyuan Property Group Limited Annual Report 2009 Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

31. Financial Instruments (continued)

Financial risk management objectives and policies (continued) (vi) Liquidity risk management The Group’s objective is to maintain a balance between continuity of funding and the fl exibility through the use of borrowings. The directors of the Company closely monitor the liquidity position and expect to have adequate sources of funding to fi nance the Group’s projects and operations.

The following tables detail the Group’s remaining contractual maturity for its fi nancial liabilities and derivative components of Convertible Notes. The table has been drawn up based on the undiscounted cash fl ows of fi nancial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash fl ows. To the extent that interest fl ows are fl oating rate, the undiscounted amount is derived from interest rate at the end of the reporting period. The undiscounted amount of the Convertible Notes is based on the assumption that there is no conversion or early redemption on the Convertible Notes. The amounts included below for variable interest rate instruments for non-derivative fi nancial liabilities are subject to changes in variable interest rates differentto those estimates of interest rates determined at the end of the reporting period.

Weighted average Total Total interest 0–60 61–180 181–365 1–2 2–3 Over 3 undiscounted carrying rate days days days years years years cash fl ow amount RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

At 31 December 2009 Financial liabilities Non-interest bearing — 598,225 512,765 427,303 119,645 21,033 — 1,678,971 1,678,971 Bank borrowings 4.7% 136,999 200,255 458,109 557,514 799,999 623,564 2,776,440 2,586,365 Convertible Notes 4.5% 9,207 — 9,284 18,685 419,093 — 456,269 331,818 Financial guarantee — 1,859,280 — 589,935 — — — 2,449,215 —

Total 2,603,711 713,020 1,484,631 695,844 1,240,125 623,564 7,360,895 4,597,154

116 Weighted Total Total China Aoyuan Property Group Limited average 0–60 61–180 181–365 1–2 2–3 Over 3 undiscounted carrying interest rate days days days years years years cash fl ow amount RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

At 31 December 2008 Financial liabilities Non-interest bearing — 327,483 280,700 233,916 65,497 28,071 — 935,667 935,667 Bank borrowings 7.0% 13,604 128,012 152,652 673,107 191,221 214,801 1,373,397 1,214,687 Convertible Notes 4.8% 11,096 — 10,098 20,272 20,468 422,883 484,817 308,039

Total 352,184 408,712 396,666 758,876 239,760 637,684 2,793,882 2,458,393

The total undiscounted cash fl ows of fi nancial guarantee at 31 December 2009 disclosed above was the maximum amount the Group could be required to settle under the arrangement for the full guaranteed amount if that amount was

Annual Report 2009 claimed by the counterparties to the guarantee. Based on expectation as at 31 December 2009, the Group considered that it was not probable that the counterparties to the fi nancial guarantee would claim under the contract. The fi nancial guarantee will be released upon the repayment of the loan by Century Profi t in December 2010 (see note 35). Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

31. Financial Instruments (continued)

Fair value of fi nancial instruments

The fair values of fi nancial assets and fi nancial liabilities are determined as follows:

The fair value of fi nancial assets and fi nancial liabilities (excluding derivative instruments and available-for-sale investment) is determined in accordance with generally accepted pricing models based on discounted cash fl ow analysis.

The fair value of derivative instruments is calculated based on generally accepted option pricing models.

The carrying amounts of the fi nancial assets and fi nancial liabilities recorded at amortised cost in the consolidated fi nancial statements approximate their fair values except the convertible notes liability component as disclosed in note 27.

Fair value measurements recognised in the consolidated statement of fi nancial position The following table provides an analysis of fi nancial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.

• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active market for identical assets or liabilities.

• Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

31/12/2009 Level 1 Level 2 Level 3 Total 117 China Aoyuan Property Group Limited RMB’000 RMB’000 RMB’000 RMB’000

Financial liability at FVTPL Derivative fi nancial instruments — — 5,968 5,968

There were no transfers between Level 1 and 2 in the current year.

Reconciliation of Level 3 fair value measurements of fi nancial asset and liability

Derivative fi nancial

instruments Annual Report 2009 RMB’000

At 1 January 2009 3,906 Fair value change of embedded derivative component of Convertible Notes 2,062

At 31 December 2009 5,968 Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

32. Acquisition of Subsidiaries

On 18 June 2009, the Group entered into a sale and purchase agreement with independent third parties (“Vendors”), in connection with the acquisition of the entire equity interest in Zhongshan Plaza Development Company Limited (中山市中山廣場開發建設有限公司) (“Zhongshan Plaza”), a property development company, through the acquisition of its parent company, Earning Evers Limited (“Earning Evers”) at a consideration of RMB1, and payments of RMB639,999,999 owed by Zhongshan Plaza and Earning Evers to the Vendors and their related companies.

As disclosed in note 17, the Group acquired the remaining 50% interest in Head Win Limited in October 2009.

The acquisition of Earning Evers and Head Win Limited are accounted for as acquisition of assets and liabilities.

The net assets of Earning Evers and Head Win Limited acquired are as follows:

RMB’000

Net assets Property, plant and equipment 648 Properties for sale 953,754 Investment properties 323,590 Trade and other receivables 2,206 Bank balances and cash 10,114 Trade and other payables (63,018)

1,226,068 Interest in a joint controlled entity (328,274)

897,794

Satisfi ed by: 118 Cash 897,794 China Aoyuan Property Group Limited Net cash infl ow of cash and cash equivalents in respect of acquisition of subsidiaries: Consideration paid (897,794) Bank balances and cash of subsidiaries acquired 10,114

(887,680) Annual Report 2009 Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

33. Disposal of Subsidiaries

During the year ended 31 December 2008, the Group formed a jointly controlled entity namely, Head Win Limited, with an independent third party (note 17). The Group then disposed of its entire interest in certain wholly-owned subsidiaries to Head Win Limited, except one subsidiary 廣州奧譽房地產開發有限公司 where the Group retains 2% equity interest.

The net liabilities of subsidiaries at the date of disposal were as follows:

RMB’000

Net assets disposed of Property, plant and equipment 51 Properties for sale 700,072 Trade and other receivables 10 Bank balances and cash 146 Trade and other payables (6,731) Amounts due to group companies (709,435) (15,887) Gain on disposal of subsidiaries 16,713 Consideration 826

Satisfi ed by: Interest in a jointly controlled entities 826

Net cash outfl ow arising on disposal Bank balances and cash disposed of (146)

The subsidiaries disposed of did not contribute signifi cantly to the Group’s cash fl ows, turnover and profi t from operations during the relevant periods prior to disposal. 119 China Aoyuan Property Group Limited 34. Major Non-Cash Transactions

The Group had the following major non-cash transactions during the year ended 31 December 2009 and 2008, respectively:

(i) During the year ended 31 December 2008, the Group entered into corporate bulk sales and purchase agreements for the sales of properties owned by the Group, total gross consideration of the corporate bulk sales amounted to RMB156,161,000. According to the terms of the agreement, 30% of the contract price was settled upon delivery of the properties and the remaining 20%, 10% and 40% of the contract price should be settled in November 2008, May 2009 and May 2010, respectively.

(ii) During the year ended 31 December 2008, the Group capitalised the amount due from a jointly controlled entity

amounting to approximately RMB330,250,000 as an additional cost of investment. Annual Report 2009

(iii) During the year ended 31 December 2007, the Group entered into corporate bulk sales and purchase agreements for the sales of properties owned by the Group, the fair value of total consideration of the corporate bulk sales amounted to RMB1,517,559,000. According to the terms of the agreements, 30% of the contract price was settled upon delivery of the properties and the remaining 20% and 50% of the contract price should be settled in June 2008 and December 2008, respectively. As disclosed in note 5, in 2008, two customers who entered into the corporate bulk sales in 2007 were unable to settle the remaining balances payable amounting to approximately RMB338,325,000 and settled by returning to the Group certain properties previously sold to them. Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

35. Contingent Liabilities

At the respective end of reporting period, the contingent liabilities of the Group were as follows:

2009 2008 RMB’000 RMB’000

Guarantees given to banks in connection with facilities granted to third parties 1,859,280 646,786

The Group acted as guarantor to the mortgage bank loans granted to certain purchasers of the Group’s properties and agreed to repurchase the properties upon the purchasers’ default the repayment of bank loans and repay the outstanding loan and interest accrual thereon. The fair value of the fi nancial guarantee contracts is not signifi cant as the default rates i low.

During the year ended 31 December 2007, the Group entered into an agreement with two independent third parties (the “Vendor”) for a potential acquisition of a company (the “Target”). However, this acquisition agreement was subsequently terminated by the Group because of the uncertainty about the validity of the Vendor’s shareholding in the Target. The Vendor then claims the Group for compensation of approximately RMB61,096,000. The legal case is in legal proceeding. However, no provision has been provided for this case because, in the opinion of the executive directors of the Company and the Company’s legal counsel, the likelihood that the Group is required to pay the compensation is remote.

The Group has provided a guarantee for a bank facility granted to Century Profi t amounting to HK$670,000,000 (equivalent to approximately RMB589,935,000) as at 31 December 2009. The fair value of the fi nancial guarantee was not signifi cant at initial recognition. No provision for fi nancial guarantee has been provided at 31 December 2009 as the default risk is low. The fi nancial guarantee will be released upon the repayment of the loan by Century Profi t in December 2010.

36. Other Commitments

120 2009 2008 China Aoyuan Property Group Limited RMB’000 RMB’000

Construction cost commitment contracted for but not provided 2,367,025 1,787,979 Other commitments (Note) — 207,827

Note: On 15 December 2008, the Group entered into a sales and purchase agreements with Shenyang Land Bureau (瀋陽市國土資源局) for the acquisition of a piece of land located in Shenyang for a a total consideration of RMB217,827,000. At 31 December 2008, RMB10,000,000 was paid as deposit for such acquisition. The land was acquired during the year ended 31 December 2009 and held for property development. Annual Report 2009 Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

37. Operating Lease Commitments

As lessor

At the end of the reporting period, the Group had contracted with tenants for the following future minimum lease payments:

2009 2008 RMB’000 RMB’000

Within one year 10,421 11,176 In the second to fi fth year inclusive 25,906 19,293 After fi ve years 10,047 12,096 46,374 42,565

The properties are expected to generate rental yields of average 1% to 4% per annum on an ongoing basis. All the properties held have committed tenants from 3 to 10 years.

As lessee

At the end of the reporting period, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

2009 2008 RMB’000 RMB’000

Within one year 7,288 10,506 In the second to fi fth year inclusive 9,123 17,219 16,411 27,725

Operating lease payments mainly represent rentals payable by the Group for certain of its offi ce premises. Leases are negotiated with range from 1 to 19 years and rentals are fi xed for an average term of 1 to 19 years. 121 China Aoyuan Property Group Limited

38. Share-Based Payment Transactions

Equity-settled share option scheme

The Company’s share option scheme (the “Scheme”), was adopted pursuant to a resolution passed on 23 October 2007 for the primary purpose of providing incentives to directors and eligible employees.

At 31 December 2009, the number of shares in respect of which options had been granted and remained outstanding under the Scheme was 38,195,145 (2008: 60,063,200), representing 1.46% (2008: 2.67%) of the shares of the Company in issue at that date. The total number of shares in respect of which options may be granted under the Scheme is not permitted to Annual Report 2009 exceed 10% of the shares of the Company in issue at any point in time, without prior approval from the Company’s shareholders. The number of shares issued and to be issued in respect of which options granted and may be granted to any individual in any one year is not permitted to exceed 1% of the shares of the Company in issue at any point in time, without prior approval from the Company’s shareholders.

Consideration of HK$1 is payable on the grant of an option. Options may be exercised according to the schedule set out below. The exercise price is determined by the directors of the Company, and will not be less than the higher of (i) the closing price of the Company’s shares on the date of grant; (ii) the average closing price of the shares for the fi ve business days immediately preceding the date of grant; and (iii) the nominal value of the Company’s shares. Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

38. Share-Based Payment Transactions (continued)

Details of specifi c categories of options are as follows:

No. of options Exercise Fair values at Option type granted Date of grant Vesting period Exercise period Price grant date HK$ HK$

2007A 1,015,800 23 October 2007 23 October 2007 to the day 2007 result announcement 6.55 1.276 before 2007 result date until 31 December announcement date 2008 (Note a)

2007A 1,523,700 23 October 2007 23 October 2007 to the day 2008 result announcement 6.55 1.731 before 2008 result date until 31 December announcement date 2009 (Note b)

2007A 2,539,500 23 October 2007 23 October 2007 to the day 2009 result announcement 6.55 2.069 before 2009 result date until 31 December announcement date 2010

2007B 4,881,000 23 October 2007 23 October 2007 to 1 January 2008 to 6.55 1.262 31 December 2007 31 December 2008 (Note a)

2007B 1,969,000 23 October 2007 23 October 2007 to 1 April 2008 to 31 December 6.55 1.278 31 March 2008 2008 (Note a)

2008A 10,000,000 18 July 2008 None 18 July 2008 to 14 July 2011 5.2 0.16

2008A 10,000,000 18 July 2008 None 18 July 2008 to 14 July 2011 1.79 0.51

2008A 20,000,000 18 July 2008 None 18 July 2008 to 31 December 1.79 0.39 2009 (Note b) 122 China Aoyuan Property Group Limited 2008B 10,000,000 25 September 2008 None Anytime during the service 0.90 0.21 period

2008C 3,000,000 1 December 2008 None Anytime during the service 2.00 0.20 period

2008C 3,000,000 1 December 2008 None Anytime during the service 0.638 0.04 period

2009 900,000 25 September 2009 None 25 September 2009 to 1.40 0.58 24 September 2012 Annual Report 2009 Note:

(a) These share options are expired as at 31 December 2008.

(b) These share options are expired as at 31 December 2009.

During the year end 31 December 2009, a total of 900,000 (2008: 56,000,000) shares options were granted and no option granted is exercised by the grantee. Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

38. Share-Based Payment Transactions (continued)

These fair values were calculated using the binominal model. The inputs into the model were as follows:

2007A and B

Weighted average share price HK$6.55 Exercise price HK$6.55 Expected volatility 45% Expected life Whole life of each share option Risk-free rate Expected dividend yield 3.0%–3.3% 1.5%

2008A 2008B 2008C 2009

Weighted average share price HK$1.73 HK$0.86 HK$0.72 HK$1.35 Exercise price HK$1.79 & HK$5.2 HK$0.9 HK$0.638 & HK$2 HK$1.40 Expected volatility 60% 60% 60% 70% Expected life Whole life of 3 years 3 years 3 years each share option Risk-free rate 1.9%–2.7% 2.7% 1.2% 2.7% Expected dividend yield 1.5% 1.5% 1.5% 1.5%

Expected volatility was determined by using the historical volatility of the Company’s share price over the previous one year. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non transferability, exercise restrictions and behavioral considerations. 123 China Aoyuan Property Group Limited The Group recognised the total expense of approximately RMB901,000 (2008: RMB16,495,000) for the year ended 31 December 2009 in relation to share options granted by the Company.

The number of share options granted expected to vest has been reduced to refl ect historical experience of forfeiture of options granted prior to completion of vesting period and accordingly the share option expense has been adjusted. At the end of the reporting period, the Group revises its estimates of the number of options that are expected to ultimately vest. The impact of the revision of the original estimates, if any, is recognised in the profi t and loss over the remaining vesting period, with a corresponding adjustment to the share option reserve.

The Binomial model has been used to estimate the fair value of the options. The variables and assumptions used in computing

the fair value of the share options are based on the directors’ best estimate. The value of an option varies with different Annual Report 2009 variables of certain subjective assumptions. Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

39. Retirement Benefi t Plan

According to the relevant laws and regulations in the PRC, the Company’s PRC subsidiaries are required to participate in a defi ned contribution retirement scheme administrated by the local municipal government. The Group’s PRC subsidiaries contribute funds which are calculated on certain percentage of the average employee salary as agreed by local municipal government to the scheme to fund the retirement benefi ts of the employees. The principal obligation of the Group with respect to the retirement benefi ts scheme is to make the required contributions under the scheme.

40. Related Party Transactions

(1) The Group had material transactions during the year with related parties as follows:

2009 2008 Related party Nature of transaction RMB’000 RMB’000

A jointly controlled entity Interest income 13,797 —

Interest was charged at 7% to 15% per annum on the outstanding balance.

(2) The remuneration of key management (excluding remuneration of directors disclosed in note 10) during the year is as follows:

2009 2008 RMB’000 RMB’000

Short-term benefi ts 6,151 7,132 Share-based payments 467 2,851 124 6,618 9,983 China Aoyuan Property Group Limited

The retirement benefi t contributions of the key management during the year ended 31 December 2009 was not material.

(3) As disclosed in note 21, the controlling shareholder of the Company has agreed to indemnify any loss arising from the reclamation of the land by the Guangzhou municipal government.

(4) As disclosed in note 35, the Group has provided a guarantee for a bank facility granted to Century Profi t amounting to HK$670,000,000 (equivalent to approximately RMB589,935,000) as at 31 December 2009.

(5) Details of the balances with a jointly controlled entity are set out in notes 20. Annual Report 2009 Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

41. Particulars of Subsidiaries

Details of the Group’s subsidiaries at 31 December 2009 and 2008 as follows:

Issued and fully Place of Attributable paid share capital/ incorporation/ equity interest registered Name of subsidiary establishment held (note 1) share capital Principal activities

Able Run Management Limited British Virgin Islands 100% US$100 Investment holding (“BVI”)

Able Sharp Limited BVI 100% US$100 Investment holding

Ace Crown Limited Hong Kong 100% HK$1 Investment holding

Act Fast Management Limited BVI 100% US$100 Investment holding

Act Now International Limited BVI 100% US$100 Investment holding

Ace Super International Limited BVI 100% US$100 Investment holding

Ace Will Holdings Limited BVI 100% US$100 Investment holding

Active Top Group Limited BVI 100% US$100 Investment holding

Add Gain Investments Limited BVI 100% US$100 Investment holding

Add Hero Holding Limited BVI 100% US$10,000 Investment holding 125 China Aoyuan Property Group Limited

Add Lion Profi ts Limited BVI 100% US$100 Investment holding

Add Move Investments Limited BVI 100% US$100 Investment holding

Add Power Investments Limited BVI 100% US$100 Investment holding

Add Right Investments Limited BVI 100% US$100 Investment holding

Add Union Management Limited BVI 100% US$100 Investment holding

All Favour Investments Limited BVI 100% US$100 Investment holding Annual Report 2009

All New Profi t Limited BVI 100% US$100 Investment holding

Alchmede Holdings Limited BVI 100% US$100 Investment holding

Allied Channel Limited Hong Kong 100% HK$1 Investment holding

Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

41. Particulars of Subsidiaries (continued)

Issued and fully Place of Attributable paid share capital/ incorporation/ equity interest registered Name of subsidiary establishment held (note 1) share capital Principal activities

Allied Era Investments Limited BVI 100% US$100 Investment holding

Alpha Winner Limited Hong Kong 100% HK$1 Investment holding

Allywin Limited BVI 100% US$100 Investment holding

Ample Mount Holdings Limited BVI 100% US$100 Investment holding

Anway Investment Limited Hong Kong 100% HK$1 Investment holding

Aoyuan Grand Place Investments and Hong Kong 100% HK$1 Investment holding Hong Kong Development Limited

Aoyuan Cannes Investments and Hong Kong 100% HK$1 Investment holding Development Limited

Asiacity Development Limited BVI 100% US$100 Investment holding

Asia Prime Limited Hong Kong 100% HK$1 Investment holding

Asia Profi t International Limited Hong Kong 100% HK$1 Investment holding

126 Auto High Management Limited BVI 100% US$100 Investment holding China Aoyuan Property Group Limited

Auto Joy Enterprises Limited BVI 100% US$100 Investment holding

Add Energy Property Investment Hong Kong 100% HK$10,000 Investment holding Holdings Limited

Auto Smart Profi ts Limited BVI 100% US$100 Investment holding

Bright Oriental Limited Hong Kong 100% HK$1 Investment holding

CAPG Limited Hong Kong 100% HK$1 Investment holding Annual Report 2009

Canton Link Investment Limited Hong Kong 100% HK$1 Investment holding

Century Earth Limited Hong Kong 100% HK$1 Investment holding Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

41. Particulars of Subsidiaries (continued)

Issued and fully Place of Attributable paid share capital/ incorporation/ equity interest registered Name of subsidiary establishment held (note 1) share capital Principal activities

Charmtex Holdings Limited Hong Kong 100% HK$1 Investment holding

Channel Time International Limited Hong Kong 100% HK$1 Investment holding

Cheer King International Limited Hong Kong 100% HK$1 Investment holding

China Aoyuan International Hong Kong 100% HK$1 Investment holding Development Limited (Formerly known as Chinaview Holdings Limited)

China Aoyuan Property Development Hong Kong 100% HK$1 Investment holding Investment Holding Limited (Formerly known as Everview (H.K.) Limited)

China Aoyuan Investment Limited Hong Kong 100% HK$1 Investment holding (Formerly known as Fullco International Limited)

China Aoyuan Financial Management Hong Kong 100% HK$1 Investment holding Investment Holding Limited (Formerly known as Gaintime (H.K.) Limited)

China Planet Limited Hong Kong 100% HK$1 Investment holding

Citiasia (H.K.) Limited Hong Kong 100% HK$1 Investment holding 127 China Aoyuan Property Group Limited East Harvest Investment Limited Hong Kong 100% HK$1 Investment holding (note 5)

Everward Development Limited Hong Kong 100% HK$1 Investment holding

Fairbo International Limited Hong Kong 100% HK$1 Investment holding

Gold Deluxe Holdings Limited Hong Kong 100% HK$1 Investment holding

Gold Lucky (HK) Investment Holding Hong Kong 100% HK$1 Investment holding Limited (note 4)

Grand Gold (H.K.) Limited Hong Kong 100% HK$1 Investment holding

Happy Genius Management Limited BVI 100% US$100 Investment holding Annual Report 2009

Head Hero International Limited BVI 100% US$100 Investment holding

Herowell Enterprises Limited Hong Kong 100% HK$1 Investment holding

High Hero Enterprises Limited BVI 100% US$100 Investment holding

High Boom International Limited BVI 100% US$100 Investment holding

Joy Power Holdings Limited BVI 100% US$100 Investment holding Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

41. Particulars of Subsidiaries (continued)

Issued and fully Place of Attributable paid share capital/ incorporation/ equity interest registered Name of subsidiary establishment held (note 1) share capital Principal activities

Landco Development Limited Hong Kong 100% HK$1 Investment holding

Mantex International Limited Hong Kong 100% HK$1 Investment holding

Meco Development Limited Hong Kong 100% HK$1 Investment holding

Merit Access Investments Limited BVI 100% US$100 Investment holding

Merit Route Investments Limited BVI 100% US$100 Investment holding

New Aoyuan City Investments and Hong Kong 100% HK$1 Investment holding Development Limited

New Empire Holdings Limited Hong Kong 100% HK$1 Investment holding

New Empire International Limited Hong Kong 100% HK$1 Investment holding

Nice More Investments Limited BVI 100% US$100 Investment holding

Olympic Village Investments and Hong Kong 100% HK$1 Investment holding Development Limited

Olympic City Investments and Hong Kong 100% HK$1 Investment holding Development Limited 128

China Aoyuan Property Group Limited Onwin Enterprises Limited Hong Kong 100% HK$1 Investment holding

Orient Time Development Limited Hong Kong 100% HK$1 Investment holding

Profi ts Point Holdings Limited BVI 100% US$100 Investment holding

Rising Bright International Limited BVI 100% US$100 Investment holding

Rising Fast Management Limited BVI 100% US$100 Investment holding

Sanbo Holdings Limited Hong Kong 100% HK$1 Investment holding

Annual Report 2009 Sharp Mate International Limited BVI 100% US$100 Investment holding

Sino Victory Development Limited Hong Kong 100% HK$1 Investment holding

Smart Million Holdings Limited BVI 100% US$100 Investment holding Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

41. Particulars of Subsidiaries (continued)

Issued and fully Place of Attributable paid share capital/ incorporation/ equity interest registered Name of subsidiary establishment held (note 1) share capital Principal activities

Speed Rich Holdings Limited BVI 100% US$100 Investment holding

Speed Winner Limited Hong Kong 100% HK$1 Investment holding

Teleimon International Limited BVI 100% US$100 Investment holding

Time Well Investment (Group) Hong Kong 100% HK$1 Investment holding Limited

Trump Luck International Limited BVI 100% US$100 Investment holding

Top Field Group Limited BVI 100% US$100 Investment holding

Topfair International Limited Hong Kong 100% HK$1 Investment holding

United Joy Management Limited BVI 100% US$100 Investment holding

Vagatori International Limited BVI 100% US$100 Investment holding

Warkaville Holdings Limited BVI 100% US$100 Investment holding

Win Hero Group Limited BVI 100% US$100 Investment holding

Win Lucky Holdings Limited Hong Kong 100% HK$1 Investment holding 129 China Aoyuan Property Group Limited Wisdom First Holdings Limited BVI 100% US$100 Investment holding

Yolinga International Limited BVI 100% US$100 Investment holding

Head Win Limited (note 5) BVI 100% US$10,000 Investment holding

Kingmind Limited (note 5) BVI 100% US$1 Investment holding

Earning Ever Limited (note 7) BVI 100% US$1 Investment holding

Magic Falcon Company Limited Hong Kong 100% HK$1 Investment holding

(note 7) Annual Report 2009

怡利發展有限公司 Hong Kong 100% HK$10,000 Investment holding (Elite Land Development Limited)

重慶創冠房地產開發有限公司 PRC 100% US$49,000,000 Property (Chongqing Chuangguan Real development Estate Development Company Limited) Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

41. Particulars of Subsidiaries (continued)

Issued and fully Place of Attributable paid share capital/ incorporation/ equity interest registered Name of subsidiary establishment held (note 1) share capital Principal activities

佛崗同力盛投資發展有限公司 PRC 100% RMB80,000,000 Property (Fogang Tong Li Sheng development Investment Development Company Limited)

奧園集團有限公司 PRC 100% RMB400,000,000 Investment holding (Aoyuan Group Company Limited)

廣州奧園海景城房地產開發 PRC 100% RMB380,000,000 Property 有限公司 development (Guangzhou Aoyuan Hai Jing Cheng Real Estate Development Company Limited)

廣州市番禺金業園房地產開發 PRC 100% RMB170,000,000 Property 有限公司 development (Guangzhou Panyu Jin Ye Yuan Real Estate Development Company Limited)

廣州市番禺金業房地產開發 PRC 100% RMB180,000,000 Property 有限公司 development 130 (Guangzhou Panyu Jin Ye China Aoyuan Property Group Limited Real Estate Development Company Limited)

廣州奧林匹克房地產開發有限公司 PRC 100% RMB60,000,000 Property (Guangzhou Olympic Real Estate development Development Company Limited)

廣州奧林匹克物業投資有限公司 PRC 100% RMB81,000,000 Investment holding (Guangzhou Olympic Properties Investment Company Limited) Annual Report 2009 廣州番禺奧林匹克房地產開發 PRC 100% RMB31,000,000 Property 有限公司 development Guangzhou Panyu Olympic Real Estate Development Company Limited) Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

41. Particulars of Subsidiaries (continued)

Issued and fully Place of Attributable paid share capital/ incorporation/ equity interest registered Name of subsidiary establishment held (note 1) share capital Principal activities

廣東奧園置業有限公司 PRC 100% RMB30,000,000 Provision of (Guangdong Aoyuan Property consultancy Company Limited) services

廣州奧園複合地產管理有限公司 PRC 100% RMB500,000 Provision of (Guangzhou Aoyuan Fuhe Real consultancy Estate Management services Company Limited)

廣州奧林匹克置業投資有限公司 PRC 100% RMB6,000,000 Provision of (Guangzhou Olympic Property consultancy Investment Company Limited) services

廣州奧園資產經營管理有限公司 PRC 100% RMB10,000,000 Provision of (Guangzhou Aoyuan Assets of consultancy Management Company Limited) services

廣州南沙奧園地產有限公司 PRC 100% RMB10,000,000 Property (Guangzhou Nansha Aoyuan Real development Estate Company Limited)

廣州南沙國奧房地產開發有限公司 PRC 100% RMB120,494,000 Property 131 (Guangzhou Nansha Guo Ao Real development China Aoyuan Property Group Limited Estate Development Company Limited)

廣州國奧物業管理有限公司 PRC 100% RMB5,100,000 Property (Guo Ao Properties Management development Company Limited)

廣州南沙國奧投資有限公司 PRC 100% RMB100,000,000 Investment holding (Guangzhou Nansha Guo Ao and project Investment Company Limited) management Annual Report 2009

廣州奧園建設工程設計有限公司 PRC 100% RMB500,000 Property design (Guangzhou Aoyuan Construction and consultation Design Company Limited)

洛陽奧園置業有限公司 PRC 100% RMB10,000,000 Property (Luoyang Aoyuan Property development Company Limited) Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

41. Particulars of Subsidiaries (continued)

Issued and fully Place of Attributable paid share capital/ incorporation/ equity interest registered Name of subsidiary establishment held (note 1) share capital Principal activities

龍南縣金城房地產開發有限公司 PRC 100% RMB23,000,000 Property (Longnan Jin Cheng Real Estate development Development Company Limited)

瀋陽奧園動漫城置業有限公司 PRC 100% US$45,000,000 Property (Shenyang Aoyuan Dong Man development Cheng Properties Company Limited)

瀋陽奧園動漫城裝飾工程有限公司 PRC 100% RMB20,000,000 Decoration (Shenyang Aoyuan Dong Man Cheng Decoration Engineering Limited)

瀋陽南奧海景城置業有限公司 PRC 100% US$25,000,000 Property (Shenyang Nan Ao Hai Jing development Cheng Properties Company Limited)

瀋陽金業創意城置業有限公司 PRC 100% US$50,000,000 Property (Shenyang Jin Ye Chuang Yi Cheng development 132 Properties Company Limited) China Aoyuan Property Group Limited

瀋陽都市華庭置業有限公司 PRC 100% US$50,000,000 Property (Shenyang Du Shi Hua Ting development Properties Company Limited)

瀋陽南奧動漫有限公司 PRC 100% RMB500,000 Cartoon design (Shenyang Nan Ao Dong Man and software Company Limited) development

玉林奧園房地產開發有限公司 PRC 100% RMB80,000,000 Property (Yulin Aoyuan Real Estate development Annual Report 2009 Development Company Limited)

玉林奧園康城房地產開發有限公司 PRC 100% RMB200,000,000 Property (Yulin Aoyuan Cannes Real Estate development Development Company Limited) Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

41. Particulars of Subsidiaries (continued)

Issued and fully Place of Attributable paid share capital/ incorporation/ equity interest registered Name of subsidiary establishment held (note 1) share capital Principal activities

重慶時尚置業有限公司 PRC 100% RMB30,000,000 Property (Chongqing Fashion Technology development Company Limited (note 6)

江門江奧地產開發有限公司 PRC 51% RMB20,000,000 Property (Jiangmen Jiangao Real Estate development Development Company Limited)

清遠市奧園置業有限公司 PRC 80% RMB50,000,000 Property (Qingyuan Aoyuan Property development Company Limited)

北京北方奥園置業有限公司 PRC 100% RMB10,000,000 Property (Beijing Beifang Aoyuan Property development Company Limited)

玉林新力體育產業有限公司 PRC 100% US$ Nil Sports gymnasium (Yulin Xinli Sports Company Limited)

瀋陽奧海動漫研究開發有限公司 PRC 100% US$ Nil Cartoon design (Shenyang Aohai Dong Man and software Company Limited) development 133 China Aoyuan Property Group Limited

瀋陽奧華動漫產業開發有限公司 PRC 100% US$ Nil Cartoon design (Shenyang Aohua Dong Man and software Company Limited) development

贛州捷城物流有限公司 PRC 100% US$14,180,000 Logistics (Ganzhou Jiecheng logistics Company Limited)

重慶奧園裝飾工程有限公司 PRC 100% RMB20,000,000 Decoration (Chongqing Aoyuan Decoration Engineering Company Limited) Annual Report 2009

重慶美景物流有限公司 PRC 100% US$ Nil Logistics (Chongqing Meijing logistics Company Limited) Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

41. Particulars of Subsidiaries (continued)

Issued and fully Place of Attributable paid share capital/ incorporation/ equity interest registered Name of subsidiary establishment held (note 1) share capital Principal activities

廣州奧園海景城裝飾工程有限公司 PRC 100% RMB Nil Decoration (Guangzhou Aoyuan Haijingcheng Decoration Engineering Company Limited)

佛岡奧園裝飾工程有限公司 PRC 100% RMB Nil Decoration (Fogang Aoyuan Decoration Engineering Company Limited)

廣州昌泰建築裝飾工程有限公司 PRC 100% RMB3,580,400 Construction and (Guangzhou Changtai Decoration Construction and Decoration Engineering Company Limited)

廣州奧園康城房地產開發有限公司 PRC 100% RMB125,552,000 Property (Guangzhou Aoyuan Cannes Real development Estate Development Company Limited)

奧園集團材料設備採購有限公司 PRC 100% RMB20,000,000 Decoration (Aoyuan Equipment Procurement 134 Company Limited) (note 4) China Aoyuan Property Group Limited

瀋陽奧園新城置業有限公司 PRC 100% RMB263,256,400 Property (Shenyang Aoyuan New City development Property Company Limited) (note 4)

瀋陽南奧苗木有限公司 PRC 100% RMB1,000,000 Decoration (Shenyang Nan Ao Plantation Company Limited) (note 4)

廣州奧譽房地產開發有限公司 PRC 100% HK$750,000,000 Property Annual Report 2009 (Guangzhou Aoyu Real Estate development Exploitation Company Limited) (note 5)

中山廣場開發建設有限公司 PRC 100% RMB735,384,082 Property (Zhongshan Plaza Development development Company Limited) (note 7) Notes to the Consolidated Financial Statements (continued) For the year ended 31 December 2009

41. Particulars of Subsidiaries (continued)

Notes:

(1) Add Hero is directly held by the Company and the remaining subsidiaries comprising the Group are indirectly held by the Company.

(2) Except for BVI and Hong Kong incorporated companies which are operating in Hong Kong, other subsidiaries are operating in the PRC.

(3) The holders of the convertible notes are not entitled to receive notice of or to attend or vote at any general meeting of Add Hero. The non-voting convertible notes practically carry no rights to dividends or to participate in any distribution on winding up.

(4) Companies were incorporated in 2009.

(5) East Harvest Investment Limited and Guangzhou Aoyu Real Estate Exploitation Company Limited were wholly-owned subsidiaries of the Company before they became jointly controlled entities of the Company during the year ended 31 December 2008. Subsequently during the year ended 31 December 2009, these companies become subsidiaries of the Company by acquiring the remaining interests in its intermediate holding company Head Win Limited and Kingmind Limited.

(6) Pursuant to a supplementary agreement entered into by the Group in October 2007, the Group is entitled all the shareholders’ rights and benefi ts derived from the operation of Chongqing Fashion Technology Company Limited (“Chongqing Fashion”) and that Chongqing Fashion shall be managed and controlled by the Group. As the Group has the power to govern the fi nancial and operating policies of Chongqing Fashion so as to obtain benefi ts from its activities under the agreement, accordingly, Chongqing Fashion is regarded as a subsidiary of the Company since October 2007.

(7) Earnings Ever Limited and its subsidiaries, Magic Falcon Company Limited and Zhongshan Plaza Development Company Limited, were acquired by the Group during the year ended 31 December 2009.

42. Events after the Reporting Period

On 15 April 2010, the Company entered into the an agreement with the Noteholder (the “Agreement”), pursuant to which the Company and the Noteholder had mutually agreed to the repurchase of the Convertible Notes as follows:

(a) The Company repurchased US$25,000,000 in principal amount of the Convertible Notes in cash at a price equal to 105% of US$25,000,000, plus accrued and unpaid interest thereon to 15 April 2010. On 15 April 2010, the Company paid a total sum of US$26,462,500 to the Noteholder. 135 China Aoyuan Property Group Limited (b) The Company shall on 31 August 2010 repurchase all the then outstanding Convertible Notes, in cash at a repurchase price equal to the greater of:

(i) the total amount equivalent to 108% of US$35,000,000 plus any interest earned in respect of such amount in designated bank accounts maintained by the a subsidiary of the Company since 15 April 2010; and

(ii) 108% of the principal amount of the Convertible Notes then outstanding, plus accrued and unpaid interest on such outstanding Convertible Notes to 31 August 2010.

subsidiary of the Company. Annual Report 2009

Based on the carrying amount of Convertible Notes repurchased, a loss on repurchase of the Convertible Notes on 15 April 2010 amounting to approximately RMB43 million will be recognised in the consolidated fi nancial statements of the Group for the year ending 31 December 2010. Financial Summary

Consolidated Results

Year ended 31 December 2005 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Revenue 854,931 883,733 2,501,397 619,941 2,364,467

Profi t (loss) before taxation 286,194 526,706 1,203,983 (89,322) 429,895 Income tax (expense) credit (96,621) (227,403) (601,612) 31,857 (103,598)

Profi t (loss) for the year 189,573 299,303 602,371 (57,465) 326,297

Consolidated Assets, Equity and Liabilities

As of 31 December 2005 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Assets Non-current assets 487,027 276,077 448,585 1,090,163 3,160,832 Current assets 1,872,033 1,913,003 7,792,127 7,258,247 8,564,509

Total assets 2,359,060 2,189,080 8,240,712 8,348,410 11,725,341

Equity and liabilities Non-current liabilities 279,349 206,859 1,341,473 1,366,873 2,243,384 Current liabilities 1,602,066 1,153,943 1,855,133 2,092,152 3,728,997

Total liabilities 1,881,415 1,360,802 3,196,606 3,459,025 5,972,381 Equity attributable to owners of the Company 477,644 828,278 5,044,106 4,879,560 5,727,308 136 Minority interests — — — 9,825 25,652 China Aoyuan Property Group Limited Total equity and liabilities 2,359,060 2,189,080 8,240,712 8,348,410 11,725,341

The Company was incorporated on 6 March 2007 as an exempted company with limited liability in the Cayman Islands and became the holding company of the Group as a result of certain business combinations transactions on 6 September 2007. The fi nancial summary has been presented on the basis that the Company had been the holding company of the Group from the beginning of the earliest period presented. Annual Report 2009 This 2009 annual report, in both English and Chinese versions (the “Annual Report”) is available on the Company’s website at http://aoyuan.com.cn (the “Company Website”) and the website of Hong Kong Exchanges and Clearing Limited at http://www.hkex.com.hk.

Shareholders who have chosen to receive the corporate communications of the Company (the “Corporate Communications”) via the Company Website and who for any reason have diffi culty in receiving or gaining access to the Annual Report posted on the Company Website may request the Annual Report in printed form. Shareholders of the Company who have received either the English version or the Chinese version of the Annual Report may request for a copy in the other language. The Annual Report in printed form and/or in the requested language will be sent free of charge by the Company upon request.

Shareholders of the Company may at any time change their choice of the means of receipt (either in printed form or via the Company Website) and/or language (either English only or Chinese only or both languages) of Corporate Communications.

Shareholders of the Company may send their request to receive the Annual Report in printed form and/ or in the requested language, and/or to change their choice of the means of receipt and/or language(s) of Corporate Communications by notice in writing to the branch share registrar of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East Hong Kong or by sending an email to at [email protected]. Design and produced by: EDICO Financial Press Services Limited website: www.edico.com.hk