Important notice

NOT FOR DISTRIBUTION IN OR INTO THE US

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

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

THE FOLLOWING OFFERING MEMORANDUM MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER, AND IN PARTICULAR, MAY NOT BE FORWARDED TO ANY US ADDRESS. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORIZED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS.

Confirmation of your Representation: This offering memorandum is being sent at your request and by accepting the e-mail and accessing this offering memorandum, you shall be deemed to have represented to us that the electronic mail address that you gave us and to which this e-mail has been delivered is not located in the US and that you consent to delivery of such offering memorandum by electronic transmission.

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

The materials relating to the offering do not constitute, and may not be used in connection with, an offer or solicitation in any place where offers or solicitations are not permitted by law. If a jurisdiction requires that the offering be made by a licensed broker or dealer and the underwriters or any affiliate of the underwriters is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by the underwriters or such affiliate on behalf of the Issuer in such jurisdiction.

This offering memorandum has been sent to you in an electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently none of J.P. Morgan Securities Ltd., DBS Bank Ltd. or any of their control persons, or any directors, officers, employees or agents, or affiliate of any such person accepts any liability or responsibility whatsoever in respect of any difference between the offering memorandum distributed to you in electronic format and the hard copy version available to you on request from J.P. Morgan Securities Ltd. or DBS Bank Ltd. Offering memorandum Strictly confidential

RKI Finance (2010) Limited (incorporated with limited liability under the laws of the British Virgin Islands) US$350,000,000 91⁄2% Guaranteed Senior Notes due 2015 unconditionally and irrevocably guaranteed by, among others, Road King Infrastructure Limited (incorporated with limited liability under the laws of Bermuda) Issue price: 100% and accrued interest, if any RKI Finance (2010) Limited, (the “Issuer”), a private company with limited liability under the laws of the British Virgin Islands, is issuing US$350,000,000 9.5% Guaranteed Senior Notes due 2015 (the “Notes” and, such issue, the “Offering”). The Notes are the Issuer’s senior obligations guaranteed by each of Road King Infrastructure Limited (the “Company” or “RKIL”) and certain of its existing subsidiaries (such subsidiaries guaranteeing the Notes are referred to herein as the “Subsidiary Guarantors” and together with RKIL, the “Guarantors,” the guarantees of the Subsidiary Guarantors are referred to herein as the “Subsidiary Guarantees” and together with the guarantee of RKIL, the “Guarantees”). All the Subsidiary Guarantors are investment holding companies that do not have any material assets other than their shareholding in their respective subsidiaries or that have charged substantially all of their assets in favor of their creditors. None of the operating subsidiaries organized under the laws of the PRC will guarantee the Notes. The Notes will constitute direct, unsubordinated, unconditional and unsecured obligations of the Issuer and the Notes shall at all times rank pari passu and without preference or priority among themselves (subject to any priority rights pursuant to applicable law). The Issuer is our wholly-owned subsidiary established solely for the purpose of issuing the Notes. The Issuer will on-lend the gross proceeds of this Offering to us. The payment obligations of the Issuer under the Notes shall, save for certain exceptions, at all times rank at least equally with all of its present and future unsecured and unsubordinated obligations. The Notes and the Guarantees will be effectively subordinated to all existing and future obligations of RKIL’s subsidiaries (other than the Subsidiary Guarantors) and be effectively subordinated to the secured obligations of the Guarantors, to the extent of the assets serving as security therefor. However, applicable law may limit the enforceability of the Subsidiary Guarantees. See “Risk factors—Risks relating to the Subsidiary Guarantors.” The Notes will bear interest from September 21, 2010 at the interest rate of 9.5% per annum. Interest on the Notes is payable semi- annually in arrear on March 21 and September 21 of each year commencing March 21, 2011. The Issuer may at its option redeem the Notes, in whole but not in part, at any time prior to September 21, 2013, at a redemption price equal to 100% of the principal amount of the Notes, plus accrued and unpaid interest, if any, to the redemption date and a “make-whole” premium. The Issuer may at its option redeem the Notes, in whole or in part, at any time and from time to time on or after September 21, 2013, at redemption prices described herein. Before September 21, 2013, the Issuer may redeem up to 35% in aggregate principal amount of the Notes, at a redemption price equal to 109.5% of their principal amount, plus accrued and unpaid interest, if any, with the proceeds from certain equity offerings. Upon the occurrence of a Change of Control Triggering Event, we must make an offer to repurchase all Notes outstanding at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the date of repurchase. For a more detailed description of the Notes, see “Terms and conditions of the Notes.” Approval in-principle has been received for the listing of the Notes on the Singapore Exchange Securities Trading Limited (the “SGX- ST”). The SGX-ST assumes no responsibility for the correctness of any statements made, opinions expressed or reports contained herein. Admission of the Notes to the Official List of the SGX-ST is not to be taken as an indication of the merits of the Issuer, the Guarantees or the Notes. Investing in the Notes involves significant risks. See “Risk factors” beginning on page 15. The Notes and the Guarantees have not been and will not be registered under the United States Securities Act of 1933, as amended (the “Securities Act”) and, subject to certain exceptions, may not be offered or sold within the United States. The Notes are being offered outside the United States in reliance on Regulation S under the Securities Act (“Regulation S”). For a description of these and certain further restrictions on offers and sales of the Notes and the distribution of this offering memorandum, see “Plan of distribution.” The Notes will be represented by beneficial interests in a permanent global note certificate (the “Global Certificate”) in registered form, without interest coupons attached, which will be registered in the name of a nominee of, and shall be deposited on or about September 21, 2010 (the “Issue Date”) with a common depositary for, Euroclear Bank S.A./N.V. (“Euroclear”) and Clearstream Banking, société anonyme (“Clearstream”). Beneficial interests in the Notes represented by the Global Certificate will be shown on, and transfers thereof will be effected only through, records maintained by Euroclear and Clearstream. Except as described herein, certificates for Notes will not be issued in exchange for the Global Certificate. Physical book-runner and joint lead manager J.P. Morgan Co-lead book-runner and joint lead manager DBS Bank Ltd. September 14, 2010 Table of contents

Page Page Summary ...... 1 Summary of provisions relating to the Summary consolidated financial and Notes while in global form ...... 184 other data ...... 6 Regulation ...... 188 Summary of the Offering ...... 9 Directors and management ...... 210 Risk factors ...... 15 Principal shareholders ...... 220 Use of proceeds ...... 49 Related party and connected Capitalization and indebtedness ...... 50 transactions ...... 222 Management’s discussion and analysis Taxation ...... 225 of financial condition and results of Global clearance and settlement ...... 227 operations ...... 51 Plan of distribution ...... 229 Industry overview ...... 71 Legal matters ...... 233 Description of the Issuer ...... 80 Independent accountants ...... 233 Corporate structure ...... 81 General information ...... 234 Our business ...... 86 Index to consolidated financial Description of material indebtedness . . . 118 statements ...... F-1 Terms and conditions of the Notes ..... 122

i Notice to investors

You should rely only on the information contained in this offering memorandum. We have not, the Issuer has not, J.P. Morgan Securities Ltd. (“J.P. Morgan” or the “Physical Book-runner”) has not and DBS Bank Ltd. (“DBS” or a “Joint Lead Manager” and, together with J.P. Morgan, the “Joint Lead Managers”) has not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. You should assume that the information appearing in this offering memorandum is accurate only as of the date on its front cover. Our business, financial condition, results of operations and prospects may have changed since that date.

The Notes and the Guarantees have not been and will not be registered under the Securities Act and, subject to certain exceptions, may not be offered or sold within the United States. By purchasing the Notes, you will be deemed to have made the acknowledgements, representations, warranties and agreements described under the heading “Plan of distribution” in this offering memorandum.

This offering memorandum contains information provided by other sources that we believe are reliable. We cannot assure you that this information is accurate or complete. This offering memorandum summarizes certain documents and other information and we refer you to them for a more complete understanding of the matters we discuss in this offering memorandum. In making an investment decision, you must rely on your own examination of us and our subsidiaries and the terms of the Notes, including the merits and risks involved. See “Risk factors” for a discussion of certain factors to be considered in connection with an investment in the Notes.

This offering memorandum is highly confidential and has been prepared by us solely for use in connection with the proposed private placement of the Notes described herein. We have not authorized its use for any other purpose. This offering memorandum may not be copied or reproduced in whole or in part, and it may be distributed and its contents disclosed only to the prospective investors to whom it is provided. By accepting delivery of this offering memorandum each investor agrees to these restrictions.

The distribution of this offering memorandum and the Offering of the Notes in certain jurisdictions may be restricted by law. Persons into whose possession this offering memorandum comes are required by us and the Joint Lead Managers to inform themselves about and observe any such restrictions. No action is being taken to permit a public offering of the Notes or the distribution of this offering memorandum in any jurisdiction where action would be required for such purposes. There are restrictions on the offer and sale of the Notes and the circulation of documents relating thereto, in certain jurisdictions including the United States, the United Kingdom, the European Economic Area, Hong Kong and Singapore, and to persons connected therewith. For a description of certain further restrictions on offers, sales and resales of the Notes and distribution of this offering memorandum, see “Plan of distribution” and “Transfer restrictions.”

No person has been or is authorized to make any representation concerning us or the Notes other than as contained herein and, if given or made, any such other information or representation should not be relied upon as having been authorized by us, the Joint Lead Managers, the Trustee (as defined herein) or the Agents (as defined herein). Neither the delivery of this offering memorandum nor any offering, sale or delivery made in connection with the

ii issue of the Notes shall, under any circumstances, constitute a representation that there has been no change or development reasonably likely to involve a change in the affairs of us since the date hereof or create any implication that the information contained herein is correct as of any date subsequent to the date hereof. This offering memorandum does not constitute an offer of, or an invitation by or on behalf of us, the Joint Lead Managers, the Trustee or the Agents to subscribe for or purchase any of the Notes and may not be used for the purpose of an offer to, or a solicitation by, anyone in any jurisdiction or in any circumstances in which such offer or solicitation is not authorized or is unlawful.

We, having made all reasonable inquiries, confirm that this offering memorandum contains all information with respect to us and our subsidiaries and the Notes that is material in the context of the issue and Offering of the Notes, that the information contained herein is true and accurate in all material respects, that the opinions and intentions expressed herein are honestly held, that we are not aware of any other facts the omission of which in our reasonable opinion might make this offering memorandum as a whole or any of such information or the expression of any such opinions or intentions materially misleading and that all reasonable inquiries have been made by us to verify the accuracy of such information; provided that this offering memorandum contains summaries which we believe to be accurate with respect to certain terms of some documents; and provided further that, economic and other data included in this offering memorandum on the toll road and property industries in the PRC, including information in relation to our and our competitors’ relative positions in these industries, are based on various government and private industry publications or the good faith belief of our management. Although we believe that such industry sources are reliable, we take responsibility for only the accurate reproduction and extraction of such summaries and data, but accept no other responsibility for such industry information. Neither we nor either of the Joint Lead Managers make any representation as to the accuracy and completeness of such industry information statistics, which have been independently verified by us or by either of the Joint Lead Managers, and may not be consistent with other information compiled within or outside the PRC. Investors are advised to read and understand the contents of this offering memorandum before investing. Due to possibly inconsistent collection methods and other problems, the statistics herein may be inaccurate and should not be unduly relied upon.

No representation or warranty, express or implied, is made or given by the Joint Lead Managers, the Trustee or the Agents as to the accuracy, completeness or sufficiency of the information contained in this offering memorandum, and nothing contained in this offering memorandum is, or shall be relied upon as, a promise, representation or warranty by the Joint Lead Managers, the Trustee or the Agents. This offering memorandum is not intended to provide the basis of any credit or other evaluation nor should it be considered as a recommendation by either us, the Joint Lead Managers, the Trustee or the Agents that any recipient of this offering memorandum should purchase the Notes. Each potential purchaser of the Notes should determine for itself the relevance of the information contained in this offering memorandum and its purchase of the Notes should be based upon such investigations with its own tax, legal and business advisers as it deems necessary.

IN CONNECTION WITH THE ISSUE OF THE NOTES, J.P. MORGAN SECURITIES LTD. (THE “STABILIZING MANAGER”) (OR PERSONS ACTING ON BEHALF OF THE STABILIZING MANAGER) MAY, IN ACCORDANCE WITH APPLICABLE LAW, OVER-ALLOT OR EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE NOTES AT A LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER, THERE IS NO ASSURANCE THAT THE

iii STABILIZING MANAGER (OR PERSONS ACTING ON BEHALF OF THE STABILIZING MANAGER) WILL UNDERTAKE STABILIZATION ACTION. ANY STABILIZATION ACTION MAY BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE PUBLIC DISCLOSURE OF THE FINAL TERMS OF THE OFFER OF THE NOTES IS MADE AND, IF BEGUN, MAY BE ENDED AT ANY TIME, BUT IT MUST END NO LATER THAN THE EARLIER OF 30 DAYS AFTER THE ISSUE DATE OF THE NOTES AND 60 DAYS AFTER THE DATE OF THE ALLOTMENT OF THE NOTES. Each person receiving this offering memorandum acknowledges that such person has not relied on the Joint Lead Managers or any person affiliated with the Joint Lead Managers or on the Trustee or the Agents in connection with his investigation of the accuracy of such information or his investment decision.

Presentation of financial and other data EBITDA is not a standard measure under Hong Kong Financial Reporting Standards (“HKFRS”), but is a widely used financial indicator of a company’s ability to service and incur debt. EBITDA should not be considered in isolation or construed as an alternative to cash flows, net income or any other measure of performance or as an indicator of our operating performance, liquidity, profitability or cash flows generated by operating, investing or financing activities. EBITDA is calculated based on the profit for the period of the Group but does not account for taxes, interest expenses, depreciation and amortization charges. Interest expenses include total borrowing costs and other finance costs. In evaluating EBITDA, we believe that investors should consider, among other things, the components of EBITDA such as turnover and operating expenses and the amount by which EBITDA exceeds capital expenditures and other charges. We have included EBITDA because we believe it is a useful supplement to cash flow data as a measure of our performance and our ability to generate cash flow from operations to cover debt service and taxes. EBITDA presented herein may not be comparable to similarly titled measures presented by other companies. Investors should not compare our EBITDA to EBITDA presented by other companies because not all companies use the same definition. Investors should also note that EBITDA as presented herein may be calculated differently from Consolidated EBITDA as defined and used in the Trust Deed governing the Notes. See “Terms and conditions of the Notes—Certain definitions” for a description of the manner in which Consolidated EBITDA is defined for purposes of the Trust Deed governing the Notes. The gross floor area (“GFA”) information in respect of our property development business contained in this offering memorandum is derived on the following basis: • For total planned GFA, when the construction of the projects or project phases is complete and we have received the completion and inspection certificates, the total planned GFA information in respect of these projects or project phases refers to the total planned GFA in such completion and inspection certificates. If we have not yet obtained the completion and inspection certificates, but have the detailed construction drawings for the projects or project phases, the total planned GFA information in respect of these projects or project phases refers to the total planned GFA in such detailed construction drawings. If we have not yet obtained the detailed construction drawings, but have obtained the construction planning permits for the projects or project phases, the total planned GFA information in respect of these projects or project phases refers to the total planned GFA in such construction planning permits. If we have not obtained any of the above documents for these projects or project phases, the total planned GFA information

iv in respect of these projects or project phases refers to the total planned GFA estimated based on our current development plans. Total planned GFA stated in completion and inspection certificates, detailed construction drawings and construction planning permits includes underground saleable GFA but excludes other underground spaces, generally used for storage purposes. The total planned GFA information in this offering memorandum includes only saleable GFA.

• “Saleable GFA” generally refers to residential properties and commercial space (including parking spaces and shared areas in the building that are exclusively allocated to such properties). Certain communal facilities, including, among others, club houses, schools and floor area for property management purposes as required by the government are not characterized as saleable area. For saleable GFA, if we have obtained the pre-sale permits for the projects or project phases, the saleable GFA information refers to the saleable GFA in the pre-sale permits. If we have not yet obtained the pre-sale permits but have had the detailed construction drawings for the projects or project phases, the estimated saleable GFA information in respect of these projects or project phases refers to the estimated saleable GFA in such detailed construction drawings. If we have not yet obtained the detailed construction drawings but have obtained the construction planning permits for the projects or project phases, the estimated saleable GFA information in respect of these projects or project phases is estimated based on our current development plans in accordance with such construction planning permits. If we have not yet obtained any of the above documents for the projects or project phases, the estimated saleable GFA information in respect of these projects or project phases is estimated based on our current development plans.

• “Unsold GFA” refers to saleable GFA that has been planned but that has not been sold and completed. We consider a property project to be sold and completed when we have delivered the property to the customer, at which point we recognize the revenue from the sale of such property and such GFA is no longer attributable to us.

Certain conventions and currency presentation We have prepared this offering memorandum using a number of conventions, which investors should consider when reading the information contained herein. In this offering memorandum, references to the “Issuer” are to RKI Finance (2010) Limited; the terms “we,” “us,” the “Company,” “RKIL” and words of similar import refer to Road King Infrastructure Limited itself and its subsidiaries, including the Issuer, individually or collectively, as the context requires. References to “you” are to the prospective investors in the Notes.

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

Our financial statements are prepared using HK dollars. For convenience only and unless otherwise noted, all translations from RMB into US dollars in this offering memorandum were made at the rate of RMB6.7815 to US$1.00 and all translations from HK dollars into US dollars

v were made at the rate of HK$7.7865 to US$1.00, based on the noon buying rate for US dollars in New York City for cable transfers in HK dollars as certified for customs purposes by the Federal Reserve Bank of New York on June 30, 2010; and all translations from RMB into HK dollars were made at the rate of RMB0.8707 to HK$1.00, based on the market cross currency mid-point trading rate published by Bloomberg L.P. on June 30, 2010. No representation is made that the US dollar, HK dollar or RMB amounts referred to in this offering memorandum could have been or could be converted into RMB, US dollars or HK dollars, as the case may be, at any particular rate or at all. For further information relating to exchange rates, see “Exchange rate information.”

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

vi Forward-looking statements This offering memorandum includes “forward-looking statements.” All statements other than statements of historical fact contained in this offering memorandum, including, without limitation, those regarding our future financial position and results of operations, strategy, plans, objectives, goals and targets, future developments in the markets where we participate or are seeking to participate, and any statements preceded by, followed by or that include the words “believe,” “expect,” “aim,” “intend,” “will,” “may,” “anticipate,” “seek,” “should,” “estimate” or similar expressions or the negative thereof, are forward-looking statements. These forward- looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond our control, which may cause our actual results, performance or achievements, or industry results to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These forward-looking statements are based on numerous assumptions regarding our present and future business strategies and the environment in which we will operate in the future. Important factors that could cause our actual results, performance or achievements to differ materially from those in the forward-looking statements include, among others, the following: • our business and operating strategies; • various business opportunities that we may pursue; • our ability to manage the growth of our property development business; • our operations and business prospects; • our financial condition and results of operations; • availability of and changes to bank loans and other forms of financing; • the general economic and industry outlook of the PRC, including but not limited to expressways, toll roads, real estate and the property market; • any changes in the PRC Government’s policies in relation to provincial and municipal highway networks, transfers of operating rights, tenor of operation, toll rates and the planning, development, construction and management aspects of highways in the PRC; • any changes in the regulatory policies of the PRC Government, the governments of the provinces in which our operations are located and other relevant government authorities relating to, among other things, joint venture arrangements and capital investment priorities; • changes in the number and classes of motor vehicles using the expressways of our toll road projects; • the effects of competition on the demand for and change in toll rates of our toll road projects; • the development of provinces, cities, and townships which our toll roads serve; • the development of new routes affecting our current and future toll roads business; • changes in political, economic, legal and social conditions in the PRC including the PRC Government’s specific policies with respect to economic growth, inflation, foreign exchange, institutional lending policies and the availability of credit;

vii • changes in population growth and gross domestic product (“GDP”) growth and the impact of those changes on the demand for our toll road projects;

• the effects of natural disasters on our business;

• adverse trends in regulatory, legislative and judicial developments, including safety, health, environmental and security directives associated with toll road projects;

• future developments in the property market in the provinces in the PRC in which we engage in property development;

• the performance of the property market in the provinces in the PRC in which we engage in property development;

• changes in political, economic, legal and social conditions in the PRC, including the specific policies of the PRC Government and the local authorities in provinces in which our property development projects are located, which affect land supply, availability and cost of financing, and pre-sale, pricing and volume of our property development projects;

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

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

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

• changes in currency exchange rates;

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

• other factors beyond our control.

Additional factors that could cause actual results, performance or achievements to differ materially include, but are not limited to, those discussed under “Risk factors” and elsewhere in this offering memorandum. We caution you not to place undue reliance on these forward- looking statements which reflect our management’s view only as of the date of this offering memorandum. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this offering memorandum might not occur.

viii Glossary In this offering memorandum, unless otherwise defined or as the context otherwise requires, the following expressions have the following meanings:

“2004 Guaranteed Notes” US$200,000,000 in aggregate principal amount of 6.25% guaranteed notes due 2011, issued by Road King Infrastructure Finance (2004) Limited and guaranteed by us in July 2004

“2007 Escrow Account” an account held by us into which all cash payments from the Toll Road Holding Companies, including all dividend and profit distributions and repayment of shareholders’ loans, are required to be paid under the Syndicated Loan

“2007 Fixed Rate Notes” US$200,000,000 in aggregate principal amount of 7.625% guaranteed senior notes due 2014, issued by Road King Infrastructure Finance (2007) Limited and guaranteed by us in May 2007

“2007 Floating Rate US$150,000,000 in aggregate principal amount of guaranteed Notes” senior floating rate notes due 2012, issued by Road King Infrastructure Finance (2007) Limited and guaranteed by us in May 2007

“2007 Notes” means the 2007 Fixed Rate Notes and the 2007 Floating Rate Notes

“Airport Highway” Provincial Highway 343 Suzhou-Shanghai Hongqiao Airport Highway, Jiangsu Province

“Baojin Expressway” National Expressway G18 Baoding-Tianjin Expressway, Hebei Province

“Bengbu Huaihe Bridge Provincial Highway 307 Bengbu Huaihe Bridge Highway, Highway” Anhui Province

“Bengbu Huaimeng Provincial Highway 307 Bengbu Huaiyuan-Mengcheng Highway” Highway, Anhui Province

“Blue County” a residential and commercial project located at No. 299, Donggang Road, Yuhua District, Shijiazhuang City, Hebei Province

“BVI” British Virgin Islands

“CBRC” China Bank Regulatory Commission

“Central Special Zone” a multi-phase residential and commercial development project located at the junction of Shangding Road and Nongye Dong Road, Zhengdong New District, Zhengzhou City, Henan Province

“Changyi Expressway” National Expressway G5513 Changsha-Yiyang Expressway, Hunan Province

ix “Chaoyanglu Huaihe National Highway 206 Bengbu Chaoyanglu Huaihe Bridge, Bridge” Anhui Province

“CJV” co-operative joint venture

“Class I highway” a divided road with limited access for motor vehicles (including motorcycles) connecting important political and economic centers with main industrialized districts, quarries, harbors and airports

“Class II highway” a road serving as a major link between political and economic centers, large industrial zones, quarries, harbors, airports and major communication centers

“Clearstream” Clearstream Banking, société anonyme

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

“Company” or “RKIL” Road King Infrastructure Limited, a company incorporated with limited liability under the laws of Bermuda

“DBS” DBS Bank Ltd., a co-lead bookrunner and a Joint Lead Manager

“Directors” the directors of the Company

“Dongguan Highway” National Highway 108 Yuci Dongchangshou-Qixian Dongguan Highway, Shanxi Province

“EJV” equity joint venture

“Elite Rich” Elite Rich Investments Limited, a wholly-owned subsidiary of our controlling shareholder, Wai Kee

“Euroclear” Euroclear Bank S.A./N.V.

“expressway” a divided and fully enclosed toll road only for motor vehicles (including motorcycles) connecting particularly important political and economic centers

“FIEs” foreign invested enterprises

“FIREE” foreign invested real estate enterprise

“Forest Creek” a multi-phase residential project located at North of Baige Road, Baishan Town, Changping District, Beijing City

“GDP” gross domestic product

“GFA” gross floor area

x “Grand Metropolis” a multi-phase commercial development project located at No. 33, Huayuan Street, Wujin District, Changzhou City, Jiangsu Province “Group” the Company and its subsidiaries “Hanguan Highway” National Highway 309 Handan-Guantao Highway, Hebei Province “Hehuai Highway” National Highway 206 Hefei-Huainan Highway, Anhui Province “Heye Highway” National Highway 312 Hefei-Yeji Highway, Anhui Province “HIBOR” Hong Kong Interbank Offered Rate “HK$” Hong Kong dollar(s), the lawful currency of Hong Kong “HKFRS” Hong Kong Financial Reporting Standards “Hong Kong” or “HK” Hong Kong Special Administrative Region of the PRC “Hong Kong Listing Rules” the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange “Hong Kong Stock The Stock Exchange of Hong Kong Limited Exchange”

“Huadu Project” a multi-phase residential and commercial development project located at North of Sandong Da Road and East of Guangqing Expressway, Huadu District, Guangzhou City, Guangdong Province “International City” a multi-phase residential and commercial development project located at No. 473, Huaibei Road, Yuhua District, Shijiazhuang City, Hebei Province “Issue Date” on or about September 21, 2010 “Jianguomen Project” a commercial development project located at Courtyard No. 13, Waijiaobu Street, Dongcheng District, Beijing City “Jihe Expressway (Eastern Shenzhen Airport-Heao Expressway (Eastern Section) Section)”

“Joint Lead Managers” DBS and J.P. Morgan “J.P. Morgan” J.P. Morgan Securities Ltd., the Physical Book-runner and a Joint Lead Manager “km” kilometer(s) “land grant” a land grant contract, land grant confirmation agreement or land use rights transfer agreement “land grant contract” an agreement between a property developer and a PRC land authority in respect of the grant of the state-owned land use rights of a parcel of land to such property developer

xi “land use right transfer an agreement in respect of the transfer of the land use rights agreement” of a parcel of land by the previous grantee of the land use rights in the secondary market

“LAT” land appreciation tax, as defined in the Provisional Regulations of the PRC on Land Appreciation Tax and the Detailed Implementation Rules on the Provisional Regulations of the PRC on Land Appreciation Tax

“LIBOR” London Interbank Offered Rate

“minimum income an undertaking given by a toll road joint venture partner in undertaking” favor of the respective subsidiary through which we hold our interest in that joint venture to pay to us, through the subsidiary, any shortfall between the cash distributions of the relevant joint venture during the relevant period and the agreed amounts to which we are entitled under the joint venture agreement in relation to the relevant joint venture

“MOT” the Ministry of Transport of the PRC, under the direct supervision of the State Council, the government body responsible for regulating the road network of the PRC

“Mountain My Life” a multi-phase residential and commercial development project located at Chengquan Town, Ji County, Tianjin City

“Mr. Sun” Mr. Sun Hongbin, to the best knowledge and belief of the Directors, founder of the group of companies that currently owns 5.26% of Sunco Property

“National Highway” a highway that has important national, political or economic value

“New Toll Road Holding Ontex Investments Limited, Road Base Investments Limited Companies” and Road Bond Investments Limited, being those of our subsidiaries whose shares are mortgaged as security for the Syndicated Loan since 2009

“Non-Guarantor our subsidiaries that are not Guarantors under the Notes Subsidiaries”

“Offering” issue by the Issuer of the Notes, as described in this offering memorandum

“Palen Villas” a multi-phase residential and commercial development project located at No. 8, Huanhu Road, Jinyin Lake, Dongxihu District, Wuhan City, Hubei Province

“Parkvista” a multi-phase residential and commercial development project located at Nos. 10 and 12, Xingsheng Road, Zhujiang New City, Tianhe District, Guangzhou City, Guangdong Province

xii “PBOC” People’s Bank of China

“Phoenix City” a multi-phase residential and commercial development project located at the junction of Susheng Road and Xieyu Road, Suzhou Industrial Park, Suzhou City, Jiangsu Province

“PRC” the People’s Republic of China, excluding Hong Kong, Macau Special Administrative Region and Taiwan

“PRC GAAP” generally accepted accounting principles and financial regulations in the PRC

“PRC Government” or the central government of the PRC, including all political “State” subdivisions (including provincial, municipal and other regional or local governmental entities) and instrumentalities thereof, or, where the context requires, any of them

“PRC Subsidiaries” our current or future PRC-incorporated Restricted Subsidiaries and Unrestricted Subsidiaries, as the context requires

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

“Provincial Highway” a road that is designed to serve intra-provincial traffic but not designated as a National Highway

“RK Properties” RK Properties Holdings Limited, our wholly-owned subsidiary incorporated in the British Virgin Islands

“RMB” Renminbi, the lawful currency of the PRC

“Royal City” a multi-phase residential and commercial development project located at No. 88, Yanzheng Dong Road, Wujin District, Changzhou City, Jiangsu Province

“Royal Panorama” a multi-phase residential and commercial development project located at No. 9, Weishier Road, Huaiyin District, Jinan City, Shandong Province

“SAFE” PRC State Administration of Foreign Exchange

“Securities Act” the United States Securities Act of 1933, as amended

“SFA” Securities and Futures Act, Chapter 289 of Singapore

“SFO” Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

“SGX-ST” Singapore Exchange Securities Trading Limited

“Shenzhen Investment” Shenzhen Investment Limited, one of our substantial shareholders

xiii “Shijin Highway” National Highway 307 Shijiazhuang-Jinzhou Highway, Hebei Province

“Shine June Garden” a multi-phase residential project located at No. 1, Lane 998, Baoxiang Road, Nanxiang Town, Jiading District, Shanghai City

“Songs & Sea” a multi-phase residential and commercial development project located at Lot No.1, Northern District, Huangcun Town, Daxing District, Beijing City

“sq.m.” square meters

“Sun Town” a multi-phase residential and commercial development project located at the junction of Weiguo Road and Helan Road, Hedong District, Tianjin City

“Sunco Property” Sunco Property Holdings Company Limited, a company incorporated in BVI with limited liability and our approximately 94.74% owned subsidiary

“Sunco Property our subscription of 49% of the equity interest in Sunco Acquisition” Property, completed in January 2007, and subsequent acquisitions of additional equity interests in Sunco Property resulting in Sunco Property being our approximately 94.74% owned subsidiary

“Sunco Property Projects” the 17 property development projects located in the PRC invested indirectly by Sunco Property

“Sunco Town” a multi-phase residential and commercial development project located at South of Nanchang Road, Jianxi District, Luoyang City, Henan Province

“Superb Sky” Superb Sky Limited, a company incorporated in the BVI with limited liability and our wholly-owned subsidiary

“Superb Sky Acquisition” our acquisition of Superb Sky as announced on June 28, 2010, by which we acquired the interest in International City

“Suzhou Junyu” Suzhou Junyu Properties Ltd. (formerly known as Suzhou Sunco Property Limited), a company incorporated in the PRC with limited liability and our wholly-owned subsidiary

“Syndicated Loan” our syndicated term loan facility for a principal amount of US$220.0 million, arranged by a consortium of lenders pursuant to an agreement dated April 11, 2007 (as amended and supplemented by a supplemental agreement dated May 18, 2007 and supplemented by a further supplemental letter dated July 3, 2009)

“Taiyu Highway” Taiyuan-Yuci Highway, Shanxi Province

“Tangjin Expressway” National Expressway G25 Tangshan-Tianjin Expressway, Hebei Province

xiv “The Heaven by Lakeside” a multi-phase residential and commercial development project located at No. 669, Zhongyuan Road, Suzhou Industrial Park, Suzhou City, Jiangsu Province

“The Riverside” a multi-phase residential and commercial development project located at Lane 2999, Baian Gong Road, Waigang Town, Jiading District, Shanghai City

“Toll Road Holding Intersafe Investments Limited, Road Giant Investments Companies” Limited, Road Mass Investments Limited, Road Rise Investments Limited, Road Team Investments Limited and Road Union Investments Limited, being those of our subsidiaries whose shares are mortgaged as security for the Syndicated Loan since 2007

“Unusual Landscape” a multi-phase residential and commercial development project located at No. 207, Haier Da Road, Yinghai Town, Jiaozhou District, Qingdao City, Shandong Province

“US” or “United States” United States of America, its territories, its possessions and all areas subject to its jurisdiction

“US$” US dollar(s), the lawful currency of the United States of America

“Vista Panorama” a multi-phase residential and commercial development project located at No. 8, Changhong Zhong Road, Hutang Town, Wujin District, Changzhou City, Jiangsu Province

“Wai Kee” Wai Kee Holdings Limited, our controlling shareholder

“WFOE” wholly foreign owned enterprise

“World & City” a multi-phase residential and commercial development project located at East of Municipal Government Building, Luoyang New District, Luoyang City, Henan Province

“Xunan Highway” National Highway 311 and Provincial Highway 103 Xuchang- Nanyang Highway, Henan Province

“Yuci City Bypass” National Highway 108 Yuci City Bypass, Shanxi Province

“Yulin City Highway” National Highway 324, Yulin Section, Guangxi Zhuang Autonomous Region

xv Exchange rate information PRC

The PBOC sets and publishes daily a base exchange rate with reference primarily to the supply and demand of Renminbi with reference to a basket of currencies in the market during the prior day. The PBOC also takes into account other factors such as general conditions existing in the international foreign exchange markets. Since 1994, the conversion of Renminbi into foreign currencies, including Hong Kong dollars and US dollars, has been based on rates set by the PBOC, which are set daily based on the previous day’s interbank foreign exchange market rates and current exchange rates in the world financial markets. From 1994 to July 2005, the official exchange rate for the conversion of Renminbi to US dollars was generally stable. Although PRC Governmental policies were introduced in 1996 to reduce restrictions on the convertibility of Renminbi into foreign currency for current account items, conversion of Renminbi into foreign exchange for capital items, such as foreign direct investment, loans or securities, requires the approval of the SAFE and other relevant authorities. On July 21, 2005, the PRC Government introduced a managed floating exchange rate system to allow the value of the Renminbi to fluctuate within a regulated band based on market supply and demand and by reference to a basket of currencies. The PRC Government has since made and in the future may make further adjustments to the exchange rate system. The PBOC authorized the China Foreign Exchange Trading Center, effective since January 4, 2006, to announce the central parity exchange rate of certain foreign currencies against the Renminbi at 9:15 AM each business day. This rate is set as the central parity for the trading against the Renminbi in the inter-bank foreign exchange spot market and the over the counter exchange rate for that business day. On May 18, 2007, the PBOC enlarged, effective on May 21, 2007, the floating band for the trading prices in the inter-bank spot exchange market of Renminbi against the US dollar from 0.3% to 0.5% around the central parity rate. This allows the Renminbi to fluctuate against the US dollar by up to 0.5% above or below the central parity rate published by the PBOC.

xvi The following table sets forth (1) the noon buying rate for US dollars in New York City for cable transfers in Renminbi as certified for customs purposes by the Federal Reserve Bank of New York for and as of the periods indicated through December 31, 2009; and (2) the noon buying rate as set forth in the H.10 statistical release of the Federal Reserve Board for and as of the period ends indicated from and after January 1, 2010:

Noon Buying Rate Period Period Low Average(1) High End (RMB per US$1.00) 2007 ...... 7.2946 7.5806 7.8127 7.2946 2008 ...... 6.7800 6.9193 7.2946 6.8225 2009 ...... 6.8176 6.8295 6.8470 6.8259 2010 January ...... 6.8258 6.8269 6.8295 6.8268 February ...... 6.8258 6.8285 6.8330 6.8258 March ...... 6.8254 6.8262 6.8270 6.8258 April ...... 6.8229 6.8256 6.8275 6.8247 May...... 6.8245 6.8275 6.8310 6.8305 June ...... 6.7815 6.8184 6.8323 6.7815 July ...... 6.7709 6.7762 6.7807 6.7735 August ...... 6.7670 6.7873 6.8069 6.8069 September (through September 3) ...... 6.8014 6.8062 6.8102 6.8014 (1) Averages are calculated by averaging the rates on the last business day of each month during the relevant year. Monthly averages are calculated by averaging the daily rates during the relevant monthly period.

On September 3, 2010, the noon buying rate for US dollars in New York City for cable transfers in Renminbi was US$1.00 to RMB6.8014 as certified for customs purposes by the Federal Reserve Bank of New York.

Hong Kong Under existing Hong Kong law, there are no foreign exchange controls or other laws, decrees or regulations that affect the remittance of dividend payments to US residents. The Basic Law of the Hong Kong (“Basic Law”), which came into effect on July 1, 1997, provides that no foreign exchange control policies shall be applied in Hong Kong. The HK dollar is freely convertible into other currencies, including the US dollar. Since October 17, 1983, the HK dollar has been pegged to the US dollar at the rate of HK$7.80 to US$1.00. The central element in the arrangements that gave effect to the peg is that by agreement between the Hong Kong government and the three Hong Kong banknote issuing banks (i.e., The Hongkong and Shanghai Banking Corporation Limited, Standard Chartered Bank (Hong Kong) Limited and the Bank of China (Hong Kong) Limited), certificates of indebtedness, which are issued by the Hong Kong Government Exchange Fund to the banknote issuing banks to be held as cover for their banknote issues, are issued and redeemed only against payment in US dollars, at the fixed exchange rate of HK$7.80 to US$1.00. When the banknotes are withdrawn from circulation, the banknote issuing banks surrender the certificates of indebtedness to the Hong Kong Government Exchange Fund and are paid the equivalent US dollars at the fixed rate. The market exchange rate of the HK dollar against the US dollar continues to be determined by the forces of supply and demand in the foreign exchange market. However, against the

xvii background of the fixed rate that applies to the issue of the Hong Kong currency in the form of banknotes, as described above, the market exchange rate has not deviated materially from the level of HK$7.80 to US$1.00 since the peg was first established. In May 2005, the Hong Kong Monetary Authority broadened the 22-year old trading band from the original rate of HK$7.80 per US dollar to a rate range of HK$7.75 to HK$7.85 per US dollar. The Hong Kong government has stated its intention to maintain the link at that rate, and it, acting through the Hong Kong Monetary Authority, has a number of means by which it may act to maintain exchange rate stability. Under the Basic Law, the HK dollar will continue to circulate and remain freely convertible. The Hong Kong government has also stated that it has no intention of imposing exchange controls in Hong Kong and that the HK dollar will remain freely convertible into other currencies, including the US dollar. However, no assurance can be given that the Hong Kong government will maintain the link within the range of HK$7.75 to HK$7.85 per US dollar or at all, or will not in the future impose exchange controls.

The following table sets forth (1) the noon buying rate for US dollars in New York City for cable transfers in HK dollars as certified for customs purposes by the Federal Reserve Bank of New York for and as of the period ends indicated through December 31, 2009 and (2) the noon buying rate as set forth in the H.10 statistical release of the Federal Reserve Board for and as of the period ends indicated from and after January 1, 2010.

Noon Buying Rate Period Period Low Average(1) High End (HK$ per US$1.00) 2007 ...... 7.7497 7.8008 7.8289 7.7984 2008 ...... 7.7497 7.7813 7.8159 7.7984 2009 ...... 7.7495 7.7509 7.7618 7.7536 2010 January ...... 7.7539 7.7624 7.7752 7.7665 February ...... 7.7619 7.7670 7.7716 7.7619 March ...... 7.7574 7.7612 7.7648 7.7647 April ...... 7.7565 7.7627 7.7675 7.7637 May...... 7.7626 7.7856 7.8030 7.7850 June ...... 7.7690 7.7880 7.8040 7.7865 July ...... 7.7651 7.7753 7.7962 7.7672 August ...... 7.7605 7.7702 7.7788 7.7781 September (through September 3) ...... 7.7702 7.7718 7.7738 7.7714

(1) Annual averages are calculated by averaging the rates on the last business day of each month during the relevant year. Monthly averages are calculated by averaging the daily rates during the relevant monthly period.

On September 3, 2010, the noon buying rate for US dollars in New York City for cable transfers in HK dollars was US$1.00 to HK$7.7714 as certified for customs purposes by the Federal Reserve Bank of New York.

xviii Summary The summary below is only intended to provide a very limited overview of information described in more detail elsewhere in this offering memorandum. As it is a summary, it does not contain all of the information that may be important to investors. Terms defined elsewhere in this offering memorandum shall have the same meanings when used in this summary. Prospective investors should therefore read this entire offering memorandum, including the section entitled “Risk factors” and the financial statements and related notes thereto, before making an investment decision.

Overview

Historically, we were principally engaged in the investment, operation and management of toll roads and expressways in the PRC. In 2004, we began engaging in the development of residential and commercial properties in the PRC and, in 2007, further solidified our entry into the property development business with our acquisition of a 49% equity interest in Sunco Property (of which we own a 94.74% equity interest as of the date of this offering memorandum). Our business is now comprised of two segments: our toll road business and our property development business.

As of June 30, 2010, our toll road projects comprised 16 expressways, highways and bridges spanning approximately 870 km and over 40 toll stations located in seven provinces in the PRC: Anhui, Guangxi, Hebei, Henan, Hunan, Jiangsu and Shanxi. As of June 30, 2010, our total investment in toll road projects was approximately HK$4,604.5 million. These investments in toll road projects are held through our wholly-owned subsidiaries that, together with their PRC joint venture partners, have established joint ventures for investment in various projects.

For the year ended December 31, 2009 and the six months ended June 30, 2010, the total traffic volume during the period recorded by our toll road projects was approximately 115.1 million vehicles and 42.9 million vehicles, respectively, our share of toll revenue was HK$1,082.9 million and HK$388.2 million, respectively, and our share of cash distributions from our toll road joint ventures was HK$539.4 million and HK$343.2 million, respectively. The figures for the six months ended June 30, 2010 reflect a significant decrease in total traffic volume during the period primarily due to the disposal of the Jihe Expressway (Eastern Section) in the second half of 2009.

As of June 30, 2010, we had over 20 residential and commercial property development projects in the PRC with a total planned GFA of approximately 8.8 million sq.m., of which approximately 5.1 million sq.m. was attributable to us. During the year ended December 31, 2009 and the six months ended June 30, 2010, we had revenues from property development of HK$4,600.4 million and HK$2,059.6 million, respectively.

For the year ended December 31, 2009 and the six months ended June 30, 2010, our EBITDA, calculated on a consolidated basis, was equal to HK$1,751.1 million, and HK$989.3 million, respectively.

1 Competitive strengths

We believe that we possess the following principal strengths, which make us competitive in our principal business sectors:

Business and geographic diversification. We believe the diversification between our established core toll road business and our growing and dynamic property development business provides a strong long-term platform to continue to expand our business. Our strong established toll road portfolio complements our property development business, which has high growth potential. In addition to the strength provided from the diverse and complementary nature of cash flows from our two business segments, we also derive benefit from geographic diversity within our toll road business. Our toll road investment portfolio includes 16 toll road projects in seven provinces in the PRC, covering approximately 870 km as of June 30, 2010. Our geographic diversity further strengthens the stability and performance of our core toll road business segment.

Predictable and stable cash flows from our toll road investments. Our core toll road business provides predictable and steady cash flows which give us stability as well as flexibility in managing our operations. The predictability and growth of our toll road business has been demonstrated by the strong growth of traffic volume and toll rate performance since 1998. The national turnover volume of freight traffic by road in the PRC increased from approximately 548.3 billion tons per kilometer in 1998 to approximately 3,638.4 billion tons per kilometer in 2009, and the national turnover volume of passenger traffic by road in the PRC increased from approximately 594.3 billion passengers per kilometer in 1998 to approximately 1,345.1 billion passengers per kilometer in 2009. We believe daily traffic will continue to grow as a result of robust vehicle consumption and economic growth in the PRC. Furthermore, the favorable contractual provisions governing the terms of our investments in the joint venture companies that operate the existing toll roads, in addition to the fact that our existing toll road joint venture companies and projects do not have any bank borrowing, enhance the stability and predictability of our cash flows.

Strong local partnerships with highway bureaus and local governments. Over the past 17 years that we have been operating and managing our toll road business, we have established strong, long-term relationships with relevant PRC Government authorities. We have formed these ties because all of our toll road joint venture partners are either subsidiaries or entities under the auspices of local highway bureaus and/or municipal or provincial governments. We believe that our long-term relationship with our PRC joint venture partners and PRC Governmental authorities and our proven track record in operating toll roads position us well to acquire strategic, high quality toll road projects in the future. In addition, we believe that our strong relationships with the PRC Governmental authorities will also be instrumental in growing our property development business.

Strategically located land reserves. Our property development portfolio provides us with an attractive project development pipeline in the coming years. We have selectively acquired land leases in readily accessible strategic locations in areas with high growth potential, with well- developed transportation infrastructure. As of June 30, 2010, we had projects comprising of approximately 5.1 million sq.m. attributable saleable GFA.

2 Proactive and “hands-on” approach led by an independent management team. We believe that active management participation in each of our projects is essential to our success, helping us to properly implement toll collection systems and contributing to efficient operations. Further in our toll road business, we routinely second our own staff to each joint venture and nominate them to the board of directors and key management positions across major operational functions, such as toll collection, finance and systems/operations. In our property business, we have grouped our development projects into four major geographical regions with each project managed by a PRC-based project manager, and each region is supervised by a senior executive (usually PRC-based). Our hands-on management style keeps us involved in the day-to-day operations of, and decision-making at, our two business segments. We believe our management team has helped to maintain prudent cash management policies and stringent internal control systems. In addition, we place a strong emphasis on corporate governance. As an example, in 2009 we created a management committee comprised of senior executives who are independent of our shareholders, which supervises and monitors all major issues in daily operations. Experienced and stable management. Over the 17 years we have operated and managed our toll road business, we have built up a strong management team comprised of experienced team of professionals based in Hong Kong and the PRC. On the toll road business side, we have management with in-depth experience in the operation of toll roads, local knowledge of the business and strong relationships with PRC Governmental authorities. On the property development business side, with the integration of the Sunco Property Acquisition complete, we now have in place an established management team with significant practical expertise in project management, engineering, construction and sales and marketing. We have experienced managers at our project companies working closely with contractors not only to control costs but also to ensure the quality of the construction work.

Strategies We intend to achieve our overall business objectives by pursuing the following strategies: Maintain and expand our core toll road business. We are committed to maintaining and expanding our core toll road business, which provides us with stable and predictable cash flows. We plan to do this by optimizing our toll road portfolio by focusing on expressways and by structuring our investments to maximize our cash returns. • Focus on expressways. We believe that expressway investments will create a higher yield for our toll road portfolio. In the first half of 2010, approximately 84.1% of our cash distributions from our toll road joint ventures was generated from tolls collected on our expressway projects. As such, we intend to seek strategic opportunities to invest in expressway projects in the future and focus on existing revenue-generating expressway projects which are higher yielding in nature so that we are well-positioned to continue to maximize our returns from these types of projects. In addition, we also intend to continue divesting our Class I and Class II highway projects as part of our strategy to optimize our toll road portfolio. • Structure our toll road investments to maximize our cash returns. The major selection criteria of a project are as follows: (i) priority is given to invest in toll road projects that are already operating and collecting tolls, (ii) the investment must meet our internal targeted rate of return and (iii) identifying new toll road investment opportunities by

3 leveraging our strong relationships with local governments. In addition, before investing in any toll road project, we carefully assess and evaluate various criteria including socio- economic demographics of the project location, the local joint venture partners, the joint venture structure, our financial resources, any applicable quality requirements and financial data of the prospective project.

Prudent and opportunistic approach to property development. We plan to continue to engage in measured growth in our property development business by selectively focusing on acquiring and pursuing primarily residential property development projects in high growth areas near city centers. Prior to making any investment decision, we will adhere to our prudent financial policies and consider the project’s expected internal rate of return, cash flows and capital requirements.

• Measured growth. We plan to continue the measured and disciplined growth of our property development portfolio. Our cautious approach to evaluation of new investments is demonstrated by our limited acquisitions since 2007. We will continue our multi-layered and thorough process for approving additional property development projects, which is designed to ensure proper due diligence has been completed on every investment decision. We conduct a comprehensive analysis to determine whether a prospective project meets our investment strategy and financial standards; we evaluate the effectiveness of the local government and its planning function; and we determine whether the infrastructure and social facilities of the area offer an attractive living and/or working environment, prior to making any decisions regarding property development projects. We plan to maintain a sustainable level of land reserves in line with our operational capacity to develop new and high quality property development projects.

• Focus on high growth areas nearby city centers for residential development. We believe high growth areas nearby city centers offer the most rewarding opportunities for development. We focus on land reserves in growth areas nearby city centers because these areas better match our prudent financial criteria and at the same time still meet our rate of return, cash flows and capital requirement objectives. We will continue to focus primarily on building residential communities with ancillary commercial developments.

Strengthening our brand by focusing on developing high quality products. We believe that market perception of our “brand” and our reputation as a property developer are very important and that our brand can be best enhanced by consistently delivering high quality products. We have actively participated in the selection of the materials used in our projects in order to achieve desired quality levels and to maintain a cohesive brand image. We will continue to leverage on our expertise in construction and project management to implement strict quality control standards and closely monitor the product quality and the workmanship of our contractors throughout the development process. Our efforts have been recognized by a number of industry groups and publications such as “SouFun,” a leading website publishing real estate information in the PRC, that has named us “Branded Chinese Real Estate Enterprise in 2009.” By cultivating a distinctive brand image, we will be able to further enhance our ability to attract our target customers and reinforce our customers’ perception of the high quality of our products and services.

Maintain a strong capital structure. From the relatively stable financial position provided by our cash-generating toll road business, we will continue to carefully manage our property development business by taking a balanced approach to growing our overall business while

4 maintaining our stable financial position. As a result, we have been able, and plan to continue, to maintain a strong liquidity position and conservative debt gearing and leverage. As of June 30, 2010, our gross debt to total capitalization ratio was 39.9% and we had over HK$3.2 billion of bank deposits (including pledged deposits) and cash on hand. We will also continue to access diversified funding sources.

Recent developments

On September 13, 2010, concurrent with the commencement of this Offering, our wholly-owned subsidiary, Will Great International Limited, commenced a cash tender offer for up to an amount equal to 50% of the combined aggregate principal amount of the outstanding 2004 Guaranteed Notes and the outstanding 2007 Floating Rate Notes upon the terms and conditions set forth in a tender offer memorandum to be issued in connection with such tender offer. The cash tender offer for the 2004 Guaranteed Notes and the 2007 Floating Rate Notes is conditioned upon the successful completion of this Offering. This Offering is not conditioned upon the successful completion of the cash tender offer for the 2004 Guaranteed Notes and the 2007 Floating Rate Notes. As of September 13, 2010, US$195.0 million in principal amount of the 2004 Guaranteed Notes and US$150.0 million in principal amount of the 2007 Floating Rate Notes were outstanding and not held by us.

The Issuer

The Issuer was incorporated under the laws of the British Virgin Islands on March 23, 2010. As of the date of this offering memorandum, it is authorized to issue a maximum of 50,000 shares of a single class each with a par value of US$1.00 and has one share in issue. The Issuer is our wholly- owned subsidiary and, as of the date of this offering memorandum, carries on and has carried on no business other than entering into arrangements for the issue of the Notes and the lending of the net proceeds thereof to us.

The registered office of the Issuer is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. The correspondence address of each of the directors of the Issuer for the purposes of his directorship in the Issuer and its principal place of business in Hong Kong is at Suite 501, 5th Floor, Tower 6, The Gateway, 9 Canton Road, Tsimshatsui, Kowloon, Hong Kong.

5 Summary consolidated financial and other data The following table presents our summary financial and other data. The summary financial data as of and for each of the years ended December 31, 2007, 2008 and 2009, and for each of the six months ended June 30, 2009 and 2010 is derived from our consolidated financial statements for those years and as of the dates indicated. Our consolidated financial statements as of and for each of the years ended December 31, 2007, 2008 and 2009 have been audited, and for each of the six months ended June 30, 2009 and 2010 have been reviewed, by Deloitte Touche Tohmatsu, Certified Public Accountants, Hong Kong. The consolidated financial statements have been prepared and presented in accordance with the HKFRS. The summary financial data below should be read in conjunction with the consolidated financial statements and the notes to those statements included elsewhere in this offering memorandum.

Summary consolidated income statement information

For the year ended December 31, For the six months ended June 30, 2007 2008 2009 2009 2009 2010 2010 HK$ HK$ HK$ US$ HK$ HK$ US$ (in thousands) Revenue ...... 2,407,770 4,630,672 4,600,424 590,821 2,464,196 2,059,624 264,512 Cost of sales ...... (1,741,789) (4,110,060) (4,061,924) (521,662) (2,217,081) (1,351,911) (173,622) Gross profit ...... 665,981 520,612 538,500 69,159 247,115 707,713 90,890 Interest income .... 96,189 19,972 23,090 2,965 9,928 14,687 1,886 Other income ...... 51,332 28,369 33,987 4,365 31,157 25,923 3,329 Other gains and losses ...... 369,554 344,639 526,533 67,621 93,592 31,692 4,070 Selling expenses .... (91,506) (112,784) (127,682) (16,398) (46,302) (68,810) (8,837) Operating expenses ...... (371,302) (510,385) (358,858) (46,087) (170,288) (202,743) (26,037) Share of results of joint ventures .... 577,107 909,759 514,323 66,053 270,088 192,235 24,688 Share of result of an associate ...... 12,267 ------Finance costs ...... (100,670) (156,855) (104,435) (13,412) (53,336) (45,614) (5,858) Profit before taxation ...... 1,208,952 1,043,327 1,045,458 134,266 381,954 655,083 84,131 Income tax expenses ...... (342,811) (366,693) (302,281) (38,821) (113,640) (385,632) (49,526) Profit for the year/period ...... 866,141 676,634 743,177 95,445 268,314 269,451 34,605 Attributable to: Owners of the Company ...... 851,067 656,429 728,080 93,506 255,091 265,465 34,093 Non-controlling interests ...... 15,074 20,205 15,097 1,939 13,223 3,986 512 866,141 676,634 743,177 95,445 268,314 269,451 34,605

6 Summary consolidated financial position information

As of December 31, As of June 30, 2007 2008 2009 2009 2010 2010 HK$ HK$ HK$ US$ HK$ US$ (in thousands) ASSETS Non-current assets Property, plant and equipment ...... 103,881 57,346 19,352 2,485 32,231 4,139 Prepaid lease payments for land ..... 49,912 33,293 - - - - Investment properties ...... - 143,851 255,437 32,805 360,891 46,348 Interests in joint ventures ...... 5,170,093 5,289,683 4,357,996 559,686 4,135,321 531,089 Loans to joint ventures ...... 81,196 - - - - - Loans to related companies ...... 54,700 54,700 48,200 6,190 48,200 6,190 Deferred tax assets ...... 81,862 40,700 31,506 4,046 30,405 3,905 Long-term receivables ...... 433,132 576,359 542,603 69,685 317,815 40,816 Available-for-sale financial assets .... 592,821 632,787 - - - - Prepayment for acquisition of additional interest in a subsidiary ...... - - 88,310 11,342 - - 6,567,597 6,828,719 5,343,404 686,239 4,924,863 632,487 Current assets Inventory of properties ...... 10,379,463 12,029,250 12,953,468 1,663,580 13,651,539 1,753,232 Prepayment for land leases ...... 1,393,210 107,865 222,334 28,554 1,052,385 135,155 Prepaid lease payments for land ..... 1,365 938 - - - - Loans to joint ventures ...... - 70,787 64,286 8,256 64,432 8,275 Loans to related companies ...... - - 3,300 424 - - Debtors, deposits and prepayments . . 769,764 686,063 330,951 42,503 535,736 68,803 Prepaid income tax ...... 226,432 225,699 211,203 27,124 216,440 27,797 Pledged bank deposits ...... 231,583 163,723 206,553 26,527 143,543 18,435 Bank balances and cash ...... 1,858,941 796,098 2,887,090 370,282 3,094,819 397,459 14,860,758 14,080,423 16,879,185 2,167,750 18,758,894 2,409,156 Total assets ...... 21,428,355 20,909,142 22,222,589 2,853,989 23,683,757 3,041,643 EQUITY AND LIABILITIES Equity attributable to shareholders of the Company Share capital ...... 75,265 73,893 73,912 9,492 74,012 9,505 Reserves ...... 8,397,151 9,295,568 9,777,653 1,255,719 9,870,999 1,267,707 8,472,416 9,369,461 9,851,565 1,265,211 9,945,011 1,277,212 Minority interests ...... 151,527 164,141 180,778 23,217 94,773 12,171 Total equity ...... 8,623,943 9,533,602 10,032,343 1,288,428 10,039,784 1,289,383 Non-current liabilities Bank and other borrowings—due after one year ...... 6,114,771 5,737,728 5,199,953 667,816 5,226,363 671,208 Deferred tax liabilities ...... 69,155 147,998 153,886 19,763 171,132 21,978 6,183,926 5,885,726 5,353,839 687,579 5,397,495 693,186 Current liabilities Creditors and accrued charges ...... 1,663,877 1,756,811 2,438,815 313,211 2,324,655 298,549 Deposits from pre-sale of properties ...... 4,127,823 2,095,694 2,904,072 372,962 4,123,584 529,581 Income tax payable ...... 219,839 212,424 292,195 37,526 410,876 52,768 Bank and other borrowings—due within one year ...... 608,947 1,424,885 1,201,325 154,283 1,387,363 178,176 6,620,486 5,489,814 6,836,407 877,982 8,246,478 1,059,074 Total equity and liabilities ...... 21,428,355 20,909,142 22,222,589 2,853,989 23,683,757 3,041,643

7 Selected summary cash flow and other financial information

For the six months ended For the year ended December 31, June 30, 2007 2008 2009 2009 2009 2010 2010 HK$ HK$ HK$ US$ HK$ HK$ US$ (in thousands, except for percentages) Summary Cash Flow Information Net cash (used in) from operating activities ...... (1,695,102) (1,730,763) 2,494,753 320,395 1,613,455 192,555 24,729 Net cash (used in) from investing activities ...... (700,375) 1,014,717 1,049,907 134,837 (35,973) 190,738 24,496 Net cash from (used in) financing activities ...... 3,096,918 (458,567) (1,460,032) (187,508) 94,668 (182,126) (23,390) Other financial data EBITDA(1) ...... 1,984,235 1,847,760 1,751,109 224,890 746,497 989,337 127,058 EBITDA margin(2) . . . 53.8% 29.2% 30.8% 30.8% 24.5% 40.4% 40.4% Capital expenditures ..... 100,530 89,934 23,333 2,997 8,684 34,947 4,488 Interest expenses . . . 414,930 469,604 404,846 51,993 202,081 174,484 22,409

(1) EBITDA is not a standard measure under HKFRS, but is a widely used financial indicator of a company’s ability to service and incur debt. EBITDA should not be considered in isolation or construed as an alternative to cash flows, net income or any other measure of performance or as an indicator of our operating performance, liquidity, profitability or cash flows generated by operating, investing or financing activities. EBITDA is calculated based on the profit for the period of the Group but does not account for taxes, interest expenses, depreciation and amortization charges. Interest expenses include total borrowing costs and other finance costs. In evaluating EBITDA, we believe that investors should consider, among other things, the components of EBITDA such as turnover and operating expenses and the amount by which EBITDA exceeds capital expenditures and other charges. We have included EBITDA because we believe it is a useful supplement to cash flow data as a measure of our performance and our ability to generate cash flow from operations to cover debt service and taxes. EBITDA presented herein may not be comparable to similarly titled measures presented by other companies. Investors should not compare our EBITDA to EBITDA presented by other companies because not all companies use the same definition. Investors should also note that EBITDA as presented herein may be calculated differently from Consolidated EBITDA as defined and used in the Trust Deed governing the Notes. See “Terms and conditions of the Notes—Certain definitions” for a description of the manner in which Consolidated EBITDA is defined for purposes of the Trust Deed governing the Notes. (2) EBITDA margin is calculated by dividing EBITDA by revenue and share of revenue in toll road joint ventures.

8 Summary of the Offering The following is a brief summary of the terms of this Offering and is qualified in its entirety by the remainder of this offering memorandum. For a detailed description of the Notes, see the section entitled “Terms and conditions of the Notes.” The terms and conditions of the Notes prevail to the extent of any inconsistency set forth in this section. This summary is not intended to be complete and does not contain all of the information that is important to an investor. Phrases used in this summary and not otherwise defined shall have the meanings given to them in “Terms and conditions of the Notes.” References in this summary to “Notes” refer to the US$350,000,000 aggregate principal amount of 9.5% Guaranteed Senior Notes due 2015.

Issuer ...... RKIFinance (2010) Limited

Notes Offered ...... US$350,000,000 aggregate principal amount of 9.5% Guaranteed Senior Notes due 2015

Offering Price ...... 100%oftheprincipal amount of the Notes

Maturity Date ...... September 21, 2015

Interest ...... TheNotes will bear interest from and including September 21, 2010 at the rate of 9.5% per annum, payable semi-annually in arrear.

Interest Payment Dates ...... OnMarch 21 and September 21 of each year, commencing March 21, 2011.

Ranking of the Notes . . . The Notes are:

• direct, unsubordinated, unconditional and (subject to certain exceptions) unsecured obligations of the Issuer;

• senior in right of payment to any future obligations of the Issuer expressly subordinated in right of payment to the Notes;

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

• guaranteed by the Guarantors on a senior basis, subject to the limitations described in “Terms and conditions of the Notes— Guarantee and Status” and in “Risk factors—Risks relating to the Notes and the Guarantees” and “Risk factors—Risks relating to the Subsidiary Guarantors”;

• effectively subordinated to all of the existing and future secured obligations of the Subsidiaries and the Company, to the extent of the value of the assets serving as security, therefor; and

• effectively subordinated to all existing and future obligations of Subsidiaries of the Company which are not Subsidiary Guarantors.

9 Guarantees ...... Each of the Guarantors will jointly and severally guarantee the due and punctual payment of the principal of, premium, if any, and interest on, and all other amounts payable under, the Notes. Some of the initial Subsidiary Guarantors will not have operations or assets. The initial Guarantors will consist of the Company and all of the Company’s Restricted Subsidiaries on the Original Issue Date other than its Subsidiaries organized under the laws of the PRC and SPV Financing Subsidiaries. None of the existing or future Restricted Subsidiaries organized under the laws of the PRC or which are SPV Financing Subsidiaries will provide a Guarantee at any time in the future.

The Company will cause each of its future Subsidiaries (other than Subsidiaries organized under the laws of the PRC and SPV Financing Subsidiaries), immediately upon becoming a Restricted Subsidiary, to provide a Guarantee.

A Guarantee given by a Guarantor may be released in certain circumstances. See “Terms and conditions of the Notes—Guarantee and status—Guarantee.”

Ranking of Guarantees ...... TheGuarantee of each Guarantor (other than a Guarantee provided by a Toll Road Holding Company or a New Toll Road Holding Company (referred to as a Subordinated Guarantor in the Notes)):

• is a general obligation of such Guarantor;

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

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

• ranks at least pari passu with all other present and future unsecured, unsubordinated Indebtedness of such Guarantor (subject to any priority rights of such unsubordinated Indebtedness pursuant to applicable law), other than with respect to the Subordinated Guarantees, which will be subordinated in right of payment to the prior payment in full of all liabilities due under guarantees of indebtedness incurred under the Syndicated Loan and, for so long as the Syndicated Loan remains outstanding, the 2007 Fixed Rate Note and 2007 Floating Rate Note guarantees.

The obligations of each Toll Road Holding Company and each New Toll Road Holding Company under its Guarantee constitute unsecured and subordinated obligations of such Toll Road Holding Company or such New Toll Road Holding Company, as the case may be, and upon

10 any distribution to creditors of such Toll Road Holding Company or New Toll Road Holding Company pursuant to a final and effective order or resolution for the bankruptcy, winding up, liquidation, receivership or similar proceeding in respect of such Toll Road Holding Company or New Toll Road Holding Company, the claims in respect of such Toll Road Holding Company’s or New Toll Road Holding Company’s guarantee shall be subordinated in right of payment to the prior payment in full of all liabilities of such Toll Road Holding Company or such New Toll Road Holding Company under its Syndicated Loan guarantee and, for so long as the Syndicated Loan remains outstanding, the 2007 Fixed Rate Note and the 2007 Floating Rate Note guarantees, but not with respect to (i) any liabilities under the Syndicated Loan guarantees in excess of the aggregate of US$250.0 million, together with interest, premium (if any), expenses and any other amounts due under the Syndicated Loan guarantee; and (ii) any liabilities which by their terms rank equally in right of payment with or junior to such Toll Road Holding Company’s or such New Toll Road Holding Company’s obligations under its guarantee.

See “Terms and conditions of the Notes—Guarantee and Status— Status.” See “Risk Factors—Risks relating to the Notes and the Guarantees—The lenders under the Syndicated Loan have a charge over an account held by us into which all cash payments from the Toll Road Holding Companies will be placed and the Subordinated Guarantees will be expressly subordinated to liabilities and obligations under any guarantees provided by the Toll Road Holding Companies or the New Toll Road Holding Companies under the Syndicated Loan.”

Optional Redemption . . At any time before September 21, 2013, we may redeem the Notes, in whole and not in part, at a redemption price equal to 100.0% of their principal amount plus the Applicable Premium and accrued and unpaid interest, if any, to the redemption date.

At any time and from time to time on or after September 21, 2013, we may redeem the Notes, in whole or in part, at a redemption price equal to the percentage of principal amount set forth below plus accrued and unpaid interest to the redemption date if redeemed during the twelve-month period beginning on September 21 of each of the years indicated below.

Redemption Period Price 2013 ...... 104.750% 2014 ...... 102.375%

In addition, at any time prior to September 21, 2013, we may redeem up to 35.0% of the principal amount of the Notes using proceeds from

11 certain equity offerings at a redemption price of 109.5% of the principal amount of the Notes plus accrued and unpaid interest, if any, to the redemption date.

Repurchase of Notes upon a Change of Control Triggering Event ...... Nolater than 30 days following a Change of Control Triggering Event, we must make an offer to repurchase all Notes then outstanding at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to (but not including) the date of repurchase.

Redemption for Taxation Reasons ...... Subject to certain exceptions and as more fully described herein, we may redeem the Notes, as a whole but not in part, at a redemption price equal to 100% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date fixed by us for redemption, if we, the Issuer or a Subsidiary Guarantor would become obligated to pay certain additional amounts as a result of certain changes in specified tax laws or certain other circumstances. See “Terms and conditions of the Notes—Redemption and purchase— Redemption for taxation reasons.”

Covenants ...... TheNotes, the Trust Deed and the Guarantees will limit our ability and the ability of the Issuer and our Restricted Subsidiaries to, among other things:

• incur additional Indebtedness and issue preferred stock;

• declare dividends on Capital Stock or purchase or redeem Capital Stock;

• make investments or other specified Restricted Payments;

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

• issue or sell Capital Stock of Restricted Subsidiaries;

• guarantee Indebtedness;

• enter into transactions with equity holders or affiliates;

• create any Lien;

• enter into Sale and Leaseback Transactions;

• sell assets;

12 • effect a consolidation or merger; or • engage in different business activities. These covenants are subject to a number of important qualifications and exceptions described in “Terms and conditions of the Notes— Covenants.” Transfer restrictions .... TheNotes will not be registered under the Securities Act or under any state securities laws of the United States and will be subject to customary restrictions on transfer and resale. See “Plan of distribution” and “Transfer restrictions.” Form, Denomination and Registration ...... TheNotes will be issued only in fully registered form, without coupons, in denominations of US$100,000 and higher integral multiples of US$1,000 in excess thereof and will be initially represented by the Global Certificate registered in the name of a nominee of a common depositary for Euroclear and Clearstream. Beneficial interests in the Notes will be shown on and transfers thereof will be executed only through records maintained by Euroclear and Clearstream. Except as discussed herein, definitive certificates for the Notes will not be issued in exchange for beneficial interests in the Notes represented by the Global Certificate. Delivery of the Notes . . . We expect to make delivery of the Notes, against payment in same- day funds, on or about September 21, 2010, which we expect will be the fifth business day following the date of this offering memorandum. See “Plan of distribution.” Use of Proceeds ...... Weestimate that the net proceeds of this Offering of the Notes, after deducting the underwriting commission and other estimated expenses payable in connection with this Offering, will be approximately US$342.0 million. We intend to use the net proceeds as follows: (i) to finance a cash tender offer for, and/or to otherwise repurchase or repay at maturity, all or a portion of the outstanding 2004 Guaranteed Notes and the outstanding 2007 Floating Rate Notes; (ii) for the refinancing of other existing indebtedness; and (iii) to make investments in our property development business. We may adjust our plans to make investments in our property development business in response to changing market conditions, circumstances such as a failure to obtain requisite approvals, changes in government policies that would render such property developments commercial unavailable and force majeure. In these situations, we will

13 carefully evaluate the situation and may reallocate the use of proceeds.

The successful completion of the cash tender offer for the 2004 Guaranteed Notes and 2007 Floating Rate Notes is not a condition to the closing of this Offering of the Notes. The successful completion of this Offering of the Notes is a condition to the closing of the cash tender offer for the 2004 Guaranteed Notes and 2007 Floating Rate Notes.

Trustee ...... DBTrustees (Hong Kong) Limited

Principal Agent ...... Deutsche Bank AG, Hong Kong Branch

Registrar ...... Deutsche Bank Luxembourg S.A.

Listing ...... Approval in-principle has been received for the listing of the Notes on the SGX-ST. The Notes will be traded on the SGX-ST in a minimum board lot size of US$200,000 for so long as the Notes are listed on the SGX-ST.

Governing Law ...... TheNotes and the Trust Deed will be governed by and will be construed in accordance with the laws of England

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

ISIN/Common Code .... XS0530341873/053034187

Further Issues ...... TheIssuer may, from time to time, issue additional Notes having the same terms and conditions as the Notes in all respects (except for the issue date, issue price and the first interest payment date) in accordance with applicable laws and regulations. Additional Notes issued in this manner may be consolidated and form a single class with the previously outstanding Notes.

14 Risk factors This offering memorandum contains forward-looking statements relating to events that involve risks and uncertainties. Prior to investing in any securities issued by us, you should carefully consider, together with all other information contained in this offering memorandum, the risk factors described below. Additional risk factors and uncertainties not at present known to us, or that we currently deem immaterial, may also adversely affect our business, financial condition or results of operations. If any of the possible events described below occur, our business, financial condition or results of operations could be materially and adversely affected. In such case, we may not be able to satisfy our obligations under the securities, and you could lose all or part of your investment.

Risks relating to our business Reduction of traffic volume or the rate of growth in traffic volume could adversely affect us. Revenue from our toll roads and our earnings are principally dependent upon the number and classes of motor vehicles using such roads and the applicable toll regime. The number and classes of vehicles using toll roads and bridges is to a large extent dependent on factors outside our control, including: • toll rates; • fuel prices; • vehicle prices and the cost of owning and operating vehicles; • the mix between different vehicle classes using the toll roads, bridges or tunnels; • population growth, vehicle ownership growth and growth in the number of people of driving age; • the occurrence of natural disasters, such as flooding, earthquakes and forest fires; • meteorological conditions that can make driving difficult or dangerous, such as heavy snowfall, fog or rain; • environmental legislation or regulation, including measures to restrict motor vehicle use; • the quality and proximity of our toll roads compared to alternative roads and other competing modes of transportation, including air travel, waterways and railways; • capacity constraints on the number of vehicles that can efficiently use the toll roads, bridges or tunnels in any given period; • general development of the provinces, cities and townships served by our toll roads; and • general economic conditions in the PRC. The volume of traffic on a given toll road is also influenced by the basis and extent of the road’s connection with other parts of the local and national highway and expressway network. There can be no assurance that future changes in the highway and expressway system and network in the provinces in which our projects are located will not adversely affect the traffic volume on our toll highways and expressways. See “—Our profitability may be affected by the existence and development of other competing means of transport.”

15 Future growth in traffic volume is expected to depend on the continued economic growth and development policies of the PRC, and the principal municipalities and counties within the PRC. Any adverse changes in these economies may adversely affect the traffic volume on our toll highways and expressways.

We may be adversely affected by the slowdown of the PRC economy caused by the recent global financial and economic crisis.

Since early 2008, there has been a significant deterioration in the US and global economy, which may worsen or be prolonged. As a result of the economic conditions, liquidity has contracted significantly. During this same period, the PRC economy also experienced a similar economic slowdown. The slowdown in economic activities in the PRC has affected and may continue to affect consumer and business spending generally, which may result in decreased demand for transportation needs and real estate properties or services. The slowdown in economic activities in the PRC has adversely impacted our toll roads and property sales.

As a result of this slowdown in economic activities in the PRC, the PRC Government has implemented a series of temporary stimulating measures, such as cutting mortgage rates for first time buyers, lowering the minimum capital requirement ratio for ordinary residential developments, and an economic stimulus package in the amount of RMB4.0 trillion. While there are signs to show that such stimulus package, measures and policies adopted by the PRC Government may have helped the PRC economy to rebound from its worst growth in a decade since the second quarter of 2009, it is still unclear whether the economic downturn in the PRC has been completely and sustainably reversed. If the economic downturn in the PRC continues, we may experience a slowdown in the use of our toll roads and in the sales of our properties, increase in finance costs, or reduction of the amount of borrowings that are available to us, which may adversely affect our business, financial condition, results of operation and prospect. Additionally, the PRC Government has begun to withdraw its economic support by rolling back various measures and policies initiated during the crisis. As such, it may be more difficult to get a mortgage and our ability to finance projects may be affected by increased capital requirements.

Our profitability may be affected by the existence and development of other competing means of transport.

The profitability of our toll roads may be affected by the existence, proximity, affordability and efficiency of other competing means of transport and alternative routes of similar quality. Several of our existing highway projects have directly competing routes nearby. We prefer to invest in projects where there are no existing alternative routes, but there can be no assurance that alternative routes that avoid tolls or impose lower or no tolls will not be developed, or that alternative means of transport competing with our existing toll roads will not be constructed or developed in the future. Furthermore, all of our toll road projects in the PRC are undertaken by means of joint ventures with entities under the auspices of local government authorities. Although we do not expect that these local authorities would approve the construction of alternative routes to compete directly with our projects in which they already have interests, there can be no assurance that such authorities will not approve competing projects; or may be over-ridden by higher authorities to do so.

16 A breakdown in our toll receipt collection system would have an adverse effect on our revenues and results of operations.

We have implemented a toll collection control system in respect of all of our toll roads. See “Our business—Our toll road business.” We rely on computer systems to ascertain the level of toll receipts on a daily basis. While we believe that malfunction of these computer systems occurs infrequently, any malfunction of these computer systems or any inadequacy in our controls could cause the information on toll receipts to become unreliable, inaccurate or permanently lost, which could have an adverse effect on our toll management, delay our receipt of our portion of toll receipts and, consequently, our revenues and results of operations.

Our toll rates are subject to the regulation by various provincial or local government authorities.

All toll rates charged by each of our joint ventures are subject to the regulation of various provincial or local government authorities. Any proposed toll rate increase is required to be approved by the relevant provincial price department and relevant provincial transportation department; taking into account various factors before giving their approval. These factors include the toll rates of comparable toll roads in the same region, the prevailing inflation and interest rates, and the affordability to users.

Our joint ventures may apply to the relevant governmental authorities for a toll rate increase in order to meet the desired rate of return on investments. However, there can be no assurance that any applications for increases of toll rates will be approved by the relevant authorities in a timely manner, or at all. Furthermore, while we have not encountered a reduction in toll rates, it is possible that the relevant governmental authorities could require us to reduce toll rates at toll roads operated by our joint ventures despite our opposition or without consulting us. If toll rates on toll roads operated by our joint ventures were to be reduced, it could adversely affect our revenues and results of operations.

Failure to enjoy preferential payment arrangements with new toll road joint venture partners may have an adverse effect on our financial performance.

In relation to our current joint venture projects, our strategy was, subject to the approval of relevant PRC authorities, to seek to include in the joint venture arrangements that our subsidiaries holding interests in the joint ventures have priority over their respective PRC partners in the distribution of profits of the joint venture until full recovery of its original capital investment. Due to the intensified competition for quality toll road projects, we believe there is limited likelihood that such terms will be agreed to by the respective PRC partners or approved by the relevant authorities of the PRC Government for any such new toll road joint ventures.

Disputes with our joint venture partners may adversely affect our business.

We have, and expect to maintain, interests in joint ventures in connection with our existing expressway projects and property development projects in the PRC. Such joint ventures may involve risks associated with the possibility that our joint venture partners may (i) have economic or business interests or objectives that are inconsistent with ours, (ii) take action contrary to our instructions or requests or contrary to our policies or objectives with respect to our investments and projects, (iii) be unable or unwilling to fulfil their obligations under the relevant joint venture or other agreements or (iv) experience financial or other difficulties. In addition, in accordance with PRC laws, certain matters relating to a joint venture require the consent of all

17 parties to the joint venture. Therefore, irrespective of our proportional interest in such joint venture, we are not able to unilaterally control all decision-making processes of our joint ventures without reference to the relevant joint venture partners. Disputes among the partners over joint venture obligations or otherwise could adversely affect the performance of our projects. There can be no assurance that we will not encounter problems with our PRC joint venture partners, which could have an adverse effect our business operations, profitability and prospects.

We may not be able to maintain stable cash distributions from our portfolio of toll road investments.

The preferential payment arrangements in our existing toll road joint ventures, all operated through CJVs, are structured such that the sharing arrangement of the net profit generated from our joint ventures passes through various stages. During the initial years of a joint venture, we typically receive preferential cash distribution until full recovery of our original capital investment. Thereafter, the cash sharing ratio may be changed to enable our joint venture partner to receive preferential cash distribution to recover its original capital investment, and the cash sharing ratio may be further adjusted so that both parties share the cash generated from the project in proportion to their respective equity interests. For example, in 2009, the cash distribution ratio of our two major expressway projects in Hebei were changed as a result of these provisions, resulting in a decrease in the overall cash contribution of our toll road business to our consolidated results. We have not invested in new toll road projects since 2005 and there can be no assurance that we will be able to invest in any. Failure to acquire new investments could result in a decrease in the amount of cash distributions we receive from our PRC joint ventures, which could have a material impact on our revenues and results of operations.

We rely on our expressway toll road projects for a large proportion of our share of cash distributions from toll road joint ventures.

We currently derive and believe that we will continue to derive a substantial portion of our share of cash distributions from toll road joint ventures from our expressway toll road projects. As of June 30, 2010, we had 16 toll road joint venture projects, three of which were expressways. The toll revenue of our expressways was HK$1,588.4 million, HK$2,229.4 million, HK$2,062.7 million and HK$832.6 million, or 67.4%, 79.3%, 82.1% and 78.6%, respectively, of the total amount of our Group’s total toll projects in the years ended December 31, 2007, 2008 and 2009 and the six months ended June 30, 2010, respectively. Our expressway projects accounted for HK$493.4 million, HK$939.2 million, HK$420.3 million and HK$288.6 million, or 67.6%, 86.8%, 77.9% and 84.1%, respectively, of our share of cash distributions from toll road joint ventures in the years ended December 31, 2007, 2008 and 2009 and the six months ended June 30, 2010, respectively. We expect that a significant portion of our share of cash distributions from toll road joint ventures will continue to be attributable to our expressway projects in the future. Major events affecting the expressways, such as extended road works or natural disasters, could adversely impact our business. If any of our expressway projects are shut down for an extended period of time or altogether, we may lose some or all of our toll collections from that project. The financial difficulties of any of our most significant expressway projects, or significant decreases in the traffic volumes on these expressways or in toll rates, or other events outside our control would have a material adverse effect on our business, results of operations, financial condition and cash flows.

18 We expect increased competition for a decreasing pool of expressway toll road investment opportunities.

We experienced increased competition for a decreasing pool of toll road investment opportunities as a result of government policy changes that stopped approving toll collection on new Class II Highways in eastern provinces after November 27, 2006. Although existing joint venture toll collection arrangements have not been invalidated, and we believe that we would be entitled to compensation if the government attempted to invalidate such existing agreements, there is no guarantee that this would be the case. We also believe it is possible that this policy to phase out toll collections could be applied to new Class I Highways in the future as well. As part of our business strategy, we intend to make future toll road-related investments only in revenue-generating expressway projects. As the pool of toll road investment opportunities decreases, there is increased competition for these toll road investments, and other toll road operators may have greater financial resources than we do. As a result, we may not be able to make future investments in toll road projects on terms that are favorable to us, or at all.

Capital expenditures on, and operation of, toll roads is subject to events outside our control.

Our joint ventures invest in and operate toll roads that have already been completed and are operational. As a result, each of our joint ventures is responsible for the maintenance and repair of its toll road at its own cost throughout the operating concession period. Such costs are typically stable and predictable, including periodic road upgrades that require higher capital expenditures. However, the condition and operation of the toll roads operated by our joint ventures may be affected by catastrophic events including but not limited to serious adverse weather, natural disasters, epidemics and major road accidents. Such catastrophic events could disrupt the operation of these toll roads, leading to loss of toll revenues, or require significant unexpected capital expenditures to fix the toll roads and related infrastructure and equipment. Although to date, no material events of this nature have adversely affected the operation of any of our toll roads for an extended period of time, there can be no guarantees that such events will not occur. If the condition or our operation of the toll highways and expressways were seriously affected as a result of any such events, our revenue and earnings and financial position of a particular joint venture may be adversely affected, which could in turn have an adverse effect on our financial results.

We are subject to regulatory approval risks.

In the PRC, toll road projects involve a complex and lengthy process of formal official and governmental authorizations and approvals as well as significant administrative and logistical difficulties concerning acquisition and usage of land use rights. Approvals are also required in order to divest an interest in a project. There can be no assurance that such approvals will be obtained either according to the terms applied for or at all. There is also no guarantee in relation to any other possible future projects that requisite approvals for the project can be obtained at the necessary time. Also, as we develop and operate our projects through CJVs, there is no assurance that we will come to an agreement with our joint venture partners with respect to the terms of our projects and that those terms are commercially and technically to our satisfaction. Delays in the process of obtaining, or a failure to obtain, the requisite licences, permits or approvals from government agencies or authorities can also increase the cost or delay or prevent the commercial operation of a business, which could adversely affect the financial performance of our toll road business.

19 Changes to the PRC Government’s transportation-related policies may impact our revenues and earnings.

Our operations, along with those of other toll road operators in the PRC, are sensitive to changes in the PRC Government’s policies relating to all aspects of the transportation sector, for example, provincial and municipal transportation networks, traffic regulation, licensing and registration of vehicles, transfers of operating rights, toll regime and the planning, development, construction and management of highways in the PRC. There is no assurance that changes in such policies would not have an adverse effect on our revenue or results of operations.

The continued growth of our business requires substantial capital investment and our ability to arrange for additional external financing can be limited.

We will require significant additional financing to fund capital expenditures and to support the future growth of our business, particularly for investments in new toll road joint ventures and our property development business. Historically, we have relied on a mixture of debt and equity financing and cash from operations and investments to fund our business requirements. Our ability to arrange for external financing and the cost of such financing are dependent on numerous factors, including general economic and capital market conditions, interest rates, credit availability from banks or other lenders, investor confidence, success of our businesses, changes in existing PRC regulations, provisions of tax and securities laws that may be applicable to our efforts to raise capital and political and economic conditions in Hong Kong and the rest of the PRC generally. Our ability to raise additional financing, particularly through loans and other forms of indebtedness, is very limited, as we are subject to various restrictions on our ability to incur additional debt and engage in other fund-raising transactions under the terms of our outstanding indebtedness. See “Description of material indebtedness,” “—We may incur substantial additional indebtedness in the future, which could adversely affect our financial condition and our ability to generate sufficient cash to satisfy our outstanding and future debt obligations” and “—We may be unable to comply with the restrictions and covenants under the Notes, the Trust Deed and other financing agreements, which could lead to a default under the terms of the Notes, the Trust Deed or those agreements resulting in an acceleration of our debt repayments.” There can be no assurance that additional debt financing, either on a short-term or a long-term basis, will be made available or, if available, that such financing will be obtained on terms favorable to us. As a result, we will be increasingly reliant on cash generated by our existing toll road and property development businesses, as well as cash generated through any equity or other fund-raising activities, and there can be no assurance that such cash flows will be sufficient to finance the future growth of our toll road and property development businesses.

We may not be able to replenish land reserves for development.

Our main source of revenue from our property development business is derived from the sale of properties that we have developed. In order to maintain business growth in the future, we must replenish and increase our land reserves for property development.

In the PRC, the government controls the availability of land and regulates land transfers in the secondary market. Government land supply policies have a direct impact on our ability to acquire land use rights for development and our costs of acquisition. In May 2002, the PRC Government introduced a nationwide system of mandatory public tender, auction or listing-for-sale for the grant of land use rights for commercial use, tourism, entertainment and commodity housing

20 development. Furthermore, the amended Regulation on Bidding, Auction and Listing Required for Granting of State-Owned Construction Land promulgated by the Ministry of Land Resources, which came into effect on November 1, 2007 specifies that the grantee of state-owned construction land use rights shall fully pay up the relevant land premium in accordance with the state-owned land granting contract before the grantee can proceed with registration of the relevant land use right and application for the relevant State-owned Construction Land Use Rights Certificate. Although the regulation does not prevent privately held land use rights from being traded in the secondary market, the intention of the PRC Government to grant state- owned land use rights at competitive market prices is likely to increase the acquisition cost of land reserves. Our business prospects may be adversely affected to the extent that we are unable to acquire quality sites on a timely basis or at prices that will enable us to achieve sufficient returns.

We guarantee mortgages provided to the purchasers of our property development projects and may become liable to mortgagee banks if customers default on their mortgage loans. As we pre-sell properties before their actual completion of construction, in accordance with industry practice, banks require us to guarantee our customers’ mortgage loans. Typically, we guarantee mortgage loans taken out by our customers until we complete the relevant properties and the property ownership certificates and certificates of mortgage with respect to the relevant properties are delivered to the mortgagee banks. If a purchaser defaults on a mortgage loan before such mortgage is duly registered, we may have to repurchase the underlying property by paying off the mortgage. If we fail to do so, the mortgagee bank may auction the underlying property and recover any additional amount outstanding from us as the guarantor of the mortgage loans. In line with industry practice, we do not conduct any independent credit checks on our customers but simply rely on the evaluation by the mortgagee banks relating to such individual customers. As of December 31, 2007, 2008 and 2009 and June 30, 2010, our outstanding guarantees in respect of our customers’ mortgage loans amounted to HK$3,264.8 million, HK$3,095.8 million, HK$3,433.2 million and HK$3,958.9 million, respectively. If substantial defaults occur in a depressed property market and we are called upon to honor our guarantees, our financial condition and results of operations will be adversely affected.

We rely on third-party consultants and contractors with respect to certain of our property development projects. We engage third-party consultants and contractors to provide services for certain of our property development projects. These include the design, construction and engineering aspects of our projects. We select third-party contractors mainly by way of an open tender or through close negotiation. Although we endeavour to employ companies with a good reputation, credibility and financial resources, there can be no assurance that such consultants and contractors will provide satisfactory services to us at the levels of quality we require. In addition, if such consultants and contractors encounter financial or other difficulties, delays may be caused in the completion of our property projects. This may then affect the quality of our works, and our project development costs may increase as a result thereof; which could have a material adverse effect on our business and financial conditions. In addition, if we expand our businesses to other regional markets in the PRC, we may not be able to engage consultants and contractors in such other regions that can meet our quality and

21 pricing requirements. Moreover, the contractors may undertake projects from other developers, engage in risky undertakings or otherwise encounter financial or other difficulties, which may cause delay in the completion of our property projects or result in increased costs to us. All of these factors will have a negative impact on our reputation, credibility, financial position and business operations.

As a holding company, we rely on dividends and repayments on shareholder loans from our subsidiaries and joint venture companies for funding. As a holding company we operate our business through our subsidiaries and joint venture companies. We also fund our subsidiaries and joint venture companies through shareholder loans. The availability of funds to service our debts depends upon dividends and repayments on shareholder loans received from our subsidiaries and joint venture companies. If our subsidiaries and joint venture companies incur debt, the holders of such debt may be able to impair the ability of such subsidiaries and joint venture companies to pay dividends or other distributions to us. As a result, our ability to service our debt will be restricted. PRC laws require that dividends can only be paid out of the net income calculated according to PRC GAAP and financial regulations in the PRC. In addition, the PRC laws require foreign-invested enterprises to set aside part of their net income as statutory reserves. These statutory reserves are not available for distribution as cash dividends. Such restrictions may have adverse effect on our ability to service our debts as we rely heavily on dividends and repayments from these entities.

Our businesses will be adversely affected if we fail to obtain, or experience material delays in obtaining, necessary government approvals for property development or certain State-owned Land Use Rights Certificates with respect to certain parcels of land in which we currently have an interest. Under the laws and regulations of the PRC, we must apply to relevant government departments for various licences, permits, certificates and approvals, and we must obtain land use rights certificates, construction plan permits, construction permits, pre-sale permits and completion acceptance certificates to develop and to complete a property development project. In particular, we have not obtained the State-owned Land Use Rights Certificate for our Huadu Project in Guangzhou as disclosed in “Our business—Our property development business.” As of June 30, 2010, State-owned Land Use Rights Certificates were pending with respect to saleable GFA of approximately 268,000 sq.m. of our land. There can be no assurance that we will receive such Land Use Rights Certificates in a timely manner, or at all, or that we will not encounter other serious difficulties in the future. If we fail to obtain such State-owned Land Use Right Certificates in a timely manner or at all, we may not have title to the land use rights and buildings. That or any other failure to obtain, or material delays in obtaining, the necessary government approval for any of our property development projects, could result in delays in completing our development as originally scheduled and our business and financial conditions will be adversely affected.

If we cannot continue to obtain formal qualification certificates, our business may be adversely affected. We typically conduct our property development business in the PRC through project companies. Property developers in the PRC, including the project companies through which we operate, must obtain a formal qualification certificate in order to carry out property development business in

22 the PRC. According to the Provisions on Administration of Qualification Certificates of Property Developers (the “Qualification Certificate Regulation”), newly established developers must first apply for a temporary qualification certificate, which is initially valid for one year and can be renewed for a maximum of two additional one-year periods. Thereafter, the developer must apply for a formal qualification certificate under one of the four grades set out in the Qualification Certificate Regulation. All property developer qualification certificates are subject to renewal on an annual basis under the Qualification Certificate Regulation. A qualification certificate will not be granted or renewed until and unless the property developer meets the various requirements set out in the Qualification Certificate Regulation.

The property developer’s registered capital, property development investments, history of property development, quality of property construction, expertise of the management and any illegalities on the part of the property developer will be taken into account by the relevant authorities in deciding whether to renew the qualification certificates.

In general, property developers in the PRC must produce a valid qualification certificate when they apply for a pre-sale permit. If any one of our project companies is unable to meet the relevant requirements, and is therefore unable to obtain or renew its qualification certificate, such project company may be given a deadline within which it has to meet these requirements and it may also be subject to a penalty of between RMB50,000 and RMB100,000. Failure to meet the requirements within the specified time-frame could result in the revocation of the business license of the relevant project company.

There can be no assurance that the qualification certificates of any of our project companies will continue to be renewed or that formal qualification certificates will be obtained in a timely manner, or at all, as and when they expire. If our project companies are unable to obtain or renew their qualification certificates, they may not be permitted to continue to engage in property development or to conduct any pre-sales for that development, or the government may impose a penalty on us and our project companies for failure to comply with the relevant licensing requirements, either of which could materially and adversely affect our business, financial condition and results of operations.

We may be liable to our respective customers for damages if we do not complete all the formalities for the issuance of the residential property ownership certificates in a timely manner.

In the PRC, property developers are required to complete all requisite formalities for the purchasers to apply for the residential property ownership certificates, including passing various governmental clearances, formalities and procedures within 90 days of delivery of the properties or such other period set out in the relevant sale contracts. There is no assurance that there will not be any delay in our property development schedules, or in the examination and approval processes of the relevant government agencies or otherwise due to other unforeseeable factors that are beyond our control, which may result in the delay for the purchasers to obtain the residential property ownership certificates. Under PRC law, we may be required to compensate such purchasers for the delay in completing the necessary formalities, which may adversely affect our business and financial conditions.

23 We may not be able to complete our property development projects on time or at all.

Property development projects require substantial capital expenditures prior to and during the construction period, and construction of a property project may take longer than a year before it may generate positive cash flow through pre-sales or sales. The progress and costs for a development project can be adversely affected by many factors, including but not limited to:

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

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

• shortages and/or rise in cost of materials, equipment, contractors and skilled labor;

• labor disputes;

• construction accidents;

• natural catastrophes;

• discovery of artifacts in the construction site;

• adverse weather conditions; and

• lack of performance or failure of consultants or third party contractors to deliver on their obligations.

Construction delays or failure to commence or complete the construction of a project according to the permits for commencement of construction and its planned specifications, schedule or budget as a result of the above factors may affect our results of operations and financial position and may also cause reputational damage. We cannot assure you that we will not experience any significant delays in completion or delivery or that we will not be subject to any liabilities for any such delays.

We may expand our business into new segments of the real estate industry which may not be successful.

We may expand our business into new segments of the real estate industry in the PRC as well as continue to expand the real estate services businesses that we currently operate. While we have accumulated experience in property development and in providing property operation services and property management services, we cannot assure you that we will be able to leverage such experiences and replicate our historical success when entering into new businesses. Although we currently do not have any definitive plans to enter into other new segments of the real estate industry, we may do so in the future. The expansion of our existing real estate business and the expansion into new businesses may require a significant amount of capital investment and involve various risks and uncertainties including the risk of operating in a new environment, the difficulties of integrating new businesses into our existing businesses and the diversion of resources and attention of our management. Any failure to address these risks and uncertainties may adversely affect our business, financial condition and results of operations.

24 We could face business and financial risks with respect to past and potential future acquisitions and mergers.

We could face significant management, administrative and financial challenges in achieving our key commercial objectives following any future mergers and acquisitions. These challenges include but are not limited to:

• difficulties in the integration of the operations, technologies and personnel of the acquired company;

• loss of key management staff upon the merger and/or acquisition;

• diversion of management’s attention away from other business concerns;

• expenses of any undisclosed or potential legal liabilities of the acquired company;

• legal, regulatory, contractual, labor or other issues that could arise from an acquisition; and

• inability to service any increased leveraged positions upon the merger/or acquisition.

The risks associated with mergers, acquisitions and strategic alliances could have a material adverse effect upon our business, financial condition and results of operations. We cannot assure you that we will be successful in integrating the acquired companies with our existing business and operations.

Potential liability for environmental problems may affect our business.

Our businesses are subject to PRC environmental laws and regulations, including those related to air, noise pollution, water pollution and waste discharge. Compliance with such laws and regulations may substantially increase our property development costs.

As required by PRC environmental laws and regulations, an environmental impact assessment must be completed in respect of each of our property developments. Before commencement of such property development, submission to the relevant government authorities for approval of such environmental impact assessment is required. Upon completion of each property development, the relevant government authorities will inspect the site to ensure that applicable environmental standards have been complied with and that the resulting report is presented together with other specified documents to the local construction administration authorities for their record. While we believe that we have complied with such requirements for all of our respective completed property developments and properties under development, it is possible that such assessments did not reveal all potential environmental liabilities that may have a material adverse effect on our business and financial conditions.

Our business may be adversely affected by further increases in borrowing rates.

Changes in borrowing rates have affected and will continue to affect the financing costs for our property development business and, ultimately, our results of operations. While we believe that the lending rate has not in the past had a material adverse effect on our ability to obtain adequate financing for our operations or on our overall financial condition, we cannot assure that lending rates will remain unchanged or that an increase in lending rates in the future will not have a material adverse effect on our operations and financial condition. Although our

25 borrowings are primarily denominated in US dollars, as of June 30, 2010, we had RMB denominated loans with an aggregate outstanding amount of RMB1,011.8 million to fund our property development business at our PRC subsidiary level. The interest rates are based on premiums or discounts to the RMB lending base rate as announced by the PBOC from time to time. We cannot assure you that PBOC will not further raise lending rates or that our business, financial condition and results of operations will not be adversely affected as a result.

We are exposed to interest rate risk.

We have cash balances placed with reputable banks and financial institutions. We manage our interest rate risk by placing such balances on varying maturities and interest rate terms. We have incurred indebtedness to finance our operations which includes floating rate indebtedness. So far to date, we have not entered into interest rate swap contracts to convert these floating rate liabilities to a fixed rate.

We may not adequately cover our exposure to interest rate fluctuations and this may result in a large interest expense and an adverse effect on our financial condition and results of operations.

Resettlement negotiations may add costs or cause delays to our property development projects.

Under PRC laws and regulations, when we are responsible for the demolition of existing properties on a site for development and the removal of existing residents, we will be required to pay resettlement costs to those residents. While none of our wholly-owned property development projects are subject to relocation and resettlement costs, such costs are payable in respect of the Sun Town project in Tianjin. On March 16, 2007, the National People’s Congress of China adopted the Property Law of the People’s Republic of China (“Property Law”), which expressly provides legal protection to housing owners. The Property Law increased the level of difficulty of effecting demolition and resettlement through administrative intervention and the cost of demolition and resettlement. The compensation payable is calculated by applying prescribed formulae provided by the relevant provincial authorities. If the amount of such resettlement cost is significant, the property development costs of these projects may be increased substantially. Furthermore, there is no assurance that the relevant provincial authorities will not change their compensation formulae. If they do, property development costs may be subject to substantial increases which could adversely affect our business, financial condition and results of operations.

Even if we are not responsible for the demolition and removal, if the party responsible for the demolition and removal and the party subject to the demolition and removal fail to reach an agreement for compensation and resettlement, either of them may apply for a ruling of the relevant governmental authorities and if a party is not satisfied with the ruling, it may initiate proceedings in a people’s court within three months from the date of service of such ruling, which may cause delays to the development projects. Such proceedings and delays, if they occur, could adversely affect our reputation and delay our property development projects. In addition, any such delays to our property development projects will lead to an increase in the cost and a delay in the expected cash inflow resulting from rental proceeds (in the case of an investment property) and pre-sales of the relevant project and the recognition of sales as turnover upon completion (in the case of properties for sale), which may in turn adversely affect our business, financial position and results of operations.

26 We are subject to multiple regulations of the PRC Governmental authorities and any non-compliance or perceived non-compliance with these regulations may have a material and adverse effect on our business, financial condition and results of operations.

Our business is regulated by various PRC Governmental authorities and departments. If any PRC authority believes that we or any of our suppliers or contractors in the course of our operations are not in compliance with PRC regulations, it could delay or even shut down our construction or sales operations, refuse to grant or renew any necessary approvals or licenses, institute legal proceedings to seize our properties, enjoin future actions or impose civil and/or criminal penalties, pecuniary or otherwise, against us, our officers or our employees. Any such action by the PRC Governmental authorities would have a material adverse effect on our business, causing delays to our property development projects, or terminating them altogether. In recent years, the PRC Government has implemented many new laws and regulations or made amendments to existing regulations concerning real estate developers. We cannot guarantee that our property development projects are fully compliant with the laws and regulations. If we are found to have breached, or are accused of having not complied with, or in the future do not comply with, any applicable PRC laws and regulations, we may be subject to the imposition of penalties or even suspension of business and confiscation of any acquired land. In such event, our business and reputation may be materially and adversely affected.

In the event the total GFA of any of our property developments were to exceed the original authorized area, the excess GFA would be subject to governmental approval and payment of additional land premium.

When the PRC Government grants the land use rights for a piece of land, it will specify in the land grant contract the use of the land and the total GFA that the developer may develop on this land. The actual GFA constructed, however, might have exceeded the total GFA authorized in the land grant contract due to factors such as subsequent planning and design adjustments. The amount of GFA in excess of the authorized amount is subject to approval when the relevant authorities inspect the properties after their completion and the developer may be required to pay additional land premium in respect of this excess GFA. If we fail to obtain the completion certificate due to such excess GFA, we will not be allowed to deliver the relevant properties or recognize the revenue from the relevant pre-sold properties and may also be subject to liabilities under the pre-sale contracts. We cannot assure you that the total constructed GFA of our existing projects under development or any future property developments will not exceed the relevant authorized GFA upon completion or that we will be able to pay the additional land premium and obtain the completion certificate on a timely basis.

Our success depends on the retention of our senior management team and other key personnel.

We depend on the services provided by our management and other qualified and experienced staff. As competition in the PRC for senior management and key personnel with experience in toll road and property development is intense, and the pool of qualified candidates is very limited, we may not be able to retain the services of our senior executives or key personnel, or attract and retain high-quality senior executives or key personnel in the future. If we fail to attract and retain qualified personnel, our business and prospects may be adversely affected. In case any core management team member leaves and we fail to find suitable substitutes, our business will be adversely impacted. Moreover, along with our growth and expansion into other

27 regional markets in the PRC, we will need to employ, train and retain employees on a much larger geographical scale. If we cannot attract and retain suitable human resources, our business and future growth may be negatively affected.

If we are not properly insulated from the rising cost of labor, construction materials or building equipment, our results of operations may be adversely affected. As the result of economic growth and the boom in the property development industry in the PRC, wages for construction workers and the prices of construction materials and building equipment have experienced substantial increases in recent years. In addition, the PRC Labor Contract Law that came into effect on January 1, 2008 enhanced the protection for employees and increased employers’ liability in many circumstances, which may further increase our labor costs. Under the terms of most of our construction contracts, our construction contractors are responsible for the wages of construction workers and procuring construction materials for our property development and would bear the risk of fluctuations in wages and construction material prices during the term of the relevant contract as we generally enter into fixed or capped unit price contracts with them. However, we are exposed to the price volatility of labor and construction materials to the extent that we periodically enter into new or renew our construction contracts during the life of a project, which may span over several years, or that we hire the employees directly or purchase the construction materials directly from suppliers. We are also exposed to the price volatility of building equipment used in properties developed by us because we usually procure such equipment ourselves. Furthermore, we typically pre-sell our properties prior to their completion and we will be unable to pass the increased costs on to our customers if construction costs increase subsequent to the time of such pre-sale. If we are unable to pass on any increase in the cost of labor, construction materials and building equipment to either our construction contractors or to the purchasers of our properties, our results of operations may be negatively affected. No assurance can be given as to the future movements of the prices of the construction materials required by us and any detrimental movements in the future could have a material adverse effect upon our financial condition and results of operations.

We are uncertain whether we have maintained or will continue to maintain sufficient insurance coverage. We maintain certain insurance policies in the operation of business. See “Our business— Insurance.” While we believe that we currently maintain adequate insurance coverage, there can be no assurance that we in fact maintain or will continue to maintain sufficient insurance coverage for the risks associated with the operation of our businesses. Business interruption insurance is currently unavailable in the PRC. If the use of any of our toll roads is interrupted in whole or in part for an extended period as a result of events beyond our control, such occurrence may adversely affect our revenues and results of operations. We do not take out insurance coverage against potential losses or damages with respect to our properties before their delivery to customers. Nor do we maintain insurance coverage against liability from tortious acts or other personal injuries on our project sites. We believe that third-party construction companies should bear such tortious and personal injury liabilities arising from our project sites. In addition, there are certain types of losses, including but not limited to losses due to typhoon, flooding, war and civil disorder, which are only insurable on limited terms, and other losses, such as earthquakes, which are currently uninsurable in the PRC. Therefore, while we believe that our practice is in line with the general practice in the PRC property development industry, there may be instances

28 when we will have to absorb losses, damages and liabilities because of our lack of insurance coverage, which may in turn adversely affect our financial condition and results of operations.

We may be involved in legal and other proceedings arising from our operations from time to time. We may be involved from time to time in disputes with various parties involved in our toll road projects and in the development and sale of our properties such as contractors, sub-contractors, suppliers, construction companies, purchasers, partners and others, as well as in connection with our acquisitions and divestitures. These disputes may lead to legal and other proceedings, and may cause us to suffer significant costs and delays. In addition, we may have disagreements with regulatory bodies and governmental authorities in the course of our operations, which may subject us to administrative proceedings and unfavorable decrees that may result in financial losses and in delays in the construction or completion of our property development projects. We may be exposed to such proceedings and decrees even for properties and projects that were not owned or operated by us at the time of any such alleged improprieties. If we are not successful in obtaining remedies under any contractual arrangements for any such undisclosed losses or damages, we may be exposed to financial losses, which may have an adverse effect on our expected profitability and ability to realize synergies from such acquisitions.

Our profitability may fluctuate due to fair value gains or losses on our investment properties pursuant to applicable accounting rules, which require us to record such gains or losses, in profit or loss, in the period in which they arise. We are required to reassess the fair value of our investment properties at every balance sheet date for which we issue financial statements. We record gains or losses arising from changes in the fair value of investment property in profit or loss for the period in which they arise. We also capitalize construction costs incurred for investment properties under construction as part of the carrying amount of these properties under construction. We recorded gains on fair value changes of our investment properties of HK$40.7 million in the year ended December 31, 2009 and HK$73.7 million for the six months ended June 30, 2010, representing 3.9% and 11.3%, respectively of our total profit before taxation for each period. As our investment properties increase (or decrease) in the future, our profitability may increase as a result of fair value gains or losses. In addition, fair value gains or losses do not give rise to any change to our cash position unless the relevant investment property is sold and therefore we may experience constraints on our liquidity even though our profitability increased. The amount of revaluation adjustments has been, and may continue to be, significantly affected by the prevailing property market conditions and may be subject to market fluctuations. Any decrease in the fair value of our investment properties would adversely affect our profitability.

The valuation attached to our property interests contains assumptions that may or may not materialize. The valuation attached to our property interests are based on certain assumptions that, by their nature, are subjective and uncertain and may differ materially from actual results. For example, with respect to properties under development for investment purposes, the valuations are based on assumptions that (1) the properties will be developed and completed in accordance with the development proposals, (2) regulatory and governmental approvals for the proposals have been obtained, (3) all premiums in connection with the properties have been paid and the properties are free of encumbrances and other restrictions and (4) we are in possession of the proper legal

29 titles and are entitled to transfer the properties at no extra land premium. For properties in which we have an attributable interest of less than 100%, the valuation assumes that the interest of the relevant project companies in the aggregate value of the property or business is equal to our proportionate ownership interest in the relevant company or business. Accordingly, the valuations are not a prediction of the actual value we expect to realize from these properties. Unanticipated results or changes in particular property developments, or changes in general or local economic conditions or other relevant factors, including changes in government regulations, could affect such values.

We are exposed to pre-sale related contractual and legal risks. There are certain risks relating to the pre-sale of properties, which is widely adopted in the PRC. In addition to our pre-sale guarantee obligations discussed above under “—We guarantee mortgages provided to the purchasers of our property development projects and may become liable to mortgagee banks if customers default on their mortgage loans,” pursuant to PRC laws and regulations and our pre-sale contracts, we are required to provide for remedies for breach of our pre-sale undertakings. For example, if we fail to complete a pre-sold property development, we will be liable to the purchasers for their losses. There is no assurance that these losses will not exceed the deposits of the pre-sold units. If we fail to complete a pre-sold property project on time, our purchasers may seek compensation for late delivery. In the event that such delay extends beyond a specified period, our purchasers may terminate the pre-sale contracts and claim refunds and damages. There is no assurance that there will not be significant delays in completion and delivery of our projects. An important source of financing for our property developments is the pre-sale proceeds of our properties. Therefore, if there is any increase in the amount of up-front expenditure which we must incur prior to obtaining the pre-sale permit or any other restriction that may restrict our ability to pre-sell our properties, we will be required to finance the various stages of our property developments through other alternative means. As a result, our business and financial conditions may be adversely affected. In addition, under current PRC laws and regulations, property developers must fulfil certain conditions before they can commence pre-sale of the relevant properties and may only use pre-sale proceeds to finance their developments. However, there can be no assurance that the PRC Government will not ban the practice of pre-selling uncompleted properties or implement further restrictions on the pre-sale of properties, such as imposing additional conditions for a pre-sale permit or further restrictions on the use of pre-sale proceeds. Any such measure will adversely affect our cash flow position and force us to seek alternative sources of funding for much of our property development business.

Our results of operations may fluctuate from period to period. Our results of operations tend to fluctuate from period to period. The number of properties that we can develop or complete during any particular period may be limited due to the substantial capital required for land acquisition and construction, as well as the lengthy development periods required before positive cash flows may be generated. In addition, several properties that we have developed or that are under development are large scale and are developed in multiple phases over the course of one to several years. The selling prices of the residential units in larger scale property developments tend to change over time, which may impact our sales proceeds and, accordingly, our revenues for any given period.

30 Our provisions for the payment of LAT for the disposal of properties may not be adequate to cover our LAT obligations.

Under PRC tax laws and regulations, properties developed for sale are subject to LAT, which is collectible by the local tax authorities. All income from the sale or transfer of state-owned land use rights, buildings and other ancillary facilities in the PRC is subject to LAT at progressive rates up to 60.0% of the appreciation value, with certain exemptions available for the sale of ordinary residential properties if the appreciation does not exceed 20% of the total deductible items, as such transactions are addressed under relevant tax laws. Sales of commercial properties are not eligible for such exemptions.

We made provisions for LAT in the amount of HK$109.2 million in 2009 and HK$147.7 million in the first half of 2010. We have estimated and made provisions for what is believed to be the full amount of applicable LAT in accordance with the requirements set forth in the relevant PRC tax laws and regulations. In the event that LAT eventually collected by the tax authorities upon completion of a tax audit exceeds the amount that we have provided for, our future net profits after tax will be adversely affected. While we believe that we have made adequate provisions for LAT, there is no assurance that such provisions will be adequate to cover our LAT obligations.

The PRC Government may adopt further measures to slow down the growth in the property sector.

Along with the economic growth in the PRC, investments in the property sector have increased significantly in the past few years. In response to concerns over the scale of the increase in property investments, the PRC Government has introduced policies to curtail property developments including as recently as April 2010, that, among others, required developers to finance a higher percentage of the capital outlay, imposed limits on mortgage payments as a percentage of income, increased down payment requirements, imposed taxes on the sale or transfer of property and imposed restrictions on the transfer of uncompleted properties. We believe that policies implemented in April 2010 have resulted in decreased customer demand, which has resulted in lower transaction volumes. See “Regulation.”

Although the various control measures are intended to promote more balanced property development in the long term, we cannot assure you that these measures will not adversely affect the development and sales of our properties. In addition, although the PRC Government has introduced an offsetting stimulus package due to the recent global financial and economic crisis, which included the reduction of deed taxes for first-time purchases of ordinary residential property of less than 90 sq.m., the waiver of stamp duty fees for individuals who are purchasing or selling ordinary residential properties, and the exemption of land appreciation tax for individuals who are selling ordinary residential properties, among other benefits, there is no assurance that such policy would remain and that various control measures would not be implemented again once the economy stabilizes, which may adversely affect our business, results of operations and financial condition.

The PRC Government’s restrictive measures to slow down the growth of the property sectors could limit our access to capital resources, reduce market demand and increase our operating costs in adapting to these measures. We cannot assure you that the PRC Government will not adopt additional and more stringent measures, which could further slow down property development in the PRC and adversely affect our business and prospects.

31 We are heavily dependent on the performance of the property market in the PRC, which is at a relatively early stage of development. The property development industry and the ownership of private property in the PRC are still in a relatively early stage of development. Although demand for private property in the PRC has been growing rapidly in recent years, such growth is often coupled with volatility in market conditions and fluctuation in property prices. It is extremely difficult to predict how much and when demand will develop, as many social, political, economic, legal and other factors, all of which are beyond our control, may affect market development. The level of uncertainty is increased by the limited availability of accurate financial and market information as well as the overall low level of transparency in the PRC. The inactive secondary market for private property may discourage the acquisition of new properties as resale is not only difficult, but can also be a long and costly process. The limited amount of property mortgage financing available to PRC individuals, compounded by the lack of security of legal title and enforceability of property rights may inhibit demand for property developments, property operation services and property agency services.

Land may be forfeited if it fails to comply with the terms of the land grant contracts. According to PRC law, if we fail to develop a property project in accordance with the terms of the land grant contract such as payment of land premium, specified use of the land and time for commencement and completion of the property development, the PRC Government may issue a warning, claim liquidated damages, and even impose an idle land fee of up to 20% of the land premium if land is left idle, or the commencement of construction is delayed, for one year. If we fail to commence development for more than two years, the land is subject to forfeiture to the PRC Government unless the delay in development is caused by government actions or force majeure. Even though the commencement of the land development is in line with the land use rights grant contract, if the developed GFA on the land is less than one-third of the total GFA of the project or the total capital invested is less than one-fourth of the total investment of the project and the suspension of the development of the land is over one year in time without government approval, the land will also be treated as idle land. Although we are not currently subject to any warning, penalty or fee or forfeited any land as a result of any delay in our property development activities, there is no assurance that no such warnings, penalties fees or circumstances leading to possible forfeiture of our land as a result of delays in the completion of a property development project will not arise in the future. If our land is forfeited, our costs incurred for the forfeited land and the related expenditure will be lost, and we will also lose the opportunity to develop the property projects on such forfeited land.

Intensified competition may adversely affect our business and financial position. In recent years, many property developers, including overseas developers, have entered the property development market in the PRC. Many of them may have more financial and other resources than us and may be more sophisticated than us in terms of engineering and technical skills. Competition among property developers in the PRC may result in an increase in the land acquisition costs and raw material costs, shortages in quality construction contractors, an over- supply of properties leading to a decreasing property prices, further delays in issuance of government approvals and higher costs to attract or retain experienced employees, any of which may adversely affect our business and financial conditions. Moreover, residential property markets across the PRC are influenced by various other factors, including changes in economic

32 conditions, banking practices and customer sentiments. If we fail to respond appropriately to changes in the property markets where we have operations, our business and financial conditions may also be adversely affected.

The terms on which mortgages are available, if at all, to purchasers of properties may affect our sales.

Most of our purchasers of residential properties rely on mortgages to fund their purchases. An increase in interest rates may increase the cost of mortgage financing, thus reducing the attractiveness of mortgages as a source of financing for property purchases and adversely affecting the affordability of residential properties. In addition, the PRC Government and commercial banks may also increase the down payment requirement, impose other conditions or otherwise change the regulatory framework in a manner which would make mortgage financing unavailable or unattractive to potential property purchasers. For example, on August 19, 2006, the PBOC set the minimum rate for property mortgages at 85% of the corresponding benchmark lending rate, which was set at 5.31% on December 23, 2008. There is no assurance that the PBOC will not raise the benchmark rates in the future. If the availability or attractiveness of mortgage financing is reduced or limited, some of our prospective customers may not be able to purchase our properties and, as a result, our business, liquidity and results of operations could be adversely affected.

Risks relating to the PRC, Hong Kong and the Asia region

We are subject to the political, legal and economic risks of doing business in the PRC.

Substantially all of our operations are located in the PRC. Our financial condition, results of operations and future prospects depend to a large extent on the success of our operations in the PRC and are subject, to a significant degree, to the political and economic situation and legal developments in the PRC.

The PRC economy differs from the economies of most developed countries in many respects, including:

• extent of government involvement;

• level of development;

• growth rate;

• economic and political structure;

• control of foreign exchange;

• allocation of resources; and

• regulation of capital reinvestment.

While the PRC economy has experienced significant growth in the past 20 years, growth has been uneven, both geographically and among the various sectors of the economy. The PRC Government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall PRC economy but may also have a negative effect on our operations. For example, our financial condition and operating

33 results may be adversely affected by the PRC Government’s control over capital investments or any changes in tax regulations or foreign exchange controls that are applicable to it.

The PRC economy has been transitioning from a planned economy to a more market-orientated economy. Although in recent years the PRC Government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises, a substantial portion of productive assets in the PRC is still owned by the PRC Government. In addition, the PRC Government continues to play a significant role in regulating the development of industries in the PRC by imposing top-down policies. It also exercises significant control over PRC economic growth through the allocation of resources, controlling the payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. There is no assurance that future changes in the PRC’s political, economic and social conditions, laws, regulations and policies will not have a material adverse effect on our current or future business, results of operations or financial condition.

The legal system in the PRC is less developed than in certain other countries and laws in the PRC may not be interpreted and enforced in a consistent manner.

Substantially all of our operations are, and will continue to be, conducted in the PRC, which is a civil law system based on written statutes in which decided legal cases have little value as precedents. Since 1979, the PRC Government has begun to promulgate a comprehensive system of laws and has introduced many new laws and regulations to provide general guidance on economic and business practices in the PRC and to regulate foreign investment. Progress has been made in the promulgation of laws and regulations dealing with economic matters such as corporate organization and governance, foreign investment, commerce, taxation and trade. The promulgation of new changes to existing laws and the abrogation of local regulations by national laws could have a negative impact on our business and prospects. In addition, as these laws, regulations and legal requirements are relatively recent, their interpretation and enforcement may involve significant uncertainty. The interpretation of PRC laws may be subject to policy changes, which reflect domestic political changes. As the PRC legal system develops, the promulgation of new laws, changes to existing laws and the pre-emption of local regulations by national laws may have an adverse effect on our prospects, financial condition and results of operations.

Furthermore, the administration of PRC laws and regulations may be subject to a certain degree of discretion by the executive authorities. This has resulted in the outcome of dispute resolutions not being as consistent or predictable compared to more developed jurisdictions. In addition, it may be difficult to obtain a swift and equitable enforcement of laws in the PRC, or the enforcement of judgments by a court of another jurisdiction.

Fluctuation of the Renminbi, particularly against the US dollar, could materially affect our financial condition and results of operations.

The exchange rates between the Renminbi and the Hong Kong dollar, the US dollar and other foreign currencies is affected by, among other things, changes in political and economic conditions in the PRC. Our currency of account is Renminbi, our reporting currency is Hong Kong dollars and the Notes are denominated in US dollars. Consequently, we bear currency conversion risk and currency exchange rate risk. A devaluation of Renminbi may adversely affect the value,

34 when stated in Hong Kong dollars or US dollars, of the return in investment received by us from our PRC joint ventures. In an attempt to mitigate exchange rate risk, we currently have arranged for all of our PRC joint ventures to distribute cash to us on a regular basis through the repayments of shareholder loans. As of June 30, 2010, we had approximately HK$5,071.7 million (US$651.3 million) of US dollar- denominated borrowings outstanding. We may in the future incur additional foreign exchange liabilities to finance further toll roads or property development projects. Our costs of servicing these borrowings will vary according to the prevailing Renminbi to US dollar exchange rate, and any devaluation of Renminbi against US dollar will increase our cost of servicing such borrowings. Renminbi is only convertible in respect of certain transactions described by the generally accepted accounting principles in the PRC as “current account” transactions. Currently, Renminbi amounts in respect of “capital account” transactions are not convertible without prior approval from the PRC Government. The value of Renminbi is subject to changes in the PRC Government policies and to international economic and political developments. Although the official exchange rate for the conversion of Renminbi to US dollars has been stable, there can be no assurance that such exchange rate will remain stable in the future. On July 21, 2005, PBOC announced changes to the Renminbi exchange rate regime. From that date onwards, the PRC moved into a managed floating exchange rate regime based on market supply and demand with reference to a basket of currencies and the Renminbi will no longer be pegged specifically to the US dollar. The current exchange rate regime does not constitute a strict peg of the Renminbi to the basket of currencies, but instead the Renminbi is allowed to fluctuate within a narrow +/-0.3% range around a central parity rate defined as the previous day’s closing RMB/US$ rate. The reference basket will be used as a guide as to whether the RMB/US$ rate should rise or fall. The PBOC has also subsequently introduced a series of measures to facilitate the reform of the Renminbi exchange rate regime, including the introduction of financial derivative products such as currency swaps in the domestic market, the relaxation on Renminbi trading by non-financial institutions and the introduction of market makers, comprising both domestic and foreign banks, for trading of Renminbi. There remains significant international pressure on the PRC Government to adopt a more flexible currency policy, which could result in a further and more significant appreciation of the Renminbi against the US dollar, the Hong Kong dollar or other foreign currency. To the extent that we need to convert the proceeds from the Notes and future financing into the Renminbi for our operations, appreciation of the Renminbi against the relevant foreign currencies would have an adverse effect on the Renminbi amount we would receive from the conversion. Conversely, if we decide to convert our Renminbi into Hong Kong dollars for the purpose of making payments for dividends on our shares or for other business purposes, appreciation of the Hong Kong dollar against the Renminbi would have a negative effect on the Hong Kong dollar amount available to us. Although not currently anticipated, any devaluation of the Renminbi would adversely affect the value of our joint ventures’ revenues and our other earnings in foreign currency terms. Moreover, our financial condition and results of operations may be adversely affected by changes in the value of certain currencies other than the Renminbi in which our subsidiaries’ financial and other obligations are denominated. There are limited hedging instruments available in the PRC to reduce our exposure to exchange rate fluctuations between the Renminbi and other currencies. To date, we have not entered into

35 any hedging transactions to reduce our exposure to such risks. We may enter into foreign exchange or interest rate hedging arrangements in respect of our US dollar-denominated liabilities under the Notes. These hedging agreements may require us to pledge or transfer cash and other collateral to secure our obligations under the agreements, and the amount of collateral required may increase as a result of mark-to-market adjustments, and such agreements may be secured by pledges of our cash and other assets as permitted under the Trust Deed. If we were unable to provide such collateral, it could constitute a default under such hedging agreements.

We are subject to foreign exchange controls in the PRC.

Our subsidiaries and joint ventures in the PRC are subject to the relevant PRC rules and regulations on currency conversion. In the PRC, SAFE regulates the conversion between Renminbi and foreign currencies. Currently, FIEs are required to apply to SAFE for “Foreign Exchange Registration Certificates for FIEs.” With such registration certifications, FIEs are allowed to open foreign currency accounts, including a “current account” and a “capital account.” Currently, conversion within the scope of the “current account,” for purposes such as the remittance of foreign currencies for payment of dividends, can be effected without the approval of SAFE. However, the conversion of currency in the “capital account” for capital items such as direct investments, loans and securities, still requires the approval of or registration with SAFE.

Our subsidiaries and joint ventures in the PRC are FIEs and the ability of them to pay dividends or make other distributions to us may be restricted by, among other things, the availability of funds, and statutory and other legal restrictions including PRC foreign exchange control restrictions. In the event that the ability of our subsidiaries and joint ventures in the PRC to distribute funds to us is restricted, it may have an adverse effect on our ability to distribute dividends to our shareholders in the future.

Profits from our subsidiaries and joint ventures in the PRC available for distribution are determined under PRC GAAP.

We derive substantially all of our profits from our operating subsidiary companies and joint ventures established in the PRC. The profits available for distribution by us are therefore dependent on, to a significant extent, the profits available for distribution by our subsidiaries and joint ventures in the PRC. In turn, profits available for distribution by companies established in the PRC are determined in accordance with PRC GAAP and such profits differ from profits determined in accordance with HKFRS in certain significant respects, including the recognition of the carrying value of certain assets. In addition, under the relevant PRC financial regulations, profits available for distribution are determined after transfers to statutory reserve funds.

It may be difficult to enforce against us in the PRC any judgments obtained from non-PRC courts.

Substantially all of our assets are located within the PRC. The PRC does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States, the United Kingdom, Japan or most other western countries. Therefore, it may be difficult for you to enforce against us in the PRC any judgments obtained from non-PRC courts.

On July 14, 2006, Hong Kong and the PRC entered into the Arrangement on Reciprocal Recognition and Enforcement of Judgements in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region Pursuant to Choice of Court

36 Agreements Between Parties Concerned (the “Arrangement”) which was implemented on August 1, 2008 pursuant to which a party with a final court judgment rendered by a Hong Kong court requiring payment of money in a commercial case according to a choice of court agreement in writing may apply for recognition and enforcement of the judgment in the PRC. A choice of court agreement in writing is defined as any agreement in writing entered into between parties after the effective date of the Arrangement in which a Hong Kong court or a PRC court is expressly designated as the court having sole jurisdiction for the dispute. However, there are also many requirements and restrictions under the Arrangement, therefore it may be difficult to enforce judgments of Hong Kong court upon the Group or our Directors and executive officers inside the PRC.

We are affected by political and economic risks in Hong Kong.

A portion of our assets and operations are located in Hong Kong. As a result, our results of operations and financial condition may be influenced by the political situation in Hong Kong and by the general state of the Hong Kong economy. On July 1, 1997, sovereignty over Hong Kong was transferred from the United Kingdom to the PRC, and Hong Kong became a Special Administrative Region of the PRC. As provided in the Sino-British Joint Declaration on the Question of Hong Kong and the Basic Law, which is Hong Kong’s constitution, Hong Kong has a high degree of autonomy except in foreign and defense affairs. Under the Basic Law, Hong Kong has its own legislative, legal and judicial systems and full economic autonomy for 50 years. Nevertheless, there can be no assurance that such policies will not be significantly altered. Future economic, political and social developments in the PRC could have significant effects on Hong Kong.

The national and regional economies in the PRC and our prospects may be adversely affected by a recurrence of SARS or an outbreak of other epidemics, such as avian flu and swine flu.

Some regions in the PRC, including the cities where we operate, are susceptible to epidemics such as Severe Acute Respiratory Syndrome (“SARS”). Past occurrences of epidemics, depending on their scale of occurrence, have caused different degrees of damage to the national and local economies in the PRC. A recurrence of SARS or an outbreak of any other epidemics in the PRC, such as the H5N1 avian flu and H1N1 swine flu, especially in the cities where we have operations, may result in material disruptions to our property development and our sales and marketing, which in turn will adversely affect our financial condition and results of operations.

The facts and statistics included in this offering memorandum relating to the PRC’s economy and its property development and transportation sectors might not be accurate.

All facts and statistics in this offering memorandum relating to the PRC’s economy and its transportation and property development sectors are extracted from publicly available publications. While our directors have taken reasonable care to ensure that the facts and statistics presented are accurately reproduced from such sources, they have not been independently verified by us or our advisors and, therefore, we make no representation as to the accuracy of such facts and statistics, which may not be consistent with other information compiled within or outside the PRC. Due to a lack of information regarding methods or the accuracy of data collection and other problems, the statistics herein may be inaccurate or may not be comparable to statistics produced for other economies and should not be unduly relied upon. Further, there can be no assurance that they are stated or compiled on the same basis or with the same degree of accuracy as may be the case elsewhere.

37 Risks relating to the Notes and the Guarantees

The Notes and the Guarantees are structurally subordinated to liabilities and obligations of each of our Non-Guarantor Subsidiaries, our secured creditors would have priority as to our assets over claims of Noteholders and we are reliant on receipt of cash from our subsidiaries and joint venture companies.

We are primarily a holding company operating through our subsidiaries and joint venture companies. The Notes are guaranteed by us and the Subsidiary Guarantors, several of which are also holding companies that operate through subsidiaries and joint venture companies. The Notes will not be guaranteed by any of our current or future PRC Subsidiaries or SPV Financing Subsidiaries (as defined in “Terms and conditions of the Notes”). See “Terms and conditions of the Notes.” Accordingly, even though we hold interests in important business operations and assets through these entities, none of them will guarantee the Issuer’s obligations under the Notes. As a result, (i) our obligations under the Notes and the obligations of the Subsidiary Guarantors under the Subsidiary Guarantee will be structurally subordinated to all existing and future obligations of the existing or future Non-Guarantor Subsidiaries and (ii) all claims of creditors of the existing or future Non-Guarantor Subsidiaries, including trade creditors, lenders and all other creditors, and rights of holders of preferred shares of such entities (if any) will have priority as to the assets of such entities over our claims or claims of the Subsidiary Guarantors and those of our creditors or creditors of the Subsidiary Guarantors, including the Noteholders.

Furthermore, to the extent that we or our subsidiaries have secured indebtedness, our secured creditors or the secured creditors of any Subsidiary Guarantor would have priority as to our assets or the assets of the Subsidiary Guarantors securing the related obligations over claims of the Noteholders in relation to the Notes. We and our subsidiaries currently have significant levels of secured indebtedness, and may incur significant additional secured or unsecured indebtedness in the future subject to the terms of the Notes. As of June 30, 2010, in line with industry practice, we had provided guarantees of HK$3,958.9 million in favor of our customers in respect of the mortgage loans provided by the banks to such customers for their purchases of our properties, compared to HK$3,433.2 million as of December 31, 2009. These guarantees will be released when the customers pledge their real estate certificates as security to banks for the mortgage loans granted. As of June 30, 2010, we had RMB1,011.8 million of project development loans outstanding, which are secured by the underlying properties. During the period from June 30, 2010 to August 31, 2010, our property development projects have secured additional short-term property development loans of RMB225.0 million in aggregate, which are secured by the underlying properties. On April 11, 2007, we entered into a syndicated loan facility for a committed US$170.0 million, arranged by a consortium of lenders (the “Syndicated Loan”), which is secured by a charge over the shares of certain of our subsidiaries engaged in the toll road business, as well as a charge over account of cash payments from such subsidiaries. Effective May 2007, we increased the size of the Syndicated Loan to US$220.0 million. See “—The lenders under the Syndicated Loan have a charge over an account held by us into which all cash payments from the Toll Road Holding Companies will be placed and the Subordinated Guarantees will be expressly subordinated to liabilities and obligations under any guarantees provided by the Toll Road Holding Companies and the New Toll Road Holding Companies under the Syndicated Loan and the 2007 Fixed Rate Notes and the 2007 Floating Rate Notes” and “Description of material indebtedness—Syndicated Loan for US$220.0 million.”

Finally, our primary assets are shareholder loans to, and our ownership interests in, our PRC Subsidiaries and joint venture companies, including those that are involved in our toll road

38 business, which are held through subsidiaries incorporated outside the PRC. These offshore subsidiaries do not have material operations, and accordingly, our ability to pay principal and interest on the Notes will depend upon our receipt of distributions of dividends and repayments of shareholder loans from our subsidiaries and joint venture companies.

The lenders under the Syndicated Loan have a charge over an account held by us into which all cash payments from the Toll Road Holding Companies will be placed and the Subordinated Guarantees will be expressly subordinated to liabilities and obligations under any guarantees provided by the Toll Road Holding Companies and the New Toll Road Holding Companies under the Syndicated Loan and the 2007 Fixed Rate Notes and the 2007 Floating Rate Notes.

On April 11, 2007 we entered into the Syndicated Loan for a committed US$170.0 million, which amount was increased to US$220.0 million in May 2007 in accordance with its terms. We have received the full proceeds of the committed portion of the Syndicated Loan. Our subsidiary, RKI Finance Limited, is the borrower under the Syndicated Loan and we are the guarantor.

The Syndicated Loan is secured by, among other things, a guarantee by us; a charge over the shares of Toll Road Holding Companies and the New Toll Road Holding Companies; and a charge over the 2007 Escrow Account. The Toll Road Holding Companies and the New Toll Road Holding Companies held directly and indirectly interests in the 18 toll road joint ventures operating certain of our expressway and highway toll road projects and projects contributed approximately 62.5% of all cash distributions received by us from all our toll road joint ventures for the year ended 2009. In addition, if the aggregate net asset value of the Toll Road Holding Companies and the New Toll Road Holding Companies falls below US$220.0 million at any time, we are required to provide security over shares of additional subsidiaries to maintain an aggregate net asset value of not less then US$220.0 million.

We are required to maintain sufficient cash in the 2007 Escrow Account during the three-month period preceding each scheduled semi-annual repayment date to service our principal and interest payment due on such repayment date, with any excess funds in the account permitted to be removed and used by us for any purposes, including payments due on the Notes, as long as there is no event of default under the Syndicated Loan. In an event of default under the Syndicated Loan, the charge over the 2007 Escrow Account in favor of the lenders under the Syndicated Loan would crystallize. In addition, all future cash payments from the Toll Road Holding Companies are required to be placed into the 2007 Escrow Account for the benefit of the lenders under the 2007 Syndicated Loan. In the event of a winding up of a Toll Road Holding Company or claims against such Toll Road Holding Company by the lenders to the Syndicated Loan and the Noteholders, the lenders would have priority as to the 2007 Escrow Account and the funds contained therein.

On May 4, 2007, the Toll Road Holding Companies entered into a guarantee agreement to guarantee the due and punctual payments of any indebtedness under the Syndicated Loan and the performance of the borrower thereunder and on July 3, 2009, the New Toll Road Holding Companies entered into a guarantee agreement to guarantee the due and punctual payments of any indebtedness under the Syndicated Loan and the performance of the borrower thereunder.

The Guarantees to be provided by the Toll Road Holding Companies and the New Toll Road Holding Companies to holders of the Notes will be expressly subordinated to the guarantees provided under the Syndicated Loan and, for so long as the Syndicated Loan remains outstanding, the 2007 Fixed Rated Notes and the 2007 Floating Rate Notes. Such guarantees will

39 enable the lenders under the Syndicated Loan and the 2007 Fixed Rated Notes and the 2007 Floating Rate Notes to have priority as to certain assets of the Toll Road Holding Companies and of the New Toll Road Holding Companies over claims of the Noteholders under any Guarantees provided by the Toll Road Holding Companies or the New Toll Road Holding Companies.

Our subsidiaries and joint ventures may be subject to contractual and regulatory restrictions on the payment of dividends and the repayment of shareholder loans to us. As a holding company, we depend upon the receipt of dividends and the repayment shareholder loans from our toll road joint ventures to satisfy our obligations, including our obligations under the Notes. Our subsidiaries and associated companies (other than the Subsidiary Guarantors) have no obligation, contingent or otherwise, to pay amounts due with respect to our obligations under the Notes and the obligation under the Subsidiary Guarantees, or to make funds available for such payments. The ability of our subsidiaries and associated companies to pay dividends or repay shareholder loans or advances to their shareholders (including the Issuer, RKIL and the Subsidiary Guarantors) is subject to, among other things, applicable law, relevant shareholders’ agreements or constitutive documents and restrictions contained in debt instruments of such subsidiaries and associated companies. In addition, if any of our project companies raises capital by issuing equity securities to third parties, dividends declared and paid with respect to such shares would not be available to the Issuer to make payments on the Notes. These restrictions could reduce the amounts that we, and the Issuer, receive from our project companies, which would restrict our ability to meet the Issuer’s payment obligations under the Notes and the Subsidiary Guarantees. In addition, payment of dividends out of the PRC is subject to limitations under PRC law. See “—Risks relating to the PRC, Hong Kong and the Asia Region—Profits from our subsidiaries and joint ventures in the PRC available for distribution are determined under PRC GAAP.” There is no assurance that we, the Issuer or the Subsidiary Guarantors will have sufficient cash flows from dividend distributions or repayment of shareholder loans or advances to satisfy the Issuer’s obligations under the Notes and the Guarantors’ obligations under the Guarantees. In addition, PRC regulations permit payment of dividends only out of accumulated profits as determined in accordance with PRC GAAP. The PRC Subsidiaries are also required to set aside a portion of their after-tax profits according to PRC GAAP to fund certain reserve funds that are not distributable as cash dividends. PRC regulations also require any foreign shareholder loan to be registered with the SAFE. On July 10, 2007, SAFE promulgated “Notice of the list of first batch of foreign-invested real estate projects that have been filed with MOFCOM” (Hui Zong Fa [2007] No. 130), which imposes certain restrictions on foreign exchange and foreign debts registration of foreign-invested real restate enterprises which are incorporated after June 1, 2007. For a foreign-invested real estate enterprise (both newly established and through capital increase that has obtained the approval certificate from the relevant commercial department and has filed such certificate with MOFCOM on or after June 1, 2007, the local Administration of Foreign Exchange will not conduct the foreign debt registration and foreign debts settlement approval process. For a foreign-invested real estate enterprise that has obtained the approval certificate from the relevant local commercial department and has failed to file such certificate with MOFCOM on or after June 1, 2007, the local Administration of Foreign Exchange will not provide foreign exchange, amend registration or support the settlement and sales process in respect to capital projects. Except as provided above, prior to repayment of principal on any such shareholder loan, the PRC Subsidiaries must present evidence of payment of any applicable withholding tax on the interest

40 payable in respect of any such shareholder loan in addition to evidence of registration with the SAFE, and any other documents that the SAFE or its local branch may require, and they need to receive an approval of the SAFE of repayment of interest and principle. Although neither we nor the Subsidiary Guarantors have previously experienced any significant problem in receiving payment of dividends, there is no assurance that we, the Issuer or the Subsidiary Guarantors will have sufficient cash flow from dividends or repayment of shareholder loans or advances to satisfy their respective obligations under the Notes or the Guarantees.

We have incurred substantial indebtedness and may incur additional indebtedness in the future and we may not be able to generate sufficient cash to satisfy our outstanding and future debt obligations.

As of June 30, 2010, we had consolidated liabilities of approximately HK$13,644.0 million. See “Description of material indebtedness.” We may from time to time incur substantial additional indebtedness, such as this Offering. The Notes impose restrictions on our ability to incur additional debt. If we or our subsidiaries incur additional debt, the risks that we face as a result of such indebtedness and leverage could intensify. The amount of our indebtedness would have important consequences to the Noteholders. For example, increased indebtedness could:

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

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

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

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

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

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

• increase the cost of additional financing.

Our ability to generate sufficient cash to satisfy our outstanding and future debt obligations will depend upon our future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, many of which are beyond our control. We may not generate sufficient cash flow to meet our anticipated operating expenses or to service our debt obligations as they become due. If we are unable to service our indebtedness, we will be forced to adopt an alternative strategy that may include actions such as reducing or delaying capital expenditures, selling assets, restructuring or refinancing existing indebtedness or seeking equity capital. These strategies, if implemented, may not be instituted on satisfactory terms.

In addition, our financing arrangements may impose operating and financial restrictions on our business (including the maintenance of certain financial ratios). See “Description of material indebtedness.” Our ability to meet our financial ratios may be affected by events beyond our control. We cannot assure you that we will be able to meet these ratios. In particular, the

41 Syndicated Loan contains standard financial and non-financial covenants, including a restriction on the ability of our subsidiaries to provide loans to any party that is not itself one of our direct or indirect subsidiaries. This would require us to seek consents from the lenders under the Syndicated Loan if we were to provide loans as may be necessary in the ordinary course of our business to most of our joint venture companies in the PRC engaged in the toll road business, in which our equity interests are typically at or below 50%. These and similar provisions may negatively affect our ability to react to changes in market conditions, take advantage of business opportunities we believe to be desirable, obtain future financing, fund necessary capital expenditures, or withstand a continuing or future downturn in our business. Any of these constraints upon us could materially and adversely affect our ability to satisfy our obligations under the Notes.

We may be unable to comply with the restrictions and covenants under the Notes, the Trust Deed and other financing agreements, including the Syndicated Loan and the 2007 Notes, which could lead to a default under the terms of the Notes, the Trust Deed or those agreements resulting in an acceleration of our debt repayments.

If we are unable to comply with the restrictions and covenants in the Notes, the Trust Deed or our current or future financing and other agreements, including the Syndicated Loan and the 2007 Notes, there could be a default under the terms of these agreements. In the event of a default under these agreements, the holders of the debt could terminate their commitments to lend to us, accelerate the debt and declare all amounts borrowed due and payable or terminate the agreements, as the case may be. Furthermore, certain debt agreements, including the Notes, may contain cross-acceleration or cross-default provisions. As a result, default under one debt agreement may cause the acceleration of debt, including the Notes, or result in a default under other debt agreements, including the Notes. If any of these events occur, there is no assurance that our assets and cash flow would be sufficient to repay in full all indebtedness, or that alternative financing could be found. Even if alternative financing can be obtained, there is no assurance that it would be on terms that are favorable or acceptable to us.

Our operations may be restricted by the terms of the Notes.

The Notes are governed by the Trust Deed, which includes a number of significant restrictive covenants that could limit our ability to plan for or to react to market conditions or meet our capital needs, which could increase the credit risk of Noteholders. These covenants restrict, among other things, our ability, and the ability of our Restricted Subsidiaries, to:

• incur additional debt and issue disqualified or preferred stock;

• make restricted payments;

• pay dividends or distributions on our capital stock, repurchase our capital stock, pay existing indebtedness, make or repay shareholder loans or advances or sell or transfer property or assets;

• issue or sell capital stock;

• guarantee indebtedness;

• enter into transactions with affiliates;

• create liens on assets to secure debt;

42 • enter into sale and leaseback transactions;

• sell assets;

• make investments;

• merge or consolidate with another company; and

• engage in a different business activity.

Our ability to comply with these covenants may be affected by events beyond our control, and we may have to curtail some of our operations and growth plans to maintain compliance.

The Issuer may be unable to purchase the Notes upon a Change of Control Triggering Event.

The Issuer may not be able to purchase the Notes upon a Change of Control Triggering Event. Upon a Change of Control Triggering Event, the Issuer must make an offer to purchase all outstanding Notes. Pursuant to this offer, the Issuer must purchase the tendered Notes at 101% of their principal amount plus accrued interest and unpaid interest, if any, up to, but not including the date of purchase.

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

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

An active trading market for the Notes may not develop, and the liquidity and trading price of the Notes could be volatile.

The Notes are a new issue of securities for which there is currently no trading market. Application for approval in-principle has been made for the listing of the Notes on the SGX-ST. However, no assurance can be given that we will be able to obtain or maintain such listing or that, if listed, a trading market will develop. We have been advised that the J.P. Morgan intends to make a market in the Notes, but it is not obligated to do so and may discontinue such market

43 making activity at any time without notice. No assurance can be given as to the liquidity of, or the development and continuation of an active trading market for, the Notes. We do not intend to apply for listing of the Notes on any securities exchange other than the SGX-ST. If an active trading market for the Notes does not develop or is not maintained, the market price and liquidity of the Notes may be adversely affected. If such a market were to develop, the Notes could trade at prices that may be higher or lower than the price at which the Notes have been issued. The price at which the Notes trade depends on many factors, including:

• prevailing interest rates and interest rate volatility;

• our results of operations, financial condition and future prospects;

• proposals of new instruments, strategic alliances and/or acquisitions;

• changes in our industry and competition;

• the market conditions for similar securities; and

• general economic conditions, almost all of which are beyond our control.

As a result, there can be no assurance that you will be able to resell the Notes at attractive prices or at all.

Our credit ratings may be lowered again or withdrawn in the future.

On March 23, 2010, Moody’s changed the outlook of our Ba3 corporate family and senior unsecured debt ratings from negative to stable. Our outlook was also revised to stable from negative by Standard and Poor’s on March 30, 2010 and our corporate credit and senior unsecured notes rating of BB- by Standard and Poor’s was also reaffirmed. Credit ratings address the Issuer’s and our ability to perform our respective obligations under the terms of the Notes and the Guarantees and credit risks in determining the likelihood that payments will be made when due under the Notes. A rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time. There is no assurance that a rating will remain for any given period of time or that a rating will not be lowered or withdrawn entirely by the relevant rating agency if, in its judgment, circumstances in the future so warrant. We have no obligation to inform Noteholders of any such revision, downgrade or withdrawal. A suspension, reduction or withdrawal at any time of the ratings assigned to the Notes may adversely affect the market price of the Notes. In addition, any ratings downgrade could adversely affect our ability to access the debt capital markets in the future which may have a material adverse effect on our financial condition and results of operations.

The Notes will initially be held in book entry form, and therefore you must rely on the procedures of the relevant clearing systems to exercise any rights and remedies.

The Notes will initially only be issued in global certificate form and held through Euroclear and Clearstream. Interests in the Notes represented by the global certificate will trade in book entry form only, and notes in definitive registered form, or definitive registered notes, will be issued in exchange for book-entry interests only in very limited circumstances. Owners of book entry interests will not be considered owners or holders of the Notes. The common depositary for Euroclear and Clearstream will be the sole registered holder of the global certificate representing the Notes. Payments of principal, interest and other amounts owing on or in respect of the global

44 certificate representing the Notes will be made to the paying agent, which will make payments to Euroclear and Clearstream. Thereafter, these payments will be credited to accounts of participants that hold book-entry interests in the global certificate representing the Notes and credited by such participants to indirect participants. After payment to the common depositary for Euroclear and Clearstream, we will have no responsibility or liability for the payment of interest, principal or other amounts to the owners of book entry interests. Accordingly, if you own a book entry interest, you must rely on the procedures of Euroclear and Clearstream, and if you are not a participant in Euroclear and Clearstream, on the procedures of the participant through which you own your interest, to exercise any rights and obligations of Noteholder under the Trust Deed.

Unlike the holders of the Notes themselves, owners of book entry interests will not have the direct right to act upon our solicitations for consents, requests for waivers or other actions from Noteholders. Instead, if you own a book entry interest, you will be permitted to act only to the extent you have received appropriate proxies to do so from Euroclear and Clearstream. The procedures implemented for the granting of such proxies may not be sufficient to enable you to vote on a timely basis.

Similarly, upon the occurrence of an Event of Default under the Trust Deed, unless and until definitive registered notes are issued in respect of all book entry interests, if you own a book entry interest, you will be restricted to acting through Euroclear and Clearstream. The procedures to be implemented through Euroclear and Clearstream may not be adequate to ensure the timely exercise of rights under the Notes.

We may be unable to obtain and remit foreign exchange.

Our ability to satisfy our obligations under the Notes depends solely upon the ability of our PRC Subsidiaries and joint venture companies to obtain and remit sufficient foreign currency to pay dividends to us and to repay shareholder loans. Our PRC Subsidiaries and joint venture companies must present certain documents to the SAFE, its authorized branch, or the designated foreign exchange bank, for approval before they can obtain and remit foreign currencies out of the PRC (including, in the case of dividends, evidence that the relevant PRC taxes have been paid and, in the case of shareholder loans, evidence of the registration of the loan with the SAFE). Prior to repayment of any shareholder loan, the relevant PRC Subsidiary or joint venture company must also present evidence of payment of the withholding tax on the interest payable in respect of such shareholder loan. In addition, except as discussed above with respect to SAFE’s “Notice of the list of first batch of foreign-invested real estate projects that have been filed with MOFCOM” promulgated on July 10, 2007, SAFE’s approval for repayment of interest and principal is required for the remittance of such interest and principal outside of the PRC. We intend to use a portion of the proceeds from this Offering of the Notes to make contributions to the registered capital of certain of our PRC Subsidiaries to finance the property development projects and/ or land acquisitions that they are currently undertaking or are to undertake. If any of our PRC Subsidiaries or joint venture companies under the shareholder loans are unable to remit foreign currency for any reason, including the failure of the SAFE to approve the registration of the loans or to approve the payments under the loans, the PRC Subsidiary or joint venture company, as the case may be, will be unable to pay us interest and principal, when due, on our shareholder loans, which may affect our ability to satisfy our obligations under the Notes.

45 Because our PRC Subsidiaries and joint venture companies’ ability to pay dividends may be restricted, the Issuer may not have sufficient funds available to pay amounts due under the Notes.

We currently conduct, and expect to continue to conduct, our operations through our joint ventures and WFOEs, in the PRC. Accordingly, we must receive dividends from our operating companies, in order to meet our cash needs. PRC laws require that dividends can only be paid out of the net income calculated according to financial regulations in the PRC and PRC GAAP. In addition, even if sufficient funds are available, our subsidiaries and joint ventures in the PRC are FIEs and, as such, their ability to pay dividends or make other distributions to us may be restricted by, among other things, statutory and other legal restrictions, including PRC foreign exchange control restrictions, as well as relevant shareholders’ agreements or constitutive documents and restrictions contained in debt instruments of such subsidiaries and associated companies. For example, under the articles of association adopted in accordance with PRC regulations, our joint venturers and WFOEs may only declare and distribute dividends annually. Although we receive monthly cash distributions from the toll road joint ventures, we cannot assure you that the cash from dividends from the joint ventures will be available on each interest payment date to pay the interest due and payable under the Notes, or on the maturity date to pay the principal of the outstanding Notes.

None of the Subsidiary Guarantors have appointed a service process agent in England, which can significantly limit the ability to obtain and enforce judgments against the Subsidiary Guarantors.

The transaction documents in relation to the Notes, which include the Global Certificate, the Subscription Agreement, the Agency Agreement and the Trust Deed, are governed by the laws of England. All of the Subsidiary Guarantors are companies incorporated in jurisdictions under laws outside of England. In addition, none of their respective directors are residents of England and all of their assets and the assets of such persons are located outside England. However, none of the Subsidiary Guarantors have appointed an agent for service of process in England. As a result, it may be difficult for the Noteholders to effect service of process within England upon any Subsidiary Guarantors or its respective directors or to enforce judgments against any of them in English courts. In the event that bankruptcy, insolvency or similar event proceedings are initiated outside England, such proceedings are likely to be complex and costly for the Noteholders and otherwise may result in greater uncertainty and delay regarding the enforcement of the Noteholders’ rights.

The insolvency laws of the British Virgin Islands, Bermuda and other local insolvency laws may differ from those of another jurisdiction with which the holders of the Notes are familiar.

Because the Issuer and the Subsidiary Guarantors are incorporated under the laws of the British Virgin Islands and RKIL is incorporated under the laws of Bermuda, any insolvency proceeding relating to the Issuer, the Subsidiary Guarantors and RKIL would likely involve the insolvency laws of the British Virgin Islands and Bermuda, respectively, the procedural and substantive provisions of which may differ from comparable provisions of the local insolvency laws of jurisdictions with which the holders of the Notes are familiar.

46 Risks relating to the Subsidiary Guarantors Our initial Subsidiary Guarantors do not currently have significant operations. None of our current PRC Subsidiaries will provide a Subsidiary Guarantee either upon issuance of the Notes or at any time thereafter. Moreover, no future subsidiaries that may be organized under the laws of the PRC will provide a Subsidiary Guarantee at any time in the future. As a result, the Notes will be effectively subordinated to all the debt and other obligations, including contingent obligations and trade payables, of the PRC Subsidiaries. The initial Subsidiary Guarantors that will guarantee the Notes do not have significant operations. We cannot assure you that the initial Subsidiary Guarantors or any subsidiaries that may become Subsidiary Guarantors in the future would have the funds necessary to satisfy our financial obligations under the Notes if we are unable to do so.

The Subsidiary Guarantees may be challenged under applicable insolvency or fraudulent transfer laws which may affect the enforceability of the Subsidiary Guarantees. Under bankruptcy laws, fraudulent transfer laws, insolvency or unfair preference or similar laws in the jurisdictions where current and future Subsidiary Guarantors are or may be established, a guarantee could be voided, or claims in respect of a guarantee could be subordinated to all other debts of that guarantor if, among other things, the guarantor, at the time it incurred the indebtedness evidenced by, or when it gives, its guarantee: • incurred the debt with the intent to hinder, delay or defraud creditors or was influenced by a desire to put the beneficiary of the guarantee in a position that, in the event of the guarantor’s insolvency, would be better than the position the beneficiary would have been in had the guarantee not been given; • received less than the reasonably equivalent value or fair consideration for the incurrence of such guarantee; • was insolvent or rendered insolvent by reason of such incurrence; • was engaged in a business or transaction for which the guarantor’s remaining assets constituted unreasonably small capital; or • intended to incur, or believed that it would incur, any debt beyond its ability to pay as it matures. The measure of insolvency for the purposes of the foregoing will vary depending on the laws of the jurisdiction which is being applied. Generally, however, a guarantor would be considered insolvent at a particular time if it was unable to pay its debts as they fall due or if the sum of its liabilities was then greater than all of its assets at a fair valuation. In addition, a guarantee may be subject to review under applicable insolvency or fraudulent transfer laws in certain jurisdictions or subject to a lawsuit by or on behalf of creditors of the guarantors. In such a case, the analysis set forth above would generally apply, except that the guarantee could also be subject to the claim that, since the guarantee was not incurred for the benefit of the guarantor, the obligations of the guarantor thereunder was incurred for less than reasonably equivalent value or fair consideration. In an attempt to limit the applicability of insolvency and fraudulent transfer laws in certain jurisdictions, the obligations of the Subsidiary Guarantors under each Subsidiary Guarantee will

47 be limited to the maximum amount that can be guaranteed by the applicable Subsidiary Guarantor without rendering the Subsidiary Guarantee, as it relates to such Subsidiary Guarantor, voidable under such applicable insolvency or fraudulent transfer laws.

If a court avoided a Subsidiary Guarantee, subordinated a Subsidiary Guarantee to other indebtedness of the relevant Subsidiary Guarantor, or held a Subsidiary Guarantee unenforceable for any other reason, Noteholders would cease to have a claim against that Subsidiary Guarantor based upon the Subsidiary Guarantee, would be subject to the prior payment of all liabilities (including trade payables) of such Subsidiary Guarantor, and would solely be our creditors and any Subsidiary Guarantor whose Subsidiary Guarantee was not voided or held unenforceable. There is no assurance that, after providing for all prior claims, there would be sufficient assets to satisfy the claims of the Noteholders.

Risks relating to the Issuer

The Issuer is our wholly-owned subsidiary with no operations of its own and will be dependent upon payments from us under intercompany loans and/or pursuant to Guarantees to meet its obligations under the Notes.

The Issuer is our wholly-owned subsidiary with limited assets and has no business operations other than issuing the Notes and engaging in related transactions and future issuances of debt securities upon and with terms substantially similar to the Notes. The proceeds from the issuance of the Notes will be used by the Issuer to provide financing to us for the uses described in “Use of proceeds” elsewhere in this offering memorandum. The Issuer’s ability to make payments on the Notes is dependent directly on payments to the Issuer by us and certain of our subsidiaries. Our ability and that of the Subsidiary Guarantors to make payments to the Issuer under intercompany loans and/or pursuant to the Guarantees will depend on a number of factors, some of which may be beyond our and their control. If we and the Subsidiary Guarantors fail to make scheduled payments to the Issuer under intercompany loans and/or pursuant to the Guarantees, the Issuer will not have any other source of funds to meet its payment obligations under the Notes.

48 Use of proceeds We estimate that the net proceeds of this Offering of the Notes, after deducting the underwriting commission and other estimated expenses payable in connection with this Offering, will be approximately US$342.0 million.

We intend to use the net proceeds as follows:

(i) to finance a cash tender offer for, and/or to otherwise repurchase or repay at maturity, all or a portion of the outstanding 2004 Guaranteed Notes and the outstanding 2007 Floating Rate Notes;

(ii) for the refinancing of other existing indebtedness; and

(iii) to make investments in our property development business.

We may adjust our plans to make investments in our property development business in response to changing market conditions, circumstances such as a failure to obtain requisite approvals, changes in government policies that would render such property developments commercial unavailable and force majeure. In these situations, we will carefully evaluate the situation and may reallocate the use of proceeds.

The successful completion of the cash tender offer for the 2004 Guaranteed Notes and 2007 Floating Rate Notes is not a condition to the closing of this Offering of the Notes. The successful completion of this Offering of the Notes is a condition to the closing of the cash tender offer for the 2004 Guaranteed Notes and 2007 Floating Rate Notes.

49 Capitalization and indebtedness The following table sets forth on an actual basis our unaudited consolidated cash and cash equivalents, short-term debt and capitalization as of June 30, 2010, and as adjusted to give effect to the issuance of the Notes.

As of June 30, 2010 Actual As Adjusted(1) HK$ US$ HK$ US$ (in millions) Cash and cash equivalents (including pledged deposits) ...... 3,238.4 415.9 5,901.4 757.9 Short-term borrowings Secured borrowings repayable within one year ...... 1,187.3 152.5 1,187.3 152.5 Unsecured borrowings repayable within one year ...... 200.0 25.7 200.0 25.7 Total short-term borrowings ...... 1,387.3 178.2 1,387.3 178.2 Long-term borrowings Secured ...... 710.2 91.2 710.2 91.2 Unsecured ...... 4,516.2 580.0 4,516.2 580.0 Notes offered hereby ...... - - 2,725.3 350.0 Total long-term borrowings ...... 5,226.4 671.2 7,951.7 1,021.2 Total borrowings(2) ...... 6,613.7 849.4 9,339.0 1,199.4 Capital and reserves Total share capital and reserves attributable to our shareholders ...... 9,945.0 1,277.2 9,945.0 1,277.2 Total capitalization(3),(4) ...... 16,558.7 2,126.6 19,284.0 2,476.6

(1) The table does not take into account any payments in respect of the cash tender offer or to otherwise repurchase or repay at maturity, all or a portion of the outstanding 2004 Guaranteed Notes or the outstanding 2007 Floating Rate Notes, and does not take into account interest payments made after June 30, 2010. We intend to use a portion of the proceeds of this Offering to finance the cash tender offer for, and/or to otherwise repurchase or repay at maturity, all or a portion of the outstanding 2004 Guaranteed Notes and the outstanding 2007 Floating Rate Notes. As of September 13, 2010, US$195.0 million in principal amount of the 2004 Guaranteed Notes and US$150.0 million in principal amount of the 2007 Floating Rate Notes were outstanding and not held by us. (2) As of June 30, 2010, our consolidated capital commitments were HK$532.9 million (US$68.4 million) and our contingent liabilities, which were in the form of guarantees provided to banks in favor of our customers in respect of mortgage loans provided by the banks for purchase of our developed properties, amounted to approximately HK$3,958.9 million (US$508.4 million). (3) Total capitalization comprises total borrowings and total capital and reserves. (4) Other than as described above, there has been no material change in our capitalization since June 30, 2010.

50 Management’s discussion and analysis of financial condition and results of operations You should read the following discussion in conjunction with our audited consolidated financial statements as of and for each of the years ended December 31, 2008 and 2009 and the unaudited condensed consolidated financial statements as of and for the six months ended June 30, 2010 and the notes thereto, which are prepared in accordance with HKFRS and included elsewhere in this offering memorandum, and the section entitled “Risk Factors.”

This section includes forward-looking statements. All statements, other than statements of historical facts, included in this section that address activities, events or developments that we expect or anticipate will or may occur in the future are forward-looking statements. These statements are based on assumptions and analyses we made in light of experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances. See “Forward-looking Statements.”

Overview

Historically, we were principally engaged in the investment, operation and management of toll roads and expressways in the PRC. In 2004, we began engaging in the development of residential and commercial properties in the PRC and, in 2007, further solidified our entry into the property development business with our acquisition of a 49% equity interest in Sunco Property (of which we own a 94.74% equity interest as of the date of this offering memorandum). Our business is now comprised of two segments: our toll road business and our property development business.

As of June 30, 2010, our toll road projects comprised 16 expressways, highways and bridges spanning approximately 870 km and over 40 toll stations located in seven provinces in the PRC: Anhui, Guangxi, Hebei, Henan, Hunan, Jiangsu and Shanxi. As of June 30, 2010, our total investment in toll road projects was approximately HK$4,604.5 million. These investments in toll road projects are held through our wholly-owned subsidiaries that, together with their PRC joint venture partners, have established joint ventures for investment in various projects.

For the year ended December 31, 2009 and the six months ended June 30, 2010, the total traffic volume during the period recorded by our toll road projects was approximately 115.1 million vehicles and 42.9 million vehicles, respectively, our share of toll revenue was HK$1,082.9 million and HK$388.2 million, respectively, and our share of cash distributions from our toll road joint ventures was HK$539.4 million and HK$343.2 million, respectively. The figures for the six months ended June 30, 2010 reflect a significant decrease in total traffic volume during the period primarily due to the disposal of the Jihe Expressway (Eastern Section) in the second half of 2009.

As of June 30, 2010, we had over 20 residential and commercial property development projects in the PRC with a total planned GFA of approximately 8.8 million sq.m., of which approximately 5.1 million sq.m. was attributable to us. During the year ended December 31, 2009 and the six months ended June 30, 2010, we had revenues from property development of HK$4,600.4 million and HK$2,059.6 million, respectively.

For the year ended December 31, 2009 and the six months ended June 30, 2010, our EBITDA, calculated on a consolidated basis, was equal to HK$1,751.1 million, and HK$989.3 million, respectively.

51 Our revenue and profit for the periods indicated for each of our segments are as follows:

Property For the six months ended Toll Road development Total (in HK$ thousands) June 30, 2010 Reportable segment revenue ...... - 2,059,624 2,059,624 Reportable segment profit ...... 91,792 240,463 332,255 Included in reportable segment profit are: Interest income ...... 634 12,555 13,189 Impairment losses on interests in joint ventures ...... (51,020) - (51,020) Share of results of joint ventures ...... 195,709 (3,474) 192,235 Depreciation ...... (43) (7,100) (7,143) Finance costs ...... (2,089) (2,449) (4,538) Income tax expenses ...... (14,449) (371,183) (385,632)

Property For the six months ended Toll Road development Total (in HK$ thousands) June 30, 2009 Reportable segment revenue ...... - 2,464,196 2,464,196 Reportable segment profit ...... 235,177 60,671 295,848 Included in reportable segment profit are: Interest income ...... 160 8,315 8,475 Gains on disposal of interests in joint ventures ...... 15,183 - 15,183 Share of results of joint ventures ...... 264,553 5,535 270,088 Depreciation ...... (86) (15,135) (15,221) Finance costs ...... (3,069) (4,486) (7,555) Income tax expenses ...... (10,726) (102,914) (113,640)

Property For the year ended Toll road development Total (in HK$ thousands) December 31, 2009 Reportable segment revenue ...... - 4,600,424 4,600,424 Reportable segment profit (loss) ...... 823,968 (10,248) 813,720 Included in reportable segment profit (loss) are: Interest income ...... 349 20,241 20,590 Gains on disposal of interests in joint ventures ...... 578,597 - 578,597 Impairment losses on interests in joint ventures ...... (158,000) - (158,000) Share of results of joint ventures ...... 484,429 29,894 514,323 Depreciation ...... (163) (21,616) (21,779) Finance costs ...... (5,600) (10,018) (15,618) Income tax expenses ...... (18,017) (284,264) (302,281)

52 Property For the year ended Toll road development Total (in HK$ thousands) December 31, 2008 Reportable segment revenue ...... - 4,630,672 4,630,672 Reportable segment profit (loss) ...... 814,517 (109,572) 704,945 Included in reportable segment profit (loss) are: Interest income ...... 288 14,164 14,452 Gains on disposal of interests in joint ventures ...... 10,272 - 10,272 Share of results of joint ventures ...... 899,617 10,142 909,759 Depreciation ...... (191) (12,963) (13,154) Finance costs ...... (6,212) (28,720) (34,932) Income tax expenses ...... (46,004) (320,689) (366,693)

Property For the year ended Toll road development Total (in HK$ thousands) December 31, 2007 Reportable segment revenue ...... - 2,407,770 2,407,770 Reportable segment profit ...... 443,884 351,710 795,594 Included in reportable segment profit are: Interest income ...... 1,535 67,072 68,607 Gains on disposal of interests in joint ventures ...... 11,130 - 11,130 Share of result of an associate ...... - 12,267 12,267 Share of results of joint ventures ...... 574,835 2,272 577,107 Depreciation ...... (314) (2,607) (2,921) Finance costs ...... (5,566) (26,046) (31,612) Income tax expenses ...... - (342,811) (342,811)

Note that due to our adoption of HKFRS 8 effective January 1, 2009, reportable segment profit for 2008 and 2009 includes profit earned by each segment, share of results of joint ventures, gains on disposal of interests in joint ventures, relevant interest income and finance costs and income tax expenses attributable to the relevant segment but without allocation of headquarters income and expenses. We have restated our segment profit for 2007 on this basis for purposes of the presentation.

Key factors affecting our results of operations

Our toll road business

Toll revenues

Our share of results of joint ventures, and consequently our profitability, are dependent on the amount of toll revenues generated by our toll road joint ventures. On a non-consolidated basis, our joint ventures’ ability to pay dividends to us as a shareholder and principal payments to us as a lender is also affected by the amount of cash that they are able to generate through toll revenues.

The operation of toll roads principally involves collection of tolls and maintenance. Revenues from our toll road projects are substantially comprised of toll receipts collected at toll plazas

53 located at each of the interchanges and barriers. Toll revenues generated by each of our joint ventures are subject to a number of factors, including traffic volume and applicable toll rates. Traffic volume is determined by user demand and road capacity. The volume can vary with the location of the asset and the period of operation, as well as seasonal effects. Toll rates are set by the relevant provincial government and provincial price bureaus. Approvals for toll increases rest primarily with these entities, which generally take into account factors such as the toll rate of comparable toll highways in the same region, affordability to users, prevailing rate of inflation and the return for investors. We continuously review the toll rates in effect at our projects. There are two types of toll collection systems: open system and closed system. An open system is a toll system in which a fixed toll for each vehicle category is collected at each toll station on the highway. Vehicles traveling on the highway must stop at each toll station and pay the fixed toll. After paying a toll the vehicle is free to leave the highway or continue to the next toll station. A closed system is a toll system in which a ticket is issued to each vehicle at the interchange toll station on entering the expressway and a toll collected on exit calculated by reference to the distance traveled on the expressway. Each of our joint ventures collects tolls by means of either open system or closed system. All of our joint ventures utilize a manual toll collection system where toll collectors stationed in the toll booths collect tolls in cash, whereas a small number of toll stations have installed automatic toll collection systems. Each of our joint ventures is responsible for the maintenance and repair of its toll road at its own cost throughout the operating concession period. Toll receipts are therefore principally dependent on traffic volume by vehicle categories, weight of the vehicle, applicable toll rates and distance traveled. See “Our business—Our toll road business” for further details regarding the toll collection system at our joint ventures.

Local provincial economies Our financial results from toll road operations are dependent upon growth in provincial economies in which our toll roads are operated and other factors, such as fluctuations in passenger transport by highway, road maintenance and repair work, as well as competition from other roadways, each of which affect traffic flow and volume on each individual toll road. We currently derive a substantial portion of the share of cash distributions from our expressway projects, which are located in Hunan and Hebei Provinces, and we intend to continue divesting our Class I and Class II highway projects as a part of our strategy to optimize our toll road portfolio. As of June 30, 2010, we had 16 toll road joint venture projects, of which three were expressways. Our expressway projects accounted for HK$493.4 million, HK$939.2 million, HK$420.3 million HK$359.0 million and HK$288.6 million, or 67.6%, 86.8%, 77.9%, 80.8% and 84.1%, respectively, of our share of cash distributions from toll road joint ventures in the years ended December 31, 2007, 2008 and 2009 and for the six months ended June 30, 2009 and 2010, respectively. See “Risk factors—Risks relating to our business—We rely on our expressway projects for a large proportion of our share of cash distributions from toll road joint ventures.” Set out below is a summary of some of the factors that affected traffic volume and annual gross toll revenue of our expressway projects, which, in turn, affected cash distributions from, and share of results of, joint ventures in 2009 and the first half of 2010.

Hebei Province We have a 40.0% equity interest in the Baojin Expressway project and a 45.0% equity interest in the Tangjin Expressway project, both located in Hebei Province. The Baojin Expressway is an

54 East-West corridor linking Tianjin and other cities in Southeast Hebei Province. In 2009, average daily traffic volume on the Baojin Expressway increased 18.8% compared to 2008, while annual gross toll revenues maintained a similar level as 2008. For the six months ended June 30, 2010, the average daily traffic volume and the gross revenue further increased by 50.9% and 20.5%, respectively, as compared with the six month ended June 30, 2009. During the six months ended June 30, 2010, traffic volume increased as a result of vehicles being diverted to the Baojin Expressway from a nearby highway. Revenue did not increase by a corresponding amount, however, because tolls are determined based on the distance traveled and the diverted vehicles only used a portion of our expressway.

The Tangjin Expressway is an important corridor connecting the northern coastal area, the northeast and the southern provinces. In 2009, the Tangjin Expressway project’s average daily traffic volume decreased 2.4% compared to 2008 and recorded RMB588.3 million in annual gross toll revenues, as compared with RMB670.4 million in 2008. The decrease in average daily traffic in 2009 was primarily due to traffic directed to our expressway as a result of traffic control in respect of the Olympic Games in 2008. For the six months ended June 30, 2010, the average daily traffic volume and gross revenue decreased 5.1% and 30.0%, respectively, as compared with the six months ended June 30, 2009. The decrease in traffic volume was mainly due to repair work carried out on a connecting expressway during the period, which negatively impacted access to the Tangjin Expressway. The decrease in revenue was mainly due to the decrease in traffic volume as well as the result of fewer overweight trucks using the expressway. In addition to typically having higher toll rates than passenger vehicles, trucks incur penalties if they are overweight.

In 2009, the cash distribution ratios for both the Baojin Expressway and Tangjin Expressway were adjusted in accordance with the terms of the relevant CJV agreements (described below under “—Joint venture agreement terms”). As such, we saw a decrease in the cash contribution from our toll road business in our consolidated results of operations.

Hunan Province

We have a 43.2% equity interest in the Changyi Expressway project located in Hunan Province. The Changyi Expressway is a major route linking Changsha City, the provincial capital of Hunan Province, and Yiyang City. The Changyi Expressway’s average daily traffic volume decreased by 5.8% to 27,160 vehicles per day in 2009 compared to 2008. In 2009, the gross annual toll revenue of the Changyi Expressway was RMB293.4 million, which was similar to the 2008 amount. For the six months ended June 30, 2010, the average daily traffic volume and gross revenue increased 4.6% and 10.9%, respectively, as compared with the six months ended June 30, 2009. The increased traffic volume on the Changyi Expressway in the six months ended June 30, 2010 as compared to the six months ended June 30, 2009, was mainly heavy vehicles which we believe resulted from the growing manufacturing base in the region where our expressway is located. These heavy vehicles typically have higher toll rates than passenger cars and, therefore, revenue increased by a greater percentage than traffic volume during this period as compared to the prior period in 2009.

Joint venture agreement terms

For our CJVs, a joint venture agreement sets out the terms of our participation, with provisions on, among other things, the time of payment and amount of capital contribution (which is in the

55 form of equity and shareholder loans), and the authorities and the responsibilities of the joint venture parties. The terms for payments of dividends and other distributions in each of our joint ventures are structured such that generally the cash flows we received from our joint ventures typically pass through three stages. During the initial years of a joint venture, we typically receive preferential cash distributions until full recovery of our original capital investment. Thereafter, in a second stage, the cash sharing ratio may be changed to enable our joint venture partner to receive preferential cash distributions to recover its original capital investment, and the cash sharing ratio may be further adjusted in a third stage so that both parties share the cash generated from the project in a predetermined ratio, mainly in proportion to their respective equity interests. For example, in 2009, the cash distribution ratio of our two major expressway projects in Hebei were changed as a result of these provisions, resulting in a decrease in the overall cash contribution of our toll road business to our consolidated results. Our current portfolio of toll road projects is primarily between the second or third stages of the cash sharing arrangements under the joint venture agreements. See “Risk factors—We may not be able to maintain stable cash distributions from our portfolio of toll road investments.” See also “Our business—Our toll road business” for details regarding each of our toll road joint ventures and the management of our toll road business.

Remittance of cash distributions

The joint venture agreement for each of our CJVs defines the basis of cash distribution for that joint venture. Cash distribution is principally comprised of annual dividends on our cash sharing ratio, repayments on shareholder loans made to the CJV and return of capital. A negligible amount of the monthly cash distribution has historically been attributable to minimum undertakings for a few toll road projects. At present, none of our current projects are subject to minimum undertakings. Cash distributions are made from the joint venture in RMB, and are deposited into the bank accounts of our subsidiaries in the PRC or exchanged into either HK dollars or US dollars and are paid into the designated bank accounts in Hong Kong, where appropriate.

We provide loans to our joint ventures in the form of shareholder loans as part of our initial capitalization of our toll road projects. Repayments on these loans augment the dividends we receive on our equity interest in those projects. We typically structure our investments in our joint ventures such that approximately 60.0% of our investment is in the form of shareholder loans, and the remainder is through equity contributions. Repayments on shareholder loans to our joint ventures provide us with a more frequent, regular and predictable cash flow from our joint ventures over the life of the joint venture rather than relying on dividends alone. This is particularly relevant in the second cash distribution stage, during which time our joint venture partner receives preferential cash distribution to recover its original capital investment, and in the final stage of cash distribution under the joint venture agreement, during which time we receive dividends in proportion to our equity interest on an annual basis.

Aggregate cash receipts from our toll road joint ventures in the form of repayment of shareholder loans, dividends or return of capital amounted to HK$729.7 million, HK$1,082.5 million, HK$539.4 million, HK$444.2 million and HK$343.2 million in the years ended December 31, 2007, 2008 and 2009 and for the six months ended June 30, 2009 and 2010, respectively.

56 Our property business

Economic growth, speed of urbanization and demand for residential properties in the PRC.

Economic growth, urbanization and higher standards of living in the PRC have been the main driving forces behind the increasing market demand for residential properties. At the current stage of the PRC economic development, while the property industry is regarded by the PRC Government as one of the PRC’s most important industries, the property industry is significantly dependent on the overall economic growth and the resultant consumer demand for residential properties. As we target mainly middle to higher income residents, we believe that private sector developments and urbanization in the PRC are especially important to our operations. Developments in the private sector, urbanization and the resultant demand for residential properties in the PRC have in the past increased the pre-sales and sales of our properties. These factors will continue to have a significant impact on our results of operations.

Regulatory measures in the real estate industry in the PRC

PRC Government policies and measures on property development and related industries have a direct impact on our business and results of operations. From time to time, the PRC Government adjusts its macroeconomic control policies to encourage or restrict development in the private property sector through measures relating to, among others, land grants, pre-sales of properties, bank financing and taxation. However, in 2004, the PRC Government implemented a series of fiscal stimulus measures with a view to stimulating the growth of the economy. These measures included cutting mortgage rates for first time buyers and lowering the minimum capital requirement ratio for ordinary residential developments. However, in 2006, the PRC Government tightened regulations to restrict growth. The PRC Government subsequently loosened credit, lowered taxes and increased infrastructure spending in response to the global financial crisis in 2008 in an effort to stimulate the economy. Following the revival of the economy in 2009, the PRC Government reduced or suspended certain of these stimulus measures. Moreover, in response to concerns over the scale of the increase in property investments, in April 2010, the PRC Government introduced policies, that, among others, required developers to finance a higher percentage of the capital outlay, imposed limits on mortgage payments as a percentage of income, increased down payment requirements, imposed taxes on the sale or transfer of property and imposed restrictions on the transfer of uncompleted properties. We believe that these policies have resulted in decreased customer demand, which has resulted in lower transaction volumes and that PRC regulatory measures in the real estate industry will continue to impact our business and results of operations.

Pre-sales

Pre-sales constitute the most important source of our operating cash inflow during the process of our project development. PRC law allows us to pre-sell properties before their completion upon satisfaction of certain requirements and requires us to use the pre-sale proceeds to finance the property projects so pre-sold. The amount and timing of cash inflows from pre-sales are affected by a number of factors, including timing and other restrictions on pre-sale imposed by the PRC Government, market demand for our properties subject to pre-sale and the number of properties we have available for pre-sale. Reduced cash flow from pre-sales of our properties will increase our reliance on external financing and will impact our ability to finance our continuing property developments. Because we recognize revenue from property sales at the time of delivery of the

57 property and not upon pre-sale of the property, there is typically a twelve to eighteen month time lag between pre-sale and recognition of revenues for the associated property.

Access to and cost of financing

Bank borrowing is another important source of funding for our property developments. As of June 30, 2010, we had an aggregate outstanding amount of RMB1,011.8 million in onshore loans to fund our property business at our PRC subsidiary level. As commercial banks in the PRC link the interest rates on their bank loans to benchmark lending rates published by PBOC, any increase in such benchmark lending rates will increase the interest costs for our developments. Our access to capital and cost of financing are also affected by restrictions imposed from time to time by the PRC Government on bank lending for property developments.

LAT

Our property developments are subject to LAT with respect to the appreciated value of the related land and properties and improvements on such land and properties. LAT applies to both domestic and foreign investors in properties in the PRC, irrespective of whether they are corporate entities or individuals. Our provision for LAT was HK$41.5 million and HK$147.7 million for the six months ended June 30, 2009 and 2010, respectively. There is a positive correlation between changes to our profit margin and the amount of LAT to which we are subject. For example, our LAT increased significantly in the six months ended June 30, 2010 as a direct result of our higher profit margins. However, we cannot assure you that the relevant tax authorities will agree with the basis on which we have calculated our LAT liabilities for provision purposes. Our financial condition may be materially adversely affected if our LAT liabilities as calculated by the relevant tax authorities are substantially higher than our provisions. We have provided more details on the PRC regulations on LAT in “Regulation—PRC taxation.”

Ability to acquire suitable land

Our ability to secure quality land at prices that can yield reasonable returns will affect our growth in the future. As the PRC economy continues to grow at a relatively high speed and demand for residential properties remains relatively strong, we expect that competition among developers for land reserves that are suitable for property development will intensify. In addition, the public tender, auction and listing-for-sale practice in respect of the grant of state- owned land use rights is also likely to increase competition for development land and to increase land acquisition costs as a result.

Factors affecting comparability of results of our property business from year to year

Because of the structure of the Sunco Property Acquisition, Sunco Property was not our subsidiary for most of 2007 and therefore our 2007 financial statements did not consolidate the full year results of Sunco Property. Rather, our 2007 financial statements reflect the results of Sunco Property from January to July 2007 as “result of an associate,” and for the remainder of the year as a consolidated entity. Beginning the year ended December 31, 2008, our financial statements reflect the consolidation of the full year results of Sunco Property.

In addition to the mechanical effects resulting from the consolidation (or exclusion) of properties and toll roads acquired or divested within a period, our results of operations from our property

58 operations tend to fluctuate from year to year and will continue to fluctuate in future periods. The number of properties that we have been and will be able to develop or complete during any particular period is limited due to substantial capital requirements for land acquisition and construction, as well as limited land supplies and lengthy development period before positive cash flows may be generated. We develop larger scale property developments through different phases during the course of several years and we do not record sales of our property projects until the property is delivered to the customer. As a result, our results of operations from our property development business fluctuate and our annual results may not be comparable from year to year in future periods.

Critical accounting policies

Critical accounting policies are those that require application of our management’s most difficult, subjective or complex judgments often as a need to make estimates about the effects of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates that are made based on past experience, expectations for the future and other information are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. Our significant accounting policies are more fully described under Note 3 of our audited consolidated financial statements on pages F-13 to F-22 included elsewhere in this offering memorandum. We have described below the critical accounting policies that our management believes are the key sources of estimation uncertainty at the balance sheet date, which have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Amortization of toll highway operation rights

Amortization of toll highway operation rights of our toll road joint ventures is provided to write off our cost on a units-of-usage basis whereby depreciation is provided based on the share of traffic volume for a particular year over projected total traffic volume throughout the operating years of the respective toll road. These projections require the use of judgments and estimates. If such judgment or estimates prove to be inaccurate, our actual results may be materially adversely affected.

Land appreciation tax

Under the Provisional Regulations on LAT implemented upon the issuance of the Provisional Regulations of the PRC on January 27, 1995, all gains arising from transfer of real estate property in the PRC effective from January 1, 1994 are subject to LAT at progressive rates up to 60% on the appreciation of land value, being the proceeds of sales of properties less deductible expenditures including borrowing costs and all property development expenditures. The provision of LAT is estimated and made according to the requirements set forth in the relevant PRC tax laws and regulations. The actual LAT liabilities are subject to the determination by the tax authorities upon completion of the property development projects.

Impairment of assets

In accordance with applicable accounting policies, we are required to test our assets for impairment at each balance sheet date. We recognize an impairment loss when the market value

59 or the sum of future discounted net cash flows expected to be realized from the asset is less than its carrying amount. If an asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Considerable judgment is necessary to estimate the fair value of the assets and accordingly, actual results could vary significantly from such estimates.

Fair value accounting for investment properties

Beginning January 1, 2009 in connection with application of amendments to Hong Kong accounting standards regarding investment property, we reclassified properties under development for investment properties amounting to HK$17.6 million and prepaid lease payments for land amounting to HK$34.2 million from property, plant and equipment to investment properties. As of June 30, 2010, we had investment properties of HK$360.9 million. Under applicable accounting policies, we account for our investment properties at fair value, and changes in fair value will have a direct effect on our profit and loss. The determination of fair value requires the use of significant judgments and assumptions by management. If management does not correctly estimate the fair value of investment properties, it could result in the value of our investment properties being overstated or understated in any period, with corresponding gains or losses based on such overstated or understated value being recorded in our profit and loss for such period.

Changes in accounting policies We applied new and revised Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards and Interpretations (hereinafter collectively referred to as “new HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). The application of the new HKFRSs has resulted in a change in the presentation of the consolidated financial statements, in particular, the presentation of segment reporting and the inclusion of consolidated statement of comprehensive income. The changes in presentation have been applied retrospectively. The adoption of the new HKFRSs has also resulted in changes to our accounting polices in several areas that have an effect on how the results for the current and/or prior accounting years are prepared and presented. These changes are more fully described under Note 2 of our June 30, 2010 six month unaudited condensed consolidated financial statements on pages F-8 and F-9, Note 2 of our 2009 audited consolidated financial statements on pages F-30 to F-32 and under Note 2 of our 2008 audited consolidated financial statements on pages F-90 to F-92 included elsewhere in this offering memorandum. The adoption of new HKFRSs has had no material effect on how the results and financial position for the six month period ended June 30, 2010, the year ended December 31, 2009 and prior accounting periods are prepared and presented. Accordingly, no prior period adjustment has been required.

We have not early applied certain new financial reporting standards, amendments or interpretations that have been issued but are not yet effective. We are not yet in the position to reasonably estimate the impact that may arise on our results and financial position from the application of these standards, amendments or interpretations. However, the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, include: amortization of toll road operation rights and net realizable values of properties under development for sale. Amortization of toll road operation rights of the Group’s infrastructure joint venture is

60 calculated based on the traffic volume for a particular year to the projected total traffic volume throughout the operating years of the respective toll road. These projections require the use of judgments and estimates. The assessment of the net realizable values of the properties under development for sale involves, inter-alia, considerable analyses of current market price of properties of a comparable standard and location, construction costs to be incurred to complete the development based on existing asset structure and construction material price lists and a forecast of future sales based on zero growth rate of property price. If the actual net realizable values of the underlying properties under development for sale are more or less than expected as a result of change in market condition and/or significant variation in the budgeted development cost, material reversal of or provision for impairment losses may result.

Results of operations

The table below sets forth, for the periods indicated, certain revenue and expense items for our consolidated operations:

For the year ended December 31, For the six months ended June 30, 2007 2008 2009 2009 2010 2010 HK$ HK$ HK$ HK$ HK$ US$ (in thousands) Revenue ...... 2,407,770 4,630,672 4,600,424 2,464,196 2,059,624 264,512 Cost of sales ...... (1,741,789) (4,110,060) (4,061,924) (2,217,081) (1,351,911) (173,622) Gross profit ...... 665,981 520,612 538,500 247,115 707,713 90,890 Interest income ...... 96,189 19,972 23,090 9,928 14,687 1,886 Other income ...... 51,332 28,369 33,987 31,157 25,923 3,329 Other gains and losses ...... 369,554 344,639 526,533 93,592 31,692 4,070 Selling expenses...... (91,506) (112,784) (127,682) (46,302) (68,810) (8,837) Operating expenses ...... (371,302) (510,385) (358,858) (170,288) (202,743) (26,037) Share of results of joint ventures ...... 577,107 909,759 514,323 270,088 192,235 24,688 Share of result of an associate ...... 12,267 - - Finance costs ...... (100,670) (156,855) (104,435) (53,336) (45,614) (5,858) Profit before taxation ...... 1,208,952 1,043,327 1,045,458 381,954 655,083 84,131 Income tax expenses ...... (342,811) (366,693) (302,281) (113,640) (385,632) (49,526) Profit for the year/period .... 866,141 676,634 743,177 268,314 269,451 34,605 Attributable to: Owners of the Company ...... 851,067 656,429 728,080 255,091 265,465 34,093 Non-controlling interests ...... 15,074 20,205 15,097 13,223 3,986 512 866,141 676,634 743,177 268,314 269,451 34,605

61 Principal components of results of operations

Revenue

The principal component of our revenue is the sale of completed properties held for sale, which we recognize after certain criteria have been met, including the completion and delivery to the purchaser pursuant to the sale agreements. Cash distributions from our toll road business are not recorded as “Revenue” but rather as “Share of results of joint ventures.”

Cost of sales

Cost of sales principally comprises costs incurred for the development of our properties being delivered, including land acquisition costs, construction costs, staff costs and finance costs.

Interest income

Our interest income is mainly comprised of interest earned on bank deposits. For the year ended December 31, 2007, interest income also included interest earned on loans made to Sunco Property before it became our subsidiary at the end of July 2007.

Other income

Other income mainly comprises income received in respect of a development project in Jinan, subsidy income from the PRC Government, car park rental income and other sundry income. In 2009, it also included a one-time gain from trading of listed securities.

Other gains and losses

Other gains and losses is comprised of gains on disposal of interests in joint ventures, increase in fair value of investment properties, impairment losses on interests in joint ventures and losses on disposal of property, plant and equipment and net exchange gain.

Selling expenses

Selling expenses principally comprises costs associated with the marketing and sales of our properties in our property development projects.

Operating expenses

Operating expenses principally comprises staff costs, including salaries, benefits and stock options granted to employees.

Share of results of joint venture

Our share of results of joint ventures comprises our share of post-acquisition profits of toll road joint ventures, net of depreciation of toll highway operation rights, current tax and deferred tax. We also receive a small portion from a property joint venture that operates a residential property project in Shanghai.

62 Finance costs Finance costs principally comprise interest costs net of capitalized interest expenses relating to loans for property developments. Because the construction period for a project or project phase does not necessarily coincide with the interest payment period of the relevant loan, not all of the interest costs related to a project or project phase can be capitalized. As a result, our finance costs fluctuate from period to period depending on the level of interest costs that are capitalized within the reporting period.

Income tax Income tax principally comprises tax assessed on the sale of properties in the PRC, enterprise income tax and LAT. Our share of results of joint ventures is net of all taxes. Deferred tax is provided for temporary differences arising from subsidiaries mainly in respect of accelerated tax depreciation and tax losses. PRC income tax has been assessed on our PRC Subsidiaries at a 25.0% statutory tax rate commencing January 1, 2008. Prior to 2008, the PRC statutory tax rate was 33.0%.

Six months ended June 30, 2010 and 2009 Revenue. Our revenue decreased 16.4% to HK$2,059.6 million for the six months ended June 30, 2010 from HK$2,464.2 million for the six months ended June 30, 2009. We delivered 202,000 sq.m. and 432,000 sq.m., respectively, for each of the six months ended June 30, 2010 and 2009. The decrease in revenue was primarily the result of a decrease in properties delivered due to timing differences between the property delivery schedules for the first half of 2009 and the first half of 2010. We experienced an increase in property deliveries in the first half of 2009 because a significant portion of the properties which were pre-sold in 2008 were delivered in the first half of 2009. The decrease in revenue in the first half of 2010 was partially offset by an increase in the average selling price per square meter of the property delivered. The increase in average selling price per square meter was the result of the recovery of the PRC property market in 2009 and increased sales volume of higher quality properties in locations where we can charge a higher price, such as at our Parkvista Phase II development in Guangzhou City. Cost of sales. Our cost of sales decreased 39.0% to HK$1,351.9 million for the six months ended June 30, 2010 from HK$2,217.1 million for the six months ended June 30, 2009, primarily as a result of a decrease in properties delivered, partially offset by higher land costs for the properties delivered. Gross Profit. Our gross profit increased 186.4% to HK$707.7 million for the six months ended June 30, 2010 from HK$247.1 million for the six months ended June 30, 2009 and our gross profit margin also improved significantly, reaching 34.4% for the six months ended June 30, 2010, compared with 10.0% for the six months ended June 30, 2009. The significant improvement in gross profit and gross margin in the first half of 2010 as compared to the same period in 2009 was partly due to the fact that our gross profit and gross margin for the first half of 2009 were lower than normal as a result of a depressed property market in 2008, which led to the adoption of price cutting measures to accelerate the sale of slow moving inventory. A significant portion of the properties which were pre-sold in 2008 were at a lower average selling price and were subsequently delivered in the first half of 2009. Interest income. Our interest income increased 48.5% to HK$14.7 million for the six months ended June 30, 2010 from HK$9.9 million for the six months ended June 30, 2009. This increase

63 was primarily attributable to higher average bank balances during the six months ended June 30, 2010 as compared to the six months ended June 30, 2009, as a result of the receipt of the consideration on the disposal of Jihe Expressway (Eastern Section) in the middle of 2009 and the increase in deposits for pre-sales of properties during 2009. Other income. Our other income decreased 17.0% to HK$25.9 million for the six months ended June 30, 2010 from HK$31.2 million for the six months ended June 30, 2009. This decrease was primarily due to a one-time gain on the disposal of an investment in trading securities, which we recognized in the first half of 2009. Excluding the effects of the one-time gain, other income mainly included the return from a development project in Jinan, subsidy income from the PRC government and car park rental income. Other gains and losses. Our other gains decreased 66.1% to HK$31.7 million for the six months ended June 30, 2010 from HK$93.6 million for the six months ended June 30, 2009. The decrease was primarily the result of the combined effect of a HK$51.6 million reduction in foreign exchange gains resulting from appreciation of the RMB against the US dollar (which decreased from HK$60.7 million for the six months ended June 30, 2009 to HK$9.1 million for the six months ended June 30, 2010), an impairment loss on our toll road investments of HK$51.0 million in the six months ended June 30, 2010 resulting from a review of the performance of our toll road joint venture projects and an increase in the gain from changes in the fair value of our investment properties of HK$55.7 million. Selling expenses. Our selling expenses increased 48.6% to HK$68.8 million for the six months ended June 30, 2010 from HK$46.3 million for the six months ended June 30, 2009. The increase was due to increased promotion and advertising activities launched in the first half of 2010 related to pre-sales of properties at several new developments, such as Phases II and III of Phoenix City and Royal Panorama. Operating expenses. Our operating expenses increased 19.0% to HK$202.7 million for the six months ended June 30, 2010 from HK$170.3 million for the six months ended June 30, 2009. The increase in our operating expenses was mainly due to higher professional fees incurred for our investing and financing activities and the fair value expense on the share options granted in April 2010. Share of results of joint ventures. Our share of results of joint ventures decreased 28.8% to HK$192.2 million for the six months ended June 30, 2010 from HK$270.1 million for the six months ended June 30, 2009. The drop in share of results of joint ventures for the six months ended June 30, 2010 was mainly due to the loss of contribution from Jihe Expressway (Eastern Section) after its disposal in the second half of 2009 as well as the incremental increases in the applicable tax rate on certain of our infrastructure joint ventures, which started on January 1, 2008 and is being increased progressively to 25.0% over a 5-year period from the 15.0% preferential tax rate in effect prior to such time. Profit for the period. Our profit for the period slightly increased 0.4% to HK$269.5 million for the six months ended June 30, 2010 from HK$268.3 million for the six months ended June 30, 2009. Although our profit before taxation increased significantly from HK$382.0 million in the six months ended June 30, 2009 to HK$655.1 million in the six months ended June 30, 2010, our income tax expense also increased significantly from HK$113.6 million in the six months ended June 30, 2009 to HK$385.6 million in the six months ended June 30, 2010 due to the positive correlation between changes to our profit margin and the amount of LAT to which we are subject.

64 Years ended December 31, 2009 and 2008

Revenue. Our revenue remained stable in 2009 with a slight decrease of 0.7% to HK$4,600.4 million in 2009 from HK$4,630.7 million in 2008. We were able to deliver 688,000 sq.m. in 2009 compared to 682,000 sq.m. in 2008.

Cost of sales. Our cost of sales decreased 1.2% to HK$4,061.9 million in 2009 from HK$4,110.1 million in 2008. This slight decrease is reflective of the slight decrease in revenue.

Gross Profit. Our gross profit increased 3.4% to HK$538.5 million in 2009 from HK$520.6 million in 2008 and our gross margin was relatively flat, increasing to 11.7% in 2009 compared to 11.2% in 2008. As we take approximately 12 months to 18 months after pre-sales to complete construction, the relative stability of our gross profit and gross margin of the properties we delivered to our customers reflect the overall sluggishness of the property market in the PRC in 2008 and the relatively stability of selling prices in 2008, of which the properties pre-sold in 2008 were mainly delivered in 2009.

Interest income. Our interest income increased 15.5% to HK$23.1 million in 2009 from HK$20.0 million in 2008. This increase was primarily attributable to overall higher bank balances in 2009 compared to 2008.

Other income. Our other income increased 19.7% to HK$34.0 million in 2009 from HK$28.4 million in 2008 primarily as a result of the recognition of a fixed return on a property development project in Jinan as well as a gain from trading of listed securities, partially offset by declines in the amount of subsidy income from the PRC Government, rental income from car park and commercial properties, and income from the forfeiture of non-refundable sales deposits compared to 2008.

Other gains and losses. Our other gains increased 52.8% to HK$526.5 million in 2009 from HK$344.6 million in 2008 primarily due to a gain of HK$563.4 million arising from our divestiture of the Jihe Expressway (Eastern Section) which was sold on June 1, 2009 for HK$1,207.7 million, as well as a HK$40.7 million gain due to changes in the fair value of investment properties. These gains were partially offset by a HK$158.0 million impairment on our toll road investment, and the fact that we had lower gains from exchange rates in 2009 as compared to 2008 due to the appreciation of the RMB.

Selling expenses. Our selling expenses increased 13.2% to HK$127.7 million in 2009 from HK$112.8 million in 2008. This increase was due to increased pre-sales of our properties (798,000 sq.m. in 2009 compared to 338,000 sq.m. in 2008).

Operating expenses. Our operating expenses decreased 29.7% to HK$358.9 million in 2009 from HK$510.4 million in 2008. The primary reason for the decrease in our operating expenses was the effects of our cost control efforts, combined with the fact that we had fewer non-recurring provisions in 2009 than we did in 2008 as a result of late delivery of properties to customers in Beijing, as well as the reversal in 2009 of a HK$20.3 million provision made in 2008 for the fair value of a Tianjin guarantee following the repayment of RMB300.0 million of bank loans in 2009.

Share of results of joint ventures. Our share of results of joint ventures decreased by 43.5% to HK$514.3 million in 2009 from HK$909.8 million in 2008. The decrease is primarily attributable to the change of cash distribution ratios of the two expressway projects in Hebei Province in 2009, and to a lesser extent, our September 2009 divestiture of the Jihe Expressway (Eastern

65 Section), and a decrease in profit contribution from other highways, in particular, the Heye project. The 2008 Beijing Olympic Games also resulted in significantly higher volume than average on the Baojin Expressway in 2008. In addition, our share of results of joint ventures was negatively affected by incremental increases in the applicable tax rate on certain of our infrastructure joint ventures, which starting January 1, 2008 will increase progressively to 25.0% over a 5-year period from the 15.0% preferential tax rate in effect prior to such time.

Profit for the year. Our profit for the year increased 9.8% to HK$743.2 million in 2009 from HK$676.6 million in 2008 mainly as a result of the gain from the disposal of the Jihe Expressway (Eastern Section).

Years ended December 31, 2008 and 2007

Revenue. Our revenue increased 92.3% to HK$4,630.7 million in 2008 from HK$2,407.8 million in 2007. This increase was mainly attributable to the full-year consolidation of the results of Sunco Property in 2008 (as compared to only five months in 2007). Square meters delivered also reflected the effects of our acquisition of Sunco Property (682,000 sq.m. in 2008 compared to 428,000 sq.m. in 2007).

Cost of sales. Our cost of sales increased 136.0% to HK$4,110.1 million in 2008 from HK$1,741.8 million in 2007. This increase was primarily due to the full-year consolidation of the results of Sunco Property in 2008 (as compared to only five months in 2007).

Gross Profit. Our gross profit decreased 21.8% to HK$520.6 million in 2008 from HK$666.0 million in 2007 and our gross margin decreased to 11.2% in 2008 compared to 27.7% in 2007. The decrease in both gross profit and gross margin is primarily attributable to the fact that in 2008 the mix of property completed and delivered was composed mainly of low margin properties and below-market priced properties inherited as part of our acquisition of Sunco Property that had been pre-sold by Sunco Property prior to the acquisition, whereas in 2007 we completed and delivered two high margin projects in Guangzhou.

Interest income. Our interest income decreased 79.2% to HK$20.0 million in 2008 from HK$96.2 million in 2007. This decrease was mainly due to the overall reduction in our average bank balances since the second half of 2007, as well as the fact that 2007 included interest income for the loans to Sunco Property entities that were consolidated since August 2007.

Other income. Our other income decreased 44.6% to HK$28.4 million in 2008 from HK$51.3 million in 2007. This decrease was primarily due to the fact that 2007 included HK$17.6 million of tax refunds and HK$12.0 million of imputed interest income on long-term receivables, which items were not included in 2008.

Other gains and losses. Our other gains decreased 6.8% to HK$344.6 million in 2008 from HK$369.6 million in 2007 primarily due to a decrease in the amount of foreign exchange gains recognized in 2008 as compared to 2007, when the RMB appreciated against the US dollar.

Selling expenses. Our selling expenses increased 23.3% to HK$112.8 million in 2008 from HK$91.5 million in 2007. This increase was primarily due to the full-year consolidation of the results of Sunco Property in 2008 (as compared to only five months in 2007), partially offset by the savings due to tighter cost controls.

Operating expenses. Our operating expenses increased 37.5% to HK$510.4 million in 2008 from HK$371.3 million in 2007. This increase was primarily due to the full-year consolidation of

66 the results of Sunco Property in 2008 (as compared to only five months in 2007), including a HK$20.3 million provision representing the fair value of a guarantee made on behalf of Sunco Property’s Tianjin properties in connection with RMB300.0 million bank loans held by such entities.

Share of results of joint ventures. Our share of results of joint ventures increased by 57.7% to HK$909.8 million in 2008 from HK$577.1 million in 2007. This increase was primarily attributable to the continued economic growth of the PRC, in particular the Bohai Economic Region, and the effects of the 2008 Beijing Olympic Games, which resulted in a significantly higher volume than average on our two expressways in Hebei Province. In addition, our share of results of joint ventures was negatively affected by increases in the applicable tax rate on certain of our infrastructure joint ventures, which began a series of increases starting January 1, 2008 from the 15.0% preferential tax rate previously in effect, with such tax rates to continue to increase progressively to 25.0%.

Profit for the year. For the foregoing reasons, our profit for the year decreased 21.9% to HK$676.6 million in 2008 from HK$866.1 million in 2007.

Liquidity and capital resources Cash flows

We fund our short-term working capital requirements through cash flow from operations, working capital facilities and long-term borrowings. As of December 31, 2007, 2008 and 2009 and June 30, 2010, we had cash and cash equivalents of HK$1,858.9 million, HK$796.1 million, HK$2,887.1 million and HK$3,094.8 million, respectively. These sources of funding, and our ability to fund our capital expenditure needs, could be adversely affected by a decrease in cash received from our toll road joint ventures, pre-sales of our properties or an inability to obtain funds from external sources on acceptable terms or in a timely manner. We believe that our existing credit lines under our short-term loans, together with cash generated from our operations and the proceeds of this Offering, will be sufficient to finance our working capital needs for the next 12 months.

Operating activities

We generated HK$2,494.8 million and HK$192.6 million of net cash from operating activities in 2009 and the first half of 2010, respectively. We used HK$1,730.8 million of net cash in operating activities in 2008 and HK$1,695.1 million of net cash in operating activities in 2007, primarily to pay land premium on our Phoenix City Project. The strong performance in property sales in the first half of 2010 increased the balance of deposits from pre-sale of properties, which in turn contributed to the increase in net cash from operating activities during the period. The increase in cash from deposits from pre-sales of properties was partially offset by the use of cash as prepayment for land leases in the first half of 2010, in particular a HK$829.5 million prepayment for a land lease in Guangzhou, in light of the increased level of development activity on our properties in the first half of 2010 as compared to 2009, when we were more focused on reducing our inventories than construction activity. Although our non-cash adjustments to reconcile net profit to cash flows resulted in slightly lower operating cash flows prior to working capital in 2009 as compared to 2008, we nevertheless were able to generate cash from operating activities in 2009 due to improvements in our working capital requirements, primarily as a result of an increase in deposits from pre-sale of properties as a result of the recovery of the PRC

67 property market in 2009 and a significant decrease in our payment for land leases. In 2008, we had increases in our working capital requirements as a result of a decrease in deposits from pre-sales of properties, as well as payments for land leases.

Investing activities

We generated HK$190.7 million, HK$1,049.9 million and HK$1,014.7 million in the first half of 2010 and in 2009 and 2008 respectively, of net cash from investing activities and used HK$700.4 million of net cash in investing activities in 2007. For the six months ended June 30, 2010, we received HK$364.6 million of dividends from joint ventures and we used HK$213.0 million to settle the first installment of the International City Acquisition. In 2009, we generated HK$1,251.1 million of cash from divestitures of interests in certain toll road ventures and received a HK$460.3 million in dividends from joint ventures and were partially offset by advances to investees (including approximately HK$716.5 million relating to the Tianjin projects). In 2008, we generated HK$671.6 million from returns on investments from joint ventures and received HK$410.9 million in dividends from our joint ventures, which were partially offset by an increase in our long-term receivables. In 2007, we used HK$700.4 million on investing activities, and received HK$474.5 million in dividends from joint ventures, and had HK$255.2 million of returns on investments in infrastructure joint ventures. Our 2007 investing activities included, generating HK$128.0 million of proceeds from the disposal of interests in infrastructure joint ventures, as well as using HK$446.2 million and HK$1,276.0 million, respectively, of cash for the acquisition of 49.0% and 39.5% interests in Sunco Property.

Financing activities

We used HK$182.1 million of net cash for financing activities for the six months ended June 30, 2010, HK$1,460.0 million of net cash for financing activities in 2009, and HK$458.6 million of net cash for financing activities in 2008, and generated HK$3,096.9 million of net cash from financing activities in 2007. In the first half of 2010, we raised HK$816.3 million of new borrowings and repaid HK$616.8 million of borrowings. We paid interest of HK$165.4 million and dividend of HK$222.0 million during the period. In 2009, the use of cash primarily reflects the fact that we raised HK$1,323.4 million of new bank borrowings but repaid HK$2,114.0 million of outstanding borrowings, including US$82.5 million of our Syndicated Loan. In 2008, we raised HK$2,103.8 million in new borrowings and repaid HK$1,821.7 million of outstanding borrowings, in addition to paying interest and dividends. In 2007, we raised HK$4,826.1 million of new borrowings (including the issuance of our 2007 Fixed Rate Notes and our 2007 Floating Rate Notes), and used HK$1,623.1 million to repay outstanding borrowings, finance the new premium due by Sunco Property and refinance existing debt at that time. In 2007, 2008 and the first half of 2010, the incremental increases in our borrowings were primarily used to finance our property projects.

Indebtedness

Our total consolidated bank and other borrowings as of December 31, 2007, 2008 and 2009 and June 30, 2010 were HK$6,723.7 million, HK$7,162.6 million, HK$6,401.3 million and HK$6,613.7 million, respectively. Long-term bank and other borrowings due more than one year from the respective dates were HK$6,114.8 million, HK$5,737.7 million, HK$5,200.0 million and HK$5,226.4 million as of December 31, 2007, 2008 and 2009 and June 30, 2010, respectively. Total finance costs were HK$414.9 million, HK$469.6 million, HK$404.8 million and HK$174.5 million, for each

68 of the years ended December 31, 2007, 2008 and 2009 and the six months ended June 30, 2010, respectively. The average interest rate was 6.9%, 6.0% and 5.1% per annum for the years ended December 31, 2007, 2008 and 2009, respectively.

As of June 30, 2010, our offshore bank and other borrowings included a US$220.0 million loan facility, a HK$200.0 million revolving and term loan facility, and our 2004 Guaranteed Notes, 2007 Fixed Rate Notes and 2007 Floating Rate Notes.

Our ratio of net long-term bank and other borrowings (being non-current bank and other borrowings and current portion of long-term bank and other borrowings less bank balance and cash (including pledged bank deposits)) to shareholders’ equity was 54.7%, 66.2%, 33.6% and 33.9% as of December 31, 2007, 2008 and 2009 and June 30, 2010, respectively.

As of June 30, 2010:

• we and our consolidated subsidiaries had consolidated indebtedness (borrowings, contingent liabilities and capital commitments) of HK$11,105.5 million (US$1,426.3 million);

• the Subsidiary Guarantors did not have any indebtedness but have guaranteed our obligations under the Syndicated Loan and the 2007 Notes; and

• the Non-Guarantor Subsidiaries had total indebtedness of HK$10,905.9 million (US$1,400.6 million), which included total contingent liabilities of HK$3,958.9 million (US$508.4 million), capital commitments of HK$532.9 million (US$68.4 million) and secured indebtedness of HK$1,897.5 million (US$243.7 million).

Other than the foregoing, neither we nor any of our subsidiaries had any secured indebtedness as of June 30, 2010.

The following table sets forth our debt by maturity as of the dates indicated:

As of December 31, As of June 30, 2007 2008 2009 2009 2010 2010 HK$ HK$ HK$ HK$ HK$ US$ (in millions) Repayable: Within one year ...... 608.9 1,424.9 1,201.3 1,552.9 1,387.4 178.2 After one year but within two years ..... 601.8 648.4 2,081.2 2,944.6 3,431.0 440.6 After two years but within five years .... 4,008.3 3,558.3 3,118.8 3,118.4 1,795.3 230.6 After five years ...... 1,504.7 1,531.0 - - - - Total borrowings ...... 6,723.7 7,162.6 6,401.3 7,615.9 6,613.7 849.4

Our borrowings are primarily denominated in US dollars. Other than our 2004 Guaranteed Notes and our 2007 Fixed Rate Notes, our borrowings were primarily on a floating rate basis as of June 30, 2010.

69 Contractual commitments and capital expenditures

In addition to the payment obligations under our borrowings set forth above, we also have continuing obligations to make future minimum lease payments under non-cancellable operating leases, which represent our rentals payable on our office premises with lease periods ranging from two to twenty years. These commitments fall due as follows:

As of December 31, As of June 30, 2007 2008 2009 2009 2010 2010 HK$ HK$ HK$ HK$ HK$ US$ (in millions) Repayable: Within one year ...... 15.8 20.2 12.5 10.8 8.7 1.1 In the second to fifth year inclusive ...... 21.3 48.9 3.8 7.1 1.2 0.2 After the fifth year ...... 171.1 125.8 ---- Total commitments ...... 208.2 194.9 16.3 17.9 9.9 1.3

We have made, and expect to continue to make, substantial capital expenditures in connection with investments in toll road joint venture projects. Purchases of land for our property development business are not considered capital expenditures unless we hold the property for investment purposes. As of June 30, 2010, we had one property held for investment purposes.

As of June 30, 2010, in line with industry practice, we provided guarantees of HK$3,958.9 million in favor of our customers in respect of the mortgage loans provided by the banks to such customers for their purchases of our properties, compared to HK$3,433.2 million as of December 31, 2009. These guarantees will be released when the customers pledge their real estate certificates as security to banks for the mortgage loans granted.

As of June 30, 2010, we had deposits of HK$143.5 million charged as security in favor of banks for mortgage loans granted to purchasers of properties in over 10 property projects and short-term facilities granted to our Group. In addition, properties valued at HK$2,168.6 million were pledged as security for certain loan facilities granted to eight property projects, and the shares of certain of our subsidiaries were pledge to secure obligations under the Syndicated Loan. Other than the foregoing pledge of shares of certain subsidiaries under the Syndicated Loan, there were no other material charges on our assets or those of our Non-Guarantor Subsidiaries as of June 30, 2010.

Off-balance sheet arrangements

Except for the contingent liabilities set forth above, we have not entered into any off-balance sheet guarantees or other commitments to guarantee the payment obligations of any third parties. While we have not, to date, entered into any hedging transactions to reduce our exposure to foreign exchange risk, we may, following this Offering, enter into certain foreign exchange or interest rate hedging arrangements in respect of our exposure to US dollar- denominated liabilities under the Notes. See “Risk factors—Risks relating to the PRC, Hong Kong and the Asia region—Fluctuation of the Renminbi, particularly against the US dollar, could materially affect our financial condition and results of operations.”

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

The economy of the PRC

According to the PRC’s National Bureau of Statistics, the PRC’s real GDP grew at an average annual growth rate of approximately 10.0 % during the five-year period from 2005 to 2009, making the PRC one of the fastest growing economies in the world. In 2009, the PRC’s nominal GDP was approximately RMB 33,535.3 billion, while real GDP grew approximately 8.7 % from 2008.

The table below sets out selected economic statistics of the PRC for the years indicated

2004 2005 2006 2007 2008 2009 Nominal GDP (RMBbn) ...... 15,987.8 18,321.7 21,192.4 25,730.6 30,067.0 33,535.3 Real GDP growth rate (%) ...... 10.1 10.2 10.7 11.4 9.0 8.7 Per capita GDP (RMB) ...... 12,336 14,053.0 16,165.0 19,524 22,698 25,125 Total investment in fixed assets (RMBbn) ...... 7,047.7 8,887.4 10,987.0 13,732.4 17,282.8 22,484.6 Fixed-asset investment growth (%) ...... 26.6 26.1 24.0 25.0 25.9 30.1 Foreign direct investment Actual investment (US$bn) ..... 60.6 60.3 63.0 74.8 92.4 90.0 Actual investment growth ..... 13.3 -0.5 4.5 18.7 23.5 -2.6

Sources: China Statistical Yearbook 2009 and China Statistical Bulletin 2004 – 2009

Overview of the highway infrastructure market in the PRC

Overview of PRC transportation systems

The strong economic growth has created pressures on the existing domestic transport infrastructure and there is a need for a more efficient and comprehensive infrastructure to cope with the increasing demands.

There are four major modes of passenger and freight traffic in the PRC: road, railway, waterways and civil aviation. As shown in the tables below, turnover volume of freight traffic and turnover volume of passenger traffic in the PRC have recorded substantial annual growth from 1998 to 2009. During this period, turnover volume of freight traffic by roads, railways, waterways and civil aviation grew at a compound rate of approximately 18.8%, 6.6%, 10.4% and 12.8% per annum, respectively, while the turnover volume of passenger traffic for roads, railways, waterways and civil aviation grew at a compound rate of approximately 7.7%, 6.9%, (4.9%) and 14.0% per annum, respectively.

71 Turnover volume of freight traffic (100 million ton-km) Freight traffic volume By By By civil by road as a Year By road railway waterways aviation Total percentage of total 1998 ...... 5,483.4 12,517.1 19,405.8 33.5 37,439.8 15% 1999 ...... 5,724.3 12,838.4 21,263.0 42.3 39,868.0 14% 2000 ...... 6,129.4 13,662.6 23,734.2 50.3 43,576.5 14% 2001 ...... 6,330.4 14,575.1 25,988.9 43.7 46,938.1 13% 2002 ...... 6,782.5 15,515.6 27,510.6 51.6 49,860.3 14% 2003 ...... 7,099.0 17,247.0 28,715.8 57.9 53,859.0 13% 2004 ...... 7,841.0 19,289.0 41,429.0 71.8 69,445.0 11% 2005 ...... 8,693.0 20,726.0 49,672.0 78.9 80,258.0 11% 2006 ...... 9,754.2 21,954.4 55,485.7 94.3 88,840.0 11% 2007 ...... 11,354.7 23,797.0 64,284.8 116.4 101,419.0 11% 2008 ...... 32,868.2 25,106.3 50,262.7 119.6 110,301.0 30% 2009 ...... 36,383.5 25,239.2 57,439.9 126.3 121,211.3 30%

Source: National Bureau of Statistics of China and China Statistical Yearbook 2009 Note: Freight traffic volume = Weight of freight (tons) x Distance traveled (km)

Turnover volume of passenger traffic (100 million passengers-km) Freight traffic volume By By By civil by road as a Year By road railway waterways aviation Total percentage of total 1998 ...... 5,942.8 3,773.4 120.3 800.2 10,636.7 56% 1999 ...... 6,199.2 4,136.0 107.3 857.3 11,299.8 55% 2000 ...... 6,657.4 4,532.6 100.5 70.5 12,261.0 54% 2001 ...... 7,207.1 4,766.8 89.9 1,091.4 13,155.2 55% 2002 ...... 7,805.8 4,969.4 81.8 1,268.7 14,125.7 55% 2003 ...... 7,695.6 4,788.6 63.1 1,263.2 13,810.5 56% 2004 ...... 8,748.4 5,712.2 66.3 1,782.3 16,309.1 54% 2005 ...... 9,292.1 6,062.0 67.8 2,044.9 17,466.7 53% 2006 ...... 10,130.8 6,622.1 73.6 2,370.7 19,197.2 53% 2007 ...... 11,506.8 7,216.3 77.8 2,791.6 21,592.6 53% 2008 ...... 12,476.1 7,778.6 59.2 2,882.8 23,196.7 54% 2009 ...... 13,450.7 7,878.9 69.1 3,374.9 24,773.6 54%

Source: China Statistical Yearbook 2009 Note: Passenger traffic volume = Number of passengers x Distance traveled (km) Roads are normally used for short-and medium-distance travel. The strong economic growth in the PRC increased the number of shorter journeys which cannot be covered efficiently by rail or sea. The following factors are considered to have promoted the growth in the use of the PRC’s road network: • increasing demand for flexible “door-to-door” travel under a more market-oriented, less centrally-planned economy; • increasing demand for industrial areas and export-processing zones requiring more short and medium-distance travel to and from urban centers; • increasing labor mobility and business-related travel;

72 • expanding township enterprises which are unable to compete with state enterprises for limited railway quotas; and

• increasing ownership of freight and passenger vehicles in the PRC (see table below).

Civil vehicle ownership from 1993 to 2009

Million Passenger vehicle Freight vehicle 60

50

40

30

20

10

0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: China Statistical Yearbook 2009

Highway infrastructure markets in provinces where we operate expressways

Hunan Province

According to information published in the China Statistical Yearbook 2009 and the 2009 Statistical Report on Domestic Economy and Social Development of Henan, the GDP of Hunan Province reached RMB1,293.1 billion, which was 14% higher than that of the previous year. Provincial government revenue was RMB 150.5 billion and this revealed an actively growing economy. In 2009, a total of 176 major projects in the province including steel, medicine, tobacco, power station and expressway with total completed investment of RMB 123.0 billion were under construction. Transportation industry also showed a stable development. Turnover of freight transport was 253.8 billion ton-km and turnover of passenger transport was 132.9 billion passenger-km in year 2009. Turnover of freight and passenger transport by highway were 126.0 billion tons km and 60.1 billion passenger-km respectively. At the end of year 2009, total length of expressway therein was 2,227 km.

Hebei Province

Following the 2008 Beijing Olympics and the economic fusion of the Beijing-Tianjin-Hebei and the Bohai Economic Circles, Hebei plays a major supporting role to the economic development of the Beijing, Tianjin and even the entire Bohai Bay area. According to information published in the China Statistical Yearbook 2009 and the 2009 Statistical Report on Domestic Economy and Social Development of Hebei, the GDP of Hebei exceeded the RMB 1,600.0 billion benchmark to

73 RMB 1,702.7 billion in 2009, representing a growth of 10%. With the rapid growth in industrial production, the economy of Hebei grew steadily. In 2009, the total value of import and export trade reached US$ 29.6 billion, in which import trade decreased by 3.4% to US$ 13.9 billion and export trade decreased by 34.6% to US$ 15.7 billion respectively. The total value-added of industry of Hebei amounted to RMB 790.2 billion which rose by 9.6%. The length of completed expressway amounted to 3,303.3 km at the end of 2009. We believe that the need for transportation will surge with the rapid economic growth of Hebei.

Overview of the property market in the PRC

According to the PRC’s National Bureau of Statistics, prices for real estate prices in the PRC increased from 2004 to 2009, with the average price of residential properties in the PRC increasing from approximately RMB 2,608.0 per sq.m. in 2004 to approximately RMB 3,576.0 per sq.m. in 2008, representing an annual compound growth rate of 11.1%.

In addition, investment in real estate development in residential properties increased from RMB 883.7 billion in 2004 to RMB 2,561.9 billion in 2009, representing an annual compound growth rate of 23.7%.

The table below sets out selected data relating to the property market in the PRC for the periods indicated.

2004 2005 2006 2007 2008 2009 Total investment in real estate (RMBbn) . . 1315.8 1,590.9 1,942.2 2,528.9 3,120.3 3,623.2 Investment in real estate development in residential properties by real estate enterprises (RMBbn) ...... 883.7 1,086.1 1,363.8 1,445.0 1,807.1 2,561.9 Total GFA sold (sq.m. millions) ...... 382.3 554.9 618.6 773.5 659.7 937.1 GFA of residential properties sold (sq.m. millions) ...... 338.2 495.9 554.2 701.3 592.8 852.9

Source: China Statistical Yearbook 2009

Urbanization rate and disposable income levels

The PRC’s National Bureau of Statistics estimates that the PRC’s urbanization rate will reach 50% in 2020 and 70% by 2050. If this materializes, it is expected to create greater demand for properties in the cities. According to the PRC’s National Bureau of Statistics, the urban population in the PRC has increased from approximately 543 million in 2004 to 621.9 million in 2009. During the same period, the urban resident per capita disposable income has also increased from RMB 9,422 in 2004 to RMB 17,175 in 2009. Such increased purchasing power is a positive sign for the property market as it may be an indication that an increasing number of high income people are entering the property market.

74 The table below sets out selected figures showing the urbanization rate in the PRC and the increase in per capita disposable income levels of the urban population in the PRC for the periods indicated.

2004 2005 2006 2007 2008 2009 Urban population (millions) ...... 543 562 577 594 607 622 Total population (millions) ...... 1300 1,308 1,314 1,321 1,328 1,335 Urbanization rate (%) ...... 41.8 43.0 43.9 44.9 45.7 46.6 Per capita disposable income of urban households (RMB) ...... 9,422 10,493 11,760 13,786 15,781 17,175

Source: China Statistical Yearbook 2009

Property markets in cities where we operate

The property market in Suzhou

Suzhou is a city on the lower reaches of the Yangtze River on the shores of Lake Taihu in the province of Jiangsu. According to the 2009 Statistical Report on Domestic Economy and Social Development of Suzhou, a total GFA of approximately 18.8 million sq.m. of commodity properties was completed in Suzhou in 2009. In 2009, total real estate investment amounted to approximately RMB 72.4 billion, representing an increase of 0.9% over 2008. In 2008 the total revenue from commodity property sales in Suzhou has increased to approximately RMB 57.3 billion; down 41.8%, of total revenue from commodity property sales in Suzhou, approximately RMB 45.9 billion were residential properties sales, representing a decrease of approximately 44.5% over 2007.

The property market in Changzhou

Changzhou is among the key cities in Jiangsu, one of the most affluent provinces in the PRC. The city is within the Yangtze River Delta and close to the PRC’s largest city, Shanghai. As of December 31, 2009, Changzhou had a population of approximately 4.5 million. During the past six years, Changzhou’s average GDP growth was 18.0%, reaching RMB 251.9 billion in 2009. The table below sets out selected economic statistics of Changzhou for the periods indicated.

2004 2005 2006 2007 2008 2009 Nominal GDP (RMBbn) ...... 110.1 130.2 156.0 188.0 220.2 251.9 Real GDP growth rate (%) ...... 15.5 15.1 15.2 15.6 12.4 11.7 Per capita GDP (RMB) ...... 31,665 37,174 37,210 43,673 50,283 56,861

Sources: 2004–2009 Statistical Reports on Domestic Economy and Social Development of Changzhou

Commodity property market in Changzhou

According to 2009 Statistical Report on Changzhou Domestic Economy and Social Development, a total GFA of approximately 10.8 million sq.m. of commodity properties was sold in 2009, which represented an increase of approximately 106.9% over 2008. A total GFA of approximately 7.9 million sq.m. of commodity residential properties was sold in 2009, which represented an increase of approximately 85.0% over 2008.

75 The property market in Tianjin Tianjin is located in the northeast of the North China Plain, adjacent to Beijing and the Bohai Sea and encircled by Hebei Province. The city possesses the largest man-made harbor in the north. Its Tianjin Port is the ocean gateway for the cities of Beijing and Tianjin and Hebei. It is also the eastern starting point for the Asia-Europe continental bridge. According to the Bureau of Statistics of Tianjin, as of December 31, 2009, Tianjin had a population of approximately 12.3 million. The city has experienced a high GDP growth rate for the six years from 2004 to 2009. In 2009, Tianjin’s GDP reached approximately RMB 750.1 billion, representing a per capita GDP of approximately RMB 62,403 and a total completed investment in real estate was approximately RMB 73.5 billion. The table below sets out selected economic statistics of Tianjin for the periods indicated. 2004 2005 2006 2007 2008 2009 Nominal GDP (RMB in billions) ...... 311.1 370.0 435.9 505.0 635.4 750.1 Real GDP growth rate (%) ...... 15.7 14.5 14.4 15.1 16.5 16.5 Per capita GDP (RMB) ...... 31,550 35,457 40,961 45,829 55,473 62,403 Per capita disposable income for urban households (RMB) ...... 11,467 12,639 14,283 16,357 19,433 21,430

Sources: 2004-2009 Statistical Reports on Domestic Economy and Social Development of Tianjin

Commodity property market in Tianjin According to the 2009 Statistical Report on Tianjin Domestic Economy and Social Development, a total GFA of approximately 28.4 million sq.m. of commodity properties was completed in Tianjin in 2009. A total GFA of approximately 15.90 million sq.m. of commodity properties was sold in Tianjin in 2009, which represented an increase of approximately 27.0% compared to 2008. The amount of turnover of commodity properties of approximately RMB 109.5 billion was sold in Tianjin in 2009.

The property market in Luoyang Luoyang is located in the western part of Henan Province. It borders the provincial capital of Zhengzhou to the east, Nanyang to the south, Sanmenxia to the west, Jiyuan to the north. It is also one of the four great ancient capitals of the PRC which are Beijing, Nanjing, Luoyang and Xian. According to the 2009 Statistical Report on Domestic Economy and Social Development of Luoyang prepared by the Bureau of Statistics of Luoyang, as of December 31, 2009, Luoyang had a population of approximately 6.4 million. The nominal GDP of Luoyang was estimated approximately RMB 207.5 billion in 2009, increased by approximately 13.0% from 2008, representing a per capita GDP of approximately RMB 32,314. The urban resident per capita disposable income in Luoyang reached approximately RMB 15,949 in 2009, representing an increase of approximately 9.0% compared to 2008.

Commodity property market in Luoyang According to the 2009 Statistical Report on Domestic Economy and Social Development of Luoyang prepared by the Bureau of Statistics of Luoyang, by the end of 2009, total real estate investment amounted to approximately RMB 13.8 billion, representing a year-on-year increase of 25.0%. During the same period, a total residential GFA of approximately 3.8 million sq.m. has been sold, representing a year-on-year increase of approximately 40.1%.

76 The property market in Zhengzhou

Zhengzhou, located in the Central Plains with the Yellow River to the north and Mountains Songshan to the west and the Huanghuai Plains to both east and the south, is the capital of Henan Province. At the junction of the Beijing-Guangzhou and Lanzhou-Lianyungang railways, it is also the political, economic, cultural, and transportation center of Henan. According to the Bureau of Statistics of Zhengzhou, as of December 31, 2009, Zhengzhou had a population of approximately 7.5 million. In 2009, Zhengzhou urban resident per capita disposable income was approximately RMB 17,117, an increase of 8.8% compare to 2008.

The nominal GDP of Zhengzhou was estimated approximately RMB 330.0 billion in 2009, an increase of approximately 12.0% from 2008.

Commodity property market in Zhengzhou

According to the 2009 Statistical Report on Domestic Economy and Social Development of Zhengzhou prepared by the Bureau of Statistics of Zhengzhou, in 2009, a total sum of approximately RMB 51.4 billion was invested in real estate projects, reflecting a year-on-year increase of 18.1%. Of the total, RMB 39.4 billion was invested in residential sector, up 15.3% as compared to last year. Transacted average price for residential reached RMB 4,294 per sq.m.

The property market in Beijing

Beijing is the national capital of the PRC and located at the mouth of Yangzi, has long been a political, commercial and cultural center of the nation. It is also one of the four municipalities in China under direct administration of the PRC central government. According to the Bureau of Statistics of Beijing, as of December 31, 2009, Beijing had a population of approximately 17.6 million. The city has experienced a high GDP growth rate for the six years from 2004 to 2009. In 2009, Beijing’s GDP reached approximately RMB 1,186.6 billion, representing a per capita GDP of approximately RMB 68,788 and a total investment in real estate was approximately RMB 233.8 billion. The table below sets out selected economic statistics of Beijing for the periods indicated:

2004 2005 2006 2007 2008 2009 Nominal GDP (RMBbn) ...... 428.3 681.5 772.0 900.6 1,048.8 1,186.6 Real GDP growth rate (%) ...... 13.2 11.1 12.0 12.3 9.0 10.1 Per capita GDP (RMB) ...... 41,599 44,969 49,505 56,044 63,029 68,788 Per capita disposable income for urban households (RMB) ...... 15,638 17,653 24,725 21,989 24,725 26,738

Sources: 2004-2009 Statistical Reports on Domestic Economy and Social Development of Beijing

Commodity property market in Beijing

According to the 2009 Statistical Report on Domestic Economy and Social Development of Beijing, a total GFA of approximately 26.8 million sq.m. of real estates was completed in Beijing in 2009. A total GFA of approximately 23.6 million sq.m. of commodity properties was sold in Beijing in 2009, which represented an increase of approximately 76.9% compared to 2008.

77 The property market in Jinan

Jinan is the capital city of Shandong Province. Jinan is located in the mid-western part of Shandong Province. Nearby to the south is the Mountains Tai, officially recognized by the United Nations as part of the world’s natural and cultural heritage. To the north is the Yellow River, which has been called the “cradle of the Chinese nation.” According to the 2009 Statistical Report on Domestic Economy and Social Development of Jinan prepared by the Bureau of Statistics of Jinan, as of December 31, 2009, Jinan had a population of approximately 6.7 million. The nominal GDP of Jinan was approximately RMB 335.1 billion in 2009 while real GDP growth approximately 12.2% from 2008, representing a per capita GDP of approximately RMB 50,376. The urban resident per capita disposable income in Jinan reached approximately RMB 22,722 in 2009, representing an increase of approximately 9.2% compared to 2008.

Commodity property market in Jinan

According to the 2009 Statistical Report on Domestic Economy and Social Development of Jinan prepared by the Bureau of Statistics of Jinan, by December 31, 2009, real estate investments in 2009 amounted to a total of approximately RMB 33.3 billion, up 21.3% compared to 2008. Of the total, the shares of residential sector amounted to approximately RMB 25.6 billion up 14.8%.

The property market in Guangzhou

Guangzhou

Guangzhou is the largest city in the southern PRC and the capital of Guangdong Province, located in the central southern region of the province. In 2009, Guangzhou had a population of approximately 10.3 million. The city experienced a high GDP growth rate for the six years from 2004 to 2009. Guangzhou’s GDP reached approximately RMB 911.3 billion in 2009, representing a per capita GDP of approximately RMB 88,178. The table below sets out selected economic statistics of Guangzhou for the periods indicated.

2004 2005 2006 2007 2008 2009 Nominal GDP (RMBbn) ...... 445.1 515.4 606.8 705.1 821.6 911.3 Real GDP growth rate (%) ...... 15.0 12.9 14.7 14.5 12.3 11.5 Per capita GDP (RMB) ...... 45,906.0 53,809.0 62,211 70,186 80,549 88,178

Sources: 2004–2009 Statistical Reports on Domestic Economy and Social Development of Guangzhou

Commodity property market in Guangzhou

According to the 2009 Statistical Report on Domestic Economy and Social Development of Guangzhou, properties with a total GFA of 9.6 million sq.m. were completed in Guangzhou in 2009, representing a decrease of 9.1% compared to 2008. A total of 13.8 million sq.m. of commodity property was sold, an increase of approximately 34.2% from 2008.

78 The property market in Shanghai

Shanghai

Shanghai sits on the Yangtze River Delta on the PRC’s eastern coast and is administratively equal to a province. In 2009, Shanghai had a population of approximately 19.2 million. According to the 2009 Statistical Report on Domestic Economy and Social Development of Shanghai, the city experienced a high GDP growth rate for the six years from 2004 to 2009. Shanghai’s GDP reached approximately RMB 1,490.1 billion in 2009, representing a per capita GDP of approximately RMB 77,556. The table below sets out selected economic statistics of Shanghai for the periods indicated.

2004 2005 2006 2007 2008 2009 Nominal GDP (RMBbn) ...... 745.0 914.4 1029.7 1200.1 1369.8 1,490.0 Real GDP growth rate (%) ...... 13.6 11.1 12.0 13.3 9.7 8.2% Per capita GDP (RMB) ...... 46,338 51,529 57,695 66,367 73,124 77,556

Sources: 2004–2009 Statistical Reports on Domestic Economy and Social Development of Shanghai

Commodity property market in Shanghai

According to the 2009 Statistical Report on Domestic Economy and Social Development of Shanghai, a total GFA of approximately 21.0 million sq.m. of real estates was completed in Shanghai in 2009. A total GFA of approximately 29.3 million sq.m. of residential commodity properties was sold in Shanghai in 2009, which represented an increase of approximately 48.9% compared to 2008. The amount of turnover of residential commodity properties of approximately RMB 362.0 billion was sold in Shanghai in 2009.

79 Description of the Issuer History and introduction

The Issuer was incorporated under the laws of the British Virgin Islands on March 23, 2010. As of the date of this offering memorandum, it is authorized to issue a maximum of 50,000 shares of a single class each with a par value of US$1.00 and has one share in issue. The Issuer is our wholly- owned subsidiary and, as of the date of this offering memorandum, carries on and has carried on no business other than entering into arrangements for the issue of the Notes and the lending of the net proceeds thereof to us. As of the date of this offering memorandum, the Issuer has no outstanding borrowings and has no contingent liabilities other than the issue of the Notes. The Issuer is not required under the laws of the British Virgin Islands to file, and does not propose to file, any of its interim or annual accounts. As of the date of this offering memorandum, the Issuer has no subsidiaries.

Management

The directors of the Issuer as of the date of this offering memorandum are:

Zen Wei Pao, William

Ko Yuk Bing

Chan Kam Hung

Fong Shiu Leung, Keter

Zen Wei Peu, Derek

The registered office of the Issuer is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. The correspondence address of each of the directors of the Issuer for the purposes of his directorship in the Issuer and its principal place of business in Hong Kong is at Suite 501, 5th Floor, Tower 6, The Gateway, 9 Canton Road, Tsimshatsui, Kowloon, Hong Kong.

The Issuer has no employees.

80 Corporate structure Our Company was incorporated with limited liability in Bermuda on March 29, 1996. Our shares have been listed on the main board of the Hong Kong Stock Exchange since July 1996. We are an investment holding company and we undertake our business primarily through our subsidiaries and joint ventures. Our investments in toll road projects are held through our wholly- owned subsidiaries, which, together with their PRC joint venture partners, have established joint ventures for investment in various projects. Our interests in property development projects are primarily held through our PRC subsidiaries. The following chart is a simplified organization chart showing our principal shareholders, our corporate holding structure and our significant operating subsidiaries as of the date of this offering memorandum, and indicates Restricted Subsidiaries and Subsidiary Guarantors under the Notes. We have prepared and provided this chart solely for the convenience of the reader, and the chart necessarily omits certain details of our corporate structure. For more details on our subsidiaries and joint ventures, see “Our business.” Shaded boxes indicate Guarantors under the Notes.

Shenzhen Investment Wai Kee and its subsidiaries Other shareholders and its subsidiary

27.32% 38.65% 34.03%

Road King Infrastructure Limited 100% RKI Finance (2010) Limited (Bermuda)+

(Issuer) 100% 100% 100%

Road King (China) Various Hong Kong and RK (China) Properties Infrastructure Limited BVI adminstrative Limited (BVI)*++ (BVI)*++ companies*++

100% 100% 100% RK Properties Holdings ++ BVI holding Hong Kong Limited (BVI)* companies*++ holding company*++ 100%

++ PRC toll road PRC toll road BVI holding companies* JVs(1) JV(2)

94.74% 100% PRC property development ++ Sunco Property* holding companies*(3)

100% 31.50% PRC property development (5) holding Property JV companies*(4)

* Restricted Subsidiary + Guarantor ++ Subsidiary Guarantor (Our financing subsidiaries, Road King Infrastructure Finance Limited, Road King Infrastructure (2004) Limited, RKI Finance Limited, Road King Infrastructure Finance (2007) Limited and RK Properties Finance (2007) Limited, will not be Subsidiary Guarantors. The BVI holding companies that invested in the joint ventures which in turn operate the Heye Highway, Baojin Expressway and Tangjin Expressway toll road projects and Intersafe Investments Limited, the BVI holding company, that previously held our interest in the Jihe Expressway (Eastern Section) are Subordinated Guarantors, as defined in the “Terms and Conditions of the Notes”).

81 (1) Includes joint ventures that operate the following toll road projects: Yulin City Highway, Dongguan Highway, Taiyu Highway, Yuci City Bypass, Shijin Highway, Hanguan Highway, Bengbu Huaihe Bridge Highway, Bengbu Huaimeng Highway, Hehuai Highway, Chaoyanglu Huaihe Bridge, Changyi Expressway, Baojin Expressway, Tangjin Expressway, Heye Highway and Xunan Highway. (2) Includes the joint venture that operates the Airport Highway toll road project. (3) PRC property development holding companies through which our wholly-owned interest in the following major property development projects are held: Vista Panorama, Grand Metropolis, Royal City, Parkvista, Huadu Project, Shine June Garden, Phoenix City, Jianguomen Project and International City. (4) Sunco Property wholly-owns 12 major property development projects, namely, Songs & Sea, Forest Creek, Sun Town, Mountain My Life, The Heaven by Lakeside, Blue County, Unusual Landscape, Royal Panorama, Central Special Zone, Sunco Town, World & City and Palen Villas. (5) Sunco Property has a 31.5% interest in a property joint venture project, namely The Riverside.

Principal subsidiaries

The following table sets forth the subsidiaries that, in the opinion of our Directors, principally affect our results and/or constitute a substantial portion of our net assets:

Proportion of Issued and fully nominal value of paid ordinary issued ordinary share capital/ shares capital/ registered registered capital Place of capital at held by the Name of incorporation/ Place of December 31, Company Principal subsidiary registration operation 2009 Directly Indirectly activities Changzhou Great PRC PRC US$91,745,300 - 100% Development Gallop and sale of Properties properties Developments Ltd.* Changzhou Great PRC PRC RMB123,500,000 - 100% Development Superior and sale of Properties properties Developments Ltd.* Changzhou PRC PRC RMB100,000,000 - 100% Development Greatmind and sale of Properties properties Developments Ltd.* Guangzhou Junde PRC PRC RMB60,000,000 - 100% Development Real Estate and sale of Limited* properties Guangzhou Junya PRC PRC RMB60,220,000 - 100% Development Real Estate and sale of Limited* properties Guangzhou PRC PRC RMB456,593,792 - 100% Development Junyue Real and sale of Estate Limited* properties

82 Proportion of Issued and fully nominal value of paid ordinary issued ordinary share capital/ shares capital/ registered registered capital Place of capital at held by the Name of incorporation/ Place of December 31, Company Principal subsidiary registration operations 2009 Directly Indirectly activities RK Properties BVI **** US$1 - 100% Provision of Finance financial (2007) Limited services RK Properties BVI **** US$1 - 100% Investment Holdings holding Limited RK Properties Hong Kong Hong Kong HK$1 - 100% Provision of Management management Limited services RKI Finance BVI **** US$1 100% - Provision of Limited financial services Road King BVI PRC HK$1,300,000,000 100% - Investment (China) holding Infrastructure Limited Road King BVI **** US$1 100% - Provision of Infrastructure financial Finance (2004) services Limited Road King BVI **** US$1 100% - Provision of Infrastructure financial Finance (2007) services Limited Road King Hong Kong Hong Kong HK$2 - 100% Provision of Infrastructure management Management services Limited Sunco Property BVI **** US$250 - 89.46% Investment Holdings holding Company Limited Tianjin PRC PRC RMB678,500,000 - 89.46% Investment Kingsvalue holding Real Estate Investment Management Limited* Tianjin Sunco PRC PRC RMB600,000,000 - 89.46% Investment Binhai Land holding Co., Ltd.*

83 Proportion of Issued and fully nominal value of paid ordinary issued ordinary share capital/ shares capital/ registered registered capital Place of capital at held by the Name of incorporation/ Place of December 31, Company Principal subsidiary registration operations 2009 Directly Indirectly activities Tianjin Sunco PRC PRC RMB760,000,000 - 89.46% Investment Binhai Real holding Estate Investment Management Limited* Tianjin Sunco Xindi PRC PRC RMB300,000,000 - 89.46% Development Property Co., Ltd. and sale of properties *** Tianjin Sunco PRC PRC RMB50,000,000 - 89.46% Development Rongxin Land and sale of Co., Ltd. properties

*** Shandong Sunco PRC PRC RMB10,000,000 - 89.46% Development Rongsheng Land and sale of Co., Ltd. properties

*** Beijing Sunco Land PRC PRC RMB90,000,000 - 89.46% Development Daxing Real and sale of Estate properties Development Co., Ltd.

*** Beijing Sunco Land PRC PRC RMB40,000,000 - 89.46% Development Fengrun Real and sale of Estate properties Development Co., Ltd.

*** Hebei Sunco PRC PRC RMB50,000,000 - 89.46% Development Property and sale of Development properties Co., Ltd.

*** Henan Sunco PRC PRC RMB55,000,000 - 89.46% Development Property Co., Ltd. and sale of properties *** Wuhan Nengda PRC PRC RMB40,000,000 - 89.46% Development Enterprise and sale of Development properties Co., Ltd.

***

84 Proportion of Issued and fully nominal value of paid ordinary issued ordinary share capital/ shares capital/ registered registered capital Place of capital at held by the Name of incorporation/ Place of December 31, Company Principal subsidiary registration operations 2009 Directly Indirectly activities Luoyang Sunco PRC PRC RMB110,000,000 - 89.46% Development Real Estate and sale of Development properties Co., Ltd.

*** Sunco Land PRC PRC RMB160,000,000 - 89.46% Development (Beijing) Real and sale of Estate properties Development Co., Ltd.

*** Zhengzhou PRC PRC RMB235,000,000 - 89.46% Development Keshu Real and sale of Estate Co., properties Ltd.** Jinan Shuncheng PRC PRC RMB130,000,000 - 89.46% Development Real Estate and sale of Development properties Co., Ltd.

*** Suzhou Industrial PRC PRC RMB250,000,000 - 89.46% Development Park Sunco and sale of Land Co., Ltd. properties

*** Suzhou Junyu PRC PRC RMB2,114,077,636 - 100% Development Properties Ltd. and sale of properties **

Information as shown above is provided as of December 31, 2009 and does not reflect (i) the January 2010 acquisition of 1,319 Shares of Sunco Property, which increased our ownership of Sunco Property from approximately 89.46% to approximately 94.74% and (ii) the Superb Sky Acquisition. The project company, Shijiazhuang Huigu Science & Technology Town Development Ltd., incorporated in the PRC, acquired through the Superb Sky Acquisition, is wholly-owned by us indirectly with a paid up capital of RMB4,150,000,000. It is mainly engaged in the development and sale of International City located in Hebei Province, the PRC. * The subsidiaries of the Company are registered as wholly foreign owned enterprises in the PRC. ** The subsidiaries of the Company are registered as sino-foreign equity joint venture enterprises in the PRC. *** The subsidiaries of the Company are registered as limited liability companies in the PRC. **** The subsidiaries of the Company are either investment holding or provision of financial services companies only and do not have any operations.

85 Our business Overview

Historically, we were principally engaged in the investment, operation and management of toll roads and expressways in the PRC. In 2004, we began engaging in the development of residential and commercial properties in the PRC and, in 2007, further solidified our entry into the property development business with our acquisition of a 49% equity interest in Sunco Property (of which we own a 94.74% equity interest as of the date of this offering memorandum). Our business is now comprised of two segments: our toll road business and our property development business.

As of June 30, 2010, our toll road projects comprised 16 expressways, highways and bridges spanning approximately 870 km and over 40 toll stations located in seven provinces in the PRC: Anhui, Guangxi, Hebei, Henan, Hunan, Jiangsu and Shanxi. As of June 30, 2010, our total investment in toll road projects was approximately HK$4,604.5 million. These investments in toll road projects are held through our wholly-owned subsidiaries that, together with their PRC joint venture partners, have established joint ventures for investment in various projects.

For the year ended December 31, 2009 and the six months ended June 30, 2010, the total traffic volume during the period recorded by our toll road projects was approximately 115.1 million vehicles and 42.9 million vehicles, respectively, our share of toll revenue was HK$1,082.9 million and HK$388.2 million, respectively, and our share of cash distributions from our toll road joint ventures was HK$539.4 million and HK$343.2 million, respectively. The figures for the six months ended June 30, 2010 reflect a significant decrease in total traffic volume during the period primarily due to the disposal of the Jihe Expressway (Eastern Section) in the second half of 2009.

As of June 30, 2010, we had over 20 residential and commercial property development projects in the PRC with a total planned GFA of approximately 8.8 million sq.m., of which approximately 5.1 million sq.m. was attributable to us. During the year ended December 31, 2009 and the six months ended June 30, 2010, we had revenues from property development of HK$4,600.4 million and HK$2,059.6 million, respectively.

For the year ended December 31, 2009 and the six months ended June 30, 2010, our EBITDA, calculated on a consolidated basis, was equal to HK$1,751.1 million, and HK$989.3 million, respectively.

Competitive strengths

We believe that we possess the following principal strengths, which make us competitive in our principal business sectors:

Business and geographic diversification.

We believe the diversification between our established core toll road business and our growing and dynamic property development business provides a strong long-term platform to continue to expand our business. Our strong established toll road portfolio complements our property development business, which has high growth potential. In addition to the strength provided from the diverse and complementary nature of cash flows from our two business segments, we also derive benefit from geographic diversity within our toll road business. Our toll road investment portfolio includes 16 toll road projects in seven provinces in the PRC, covering

86 approximately 870 km as of June 30, 2010. Our geographic diversity further strengthens the stability and performance of our core toll road business segment.

Predictable and stable cash flows from our toll road investments.

Our core toll road business provides predictable and steady cash flows which give us stability as well as flexibility in managing our operations. The predictability and growth of our toll road business has been demonstrated by the strong growth of traffic volume and toll rate performance since 1998. The national turnover volume of freight traffic by road in the PRC increased from approximately 548.3 billion tons per kilometer in 1998 to approximately 3,638.4 billion tons per kilometer in 2009, and the national turnover volume of passenger traffic by road in the PRC increased from approximately 594.3 billion passengers per kilometer in 1998 to approximately 1,345.1 billion passengers per kilometer in 2009. We believe daily traffic will continue to grow as a result of robust vehicle consumption and economic growth in the PRC. Furthermore, the favorable contractual provisions governing the terms of our investments in the joint venture companies that operate the existing toll roads, in addition to the fact that our existing toll road joint venture companies and projects do not have any bank borrowing enhance the stability and predictability of our cash flows.

Strong local partnerships with highway bureaus and local governments.

Over the past 17 years that we have been operating and managing our toll road business, we have established strong, long-term relationships with relevant PRC Government authorities. We have formed these ties because all of our toll road joint venture partners are either subsidiaries or entities under the auspices of local highway bureaus and/or municipal or provincial governments. We believe that our long-term relationship with our PRC joint venture partners and PRC Governmental authorities and our proven track record in operating toll roads position us well to acquire strategic, high quality toll road projects in the future. In addition, we believe that our strong relationships with the PRC Governmental authorities will also be instrumental in growing our property development business.

Strategically located land reserves.

Our property development portfolio provides us with an attractive project development pipeline in the coming years. We have selectively acquired land leases in readily accessible strategic locations in areas with high growth potential, with well-developed transportation infrastructure. As of June 30, 2010, we had projects comprising of approximately 5.1 million sq.m. attributable saleable GFA.

Proactive and “hands-on” approach led by an independent management team.

We believe that active management participation in each of our projects is essential to our success, helping us to properly implement toll collection systems and contributing to efficient operations. Further in our toll road business, we routinely second our own staff to each joint venture and nominate them to the board of directors and key management positions across major operational functions, such as toll collection, finance and systems/operations. In our property business, we have grouped our development projects into four major geographical regions with each project managed by a PRC-based project manager, and each region is supervised by a senior executive (usually PRC-based). Our hands-on management style keeps us

87 involved in the day-to-day operations of, and decision-making at, our two business segments. We believe our management team has helped to maintain prudent cash management policies and stringent internal control systems. In addition, we place a strong emphasis on corporate governance. As an example, in 2009 we created a management committee comprised of senior executives who are independent of our shareholders, which supervises and monitors all major issues in daily operations.

Experienced and stable management.

Over the 17 years we have operated and managed our toll road business, we have built up a strong management team comprised of experienced team of professionals based in Hong Kong and the PRC. On the toll road business side, we have management with in-depth experience in the operation of toll roads, local knowledge of the business and strong relationships with PRC Governmental authorities. On the property development business side, with the integration of the Sunco Property Acquisition complete, we have in place an established management team with significant practical expertise in project management, engineering, construction and sales and marketing. We have experienced managers at our project companies working closely with contractors not only to control costs but also to ensure the quality of the construction work.

Strategies

We intend to achieve our overall business objectives by pursuing the following strategies:

Maintain and expand our core toll road business.

We are committed to maintaining and expanding our core toll road business, which provides us with stable and predictable cash flows. We plan to do this by optimizing our toll road portfolio by focusing on expressways and by structuring our investments to maximize our cash returns.

• Focus on expressways. We believe that expressway investments will create a higher yield for our toll road portfolio. In the first half of 2010, approximately 84.1% of our cash distributions from our toll road joint ventures was generated from tolls collected on our expressway projects. As such, we intend to seek strategic opportunities to invest in expressway projects in the future and focus on existing revenue-generating expressway projects which are higher yielding in nature so that we are well-positioned to continue to maximize our returns from these types of projects. In addition, we also intend to continue divesting our Class I and Class II highway projects as part of our strategy to optimize our toll road portfolio.

• Structure our toll road investments to maximize our cash returns. The major selection criteria of a project are as follows: (i) priority is given to invest in toll road projects that are already operating and collecting tolls, (ii) the investment must meet our internal targeted rate of return and (iii) identifying of new toll road investment opportunities by leveraging our strong relationships with local governments. In addition, before investing in any toll road project, we carefully assess and evaluate various criteria including socio- economic demographics of the project location, the local joint venture partners, the joint venture structure, our financial resources, any applicable quality requirements and financial data of the prospective project.

88 Prudent and opportunistic approach to property development.

We plan to continue to engage in measured growth in our property development business by selectively focusing on acquiring and pursuing primarily residential property development projects in high growth areas near city centers. Prior to making any investment decision, we will adhere to our prudent financial policies and consider the project’s expected internal rate of return, cash flows and capital requirements.

• Measured growth. We plan to continue the measured and disciplined growth of our property development portfolio. Our cautious approach to evaluation of new investments is demonstrated by our limited acquisitions since 2007. We will continue our multi-layered and thorough process for approving additional property development project, which is designed to ensure proper due diligence has been completed on every investment decision. We conduct a comprehensive analysis to determine whether a prospective project meets our investment strategy and financial standards; we evaluate the effectiveness of the local government and its planning function; and we determine whether the infrastructure and social facilities of the area offer an attractive living and/or working environment, prior to making any decisions regarding property development projects. We plan to maintain a sustainable level of land reserves in line with our operational capacity to develop new and high quality property development projects.

• Focus on high growth areas nearby city centers for residential development. We believe high growth areas nearby city centers offer the most rewarding opportunities for development. We focus on land reserves in growth areas nearby city centers because these areas better match our prudent financial criteria and at the same time still meeting our rate of return, cash flows and capital requirement objectives. We will continue to focus primarily on building residential communities with ancillary commercial developments.

Strengthening our brand by focusing on developing high quality products.

We believe that market perception of our “brand” and our reputation as a property developer are very important and that our brand can be best enhanced by consistently delivering high quality products. We have actively participated in the selection of the materials used in our projects in order to achieve desired quality levels and to maintain a cohesive brand image. We will continue to leverage on our expertise in construction and project management to implement strict quality control standards and closely monitor the product quality and the workmanship of our contractors throughout the development process. Our efforts have been recognized by a number of industry groups and publications such as “SouFun,” a leading website publishing real estate information in the PRC, that has named us, “Branded Chinese Real Estate Enterprise in 2009.” By cultivating a distinctive brand image, we will be able to further enhance our ability to attract our target customers and reinforce our customers’ perception of the high quality of our products and services.

Maintain a strong capital structure.

From the relatively stable financial position provided by our cash-generating toll road business, we will continue to carefully manage our property development business by taking a balanced approach to growing our overall business while maintaining our stable financial position. As a result, we have been able, and plan to continue, to maintain a strong liquidity position and

89 conservative debt gearing and leverage. As of June 30, 2010, our gross debt to capitalization ratio was 39.9% and we had over HK$3.2 billion of bank deposits (including pledged deposits) and cash on hand. We will also continue to access diversified funding sources.

History and development

A brief summary of our history is set out below:

Year Key Events 1993 • Our business was started by Wai Kee Holdings Limited investing in toll road projects in the PRC. 1994 • Road King Infrastructure Limited was jointly established by Wai Kee Holdings Limited and AIG Asia Infrastructure Fund L.P. 1996 • Our company was incorporated in Bermuda as a holding company. • We were listed on the Hong Kong Stock Exchange in July. 1997 • We were voted as one of the “1997 Best Managed Companies in Hong Kong” by Asiamoney Magazine. 1999 • We were selected as a constituent stock of the Hang Seng MidCap 50 Index. 2001 • We were selected as a constituent of the then 200-stock Hang Seng Composite Index Series. 2004 • We entered the property development business in the PRC. 2006 • We acquired 100% of Suzhou Junyu. 2007 • We acquired our ownership interest in Sunco Property. 2009 • We were ranked 37th in the “Top 500 Chinese Entrepreneur in China Market 2009” list prepared by Global Chinese Entrepreneur.

Business

Our business activities and interests are divided into two principal areas: operating toll roads and developing properties in the PRC.

The following tables show a breakdown of our business in terms of profit for the year for the periods indicated:

Six months ended Year ended December 31, June 30, 2007 2008 2009 2009 2010 (in HK$ thousands) Total reportable segment revenue .... 2,407,770 4,630,672 4,600,424 2,464,196 2,059,624 Toll road reportable segment profit . . . 443,884 814,517 823,968 235,177 91,792 Property reportable segment profit (loss) ...... 351,710 (109,572) (10,248) 60,671 240,463 Unallocated(1) ...... 70,547 (28,311) (70,543) (27,534) (62,804) Consolidated profit for the year ...... 866,141 676,634 743,177 268,314 269,451

(1) Unallocated represents income and expenses that are not allocated to either of our two business segments. These include, among other things, interest income, finance costs, and corporate income and expenses.

90 Our toll road business

As of June 30, 2010, our toll road projects comprised 16 expressways and highways spanning approximately 870 km and over 40 toll stations located in seven provinces in the PRC: Anhui, Guangxi, Hebei, Henan, Hunan, Jiangsu, and Shanxi, as depicted in the following map:

Our toll road portfolio

Shanxi Hebei No. of projects: 3 No. of projects: 4 Length: 72km Length: 282km Funds invested: RMB 404.1 million Funds invested: RMB 2,254.8 million

Henan Jiangsu No. of projects: 1 No. of projects: 1 Length: 80km Length: 53km Funds invested: RMB 205.0 million Funds invested: RMB 195.1 million

Hunan No. of projects: 1 Length: 76km Funds invested: RMB 618.4 million Anhui No. of projects: 5 Length: 302km Funds invested: RMB 1,011.2 million Guangxi No. of projects: 1 Length: 11km Funds invested: RMB 157.3 million

Total length: approximately 870km Total funds invested: approximately RMB4.8 billion

Our toll road business is carried out through joint ventures, in which our current equity interests range from 35% to 70%. The operation of toll roads principally involves collection of tolls and maintenance.

Toll rates

Revenues from our toll road projects are substantially comprised of toll receipts collected at toll plazas located at each of the interchanges and barriers. Expressways operate on a closed toll system and highways and other roads and bridges operate on an open toll system. Toll rates for expressways are determined by the provincial government, and are generally assessed as a RMB per kilometer traveled based on vehicle classification, including the type and weight of vehicle and the number of axles and wheels, and which range in size from passenger cars, jeeps and motorcycles up to double deck cars, heavy trucks and trailers. We implemented weight-based tolling for the Tangjin Expressway and Baojin Expressway in 2008. We expect to implement weight-based tolling for the Changyi Expressway in 2011. Toll rates for highways are not assessed as a RMB price per kilometer, but rather on a fixed rate determined by the provincial government for each different vehicle classification. Toll receipts are therefore principally dependent on traffic volume by vehicle categories, applicable toll rates and distance traveled.

Approval for toll increases rests primarily with the relevant provincial government and provincial price bureaus, which generally take into account factors such as the toll rate of comparable toll highways and expressways in the same region, affordability to users, prevailing rate of inflation and the return for investors. There can be no assurance that any applications for increases of toll

91 rates will be approved by the relevant authorities in a timely manner, or at all. See “Risk factors—Our toll rates are subject to the regulation by various provincial or local government authorities.”

Joint venture agreement terms

Our interest in the toll road joint ventures is held, through our project holding companies, generally in the form of CJVs with our respective PRC joint venture partners. In the PRC, the structure of a CJV allows the joint venture parties more flexibility in structuring their investments and in determining their rights, liabilities and obligations. Profits of a CJV are distributed to the parties in such manner as the parties may agree to, rather than in strict proportion to their capital investment in the joint venture. For instance, a foreign party may recover its investment first during the joint venture term if it is agreed in the CJV contract that the Chinese party shall keep the fixed assets of the JV without compensation upon expiration of the joint venture term.

When we have identified a potential project that we believe would make valuable contributions to our business, a formal CJV agreement will be negotiated and signed by one of our subsidiaries with the respective PRC joint venture partner. Generally, we provide the financing for the joint venture and the joint venture partner provides the underlying property asset and the toll license. Under the terms of the agreement, the joint venture has the right to operate and collect tolls on roads but does not own the underlying toll road asset. While the operating rights of a toll road cannot be sold to a third party without approval from relevant government departments, we and our respective joint venture partners each have the right of first refusal on the sale of the interest in the joint venture. Each of our joint ventures has the exclusive right to operate the relevant roads for a fixed term, generally ranging from 18-32 years, and upon expiry of the joint venture agreement, all fixed assets are transferred to the respective PRC joint venture partner.

The joint venture agreement sets out our participation in the CJV with provisions on, among other things, the time of payment and amount of capital contribution (which is in the form of equity, giving us long-term returns on our investment, and shareholders’ loans, providing us with a more frequent, regular and predictable cash flow over the life of the joint venture), the authorities and the responsibilities of the joint venture parties. We endeavour to include the following terms, where possible and appropriate, in the joint venture agreements:

• assigning to the PRC joint venture partner the primary responsibility for obtaining the necessary government approvals for the relevant joint venture and its operations; and

• preferential cash distribution to us to accelerate the return of our original capital investment.

For details regarding the cash sharing arrangements applicable to our toll road joint ventures and loans we make to our joint ventures, see “Management’s discussion and analysis of financial condition and results of operations—Key factors affecting our results of operations.”

92 Existing projects summary

The following table sets forth certain information regarding our existing toll road projects as of June 30, 2010:

Beneficial ownership Joint as of Cash Joint venture June 30, Our received venture expiration Project(1) Length 2010(2) Investment(3) in 2009 period date (RMB in (HK$ in millions) millions) Expressways Hunan Province National Expressway G5513 Changsha-Yiyang Expressway ...... 76km 43.17% 618.4 93.3 27 years Oct 2024 Hebei Province National Expressway G18 Baoding-Tianjin Expressway ...... 105km 40% 960.0 131.4 30 years Sep 2033 National Expressway G25 Tangshan-Tianjin Expressway ...... 58km 45% 798.9 148.1 18 years Jan 2023 Class I Highways Guangxi Zhuang Autonomous Region National Highway 324, Yulin Section ...... 11km 70% 157.3 6.6 30 years Nov 2026 Shanxi Province National Highway 108 Yuci Dongchangshou—Qixian Dongguan Highway ...... 38km 65% 160.6 0.5 20 years Nov 2016 Taiyuan-Yuci Highway ...... 17km 65% 135.6 1.4 23 years May 2020 National Highway 108 Yuci City Bypass ...... 17km 65% 107.9 - 23 years May 2020 Anhui-Province National Highway 312 Hefei-Yeji Highway ..... 130km 50% 551.0 10.0 25 years Mar 2025 Henan Province National Highway 311 and Provincial Highway 103 Xuchang-Nanyang Highway ...... 80km 50% 205.0 8.4 23 years Jan 2020 Hebei Province National Highway 307 Shijiazhuang-Jinzhou Highway ...... 40km 60% 215.9 5.8 20 years Jul 2017 National Highway 309 Handan-Guantao Highway ...... 79km 70% 280.0 5.1 18 years / Sep 2015 / 20 years May 2017 Class II Highways Jiangsu Province Provincial Highway 343 Suzhou-Shanghai Hongqiao Airport Highway ...... 53km 50% 195.1 11.2 23 years Dec 2017 Anhui Province Provincial Highway 307 Bengbu Huaihe Bridge Highway(4) ...... 21km 35% 81.3 7.5 32 years Nov 2029 Provincial Highway 307 Bengbu Huaiyuan Mengcheng Highway ...... 59km 35% 59.5 2.8 32 years Nov 2029 National Highway 206 Hefei-Huainan Highway ...... 90km 60% 255.0 - 25 years Jul 2022 Other Anhui Province National Highway 206 Bengbu Chaoyanglu Huaihe Bridge(5) ...... 2km 35% 64.4 6.8 30years Nov 2029 Total ...... 876km 4,845.9 438.9 Toll roads disposed of in 2009(6) ...... 78km 708.0 100.5

93 (1) The projects listed in this table are held through various joint ventures; for the name of the joint ventures, please refer to note 20 to the consolidated financial statements as of and for the years ended December 31, 2009 and 2008 and note 19 to the consolidated financial statements as of and for the years ended December 31, 2008 and 2007 included elsewhere in this offering memorandum. (2) The cash sharing ratios in these existing toll road project joint ventures differ from the proportion of our beneficial ownership. During the early stage of the joint ventures, we typically receive preferential cash distributions until full recovery of our original capital investment. Thereafter, in a second stage, the cash sharing ratio may be changed to enable our joint venture partner to receive preferential cash distributions to recover its original capital investment, and the cash sharing ratio may be further adjusted in a third stage so that both parties share the cash generated from the project in a predetermined ratio, mainly in proportion to their respective equity interests. (3) Our investment reflects the total investment made and includes investment made in the form of registered capital and shareholder’s loan. (4) Classified as a “Super Class II highway and cable-stayed bridge.” (5) Classified as a “Continuous rigid frame structure.” (6) Toll roads disposed of in 2009 include the Jihe Expressway (Eastern Section) and the Yulin-Gongguan Highway (Yulin Section).

A brief description of our toll road projects is as follows:

National Expressways

National Expressway G5513 Changsha-Yiyang Expressway—Changyi Expressway in Hunan Province is a project consisting of an expressway (Changyi Expressway) and a national highway (National Highway 319) which are parallel to each other. Changyi Expressway approximately 76 km in length, linking Changsha City, the provincial capital of Hunan Province, and Yiyang City and serves as a cross-link between two national trunk roads connecting northern and southern China. Changyi Expressway is the major connecting route between Changsha-Yongan Expressway and Changsha Huanghua Airport. National Highway 319 is a Class II highway with a length of approximately 90 km from Changsha City to Yiyang City. The total project cost is approximately RMB1,432.6 million, of which we have contributed RMB618.4 million. We have a 43.17% equity interest in this project. This project earned RMB293.4 million in gross toll revenues in 2009. We received cash distributions of HK$93.3 million from this CJV project in 2009. The term of this joint venture is 27 years beginning October 1997. Changyi Expressway is fully operational and has been collecting tolls since 1998. The joint venture period is the same as that for Changyi Expressway. National Highway 319 is fully operational and has been collecting tolls since we acquired our interest in this project.

National Expressway G18 Baoding-Tianjin Expressway—Baojin Expressway in Hebei Province is an expressway with a length of approximately 105 km situated in Hebei. It is part of the trunk road of Hebei Province that runs from the border between Hebei Province and Tianjin to Xushui in Baoding and connects to the Beijing-Shijiazhuang Expressway. Baojin Expressway is one of the major routes connecting Tianjin and north-eastern provinces with Shijiazhuang and provinces to the south such as Shanxi and Henan. The total project cost is approximately RMB2,400.0 million, of which we have contributed RMB960.0 million. We have a 40.0% equity interest in this project. This project earned RMB611.0 million in gross toll revenues in 2009. We received HK$131.4 million in cash distributions from this CJV project in 2009. The term of this joint venture is 30 years beginning September 2003. Baojin Expressway is fully operational and has been collecting tolls since 1999.

National Expressway G25 Tangshan-Tianjin Expressway—Tangjin Expressway in Hebei Province is an expressway with a length of approximately 58 km situated in Hebei Province. It connects Tangshan and Tianjin and is a major road connecting the southern and eastern coastal areas, Tianjin, Tangshan, Qinhuangdao and the north-eastern region of China. The total project cost is

94 approximately RMB1,775.4 million, of which we have contributed RMB798.9 million. We have a 45.0% equity interest in this project. This project earned RMB588.3 million in gross toll revenues in 2009. We received HK$148.1 million in cash distributions from this CJV project in 2009. The term of this joint venture is 18 years beginning in January 2005. Tangjin Expressway is fully operational and has been collecting tolls since 1999.

Class I Highways

We have eight Class I Highways located in Anhui Province, Guangxi Zhuang Autonomous Region, Hebei Province, Henan Province and Shanxi Province. The length of our Class I Highways range from 11 km to 130 km. Our equity interest in the relevant joint venture ranges from 50% to 70%. We received RMB267.8 million in annual gross toll revenue in 2009 from our Class I Highways.

Class II Highways

We have four Class II Highways located in Anhui Province and Jiangsu Province. The length of our Class II Highways range from 21 km to 90 km. Our equity interest in the relevant joint venture ranges from 35% to 60%. We received RMB113.8 million in annual gross toll revenue in 2009 from our Class II Highways.

95 Traffic flow and toll revenue

A summary of annual daily traffic on each of our existing toll roads and the annual gross toll revenue collected by each project CJV for the years ended December 31, 2007, 2008 and 2009 and the six months ended June 30, 2010 is set out below:

For the six months For the six months For the year ended December 31, ended June 30, ended June 30, 2007 2008 2009 2009 2010 Average Annual Average Annual Average Annual Average Average Daily Gross Toll Daily Gross Toll Daily Gross Toll Daily Gross Toll Daily Gross Toll Project Traffic Revenue Traffic Revenue Traffic Revenue Traffic Revenue Traffic Revenue (RMB in (RMB in (RMB in (RMB in (RMB in millions) millions) millions) millions) millions) Expressways Hebei Province National Expressway G18 Baoding-Tianjin Expressway ...... 20,528 385.7 23,918 612.0 28,422 611.0 24,502 273.1 36,979 329.2 National Expressway G25 Tangshan-Tianjin Expressway ...... 28,697 470.6 30,849 670.4 30,109 588.3 31,435 334.2 29,843 233.7 Hunan Province National Expressway G5513 Changsha- Yiyang Expressway . . 28,458 289.9 28,841 286.0 27,160 293.4 28,423 154.6 29,730 171.5

Class I Highways Anhui Province National Highway 312 Hefei-Yeji Highway ...... 37,282 210.2 24,244 89.2 23,811 81.6 22,657 38.0 26,368 47.8 Hebei Province National Highway 307 Shijiazhuang- Jinzhou Highway ...... 12,933 52.5 11,531 41.8 13,191 42.8 12,024 20.2 14,410 16.7 National Highway 309 Handan-Guantao Highway ...... 10,544 69.1 5,205 27.9 5,570 25.8 5,173 10.9 6,599 15.1 Henan Province National Highway 311 and Provincial Highway 103 Xuchang-Nanyang Highway ...... 11,043 66.3 10,209 64.1 12,196 67.9 11,833 32.8 12,606 34.5 Guangxi Zhuang Autonomous Region National Highway 324, Yulin Section ...... 8,346 19.8 7,891 18.1 6,319 10.9 6,087 5.0 6,766 8.1 Shanxi Province National Highway 108 Yuci Dongchangshou- Qixian Dongguan Highway ...... 8,382 31.0 6,807 28.4 7,440 15.9 7,210 8.8 7,964 9.9 National Highway 108 Yuci City Bypass ..... 9,803 20.2 10,324 20.6 7,821 9.4 7,427 4.4 7,994 5.1 Taiyuan-Yuci Highway ...... 14,875 27.3 8,942 15.6 6,817 13.5 7,251 6.5 5,586 5.8

96 For the six months For the six months For the year ended December 31, ended June 30, ended June 30, 2007 2008 2009 2009 2010 Average Annual Average Annual Average Annual Average Average Daily Gross Toll Daily Gross Toll Daily Gross Toll Daily Gross Toll Daily Gross Toll Project Traffic Revenue Traffic Revenue Traffic Revenue Traffic Revenue Traffic Revenue (RMB in (RMB in (RMB in (RMB in (RMB in millions) millions) millions) millions) millions) Class II Highways Anhui Province National Highway 206 Hefei Huainan Highway ..... 16,440 77.8 9,888 46.5 6,407 26.2 6,785 13.3 5,837 11.9 Provincial Highway 307 Bengbu Huaihe Bridge Highway ..... 12,126 31.3 14,316 37.7 17,005 41.6 21,410 28.1 21,401 19.3 Provincial Highway 307 Bengbu Huaiyuan Mengcheng Highway ..... 7,416 15.3 8,114 17.1 7,096 15.7 3,559 2.5 4,146 4.9 Jiangsu Province Provincial Highway 343 Suzhou- Shanghai Hongqiao Airport Highway ..... 6,818 39.2 7,209 48.2 5,268 30.3 5,095 14.9 5,378 14.8

Other Anhui Province National Highway 206, Bengbu Chaoyanglu Huaihe Bridge ...... 7,789 15.3 8,843 15.3 10,546 14.9 9,647 7.8 15,365 5.6 Total ...... 1,821.5 2,038.9 1,889.2 955.1 933.9

Competition in our toll road business

Our projects face competition from existing routes or alternative routes of comparable quality to our roads and bridges and alternative modes of transportation, which may avoid the tolls or charge lower or zero tolls or provide more direct routing.

The profitability of a toll road may be affected by the existence of other competing means of transport and alternative routes which are of similar quality, and their proximity to such toll road.

Several of our existing highway projects have directly competing routes. We prefer to invest in projects where there are no existing alternative routes, but there can be no assurance that alternate routes that avoid the tolls or impose lower charge or zero tolls will not be devised, or that alternate means of transport competing with our existing toll roads will not be constructed or established in the future. All of our projects in the PRC are undertaken by means of joint ventures with entities under the auspices of local government authorities, and we believe these arrangements minimize the risk of these local authorities to approve the construction of alternative routes to compete directly with our projects in which they already have interests.

97 In addition, some of our toll road joint venture agreements contain provisions that give us a first right to participate in any project of the relevant joint venture partner to operate and manage competing routes. See “Risk factors—Risks relating to our business—Our profitability may be affected by the existence and development of other competing means of transport.”

Toll road operations

Our toll road operations can be divided into two phases: the first phase involves the identification, evaluation and negotiation of new road projects and the second phase encompasses the management of daily operations and on-going maintenance of these roads after acquisition.

Project selection criteria and evaluation process

Our toll road investment strategy is to select projects to maximize our internal target rate of return over the life of a project, while maximizing our cash returns in the early stage of a project and to minimize the uncertainty of cash flow generated from the projects. In addition, we prefer to invest in toll roads that are at least partially completed and currently collecting tolls, which we believe minimizes our exposure to uncertainties involved with construction, such as cost over- runs or delays in completion of a project, and reduces the time before traffic growth is achieved. We are also gradually restructuring our investment portfolio to include more expressway and superhighway projects.

We aim to enter into CJVs with joint venture partners who are under the supervision of local highway bureaus or municipal/provincial governments. We believe these government entities have in-depth knowledge of the local conditions and technical expertise.

We undertake due diligence on each prospective project, which includes conducting feasibility studies, traffic studies, detailed financial analysis as well as vetting prospective joint venture partners and reviewing relevant contracts, approval and licenses. The following steps are typically taken in the project evaluation process:

• We review feasibility reports to assess the economic and technical viability of each proposed project. These feasibility reports are generally prepared by PRC transport organizations for submission to municipal planning committees for approval. They generally consist of analyses of (i) traffic demand in the region; (ii) traffic volume forecasts; (iii) the regional social and economic environment; (iv) technical specifications and construction cost of the roads; and (v) financial aspects of the project.

• We conduct our own traffic studies at project locations and perform internal financial analyses, taking into account factors such as (i) past economic growth; (ii) historic traffic growth and forecasts of future growth; (iii) exchange rate and inflation rate forecasts; (iv) profit distribution arrangements; (v) development of new roads, townships and industrial sites in nearby areas; and (vi) projected increases in toll rates.

• We conduct background checks of key personnel of potential partners through interviews and by checking the relevant government records in order to ensure that such personnel are authorized to act on behalf of the respective PRC joint venture partners.

98 Joint venture management

We believe that our direct involvement and application of efficient management techniques are the key factors for successful management of our joint ventures. The decision making processes are jointly controlled by the PRC joint venture partners and us. We send an experienced project manager to each of our joint ventures to act as either the general manager or the deputy general manager of the joint venture. These project managers have key responsibilities in relation to the ongoing management functions of such joint ventures including, but not limited to, accounting, internal control, toll collection, road repair and maintenance, taxation and administration.

These project managers work with teams of experienced management, engineering and financial staff stationed at their respective project locations. Members of staff from both our operations division and the finance and administration division in Hong Kong also regularly visit the various offices of our joint ventures in the PRC to oversee and monitor the operations of the local project teams.

In addition to project management staff, we have an engineering technical team, a traffic audit team and an accounting audit team providing specialized services to assist our project management staff at each project location. The engineering technical team comprises expert engineers responsible for resolution of technical problems and assistance in assessing new projects. The traffic audit team is responsible for auditing traffic flow of existing projects and assisting in the assessment of traffic flow for new projects. The accounting audit team is responsible for internal control reviews and financial audit of existing projects.

Toll collection operations

There are two types of toll collection systems: open system and closed system. An open system is a toll system in which a fixed toll for each vehicle category is collected at each toll station on the highway. Vehicles traveling on the highway must stop at each toll station and pay the fixed toll. After paying a toll the vehicle is free to leave the highway or continue to the next toll station. A closed system is a toll system in which a ticket is issued to each vehicle at the interchange toll station on entering the expressway and a toll collected on exit calculated by reference to the distance traveled on the expressway. Each of our joint ventures collects tolls by means of an closed system. Most of our joint ventures utilize a manual toll collection system where toll collectors stationed in the toll booths collect tolls in cash, whereas a small number of toll stations have installed automatic toll collection systems. Toll receipts are principally dependent on traffic volume by vehicle categories, weight of the vehicle, applicable toll rates and distance traveled.

We closely monitor the collection of tolls and endeavor to minimize fraud and pilfering. Every toll collector must issue a ticket, pre-printed or computer printed, for each vehicle passing through his or her collection point and place all cash received into a sealed box. At the end of his or her shift, the toll collector delivers the box and ticket stubs of the pre-printed tickets to the station supervisor. A reconciliation of the cash receipts against the total number of tickets issued is carried out by a cashier. Each joint venture adopts a policy requiring every toll collector to be accountable for any shortfall in the tolls he or she collects.

In addition to regular reconciliation, we carry out periodic spot checks of each toll collector. Each toll booth and toll plaza is installed with closed circuit television cameras and monitoring systems to monitor traffic and toll collection 24 hours a day, seven days a week. Pictures of each vehicle

99 passing through the station are captured and video recordings are retained for three months. Video records are retrievable from internal computer networks by supervisors or management staff for systematic investigations for any losses of tolls.

Road maintenance

Each of our joint ventures is responsible for the maintenance and repair of its toll road at its own cost throughout the operating concession period and is generally funded through the joint venture’s regular working capital. Maintenance is carried out to ensure compliance with the requirements and standards of maintenance under each road’s class classification. Maintenance of roads and other facilities falls into two main categories: routine maintenance and major repairs. Routine maintenance includes the clearing of carriageways, minor road pavement repairs, replacement of damaged road equipment, clearing of culverts and drains, grass cutting, landscape and building maintenance. Major repairs include substantial repair of damaged road pavement or rectification of major structural defects or failures to works such as drainage systems or embankments. Normally, major repairs of each toll road are carried out every five to seven years. For the year ended December 31, 2009, the expenses incurred by our joint ventures for repairs and maintenance represented approximately 16.7% of the aggregate annual toll revenue of such joint ventures for that year.

For some projects, we have entered into maintenance agreements with the PRC joint venture partners who undertake maintenance works for an annual fee. However, in order to improve the quality of the maintenance services for our toll roads and to reduce costs, maintenance contractors (especially in relation to the provision of major repair works) are selected on an open tender basis.

We are developing the second phase of the “Pavement Management System” to monitor the conditions of the roads and to optimize the road maintenance program in order to achieve an economical way of maintenance expense. The Pavement Management System is a comprehensive tool for evaluating highway conditions. This system can be customized to meet project needs in relation to data storage and to assist in making maintenance and rehabilitation plan.

Our property development business Overview

Our property development business involves the development and sale of residential and commercial properties principally targeting middle-to high-income residents in the PRC. Our projects primarily include residential communities consisting of low-rise and high-rise apartment units with ancillary commercial facilities. Our 2007 acquisition of Sunco Property expanded our property development portfolio, and in January 2010, the Group completed the acquisition of 1,319 shares of Sunco Property from Elite Rich, increasing the Group’s interests in Sunco Property from 89.46% as of December 31, 2009 to approximately 94.74% as of the date of this offering memorandum. As of June 30, 2010, we had over 20 major property development projects in the PRC with approximately 5.1 million sq.m. of saleable GFA attributable to us as of June 30, 2010. These projects, at various states of development, comprise three projects located in Changzhou (Jiangsu), two projects located in Suzhou (Jiangsu), two projects located in Guangzhou (Guangdong), two projects located in Shanghai, three projects located in Beijing, three projects located in Henan, two projects located in Shandong, two projects located in Hebei, one project located in Hubei and two projects located in Tianjin. Virtually all of these development projects

100 are located near major institutions and landmarks and along major transportation routes including the subway and railway lines. We will continue to primarily focus on the development of residential properties, pursuing growth opportunities in strategically selected provincial capitals and cities in the PRC.

Although, we currently have an interest in property development projects with total saleable GFA attributable to us of approximately 5.1 million sq.m., as of June 30, 2010, we continue to seek additional development properties generally in the PRC to build up our land bank, focusing on high growth areas nearby city centres. Our current property development projects are located in nine provinces and municipalities across the PRC as depicted in the following map:

Our property portfolio

Hebei Beijing No. of projects: 2 No. of projects: 3 Developing and underdeveloped Developing and underdeveloped GFA: 285,000 sq.m. GFA: 192,000 sq.m.

Henan Tianjin No. of projects: 3 No. of projects: 2 Developing and underdeveloped Developing and underdeveloped GFA: 516,000 sq.m. GFA: 761,000 sq.m.

Hubei Shandong No. of projects: 1 No. of projects: 2 Developing and underdeveloped Developing and underdeveloped GFA: 26,000 sq.m. GFA: 496,000 sq.m.

Guangdong Shanghai No. of projects: 2 No. of projects: 2 Developing and underdeveloped Developing and underdeveloped GFA: 296,000 sq.m. GFA: 226,000 sq.m.

Jiangsu No. of projects: 5 Developing and underdeveloped GFA: 2,309,000 sq.m.

101 Our projects

The following table sets forth certain details of our property development projects as of June 30, 2010:

Total Interest Target Total Saleable Attributable Site Completion planned GFA sold & Attributable Project name to Us Area Phase Date saleable GFA delivered Total Saleable GFA presold Total Saleable GFA unsold GFA to us(2)

Commercial Commercial Total Total Residential & Others(1) Total Residential & Others(1) Total Total (sqm) (sqm) (sqm) (sqm) (sqm) (sqm) (sqm) (sqm) (sqm) (sqm) Beijing City Songs & Sea 94.74% 309,000 1-3, 7&8 Completed 278,000 275,000 2,000 - 2,000 1,000 - 1,000 3,000 4 2011 33,000 - 5,000 - 5,000 28,000 - 28,000 31,000 5 2010 40,000 - 28,000 - 28,000 12,000 - 12,000 38,000 6 2012 68,000 - - - - 58,000 10,000 68,000 64,000 9 2011 12,000 - - - - - 12,000 12,000 11,000 Forest Creek 94.74% 361,000 1-3 Completed 191,000 176,000 6,000 - 6,000 9,000 - 9,000 14,000 Jianguomen Project 100% 11,000 2013 31,000 - - - - - 31,000 31,000 31,000

Shanghai City Shine June Garden 100% 133,000 1 2010 22,000 21,000 - - - 1,000 - 1,000 1,000 2 2010 28,000 - 22,000 - 22,000 6,000 - 6,000 28,000 3 2011 67,000 - - - - 67,000 - 67,000 67,000 4 2012 94,000 - - - - 94,000 - 94,000 94,000 The Riverside 29.84% 315,000 1-2 Completed 102,000 99,000 - - - 1,000 2,000 3,000 1,000 3 2011 60,000 - 14,000 - 14,000 46,000 - 46,000 18,000 4 2013 58,000 - - - - 45,000 13,000 58,000 17,000

Tianjin City Sun Town 94.74% 820,000 1-5 Completed 587,000 567,000 1,000 - 1,000 - 19,000 19,000 19,000 6 2010 42,000 - - - - 41,000 1,000 42,000 40,000 7 2014 253,000 - - - - 251,000 2,000 253,000 240,000 8 2017 261,000 - - - - 261,000 - 261,000 247,000 Mountain My Life 94.74% 327,000 1 Completed 71,000 51,000 - - - 17,000 3,000 20,000 19,000 2 2010 40,000 - 20,000 - 20,000 20,000 - 20,000 38,000 3 2012 60,000 - - - - 59,000 1,000 60,000 57,000 4 2015 107,000 - - - - 107,000 - 107,000 101,000 Guangdong Province, Guangzhou City Huadu Project 100% 134,000 2014 268,000 - - - - 219,000 49,000 268,000 268,000 Parkvista Phase II 100% 7,000 Completed 74,000 46,000 2,000 - 2,000 6,000 20,000 26,000 28,000

Hebei Province, Shijiazhuang City International City 100% 297,000 1-3 Completed 414,000 413,000 - - - 1,000 - 1,000 1,000 4 2013 200,000 - - - - 200,000 - 200,000 200,000 Blue County 94.74% 91,000 2011 158,000 69,000 26,000 - 26,000 62,000 1,000 63,000 84,000

Henan Province Luoyang City Sunco Town 94.74% 111,000 1-2 Completed 142,000 124,000 - 1,000 1,000 14,000 3,000 17,000 17,000 3 2012 99,000 - 36,000 - 36,000 63,000 - 63,000 94,000 4 2013 83,000 - - - - 83,000 - 83,000 79,000 World & City 94.74% 76,000 1-2 Completed 101,000 95,000 - 1,000 1,000 3,000 2,000 5,000 6,000 3 2012 103,000 - 50,000 - 50,000 43,000 10,000 53,000 98,000

Zhengzhou City Central Special Zone 94.74% 219,000 1-2 Completed 290,000 280,000 3,000 - 3,000 1,000 6,000 7,000 9,000 3 2013 168,000 - 51,000 - 51,000 95,000 22,000 117,000 159,000 4 2014 57,000 - - - - 29,000 28,000 57,000 54,000

102 Total Interest Target Total Saleable Attributable Site Completion planned GFA sold & Attributable Project name to Us Area Phase Date saleable GFA delivered Total Saleable GFA presold Total Saleable GFA unsold GFA to us(2) Commercial Commercial Total Total Residential & Others(1) Total Residential & Others(1) Total Total (sqm) (sqm) (sqm) (sqm) (sqm) (sqm) (sqm) (sqm) (sqm) (sqm) Hubei Province Wuhan City Palen Villas 94.74% 172,000 1 Completed 121,000 120,000 - - - 1,000 - 1,000 1,000 2 2011 68,000 42,000 11,000 - 11,000 13,000 2,000 15,000 25,000 Jinagsu Province Changzhou City Royal City 100% 487,000 1 Completed 168,000 151,000 1,000 - 1,000 1,000 15,000 16,000 17,000 2 2010 173,000 106,000 1,000 - 1,000 44,000 22,000 66,000 67,000 3 2011 91,000 - 24,000 - 24,000 53,000 14,000 67,000 91,000 4 2012 68,000 - - - - 58,000 10,000 68,000 68,000 5 2012 150,000 - - - - 133,000 17,000 150,000 150,000 6 2013 84,000 - - - - 70,000 14,000 84,000 84,000 7 2014 159,000 - - - - 136,000 23,000 159,000 159,000 8 2015 62,000 - - - - 49,000 13,000 62,000 62,000 Vista Panorama 100% 127,000 1 Completed 118,000 101,000 - - - - 17,000 17,000 17,000 2 2011 176,000 - 128,000 - 128,000 28,000 20,000 48,000 176,000 3 2013 154,000 - - - - 127,000 27,000 154,000 154,000 Grand Metropolis(3) 100% 67,000 1 Completed 26,000 - - - - - 26,000 26,000 26,000 2 2013 92,000 - - - - - 92,000 92,000 92,000 Suzhou City Phoenix City 100% 860,000 1 Completed 346,000 325,000 - - - 3,000 18,000 21,000 21,000 2 2016 616,000 - 90,000 - 90,000 508,000 18,000 526,000 616,000 3 2016 498,000 - - - - 486,000 12,000 498,000 498,000 The Heaven by Lakeside 94.74% 153,000 1-5 Completed 292,000 281,000 2,000 - 2,000 8,000 1,000 9,000 11,000

Shandong Province Jinan City Royal Panorama 94.74% 177,000 1 2010 59,000 - 59,000 - 59,000 - - - 56,000 2 2011 55,000 - 19,000 - 19,000 36,000 - 36,000 52,000 3 2012 101,000 - - - - 101,000 - 101,000 96,000 4 2013 84,000 - - - - 77,000 7,000 84,000 80,000 5 2014 18,000 - - - - 9,000 9,000 18,000 17,000 Qingdao City Unusual Landscape 94.74% 249,000 1 Completed 92,000 78,000 - - - 4,000 10,000 14,000 13,000 2 2010 68,000 39,000 15,000 - 15,000 14,000 - 14,000 28,000 3 2015 163,000 - - - - 163,000 - 163,000 154,000 Total 5,503,000 8,764,000 3,459,000 616,000 2,000 618,000 4,114,000 573,000 4,687,000 5,107,000

(1)—Commercial and others includes commercial GFA and parking spaces (2)—Attributable GFA to us includes total saleable GFA presold and the total saleable GFA unsold (3)—Investment Properties

The following is a brief description of our property development projects. The following discussion of property interests and attributable GFA as of June 30, 2010.

Beijing City

We currently have a 100% interest in one property development project in Beijing with a total planned GFA of approximately 31,000 sq.m., all of which saleable GFA was attributable to us as of June 30, 2010. We currently have a 94.74% interest in two property development projects with a total planned GFA of approximately 622,000 sq.m., of which approximately 161,000 sq.m. was attributable to us as of June 30, 2010.

103 Songs & Sea

Songs & Sea is a multi-phase residential and commercial development project located at Lot No.1, Northern District, Huangcun Town, Daxing District, Beijing City, the PRC, occupying a site area of approximately 309,000 sq.m. We currently have a 94.74% interest in this project.

Songs & Sea has planned GFA of approximately 431,000 sq.m., of which residential GFA and commercial and other GFA attributable to us as of June 30, 2010 was approximately 126,000 sq.m. and 21,000 sq.m., respectively. Most of the phases of this project have been completed and delivered. Total sales recognized in 2009 were HK$720.7 million and total contractual sales were HK$566.3 million in the same period. Construction and pre-sales of the remaining phases of the Songs & Sea project are underway and the whole project is expected to be completed in 2012.

Forest Creek

Forest Creek is a multi-phase residential project located at North of Baige Road, Baishan Town, Changping District, Beijing City, the PRC, occupying a site area of approximately 361,000 sq.m. We currently have a 94.74% interest in this project.

Forest Creek was completed in 2009. It has completed GFA of approximately 191,000 sq.m., 14,000 sq.m. of which saleable GFA was attributable to us as of June 30, 2010. Total sales recognized in 2009 were HK$251.6 million and total contractual sales were HK$237.3 million in the same period.

Jianguomen Project

Jianguomen Project is a commercial development project located at Courtyard No. 13, Waijiaobu Street, Dongcheng District, Beijing City, the PRC, occupying a site area of approximately 11,000 sq.m. We currently have a 100% interest in this project.

Jianguomen Project has planned GFA of approximately 31,000 sq.m., all of which saleable GFA was attributable to us as of June 30, 2010. We expect to complete construction of Jianguomen Project in 2013.

Shanghai City

We currently have a 100% interest in one property development project in Shanghai with a total planned GFA of approximately 211,000 sq.m., of which approximately 190,000 sq.m. saleable GFA was attributable to us as of June 30, 2010. We currently have a 29.84% interest in one property development project in Shanghai with a total planned GFA of approximately 220,000 sq.m., of which approximately 36,000 sq.m. saleable GFA was attributable to us as of June 30, 2010.

Shine June Garden

Shine June Garden is a multi-phase residential project located at No. 1, Lane 998, Baoxiang Road, Nanxiang Town, Jiading District, Shanghai City, the PRC, occupying a site area of approximately 133,000 sq.m. We currently have a 100% interest in this project.

Shine June Garden has planned GFA of approximately 211,000 sq.m., of which approximately 190,000 sq.m. saleable GFA was attributable to us as of June 30, 2010. Pre-sales of portions of

104 Phases 1 and 2 have commenced and total contractual sales were HK$547.2 million in 2009. We expect to complete construction of Shine June Garden in phases in 2012.

The Riverside

The Riverside is a multi-phase residential and commercial development project located at Lane 2999, Baian Gong Road, Waigang Town, Jiading District, Shanghai City, the PRC, occupying a site area of approximately 315,000 sq.m. We currently have a 29.84% interest in this project.

The Riverside has planned GFA of approximately 220,000 sq.m., of which residential GFA and commercial and other GFA attributable to us as of June 30, 2010 was approximately 32,000 sq.m. and 4,000 sq.m., respectively. Portions of Phases 1 and 2 have been completed and sold and pre-sales of the remaining portions have commenced. Total sales recognized in 2009 were HK$469.9 million and total contractual sales were HK$286.6 million in the same period. We expect to complete construction of The Riverside in phases in 2013.

Tianjin City

We currently have a 94.74% interest in two property development projects in Tianjin with a total planned GFA of approximately 1.4 million sq.m., of which approximately 761,000 sq.m. saleable GFA was attributable to us as of June 30, 2010.

Sun Town

Sun Town is a multi-phase residential and commercial development project located at the junction of Weiguo Road and Helan Road, Hedong District, Tianjin City, the PRC, occupying a site area of approximately 820,000 sq.m. We currently have a 94.74% interest in this project.

Sun Town has planned GFA of approximately 1.1 million sq.m., of which residential GFA and commercial and other GFA attributable to us as of June 30, 2010 was approximately 525,000 sq.m. and 21,000 sq.m., respectively. As we are currently redesigning the master plan, pre-sales are expected to recommence in 2010. We expect to complete construction of Sun Town in phases in 2017.

Mountain My Life

Mountain My Life is a multi-phase residential and commercial development project located at Chengquan Town, Ji County, Tianjin City, the PRC, occupying a site area of approximately 327,000 sq.m. We currently have a 94.74% interest in this project.

Mountain My Life has planned GFA of approximately 278,000 sq.m., of which residential GFA and commercial and other GFA attributable to us as of June 30, 2010 was approximately 211,000 sq.m. and 4,000 sq.m., respectively. The construction of phase 2 has commenced and pre-sales are expected to commence before the end of 2010. We expect to complete construction of Mountain My Life in phases in 2015.

Guangdong Province

We have 2 wholly-owned property development projects in Guangzhou City with total planned GFA of approximately 342,000 sq.m., of which approximately 296,000 sq.m. saleable GFA was attributable to us as of June 30, 2010.

105 Huadu Project

In Guangzhou City, the Huadu Project is a multi-phase residential and commercial development project located at North of Sandong Da Road and East of Guangqing Expressway, Huadu District, Guangzhou City, Guangdong Province, the PRC, occupying a site area of approximately 134,000 sq.m. We currently have a 100% interest in this project.

The Huadu Project has planned GFA of approximately 268,000 sq.m., of which residential GFA and commercial and other GFA attributable to us as of June 30, 2010 was approximately 219,000 sq.m. and 49,000 sq.m., respectively. We expect to complete construction of the Huadu Project in phases in 2014.

We expect to receive the State-owned Land Use Rights Certificate by the end of 2010.

Parkvista (Phase I and Phase II)

In Guangzhou City, Parkvista is a multi-phase residential and commercial development project located at Nos. 10 and 12, Xingsheng Road, Zhujiang New City, Tianhe District, Guangzhou City, Guangdong Province, the PRC, occupying a site area of approximately 14,000 sq.m. We currently have a 100% interest in this project.

Parkvista has planned GFA of approximately 75,000 sq.m. at Phase I, and planned GFA of approximately 74,000 sq.m. at Phase II, of which residential GFA and commercial and other GFA attributable to us as of June 30, 2010 was approximately 8,000 sq.m. and 20,000 sq.m., respectively. Phases I and II of Parkvista were completed in 2007 and 2009, respectively. Total sales recognized in 2009 were HK$640.9 million and total contractual sales were HK$987.1 million in the same period.

Hebei Province

We currently have a 100% interest in one property development project in Shijiazhuang City with a total planned GFA of 614,000 sq.m., of which approximately 201,000 sq.m. saleable GFA was attributable to us as of June 30, 2010.

We currently have a 94.74% interest in one property development project in Shijiazhuang City, with a total planned GFA of 158,000 sq.m., of which approximately 84,000 sq.m. saleable GFA was attributable to us as of June 30, 2010.

International City

In Shijiazhuang City, International City is a multi-phase residential and commercial development project located at No. 473, Huaibei Road, Yuhua District, Shijiazhuang City, Hebei Province, the PRC, occupying a site area of approximately 297,000 sq.m. We currently have a 100% interest in this project.

International City has planned GFA of approximately 614,000 sq.m., of which residential GFA attributable to us as of June 30, 2010 was approximately 201,000 sq.m. Phases 1 to 3 have been completed and sold. The construction of phase 4 has commenced and pre-sales began in July 2010.

106 Blue County

In Shijiazhuang City, Blue County is a residential and commercial project located at No. 299, Donggang Road, Yuhua District, Shijiazhuang City, Hebei Province, the PRC, occupying a site area of approximately 91,000 sq.m. We currently have a 94.74% interest in this property.

Blue County has planned GFA of approximately 158,000 sq.m., of which residential GFA and commercial and other GFA attributable to us as of June 30, 2010 was approximately 83,000 sq.m. and 1,000 sq.m., respectively. Part of this project has been completed and delivered. Total sales recognized in 2009 were HK$276.5 million and total contractual sales were HK$352.2 million in the same period. We expect to complete the construction of Blue County in 2011.

Henan Province

We currently have a 94.74% interest in two property development projects in Luoyang City, with a total planned GFA of approximately 528,000 sq.m., of which approximately 294,000 sq.m. saleable GFA was attributable to us as of June 30, 2010. We also have a 94.74% interest in a property development project in Zhengzhou City, with a total planned GFA of approximately 515,000 sq.m., of which approximately 222,000 sq.m. saleable GFA was attributable to us as of June 30, 2010.

Sunco Town

In Luoyang City, Sunco Town is a multi-phase residential and commercial development project located at South of Nanchang Road, Jianxi District, Luoyang City, Henan Province, the PRC, occupying a site area of approximately 111,000 sq.m. We currently have a 94.74% interest in this property.

Sunco Town has planned GFA of approximately 324,000 sq.m., of which residential GFA and commercial and other GFA attributable to us as of June 30, 2010 was approximately 186,000 sq.m. and 4,000 sq.m., respectively. Phase 1 and Phase 2 of this project have been completed and sold, and pre-sales of part of Phase 3 have commenced. Total sales recognized in 2009 were HK$76.9 million and total contractual sales were HK$128.3 million in the same period. We expect to complete construction of the remaining portion of the Sunco Town in phases in 2013.

World & City

In Luoyang City, World & City is a multi-phase residential and commercial development project located at East of Municipal Government Building, Luoyang New District, Luoyang City, Henan Province, the PRC, occupying a site area of approximately 76,000 sq.m. We currently have a 94.74% interest in this property.

World & City has planned GFA of approximately 204,000 sq.m., of which residential GFA and commercial and other GFA attributable to us as of June 30, 2010 was approximately 91,000 sq.m. and 13,000 sq.m., respectively. Phases 1 and 2 of this project have been completed and sold, and pre-sales of part of the remaining phase have commenced. Total sales recognized in 2009 were HK$155.5 million and total contractual sales were HK$116.2 million in the same period. We expect to complete construction of World & City in phases in 2012.

107 Central Special Zone

In Zhengzhou City, Central Special Zone is a multi-phase residential and commercial development project located at the junction of Shangding Road and Nongye Dong Road, Zhengdong New District, Zhengzhou City, Henan Province, the PRC, occupying a total site area of approximately 219,000 sq.m. We currently have a 94.74% interest in this property.

Central Special Zone has planned GFA of approximately 515,000 sq.m., of which residential GFA and commercial and other GFA attributable to us as of June 30, 2010 was approximately 169,000 sq.m. and 53,000 sq.m., respectively. Phases 1 and 2 of this project have been completed and sold and pre-sales of part of Phase 3 have commenced. Total sales recognized in 2009 were HK$463.3 million and total contractual sales were HK$350.5 million in the same period. We expect to complete construction of the Central Special Zone in phases in 2014.

Hubei Province

We currently have a 94.74% interest in one property development project in Wuhan City, with a total planned GFA of approximately 189,000 sq.m., of which approximately 26,000 sq.m. saleable GFA was attributable to us as of June 30, 2010.

Palen Villas

In Wuhan City, Palen Villas is a multi-phase residential and commercial development project located at No. 8, Huanhu Road, Jinyin Lake, Dongxihu District, Wuhan City, Hubei Province, the PRC, occupying a site area of approximately 172,000 sq.m. We currently have a 94.74% interest in this property.

Palen Villas has planned GFA of approximately 189,000 sq.m., of which residential GFA and commercial and other GFA attributable to us as of June 30, 2010 was approximately 24,000 sq.m. and 2,000 sq.m., respectively. Phase 1 and a portion of Phase 2 have been completed and sold and pre-sales of the remaining portion of Phase 2 have commenced. Total sales recognized in 2009 were HK$81.6 million and total contractual sales were HK$101.2 million in the same period. We expect to complete construction of Palen Villas in phases in 2011.

Jiangsu Province

We currently have three wholly-owned property development projects in Changzhou City and one wholly-owned property development project in Suzhou City with a total planned GFA of approximately 3.0 million sq.m., of which approximately 2.3 million sq.m. saleable GFA was attributable to us as of June 30, 2010. We currently also have a 94.74% interest in one property development project in Suzhou City with a total planned GFA of approximately 292,000 sq.m., of which approximately 11,000 sq.m. saleable GFA was attributable to us as of June 30, 2010.

Royal City

In Changzhou City, Royal City is a multi-phase residential and commercial development project located at No. 88, Yanzheng Dong Road, Wujin District, Changzhou City, Jiangsu Province, the PRC, occupying a site area of approximately 487,000 sq.m. We currently have a 100% interest in this project.

108 Royal City has planned GFA of approximately 955,000 sq.m., of which residential GFA and commercial and other GFA attributable to us as of June 30, 2010 was approximately 570,000 sq.m. and 128,000 sq.m., respectively. Phase 1 and a portion of Phase 2 have been completed and sold and pre-sales of the remaining portion of Phase 2 have commenced. Total sales recognized in 2009 were HK$384.0 million and total contractual sales were HK$536.3 million in the same period. We expect to complete construction of Royal City in phases in 2015.

Vista Panorama In Changzhou City, Vista Panorama is a multi-phase residential and commercial development project located at No. 8, Changhong Zhong Road, Hutang Town, Wujin District, Changzhou City, Jiangsu Province, the PRC, occupying a site area of approximately 127,000 sq.m. We currently have a 100% interest in this project. Vista Panorama has planned GFA of approximately 448,000 sq.m., of which residential GFA and commercial and other GFA attributable to us as of June 30, 2010 was approximately 283,000 sq.m. and 64,000 sq.m., respectively. A portion of Phase 1 has been completed and sold and pre-sales of the remaining portion of Phase 1 and a portion of Phase 2 have commenced. Total sales recognized in 2009 were HK$517.2 million and total contractual sales were HK$573.5 million in the same period. We expect to complete construction of Vista Panorama in phases in 2013.

Grand Metropolis In Changzhou City, Grand Metropolis is a multi-phase “shopping arcade” commercial development project located at No. 33, Huayuan Street, Wujin District, Changzhou City, Jiangsu Province, the PRC, occupying a site area of approximately 67,000 sq.m. We currently have a 100% interest in this property. This location places Grand Metropolois in the central urban zone of the Wujin District, which comprises government administration, tourism, culture, commerce and residential facilities. The Wujin Government administrative center is to the southwest, Changzhou University Town with over 100,000 faculty members and students is to the south and Nantian Park is to the north of Grand Metropolis. Our other projects in Changzhou City, Royal City and Vista Panorama, are nearby. Grand Metropolis has a total planned GFA of approximately 118,000 sq.m., all of which saleable GFA was attributable to us as of June 30, 2010. We intend to keep this property as an investment property and lease out the commercial space. We expect to complete construction of Grand Metropolis in 2013.

Phoenix City In Suzhou City, Phoenix City is a multi-phase residential and commercial development project located at the junction of Susheng Road and Xieyu Road, Suzhou Industrial Park, Suzhou City, Jiangsu Province, the PRC, occupying a site area of approximately 860,000 sq.m. We currently have a 100% interest in this project. Phoenix City has planned GFA of approximately 1.4 million sq.m., of which residential GFA and commercial and other GFA attributable to us as of June 30, 2010 was approximately 1.1 million sq.m. and 48,000 sq.m., respectively. Phase 1 has been completed and sold and pre-sales of a portion of Phase 2 have commenced. Total sales recognized in 2009 were HK$500.2 million and total contractual sales were HK$797.7 million in the same period. We expect to complete construction of Phoenix City in phases in 2016.

109 The Heaven by Lakeside In Suzhou City, The Heaven by Lakeside is a multi-phase residential and commercial development project located at No. 669, Zhongyuan Road, Suzhou Industrial Park, Suzhou City, Jiangsu Province, the PRC, occupying a total site area of approximately 153,000 sq.m. We currently have a 94.74% interest in this project. The Heaven by Lakeside has completed GFA of approximately 292,000 sq.m., of which residential GFA and commercial and other GFA attributable to us as of June 30, 2010 was approximately 10,000 sq.m. and 1,000 sq.m., respectively. The Heaven by Lakeside project was completed in 2009. Total sales recognized in 2009 were HK$465.0 million and total contractual sales were HK$441.6 million in the same period.

Shandong Province We currently have a 94.74% interest in a property development project in Jinan City with a total planned GFA of approximately 317,000 sq.m., of which approximately 301,000 sq.m. saleable GFA was attributable to us as of June 30, 2010. We also have a 94.74% interest in one property development project in Qingdao City with a total planned GFA of approximately 323,000 sq.m., of which approximately 195,000 sq.m. saleable GFA was attributable to us as of June 30, 2010.

Royal Panorama In Jinan City, Royal Panorama is a multi-phase residential and commercial development project located at No. 9, Weishier Road, Huaiyin District, Jinan City, Shandong Province, the PRC, occupying a site area of approximately 177,000 sq.m. We currently have a 94.74% interest in this property. Royal Panorama has planned GFA of approximately 317,000 sq.m., of which residential GFA and commercial and other GFA attributable to us as of June 30, 2010 was approximately 285,000 sq.m. and 16,000 sq.m., respectively. Pre-sales of a portion of phase 1 have commenced and total contracted sales were HK$376.0 million in 2009. We expect to complete construction of Royal Panorama in phases in 2014.

Unusual Landscape In Qingdao City, Unusual Landscape is a multi-phase residential and commercial development project located at No. 207, Haier Da Road, Yinghai Town, Jiaozhou District, Qingdao City, Shandong Province, the PRC, occupying a site area of approximately 249,000 sq.m. We currently have a 94.74% interest in this property. Unusual Landscape has planned GFA of approximately 323,000 sq.m., of which residential GFA and commercial and other GFA attributable to us as of June 30, 2010 was approximately 186,000 sq.m. and 9,000 sq.m., respectively. Phase 1 has been completed and sold and pre-sales of a portion of Phase 2 have commenced. Total sales recognized in 2009 were HK$107.6 million and total contractual sales were HK$22.9 million in the same period. We expect to complete construction of Unusual Landscape in phases in 2015.

Property development—project management We strive to maintain active management participation over our projects, which are grouped into four major geographical regions. Each project is managed by a project manager and each region

110 is supervised by a senior executive based mainly in the PRC. The project managers are responsible for the day-to-day operations and project management of each individual project. Each individual project company is responsible for implementing infrastructure, engineering and supervision of day-to-day construction work. We have a property committee that evaluates the major decisions facing the property business. We also have an independent management committee that makes decisions on a group-wide basis. Before we decide to acquire a piece of land, the project managers and regional senior executives pass their recommendations to the divisional management committee, which then reports to the group-wide independent management committee. Any investment decision regarding the acquisition of land is ultimately made by our Board of Directors.

We conduct feasibility studies, which include market analyses of prospective projects in deciding whether to develop a particular site. In addition, our pre-acquisition site visits and investigations, in conjunction with research and analysis, enable us to understand the general trends and specific conditions of target property markets when assessing the suitability for development of a particular site. When selecting sites for our development projects, we usually apply the following criteria:

• geographical location of the development sites, for example, proximity and accessibility to city centers or business districts;

• property market conditions in the vicinity of the development site;

• local urban planning and specifications; and

• estimated cost, investment and financial return.

During the construction phase, our project companies are responsible for managing site progress. They work closely with the contractors, as overseen by our senior managers to control costs and to ensure the quality of the construction work. In light of our growing property development project portfolio across a wider geographical region, we have developed uniform guidelines setting out our policies in respect of both operational and financial management to be applied to our current projects, and any projects that we may acquire in the future. Furthermore, our financial audit teams for our property development projects was established in 2007 and consists of four people located in the PRC.

Our marketing and sales team and our design service providers are involved in the early stages of the site identification process. The marketing and sales team carries out research and analysis relating to potential market demand.

Upon completion of the preliminary feasibility studies, our Directors become more closely involved in the assessment process by conducting on-site visits before deciding whether to proceed with the acquisition of a site.

Land acquisition

Prior to July 2002, land use rights could be obtained through a land grant contract from local government authorities. Since July 1, 2002, the PRC government introduced regulations requiring that the land transferred from government authorities be sold by a public tender, auction or listing-for-sale. Prior to submitting a tender, we analyze the market and estimate the budget required to develop the project. To acquire a parcel of land, we first need to be successful in the public tender, auction or the listing-for-sale process.

111 As of June 30, 2010, we had obtained land use rights for all of our property development projects with the exception of our Huadu Project in Guangzhou, for which we expect to receive the State- owned land Use Rights Certificate by the end of 2010. We obtained the land use rights of all of our parcels of land after July 1, 2002 through a public tender, auction or listing-for-sale. As of June 30, 2010, we had no outstanding land premium.

Project development cycle

Development of our properties usually entails five phases: land acquisition and resettlement (if any); project planning and pre-construction; project design; construction; and pre-sales, sales and after-sales services. The following diagram illustrates the typical stages of the property development cycle and the key elements and milestones within each stage:

Sales planning, quality and cost control

Project selection, Project planning Project Design Construction Pre-sales, sales land acquisition and - survey - tender of and after-sales and resettlement pre-construction - architectural contractors services - site search and - obtain land use and and - management of analysis rights construction procurement of existing and - market analysis certificates and design supplies potential - feasibility permits - landscape - construction customers study design supervision - preparation for - project - interior design - completion pre-sales valuation inspection - sales - acquisition of promotion land - follow up from - execution of signing of sales land grant contract contract and - delivery of completion of units relevant - title assistance procedures - resettlement (if any)

The typical development cycle for vacant land in the PRC is approximately three years, whereas the development cycle for urban property projects can be longer, particularly for project sites that are not vacant at the time of acquisition. Depending on the size of a development and other factors, the entire development period may last substantially longer. The pace of property development is determined by selling prices, sales volume and the level of our land reserves.

We may obtain multiple governmental approvals and permits, including land use rights certificates, from the relevant authorities for a group of property developments that we view as a single property development for business purposes.

The relevant authorities will not generally issue the formal land use rights certificate in respect of a piece of land until the land premium is paid in full and the resettlement process is completed. As a result, in order to adjust to the pace of development, the land for a property development may be divided into one or more parcels for which multiple land use rights certificates were granted at different stages of development.

112 We design and develop the land we are granted according to the preliminary development plan, including the total GFA that may be built, in our land grant contracts. The actual GFA constructed, however, may exceed the total GFA authorized in the land grant contracts due to factors such as subsequent planning, design adjustments and urban development plans. In the event our property developments exceed the authorized GFA, we would need to apply for approval for such excess. Such excess GFA could result in us paying additional land premium. We do not believe that any such additional land premium would have any material adverse effect on our business, financial condition, results of operations or prospects. We are actively involved in all of the different stages of the development process in order to control the costs, schedule and quality of our projects. Except for the construction work, which is contracted to third-party construction companies, our project companies oversee and largely perform all aspects of their development operations, including the selection and purchase of sites, the preparation of feasibility studies, the obtaining of government approvals for development, the supervision of construction and the marketing of completed projects.

Our classification of properties reflects the basis on which we operate our business and may differ from classifications employed by other developers. Each property project or project phase may be subject to multiple land use rights certificates, construction permits, pre-sale permits and other permits and certificates, which may be issued at different times throughout their developments. The differences between our classification of properties and the classification of properties in our financial statements included elsewhere in this offering memorandum are as follows:

• “properties under development for sale” are included in current assets at the lower of cost and net realizable value. Cost of property in the course of development comprises land costs, construction expenditures, borrowing costs directly attributable to construction of such properties and other direct costs. Net realizable value is based on estimated selling in the ordinary course of business as determined by management with reference to the prevailing market conditions, less further costs expected to be incurred to completion and selling and marketing expenses;

• “completed properties held for sale” are included in current assets at the lower of cost and net realizable value. Cost of property comprises land costs, construction expenditure, borrowing cost directly attributable to construction of such properties and other direct costs. Net realizable value is based on the estimated selling price in the ordinary course of business as determined by the management with reference to the prevailing market conditions, less the estimated costs necessary to make the sale; and

• “investment properties” including completed and under construction, are properties held to earn rental income or for capital appreciation and included in the non-current assets. We measure investment properties using the fair value model on an annual basis. Gains or losses arising from changes in the fair value of investment property are included in profit or loss for the period in which they arise. Construction costs incurred for investment properties under construction are capitalized as part of the carrying amount of the investment properties under construction.

Competition in our property development business

We compete with other property developers for the opportunity to participate in property development projects and in the acquisition of development properties. The principal factors of

113 competition for such opportunities include the acquisition price and the financial resources of the developers. The property markets in cities in which our projects are located are highly competitive. As we focus on developing and sale of residential and commercial properties targeting middle and high income residents in the PRC at prime locations in strategically selected provincial capitals and cities in the PRC, our competitors would include both large and medium sized PRC state-owned, collectively owned and private property developers.

We believe that the principal factors that affect competition for customers for our residential properties are pricing, location, quality and design, and associated market perception of the “brand” and reputation of the developer. In addition, we believe that our experienced property development personnel will facilitate the growth of our property development business. Competition for our commercial properties is primarily based on our positioning, pricing, location, quality, design and potential customer traffic.

114 Properties used by us The following table sets forth details regarding the properties we lease for office purposes as of June 30, 2010: Approx. Term of Monthly Property Description GFA lease Rent Lessor Lessee (sq.m.) Beijing City Level 4, Tower B, The Fifth Unit Nos.5-6 728 3 years RMB152,777(1)Independent Beijing Sunco Square, No 5, Chaoyangmen expiring PRC party(3) Land Daxing North Street, Dong Cheng July 14, 2011 Real Estate District Development Co. Ltd Shenzhen City Noble Center, No. 1006, 3rd Fu Rooms B-D, Floor 35 1,181 3 years RMB198,321(1)Independent Sizhi Trade Zhong Road, Fu Tian District expiring PRC party(3) (Shenzhen Co. January 31, Ltd) 2011 Tianjin City Teda Building, No. 256 Jiefang Level 7, Blocks A 362 1 year, RMB38,491(2) Independent Tianjin Sunco South Road, Hexi District and B expiring PRC party(3) Binhai Real September 30, Estate 2010 Investment Management Limited Teda Building, No. 256 Jiefang Level 7, Blocks H to 742 3 year, RMB77,885(2) Independent Tianjin Sunco South Road, Hexi District L expiring PRC party(3) Binhai Real July 3, 2012 Estate Investment Management Limited Teda Building, No. 256 Jiefang Level 7, Blocks M 160 1 year RMB16,767(2) Independent Tianjin Sunco South Road, Hexi District and N expiring PRC party(3) Binhai Real July 3, 2010* Estate Investment Management Limited Teda Building, No. 256 Jiefang Level 5, Blocks H 217 6 months RMB22,948(2) Independent Tianjin Sunco South Road, Hexi District expiring PRC party(3) Binhai Real December 29, Estate 2010 Investment Management Limited Guangdong Province 29 Floor, NanFang Securities Units 2901, 2902, 540 1 year RMB44,262(1) Independent Guangzhou Building, 140-148 Tiyu East 2911, 2912 expiring PRC party(3) Junde Real Road, Guangzhou City August 9, Estate Limited 2010** Jiangsu Province No. 156 Dingan Zhong Road, 4th Floor 1,200 2 year RMB11,500(1) Independent Changzhou Hutang Town, Wujin District, expiring PRC party(3) Great Gallop Changzhou City March 31, Properties 2012 Developments Limited Hong Kong Tower 6, The Gateway, No.9 Suites 501-5 & 14 935 3 years HK$312,139(1) Harbor City Road King Canton Road, Tsimshatsui, expiring Estates Infrastructure Kowloon April 12, 2011 Limited Management Limited Tower 6, The Gateway, No.9 Suites 506-8 522 3 years HK$168,480(1) Harbor City RK Properties Canton Road, Tsimshatsui, expiring Estates Management Kowloon October 31, Limited Limited 2010 (1) Exclusive of property taxes, management fees, water, electricity and sanitary charges. (2) Exclusive of property taxes, water, electricity and sanitary charges. (3) These independent PRC parties do not have formal English names. * This property is now subject to a one year lease that is set to expire on July 3, 2011 for an annual rental of RMB215,648. ** We did not renew the lease contract of this property after its expiry on August 9, 2010

115 Employees

As of December 31, 2007, 2008 and 2009 and June 30, 2010, we had 1,467, 1,105, 1,296 and 1,467 employees (excluding the staff of our joint venture partners), respectively.

We have not experienced any strikes or other disruptions due to labor disputes. We continue to maintain good relationships with our employees.

Employees are remunerated according to their performance and contribution. Other employee benefits include but are not limited to provident fund contributions, insurance coverage, training programs, as well as a share option scheme. As of June 30, 2010, 15,110,000 share options had been granted to Directors and employees and were outstanding under our share option scheme.

Insurance

Our policy is to ensure that our toll road joint ventures obtain sufficient property insurance and third party liability insurance. We also maintain a global insurance to cover those joint ventures that we believe may not have sufficient insurance coverage.

As required under PRC insurance laws and regulations, we maintain all third-party insurance policies for all our properties under construction. We do not maintain insurance policies for properties that have been delivered to our customers. We consider that our insurance coverage is sufficient for our present purposes. See “Risk factors—Risks relating to our business—We are uncertain whether we have maintained or will continue to maintain sufficient insurance coverage.”

Environmental matters

Property development companies in the PRC are subject to a number of environmental laws and regulations including the PRC Environment Protection Law, the PRC Law on Prevention and Control of Noise Pollution, the PRC Law on Environmental Impact Assessment, and the Administrative Regulations on Environmental Protection in relation to Construction Environment. Please refer to the section headed “Regulation—Environmental protection” and to “Risk factors—Risks relating to our business—Potential liability for environmental problems may affect our business” for details of these environmental laws and regulations and the effect that it may have on our business.

We have submitted the relevant environmental impact study, report or environmental impact analysis table to the environmental authorities prior to commencement of construction of our property development projects. We have not experienced any problems in the inspections conducted by the relevant environmental authorities upon handover of our properties.

Legal proceedings

In October 2007, we and Huge Rise Investment Limited filed a writ of summons against Sunco China Holdings Limited and Sunco Management Holdings Limited (both of which are beneficially owned by Mr. Sun) and Mr. Sun, to claim for loss and damages related to the payment of certain construction costs, tax expenses and penalties in relation to the violation of certain development regulations in the PRC, which were undisclosed by Mr. Sun at the time of negotiation and the

116 conclusion of various agreements leading to the acquisition of Sunco Property and its subsidiaries in late 2006 and early 2007. Certain of these unrecorded liabilities were recorded in the books of subsidiaries held by Sunco Property upon the completion of the acquisition by the Group. We expect the trial to commence in the near future, but the trial date has not been set. We intend to continue to pursue our claims in a manner that we believe is in our and our stockholders’ interests.

Except as disclosed in this offering memorandum, there are no legal or arbitration proceedings against or affecting the Issuer, us, any of our subsidiaries or any of our assets and we are not aware of any pending or threatened proceedings, which are material in the context of this issue of the Notes or the Guarantees.

117 Description of material indebtedness

To fund our existing toll road and property development projects and to finance our working capital requirements, we and our subsidiaries and associated entities, including joint venture companies, have entered into loan agreements with various financial institutions. We have also issued the 2004 Guaranteed Notes, the 2007 Fixed Rate Notes and the 2007 Floating Rate Notes. We set forth below a summary of the material terms and conditions of certain of these loans, the 2004 Guaranteed Notes, the 2007 Fixed Rate Notes and the 2007 Floating Rate Notes, and other indebtedness. We intend to use a portion of the proceeds of this Offering of the Notes to finance a cash tender for, and/or to otherwise repurchase or redeem at maturity, all or a portion of the outstanding 2004 Guaranteed Notes not already held by us and the outstanding 2007 Floating Rate Notes. The successful completion of the cash tender offer for the 2004 Guaranteed Notes and 2007 Floating Rate Notes is not a condition to the closing of this Offering of the Notes. The successful completion of this Offering of the Notes is a condition to the closing of the cash tender offer for the 2004 Guaranteed Notes and 2007 Floating Rate Notes.

RMB1,011.8 million project development loans

As of June 30, 2010, we had RMB1,011.8 million in RMB-denominated loans outstanding, which are secured by our properties.

Customer guarantees

In line with industry practice, we provide guarantees to mortgagee banks in respect of mortgage loans taken out by purchasers of our properties. These guarantees will be released when the customers pledge their real estate certificates as security to banks for the mortgage loans granted. As of June 30, 2010, we had provided an aggregate HK$3,958.9 million in guarantees to our customers.

Syndicated loan for US$220.0 million

On April 11, 2007 we entered into the Syndicated Loan (which has been amended and supplemented by a supplemental agreement on May 18, 2007 and further amended and supplemented by a further supplemental letter on July 3, 2009) for a committed US$170.0 million arranged by a consortium of lenders for the purpose of refinancing a US$120.0 million revolving and term loan facility and a US$50.0 million term loan facility. Effective May 2007, we increased the size of the Syndicated Loan to US$220.0 million. As of June 30, 2010, the outstanding principal amount under the Syndicated Loan was US$110.0 million.

Our subsidiary, RKI Finance Limited, is the borrower under the Syndicated Loan and we are the guarantor. All amounts outstanding under the loan mature on April 11, 2012, and are subject to an annual interest rate of 1.0% over LIBOR.

This Syndicated Facility is secured, among other things, by our guarantee, a charge over the shares of the Toll Road Holding Companies and the New Toll Road Holding Companies. We are required to maintain sufficient cash in the 2007 Escrow Account during the three-month period preceding each scheduled semi-annual repayment date to service our principal and interest payment due on such repayment date.

118 We are subject to certain standard financial and non-financial covenants under the Syndicated Loan. These covenants include: • a requirement that any borrowings provided by the Toll Road Holding Companies and the New Toll Road Holding Companies to any of our subsidiaries be subordinated to the rights of the lenders under the Syndicated Loan; • a restriction on the ability of our subsidiaries to provide loans to any party that is not itself one of our direct or indirect subsidiaries, including most of our joint venture companies in the PRC engaged in the toll road business; and • a requirement that if the aggregate net asset value of our subsidiaries whose shares have been pledged to secure our obligations under the Syndicated Loan, which are currently the Toll Road Holding Companies and the New Toll Road Holding Companies, falls below US$220.0 million at any time, we are to provide security over shares of additional subsidiaries to maintain an aggregate net asset value of not less than US$220.0 million. On May 4, 2007 the Toll Road Holding Companies entered into a guarantee agreement to guarantee the due and punctual payments of any indebtedness under the Syndicated Loan and the performance of the borrower thereunder. On July 3, 2009 the New Toll Road Holding Companies entered into a guarantee agreement to guarantee the due and punctual payments of any indebtedness under the Syndicated Loan and the performance of the borrower thereunder in light of our disposal of our interest in the Jihe Expressway (Eastern Section). Any guarantees to be provided by the Toll Road Holding Companies or the New Toll Road Holding Companies to the holders of the Notes will be subordinated to the guarantees provided to the lenders under the Syndicated Loan and, for so long as the Syndicated Loan remains outstanding, to the holders of the 2007 Fixed Rate Notes and the 2007 Floating Rate Notes. Such guarantees will enable the lenders under the Syndicated Loan and the holders of the 2007 Notes to have priority as to the assets of the Toll Road Companies and the New Toll Road Companies over claims of the Noteholders under any Guarantees to be provided by the Toll Road Holding Companies and the New Toll Road Companies. See “Risk Factors—Risks relating to the Notes and the Guarantees—The lenders under the Syndicated Loan have a charge over an account held by us into which all cash payments from the Toll Road Holding Companies will be placed and the Subordinated Guarantees will be expressly subordinated to liabilities and obligations under any guarantees provided by the Toll Road Holding Companies under the Syndicated Loan.”

HK$150.0 million term loan and HK$50.0 million revolving facility On November 3, 2009, we entered into a HK$150.0 million term loan and a HK$50.0 million revolving loan facility with Hang Seng Bank Limited for general working capital purposes. As of June 30, 2010, the entire facility was fully utilized. The term loan and revolving facility will mature in three years and are subject to an annual interest rate of 1.8% over HIBOR.

US$25.0 million term loan facility On May 20, 2010, we entered into a US$25.0 million (or its equivalent in Hong Kong dollars) term loan facility with CITIC Bank International Limited. As of June 30, 2010, the entire facility was

119 fully utilized. The loan facility is subject to an annual interest rate of 1.4% over LIBOR or HIBOR (as appropriate). One half of the facility will mature on May 20, 2011 and the remainder will mature on May 20, 2012.

2004 Guaranteed Notes due 2011 On July 15, 2004, Road King Infrastructure Finance (2004) Limited issued the 2004 Guaranteed Notes, which have been unconditionally and irrevocably guaranteed by RKIL. The proceeds from the offering of 2004 Guaranteed Notes were used for the purposes of investments in toll roads or other transportation related projects, refinancing of indebtedness existing at that time and as general working capital. The guarantee ranks at least pari passu with all of our other present and future unsecured and unsubordinated obligations. RKI Finance Limited and we, as guarantor, have given a negative pledge that no security interest will be created or permitted to subsist upon the whole or any part of our respective present or future undertaking, assets or revenues (including uncalled capital) to secure any indebtedness or guarantee of indebtedness. The 2004 Guaranteed Notes carry an annual interest rate of 6.25%. The 2004 Guaranteed Notes are listed on the SGX-ST and will mature on July 15, 2011.

Redemption RKI Finance Limited is not entitled to redeem the 2004 Guaranteed Notes otherwise than as provided under scheduled redemption, on July 15, 2011, or redemption for tax reasons. RKI Finance Limited, RKIL, or any of its subsidiaries may at any time purchase 2004 Guaranteed Notes in the open market or otherwise and at any price, provided that all unmatured coupons are purchased therewith. If any such purchase is made by tender, the tender must be made available to all holders of 2004 Guaranteed Notes. We intend to use a portion of the proceeds of this Offering to finance a cash tender offer for, or to otherwise repurchase, any and all of the outstanding 2004 Guaranteed Notes not already held by us. The successful completion of the cash tender offer for the 2004 Guaranteed Notes and the 2007 Floating Rate Notes is not a condition to the closing of this Offering of the Notes. The successful completion of this Offering of the Notes is a condition to the closing of the cash tender offer for the 2004 Guaranteed Notes and the 2007 Floating Rate Notes.

2007 Fixed Rate Notes due 2014 and 2007 Floating Rate Notes due 2012 On May 14, 2007, Road King Infrastructure Finance (2007) Limited issued the 2007 Fixed Rate Notes and the 2007 Floating Rate Notes, which have been unconditionally and irrevocably guaranteed by RKIL. The proceeds from the offering of the 2007 Fixed Rate Notes and the 2007 Floating Rate Notes were used to pay a portion of land premium payments due by Suzhou Junyu, finance the acquisition of land in the PRC, and refinance existing debt at that time. The guarantee ranks at least pari passu with all of our other present and future unsecured and unsubordinated obligations, provided that the guarantees provided by the Toll Road Holding Companies are explicitly subordinated to the guarantees provided by the Toll Road Holding Companies under the Syndicated Loan. Road King Infrastructure Finance (2007) Limited and we, as guarantor, have given a negative pledge that, except for certain permitted liens, no security interest will be created or permitted to subsist upon any of our respective assets or properties of any kind, unless the 2007 Fixed Rate Notes and the 2007 Floating Rate Notes are secured equally and ratably with (or, if the obligation or liability to be secured by such lien is subordinated in right of payment to the 2007 Fixed Rate Notes and the 2007 Floating Rate Notes, prior to) the

120 indebtedness secured by such lien. For so long as the Syndicated Loan remains outstanding, any guarantees to be provided by the Toll Road Holding Companies or the New Toll Road Holding Companies to the holders of the Notes will be subordinated to the guarantees provided to the holders of the 2007 Fixed Rate Notes and the 2007 Floating Rate Notes. The 2007 Fixed Rate Notes carry an annual interest rate of 7.625 per cent. The 2007 Floating Rate Notes carry an interest rate equal to three month LIBOR, plus 2.25 per cent per annum, which is reset quarterly. The 2007 Fixed Rate Notes and the 2007 Floating Rate Notes are listed on the SGX-ST and will mature on May 14, 2014 and May 14, 2012, respectively. Any guarantees to be provided by the Toll Road Holding Companies or the New Toll Road Holding Companies to the holders of the Notes will be subordinated to the guarantees provided to the lenders under the Syndicated Loan, and to the holders of the 2007 Fixed Rate Notes and the 2007 Floating Rate Notes.

Redemption At any time before May 14, 2011, we may redeem the 2007 Fixed Rate Notes, in whole and not in part, at a redemption price equal to 100% of their principal amount plus an applicable premium and accrued and unpaid interest, if any, to the redemption date. At any time and from time to time on or after May 14, 2011, we may redeem the 2007 Fixed Rate Notes, in whole or in part, at a redemption price equal to the percentage of principal amount set forth below plus accrued and unpaid interest to the redemption date if redeemed during the twelve-month period beginning on May 14 of each of the years indicated below. Redemption Period Price 2011 ...... 103.8125% 2012 ...... 101.9063% 2013 and thereafter ...... 100.00%

In addition, at any time prior to May 14, 2010, we may redeem up to 35% of the principal amount of the 2007 Fixed Rate Notes using proceeds from certain equity offerings at a redemption price of 107.625% of the principal amount of the 2007 Fixed Rate Notes plus accrued and unpaid interest, if any, to the redemption date. At any time and from time to time, we may redeem the 2007 Floating Rate Notes, in whole or in part, at a redemption price equal to the percentage of principal amount set forth below plus accrued and unpaid interest to the redemption date if redeemed during the twelve-month period beginning on the Interest Payment Date falling on, or nearest to, May 14 of each of the years indicated below. Redemption Period Price 2008 ...... 103.00% 2009 ...... 102.00% 2010 and thereafter ...... 100.00%

We intend to use a portion of the proceeds of this Offering to finance a cash tender offer for the 2007 Floating Rate Notes. The successful completion of the cash tender offer for the 2004 Guaranteed Notes and the 2007 Floating Rate Notes is not a condition to the closing of this Offering of the Notes. The successful completion of this Offering of the Notes is a condition to the closing of the cash tender offer for the 2004 Guaranteed Notes and the 2007 Floating Rate Notes.

121 Terms and conditions of the Notes The following (subject to amendment, and other than the words in italics) is the text of the terms and conditions of the Notes (the “Conditions”) which will appear on the reverse of each of the definitive certificates evidencing the Notes:

The issue of the US$350,000,000 aggregate principal amount of 9.5 per cent. Guaranteed Notes due 2015 (the “Notes,” which term shall include, unless the context requires otherwise, any further Notes issued in accordance with Condition 17 and consolidated and forming a single series therewith) of RKI Finance (2010) Limited (the “Issuer”) was authorized by the resolutions of the Board of Directors of the Issuer passed on September 13, 2010. The Notes are jointly and severally guaranteed by Road King Infrastructure Limited (the “Company”) and each of the Subsidiary Guarantors (together with the Company, the “Guarantors”). The giving of the Guarantee (as defined below) was authorized by resolutions of the board of directors of the Company and each of the Subsidiary Guarantors passed on September 13, 2010. The Notes are constituted by a trust deed to be dated on or about September 21, 2010 (the “Trust Deed”) made between the Issuer, the Company, the Subsidiary Guarantors and DB Trustees (Hong Kong) Limited as trustee for the holders of the Notes (the “Trustee,” which term shall, where the context so permits, include all other persons for the time being acting as trustee or trustees under the Trust Deed) and are subject to the paying agency agreement to be dated on or about September 21, 2010 (the “Agency Agreement”) made between the Issuer, the Trustee, Deutsche Bank AG, Hong Kong Branch as principal agent (the “Principal Agent”) and agent bank (the “Agent Bank”), Deutsche Bank Luxembourg S.A. as registrar (the “Registrar”) and the other paying agents and transfer agents appointed under it (each a “Paying Agent”ora“Transfer Agent” and together with the Registrar, the Principal Agent and the Agent Bank, the “Agents”) relating to the Notes. References to the “Principal Agent,” “Registrar,” “Agent Bank” and “Agents” below are references to the principal agent, registrar, agent bank and agents for the time being for the Notes. The statements in these Conditions include summaries of, and are subject to, the detailed provisions of the Trust Deed. Unless otherwise defined, terms used in these Conditions have the meanings specified in the Trust Deed. Copies of the Trust Deed and of the Agency Agreement are available for inspection at the registered office of the Trustee being at the date hereof at 48th Floor, Cheung Kong Center, 2 Queen’s Road Central, Hong Kong and at the specified offices of each of the Agents other than the Agent Bank. The Holders are entitled to the benefit of, and are bound by, the Trust Deed and are deemed to have notice of, all the provisions of the Trust Deed and the Agency Agreement.

1 Guarantee and status (A) Guarantee

The Company and each Subsidiary Guarantor has unconditionally and irrevocably guaranteed, on a joint and several basis, the due payment of all sums expressed to be payable by the Issuer under the Trust Deed and the Notes. Each Guarantor’s obligations in that respect (the “Guarantee”) are contained in the Trust Deed.

The Company will cause each of its future Subsidiaries (other than Subsidiaries organized under the laws of the PRC and SPV Financing Subsidiaries), immediately upon becoming a Restricted Subsidiary, to execute and deliver to the Trustee a supplemental deed to the Trust Deed pursuant to which such Restricted Subsidiary will, jointly and severally, guarantee the due payment of all sums expressed to be payable by the Issuer under the Trust Deed and the Notes.

122 The Guarantee may be released (on the occurrence of the events set out in paragraphs (i) and (ii) below, only in relation to the Subsidiary Guarantor affected) if:

(i) in relation to any Subsidiary Guarantor, such Subsidiary Guarantor is disposed of in accordance with these Conditions and the Trust Deed provided that: (a) such Subsidiary Guarantor is simultaneously released from its obligations (if any) in respect of any other Indebtedness of the Issuer, the Company or any Restricted Subsidiary; and (b) the proceeds of any such disposal are used for purposes either permitted or required by these Conditions or the Trust Deed;

(ii) in relation to any Subsidiary Guarantor, the Company designates such Subsidiary Guarantor to be an Unrestricted Subsidiary in accordance with these Conditions and the Trust Deed;

(iii) in relation to RKP, and any Subsidiary Guarantor that is an RKP Subsidiary, either: (a) the Company designates RKP and its Subsidiaries as Unrestricted Subsidiaries in accordance with these Conditions and the Trust Deed; or (b) upon the consummation of an RKP IPO;

(iv) upon a defeasance as set out in Condition 8; or

(v) all amounts due and payable under the Notes, the Trust Deed and the Agency Agreement have been paid in full.

No release of a Guarantor from the Guarantee shall be effective against the Trustee or the Holders until the Company has delivered to the Trustee an Officer’s Certificate stating that all requirements relating to such release have been complied with and that such release is authorized and permitted by the Trust Deed.

For the purposes of these Conditions, “Subsidiary Guarantor” means each of the Persons named as such in the Trust Deed and any other Subsidiary from time to time that enters into a guarantee, indemnity or arrangement with a similar effect in relation to the Notes pursuant to the Trust Deed and the Notes; provided that Subsidiary Guarantor shall not include any Person whose Subsidiary Guarantee has been released in accordance with the Trust Deed and the Notes.

(B) Status

(1) The Notes constitute direct, unsubordinated, unconditional and (subject to Condition 6G) unsecured obligations of the Issuer and the Notes shall at all times rank pari passu and without preference or priority among themselves. The payment obligations of the Issuer under the Notes shall, save for such exceptions as may be provided by mandatory provisions of applicable law and subject to Condition 6G, at all times rank at least equally with all of its other present and future unsecured and unsubordinated obligations.

(2) The Guarantee of each Guarantor constitutes a general obligation of such Guarantor, and shall, save for such exceptions as provided in Condition 1B(3) below and as may be provided by mandatory provisions of applicable law and subject to Condition 6G, at all times rank pari passu with all of its other present and future unsecured and unsubordinated obligations.

123 (3) The obligations of each Subordinated Guarantor under its Guarantee constitutes unsecured and subordinated obligations of such Subordinated Guarantor, and upon any distribution to creditors of such Subordinated Guarantor pursuant to a final and effective order or resolution for the bankruptcy, winding up, liquidation, receivership or similar proceeding in respect of such Subordinated Guarantor (a “Winding Up”), the claims in respect of such Subordinated Guarantor’s Guarantee shall be subordinated in right of payment to the prior payment in full of all liabilities of such Subordinated Guarantor under its Syndicated Loan Guarantee and, for so long as the Syndicated Loan remains outstanding, its 2007 Note Guarantees, but not with respect to (i) any liabilities under the Syndicated Loan Guarantees in excess of the aggregate of US$250.0 million, together with interest, premium (if any), expenses and any other amounts due under the Syndicated Loan Guarantee; and (ii) any liabilities which by their terms rank equally in right of payment with or junior to such Subordinated Guarantor’s obligations under its Guarantee.

2 Form and denomination The Notes are issued in registered form in the denomination of US$100,000 and higher integral multiples of US$1,000 each. A Note certificate (each a “Certificate”) will be issued to each Noteholder in respect of its registered holding of Notes. Each Certificate will be numbered serially with an identifying number which will be recorded on the relevant Certificate and in the register of Holders which the Company will procure to be kept by the Registrar. Upon issue, the Notes will be represented by the Global Certificate deposited with a common depositary for, and representing Notes registered in the name of a nominee of, Euroclear and Clearstream. The Conditions are modified by certain provisions contained in the Global Certificate. So long as the Notes are represented by the Global Certificate and the relevant clearing systems so permit, transfers of interests in the Notes through the relevant clearing systems shall be in principal amounts of at least US$100,000 and integral multiples of US$1,000 thereafter. Further, approval in-principle has been received for the listing of the Notes on the official list of the SGX-ST. Any Notes traded on the SGX-ST are required to trade in minimum board lot sizes of US$200,000 for as long as the Notes are listed on the SGX-ST.

3 Title Title to the Notes passes only by transfer and registration in the register of Holders as described in Condition 4. The Person whose name is entered in the Register as the Holder of any Note will (except as otherwise required by law) be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any interest in it or any writing on, or the theft or loss of, the Certificate issued in respect of it) and no person will be liable for so treating the Holder. In these Conditions, “Noteholder” and (in relation to a Note) “Holder” means the Person in whose name a Note is registered.

4 Transfers of Notes; issue of Certificates (A) Register The Issuer will cause to be kept at the specified office of the Registrar and in accordance with the terms of the Agency Agreement a register outside Hong Kong on which shall be entered the names and addresses of the holders of the Notes and the particulars of the Notes held by them and of all transfers of the Notes (the “Register”). Each Noteholder shall be entitled to receive only one Certificate in respect of its entire holding of Notes.

124 (B) Transfer

Subject to the Agency Agreement, a Note may be transferred by delivery of the Certificate issued in respect of that Note, with the form of transfer on the back duly completed and signed by the Holder or his attorney duly authorized in writing, to the specified office of the Registrar or any of the Agents other than the Agent Bank. No transfer of a Note will be valid unless and until entered on the Register. Transfers of interests in the Notes evidenced by the Global Certificate will be effected in accordance with the rules of the relevant clearing systems.

(C) Delivery of new certificates

Each new Certificate to be issued upon a transfer of Notes will, within five business days of receipt by the Registrar or, as the case may be, any other relevant Agent which for the avoidance of doubt shall not include the Agent Bank of the form of transfer, be made available for collection at the specified office of the Registrar or such other relevant Agent or, if so requested in the form of transfer, be mailed by uninsured mail at the risk of the Holder entitled to the Notes (but free of charge to the Holder) to the address specified in the form of transfer. Except in the limited circumstances described herein (see “The Global Certificate”), owners of interests in the Notes will not be entitled to receive physical delivery of Certificates.

Where only part of a principal amount of the Notes (being that of one or more Notes) in respect of which a Certificate is issued is to be transferred a new Certificate in respect of the Notes not so transferred will, within five business days of delivery of the original Certificate to the Registrar or other relevant Agent which for the avoidance of doubt shall not include the Agent Bank, be made available for collection at the specified office of the Registrar or such other relevant Agent or, if so requested in the form of transfer, be mailed by uninsured mail at the risk of the holder of the Notes not so transferred (but free of charge to the Holder) to the address of such Holder appearing on the Register.

For the purposes of this Condition 4, “business day” shall mean a day other than a Saturday or Sunday on which banks are open for business in the city in which the specified office of the Registrar (if a Certificate is deposited with it in connection with a transfer) or the Agent with whom a Certificate is deposited in connection with a transfer is located.

(D) Formalities free of charge

Registration of transfer of Notes will be effected without charge by or on behalf of the Issuer or any of the Agents which for the avoidance of doubt shall not include the Agent Bank, but upon payment (or the giving of such indemnity as the Issuer or any of such Agents may require) in respect of any tax or other governmental charges which may be imposed in relation to such transfer.

(E) Closed periods

No Noteholder may require the transfer of a Note to be registered (i) during the period of seven days ending on (and including) the dates for payment of any principal pursuant to the Conditions; or (ii) during the period of 15 days ending on (and including) any Interest Record Date (as defined in Condition 10A).

125 (F) Regulations

All transfers of Notes and entries on the register of Holders will be made subject to the detailed regulations concerning the transfer of Notes scheduled to the Agency Agreement. The regulations may be changed by the Issuer, with the prior written approval of the Trustee and the Registrar. A copy of the current regulations will be mailed (free of charge) by the Registrar to any Noteholder who asks for one.

5 Redemption and purchase

(A) Maturity

Unless previously redeemed, or purchased and cancelled as provided herein, the Issuer will redeem each Note at its principal amount on September 21, 2015 (the “Maturity Date”). The Issuer may not redeem the Notes at its option prior to that date except as provided in Conditions 5B, 5F, 5G and 5H below (but without prejudice to Condition 12).

(B) Redemption for taxation reasons

At any time the Issuer may, having given not less than 30 nor more than 60 days’ notice to the Holders in accordance with Condition 18 (which notice shall be irrevocable) redeem all, but not some only, of the Notes at 100% of their principal amount (together with interest accrued and unpaid to the date fixed for redemption and including any additional amounts as referred to in Condition 11) if (i) the Issuer satisfies the Trustee immediately prior to the giving of such notice that the Issuer, the Company, a Surviving Person or an applicable Subsidiary Guarantor has or will become obliged to pay additional amounts as referred to in Condition 11 as a result of any change in, or amendment to, the laws or regulations of any jurisdiction in which the Issuer, the Company, such Surviving Person or such Subsidiary Guarantor is organized or resident for tax purposes (or any political subdivision or taxing authority thereof or therein) (each, as applicable, a“Relevant Jurisdiction”) or any change in the general application or official interpretation of such laws or regulations (including a holding, judgment or order by a court of competent jurisdiction), which change or amendment becomes effective (a) with respect to the Issuer, the Company or any initial Subsidiary Guarantor, on or after the Original Issue Date, or (b) with respect to any future Subsidiary Guarantor or Surviving Person, the date such future Subsidiary Guarantor or Surviving Person becomes a future Subsidiary Guarantor or Surviving Person, with respect to any payment due or to become due under the Notes or the Trust Deed, the Issuer, the Company, a Surviving Person or a Subsidiary Guarantor, as the case may be, is, or on the next Interest Record Date would be, required to pay such additional amounts, and (ii) such obligation cannot be avoided by the Issuer, the Company, such Surviving Person or the Subsidiary Guarantor, as the case may be, taking reasonable measures available to it, provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer, the Company, such Surviving Person or a Subsidiary Guarantor, as the case may be, would be obliged to pay such additional amounts were a payment in respect of the Notes then due. Prior to the giving of any notice of redemption pursuant to this paragraph, the Issuer shall deliver to the Trustee (a) a certificate signed by two directors of the Issuer stating that the obligation referred to in (i) above cannot be avoided by the Issuer, the Company, such Surviving Person or such Subsidiary Guarantor, as the case may be, taking reasonable measures available to it and (b) an opinion of independent legal or tax advisers of recognized standing with respect to tax matters and acceptable to the Trustee to the effect that such change or amendment has

126 occurred (irrespective of whether such amendment or change is then effective) and the Trustee shall be entitled to accept such certificate and opinion as sufficient evidence thereof in which event it shall be conclusive and binding on the Holders.

(C) Purchases The Issuer, the Company or any of the Company’s Subsidiaries may at any time and from time to time purchase Notes at any price in the open market or otherwise.

(D) Cancellation All Notes which are redeemed or purchased by the Issuer, the Company or any of the Company’s Subsidiaries will forthwith be cancelled. Certificates in respect of all Notes cancelled will be forwarded to or to the order of the Registrar and such Notes may not be reissued or resold.

(E) Change of control Upon the occurrence of a Change of Control Triggering Event, each Noteholder shall have the right to require that the Issuer repurchase such Noteholder’s Notes at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase (without prejudice to the right of Holders of record on the relevant Interest Record Date to receive interest due on the relevant Interest Payment Date). Within 30 days following any Change of Control Triggering Event the Issuer will give notice to the Holders in accordance with Condition 18 with a copy to the Trustee (the “Change of Control Offer”) stating: (1) that a Change of Control Triggering Event has occurred and that each Noteholder has the right to require the Issuer to purchase such Noteholder’s Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to (but not including) the date of purchase (subject to the right of Holders of record on the relevant Interest Record Date to receive interest on the relevant Interest Payment Date); (2) the circumstances and relevant facts regarding such Change of Control Triggering Event; (3) the purchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is given); and (4) the instructions, as determined by the Issuer, consistent with this Condition 5E, that a Noteholder must follow in order to have its Notes purchased. The Issuer will not be required to make a Change of Control Offer following a Change of Control Triggering Event if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Trust Deed applicable to a Change of Control Offer made by the Issuer and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. The Issuer will comply, to the extent applicable, with the requirements of any securities laws or regulations and the rules of any stock exchange on which the Notes are listed from time to time in connection with the repurchase of notes as a result of a Change of Control Triggering Event. To the extent that the provisions of any securities laws or regulations or stock exchange rules

127 conflict with the provisions of this Condition 5E, the Issuer will comply with the applicable securities laws and regulations and stock exchange rules and shall not be deemed to have breached its obligations under this Condition 5E by virtue of its compliance with such securities laws or regulations or stock exchange rules. None of the Trustee or the Agents shall be required to take any steps to ascertain whether a Change of Control Triggering Event or a Change of Control Offer or any event which could lead to a Change of Control Triggering Event or a Change of Control Offer has occurred or may occur and shall be entitled to assume that no such event has occurred until they have received written notice to the contrary from the Issuer. None of the Trustee or the Agents shall be required to take any steps to ascertain whether the condition for the exercise of the rights of Noteholders in accordance with Condition 5E has occurred. None of the Trustee or the Agents shall be responsible for determining or verifying whether a Note is to be accepted for redemption under this Condition 5E and will not be responsible to Holders for any loss or liability arising from any failure by it to do so. None of the Trustee or the Agents shall be under any duty to determine, calculate or verify the redemption amount payable under this Condition 5E and will not be responsible to Holders for any loss arising from any failure by it to do so.

(F) Equity clawback Prior to September 21, 2013, the Issuer may at its option on one or more occasions redeem the Notes in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the Notes originally issued at a redemption price (expressed as a percentage of principal amount) of 109.5%, plus accrued and unpaid interest to the redemption date, with the Net Cash Proceeds from one or more Equity Offerings, provided that: (1) at least 65% of the aggregate principal amount of the Notes remains outstanding immediately after the occurrence of each such redemption; and (2) each such redemption occurs within 60 days after the closing date of the related Equity Offering. Upon a redemption in accordance with this Condition 5F, the principal amount of Notes shall be reduced by the amount of US dollars paid to Holders (with respect to principal) pro rata to the outstanding principal amount of Notes. None of the Trustee or the Agents shall be required to take any steps to ascertain whether the condition for a redemption in accordance with this Condition 5F has occurred. None of the Trustee or the Agents shall be responsible for determining or verifying whether a Note is to be accepted for pro rata redemption under this Condition 5F and will not be responsible to Holders for any loss or liability arising from any failure by it to do so. So long as the Notes are represented by the Global Certificate and the Global Certificate is held on behalf of the Clearing Systems, any pro rata reduction in the principal amount of Notes to be redeemed upon automatic redemption in accordance with Condition 5F will be effected by way of a reduction in the face value of the Notes within the relevant Clearing System(s) in accordance with the rules of the relevant Clearing System(s).

(G) Make whole redemption At any time or from time to time prior to September 21, 2013, the Issuer may redeem the Notes, in whole and not in part, upon not less than 30 nor more than 60 days’ notice, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium plus accrued and unpaid interest to such redemption date.

128 (H) Optional redemption

At any time and from time to time on or after September 21, 2013, the Issuer may redeem the Notes, in whole or in part, at a redemption price equal to the percentage of principal amount set forth below plus accrued and unpaid interest to the redemption date if redeemed during the twelve-month period beginning on September 21 of each of the years indicated below.

Redemption Period Price 2013 ...... 104.750% 2014 ...... 102.375%

None of the Trustee or the Agents shall be responsible for calculating or verifying the redemption price payable pursuant to Condition 5G or this Condition 5H or for determining or verifying whether a Note is to be accepted for redemption under Condition 5G or this Condition 5H and will not be responsible to Holders or any other person for any loss arising from any failure by it to do so.

6 Covenants (A) Limitation on indebtedness and disqualified stock or preferred stock

(1) The Company will not, and will not permit any Restricted Subsidiary to, Incur any Indebtedness (including Acquired Indebtedness), and the Company will not permit any Restricted Subsidiary to issue Preferred Stock, provided that (x) the Company and any SPV Financing Subsidiary may Incur Indebtedness (including Acquired Indebtedness) and (y) any Restricted Subsidiary (other than an SPV Financing Subsidiary) may Incur Permitted Subsidiary Indebtedness if, on the date of such Incurrence of such Indebtedness and after giving effect thereto and the receipt and application of the proceeds therefrom, (i) no Potential Event of Default or Event of Default has occurred and is continuing and (ii) the Fixed Charge Coverage Ratio would be not less than 2.5 to 1.0. Notwithstanding the foregoing sentence, the Company will not permit any Restricted Subsidiary to Incur any Disqualified Stock (other than Disqualified Stock of Restricted Subsidiaries held by the Company or a Subsidiary Guarantor, so long as it is so held).

(2) Notwithstanding Condition 6A(1), the Company and, to the extent provided below, any Restricted Subsidiary may Incur each and all of the following (“Permitted Indebtedness”):

(a) Indebtedness under the Notes (excluding any further Notes issued in accordance with Condition 17) and the Guarantee;

(b) any Pari Passu Subsidiary Guarantees by any Subsidiary Guarantor;

(c) Indebtedness of the Company or any Restricted Subsidiary outstanding on the Original Issue Date excluding Indebtedness permitted under Condition 6A(2)(d); provided that such Indebtedness of Restricted Subsidiaries (other than an SPV Financing Subsidiary) shall be included in the calculation of Permitted Subsidiary Indebtedness;

(d) Indebtedness of the Company or any Restricted Subsidiary owed to the Company or any Restricted Subsidiary; provided that (x) any event which results in

129 any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of such Indebtedness (other than to the Company or any Restricted Subsidiary) shall be deemed, in each case, to constitute an Incurrence of such Indebtedness not permitted by this Condition 6A(2)(d); (y) if the Company or any Subsidiary Guarantor is the obligor on such Indebtedness, such Indebtedness must be unsecured and expressly be subordinated to the prior payment in full of all obligations under the Notes and the Trust Deed, in the case of the Company, or the Guarantee of such Subsidiary Guarantor, in the case of a Subsidiary Guarantor; and (z) if the Indebtedness is owed to the Company or any Subsidiary Guarantor, such Indebtedness must be evidenced by an unsubordinated promissory note or a similar instrument under applicable law;

(e) Indebtedness (“Permitted Refinancing Indebtedness”) issued in exchange for, or the net proceeds of which are used to refinance or refund, then outstanding Indebtedness Incurred under Conditions 6A(1) or Condition 6A(2)(a), 6A(2)(b), 6A(2)(c), 6A(2)(k) or 6A(2)(n) of this covenant in an amount not to exceed the amount so refinanced or refunded (plus premiums, accrued interest, fees and expenses); provided that (i) Indebtedness the proceeds of which are used to refinance or refund the Notes or Indebtedness that is pari passu with, or subordinated in right of payment to, the Notes or a Subsidiary Guarantee shall only be permitted under this Condition 6A(2)(e) if (x) in case the Notes are refinanced in part or the Indebtedness to be refinanced is pari passu with the Notes or a Subsidiary Guarantee, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is issued or remains outstanding, is expressly made pari passu with, or subordinate in right of payment to, the remaining Notes or a Subsidiary Guarantee, or (y) in case the Indebtedness to be refinanced is subordinated in right of payment to the Notes or a Subsidiary Guarantee, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is issued or remains outstanding, is expressly made subordinate in right of payment to the Notes or a Subsidiary Guarantee at least to the extent that the Indebtedness to be refinanced is subordinated to the Notes or a Subsidiary Guarantee, (ii) such new Indebtedness, determined as of the date of Incurrence of such new Indebtedness, does not mature prior to the Stated Maturity of the Indebtedness to be refinanced or refunded, and the Average Life of such new Indebtedness is at least equal to the remaining Average Life of the Indebtedness to be refinanced or refunded and (iii) in no event may Indebtedness of the Company or any Subsidiary Guarantor be refinanced pursuant to this Condition 6A(2)(e) by means of any Indebtedness of any Subsidiary that is not a Subsidiary Guarantor (except in the case of Indebtedness in the form of a guarantee by the Company or a Subsidiary Guarantor that is refinanced by a guarantee of Indebtedness of an SPV Financing Subsidiary);

(f) Indebtedness Incurred by the Company or any Restricted Subsidiary pursuant to Hedging Obligations entered into in the ordinary course of business and designed solely to protect the Company or any Restricted Subsidiary from fluctuations in interest rates, currencies or the price of commodities or to reduce current interest expense, and not for speculation;

130 (g) Indebtedness Incurred by the Company or any Restricted Subsidiary constituting reimbursement obligations with respect to letters of credit, trade guarantees or similar instruments issued in the ordinary course of business to the extent that such letters of credit or trade guarantees are not drawn upon or, if drawn upon, to the extent such drawing is reimbursed no later than 30 days following receipt by the Company or such Restricted Subsidiary of a demand for reimbursement; (h) Indebtedness arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from guarantees or letters of credit, surety bonds or performance bonds securing any obligation of the Company or any Restricted Subsidiary pursuant to such agreements, in any case, Incurred in connection with the disposition of any business, assets or Restricted Subsidiary, other than guarantees of Indebtedness Incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiary for the purpose of financing such acquisition; provided that the maximum aggregate liability in respect of all such Indebtedness in the nature of such guarantee shall at no time exceed the gross proceeds actually received from the sale of such business, assets or Restricted Subsidiary; (i) (a) Guarantees by the Company or any Subsidiary Guarantor of Indebtedness of the Company or any Restricted Subsidiary that was permitted to be Incurred by another provision of this covenant, or (b) Guarantees by any Restricted Subsidiary of Indebtedness of another Restricted Subsidiary that was permitted to be Incurred under Condition 6A(2)(f) above or Condition 6A(2)(j) or 6A(2)(k) below; (j) Indebtedness of the Company or any Restricted Subsidiary with a maturity of one year or less used by the Company or any Restricted Subsidiary for working capital; provided that the aggregate principal amount of Indebtedness permitted by this Condition 6A(2)(j) at any time does not exceed an amount equal to the greater of US$30.0 million and 2.0% of the Total Assets as of the date of the Incurrence of such Indebtedness; (k) Indebtedness Incurred by the Company or any Restricted Subsidiary for the purpose of financing (x) all or any part of the purchase price of assets, real or personal property (including the lease purchase price of land use rights) or equipment to be used in the ordinary course of business by the Company or a Restricted Subsidiary in the Permitted Business including any such purchase through the acquisition of Capital Stock of any Person that owns such real or personal property or equipment which will, upon acquisition, become a Restricted Subsidiary, or (y) all or any part of the purchase price or the cost of development, construction or improvement of real or personal property (including the lease purchase price of land use rights) or equipment to be used in the ordinary course of business by the Company or such Restricted Subsidiary in the Permitted Business; provided that in the case of clauses (x) and (y), (A) the aggregate principal amount of such Indebtedness shall not exceed such purchase price or cost, (B) such Indebtedness shall be Incurred no later than 180 days after the acquisition of such property or completion of such development, construction or improvement and (C) on the date of the Incurrence of such Indebtedness and after giving effect thereto, the aggregate principal amount outstanding of all

131 such Indebtedness permitted by this Condition 6A(2)(k) (together with refinancings thereof, but excluding any Contractor Guarantee Incurred under this Condition 6A(2)(k) to the extent the amount of such Contractor Guarantee is otherwise reflected in such aggregate principal amount) does not exceed an amount equal to 15.0% of Total Assets;

(l) Pre-Registration Mortgage Guarantees by the Company or any Restricted Subsidiary;

(m) Indebtedness Incurred by the Company or any Restricted Subsidiary constituting reimbursement obligations with respect to workers’ compensation claims or self-insurance obligations or bid, performance or surety bonds (in each case other than for an obligation for borrowed money);

(n) Indebtedness of the Company or any Restricted Subsidiary in an aggregate principal amount outstanding at any time (together with refinancings thereof) not to exceed US$10.0 million (or the Dollar Equivalent thereof); and

(o) a Syndicated Loan Guarantee by a Subordinated Guarantor or Road King (China) Infrastructure Limited to guarantee Indebtedness Incurred under the Syndicated Loan.

(3) For purposes of determining compliance with this Condition 6A, in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described under the proviso in Condition 6A(1), the Issuer, in its sole discretion, shall classify, and from time to time may reclassify, such item of Indebtedness.

For the purposes of determining compliance with any US dollar-denominated restriction on the Incurrence of Indebtedness, the US dollar equivalent principal amount of Indebtedness denominated in a foreign currency shall be calculated based on the relevant currency exchange rate in effect on the date that such Indebtedness was Incurred, in the case of term Indebtedness, or first committed, in the case of revolving credit Indebtedness; provided that if such Indebtedness is Incurred to refinance other Indebtedness denominated in a foreign currency, and such refinancing would cause the applicable US dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such US dollar- denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such refinancing Indebtedness does not exceed the principal amount of such Indebtedness being refinanced. Notwithstanding any other provision of this Condition 6A, the maximum amount of Indebtedness that the Company and its Restricted Subsidiaries may Incur pursuant to this Condition 6A shall not be deemed exceeded solely as a result of fluctuations in the exchange rate of currencies. The principal amount of any Indebtedness Incurred to refinance other Indebtedness, if Incurred in a different currency from the Indebtedness being refinanced, shall be calculated based on the currency exchange rate applicable to currencies in which such refinancing Indebtedness is denominated that is in effect on the date of such refinancing.

(4) The Company will not Incur, and will not permit any Subsidiary Guarantor to Incur, any Indebtedness if such Indebtedness is contractually subordinated in right of payment to any other Indebtedness of the Company or such Subsidiary Guarantor, as the case may

132 be, unless such Indebtedness is also contractually subordinated in right of payment to the Notes or the Subsidiary Guarantees, on substantially identical terms; provided, however, that the foregoing limitation shall not apply (i) to any guarantee by a Subsidiary Guarantor of Relevant Indebtedness issued by the Company or a Restricted Subsidiary, which is subordinated in right of payment to the prior payment in part or in full of all liabilities of such Subordinated Guarantor under its Syndicated Loan Guarantee and its 2007 Notes Guarantees, as the case may be or (ii) to distinctions between categories of Indebtedness that exist by reason of any Liens or guarantees securing or in favor of some but not all of such Indebtedness.

(5) The Company and the Restricted Subsidiaries will use their best efforts to ensure that the Toll Road Joint Venture Companies which are not Restricted Subsidiaries will seek to minimize their Indebtedness to Persons other than the Company or Restricted Subsidiaries and maximize their dividend yield such that the level of Indebtedness to Persons other than the Company or Restricted Subsidiaries at, and the amount of dividends paid by, the Toll Road Joint Venture Companies would not be expected to materially and adversely affect the ability of the Company to make any required payment on the Notes.

(6) The Company will not Incur, and will not permit any Restricted Subsidiary to Incur, any Indebtedness under the Syndicated Loan in excess of US$250.0 million in aggregate.

(B) Limitation on restricted payments

The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly (the payments or any other actions described in Conditions 6B(1) to 6B(4) below being collectively referred to as “Restricted Payments”):

(1) declare or pay any dividend or make any distribution on or with respect to the Company’s or any Restricted Subsidiary’s Capital Stock (other than dividends or distributions payable or paid in shares of the Company’s or any Restricted Subsidiary’s Capital Stock (other than Disqualified Stock or Preferred Stock) or in options, warrants or other rights to acquire shares of such Capital Stock) held by Persons other than the Company or any Wholly-Owned Restricted Subsidiary;

(2) purchase, call for redemption or redeem, retire or otherwise acquire for value any shares of Capital Stock of the Company or any Restricted Subsidiary (including options, warrants or other rights to acquire such shares of Capital Stock) or any direct or indirect parent of the Company held by any Persons other than the Company or any Wholly- Owned Restricted Subsidiary;

(3) make any voluntary or optional principal payment, or voluntary or optional redemption, repurchase, defeasance, or other acquisition or retirement for value, of Indebtedness that is subordinated in right of payment to the Notes or any of the Subsidiary Guarantees (excluding any intercompany Indebtedness between or among the Company and any Wholly-Owned Restricted Subsidiary); or

(4) make any Investment, other than a Permitted Investment, if, at the time of, and after giving effect to, the proposed Restricted Payment:

(a) a Potential Event of Default or Event of Default has occurred and is continuing or would occur as a result of such Restricted Payment;

133 (b) the Company could not Incur at least US$1.00 of Indebtedness under the proviso in the first sentence of Condition 6A(1); or

(c) such Restricted Payment, together with the aggregate amount of all Restricted Payments made by the Company and its Restricted Subsidiaries after May 14, 2007, shall exceed the sum (without duplication) of:

(i) the Consolidated EBITDA of the Company accrued on a cumulative basis during the period (taken as one accounting period) beginning on January 1, 2007 and ending on the last day of the Company’s most recently ended fiscal semi-annual period for which consolidated financial statements of the Company (which the Company shall use its best efforts to compile in a timely manner) are available, less (A) the product of 2.5 times the Consolidated Interest Expense of the Company for the same period (for Restricted Payments made on or prior to September 21, 2013), or (B) the product of 3.0 times the Consolidated Interest Expense of the Company for the same period (for Restricted Payments made thereafter); and such financial statements have been provided by the Issuer to the Trustee at the time of such Restricted Payment (the Trustee shall not have any obligation to check or verify the accuracy and correctness of such financial statements or other information provided to it or to monitor compliance with the Conditions and will not be responsible to Holders or any other person for any loss or liability arising from failure to do so and shall be entitled to rely on such information as conclusive and binding on the Issuer, the Company and the Holders); plus

(ii) 100% of the aggregate Net Cash Proceeds received by the Company after May 14, 2007 as a capital contribution to its common equity or from the issuance and sale of its Capital Stock (other than Disqualified Stock) to a Person who is not a Subsidiary of the Company, including any such Net Cash Proceeds received upon (x) the conversion of any Indebtedness (other than Subordinated Indebtedness) of the Company into Capital Stock (other than Disqualified Stock) of the Company, or (y) the exercise by a Person who is not a Subsidiary of the Company of any options, warrants or other rights to acquire Capital Stock of the Company (other than Disqualified Stock), in each case after deducting the amount of any such Net Cash Proceeds used to redeem, repurchase, defease or otherwise acquire or retire for value any Subordinated Indebtedness or Capital Stock of the Company; plus

(iii) the amount by which Indebtedness of RKP or any RKP Restricted Subsidiary is reduced on the balance sheet of RKP or such RKP Restricted Subsidiary, as the case may be, upon the conversion or exchange subsequent to May 14, 2007 of any Indebtedness of RKP or such RKP Restricted Subsidiary convertible or exchangeable for Capital Stock (other than Disqualified Stock) of RKP or such RKP Restricted Subsidiary (less the amount of any cash, or the fair value of any other property, distributed by RKP or such RKP Restricted Subsidiary upon such conversion or exchange); provided, however, that the foregoing amount shall not exceed the Net

134 Cash Proceeds received by RKP or such RKP Restricted Subsidiary, as the case may be, from the Incurrence of such Indebtedness; plus (iv) an amount equal to the net reduction in Investments (other than reductions in Permitted Investments) that were made after May 14, 2007 in any Person resulting from (w) payments of interest on Indebtedness, dividends or repayments of loans or advances by such Person, in each case to the Company or any Restricted Subsidiary (except, in each case, to the extent any such payment or proceeds are included in the calculation of Consolidated EBITDA), (x) the unconditional release of a guarantee (to the extent such guarantee when given constituted a Restricted Payment made under this covenant) provided by the Company or a Restricted Subsidiary after May 14, 2007 of an obligation of another Person, (y) to the extent that an Investment made after May 14, 2007 is sold or otherwise liquidated or repaid for cash, the lesser of (A) cash return of capital with respect to such Investment (less the cost of disposition, if any) and (B) the initial amount of such Investment, or (z) from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries, not to exceed, in each case, the amount of Investments made by the Company or a Restricted Subsidiary after May 14, 2007 in any such Person or Unrestricted Subsidiary. The foregoing provision shall not prohibit any of the following: (A) the payment of any dividend or redemption of any Capital Stock within 60 days after the related date of declaration or call for redemption if, at said date of declaration or call for redemption, such payment or redemption would comply with the preceding paragraph; (B) the redemption, repurchase, defeasance or other acquisition or retirement for value of Subordinated Indebtedness of the Company or any Subsidiary Guarantor with the Net Cash Proceeds of, or in exchange for, a substantially concurrent Incurrence of Permitted Refinancing Indebtedness for such Subordinated Indebtedness; (C) the redemption, repurchase or other acquisition of Capital Stock of the Company or any Subsidiary Guarantor (or options, warrants or other rights to acquire such Capital Stock) in exchange for, or out of the Net Cash Proceeds of a substantially concurrent capital contribution or sale (other than to a Subsidiary of the Company) of, shares of Capital Stock (other than Disqualified Stock) of the Company or any Subsidiary Guarantor (or options, warrants or other rights to acquire such Capital Stock); provided that the amount of any such Net Cash Proceeds that are utilized for any such Restricted Payment will be excluded from Condition 6B(c)(ii); (D) the redemption, repurchase, defeasance or other acquisition or retirement for value of Subordinated Indebtedness of the Company or any Subsidiary Guarantor in exchange for, or out of the Net Cash Proceeds of, a substantially concurrent capital contribution or sale (other than to a Subsidiary of the Company) of, shares of Capital Stock (other than Disqualified Stock) of the Company or any Subsidiary Guarantor (or options, warrants or other rights to acquire such Capital Stock); provided that the amount of any such Net Cash Proceeds that are utilized for any such Restricted Payment will be excluded from Condition 6B(c)(ii);

135 (E) the declaration or payment of any dividends or distributions declared, paid or made by a Restricted Subsidiary payable, or, the redemption, repurchase, defeasance or other acquisition or retirement by a Restricted Subsidiary of any of its Capital Stock, on a pro rata basis, or on a basis more favorable to the Company or Restricted Subsidiary, to or from all holders of any class of Capital Stock of such Restricted Subsidiary, a majority of which is held directly, or indirectly through Restricted Subsidiaries, by the Company;

(F) Restricted Payments in an aggregate amount not to exceed US$50.0 million (or the Dollar Equivalent thereof);

(G) the declaration or payment of dividends by the Company to holders of its Common Stock in an aggregate amount not to exceed US$50.0 million (or the Dollar Equivalent thereof) in any single fiscal year (in addition to or in lieu of dividends declared or paid pursuant to any other provision of this Condition 6B, including the amount of special dividends declared or paid by the Company pursuant to Condition 6B(H) below);

(H) the declaration or payment of special dividends by the Company to holders of its Common Stock in an amount equal to the sum of US$100.0 million and the Net Cash Proceeds received by the Company or a Restricted Subsidiary from the sale of shares of Capital Stock of RKP in an RKP IPO, provided that such sum shall not exceed the net gain recognized by the Company pursuant to GAAP on the increase in the valuation of its shares of Capital Stock of RKP in connection with an RKP IPO;

(I) the making of Investments in Toll Road Joint Venture Companies up to an amount equal to the aggregate amount of repayments of loans or advances (or payments of interest thereon) to the Company or a Restricted Subsidiary for loans or advances made to Toll Road Joint Venture Companies prior to May 14, 2007 by the Company or such Restricted Subsidiary (except, in each case, to the extent any such payment or repayment is included in the calculation of Consolidated EBITDA); or

(J) the repurchase of Capital Stock of the Company by the Company in connection with the Company’s employee incentive or stock option plans up to an aggregate amount of US$10.0 million, provided that, in the case of Condition 6B(E), 6B(F), 6B(G), 6B(H), 6B(I) or 6B(J) above, no Potential Event of Default or Event of Default shall have occurred and be continuing or would occur as a consequence of the actions or payments set forth therein.

Each Restricted Payment permitted pursuant to Conditions 6B(A) or 6B(F) shall be included in calculating whether Condition 6B(c) has been met with respect to any subsequent Restricted Payments.

The amount of any Restricted Payments (other than cash) will be the Fair Market Value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or the Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The value of any assets or securities that are required to be valued by this Condition 6B will be the Fair Market Value. The Board of Directors’ determination of the Fair Market Value of a Restricted Payment or any such assets or securities must be based upon an opinion or appraisal issued by an Independent Financial Advisor if the Fair Market Value exceeds US$5.0 million (or the Dollar Equivalent thereof).

136 Not later than the date of making any Restricted Payment in an amount in excess of US$5.0 million (or the Dollar Equivalent thereof), the Company will deliver to the Trustee an Officers’ Certificate acceptable to the Trustee stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by Condition 6B were computed, together with a copy of any fairness opinion or appraisal required by the Trust Deed. The Trustee shall not have any obligation to check or verify the accuracy and correctness of such Officers’ Certificate or to monitor compliance with the Conditions and will not be responsible to Holders or any other person for any loss or liability arising from failure to do so and shall be entitled to rely on such Officers’ Certificate as conclusive and binding on the Issuer, the Company and the Holders.

(C) Limitation on dividend and other payment restrictions affecting restricted subsidiaries

(1) Except as provided below, the Company will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to:

(a) pay dividends or make any other distributions on any Capital Stock of such Restricted Subsidiary owned by the Company or any other Restricted Subsidiary;

(b) pay any Indebtedness or other obligation owed to the Company or any other Restricted Subsidiary;

(c) make loans or advances to the Company or any other Restricted Subsidiary; or

(d) sell, lease or transfer any of its property or assets to the Company or any other Restricted Subsidiary.

(2) Condition 6C(1) does not apply to any encumbrances or restrictions:

(a) existing in agreements as in effect on the Original Issue Date, or existing in any of the Notes, the Subsidiary Guarantees, the Trust Deed or any Pari Passu Subsidiary Guarantee of any Subsidiary Guarantor, and any extensions, refinancings, renewals or replacements of any of the foregoing agreements; provided that the encumbrances and restrictions in any such extension, refinancing, renewal or replacement, taken as a whole, are no more restrictive in any material respect to the Holders than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed or replaced;

(b) existing under or by reason of applicable law;

(c) existing with respect to any Person or the property or assets of such Person acquired by the Company or any Restricted Subsidiary, existing at the time of such acquisition and not incurred in contemplation thereof, which encumbrances or restrictions are not applicable to any Person or the property or assets of any Person other than such Person or the property or assets of such Person so acquired, and any extensions, refinancings, renewals or replacements thereof; provided that the encumbrances and restrictions in any such extension, refinancing, renewal or replacement, taken as a whole, are no more restrictive in any material respect to the Holders than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed or replaced;

137 (d) that otherwise would be prohibited by the provision described in Condition 6C(1)(d) of this covenant if they arise, or are agreed to in the ordinary course of business, and that (x) restrict in a customary manner the subletting, assignment or transfer of any property or asset that is subject to a lease or licence, (y) exist by virtue of any Lien on, or agreement to transfer, option or similar right with respect to any property or assets of the Company or any Restricted Subsidiary not otherwise prohibited by the Trust Deed or (z) do not relate to any Indebtedness, and that do not, individually or in the aggregate, detract from the value of property or assets of the Company or any Restricted Subsidiary in any manner material to the Company or any Restricted Subsidiary;

(e) with respect to a Restricted Subsidiary and imposed pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock of, or property and assets of, such Restricted Subsidiary that is permitted by Conditions 6A, 6D and 6I; or

(f) with respect to any PRC Restricted Subsidiary and imposed pursuant to an agreement that has been entered into for the Incurrence of Indebtedness permitted under Conditions 6A(2)(j), 6A(2)(k) and 6A(2)(n) if, as determined by the Board of Directors, the encumbrances or restrictions are (i) customary for such types of agreements and (ii) would not, at the time agreed to, be expected to materially and adversely affect the ability of the Company to make any required payment on the Notes and, with respect to Conditions 6A(2)(k) and 6A(2)(n), any extension, refinancings, renewals or replacements of any of the foregoing agreements; provided that the encumbrances and restrictions in any such extension, refinancing, renewal or replacement, taken as a whole, are no more restrictive in any material respect to the Holders than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed or replaced.

(D) Limitation on sales and issuances of capital stock in restricted subsidiaries

The Company will not sell, and will not permit any Restricted Subsidiary, directly or indirectly, to issue or sell, any shares of Capital Stock of a Restricted Subsidiary except:

(1) to the Company or a Wholly-Owned Restricted Subsidiary;

(2) to the extent such Capital Stock represents director’s qualifying shares or is required by applicable law to be held by a Person other than the Company or a Wholly-Owned Restricted Subsidiary;

(3) the issuance or sale of Capital Stock of a Restricted Subsidiary if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any remaining Investment in such Person would have been permitted to be made under Condition 6B if made on the date of such issuance or sale, and provided that such issuance or sale of Capital Stock is in accordance with Condition 6I; and

(4) the issuance or sale of Capital Stock of a Restricted Subsidiary (which remains a Restricted Subsidiary after any such issuance or sale); provided that such issuance or sale of Capital Stock is in accordance with Condition 6I.

138 (E) Limitation on issuances of guarantees by restricted subsidiaries

The Company will not permit any Restricted Subsidiary which is not a Subsidiary Guarantor, directly or indirectly, to guarantee any Indebtedness (“Guaranteed Indebtedness”) of the Company or any other Restricted Subsidiary, unless: (1)(a) such Restricted Subsidiary simultaneously executes and delivers a supplemental trust deed to the Trust Deed providing for an unsubordinated Subsidiary Guarantee of payment of the Notes by such Restricted Subsidiary and (b) such Restricted Subsidiary waives and will not in any manner whatsoever claim, or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Company or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Subsidiary Guarantee until the Notes have been paid in full; (2) such guarantee and such Guaranteed Indebtedness are permitted by Conditions 6A(2)(c), 6A(2)(d) or 6A(2)(i)(b) (other than, in the case of Conditions 6A(2)(i)(b), a Guarantee by a PRC Restricted Subsidiary of the Indebtedness of a non-PRC Restricted Subsidiary); or (3) such guarantee is a Syndicated Loan Guarantee provided by a Subordinated Guarantor or Road King (China) Infrastructure Limited which is otherwise permitted by Condition 6A(6).

If the Guaranteed Indebtedness (a) ranks pari passu in right of payment with the Notes or any Subsidiary Guarantee, then the guarantee of such Guaranteed Indebtedness shall rank pari passu in right of payment with, or subordinated to, the Subsidiary Guarantee or (b) is subordinated in right of payment to the Notes or any Subsidiary Guarantee, then the guarantee of such Guaranteed Indebtedness shall be subordinated in right of payment to the Subsidiary Guarantee at least to the extent that the Guaranteed Indebtedness is subordinated to the Notes or the Subsidiary Guarantee.

(F) Limitation on transactions with shareholders and affiliates

The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into, renew or extend any transaction or arrangement (including, without limitation, the purchase, sale, lease or exchange of property or assets, or the rendering of any service) with (a) any holder (or any Affiliate of such holder) of 10% or more of any class of Capital Stock of the Company or (b) any Affiliate of the Company or any Restricted Subsidiary (each an “Affiliate Transaction”), unless:

(1) the Affiliate Transaction is on fair and reasonable terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable arm’s-length transaction by the Company or the relevant Restricted Subsidiary with a Person that is not an Affiliate of the Company or any Restricted Subsidiary; and

(2) the Company delivers to the Trustee (in each case in form and substance acceptable to the Trustee):

(a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of US$5.0 million (or the Dollar Equivalent thereof), a Board Resolution set forth in an Officers’ Certificate certifying that such Affiliate Transaction complies with this Condition and such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors; and

139 (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of US$20.0 million (or the Dollar Equivalent thereof), in addition to the Officer’s Certificate required in Condition 6F(2)(a), an opinion as to the fairness to the Company or such Restricted Subsidiary of such Affiliate Transaction from a financial point of view issued by an Independent Financial Advisor.

The Trustee shall not have any obligation to check or verify the accuracy and correctness of such information provided to it or to monitor compliance with the Conditions and will not be responsible to Holders or any other person for any loss or liability arising from failure to do so and shall be entitled to rely on such information as conclusive and binding on the Issuer, the Company and the Holders.

The foregoing limitation does not limit, and shall not apply to:

(i) the payment of reasonable and customary regular fees to directors of the Company who are not employees of the Company;

(ii) transactions between or among the Company and any of its Wholly- Owned Restricted Subsidiaries or between or among Wholly-Owned Restricted Subsidiaries;

(iii) any Restricted Payment of the type described in Conditions 6B(1) or 6B(2) if permitted by Conditions 6B; and

(iv) the issuance of securities to officers and directors of the Company or any Restricted Subsidiary pursuant to an employee stock or share option scheme, so long as such scheme is in compliance with the Hong Kong Listing Rules.

In addition, the requirements of Condition 6F(2) shall not apply to (i) Investments (other than Permitted Investments) not prohibited by Condition 6B, (ii) Investments permitted pursuant to clause (15) of the definition of “Permitted Investments,” (iii) any transaction required pursuant to agreements in effect on the Original Issue Date and described in the Offering Memorandum, or any amendment or modification or replacement thereof, so long as such amendment, modification or replacement is not more disadvantageous to the Company and its Restricted Subsidiaries than the original agreement in effect on the Original Issue Date; (iii) the issue of Common Stock by the Company to any Permitted Holder and/or any of its Affiliates within 14 days after such Person has executed an agreement to reduce its holding of Common Stock by placing such Common Stock to a Person who is not an Affiliate of the Company, provided that the Common Stock must be issued by the Company at a price not less than the placing price and the number of Common Stock issued to the Permitted Holder and/or its Affiliates must not exceed the number of Common Stock placed by such Person and (iv) any transaction between or among the Company and any Restricted Subsidiary that is not a Wholly-Owned Restricted Subsidiary; provided that in the case of (iv) (x) such transaction is entered into in the ordinary course of business and (y) none of the minority shareholders or minority partners who beneficially

140 owns 10% or more of any class of Capital Stock of such Restricted Subsidiary is a Person described in (a) or (b) of the first paragraph of this Condition 6F (other than by reason of such minority shareholder or minority partner being an officer or director of such Restricted Subsidiary).

(G) Limitation on liens

The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, incur, assume or permit to exist any Lien of any nature whatsoever on any of its assets or properties of any kind, whether owned at the Original Issue Date or thereafter acquired, except Permitted Liens, unless the Notes are secured equally and rateably with (or, if the obligation or liability to be secured by such Lien is subordinated in right of payment to the Notes, prior to) the Indebtedness secured by such Lien.

(H) Limitation on sale and leaseback transactions

The Company will not, and will not permit any Restricted Subsidiary to, enter into any Sale and Leaseback Transaction; provided that the Company may enter into a Sale and Leaseback Transaction if:

(1) the Company could have (a) incurred Indebtedness in an amount equal to the Attributable Indebtedness relating to such Sale and Leaseback Transaction under Condition 6A and (b) incurred a Lien to secure such Indebtedness pursuant to Condition 6G, in which case, the corresponding Indebtedness and Lien will be deemed incurred pursuant to those provisions;

(2) the gross cash proceeds of that Sale and Leaseback Transaction are at least equal to the Fair Market Value of the property that is the subject of such Sale and Leaseback Transaction; and

(3) the transfer of assets in that Sale and Leaseback Transaction is permitted by, and the Company applies the proceeds of such transaction in compliance with, Condition 6I.

(I) Limitation on asset sales

The Company will not, and will not permit any Restricted Subsidiary to, consummate any Asset Sale, unless:

(1) no Potential Event of Default or Event of Default shall have occurred and be continuing or would occur as a result of such Asset Sale;

(2) the consideration received by the Company or such Restricted Subsidiary, as the case may be, is at least equal to the Fair Market Value of the assets sold or disposed of;

(3) in the case of an Asset Sale that constitutes an Asset Disposition, the Company could Incur at least US$1.00 of Indebtedness under the proviso in the first sentence of Condition 6A(1) after giving pro forma effect to such Asset Disposition;

(4) at least 75% of the consideration received consists of cash or Temporary Cash Investments or Replacement Assets; provided that in the case of an Asset Sale in which the Company or such Restricted Subsidiary receives Replacement Assets involving aggregate consideration in excess of US$10.0 million (or the Dollar Equivalent thereof),

141 the Company shall deliver to the Trustee an opinion as to the fairness to the Company or such Restricted Subsidiary of such Asset Sale from a financial point of view issued by an Independent Financial Advisor. The Trustee shall not have any obligation to check or verify the accuracy and correctness of such information provided to it or to monitor compliance with the Conditions and shall be entitled to rely on such information as conclusive and binding on the Issuer, the Company and the Holders.

For purposes of this provision, each of the following will be deemed to be cash:

(a) any liabilities, as shown on the Company’s most recent consolidated balance sheet, of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Subsidiary Guarantee) that are assumed by the transferee of any such assets pursuant to a customary assumption, assignment, novation or similar agreement that releases the Company or such Restricted Subsidiary from further liability;

(b) any securities, notes or other obligations received by the Company or any Restricted Subsidiary from such transferee that are promptly, but in any event within 30 days of closing, converted by the Company or such Restricted Subsidiary into cash, to the extent of the cash received in that conversion; and

(c) the assumption or discharge of Indebtedness of the Company (other than obligations in respect of Disqualified Stock of the Company) or any Restricted Subsidiary (other than obligations in respect of Disqualified Stock or Preferred Stock of a Subsidiary Guarantor) and the release of the Company or such Restricted Subsidiary from all liability on such Indebtedness in connection with such Asset Sale.

Within 360 days after the receipt of any Net Cash Proceeds from an Asset Sale, the Company (or the applicable Restricted Subsidiary, as the case may be) may apply such Net Cash Proceeds to:

(i) permanently repay Senior Indebtedness of the Company or a Subsidiary Guarantor or any Indebtedness of a Restricted Subsidiary that is not a Subsidiary Guarantor (and, if such Senior Indebtedness repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto) in each case owing to a Person other than the Company or a Restricted Subsidiary; or

(ii) acquire Replacement Assets.

On the 361st day after an Asset Sale or such earlier date, if any, as the Company determines not to apply the Net Cash Proceeds relating to such Asset Sale as set forth in preceding paragraph (such date being referred as an “Excess Proceeds Trigger Date”), such aggregate amount of Net Cash Proceeds that has not been applied on or before the Excess Proceeds Trigger Date as permitted in the preceding paragraph (“Excess Proceeds”) will be applied by the Issuer to make an offer to purchase to all Holders of Notes and all holders of other Indebtedness that is pari passu with the Notes or the Guarantee containing provisions similar to those set forth in the Trust Deed with respect to offers to purchase with the proceeds of sales of assets, to purchase the maximum principal amount of Notes and such other pari passu Indebtedness that may be purchased out of the Excess Proceeds in accordance with the procedures set forth in these Conditions and the Trust Deed (an “Excess Proceeds Repurchase Offer”). The offer price in any Excess Proceeds Repurchase Offer will be equal to 100% of the principal amount of the Notes

142 and such other pari passu Indebtedness plus accrued and unpaid interest, if any, to the date of purchase, and will be payable in cash. The Issuer shall defer the Excess Proceeds Repurchase Offer until there are aggregate unutilized Excess Proceeds equal to or in excess of $20.0 million (or the Dollar Equivalent thereof) resulting from one or more Asset Sales, at which time, within ten days thereof, the entire unutilized amount of Excess Proceeds will be applied as provided above to make an Excess Proceeds Repurchase Offer. If any Excess Proceeds remain after consummation of an Excess Proceeds Repurchase Offer, the Company may use such Excess Proceeds for any purpose not otherwise prohibited by the Trust Deed. If the aggregate principal amount of Notes and such other pari passu Indebtedness tendered into such Excess Proceeds Repurchase Offer exceeds the amount of Excess Proceeds, the Notes and such other pari passu Indebtedness will be purchased on a pro rata basis based on the principal amount of Notes and such other pari passu Indebtedness tendered. Upon completion of each Excess Proceeds Repurchase Offer, the Excess Proceeds subject to such Asset Sale will no longer be deemed to be Excess Proceeds and the amount of Excess Proceeds will be reset to zero.

Pending application of the Net Cash Proceeds or Excess Proceeds pursuant to this Condition 6(I), such Net Cash Proceeds or Excess Proceeds shall be invested in Temporary Cash Investments.

(J) Limitation on consolidation and merger

Neither the Issuer nor the Company will consolidate with, merge with or into another Person, permit any Person to merge with or into it, or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its and the Restricted Subsidiaries’ properties and assets (computed on a consolidated basis) (as an entirety or substantially an entirety in one transaction or a series of related transactions), unless:

(1) the Issuer or the Company, as the case may be, shall be the continuing Person, or the Person (if other than it) formed by such consolidation or merger or that acquired or leased such property and assets (the “Surviving Person”) shall be a corporation organized and validly existing under the laws of Bermuda, the British Virgin Islands, the Cayman Islands, Hong Kong or the United States or any jurisdiction thereof and shall expressly assume, by a supplemental trust deed to the Trust Deed, executed and delivered to the Trustee, all the obligations of the Issuer or the Company, as the case may be, under the Trust Deed and the Notes, as the case may be, and the Trust Deed and the Notes, as the case may be, shall remain in full force and effect;

(2) immediately prior to and after giving effect to such transaction, no Event of Default or Potential Event of Default shall have occurred and be continuing;

(3) immediately after giving effect to such transaction on a pro forma basis, the Company or the Surviving Person, as the case may be, shall have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Company immediately prior to such transaction;

(4) immediately after giving effect to such transaction on a pro forma basis, the Company or the Surviving Person, as the case may be, could Incur at least US$1.00 of Indebtedness under the proviso in the first sentence of Condition 6A(1);

(5) the Issuer or the Company, as the case may be, delivers to the Trustee (a) an Officers’ Certificate (attaching the arithmetic computations to demonstrate compliance with Conditions 6J(3) and 6J(4)) and (b) an Opinion of Counsel, in each case stating that such

143 consolidation, merger or transfer and such supplemental trust deed complies with this Condition 6J and that all conditions precedent provided for herein relating to such transaction have been complied with;

(6) each Subsidiary Guarantor, unless such Subsidiary Guarantor is the Person with which the Issuer or the Company, as the case may be, has entered into a transaction described under this Condition 6J shall execute and deliver a supplemental trust deed to the Trust Deed confirming that its Guarantee shall apply to the obligations of the Issuer or the Surviving Person in accordance with the Notes and the Trust Deed; and

(7) no Rating Decline shall have occurred.

The Trustee shall not have any obligation to check or verify the accuracy and correctness of the arithmetic computations attached to such Officers’ Certificate and will not be responsible to Holders or any other person for any loss or liability arising from failure to do so and shall be entitled to rely on such Officers’ Certificate and the attached computations as conclusive and binding on the Issuer, the Company and the Holders.

No Subsidiary Guarantor will consolidate with or merge with or into another Person, permit any Person to merge with or into it, or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its and its Restricted Subsidiaries’ properties and assets (computed on a consolidated basis) (as an entirety or substantially an entirety in one transaction or a series of related transactions) to another Person (other than the Company or another Subsidiary Guarantor), unless:

(i) such Subsidiary Guarantor shall be the continuing Person, or the Person (if other than it) formed by such consolidation or merger or that acquired or leased such property and assets shall be the Company, another Subsidiary Guarantor or shall become a Subsidiary Guarantor concurrently with the transaction;

(ii) immediately prior to and after giving effect to such transaction, no Event of Default or Potential Event of Default shall have occurred and be continuing;

(iii) immediately after giving effect to such transaction on a pro forma basis, the Company shall have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Company immediately prior to such transaction;

(iv) immediately after giving effect to such transaction on a pro forma basis, the Company could Incur at least US$1.00 of Indebtedness under the proviso in the first sentence of Condition 6A(1);

(v) the Company delivers to the Trustee (x) an Officers’ Certificate (attaching the arithmetic computations to demonstrate compliance with Conditions 6J(iii) and 6J(iv)) and (y) an Opinion of Counsel, in each case stating that such consolidation, merger or transfer and the relevant supplemental trust deed complies with this Condition 6J and that all conditions precedent provided for herein relating to such transaction have been complied with; and

(vi) no Rating Decline shall have occurred, provided that this paragraph shall not apply to any sale or other disposition that complies with Condition 6I or any Subsidiary Guarantor whose Guarantee is unconditionally released in accordance with the provisions described under Condition 1A.

144 The Trustee shall not have any obligation to check or verify the accuracy and correctness of the arithmetic computations attached to such Officers’ Certificate and will not be responsible to Holders or any other person for any loss or liability arising from failure to do so and shall be entitled to rely on such Officer’s Certificate and the attached computations as conclusive and binding on the Issuer, the Company and the Holders.

(K) Limitation on business activities

The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, engage in any business other than a Permitted Business; provided, however, that the Company or any Restricted Subsidiary may own Capital Stock of an Unrestricted Subsidiary or joint venture or other entity that is engaged in a business other than Permitted Business as long as any Investment therein was not prohibited when made by Condition 6B.

(L) Use of proceeds

The Company will not, and will not permit any Restricted Subsidiary to, use the net proceeds from the sale of the Notes, in any amount, for any purpose other than (1) in the approximate amounts and for the purposes specified (including any adjustment in response to changes in acquisition or development plans as contemplated) under the section “Use of Proceeds” in the Offering Memorandum and (2) pending the application of all of such net proceeds in such manner, to invest the portion of such net proceeds not yet so applied in Temporary Cash Investments.

(M) Designation of restricted and unrestricted subsidiaries

The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary; provided that (1) Road King (China) Infrastructure Limited shall always be a Restricted Subsidiary, (2) No Potential Event of Default or Event of Default shall have occurred, or be continuing at the time of or after giving effect to such designation; (3) neither the Company nor any Restricted Subsidiary guarantees or provides credit support for the Indebtedness of such Restricted Subsidiary; (4) such Restricted Subsidiary has no outstanding Indebtedness that could trigger a cross-default to the Indebtedness of the Company; (5) such Restricted Subsidiary does not own any Disqualified Stock of the Company or Disqualified Stock or Preferred Stock of another Restricted Subsidiary or hold any Indebtedness of, or Lien on any property of the Company or any Restricted Subsidiary, if such Disqualified Stock or Preferred Stock or Indebtedness could not be Incurred under Condition 6A or such Lien would violate Condition 6G; (6) such Restricted Subsidiary does not own any Voting Stock of another Restricted Subsidiary, and all of its Subsidiaries are Unrestricted Subsidiaries or are being concurrently designated as Unrestricted Subsidiaries in accordance with this paragraph; and (7) the Investment deemed to have been made thereby in such newly designated Unrestricted Subsidiary and each other newly designated Unrestricted Subsidiary being concurrently redesignated would be permitted to be made by Condition 6B.

The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that (a) no Default or Event of Default shall have occurred or be continuing at the time of or after giving effect to such designation; (b) any Indebtedness of such Unrestricted Subsidiary outstanding at the time of such designation which will be deemed to have been Incurred by such newly designated Restricted Subsidiary as a result of such designation would be permitted to be

145 Incurred by Condition 6A; (c) any Lien on the property of such Unrestricted Subsidiary at the time of such designation which will be deemed to have been incurred by such newly designated Restricted Subsidiary as a result of such designation would be permitted to be incurred by Condition 6G; (d) such Unrestricted Subsidiary is not a Subsidiary of another Unrestricted Subsidiary (that is not concurrently being designated as a Restricted Subsidiary); and (e) if such Restricted Subsidiary is not organized under the laws of the PRC, such Restricted Subsidiary shall upon such designation execute and deliver to the Trustee a supplemental trust deed to the Trust Deed by which such Restricted Subsidiary shall become a Subsidiary Guarantor.

Any designation of a Restricted Subsidiary (including a newly formed or acquired Subsidiary) as an Unrestricted Subsidiary, or an Unrestricted Subsidiary as a Restricted Subsidiary, will be evidenced to the Trustee by filing with the Trustee a certified copy of a resolution of the Board of Directors giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the preceding conditions and was permitted by the covenants of this Condition 6M. The Trustee shall not have any obligation to check or verify the accuracy and correctness of such Officers’ Certificate or to monitor compliance with the Conditions and will not be responsible to Holders or any other person for any loss or liability arising from failure to do so and shall be entitled to rely on such Officers’ Certificate as conclusive and binding on the Issuer, the Company and the Holders.

(N) Government approvals and licences; compliance with law

The Company will, and will cause each Restricted Subsidiary to (1) obtain and maintain in full force and effect all governmental approvals, authorizations, consents, permits, concessions and licences as are necessary to engage in the Permitted Business, (2) preserve and maintain good and valid title to its properties and assets free and clear of any Liens other than Permitted Liens and (c) comply with all laws, regulations, orders, judgments and decrees of any governmental body, except to the extent that failure so to obtain, maintain, preserve and comply would not reasonably be expected to have a material adverse effect on (a) the business, results of operations or prospects of the Company and its Restricted Subsidiaries taken as a whole or (b) the ability of the Company or any Subsidiary Guarantor to perform its obligations under the Notes, the Guarantee or the Trust Deed.

(O) Provision of financial information

(1) So long as any of the Notes remain outstanding, the Issuer will file with the Trustee and furnish to the Holders upon request, as soon as they are available but in any event not more than ten calendar days after they are filed with the Stock Exchange, true and correct copies of any financial or other report in the English language filed by the Company with such exchange; provided that if at any time the Common Stock of the Company ceases to be listed for trading on the Stock Exchange, the Issuer will file with the Trustee and furnish to the Holders:

(a) as soon as they are available, but in any event within 90 calendar days after the end of the fiscal year of the Company, copies of its financial statements (on a consolidated basis) in respect of such financial year (including a statement of income, balance sheet and cash flow statement) audited by a member firm of an internationally recognized firm of independent accountants;

146 (b) as soon as they are available, but in any event within 90 calendar days after the end of the second financial quarter of the Company, copies of its financial statements (on a consolidated basis) in respect of such half-year period (including a statement of income, balance sheet and cash flow statement) reviewed by a member firm of an internationally recognized firm of independent accountants; and (c) as soon as they are available, but in any event within 45 calendar days after the end of each of the first and third financial quarter of the Company, copies of its unaudited financial statement (on a consolidated basis), including a statement of income, balance sheet and cash flow statement, prepared on a basis consistent with the audited financial statements of the Company together with a certificate signed by the person then authorized to sign financial statements on behalf of the Company to the effect that such financial statements are true in all material respects and present fairly the financial position of the Company as at the end of, and the results of its operations for, the relevant quarterly period. The Trustee shall not have any obligation to check or verify the accuracy and correctness of the financial information provided to it pursuant to this Condition 6O or to monitor compliance with the Conditions and will not be responsible to Holders or any other person for any loss or liability arising from failure to do so and shall be entitled to rely on such information as conclusive and binding on the Issuer, the Company and the Holders. (2) In addition, so long as any of the Notes remain outstanding, the Issuer will provide to the Trustee (a) within 120 days after the close of each fiscal year, an Officers’ Certificate stating the Fixed Charge Coverage Ratio with respect to the two most recent fiscal semi- annual periods and showing in reasonable detail the calculation of the Fixed Charge Coverage Ratio, including the arithmetic computations of each component of the Fixed Charge Coverage Ratio, with a certificate from the Company’s external auditors verifying the accuracy and correctness of the calculation and arithmetic computation; and (b) as soon as possible and in any event within 30 days after the Issuer or the Company becomes aware or should reasonably become aware of the occurrence of a Potential Event of Default or Event of Default, an Officers’ Certificate setting forth the details of the Potential Event of Default or Event of Default, and the action which the Issuer or the Company, as the case may be, proposes to take with respect thereto. (3) The Trust Deed does not oblige the Trustee to monitor compliance by the Issuer or the Company with the Conditions but it does oblige the Issuer to furnish the Trustee with the above certificates, on which the Trustee may, in the absence of manifest error, rely as to such compliance. The Trustee shall not have any obligation to check or verify the accuracy and correctness of the arithmetic computations attached to such certificates and will not be responsible to Holders or any other person for any loss or liability arising from failure to do so and shall be entitled to rely on such certificates and the attached computations and opinion as conclusive and binding on the Issuer, the Company and the Holders.

(P) Limitations on activities of the issuer Notwithstanding anything contained in the Trust Deed to the contrary, the Issuer will not engage in any business activity or undertake any other activity, except any activity: (a) relating to the offering, sale or issuance of the Notes, the Incurrence of Indebtedness represented by the Notes, lending the proceeds thereof to the Company and any other activities in connection therewith;

147 (b) undertaken with the purpose of fulfilling any obligations under the Notes, the Trust Deed or the Agency Agreement; or

(c) directly related to the establishment and/or maintenance of the Issuer’s corporate existence.

The Issuer shall not (a) issue any Capital Stock other than the issuance of its ordinary shares to the Company or otherwise in a de minimis amount to local residents to the extent required by applicable law or (b) acquire or receive any property or assets (including, without limitation, any Capital Stock or Indebtedness of any Person), other than payments in respect of the lending of the proceeds of the sale of the Notes to the Company (the “Intercompany Loan”).

The Issuer shall at all times remain a Wholly-Owned Restricted Subsidiary of the Company.

Whenever the Issuer receives a payment or prepayment under the Intercompany Loan, it shall use the funds received solely to satisfy its obligations (to the extent of the amount owing in respect of such obligations) under the Notes, the Trust Deed and the Agency Agreement.

For so long as any Notes are outstanding, neither the Issuer nor the Company will commence or take any action to cause a winding-up or liquidation of the Issuer. Except as provided in the Trust Deed, the Issuer shall not, and the Company shall procure that the Issuer does not, assign or novate its rights under the Intercompany Loan.

7 Suspension of Covenants

With effect from the first day (the “Suspension Date”) that:

(1) two Rating Agencies have publicly announced that the Notes have been assigned an Investment Grade rating; and

(2) no Potential Event of Default or Event of Default has occurred and is continuing, the Issuer, the Company and the Restricted Subsidiaries will not be subject to Conditions 6A, 6B, 6C, 6D, 6E, 6H, 6I and 6K (collectively, the “Suspended Covenants”).

In the event that the Issuer, the Company and the Restricted Subsidiaries are not subject to the Suspended Covenants for any period of time as a result of the preceding paragraph and, on any subsequent date (the “Reversion Date”), any one of the Rating Agencies publicly announces the withdrawal of its ratings or the downgrade of the ratings assigned to the Notes below the required Investment Grade ratings or a Potential Event of Default or Event of Default occurs and is continuing, then the Issuer, the Company and the Restricted Subsidiaries will thereafter again be subject to the Suspended Covenants with effect from the Reversion Date. The period of time between the Suspension Date and the Reversion Date is referred to in these Conditions as the “Suspension Period.” Notwithstanding that the Suspended Covenants may be reinstated, no Event of Default will be deemed to have occurred as a result of a failure to comply with the Suspended Covenants during the Suspension Period.

On the Reversion Date, all Indebtedness Incurred during the Suspension Period will be classified to have been Incurred pursuant to (a) the proviso in the first paragraph of Condition 6A or (b) one of the clauses set forth in the definition of Permitted Indebtedness in Condition 6A (in the context of both (a) and (b), to the extent such Indebtedness would be permitted to be Incurred thereunder as of the Reversion Date and after giving effect to Indebtedness Incurred

148 prior to the Suspension Period and outstanding on the Reversion Date). To the extent such Indebtedness would not be so permitted to be Incurred pursuant to the proviso in the first paragraph of Condition 6A or one of the clauses set forth in the definition of Permitted Indebtedness in Condition 6A such Indebtedness will be deemed to have been in existence on the Original Issue Date so that it is classified as Permitted Indebtedness under Condition 6A(2)(c).

On the Reversion Date, all Restricted Payments and Permitted Investments declared or made during the Suspension Period will be classified to have been declared or made pursuant to (a) Condition 6B(4)(c) or (b) one of the clauses set forth in the definition of Permitted Investments (in the context of both (a) and (b), to the extent such Restricted Payments or Investments would be permitted to be Incurred thereunder as of the Reversion Date and giving effect to any Restricted Payment or Investment made prior to the Suspension Period) as though the provisions under Condition 6B and under the definition of Permitted Investment had been in effect during the entire period of time from the Original Issue Date. Accordingly, Restricted Payments made during the Suspension Period will reduce the amount available to be made as Restricted Payments under Condition 6B(4)(c) (even if such reduction would result in the amount thereunder being a negative number) or otherwise comply with the definition of Permitted Investment. To the extent any Restricted Payment would not be so permitted to be declared or made, such Restricted Payment will be deemed a “Permitted Investment.”

For purposes of determining compliance with Condition 6I on the Reversion Date, the Net Cash Proceeds from all Asset Sales not applied in accordance with Condition 6I will be deemed to be reset to zero.

8 Defeasance The Trust Deed will provide that the Issuer will be deemed to have paid and will be discharged from any and all obligations in respect of the Notes on the 366th day after the deposit referred to below, and the provisions of the Trust Deed will no longer be in effect with respect to the Notes (except for certain obligations to register the transfer or exchange of the Notes, to replace stolen, lost or mutilated Notes, to maintain paying agents and to hold monies for payment in trust and other matters described in the Trust Deed) if, among other things:

(1) the Issuer (a) has deposited with the Trustee, in trust, money and/or US Government Obligations that through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient to pay the principal of, premium, if any, and accrued interest on the Notes on the Stated Maturity of such payments in accordance with the terms of the Trust Deed and the Notes and (b) delivers to the Trustee an Opinion of Counsel or a certificate of an internationally- recognized firm of independent accountants, in each case, acceptable to the Trustee, to the effect that the amount deposited by the Issuer is sufficient to provide payment for the principal of, premium, if any, and accrued interest on, the Notes on the Stated Maturity of such payments in accordance with the terms of the Trust Deed;

(2) the Issuer has delivered to the Trustee in form and substance acceptable to the Trustee (a) either (i) an Opinion of Counsel of recognized international standing acceptable to the Trustee with respect to US federal income tax matters which is based on a change in applicable US federal income tax law occurring after the Original Issue Date to the effect that beneficial owners will not recognize income, gain or loss for US federal income tax purposes as a result of the Issuer’s exercise of its option under this Condition 8 and will be

149 subject to US federal income tax on the same amount and in the same manner and at the same time as would have been the case if such deposit, defeasance and discharge had not occurred or (ii) a ruling directed to the Trustee received from the US Internal Revenue Service to the same effect as the aforementioned Opinion of Counsel, (b) an Opinion of Counsel of recognized international standing acceptable to the Trustee to the effect that the creation of the defeasance trust does not violate the US Investment Company Act of 1940, as amended, and after the passage of 183 days following the deposit, the trust fund will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law and (c) an Opinion of Counsel acceptable to the Trustee to the effect that after the passage of 366 days following the deposit, the trust fund will not be subject to the effect of Articles 31 and 32 of the PRC Enterprise Bankruptcy Law; and (3) immediately after giving effect to such deposit on a pro forma basis, no Event of Default, or Potential Event of Default, shall have occurred and be continuing on the date of such deposit or during the period ending on the 183rd day after the date of such deposit, and such defeasance shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Issuer, the Company or any of its Restricted Subsidiaries is a party or by which the Issuer, the Company or any of its Restricted Subsidiaries is bound. In the case of either discharge or defeasance, the Subsidiary Guarantees, insofar as they relate to payments under the Notes, will terminate. For the avoidance of doubt, the provisions of the Trust Deed relating to the appointment of the Trustee, the rights, powers, authorities and discretions of the Trustee, the remuneration and indemnification of the Trustee and provisions therein for the protection of the Trustee and/or limiting the obligations and/or liability of the Trustee shall remain in full force and effect notwithstanding any such deposit or defeasance as aforesaid. The Trust Deed further will provide that: (A) the provisions of the Trust Deed will no longer be in effect with respect to: (i) clauses (3), (4), (5)(a) and (7) under the first paragraph of Condition 6J; (ii) clauses (iii), (iv), (v)(x) and (vi) under the third paragraph under Condition 6J; and (iii) all of the covenants described herein under Condition 6, other than those clauses of Condition 6J noted in this Condition 8 and other than as described under Condition 6N and Condition 6A(4), and (B) (1) clause (iii) under Condition 12 with respect to such clauses (3), (4), (5)(a) and (7) under the first paragraph and clauses (iii), (iv), (v)(x), and (vi) under the third paragraph under Condition 6J and with respect to the other events set forth in such clause (iii) under Condition 12; (2) clause (iv) under Condition 12 with respect to such other covenants; and (3) clauses (v) and (vi) under Condition 12, shall be deemed not to be Events of Default, upon, among other things, the deposit with the Trustee, in trust, of money, US Government Obligations or a combination thereof that through the payment of interest and principal in

150 respect thereof in accordance with their terms will provide money in an amount sufficient to pay the principal of, premium, if any, and accrued interest on the Notes on the Stated Maturity of such payments in accordance with the terms of the Trust Deed and the Notes, the satisfaction of the provisions described in Condition 8(2)(b) and the delivery by the Issuer to the Trustee, in form and substance satisfactory to the Trustee, of an Opinion of Counsel of recognized standing acceptable to the Trustee with respect to US federal income tax matters to the effect that beneficial owners will not recognize income, gain or loss for US federal income tax purposes as a result of such deposit and defeasance of certain covenants and Events of Default and will be subject to US federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred. In the event the Issuer exercises its option to omit compliance with certain covenants and provisions of the Trust Deed with respect to the Notes as described in the immediately preceding paragraph and the Notes are declared due and payable because of the occurrence of an Event of Default that remains applicable, the Issuer will remain liable for any amounts due on the Notes at the time of the acceleration resulting from such Event of Default.

9 Interest The Notes bear interest from September 21, 2010. The rate of interest of the Notes is 9.5 per cent. per annum (the “Interest Rate”). Interest is payable semi-annually in arrear on March 21 and September 21 in each year (each an “Interest Payment Date”) commencing March 21, 2011. Each Note will cease to bear interest from the due date for redemption unless, upon surrender in accordance with Condition 10, payment of principal is improperly withheld or refused. In such event it shall continue to bear interest at the interest rate as set forth in and in accordance with Condition 10E (both before and after judgment) until whichever is the earlier of (a) the day on which all sums due in respect of such Note up to that day are received by or on behalf of the relevant Holder, and (b) the day seven days after the Trustee or the Principal Agent has notified Holders of receipt of all sums due in respect of all the Notes up to that seventh day (except to the extent that there is failure in the subsequent payment to the relevant Holders under these Conditions). Interest on the Notes will be calculated on the basis of a 360-day year comprised of 12 30-day months. If interest is required to be calculated for a period other than a scheduled semi-annual interest period, it will be calculated on the basis of actual days elapsed and a 360-day year.

10 Payments (A) Principal and interest Payment of principal and premium (if any) will be made in US dollars by transfer to the registered account of the Holder or by US dollar cheque drawn on a bank in New York City mailed to the registered address of the Noteholder if it does not have a registered account. Payment of principal and premium (if any) will only be made after surrender of the relevant Certificate at the specified office of any of the Agents other than the Agent Bank. Interest on Notes due on an Interest Payment Date will be paid on the due date for the payment of interest to the Holder shown on the Register at the close of business on the fifteenth day before the due date for the payment of interest (the “Interest Record Date”). Payments of interest on each Note will be made by transfer to the registered account of the Noteholder or by US dollar cheque drawn on a bank in New York City mailed to the registered address of the Noteholder if it does not have a registered account.

151 References in these Conditions, the Trust Deed and the Agency Agreement to principal in respect of any Note shall, where the context so permits, be deemed to include a reference to any premium payable thereon, including Applicable Premium, if applicable.

(B) Registered accounts

For the purposes of this Condition, a Holder’s registered account means the US dollar account maintained by it or on its behalf with a bank in New York City, details of which appear on the Register at the close of business on the second business day (as defined below) before the due date for payment, and a Noteholder’s registered address means its address appearing on the Register at that time.

(C) Fiscal laws

All payments are subject in all cases to any applicable laws and regulations in the place of payment, but without prejudice to the provisions of Condition 11. No commissions or expenses shall be charged to the Holders in respect of such payments.

(D) Payment initiation

Where payment is to be made by transfer to a registered account, payment instructions (for value on the due date or, if that is not a business day (as defined below), for value on the first following day which is a business day) will be initiated and, where payment is to be made by cheque, the cheque will be mailed (at the risk and, if mailed at the request of the Holder otherwise than by ordinary mail, expense of the Holder) on the due date for payment (or, if that is not a business day, the immediately following business day) or, in the case of a payment of principal, if later, on the business day on which the relevant Certificate is surrendered at the specified office of an Agent other than the Agent Bank.

(E) Default interest and delay in payment

If the Issuer fails to pay any sum in respect of the Notes when the same becomes due and payable under these Conditions, interest shall accrue on the overdue sum at the rate of 2.0% per annum from the due date. Such default interest shall accrue on the basis of the actual number of days elapsed and a 360-day year.

Holders will not be entitled to any interest or other payment for any delay after the due date in receiving the amount due if the due date is not a business day, if the Noteholder is late in surrendering its Certificate (if required to do so) or if a cheque mailed in accordance with this Condition arrives after the due date for payment.

(F) Business day

In this Condition 10, “business day” means a day other than a Saturday or Sunday on which commercial banks are open for business in New York City, Hong Kong and, in the case of the surrender of a Certificate, in the place where the Certificate is surrendered. If an amount which is due on the Notes is not paid in full, the Registrar will annotate the Register with a record of the amount (if any) in fact paid.

152 11 Taxation

All payments made by the Issuer or, as the case may be, the Company or any Subsidiary Guarantor under or in respect of the Trust Deed or the Notes will be made free from any restriction or condition and be made without deduction or withholding for or on account of any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or on behalf of a Relevant Jurisdiction, unless deduction or withholding of such taxes, duties, assessments or governmental charges is compelled by law or by regulation or governmental policy having the force of law. In such event, the Issuer or, as the case may be, the Company or the Subsidiary Guarantor will pay such additional amounts as will result in the receipt by the Holders of the net amounts after such deduction or withholding equal to the amounts which would otherwise have been receivable by them had no such deduction or withholding been required except that no such additional amount shall be payable in respect of any Note:

(i) to a Holder (or to a third party on behalf of a Holder) who is subject to such taxes, duties, assessments or governmental charges in respect of such Note by reason of his having some present or former connection with a Relevant Jurisdiction otherwise than merely by holding the Note or by the receipt of amounts in respect of the Note;

(ii) (in the case of a payment of principal) if the Certificate in respect of such Note is surrendered more than 30 days after the relevant date except to the extent that the Holder would have been entitled to such additional amount on surrendering the relevant Certificate for payment on the last day of such period of 30 days,

(iii) where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to European Union Directive 2003/48/EC or any other Directive implementing the conclusions of the ECOFIN Council meeting of November 26 and 27, 2000 on the taxation of savings income or any law implementing or complying with, or introduced in order to conform to, such Directive; or

(iv) presented for payment or on behalf of a Holder who would have been able to avoid such withholding or deduction by presenting the relevant Note to another paying agent in a Member State of the European Union.

For the purposes hereof, “relevant date” means whichever is the later of (a) the date on which such payment first becomes due and (b) if the full amount payable has not been received by the Trustee or the Principal Agent on or prior to such due date, the date on which, the full amount having been so received, notice to that effect shall have been given to the Holders and cheques despatched or payment made.

References in these Conditions to principal, interest and premium (if any) shall be deemed also to refer to any additional amounts which may be payable under this Condition or any undertaking or covenant given in addition thereto or in substitution therefor pursuant to the Trust Deed.

12 Events of default

The following events will be defined as “Events of Default” in the Trust Deed:

(i) default in the payment of principal of (or premium, if any, on) the Notes when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise;

153 (ii) default in the payment of interest on any Note when the same becomes due and payable, and such default continues for a period of 30 days;

(iii) default in the performance or breach of the provisions of the covenant described under Conditions 6G or 6J, the failure by the Issuer to make or consummate an offer to purchase in the manner described under Condition 6I or a Change of Control Offer under Condition 5E;

(iv) the Issuer, the Company or any Restricted Subsidiary defaults in the performance of or breaches any other covenant or agreement in the Trust Deed or under the Notes (other than a default specified in clause (i), (ii) or (iii) above) and such default or breach continues for a period of 30 consecutive days after written notice by the Trustee or the Holders of 25% or more in aggregate principal amount of the Notes;

(v) there occurs with respect to any Indebtedness of the Issuer, the Company or any Restricted Subsidiary having an outstanding principal amount of US$7.5 million (or the Dollar Equivalent thereof) or more in the aggregate for all such Indebtedness of all such Persons, whether such Indebtedness now exists or shall hereafter be created, (a) an event of default that has caused the holder thereof to declare such Indebtedness to be due and payable prior to its Stated Maturity and/or (b) the failure to make a principal payment when due;

(vi) one or more final judgments or orders for the payment of money are rendered against the Issuer, the Company or any Restricted Subsidiary and are not paid or discharged, and there is a period of 60 consecutive days following entry of the final judgment or order that causes the aggregate amount for all such final judgments or orders outstanding and not paid or discharged against all such Persons to exceed US$7.5 million (in excess of amounts which the Company’s insurance carriers have agreed to pay under applicable policies) during which a stay of enforcement, by reason of a pending appeal or otherwise, is not in effect;

(vii) an involuntary case or other proceeding is commenced against the Issuer, the Company or any Restricted Subsidiary with respect to it or its debts under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect seeking the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer, the Company or any Restricted Subsidiary or for any substantial part of the property and assets of the Issuer, the Company or any Restricted Subsidiary and such involuntary case or other proceeding remains undismissed and unstayed for a period of 60 consecutive days; or an order for relief is entered against the Issuer, the Company or any Restricted Subsidiary under any applicable bankruptcy, insolvency or other similar law as now or hereafter in effect;

(viii) the Issuer, the Company or any Restricted Subsidiary (a) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (b) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer, the Company or any Restricted Subsidiary or for all or substantially all of the property and assets of the Issuer, the Company or any Restricted Subsidiary or (c) effects any general assignment for the benefit of creditors; or

(ix) any Subsidiary Guarantor denies or disaffirms its obligations under its Subsidiary Guarantee or, except as permitted by the Trust Deed, any Subsidiary Guarantee is

154 determined to be unenforceable or invalid or shall for any reason cease to be in full force and effect.

If an Event of Default (other than an Event of Default specified in clause (vii) or (viii) above) occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding, by written notice to the Issuer (and to the Trustee if such notice is given by the Holders), may, and the Trustee at the request of Holders of at least 25% in aggregate principal amount of the Notes then outstanding (subject to being indemnified and/or secured by the Holders to its satisfaction), shall, declare the principal of, premium, if any, and accrued and unpaid interest on the Notes to be immediately due and payable. Upon a declaration of acceleration, such principal of, premium, if any, and accrued and unpaid interest shall be immediately due and payable. If an Event of Default specified in clause (vii) or (viii) above occurs with respect to the Issuer, the Company or any Restricted Subsidiary, the principal of, premium, if any, and accrued and unpaid interest on the Notes then outstanding shall automatically become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder.

The Holders of at least a majority in principal amount of the outstanding Notes by written notice to the Issuer and to the Trustee may waive all past Potential Events of Default and Events of Default and rescind and annul a declaration of acceleration and its consequences if:

(1) all existing Potential Events of Default and Events of Default, other than the non-payment of the principal of, premium, if any, and interest on the Notes that have become due solely by such declaration of acceleration, have been cured or waived, and

(2) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction.

Upon such waiver, the Potential Event of Default will cease to exist, and any Event of Default arising therefrom will be deemed to have been cured, but no such waiver will extend to any subsequent or other Potential Event of Default or Event of Default or impair any right consequent thereon.

The Holders of at least a majority in aggregate principal amount of the outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or the Trust Deed, that may involve the Trustee in personal liability or if the Trustee is not indemnified and/or secured to its satisfaction by the Holders giving the direction, or that the Trustee determines in good faith may be unduly prejudicial to the rights of Holders not joining in the giving of such direction and may take any other action it deems proper that is not inconsistent with any such direction received from Holders.

A Holder may not institute any proceeding, judicial or otherwise, with respect to the Trust Deed or the Notes, or for the appointment of a receiver or trustee, or for any other remedy under the Trust Deed or the Notes, unless:

(A) the Holder has previously given the Trustee written notice of a continuing Event of Default;

(B) the Holders of at least 25% in aggregate principal amount of outstanding Notes make a written request to the Trustee to pursue the remedy;

155 (C) such Holder or Holders provide the Trustee indemnity and/or security satisfactory to the Trustee against any loss, fees, costs, liability or expense to be incurred in compliance with such request; (D) the Trustee does not comply with the request within 60 days after receipt of the request and the provision of indemnity and/or security; and (E) during such 60-day period, the Holders of a majority in aggregate principal amount of the outstanding Notes do not give the Trustee a direction that is inconsistent with the request. However, such limitations do not apply to the right of any Holder of a Note to receive payment of the principal of, premium, if any, or interest on, such Note, or to bring suit for the enforcement of any such payment, on or after the due date expressed in the Notes, which right shall not be impaired or affected without the consent of the Holder.

13 Prescription Claims in respect of amounts due in respect of the Notes will become prescribed unless made within ten years (in the case of principal) and five years (in the case of interest or premium (if any)) from the relevant date (as defined in Condition 11) in respect thereof.

14 Meetings of Holders, Modification and Waiver (A) Meetings The Trust Deed contains provisions for convening meetings of Holders to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of the Notes or the provisions of the Trust Deed. The quorum at any such meeting for passing an Extraordinary Resolution will be two or more persons holding or representing over 50% in principal amount of the Notes for the time being outstanding or, at any adjourned such meeting, two or more persons being or representing Holders whatever the principal amount of the Notes so held or represented unless the business of such meeting includes consideration of proposals, inter alia: (i) to modify the due date for any payment in respect of the Notes; (ii) to reduce or cancel the amount of principal or premium payable in respect of the Notes or to reduce or cancel the interest (including default interest under Condition 10E, if applicable) on the Notes or to vary the method of calculating the Interest Rate or to reduce the initial Interest Rate; (iii) to change the currency of payment of the Notes; (iv) to modify the provisions concerning the quorum required at any meeting of the Holders or the majority required to pass an Extraordinary Resolution or sign a resolution in writing; (v) to modify or cancel a Guarantee (other than any release pursuant to Condition 1); (vi) to modify the provisions relating to defeasance; (vii) impair the right to institute suit for the enforcement of any payment on or after the Stated Maturity (or, in the case of a redemption, on or after the redemption date) of any Note;

156 (viii) without prejudice to waiver of Potential Events of Defaults or Events of Default pursuant to Condition 12, waive a default in the payment of principal of, premium, if any, or interest on the Notes;

(ix) reduce the percentage or aggregate principal amount of outstanding Notes the consent of whose Holders is necessary for waiver of compliance with certain provisions of the Notes or for waiver of certain defaults;

(x) reduce the amount payable upon a Change of Control Offer or an offer to purchase with the Excess Proceeds from any Asset Sale, or change the time or manner by which a Change of Control Offer or an offer to purchase with the Excess Proceeds or other proceeds from any Asset Sale may be made or by which the Notes must be repurchased pursuant to a Change of Control Offer or an offer to purchase with the Excess Proceeds or other proceeds from any Asset Sale;

(xi) change the redemption date or the redemption price of the Notes from that stated under Conditions 5B, 5F, 5G or 5H;

(xii) amend, change or modify the obligation of the Issuer, the Company or any Subsidiary Guarantor to pay additional amounts under Condition 11; or

(xiii) amend, change or modify any provision of the Trust Deed or the Notes or the related definition affecting the ranking of the Notes or any Guarantee in a manner which adversely affects the Holders, in which case the necessary quorum for passing an Extraordinary Resolution will be two or more persons holding or representing not less than 66%, or at any adjourned such meeting not less than 33% in principal amount of the Notes for the time being outstanding. An Extraordinary Resolution passed at any meeting of Holders will be binding on all Holders, whether or not they are present at the meeting. The Trust Deed provides that a written resolution signed by or on behalf of the Holders of not less than 90% of the aggregate principal amount of Notes outstanding shall be as valid and effective as a duly passed Extraordinary Resolution, other than with respect to a written waiver made pursuant to Condition 12.

(B) Modification and waiver

The Trustee may agree, without the consent of the Holders, to:

(i) any modification (except as mentioned in Condition 14A above) to, or the waiver or authorization of any breach or proposed breach of, the Notes, the Agency Agreement or the Trust Deed which is not, in the opinion of the Trustee, materially prejudicial to the interests of the Holders, which shall include modifications or amendments to:

(a) comply with the provisions described under Condition 6J;

(b) evidence and provide for the acceptance of appointment by a successor Trustee;

(c) add any Subsidiary Guarantor or any Subsidiary Guarantee or release any Subsidiary Guarantor from any Subsidiary Guarantee as provided or permitted by the terms of the Trust Deed and the Notes;

(d) provide for the issuance of additional Notes in accordance with Condition 17;

157 (e) in any other case where a supplemental Trust Deed is required or permitted to be entered into pursuant to the provisions of the Trust Deed without the consent of any Holder; or

(f) effect any changes to the Trust Deed or the Agency Agreement in a manner necessary to comply with the procedures of Euroclear or Clearstream; or

(ii) any modification to the Notes or the Trust Deed or the Agency Agreement which, in the Trustee’s opinion, is of a formal, minor or technical nature or to correct a manifest error or an error established as such to the satisfaction of the Trustee or to comply with mandatory provisions of law.

Any such modification, waiver or authorization will be binding on the Holders and, unless the Trustee agrees otherwise, any such modifications will be notified by the Issuer to the Holders as soon as practicable thereafter.

(C) Interests of holders

In connection with the exercise of its functions (including but not limited to those in relation to any proposed modification, authorization or waiver) the Trustee shall have regard to the interests of the Holders as a class and shall not have regard to the consequences of such exercise for individual Holders and the Trustee shall not be entitled to require, nor shall any Noteholder be entitled to claim, from the Issuer, the Company, the Subsidiary Guarantors or the Trustee, any indemnification or payment in respect of any tax consequences of any such exercise upon individual Holders except to the extent provided for in Condition 11 and/or any undertakings given in addition thereto or in substitution therefor pursuant to the Trust Deed.

In the event of the passing of an Extraordinary Resolution in accordance with Condition 14A or a modification, waiver or authorization in accordance with Condition 14B, the Issuer will procure that the Holders are notified in accordance with Condition 18.

15 Substitution

The Trust Deed contains provisions permitting the Trustee to agree, subject to such amendment of the Trust Deed and such other conditions as the Trustee may require, but without the consent of the Holders, to the substitution of certain other entities in place of any Subsidiary Guarantor, or of any previous substituted company, as a guarantor under the Trust Deed and the Notes. In the case of such a substitution the Trustee may agree, without the consent of the Holders, to a change of the law governing the relevant Subsidiary Guarantee provided that such change would not in the opinion of the Trustee be materially prejudicial to the interests of the Holders.

16 Replacement of Certificates

If any Certificate is mutilated, defaced, destroyed, stolen or lost, it may be replaced at the specified office of the Registrar or any Agent other than the Agent Bank upon payment by the claimant of such costs as may be incurred in connection therewith and on such terms as to evidence and indemnity as the Issuer and such Agent may require mutilated or defaced Certificates must be surrendered before replacements will be issued.

158 17 Further issues Subject to Condition 6A, the Issuer may from time to time, without the consent of the Holders, create and issue further Notes having the same terms and conditions as the Notes in all respects and so that such further issue shall be consolidated and form a single series with the Notes. Such further Notes may, with the consent of the Trustee, be constituted by a deed supplemental to the Trust Deed.

18 Notices All notices to Holders shall be validly given if mailed to them at their respective addresses in the register of Holders maintained by the Registrar or published in a leading newspaper having general circulation in Hong Kong or, if such publication shall not be practicable, in an English language newspaper of general circulation in Asia. Any such notice shall be deemed to have been given on the later of the date of such publication or, if published more than once, on the first date on which publication is made.

19 Agents The names of the initial Agents and the Registrar and their specified offices are set out below. The Issuer reserves the right, subject to the prior written approval of the Trustee, at any time to vary or terminate the appointment of any Agent or the Registrar and to appoint additional or other Agents or a replacement Registrar. The Issuer will at all times maintain (a) a Principal Agent, (b) a Paying Agent with a specified office in a European Union member state that will not be obliged to withhold or deduct tax pursuant to any law implementing the Savings Directive (2003/48/EC) or any other Directive implementing the conclusions of the ECOFIN Council Meeting of 26 and 27 November 2000, and (c) a Registrar which will maintain the register of Holders outside Hong Kong and the United Kingdom. Notice of any such termination or appointment, of any changes in the specified offices of any Agent or the Registrar and of any change in the identity of the Registrar or the Principal Agent will be given promptly by the Issuer to the Holders and in any event not less than 45 days’ notice will be given.

20 Indemnification The Trust Deed and the Agency Agreement contain provisions for the indemnification of each of the Trustee and the Agents and for their relief from responsibility, including provisions relieving the Trustee from taking proceedings to enforce repayment unless indemnified and/or secured to its satisfaction. The Trustee is entitled to enter into business transactions with the Issuer and the Company and any entity related to the Issuer or the Company without accounting for any profit. The Trustee shall not be responsible for the performance by any other person appointed by the Issuer in relation to the Notes of their duties and obligations in respect of the same and, unless it has actual knowledge to the contrary, shall assume that the same are being duly performed. The Trustee shall not be liable to any Holder or any other person for any action taken by the Holders or the Trustee in accordance with the instructions of the Holders. The Trustee shall be entitled to rely on any direction, request or resolution of Holders given by holders of the requisite principal amount of Notes outstanding or passed at a meeting of Holders convened and held in accordance with the Trust Deed.

Whenever the Trustee is required or entitled by the terms of the Trust Deed or the Conditions to exercise any discretion or power, take any action, make any decision or give any direction, the

159 Trustee is entitled, prior to their exercising any such discretion or power, taking any such action, making any such decision, or giving any such direction, to seek directions from the Holders by way of an Extraordinary Resolution, and the Trustee is not responsible for any loss or liability incurred by any person as a result of any delay in it exercising such discretion or power, taking such action, making such decision, or giving such direction where the Trustee is seeking such directions.

The Trustee shall not be under any obligation to monitor compliance with the provisions of these Conditions.

The Trustee may rely without liability to Holders on any certificate prepared by the directors of the Issuer or the Company whether or not accompanied by a certificate or report prepared by an internationally recognized firm of accountants pursuant to the Conditions and/or the Trust Deed, whether or not addressed to the Trustee and whether or not if so accompanied the internationally recognized firm of accountants’ liability in respect thereof is limited by a monetary cap or otherwise limited or excluded and shall be obliged to do so where the certificate or report is delivered pursuant to the obligation of the Issuer, the Company or the Subsidiary Guarantors to procure such delivery under these Conditions; any such certificate or report shall be conclusive and binding on the Issuer, the Guarantors, the Trustee and the Holders.

21 Contracts (Rights of Third Parties) Act 1999

No person shall have any right to enforce any term or condition of the Notes or any provision of the Trust Deed under the Contracts (Rights of Third Parties) Act 1999.

22 Certain Definitions

“2007 Note Guarantees” means each of the guarantees by certain of the Subsidiary Guarantors unconditionally and irrevocably guaranteeing the due payment of all sums expressed to be payable by Road King Infrastructure Finance (2007) Limited under the trust deed dated May 14, 2007 among Road King Infrastructure Finance (2007) Limited, the Company, the Subsidiary Guarantors named therein and DB Trustees (Hong Kong) Limited and its US$200,000,000 7.625% Senior Notes due 2014 and US$150,000,000 Senior Floating Rate Notes due 2012 constituted thereby.

“Acquired Indebtedness” means Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary or Indebtedness of a Restricted Subsidiary assumed in connection with an Asset Acquisition by such Restricted Subsidiary and whether or not Incurred in connection with, or in contemplation of, the Person merging with or into or becoming a Restricted Subsidiary.

“Adjusted Treasury Rate” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield in maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

“Affiliate” means, with respect to any Person, any other Person (i) directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person, (ii) who is a director or officer of such Person or any Subsidiary of such Person or of any Person referred to in clause (i) of this definition or (iii) who is a spouse or any person cohabiting as a spouse, child

160 or step-child, parent or step-parent, brother, sister, step-brother or step-sister, parent-in-law, grandchild, grandparent, uncle, aunt, nephew or niece of a Person described in clause (i) or (ii). For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. “Applicable Premium” means with respect to any Note on any redemption date the greater of: (1) 1.00% of the principal amount of such Note; and (2) the excess of (a) the present value at such redemption date of (i) the redemption price of such Note on September 21, 2013 (such redemption price being described in the first paragraph in Condition 5H exclusive of any accrued interest) plus (ii) all required remaining scheduled interest payments due on such Note through September 21, 2013 (excluding accrued but unpaid interest to such redemption date) computed using a discount rate equal to the Adjusted Treasury Rate as of such redemption date plus 100 basis points; over (b) the principal amount of such Note on such redemption date. “Asset Acquisition” means (1) an Investment by the Company or any Restricted Subsidiary in any other Person pursuant to which such Person shall become a Restricted Subsidiary or shall be merged into or consolidated with the Company or any Restricted Subsidiary, or (2) an acquisition by the Company or any Restricted Subsidiary of the property and assets of any Person other than the Company or any Restricted Subsidiary that constitute substantially all of a division or line of business of such Person. “Asset Disposition” means the sale or other disposition by the Company or any Restricted Subsidiary (other than to the Company or another Restricted Subsidiary) of (1) all or substantially all of the Capital Stock of any Restricted Subsidiary or (2) all or substantially all of the assets that constitute a division or line of business of the Company or any Restricted Subsidiary. “Asset Sale” means any sale, transfer or other disposition (including by way of merger, consolidation or a Sale and Leaseback Transaction) of any of its property or assets (including any sale or issuance of the Capital Stock of any Restricted Subsidiary) in one transaction or a series of related transactions by the Company or any Restricted Subsidiary to any Person other than the Company or any Restricted Subsidiary to any Person, in each case that is not governed by Condition 6J; provided that “Asset Sale” shall not include: (a) sales or other dispositions of inventory, receivables and other current assets (including properties under development for sale and completed properties for sale) in the ordinary course of business; (b) sales, transfers or other dispositions of assets constituting a Permitted Investment or Restricted Payment permitted to be made under Condition 6B; (c) sales, transfers or other dispositions of assets with a Fair Market Value not in excess of US$5.0 million (or the Dollar Equivalent thereof) in any transaction or series of related transactions; (d) any sale, transfer, assignment or other disposition of any property or equipment that has become damaged, worn out, obsolete or otherwise unsuitable for use in connection with the business of the Company or its Restricted Subsidiaries; or

161 (e) any transfer, assignment or other disposition deemed to occur in connection with creating or granting any Permitted Lien.

“Attributable Indebtedness” means, in respect of a Sale and Leaseback Transaction, at the time of determination, the present value, discounted at the interest rate implicit in such Sale and Leaseback Transaction, of the total obligations of the lessee for rental payments during the remaining term of the lease in such Sale and Leaseback Transaction, including any period for which such lease has been extended or may, at the option of the lessor, be extended.

“Average Life” means, at any date of determination with respect to any Indebtedness, the quotient obtained by dividing (1) the sum of the products of (a) the number of years from such date of determination to the dates of each successive scheduled principal payment of such Indebtedness and (b) the amount of such principal payment by (2) the sum of all such principal payments.

“Board of Directors” means the board of directors elected or appointed by the stockholders of the Company to manage the business of the Company or any committee of such board duly authorized to take the action purported to be taken by such committee.

“Board Resolution” means any resolution of the Board of Directors taking an action which it is authorized to take and adopted at a meeting duly called and held at which a quorum of disinterested members (if so required) was present and acting throughout or adopted by written resolution executed by every member of the Board of Directors.

“business day” means any day which is not a Saturday, Sunday, legal holiday or other day on which banking institutions in the City of New York or London or in Hong Kong (or in any other place in which payments on the Notes are to be made) are authorized by law or governmental regulation to close.

“Capitalized Lease” means, with respect to any Person, any lease of any property (whether real, personal or mixed) which, in conformity with GAAP, is required to be capitalized on the balance sheet of such Person.

“Capitalized Lease Obligations” means the discounted present value of the rental obligations under a Capitalized Lease.

“Capital Stock” means, with respect to any Person, any and all shares, interests (including partnership interests), rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated, whether voting or non-voting) equity of such Person, whether outstanding on the Original Issue Date or issued thereafter, including, without limitation, all Common Stock and Preferred Stock, but excluding any debt securities convertible into such equity.

“Change of Control” means the occurrence of one or more of the following events:

(1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries, taken as a whole, to any “person” (within the meaning of Section 13(d) of the Exchange Act), other than one or more Permitted Holders;

(2) the Company consolidates with, or merges with or into, any Person (other than one or more Permitted Holders), or any Person consolidates with, or merges with or into, the Company, in any such event pursuant to a transaction in which any of the outstanding

162 Voting Stock of the Company or such other Person is converted into or exchanged for cash, securities or other property, other than any such transaction (i) the outstanding Voting Stock of the Company is reclassified into or exchanged for other Voting Stock of the Company or for Voting Stock of the surviving corporation; and (ii) the holders of the Voting Stock of the Company immediately prior to such transaction own, directly or indirectly, not less than a majority of the Voting Stock of the Company or the surviving corporation immediately after such transaction and in substantially the same proportion as before the transaction;

(3) the Permitted Holders are collectively the beneficial owners of less than 30% of the total voting power of the Voting Stock of the Company;

(4) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as such term is used in Rule 13d-3 of the Exchange Act) directly or indirectly, of total voting power of the Voting Stock of the Company greater than such total voting power held beneficially by the Permitted Holders;

(5) individuals who on the Original Issue Date constituted the Board of Directors (together with any new directors whose election by the Board of Directors was approved by a vote of at least a majority of the members of the Board of Directors then still in office who were members of the Board of Directors on the Original Issue Date or whose election was previously so approved) cease for any reason to constitute a majority of the members of the Board of Directors then in office; or

(6) the adoption of a plan relating to the liquidation or dissolution of the Company.

“Change of Control Triggering Event” means the occurrence of both a Change of Control and a Rating Decline.

“Clearstream” means Clearstream Banking, société anonyme, Luxembourg.

“Comparable Treasury Issue” means the US Treasury security selected by a Reference Treasury Dealer selected by the Issuer acting in good faith having a maturity comparable to September 21, 2013 that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such Notes from the redemption date to September 21, 2013.

“Comparable Treasury Price” means, with respect to any redemption date:

(1) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day preceding such redemption date, as set forth in the daily statistical release (of any successor release) published by the Federal Reserve Bank of New York and designated “Composite 3:30 p.m. Quotations for US Government Securities”; or

(2) if such release (or any successor release) is not published or does not contain such prices on such Business Day, (a) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or (b) if fewer than three such Reference Treasury Dealer Quotations are available, the average of all such quotations.

163 “Commodity Hedging Agreement” means any spot, forward or option, commodity price protection agreements or other similar agreement or arrangement designed to protect against fluctuations in commodity prices.

“Common Stock” means, with respect to any Person, any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person’s common stock or ordinary shares, whether or not outstanding at the date of the Trust Deed, and include, without limitation, all series and classes of such common stock or ordinary shares.

“Consolidated EBITDA” means, for any period, Consolidated Net Income for such period plus, to the extent such amount was deducted in calculating such Consolidated Net Income:

(1) Consolidated Interest Expense (other than dividends paid on Preferred Stock);

(2) income taxes (other than income taxes attributable to extraordinary and non-recurring gains (or losses) or sales of assets), and including the amount of any land appreciation tax, as defined in the Provisional Regulations of the PRC on Land Appreciation Tax and the Detailed Implementation Rules on the Provisional Regulations of the PRC on Land Appreciation Tax; and

(3) depreciation expense, amortization expense and all other non-cash items reducing Consolidated Net Income (other than non-cash items in a period which reflect cash expenses paid or to be paid in another period), less all non-cash items increasing Consolidated Net Income, all as determined on a consolidated basis for the Company and its Restricted Subsidiaries in conformity with GAAP, provided that (i) if any Restricted Subsidiary is not a Wholly-Owned Restricted Subsidiary, Consolidated EBITDA shall be reduced (to the extent not otherwise reduced in accordance with GAAP) by an amount equal to (A) the amount of the Consolidated Net Income attributable to such Restricted Subsidiary multiplied by (B) the percentage ownership interest in the income of such Restricted Subsidiary not owned on the last day of such period by the Company or any Restricted Subsidiary and (ii) in the case of any PRC CJV, Consolidated EBITDA shall be reduced (to the extent not already reduced in accordance with GAAP) by any payments, distributions or amounts (including the Fair Market Value of any non-cash payments, distributions or amounts) required to be made or paid by such PRC CJV to the PRC CJV Partner, or to which the PRC CJV Partner otherwise has a right or is entitled, pursuant to the joint venture agreement governing such PRC CJV.

“Consolidated Fixed Charges” means, for any period, the sum (without duplication) of (1) Consolidated Interest Expense for such period and (2) all cash and non-cash dividends paid, declared, accrued or accumulated during such period on any Disqualified Stock or Preferred Stock of the Company or any Restricted Subsidiary held by Persons other than the Company or any Wholly-Owned Restricted Subsidiary, except for dividends payable in the Company’s Capital Stock (other than Disqualified Stock) or paid to the Company or to a Wholly-Owned Restricted Subsidiary.

“Consolidated Interest Expense” means, for any period, the amount that would be included in gross interest expense on a consolidated income statement prepared in accordance with GAAP for such period of the Company and its Restricted Subsidiaries, plus, to the extent not included in

164 such gross interest expense, and to the extent incurred, accrued or payable during such period by the Company and its Restricted Subsidiaries, without duplication:

(1) interest expense attributable to Capitalized Lease Obligations and imputed interest with respect to Attributable Indebtedness;

(2) amortization of debt issuance costs and original issue discount expense and non-cash interest payments in respect of any Indebtedness;

(3) the interest portion of any deferred payment obligation;

(4) all commissions, discounts and other fees and charges with respect to letters of credit or similar instruments issued for financing purposes or in respect of any Indebtedness;

(5) the net costs associated with Hedging Obligations (including the amortization of fees);

(6) interest accruing on Indebtedness of any other Person that is guaranteed by the Company or any Restricted Subsidiary (other than Pre-Registration Mortgage Guarantees incurred pursuant to Condition 6(A)); and

(7) any capitalized interest, provided that interest expense attributable to interest on any Indebtedness bearing a floating interest rate will be computed on a pro forma basis as if the rate in effect on the date of determination had been the applicable rate for the entire relevant period.

“Consolidated Net Income” means, with respect to any specified Person for any period, the aggregate net income (or loss) of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in conformity with GAAP; provided that the following items shall be excluded in computing Consolidated Net Income (without duplication):

(1) the net income (or loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting except that:

(a) subject to the exclusion contained in clause (5) below, the Company’s equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to a Restricted Subsidiary, to the limitations contained in clause (3) below); and

(b) the Company’s equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income to the extent funded with cash or other assets of the Company or Restricted Subsidiaries;

(2) the net income (or loss) of any Person accrued prior to the date it becomes a Restricted Subsidiary or is merged into or consolidated with the Company or any Restricted Subsidiary or all or substantially all of the property and assets of such Person are acquired by the Company or any Restricted Subsidiary;

(3) the net income (but not loss) of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of such net income is not at the time permitted by the operation of the terms of its

165 charter, articles of association or other similar constitutive documents, or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Restricted Subsidiary; (4) the cumulative effect of a change in accounting principles; (5) any net after-tax gains realized on the sale or other disposition of (a) any property or assets of the Company or any Restricted Subsidiary which is not sold in the ordinary course of its business or (b) any Capital Stock of any Person (including any gains by the Company realized on sales of Capital Stock of the Company or any Restricted Subsidiary); (6) any translation gains and losses due solely to fluctuations in currency values and related tax effects; and (7) any net after-tax extraordinary or non-recurring gains. “Consolidated Net Worth” means, at any date of determination, stockholders’ equity as set forth on the most recently available semi-annual or annual consolidated financial statements of the Company prepared in accordance with GAAP (which the Company shall use its best efforts to compile in a timely manner), plus, to the extent not included, any Preferred Stock of the Company, less any amounts attributable to Disqualified Stock or any equity security convertible into or exchangeable for Indebtedness, the cost of treasury stock and the principal amount of any promissory notes receivable from the sale of the Capital Stock of the Company or any Restricted Subsidiary, each item to be determined in conformity with GAAP. “Contractor Guarantees” means any guarantee by the Company or any Restricted Subsidiary of Indebtedness of any contractor, builder or other similar Person engaged by the Company or a Restricted Subsidiary in connection with the development, construction or improvement of real or personal property or equipment to be used in a Permitted Business by the Company or any Restricted Subsidiary in the ordinary course of business, which Indebtedness was Incurred by such contractor, builder or other similar Person to finance the cost of such development, construction or improvement. “Currency Agreement” means any foreign exchange forward contract, currency swap agreement, currency option agreement or other similar agreement or arrangement designed to protect against fluctuations in foreign exchange rates. “Disqualified Stock” means any class or series of Capital Stock of any Person that by its terms or otherwise is (1) required to be redeemed prior to the Stated Maturity of the Notes, (2) redeemable at the option of the holder of such class or series of Capital Stock at any time prior to the Stated Maturity of the Notes or (3) convertible into or exchangeable for Capital Stock referred to in clause (1) or (2) above or Indebtedness having a scheduled maturity prior to the Stated Maturity of the Notes; provided that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an “ asset sale” or “change of control” occurring prior to the Stated Maturity of the Notes shall not constitute Disqualified Stock if the “ asset sale” or “change of control” provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in Condition 6I and Condition 5E and such Capital Stock specifically provides that such Person will not repurchase or redeem any such stock pursuant to such provision prior to the Company’s repurchase of the Notes as are required to be redeemed or repurchased pursuant to Condition 6I and Condition 5E.

166 “Dollar Equivalent” means, with respect to any monetary amount in a currency other than US dollars, at any time for the determination thereof, the amount of US dollars obtained by converting such foreign currency involved in such computation into US dollars at the base rate for the purchase of US dollars with the applicable foreign currency as quoted by the Federal Reserve Bank of New York on the date of determination.

“Equity Offering” means (i) any underwritten primary public offering or private placement of Common Stock of the Company after the Original Issue Date; (ii) any underwritten secondary public offering or secondary private placement of Common Stock of the Company beneficially owned by a Permitted Holder, after the Original Issue Date, to the extent that a Permitted Holder or a company controlled by a Permitted Holder concurrently with such public offering or private placement purchases in cash an equal amount of Common Stock from the Company at the same price as the public offering or private placing price or (iii) any public offering or private placement of Capital Stock of a Restricted Subsidiary; provided that any offering or placing referred to in (A) clause (i) or (B) clause (ii) or (C) clause (iii) or (D) any combination of clauses (i), (ii) and (iii) result in the aggregate gross cash proceeds received by the Company being no less than US$20.0 million (or the Dollar Equivalent thereof).

“Event of Default” means each of the events set out in Condition 12.

“Euroclear” means Euroclear Bank S.A./N.V., as operator of the Euroclear System.

“Exchange Act” means the US Securities Exchange Act of 1934, as amended.

“Fair Market Value” means the price that would be paid in an arm’s-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy, as determined in good faith by the Board of Directors, whose determination shall be conclusive if evidenced by a Board Resolution.

“Fixed Charge Coverage Ratio” means, on any Transaction Date, the ratio of (1) the aggregate amount of Consolidated EBITDA for the then most recent two fiscal semi-annual periods prior to such Transaction Date for which consolidated financial statements of the Company (which the Company shall use its best efforts to compile in a timely manner) are available (the “Two Semi- Annual Period”) to (2) the aggregate Consolidated Fixed Charges during such Two Semi-Annual Period. In making the foregoing calculation:

(a) pro forma effect shall be given to any Indebtedness, Disqualified Stock or Preferred Stock Incurred, repaid or redeemed during the period (the “Reference Period”) commencing on and including the first day of the Two Semi-Annual Period and ending on and including the Transaction Date (other than Indebtedness Incurred or repaid under a revolving credit or similar arrangement (or under any predecessor revolving credit or similar arrangement) in effect on the last day of such Two Semi-Annual Period), in each case as if such Indebtedness, Disqualified Stock or Preferred Stock had been Incurred, repaid or redeemed on the first day of such Reference Period; provided that, in the event of any such repayment or redemption, Consolidated EBITDA for such Two Semi-Annual Period shall not include any interest income actually earned during such Two Semi- Annual Period in respect of the funds used to repay or redeem such Indebtedness, Disqualified Stock or Preferred Stock;

(b) Consolidated Interest Expense attributable to interest on any Indebtedness (whether existing or being Incurred) computed on a pro forma basis and bearing a floating interest

167 rate shall be computed as if the rate in effect on the Transaction Date (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months or, if shorter, at least equal to the remaining term of such Indebtedness) had been the applicable rate for the entire period;

(c) pro forma effect shall be given to the creation, designation or redesignation of Restricted and Unrestricted Subsidiaries as if such creation, designation or redesignation had occurred on the first day of such Reference Period;

(d) pro forma effect shall be given to Asset Dispositions and Asset Acquisitions (including giving pro forma effect to the application of proceeds of any Asset Disposition) that occur during such Reference Period as if they had occurred and such proceeds had been applied on the first day of such Reference Period; and

(e) pro forma effect shall be given to asset dispositions and asset acquisitions (including giving pro forma effect to the application of proceeds of any asset disposition) that have been made by any Person that has become a Restricted Subsidiary or has been merged with or into the Company or any Restricted Subsidiary during such Reference Period and that would have constituted Asset Dispositions or Asset Acquisitions had such transactions occurred when such Person was a Restricted Subsidiary as if such asset dispositions or asset acquisitions were Asset Dispositions or Asset Acquisitions that occurred on the first day of such Reference Period, provided that to the extent that clause (d) or (e) of this paragraph requires that pro forma effect be given to an Asset Acquisition or Asset Disposition (or asset acquisition or asset disposition), such pro forma calculation shall be based upon the two full fiscal semi-annual periods immediately preceding the Transaction Date of the Person, or division or line of business of the Person, that is acquired or disposed of for which financial information is available.

“GAAP” means Hong Kong Financial Reporting Standards as in effect from time to time. All ratios and computations contained or referred to in the Trust Deed shall be computed in conformity with GAAP applied on a consistent basis.

“guarantee” means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term “guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The term “guarantee” used as a verb has a corresponding meaning.

“Hedging Obligation” of any Person means the obligations of such Person pursuant to any Commodity Hedging Agreement, Currency Agreement or Interest Rate Agreement.

“Holder” means the Person in whose name a Note is registered in the Register.

“Hong Kong Listing Rules” means the Rules Governing the Listing of Securities on the Stock Exchange.

168 “Incur” means, with respect to any Indebtedness or Capital Stock, to incur, create, issue, assume, guarantee or otherwise become liable for or with respect to, or become responsible for, the payment of, contingently or otherwise, such Indebtedness or Capital Stock; provided that (1) any Indebtedness and Capital Stock of a Person existing at the time such Person becomes a Restricted Subsidiary (or fails to meet the qualifications necessary to remain an Unrestricted Subsidiary) will be deemed to be Incurred by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary and (2) the accretion of original issue discount shall not be considered an Incurrence of Indebtedness. The terms “Incurrence,” “Incurred” and “Incurring” have meanings correlative with the foregoing. “Indebtedness” means, with respect to any Person at any date of determination (without duplication): (1) all indebtedness of such Person for borrowed money; (2) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (3) all obligations of such Person in respect of letters of credit, bankers’ acceptances or other similar instruments; (4) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, except Trade Payables; (5) all Capitalized Lease Obligations and Attributable Indebtedness; (6) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided that the amount of such Indebtedness shall be the lesser of (a) the Fair Market Value of such asset at such date of determination and (b) the amount of the Indebtedness so secured; (7) all Indebtedness of other Persons guaranteed by such Person, to the extent so guaranteed; (8) to the extent not otherwise included in this definition, Hedging Obligations; and (9) all Disqualified Stock issued by such Person valued at the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price plus accrued dividends. Notwithstanding the foregoing, Indebtedness shall not include any capital commitments, deferred payment obligations or similar obligations Incurred in the ordinary course of business in connection with the acquisition, development, construction or improvement of real or personal property (including land use rights) to be used in a Permitted Business; provided that such Indebtedness is not reflected and is not required under GAAP to be reflected on the balance sheet of the Company or any Restricted Subsidiary (contingent obligations and commitments referred to in a footnote to financial statements and not otherwise reflected on the balance sheet will not be deemed to be reflected on such balance sheet). The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation, provided that: (i) the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the remaining unamortized portion

169 of the original issue discount of such Indebtedness at such time as determined in conformity with GAAP,

(ii) money borrowed and set aside at the time of the Incurrence of any Indebtedness in order to prefund the payment of the interest on such Indebtedness shall not be deemed to be “Indebtedness” so long as such money is held to secure the payment of such interest, and

(iii) the amount of Indebtedness with respect to any Hedging Obligation shall be equal to the net amount payable if such Hedging Obligation terminated at that time due to default by such Person.

“Independent Financial Advisor” means a reputable licensed and qualified financial advisor, investment bank, appraisal firm or accounting firm of international standing, provided that such advisor or firm is not an Affiliate of the Company.

“Interest Rate Agreement” means any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement, option or future contract or other similar agreement or arrangement designed to protect against fluctuations in interest rates, convert a fixed rate of interest into a floating rate of interest, convert a floating rate of interest into a different floating rate of interest, or lower interest currently paid on Indebtedness of any Person.

“Investment” means:

(1) any direct or indirect advance, loan or other extension of credit to another Person;

(2) any capital contribution to another Person (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others);

(3) any purchase or acquisition of Capital Stock, Indebtedness, bonds, notes, debentures or other similar instruments or securities issued by another Person; or

(4) any guarantee of any obligation of another Person.

“Invest,” “Investing” and “Invested” shall have corresponding meanings.

For the purposes of the provisions of Condition 6B and Condition 6M: (a) the Company will be deemed to have made an Investment in an Unrestricted Subsidiary in an amount equal to the Fair Market Value of the assets (net of liabilities owed to any Person other than the Company or a Restricted Subsidiary and that are not guaranteed by the Company or a Restricted Subsidiary) of a Restricted Subsidiary that is designated an Unrestricted Subsidiary at the time of such designation, (b) any property transferred to or from any Person shall be valued at its Fair Market Value at the time of such transfer, and (c) if the Company or any Restricted Subsidiary sells or otherwise disposes of any Capital Stock of a Restricted Subsidiary (including any issuance of Capital Stock by a Restricted Subsidiary) such that, after giving effect to any such sale or disposition, such Restricted Subsidiary would cease to be a Subsidiary of the Company, the Company shall be deemed to have made an “Investment” on the date of such sale or disposition equal to sum of the Fair Market Value of the Capital Stock of such former Restricted Subsidiary held by the Company or any Restricted Subsidiary immediately following such sale or other

170 disposition and the amount of any Indebtedness of such former Restricted Subsidiary guaranteed by the Company or any Restricted Subsidiary or owed to the Company or any other Restricted Subsidiary immediately following such sale or other disposition; provided, however, that with respect to any designation of RKP (and any RKP Restricted Subsidiaries) as an Unrestricted Subsidiary immediately prior to or as a result of an RKP IPO, the Investments deemed to have been made in RKP and such RKP Restricted Subsidiaries shall be limited to the amount of all Investments made in RKP and such RKP Restricted Subsidiaries after May 14, 2007 (including the amount of any converted or exchanged Indebtedness of RKP or any RKP Restricted Subsidiaries included in calculating whether Condition 6B(c) has been met pursuant to Condition 6B(c)(iii)). “Investment Grade” means (i) a rating of “AAA,” “AA,” “A” or “BBB,” as modified by a “+” or “-” indication, or an equivalent rating representing one of the four highest Rating Categories, by S&P or any of its successors or assigns, or (ii) a rating of “Aaa,” “Aa,” “A” or “Baa,” as modified by a “1,” “2” or “3” indication, or an equivalent rating representing one of the four highest Rating Categories, by Moody’s or any of its successors or assigns, or the equivalent ratings of any internationally recognized rating agency or agencies, as the case may be, which shall have been designated by the Company as having been substituted for S&P or Moody’s or either or both of them, as the case may be. “Joint Venture Companies” means the cooperative joint venture companies or other Persons pursuant to which the Company and its Restricted Subsidiaries and their respective joint venture partners engage in a Permitted Business. “Joint Venture Interests” means the Company and its Restricted Subsidiaries’ beneficial interests in the Joint Venture Companies, whether through ownership of Capital Stock, by contract or otherwise. “Lien” means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof or any agreement to create any mortgage, pledge, security interest, lien, charge, easement or encumbrance of any kind). “Moody’s” means Moody’s Investors Service and its affiliates. “Net Cash Proceeds” means: (1) with respect to any Asset Sale, the proceeds of such Asset Sale in the form of cash or Temporary Cash Investments, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or Temporary Cash Investments and proceeds from the conversion of other property received when converted to cash or Temporary Cash Investments, net of: (a) brokerage commissions and other fees and expenses (including fees and expenses of counsel and investment bankers) related to such Asset Sale; (b) provisions for all taxes (whether or not such taxes will actually be paid or are payable) as a result of such Asset Sale without regard to the consolidated results of operations of the Company and its Restricted Subsidiaries, taken as a whole; (c) payments made to repay Indebtedness or any other obligation outstanding at the time of such Asset Sale that either (x) is secured by a Lien on the property or assets sold or (y) is required to be paid as a result of such sale; and

171 (d) appropriate amounts to be provided by the Company or any Restricted Subsidiary as a reserve against any liabilities associated with such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as determined in conformity with GAAP; and

(2) with respect to any issuance or sale of Capital Stock, the proceeds of such issuance or sale in the form of cash or Temporary Cash Investments, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or Temporary Cash Investments and proceeds from the conversion of other property received when converted to cash or Temporary Cash Investments, net of attorneys’ fees, accountants’ fees, underwriters’ or placement agents’ fees, discounts or commissions and brokerage, consultant and other fees incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof.

“Offering Memorandum” means the offering memorandum dated September 14, 2010 issued by the Company in connection with the issue and offering of the Notes.

“Officer” means one of the executive officers of the Company or, in the case of a Subsidiary Guarantor or the Issuer, one of the directors or executive officers of such Subsidiary Guarantor or, as the case may be, the Issuer.

“Officers’ Certificate” means a certificate signed by two Officers.

“Opinion of Counsel” means a written opinion, in form and substance acceptable to the Trustee, from legal counsel of recognized standing who is acceptable to the Trustee that meets the requirements of the Trust Deed.

“Original Issue Date” means the date on which the Notes are originally issued under the Trust Deed.

“Pari Passu Subsidiary Guarantee” means a guarantee by any Subsidiary Guarantor of Indebtedness of the Company (including any further Notes issued in accordance with Condition 17); provided that (1) the Company and such Subsidiary Guarantor were permitted to Incur such Indebtedness under Condition 6A and (2) such guarantee ranks pari passu with the Subsidiary Guarantee of such Subsidiary Guarantor.

“Payment Default” means (1) any default in the payment of interest on any Note when the same becomes due and payable, (2) any default in the payment of principal of (or premium, if any, on) the Notes when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise, (3) the failure by the Company to make or consummate a Change of Control Offer in the manner described under Condition 5E or an offer to purchase in the manner described under Condition 6I or (4) any Event of Default specified in Condition 12(v).

“Permitted Business” means any business conducted or proposed to be conducted (as described in the Offering Memorandum) by the Company and its Restricted Subsidiaries on the Original Issue Date and other businesses reasonably related or ancillary thereto.

“Permitted Holders” means any or all of the following:

(1) Wai Kee Holdings Limited;

172 (2) any Affiliate (other than an Affiliate defined in clause (ii) or (iii) of the definition of Affiliate) of the Person specified in clause (1); and

(3) any Person both the Capital Stock and the Voting Stock of which (or in the case of a trust, the beneficial interests in which) are more than 80% owned by Persons specified in clauses (1) and (2).

“Permitted Investment” means:

(1) any Investment in the Company or a Restricted Subsidiary that is primarily engaged in a Permitted Business or a Person which will, upon the making of such Investment, become a Restricted Subsidiary that is primarily engaged in a Permitted Business or be merged or consolidated with or into or transfer or convey all or substantially all its assets to the Company or a Restricted Subsidiary that is primarily engaged in a Permitted Business;

(2) Temporary Cash Investments;

(3) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses in accordance with GAAP and not in excess of US$1.0 million (or the Dollar Equivalent thereof) outstanding at any time;

(4) stock, obligations or securities received in satisfaction of judgments;

(5) an Investment in an Unrestricted Subsidiary consisting solely of an Investment in another Unrestricted Subsidiary;

(6) any Investment pursuant to a Hedging Obligation entered into in the ordinary course of business (and not for speculation) and designed solely to protect the Company or any Restricted Subsidiary against fluctuations in commodity prices, interest rates or foreign currency exchange rates;

(7) receivables owing to the Company or any Restricted Subsidiary, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms;

(8) any securities or other Investments received as consideration in, or retained in connection with, sales or other dispositions of property or assets, including Asset Dispositions made in compliance with Condition 6I;

(9) pledges or deposits (x) with respect to leases or utilities provided to third parties in the ordinary course of business or (y) otherwise described in the definition of Permitted Liens or made in connection with Liens permitted under Condition 6G;

(10) any Investment pursuant to Pre-Registration Mortgage Guarantees or Contractor Guarantees by the Company or any Restricted Subsidiary;

(11) advances to contractors or suppliers for the acquisition of assets or consumables or services in the ordinary course of business that are recorded as deposits or prepaid expenses on the Company’s consolidated balance sheet;

(12) Investments in securities of a Person received pursuant to (a) any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such Person

173 or (b) an enforcement by the Company or any of its Restricted Subsidiaries any security granted to secure any Investment or other transfer of title with respect to any Investment in default;

(13) deposits of pre-sale proceeds made by the Company or an Restricted Subsidiary in order to secure the completion and delivery of pre sold properties and issuance of the related land use title in the ordinary course of business; and

(14) deposits made in order to secure the performance of the Company or any Restricted Subsidiary and prepayments made in connection with the acquisition of real property, land use rights or other assets used in the Permitted Business by the Company or any Restricted Subsidiary, in each case in the ordinary course of business.

“Permitted Liens” means:

(1) Liens for taxes, assessments, governmental charges or claims that are being contested in good faith by appropriate legal or administrative proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made;

(2) statutory and common law Liens of landlords and carriers, warehousemen, mechanics, suppliers, repairmen or other similar Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate legal or administrative proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made;

(3) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory or regulatory obligations, bankers’ acceptances, surety and appeal bonds, government contracts, performance and return-of-money bonds and other obligations of a similar nature incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money);

(4) leases or subleases granted to others that do not materially interfere with the ordinary course of business of the Company and its Restricted Subsidiaries, taken as a whole;

(5) Liens encumbering property or assets under construction arising from progress or partial payments by a customer of the Company or its Restricted Subsidiaries relating to such property or assets;

(6) any interest or title of a lessor in the property subject to any operating lease;

(7) Liens on property of, or on shares of Capital Stock or Indebtedness of, any Person existing at the time such Person becomes, or becomes a part of, any Restricted Subsidiary; provided that such Liens do not extend to or cover any property or assets of the Company or any Restricted Subsidiary other than the property or assets acquired; provided further that such Liens were not created in contemplation of or in connection with the transactions or series of transactions pursuant to which such Person became a Restricted Subsidiary;

(8) Liens in favor of the Company or any Restricted Subsidiary;

174 (9) Liens arising from the attachment or rendering of a final judgment or order against the Company or any Restricted Subsidiary that does not give rise to an Event of Default or Potential Event of Default;

(10) Liens securing reimbursement obligations with respect to letters of credit that encumber documents and other property relating to such letters of credit and the products and proceeds thereof;

(11) Liens existing on the Original Issue Date;

(12) Liens securing Indebtedness which is Incurred to refinance secured Indebtedness which is permitted to be Incurred under Condition 6A(2)(e); provided that such Liens do not extend to or cover any property or assets of the Company or any Restricted Subsidiary other than the property or assets securing the Indebtedness being refinanced;

(13) Liens on current assets securing Indebtedness which is permitted to be Incurred under Condition 6A(2)(j) and Liens on assets securing Indebtedness which is permitted to be Incurred under Condition 6A(2)(n);

(14) Liens securing Indebtedness of the Company or any Restricted Subsidiary under any Pre-Registration Mortgage Guarantee;

(15) easements, rights-of-way, municipal and zoning ordinances or other restrictions as to the use of properties in favor of governmental agencies or utility companies that do not materially adversely affect the value of such properties or materially impair the use for the purposes of which such properties are held by the Company or any Restricted Subsidiary;

(16) Liens securing Indebtedness under Hedging Obligations entered into in the ordinary course of business and designed solely to protect the Company or any Restricted Subsidiary from fluctuations in interest rates, currencies or the price of commodities and not for speculation;

(17) Liens arising solely by virtue of any statutory or common law provisions relating to banker’s Liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a depositary institution provided that such deposit account is not intended by the Company or any Restricted Subsidiary to provide collateral to the depository institution;

(18) Liens (including extensions and renewals thereof) upon real or personal property acquired after the Original Issue Date; provided that, (a) such Lien is created solely for the purpose of securing Indebtedness of the type described under Condition 6A(2)(k) and such Lien is created prior to, at the time of or within 180 days after the later of the acquisition or the completion of development or construction or improvement of such property, (b) the principal amount of the Indebtedness secured by such Lien does not exceed 100% of such acquisition, completion or improvement costs and (c) such Lien shall not extend to or cover any property or assets other than such item of property and any improvements on such item provided that, in the case of clauses (b) and (c), such Lien may cover other property or assets (instead of or in addition to such item of property, or improvements) and the principal amount of Indebtedness secured by such Lien may exceed 100% of such acquisition, completion or improvement costs if (x) such Lien is incurred in the ordinary course of business and (y) the aggregate book value of property

175 or assets (as reflected in the most recent available consolidated financial statements of the Company (which may be internal consolidated statements) or, if any such property or assets have been acquired since the date of such financial statements, the cost of such property or assets) subject to Liens incurred pursuant to this clause (18) does not exceed 150% of the aggregate principal amount of Indebtedness secured by such Liens;

(19) Liens on deposits of pre-sale proceeds made in order to secure the completion and delivery of pre-sold properties and issuance of the related land use title made in the ordinary course of business and not securing Indebtedness of the Company or any Restricted Subsidiary;

(20) Liens on deposits made in order to secure the performance of the Company or any of its Restricted Subsidiaries in connection with the acquisition of real property or land use rights by the Company or any of its Restricted Subsidiaries in the ordinary course of business and not securing Indebtedness of the Company or any Restricted Subsidiary; and

(21) Liens on deposits made in order to comply with statutory obligations to maintain deposits for workers’ compensation claims and other purposes specified by statute in the ordinary course of business and not securing Indebtedness of the Company or any Restricted Subsidiary; and

(22) Liens securing Indebtedness incurred under the Syndicated Loan after the Original Issue Date as mortgages over shares of Capital Stock of Restricted Subsidiaries (other than the Subordinated Guarantors) in order to increase, pursuant to the terms of the Syndicated Loan, to not less than US$200.0 million (or such other amount as may be required under the Syndicated Loan) the aggregate net asset value of the Restricted Subsidiaries whose shares secure indebtedness under the Syndicated Loan; provided, however, that such Liens do not cause the aggregate net asset value, at the time such Liens are created, of all Restricted Subsidiaries (including the Subordinated Guarantors) whose shares secure Indebtedness under the Syndicated Loan to exceed 110% of the principal amount of the Syndicated Loan then outstanding.

“Permitted Subsidiary Indebtedness” means Indebtedness (other than Public Indebtedness) of, and all Preferred Stock issued by, the Restricted Subsidiaries, taken as a whole, provided that, on the date of the Incurrence of such Indebtedness or issuance of such Preferred Stock, as the case may be, and after giving effect thereto and the application of the proceeds thereof, the aggregate principal amount outstanding of all such Indebtedness and Preferred Stock does not exceed an amount equal to 20% of the Total Assets; provided, however, that Permitted Subsidiary Indebtedness shall not include any Indebtedness of any Restricted Subsidiary permitted under Conditions 6A(2)(a), 6A(2)(b), 6A(2)(d), 6A(2)(f) and 6A(2)(l), or any Indebtedness of any SPV Financing Subsidiary.

“Person” means any individual, corporation, partnership, limited liability company, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof.

“Potential Event of Default” means any event that is, or after notice or passage of time or both would be, an Event of Default.

“PRC” means the People’s Republic of China, excluding Hong Kong Special Administrative Region, Macau and Taiwan.

176 “PRC CJV” means any Subsidiary that is a Sino-foreign cooperative joint venture enterprise with limited liability, established in the PRC pursuant to the Law of the People’s Republic of China on Sino-foreign Cooperative Joint Ventures adopted on April 13, 1988 (as most recently amended on October 31, 2000) and the Detailed Rules for the Implementation of the Law of the People’s Republic of China on Sino-foreign Cooperative Joint Ventures promulgated on September 4, 1995, as such laws may be amended.

“PRC CJV Partner” means with respect to a PRC CJV, the other party or parties to the joint venture agreement relating to such PRC CJV with the Company or any Restricted Subsidiary.

“PRC Restricted Subsidiary” means a Restricted Subsidiary organized under the laws of the PRC.

“Preferred Stock” as applied to the Capital Stock of any Person means Capital Stock of any class or classes that by its term is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over any other class of Capital Stock of such Person.

“Pre-Registration Mortgage Guarantees” means any guarantee by the Company or any Restricted Subsidiary in favor of any bank or other similar financial institutions in the ordinary course of business of secured loans of purchasers of individual units of properties from the Company or any Restricted Subsidiary; provided that any such guarantee shall be released in full on or before the perfection of security interest in such properties under applicable law in favor of the relevant lender.

“Public Indebtedness” means any bonds, debentures, notes or similar debt securities issued in a public offering or a private placement (other than the Notes) to institutional investors.

“Rating Agencies” means (i) S&P, (ii) Moody’s and (iii) if S&P or Moody’s or both of them shall not make a rating of the Notes publicly available, an internationally recognized securities rating agency or agencies, as the case may be, selected by the Company, which shall be substituted for S&P or Moody’s or both of them, as the case may be.

“Rating Category” means (1) with respect to S&P, any of the following categories: “AAA,” “AA,” “A,” “BBB,” “BB,” “B,” “CCC,” “CC,” “C” and “D” (or equivalent successor categories); (2) with respect to Moody’s, any of the following categories: of “Aaa,” “Aa,” “A,” “Baa,” “Ba,” “B,” “Caa,” “Ca,” “C” and “D” (or equivalent successor categories); and (3) the equivalent of any such category of S&P or Moody’s used by another Rating Agency. In determining whether the rating of the Notes has decreased by one or more gradations, gradations within Rating Categories (“+” and “-” for S&P; “1,” “2” and “3” for Moody’s; or the equivalent gradations for another Rating Agency) shall be taken into account (e.g., with respect to S&P, a decline in a rating from “BB+” to “BB,” as well as from “BB-” to “B+,” will constitute a decrease of one gradation).

“Rating Date” means that date which is 90 days prior to the earlier of (a) the occurrence of any actions contemplated in Condition 6J and (b) a public notice of the occurrence of any such actions.

“Rating Decline” means (1) in connection with a Change of Control Triggering Event, the occurrence on, or within six months after, the date, or public notice of the occurrence of, a Change of Control or the intention by the Company or any Person or Persons to effect a Change of Control (which period shall be extended so long as the rating of the Notes is under publicly announced consideration for possible downgrade by any of the Rating Agencies) of any of the

177 events listed below, or (2) in connection with actions contemplated under Condition 6J, the notification by any of the Rating Agencies that such proposed actions will result in any of the events listed below:

(a) in the event the Notes are rated by each of Moody’s and S&P on the Rating Date as Investment Grade, the rating of the Notes by any one Rating Agency shall be below Investment Grade;

(b) in the event the Notes are rated by one or more, but not all, of the Rating Agencies on the Rating Date as Investment Grade, the rating of the Notes by any one of such Rating Agencies shall be below Investment Grade; or

(c) in the event the Notes are rated below Investment Grade by each Rating Agency on the Rating Date, the rating of the Notes by any one Rating Agency shall be decreased by one or more gradations (including gradations within Rating Categories as well as between Rating Categories).

“Reference Treasury Dealer” means each of any three investment banks of recognized standing that is a primary US Government securities dealer in The City of New York, selected by the Issuer in good faith.

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date, the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Issuer by such Reference Treasury Dealer at 5:00 p.m. on the third Business Day preceding such redemption date.

“Relevant Indebtedness” means any Indebtedness which is in the form of or represented by any bond, note, debenture, debenture stock, loan stock, certificate or other instrument which is, or is capable of being, listed, quoted or traded on any stock exchange or in any securities market (including, without limitation, any over-the-counter market).

“Replacement Assets” means, on any date, property or assets (other than current assets) of a nature or type or that are used in a Permitted Business, and for the purposes of Condition 6I(4), shall include (i) Capital Stock of any Person holding such property or assets, which is primarily engaged in a Permitted Business and will upon the acquisition by the Company or any Restricted Subsidiary of such Capital Stock, become a Restricted Subsidiary; and (ii) an Investment in a Toll Road Joint Venture Company otherwise permitted under Condition 6B.

“Restricted Subsidiary” means any Subsidiary of the Company other than an Unrestricted Subsidiary.

“RKP” means Road King Properties Limited, RK Properties Holdings Limited or the Surviving RKP Entity.

“RKP IPO” means the offering and listing of shares of Capital Stock of RKP on the Stock Exchange or any internationally recognized stock exchange that complies with the rules of such stock exchange and the following conditions:

(a) it is an offer of Capital Stock of RKP to the public for subscription or sale exclusively for cash, accompanied or preceded by the grant of listing of, and permission to deal in, such shares of Capital Stock by the Stock Exchange; and

178 (b) the Issuer shall have delivered an Officers’ Certificate to the Trustee that, immediately after consummation of such offering and listing, no Event of Default hereunder, and no event which, with the giving of notice or the passage of time, or both, would constitute an Event of Default hereunder, shall have occurred and be continuing. The Trustee shall not have any obligation to check or verify the accuracy and correctness of such information provided to it and will not be responsible to Holders or any other person for any loss or liability arising from failure to do so and shall be entitled to rely on such information as conclusive and binding on the Issuer, the Company and the Holders.

“RKP Restricted Subsidiaries” means Restricted Subsidiaries which are Subsidiaries of RKP.

“S&P” means Standard & Poor’s Ratings Services and its affiliates.

“Sale and Leaseback Transaction” means any direct or indirect arrangement relating to property (whether real, personal or mixed), now owned or hereafter acquired whereby the Company or any Restricted Subsidiary transfers such property to another Person and the Company or any Restricted Subsidiary leases it from such Person.

“Senior Indebtedness” of the Company or any Restricted Subsidiary, as the case may be, means all Indebtedness of the Company or such Restricted Subsidiary, as relevant, whether outstanding on the Original Issue Date or thereafter created, except for Indebtedness which, in the instrument creating or evidencing the same, is expressly stated to be subordinated in right of payment to the Notes or, in respect of any Restricted Subsidiary that is a Subsidiary Guarantor, its Subsidiary Guarantee; provided that Senior Indebtedness does not include (1) any obligation to the Company or any Restricted Subsidiary, (2) trade payables or (3) Indebtedness Incurred in violation of the Trust Deed.

“SPV Financing Subsidiary” means any existing or future Wholly-Owned Subsidiary of the Company:

(1) whose sole business activity is:

(i) related to the Incurrence of Indebtedness (“SPV Indebtedness”) which is otherwise permitted under Condition 6A, lending the proceeds thereof to the Company or any Subsidiary Guarantor and any other activities in connection therewith;

(ii) undertaken for the purpose of fulfilling any obligations under such SPV Indebtedness;

(iii) directly related to the establishment and/or maintenance of such SPV Financing Subsidiary’s corporate existence,

(2) which does not acquire any property or assets (including, without limitation, any Capital Stock or Indebtedness of any Person), other than payments in respect of the lending of the proceeds of such SPV Indebtedness to the Company or any Subsidiary Guarantor; and

(3) which uses payments or prepayments received by it pursuant to its lending of the proceeds of such SPV Indebtedness to the Company or any Subsidiary Guarantor solely to satisfy its obligations under its SPV Indebtedness,

179 and as of the Original Issue Date includes the Issuer, Road King Infrastructure Finance Limited, Road King Infrastructure Finance (2004) Limited, RKI Finance Limited, Road King Infrastructure Finance (2007) Limited and RK Properties Finance (2007) Limited. “Stated Maturity” means, (1) with respect to any Indebtedness, the date specified in such debt security as the fixed date on which the final installment of principal of such Indebtedness is due and payable as set forth in the documentation governing such Indebtedness and (2) with respect to any scheduled installment of principal of or interest on any Indebtedness, the date specified as the fixed date on which such installment is due and payable as set forth in the documentation governing such Indebtedness. “Stock Exchange” means The Stock Exchange of Hong Kong Limited. “Subordinated Guarantors” means each of Intersafe Investments Limited, Road Giant Investments Limited, Road Mass Investments Limited, Road Rise Investments Limited, Road Team Investments Limited, Road Union Investments Limited, Ontex Investments Limited, Road Base Investments Limited and Road Bond Investments Limited. “Subordinated Indebtedness” means any Indebtedness of the Company or any Subsidiary Guarantor which is contractually subordinated or junior in right of payment to the Notes or any Subsidiary Guarantee, as applicable, pursuant to a written agreement to such effect. “Subsidiary” means, with respect to any Person, any corporation, association or other business entity of which more than 50% of the voting power of the outstanding Voting Stock is owned, directly or indirectly, by such Person and one or more other Subsidiaries of such Person. “Subsidiary Guarantee” means any guarantee of the obligations of the Issuer under the Trust Deed and the Notes by any Subsidiary Guarantor. “Subsidiary Guarantor” means any initial Subsidiary Guarantor named herein and any other Restricted Subsidiary which guarantees the payment of the Notes pursuant to the Trust Deed and the Notes; provided that Subsidiary Guarantor will not include any Person whose Subsidiary Guarantee has been released in accordance with the Trust Deed and the Notes. “Surviving RKP Entity” means any Person which RKP consolidates with, merges with or into, or to which RKP sells, conveys, transfers, leases or otherwise disposes of all or substantially all of its and its Restricted Subsidiaries’ properties and assets (computed on a consolidated basis) (as an entirety or substantially an entirety in one transaction or a series of related transactions) for purposes of consummating the RKP IPO. “Syndicated Loan” means the Term Loan Facility dated April 11, 2007 between the Company, as guarantor, RKI Finance Limited, as borrower, CITIC Bank International Limited (formerly known as CITIC Ka Wah Bank Limited) and Industrial and Commercial Bank of China (Asia) Limited, as Co-ordinating Arrangers and the other parties thereof, as amended from time to time. “Syndicated Loan Guarantee” means a guarantee of the Syndicated Loan. “Temporary Cash Investment” means any of the following: (1) direct obligations of the United States of America, any state of the European Economic Area, the People’s Republic of China and Hong Kong or any agency thereof or obligations fully and unconditionally guaranteed by the United States of America, any state of the European Economic Area, the People’s Republic of China and Hong Kong or any agency thereof, in each case maturing within one year;

180 (2) time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America or any state thereof or Hong Kong, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of US$100.0 million (or the Dollar Equivalent thereof) and has outstanding debt which is rated “A” (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money market fund sponsored by a registered broker dealer or mutual fund distributor;

(3) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (1) above entered into with a bank or trust company meeting the qualifications described in clause (2) above;

(4) commercial paper, maturing not more than 180 days after the date of acquisition thereof, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of “P-1” (or higher) according to Moody’s or “A-1” (or higher) according to S&P;

(5) securities, maturing within one year of the date of acquisition thereof, issued or fully and unconditionally guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof or Hong Kong and rated at least “A” by S&P or Moody’s;

(6) any money market fund that has at least 95% of its assets continuously invested in investments of the types described in clauses (1) through (5) above; and

(7) time deposit accounts, certificates of deposit and money market deposits with (i) Bank of China, Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, Shanghai Pudong Development Bank, China Minisheng Banking Corp. Ltd, China Merchants Bank, China Everbright Bank, Bank of Communications, Bank of East Asia Guangzhou Branch, China Citic Bank, Shenzhen Development Bank Co. Ltd, Hua Xia Bank and Guangdong Development Bank, (ii) any other bank or trust company organized under the laws of the PRC whose long-term debt is rated as high or higher than any of those banks listed in clause (i) of this paragraph or (iii) any other bank organized under the laws of the PRC, provided that, in the case of clause (iii), such deposits do not exceed US$10.0 million (or the Dollar Equivalent thereof) with any single bank or US$30.0 million (or the Dollar Equivalent thereof) in the aggregate on any date of determination.

“Toll Road Joint Venture Companies” means Joint Venture Companies which currently are, or in the future will be, engaged in the business of investing in, operating and managing toll roads.

“Total Assets” means, as of any date, the total consolidated assets of the Company and its Restricted Subsidiaries measured in accordance with GAAP for the most recent semi-annual period for which consolidated financial statements of the Company (which the Company shall use its best efforts to compile on a timely manner) are available (which may be internal consolidated financial statements) provided that only with respect to Condition 6A(2)(k) and the definition of “Permitted Subsidiary Indebtedness,” “Total Assets” shall be calculated after giving pro forma effect to include the cumulative value of all of the real or personal property or equipment the

181 acquisition, development, construction or improvement of which requires or required the Incurrence of Indebtedness and calculation of Total Assets thereunder, as measured by the purchase price or actual cost therefor or budgeted cost provided in good faith by the Company or any Restricted Subsidiaries to the bank or other similar financial institutional lender providing such Indebtedness.

“Trade Payables” means, with respect to any Person, any accounts payable or any other indebtedness or monetary obligation to trade creditors created, assumed or guaranteed by such Person or any of its Subsidiaries arising in the ordinary course of business in connection with the acquisition of goods or services.

“Transaction Date” means, with respect to the Incurrence of any Indebtedness, the date such Indebtedness is to be Incurred and, with respect to any Restricted Payment, the date such Restricted Payment is to be made.

“Unrestricted Subsidiary” means (1) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided herein and (2) any Subsidiary of an Unrestricted Subsidiary, and includes, as of the Original Issue Date, Road King Infrastructure Finance (1997) Limited.

“US Government Obligations” means securities that are (1) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (2) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally Guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof at any time prior to the Stated Maturity of the Notes, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such US Government Obligation or a specific payment of interest on or principal of any such US Government Obligation held by such custodian for the account of the holder of a depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the US Government Obligation or the specific payment of interest on or principal of the US Government Obligation evidenced by such depository receipt.

“Voting Stock” means, with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person.

“Wholly-Owned” means, with respect to any Subsidiary of any Person, the ownership of all of the outstanding Capital Stock of such Subsidiary (other than any director’s qualifying shares or Investments by foreign nationals mandated by applicable law) by such Person or one or more Wholly-Owned Subsidiaries of such Person; provided that Subsidiaries that are PRC CJVs shall not be considered Wholly-Owned Subsidiaries unless such Person or one or more Wholly-Owned Subsidiaries of such Person are entitled to 95% or more of the economic benefits distributable by such Subsidiary.

23 Governing law and submission to jurisdiction The Notes, the Trust Deed and the Agency Agreement and any non-contractual obligations arising out of or in connection therewith are governed by, and shall be construed in accordance

182 with, the laws of England. In relation to any legal action or proceedings arising out of or in connection with the Trust Deed or the Notes, each of the Issuer, the Company and the Guarantors has in the Trust Deed irrevocably submitted to the non-exclusive jurisdiction of the courts of England, and each of the Issuer and the Company in relation thereto has appointed an agent for service of process in England.

183 Summary of provisions relating to the Notes while in global form The Notes will be represented by a Global Certificate. The Global Certificate contains provisions that apply to the Notes in respect of which the Global Certificate is issued, some of which modify the effect of the terms and conditions of the Notes set out in this offering memorandum. The following is a summary of certain of those provisions:

Global Certificate Upon the issuance of the Global Certificate, Euroclear or Clearstream, Luxembourg, as the case may be, will credit, on their internal system, the respective principal amounts of the individual beneficial interests represented by such Global Certificate to the respective accounts of persons who have accounts with them. Such accounts will be designated by the Joint Lead Managers. Ownership of beneficial interests in the Notes represented by the Global Certificate will be shown on, and the transfer of such ownership interests will be effected only through, records maintained by Euroclear and Clearstream, Luxembourg (with respect to interests of participants) and on the records of participants (with respect to interests of persons holding through participants). Investors may hold their interest in the Global Certificate directly through Euroclear or Clearstream, Luxembourg, as the case may be, if they are participants in such systems, or indirectly through organizations that are participants in such systems. The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and such laws may impair the ability to own, transfer or pledge beneficial interests in the Global Certificate. Payments of principal of, and interest on, Notes represented by the Global Certificate will be made to Euroclear or Clearstream, Luxembourg or the nominee for their common depositary, as the case may be, as the registered owner of such Global Certificate. None of the Issuer, the Trustee, the Registrar, the Paying Agents, the Transfer Agents, any other Agent or any other agent of any of them will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Global Certificate or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. The Issuer expects that Euroclear, Clearstream, Luxembourg or the nominee of their common depositary, upon receipt of any payment of principal or interest in respect of the Global Certificate, will immediately credit participants’ accounts with payments in amounts proportionate to their respective beneficial interests in such Global Certificate as shown on the records of Euroclear, Clearstream, Luxembourg or such nominee, as the case may be. The Issuer also expects that payments by participants to owners of beneficial interests in such Global Certificate held through such participants will be governed by standing customer instructions and customary practices, as is now the case with securities held for the accounts of customers registered in “street name,” and will be the responsibility of such participants. Euroclear and Clearstream, Luxembourg will take any action permitted to be taken by a Noteholder only at the direction of one or more participants to whose accounts with Euroclear or Clearstream, Luxembourg, as the case may be, interests in the Global Certificate are credited and only in respect of such portion of the aggregate principal amount of Notes as to which such participant or participants has or have given such direction.

184 Although the Issuer and each of the Guarantors understand that Euroclear and Clearstream, Luxembourg will comply with the foregoing procedures in order to facilitate transfers of interests in the Notes represented by the Global Certificate among participants of Euroclear and Clearstream, Luxembourg, they are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time.

None of the Issuer, any of the Guarantors, the Trustee, the Registrar, the Paying Agents, the Transfer Agents, any other Agent or any other agent of any of them will have any responsibility for the performance by Euroclear or Clearstream, Luxembourg or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations.

In addition, the Global Certificate will contain the following provisions which modify the terms and conditions of the Notes as they apply to the Notes when evidenced by the Global Certificate.

Meetings

The holder of, or a proxy for the holder of, the Global Certificate will be treated as being two persons for the purposes of any quorum requirements of a meeting of Noteholders and, at any such Meeting, as having one vote in respect of each US$1,000 in principal amount of the Notes for which the Global Certificate is issued. The Trustee may allow a person with an interest in the Notes in respect of which the Global Certificate has been issued to attend and speak at any Meeting of Noteholders on appropriate proof of his identity and interest.

Trustee’s powers

In considering the interests of Noteholders, while the Global Certificate is held on behalf of Euroclear and/or Clearstream, Luxembourg or any other clearing system, the Trustee may have regard to any information provided to it by such clearing system(s) or its operator as to the identity of its accountholders with entitlement to the Notes represented by the Global Certificate and may consider such interests as if such accountholders were the holders of the Notes represented by the Global Certificate.

Purchase and cancellation

Cancellation of any Note represented by the Global Certificate will be effected by reduction in the principal amount of the Global Certificate and in the Register.

Payments

Payments of principal, premium (if any) and interest in respect of the Notes in respect of which the Global Certificate is issued will be made without presentation or, if no further payment falls to be made in respect of the Notes, against presentation and surrender of the Global Certificate to or to the order of the Principal Agent at its specified office or such other Agent as shall have been notified to the Noteholders for such purpose.

Enforcement

For the purposes of enforcement of the provisions of the Trust Deed against the Trustee, the persons named in a certificate of the holders of the Notes represented by the Global Certificate

185 shall be recognized as the beneficiaries of the trusts set out in the Trust Deed to the extent of the principal amount of their interest in the Notes set out in the certificate of the holder as if they were themselves the Noteholders in such principal amounts.

For all purposes, each person who is for the time being shown in the records of Euroclear or of Clearstream, Luxembourg as a holder of a particular principal amount of Notes in respect of which the Global Certificate is issued, (in which regard any certificate or other document issued by Euroclear or Clearstream, Luxembourg as to the principal amount of Notes represented by the Global Certificate standing to the account of any person shall be conclusive and binding for all purposes) shall be recognised as the holder of such principal amount of Notes.

Notices

So long as all Notes are represented by the Global Certificate and the same is deposited with a nominee for a common depositary for Euroclear and Clearstream, Luxembourg, notices to the Noteholders shall be given by delivery to Euroclear and Clearstream, Luxembourg, for communication by them to entitled accountholders in substitution for publication as required by the Conditions.

Definitive Certificates

Owners of interest in the Notes in respect of which the Global Certificate is issued will be entitled to have title to such Notes registered in their names, and to receive Definitive Certificates in respect of their entitlement, in either of the following circumstances: (i) Euroclear and/or Clearstream, Luxembourg is closed for business for a continuous period of 14 days (other than by reason of legal holiday) or announces an intention permanently to cease business or does in fact do so; or (ii) if the Notes become due and payable pursuant to Condition 12.

Whenever the Global Certificate is to be exchanged for Definitive Certificates, such Definitive Certificates shall be issued in an aggregate principal amount equal to the principal amount of the Global Certificate within five business days of the delivery, by or on behalf of the Holder, Euroclear and/or Clearstream, Luxembourg to the Registrar of such information as is required to complete and deliver such Definitive Certificates (including, without limitation, the names and addresses of the persons in whose names the Definitive Certificates are to be registered and the principal amount of each such person’s holding) against the surrender of the Global Certificate at the specified office of the Registrar. Such exchange shall be effected in accordance with the provisions of the Agency Agreement and the regulations concerning the transfer and registration of Notes scheduled thereto and, in particular, shall be effected without charge to any Holder or the Trustee, but against such indemnity as the Registrar may require in respect of any tax or other duty of whatsoever nature which may be levied or imposed in connection with such exchange. In this paragraph, “business day” means a day on which commercial banks are open for business (including, without limitation, dealings in foreign currencies) in the city in which the Registrar has its specified office.

On exchange in full of the Global Certificate, the Registrar shall cancel it.

Repurchase of the Notes at option of the Noteholders

The Noteholders’ options in Condition 6I and Condition 5E may be exercised by the holder of the Global Certificate giving notice to the Principal Agent of the principal amount of Notes in respect

186 of which the option is exercised and presenting the Global Certificate for endorsement or exercise within the time limits specified in such Conditions.

Redemption by the Issuer

The Issuer’s option in Condition 5B, Condition 5F, Condition 5G and Condition 5H shall be exercised by the Issuer giving notice to the Noteholders within the time limits set out in and containing the information required by Condition 5B, Condition 5F, Condition 5G or Condition 5H, as the case may be, except that the notice shall not be required to contain the serial numbers of Notes drawn for redemption in the case of a partial redemption of Notes and accordingly no drawing of Notes for redemption shall be required. Any redemption by the Issuer pursuant to Condition 5F or Condition 5H will be on a pro-rata basis in accordance with the rules of Euroclear and Clearstream, Luxembourg.

Transfers

Transfers of interests in the Notes will be effected through the records of Euroclear and Clearstream, Luxembourg and their respective participants in accordance with the rules and procedures of Euroclear and Clearstream, Luxembourg and their respective direct and indirect participants.

Trading amounts

So long as the Notes are represented by the Global Certificate and the relevant clearing systems so permit, the Notes shall be tradable in minimum principal amounts of US$100,000 and integral multiples of US$1,000 thereafter.

187 Regulation

PRC regulations of highway and toll road business

General system for highway business

The PRC Highway Law (the “Highway Law”) is the basic law within the PRC legal regime applicable to the highway and toll road business. It was adopted by the National People’s Congress on July 3, 1997, and amended in October 1999, August 2004 and August 2009. Planning, construction, maintenance, management, use and administration of roads within the borders of the PRC, including road bridges, road tunnels and road crossings, shall comply with the requirements of the Highway Law.

The Ministry of Transportation (“MOT”) is responsible for road work nationwide. The transportation departments of local governments above the county level are responsible for road work within their administrative jurisdictions.

The PRC Government has placed great significance on the development of roads and road construction has been incorporated into the national economic and social development plan, following the principles of comprehensive planning, rational distribution, assured quality, environmental protection, and equal emphasis on construction, improvement and maintenance.

The PRC Government encourages domestic and foreign investors to invest in road construction and operation. According to the Highway Law, all roads are protected by the State and no individual or entity shall destroy or damage roads or illegally occupy roads, road land or road facilities. Investors shall establish a special purpose project company with legal person status for each road, and the project company shall be responsible for the development, construction, operation and maintenance of the road in accordance with the relevant laws and regulations. The project companies are allowed to raise funds through equity and debt issuances, subject to government approval.

Roads in the PRC are categorized as national roads, provincial roads, county roads and township roads according to their significance in the national road network. Roads are also categorized as expressways, first grade roads, second grade roads, third grade roads and fourth grade roads according to the level of their technical standards.

The MOT is responsible for drawing up the national road plan in conjunction with the relevant State Council departments including the National Development Reform Commission (the “NDRC”) and in consultation with the provincial governments bordering the road. The national plan shall be approved by the State Council. The provincial level departments in charge of transportation shall draw up the provincial road plan in consultation with the lower level governments bordering the road. The provincial road plans shall be approved by the provincial governments and filed with the MOT.

Road construction must be carried out in accordance with the infrastructure construction procedures provided in laws and regulations. Project companies shall obtain the necessary approvals, licenses and permits for road construction from the transportation departments above the county level. Feasibility study work, survey and design work which are necessary prior to commencement of construction and approval by the relevant transportation departments shall be undertaken only by companies or entities holding the required qualification certificates.

188 After the road construction is completed, the roads shall be examined and checked by the project companies and relevant governmental authorities (“Construction Checking”). Any road which has not been checked or which is not up to the standards may not be put into use.

According to the Measures of Completion Checking and Delivery of Road Construction (“Checking Measures”) promulgated by the MOT on March 31, 2004 and effective on October 1, 2004, Construction Checking of a road is divided into two stages: Delivery Checking and Completion Checking. Delivery Checking shall be organized by the project company with participation of the road designer, project manager and contractor after completion of the construction. According to the Checking Measures, the Delivery Checking is a preliminary assessment of the construction work. Its purpose is to examine whether the construction work complies with the requirements of the construction agreement, whether the quality of road meets the required standards, and whether the examined section may be delivered for construction of the next phase. After road construction is completed and the Delivery Checking of each section is conducted, the project company shall prepare a project delivery checking report. This report shall be filed with the transportation department. Once the Delivery Checking of each section is complete, the project company shall request the quality control institutions recognized by MOT to issue a project inspection report. This report shall be filed with the transportation department. If the transportation department makes no comments on the project inspection report within 15 days after the filing, the road may be put into trial operation. Trial operation may not last longer than three years. After the first two years of trial operation, the project company shall apply to the communication department for Completion Checking. Completion checking shall be organized by the communication department and its purpose is to inspect and assess the construction and quality of the road, and to assess the performance of each participant in the road construction project. The project company, designer, project manager and contractor shall all submit a working report regarding their respective work to the transportation department as part of this process. If the road is in compliance with the design standards and the requirements set forth in the construction contract, governmental permits, and relevant laws and regulations, the transportation department shall decide the grade of the road and issue a project completion evaluation report. If the project company does not file an application for the Completion Checking within the three-year trial operation period, the transportation department may order the project company to do so. If the project company fails to comply with the order, the transportation department may suspend the trial operation of the road.

Toll road business

According to the Highway Law, the State permits the development of toll roads including road bridges and tunnels, but at the same time restricts the number of toll collection stations.

Collection of tolls by the project company operating the road shall be approved by the relevant provincial level department of transportation. Only the operators of the following roads may be approved to collect tolls:

• roads built by transportation departments of local governments above the county level with loans, or with funds raised from enterprises or individuals (“Governmental Toll Roads”); and

• roads for which domestic or foreign investors have been assigned the toll collection right; and

189 • roads built with investment from domestic or foreign investors (collectively “Investment Toll Roads”).

Pursuant to the Regulations on Toll Road Administration (“Toll Road Regulations”) promulgated by the State Council on September 13, 2004 and effective on November 1, 2004, the MOT requirements for toll roads include:

• consecutive mileage no less than 30 kilometers for expressway, except for the expressway a city to the local airport;

• consecutive mileage no less than 50 kilometers for first grade highway; and

• mileage no less than 800 meters for bridge or tunnel with two lanes, or 500 meters for bridge or tunnel with four lanes.

Operators of roads lower than second grade shall not be approved to collect tolls, except for those legally approved with a consecutive mileage of no less than 60 kilometers located in the central and western provinces. The right of the operator of a toll road includes the right to collect tolls and operate advertisements and service facilities along the road.

The set-up of toll collection stations on the road shall be approved by the provincial department of transportation pursuant to the following requirements:

• for expressways and other closed type highways, collection stations may be set up only at the entrance and exit of the road, except at the connection points between provinces; and

• the distance between two collection stations on open type highways shall not be less than 50 kilometers.

The term of toll collection shall also be approved by the PRC Government at the provincial level. The term for Governmental Toll Roads shall not be longer than 15 years or 20 years for central and western provinces designated by the State Council. Once the loans used to build the road are paid, the operator shall stop toll collection. For Investment Toll Roads, the term shall be decided pursuant to the principle of full recovery of investment costs and reasonable investment return, but shall not be longer than 25 years or 30 years for central and western provinces designated by the State Council.

The operator of the toll road shall submit to the provincial department of transportation a proposal of the amount of tolls to be collected. The provincial department of transportation shall review the proposal in conjunction with the provincial departments in charge of price. Together, the departments submit the proposal to the provincial government for final approval. A hearing may be required before the approval is granted. Any adjustment of the amount of tolls to be collected shall also be approved by the provincial government.

Pursuant to the Highway Law, in the case of roads for which the toll collection right is acquired from a third person, including the government or investors, the toll collection right shall revert to the transferor when the contract term expires. In the case of toll roads built with investment from and operated by, domestic or foreign investors, the road shall revert to the State without compensation and is operated by the relevant transportation department.

On November 27, 2006, MOT issued a Notice on Further Regulating the Administration of Toll Roads (“MOT Notice”). Pursuant to the MOT Notice, second grade toll roads shall not be

190 approved for construction in the eastern provinces and the number of new second grade toll roads shall be strictly limited. Set-up of toll collection stations on second grade toll roads in central or western provinces shall also be restricted. The operators of the Governmental Toll Roads shall not transfer their toll collection rights until the State Council promulgates the rules governing transfer of toll collection rights.

In accordance with an approval letter issued to the MOT and PBOC by the State Council dated April 26, 1999, a toll collection right may be pledged to secure bank loans lent by domestic banks to the operator of the toll road. The pledge shall be registered with the transportation department at or above the municipal level. The pledgor of the toll collection right may enforce the pledge in accordance with the laws and regulations.

According to a notice of the Ministry of Finance and State Administration of Taxation dated May 11, 2005, the business tax of the operator a toll expressway with respect to its vehicle tolls was reduced to 3% from 5% beginning June 1, 2005.

The land system of the PRC

All land in the PRC is either State-owned or collective-owned, depending on the location of the land. All land in the urban areas is State-owned, and all land in the rural areas is, unless otherwise specified by law, collective-owned. The State has the right to reclaim land and must provide appropriate compensation to the dispossessed parties where the public good so requires.

Although all land in the PRC is owned by the State or by collectives, private individuals, enterprises and other organizations are permitted to hold, lease and develop land for which they are granted land use rights.

National legislation

In April 1988, the Constitution of the PRC (the “Constitution”) was amended by the National People’s Congress to allow for the transfer of land use rights for value. In December 1988, the Land Administration Law of the PRC was amended to permit the transfer of land use rights.

Under the Provisional Regulations of the PRC Concerning the Grant and Assignment of the Right to Use State-owned Land in Urban Areas (the “Urban Land Regulations”) promulgated in May 1990, local governments at or above the county level have the power to grant land use rights for specific purposes and for a definite period pursuant to a contract for the grant of land use rights upon payment of a grant premium.

Under the Urban Land Regulations, there are differing maximum periods of land grants for different uses of the land. They are generally as follows:

Maximum period for use of land In years Commercial, tourism, entertainment ...... 40 Residential ...... 70 Industrial ...... 50 Public utilities (education, science, culture, health and sports) ...... 50 Others ...... 50

Under the Urban Land Regulations, all local and foreign enterprises are permitted to acquire land use rights unless the law provides otherwise. The State may not resume possession of lawfully

191 granted land use rights prior to expiration of the grant term. If the public interest requires the resumption of possession by the State under special circumstances during the term of grant, the State must compensate the disposed party. A land user may lawfully assign, mortgage or lease its land use rights to a third party for the remainder of the grant term.

Upon expiration of the grant’s term, renewal is possible subject to the execution of a new contract for land use rights and payment of a premium. If the term of the grant is not renewed, the land use rights and ownership of any buildings thereon will revert to the State without compensation.

In order to stop illegal occupation and environmental degradation, prevent overheating uncertain designated sectors of the economy, and protection of cultivated land, the General Office of the State Council issued the Urgent Notice on Further Governing and Rectifying the Real Estate Market and Strengthening the Administration of Land on April 29, 2004.

The notice addresses issues including,

(i) continuing the rectification of the real estate market by cooperation between the PRC Ministry of Land and Resources and other authorities on problems existing in the grant of State-owned land use right by way of tender, auction and invitation for bidding;

(ii) strictly administering approvals of construction land;

(iii) protecting basic agricultural land;

(iv) strictly implementing the general strategy and annual plan for land use, and the balance system for occupying and compensating cultivated land; and

(v) actively promoting the reform of the administration system of land and resources.

Approvals for converting agricultural land to non-agricultural land will be suspended throughout China during this period, except for certain major public infrastructure projects approved by the State Council.

On March 26, 2005, the General Office of the State Council promulgated a Notice on Effectively Stabilizing House Prices to promote the sound development of the real estate market. The notice provided that housing prices should be stabilized and the system governing housing supply should be adjusted and improved. In accordance with the notice, seven departments of the State Council including the Ministry of Construction issued an Opinion on the Work of Stabilizing Housing Prices on April 30, 2005. The opinion emphasized three main points. First, local governments should focus on increasing the supply of low to medium-end ordinary residential housing and control the construction of high-end residential houses. Second, to curb speculation in the real estate market, business taxes would be levied beginning June 1, 2005 on the total revenue arising from any sale of homes within two years of their purchase or on the difference between the sales price and the original price for any transfer of non-residential purpose homes by individuals after two or more years of purchase. Third, the real estate registration department will no longer register the sale of apartment units which are pre-sold, where such units have not obtained the relevant Real Estate Ownership Certificates.

On May 24, 2006, the General Office of the State Council issued the Notice on Adjusting the Housing Structure and Stabilizing Housing Prices. The notice provided for six broad measures including specific directives to (i) encourage mass-market residential developments and curb the

192 development of high-end residential properties; (ii) enforce the collection of business taxes on property sales; (iii) restrict housing mortgage loans to not more than 70% of the total property price; (iv) halt land supply for villas projects and restrict land supply for high-end, low density residential projects; (v) moderate the progress and scale of demolition of old properties for redevelopment; (vi) local governments are also required to ensure that at least 70% of the total development and construction area within the city also must consists of units of less than 90 sq.m. in size (with any exceptions requiring the approval of the Ministry of Construction); and (vii) banks are not permitted to provide loans to a property developer whose total capital fund is less than 35% of the total investment amount in an intended development project. On August 30, 2006, the State Council published the Notice on Strengthening the Regulation and Control of the Land, which regulates land management and the protection of cultivated land. According to the notice, land designated for industrial purposes shall be granted by way of tender, auction and bidding, but in any event shall not be sold below the reserve price. On December 30, 2007, the Notice of the General Office of the State Council on Strict Enforcement of Regulations and Policies Regarding Rural Collective Land Construction was issued to introduce a series of measures to strengthen administration and management of rural collective land construction. On January 3, 2008, the State Council issued the Circular on Saving Intensive-use Land regarding land conservation and improving the efficiency of land use. The circular called on relevant government agencies to map out large-scale “scientific infrastructure” programs, tighten land use approvals in both rural and urban areas and step up land market monitoring. The circular prescribed that, if land approved for development remains unused for more than two years, it should be recovered by the government. If the land remains idle for more than one year and less than two years, land developers should pay a 20 percent non-usage fee. More than 70 percent of the land used for construction of urban housing should be designated for residential low-rent units, affordable housing, price- controlled housing and small units of less than 90 sq.m. The circular also stipulates that loans or financing will not be provided for land that is put to illegal use. On January 7, 2010, the General Office of the State Council promulgated a Notice on Promoting the Stable and Healthy Development of Real Estate Market to restrain the excessive growth of house prices and promote the sound development of the real estate market. The notice provided that supply of low-income housing should be effectively ensured and housing consumption should be properly guided to restrict the housing demand for investment purpose. In accordance with the notice, the PRC Administration of Land and Resources issued the Notice on Relevant Issues on Strengthening the Supply and Supervision of Land for Real Estate Development on March 8 2010 that stated local governments should accelerate planning to ensure the effective supply of land for housing construction use, effectively strengthen the supervision on land for housing construction use and establishing an information publication system. On April 17, 2010, the State Council issued a Circular on Resolutely Curbing the Housing Prices in Some Cities from Rising Too Fast (Guo Fa [2010] No. 10), which measures are designed to slow down rising housing prices and address the housing problems of the rural population. Under the Circular, all relevant departments are required to hasten their efforts to implement relevant policies and measures consistent with the Circular and are required to be proactive in interpreting market regulation polices with respect to the real estate, among other items. In particular, the Circular increased the minimum down payment for a mortgage-financed purchase of a first residence with a GFA greater than 90 sq.m. to 30%, increased the minimum down payment for a mortgage-financed purchase of a second residence to 50%, and provided that the

193 interest rate shall not be lower than 1.1 times the benchmark interest rate of the same grade for the same period as announced by the PBOC. The Circular also gave discretionary authority to commercial banks to use credit risk management principles to further adjust upwards down payment percentages and mortgage interest rates for buyers of second (or more) residences based on the number of residences purchased. Notably, the Circular also provided that in certain cities where housing prices are too high and increasing too fast (which includes cities where the Company has property development projects), and where there is a shortage in supply of housing, commercial banks may refuse to provide mortgage financing for the purchase of a third (or more) residence.

Grant PRC law distinguishes between the land ownership rights and use rights. Land use rights can be granted by the State and entitles a person to exclusive use of a piece of land for a specified purpose within a specified term and on such other terms and conditions as may be prescribed. A premium is payable on the grant of land use rights. The maximum term that can be granted for the right to use a piece of land depends on the purpose for which the land is used. As described above, the maximum limits specified in the relevant regulations vary from 40 to 70 years depending on the purpose for which the land is used. Under the Urban Land Regulations, there are three methods by which land use rights may be granted, namely by agreement, tender or auction. On June 11, 2003, the Ministry of Land and Resources promulgated the Regulation on the Granting of State-owned Land Use Rights by Agreement. According to such regulation, if there is only one intended user on a parcel of land, the land use rights (excluding land use rights used for business purposes, such as commercial, tourism, entertainment and commodity residential properties) may be granted by agreement. The local land bureau, together with other relevant government departments including the city planning authority, will formulate the plan concerning issues including location, boundaries, purpose of use, area, term of grant, conditions of use, conditions for planning and design as well as the proposed land premium, which shall not be lower than the minimums determined by the State, and submit such plan to the relevant government for approval. The local land bureau and the person who is interested will negotiate and enter into the grant contract based on such plan. If two or more entities are interested in the land use rights proposed to be granted, such land use rights shall be granted by way of tender, auction or bidding. Furthermore, according to the Rules Regarding the Grant of State-owned Land Use Rights by Way of Tender, Auction and Bidding (the “Land Use Grant Rules”) which are effective from July 1, 2002, as amended, and retitiled, “The Regulation on Bidding, Auction and Listing Required for Granting of State-Owned Construction Land,” and promulgated by the Ministry of Land Resources in 2007, land use rights for commercial, tourism, entertainment and residential purposes can only be granted through tender, auction or bidding. Furthermore, the grantee of State-owned construction land use rights shall fully pay the relevant land premium in accordance with the State-owned land granting contract before it can proceed with registration of and application for a State-owned Construction Land Use Rights Certificate. Where land use rights are granted by way of tender, invitations to tender will be issued by the local land bureau. The invitation will set out the terms and conditions upon which the land use rights are proposed to be granted. A committee will be established by the relevant local land bureau to consider tenders which have been submitted. The successful bidder will then be asked to sign the grant contract with the local land bureau and pay the relevant land premium within a

194 prescribed period. The land bureau will consider the following factors: the successful bidder shall be either the bidder who can satisfy the comprehensive evaluation criteria of the tender, or who can satisfy the substantial requirements of the tender and also offers the highest bid.

Where land use rights are granted by way of auction, a public auction will be held by the local land bureau. The land use rights are granted to the highest bidder. The successful bidder will be asked to enter into a grant contract with the local land bureau.

Where land use rights are granted by way of bidding, a public notice will be issued by the local land bureau to specify the location, area and purpose of use of land, the initial bidding price, the period for receiving bids and the terms and conditions of the land grant.

Upon signing of the contract for the grant of land use rights, the grantee is required to pay a land premium pursuant to the terms of the contract. The contract is then submitted to the relevant local land bureau for the issue of the land use right certificate. Upon expiration of the term of grant, the grantee may apply for renewal of the term. Upon approval by the relevant local land bureau, a new contract shall be entered into to renew the grant, and a grant premium shall be paid.

In order to control and facilitate the procedure for obtaining land use rights, several local governments have set forth standard land grant contracts. These standard form contracts typically include terms such as use of land, land premium and manner of payment, building restrictions, total GFA and height limitations, construction of public facilities, submission of building plans and approvals, deadlines for completion of construction, town planning requirements, restrictions against alienation before payment of premium and completion of prescribed development and liability for breach of contract. Any change requested by the land user in the specified use of land after the execution of a land grant contract will be subject to approvals from the relevant local land bureau and the relevant urban planning department, and a new land use contract may have to be signed and the land premium may have to be adjusted to reflect the added value of the new use. Registration procedures must then be carried out immediately.

On February 27, 2007, the Ministry of Land and Resources and the Ministry of Finance jointly promulgated the Provisional Measures on Financial Administration of Reserve Land Funds for the purpose of improving the land reserve system, strengthening land regulation and control, regulating the operation of the real estate market, strengthening land administration and regulating land reserve administration.

On September 8, 2007, the Ministry of Land and Resources promulgated a “Notice on Strengthening the Disposal of Idle Land” providing that the Grant of State-owned Land Use Right shall be granted by way of “Cultivated Land.” It means that the Grant of State-owned Land Use Right can only be transferred after the payment of compensation fees for landing and settlement and completion of the land development at the earlier stage. The notice also prescribes that the State-owned Land Use Rights Certificate shall not be issued before the land grant premium for acquisition of land has been paid in full, nor be issued separately according to the ratio of payment of land grant premium.

On September 28, 2007, the Ministry of Land Resources promulgated the Regulation on Bidding, Auction and Listing Required for Construction on State-Owned Land which became effective on November 1, 2007. This regulation specifies that the grantee of State-owned land for development purposes rights shall fully pay the relevant land premium in accordance with the State-owned land granting contract before proceeding with registration of and application for a State-owned Construction Land Use Rights Certificate.

195 On November 19, 2007, the Ministry of Land and Resources, the Ministry of Finance and the PBOC jointly promulgated the Measures for the Administration of Reserved Land (“Reserved Land Measures”). As defined in the Reserved Land Measures, reserved land refers to the phased development of land, and the reserving of land for county or city government projects. The purpose of reserving such land is to control the property market and promote the appropriate use of land resources. Under the Reserved Land Measures, the Ministry of Land and Resources, the Ministry of Finance and the PBOC will jointly draft plans for the implementation of projects located on reserved land and monitor the adherence of county and city governments to such plans. Before implementation of such plans, relevant governmental approvals must be obtained.

Withdrawal of land

According to the Law of Administration of Urban Real Estate (the “Urban Real Estate Law”), where a real property development is carried out on land for which the land use rights are acquired by grant, the land must be developed in line with the specified use and the deadline for commencement of development set out in the land grant contract. Where the development does not commence within one year from the specified date, an idle land fee may be charged at a rate equivalent to not more than 20 per cent of the relevant land premium. Where the development does not commence within two years from the specified date, the relevant land use rights may be withdrawn without compensation, except where the commencement of construction is delayed due to force majeure, an act of government, or delays in preliminary work necessary for the commencement of development.

According to the Measures on Disposal of Idle Land, “idle land” refers to land granted for use but laying idle because the land user fails to commence development and construction before the specified commencement date without consent of government. Where the land is deemed “idle land,” relevant municipal or county land administrative departments (the “Land Administrative Authorities”) shall inform the land user and prepare a plan for the disposal of the idle land. Where the land is mortgaged, the mortgagee shall be informed to participate in the preparation of the disposal plan. The Land Administrative Authorities are responsible for implementing the disposal plan after such plan has been approved by the government which originally approved the use of the land.

The methods of disposal of idle land include the following:

(i) extending the development and construction period by no more than one year;

(ii) changing use of the land, and subsequently initiating alternative development and construction; and

(iii) arranging for temporary use of the land and re-approving the development once the original project satisfies the conditions for construction, where the land has appreciated in value, the government will increase the land premium in accordance with the appreciated value.

Where the land is idle due to government conduct and the land user has partly paid the compensation or requisition fee for the land, in addition to the methods provided above, the government may acknowledge the relevant land to the land user for the part of land which the land user has paid the compensation or requisition fee; while the remaining part of the land will be withdrawn by the government.

196 The “Notice on Strengthening the Disposing of Idle Land” issued by the Ministry of Land Resources on September 8, 2007 emphasized the acceleration of disposal of idle land. The Notice adopts several measures including: the imposition of an idle land penalty of up to 20% of the land premium and reclamation of the idle land without compensation as required by the relevant regulations. For land that becomes idle as a result of illegal government approval, such land shall be reclaimed before the end of 2007. On September 30, 2007, the Ministry of Land Resources issued the “Notice On Implementation of the “Several Opinions of the State Council of the PRC on Solving Housings Shortage with respect to Urban Low-Income Household” and Further Strengthening Control on Land Supply.” The objective of these regulations was to strengthen disposal of idle land. Under the regulations, in cases where such land remains undeveloped one year after the construction commencement date, an idle land penalty on the real estate developer may be levied by the land regulatory authority, and the real estate developer would be required to remedy the situation within a prescribed period. The land regulatory authority may impose an idle land penalty of up to 20% of the land premium. In cases where such land remains undeveloped for two years, the land regulatory authority may reclaim the land. If the development of such land has commenced but development suspended without approval for one year, and the portion of the land that has been developed is less than one-third of the total area to be developed, or the amount of capital directly invested in the construction of the building is less than one-quarter of the total investment, such land shall be handled as idle land.

Transfer After land use rights relating to a particular area of land have been granted by the State, unless any restriction is imposed, the party to whom such land use rights are granted may transfer, lease or mortgage the property. The difference between a transfer and a lease is that a transfer involves the vesting of the land use rights by the transferor in the transferee during the term for which such land use rights are vested in the transferor. A lease, on the other hand, does not involve a transfer of such rights by the lessor to the lessee. Furthermore, a lease, unlike a transfer, does not usually involve the payment of a premium. Instead, a rent is payable during the term of the lease. Land use rights cannot be transferred, leased or mortgaged if the provisions of the grant contract, with respect to the prescribed period and conditions of investment, development and use of the land, have not been complied with. In addition, different areas in the PRC have different conditions which must be fulfilled before the respective land use rights can be transferred, leased or mortgaged. All transfers, mortgages and leases of land use rights must be evidenced by a written contract between the parties which must be registered with the relevant local land bureau at municipality or country level. Upon a transfer of land use rights, all rights and obligations contained in the contract pursuant to which the land use rights were originally granted by the State are deemed to be incorporated as part of the terms and conditions of such transfer, depending on the nature of the transaction. Under the Urban Real Property Law, real property that has not been registered and of which a title certificate has not been obtained in accordance with the law may not be assigned. Also, under the Urban Real Property Law, if land use rights are acquired by means of grant, the real property shall not be assigned before the following conditions have been met: (i) the premium for the grant of land use rights must have been paid in full in accordance with the land grant contract and a land use right certificate must have been obtained; (ii) investment or development

197 must have been made or carried out in accordance with terms of the land grant contract; (iii) more than 25% of the total amount of investment or development must have been made or completed; and (iv) where the investment or development involves a large tract of land, conditions for use of the land for industrial or other construction purposes have been satisfied.

On July 18, 2006, the State Administration of Taxation promulgated the Notice on Relevant Issues Concerning Imposing Individual Income Tax on House Transfer Income Received by Individual. Pursuant to this notice, the individual income tax rate of 20% shall be imposed on the difference between the sale price and the original purchase price together with other reasonable fees of all transfers of residential properties by an individual after August 1, 2006. An exception is granted where the transfer takes place five years after the original purchase date and the residential property is used by the transferor as his and his family’s residence.

Termination

A land use right terminates upon the expiration of the term of the grant specified in the land grant contract and the resumption of that right. Upon expiry, the land use right and ownership of the related buildings erected thereon and other attachments may be acquired by the State without compensation. The land user will take steps to surrender the land use right certificate and cancel the registration of the certificate in accordance with relevant regulations. A land user may apply for renewal of the land use rights and, if the application is granted, the land user is required to enter into a new land grant contract, pay a premium and effect appropriate registration for the renewed right.

The State generally will not withdraw a land use right before the expiration of its term of grant and for special reasons (such as in the public interests), it must offer proper compensation to the land user, having regard to the surrounding circumstances and the period for which the land use right has been enjoyed by the user.

Document of title

In the PRC, there are two registers for property interests. Land registration is achieved by the issue of a land use right certificate by the relevant authority to the land user. It is evidence that the land user has obtained land use rights which can be assigned, mortgaged or leased. The building registration is the issue of a building ownership certificate or a real estate ownership certificate (the “Real Estate Ownership Certificate”) to the owner. It is evidence that the owner has obtained building ownership rights in respect of the building erected on a piece of land. According to the Land Registration Regulations (the “Registration Regulations”) promulgated by the State Land Administration Bureau on December 18, 1995 and implemented on February 1, 1996, and the Administrative Rules on Registration of Urban Real Estate Property promulgated by the Ministry of Construction on October 27, 1997 and implemented on January 1, 1998, all land use rights and building ownership rights which are duly registered are protected by the law.

In connection with these registration systems, real estate and land registries have been established in the PRC. In most cities in the PRC, the above systems are separate systems. However, in Shenzhen, Shanghai, Guangzhou and some other major cities, the two systems have been consolidated and a single composite real estate ownership certificate will be issued evidencing the ownerships of both land use rights and the building erected thereon.

198 Mortgage and guarantee The grant of mortgages in the PRC is governed by the Security Law of the PRC (the “Security Law”), the Property Law and by relevant laws regulating real estate. Under the Security Law, any mortgage contract must be in writing and must contain specified provisions including (i) the type and amount of the secured indebtedness; (ii) the period of the debtor’s obligation; (iii) the name, quantity, quality, status, location and ownership of the land use rights of the mortgaged property; and (iv) the scope of the mortgage. For mortgages of urban real properties, new buildings on a piece of land after a mortgage has been entered into will not be subject to the mortgage. The validity of a mortgage depends on the validity of the contract and registration of the mortgage with authorities. If the mortgage is not duly repaid, the mortgagee may sell the property to settle the outstanding amount and return the balance of the proceeds from the sale to the mortgagor. If the proceeds from the sale of such property are not sufficient to cover the outstanding amount, the mortgagee may bring proceedings before a competent court or arbitration tribunal (where there is an agreement to recover the outstanding amount through arbitration) in the PRC. The Security Law also contains comprehensive provisions dealing with guarantees. Under the Security Law, guarantees may be in two forms: (i) guarantees whereby the guarantor bears the liability when the debtor is unable to repay the outstanding debt; and (ii) guarantees with joint and several liability whereby the guarantor and debtor are jointly and severally liable for the payment obligation. The Property Law provides that the mortgage registration of buildings and other objects fixed to land, the right to use construction land, and a building under construction shall be gone through, such mortgage right shall be established as of the date of registration. The buildings newly constructed on the land after the mortgage of the right to use construction land shall not belong to the mortgaged properties. Such newly constructed buildings can be disposed of together with the disposal of the aforesaid right to use construction land so as to realize the mortgage right, however, the mortgagee has no right to seek preferred payments from the money generated from the disposal of these newly constructed buildings. Pursuant to the Property Law, guarantee contracts must be in writing and creditors shall exercise their rights within the statute of limitations of the principal debt to preserve their rights before the People’s court. The Property Law provides that where indebtedness is secured by both a guarantee and by mortgaged property, the creditor shall realize the creditor’s rights as agreed with the counterpart. In the absence of an unambiguous agreement, and where the creditor provides his own property as security, creditors’ rights shall be realized first from the mortgaged property. If the mortgaged property is provided by a third party, the creditor may choose to realize his rights either from the mortgaged property or guarantee. Such third party, after undertaking the security liability, has the right to claim compensation against the debtor. The Ministry of Land and Resources (“MLR”), on December 30, 2007, issued the Administrative Measures on Land Registration. The measures took effect on February 1, 2008. According to the measures, land registration refers to the public recording of land-use rights. The measures stipulate that the administrative department of land and resources must conclude land registrations within 20 days after receiving an application. If the case is complex, a 10-day extension may be granted by the principal of land and resources’ administrative department.

199 On April 9, 2008, MLR released the Circular on Implementing the Land Registration Measures and Further Strengthening Land Registration Work, which calls for stringent land registration according to laws, cessation of illegal registration, and prohibition of registration of illegally obtained land. The circular points out that the registrations will not be granted to cases involving unresolved land disputes, as well as cases where the full contract price has not been paid or where the land use has been changed illegally. In addition, the circular stipulates that persons without a Land Registration Qualification Certificate must not be engaged in land ownership investigation and examination. Any person responsible for incorrect or incomplete registrations must bear the consequences. On February 15, 2008, the Ministry of Construction (“MOC”) released Procedures for Property Registration (the “Procedures”). The Procedures took effect on July 1, 2008. The Procedures stipulate that in property registrations, the owners of the housing property rights should correspond with the owners of the land use rights. Based on the Property Law, the Procedures specifically regulate the pre-registration and registration of mortgage rights for construction work in progress, registration for maximum mortgage amount, registration of rectification, registration for objection and registration for easement.

Leasing Both the Urban Land Regulations and the Urban Real Property Law permit leasing of granted land use rights and buildings thereon. However, leasing of land use rights and buildings obtained through allocation are regulated by the Urban Land Regulations. Leasing of urban real properties is also governed by the Measures for Administration of Leasing of Urban Buildings (the “Measures”), which was promulgated in accordance with the Urban Real Property Law. Under the Measures, owners of buildings in the PRC are entitled to lease their buildings, but landlords and tenants are required to enter into a written lease contract which must contain certain specified provisions. The contract has to be registered with the relevant property administrative authority at municipality or county level within 30 days after its execution. A contract cannot be longer than the remainder of the term under the land grant contract. The tenant may, upon obtaining consent from the landlord, sublease the premises. According to the Urban Real Property Law, where the owner of a house built on state-owned land leases his/her property for profit and the land use rights were obtained through allocation, any proceeds in the form of rent must be paid to the State.

Resettlement Pursuant to the Administration Rules of Demolition and Removal of Housing in Urban Areas promulgated by the State Council on June 13, 2001, the party responsible for resettlement (the “Resettling Party”) should apply for a resettlement permit and provide monetary compensation or alternative residence for the residents to be resettled. The real estate administration authority will issue a resettlement notice after granting the resettlement permit. The notice will detail the parties concerned, the properties affected and the period of the resettlement. The Resettling Party will then enter into written agreements with the relevant residents detailing, among other things, the compensation to be provided to the residents. The compensation will be determined on the basis of, among other things, the property’s location, permitted use and GFA. If the Resettling Party and the residents fail to reach agreement, either party may apply to the relevant authority for a ruling. A ruling will be given within 30 days of the application, after which either party may initiate proceedings in the people’s court within three months to contest the ruling.

200 In order to prevent illegal demolition and removal, and overheating investment, the General Office of the State Council issued the Notice on Controlling the Scale of Demolition and Removal and Strengthening Administration of Demolition and Removal on June 6, 2004. The notice addresses issues including, but not limited to, the following: (i) strictly controlling demolition and removal to ensure that the total area of demolition and removal is less than that of the previous year; (ii) strictly administering the procedures of demolition and removal, in an open, fair and just manner; (iii) strengthening the supervision and administration of the compensation costs incurred for demolition and removal, and ensuring the completion of the relocation; and (iv) strictly punishing certain illegal actions in relation to demolition and removal.

Property development Property development projects in the PRC are generally divided into single projects and large tract development projects. A single project refers to the construction and subsequent sale of buildings on a plot of land. A large tract development project consists of comprehensive development of an area and construction of necessary infrastructure such as water, electricity, road and transportation facilities. The developer may either assign the land use rights of the developed area or construct buildings on the land itself, and sell or lease the buildings thereon.

Once the developer identifies a piece of land for development, it has to apply for a construction land use planning certificate from the relevant planning commission. Once this certificate is obtained, the developer will have to submit a detailed plan for the design of buildings and construction in order to obtain a construction works planning permit and a work commencement permit.

Environmental protection The laws and regulations governing the environmental requirements for real estate development in the PRC include the Environmental Protection Law, the Prevention and Control of Noise Pollution Law, the Environmental Impact Assessment Law and the Administrative Regulations on Environmental Protection for Development Projects. To gain approval for the commencement of construction, a developer must submit either an environmental impact analysis form or an environmental impact registration form. In addition, upon completion of the property development, the relevant environmental authorities will also inspect the property to ensure compliance with environmental standards and regulations before the property can be delivered to the purchasers.

Pre-sale and sale Pursuant to the Urban Real Property Law and the Administrative Measures Governing the Pre-sale of Urban Real Estate (the “Administrative Measures”) amended on July 20, 2004, unfinished commodity houses may be sold when certain conditions and/or requirements are satisfied. Pre-sale of commodity houses is regulated by an approval system. Developers who intend to pre-sell their commodity houses shall apply to the relevant Real Estate Administration Department of the People’s Government at city or county level and obtain a pre-sale permit. When commodity houses are pre-sold, the following requirements shall be satisfied according to the Urban Real Property Law and the Administrative Measures: (i) the land premium for land use rights must be paid in full and the land use right certificate must be obtained;

201 (ii) the construction works planning permit and the work commencement permit must be obtained;

(iii) funds contributed to the development of the project shall amount to at least 25% of the total amount of the project investment, and project progress and the date of completion of the project for use must be ascertained; and

(iv) the pre-sale approval must be obtained.

The Ministry of Construction, National Development and Reform Commission jointly promulgated the Notice of Further Rectifying the Trade Order of Real Estate on July 6, 2006. The purpose of this notice is to strengthen the regulation of pre-selling of real estate. The notice provides that real estate development enterprises shall start to sell commodity residential properties within ten days after obtaining the pre-sale permit.

On April 13, 2010, the Ministry of Housing and Urban Rural Development issued the Circular of Relevant Issues on Further Strengthening the Supervision on Real Estate Market and Improving the Commercial Housing Pre-selling System, which was issued to rectify and regulate the PRC real estate market and maintain the rights and interests of PRC housing consumers. Pursuant to the Circular, within ten days of obtaining a pre-sale permit for the sale of commodity residential property, an enterprise must disclose that such pre-sale permit has been obtained, and must establish the market price on the basis of the price included in the pre-sale permit application.

The relevant local pre-sale regulations have been issued in Shenzhen, Shanghai, Fuzhou, Xiamen, Qingdao and some other cities.

The Administration Regulations on Transfer of Urban Real Estate of Beijing, was promulgated on September 2, 2003 and became effective from December 1, 2003. With regard to pre-sale of property in Beijing, the following conditions must be satisfied: (i) the land premium has been fully paid and the land use right certificate has been obtained; (ii) a construction land permit has been obtained if the property units are categorized as low-income housing for pre-sale; (iii) the construction works planning permit and the work commencement permit have been obtained; (iv) the amount of funds allocated to the development of the project is no less than 25% of the total amount of the project investment; (v) the expected completion date has been determined, and is in conformity with the maximum pre-sale period announced by the Beijing Municipal Land and Property Administration Bureau. To date, the authority has not made any mandate on such maximum pre-sale period.

Pursuant to the Notice Regarding the Adjustment to the Administration of Sale of Commodity Houses Sold in Domestic and Overseas Markets issued by Beijing Administration of Land, Resources and Housing on August 5, 2002 and implemented on September 1, 2002, the distinction between sales in the domestic market and the overseas market has been abolished in Beijing. A standard property unit pre-sale permit will be issued to any project which meets the specified pre-sale conditions.

Real estate loans

On June 5, 2003, PBOC promulgated the Notice on Further Strengthening the Administration of Real Estate Loans. According to the notice, the commercial banks support real estate projects targeted at mid to lower-income households and appropriately restrict the granting of real

202 estate loans to projects involving spacious apartments, luxurious apartments and villas. The notice strictly prohibits banks from advancing working capital loans to real estate developers. When applying for a real estate loan, the real estate developer’s own capital in any proposed real estate project should not be less than 30% of the total investment of the project. The notice also prohibits loans advanced for the payment of land premium for land use rights.

On August 12, 2003, the State Council published the Notice by the State Council on Facilitating Sustained and Healthy Development of Real Estate Market, which provides a series of measures to control the real estate market. It seeks to increase the supply of common residential houses, control the construction of high-end commodity houses, and strengthen the supervision of the real property administration. The purpose of the notice is to create a positive influence on the long-term development of the real estate market in China.

On September 2, 2004, the CBRC issued a Guideline for Commercial Banks of Risks of Real Estate Loans. According to the guideline, no loan shall be granted to projects which have not obtained the land use right certificate, construction land planning permit, construction works planning permit and work commencement permit. The guideline also stipulated that in order for banks to extend loans to the real estate developer, not less than 35% of the total investment in a property development project must come from the real estate developer’s own capital for the project. In addition, the guideline requires commercial banks to set up strict approval systems for loan grants.

On March 16, 2005, PBOC promulgated a Notice on Adjusting the Housing Loan Policy and Deposit Rate of Excess Reserves for Commercial Banks which cancelled the preferential mortgage lending interest rate for individuals and restricted the minimum mortgage loan rate at 0.9 times of the benchmark rate. The PBOC also increased the public housing fund rate by 0.18%. Lastly, it permitted commercial banks to decrease mortgage loan rate from 80% to 70% of the value of the property if it is located in a city where the property prices are increasing too rapidly.

On September 27, 2007, the PBOC and CBRC jointly issued the Notice on Strengthening the Administration of Commercial Real Estate Credit Loans, which places stringent requirements on loan grants to the second and subsequent purchases of housing by individuals. For those who used credit loans to purchase housing and subsequently applied for purchasing second (inclusive) housing, the down payment shall not be less than 40% of the total purchase price, while the interest rate of such loan shall not be lower than 1.1 times the benchmark interest rate of the same grade for the same period as announced by the PBOC. Moreover, the ratio of the down payment to the interest rate of the loan shall be adjusted upwards according to the number of purchases. The specific range of increase will be determined by commercial banks at their own discretion based on principles of credit risk management, however, the monthly expenses for an individual purchaser paying housing loans shall not be more than 50% of the purchaser’s monthly income.

On January 7, 2010, the General Office of the State Council promulgated a Notice on Promoting the Stable and Healthy Development of Real Estate Market which provides that the down payment on a second bank loan-funded house must be at least 40% of the home’s purchase price, and the interest rate should be determined in accordance with the risk.

Local legislation

While the Urban Land Regulations set out a general framework for transactions relating to land use rights, various local legislation regulates specific transactions within specific areas relating to

203 the grant and transfer of land use rights. Some of them are inconsistent with the national legislation. The central authority has taken the position that if there are inconsistencies the national legislation shall prevail.

Foreign investment in property development

The Urban Land Regulations state that foreign entities may acquire land use rights in China unless the law otherwise provides. However, in order to develop the land acquired, foreign investment enterprises must be established in the form of equity or CJVs or wholly foreign- owned enterprises.

According to the Regulations of Foreign Investment Guideline promulgated by the State Council on February 11, 2002, and the Guideline Catalogue of Foreign Investment Industries promulgated on November 30, 2004 by the State Development and Reform Commission and the Ministry of Commerce, investments in high-class hotels, villas and high quality office buildings and international exhibition centers are classified as restricted foreign investment projects. The development and management of “tracts of land,” as defined in the Interim Measures for the Administration of the Foreign-Invested Development and Management of Tracts of Land promulgated on May 19, 1990, shall be permitted to be carried out by equity joint ventures (“EJVs”) or CJVs only. Pursuant to the amended Guideline Catalogue of Foreign Investment Industries (the “2007 Catalogue”) jointly enacted by MOFCOM and NDRC on October 31, 2007 and enforced on December 1, 2007, which repealed the 2004 Catalogue, the development and construction of ordinary residential houses has been removed from the encouraged category to the permitted category; the restricted category has been adjusted as follows: (i) the development of large scale land lots shall be operated only by sino-foreign equity joint venture or sino-foreign co-operate joint venture; (ii) the construction and operation of high-end hotels, villas, premium office buildings, international conference centers; (iii) housing agents, brokerages and the second-tier real estate market. The construction and operation of large scale theme park has been removed from the Real Estate industry to the Culture, Sports and Entertainment Industries, which is still in the restricted category. As such, the enterprise investing in such projects will not be regarded as a real estate development company and the construction and operation of golf courses has been moved from the restricted category to the prohibited category.

Establishment of a foreign investment enterprise engaged in property development, commonly referred to as a “development company,” is subject to approval by China’s government. To establish a foreign investment enterprise, the joint venture partners must submit a project application report to the central or local development and reform authority for approval. At the same time, the parties typically negotiate and execute the joint venture contract and articles of association for the establishment of the development company. The project application report, the joint venture contract and articles of association shall then be submitted to the central or local foreign economic and trade authorities for approval. After obtaining the approval certificate, the foreign investor and the domestic party can apply to the relevant industry and commerce authority for a foreign investment enterprise business license for the development company. In addition, all property development companies, including foreign investment enterprises, are also required to apply for a property development enterprise qualification certificate from the central or local construction authority.

According to applicable laws, it is clear that the PRC Government will protect the legal rights and investments by foreign investors, and will not nationalize or appropriate any Sino-foreign joint

204 venture or any foreign wholly-owned enterprise unless it is in the public interest and the relevant foreign investors are appropriately compensated.

On July 11, 2006, the Ministry of Construction, Ministry of Commerce, National Development and Reform Commission, PBOC, PRC State Administration for Industry and Commerce and SAFE jointly promulgated the Opinions on Foreign Investment in Real Estate, which states that: (i) an overseas entity or individual investing in real estate in China other than for self-use, shall apply for the establishment of a foreign invested real estate enterprise (“FIREE”) and shall only conduct operations within the authorized business scope after obtaining the relevant approvals from and registering with the relevant governmental authorities; (ii) a FIREE with a total investment of at least US$10 million shall have registered capital of at least 50%, whereas for a FIREE with a total investment of less than US$10 million, the current rules on registered capital shall apply; (iii) a newly established FIREE can only obtain an approval certificate and business license valid for one year. The approval certificate and business license can be obtained after the land grant premium for the land has been paid by submitting the land use right certificate to the relevant government departments; and (iv) an equity transfer of a FIREE or transfer of its projects, as well as the acquisition of a domestic real estate enterprise by foreign investors, must first be approved by the Ministry of Commerce. The investor shall submit a letter to the Ministry of Commerce confirming that it will abide by the land grant contract, the construction land planning permit and the construction works planning permit. In addition, the investor shall submit the land use right certificate, the registration of change of investor, and evidence from the tax authorities confirming that tax relating to the transfer has been fully paid; (v) foreign investors acquiring either a domestic real estate enterprise through an equity transfer or acquiring the Chinese investors’ equity interest in an EJV shall pay the purchase price from its own capital and shall ensure that the enterprise’s employees and bank loans are treated and dealt with in accordance with PRC laws; (vi) a FIREE is prohibited from borrowing from any domestic or foreign lenders and SAFE shall not approve the settlement of any foreign loans, if the registered capital of a FIREE is not fully paid up, if its land use right certificate has not been obtained or if the paid-in capital is less than 35% of the total investment amount of the project; (vii) the investors in a FIREE shall not in any manner stipulate a fixed return clause in the joint venture contract or in any other documents; (viii) a branch or representative office established by a foreign investor in China (other than a FIREE), or a foreign individual working or studying in the PRC for more than one year, is permitted to purchase commodity residential properties located in the PRC only for the purpose of self-residence. Residents of Hong Kong, Macau and Taiwan and overseas Chinese may purchase commodity residential properties of a stipulated floor area based on their living requirements in the PRC for self-residence purposes.

On July 10, 2007, SAFE promulgated Notice of the list of first batch of foreign-invested real estate projects that have been filed with MOFCOM (Hui Zong Fa [2007] No. 130), which imposes some restrictions on foreign exchange and foreign debts registration of the foreign-invested real restate enterprises which are incorporated after June 1, 2007, the details are as following: (a) the local Administration of Foreign Exchange will not conduct the foreign debt registration and foreign debts settlement approval process for a foreign-invested real estate enterprise (both newly established and through capital increase, same below) which has obtained the approval certificate from the competent commercial department and filed with MOFCOM after and including June 1, 2007 (same below); and (b) the local Administration of Foreign Exchange will not conduct foreign exchange (or change the registration) and the settlement and sales process for capital projects for a foreign-invested real estate enterprise which has obtained the approval

205 certificate from the local competent commercial department but failed to filed with MOFCOM after and including June 1, 2007.

On June 18, 2008, MOFCOM issued the Notice on Proper Handling of Archiving Documents for Foreign investment in the Real Estate Industry. According to the notice, the provincial level departments of commerce are authorized to verify the materials submitted by the foreign invested real estate enterprise for archiving. MOFCOM together with other departments of the State Council shall conduct spot-checks over the above enterprises.

Foreign exchange controls

The lawful currency of the PRC is the Renminbi, which is subject to foreign exchange controls and is not freely convertible into foreign exchange at this time. SAFE, under the authority of the PBOC, administers all matters relating to foreign exchange, including the enforcement of foreign exchange control regulations.

On July 21, 2005, the PBOC announced that, beginning on July 21, 2005, China will implement a regulated and managed floating exchange rate system based on market supply and demand and by reference to a basket of currencies. The Renminbi exchange rate is no longer pegged to the US dollar. The PBOC will announce the closing price of a foreign currency such as the US dollar traded against the Renminbi in the inter-bank foreign exchange market after the market closing on each business day, setting the central parity for trading of the Renminbi on the following business day.

Foreign exchange income from loans issued by organizations outside the territory or from the issuance of bonds and shares is not required to be sold to designated banks, but may be deposited in foreign exchange accounts with designated banks.

Without the approval of SAFE, enterprises in China (including foreign-invested enterprises) which require foreign exchange for transactions relating to current account items may effect payment from their foreign exchange account or convert and pay at the designated foreign exchange banks, upon presentation of valid receipts and proof. Foreign-invested enterprises which need foreign currencies for the distribution of profits to their shareholders, and Chinese enterprises which are required to pay dividends to shareholders in foreign currencies, may effect payment from their foreign exchange account or convert and pay at the designated foreign exchange banks with the approval of board resolutions on the distribution of profits.

Convertibility of foreign exchange for capital account items, like direct investment loans lent by foreign lenders and capital contribution, still requires prior approval from or registration with SAFE or its competent branch.

Pursuant to the PRC Regulation of Administration of Foreign Exchange (“Foreign Exchange Regulation”) promulgated by the State Council on August 5, 2008, domestic entities borrowing loans from offshore lenders, including loans from foreign shareholders (“External Loans”) shall be approved by or registered with PRC Governmental authorities. According to the Provisional Measures of Administration of External Debts, promulgated by the National Development and Planning Commission (“NDRC”), Ministry of Finance and SAFE on January 8, 2003 and effective on March 1, 2003, PRC companies (excluding foreign invested companies) borrowing External Loans of long or medium term by a require approval by the NDRC. Borrowing short-term External Loans shall need to be approved by SAFE, and the total amount of such loans shall be limited to the

206 yearly quota imposed by SAFE. Outstanding short-term External Loans shall not be more than such quota at any time. A PRC-incorporated foreign invested enterprise borrowing external loans, is not required to obtain approval from SAFE or other PRC Governmental authorities. However, the amount of External Loans it may borrow is restricted by PRC laws, i.e., the aggregate of the total long or medium term External Loans it has borrowed and the total of outstanding short-term External Loans, shall be limited by the difference between its total investment and registered capital approved by the PRC Governmental authorities. Pursuant to Foreign Exchange Regulation, each External Loan shall be registered with the local branch of SAFE. Without such registration, the External Loan is not enforceable in the PRC. Any repayment of the principle and interest of any External Loan shall also require approval by the local branch of SAFE.

In January and April 2005, SAFE issued two regulations that require PRC residents to register with and receive approvals from SAFE in connection with their offshore investment activities. The purpose of these regulations is to achieve the proper balance of foreign exchange and the standardization of all cross-border flows of funds.

On October 21, 2005, SAFE issued the Notice on Issues Relating to the Administration of Foreign Exchange in Fund-raising and Reverse Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies which became effective as of November 1, 2005. The notice replaced the two regulations issued by SAFE in January and April 2005 mentioned above. According to the notice, “special purpose company” refers to an offshore company established or indirectly controlled by PRC residents for the special purpose of carrying out financing of their assets or equity interest in PRC domestic enterprise. Before establishing control over such a special purpose company, each PRC resident, whether a natural or legal person, must complete the overseas investment foreign exchange registration procedures with the relevant local SAFE branch. The notice applies retroactively. As a result, PRC residents who have acquired control of offshore companies that have made onshore investments in the PRC in the past are required to complete the relevant overseas investment foreign exchange registration procedures by March 31, 2006.

On September 1, 2006, the Ministry of Construction and SAFE promulgated the Circular on the Issues Concerning the Regulation of Foreign Exchange Administration of the Real Estate Market. This circular states that: (i) where foreign exchange is remitted for a real estate purchase, the foreign purchaser shall be subject to examination by the designated foreign exchange bank. The remitted funds shall be directly remitted by the bank to the RMB account of the real estate development enterprise and no payment remitted from abroad by the purchasers shall be kept in the foreign exchange current account of the real estate development enterprises; (ii) where the real estate purchase fails to close and the foreign purchaser intends to remit the purchase price in RMB back to foreign currencies, the foreign purchaser shall be subject to examination by the designated foreign exchange bank; (iii) when selling real estates in China and the purchase price received in RMB is remitted to foreign currencies, the foreign purchaser shall be subject to examination by the local branch of SAFE; and (iv) if the registered capital of a FIREE is not fully paid up, its land use right certificate has not been obtained or the paid-in capital is less than 35% of the total investment amount of the project, the FIREE is prohibited from borrowing from any domestic or foreign lenders and SAFE shall not approve the settlement of any foreign loans.

207 Taxation in China Income tax The PRC Enterprise Income Tax Law (“EIT Law”), and the implementation regulations for the EIT Law issued by the PRC State Council became effective as of January 1, 2008. The EIT Law adopts a uniform income tax rate of 25% for both PRC domestic enterprises and foreign invested enterprises. The EIT Law further provides that enterprises established outside of China whose “de facto management bodies” are located in China are considered “resident enterprises” and are generally subject to the uniform 25% enterprise income tax rate of their worldwide income. Under the implementation regulations for the EIT Law issued by the PRC State Council, a “de facto management body” is defined as a body that has material managerial control over the manufacturing and business operations, personnel and human resources, finances and treasury, and acquisition and disposition of properties and other assets of an enterprise. Currently no interpretation or application of the new EIT Law and its implementing rules is available for entities that are not controlled by Chinese enterprises or group enterprise. Under the EIT Law a 10% income tax is applicable to dividends payable to investors that are “non-resident enterprises,” that do not have a place of business in the PRC, or that have place of business but the relevant income is not effectively connected with the place of business, to the extent such dividends have their sources within the PRC. Similarly, any gain realized on the transfer of shares of a PRC resident enterprise by such investors is also subject to 10% PRC income tax if such gain is regarded as income derived from sources within the PRC. However, under a new PRC tax law that became effective in January 2008 and the Arrangement between the PRC and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion, (“Double Taxation Arrangement”) that became effective on January 1, 2007, dividends from PRC subsidiaries paid through Hong Kong subsidiary may be subject to a withholding tax at a rate of 5%.

Business tax Certain business activities in China, as set out in the Provisional Regulations Concerning Business Tax, require payment of a business tax. The business tax applies to construction, leases and sales of real estate properties in China. The tax is a turnover tax charged on gross revenue. No deduction of purchased services or materials is allowed. However, deductions from gross revenue are allowed for subcontracting fees paid among the transportation, tourism and construction industries. The rate of business tax payable for property sale and leasing transactions is 5% of the proceeds from the sale or leasing of real estate/immovable properties in China. On May 27, 2005, the State Administration of Taxation, the Ministry of Finance and the Ministry of Construction jointly issued a Notice on Strengthening the Administration of Taxes in connection with Real Estate. According to the notice, from June 1, 2005, a business tax shall be imposed on the full amount of the sale income, upon the transfer of a residential house by an individual within two years from the purchase date. In the case of a house other than an ordinary residential house, business tax shall be imposed on the difference between the sale income and the purchase price, provided that the transfer occurs after two years from the purchase date. The interest accrued upon the External Loans payable by PRC borrowers to foreign lenders is subject to PRC business tax. The borrower needs to present evidence of payment of business tax to the local branch of the SAFE for approval of the repayment of the interest and principle of any External Loans.

208 Land appreciation tax

Where a gain is generated by the transfer of land use rights and its attachments, the entities or individuals involved must pay a land appreciation tax (“LAT”). This tax is calculated based on the appreciated value of the real estate property. The applicable marginal tax rate progresses up to 60% based on the ratio of the appreciated value as compared to the original cost. A full exemption is available for individual owners that assign their personal residence of five years or more. For personal residences held more than three years but less than five years, a 50% reduction of the LAT is available.

Property developers may deduct an additional 20% of valid expenses in the calculation of the land appreciation amount. Deductible expenses include: land use right costs incurred and other costs associated with acquiring such right, costs associated with property development, such as removal fees, construction costs, basic infrastructure costs, indirect development costs, sales expenses, management expenses and finance expenses. LAT is assessed at completion of the property transfer. Net profit is assessed after the completion of each phase to derive the tax liability.

Urban real estate tax

Foreign investment enterprises engaged in development and investment of real estate in China are required to pay urban real estate tax on land and buildings owned by them in urban areas in China. The tax is charged at a rate of 1.2% based on the original value of the property discounted by 10% to 30%. If no original value is ascertainable, the tax is determined by the relevant local tax authorities with reference to the value of like properties.

Stamp duty

Persons who have executed or received dutiable documents within China are subject to a stamp tax. Dutiable documents include contracts for the sale of goods, for processing work, for construction and engineering projects, for lease of property and technology, and the transfer of property. For property transfers, a stamp duty is payable by each party, assessed at 0.05% of the contractual price. For the leasing of property, a stamp tax is payable by each party of 0.1% of the total amount of rent.

209 Directors and management The following table sets forth certain information with respect to our board of directors (our “Board”) as of the date of this Offering Memorandum.

Name Age Title Executive Directors Mr. Zen Wei Pao, William ...... 63 Chairman Mr. Ko Yuk Bing ...... 55 Deputy Chairman, Managing Director and Chief Executive Officer Mr. Chan Kam Hung ...... 52 Chief Operating Officer Mr. Fong Shiu Leung, Keter ...... 47 Finance Director Mr. Zen Wei Peu, Derek ...... 58 Non-executive Directors Mr. Guo Limin ...... 47 Mr. Xu Ruxin ...... 56 Mr. Lam Wai Hon, Patrick ...... 48 Independent Non-executive Directors Mr. Chow Shiu Kee, Stephen ...... 62 Mr. Lau Sai Yung ...... 62 Dr. Chow Ming Kuen, Joseph ...... 69

Our Board consists of eleven Directors, three of whom are Non-executive Directors and three of whom are Independent Non-executive Directors. Our Independent Non-executive Directors are professionals from the fields of law, engineering and accounting. The powers and duties of our Board include: determining our business and investment plans, formulating corporate strategies, overseeing the management and making decisions in the best interest of the Company, convening shareholders’ meetings and reporting the Board’s work at the shareholders’ meetings and implementing the resolutions passed on the shareholders’ meetings. Our Directors are elected at our annual shareholders’ meetings, renewable upon re-election and re-appointment. We have entered into service contracts with each of our Executive Directors.

Biographical Details Executive Directors

Mr. Zen Wei Pao, William, aged 63, has been our Chairman since our establishment. He is also the Chairman of Wai Kee. The shares of Wai Kee are listed on the main board of the Hong Kong Stock Exchange. Mr. Zen holds a Bachelor of Science degree and a Master of Business Administration degree. He is a member of both The Hong Kong Institution of Engineers and The Institute of Quarrying, United Kingdom. He has extensive experience in civil engineering, construction material, and infrastructure and property development in Hong Kong, Taiwan and the PRC. He is the brother of Mr. Zen Wei Peu, Derek and the father of Mr. Zen Chung Hei, Hayley.

Mr. Ko Yuk Bing, aged 55, is our Deputy Chairman, Managing Director and Chief Executive Officer. Mr. Ko joined the Company in early 1995. He holds a Master of Science degree in Engineering. He is a Chartered Engineer and a fellow of the Institution of Civil Engineers, United Kingdom, The Institution of Structural Engineers, United Kingdom and The Hong Kong

210 Institution of Engineers. Mr. Ko has extensive experience in infrastructure development in Hong Kong and the PRC, and has over 20 years of experience in business development and operations in the PRC.

Mr. Chan Kam Hung, aged 52, is our Chief Operating Officer. Mr. Chan has been appointed as an Executive Director of the Company since July 2002. He is also an Independent Non-executive Director of China Metal Recycling (Holdings) Limited (“China Metal”). The shares of China Metal are listed on the main board of the Hong Kong Stock Exchange. He holds a Bachelor of Economics degree from the University of Sydney. He is a Chartered Accountant of Australia and a fellow of the Hong Kong Institute of Certified Public Accountants. Mr. Chan has over 25 years of auditing, accounting and corporate management experience. Prior to joining the Company, he held senior corporate management positions in several multi-national companies and listed companies in Hong Kong.

Mr. Fong Shiu Leung, Keter, aged 47, is our Finance Director. Mr. Fong has been appointed as an Executive Director of the Company since July 2000. He holds a Bachelor of Arts degree in Accountancy. He is a Certified Practising Accountant in Australia and a fellow of the Hong Kong Institute of Certified Public Accountants. He has over 20 years of experience in auditing, accounting and business advisory profession. Prior to joining the Company, he was an audit principal of an international accounting firm.

Mr. Zen Wei Peu, Derek, aged 58, has been our Director since our establishment. He is also the Vice Chairman of Wai Kee and the Chairman of Build King Holdings Limited (“Build King”). The shares of Wai Kee and Build King are listed on the main board of the Hong Kong Stock Exchange. He holds a Bachelor of Science degree in Engineering and a Master of Business Administration degree. He is a Chartered Engineer, a member of the Institution of Civil Engineers, United Kingdom and a fellow of The Institute of Quarrying, United Kingdom. Mr. Zen has over 30 years of experience in civil engineering industry. He is the brother of Mr. Zen Wei Pao, William and the uncle of Mr. Zen Chung Hei, Hayley.

Non-executive Directors

Mr. Guo Limin, aged 47, has been appointed as our Non-executive Director since October 2009. He is the Chairman of Shum Yip Holdings Company Limited (“Shum Yip”) and Shenzhen Investment and a Non-executive Director of Ping An Insurance (Group) Company of China, Ltd. (“Ping An”) and Coastal Greenland Limited (“Coastal”). The shares of Shenzhen Investment, Ping An and Coastal are listed on the main board of the Hong Kong Stock Exchange. Mr. Guo holds a Bachelor degree in Chemical Engineering of Beijing Institute of Chemical Industry and a Master degree in International Business of Hunan University. He has over 20 years of experience in administrative management.

Mr. Xu Ruxin, aged 56, has been appointed as our Non-executive Director since December 2009. He is the President of Shum Yip, an Executive Director and the President of Shenzhen Investment and a Non-executive Director of Coastal. Mr. Xu holds a Master degree in Economics from Guangdong Academy of Social Sciences and is a Senior Engineer. He has over 20 years of experience in architectural technology, property development as well as corporate management.

Mr. Lam Wai Hon, Patrick, aged 48, has been appointed as our Non-executive Director since May 2010. Mr. Lam is a Chartered Accountant by training and holds a Master of Business Administration Degree from The University of Edinburgh and a Bachelor degree from The

211 University of Essex, the United Kingdom. He is a fellow member of the Hong Kong Institute of Certified Public Accountants and the Institute of Chartered Accountants in England and Wales, and a member of the Institute of Chartered Accountants of Ontario, Canada. Mr. Lam is presently Assistant General Manager of New World Development Company Limited and an Executive Director of NWS Holdings Limited (collectively referred to “New World Group”), and a Non- executive Director of Wai Kee. The shares of these three companies are listed on the main board of the Hong Kong Stock Exchange. He is also a Director of Guangdong Baolihua New Energy Stock Co., Ltd., a listed company in China and an Executive Director of Hong Kong Convention and Exhibition Centre (Management) Limited. During the last three years, Mr. Lam was a Non- executive Director of Build King and Taifook Securities Group Limited, the shares of both companies are listed on the main board of the Hong Kong Stock Exchange. Prior to joining the New World Group, Mr. Lam worked for an international accounting firm.

Independent Non-executive Directors

Mr. Chow Shiu Kee, Stephen, aged 62, has been appointed as our Independent Non-executive Director since April 1996. He is a partner of the solicitors firm of Messrs. Wong Poon Chan Law & Co. Mr. Chow holds a Bachelor of Arts degree and a Master of Law degree from The University of Hong Kong. He is a solicitor admitted to practice in Hong Kong and also a Notary Public and a China Appointed Attesting Officer by Ministry of Justice of the PRC. Mr. Chow is a panel member of Solicitors Disciplinary Tribunal Panel, the Chairman of Appeal Tribunal Panel (Buildings) and a member of Appeal Panel (Housing).

Mr. Lau Sai Yung, aged 62, has been appointed as our Independent Non-executive Director since August 2004. He is the sole-proprietor of Lau SY & Co., Certified Public Accountants, the Executive Chairman of Union Alpha CPA Limited, the Director of Union Alpha CAAP Certified Public Accountants Limited, a council member and an Honorary Fellow of The Chinese University of Hong Kong and also holds honorary positions in various schools, charitable and non-profit making organizations. He holds a Bachelor degree in Business Administration from The Chinese University of Hong Kong. He is a Certified Public Accountant (Practising), a fellow of the Association of Chartered Certified Accountants of the United Kingdom and the Hong Kong Institute of Certified Public Accountants, an associate member of the Institute of Chartered Accountants in England and Wales, The Taxation Institute of Hong Kong, The Hong Kong Institute of Chartered Secretaries and the Institute of Chartered Secretaries and Administrators of the United Kingdom, and a member of The Society of Chinese Accountants and Auditors, Hong Kong. Mr. Lau has over 35 years of experience in the profession of accounting.

Dr. Chow Ming Kuen, Joseph, OBE, JP, aged 69, has been appointed as our Independent Non-executive Director since April 2008. He is the Chairman of Joseph Chow and Partners Limited, a firm of independent civil and structural consulting engineers. He is also the Chairman and Independent Non-executive Director of PYI Corporation Limited, an Independent Non-executive Director of Chevalier International Holdings Limited and Build King and a Non-executive Director of Wheelock Properties Limited, the shares of these four companies are listed on the main board of the Hong Kong Stock Exchange. Dr. Chow is a civil and structural engineer by profession. He is a fellow of The Hong Kong Institution of Engineers, the Institution of Civil Engineers and The Institution of Structural Engineers. Dr. Chow is the Chairman of the Hong Kong Construction Workers Registration Authority and a Hon Senior Superintendent of the Hong Kong Auxiliary Police Force. Dr. Chow previously served as President of the Hong Kong Institution of Engineers, Chairman of Hong Kong Engineers’ Registration Board, Hong Kong

212 Examinations and Assessment Authority, Pamela Youde Nethersole Eastern Hospital as well as the Hong Kong Country Club.

Senior Management

Ms. Chuk Wing Suet, Josephine, aged 38, joined our Group in 1994, is a Deputy Chief Operating Officer of our Group and a director of RK Properties. She holds a Bachelor of Social Science degree and a Master of Business Administration degree. Ms. Chuk has over 17 years of experience in business investment, operation, development and promotion in Hong Kong and the PRC.

Mr. Yu Kam Fat, James, aged 54, joined our Group in 1998, is a Deputy Chief Operating Officer of our Group responsible for the Toll Road Division. He holds a Bachelor and a Master of Science degree in Civil Engineering. He is a Chartered Engineer, a member of The Association of Professional Engineers of Ontario, Canada, the Institution of Civil Engineers, United Kingdom, The Institution of Structural Engineers, United Kingdom, The Chartered Institution of Highway and Transportation, United Kingdom and a fellow of The Hong Kong Institution of Engineers. Mr. Yu is also a Registered Structural Engineers, Hong Kong and a Registered Professional Engineer, Hong Kong. He has over 30 years of experience in civil engineering and project management.

Mr. Wang Hao, aged 39, joined the Group in 2007, is the Deputy Chief Executive Officer of the Property Division and is responsible for property development projects in Northern China. He holds a Bachelor and a Master of Structural Engineering degree. Mr. Wang has over 15 years of experience in engineering, corporate management and credit control. He was the Chief Financial Officer and the Chief Executive Officer of the Sunco Property group.

Ms. Tian Aijun, aged 42, joined the Group in 2007, is the Director in charge and Chief Operating Officer of Central China Region and Shandong Region of the Property Division. She holds a Bachelor of Education degree and a Master in Accounting degree. She is a Registered Accountant in the PRC and has over 10 years of experience in corporate management and project operation management. Prior to joining the Group, Ms. Tian had several years of experience in audit and in education management. She was the responsible person for the regional and the group operation and management of the Sunco Property group.

Mr. Zen Chung Hei, Hayley, aged 35, joined the Group in 2006, is the Chief Financial Officer of the Property Division. He holds a Bachelor of Commerce degree in Accounting, a Bachelor of Science degree in Computer Science and a Master of Business Administration degree. He is a member of both the Hong Kong Institute of Certified Public Accountants and the New Zealand Institute of Chartered Accountants. Mr. Zen has 15 years experience in finance, accounting, business investment and development in the United States, Hong Kong and the PRC. He is the son of Mr. Zen Wei Pao, William and the nephew of Mr. Zen Wei Peu, Derek.

Mr. Leung Chin Wan, aged 56, joined the Group in 1997, is the Engineering and Cost Controller of the Property Division. He holds a Master of Science degree in Engineering. He is a member of The Hong Kong Institution of Engineers. Mr. Leung has over 32 years of experience in civil engineering with more than 21 years of experience in the PRC project management.

Mr. Chan Sai Kuen, Daniel, aged 53, joined the Group in 1994, is the General Manager of the Toll Road Division. He holds a Bachelor of Business Administration degree in Accounting and has over 29 years of experience in accounting and project management.

213 Mr. Lee Tak Fai, Kennedy, aged 44, joined the Group in 2007, is the Financial Controller of the Group. He holds a Bachelor of Social Science degree from the University of Hong Kong. He is a fellow of both the Association of Chartered Certified Accountants of the United Kingdom and the Hong Kong Institute of Certified Public Accountants. He has 20 years of experience in accounting, assurance and business advisory services. Prior to joining our Group, Mr. Lee worked for a number of international accounting firms during the period 1990 to 2003 and was previously the financial controller as well as qualified accountant and the assistant general manager of the corporate finance department of several companies listed on the main board of the Hong Kong Stock Exchange.

Committees

Remuneration Committee

The Remuneration Committee was formed in 2005 and currently comprises four members, namely Messrs. Chow Shiu Kee, Stephen (the Chairman of the Remuneration Committee), Zen Wei Pao, William, Lau Sai Yung and Dr. Chow Ming Kuen, Joseph.

The main responsibilities of the Remuneration Committee are to support and advise the Board regarding our remuneration policy, and the formulation and review of the specific remuneration packages of our Executive Directors (excluding the Chairman of the Board) and senior management staff and the determination of their remuneration packages.

In 2009, the Remuneration Committee reviewed and approved the remuneration and bonus packages of Executive Directors (excluding the Chairman of the Board) and senior management, the employment contracts of new senior staff and the compensation packages to Hong Kong and the PRC senior departure staff. It also reviewed the level of pay-rise, the fringe benefits and payment of discretionary bonus to the general staff.

Audit Committee

The Audit Committee was formed in 1998 and currently comprises three members, namely, Messrs. Lau Sai Yung (the Chairman of our Audit Committee), Chow Shiu Kee, Stephen and Dr. Chow Ming Kuen, Joseph, all of whom are Independent Non-executive Directors.

The main responsibilities of the Audit Committee are to review the consolidated financial statements and the auditor’s reports and monitor the integrity of the consolidated financial statements. It also assists the Board to oversee internal control structure, risk management system and internal and external audit functions.

In 2009, the Audit Committee reviewed the published consolidated financial statements prior to recommending them to the Board for approval, approved the terms of engagement of external auditor and reviewed the effectiveness of our Group’s internal control system.

During the year, the Audit Committee had met with the external auditor without the presence of any Executive Directors.

Management committees

A Management Committee at the corporate level was formed in February 2009 and comprises five members, namely, Messrs. Ko Yuk Bing (the Convenor), Chan Kam Hung, Fong Shiu Leung,

214 Keter, Ms. Chuk Wing Suet, Josephine and Mr. Yu Kam Fat, James. The Committee held regular meetings to coordinate and handle major issues in daily operations.

To oversee the expanding property business, a separate Management Committee at the divisional level was also established to supervise and monitor the property development business in various cities in the PRC.

Compensation of Directors

The aggregate amount of fees, salaries, housing allowances, contributions to pension schemes, other allowances and benefits in kind paid by us to our Directors during the years ended December 31, 2007, 2008 and 2009 was HK$32.0 million, HK$37.5 million and HK$39.9 million, respectively.

Executive and Non-executive Directors’ remuneration

For the year ended December 31 2007 2008 2009 (in HK$ thousands) Executive Directors: Zen Wei Pao, William ...... 6,214 13,327 14,217 Ko Yuk Bing ...... 12,464 10,698 11,486 Chan Kam Hung ...... 5,480 4,938 5,233 Fong Shiu Leung, Keter ...... 3,687 3,558 3,944 Zen Wei Peu, Derek ...... 2,882 3,512 3,512 30,727 36,033 38,392

Non-executive Directors: Hu Aimin(1) ...... 180 180 149 Zhang Yijun(2) ...... 180 180 181 Guo Limin(3) ...... - - 44 Xu Ruxin(4) ...... - - 12 360 360 386

Independent Non-executive Directors: Chow Shiu Kee, Stephen ...... 300 315 337 Lau Sai Yung ...... 300 324 352 Chow Ming Kuen, Joseph ...... - 188 327 Chan Hing Chiu, Vincent(5) ...... 300 120 - Choy Kwok Hung, Patrick(6) ...... - 188 127 900 1,135 1,143 Total ...... 31,987 37,528 39,921

(1) Mr. Hu Aimin resigned on October 13, 2009. (2) Mr. Zhang Yijun resigned on December 11, 2009. (3) Mr. Guo Limin was appointed on October 13, 2009. (4) Mr. Xu Ruxin was appointed on December 11, 2009. (5) Mr. Chan Hing Chiu, Vincent retired on May 26, 2008. (6) Mr. Choy Kwok Hung, Patrick retired on May 21, 2009.

215 Directors’ interests and short positions As of June 30, 2010, the interests and short positions of the Directors in the shares, underlying shares and debentures of the Company or any associated corporations (within the meaning of Part XV of the SFO) (including interests and short positions which they were taken or deemed to have under such provisions of the SFO) as recorded in the register maintained pursuant to section 352 of the SFO or were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies, to be notified to us and the Hong Kong Stock Exchange were as follows:

The Company Interests in shares of the Company

Number of Shares held Capacity/ Percentage(3) Name of Director nature of interest Long position Short position of holding

(%) Zen Wei Pao, William ...... Personal 5,824,000(1) - 0.79 6,400,000(2) - 0.86 Ko Yuk Bing ...... Personal 410,000(1) - 0.06 6,400,000(2) - 0.86 Chan Kam Hung ...... Personal 1,000,000(1) - 0.14 4,300,000(2) - 0.58 Fong Shiu Leung, Keter ...... Personal 380,000(1) - 0.05 4,600,000(2) - 0.62 Zen Wei Peu, Derek ...... Personal 6,053,000(1) - 0.82 3,150,000(2) - 0.43 Guo Limin ...... Personal 150,000(2) - 0.02 Xu Ruxin ...... Personal 150,000(2) - 0.02 Chow Shiu Kee, Stephen ...... Personal 321,000(1) - 0.04 750,000(2) - 0.10 Lau Sai Yung ...... Personal 55,000(1) - 0.01 750,000(2) - 0.10 Chow Ming Kuen, Joseph ...... Personal 150,000(2) - 0.02

(1) Long position in the shares of the Company (other than pursuant to equity derivatives such as share options, warrants to subscribe or convertible bonds). (2) Long position in the underlying shares of the Company pursuant to unlisted equity derivatives (including physically settled, cash settled and other equity derivatives). Share options granted to Directors are included in this category, the particulars and movements of which are set out below. (3) The percentage was calculated based on 740,116,566 shares of the Company in issue as of June 30, 2010.

Details of share options Description of option scheme A share option scheme was approved in an annual general meeting held on May 12, 2003. According to this share option scheme, our Directors may, at their discretion at any time during the ten years from the date of approval, invite any executive and/or employee to take up share options. An option may be exercised in accordance with the terms of the share option scheme.

216 For the period June 30, 2010, 1,000,000 share options granted under our share option scheme were exercised and as of June 30, 2010, 46,120,000 share options were outstanding under the share option scheme. Particulars of the share option scheme are set out in note 30 to our consolidated financial statements contained elsewhere in this offering memorandum.

217 A summary of movements during the period under the share option scheme is as follows: Number of share options Granted Weighted Balance at during Exercised Lapsed Balance average January 1, the during during June 30, closing Name 2010 period the period the period 2010 price(3) HK$ Directors Zen Wei Pao, William ...... 1,000,000(1) - (1,000,000) - - 6.31 2,500,000(2) - - - 2,500,000 - 2,500,000(3) - - - 2,500,000 - - 1,400,000(4) - - 1,400,000 - Ko Yuk Bing ...... 500,000(1) - - - 500,000 - 2,300,000(2) - - - 2,300,000 - 2,300,000(3) - - - 2,300,000 - - 1,300,000(4) - - 1,300,000 - Chan Kam Hung ...... 1,800,000(2) - - - 1,800,000 - 1,600,000(3) - - - 1,600,000 - - 900,000(4) - - 900,000 - Fong Shiu Leung, Keter ..... 700,000(1) - - - 700,000 - 1,400,000(2) - - - 1,400,000 - 1,600,000(3) - - - 1,600,000 - - 900,000(4) - - 900,000 - Zen Wei Peu, Derek ...... 800,000(2) - - - 800,000 - 1,500,000(3) - - - 1,500,000 - - 850,000(4) - - 850,000 - Guo Limin ...... - 150,000(4) - - 150,000 - Xu Ruxin ...... - 150,000(4) - - 150,000 - Hu Aimin* ...... 250,000(2) - - (250,000) - - 250,000(3) - - (250,000) - - Zhang Yijun* ...... 250,000(2) - - (250,000) - - 250,000(3) - - (250,000) - - Chow Shiu Kee, Stephen .... 250,000(1) - - - 250,000 - 250,000(2) - - - 250,000 - 100,000(3) - - - 100,000 - - 150,000(4) - - 150,000 - Lau Sai Yung ...... 250,000(1) - - - 250,000 - 250,000(2) - - - 250,000 - 100,000(3) - - - 100,000 - 150,000(4) - - 150,000 - Chow Ming Kuen, Joseph . . . - 150,000(4) - - 150,000 - Total ...... 22,700,000 6,100,000 (1,000,000) (1,000,000) 26,800,000 Others Employees ...... 100,000(1) - - - 100,000 - 3,675,000(2) - - (40,000) 3,635,000 - 6,710,000(3) - - (90,000) 6,620,000 - - 9,010,000(4) - (45,000) 8,965,000 - Total ...... 10,485,000 9,010,000 - (175,000) 19,320,000 Grand Total ...... 33,185,000 15,110,000 (1,000,000) (1,175,000) 46,120,000

218 (1) The share options under this issue were granted on December 14, 2005 with an exercisable period from December 14, 2005 to December 13, 2010 and an exercise price of HK$5.80. (2) The share options under this issue were granted on December 20, 2006 with an exercisable period from December 20, 2006 to December 19, 2011 and an exercise price of HK$11.66. (3) The share options under this issue were granted on November 6, 2007 with an exercisable period from November 6, 2007 to November 5, 2012 and an exercise price of HK$14.85. (4) The share options under this issue were granted on April 9, 2010 with an exercisable period from April 9, 2010 to April 8, 2015 and an exercise price of HK$6.79. (5) This represents the weighted average closing price of the shares of the Company immediately before the date on which the share options were exercised. * Messrs. Hu Aimin and Zhang Yijun resigned as Non-executive Directors of the Company on October 13, 2009 and December 11, 2009 respectively. The Board approved to extend the exercisable period of their share options for six months from the date of their resignation. The extensions of the exercisable periods to Messrs. Hu Aimin and Zhang Yijin were expired on April 12, 2010 and June 10, 2010 respectively.

Save as disclosed above, none of the Directors or their associates had any interests or short positions in any shares, underlying shares and debentures of the Company or any associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept by the Company under section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.

Save as disclosed herein, none of the Directors or their spouses or children under 18 years of age was granted or had exercised any rights to subscribe for any securities of the Company or any of its associated corporation.

219 Principal shareholders

Substantial shareholders and other interests

As of June 30, the following persons (other than our Directors), had interests or short positions in our shares and underlying shares as recorded in our register required to be kept pursuant to section 336 of the SFO:

Capacity/ Number of shares held Percentage Name of shareholdernature of interest Long position(1) Short position of holding(11) (%) Wai Kee(2) ...... Corporate 286,317,428 - 38.69 Wai Kee (Zens) Holding Limited(3) ...... Corporate 286,317,428 - 38.69 Groove Trading Limited(4) ...... Personal/Beneficiary 65,918,000 - 8.90 Wai Kee China Investments (BVI) Company Limited(4) ...... Corporate 217,399,428 - 29.37 Wai Kee China Investments Company Limited(5) ...... Corporate 217,399,428 - 29.37 ZWP Investments Limited(6) ..... Personal/Beneficiary 217,399,428 - 29.37 Shum Yip Holdings Company Limited (7) .... Corporate 202,334,142 - 27.34 Shum Yip Holdings Company Limited(8) ...... Corporate 202,334,142 - 27.34 Shenzhen Investment(9) ...... Corporate 202,334,142 - 27.34 Hover Limited(10) ...... Personal/Beneficiary 202,334,142 - 27.34

(1) Long position in the shares of the Company (other than pursuant to equity derivatives such as share options, warrants to subscribe or convertible bonds). (2) Wai Kee is deemed to be interested in the shares of the Company through its interests in (i) its wholly-owned subsidiaries, namely Wai Kee (Zens) Holding Limited, Groove Trading Limited, Wai Kee China Investments (BVI) Company Limited, Wai Kee China Investments Company Limited, ZWP Investments Limited and Top Horizon Holdings Limited; and (ii) its subsidiaries, namely Build King, Top Tactic Holdings Limited, Amazing Reward Group Limited, Leader Construction Company Limited and Leader Civil Engineering Corporation Limited, which beneficially held 3,000,000 shares of the Company. (3) Wai Kee (Zens) Holding Limited is a direct wholly-owned subsidiary of Wai Kee. (4) Groove Trading Limited and Wai Kee China Investments (BVI) Company Limited are direct wholly-owned subsidiaries of Wai Kee (Zens) Holding Limited. (5) Wai Kee China Investments Company Limited is a direct wholly-owned subsidiary of Wai Kee China Investments (BVI) Company Limited. (6) ZWP Investments Limited is a direct wholly-owned subsidiary of Wai Kee China Investments Company Limited. (7) Shum Yip Holdings Company Limited (incorporated in the PRC) is deemed to be interested in the shares of the Company through its 100% interest in Shum Yip Holdings Company Limited. (8) Shum Yip Holdings Company Limited (incorporated in Hong Kong) is deemed to be interested in the shares of the Company through its 43.19% interest in Shenzhen Investment. (9) Shenzhen Investment is deemed to be interested in the shares of the Company through its interests in its wholly-owned subsidiary, Hover Limited. (10) Hover Limited is a direct wholly-owned subsidiary of Shenzhen Investment. (11) The percentage was calculated based on 740,116,566 shares of the Company in issue as of June 30, 2010.

220 Save as disclosed above, no other person (other than a Director) was recorded in the register required to be kept under Section 336 of the SFO as having an interest or short position in our shares and underlying shares as of June 30, 2010.

Our largest shareholders

We were founded by Wai Kee and AIG Asian Infrastructure Fund L.P. in 1993. Our largest shareholders are Wai Kee, a Hong Kong-listed civil engineering company with operations in Hong Kong and the PRC, and Shenzhen Investment, a Hong Kong-listed property development, investment and management company based in Shenzhen, the PRC.

Brief information on our current major shareholders is outlined below:

Wai Kee

Wai Kee was established in 1970 and has been listed on the Hong Kong Stock Exchange since 1992. Its principal business activities include toll roads and expressways investment, property development in the PRC through us, civil construction and quarrying.

Two of the directors of Wai Kee, Mr. Zen Wei Pao, William and Mr. Zen Wei Peu, Derek are also our Directors. Mr. Zen Wei Pao, William, is our Chairman.

Shenzhen Investment

Shenzhen Investment was established in 1985 and listed on the Hong Kong Stock Exchange in 1997. It is principally engaged in the businesses of property development, investment and management.

Two directors of Shenzhen Investment and its subsidiaries, Messrs. Guo Limin and Xu Ruxin, were appointed as our Non-executive Directors on October 13, 2009 and December 11, 2009, respectively.

221 Related party and connected transactions From time to time, we engage in a variety of transactions with our affiliates, including subsidiaries of Wai Kee. Wai Kee and its subsidiaries have significant beneficial interest in us.

The following table sets forth our ongoing related party transactions:

For the six months ended Year ended December 31, June 30, Related parties Nature 2007 2008 2009 2010 (in HK$ thousands) Property construction joint venture ...... Construction cost paid 233,391 87,336 - - Property development joint venture ...... Interest income - 2,071 7,795 1,869 Sunco Property ...... Interest income 27,456 - - - Related companies (note) ...... Interest income 28,279 2,581 1,544 1,196

Note: Loan interest income of HK$1,544,000 (2008: HK$2,581,000; 2007: HK$3,766,000) was received from former subsidiaries in which Wai Kee has significant beneficial interest in the company. Loan interest income of HK$24,513,000 was received from Sunco Real Estate Investment Limited in 2007 and the loan to Sunco Real Estate Investment Limited had been fully repaid in the second half year of 2007. Sunco Real Estate Investment Limited was controlled by Mr. Sun.

On July 25, 2008, the Group entered into a sale and purchase agreement to dispose of its 61.0% equity interest in Luodingshi Luochong Highway Co., Ltd. to the PRC joint venture partner at a cash consideration of HK$62.7 million.

In November 2008, the Group entered into a sale and purchase agreement with a wholly-owned subsidiary of Build King Holdings Limited, a company listed on the Stock Exchange in which certain Directors of the Company have beneficial interests, pursuant to which the Group acquired the remaining 40.0% equity interest in Value Ahead Limited engaging in investment holding, at a cash consideration of HK$9.4 million. Previously, Value Ahead Limited was a jointly controlled entity of the Company that, together with its subsidiary, carried out building construction for the Group in the PRC. After the completion of the acquisition, Value Ahead Limited became a wholly-owned subsidiary of the Company. The loan to Value Ahead Limited was fully settled in cash upon completion of the acquisition.

As of June 30, 2010, the loans to related companies of HK$48.2 million (December 31, 2009: HK$51.5 million) represented the cash advances to former subsidiaries in which one of its shareholders is Wai Kee which has significant beneficial interest in the Company. The loans to related companies are unsecured, interest bearing at LIBOR or HIBOR plus 1.75% per annum up to February 2010 and at a fixed rate of 6.25% per annum for the period from March 2010 to the maturity date of the loans. The loans to related companies as of December 2007 and 2008 are unsecured, interest bearing at LIBOR or HIBOR plus 1.7% per annum and are wholly repayable in August 2010. On August 26, 2009, the Group entered into the restatement and amendment agreements with the related companies to extend the maturity date of loans advanced to the related companies.

On March 31, 2009, the Group entered into a sale and purchase agreement to dispose of its 70.0% equity interest in Guangxi Hengjing Highway Development Co., Ltd. to the PRC joint venture partner at a cash consideration of HK$124.3 million.

222 On June 1, 2009, the Group entered into a sale and purchase agreement to dispose of its 45.0% equity interest in Shenzhen Airport-Heao Expressway (Eastern Section) Co., Ltd. to the PRC joint venture partner at a cash consideration of HK$1,207.7 million.

As of June 30, 2010, the loan to a joint venture of HK$64.4 million (December 31, 2009: HK$64.3 million) represented a loan to Shanghai Sunco Fangcheng Property Co., Ltd. ( ), which was unsecured, carried interest at a fixed rate of 5.6% (2008: 8.4%) per annum and repayable within one year. During the year ended December 31, 2009, the loan was renewed and maturity date extended to September 2010. In addition, as of December 31, 2008, the loans to joint ventures of HK$70.8 million (2007: HK$81.2 million) included loans to Shanghai Sunco Fangcheng Property Co., Ltd. ( ) amounting to HK$70.8 million (2007: HK$66.3 million), which was unsecured, carried interest at a fixed rate of 8.4% (2007: 5.58%) per annum and repayable before September 2009 and the remaining balance of HK$14.9 million as of December 31, 2007 was the loan to Value Ahead Limited, which was unsecured, interest-free and with no fixed repayment terms. As the loan to Shanghai Sunco Fangcheng Property Co., Ltd. ( ) will be fully settled within one year, this has been classified as current asset as of December 31, 2008.

On December 1, 2009, RK Investment (Shenzhen) Limited (“RK(Shenzhen)”), an indirect wholly- owned subsidiary of the Company, and Elite Rich, an indirect wholly-owned subsidiary of Wai Kee, entered into the sale and purchase agreement (“S&P Agreement”) whereby RK(Shenzhen) agreed to purchase and Elite Rich agreed to sell a maximum of 1,319 shares of Sunco Property (“Sunco Property Shares”) at an aggregate consideration of HK$88.3 million. If any of the other shareholders of Sunco Property exercised its pre-emption right to purchase those Sunco Property Shares under the shareholders’ agreement dated January 23, 2007, it was required to enter an agreement with Elite Rich that was identical in all respects (except for the identity of the buyer and the number of shares to be sold) with the S&P Agreement. As Elite Rich was an indirect wholly-owned subsidiary of Wai Kee which beneficially owned approximately 38.74% of the Company as at date of the signing of the S&P Agreement, the acquisition constituted a connected transaction for the Company under Rule 14A.13(1)(a) of the Hong Kong Listing Rules and was subject to announcement, reporting and independent shareholders’ approval. On January 18, 2010, RK Investment (Beijing) Limited (“RK(Beijing)”), one of the shareholders of Sunco Property, exercised its pre-emption right to purchase the 1,319 Sunco Property Shares, and accordingly RK(Shenzhen) was not entitled to purchase any Sunco Property Shares pursuant to the S&P Agreement. Other than RK(Beijing), no other shareholders of Sunco Property exercised their pre-emption rights to acquire the 1,319 Sunco Property Shares. The acquisition was duly approved by the independent shareholders of the Company at the special general meeting held on January 19, 2010. As at the date of completion (i.e., January 27, 2010), RK(Beijing) acquired the 1,319 Sunco Property Shares, and as a result of which the Group’s ownership interest in Sunco Property (through RK(Beijing)) has increased from 89.46% to approximately 94.74%.

223 Compensation of key management personnel

The remuneration of directors and other members of key management during the year was as follows:

For the six months ended Year ended December 31, June 30, 2007 2008 2009 2010 (in HK$ thousands) Short-term employment benefits ...... 58,571 68,756 65,262 31,920 Post-employment benefits ...... 2,077 3,049 2,889 1,611 Share-based payments ...... 41,552 - - 14,156 102,200 71,805 68,151 47,687

The remuneration of directors and key executives is determined by the performance of individuals and market trends. We believe the above related party transactions were conducted in the normal course of our business, on normal commercial terms and in accordance with terms of contracts entered into by us and our related parties.

224 Taxation The following summary of certain Bermuda, British Virgin Islands and Hong Kong tax consequences of the purchase, ownership and disposition of Notes is based upon applicable laws, regulations, rulings and decisions in effect as of the date of this offering memorandum, all of which are subject to change (possibly with retroactive effect). This discussion does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase, own or dispose of the Notes and does not purport to deal with consequences applicable to all categories of investors, some of which may be subject to special rules. Persons considering the purchase of Notes should consult their own tax advisors concerning the tax consequences of the purchase, ownership and disposition of Notes.

Bermuda Under current Bermuda legislation, there is no withholding tax, capital gains tax, income or profits tax, capital transfer tax, estate duty or inheritance tax payable in Bermuda by us or our shareholders or holders of the Notes other than those shareholders or holders ordinarily resident in Bermuda.

British Virgin Islands There is no income or other tax of the British Virgin Islands imposed by withholding or otherwise on any payment to be made to or by the Issuer or by the Subsidiary Guarantors pursuant to the Subsidiary Guarantees.

Hong Kong Withholding tax No withholding tax is payable in Hong Kong on payments of principal or interest on the Notes or in respect of any capital gains arising from the sale of the Notes.

Profits tax Hong Kong profits tax is charged on every person carrying on a trade, profession or business in Hong Kong in respect of assessable profits arising in or derived from Hong Kong from such trade, profession or business. Under the Inland Revenue Ordinance (Chapter 112 of the Laws of Hong Kong) (the “Inland Revenue Ordinance”) as it is currently applied, Hong Kong profits tax may be charged on revenue profits arising on the sale, disposal or redemption of the Notes where such sale, disposal or redemption is or forms part of a trade, profession or business carried on in Hong Kong. Interest on the Notes will be subject to Hong Kong profits tax where such interest has a Hong Kong source, and is received by or accrues to: • a financial institution (as defined in the Inland Revenue Ordinance) and arises through or from the carrying on by the financial institution of its business in Hong Kong; or • a corporation carrying on a trade, profession or business in Hong Kong; or • a person, other than a corporation, carrying on a trade, profession or business in Hong Kong and such interest is in respect of the funds of the trade, profession or business.

225 Stamp duty

No Hong Kong stamp duty will be chargeable upon the issue or transfer of a Note.

Estate duty

There is no estate duty in Hong Kong, and thus, no estate duty is payable under the Estate Duty Ordinance in respect of the Notes.

226 Global clearance and settlement See “Definitions” in “Terms and conditions of the Notes” for the definitions of certain capitalized terms used in this section.

Investors in the Notes may hold Notes through Euroclear or Clearstream, Luxembourg. Initial settlement and all secondary trades will settle as described below. Although the Issuer understands that Euroclear and Clearstream, Luxembourg will comply with the procedures provided below in order to facilitate transfers of Notes among participants of Euroclear and Clearstream, Luxembourg, they are under no obligation to perform or continue to perform such procedures, and such procedures may be modified or discontinued at any time. None of the Issuer, the Guarantors, the Trustee, the Registrar, the Transfer Agents, the Paying Agents, any other Agent or any other agent of any of them will have any responsibility for the performance by Euroclear or Clearstream, Luxembourg or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations. With respect to clearance and settlement through Euroclear and Clearstream, Luxembourg, the Issuer understands as follows:

The clearing systems Euroclear and Clearstream, Luxembourg

Euroclear and Clearstream, Luxembourg hold securities for participating organizations and facilitate the clearance and settlement of securities transactions between their respective participants through electronic book-entry changes in accounts of such participants. Euroclear and Clearstream, Luxembourg provide to their participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Euroclear and Clearstream, Luxembourg interface with domestic securities markets.

Euroclear and Clearstream, Luxembourg participants are financial institutions such as underwriters, securities brokers and dealers, banks, trust companies and certain other organizations. Indirect access to Euroclear or Clearstream, Luxembourg is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Euroclear or Clearstream, Luxembourg participant, either directly or indirectly.

Initial settlement

The Notes will be issued initially in the form of a Global Certificate in book-entry form and will be deposited with a common depository for Euroclear and Clearstream, Luxembourg. The Global Certificate will be registered in the name of a nominee of the common depositary for Euroclear and Clearstream, Luxembourg. As necessary the Registrar will adjust the amount of Notes on the register for the amounts of Euroclear and Clearstream, Luxembourg to reflect the amount of Notes held through Euroclear and Clearstream, Luxembourg, respectively. Investors’ interests in Notes held in book-entry form by Euroclear or Clearstream, Luxembourg, as the case may be, will be represented through financial institutions acting on their behalf as direct and indirect participants in Euroclear or Clearstream, Luxembourg, as the case may be. In addition, Euroclear and Clearstream, Luxembourg may hold positions in the Notes on behalf of their participants through their respective depositories.

227 Investors electing to hold their Notes through Euroclear or Clearstream, Luxembourg accounts will follow the settlement procedures applicable to conventional notes. Book-entry interests in the Notes will be credited to Euroclear and Clearstream, Luxembourg participants’ securities clearance accounts on the business day following the Issue Date against payment for value on the Issue Date. The Issuer will not impose any fees in respect of the Notes; however, holders of book- entry interests in the Notes may incur fees normally payable in respect of maintenance and operation of accounts in Euroclear and Clearstream, Luxembourg.

Because the purchaser determines the place of delivery, it is important to establish at the time of trading of any Notes where both the purchaser’s and seller’s accounts are located to ensure that settlement can be made on the desired value date.

Trading between Euroclear and/or Clearstream, Luxembourg participants

Secondary market trading between Euroclear participants and/or Clearstream, Luxembourg participants will be settled using the procedures applicable to conventional notes in same-day funds.

228 Plan of distribution The Issuer and the Subsidiary Guarantors have entered into a subscription agreement with J.P. Morgan Securities Ltd. and DBS Bank Ltd. (together, the “Joint Lead Managers”) dated September 14, 2010 (the “Subscription Agreement”), pursuant to which and subject to certain conditions contained therein, the Issuer agreed to sell to the Joint Lead Managers, and the Joint Lead Managers agreed to severally but not jointly subscribe and pay for, or to procure subscribers to subscribe and pay for, the aggregate principal amount of the Notes in the following amounts:

Notes Principal Amount J.P. Morgan Securities Ltd...... US$238,000,000 DBS Bank Ltd...... US$112,000,000 Total ...... US$350,000,000

The Subscription Agreement provides that the Issuer and the Subsidiary Guarantors joint and severally will indemnify the Joint Lead Managers against certain liabilities in connection with the offer and sale of the Notes. The Subscription Agreement provides that the obligations of the Joint Lead Managers are subject to certain conditions precedent, and entitles the Joint Lead Managers to terminate it in certain circumstances prior to payment being made to the Issuer.

The Joint Lead Managers and certain of their affiliates may have performed certain investment banking and advisory services for the Issuer and/or its affiliates from time to time for which they have received customary fees and expenses and may, from time to time, engage in transactions with and perform services for the Issuer and/or its affiliates in the ordinary course of their business. The Joint Lead Managers or certain of their affiliates may purchase Notes and be allocated Notes for asset management and/or proprietary purposes but not with a view to distribution.

The Joint Lead Managers or their respective affiliates may purchase Notes for its or their own account and enter into transactions, including credit derivatives, such as asset swaps, repackaging and credit default swaps relating to Notes and/or other securities of the Issuer or its subsidiaries or associates at the same time as the offer and sale of Notes or in secondary market transactions. Such transactions would be carried out as bilateral trades with selected counterparties and separately from any existing sale or resale of Notes to which this offering memorandum relates (notwithstanding that such selected counterparties may also be purchasers of Notes).

In connection with the issue of the Notes, subject to the mutual agreement of the Joint Lead Managers, J.P. Morgan Securities Ltd. (the “Stabilizing Manager”) may over-allot Notes or effect transactions with a view to supporting the price of the Notes at a level higher than that which might otherwise prevail, but in so doing, the Stabilizing Manager shall act as principal and not as agent of the Issuer. There is no assurance, however, that the Stabilizing Manager will undertake stabilization action. Any stabilization action may begin on or after the date on which adequate public disclosure of the terms of the Notes is made and, if begun, may be ended at any time, but it must end no later than the earlier of 30 days after the issue date of the Notes and 60 days after the date of the allotment of the Notes. Any loss or profit sustained as a consequence of any such over-allotment or stabilization shall be for the account of the Joint Lead Managers.

We, along with the Issuer and the Subsidiary Guarantors, have agreed that we will not, nor will we permit our subsidiaries to, directly or indirectly, until 90 days after the issuance of the Notes,

229 issue or offer any debt securities (other than the Notes) to the public or through a private placement in which we or any of our subsidiaries is the borrower, debtor, issuer or guarantor, unless we have obtained the prior written consent of the Joint Lead Managers. During the 90-day period referred to above, neither we nor any of our subsidiaries has mandated and none of them will mandate any other party to arrange any issue or offering of debt securities in connection with which it is the issuer or guarantor. As used in this paragraph, the term “debt securities” does not include (i) any bonds that are convertible into, or exchangeable for, equity securities of any person; or (ii) any bonds which are denominated in a currency other than US dollars, Hong Kong dollars, Euro or Japanese Yen. The distribution of this Offering Circular or any offering material and the offering, sale or delivery of the Notes is restricted by law in certain jurisdictions. Therefore, persons who may come into possession of this Offering Circular or any offering material are advised to consult with their own legal advisers as to what restrictions may be applicable to them and to observe such restrictions. This Offering Circular may not be used for the purpose of an offer or invitation in any circumstances in which such offer or invitation is not authorized.

United States The Notes and the Guarantees have not been and will not be registered under the Securities Act, and may not be offered or sold within the United States except in certain transactions exempt from the registration requirements of the Securities Act. The Notes and the Guarantees are being offered and sold outside of the United States in reliance on Regulation S. In addition, until 40 days after the commencement of the Offering of the Notes and the Guarantees, an offer or sale of the Notes or the Guarantees within the United States by any dealer (whether or not participating in the Offering) may violate the registration requirements of the Securities Act.

United Kingdom Each of the Joint Lead Managers have represented and agreed that: (a) (i) it is a person whose ordinary activities involve it in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of its business and (ii) it has not offered or sold and will not offer or sell the Notes other than to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or as agent) for the purposes of their businesses or who it is reasonable to expect will acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of their businesses where the issue of the Notes would otherwise constitute a contravention of Section 19 of the FSMA by the Issuer; (b) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of the Notes in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer or the Guarantors; and (c) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom.

230 Hong Kong Each of the Joint Lead Managers have not offered or sold and will not offer or sell in Hong Kong, by means of any document, other than (i) to “professional investors” as defined in the SFO and any rules made under the SFO or (ii) in circumstances which do not result in the document being a “prospectus” as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. Each of the Joint Lead Managers have not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the Notes which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the Notes which are intended to be disposed of to persons outside Hong Kong or only to “professional investors” within the meaning of the SFO and any rules made thereunder.

Singapore Each of the Joint Lead Managers has acknowledged that this offering memorandum has not been and will not be registered as a prospectus with the Monetary Authority of Singapore. Accordingly, each of the Joint Lead Managers have represented, warranted and agreed that it has not offered or sold any Notes or caused the Notes to be made the subject of an invitation for subscription or purchase and will not offer or sell the Notes or cause the Notes to be made the subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, this offering memorandum or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Notes, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. Note: Where the Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is: (a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the Notes pursuant to an offer made under Section 275 of the SFA except: (i) to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;

231 (ii) where no consideration is or will be given for the transfer;

(iii) where the transfer is by operation of law; or

(iv) as specified in Section 276(7) of the SFA.

Japan

The Notes have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (the “Financial Instruments and Exchange Act”). Accordingly, each Joint Lead Manager represents and agrees that it has not, directly or indirectly, offered or sold and will not, directly or indirectly, offer or sell any Notes in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan) or to others for re-offering or re- sale, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Act and other relevant laws and regulations of Japan.

Bermuda

Each Joint Lead Manager represents, warrants and agrees that it has not, directly or indirectly, offered or sold and will not, directly or indirectly, offer or sell any Notes to any person, firm or company regarded as a resident of Bermuda for exchange control purposes.

British Virgin Islands

Each Joint Lead Manager represents, warrants and agrees that it has not, directly or indirectly, offered or sold and will not, directly or indirectly, offer or sell any Notes to the public in the British Virgin Islands.

232 Legal matters Certain matters of English law will be passed upon for us by Sidley Austin LLP. Certain matters of Hong Kong law will be passed upon for us by Richards Butler in association with Reed Smith LLP. Certain matters of the laws of Bermuda and the British Virgin Islands will be passed upon for us by Conyers Dill & Pearman. Certain matters of PRC law will be passed upon for us by Global Law Office. Certain matters of English law will be passed upon for the Joint Lead Managers by Linklaters. Certain matters of PRC law will be passed upon for the Joint Lead Managers by Commerce & Finance Law Offices and Jingtian & Gongcheng.

Independent accountants Our audited consolidated financial statements as of and for each of the years ended December 31, 2008 and 2009 included in this offering memorandum have been audited by Deloitte Touche Tohmatsu, Certified Public Accountants, Hong Kong, as stated in their report appearing herein.

233 General information

Consents

We, the Issuer and the Subsidiary Guarantors have each obtained all necessary consents, approvals and authorizations in connection with the issue of and performance under the Notes and the Guarantees. The entering into of the Global Certificate, Trust Deed and Agency Agreement and the issue of the Notes have been authorized by resolutions passed at the meeting of the board of directors of the Issuer held on September 13, 2010. The giving of the respective Guarantees was authorized by resolutions passed at the respective meetings our Boards of Directors and the boards of directors of the Issuer and the respective Subsidiary Guarantors held on September 13, 2010.

Litigation

Except as disclosed in this offering memorandum, there are no legal or arbitration proceedings against or affecting the Issuer, us, any of our subsidiaries or any of our assets, and we are not aware of any pending or threatened proceedings, which are material in the context of this issue of the Notes or the Guarantees.

No material adverse change

Except as disclosed herein, since June 30, 2010, there has been no material adverse change, nor any development or event involving a prospective material adverse change, in or affecting the general affairs, management, business, condition (financial or otherwise), shareholders’ equity, results of operations or prospects of us, the Issuer and our subsidiaries, taken as a whole.

Documents available

Copies of our latest annual report and consolidated accounts and our latest unaudited interim consolidated accounts may be obtained free of charge, and copies of the Trust Deed and the Agency Agreement will be available for inspection, at our specified office at Suite 501, 5th floor, Tower 6, The Gateway, 9 Canton Road, Tsimshatsui, Kowloon, Hong Kong during normal business hours, so long as any of the Notes is outstanding. We publish unaudited consolidated interim financial statements every year for the six months ended June 30.

Clearing system and settlement

The Notes have been accepted for clearance through the facilities of Euroclear and Clearstream. Certain trading information with respect to the Notes is set out forth below:

Common ISIN Code Global Note representing the Notes ...... XS0530341873 053034187

Listing of the Notes

Approval in-principle has been received for the listing of the Notes on the SGX-ST. So long as the Notes are listed on the SGX-ST and the rules of the SGX-ST so require, the Issuer will appoint and

234 maintain a paying agent in Singapore, where the Notes may be presented or surrendered for payment or redemption, in the event that the Global Certificate is exchanged for definitive certificates. In addition, in the event that the Global Certificate is exchanged for definitive certificates, announcement of such exchange shall be made by or on behalf of the Issuer through the SGX-ST and such announcement will include all material information with respect to the delivery of the definitive certificates, including details of the paying agent in Singapore.

235 Index to consolidated financial statements Financial Statements under HKFRS

Unaudited Condensed Consolidated Financial Statements as of and for the six months ended June 30, 2010 Report On Review of Interim Financial Information of Deloitte Touche Tohmatsu, Certified Public Accountants dated August 12, 2010 ...... F-2 Condensed Consolidated Income Statement ...... F-3 Condensed Consolidated Statement of Comprehensive Income ...... F-4 Condensed Consolidated Statement of Financial Position ...... F-5 Condensed Consolidated Statement of Changes in Equity ...... F-6 Condensed Consolidated Statement of Cash Flows ...... F-7 Notes to the Condensed Consolidated Financial Statements ...... F-8 Audited Consolidated Financial Statements as of and for the year ended December 31, 2009 Independent Auditor’s Report of Deloitte Touche Tohmatsu, Certified Public Accountants dated March 26, 2010 ...... F-22 Consolidated Income Statement ...... F-24 Consolidated Statement of Comprehensive Income ...... F-25 Consolidated Statement of Financial Position ...... F-26 Consolidated Statement of Changes in Equity ...... F-28 Consolidated Statement of Cash Flows ...... F-29 Notes to the Consolidated Financial Statements ...... F-30 Audited Consolidated Financial Statements as of and for the year ended December 31, 2008 Independent Auditor’s Report of Deloitte Touche Tohmatsu, Certified Public Accountants dated April 2, 2009 ...... F-83 Consolidated Income Statement ...... F-85 Consolidated Balance Sheet ...... F-86 Consolidated Statement of Changes in Equity ...... F-88 Consolidated Cash Flow Statement ...... F-89 Notes to the Consolidated Financial Statements ...... F-90

F-1 Report on review of interim financial information To the board of directors of Road King Infrastructure Limited (incorporated in Bermuda with limited liability) Introduction

We have reviewed the interim financial information set out on pages 9 to 33, which comprises the condensed consolidated statement of financial position of Road King Infrastructure Limited and its subsidiaries as of 30 June 2010 and the related condensed consolidated income statement, statement of comprehensive income, statement of changes in equity and statement of cash flows for the six-month period then ended and certain explanatory notes. The Main Board Listing Rules governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and the Hong Kong Accounting Standard 34 “Interim Financial Reporting” (“HKAS 34”) issued by the Hong Kong Institute of Certified Public Accountants. The directors of the Company are responsible for the preparation and presentation of this interim financial information in accordance with HKAS 34. Our responsibility is to express a conclusion on this interim financial information based on our review, and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Scope of review

We conducted our review in accordance with the Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Hong Kong Institute of Certified Public Accountants. A review of interim financial information consists of making inquires, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim financial information is not prepared, in all material respects, in accordance with HKAS 34.

Deloitte Touche Tohmatsu Certified Public Accountants

Hong Kong 12 August 2010

F-2 Condensed consolidated income statement For the six months ended 30 June 2010

Six months ended 30 June Notes 2010 2009 (Unaudited) (Unaudited) HK$’000 HK$’000 Revenue ...... 3 2,059,624 2,464,196 Cost of sales ...... (1,351,911) (2,217,081) Gross profit ...... 707,713 247,115 Interest income ...... 14,687 9,928 Other income ...... 25,923 31,157 Other gains and losses ...... 5 31,692 93,592 Selling expenses ...... (68,810) (46,302) Operating expenses ...... (202,743) (170,288) Share of results of joint ventures ...... 6 192,235 270,088 Finance costs ...... 7 (45,614) (53,336) Profit before taxation ...... 8 655,083 381,954 Income tax expenses ...... 9 (385,632) (113,640) Profit for the period ...... 269,451 268,314 Profit attributable to: Owners of the Company ...... 265,465 255,091 Non-controlling interests ...... 3,986 13,223 269,451 268,314 Earnings per share ...... 11 —Basic ...... HK$0.36 HK$0.35 —Diluted ...... HK$0.36 HK$0.35

F-3 Condensed consolidated statement of comprehensive income For the six months ended 30 June 2010

Six months ended 30 June 2010 2009 (Unaudited) (Unaudited) HK$’000 HK$’000 Profit for the period ...... 269,451 268,314 Other comprehensive income Exchange difference arising on translation to presentation currency . . . 22,535 87,003 Total comprehensive income for the period ...... 291,986 355,317

Total comprehensive income attributable to: Owners of the Company ...... 287,786 340,500 Non-controlling interests ...... 4,200 14,817 291,986 355,317

F-4 Condensed consolidated statement of financial position At 30 June 2010

30 June 2010 31 December 2009 (Unaudited) (Audited) Notes HK$’000 HK$’000 ASSETS Non-current assets Property, plant and equipment ...... 32,231 19,352 Investment properties ...... 12 360,891 255,437 Interests in joint ventures ...... 13 4,135,321 4,357,996 Loans to related companies ...... 14 48,200 48,200 Deferred tax assets ...... 30,405 31,506 Long-term receivables ...... 15 317,815 542,603 Prepayment for acquisition of additional interest in a subsidiary ...... - 88,310 4,924,863 5,343,404 Current assets Inventory of properties ...... 16 13,651,539 12,953,468 Prepayment for land leases ...... 17 1,052,385 222,334 Loan to a joint venture ...... 18 64,432 64,286 Loans to related companies ...... 14 - 3,300 Debtors, deposits and prepayments ...... 19 535,736 330,951 Prepaid income tax ...... 216,440 211,203 Pledged bank deposits ...... 20 143,543 206,553 Bank balances and cash ...... 3,094,819 2,887,090 18,758,894 16,879,185 Total assets ...... 23,683,757 22,222,589 EQUITY AND LIABILITIES Equity attributable to owners of the Company Share capital ...... 21 74,012 73,912 Reserves ...... 9,870,999 9,777,653 9,945,011 9,851,565 Non-controlling interests ...... 94,773 180,778 Total equity ...... 10,039,784 10,032,343 Non-current liabilities Bank and other borrowings—due after one year ...... 22 5,226,363 5,199,953 Deferred tax liabilities ...... 171,132 153,886 5,397,495 5,353,839 Current liabilities Creditors and accrued charges ...... 23 2,324,655 2,438,815 Deposits from pre-sale of properties ...... 4,123,584 2,904,072 Income tax payable ...... 410,876 292,195 Bank and other borrowings—due within one year ...... 22 1,387,363 1,201,325 8,246,478 6,836,407 Total equity and liabilities ...... 23,683,757 22,222,589

F-5 Condensed consolidated statement of changes in equity For the six months ended 30 June 2010

Attributable to owners of the Company Foreign currency Share Non- Share Share translation Special option Statutory Retained controlling Total capital premium reserve reserve reserve reserve profits Total interests equity HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Balance at 1 January 2009 (audited) ..... 73,893 3,142,142 1,279,924 1,260,000 85,791 32,945 3,494,766 9,369,461 164,141 9,533,602 Profit for the period ...... – – – – – – 255,091 255,091 13,223 268,314 Exchange differences arising on translation to presentation currency ...... – – 85,409 – – – – 85,409 1,594 87,003 Total comprehensive income for the period ...... – – 85,409 – – – 255,091 340,500 14,817 355,317 Sub-total ...... 73,893 3,142,142 1,365,333 1,260,000 85,791 32,945 3,749,857 9,709,961 178,958 9,888,919 Released upon disposal of interest in a joint venture . . – – (17,972) – – – 17,972 – – – Lapse or cancellation of share options . . . – – – – (2,498) – 2,498 – – – Dividend ...... – – – – – – (147,785) (147,785) – (147,785) Balance at 30 June 2009 (unaudited) . . . 73,893 3,142,142 1,347,361 1,260,000 83,293 32,945 3,622,542 9,562,176 178,958 9,741,134 Balance at 1 January 2010 (audited) ..... 73,912 3,143,206 1,198,504 1,260,000 82,641 37,548 4,055,754 9,851,565 180,778 10,032,343 Profit for the period ...... – – – – – – 265,465 265,465 3,986 269,451 Exchange differences arising on translation to presentation currency ...... – – 22,321 – – – – 22,321 214 22,535 Total comprehensive income for the period ...... – – 22,321 – – – 265,465 287,786 4,200 291,986 Sub-total ...... 73,912 3,143,206 1,220,825 1,260,000 82,641 37,548 4,321,219 10,139,351 184,978 10,324,329 Issue of ordinary shares upon exercise of share options . . . 100 5,700 – – – – – 5,800 – 5,800 Lapse or cancellation of share options . . . – – – – (2,985) – 2,985 – – – Transfer upon exercise of share options . . . – 234 – – (234) – – – – – Recognition of equity- settled share based payments ...... – – – – 20,000 – – 20,000 – 20,000 Released upon strike-off of subsidiaries of the Company ...... – – 25,853 – – – (25,853) – – – Acquisition of additional interest in a subsidiary ..... – – – – – – 1,895 1,895 (90,205) (88,310) Appropriation ...... – – – – – 7,515 (7,515) – – – Dividend ...... – – – – – – (222,035) (222,035) – (222,035) Balance at 30 June 2010 (unaudited) . . . 74,012 3,149,140 1,246,678 1,260,000 99,422 45,063 4,070,696 9,945,011 94,773 10,039,784

F-6 Condensed consolidated statement of cash flows For the six months ended 30 June 2010

Six months ended 30 June 2010 2009 (Unaudited) (Unaudited) Note HK$’000 HK$’000 Net cash from operating activities: Increase in prepayment for land leases ...... (829,545) - Decrease in inventory of properties ...... 119,112 1,400,954 Increase in deposits from pre-sale of properties ...... 1,212,912 132,067 Other operating cash flows ...... (309,924) 80,434 192,555 1,613,455

Net cash from (used in) investing activities: Cash distributions/dividends received from joint ventures ...... 364,623 444,228 Proceeds on disposal of an interest in a joint venture ...... - 52,053 Advances to investees ...... - (446,086) Additions to investment properties ...... (31,010) (7,965) Net cash outflow from acquisition of subsidiaries ...... 24 (212,952) - Decrease (increase) in pledged bank deposits ...... 63,479 (112,315) Other investing cash flows ...... 6,598 34,112 190,738 (35,973)

Net cash (used in) from financing activities: New borrowings raised ...... 816,260 1,038,549 Repayment of borrowings ...... (616,776) (609,768) Issue of ordinary shares ...... 5,800 - Interest paid ...... (165,375) (186,328) Dividend paid ...... (222,035) (147,785) (182,126) 94,668 Net increase in cash and cash equivalents ...... 201,167 1,672,150 Cash and cash equivalents at 1 January ...... 2,887,090 796,098 Effect of foreign exchange rate changes ...... 6,562 6,364 Cash and cash equivalents at 30 June ...... 3,094,819 2,474,612

Analysis of balances of cash and cash equivalents Bank balances and cash ...... 3,094,819 2,474,612

F-7 Notes to the condensed consolidated financial statements For the six months ended 30 June 2010 1. Basis of preparation

The condensed consolidated financial statements have been prepared in accordance with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities (the “Listing Rules”) on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) and with the Hong Kong Accounting Standard (the “HKAS”) 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

2. Principal accounting policies

The condensed consolidated financial statements have been prepared on the historical cost basis except for investment properties, which are measured at fair values.

The accounting policies used in the condensed consolidated financial statements are consistent with those followed in the preparation of the Group’s annual financial statements for the year ended 31 December 2009 except as described below.

In the current interim period, the Group has applied, for the first time, the following new and revised HKAS(s), Hong Kong Financial Reporting Standards (“HKFRS(s)”), amendments and interpretations (“HK(IFRIC) Int”) (hereinafter collectively referred to as the “new and revised HKFRSs”) issued by the HKICPA:

HKFRSs (Amendments) ...... Amendment to HKFRS 5 as part of Improvements to HKFRSs 2008 HKFRSs (Amendments) ...... Improvements to HKFRSs 2009 HKAS 27 (Revised 2008) ...... Consolidated and Separate Financial Statements HKAS 39 (Amendment) ...... Eligible Hedged Items HKFRS 1 (Amendment) ...... Additional Exemptions for First-time Adopters HKFRS 2 (Amendment) ...... Group Cash-settled Share-based Payment Transactions HKFRS 3 (Revised 2008) ...... Business Combinations HK(IFRIC)-Int 17 ...... Distributions of Non-cash Assets to Owners

HKAS 27 (Revised 2008) “Consolidated and Separate Financial Statements”

The application of HKAS 27 (Revised 2008) has resulted in a change in the Group’s accounting policies regarding increases or decreases in ownership interests in subsidiaries of the Group.

In prior years, in the absence of specific requirements in HKFRSs, increases in interests in existing subsidiaries were treated in the same manner as the acquisition of subsidiaries, with goodwill or a bargain purchase gain being recognised where appropriate; for decreases in interests in existing subsidiaries that did not involve a loss of control, the difference between the consideration received and the carrying amount of the share of net assets disposed of, was recognised in profit or loss. Under HKAS 27 (Revised 2008), all such increases or decreases are dealt with in equity, with no impact on goodwill or profit or loss.

When control of a subsidiary is lost as a result of a transaction, event or other circumstances, the revised standard requires that the Group derecognises all assets, liabilities and non-controlling

F-8 interests at their carrying amount. Any retained interest in the former subsidiary is recognised at its fair value at the date the control is lost. A gain or loss on loss of control is recognised in profit or loss as the difference between the proceeds, if any, and these adjustments.

In January 2010, the Group has completed the acquisition of 5.28% additional equity interest in Sunco Property Holdings Company Limited (“Sunco Property”), a subsidiary of the Company engaged in investment holding, from Wai Kee Holdings Limited (“Wai Kee”) which has significant beneficial interest in the Company, at a cash consideration of HK$88,310,000, which has been prepaid before 31 December 2009 and recognised as prepayment for acquisition of additional interest in a subsidiary under non-current assets as at 31 December 2009. After the acquisition, the Company’s interest in Sunco Property has been increased from 89.46% to 94.74%. The difference between the purchase consideration and the decrease in the carrying value of non-controlling interests of Sunco Property of HK$1,895,000 has been recognised directly in equity (including in retained profits).

The application of other new and revised HKFRSs has had no material effect on the condensed consolidated financial statements of the Group for the current or prior accounting periods.

The Group has not early applied the following new and revised standards, amendments or interpretations that have been issued but are not yet effective.

HKFRSs (Amendments) ...... Improvements to HKFRSs 20101 HKAS 24 (Revised) ...... Related Party Disclosures4 HKAS 32 (Amendment) ...... Classification of Rights Issues2 HKFRS 1 (Amendment) ...... Limited Exemption from Comparative HKFRS 7 Disclosures for First-time Adopters3 HKFRS 9 ...... Financial Instruments5 HK(IFRIC)-Int 14 (Amendment) ...... Prepayments of a Minimum Funding Requirement4 HK(IFRIC)-Int 19 ...... Extinguishing Financial Liabilities with Equity Instruments3

1 Effective for annual periods beginning on or after 1 July 2010 and 1 January 2011, as appropriate. 2 Effective for annual periods beginning on or after 1 February 2010. 3 Effective for annual periods beginning on or after 1 July 2010. 4 Effective for annual periods beginning on or after 1 January 2011. 5 Effective for annual periods beginning on or after 1 January 2013.

HKFRS 9 “Financial Instruments” introduces new requirements for the classification and measurement of financial assets and will be effective from 1 January 2013, with earlier application permitted. The standard requires all recognised financial assets that are within the scope of HKAS 39 “Financial Instruments: Recognition and Measurement” to be measured at either amortised cost or fair value. Specifically, debt investments that (i) are held within a business model whose objective is to collect the contractual cash flows and (ii) have contractual cash flows 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 HKFRS 9 might affect the classification and measurement of the Group’s financial assets.

The directors of the Company (the “Directors”) anticipate that the application of the other new or revised standards, amendments or interpretations will not have material impact on the results and the financial position of the Group.

F-9 3. Revenue

Six months ended 30 June 2010 2009 HK$’000 HK$’000 Revenue of the Group Sale of completed properties held for sale ...... 2,059,624 2,464,196 Group’s share of toll revenue of infrastructure joint ventures ...... 388,186 578,537 Revenue of the Group and Group’s share of toll revenue of infrastructure joint ventures ...... 2,447,810 3,042,733

4. Segment information The Group’s operating segments, based on the information reported to the Group’s chief operating decision maker for the purposes of resource allocation and assessment of performance are as follows:

Toll road ...... — development, operation and management of toll roads through the infrastructure joint ventures Property development ...... — development and sale of properties

The following is an analysis of the Group’s revenue, profit and assets by operating segments for the periods under review:

Six months ended 30 June 2010 Six months ended 30 June 2009 Property Property Toll road development Total Toll road development Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Segment revenue ...... - 2,059,624 2,059,624 - 2,464,196 2,464,196 Segment profit ...... 91,792 240,463 332,255 235,177 60,671 295,848

At 30 June 2010 At 31 December 2009 Property Property Toll road development Total Toll road development Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Segment assets (including interests in joint ventures) ...... 4,150,884 16,729,828 20,880,712 4,376,361 15,305,633 19,681,994

(a) Measurement

Segment profit represents profit earned by each segment, which includes share of results of joint ventures, gain on disposal of interest in a joint venture, impairment losses on interests in joint ventures, change in fair value of investment properties, relevant interest income and finance costs and income tax expenses attributable to the relevant segment but without allocation of headquarter income and expenses.

F-10 Segment assets include property, plant and equipment, investment properties, interests in joint ventures, long-term receivables, prepayment for acquisition of additional interest in a subsidiary, inventory of properties, prepayment for land leases, loan to a joint venture, debtors, deposits and prepayments, prepaid income tax, pledged bank deposits, bank balances and cash and deferred tax assets which are directly attributable to the relevant operating segment.

(b) Reconciliation of total segment profit and total segment assets

Six months ended 30 June 2010 2009 HK$’000 HK$’000 Total segment profit ...... 332,255 295,848 Unallocated items: Interest income ...... 1,498 1,453 Corporate income ...... 2,155 23,313 Corporate expenses ...... (25,381) (6,519) Finance costs ...... (41,076) (45,781) Consolidated profit for the period ...... 269,451 268,314

30 June 31 December 2010 2009 HK$’000 HK$’000 Total segment assets ...... 20,880,712 19,681,994 Unallocated assets: Property, plant and equipment ...... 425 600 Loans to related companies ...... 48,200 51,500 Deposits and prepayments ...... 3,816 4,453 Bank balances and cash ...... 2,750,604 2,484,042 Consolidated total assets ...... 23,683,757 22,222,589

5. Other gains and losses

Six months ended 30 June 2010 2009 HK$’000 HK$’000 Gains on disposal of interest in a joint venture ...... – 15,183 Losses on disposal of property, plant and equipment ...... (56) (298) Impairment losses on interests in joint ventures ...... (51,020) – Increase in fair value of investment properties ...... 73,696 17,998 Net exchange gains ...... 9,072 60,709 31,692 93,592

F-11 6. Share of results of joint ventures

Six months ended 30 June 2010 2009 HK$’000 HK$’000 Share of profits of infrastructure joint ventures before amortisation and taxation ...... 348,137 411,539 Less share of: Amortisation of toll road operation rights ...... (90,760) (90,907) Current tax ...... (63,668) (47,179) Deferred tax ...... 2,000 (8,900) 195,709 264,553 Share of (loss) profit of other joint venture ...... (3,474) 5,535 192,235 270,088

The current tax amount represents the Group’s share of enterprise income tax attributable to the infrastructure joint ventures registered in the People’s Republic of China (the “PRC”).

Deferred tax has been provided for temporary differences between the carrying amount of toll road operation rights and the corresponding tax base used in the computation of taxable profits for the PRC infrastructure joint ventures. For the infrastructure joint ventures that enjoyed preferential rate of 15% or lower up to 31 December 2007, based on a grandfathering provision, the tax rate increases progressively to 25% over five years from 1 January 2008 onwards.

7. Finance costs

Six months ended 30 June 2010 2009 HK$’000 HK$’000 Interest on borrowings wholly repayable within five years ...... 160,208 181,774 Other finance costs ...... 14,276 20,307 174,484 202,081 Less: Capitalised in properties under development for sale ...... (128,870) (148,745) 45,614 53,336

8. Profit before taxation

Six months ended 30 June 2010 2009 HK$’000 HK$’000 Profit before taxation has been arrived at after charging: Depreciation of property, plant and equipment ...... 7,719 16,249 Less: Capitalised in properties under development for sale ...... (377) (773) 7,342 15,476 and after crediting: Bank interest income ...... 8,620 4,413

F-12 9. Income tax expenses Six months ended 30 June 2010 2009 HK$’000 HK$’000 Current tax: PRC enterprise income tax (“EIT”) ...... 193,473 63,053 PRC land appreciation tax (“LAT”) ...... 147,729 41,533 PRC withholding tax ...... 26,337 11,356 367,539 115,942

Deferred tax: Current period ...... 18,093 (2,302) 385,632 113,640

No provision for Hong Kong profits tax has been made as there was no assessable profit derived from Hong Kong. The EIT of subsidiaries is calculated at a statutory tax rate of 25%. The provision of LAT is estimated according to the requirements set forth in the relevant PRC tax laws and regulations.

10. Dividend paid Six months ended 30 June 2010 2009 HK$’000 HK$’000 2009 final dividend paid of HK$0.30 (six months ended 30 June 2009: 2008 final dividend paid of HK$0.20) per share ...... 222,035 147,785

An interim dividend in respect of 2010 of HK$0.20 (six months ended 30 June 2009: HK$0.20) per share amounting to a total of HK$148,000,000 (six months ended 30 June 2009: HK$148,000,000) has been declared by the Board on 12 August 2010. This interim dividend has not been included as a liability in these condensed consolidated financial statements as it was declared after the end of the reporting period. The amount of the interim dividend has been calculated on the basis of 740,116,566 shares in issue as at 12 August 2010.

11. Earnings per share The calculation of the basic and diluted earnings per share attributable to the owners of the Company is based on the following data:

Six months ended 30 June 2010 2009 HK$’000 HK$’000 Earnings for the purposes of basic and diluted earnings per share attributable to the owners of the Company ...... 265,465 255,091

F-13 Six months ended 30 June 2010 2009 ‘000 ‘000 Weighted average number of ordinary shares for the purpose of basic earnings per share ...... 739,647 738,927 Effect of dilutive potential ordinary shares: Share options ...... 76 - Weighted average number of ordinary shares for the purpose of diluted earnings per share ...... 739,723 738,927

The share options outstanding during the period ended 30 June 2009 had an anti-dilutive effect on the basic earnings per share because the exercise prices of the share options were higher than the average market prices of the shares of the Company in prior period.

12. Investment properties

2010 2009 HK$’000 HK$’000 Completed properties, at fair value At 1 January ...... 171,233 143,851 Change in fair value recognised in condensed consolidated income statement ...... 6,772 25,989 Exchange difference arising on translation to presentation currency ...... 404 1,393 At 30 June/31 December ...... 178,409 171,233

Properties under construction, at fair value At 1 January ...... 84,204 - Reclassified from properties under development for investment properties previously grouped under property, plant and equipment and prepaid lease payments for land ...... - 51,806 Additions ...... 31,010 17,189 Change in fair value recognised in condensed consolidated income statement ...... 66,924 14,689 Exchange difference arising on translation to presentation currency ...... 344 520 At 30 June/31 December ...... 182,482 84,204 Total ...... 360,891 255,437

F-14 The fair values of investment properties under construction and completed investment properties at 30 June 2010 and 31 December 2009 were determined by reference to valuations carried out by an independent firm of professional valuers not connected with the Group. The fair values of the investment properties were determined by the valuers on the following basis: Vacant portion of investment properties — by reference to market evidence of transaction prices for similar properties in the similar location Occupied completed properties — by reference to capitalised income to be derived from the existing tenancies and the reversionary income potential of the properties or, where appropriate, by reference to market evidence of transaction prices for similar properties in the same locations and conditions Properties under construction — by reference to the current or recent prices of investment properties and estimated costs to completion based on construction budget, past experience, committed contracts as well as allowances for contingencies The investment properties are situated in the PRC under medium term leases. All of the Group’s leasehold interests in land held under operating leases to earn rentals or for capital appreciation purposes are classified as investment properties and are accounted for using the fair value model.

13. Interests in joint ventures 30 June 31 December 2010 2009 HK$’000 HK$’000 Interests in infrastructure joint ventures Cost of investments ...... 4,604,529 4,606,618 Share of post-acquisition undistributed profits and other comprehensive income, net of dividends received ...... 3,098,747 3,428,703 Return of cost of investments (note (a)) ...... (3,384,136) (3,569,371) Impairment losses on cost of investments (note (b)) ...... (209,020) (158,000) 4,110,120 4,307,950

Interest in other joint venture Cost of investment ...... 16,123 16,123 Share of post-acquisition profit and other comprehensive income, net of dividend received ...... 9,078 33,923

25,201 50,046 4,135,321 4,357,996

Notes: (a) The infrastructure joint ventures distribute the cash surplus to the Group on a regular basis including a return of total investment costs to the Group. The amount of cash distribution varies from time to time and depends on the toll road performance, the amount of operating expenses and capital expenditure incurred by the joint ventures.

F-15 (b) During the current period, the Group conducted a review on the performance of the toll road infrastructure projects and has recognised impairment losses of HK$51,020,000 (six months ended 30 June 2009: nil) on the interests in certain infrastructure joint ventures. The recoverable amounts of interests in infrastructure joint ventures are determined based on value-in-use calculations, which were estimated by the present value of the estimated future returns on investments from the joint ventures.

14. Loans to related companies

The loans to related companies of HK$48,200,000 (31 December 2009: HK$51,500,000) represented the cash advances to former subsidiaries in which one of its shareholders is Wai Kee. The amount of HK$3,300,000, which was included in current assets of the Group at 31 December 2009, has been repaid during the current period. The loans to related companies are unsecured, interest bearing at London Interbank Offered Rate (“LIBOR”) or Hong Kong Interbank Offered Rate (“HIBOR”) plus 1.75% per annum up to February 2010 and at a fixed rate of 6.25% per annum for the period from March 2010 to August 2012.

15. Long-term receivables

30 June 31 December 2010 2009 HK$’000 HK$’000 Minimum income undertakings (note (a)) ...... 2,280 4,995 Deferred consideration on disposal of interest in a joint venture (note (b)) ...... - 27,211 Amount due from Huge Rise Investments Limited and its subsidiaries (“Huge Rise Group”) (note (c)) ...... 315,535 510,397 317,815 542,603

Notes: (a) Included in long-term receivables and debtors of the Group aged more than 90 days as disclosed in note 19 are the amounts of HK$2,280,000 (31 December 2009: HK$4,995,000) and HK$5,455,000 (31 December 2009: HK$8,163,000), respectively representing minimum income undertakings due from the PRC joint venture partners. Minimum income undertakings have been recognised in accordance with the terms set out in the relevant joint venture agreements and are settled according to the schedules agreed with the relevant PRC joint venture partners. The revised repayment schedule of minimum income undertakings was agreed with the PRC joint venture partners in 2007 and the amounts will be fully repaid in December 2011. (b) It represented the deferred consideration which arose from disposal of an infrastructure joint venture to a PRC joint venture partner in March 2009 which will be fully repaid in 2011. The consideration due within one year of HK$27,273,000 (31 December 2009: HK$27,211,000) has been included in other receivables of the Group (see note 19). (c) The balance represented the cash advance to Huge Rise Group, the independent third party of the Group. According to the revised cash advance agreement dated 4 January 2010, the outstanding amount will be fully repaid by December 2014 and is interest bearing at 1% per annum over three month HIBOR. Subsequent to 30 June 2010, Huge Rise Group repaid an amount of HK$150,000,000.

16. Inventory of properties

30 June 31 December 2010 2009 HK$’000 HK$’000 Completed properties held for sale ...... 1,445,731 2,433,293 Properties under development for sale (note) ...... 12,205,808 10,520,175 13,651,539 12,953,468

Note: Included in the amount are properties under development for sale of HK$2,620,195,000 (31 December 2009: HK$1,664,383,000) which are expected to be completed and delivered to the customers within twelve months from the end of the reporting period.

F-16 17. Prepayment for land leases

As at 30 June 2010, a total prepayment of HK$1,052,385,000 (31 December 2009: HK$222,334,000) was made for the acquisition of certain pieces of land in the PRC. Upon completion of the acquisition and delivery of relevant land title document to the Group, the prepaid amount will be transferred to the account of “Properties under development for sale”.

18. Loan to a joint venture

At 30 June 2010, the loan to a joint venture of HK$64,432,000 (31 December 2009: HK$64,286,000) represented a loan to , which was unsecured, carried interest at a fixed rate of 5.6% (31 December 2009: 5.6%) per annum and recoverable in September 2010.

19. Debtors, deposits and prepayments

30 June 31 December 2010 2009 HK$’000 HK$’000 Aged analysis of debtors, presented based on invoice date (note (a)): Within 60 days ...... 16,505 11,227 60 to 90 days ...... 179 6,267 More than 90 days ...... 15,626 14,263 32,310 31,757 Deferred consideration on disposal of interest in a joint venture (note 15(b)) ...... 27,273 27,211 Interest receivable ...... 1,614 1,439 Prepayments of business tax and other taxes ...... 196,770 115,904 Other receivables, deposits and prepayments (note (b)) ...... 277,769 154,640 535,736 330,951

Notes: (a) Other than the minimum income undertakings as mentioned in note 15(a), the debtors are mainly arisen from sale of properties. Considerations in respect of properties sold are received in accordance with terms of the related sales and purchase agreements, normally within 60 days from the agreements. Considerations under pre-sale contracts will be fully received prior to the delivery of the properties to the purchasers. (b) At 30 June 2010, included in other receivables, deposits and prepayments is an amount of HK$160,341,000 (31 December 2009: HK$31,746,000) representing the tender deposits paid to the local government or its agents in several provinces for the tender of several pieces of land through public auctions. The tender deposits will be refunded if the Group fails to acquire the pieces of land during the tender. The public auction of these tender deposits paid will be taking place within one year from the end of the reporting period and the amounts are classified as short-term deposits. In November 2007, the Group entered into a cooperative agreement (“Cooperative Agreement”) for carrying out development on several pieces of land in Jinan province. In 2009, the Group entered into a settlement agreement dated 28 April 2009 to terminate the Cooperative Agreement. The prepayment made by the Group under the Cooperative Agreement would be refunded together with a fixed return of HK$36,281,000 by installment. As at 30 June 2010, the outstanding balance was HK$13,182,000 (31 December 2009: HK$51,700,000) and such balance will be fully settled within 2010.

20. Pledged bank deposits

The pledged bank deposits were pledged as securities in favour of banks for mortgage facilities granted to the buyers of the Group and short-term facilities granted to the Group.

F-17 21. Share capital

Number of shares HK$’000 Authorised: Ordinary shares of HK$0.1 each ...... 20,000,000,000 2,000,000 7.5% convertible preference shares of HK$0.1 each ...... 518,380 52 Issued and fully paid: Ordinary shares ...... At 1 January 2010 ...... 739,116,566 73,912 Issue of shares upon exercise of share options ...... 1,000,000 100 At 30 June 2010 ...... 740,116,566 74,012

The Company has a share option scheme for the directors and eligible employees of the Group. At 30 June 2010, the number of outstanding share options are 46,120,000 (31 December 2009: 33,185,000).

As a result of the exercise of the Company’s share options at an exercise price of HK$5.80 during the current period, 1,000,000 ordinary shares were issued by the Company giving a total cash consideration of HK$5,800,000.

During the period, 15,110,000 share options were granted to the directors and employees of the Group and the share options are fully vested at the date of grant. The estimated fair value of the options granted during the period of HK$20,000,000 was recognised in the condensed consolidated income statement. The fair value was calculated using the Hull White Trinomial pricing model. During the period, 1,175,000 share options were lapsed.

22. Bank and other borrowings

30 June 31 December 2010 2009 HK$’000 HK$’000 Senior notes (note (a)) ...... 2,698,373 2,692,473 Guaranteed notes (note (b)) ...... 1,522,218 1,522,085 Bank loans (note (c)) ...... 2,393,135 2,186,720 6,613,726 6,401,278

F-18 The maturity of the above loans is as follows: 30 June 31 December 2010 2009 HK$’000 HK$’000 Unsecured borrowings repayable: Within one year ...... 200,059 113,379 More than one year but not exceeding two years ...... 2,777,655 1,522,085 More than two years but not exceeding five years ...... 1,738,531 2,791,501 4,716,245 4,426,965 Secured borrowings repayable: Within one year ...... 1,187,304 1,087,946 More than one year but not exceeding two years ...... 653,359 559,119 More than two years but not exceeding five years ...... 56,818 327,248 1,897,481 1,974,313 Total borrowings ...... 6,613,726 6,401,278 Less: Amount due within one year shown under current liabilities ..... (1,387,363) (1,201,325) Amount due over one year shown under non-current liabilities ...... 5,226,363 5,199,953

Notes: (a) The senior notes are listed on the Stock Exchange of Singapore. The notes include carrying amount of HK$1,538,884,000 (31 December 2009: HK$1,536,047,000), which bear interest at a fixed rate of 7.625% per annum and will mature in May 2014. The senior notes with carrying amount of HK$1,159,489,000 (31 December 2009: HK$1,156,426,000), which bear interest at a floating rate of three month LIBOR plus 2.25% per annum and will mature in May 2012. The fair value of the senior notes based on the quoted asked price at 30 June 2010 was HK$2,544,750,000 (31 December 2009: HK$2,466,750,000). (b) The guaranteed notes, which are listed on the Stock Exchange of Singapore, bear interest at a fixed rate of 6.25% per annum and will mature in July 2011. The fair value of the guaranteed notes based on the quoted asked price at 30 June 2010 was HK$1,528,605,000 (31 December 2009: HK$1,482,975,000). (c) Bank loans with carrying amount of HK$1,149,739,000 (31 December 2009: HK$1,025,582,000) bear interest at a fixed rate of 4.86% to 5.94% (31 December 2009: 4.86% to 7.08%) per annum. Interest rates on the remaining bank loans, which carried at floating interest rates, ranged from 1.35% to 2.06% (31 December 2009: 1.39% to 1.87%) per annum.

23. Creditors and accrued charges 30 June 31 December 2010 2009 HK$’000 HK$’000 Aged analysis of creditors, presented based on invoice date: Within 60 days ...... 111,714 9,299 60 to 90 days ...... 27,363 11,339 More than 90 days ...... 79,138 99,722 218,215 120,360 Accrued construction costs ...... 1,482,120 1,872,993

1,700,335 1,993,353 Interest payable ...... 65,239 66,385 Accrued taxes (other than EIT and LAT) ...... 19,210 15,595 Deferred consideration (note 24) ...... 213,490 - Other accrued charges ...... 326,381 363,482

2,324,655 2,438,815

F-19 24. Acquisition of subsidiaries

On 28 June 2010, the Group acquired and assumed the following assets and liabilities through acquisition of the entire equity interest in Superb Sky Limited from Huge Rise Group at a cash consideration of HK$505,000,000. The subsidiaries of Superb Sky Limited mainly hold a property development project in Shijiazhuang, PRC. It was accounted for as purchase of assets.

The net assets acquired in the transaction are as follows:

HK$’000 Property, plant and equipment ...... 389 Completed properties held for sale ...... 3,000 Properties under development for sale ...... 658,208 Debtors, deposits and prepayments ...... 3,411 Prepaid income tax ...... 1,111 Bank balances and cash ...... 78,558 Creditors and accrued charges ...... (52,572) Amount due to the Group ...... (187,105) 505,000

Satisfied by: Cash consideration paid ...... 291,510 Deferred consideration due within one year (note) ...... 213,490 505,000

Net cash outflow arising on acquisition: Cash consideration paid ...... 291,510 Bank balances and cash acquired ...... (78,558) 212,952

Note: The deferred consideration is non-interest bearing and the amount will be fully settled within 2010. Subsequent to 30 June 2010, deferred consideration of HK$150,000,000 has been settled by the Group.

25. Capital commitments

At 30 June 2010, the further construction costs to be incurred by the Group for the completion of the development of the investment properties under construction in Changzhou were HK$532,944,000 (31 December 2009: HK$562,675,000).

26. Contingent liabilities

At 30 June 2010, the Group provided guarantees of HK$3,958,887,000 (31 December 2009: HK$3,433,161,000) to banks in favour of its customers in respect of the mortgage loans provided by the banks to such customers for purchase of the Group’s developed properties. These guarantees provided by the Group to the banks would be released upon receiving the building ownership certificate of the respective property by the banks from the customers as a pledge for security to the mortgage loan granted. The Directors considered that the fair value of such guarantee on initial recognition was insignificant.

F-20 27. Litigation The Group and Huge Rise filed a writ of summons against Sunco China Holdings Limited and Sunco Management Holdings Limited (both of which are beneficially owned by Mr. Sun Hong Bin (“Mr. Sun”)) and Mr. Sun (collectively referred to as the “Defendants”) in October 2007, to claim for the loss and damage related to the payment of certain construction costs, tax expenses and penalty in relation to violation of certain development regulations in the PRC, which were undisclosed by Mr. Sun in connection with the acquisition of certain companies, including the Tianjin Companies, from the Defendants. These undisclosed liabilities have been recognised and recorded by the Group after the date of acquisition. The litigation proceedings against the Defendants by the Group are still in progress. The Group will continue to pursue its claims in a manner that is in the interests of the Company and its shareholders as a whole. 28. Pledge of assets At 30 June 2010, other than the pledged bank deposits as disclosed in note 20, the Group’s inventory of properties of HK$2,168,600,000 (31 December 2009: HK$3,744,759,000) and the shares of certain of the Company’s subsidiaries were pledged to secure the banking facilities granted to the Group. 29. Related party transactions Other than set out in notes 14 and 18 to the condensed consolidated financial statements, the Group had significant transactions with the following related parties during the period, details of which are as follows: Six months ended 30 June Related parties Nature 2010 2009 HK$’000 HK$’000 Property development joint venture (note 18) ..... Interest income 1,869 4,516 Related companies (note 14) ...... Interest income 1,196 999

Compensation of key management personnel The remuneration of Directors and other members of key management during the period was as follows: Six months ended 30 June 2010 2009 HK$’000 HK$’000 Short-term employment benefits ...... 31,920 32,444 Post-employment benefits ...... 1,611 1,428 Share-based payments ...... 14,156 - 47,687 33,872

The remuneration of Directors and key executives is determined by the performance of individuals and market trends. 30. Total assets less current liabilities/net current assets The Group’s total assets less current liabilities at 30 June 2010 amounted to HK$15,437,279,000 (31 December 2009: HK$15,386,182,000). The Group’s net current assets at 30 June 2010 amounted to HK$10,512,416,000 (31 December 2009: HK$10,042,778,000).

F-21 Independent auditor’s report

The following is the text of our audited consolidated financial statements for the year ended December 31, 2009, included in pages F-4 through F-62, reproduced from the annual report of Road King Infrastructure Limited for the same period. References to page numbers are to page numbers of such annual report of Road King Infrastructure Limited for the year ended December 31, 2009.

To the shareholders of Road King Infrastructure Limited (incorporated in Bermuda with limited liability)

We have audited the consolidated financial statements of Road King Infrastructure Limited and its subsidiaries (collectively referred to as the “Group”) set out on pages 57 to 136, which comprise the consolidated statement of financial position as at 31 December 2009, and the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Directors’ responsibility for the consolidated financial statements

The directors of the Company are responsible for the preparation and the true and fair presentation of these consolidated financial statements in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the disclosure requirements of the Hong Kong Companies Ordinance. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to report our opinion solely to you, as a body, in accordance with section 90 of The Companies Act of Bermuda, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and true and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the

F-22 appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of the Group as at 31 December 2009 and of the Group’s profit and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.

Deloitte Touche Tohmatsu Certified Public Accountants

Hong Kong 26 March 2010

F-23 Consolidated income statement For the year ended 31 December 2009

Notes 2009 2008 HK$’000 HK$’000 Revenue ...... 7 4,600,424 4,630,672 Cost of sales ...... (4,061,924) (4,110,060) Gross profit ...... 538,500 520,612 Interest income ...... 23,090 19,972 Other income ...... 33,987 28,369 Other gains and losses ...... 9 526,533 344,639 Selling expenses ...... (127,682) (112,784) Operating expenses ...... (358,858) (510,385) Share of results of joint ventures ...... 10 514,323 909,759 Finance costs ...... 11 (104,435) (156,855) Profit before taxation ...... 12 1,045,458 1,043,327 Income tax expenses ...... 14 (302,281) (366,693) Profit for the year ...... 743,177 676,634 Profit attributable to: Owners of the Company ...... 728,080 656,429 Minority interests ...... 15,097 20,205 743,177 676,634 Earnings per share ...... 16 —Basic ...... HK$0.99 HK$0.87 —Diluted ...... HK$0.99 HK$0.87

F-24 Consolidated statement of comprehensive income For the year ended 31 December 2009

2009 2008 HK$’000 HK$’000 Profit for the year ...... 743,177 676,634 Other comprehensive income Exchange differences arising on translation to presentation currency ...... 50,090 557,130 Reclassification adjustment upon disposal of interest in a joint venture ..... - (15,296)

50,090 541,834 Total comprehensive income for the year ...... 793,267 1,218,468

Total comprehensive income attributable to: Owners of the Company ...... 776,630 1,188,875 Minority interests ...... 16,637 29,593 793,267 1,218,468

F-25 Consolidated statement of financial position At 31 December 2009

Notes 2009 2008 HK$’000 HK$’000 ASSETS Non-current assets Property, plant and equipment ...... 17 19,352 57,346 Prepaid lease payments for land ...... 18 - 33,293 Investment properties ...... 19 255,437 143,851 Interests in joint ventures ...... 20 4,357,996 5,289,683 Loans to related companies ...... 22 48,200 54,700 Deferred tax assets ...... 32 31,506 40,700 Long-term receivables ...... 23 542,603 576,359 Available-for-sale financial assets ...... 24 - 632,787 Prepayment for acquisition of additional interest in a subsidiary ...... 45 88,310 - 5,343,404 6,828,719 Current assets Inventory of properties ...... 25 12,953,468 12,029,250 Prepayment for land leases ...... 26 222,334 107,865 Prepaid lease payments for land ...... 18 - 938 Loan to a joint venture ...... 21 64,286 70,787 Loans to related companies ...... 22 3,300 - Debtors, deposits and prepayments ...... 27 330,951 686,063 Prepaid income tax ...... 211,203 225,699 Pledged bank deposits ...... 28 206,553 163,723 Bank balances and cash ...... 28 2,887,090 796,098 16,879,185 14,080,423 Total assets ...... 22,222,589 20,909,142

F-26 Notes 2009 2008 HK$’000 HK$’000 EQUITY AND LIABILITIES Equity attributable to owners of the Company Share capital ...... 29 73,912 73,893 Reserves ...... 9,777,653 9,295,568 9,851,565 9,369,461 Minority interests ...... 180,778 164,141 Total equity ...... 10,032,343 9,533,602 Non-current liabilities Bank and other borrowings—due after one year ...... 31 5,199,953 5,737,728 Deferred tax liabilities ...... 32 153,886 147,998 5,353,839 5,885,726 Current liabilities Creditors and accrued charges ...... 33 2,438,815 1,756,811 Deposits from pre-sale of properties ...... 2,904,072 2,095,694 Income tax payable ...... 292,195 212,424 Bank and other borrowings—due within one year ...... 31 1,201,325 1,424,885 6,836,407 5,489,814 Total equity and liabilities ...... 22,222,589 20,909,142

The consolidated financial statements on pages 57 to 136 were approved and authorised for issue by the Board of Directors on 26 March 2010 and are signed on its behalf by:

Zen Wei Pao, William Ko Yuk Bing Director Director

F-27 Consolidated statement of changes in equity For the year ended 31 December 2009

Attributable to owners of the Company Foreign currency Share Share Share translation Special option Statutory Retained Minority Total capital premium reserve reserve reserve reserve profits Total interests equity HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note a) (Note b) Balance at 1 January 2008 ...... 75,265 3,184,312 747,478 1,260,000 95,514 10,867 3,098,980 8,472,416 151,527 8,623,943 Profit for the year ...... – – – – – – 656,429 656,429 20,205 676,634 Exchange differences arising on translation to presentation currency . . . – – 547,742 – – – – 547,742 9,388 557,130 Reclassification adjustment upon disposal of interest in a joint venture ...... – – (15,296) – – – – (15,296) – (15,296) Total comprehensive income for the year ..... – – 532,446 – – – 656,429 1,188,875 29,593 1,218,468 Sub-total ...... 75,265 3,184,312 1,279,924 1,260,000 95,514 10,867 3,755,409 9,661,291 181,120 9,842,411 Issue of ordinary shares upon exercise of share options ...... 4 209 – – – – – 213 – 213 Transfer upon exercise of share options ...... – 2 – – (2) – – – – – Lapse or cancellation of share options ...... – – – – (9,721) – 9,721 – – – Shares repurchased and cancelled ...... (1,376) (42,381) – – – – – (43,757) – (43,757) Acquisition of additional interest in a subsidiary . . . – – – – – – – – (16,979) (16,979) Dividends ...... – – – – – – (248,286) (248,286) – (248,286) Appropriation ...... – – – – – 22,078 (22,078) – – – Balance at 31 December 2008 ...... 73,893 3,142,142 1,279,924 1,260,000 85,791 32,945 3,494,766 9,369,461 164,141 9,533,602 Profit for the year ...... – – – – – – 728,080 728,080 15,097 743,177 Exchange differences arising on translation to presentation currency . . . – – 48,550 – – – – 48,550 1,540 50,090 Total comprehensive income for the year ..... – – 48,550 – – – 728,080 776,630 16,637 793,267 Sub-total ...... 73,893 3,142,142 1,328,474 1,260,000 85,791 32,945 4,222,846 10,146,091 180,778 10,326,869 Issue of ordinary shares upon exercise of share options ...... 19 1,064 – – – – – 1,083 – 1,083 Lapse or cancellation of share options ...... – – – – (3,150) – 3,150 – – – Release upon disposal of interests in joint ventures ...... – – (129,970) – – – 129,970 – – – Dividends ...... – – – – – – (295,609) (295,609) – (295,609) Appropriation ...... – – – – – 4,603 (4,603) – – – Balance at 31 December 2009 ...... 73,912 3,143,206 1,198,504 1,260,000 82,641 37,548 4,055,754 9,851,565 180,778 10,032,343

Notes: (a) Special reserve was arisen on group reorganisation and represents the difference between the nominal amount of the share capital issued by the Company and the aggregate of the nominal amount of the issued share capital of a subsidiary, which was acquired by the Company pursuant to the group reorganisation. (b) The statutory reserve of the Group represents reserve required by relevant laws of the People’s Republic of China (“PRC”) applicable to the Company’s PRC subsidiaries.

F-28 Consolidated statement of cash flows For the year ended 31 December 2009

Notes 2009 2008 HK$’000 HK$’000 Operating activities Profit before taxation ...... 1,045,458 1,043,327 Adjustments for: Depreciation of property, plant and equipment ...... 22,268 13,958 Impairment losses on interests in joint ventures ...... 158,000 – Change in fair value of investment properties ...... (40,678) – Interest income ...... (23,090) (19,972) Finance costs ...... 104,435 156,855 Gains on disposal of interests in joint ventures ...... 35 (578,597) (10,272) Share of results of joint ventures ...... (514,323) (909,759) Losses on disposal of property, plant and equipment, net ...... 1,485 1,017 Operating cash flows before movements in working capital ...... 174,958 275,154 Decrease in debtors, deposits and prepayments ...... 394,570 80,731 Increase in completed properties held for sale ...... (652,827) (94,334) Decrease in properties under development for sale ...... 2,328,046 1,651,149 (Decrease) increase in creditors and accrued charges ...... (221,592) 113,963 Increase (decrease) in deposits from pre-sale of properties ...... 759,386 (2,310,409) Payment for land leases ...... (113,491) (1,197,439) Cash generated from (used in) operations ...... 2,669,050 (1,481,185) Income tax paid ...... (174,297) (249,578) Net cash from (used in) operating activities ...... 2,494,753 (1,730,763) Investing activities Dividends received from joint ventures ...... 460,303 410,898 Returns on investments from joint ventures ...... 88,528 671,647 Additions to investment properties ...... (17,189) – (Increase) decrease in pledged bank deposits ...... (41,345) 67,860 Net proceeds on disposal of interests in joint ventures ...... 35 1,251,097 62,697 Interest received ...... 21,904 24,660 Proceeds on disposal of property, plant and equipment ...... 2,231 2,168 Decrease (increase) in long-term receivables ...... 66,195 (114,027) Purchases of property, plant and equipment ...... (5,313) (86,360) Net cash inflow (outflow) from acquisition of subsidiaries ...... 34 914 (7,847) Acquisition of additional interest in a subsidiary ...... – (16,979) Receipt of loan settlement from a related company ...... 3,200 – Receipt of loan settlement from a joint venture ...... 7,143 – Receipt of deferred consideration arising from disposal of a joint venture ...... 17,007 – Advances to investees ...... (716,458) – Prepayment for acquisition of additional interest in a subsidiary ...... (88,310) – Net cash from investing activities ...... 1,049,907 1,014,717 Financing activities ...... New borrowings raised ...... 1,323,356 2,103,839 Repayment of borrowings ...... (2,113,964) (1,821,737) Issue of ordinary shares ...... 1,083 213 Dividends paid ...... (295,609) (248,286) Interest paid ...... (374,898) (448,839) Repurchase of ordinary shares ...... – (43,757) Net cash used in financing activities ...... (1,460,032) (458,567) Net increase (decrease) in cash and cash equivalents ...... 2,084,628 (1,174,613) Cash and cash equivalents at beginning of the year ...... 796,098 1,858,941 Effect of foreign exchange rate changes ...... 6,364 111,770 Cash and cash equivalents at end of the year, represented by bank balances and cash ...... 2,887,090 796,098

F-29 Notes to the consolidated financial statements For the year ended 31 December 2009 1. General

The Company is an exempted company incorporated in Bermuda and its shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). The address of the registered office is Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda and principal place of business of the Company is Suite 501, 5/F, Tower 6, The Gateway, 9 Canton Road, Tsimshatsui, Kowloon, Hong Kong.

The Company acts as an investment holding company. The principal activities of the Group are the development, operation and management of toll roads through the infrastructure joint ventures and operation of property development business in the PRC. The principal activities of the major subsidiaries and joint ventures are detailed in notes 43 and 20 respectively.

The functional currency of the Company and the Group’s jointly controlled entities and its major subsidiaries is Renminbi (“RMB”). However, the consolidated financial statements of the Group are presented in Hong Kong dollars as the directors of the Company (the “Directors”) consider this presentation is more useful for its current and potential investors.

2. Application of new and revised Hong Kong Financial Reporting Standards

In the current year, the Group has applied, the following Hong Kong Accounting Standards (“HKAS(s)”), Hong Kong Financial Reporting Standards (“HKFRS(s)”), amendments and interpretations (“HK(IFRIC) Int”) (hereinafter collectively referred to as the “new and revised HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”):

HKAS 1 (Revised 2007) ...... Presentation of Financial Statements HKAS 23 (Revised 2007) ...... Borrowing Costs HKAS 32 & 1 (Amendments) ...... Puttable Financial Instruments and Obligations Arising on Liquidation HKFRS 1 & HKAS 27 (Amendments) ...... Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate HKFRS 2 (Amendment) ...... Vesting Conditions and Cancellations HKFRS 7 (Amendment) ...... Improving Disclosures about Financial Instruments HKFRS 8 ...... Operating Segments HK(IFRIC)-Int 9 & HKAS 39 (Amendments) . . . Embedded Derivatives HK(IFRIC)-Int 13 ...... Customer Loyalty Programmes HK(IFRIC)-Int 15 ...... Agreements for the Construction of Real Estate HK(IFRIC)-Int 16 ...... Hedges of a Net Investment in a Foreign Operation HK(IFRIC)-Int 18 ...... Transfers of Assets from Customers HKFRSs (Amendments) ...... Improvements to HKFRSs issued in 2008, except for the amendment to HKFRS 5 that is effective for annual periods beginning on or after 1 July 2009 HKFRSs (Amendments) ...... Improvements to HKFRSs issued in 2009 in relation to the amendment to paragraph 80 to HKAS 39

F-30 The adoption of these new and revised HKFRSs had no material effect on the results or financial position of the Group for the current or prior accounting periods except for the impact as described below.

HKAS 1 (Revised 2007) “Presentation of Financial Statements”

HKAS 1 (Revised 2007) has introduced a number of terminology changes (including revised titles for the consolidated financial statements) and has resulted in a number of changes in presentation and disclosure. However, HKAS 1 (Revised 2007) has had no impact on the reported results or financial position of the Group.

HKAS 23 (Revised 2007) “Borrowing Costs”

HKAS 23 (Revised 2007) has been revised to require capitalisation of borrowing costs when such costs are directly attributable to the acquisition, construction or production of a qualifying asset. The option of immediately expensing those borrowing costs is removed. As the Group’s current policy for borrowing costs aligns with the requirements of the revised standard, the revised standard has no significant financial impact on the Group.

HKFRS 8 “Operating Segments”

HKFRS 8 is a disclosure standard that has not resulted in a redesignation of the Group’s reportable segments (see note 8), and has had no impact on the reported results or financial position of the Group.

Amendment to HKAS 40 “Investment Property”

The application of the amendment to HKAS 40 “Investment Property” arising from Improvements to HKFRSs issued in 2008 affects the accounting for property under construction or development for future use as an investment property of the Group. The amendment to HKAS 40 brings such property within the scope of HKAS 40 which, therefore, shall be accounted for under the fair value model in accordance with the Group’s accounting policy. Prior to the application of this amendment, such property was accounted for at cost less impairment in accordance with HKAS 16 “Property, plant and equipment”. The amendment is applied prospectively from 1 January 2009 in accordance with the relevant transitional provision. As a result, the properties under development for investment properties amounting to HK$17,575,000 and prepaid lease payments for land amounting to HK$34,231,000 were reclassified to investment properties under construction at 1 January 2009 and profit for the year and total comprehensive income for the year have been increased by HK$11,017,000 arising from adoption of the amendment as at 1 January 2009, taking into account the change in fair value of the investment properties under construction up to 1 January 2009 of HK$14,689,000 and its related deferred taxation of HK$3,672,000. There was no significant change in fair value of investment properties under construction since 1 January 2009.

F-31 The Group has not early applied the following new and revised standards, amendments or interpretations that have been issued but are not yet effective.

HKFRSs (Amendments) ...... Amendment to HKFRS 5 as part of Improvements to HKFRSs 20081 HKFRSs (Amendments) ...... Improvements to HKFRSs 20092 HKAS 24 (Revised) ...... Related Party Disclosures6 HKAS 27 (Revised) ...... Consolidated and Separate Financial Statements1 HKAS 32 (Amendment) ...... Classification of Rights Issues4 HKAS 39 (Amendment) ...... Eligible Hedged Items1 HKFRS 1 (Amendment) ...... Additional Exemptions for First-time Adopters3 HKFRS 1 (Amendment) ...... Limited Exemption from Comparative HKFRS 7 Disclosure for First-time Adopters5 HKFRS 2 (Amendment) ...... Group Cash-settled Share-based Payment Transactions3 HKFRS 3 (Revised 2008) ...... Business Combinations1 HKFRS 9 ...... Financial Instruments7 HK (IFRIC)-Int 14 (Amendment) ...... Prepayments of a Minimum Funding Requirement6 HK (IFRIC)-Int 17 ...... Distributions of Non-cash Assets to Owners1 HK (IFRIC)-Int 19 ...... Extinguishing Financial Liabilities with Equity Instruments5

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 beginning 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 application of HKFRS 3 (Revised 2008) may affect the accounting for business combination for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. HKAS 27 (Revised) will affect the accounting treatment for changes in a parent’s ownership interest in a subsidiary.

HKFRS 9 “Financial Instruments” introduces new requirements for the classification and measurement of financial assets and will be effective from 1 January 2013, with earlier application permitted. The standard requires all recognised financial assets that are within the scope of HKAS 39 “Financial Instruments: Recognition and Measurement” to be measured at either amortised cost or fair value. Specifically, debt investments that (i) are held within a business model whose objective is to collect the contractual cash flows and (ii) have contractual cash flows 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 HKFRS 9 might affect the classification and measurement of the Group’s financial assets.

The Directors anticipate that the application of the other new and revised standards, amendments and interpretations will have no material impact on the consolidated financial statements.

F-32 3. Significant Accounting Policies The consolidated financial statements have been prepared on the historical cost basis except for investment properties which are measured at fair values. The consolidated financial statements have been prepared in accordance with HKFRSs issued by the HKICPA. In addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange and the Hong Kong Companies Ordinance. The principal accounting policies adopted are as follows:

Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the consolidated financial statements from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. 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 in excess of the minority’s interest 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 identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under HKFRS 3 “Business Combinations” are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with HKFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”, which are recognised and measured at fair value less costs to sell. Acquisition of additional interests in subsidiaries is recorded at the book value of the net assets attributable to the interests. The excess of the carrying amounts of net assets attributable to the interests over the cost of the acquisition is recognised as discount on acquisition. 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 identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.

F-33 The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

Revenue recognition

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

Sale of properties

Revenue from sale of properties is recognised upon the relevant properties have been completed and delivered to the purchasers pursuant to the sale agreements. Deposits received from sale of properties prior to meeting the criteria for revenue recognition are recorded as “Deposits from pre-sale of properties” under current liabilities.

Property rentals

Rentals receivable under operating leases are recognised and credited to the consolidated income statement on a straight line basis over the relevant lease term.

Contingent rental income (representing income over and above base rent) such as turnover rent, is recognised according to the terms of the lease agreements when the amount can be reliably measured, in the accounting period in which they are earned.

Others

Minimum income undertakings are recognised when receivable in accordance with the joint venture agreements.

Interest income from a financial 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 discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

Dividend income from investments is recognised when the Group’s right to receive payment has been established.

Property, plant and equipment

Property, plant and equipment are stated at cost less subsequent accumulated depreciation and accumulated impairment losses.

Depreciation is provided to write off the cost of items of property, plant and equipment over their estimated useful lives and after taking into account of their estimated residual value, using the straight line method.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to 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 consolidated income statement in the year in which the item is derecognised.

F-34 Prior to 1 January 2009, property that was being constructed or developed for future use as an investment property was included in property, plant and equipment until construction or development was complete, at which time it was reclassified to and subsequently accounted for as an investment property. Any difference between the fair value of the property at that date and its previous carrying amount was recognised in profit or loss. Upon adoption of amendments to HKAS 40, that property has been reclassified as an investment property at 1 January 2009.

Prepaid lease payments for land

The prepaid lease payments represent payment for land use rights, other than those included in the properties under development for sale, which are initially recognised at cost and released to the consolidated income statement over the lease term on a straight line basis.

Investment properties

Investment property, which is property 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 profit or loss for the period in which they arise.

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 profit or loss in the period in which they arise.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use or no future economic benefits 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 consolidated income statement in the year in which the item is derecognised.

Joint ventures

Joint venture arrangements that involve the establishment of a separate entity in which venturers have joint control over the economic activity of the entity are referred to as jointly controlled entities. In particular, joint venture arrangements which involve the establishment of a separate entity in which the Group and other venturers have joint control over the investment in and development, operation and management of toll roads and in which each venturer has an interest are referred to as infrastructure joint ventures.

The Group’s infrastructure joint ventures are Sino-foreign co-operative joint ventures registered in the PRC in respect of which the partners’ cash/profit sharing ratios upon the expiration of the joint venture periods are predetermined in accordance with the joint venture agreements and may not be in proportion to their capital contribution ratios.

Where the Group’s interest in the joint venture is such that it establishes joint control over the economic activity of the joint venture with other venturers, the Group’s interests in the joint

F-35 ventures are accounted for under equity method of accounting and are carried at cost plus its share of post-acquisition changes in the Group’s share of the net assets of the jointly controlled entities less any identified impairment loss.

When the Group’s share of losses of a jointly controlled entity equals or exceeds its interest in that jointly controlled entity (which includes any long-term interests that, in substance, form part of the Group’s net investment in the 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, profits or losses are eliminated to the extent of the Group’s interest in the jointly controlled entity.

Toll road operation right of joint ventures

The concession intangible assets, which are the toll road operation rights of the Group’s infrastructure joint ventures, are amortised to write off their cost, over their expected useful lives or the remaining concession period, whichever is shorter, commencing from the date of commencement of operation of the underlying toll roads using an amortisation method which reflects the pattern in which the intangible asset’s future economic benefits are expected to be consumed.

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 asset is estimated in order to determine the extent of the impairment loss, if any. If the recoverable amount of an asset is 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, to the extent 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 under development for sale

Properties under development for sale are stated at the lower of cost and net realisable value. Net realisable value takes into account the price ultimately expected to be realised, less applicable selling expenses and the anticipated costs to completion.

The cost of properties under development for sale comprises land costs, construction costs, borrowing costs capitalised according to the Group’s accounting policy and directly attributable expenses incurred during the development period. On completion, the properties are transferred to completed properties held for sale.

F-36 Completed properties held for sale Completed properties held for sale are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average cost method. Net realisable value takes into account the price ultimately expected to be realised, less applicable selling expenses.

Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, are capitalised as part of the cost of those assets. Capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Foreign currencies In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recorded in its functional currency (i.e. the currency of the primary economic environment in which the entity operates) 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 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 re-translation of monetary items, are recognised in profit or loss in the period in which they arise. For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into the presentation currency of the Group (i.e. Hong Kong dollars) at the rate of exchange prevailing at the end of the reporting period, and their income and expenses are translated at the average exchange rates for the year, unless exchange rates fluctuate significantly during the period, in which case, the exchange rates prevailing at the dates of transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity (the foreign currency translation reserve).

Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All the other leases are classified as operating leases.

The Group as lessor Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Contingent rental income (representing income over and above base rent) such as turnover rent, is recognised according to the terms of the lease agreements when the amount can be reliably measured, in the accounting period in which they are earned.

F-37 The Group as lessee

Rentals payable under operating leases are charged to profit or loss on a straight line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are recognised as a reduction of rental expense over the lease term on a straight line basis.

Retirement benefit costs

Payments to the state-managed retirement benefit scheme operated by the government and the Mandatory Provident Fund Scheme are charged as an expense when employees have rendered service entitling them to the contributions.

Taxation

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

The tax currently payable is based on taxable profit for the year. Taxable profit differs from the profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years, and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary difference to the extent that it is probable that taxable profit 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 negative 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 profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with 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 sufficient taxable profit against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of the reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which 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 reflects 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

F-38 profit 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.

Financial instruments

Financial assets and financial liabilities are recognised on the statement of financial position when a group entity becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets

The Group’s financial assets are classified into loans and receivables, and available-for-sale financial assets.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset 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 financial asset, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including loans to joint ventures and related companies, long-term receivables, debtors, pledged bank deposits and bank balances and cash) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment loss on financial assets below).

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated or not classified as “financial assets at fair value through profit or loss”, loans and receivables or held-to-maturity investments.

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 instruments are measured at cost less any identified impairment losses at the end of the reporting period (see accounting policy on impairment loss on financial assets below).

F-39 Impairment loss on financial 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 financial asset, the estimated future cash flows of the financial assets have been impacted.

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

For all other financial assets, objective evidence of impairment could include:

• significant financial difficulty 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 financial re-organisation.

For certain categories of financial assets, such as debtors, assets that are assessed not to be impaired individually are subsequently 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, observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, an impairment loss is recognised in profit 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 the estimated future cash flows discounted at the original effective interest rate.

For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

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

For financial 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 recognised impairment loss is reversed through profit 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.

Impairment losses on available-for-sale equity investments will not be reversed in profit or loss in subsequent periods.

F-40 Financial liabilities and equity

Financial liabilities and equity instruments issued by the group entity are classified according to the substance of the contractual arrangements entered into and the definitions of a financial 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. The Group’s financial liabilities are generally classified into other financial liabilities.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

Interest expense is recognised on an effective interest basis.

Other financial liabilities

Other financial liabilities (including creditors and bank and other borrowings) are subsequently measured at amortised cost using the effective interest method.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Repurchase of the Company’s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.

Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. A financial guarantee contract issued by the Group and not designated as at fair value through profit or loss is recognised initially at its fair value less transaction costs that are directly attributable to the issue of the financial guarantee contract. Subsequent to initial recognition, the Group measures the financial guarantee contract at the higher of: (i) the amount determined in accordance with HKAS 37 “Provisions, Contingent Liabilities and Contingent Assets”; and (ii) the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with HKAS 18 “Revenue”.

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the assets expire, or the financial assets are transferred and the Group has transferred substantially all the risks and

F-41 rewards of ownership of the financial assets. On derecognition of a financial 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 profit or loss. If the Group retains substantially all the risks and rewards of ownership of a transferred asset, the Group continues to recognise the financial asset and recognise a collateralised borrowing for proceeds received.

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Share-based payment transactions

For share options granted to directors and employees of the Company and its subsidiaries, the fair value of services received determined by reference to the fair value of share options granted at the grant date is recognised as an expense in full at the grant date when the share options granted vest immediately, with a corresponding increase in equity (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 or are still not exercised at the expiry date, the amount previously recognised in share option reserve will be transferred to retained profits.

4. Critical accounting judgments and key sources of estimation uncertainty

In the application of the Group’s accounting policies, which are described in note 3, the Directors are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

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 significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Amortisation of toll road operation rights

Amortisation of toll road operation rights of the Group’s infrastructure joint venture is calculated based on the traffic volume for a particular year to the projected total traffic volume throughout the operating years of the respective toll road. These projections require the use of judgments and estimates.

F-42 Net realisable values of properties under development for sale

The assessment of the net realisable values of the properties under development for sale involves, inter-alia, considerable analyses of current market price of properties of a comparable standard and location, construction costs to be incurred to complete the development based on existing asset structure and construction material price lists and a forecast of future sales based on zero growth rate of property price. If the actual net realisable values of the underlying properties under development for sale are more or less than expected as a result of change in market condition and/or significant variation in the budgeted development cost, material reversal of or provision for impairment losses may result.

5. 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 balance. The Group’s overall strategy remains unchanged since 2008.

The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 31, and equity attributable to equity holders of the Company, comprising issued capital and reserves.

The management of the Group reviews the capital structure periodically. As part of this review, the management of the Group assesses the annual budget which incorporates the planned construction projects and takes into account of the provision of funding. Based on the proposed annual budget, the management of the Group considers the cost of capital and the risks associated with the capital. The management of the Group also balances 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 management of the Group monitors the utilisation of bank borrowings and ensures full compliance with loan covenants during the year and at the end of the reporting period.

6. Financial instruments

(a) Categories of financial instruments

2009 2008 HK$’000 HK$’000 Financial assets Loans and receivables at amortised cost (including cash and cash equivalents) ...... 3,955,500 2,224,724 Available-for-sale financial assets ...... - 632,787 Financial liabilities Liabilities at amortised cost ...... 8,840,093 8,813,152 Financial guarantee contracts ...... - 20,337

(b) Financial risk management objectives and policies

The management of the Group has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Group’s risk management policies are established

F-43 to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

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

There has been no change to the Group’s exposure to market risks or the manner in which it manages and measures these risks.

(i) Market risk

The Group’s activities expose primarily to the financial risks of changes in foreign exchange rate and interest rates.

Foreign currency risk management

Certain transactions of the Group are denominated in foreign currencies which are different from the functional currency of the respective Group entities and therefore the Group is exposed to foreign currency risk. The Group currently does not arrange for instruments hedging the foreign currency risk. However, the management of the Group monitors foreign exchange exposure and will consider hedging significant foreign exchange exposure should the need arise. The carrying amounts of the Group’s foreign currency denominated monetary assets and liabilities at the end of the reporting date are as follows:

Assets Liabilities 2009 2008 2009 2008 HK$’000 HK$’000 HK$’000 HK$’000 United States dollars ...... 94,797 68,939 5,340,545 6,006,545 Hong Kong dollars ...... 375,445 147,006 131,100 508,989

Foreign currency sensitivity analysis

The following table details the Group’s sensitivity to a 5% increase and decrease in the Renminbi against the relevant foreign currencies. 5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the possible change in foreign exchange rate. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the end of the reporting period for a 5% change in foreign currency rate. A positive number below indicates an increase in profit where Renminbi strengthens against the relevant currencies. For a 5% weakening of Renminbi against the relevant currencies, there would be an equal and opposite impact on the profit, and the balances below would be negative.

Profit or loss 2009 2008 HK$’000 HK$’000 United States dollars ...... 262,287 296,880 Hong Kong dollars ...... (12,217) 18,099

F-44 Interest rate risk management The Group has exposed to cash flow interest rate risk due to the fluctuation of the prevailing market interest rate on loans to related companies and bank and other borrowings which carry interest at prevailing market interest rates. The Group’s fair value interest rate risk relates primarily to a loan to a joint venture and bank and other borrowings which carry interest at fixed interest rates. The Group currently does not use any derivative contracts to hedge its exposure to interest rate risk. However, the management will consider hedging significant interest rate exposure should the need arise.

Interest rate sensitivity The sensitivity analysis below have been determined based on the exposure to interest rates for non-derivative instruments at the end of the reporting period and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates. A 100 basis point increase or decrease 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 100 basis points higher/lower and all other variables were held constant, the Group’s profit for the year ended 31 December 2009 would decrease/increase by HK$6,704,000 (2008: decrease/increase by HK$10,583,000) after capitalisation of additional finance costs in properties under development for sale of HK$15,957,000 (2008: HK$22,597,000).

(ii) Credit risk management As at 31 December 2009, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties is arising from the carrying amount of the respective recognised financial assets as stated in the consolidated statement of financial position. In order to minimise the credit risk, the management of the Group has policies in place 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 management of the Group reviews the recoverable amount of each debtor at the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the management of the Group considers that the Group’s credit risk is significantly reduced. The management of the Company considers that the credit risk on liquid funds is low as counterparties are banks which do not have liquidity problem. Other than the loan to a joint venture, loans to related companies, long-term receivables and other receivables as mentioned in notes 21, 22, 23 and 27 respectively, the Group has no significant concentration of credit risk, with exposure spread over a number of counterparties having similar characteristics. Included in long-term receivables are receivables of HK$510,397,000 (2008: HK$551,858,000) due from an independent third party, the Directors considered that the credit risk exposure is satisfactory because the independent third party has sufficient assets to be realised for the repayment of the outstanding receivables, if necessary. For the loans to a joint venture and two related companies as disclosed in notes 21 and 22 respectively, the management of the Group has closely monitored the financial position of the joint venture and related companies, and will consider to provide impairment if necessary.

F-45 For the deferred consideration on disposal of interest in a joint venture as disclosed in notes 23 and 27 and prepayment to a third party as disclosed in note 27(b), the management of the Group has closely monitored the repayment of the outstanding amounts in accordance with the agreed repayment terms.

For properties that are still under construction, the Group typically provides guarantees to banks in connection with the customers’ borrowing of mortgage loans to finance for the amount up to 70% of their total purchase price of the property. If a purchaser defaults on the payment of its mortgage during the term of the guarantee, the bank holding the mortgage may demand the Group to repay the outstanding amount under the loan and any accrued interest thereon. Under current market condition, the mortgage facilities are secured by the properties with the market price higher than the guaranteed amounts. In this regard, the management of the Group considers the Group’s credit risk is significantly reduced.

(iii) Liquidity risk management

In the management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. The management of the Group monitors the utilisation of bank and other borrowings and ensures compliance with loan covenants.

The Group relies on bank and other borrowings as a significant source of liquidity. As at 31 December 2009, the Group has available unutilised banking facilities of HK$156,689,000 (2008: HK$175,281,000).

Ultimate responsibility for liquidity risk management rests with the management of the Group which has built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate working capital and available banking facilities and continuously monitors the forecast and actual cash flows.

F-46 Liquidity and interest risk tables

The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities based on the agreed repayment terms. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The tables include both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate curves at the end of reporting period.

Weighted average effective Total interest 6 months 6-12 1-2 2-5 Over undiscounted Carrying rate or less months years years 5 years cash flows amount % HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 2009 Creditors and accrued charges ...... - 2,359,447 9,633 69,735 - - 2,438,815 2,438,815 Bank and other borrowings —fixed rate ...... 6.64 175,921 451,281 1,954,234 2,368,044 - 4,949,480 4,083,714 —variable rate ...... 2.31 236,775 235,565 467,169 1,502,070 - 2,441,579 2,317,564 Financial guarantee contracts ...... - 3,433,161 - - - - 3,433,161 - 6,205,304 696,479 2,491,138 3,870,114 - 13,263,035 8,840,093 2008 Creditors and accrued charges ...... - 1,629,534 3,152 17,853 - - 1,650,539 1,650,539 Bank and other borrowings —fixed rate ...... 6.92 415,462 358,757 451,365 2,020,409 1,619,339 4,865,332 3,836,301 —variable rate ...... 4.53 325,016 733,532 544,221 2,166,411 - 3,769,180 3,326,312 Financial guarantee contracts ...... - 3,432,853 - - - - 3,432,853 20,337 5,802,865 1,095,441 1,013,439 4,186,820 1,619,339 13,717,904 8,833,489

The amounts included above for financial guarantee contracts are the maximum amounts the Group could be required to settle under the arrangement for the full guaranteed amount if that amount is claimed by the counterparty to the guarantee. Based on the expectations at the end of the reporting period, the Group considers that it is more likely than not that no amount will be payable under the arrangement. However, this estimate is subject to change depending on the probability of the counterparty claiming under the guarantee which is a function of the likelihood that the financial receivables held by the counterparty which are guaranteed suffer credit losses.

The amounts included above for variable interest rate instruments for non-derivative financial liabilities is subject to change if changes in variable interest rates differ to those estimates of interest rates determined at the end of the reporting period.

(c) Fair value of financial instruments

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

• the fair value of financial assets and financial liabilities is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions and dealer quotes for similar instruments; and

F-47 • the fair value of financial guarantee contracts at initial recognition is determined using option pricing models where the main assumptions are the probability of default by the specified counterparty extrapolated from market-based credit information and the amount of loss, given the default.

Other than set out in note 31, the Directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the consolidated financial statements approximate to their fair values.

7. Revenue

2009 2008 HK$’000 HK$’000 Revenue of the Group Sale of completed properties held for sale ...... 4,600,424 4,630,672 Group’s share of toll revenue of infrastructure joint ventures ...... 1,082,933 1,698,633 Revenue of the Group and Group’s share of revenue of infrastructure joint ventures ...... 5,683,357 6,329,305

8. Segmental Information

The Group has adopted HKFRS 8 “Operating Segments” with effect from 1 January 2009. HKFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance. In contrast, the predecessor standard (HKAS 14 “Segment Reporting”) required an entity to identify two sets of segments (business and geographical), using a risks and rewards approach, with the entity’s system of internal financial reporting to key management personnel’s serving only as the starting point for the identification of such segments.

The identification of the Group’s reportable segments under HKFRS 8 is consistent with the prior years’ presentation of business segments under HKAS 14. Information reported to the Group’s chief operating decision maker for the purposes of resource allocation and assessment of performance is focused on two main operations: toll road and property development. The Group’s reportable segments under HKFRS 8 are as follows:

Toll road — development, operation and management of toll roads through the infrastructure joint ventures Property development — development and sale of properties

The adoption of HKFRS 8 has changed the basis of measurement of segment profit. Previously under HKAS 14, the Group included interest income, exchange gains, gains on disposal of interests in joint ventures, share of results of joint ventures, finance costs, income tax expenses and certain unallocated expenses as unallocated corporate items, without allocating them to relevant operating segments, which is different from the measurement under HKFRS 8. Amounts reported for the prior year have been restated to conform to the presentation under HKFRS 8.

F-48 The following is an analysis of the Group’s revenue, profit, assets, liabilities and other information by operating segments for the years under review:

2009 2008 Property Property Toll road development Total Toll road development Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Reportable segment revenue ...... - 4,600,424 4,600,424 - 4,630,672 4,630,672 Reportable segment profit (loss) ...... 823,968 (10,248) 813,720 814,517 (109,572) 704,945 Reportable segment assets (including interests in joint ventures) ...... 4,376,361 15,305,633 19,681,994 5,306,296 15,146,327 20,452,623 Reportable segment liabilities ...... (50,269) (10,269,610) (10,319,879) (134,186) (9,140,321) (9,274,507)

Other segment information Amounts included in the measure of segment profit or loss or segment assets: Interest income ...... 349 20,241 20,590 288 14,164 14,452 Gains on disposal of interests in joint ventures ...... 578,597 - 578,597 10,272 - 10,272 Impairment losses on interests in joint ventures ...... (158,000) - (158,000) --- Depreciation ...... (163) (21,616) (21,779) (191) (12,963) (13,154) Finance costs ...... (5,600) (10,018) (15,618) (6,212) (28,720) (34,932) Income tax expenses . . . (18,017) (284,264) (302,281) (46,004) (320,689) (366,693) Share of results of joint ventures ...... 484,429 29,894 514,323 899,617 10,142 909,759 Interests in joint ventures ...... 4,307,950 50,046 4,357,996 5,260,470 29,213 5,289,683 Additions to non-current segment assets during the year ...... 35 23,285 23,320 44 89,799 89,843

F-49 (a) Measurement

The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 3.

Segment profit includes profit earned by each segment, share of results of joint ventures, gains on disposal of interests in joint ventures, impairment losses on interests in joint ventures, relevant interest income and finance costs and income tax expenses attributable to the relevant segment but without allocation of headquarter income and expenses.

Segment assets include property, plant and equipment, investment properties, prepaid lease payments for land, interests in joint ventures, long-term receivables, available-for-sale financial assets, prepayment for acquisition of additional interest in a subsidiary, inventory of properties, prepayment for land leases, loan to a joint venture, debtors, deposits and prepayments, prepaid income tax, pledged bank deposits, bank balances and cash and deferred tax assets which are directly attributable to the relevant reportable segment.

Segment liabilities include creditors and accrued charges, deposits from pre-sale of properties, income tax payable, bank and other borrowings and deferred tax liabilities which are directly attributable to the relevant reportable segment.

Additions to non-current assets are the total costs incurred during the year to acquire segment assets that are expected to be used for more than one year and comprises purchase of property, plant and equipment and investment properties directly attributable to the segment.

(b) Reconciliation of total reportable segment profit, total reportable segment assets and total reportable segment liabilities

2009 2008 HK$’000 HK$’000 Total reportable segment profit ...... 813,720 704,945 Unallocated items: Interest income ...... 2,500 5,520 Corporate income ...... 25,819 101,417 Corporate expenses ...... (10,045) (13,325) Finance costs ...... (88,817) (121,923) Consolidated profit for the year ...... 743,177 676,634 Total reportable segment assets ...... 19,681,994 20,452,623 Unallocated assets: Property, plant and equipment ...... 600 1,074 Loans to related companies ...... 51,500 54,700 Deposits and prepayments ...... 4,453 10,249 Bank balances and cash ...... 2,484,042 390,496 Consolidated total assets ...... 22,222,589 20,909,142 Total reportable segment liabilities ...... (10,319,879) (9,274,507) Unallocated liabilities: Accrued charges ...... (78,468) (88,428) Bank and other borrowings ...... (1,791,899) (2,012,605) Consolidated total liabilities ...... (12,190,246) (11,375,540)

F-50 (c) Revenue from major products and services

An analysis of the Group’s revenue for the year from its major products and services is set out in note 7.

(d) Information about geographical areas

All the Group’s revenue is attributable to customers in the PRC and over 90% of the Group’s total non-current assets are located in the PRC and the remaining non-current assets are located in Hong Kong.

(e) Information about major customers

In view of the nature of the toll road business, there are no major customers and suppliers. For the property business, there was no customer who accounted for over 10% of the total revenue generated from property business.

9. Other Gains and Losses

2009 2008 HK$’000 HK$’000 Gains on disposal of interests in joint ventures ...... 578,597 10,272 Impairment losses on interests in joint ventures ...... (158,000) - Losses on disposal of property, plant and equipment ...... (1,485) (1,017) Increase in fair value of investment properties ...... 40,678 - Net exchange gains ...... 66,743 335,384 526,533 344,639

10. Share of Results of Joint Ventures

2009 2008 HK$’000 HK$’000 Share of profits of infrastructure joint ventures before amortisation and taxation ...... 762,966 1,220,488 Less share of : Amortisation of toll road operation rights ...... (191,834) (208,821) Current tax ...... (85,203) (100,050) Deferred tax ...... (1,500) (12,000) 484,429 899,617 Share of profits of other joint ventures ...... 29,894 10,142 514,323 909,759

The current tax amount represents the share of the PRC enterprise income tax attributable to the PRC infrastructure joint ventures.

Deferred tax has been provided for temporary differences between the carrying amount of toll road operation rights and the corresponding tax base used in the computation of taxable profits for the PRC infrastructure joint ventures. For the infrastructure joint ventures that enjoyed

F-51 preferential rate of 15% or lower for the PRC enterprise income tax as at 31 December 2007, based on a grandfathering provision, the tax rate increases progressively to 25% over five years from 1 January 2008 onwards.

11. Finance Costs

2009 2008 HK$’000 HK$’000 Interest on: Borrowings wholly repayable within five years ...... 364,424 319,882 Borrowings not wholly repayable within five years ...... - 122,468 Total borrowing costs ...... 364,424 442,350 Other finance costs ...... 40,422 27,254 404,846 469,604 Less: Capitalised in properties under development for sale ...... (300,411) (312,749) 104,435 156,855

Borrowing costs capitalised during the year are calculated by applying an average capitalisation rate of 4.74% (2008: 5.71%) per annum to expenditure on qualifying assets.

12. Profit Before Taxation

2009 2008 HK$’000 HK$’000 Profit before taxation has been arrived at after charging: Depreciation of property, plant and equipment ...... 23,079 15,021 Less: Capitalised in properties under development for sale ...... (811) (1,063) 22,268 13,958 Operating lease rentals in respect of leasehold land, premises and equipment ...... 13,801 22,725 Less: Capitalised in properties under development for sale ...... (741) (817) 13,060 21,908 Staff costs ...... 167,694 178,422 Provident fund scheme contributions, net of forfeited contributions of HK$195,000 (2008: HK$343,000) ...... 22,470 24,635 Less: Capitalised in properties under development for sale ...... (44,926) (52,278) Total staff costs (excluding Directors’ emoluments) ...... 145,238 150,779 Auditor’s remuneration ...... 5,049 5,327 Cost of inventory of properties recognised as an expense ...... 4,061,924 4,110,060 and after crediting: Bank interest income ...... 13,751 15,320 Rental income in respect of investment properties with insignificant rental outgoings ...... 4,654 1,329

F-52 13. Directors’ and employees’ emoluments

Directors’ emoluments

Salaries Performance Retirement Directors’ and related scheme 2009 fees allowances bonus contributions Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Executive Directors Zen Wei Pao, William ...... - 4,750 8,992 475 14,217 Ko Yuk Bing ...... - 3,823 7,281 382 11,486 Chan Kam Hung ...... - 2,441 2,548 244 5,233 Fong Shiu Leung, Keter ...... - 1,931 1,820 193 3,944 Zen Wei Peu, Derek ...... - 3,500 - 12 3,512 Non-executive Directors Hu Aimin ...... 149 - - - 149 Zhang Yijun ...... 181 - - - 181 Guo Limin ...... 44 - - - 44 Xu Ruxin ...... 12 - - - 12 Independent Non-executive Directors Chow Shiu Kee, Stephen ...... 337 - - - 337 Lau Sai Yung ...... 352 - - - 352 Chow Ming Kuen, Joseph ...... 327 - - - 327 Choy Kwok Hung, Patrick ...... 127 - - - 127 1,529 16,445 20,641 1,306 39,921

Salaries Performance Retirement Directors’ and related scheme 2008 fees allowances bonus contributions Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Executive Directors Zen Wei Pao, William ...... - 4,750 8,102 475 13,327 Ko Yuk Bing ...... - 3,762 6,560 376 10,698 Chan Kam Hung ...... - 2,402 2,296 240 4,938 Fong Shiu Leung, Keter ...... - 1,901 1,467 190 3,558 Zen Wei Peu, Derek ...... - 3,500 - 12 3,512 Non-executive Directors Hu Aimin ...... 180 - - - 180 Zhang Yijun ...... 180 - - - 180 Independent Non-executive Directors Chan Hing Chin, Vincent ...... 120 - - - 120 Chow Shiu Kee, Stephen ...... 315 - - - 315 Lau Sai Yung ...... 324 - - - 324 Chow Ming Kuen, Joseph ...... 188 - - - 188 Choy Kwok Hung, Patrick ...... 188 - - - 188 1,495 16,315 18,425 1,293 37,528

F-53 In addition to the above Directors’ emoluments, certain share options were granted to the Directors and the details of share options held by individual Directors at 31 December 2009 and 31 December 2008 are shown in the Directors’ Report.

All the five highest paid individuals in the Group for both years presented are the Directors whose emoluments are included above.

14. Income tax expenses

2009 2008 HK$’000 HK$’000 Current tax: PRC enterprise income tax (“EIT”) ...... 162,092 128,034 PRC land appreciation tax (“LAT”) ...... 109,237 115,124 PRC withholding tax ...... 15,725 - 287,054 243,158 Deferred tax (note 32): Current year ...... 15,227 123,535 302,281 366,693

No provision for Hong Kong Profits Tax has been made as there was no assessable profit derived from Hong Kong.

The EIT is calculated at a statutory tax rate of 25%.

The provision for LAT is estimated according to the requirements set forth in the relevant PRC tax laws and regulations.

The income tax for the year is reconciled to profit before taxation as follows:

2009 2008 HK$’000 HK$’000 Profit before taxation ...... 1,045,458 1,043,327 Tax at the applicable income tax rate of 25% (2008: 25%) (note) ...... 261,365 260,832 LAT provision ...... 109,237 115,124 Tax effect of LAT ...... (27,309) (28,781) Tax effect of expenses not deductible for tax purpose ...... 179,811 242,700 Tax effect of income not taxable for tax purpose ...... (170,876) (104,492) Tax effect of share of results of joint ventures ...... (128,581) (227,440) Tax effect of tax losses not recognised ...... 40,502 36,679 Tax effect on temporary differences not recognised ...... 63,638 21,980 Tax effect of utilisation of tax losses previously not recognised ...... (61,955) (7,557) Deferred tax on undistributed earnings of PRC subsidiaries and joint ventures ...... 2,292 46,000 PRC withholding tax ...... 15,725 - Others ...... 18,432 11,648 Income tax for the year ...... 302,281 366,693 Effective tax rate for the year ...... 28.9% 35.1%

Note: The domestic tax rate of major subsidiaries in the PRC is used for the reconciliation as it is where the operations of the Group are substantially based.

F-54 15. Dividends paid

2009 2008 HK$’000 HK$’000 2008 final dividend paid of HK$0.20 (2008: HK$0.28 for 2007) per share ...... 147,785 210,752 2009 interim dividend paid of HK$0.20 (2008: HK$0.05) per share ...... 147,824 37,534 295,609 248,286

A final dividend in respect of 2009 of HK$0.30 per share amounting to a total of approximately HK$222 million has been declared by the Board. The amount has not been included as a liability in the consolidated financial statements as it was declared after the end of the reporting period.

The amount of the proposed final dividend has been calculated on the basis of 739,116,566 shares in issue as at 26 March 2010.

16. Earnings per share

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

2009 2008 HK$’000 HK$’000 Earnings for the purposes of basic and diluted earnings per share attributable to the owners of the Company ...... 728,080 656,429

2009 2008 Number Number of shares of shares ’000 ’000 Weighted average number of ordinary shares for the purpose of basic earnings per share ...... 738,993 750,694 Effect of dilutive potential ordinary shares: Share options ...... - 662 Weighted average number of ordinary shares for the purpose of diluted earnings per share ...... 738,993 751,356

The share options outstanding during the year ended 31 December 2009 were anti-dilutive because the exercise prices of the share options were higher than the average market prices of the shares of the Company during the year.

F-55 17. Property, plant and equipment

Properties under development Furniture, for fixtures investment Land and Leasehold and Plant and Motor properties buildings improvements equipment machinery vehicles Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note) Cost At 1 January 2008 ...... 76,072 560 4,574 17,966 - 22,342 121,514 Additions ...... 61,185 - 14,838 8,796 - 3,002 87,821 Disposals ...... - (154) (64) (2,119) - (5,567) (7,904) Transfer to investment properties (note 19) ...... (124,810) - - - - - (124,810) Acquisition of subsidiaries (note 34(b)) ...... - 712 - 195 905 301 2,113 Exchange adjustments ...... 5,128 38 96 787 - 1,891 7,940 At 31 December 2008 ...... 17,575 1,156 19,444 25,625 905 21,969 86,674 Additions ...... - - 1,871 2,380 - 1,062 5,313 Disposals ...... - (227) - (4,208) (804) (5,612) (10,851) Transfer to investment properties (note 19) ...... (17,575) - - - - - (17,575) Acquisition of subsidiaries (note 34(a)) ...... - - - 92 - 739 831 Exchange adjustments ...... - 10 152 211 9 216 598 At 31 December 2009 ...... - 939 21,467 24,100 110 18,374 64,990

Depreciation At 1 January 2008 ...... - 196 3,676 7,704 - 6,057 17,633 Charge for the year ...... - 17 5,077 5,615 - 4,312 15,021 Eliminated on disposals ..... - (37) (64) (1,455) - (3,163) (4,719) Exchange adjustments ...... - 14 127 716 - 536 1,393 At 31 December 2008 ...... - 190 8,816 12,580 - 7,742 29,328 Charge for the year ...... - 283 11,144 7,356 47 4,249 23,079 Eliminated on disposals ..... - (87) - (3,830) - (3,218) (7,135) Exchange adjustments ...... - 3 95 164 - 104 366 At 31 December 2009 ...... - 389 20,055 16,270 47 8,877 45,638 Carrying values At 31 December 2009 ...... - 550 1,412 7,830 63 9,497 19,352

At 31 December 2008 ...... 17,575 966 10,628 13,045 905 14,227 57,346

Note: Properties under development for investment properties were located in the PRC and held under medium term lease. During the year ended 31 December 2008, certain properties had been completed and transferred to investment properties. At 1 January 2009, the Group has adopted the amendments to HKAS 40 “Investment Properties”, as described in note 2, which brings investment properties under construction within the scope of HKAS 40 “Investment Properties”. Consequently, at 1 January 2009, all properties under development for investment properties were transferred to investment properties.

F-56 Items of property, plant and equipment are depreciated on a straight line basis at the following rates per annum:

Land and buildings ...... Over the term of the lease from 20 to 25 years Leasehold improvements ...... Over the term of the lease or 3 years, whichever is shorter Furniture, fixtures and equipment ...... 10%-25% Plant and machinery ...... 20%-30% Motor vehicles ...... 12.5%-25%

The Group’s land and buildings are situated in the PRC and are held under medium term leases.

The allocation of land and buildings elements cannot be made reliably, and the leasehold interests in land continue to be accounted for as property, plant and equipment.

18. Prepaid lease payments for land

2009 2008 HK$’000 HK$’000 Land in the PRC on medium-term lease ...... - 34,231

Analysed for reporting purposes as: Non-current asset ...... - 33,293 Current asset ...... - 938 - 34,231

The prepaid lease payments for land are developed for future use as investment properties. During the year ended 31 December 2008, certain properties were completed and the corresponding prepaid lease payments for land of HK$19,041,000 were transferred to investment properties. At 1 January 2009, the Group adopted the amendments to HKAS 40 “Investment Properties”, as described in note 2, which brings investment properties under construction within the scope of HKAS 40 “Investment Properties”. Consequently, at 1 January 2009, all the prepaid lease payments for land of HK$34,231,000 were transferred to investment properties.

F-57 19. Investment properties

2009 2008 HK$’000 HK$’000 Completed properties, at fair value At 1 January ...... 143,851 - Reclassified from properties under development for investment properties (note 17) ...... - 124,810 Reclassified from prepaid lease payments for land (note 18) ...... - 19,041 Change in fair value recognised in the consolidated income statement ...... 25,989 - Exchange difference arising on translation to presentation currency ...... 1,393 - At 31 December ...... 171,233 143,851

Properties under construction, at fair value Reclassified from properties under development for investment properties previously included in property, plant and equipment at 1 January 2009 (note 17) ...... 17,575 - Reclassified from prepaid lease payments for land at 1 January 2009 (note 18) ...... 34,231 - Increase in fair value at 1 January 2009 ...... 14,689 - Additions ...... 17,189 - Exchange difference arising on translation to presentation currency ...... 520 - At 31 December ...... 84,204 - Total ...... 255,437 143,851

At 1 January 2009, the properties under development for investment properties amounting to HK$17,575,000 and prepaid lease payments for land amounting to HK$34,231,000 were reclassified to investment properties under construction arising from the application of the amendments to HKAS 40 “Investment Property”.

During the year ended 31 December 2008, development cost amounting to HK$124,810,000 and prepaid lease payments for land of HK$19,041,000 were transferred from the balances of properties under development for investment properties and prepaid lease payments for land respectively to investment properties upon the completion of the development of related investment properties. Since the fair value of the properties at 31 December 2008 was similar to the carrying amount and fair value of the properties at the date of transfer, no revaluation gain upon completion of the properties and change in fair value was recognised in profit or loss during the year ended 31 December 2008.

F-58 The fair values of investment properties under construction at the date of transfer and at 31 December 2009, and the fair values of completed investment properties at 31 December 2009 and 31 December 2008 were determined by reference to valuations carried out by an independent firm of professional valuers not connected with the Group. The fair values of the investment properties were determined by the valuers on the following basis: Vacant portion of investment properties — by reference to market evidence of transaction prices for similar properties in the similar location Occupied properties — by reference to capitalised income to be derived from the existing tenancies and the reversionary income potential of the properties or, where appropriate, by reference to market evidence of transaction prices for similar properties in the same locations and conditions Properties under construction (bare land) — by reference to market evidence of transaction prices for similar land in the similar location The investment properties are situated in the PRC under medium term leases. All of the Group’s leasehold interests in land held under operating leases to earn rentals or for capital appreciation purposes are classified as investment properties and are accounted for using the fair value model. 20. Interests in joint ventures 2009 2008 HK$’000 HK$’000 Interests in infrastructure joint ventures Cost of investments ...... 4,606,618 5,315,447 Share of post-acquisition undistributed profits and other comprehensive income, net of dividends received ...... 3,428,703 3,720,225 Return of cost of investments (note a) ...... (3,569,371) (3,775,202) Impairment losses on cost of investments (note b) ...... (158,000) - 4,307,950 5,260,470

Interest in other joint venture Cost of investment ...... 16,123 16,123 Share of post-acquisition profit and other comprehensive income, net of dividend received ...... 33,923 13,090 50,046 29,213 4,357,996 5,289,683

Notes: (a) The infrastructure joint ventures distribute the cash surplus to the Group on a regular basis including a return of total investment costs to the Group. The amount of cash distribution varies from time to time and depends on the toll road performance, the amount of operating expenses and capital expenditure incurred by the joint ventures. (b) The Group has carried out impairment review on the carrying amount of interests in joint ventures at the end of the reporting period and recognised an impairment loss of HK$158,000,000 during the year. The amount of impairment losses is measured as the difference between the carrying amount of interests in joint ventures and the present value of the estimated future returns on investments from the joint ventures. Due to the reduction of traffic flow of certain toll road infrastructure projects, the Group has revised its cash flow forecasts and the carrying amounts of interests in certain joint ventures has therefore been reduced to the recoverable amount through the recognition of impairment losses.

F-59 Infrastructure joint ventures

All infrastructure joint ventures are co-operative joint ventures established and operating in the PRC, details of which at 31 December 2009 and 2008 are as follows:

Proportion of registered capital Registered held indirectly by Name of infrastructure joint venture capital the Company Principal activities Anhui Road Universe Hefei Highway RMB133,530,000 50%# Investment in, construction, operation Development Co., Ltd. and management of Hefei—Liuan Highway, (Hefei Section) in Anhui, the PRC Anhui Road Universe Hehuai Highway RMB90,000,000 60%*# Construction, operation and Dayang Section Development Co., Ltd. management of National Highway 206 Hehuai Highway (Dayang Section) in Anhui, the PRC Anhui Road Universe Hehuai Highway RMB80,000,000 60%*# Construction, operation and Yangjin Section Development Co., Ltd. management of National Highway 206 Hehuai Highway (Yangjin Section) in Anhui, the PRC Anhui Road Universe Liuan Highway RMB92,400,000 50%# Investment in, construction, operation Development Co., Ltd. and management of Hefei—Liuan Highway, (Liuan Section) in Anhui, the PRC Bengbu Road King Huaihe Bridge Highway RMB92,880,000 35%# Investment in and development, Development Co., Ltd. operation and management of Provincial Highway 307 Bengbu Huaihe Bridge in Anhui, the PRC Bengbu Road King Huaimeng Highway RMB68,040,000 35%# Investment in and development, Development Co., Ltd. operation and management of Provincial Highway 307 Bengbu Huaiyuan—Mengcheng Highway in Anhui, the PRC Bengbu Road King Chaoyanglu Huaihe RMB73,592,000 35%# Investment in and construction, Highway Bridge Development Co., Ltd operation and management of Bengbu Chaoyanglu Huaihe Highway Bridge in Anhui, the PRC Guangxi Hengjing Highway Development RMB81,520,000 70%*#@ Investment in and development, Co., Ltd. operation and management of Yulin—Gongguan Highway, (Yulin Section), in Guangxi Zhuang Autonomous Region, the PRC Guangxi Lutong Highway Development RMB99,562,400 70%*# Investment in and development, Co., Ltd. operation and management of National Highway 324 (Yulin Section) Guangxi Zhuang Autonomous Region, the PRC Handan Rongguang Highway RMB78,200,000 70%*# Construction, operation and Development Co., Ltd. management of National Highway 309, Handan—Feixiang Highway in Hebei, the PRC Handan Xinguang Highway Development RMB81,800,000 70%*# Construction, operation and Co., Ltd. management of National Highway 309, Feixiang—Guantao Highway in Hebei, the PRC

F-60 Proportion of registered capital Registered held indirectly by Name of infrastructure joint venture capital the Company Principal activities Hebei Baofa Expressway Co., Ltd. RMB96,287,600 40%# Investment in and operation and management of Hebei Baojin Expressway (Bazhou Dong Section) in Hebei, the PRC Hebei Baofeng Expressway Co., Ltd. RMB95,700,000 40%# Investment in and operation and management of Hebei Baojin Expressway (Rong Cheng—Xiong Xian Section) in Hebei, the PRC Hebei Baohui Expressway Co., Ltd. RMB96,007,600 40%# Investment in and operation and management of Hebei Baojin Expressway (Bazhou Zhong Section) in Hebei, the PRC Hebei Baojie Expressway Co., Ltd. RMB97,262,000 40%# Investment in and operation and management of Hebei Baojin Expressway (Xiongxian—Bazhou Section) in Hebei, the PRC Hebei Baojin Expressway Co., Ltd. RMB96,843,600 40%# Investment in and operation and management of Hebei Baojin Expressway (Xushui—Rongcheng Section) in Hebei, the PRC Hebei Baoli Expressway Co., Ltd. RMB97,359,600 40%# Investment in and operation and management of Hebei Baojin Expressway (Xiongxian East Section) in Hebei, the PRC Hebei Baoming Expressway Co., Ltd. RMB90,030,400 40%# Investment in and operation and management of Hebei Baojin Expressway (Bazhou—Tianjinjie Section) in Hebei, the PRC Hebei Baosheng Expressway Co., Ltd. RMB96,507,600 40%# Investment in and operation and management of Hebei Baojin Expressway (Xiongxian Section) in Hebei, the PRC Hebei Baoyi Expressway Co., Ltd. RMB96,575,200 40%# Investment in and operation and management of Hebei Baojin Expressway (Rong Cheng Section) in Hebei, the PRC Hebei Baoyu Expressway Co., Ltd. RMB97,426,400 40%# Investment in and operation and management of Hebei Baojin Expressway (Bazhou West Section) in Hebei, the PRC Hebei Tanghui Expressway Co., Ltd. RMB287,324,000 45%# Investment in and operation and management of Hebei Tangjin Expressway (Chenzhuang—Fengnan Section) in Hebei, the PRC Hebei Tangjin Expressway Co., Ltd. RMB250,300,000 45%# Investment in and operation and management of Hebei Tangjin Expressway (Fengnan—Jijinjie Section) in Hebei, the PRC Hebei Tangrun Expressway Co., Ltd. RMB172,524,000 45%# Investment in and operation and management of Hebei Tangjin Expressway (Shuangmiao— Chenzhuang Section) in Hebei, the PRC

F-61 Proportion of registered capital Registered held indirectly by Name of infrastructure joint venture capital the Company Principal activities Hunan Changyi (Baining) Expressway Co., RMB97,011,500 43.17%# Investment in and development, Ltd. operation and management of Hunan Changsha—Yiyang Expressway (Baining Section) in Hunan, the PRC Hunan Changyi (Cangyi) Expressway Co., RMB98,985,400 43.17%# Investment in and development, Ltd. operation and management of Hunan Changsha—Yiyang Expressway (Cangyi Section) in Hunan, the PRC Hunan Changyi Expressway Co., Ltd. RMB98,553,500 43.17%# Investment in and development, operation and management of Hunan Changsha—Yiyang Expressway (Changbai Section) in Hunan, the PRC Hunan Changyi (Hengcang) Expressway RMB101,695,200 43.17%# Investment in and development, Co., Ltd. operation and management of Hunan Changsha—Yiyang Expressway (Hengcang Section) in Hunan, the PRC Hunan Changyi (Ningheng) Expressway RMB98,458,100 43.17%# Investment in and development, Co., Ltd. operation and management of Hunan Changsha—Yiyang Expressway (Ningheng Section) in Hunan, the PRC Hunan Changyi (Zijiang No. 2 Bridge) RMB78,328,300 43.17%# Investment in and development, Expressway Co., Ltd. operation and management of Hunan Changsha—Yiyang Expressway (Zijiang No. 2 Bridge) in Hunan, the PRC Liuan Road Universe Liuye Highway RMB97,800,000 50%# Investment in, construction, operation Development Co., Ltd. and management of Liuan—Yeji Highway (Western Section) in Anhui, the PRC Liuan Road Universe Pihe Bridge RMB90,364,000 50%# Investment in, construction, operation Development Co., Ltd. and management of Pihe Bridge in Anhui, the PRC Pingdingshan Road King Xuchang— RMB73,400,000 50%# Investment in and development, Nanyang Highway (Xiangcheng Section) operation and management of Development Co., Ltd. National Highway 311 and Provincial Highway 103 Xunan Highway, (Xiangcheng Section) in Henan, the PRC Pingdingshan Road King Xuchang— RMB63,400,000 50%# Investment in and development, Nanyang Highway (Yexian Section) operation and management of Development Co., Ltd. National Highway 311 and Provincial Highway 103 Xunan Highway, (Yexian Section) in Henan, the PRC Shanxi Lutong Dongguan Highway RMB82,340,000 65%*# Investment in, operation and Co., Ltd. management of National Highway 108 Yuci Dongchangshou—Qixian Dongguan Highway in Shanxi, the PRC Shanxi Lutong Taiyu Highway Co., Ltd. RMB83,414,000 65%*# Investment in, operation and management of Taiyuan—Yuci Highway in Shanxi, the PRC Shanxi Lutong Yuci Highway Co., Ltd. RMB66,412,000 65%*# Investment in, operation and management of National Highway 108 Yuci City Bypass in Shanxi, the PRC

F-62 Proportion of registered capital Registered held indirectly by Name of infrastructure joint venture capital the Company Principal activities Shenzhen Airport—Heao Expressway RMB440,000,000 45%@ Construction and management of (Eastern Section) Co., Ltd. Shenzhen Airport—Heao Expressway (Eastern Section) in Shenzhen, the PRC Shijiazhuang Luhui Road & Bridge RMB88,000,000 60%*# Construction, operation and Development Co., Ltd. management of National Highway 307, Shijiazhuang—Gaocheng Highway in Hebei, the PRC Shijiazhuang Luxin Road & Bridge RMB44,000,000 60%*# Construction, operation and Development Co., Ltd. management of National Highway 307, Gaocheng—Jinzhou Highway in Hebei, the PRC Suzhou Road King Shanghai—Suzhou RMB130,000,000 50% Construction and management of Airport Road Development Co., Ltd. Provincial Highway 343, Suzhou— Shanghai Hongqiao Airport Highway (Suzhou Section) in Jiangsu, the PRC

* The Group exercises joint control over the financial and operating policies of these companies with other PRC joint venture partners in accordance with joint venture agreements, and accordingly, these companies have not been accounted for as subsidiaries. # The profit/cash sharing ratios in these infrastructure joint ventures differ from the proportion of the registered capital held by the Group over the duration of the joint ventures. During the early stage of the joint ventures, the Group is entitled to higher profit/cash sharing ratios than the proportion of registered capital held by the Group as contained in the relevant joint venture agreements. Thereafter, until such time as specified in the joint venture agreements, the other venturers of the joint ventures are entitled to profit/cash sharing ratios higher than their respective proportion of registered capital held by them as contained in the joint venture agreements. Thereafter, the profit/cash sharing ratios of the joint ventures may be the same as the proportion of their registered capital or in accordance with a predetermined ratio stipulated in the joint venture agreements. @ The Group’s interests in these two joint ventures were disposed of in 2009.

Property development joint venture

Particulars of the Group’s interest in a property development joint venture as at 31 December 2009 and 2008 are as follows:

Attributable Place of Principal place Registered interest to Principal Name of entity establishment of business capital the Group activity PRC PRC RMB 50,000,000 31.5% Property (“Shanghai Fengcheng”) development

The summary of aggregate financial information of the Group’s interests in the joint ventures which is accounted for using equity method, based on the adjusted financial statements prepared under HKFRSs, is as follows:

2009 2008 HK$’000 HK$’000 Income recognised in profit or loss ...... 1,239,397 1,832,810 Expenses recognised in profit or loss ...... (725,074) (923,051) Other comprehensive income ...... - - Current assets ...... 666,075 611,966 Non-current assets ...... 4,214,789 5,160,216 Current liabilities ...... (364,868) (482,499) Non-current liabilities ...... - -

F-63 21. Loan to a joint venture At 31 December 2009, the loan to a joint venture of HK$64,286,000 (2008: HK$70,787,000) represented a loan to Shanghai Fengcheng, which was secured, carried interest at a fixed rate of 5.6% (2008: 8.4%) per annum and recoverable within one year. During the year, the loan was renewed and the maturity date of the loan has been extended to September 2010.

22. Loans to related companies The loans to related companies represented the cash advances to former subsidiaries in which one of its shareholders is Wai Kee Holdings Limited (“Wai Kee”), which has significant beneficial interest in the Company. During the year, the loans have been renewed with revised repayment schedule and the maturity dates of the loans have been extended. During the renewal, an amount of HK$3,200,000 was repaid. The loans to related companies are unsecured, interest bearing at the London Interbank Offered Rate (“LIBOR”) or Hong Kong Interbank Offered Rate (“HIBOR”) plus 1.75% per annum up to February 2010 and at a fixed rate of 6.25% per annum for the period from March 2010 to the maturity dates of the respective loans (2008: LIBOR or HIBOR plus 1.7% per annum).

2009 2008 HK$’000 HK$’000 Maturity profile of loans to related companies repayable in: —August 2010 ...... 3,300 54,700 —August 2011 ...... 16,700 - —August 2012 ...... 31,500 - 51,500 54,700 Included in current assets ...... (3,300) - 48,200 54,700 The loans were denominated in: United States dollars ...... 31,500 31,500 Hong Kong dollars ...... 20,000 23,200 51,500 54,700

23. Long-term receivables 2009 2008 HK$’000 HK$’000 Minimum income undertakings (note (a)) ...... 4,995 10,344 Deferred consideration on disposal of interest in a joint venture (note (b)).. 27,211 14,157 Amount due from Huge Rise Investments Limited (“Huge Rise”) (note (c)) ... 510,397 551,858 542,603 576,359

Notes: (a) Included in long-term receivables and debtors aged more than 90 days of the Group are the amounts of HK$4,995,000 (2008: HK$10,344,000) and HK$8,163,000 (2008: HK$5,911,000) respectively representing minimum income undertakings due from the PRC joint venture partners. Minimum income undertakings have been recognised in accordance with the terms set out in the relevant joint venture agreements and are settled according to the schedules agreed with the relevant PRC joint venture partners. The revised repayment schedule of minimum income undertakings was agreed with the PRC joint venture partners in 2007 and the amounts will be fully repaid in 2011.

F-64 (b) The balance of HK$14,157,000 at 31 December 2008, which represented the deferred consideration arisen from disposal of an infrastructure joint venture to the PRC joint venture partner in 2006, was fully repaid by the PRC joint venture partner in 2009. The balance of HK$27,211,000 at 31 December 2009 represented the deferred consideration which arose from disposal of an infrastructure joint venture to a PRC joint venture partner in the current year (see note 35(a)(ii)) which will be fully repaid in 2011. The consideration due within one year of HK$27,211,000 at 31 December 2009 has been included in other receivables of the Group (see note 27). (c) The balance represented the cash advance to Huge Rise and its subsidiaries (“Huge Rise Group”), the independent third parties of the Group. On 4 January 2010, Huge Rise and the Company has revised the cash advance arrangement and agreed that the cash advance will be fully repaid by December 2014 and is interest bearing at 1% per annum over 3 month HIBOR. The credit risk on amount due from Huge Rise Group was disclosed in note 6(b)(ii).

24. Available-for-sale financial assets On 26 May 2007, , a wholly-owned subsidiary of Sunco Property Holdings Company Limited (“Sunco Property”), entered into sale and purchase agreements with certain subsidiaries of Sunco Real Estate Investment Limited (“Sunco Real Estate”), being the vendor, for the acquisition of, inter alia, the entire equity interests in and (collectively referred to as the “Tianjin Companies”) at a total cash consideration of RMB563,180,000 (equivalent to HK$632,787,000). Sunco Real Estate was controlled by Mr. Sun Hongbin (“Mr. Sun”), the then major beneficial owner of Sunco Property prior to the Group’s acquisitions of Sunco Property in 2007. Upon the completion of the acquisition of additional interest in Sunco Property by the Group on 20 July 2007, Sunco Property became an indirect subsidiary of the Company and, in the absence of the circumstances described below, the Tianjin Companies would also have become indirect subsidiaries of the Company, of which the Group would have 89.46% equity interests in them as at 31 December 2008.

As at 31 December 2008, although the Group’s PRC legal counsel confirmed that the legal procedures in respect of the acquisition of the Tianjin Companies were completed and the acquisition was legally enforceable under the relevant laws in the PRC, the Group had not yet obtained effective control over the Tianjin Companies as the former management of the Tianjin Companies did not allow the representatives of the Group to access to the then office of the Tianjin Companies, and hand over the official seals, the books and records as well as other relevant documents of the Tianjin Companies. As the Group did not obtain effective control or exercise significant influence over the operating and financing policies of the Tianjin Companies, the Tianjin Companies were not then considered as subsidiaries or associates of the Company and therefore the financial statements of the Tianjin Companies had not been consolidated into or equity accounted for in the Group’s consolidated financial statements for each of the two years ended 31 December 2008. Instead, the investments in the Tianjin Companies were accounted for as available-for-sale financial assets and had been recorded at cost less impairment as at 31 December 2008 and 2007 because the investments were unquoted equity shares whose range of reasonable fair value estimates was so significant that the Directors were of the opinion that the fair values could not be measured reliably. Based on the impairment review on the investments in the Tianjin Companies, in the opinion of the Directors, no impairment on the investment cost in the Tianjin Companies was considered necessary.

With the assistance provided by the Tianjin municipal government, the Group received the official seals of the Tianjin Companies on 24 August 2009 and was able to carry out the due diligence works on the books and records as well as other relevant documents of the Tianjin Companies in September 2009. In the opinion of the Directors, the Group obtained effective control to govern the financial and operating policies of the Tianjin Companies so as to obtain benefits from their activities in September 2009. Accordingly, the assets and liabilities of the Tianjin Companies and their results have been consolidated in the Group’s consolidated financial

F-65 statements since the date the Group obtained effective control. The assets and liabilities of the Tianjin Companies at the date of acquisition have been disclosed in note 34(a).

25. Inventory of properties

2009 2008 HK$’000 HK$’000 Completed properties held for sale ...... 2,433,293 1,511,717 Properties under development for sale (note) ...... 10,520,175 10,517,533 12,953,468 12,029,250

Note: Included in the amount are properties under development for sale of HK$1,664,383,000 (2008: HK$2,657,744,000) expected to be completed and delivered to the customers within twelve months from the end of the reporting period.

26. Prepayment for land leases

As at 31 December 2009, a total prepayment of HK$222,334,000 (2008: HK$107,865,000) was made for the acquisition of certain pieces of land in the PRC. Upon completion of the acquisition and delivery of relevant land title document to the Group, the prepaid amount will be transferred to the account of “Properties under development for sale”.

27. Debtors, deposits and prepayments

2009 2008 HK$’000 HK$’000 Aged analysis of debtors, presented based on invoice date (note (a)): Within 60 days ...... 11,227 12,279 60 to 90 days ...... 6,267 340 More than 90 days ...... 14,263 11,139 31,757 23,758 Deferred consideration on disposal of interest in a joint venture (notes 23(b) and 35(a)(ii)) ...... 27,211 14,719 Interest receivable ...... 1,439 253 Prepayment of business tax and other taxes ...... 115,904 101,573 Other receivables, deposits and prepayments (note (b)) ...... 154,640 545,760 330,951 686,063

Notes: (a) Other than the minimum income undertakings as mentioned in note 23(a), the debtors are mainly arisen from sale of properties. Consideration in respect of properties sold is paid in accordance with the terms of the related sale and purchase agreements, normally within 60 days from the agreements. Consideration under pre-sale contracts will be fully received prior to the delivery of the properties to the purchasers. (b) At 31 December 2009, included in other receivables, deposits and prepayments is an amount of HK$31,746,000 (2008: HK$31,461,000) representing the tender deposits paid to the local government or its agents for the tender of several pieces of land through public auctions. The tender deposits will be refunded if the Group fails to acquire the pieces of land during the tender. The public auction of these tender deposits paid will be taking place within one year and the amounts are classified as short-term deposits. In November 2007, the Group entered into a cooperative agreement (“Cooperative Agreement”) for carrying out development to render several pieces of land in Jinan province. The prepayment as at 31 December 2008 was HK$381,573,000. In 2009, the Group entered into a settlement agreement dated 28 April 2009 to terminate the Cooperative Agreement. The prepayment would be refunded together with a fixed return of HK$18,140,000 by installment. As at 31 December 2009, an amount of HK$351,474,000 has already been settled and the outstanding balance of HK$51,700,000 will be settled before 30 June 2010.

F-66 The Group has insignificant trade receivable balances which are past due at the end of the reporting period. Included in trade debtors are minimum income undertakings of HK$8,163,000 (2008: HK$5,911,000) which are settled according to an agreed repayment schedule, the remaining trade debtor balance has been substantially settled subsequent to the end of the reporting period, no impairment loss is recognised.

In determining the recoverability of trade debtors, 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. The concentration of credit risk is limited because the customer base is large and unrelated. Accordingly, the Directors believe that there is no credit provision required at the end of the reporting period.

28. Pledged bank deposits/bank balances and cash

Included in pledged bank deposits were bank balances of HK$206,553,000 (2008: HK$163,723,000) which are pledged as securities in favour of banks for mortgage facilities granted to the buyers of the Group and short-term facilities granted to the Group.

Bank balances carry interest at market rates which range from 0.01% to 1.17% (2008: 0.02% to 1.17%) per annum. The average effective interest rate of pledged bank deposits was 0.36% (2008: 0.36%) per annum.

The Group’s pledged bank deposits and bank balances and cash that are denominated in currencies other than the functional currencies of the relevant group entities are set out below:

2009 2008 HK$’000 HK$’000 Hong Kong dollars ...... 353,122 119,667 United States dollars ...... 60,544 34,573

29. Share capital

2009 2008 2009 2008 Number of Number of HK$’000 HK$’000 shares shares Authorised: Ordinary shares of HK$0.1 each ...... 20,000,000,000 20,000,000,000 2,000,000 2,000,000 7.5% convertible preference shares (“CP shares”) of HK$0.1 each ...... 518,380 518,380 52 52

Issued and fully paid: Ordinary shares At 1 January ...... 738,926,566 752,646,566 73,893 75,265 Issue of shares upon exercise of share options ...... 190,000 40,000 19 4 Shares repurchased and cancelled .... - (13,760,000) - (1,376) At 31 December ...... 739,116,566 738,926,566 73,912 73,893

As a result of the exercise of the Company’s share options during the year, 190,000 (2008: 40,000) ordinary shares were issued by the Company as detailed in note 30.

F-67 During the year ended 31 December 2008, the Company repurchased its own shares through the Stock Exchange as follows:

No. of Aggregate ordinary shares Price per share consideration Month of repurchase of HK$0.1 each Highest Lowest paid HK$ HK$ HK$’000 August 2008 ...... 626,000 6.16 5.85 3,746 September 2008 ...... 2,862,000 6.28 4.26 15,550 October 2008 ...... 8,454,000 4.30 1.65 20,310 November 2008 ...... 1,818,000 2.60 1.96 4,151 13,760,000 43,757

The above shares were cancelled upon repurchase.

None of the Company’s subsidiaries purchased, sold or redeemed any of the Company’s listed shares during the year.

30. Share option scheme

The share option scheme was adopted by the Company in 2003. The purpose of the scheme is to provide selected participants with the opportunity to acquire proprietary interests of the Company in order to encourage those participants to work towards enhancing the value of the Company and its shares for the benefit of the Company and its shareholders as a whole. The participants include full-time employees, executives or officers and directors of the Company or any of its subsidiaries.

The total number of shares which may be issued under the share option scheme and any other schemes of the Company must not in aggregate exceed 10% (the “10% Limit”) of the shares in issue as at the date of adoption of the share option scheme less the aggregate of exercised, cancelled and outstanding options. On 15 May 2007, renewal of the 10% share option scheme mandate limit was approved by the shareholders and the total number of options available for grant at 31 December 2009 under the share option scheme was 54,650,156. At 31 December 2009, the number of shares in respect of which options had been granted and remained outstanding under the scheme was 33,185,000, representing approximately 4.49% of the Company’s issued share capital at that date. The 10% Limit may be refreshed with the approval of shareholders of the Company. The maximum number of shares that may be issued upon exercise of all outstanding options granted and are yet to be exercised under the share option scheme and any other schemes must not exceed 30% of the shares in issue from time to time. The total number of shares issued and to be issued upon exercise of the options granted to each participant (including exercised, lapsed/cancelled and outstanding options) in any 12-month period must not exceed 1% of the shares in issue unless the same is approved by the shareholders.

The option exercisable period commences on the commencement date (the date upon which the options are granted and accepted) of such options and ends on the fifth anniversary of the commencement date. Each participant must pay HK$1 as consideration for the grant of options within 28 days from the date of offer.

F-68 The exercise price shall be determined by the Board, being not less than the highest of (a) the closing price of the shares as stated in the Stock Exchange’s daily quotation sheet on the date of offer; (b) the average of the official closing prices of the shares stated in the Stock Exchange’s daily quotation sheets for the 5 business days immediately preceding the date of offer; and (c) the nominal value of the shares.

The share option scheme shall be valid and effective for a period of 10 years commencing on the adoption date, i.e. 12 May 2003.

No share options were granted by the Group in 2008 and 2009.

The following tables disclose details of the Company’s share options held by Directors and employees and movements in such holdings during the year.

2009

Lapsed/ Balance Exercised cancelled Balance Exercise at during during at Date of grant Exercisable period price 1.1.2009 the year the year 31.12.2009 HK$ Directors 26 August 2004 26 August 2004 to 25 August 2009 5.70 140,000 (140,000) - - 14 December 2005 14 December 2005 to 13 December 2010 5.80 2,700,000 - - 2,700,000 20 December 2006 20 December 2006 to 19 December 2011 11.66 9,800,000 - - 9,800,000 6 November 2007 6 November 2007 to 5 November 2012 14.85 10,200,000 - - 10,200,000 22,840,000 (140,000) - 22,700,000

Employees 26 August 2004 26 August 2004 to 25 August 2009 5.70 390,000 (50,000) (340,000) - 14 December 2005 14 December 2005 to 13 December 2010 5.80 100,000 - - 100,000 20 December 2006 20 December 2006 to 19 December 2011 11.66 4,192,000 - (517,000) 3,675,000 6 November 2007 6 November 2007 to 5 November 2012 14.85 7,360,000 - (650,000) 6,710,000 12,042,000 (50,000) (1,507,000) 10,485,000 34,882,000 (190,000) (1,507,000) 33,185,000 Weighted average exercise price 12.70 5.70 11.69 12.79

F-69 2008

Lapsed/ Balance Exercised cancelled Balance Exercise at during during at Date of grant Exercisable period price 1.1.2008 the year the year 31.12.2008 HK$ Directors 26 August 2004 26 August 2004 to 25 August 2009 5.70 140,000 - - 140,000 14 December 2005 14 December 2005 to 13 December 2010 5.80 2,700,000 - - 2,700,000 20 December 2006 20 December 2006 to 19 December 2011 11.66 10,050,000 - (250,000) 9,800,000 6 November 2007 6 November 2007 to 5 November 2012 14.85 10,300,000 - (100,000) 10,200,000 23,190,000 - (350,000) 22,840,000 Employees 17 October 2003 17 October 2003 to 16 October 2008 5.15 135,000 (30,000) (105,000) - 26 August 2004 26 August 2004 to 25 August 2009 5.70 390,000 - - 390,000 14 December 2005 14 December 2005 to 13 December 2010 5.80 110,000 (10,000) - 100,000 20 December 2006 20 December 2006 to 19 December 2011 11.66 5,730,000 - (1,538,000) 4,192,000 6 November 2007 6 November 2007 to 5 November 2012 14.85 9,160,000 - (1,800,000) 7,360,000 15,525,000 (40,000) (3,443,000) 12,042,000 38,715,000 (40,000) (3,793,000) 34,882,000 Weighted average exercise price 12.73 5.31 13.08 12.70

The weighted average closing price of the Company’s shares immediately before the date on which share options were exercised during the year is HK$5.92 (2008: HK$9.51).

31. Bank and other borrowings

2009 2008 HK$’000 HK$’000 Senior notes (note (a)) ...... 2,692,473 2,681,952 Guaranteed notes (note (b)) ...... 1,522,085 1,558,978 Bank loans (note (c)) ...... 2,186,720 2,921,683 6,401,278 7,162,613

F-70 The maturity of the above loans is as follows:

2009 2008 HK$’000 HK$’000 Unsecured borrowings repayable: Within one year ...... 113,379 268,539 More than one year but not exceeding two years ...... 1,522,085 - More than two years but not exceeding five years ...... 2,791,501 2,709,890 More than five years ...... - 1,531,040

4,426,965 4,509,469

Secured borrowings repayable: Within one year ...... 1,087,946 1,156,346 More than one year but not exceeding two years ...... 559,119 648,356 More than two years but not exceeding five years ...... 327,248 848,442

1,974,313 2,653,144

Total borrowings ...... 6,401,278 7,162,613 Less: Amount due within one year shown under current liabilities ...... (1,201,325) (1,424,885) Amount due over one year shown under non-current liabilities ...... 5,199,953 5,737,728

Notes: (a) The senior notes are listed on the stock exchange in Singapore. The notes include carrying amount of HK$1,536,047,000 (2008: HK$1,531,040,000), which bear interest at a fixed rate of 7.625% per annum and will mature in May 2014. The senior notes with carrying amount of HK$1,156,426,000 (2008: HK$1,150,912,000), which bear interest at a floating rate of three month LIBOR plus 2.25% per annum which will mature in May 2012. The fair value of the senior notes based on the quoted asked price at 31 December 2009 was HK$2,466,750,000 (2008: HK$1,493,700,000). (b) The guaranteed notes, which are listed on the stock exchange in Singapore, bear interest at a fixed rate of 6.25% per annum and will mature in July 2011. The fair value of the guaranteed notes based on the quoted asked price at 31 December 2009 was HK$1,482,975,000 (2008: HK$889,200,000). (c) Bank loans with carrying amount of HK$1,025,582,000 (2008: HK$746,283,000) bear interest at a fixed rate of 4.86% to 7.08% (2008: 5.84% to 9.07%) per annum. Interest rates on the remaining bank loans, which carried at floating interest rates, range from 1.39% to 1.87% (2008: 2.50% to 3.10%) per annum.

The Group’s borrowings that are denominated in currencies other than the functional currencies of the relevant group entities are set out below:

2009 2008 HK$’000 HK$’000 Hong Kong dollars ...... 99,028 478,515 United States dollars ...... 5,276,669 5,937,815

F-71 32. Deferred taxation

The following are the major deferred tax liabilities (assets) recognised and movements thereon during the current and prior years:

Undistributed Fair value earnings of Interest adjustment subsidiaries Change in capitalised on properties and joint fair value of on properties Tax under ventures investment under losses development in the PRC properties development Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 At 1 January 2008 .... (129,211) 47,349 - - 69,155 (12,707) Charge (credit) for the year ...... 61,263 (16,399) 46,000 - 32,671 123,535 Exchange adjustments ...... (7,956) 4,253 - - 173 (3,530) At 31 December 2008 ...... (75,904) 35,203 46,000 - 101,999 107,298 Charge (credit) for the year ...... 22,765 (13,234) 2,292 10,169 (6,765) 15,227 Exchange adjustments ...... (346) 10 57 35 99 (145) At 31 December 2009 ...... (53,485) 21,979 48,349 10,204 95,333 122,380

Note: Deferred tax has been provided for (i) fair value adjustment on properties under development for sale; (ii) temporary differences between the carrying amount and the tax base of properties under development for sale, arising from the capitalisation of certain interest expenses in properties under development for sale in consolidation level; (iii) undistributed earnings of subsidiaries and joint ventures in the PRC; (iv) change in fair value of investment properties and (v) the tax losses.

For the purpose of presentation in the consolidated statement of financial position, certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances for financial reporting purposes:

2009 2008 HK$’000 HK$’000 Deferred tax assets ...... (31,506) (40,700) Deferred tax liabilities ...... 153,886 147,998 122,380 107,298

Deferred tax assets has not been recognised in the consolidated financial statements in respect of deductible temporary differences amounting to HK$342,472,000 (2008: HK$87,920,000) due to the unpredictability of future taxable profit streams.

At 31 December 2009, the Group has estimated unused tax losses of HK$1,214,351,000 (2008: HK$875,765,000) available to offset against future profits. A deferred tax asset has been recognised in respect of HK$213,938,000 (2008: HK$303,614,000) of such losses. No deferred tax asset has been recognised in respect of the remaining losses of HK$1,000,413,000 (2008: HK$572,151,000) due to the unpredictability of future taxable profit streams. Such remaining unrecognised tax losses of HK$1,000,413,000 (2008: HK$572,151,000) will expire within five years from the end of the reporting period.

F-72 33. Creditors and accrued charges

2009 2008 HK$’000 HK$’000 Aged analysis of creditors, presented based on invoice date: Within 60 days ...... 9,299 33,332 60 to 90 days ...... 11,339 2,770 More than 90 days ...... 99,722 105,386 120,360 141,488 Accrued construction costs ...... 1,872,993 1,157,891 1,993,353 1,299,379 Interest payable ...... 66,385 70,384 Accrued taxes (other than EIT and LAT) ...... 15,595 13,750 Other accrued charges ...... 363,482 373,298 2,438,815 1,756,811

34. Acquisition of subsidiaries

(a) Year ended 31 December 2009

As detailed in note 24, the Group received the official seals of the Tianjin Companies on 24 August 2009 and obtained the effective control over the Tianjin Companies by September 2009. The financial results of the Tianjin Companies were consolidated to the Group’s consolidated financial statements since the date that the Group has obtained effective control over the Tianjin Companies. It was accounted for as purchase of assets.

The Group acquired and assumed the following assets and liabilities respectively through acquisition of the Tianjin Companies.

HK$’000 Net assets acquired: Property, plant and equipment ...... 831 Completed properties held for sale ...... 268,749 Properties under development for sale ...... 2,010,724 Debtors, deposits and prepayments ...... 11,061 Prepaid income tax ...... 28,379 Bank balances and cash ...... 914 Creditors and accrued charges ...... (907,595) Deposits from pre-sale of properties ...... (48,992) Income tax payable ...... (9,112) 1,354,959 Satisfied by: Transferred from available-for-sale financial assets and advances to investees .... 1,354,959 Net cash inflow arising on acquisition: Bank balances and cash acquired ...... 914

F-73 (b) Year ended 31 December 2008

In November 2008, the Group entered into a sale and purchase agreement with a wholly-owned subsidiary of Build King Holdings Limited, a company listed on the Stock Exchange in which certain Directors have beneficial interests, pursuant to which the Group acquired the remaining 40% equity interest in Value Ahead Limited engaging in investment holding, at a cash consideration of HK$9,425,000. Previously Value Ahead Limited was a jointly controlled entity of the Company which, together with its subsidiary, carried out building construction for the Group in the PRC. After the completion of the acquisition, Value Ahead Limited became a wholly- owned subsidiary of the Company.

The Group had acquired and assumed the following assets and liabilities through the acquisition of subsidiaries.

HK$’000 Net assets acquired: Property, plant and equipment ...... 2,113 Amounts due from related companies ...... 52,411 Debtors, deposits and prepayments ...... 1,718 Bank balances and cash ...... 1,578 Amounts due to shareholders ...... (14,136) Amounts due to related companies ...... (4,272) Creditors and accrued charges ...... (29,986) 9,426 Satisfied by: Transferred from interest in a joint venture ...... 1 Cash consideration ...... 9,425 9,426 Net cash outflow arising on acquisition: Cash consideration paid ...... (9,425) Bank balances and cash acquired ...... 1,578 (7,847)

Value Ahead Limited had insignificant contributions to Group’s profit after taxation, operating, investing and financing cash flows for the period between the date of acquisition and at the end of the reporting period.

35. Disposal of interests in joint ventures

(a) Year ended 31 December 2009

(i) Shenzhen Airport-Heao Expressway (Eastern Section) Co., Ltd.

On 1 June 2009, the Group entered into a sale and purchase agreement to dispose of its 45% equity interest in Shenzhen Airport-Heao Expressway (Eastern Section) Co., Ltd. to the PRC joint venture partner at a cash consideration of HK$1,207,684,000. The gain on disposal of the joint venture was recognised in profit or loss.

F-74 The disposal of the Group’s interest in the joint venture during the year had the following effects:

HK$’000 Cost of investment ...... 584,864 Share of post-acquisition undistributed profits and other comprehensive income . . . 253,130 Reduction of cost of investment ...... (202,364) Carrying amount of interest in the joint venture disposed of ...... 635,630 Expenses in connection with the disposal ...... 8,640 Gain on disposal ...... 563,414 Total consideration ...... 1,207,684 Satisfied by: Cash consideration ...... 1,207,684 Net cash inflow arising on disposal: Cash consideration ...... 1,207,684 Expenses in connection with the disposal ...... (8,640) 1,199,044

During the year, other than the consideration received from disposal of the interest in a joint venture, the disposed joint venture had contributed to the Group’s profit after taxation of HK$99,743,000 and investing cash flow of HK$47,511,000.

(ii) Guangxi Hengjing Highway Development Co., Ltd. On 31 March 2009, the Group entered into a sale and purchase agreement to dispose of its 70% equity interest in Guangxi Hengjing Highway Development Co., Ltd. to the PRC joint venture partner at a cash consideration of HK$124,270,000. The gain on disposal of the joint venture was recognised in profit or loss. The Group’s disposal of its interest in the joint venture during the year had the following effects:

HK$’000 Cost of investment ...... 118,365 Share of post-acquisition undistributed profits and other comprehensive income . . . 81,929 Reduction of cost of investment ...... (91,995) Carrying amount of interest in the joint venture disposed of ...... 108,299 Expenses in connection with the disposal ...... 788 Gain on disposal ...... 15,183 Total consideration ...... 124,270 Satisfied by: Cash consideration ...... 52,841 Deferred consideration—current portion ...... 44,218 Deferred consideration—non-current portion (note 23(b)) ...... 27,211 124,270 Net cash inflow arising on disposal: Cash consideration ...... 52,841 Expenses in connection with the disposal ...... (788) 52,053

F-75 Notes: (a) Included in the current portion of deferred consideration, HK$17,007,000 has been received up to 31 December 2009 and the remaining balance of HK$27,211,000 was included in other receivables as disclosed in note 27. (b) During the year, other than the consideration received from disposal of the interest in the joint venture, the disposed joint venture had no significant contribution to the Group’s profit after taxation, operating, investing and financing cash flows.

(b) Year ended 31 December 2008

On 25 July 2008, the Group entered into a sale and purchase agreement to dispose of its 61% equity interest in Luodingshi Luochong Highway Co., Ltd. to the PRC joint venture partner at a cash consideration of HK$62,697,000. The gain on disposal of the joint venture was recognised in profit or loss.

The Group’s disposal of its interest in the joint venture during the year ended 31 December 2008 had the following effects:

HK$’000 Cost of investment ...... 169,767 Share of post-acquisition undistributed profits ...... 97,550 Reduction of cost of investment ...... (200,495) Net assets disposed of ...... 66,822 Translation reserve released ...... (15,296) Expenses in connection with the disposal ...... 899 Gain on disposal ...... 10,272 Total consideration ...... 62,697 Satisfied by: Cash consideration ...... 62,697 Cash inflow arising on disposal: Cash consideration ...... 62,697

During the year ended 31 December 2008, other than the consideration received from disposal of the joint venture, it had no significant contribution to the Group’s profit after taxation, operating, investing and financing cash flows.

36. Retirement benefit plans For the operations in Hong Kong, the Group operates a Mandatory Provident Fund Scheme (the “Scheme”) for all qualifying employees including Directors in Hong Kong. The assets of the Scheme are held separately from those of the Group in funds under the control of the independent trustee. Both the Group and the employees contribute a fixed percent to the Scheme based on their monthly salary in accordance with government regulations. The Scheme contributions represent contributions payable to the fund by the Group at rates specified in the rules of the Scheme. Where there are employees who leave the Scheme prior to vesting fully in the contributions, the amount of the forfeited contributions will be used to reduce future contributions payable by the Group. There were no forfeited contributions available to reduce future contributions at the end of the reporting period.

For the operations in the PRC, the employees of the Group’s subsidiaries in the PRC are members of a state-managed retirement benefit scheme operated by the government. The subsidiaries are

F-76 required to contribute a fixed percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement scheme is to make the specified contributions.

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 HK$’000 HK$’000 Within one year ...... 6,402 5,702 In the second to fifth year inclusive ...... 26,069 22,521 Over five years ...... 85,723 83,099 118,194 111,322

Pursuant to the rental agreement, the rental income is charged to and received from the tenant based on a certain percentage of turnover of the relevant operation that occupied the properties, subject to a minimum fixed charge commencing from late 2010.

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 HK$’000 HK$’000 Within one year ...... 12,543 20,167 In the second to fifth year inclusive ...... 3,790 48,858 Over five years ...... - 125,826 16,333 194,851

The commitments represent rentals payable by the Group for its offices and staff quarters with the lease periods ranging from one to five years. During the year, the lease of a hotel property with a lease term of twenty years was terminated.

Monthly rental was fixed and recognised over the terms of the leases.

38. Capital commitments

At the end of the reporting period, the Group was committed to invest HK$562,675,000 (2008: HK$455,217,000) to develop a shopping mall in Changzhou for investment purpose.

39. Contingent liabilities

(a) At 31 December 2009, the Group provided guarantees of HK$3,433,161,000 (2008: HK$3,095,774,000) to banks in favour of its customers in respect of the mortgage loans provided by the banks to such customers for the purchase of the Group’s developed properties. These

F-77 guarantees provided by the Group to the banks would be released upon receiving the building ownership certificate of the respective property by the banks from the customers as a pledge for security to the mortgage loan granted. The Directors considered that the fair value of such guarantees on initial recognition was insignificant.

(b) At 31 December 2008, the Group provided guarantees in favour of banks to provide credit facilities to the Tianjin Companies, of which the Group has obtained effective control in 2009 as described in note 24, amounting to HK$337,079,000. The bank loans were secured by a pledge of the properties including land and properties under development for sale held by the Tianjin Companies. The bank loans were fully repaid by the Group during the year and the guarantees provided by the Group were released accordingly.

At 31 December 2008, an amount of HK$20,337,000 had been recognised in the consolidated statement of financial position as liabilities and included in other accrued charges as set out in note 33.

40. Litigation

Other than set out in note 24, the Group and Huge Rise filed a writ of summons against Sunco China Holdings Limited, Sunco Management Holdings Limited (both of which are beneficially owned by Mr. Sun) and Mr. Sun (collectively referred to as the “Defendants”) in October 2007, to claim for the loss and damage related to the payment of certain construction costs, tax expenses and penalty in relation to violation of certain development regulations in the PRC, which were undisclosed by Mr. Sun in connection with the acquisition of certain companies, including the Tianjin Companies, from the Defendants. These undisclosed liabilities have been recognised and recorded by the Group after the date of acquisition.

The processes for the discovery of evidence and preparation of witness statements have been completed and the trial will soon commence.

41. Pledge of assets

At the end of the reporting period, other than the pledged bank deposits as disclosed in note 28, the Group’s inventory of properties of HK$3,744,759,000 (2008: HK$2,074,124,000) were pledged and the shares of certain of the Company’s subsidiaries were pledged to secure the banking facilities granted to the Group.

42. Related party transactions

Other than set out in notes 21, 22, 34(b), 35 and 45 to the consolidated financial statements, the Group had significant transactions with the following related parties during the year, details of which are as follows:

Related parties Nature 2009 2008 HK$’000 HK$’000 Property construction joint venture ...... Construction cost paid - 87,366 Property development joint venture ...... Interest income 7,795 2,071 Related companies (Note) ...... Interest income 1,544 2,581

Note: Loan interest income of HK$1,544,000 (2008: HK$2,581,000) was received from former subsidiaries in which Wai Kee is now having a significant beneficial interest.

F-78 Details of the connected transactions of the Group are set out under the heading of “Connected Transactions” in the Directors’ Report.

Compensation of key management personnel The remuneration of Directors and other members of key management during the year was as follows: 2009 2008 HK$’000 HK$’000 Short-term employment benefits ...... 65,262 68,756 Post-employment benefits ...... 2,889 3,049 68,151 71,805

The remuneration of Directors and key executives is determined by the performance of individuals and market trends.

43. Principal subsidiaries Details of the Company’s principal subsidiaries at 31 December 2009 and 2008 are as follows: Issued and fully Proportion of paid ordinary nominal value of Place of share capital/ issued ordinary shares incorporation/ Place of paid registered capital/registered capital Principal Name of subsidiary registration operation capital held by the Company activities Directly Indirectly %% Changzhou Great Gallop PRC PRC US$91,745,300 - 100 Development Properties and sale of Developments Ltd.* properties Changzhou Great PRC PRC RMB123,500,000 - 100 Development Superior Properties and sale of Developments Ltd.* properties Changzhou Greatmind PRC PRC RMB100,000,000 - 100 Development Properties and sale of Developments Ltd.* properties Guangzhou Junde Real PRC PRC RMB60,000,000 - 100 Development Estate Limited* and sale of properties Guangzhou Junya Real PRC PRC RMB60,220,000 - 100 Development Estate Limited* and sale of properties Guangzhou Junyue Real PRC PRC RMB456,593,792 - 100 Development Estate Limited* and sale of properties RK Properties Finance British Virgin # US$1 - 100 Provision of (2007) Limited Islands (“BVI”) financial services RK Properties Holdings BVI # US$1 - 100 Investment Limited holding RK Properties Hong Kong Hong Kong HK$1 - 100 Provision of Management Limited management services

F-79 Issued and fully Proportion of paid ordinary nominal value of Place of share capital/ issued ordinary shares incorporation/ Place of paid registered capital/registered capital Principal Name of subsidiary registration operation capital held by the Company activities Directly Indirectly %% RKI Finance Limited BVI # US$1 100 - Provision of financial services Road King (China) BVI PRC HK$1,300,000,000 100 - Investment Infrastructure Limited holding Road King Infrastructure BVI # US$1 100 - Provision of Finance (2004) Limited financial services Road King Infrastructure BVI # US$1 100 - Provision of Finance (2007) Limited financial services Road King Infrastructure Hong Kong Hong Kong HK$2 - 100 Provision of Management Limited management services Sunco Property Holdings BVI # US$250 - 89.46 Investment Company Limited holding Tianjin Kingsvalue Real PRC PRC RMB678,500,000 - 89.46 Investment Estate Investment holding Management Limited* Tianjin Sunco Binhai Land PRC PRC RMB600,000,000 - 89.46 Investment Co., Ltd.* holding Tianjin Sunco Binhai Real PRC PRC RMB760,000,000 - 89.46 Investment Estate Investment holding Management Limited* *** PRC PRC RMB300,000,000 - 89.46 Development and sale of properties *** PRC PRC RMB50,000,000 - 89.46 Development and sale of properties *** PRC PRC RMB10,000,000 - 89.46 Development and sale of properties PRC PRC RMB90,000,000 - 89.46 Development *** and sale of properties PRC PRC RMB40,000,000 - 89.46 Development *** and sale of properties PRC PRC RMB50,000,000 - 89.46 Development *** and sale of properties *** PRC PRC RMB55,000,000 - 89.46 Development and sale of properties *** PRC PRC RMB40,000,000 - 89.46 Development and sale of properties

F-80 Issued and fully Proportion of paid ordinary nominal value of Place of share capital/ issued ordinary shares incorporation/ Place of paid registered capital/registered capital Principal Name of subsidiary registration operation capital held by the Company activities Directly Indirectly %% PRC PRC RMB110,000,000 - 89.46 Development *** and sale of properties PRC PRC RMB160,000,000 - 89.46 Development *** and sale of properties Zhengzhou Keshu Real PRC PRC RMB235,000,000 - 89.46 Development Estate Co., Ltd.** and sale of properties *** PRC PRC RMB130,000,000 - 89.46 Development and sale of properties PRC PRC RMB250,000,000 - 89.46 Development *** and sale of properties ** PRC PRC RMB2,114,077,636 - 100 Development and sale of properties

# The subsidiaries of the Company are either investment holding or provision of financial services companies only and do not have any operations. * The subsidiaries of the Company are registered as wholly foreign owned enterprises in the PRC. ** The subsidiaries of the Company are registered as sino-foreign equity joint venture enterprises in the PRC. *** The subsidiaries of the Company are registered as limited liability companies in the PRC.

The above table lists the subsidiaries of the Company which, in the opinion of the Directors, principally affect the results of the year or constituted a substantial portion of the net assets of the Group. To give details of other subsidiaries would, in the opinion of the Directors, result in particulars of excessive length.

None of the subsidiaries had any debt securities at the end of the year except for Road King Infrastructure Finance (2004) Limited and Road King Infrastructure Finance (2007) Limited, which have issued HK$1,522,085,000 (2008: HK$1,558,978,000) of guaranteed notes and HK$2,692,473,000 (2008: HK$2,681,952,000) of senior notes respectively.

44. Total assets less current liabilities/net current assets

The Group’s total assets less current liabilities at 31 December 2009 amounted to HK$15,386,182,000 (2008: HK$15,419,328,000). The Group’s net current assets at 31 December 2009 amounted to HK$10,042,778,000 (2008: HK$8,590,609,000).

45. Event after the reporting period

On 1 December 2009, the Group entered into a sale and purchase agreement with Wai Kee, pursuant to which the Group will acquire 5.28% additional equity interest in Sunco Property, a subsidiary of the Company engaging in investment holding, from Wai Kee at a cash consideration

F-81 of HK$88,310,000. The transaction was completed on 27 January 2010. Sunco Property has a number of subsidiaries engaging in property development business. After the acquisition, the Company’s interest in Sunco Property has been increased from 89.46% to 94.74%. The cash consideration was fully paid by the Group before the end of the reporting period and included in the non-current assets of the consolidated statement of financial position.

F-82 Independent auditor’s report The following is the text of our audited consolidated financial statements for the year ended December 31, 2008, included in pages F-65 through F-124, reproduced from the annual report of Road King Infrastructure Limited for the same period. References to page numbers are to page numbers of such annual report of Road King Infrastructure Limited for the year ended December 31, 2008. To the shareholders of Road King Infrastructure Limited (incorporated in Bermuda with limited liability) We have audited the consolidated financial statements of Road King Infrastructure Limited and its subsidiaries (collectively referred to as the “Group”) set out on pages 55 to 125, which comprise the consolidated balance sheet as at 31 December 2008, and the consolidated income statement, consolidated statement of changes in equity and consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. Directors’ responsibility for the consolidated financial statements The Directors of the Company are responsible for the preparation and the true and fair presentation of these consolidated financial statements in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants and the disclosure requirements of the Hong Kong Companies Ordinance. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor’s responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to report our opinion solely to you, as a body, in accordance with section 90 of The Companies Act of Bermuda, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and true and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

F-83 Opinion In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of the Group as at 31 December 2008 and of the Group’s profit and cash flows for the year then ended in accordance with HKFRSs and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance. Without qualifying our opinion we draw attention to notes 23 and 38 to the consolidated financial statements. The Group currently has not obtained effective control over and (collectively referred to as the “Tianjin Companies”) despite the fact that the board of directors of the Tianjin Companies was appointed by the Group, due to the circumstances described in note 23, and accordingly, the Group has not accounted for the Tianjin Companies as subsidiaries of the Group. The Group has commenced legal proceedings against the former management of the Tianjin Companies with a view to obtain effective control over these companies. However, the legal proceedings against the former management of the Tianjin Companies are temporarily suspended on the basis that unspecified facts which relate to those proceedings may overlap with unspecified matters under investigation by Tianjin authorities. In January 2009, the Company received a notice from Tianjin authorities advising that their investigation was completed. Based on the advice of the Group’s legal counsel in the People’s Republic of China (“PRC”), it is highly probable that the Group could lift the suspension of the legal proceedings, which will result in the effective continuation of the Group’s legal proceedings against the former management of the Tianjin Companies. The Directors, based on advice of the Group’s PRC legal counsel, are of the firm belief that the court ruling will be favourable to the Group and accordingly, the Group will be able to assume effective control over the Tianjin Companies in the foreseeable future. Based on the impairment review on the investments in the Tianjin Companies, as mentioned in note 23, in the opinion of the Directors of the Company, no impairment on the investment cost in the Tianjin Companies is considered necessary. However, as the timing of re-opening of the court hearing and the eventual outcome of the court proceedings cannot be determined with certainty, there exist uncertainties which may affect the following: • the Group being unable to obtain effective control over the Tianjin Companies or otherwise realise the underlying properties of the Tianjin Companies, thereby impacting the recoverability of the Group’s investments in these companies amounting to HK$632,787,000 as at 31 December 2008; and • the bank seeking payment from the Group in relation to credit facilities to the Tianjin Companies amounting to HK$337,079,000 as at 31 December 2008 which have been guaranteed by the Group as described in note 38, in the event that the Tianjin Companies are not in a position to repay and the properties pledged by the Tianjin Companies are insufficient to cover the credit facilities by the maturity dates in June 2009. Other than the fair value of the guarantees amounting to HK$22,000,000 as at the date the guarantee were initially given and HK$20,337,000 as at the date the credit facilities were renewed in July 2008, no provision for any liability or impairment that may result has been made in the consolidated financial statements.

Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong 2 April 2009

F-84 Consolidated income statement For the year ended 31 December 2008

Notes 2008 2007 HK$’000 HK$’000 Revenue ...... 7 4,630,672 2,407,770 Cost of sales ...... (4,110,060) (1,741,789) Gross profit ...... 520,612 665,981 Interest income ...... 19,972 96,189 Other income ...... 373,008 420,886 Selling expenses ...... (112,784) (91,506) Operating expenses ...... (510,385) (371,302) Share of results of joint ventures ...... 9 909,759 577,107 Share of results of an associate ...... - 12,267 Finance costs ...... 10 (156,855) (100,670) Profit before taxation ...... 11 1,043,327 1,208,952 Income tax expenses ...... 13 (366,693) (342,811) Profit for the year ...... 676,634 866,141

Attributable to: Shareholders of the Company ...... 656,429 851,067 Minority interests ...... 20,205 15,074

676,634 866,141 Dividends paid ...... 14 248,286 372,698 Earnings per share ...... 15 —Basic ...... HK$0.87 HK$1.16 —Diluted ...... HK$0.87 HK$1.14

F-85 Consolidated balance sheet At 31 December 2008

Notes 2008 2007 HK$’000 HK$’000 ASSETS Non-current assets Property, plant and equipment ...... 16 57,346 103,881 Prepaid lease payments for land ...... 17 33,293 49,912 Investment properties ...... 18 143,851 - Interests in joint ventures ...... 19 5,289,683 5,170,093 Loans to joint ventures ...... 20 - 81,196 Loans to related companies ...... 21 54,700 54,700 Deferred tax assets ...... 31 40,700 81,862 Long-term receivables ...... 22 576,359 433,132 Available-for-sale investments ...... 23 632,787 592,821 6,828,719 6,567,597

Current assets Inventory of properties ...... 24 12,029,250 10,379,463 Prepayment for land leases ...... 25 107,865 1,393,210 Prepaid lease payments for land ...... 17 938 1,365 Loan to a joint venture ...... 20 70,787 - Debtors, deposits and prepayments ...... 26 686,063 769,764 Prepaid income tax ...... 225,699 226,432 Pledged bank deposits ...... 27 163,723 231,583 Bank balances and cash ...... 27 796,098 1,858,941 14,080,423 14,860,758 Total assets ...... 20,909,142 21,428,355

F-86 Notes 2008 2007 HK$’000 HK$’000 EQUITY AND LIABILITIES Equity attributable to shareholders of the Company Share capital ...... 28 73,893 75,265 Reserves ...... 9,295,568 8,397,151

9,369,461 8,472,416 Minority interests ...... 164,141 151,527 Total equity ...... 9,533,602 8,623,943

Non-current liabilities Bank and other borrowings—due after one year ...... 30 5,737,728 6,114,771 Deferred tax liabilities ...... 31 147,998 69,155

5,885,726 6,183,926

Current liabilities Creditors and accrued charges ...... 32 1,756,811 1,663,877 Deposits from pre-sale of properties ...... 2,095,694 4,127,823 Income tax payable ...... 212,424 219,839 Bank and other borrowings—due within one year ...... 30 1,424,885 608,947

5,489,814 6,620,486 Total equity and liabilities ...... 20,909,142 21,428,355

The consolidated financial statements on pages 55 to 125 were approved and authorised for issue by the Board of Directors on 2 April 2009 and are signed on its behalf by:

Zen Wei Pao, William Ko Yuk Bing Director Director

F-87 Consolidated statement of changes in equity For the year ended 31 December 2008

Attributable to shareholders of the Company Share Share Share Translation Special option Statutory Retained Minority Total capital premium reserve reserve reserve reserve profits Total interests equity HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note 1) (Note 2) Balance at 1 January 2007 ...... 69,008 2,522,627 257,722 1,260,000 36,795 - 2,631,416 6,777,568 - 6,777,568 Exchange differences arising on translation to presentation currency recognised directly in equity ...... - - 497,594 - - - - 497,594 187 497,781 Released upon disposal of infrastructure joint ventures ...... - - (7,838) - - - - (7,838) - (7,838) Profit for the year ...... ------851,067 851,067 15,074 866,141 Total recognised income and expense for the year ...... - - 489,756 - - - 851,067 1,340,823 15,261 1,356,084 Sub-total ...... 69,008 2,522,627 747,478 1,260,000 36,795 - 3,482,483 8,118,391 15,261 8,133,652 Recognition of equity-settled expense—share based payments . . - - - - 66,783 - - 66,783 - 66,783 Placement of new shares ...... 4,500 544,500 - - - - - 549,000 - 549,000 Expenses incurred in relation to the placement of new shares ...... - (10,368) - - - - - (10,368) - (10,368) Issue of ordinary shares upon exercise of share options ...... 1,757 119,551 - - - - - 121,308 - 121,308 Transfer upon exercise of share options ...... - 8,002 - - (8,002) - - - - - Forfeiture of share options ...... - - - - (62) - 62 - - - Acquisition of subsidiaries ...... ------136,266 136,266 Dividends ...... ------(372,698) (372,698) - (372,698) Appropriation ...... - - - - - 10,867 (10,867) - - - Balance at 31 December 2007 ...... 75,265 3,184,312 747,478 1,260,000 95,514 10,867 3,098,980 8,472,416 151,527 8,623,943 Exchange differences arising on translation to presentation currency recognised directly in equity ...... - - 547,742 - - - - 547,742 9,388 557,130 Released upon disposal of an infrastructure joint venture ...... - - (15,296) - - - - (15,296) - (15,296) Profit for the year ...... ------656,429 656,429 20,205 676,634 Total recognised income and expense for the year ...... - - 532,446 - - - 656,429 1,188,875 29,593 1,218,468 Sub-total ...... 75,265 3,184,312 1,279,924 1,260,000 95,514 10,867 3,755,409 9,661,291 181,120 9,842,411 Issue of ordinary shares upon exercise of share options ...... 4 209 - - - - - 213 - 213 Transfer upon exercise of share options ...... - 2 - - (2) - - - - - Forfeiture of share options ...... - - - - (9,721) - 9,721 - - - Shares repurchased and cancelled . . . (1,376) (42,381) - - - - - (43,757) - (43,757) Acquisition of additional interest in a subsidiary ...... ------(16,979) (16,979) Dividends ...... ------(248,286) (248,286) - (248,286) Appropriation ...... - - - - - 22,078 (22,078) - - - Balance at 31 December 2008 ...... 73,893 3,142,142 1,279,924 1,260,000 85,791 32,945 3,494,766 9,369,461 164,141 9,533,602

Note 1: Special reserve was arisen on group reorganisation representing the difference between the nominal amount of the share capital issued by the Company and the aggregate of the nominal amount of the issued share capital of a subsidiary, which was acquired by the Company pursuant to the group reorganisation. Note 2: The statutory reserve of the Group represents reserve required by relevant laws of the People’s Republic of China (the “PRC”) applicable to the Company’s PRC subsidiaries.

F-88 Consolidated cash flow statement For the year ended 31 December 2008

Notes 2008 2007 HK$’000 HK$’000 Operating activities Profit before taxation ...... 1,043,327 1,208,952 Adjustments for: Depreciation of property, plant and equipment ...... 13,958 4,104 Interest income ...... (19,972) (96,189) Finance costs ...... 156,855 100,670 Share-based payments ...... - 66,783 Gain on disposal of interests in infrastructure joint ventures ...... 34 (10,272) (11,130) Share of results of joint ventures ...... (909,759) (577,107) Share of results of an associate ...... - (12,267) Loss on disposal of property, plant and equipment, net ...... 1,017 251 Operating cash flows before movements in working capital ...... 275,154 684,067 Decrease in debtors, deposits and prepayments ...... 80,731 1,941,473 (Increase) decrease in completed properties held for sale ...... (94,334) 309,948 Decrease (increase) in properties under development for sale ...... 1,651,149 (997,246) Increase (decrease) in creditors and accrued charges ...... 113,963 (2,937,647) (Decrease) increase in deposits from pre-sale of properties ...... (2,310,409) 240,146 Payment for land leases ...... (1,197,439) (730,992) Cash used in operations ...... (1,481,185) (1,490,251) Income tax paid ...... (249,578) (204,851) Net cash used in operating activities ...... (1,730,763) (1,695,102) Investing activities Dividends received from infrastructure joint ventures ...... 410,898 474,504 Returns on investments from infrastructure joint ventures ...... 671,647 255,211 Decrease (increase) in pledged bank deposits ...... 67,860 (57,538) Proceeds on disposal of interests in infrastructure joint ventures ...... 34 62,697 128,000 Interest received ...... 24,660 96,958 Proceeds on disposal of property, plant and equipment ...... 2,168 666 Increase in long-term receivables ...... (114,027) (12,000) Purchases of property, plant and equipment ...... (86,360) (85,889) Acquisition of additional interest in a subsidiary ...... (16,979) - Net cash outflow from acquisition of subsidiaries ...... 33 (7,847) (685,849) Acquisition of an associate ...... 33 - (275,741) Repayment from a related company ...... - 363,636 Repayment of deferred consideration arising from disposal of an infrastructure joint venture ...... - 31,067 Capital contributions to infrastructure joint ventures ...... - (8,911) Loans to associates ...... - (806,896) Loan to a joint venture ...... - (66,316) Additions to prepaid lease payments for land ...... - (51,277) Net cash from (used in) investing activities ...... 1,014,717 (700,375) Financing activities New borrowings raised ...... 2,103,839 4,826,117 Issue of ordinary shares ...... 213 670,308 Repayment of borrowings ...... (1,821,737) (1,623,113) Interest paid ...... (448,839) (393,328) Dividends paid ...... (248,286) (372,698) Repurchase of ordinary shares ...... (43,757) - Expenses incurred in connection with the issue of shares ...... - (10,368) Net cash (used in) from financing activities ...... (458,567) 3,096,918 Net (decrease) increase in cash and cash equivalents ...... (1,174,613) 701,441 Cash and cash equivalents at beginning of the year ...... 1,858,941 1,113,374 Effect of foreign exchange rate changes ...... 111,770 44,126 Cash and cash equivalents at end of the year, represented by bank balances and cash ...... 796,098 1,858,941

F-89 Notes to the consolidated financial statements For the year ended 31 December 2008 1. General

The Company is an exempted company incorporated in Bermuda and its shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). The address of the registered office is Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda and principal place of business of the Company is Suite 501, 5/F, Tower 6, The Gateway, 9 Canton Road, Tsimshatsui, Kowloon, Hong Kong.

The Company is an investment holding company. The principal activities of the Group are the development, operation and management of toll roads through the infrastructure joint ventures and operation of property development business in the People’s Republic of China (the “PRC”). The principal activities of the major subsidiaries and joint ventures are detailed in notes 42 and 19 respectively.

The functional currency of the Company and the Group’s jointly controlled entities and its major subsidiaries is Renminbi (“RMB”). However, the financial statements of the Group are presented in Hong Kong dollars as the Directors consider this presentation is more useful for its current and potential investors.

2. Application of new and revised Hong Kong financial reporting standards

In the current year, the Group has applied, the following amendments and new interpretations (“new HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), which are or have become effective.

HKAS 39 & HKFRS 7 (Amendments) . . . Reclassification of Financial Assets HK(IFRIC)-Int 11 ...... HKFRS 2: Group and Treasury Share Transactions HK(IFRIC)-Int 12 ...... Service Concession Arrangements HK(IFRIC)-Int 14 ...... HKAS 19—The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

The Directors have made an assessment on the impact of the new HKFRSs, especially the HK(IFRIC)—Int 12 “Service Concession Arrangements”. Upon the adoption of HK(IFRIC)—Int 12, the service concession rights held by the Group’s infrastructure joint ventures are no longer recognised as property, plant and equipment and are recorded as intangible assets. There is no change in the method of amortisation of concession intangible assets as stated in the accounting policy in note 3 before and after the adoption of HK(IFRIC)—Int 12. As these joint ventures are accounted for by the Group on an equity accounting basis, the Directors concluded that the adoption of these new HKFRSs had no material effects on the results or financial position of the Group for the current or prior accounting periods. Accordingly, no prior period adjustment was required.

F-90 The Group has not early applied the new and revised standards, amendments and interpretations that have been issued but are not yet effective.

HKFRSs (Amendments) ...... Improvements to HKFRSs1 HKAS 1 (Revised) ...... Presentation of Financial Statements2 HKAS 23 (Revised) ...... Borrowing Costs2 HKAS 27 (Revised) ...... Consolidated and Separate Financial Statements3 HKAS 32 & 1 (Amendments) ...... Puttable Financial Instruments and Obligations Arising on Liquidation2 HKAS 39 (Amendment) ...... Eligible Hedged Items3 HKFRS 1 & HKAS 27 Cost of an Investment in a Subsidiary, Jointly Controlled (Amendments) ...... Entity or Associate2 HKFRS 2 (Amendment) ...... Vesting Conditions and Cancellations2 HKFRS 3 (Revised) ...... Business Combinations3 HKFRS 7 (Amendments) ...... Improving Disclosures about Financial Instruments2 HKFRS 8 ...... Operating Segments2 HK(IFRIC)-Int 9 & HKAS 39 (Amendments) ...... Embedded Derivatives4 HK(IFRIC)-Int 13 ...... Customer Loyalty Programmes5 HK(IFRIC)-Int 15 ...... Agreements for the Construction of Real Estate2 HK(IFRIC)-Int 16 ...... Hedges of a Net Investment in a Foreign Operation6 HK(IFRIC)-Int 17 ...... Distributions of Non-cash Assets to Owners3 HK(IFRIC)-Int 18 ...... Transfers of Assets from Customers7

1 Effective for annual periods beginning on or after 1 January 2009 except for the amendments to HKFRS 5, effective for annual periods beginning on or after 1 July 2009 2 Effective for annual periods beginning on or after 1 January 2009 3 Effective for annual periods beginning on or after 1 July 2009 4 Effective for annual periods ending on or after 30 June 2009 5 Effective for annual periods beginning on or after 1 July 2008 6 Effective for annual periods beginning on or after 1 October 2008 7 Effective for transfers on or after 1 July 2009

The application of HKFRS 3 (Revised) may affect the Group’s accounting for business combinations for which the acquisition date is on or after 1 January 2010. HKAS 27 (Revised) will affect the accounting treatment for changes in the Group’s ownership interest in a subsidiary.

The application of the amendment to HKAS 40 “Investment Property” arising from improvements to HKFRSs may affect the accounting for property under construction or development for future use as an investment property of the Group. The amendment to HKAS 40 brings such property within the scope of HKAS 40 which, therefore, shall be accounted for under the fair value model in accordance with the Group’s accounting policy. Such property is currently accounted for at cost less impairment in accordance with HKAS 16 “Property, Plant and Equipment”. The amendment is to be applied prospectively and is effective for the Group’s financial year beginning on or after 1 January 2009.

HK(IFRIC)—Int 15 clarifies the timing of revenue recognition in relation to real estate sales, which will be effective for annual periods beginning on or after 1 January 2009. The Directors have made assessment on the potential impact of this interpretation and concluded that no material effect on the results or financial position of the Group will be affected.

F-91 The Directors of the Company anticipate that the application of the other new and revised standards, amendments or interpretations will have no material impact on the results and the financial position of the Group.

3. Significant accounting policies

The consolidated financial statements have been prepared on the historical cost basis except for investment properties which are measured at fair values.

The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the HKICPA. In addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange and the Hong Kong Companies Ordinance. The principal accounting policies adopted are as follows:

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

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

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

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 in excess of the minority’s interest 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 identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under HKFRS 3 “Business Combinations” are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with HKFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”, which are recognised and measured at fair value less costs to sell.

F-92 Acquisition of additional interests in subsidiaries is recorded at the book value of the net assets attributable to the interests. The excess of the carrying amounts of net assets attributable to the interests over the cost of the acquisition is recognised as discount on acquisition.

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 identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.

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

Revenue recognition

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

Sale of properties

Income from sale of properties is recognised upon the relevant properties have been completed and delivered to the purchasers pursuant to the sales agreement. Deposits received from sale of properties are recorded as “Deposits from pre-sale of properties” under current liabilities.

Property rentals

Rentals receivable under operating leases are recognised and credited to the consolidated income statement on a straight line basis over the relevant lease term.

Contingent rental income (representing income over and above base rent) such as turnover rent, is recognised according to the terms of the lease agreements when the amount can be reliably measured, in the accounting period in which they are earned.

Others

Minimum income undertakings are recognised when receivable in accordance with the joint venture agreements.

Interest income from a financial 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 discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

Dividend income from investments is recognised when the Group’s right to receive payment has been established.

Property, plant and equipment

Property, plant and equipment are stated at cost less subsequent accumulated depreciation and accumulated impairment losses.

F-93 Depreciation is provided to write off the cost of items of property, plant and equipment over their estimated useful lives and after taking into account of their estimated residual value, using the straight line method.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to 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 consolidated income statement in the year in which the item is derecognised.

Prepaid lease payments for land

The prepaid lease payments represent payment for land use rights, other than those included in the properties under development for sale, which are initially recognised at cost and released to consolidated income statement over the lease term on a straight line basis.

Investment properties

Investment property, which is property 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. Gain or losses arising from changes in the fair value of investment property are included in profit or loss for the period in which they arise.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use or no future economic benefits 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 consolidated income statement in the year in which the item is derecognised.

Properties under development for investment properties

Property that is being constructed or developed for future use as an investment property is classified as property under development and carried at cost less recognised impairment loss until construction or development is complete, at which time it is reclassified to and subsequently accounted for as investment property carried at fair value. Any difference between fair value of the property at that date and its previous carrying amount is recognised in profit or loss.

Joint ventures

Joint venture arrangements that involve the establishment of a separate entity in which venturers have joint control over the economic activity of the entity are referred to as jointly controlled entities. In particular, joint venture arrangements which involve the establishment of a separate entity in which the Group and other venturers have joint control over the investment in and development, operation and management of toll roads and in which each venturer has an interest are referred to as infrastructure joint ventures.

The Group’s infrastructure joint ventures are Sino-foreign co-operative joint ventures registered in the PRC in respect of which the partners’ cash/profit sharing ratios upon the expiration of the

F-94 joint venture periods are predetermined in accordance with the joint venture agreements and may not be in proportion to their capital contribution ratios. Where the Group’s interest in the joint venture is such that it establishes joint control over the economic activity of the joint venture with other venturers, the Group’s interests in the joint ventures are accounted for under equity method of accounting and are carried at cost plus its share of post-acquisition changes in the Group’s share of the net assets of the jointly controlled entities less any identified impairment loss. When the Group’s share of losses of a jointly controlled entity equals or exceeds its interest in that jointly controlled entity (which includes any long-term interests that, in substance, form part of the Group’s net investment in the 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, profits or losses are eliminated to the extent of the Group’s interest in the jointly controlled entity.

Toll road operation right of joint ventures The concession intangible assets, which are the toll road operation rights of the Group’s infrastructure joint ventures, are amortised to write off their cost, over their expected useful lives or the remaining concession period, whichever is shorter, commencing from the date of commencement of operation of the underlying toll roads using an amortisation method which reflects the pattern in which the intangible asset’s future economic benefits are expected to be consumed.

Investments in associates An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting, except when the investment is classified as held for sale (in which case it is accounted for under HKFRS 5 “Non-current Assets Held For Sale and Discontinued Operations”), or when the investment is designated as at fair value through profit or loss upon initial recognition or is classified as held for trading (in which case it is accounted for under HKAS 39 “Financial Instruments: Recognition and Measurement”). Under the equity method, investments in associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the associates, less any identified impairment loss. When the Group’s share of loss of an associate equals or exceeds its interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate), 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 associate.

Impairment of tangible assets At each balance sheet date, 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

F-95 the recoverable amount of an asset is 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, to the extent 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 under development for sale

Properties under development for sale are stated at the lower of cost and net realisable value. Net realisable value takes into account the price ultimately expected to be realised, less applicable selling expenses and the anticipated costs to completion.

The cost of properties under development for sale comprises land costs, construction costs, borrowing costs capitalised according to the Group’s accounting policy and directly attributable expenses incurred during the development period. On completion, the properties are transferred to completed properties held for sale.

Completed properties held for sale

Completed properties held for sale are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average cost method. Net realisable value takes into account the price ultimately expected to be realised, less applicable selling expenses.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, are capitalised as part of the cost of those assets. Capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

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

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recorded in its functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are re-translated at the rates prevailing on the balance sheet date. 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 profit or loss in the period in which they arise.

F-96 For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into the presentation currency of the Group (i.e. Hong Kong dollars) at the rate of exchange prevailing at the balance sheet date, and their income and expenses are translated at the average exchange rates for the year, unless exchange rates fluctuate significantly during the period, in which case, the exchange rates prevailing at the dates of transactions are used. Exchange differences arising, if any, are recognised as a separate component of equity (the translation reserve).

Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All the other leases are classified as operating leases.

The Group as lessor Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Contingent rental income (representing income over and above base rent) such as turnover rent, is recognised according to the terms of the lease agreements when the amount can be reliably measured, in the accounting period in which they are earned.

The Group as lessee Rentals payable under operating leases are charged to profit or loss on a straight line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are recognised as a reduction of rental expense over the lease term on a straight line basis.

Retirement benefit costs Payments to defined contribution retirement benefit plans and the Mandatory Provident Fund Scheme are charged as an expense when employees have rendered service entitling them to the contributions.

Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from the profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years, and it further excludes income statement items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and

F-97 liabilities are not recognised if the temporary difference arises from goodwill (or negative 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 profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, associates 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.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Financial instruments

Financial assets and financial liabilities are recognised on the balance sheet when a group entity becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets

The Group’s financial assets are classified into loans and receivables, and available-for-sale financial assets.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset 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 on points 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 financial asset, or, where appropriate, a shorter period.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. At each balance sheet date subsequent to initial recognition, loans and receivables (including loans to joint ventures and related companies, long- term receivables, debtors, pledged bank deposits and bank balances and cash) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment loss on financial assets below).

F-98 Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated or not classified as “financial assets at fair value through profit or loss” and as loans and receivables.

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 instruments are measured at cost less any identified impairment losses at each balance sheet date subsequent to initial recognition (see accounting policy on impairment loss on financial assets below).

Impairment of financial assets

Financial assets are assessed for indicators of impairment at each balance sheet date. 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 financial asset, the estimated future cash flows of the financial assets have been impacted.

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

For all other financial assets, objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty;

• default or delinquency in interest or principal payments; or

• it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

For certain categories of financial assets, such as debtors, assets that are assessed not to be impaired individually are subsequently 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, observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, an impairment loss is recognised in profit 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 the estimated future cash flows discounted at the original effective interest rate.

For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

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

F-99 For financial 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 recognised impairment loss is reversed through profit 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.

Impairment losses on available-for-sale equity investments will not be reversed in profit or loss in subsequent periods.

Financial liabilities and equity

Financial liabilities and equity instruments issued by a group entity are classified according to the substance of the contractual arrangements entered into and the definitions of a financial 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. The Group’s financial liabilities are generally classified into other financial liabilities.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

Interest expense is recognised on an effective interest basis.

Other financial liabilities

Other financial liabilities (including creditors, bank and other borrowings) are subsequently measured at amortised cost using the effective interest method.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. A financial guarantee contract issued by the Group and not designated as at fair value through profit or loss is recognised initially at its fair value less transaction costs that are directly attributable to the issue of the financial guarantee contract. Subsequent to initial recognition, the Group measures the financial guarantee contract at the higher of: (i) the amount determined in accordance with HKAS 37 “Provisions, Contingent Liabilities and Contingent Assets”; and (ii) the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with HKAS 18 “Revenue”.

F-100 Derecognition

Financial assets are derecognised when the rights to receive cash flows from the assets expire, or the financial assets are transferred and the Group has transferred substantially all the risks and rewards of ownership of the financial assets. On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognised in profit or loss. If the Group retains substantially all the risks and rewards of ownership of a transferred asset, the Group continues to recognise the financial asset and recognise a collateralised borrowing for proceeds received.

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the Directors’ best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.

Share-based payment transactions

For share options granted to Directors and employees of the Company, the fair value of services received determined by reference to the fair value of share options granted at the grant date is recognised as an expense in full at the grant date when the share options granted vest immediately, with a corresponding increase in equity (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 or are still not exercised at the expiry date, the amount previously recognised in share option reserve will be transferred to retained profits.

4. Critical accounting judgments and key sources of estimation uncertainty

In the application of the Group’s accounting policies, which are described in note 3, the Directors of the Company are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

F-101 Key sources of estimation uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Amortisation of toll road operation rights

Amortisation of toll road operation rights of the Group’s infrastructure joint venture is recognised to write off their cost on a units-of-usage basis whereby amortisation is provided based on the share of traffic volume for a particular year over projected total traffic volume throughout the operating years of the respective toll road. If it is considered appropriate, independent professional traffic studies will be obtained. These projections require the use of judgments and estimates.

Estimated impairment of available-for-sale financial assets

For available-for-sale financial assets, they are stated at cost less impairment and the deterioration in the financial position of the Tianjin Companies (as defined in note 23) and the decline in market values of the properties held by the Tianjin Companies are considered to be objective evidence of impairment. Judgment is required when determining whether it is necessary to make any impairment on the investment cost in the Tianjin Companies.

In carrying out the impairment review by the Group, the fair values of the properties held by the Tianjin Companies, including land, properties under development and completed properties held for sale, have been arrived at on the basis of a valuation carried out on that date by an independent firm of professional valuers not connected to the Group.

In addition, as mentioned in note 23, the management of the Group has carried out sufficient due diligence works to verify the ownership of the properties and the actual and contingent liabilities of the Tianjin Companies. In 2006, the PRC government had reinforced the compliance of regulation on idle land confiscation which was issued by the Ministry of Land Resources of the PRC on 26 April 1999. Certain land currently held by the Tianjin Companies may be potentially classified as idle land. The management of the Group has assessed the issue, and based on the legal advice, as long as the Group can resume the project development of Tianjin Companies shortly, the idle land confiscation and potential penalty charge will not be materialised.

Against these backgrounds, the Directors are of the opinion that it is not necessary to make any impairment on the investment cost in the Tianjin Companies.

Bank guarantees to the Tianjin Companies

As at 31 December 2008, the Group has given bank guarantees to the Tianjin Companies. No provision has been made in the consolidated financial statements in respect of the full bank guarantees amount given to the Tianjin Companies, and details of the judgment of the Directors of the Company are set out in note 38.

F-102 5. 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 balance.

The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 30, and equity attributable to equity holders of the Company, comprising issued capital and reserves.

The management of the Group reviews the capital structure periodically. As a part of this review, the management of the Group assesses the annual budget which incorporates the planned construction projects and takes into account of the provision of funding. Based on the proposed annual budget, the management of the Group considers the cost of capital and the risks associated with the capital. The management of the Group also balances 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 management of the Group monitors the utilisation of bank borrowings and ensures full compliance with loan covenants during the year and as at the balance sheet date.

6. Financial instruments

(a) Categories of financial instruments

2008 2007 HK$’000 HK$’000 Financial assets Loans and receivables at amortised cost (including cash and cash equivalents) ...... 2,224,724 3,210,335 Available-for-sale investments ...... 632,787 592,821

Financial liabilities Liabilities at amortised cost ...... 8,813,152 8,374,595 Financial guarantee contracts ...... 20,337 13,000

(b) Financial risk management objectives and policies

The management of the Group has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

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

There has been no change to the Group’s exposure to market risks or the manner in which it manages and measures these risks.

F-103 (i) Market risk

The Group’s activities expose it primarily to the financial risks of changes in foreign exchange rate and interest rates.

Foreign currency risk management

Certain transactions of the Group are denominated in foreign currencies which are different from the functional currency of the Group and therefore the Group is exposed to foreign currency risk. The Group currently does not have a foreign currency hedging policy. However, the management of the Group monitors foreign exchange exposure and will consider hedging significant foreign exchange exposure should the need arise. The carrying amounts of the Group’s foreign currency denominated monetary assets and liabilities at the reporting date are as follows:

Assets Liabilities 2008 2007 2008 2007 HK$’000 HK$’000 HK$’000 HK$’000 United States dollars ...... 68,939 185,682 6,006,545 5,907,877 Hong Kong dollars ...... 147,006 99,775 508,989 129,350

Foreign currency sensitivity analysis

The following table details the Group’s sensitivity to a 5% increase and decrease in the Renminbi against the relevant foreign currencies. 5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the possible change in foreign exchange rate. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 5% change in foreign currency rate. A positive number below indicates an increase in profit where Renminbi strengthens against the relevant currencies. For a 5% weakening of Renminbi against the relevant currencies, there would be an equal and opposite impact on the profit, and the balances below would be negative.

Profit or loss 2008 2007 HK$’000 HK$’000 United States dollars ...... 296,880 286,110 Hong Kong dollars ...... 18,099 1,479

The Group’s sensitivity to foreign currency has increased during the year ended 31 December 2008, mainly attributable to the larger outstanding bank and other borrowings denominated in United States dollars.

Interest rate risk management

The Group has exposed to cash flow interest rate risk due to the fluctuation of the prevailing market interest rate on loans to related companies and bank and other borrowings which carry at prevailing market interest rates.

F-104 The Group’s fair value interest rate risk relates primarily to loans to joint ventures and bank and other borrowings which carry at fixed interest rates. The Group currently does not use any derivative contracts to hedge its exposure to interest rate risk. However, the management will consider hedging significant interest rate exposure should the need arise.

Interest rate sensitivity

The sensitivity analysis below have been determined based on the exposure to interest rates for non-derivative instruments at the balance sheet date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates. A 100 basis point increase or decrease 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 100 basis points higher/lower and all other variables were held constant, the Group’s profit for the year ended 31 December 2008 would decrease/increase by HK$10,583,000 (2007: decrease/increase by HK$6,516,000) after capitalisation of additional finance costs in properties under development for sale of HK$22,597,000 (2007: HK$22,367,000). This is mainly attributable to the increase in the bank and other borrowings.

(ii) Credit risk management

As at 31 December 2008, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties is arising from:

• The carrying amount of the respective recognised financial assets as stated in the consolidated balance sheet; and

• The amount of contingent liabilities in relation to financial guarantee issued by the Group as disclosed in note 38.

In order to minimise the credit risk, the management of the Group has policies in place 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 management of the Group reviews the recoverable amount of each debtor at each balance sheet date to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the management of the Group considers that the Group’s credit risk is significantly reduced.

The management of the Company considers that the credit risk on liquid funds is low as counterparties are banks which do not have liquidity problem.

Other than the long-term receivables as mentioned in note 22, the Group has no significant concentration of credit risk, with exposure spread over a number of counterparties having similar characteristics. Included in long-term receivables are receivables of HK$551,858,000 (2007: HK$391,336,000) which are secured by the properties held by an independent third party, and the Directors of the Company considered that the credit risk exposure has been reduced accordingly.

For properties that are still under construction, the Group typically provides guarantees to banks in connection with the customers’ borrowing of mortgage loans to finance for the amount up to

F-105 70% of their total purchase price of the properties. If a purchaser defaults on the payment of its mortgage during the term of the guarantee, the bank holding the mortgage may demand the Group to repay the outstanding amount under the loan and any accrued interest thereon. Under current market condition, the mortgage facilities are secured by the properties with the market price higher than the guaranteed amounts. In this regard, the management of the Group considers the Group’s credit risk is significantly reduced.

(iii) Liquidity risk management

In the management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. The management of the Group monitors the utilisation of bank and other borrowings and ensures compliance with loan covenants.

The Group relies on bank and other borrowings as a significant source of liquidity. As at 31 December 2008, the Group has available unutilised banking facilities of HK$175,281,000 (2007: HK$937,895,000).

Ultimate responsibility for liquidity risk management rests with the management of the Group which has built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate working capital and available banking facilities and continuously monitors the forecast and actual cash flows.

F-106 Liquidity and interest risk tables

The following table details the Group’s remaining contractual maturity for its financial liabilities. For non-derivative financial liabilities, the table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay.

Weighted average effective Total interest 6 months 6-12 Over 5 undiscounted Carrying rate or less months 1-2 years 2-5 years years cash flows amount % HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 2008 Creditors and accrued charges ...... - 1,629,534 3,152 17,853 - - 1,650,539 1,650,539 Financial guarantee contracts ...... - 20,337 - - - - 20,337 20,337 Bank and other borrowings —fixed rate ...... 6.92 415,462 358,757 451,365 2,020,409 1,619,339 4,865,332 3,836,301 —floating rate ...... 4.53 325,016 733,532 544,221 2,166,411 - 3,769,180 3,326,312 2,390,349 1,095,441 1,013,439 4,186,820 1,619,339 10,305,388 8,833,489

2007 Creditors and accrued charges ...... - 1,429,025 11,840 210,012 - - 1,650,877 1,650,877 Financial guarantee contracts ...... - 13,000 - - - - 13,000 13,000 Bank and other borrowings —fixed rate ...... 7.22 371,369 392,007 415,203 2,129,227 1,712,619 5,020,425 3,830,220 —floating rate ...... 6.69 199,949 99,757 615,134 2,736,238 - 3,651,078 2,893,498 2,013,343 503,604 1,240,349 4,865,465 1,712,619 10,335,380 8,387,595

(c) Fair value of financial instruments

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

• the fair value of financial assets and financial liabilities is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions and dealer quotes for similar instruments; and

• the fair value of financial guarantee contracts at initial recognition is determined using option pricing models where the main assumptions are the probability of default by the specified counterparty extrapolated from market-based credit information and the amount of loss, given the default.

Other than set out in note 30, the Directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the consolidated financial statements approximate to their fair values.

F-107 7. Revenue

An analysis of the Group’s revenue for the year is as follows:

2008 2007 HK$’000 HK$’000 Revenue of the Group Sale of completed properties held for sale ...... 4,630,672 2,407,770 Share of toll revenue of infrastructure joint ventures ...... 1,698,633 1,281,524 Revenue of the Group and share of revenue of infrastructure joint ventures ...... 6,329,305 3,689,294

8. Segmental information

The businesses based upon which the Group reports its primary segment information are as follows:

Toll road ...... - development, operation and management of toll roads through the infrastructure joint ventures Property development ...... - development and sale of properties

The Group’s revenue and profit for the year ended 31 December 2008 by business activities and geographical markets are as follows:

By business segments:

Toll Property road development Unallocated Consolidated HK$’000 HK$’000 HK$’000 HK$’000 2008 Revenue ...... - 4,630,672 - 4,630,672 Segment results ...... (18,649) (10,359) - (29,008) Gain on disposal of interest in an infrastructure joint venture ...... 10,272 - - 10,272 Interest income ...... - - 19,972 19,972 Corporate income ...... - - 335,561 335,561 Corporate expenses ...... - - (46,374) (46,374) Share of results of joint ventures ...... 899,617 10,142 - 909,759 Finance costs ...... - - (156,855) (156,855) Profit before taxation ...... 1,043,327 Income tax expenses ...... (366,693) Profit for the year ...... 676,634

F-108 Property Toll road development Unallocated Consolidated HK$’000 HK$’000 HK$’000 HK$’000 Consolidated Balance Sheet Assets Segment assets ...... 16,950 12,981,014 - 12,997,964 Interests in joint ventures ...... 5,260,470 29,213 - 5,289,683 Loan to a joint venture ...... - 70,787 - 70,787 Unallocated corporate assets ...... - - 2,550,708 2,550,708 Total assets ...... 20,909,142

Liabilities Segment liabilities ...... 438 3,675,890 - 3,676,328 Unallocated corporate liabilities ...... - - 7,699,212 7,699,212 Total liabilities ...... 11,375,540

Other information Capital additions ...... 44 89,799 91 89,934 Depreciation ...... 191 12,961 806 13,958

Toll Property road development Unallocated Consolidated HK$’000 HK$’000 HK$’000 HK$’000 2007 Revenue ...... - 2,407,770 - 2,407,770 Segment results ...... (17,597) 441,909 - 424,312 Gain on disposal of interests in infrastructure joint ventures ...... 11,130 - - 11,130 Interest income ...... - - 96,189 96,189 Corporate income ...... - - 367,792 367,792 Corporate expenses ...... - - (179,175) (179,175) Share of results of joint ventures ...... 574,835 2,272 - 577,107 Share of results of an associate ...... - 12,267 - 12,267 Finance costs ...... - - (100,670) (100,670) Profit before taxation ...... 1,208,952 Income tax expenses ...... (342,811) Profit for the year ...... 866,141

F-109 Property Toll road development Unallocated Consolidated HK$’000 HK$’000 HK$’000 HK$’000 Consolidated Balance Sheet Assets Segment assets ...... 21,448 12,659,828 - 12,681,276 Interests in joint ventures ...... 5,152,386 17,707 - 5,170,093 Loans to joint ventures ...... - 81,196 - 81,196 Unallocated corporate assets ...... - - 3,495,790 3,495,790 Total assets ...... 21,428,355

Liabilities Segment liabilities ...... 2,148 5,645,633 - 5,647,781 Unallocated corporate liabilities ...... - - 7,156,631 7,156,631 Total liabilities ...... 12,804,412

Other information Capital additions ...... 276 98,853 1,401 100,530 Depreciation ...... 314 2,607 1,183 4,104 Share-based payments ...... - - 66,783 66,783

By geographical segments: Over 90% of the Group’s turnover and contribution to operation profit is attributable to customers in the PRC. Accordingly, no analysis of geographical segment is presented in both years.

9. Share of results of joint ventures 2008 2007 HK$’000 HK$’000 Share of post-acquisition profits of infrastructure joint ventures before amortisation and taxation ...... 1,220,488 931,084 Less: Amortisation of toll road operation rights ...... (208,821) (201,756) Current tax ...... (100,050) (70,093) Deferred tax ...... (12,000) (84,400) 899,617 574,835 Share of post-acquisition profits of other joint ventures ...... 10,142 2,272 909,759 577,107

The current tax amount represents the share of the PRC enterprise income tax attributable to the PRC infrastructure joint ventures. Deferred tax has been provided for temporary differences between the carrying amount of toll road operation right and the corresponding tax base used in the computation of taxable profits for the PRC infrastructure joint ventures. For the infrastructure joint ventures that enjoyed preferential rate of 15% or lower up to 31 December 2007, based on a grandfathering provision, the tax rate increases progressively to 25% over five years from 1 January 2008 onwards.

F-110 10. Finance costs

2008 2007 HK$’000 HK$’000 Interest on: Borrowings wholly repayable within five years ...... 319,882 311,430 Borrowings not wholly repayable within five years ...... 122,468 73,851 Total borrowing costs ...... 442,350 385,281 Other finance costs ...... 27,254 29,649

469,604 414,930 Less: Capitalised in properties under development for sale ...... (312,749) (314,260) 156,855 100,670

Borrowing costs capitalised during the year are calculated by applying an average capitalisation rate of 5.71% (2007: 6.76%) per annum to expenditure on qualifying assets.

11. Profit before taxation

2008 2007 HK$’000 HK$’000 Profit before taxation has been arrived at after charging: Depreciation of property, plant and equipment ...... 15,021 5,824 Less: Capitalised in properties under development for sale ...... (1,063) (1,720) 13,958 4,104 Operating lease rentals in respect of leasehold land, premises and equipment ...... 22,725 4,293 Less: Capitalised in properties under development for sale ...... (817) (888) 21,908 3,405

Amortisation of prepaid lease payment for land ...... 1,461 1,365 Less: Capitalised in property, plant and equipment ...... (1,461) (1,365) - -

Staff costs ...... 178,422 116,145 Share-based payments ...... - 31,508 Provident fund scheme contributions, net of forfeited contributions of HK$343,000 (2007: HK$335,000) ...... 24,635 15,140 Less: Capitalised in properties under development for sale ...... (52,278) (23,477) Total staff costs (excluding Directors’ emoluments) ...... 150,779 139,316

Auditor’s remuneration ...... 5,327 3,974 Loss on disposal of property, plant and equipment ...... 1,017 251 Cost of inventories recognised as an expense ...... 4,110,060 1,741,789 Share of tax of an associate ...... - 21,742 and after crediting: Bank interest income ...... 15,320 40,454 Gain on disposal of interests in infrastructure joint ventures (Note 34) 10,272 11,130 Net exchange gain included in other income ...... 335,384 358,675

F-111 12. Directors’ and employees’ emoluments Directors’ emoluments Salaries Performance Retirement Directors’ and related scheme 2008 fees allowances bonus contributions Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Executive Directors Zen Wei Pao, William ...... - 4,750 8,102 475 13,327 Ko Yuk Bing ...... - 3,762 6,560 376 10,698 Chan Kam Hung ...... - 2,402 2,296 240 4,938 Fong Shiu Leung, Keter ...... - 1,901 1,467 190 3,558 Zen Wei Peu, Derek ...... - 3,500 - 12 3,512 Non-executive Directors Hu Aimin ...... 180 - - - 180 Zhang Yijun ...... 180 - - - 180 Independent Non-executive Directors Chan Hing Chiu, Vincent ...... 120 - - - 120 Chow Shiu Kee, Stephen ...... 315 - - - 315 Lau Sai Yung ...... 324 - - - 324 Chow Ming Kuen, Joseph ...... 188 - - - 188 Choy Kwok Hung, Patrick ...... 188 - - - 188 1,495 16,315 18,425 1,293 37,528

Salaries Performance Retirement Directors’ and related scheme 2007 fees allowances bonus contributions Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Executive Directors Zen Wei Pao, William ...... - 6,202 - 12 6,214 Ko Yuk Bing ...... - 3,594 8,511 359 12,464 Chan Kam Hung ...... - 2,284 2,979 217 5,480 Fong Shiu Leung, Keter ...... - 1,805 1,702 180 3,687 Zen Wei Peu, Derek ...... - 2,870 - 12 2,882 Non-executive Directors Hu Aimin ...... 180 - - - 180 Zhang Yijun ...... 180 - - - 180 Independent Non-executive Directors Chan Hing Chiu, Vincent ...... 300 - - - 300 Chow Shiu Kee, Stephen ...... 300 - - - 300 Lau Sai Yung ...... 300 - - - 300 1,260 16,755 13,192 780 31,987

In addition to the above Directors’ emoluments, certain share options were granted to the Directors and the details of share options held by individual Directors at 31 December 2008 and 31 December 2007 are shown in the Directors’ report.

F-112 All the five highest paid individuals in the Group for both years presented are Directors of the Company whose emoluments are included above.

13. Income tax expenses

2008 2007 HK$’000 HK$’000 Current tax: PRC enterprise income tax ...... 128,034 150,727 PRC Land Appreciation Tax (“LAT”) ...... 115,124 107,299

243,158 258,026 Deferred tax (Note 31): Current year ...... 123,535 80,021 Attributable to a change in tax rate ...... - 4,764

123,535 84,785

366,693 342,811

No provision for Hong Kong Profits Tax has been made as there was no assessable profit derived from Hong Kong.

The PRC enterprise income tax of subsidiaries is calculated at a statutory tax rate of 25% (2007: 33%).

The provision of LAT is estimated according to the requirements set forth in the relevant PRC tax laws and regulations.

On 16 March 2007, the National People’s Congress approved the Enterprise Income Tax Law of the People’s Republic of China (the “new EIT Law”), which became effective from 1 January 2008. According to the new EIT Law, both domestic and foreign invested enterprises are subject to an unified income tax rate of 25%. The Tax Law of the People’s Republic of China for Enterprises with Foreign Investment and Foreign Enterprises, and Provisional Regulations of the People’s Republic of China on Enterprise Income Tax were abolished simultaneously. Detailed measures of the new EIT Law, specific provisions concerning the applicable income tax rates, computation of taxable income, as well as specific preferential tax treatments and their transitional provisions for the periods from 2007 and onwards were issued in December 2007. The deferred tax balance had been adjusted during the year ended 31 December 2007 to reflect the tax rates that were expected to apply to the respective periods when the asset is realised or the liability is settled.

According to a joint circular of the Ministry of Finance and State Administration of Taxation, Cai Shui [2008] No. 1, dividends distributed out of the profits generated before 1 January 2008 to foreign shareholders of a foreign investment enterprise were exempted from withholding income tax whereas dividends distributed out of profits generated since 1 January 2008 shall be subject to withholding income tax pursuant to Articles 3 and 27 of the new EIT Law and Article 91 of the new Detailed Rules for the Implementation of the new EIT Law. Accordingly, deferred tax liability of HK$46,000,000 on the undistributed earnings of subsidiaries and joint ventures has been charged to the consolidated income statement for the year.

F-113 The income tax for the year can be reconciled to profit before taxation in the consolidated income statement as follows:

2008 2007 HK$’000 HK$’000 Profit before taxation ...... 1,043,327 1,208,952

Tax at the applicable income tax rate of 25% (2007: 33%) (Note) ...... 260,832 398,954 LAT provision ...... 115,124 107,299 Tax effect of LAT ...... (28,781) (35,409) Tax effect of expenses not deductible for tax purpose ...... 242,700 198,507 Tax effect of income not taxable for tax purpose ...... (104,492) (151,990) Tax effect of share of results of joint ventures ...... (227,440) (190,445) Tax effect of share of results of an associate ...... - (4,048) Tax effect of tax losses not recognised ...... 36,679 19,206 Tax effect on temporary differences not recognised ...... 21,980 - Tax effect of utilisation of tax losses previously not recognised ...... (7,557) (4,027) Deferred tax on undistributed earnings of PRC subsidiaries and joint ventures ...... 46,000 - Tax effect of change in tax rate ...... - 4,764 Others ...... 11,648 - Income tax for the year ...... 366,693 342,811 Effective tax rate for the year ...... 35.1% 28.4%

Note: The domestic tax rate of major subsidiaries in the PRC is used for the reconciliation as it is where the operations of the Group are substantially based.

14. Dividends paid

2008 2007 HK$’000 HK$’000 2007 final dividend paid of HK$0.28 (2007: HK$0.26 for 2006) per share ...... 210,752 192,790 2008 interim dividend paid of HK$0.05 (2007: HK$0.24) per share ...... 37,534 179,908

248,286 372,698

A final dividend in respect of 2008 of HK$0.20 per share amounting to a total of approximately HK$148,000,000 is proposed by the Board. This dividend is subject to approval by shareholders at the forthcoming Annual General Meeting and has not been included as a liability in these consolidated financial statements. The amount will be accounted for as an appropriation of reserves in the year ending 31 December 2009.

The amount of the final dividend proposed has been calculated on the basis of 738,926,566 shares in issue as at 31 March 2009.

F-114 15. Earnings per share

The calculation of the basic and diluted earnings per share attributable to the shareholders of the Company is based on the following data:

2008 2007 HK$’000 HK$’000 Earnings for the purposes of basic and diluted earnings per share attributable to the shareholders of the Company ...... 656,429 851,067

2008 2007 Number of Number of shares shares Weighted average number of ordinary shares for the purpose of basic earnings per share ...... 750,694,000 736,404,000 Effect of dilutive potential ordinary shares: Share options ...... 662,000 8,597,000 Weighted average number of ordinary shares for the purpose of diluted earnings per share ...... 751,356,000 745,001,000

F-115 16. Property, plant and equipment

Properties under development Land Furniture, for investment and Leasehold fixtures and Plant and Motor properties buildings improvements equipment machinery vehicles Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note) Cost At 1 January 2007 ...... - 985 3,288 9,186 - 8,374 21,833 Additions ...... 76,072 - 1,253 3,319 - 5,245 85,889 Disposals ...... - (486) - (445) - (775) (1,706) Acquisition of subsidiaries ..... - - - 5,503 - 9,138 14,641 Exchange adjustments ...... - 61 33 403 - 360 857 At 31 December 2007 ...... 76,072 560 4,574 17,966 - 22,342 121,514 Additions ...... 61,185 - 14,838 8,796 - 3,002 87,821 Disposals ...... - (154) (64) (2,119) - (5,567) (7,904) Transfer to investment properties ...... (124,810) - - - - - (124,810) Acquisition of subsidiaries (note 33)...... - 712 - 195 905 301 2,113 Exchange adjustments ...... 5,128 38 96 787 - 1,891 7,940 At 31 December 2008 ...... 17,575 1,156 19,444 25,625 905 21,969 86,674 Depreciation At 1 January 2007 ...... - 337 3,004 5,351 - 3,417 12,109 Charge for the year ...... - 21 632 2,433 - 2,738 5,824 Eliminated on disposals ...... - (183) - (353) - (253) (789) Exchange adjustments ...... - 21 40 273 - 155 489 At 31 December 2007 ...... - 196 3,676 7,704 - 6,057 17,633 Charge for the year ...... - 17 5,077 5,615 - 4,312 15,021 Eliminated on disposals ...... - (37) (64) (1,455) - (3,163) (4,719) Exchange adjustments ...... - 14 127 716 - 536 1,393 At 31 December 2008 ...... - 190 8,816 12,580 - 7,742 29,328 Carrying values At 31 December 2008 ...... 17,575 966 10,628 13,045 905 14,227 57,346 At 31 December 2007 ...... 76,072 364 898 10,262 - 16,285 103,881

Note: Properties under development for investment properties are located in the PRC and held under medium term lease. During the year, certain properties have been completed and transferred to investment properties.

Items of property, plant and equipment are depreciated on a straight line basis at the following rates per annum:

Land and buildings Over the term of the lease from 20 to 25 years Leasehold improvements Over the term of the lease or 3 years, whichever is shorter Furniture, fixtures and equipment 10%-25% Plant and machinery 20%-30% Motor vehicles 12.5%-25%

The Group’s land and buildings are situated in the PRC and are held under medium term leases.

The allocation of land and buildings elements cannot be made reliably, and the leasehold interests in land continue to be accounted for as property, plant and equipment.

F-116 17. Prepaid lease payments for land

2008 2007 HK$’000 HK$’000 Land in the PRC on medium-term lease ...... 34,231 51,277 Analysed for reporting purposes as: Non-current asset ...... 33,293 49,912 Current asset ...... 938 1,365 34,231 51,277

During the year, certain properties have been completed and the corresponding prepaid lease payments for land of HK$19,041,000 are transferred to investment properties.

18. Investment properties

HK$’000 Fair value Reclassified from properties under development for investment properties (Note 16) ...... 124,810 Reclassified from prepaid lease payments for land (Note 17) ...... 19,041 At 31 December 2008 ...... 143,851

During the year, development cost amounting to HK$124,810,000 and prepaid lease payments for land of HK$19,041,000 were transferred from the balances of properties under development for investment properties and prepaid lease payments for land respectively to investment properties upon the completion of the development of certain investment properties. The fair values of such investment properties at the date of transfer and at 31 December 2008 were determined by reference to valuations carried out by an independent firm of professional valuers not connected with the Group. The fair value of the vacant portion were arrived at by reference to market evidence of transaction prices for similar properties in the same location. The fair value of occupied properties were arrived at by reference to capitalised income to be derived from the existing tenancies and the reversionary income potential of the properties or, where appropriate, by reference to market evidence of transaction prices for similar properties in the same locations and conditions. Since the fair value of the properties at 31 December 2008 is similar to the carrying amount and fair value of the properties at the completion date, no revaluation gain upon completion of the properties and change in fair value is recognised in profit or loss.

The investment properties are situated in the PRC under medium term lease. All of the Group’s leasehold interests in land held under operating leases to earn rentals or for capital appreciation purposes are measured using the fair value model and are classified and accounted for as investment properties.

F-117 19. Interests in joint ventures

2008 2007 HK$’000 HK$’000 Interests in infrastructure joint ventures Cost of investments ...... 5,315,447 5,491,426 Share of post-acquisition undistributed profits and reserves ...... 3,720,225 2,965,010 Return of cost of investments (Note) ...... (3,775,202) (3,304,050)

5,260,470 5,152,386 Interests in other joint venture(s) Cost of investments ...... 16,123 16,124 Share of post-acquisition profits and reserves ...... 13,090 1,583

29,213 17,707

5,289,683 5,170,093

Note: The infrastructure joint ventures distribute the cash surplus to the Group on monthly basis as a return of total investment costs to the Group, the amount of monthly cash distribution varies and depends on the toll road performance, the amount of operating expenses and capital expenditure incurred by the joint ventures.

Infrastructure joint ventures

All infrastructure joint ventures are co-operative joint ventures established and operating in the PRC, details of which at 31 December 2008 and 2007 are as follows:

Proportion of registered capital Registered held indirectly by Name of infrastructure joint venture capital the Company Principal activities Anhui Road Universe Hefei Highway RMB133,530,000 50%# Construction and Development Co., Ltd. management of Hefei—Liuan Highway, (Hefei Section) in Anhui, the PRC Anhui Road Universe Hehuai Highway Dayang RMB90,000,000 60%*# Investment in and Section Development Co., Ltd. development, operation and management of National Highway 206 Hefei—Huainan Highway (Dayang Section) in Anhui, the PRC Anhui Road Universe Hehuai Highway Yangjin RMB80,000,000 60%*# Investment in and Section Development Co., Ltd. development, operation and management of National Highway 206 Hefei—Huainan Highway (Yangjin Section) in Anhui, the PRC Anhui Road Universe Liuan Highway RMB92,400,000 50%# Construction and Development Co., Ltd. management of Hefei—Liuan Highway, (Liuan Section) in Anhui, the PRC

F-118 Proportion of registered capital Registered held indirectly by Name of infrastructure joint venture capital the Company Principal activities Bengbu Road King Huaihe Bridge Highway RMB54,180,000 35%# Investment in and Development Co., Ltd. development, operation and management of Provincial Highway 307 Bengbu Huaihe Bridge in Anhui, the PRC Bengbu Road King Huaimeng Highway RMB39,690,000 35%# Investment in and Development Co., Ltd. development, operation and management of Provincial Highway 307 Bengbu Huaiyuan—Mengcheng Highway in Anhui, the PRC Bengbu Road King Chaoyanglu Huaihe RMB42,929,000 35%# Investment in and Highway Bridge Development Co., Ltd. construction, operation and management of Bengbu Chaoyanglu Huaihe Highway Bridge in Anhui, the PRC Guangxi Hengjing Highway Development Co., RMB81,520,000 70%*# Investment in and Ltd. development, operation and management of Yulin— Gongguan Highway, (Yulin Section), in Guangxi Zhuang Autonomous Region, the PRC Guangxi Lutong Highway Development Co., RMB99,562,000 70%*# Investment in and Ltd. development, operation and management of Yulin City Ring Roads, in Guangxi Zhuang Autonomous Region, the PRC Handan Rongguang Highway Development Co., RMB78,200,000 70%*# Construction and Ltd. management of National Highway 309, Handan— Feixiang Highway in Hebei, the PRC Handan Xinguang Highway Development Co., RMB81,800,000 70%*# Construction and Ltd. management of National Highway 309, Feixiang— Guantao Highway in Hebei, the PRC Hebei Baofa Expressway Co., Ltd. RMB38,515,000 40%# Investment in and operation and management of Hebei Baojin Expressway (Bazhou Dong) in Hebei, the PRC Hebei Baofeng Expressway Co., Ltd. RMB38,280,000 40%# Investment in and operation and management of Hebei Baojin Expressway (Rong Cheng—Xiong Xian) in Hebei, the PRC Hebei Baohui Expressway Co., Ltd. RMB38,403,000 40%# Investment in and operation and management of Hebei Baojin Expressway (Bazhou Zhong) in Hebei, the PRC Hebei Baojie Expressway Co., Ltd. RMB38,905,000 40%# Investment in and operation and management of Hebei Baojin Expressway (Xiongxian—Bazhou) in Hebei, the PRC

F-119 Proportion of registered capital Registered held indirectly by Name of infrastructure joint venture capital the Company Principal activities Hebei Baojin Expressway Co., Ltd. RMB38,737,000 40%# Investment in and operation and management of Hebei Baojin Expressway (Xushui—Rongcheng) in Hebei, the PRC Hebei Baoli Expressway Co., Ltd. RMB38,944,000 40%# Investment in and operation and management of Hebei Baojin Expressway (Xiongxian East) in Hebei, the PRC Hebei Baoming Expressway Co., Ltd. RMB36,012,000 40%# Investment in and operation and management of Hebei Baojin Expressway (Bazhou—Tianjinjie) in Hebei, the PRC Hebei Baosheng Expressway Co., Ltd. RMB38,603,000 40%# Investment in and operation and management of Hebei Baojin Expressway (Xiongxian West) in Hebei, the PRC Hebei Baoyi Expressway Co., Ltd. RMB38,630,000 40%# Investment in and operation and management of Hebei Baojin Expressway (Rong Cheng) in Hebei, the PRC Hebei Baoyu Expressway Co., Ltd. RMB38,971,000 40%# Investment in and operation and management of Hebei Baojin Expressway (Bazhou West) in Hebei, the PRC Hebei Tanghui Expressway Co., Ltd. RMB129,296,000 45%# Investment in and operation and management of Hebei Tangjin Expressway (Chenzhuang—Fengnan) in Hebei, the PRC Hebei Tangjin Expressway Co., Ltd. RMB112,635,000 45%# Investment in and operation and management of Hebei Tangjin Expressway (Fengnan—Jijinjie) in Hebei, the PRC Hebei Tangrun Expressway Co., Ltd. RMB77,636,000 45%# Investment in and operation and management of Hebei Tangjin Expressway (Shuangmiao—Chenzhuang) in Hebei, the PRC Hunan Changyi (Baining) Expressway Co., Ltd. RMB97,012,000 43.17%# Investment in and development, operation and management of Hunan Changsha—Yiyang Expressway (Baining Section) in Hunan, the PRC Hunan Changyi (Cangyi) Expressway Co., Ltd. RMB98,985,000 43.17%# Investment in and development, operation and management of Hunan Changsha—Yiyang Expressway (Cangyi Section) in Hunan, the PRC Hunan Changyi Expressway Co., Ltd. RMB98,554,000 43.17%# Investment in and development, operation and management of Hunan Changsha—Yiyang Expressway (Changbai Section) in Hunan, the PRC

F-120 Proportion of registered capital Registered held indirectly by Name of infrastructure joint venture capital the Company Principal activities Hunan Changyi (Hengcang) Expressway Co., RMB101,695,000 43.17%# Investment in and Ltd. development, operation and management of Hunan Changsha—Yiyang Expressway (Hengcang Section) in Hunan, the PRC Hunan Changyi (Ningheng) Expressway Co., RMB98,458,000 43.17%# Investment in and development, Ltd. operation and management of Hunan Changsha—Yiyang Expressway (Ningheng Section) in Hunan, the PRC Hunan Changyi (Zijiang No. 2 Bridge) RMB78,328,000 43.17%# Investment in and Expressway Co., Ltd. development, operation and management of Hunan Changsha—Yiyang Expressway (Zijiang No. 2 Bridge) in Hunan, the PRC Liuan Road Universe Liuye Highway RMB97,800,000 50%# Construction and Development Co., Ltd. management of Liuan—Yeji Highway (Western Section) in Anhui, the PRC Liuan Road Universe Pihe Bridge Development RMB90,364,000 50%# Construction and Co., Ltd. management of Pihe Bridge in Anhui, the PRC Luodingshi Luochong Highway Co., Ltd. RMB96,800,000 61%*#@ Construction and management of National Highway 324 Luoding— Chonghua Highway in Guangdong, the PRC Pingdingshan Road King Xuchang—Nanyang RMB73,400,000 50%# Investment in and Highway (Xiangcheng Section) Development development, operation and Co., Ltd. management of National Highway 311 & Provincial Highway 103 Xuchang— Nanyang Highway, (Xiangcheng Section) in Henan, the PRC Pingdingshan Road King Xuchang -Nanyang RMB63,400,000 50%# Investment in and Highway (Yexian Section) Development Co., development, operation and Ltd. management of Provincial Highway 103 Xuchang— Nanyang Highway, (Yexian Section) in Henan, the PRC Shanxi Lutong Dongguan Highway Co., Ltd. RMB82,340,000 65%*# Investment in and development, operation and management of National Highway 108 Yuci Dongchangshou—Qixian Dongguan Highway in Shanxi, the PRC Shanxi Lutong Taiyu Highway Co., Ltd. RMB83,414,000 65%*# Construction and management of Taiyuan— Yuci Highway in Shanxi, the PRC Shanxi Lutong Yuci Highway Co., Ltd. RMB66,412,000 65%*# Construction and management of National Highway 108 Yuci City Bypass in Shanxi, the PRC

F-121 Proportion of registered capital Registered held indirectly by Name of infrastructure joint venture capital the Company Principal activities Shenzhen Airport—Heao Expressway (Eastern RMB440,000,000 45% Construction and Section) Co., Ltd. management of Shenzhen Airport—Heao Expressway (Eastern Section) in Shenzhen, the PRC Shijiazhuang Luhui Road & Bridge RMB88,000,000 60%*# Construction and Development Co., Ltd. management of National Highway 307, Shijiazhuang— Gaocheng Highway in Hebei, the PRC Shijiazhuang Luxin Road & Bridge RMB44,000,000 60%*# Construction and Development Co., Ltd. management of National Highway 307, Gaocheng— Jinzhou Highway in Hebei, the PRC Suzhou Road King Shanghai—Suzhou Airport RMB130,000,000 50% Construction and Road Development Co., Ltd. management of Provincial Highway 343, Suzhou—Shanghai Airport Highway in Jiangsu, the PRC

* The Group exercises joint control over the financial and operating policies of theses companies with other PRC joint venture partners in accordance with joint venture agreements, and accordingly, these companies have not been accounted for as subsidiaries. # The profit/cash sharing ratios in these infrastructure joint ventures differ from the proportion of the registered capital held by the Group over the duration of the joint ventures. During the early stage of the joint ventures, the Group is usually entitled to higher profit/cash sharing ratios than the proportion of registered capital held by the Group as contained in the relevant joint venture agreements. Thereafter, until such time as specified in the joint venture agreements, the other venturers of the joint ventures may be entitled to profit/cash sharing ratios higher than their respective proportion of registered capital held by them over a specific year of time under the joint venture agreements. Thereafter, the profit sharing ratios of the Group may be the same as the proportion of the registered capital held by the Group or in accordance with a predetermined ratio stipulated in the joint venture agreements. @ The joint venture was disposed of in 2008.

Particulars of the Group’s interest in other joint ventures as at 31 December 2008 and 2007 are as follows:

Property development joint venture

Principal Attributable Place of place of interest to Name of entity establishment business the Group Principal activity

(“Shanghai Fengcheng”) PRC PRC 31.5% Property development

Other joint venture

Principal Attributable Place of place of interest to Name of entity establishment business the Group Principal activity

Value Ahead Limited British Virgin Islands PRC 60% Investment holding (Note) (“BVI”)

Note: As mentioned in note 33 (i), the joint venture has become a wholly-owned subsidiary of the Company in 2008.

F-122 The summary of aggregate financial information of the Group’s interests in the joint ventures which is accounted for using equity method, based on the adjusted financial statements prepared under HKFRSs, is as follows:

2008 2007 HK$’000 HK$’000 Income ...... 1,832,810 1,453,152 Expenses ...... (923,051) (876,045) Assets ...... 7,471,495 7,373,152 Liabilities ...... (2,181,812) (2,203,059)

20. Loan(s) to joint venture(s)

At 31 December 2008, the loans to joint ventures of HK$70,787,000 (2007: HK$81,196,000) included loans to Shanghai Fengcheng amounting to HK$70,787,000 (2007: HK$66,316,000), which was unsecured, carried interest at a fixed rate of 8.4% (2007: 5.58%) per annum and repayable before September 2009 and the remaining balance of HK$14,880,000 at 31 December 2007 was the loan to Value Ahead Limited, which was unsecured, interest-free and with no fixed repayment terms.

As the loans to Shanghai Fengcheng will be fully settled within one year, this has been classified as current asset at 31 December 2008.

In 2008, the loan to Value Ahead Limited was fully settled by cash upon the completion of acquisition of the subsidiary as mentioned in note 33(i).

21. Loans to related companies

The loans to related companies of HK$54,700,000 (2007: HK$54,700,000), in which HK$31,500,000 (2007: HK$31,500,000) were denominated in United States dollars and HK$23,200,000 (2007: HK$23,200,000) were denominated in Hong Kong dollars, represented the cash advances to former subsidiaries in which one of its shareholders is Wai Kee Holdings Limited, which has significant beneficial interest in the Company. The loans to related companies are unsecured, interest bearing at the London Interbank Offered Rate (“LIBOR”) or Hong Kong Interbank Offered Rate plus 1.7% per annum and are wholly repayable in 2010.

22. Long-term receivables

2008 2007 HK$’000 HK$’000 Minimum income undertakings (Note (i)) ...... 10,344 14,743 Deferred consideration on disposal of an infrastructure joint venture (Note (ii)) ...... 14,157 27,053 Amount due from Huge Rise Investments Limited (“Huge Rise”) (Note (iii)) ... 551,858 391,336

576,359 433,132

F-123 Notes: (i) Included in long-term receivables and debtors aged more than 90 days of the Group are the amounts of HK$10,344,000 (2007: HK$14,743,000) and HK$5,911,000 (2007: HK$970,000) as disclosed in note 26, respectively representing minimum income undertakings due from the PRC joint venture partners. Minimum income undertakings have been recognised in accordance with the terms set out in the relevant joint venture agreements and are settled according to the schedules agreed with the relevant PRC joint venture partners. The revised repayment schedule of minimum income undertakings was agreed with the PRC joint venture partners in 2007 and the amounts will be fully repaid in 2011. (ii) The balance of HK$14,157,000 (2007: HK$27,053,000) represented the deferred consideration which arose from disposal of an infrastructure joint venture to the PRC joint venture in April 2006 in accordance with the agreed repayment schedule of the deferred consideration. The amount due within one year amounting to HK$14,719,000 (2007: HK$15,564,000) (see note 26) has been included in other receivables of the Group. The amounts will be fully repaid in 2010. (iii) The balance represented the cash advance to Tianjin Sunco Real Estate Company Limited (“Tianjin Sunco WOFE”), a company controlled by Huge Rise, an independent third party of the Group. Huge Rise has agreed that the whole balance will be fully repaid before 31 December 2009. At 31 December 2008, the Group has provided temporary finance to Tianjin Sunco WOFE amounting to HK$551,858,000 for the property development in the PRC. The amount is secured by the assets of the Huge Rise and its subsidiaries (“Huge Rise Group”) to the extent of the outstanding amount. The Directors of the Company considered that the credit risk of the amount due from Huge Rise is limited as the assets consisted of land and other properties owned by the Huge Rise Group with their fair values of approximately HK$587,000,000 which is higher than the outstanding balance. The fair value of such assets were arrived at by reference to market evidence of transaction prices for similar properties. The amount is carried at fixed interest rate which is still subject to negotiation with Huge Rise.

23. Available-for-sale investments On 26 May 2007, , a wholly-owned subsidiary of Sunco Property Holdings Company Limited (“Sunco Property”), entered into sale and purchase agreements with certain subsidiaries of Sunco Real Estate Investment Limited (“Sunco Real Estate”), being the vendor, for the acquisition of, inter alia, the entire equity interests in and (collectively referred to as the “Tianjin Companies”) at a total cash consideration of RMB563,180,000 (equivalent to HK$632,787,000). Sunco Real Estate was controlled by Mr. Sun Hongbin (“Mr. Sun”), the then major beneficial owner of Sunco Property prior to the Group’s acquisitions of Sunco Property as detailed in note 33(ii). Upon completion of the acquisition of additional 39.46% interest in Sunco Property by the Group on 27 July 2007, Sunco Property became an indirect subsidiary of the Company and, in the absence of the circumstances described below, the Tianjin Companies would also have become indirect subsidiaries of the Company. The Group’s PRC legal counsel has confirmed that the legal procedures in respect of the acquisition of the Tianjin Companies by the Group have been completed and the acquisition was legally enforceable under the relevant laws in the PRC. However, the Group had not yet obtained effective control over the Tianjin Companies despite the fact that the board of directors of the Tianjin Companies was appointed by the Group as the former management of the Tianjin Companies had not yet allowed the representatives of the Group to access the office of the Tianjin Companies, and had not yet handed over the official seals, the books and records as well as other relevant documents of the Tianjin Companies. The Group has implemented certain preventive measures to preserve the assets of the Tianjin Companies including, but not limited to, (i) issuing a warning letter to the former management preventing them from taking any actions which will be detrimental to the Tianjin Companies; (ii) publishing a notice in a local newspaper in Tianjin to alert the public to take extra care when entering into any transactions with the Tianjin Companies; and (iii) issuing letters to the relevant banks in Tianjin to alert them to take extra care when entering into mortgage transactions with the customers and any other bank transactions with the Tianjin Companies.

F-124 As the Group has not yet obtained effective control or exercise significant influence over the operating and financing policies of the Tianjin Companies, the Tianjin Companies are not currently considered to be subsidiaries or associates of the Company and therefore the financial statements of the Tianjin Companies have not been consolidated into or equity accounted for in the Group’s consolidated financial statements. Instead, the investments in the Tianjin Companies are accounted for as available-for-sale investments at each balance sheet date and have been recorded at cost less impairment as at 31 December 2008 and 2007 because the investments are unquoted equity shares whose range of reasonable fair value estimates is so significant that the Directors are of the opinion that the fair values cannot be measured reliably. Based on the impairment review on the investments in the Tianjin Companies, in the opinion of the Directors, no impairment on the investment cost in the Tianjin Companies is considered necessary.

The Group commenced legal proceedings in the Tianjin Nankai District People’s Court in October 2007 to enforce its rights and to assume effective control over the Tianjin Companies. However, the legal proceedings against the former management of the Tianjin Companies had been temporarily suspended in 2008 on the basis that unspecified facts which related to those proceedings might overlap with unspecified matters under investigation by Tianjin authorities.

In January 2009, the Company received a notice advising that an investigation on a criminal accusation by Tianjin authorities was officially dismissed. Based on the advice of the Group’s PRC legal counsel, it is highly probable that the Group will be able to lift the suspension of the legal proceedings, which will result in the effective continuation of the Group’s legal proceedings to assume the effective control over the Tianjin Companies. The Directors, based on advice of the Group’s PRC legal counsel, are of the firm belief that the court ruling will be favourable to the Group and accordingly, the Group will be able to assume effective control over the Tianjin Companies in the foreseeable future. The Group will continue its best endeavours to pursue the lawsuit in order to assume effective control over the Tianjin Companies.

24. Inventory of properties

2008 2007 HK$’000 HK$’000 Completed properties held for sale ...... 1,511,717 1,387,063 Properties under development for sale (Note) ...... 10,517,533 8,992,400

12,029,250 10,379,463

Note: Included in the amount are properties under development for sale of HK$2,657,744,000 (2007: HK$4,685,213,000) expected to be completed and delivered to the customers within twelve months from the balance sheet date.

25. Prepayment for land leases

As at 31 December 2008, a total prepayment of HK$107,865,000 (2007: HK$1,393,210,000) was made for the acquisition of certain pieces of land in the PRC. Upon completion of the acquisition and delivery of relevant land title document to the Group, the prepaid amount will be transferred to the account of “Properties under development for sale”.

F-125 26. Debtors, deposits and prepayments 2008 2007 HK$’000 HK$’000 Aged analysis of debtors: Within 60 days ...... 12,279 11,554 60 to 90 days ...... 340 5,477 More than 90 days ...... 11,139 1,064 23,758 18,095 Deferred consideration on disposal of an infrastructure joint venture (Note 22(ii)) ...... 14,719 15,564 Interest receivable ...... 253 4,941 Prepayment of business tax and other taxes ...... 101,573 191,430 Other receivables, deposits and prepayments (Note) ...... 545,760 539,734 686,063 769,764

Other than the minimum income undertakings as mentioned in note 22 (i), the debtors are mainly arisen from sale of properties. Consideration in respect of properties sold are paid in accordance with the terms of the related sale and purchase agreement, normally within 60 days from the agreement. Consideration under pre-sale contracts will be fully received prior to the delivery of the properties to the purchasers. The Group has insignificant trade receivable balances which are past due at the reporting date. Included in trade debtors are minimum income undertakings of HK$5,911,000 (2007: HK$970,000) which are settled according to an agreed repayment schedule, the remaining trade debtor balance has been substantially settled subsequent to year end date, no impairment loss is recognised. In determining the recoverability of trade debtors, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the balance sheet date. The concentration of credit risk is limited because the customer base is large and unrelated. Accordingly, the Directors believe that there is no credit provision required as at balance sheet date.

Note: At 31 December 2008, included in other receivables, deposits and prepayments is an amount of HK$31,461,000 (2007: HK$95,166,000) representing the tender deposits paid to the local government or its agents in several provinces for the tender of several pieces of land through public auctions. The tender deposits would be refunded if the Group failed to acquire the pieces of land during the tender. The public auction of these tender deposits paid will be taking place within one year and the amounts are classified as short-term deposits. In November 2007, the Group and an independent third party (“Independent Party A”) entered into a cooperative agreement with another independent third party (“Independent Party B”), a state-owned enterprise located in Jinan province, pursuant to which Independent Party B is responsible for carrying out development to render several pieces of land (the “Lands”) suitable for commercial, office, tourism and public uses. The Group is responsible for the financing of the land development works. Such land development works included but is not limited to the removal of the existing buildings situated on the Lands, the relocation of the existing residents, the provision of infrastructure systems including roads, drainage system, water pipes, gas and electricity supply and the construction of public facilities. A prepayment of HK$381,573,000 (2007: HK$357,474,000) has been paid by the Group to Independent Party B as part of the total cost to be incurred for the development. Pursuant to the cooperative agreement, Independent Party B is responsible for selling the land use right of the Lands through the public tenders or auctions. If the Lands were to be sold to the Group at the said public tenders or auctions, the Group is responsible for the payment of the price at which the Lands will be sold at the public tenders or auctions and Independent Party B will reimburse to the Group the actual development costs incurred for the Lands and a development return at the rate of 10% of the total costs incurred by the Group. Pursuant to the cooperative agreement, the Group will be reimbursed for the actual costs incurred in carrying out the development and be entitled to the fixed return of 10% of the total costs incurred irrespective of whether the Group will obtain the land use right of the Lands in the future. Subsequent to 31 December 2008, in view of the current market conditions, the Group determined that they will not acquire the Lands through the public tender. As agreed with Independent Party B, the Group will be refunded the full amount of the development costs already paid together with a fixed return on the total costs incurred before 31 December 2009.

F-126 27. Pledged bank deposits/bank balances and cash

Included in pledged deposits were bank balances of HK$163,723,000 (2007: HK$231,583,000) which are pledged as security in favour of banks for short-term facilities granted to the Group.

Bank balances carry interest at market rates which range from 0.02% to 1.17% (2007: 0.72% to 5.00%) per annum. The average effective interest rate of pledged deposits was 0.36% (2007: 0.77%) per annum.

The Group’s pledged bank deposits and bank balances and cash that are denominated in currencies other than the functional currencies of the relevant group entities are set out below:

2008 2007 HK$’000 HK$’000 Hong Kong dollars ...... 119,667 68,246 United States dollars ...... 34,573 132,775

28. Share capital

2008 2007 2008 2007 Number Number of shares of shares HK$’000 HK$’000 Authorised: Ordinary shares of HK$0.1 each ...... 20,000,000,000 20,000,000,000 2,000,000 2,000,000 7.5% convertible preference shares (“CP shares”) of HK$0.1 each ...... 518,380 518,380 52 52 Issued and fully paid: Ordinary shares At 1 January ...... 752,646,566 690,076,566 75,265 69,008 Issue of shares upon exercise of share options ...... 40,000 17,570,000 4 1,757 Placement of new shares ...... - 45,000,000 - 4,500 Shares repurchased and cancelled .... (13,760,000) - (1,376) - At 31 December ...... 738,926,566 752,646,566 73,893 75,265

As a result of the exercise of the Company’s share options during the year, 40,000 (2007: 17,570,000) ordinary shares were issued by the Company as detailed in note 29.

In March 2007, 45,000,000 ordinary shares of the Company were placed in the market to the subscribers independent of the Group at a price of HK$12.20 per share. The proceeds from placement of shares of the Company were used for the property development business and working capital of the Group. All the new shares issued rank pari passu in all respects with the existing shares.

F-127 In addition, the Company repurchased its own shares through the Stock Exchange during the year as follows: Aggregate No. of ordinary Price per share consideration Month of repurchase shares of HK$0.1 each Highest Lowest paid HK$ HK$ HK$’000 August 2008 ...... 626,000 6.16 5.85 3,746 September 2008 ...... 2,862,000 6.28 4.26 15,550 October 2008 ...... 8,454,000 4.30 1.65 20,310 November 2008 ...... 1,818,000 2.60 1.96 4,151 13,760,000 43,757

The above shares were cancelled upon repurchase. None of the Company’s subsidiaries purchased, sold or redeemed any of the Company’s listed securities during the year.

29. Share option scheme The share option scheme was adopted by the Company in 2003. The purpose of the share option scheme is to provide selected participants with the opportunity to acquire proprietary interests of the Company in order to encourage those participants to work towards enhancing the value of the Company and its shares for the benefit of the Company and its shareholders as a whole. The participants include full-time employees, executives or officers and Directors of the Company or any of its subsidiaries. The total number of shares which may be issued under the share option scheme and any other schemes of the Company must not in aggregate exceed 10% (the “10% Limit”) of the shares in issue as at the date of adoption of the share option scheme less the aggregate of exercised, cancelled and outstanding options. On 15 May 2007, renewal of the 10% share option scheme mandate limit was approved by the shareholders. Since then, a number of options were granted to eligible participants and the total number of shares available for issue under the share option scheme is 54,650,156 representing approximately 7.26% of the Company’s issued share capital as at the date of this report. The 10% Limit may be refreshed with the approval of shareholders of the Company. The maximum number of shares that may be issued upon exercise of all outstanding options granted and are yet to be exercised under the share option scheme and any other schemes must not exceed 30% of the shares in issue from time to time. The total number of shares issued and to be issued upon exercise of the options granted to each participant (including exercised, lapsed/cancelled and outstanding options) in any 12-month period must not exceed 1% of the shares in issue unless the same is approved by the shareholders. The option exercisable period commences on the commencement date (the date upon which the options are granted and accepted) of such options and ends on the fifth anniversary of the commencement date. Each participant must pay HK$1 as consideration for the grant of options within 28 days from the date of offer. The exercise price shall be determined by the Board, being not less than the highest of (a) the closing price of the shares as stated in the Stock Exchange’s daily quotation sheet on the date of offer; (b) the average of the official closing prices of the shares stated in the Stock Exchange’s daily quotation sheets for the 5 business days immediately preceding the date of offer; and (c) the nominal value of the shares.

F-128 The share option scheme shall be valid and effective for a period of 10 years commencing on the adoption date, i.e. 12 May 2003.

In 2007, 19,500,000 share options were granted under the share option scheme to Directors and employees for an aggregate consideration of HK$118. The estimated fair values of the options granted were HK$66,783,000. The fair values of the options were calculated using Binominal pricing model. The inputs into the model were as follows:

2007 Share price at date of grant ...... HK$15.50 Exercise price ...... HK$14.85 Expected volatility ...... 27.91% Expected life ...... 5years Risk-free rate ...... 3.186% Expected dividend yield ...... 3.23%

The expected volatility was determined by using the historical volatility of the Company’s share price over the previous year.

The Group recognised these fair values as expenses for the year ended 31 December 2007.

No share options were granted by the Group during the year.

F-129 The following tables disclose details of the Company’s share options held by Directors and employees and movements in such holdings during the year.

2008

Lapsed/ Balance Exercised cancelled Balance Exercise at during during at Date of grant Exercisable period price 1.1.2008 the year the year 31.12.2008 HK$ Directors 26 August 2004 26 August 2004 to 25 August 2009 5.70 140,000 - - 140,000 14 December 2005 14 December 2005 to 13 December 2010 5.80 2,700,000 - - 2,700,000 20 December 2006 20 December 2006 to 19 December 2011 11.66 10,050,000 - (250,000) 9,800,000 6 November 2007 6 November 2007 to 5 November 2012 14.85 10,300,000 - (100,000) 10,200,000

23,190,000 - (350,000) 22,840,000

Employees 17 October 2003 17 October 2003 to 16 October 2008 5.15 135,000 (30,000) (105,000) - 26 August 2004 26 August 2004 to 25 August 2009 5.70 390,000 - - 390,000 14 December 2005 14 December 2005 to 13 December 2010 5.80 110,000 (10,000) - 100,000 20 December 2006 20 December 2006 to 19 December 2011 11.66 5,730,000 - (1,538,000) 4,192,000 6 November 2007 6 November 2007 to 5 November 2012 14.85 9,160,000 - (1,800,000) 7,360,000

15,525,000 (40,000) (3,443,000) 12,042,000

38,715,000 (40,000) (3,793,000) 34,882,000 Weighted average exercise price 12.73 5.31 13.08 12.70

F-130 2007

Lapsed/ Balance Granted Exercised cancelled Balance Exercise at during during during at Date of grant Exercisable period price 1.1.2007 the year the year the year 31.12.2007 HK$ Directors 17 October 2003 17 October 2003 to 16 October 2008 5.15 750,000 - (750,000) - - 26 August 2004 26 August 2004 to 25 August 2009 5.70 5,600,000 - (5,460,000) - 140,000 14 December 2005 14 December 2005 to 13 December 2010 5.80 8,750,000 - (6,050,000) - 2,700,000 20 December 2006 20 December 2006 to 19 December 2011 11.66 10,550,000 - (500,000) - 10,050,000 6 November 2007 6 November 2007 to 5 November 2012 14.85 - 10,300,000 - - 10,300,000

25,650,000 10,300,000 (12,760,000) - 23,190,000

Employees 17 October 2003 17 October 2003 to 16 October 2008 5.15 460,000 - (325,000) - 135,000 26 August 2004 26 August 2004 to 25 August 2009 5.70 490,000 - (100,000) - 390,000 14 December 2005 14 December 2005 to 13 December 2010 5.80 1,470,000 - (1,360,000) - 110,000 20 December 2006 20 December 2006 to 19 December 2011 11.66 8,790,000 - (3,025,000) (35,000) 5,730,000 6 November 2007 6 November 2007 to 5 November 2012 14.85 - 9,200,000 - (40,000) 9,160,000

11,210,000 9,200,000 (4,810,000) (75,000) 15,525,000

36,860,000 19,500,000 (17,570,000) (75,000) 38,715,000 Weighted average exercise price 8.84 14.85 6.90 13.36 12.73

The weighted average closing price of the Company’s shares immediately before the date on which share options were exercised during the year is HK$9.51 (2007: HK$14.20).

F-131 30. Bank and other borrowings

2008 2007 HK$’000 HK$’000 Senior notes (Note (i)) ...... 2,681,952 2,634,176 Guaranteed notes (Note (ii)) ...... 1,558,978 1,536,075 Bank loans (Note (iii)) ...... 2,921,683 2,553,467

7,162,613 6,723,718

The maturity of the above loans is as follows:

2008 2007 HK$’000 HK$’000 Unsecured borrowings repayable: Within one year ...... 268,539 447,368 More than two years but not exceeding five years ...... 2,709,890 2,665,580 More than five years ...... 1,531,040 1,504,671

4,509,469 4,617,619

Secured borrowings repayable: Within one year ...... 1,156,346 161,579 More than one year but not exceeding two years ...... 648,356 601,788 More than two years but not exceeding five years ...... 848,442 1,342,732

2,653,144 2,106,099

Total borrowings ...... 7,162,613 6,723,718 Less: Amount due within one year shown under current liabilities ...... (1,424,885) (608,947) Amount due over one year shown under non-current liabilities ...... 5,737,728 6,114,771

Notes: (i) The senior notes are listed on the stock exchange in Singapore. The notes include carrying amount of HK$1,531,040,000 (2007: HK$1,504,671,000), which bear interest at a fixed rate of 7.625% per annum and will mature in May 2014. The senior notes with carrying amount of HK$1,150,912,000 (2007: HK$1,129,505,000), bear interest at a floating rate of three month LIBOR plus 2.25% per annum which will mature in May 2012. The fair value of the senior notes based on the quoted asked price at 31 December 2008 was HK$1,493,700,000 (2007: HK$2,476,800,000). (ii) The guaranteed notes, which are listed on the stock exchange in Singapore, bear interest at a fixed rate of 6.25% per annum and will mature in July 2011. The fair value of the guaranteed notes based on the quoted asked price at 31 December 2008 was HK$889,200,000 (2007: HK$1,351,680,000). (iii) Bank loans with carrying amount of HK$746,283,000 (2007: HK$789,474,000) bear interest at a fixed rate of 5.84% to 9.07% (2007: 6.89% to 8.96%) per annum. Interest rates on the remaining bank loans, which were carried at floating interest rates, range from 2.50% to 3.10% (2007: 4.98% to 7.60%) per annum.

The Group’s borrowings that are denominated in currencies other than the functional currencies of the relevant group entities are set out below:

2008 2007 HK$’000 HK$’000 Hong Kong dollars ...... 478,515 100,000 United States dollars ...... 5,937,815 5,834,245

F-132 31. Deferred taxation

The following are the major deferred tax liabilities (assets) recognised and movements thereon during the current and prior year:

Undistributed Fair value earnings of adjustment subsidiaries on and properties joint Tax under ventures losses development in the PRC Others Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note) At 1 January 2007 ...... (65,347) 55,771 - 5,885 (3,691) Attributable to a change in tax rate . . 15,934 (9,743) - (1,427) 4,764 Charge for the year ...... 15,340 - - 64,681 80,021 Acquisition of subsidiaries ...... (93,037) - - - (93,037) Exchange adjustments ...... (2,101) 1,321 - 16 (764) At 31 December 2007 ...... (129,211) 47,349 - 69,155 (12,707) Charge for the year ...... 61,263 (16,399) 46,000 32,671 123,535 Exchange adjustments ...... (7,956) 4,253 - 173 (3,530)

At 31 December 2008 ...... (75,904) 35,203 46,000 101,999 107,298

Note: Deferred tax has been provided for (i) fair value adjustment on properties under development for sale; (ii) temporary differences between the carrying amount and the tax base of properties under development for sale, arising from the capitalisation of certain interest expenses in properties under development for sale in consolidation level; (iii) undistributed earnings of subsidiaries and joint ventures in the PRC and (iv) the tax losses.

For the purpose of balance sheet presentation, certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances for financial reporting purposes:

2008 2007 HK$’000 HK$’000 Deferred tax assets ...... (40,700) (81,862) Deferred tax liabilities ...... 147,998 69,155

107,298 (12,707)

Deferred tax assets has not been recognised in the consolidated financial statements in respect of temporary differences amounting to HK$87,920,000 (2007: HK$nil) due to the unpredictability of future taxable profit streams.

At 31 December 2008, the Group has estimated unused tax losses of HK$600,003,000 (2007: HK$597,214,000) available to offset against future profits. A deferred tax asset has been recognised in respect of HK$303,614,000 (2007: HK$516,844,000) of such losses. No deferred tax asset has been recognised in respect of the remaining losses of HK$296,389,000 (2007: HK$80,370,000) due to the unpredictability of future taxable profit streams. Such remaining unrecognised tax losses is an amount of HK$296,389,000 (2007: HK$80,370,000) will expire within five years from the balance sheet date.

F-133 32. Creditors and accrued charges

2008 2007 HK$’000 HK$’000 Aged analysis of creditors: Within 60 days ...... 33,332 39,293 60 to 90 days ...... 2,770 2,208 More than 90 days ...... 105,386 11,840

141,488 53,341 Accrued construction costs ...... 1,157,891 1,149,023

1,299,379 1,202,364 Interest payable ...... 70,384 74,160 Accrued taxes ...... 13,750 48,231 Other accrued charges ...... 373,298 339,122

1,756,811 1,663,877

33. Acquisition of subsidiaries

(i) Year ended 31 December 2008

In November 2008, the Group entered into a sale and purchase agreement with a wholly-owned subsidiary of Build King Holdings Limited, a company listed on the Stock Exchange in which certain Directors of the Company have beneficial interests, pursuant to which the Group acquired the remaining 40% equity interest in Value Ahead Limited engaging in investment holding, at a cash consideration of HK$9,425,000. Previously, Value Ahead Limited was a jointly controlled entity of the Company which, together with its subsidiary, carried out building construction for the Group in the PRC. After the completion of the acquisition, Value Ahead Limited became a wholly-owned subsidiary of the Company.

F-134 The Group acquired and assumed the following assets and liabilities through the acquisition of subsidiaries:

HK$’000 Net assets acquired: Property, plant and equipment ...... 2,113 Amounts due from related companies ...... 52,411 Debtors, deposits and prepayments ...... 1,718 Bank balances and cash ...... 1,578 Amounts due to shareholders ...... (14,136) Amounts due to related companies ...... (4,272) Creditors and accrued charges ...... (29,986)

9,426

Satisfied by: Transferred from interest in a joint venture ...... 1 Cash consideration ...... 9,425

9,426

Net cash outflow arising on acquisition: Cash consideration paid ...... (9,425) Bank balances and cash acquired ...... 1,578

(7,847)

Value Ahead Limited had insignificant contributions to Group’s profit after taxation, operating, investing and financing cash flows for the period between the date of acquisition and the balance sheet date.

(ii) Year ended 31 December 2007

Pursuant to the subscription agreement dated 17 October 2006, the aggregate consideration paid for the subscription of 49% enlarged issued share capital of Sunco Property (the “Sunco Property Subscription”) of HK$446,208,000 was satisfied by the Group by way of i) cash of HK$275,741,000; ii) capitalisation of loans to Sunco Property of HK$170,467,000. The Sunco Property Subscription had been accounted for as purchase of assets as the underlying assets acquired are the property development projects in the PRC which were in their early development stage. The Sunco Property Subscription was completed on 11 January 2007, and 49% equity interest in Sunco Property was held by the Company and Sunco Property was classified as an associate of the Group starting from 11 January 2007. In July 2007, the Group had further acquired and subscribed 39.46% equity interest in Sunco Property. The total consideration paid for such acquisition was HK$1,276,000,000. The consideration was satisfied by the Group by way of (i) cash of HK$276,000,000 paid to certain shareholders of Sunco Property; (ii) capitalisation of loans to Sunco Property of HK$1,000,000,000. The details of the transaction were set out in the circular of the Company dated 30 June 2007. The transaction was accounted for as purchase of assets, and it was completed on 20 July 2007. Thereafter, 88.46% equity interest in Sunco Property was held by the Company and Sunco Property became a subsidiary of the Company.

F-135 The Group acquired and assumed the following assets and liabilities respectively through acquisition of Sunco Property.

HK$’000 Net assets acquired: Property, plant and equipment ...... 14,641 Available-for-sale investments ...... 592,821 Interest in a joint venture ...... 16,123 Deferred tax assets ...... 93,037 Properties under development for sale ...... 5,080,040 Completed properties held for sale ...... 1,281,348 Prepayment for land leases ...... 203,460 Debtors, deposits and prepayments ...... 2,437,898 Amounts due from related companies ...... 379,336 Prepaid income tax ...... 190,407 Pledged bank deposits ...... 150,027 Bank balances and cash ...... 590,151 Creditors and accrued charges ...... (3,948,222) Amounts due to related companies ...... (1,233,725) Bank borrowings ...... (402,484) Deposits from pre-sale of properties ...... (3,504,183) Income tax payable ...... (80,017) 1,860,658 Minority interests ...... (136,266) 1,724,392 Net cash outflow arising on acquisition: Cash consideration paid ...... 1,276,000 Bank balances and cash acquired ...... (590,151) 685,849 Satisfied by: Transferred from interest in an associate ...... 448,392 Cash consideration ...... 1,276,000 1,724,392

34. Disposal of interests in infrastructure joint ventures

(i) Year ended 31 December 2008

On 25 July 2008, the Group entered into a sale and purchase agreement to dispose of its 61% equity interest in Luodingshi Luochong Highway Co., Ltd. to the PRC joint venture partner at a cash consideration of HK$62,697,000. The gain on disposal of the infrastructure joint venture was recognised in profit and loss.

F-136 The Group’s disposal of its interest in the infrastructure joint venture during the year ended 31 December 2008 had the following effects:

2008 HK$’000 Cost of investment ...... 169,767 Share of post-acquisition undistributed profits ...... 97,550 Reduction of cost of investment ...... (200,495) Net assets disposed of ...... 66,822 Translation reserve released ...... (15,296) Expenses in connection with the disposal ...... 899 Gain on disposal ...... 10,272 Total consideration ...... 62,697 Satisfied by: Cash consideration ...... 62,697 Cash inflow arising on disposal: Cash consideration ...... 62,697

During the year ended 31 December 2008, other than the consideration received from disposal of the infrastructure joint venture, it had no significant contribution to the Group’s profit after taxation, operating, investing and financing cash flows.

(ii) Year ended 31 December 2007

On 11 June 2007, the Group entered into three sale and purchase agreements to dispose of 25% equity interests in three infrastructure joint ventures, namely Bengbu Road King Chaoyanglu Huaihe Highway Bridge Development Co., Ltd, Bengbu Road King Huaihe Bridge Highway Development Co., Ltd. and Bengbu Road King Huaimeng Highway Development Co., Ltd., to the respective PRC joint venture partners at an aggregate consideration of HK$128,000,000. The gain on disposal of the three infrastructure joint ventures was recognised in profit and loss.

F-137 The Group’s disposal of its interest in the infrastructure joint ventures during the year ended 31 December 2007 had the following effects:

2007 HK$’000 Cost of investments ...... 147,971 Share of post-acquisition undistributed profits ...... 59,957 Reduction of cost of investments ...... (84,070) Net assets disposed of ...... 123,858 Translation reserve released ...... (7,838) Expenses in connection with the disposal ...... 850 Gain on disposal ...... 11,130 Total consideration ...... 128,000 Satisfied by: Cash consideration ...... 128,000 Cash inflow arising on disposal: Cash consideration ...... 128,000

During the year ended 31 December 2007, the disposed infrastructure joint ventures contributed to the Group’s profit after taxation of HK$1,652,000, operating cash inflow of HK$3,406,000 and investing cash inflow of HK$3,701,000.

35. Retirement benefit plans

For the operations in Hong Kong, the Group operates a Mandatory Provident Fund Scheme (the “Scheme”) for all qualifying employees including Directors in Hong Kong. The assets of the Scheme are held separately from those of the Group in funds under the control of the independent trustee. Both the Group and the employees contribute a fixed percent to the Scheme based on their monthly salary in accordance with government regulations. The Scheme contributions represent contributions payable to the fund by the Group at rates specified in the rules of the Scheme. Where there are employees who leave the Scheme prior to vesting fully in the contributions, the amount of the forfeited contributions will be used to reduce future contributions payable by the Group. There were no forfeited contributions available to reduce future contributions at the balance sheet date.

For the operations in the PRC, the employees of the Group’s subsidiaries in the PRC are members of a state-managed retirement benefit scheme operated by the government. The subsidiaries are required to contribute a fixed percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement scheme is to make the specified contributions.

F-138 36. Operating lease commitments

As lessor

At the balance sheet date, the Group had contracted with tenants for the following future minimum lease payments:

2008 2007 HK$’000 HK$’000 Within one year ...... 5,702 - In the second to fifth year inclusive ...... 22,521 - Over five years ...... 83,099 - 111,322 -

Pursuant to the rental agreement, the rental income is charged to and received from the tenant based on a certain percentage of turnover of the relevant operation that occupied the properties, subject to a minimum fixed charge commencing from late 2010.

As lessee

At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows:

2008 2007 HK$’000 HK$’000 Within one year ...... 20,167 15,767 In the second to fifth year inclusive ...... 48,858 21,272 Over five years ...... 125,826 171,159 194,851 208,198

The commitments represent rentals payable by the Group for its offices and staff quarters with the lease periods ranging from one to twenty years.

Monthly rental was fixed and recognised over the terms of the leases.

37. Capital commitments

At the balance sheet date, the Group is committed to invest HK$455,217,000 (2007: HK$437,145,000) to develop a shopping mall in Changzhou for investment purpose.

38. Contingent liabilities

(i) At 31 December 2008, the Group provided guarantees of HK$3,095,774,000 (2007: HK$3,264,795,000) to banks in favour of its customers in respect of the mortgage loans provided by the banks to such customers for the purchase of the Group’s developed properties. These guarantees provided by the Group to the banks would be released upon receiving the building ownership certificate of the respective property by the banks from the customers as a pledge for security to the mortgage loan granted. The Directors considered that the fair value of such guarantees on initial recognition was insignificant.

F-139 (ii) At 31 December 2008, the Group provided guarantees in favour of banks to provide credit facilities to the Tianjin Companies, of which the Group is in the process of seeking to obtain effective control as described in note 23, amounting to HK$337,079,000 (2007: HK$315,789,000). The bank loans are secured by a pledge of the properties including land and properties under development for sale held by the Tianjin Companies.

The movement of the carrying amount of the financial guarantees is as follows:

HK$’000 At date of inception ...... 22,000 Amortisation during the year ...... (9,000) At 31 December 2007 ...... 13,000 Amortisation during the year ...... (13,000) Provision during the year upon renewal of bank loans ...... 20,337 Balance at 31 December 2008 ...... 20,337

At 31 December 2008, the balance of HK$20,337,000 (2007: HK$13,000,000) has been included in other accrued charges as set out in note 32.

In July 2008, the Tianjin Companies agreed with the bank to extend the maturity dates of their bank loans to June 2009. The management will closely monitor the financial position of the Tianjin Companies to ensure that adequate provision is made if the financial position of the Tianjin Companies deteriorates which will cause a financial loss to the Group due to the failure to repay the bank loans.

39. Litigation

Other than set out in note 23, the Group and Huge Rise filed a writ of summons against Sunco China Holdings Limited and Sunco Management Holdings Limited (both of which are beneficially owned by Mr. Sun, collectively referred to as the “Defendants”), to claim for the loss and damage related to the payment of certain construction costs, tax expenses and penalty in relation to violation of certain development regulations in the PRC, which were undisclosed by Mr. Sun at the time of negotiation and the conclusion of various agreements leading to the acquisition of Sunco Property and its subsidiaries in late 2006 and early 2007. Certain of these unrecorded liabilities have been recorded in the books of subsidiaries held by Sunco Property upon the completion of the acquisition by the Group.

The Group commenced in October 2007 litigation proceedings against Sunco China Holdings Limited and Sunco Management Holdings Limited and Mr. Sun. The proceedings are now at the stage of discovery and preparation of witness statements and the Company is taking legal advice with regards to the information that has been received.

40. Pledge of assets

At the balance sheet date, other than the pledged bank deposits as disclosed in note 27, the Group’s inventory of properties of HK$2,074,124,000 (2007: HK$1,357,231,000) were pledged and the shares of certain of the Company’s subsidiaries were pledged to secure the banking facilities granted to the Group.

F-140 41. Related party transactions

Other than set out in notes 20, 21 and 33 (i) to the consolidated financial statements, the Group had significant transactions with the following related parties during the year, details of which are as follows:

Related parties Nature 2008 2007 HK$’000 HK$’000 Infrastructure joint ventures ...... Dividend received 410,898 474,504 Property construction joint venture ...... Construction cost paid 87,366 233,391 Property development joint venture ...... Interest income 2,071 - Sunco Property ...... Interest income - 27,456 Related companies (Note) ...... Interest income 2,581 28,279

Note: Loan interest income of HK$2,581,000 (2007: HK$3,766,000) was received from former subsidiaries in which one of its shareholders is Wai Kee Holdings Limited, which has significant beneficial interest in the Company. Loan interest income of HK$24,513,000 was received from Sunco Real Estate Investment Limited (“Sunco Real Estate”) in 2007 and the loan to Sunco Real Estate had been fully repaid in the second half year of 2007. Sunco Real Estate was controlled by Mr. Sun.

Compensation of key management personnel

The remuneration of Directors and other members of key management during the year was as follows:

2008 2007 HK$’000 HK$’000 Short-term employment benefits ...... 68,756 58,571 Post-employment benefits ...... 3,049 2,077 Share-based payments ...... - 41,552 71,805 102,200

The remuneration of Directors and key executives is determined by the performance of individuals and market trends.

42. Principal subsidiaries

Details of the Company’s principal subsidiaries at 31 December 2008 and 2007 are as follows:

Proportion of nominal value of Issued and issued ordinary fully paid shares capital/ ordinary registered capital Place of share held by the incorporation/ Place of capital/paid Company Principal Name of subsidiary registration operation registered capital Directly Indirectly activities %% Changzhou Great Gallop PRC PRC US$50,745,300 - 100 Development Properties and sale of Developments Limited* properties

Changzhou Great PRC PRC RMB123,500,000 - 100 Development Superior Properties and sale of Developments Limited* properties

F-141 Proportion of nominal value of Issued and issued ordinary fully paid shares capital/ ordinary registered capital Place of share held by the incorporation/ Place of capital/paid Company Principal Name of subsidiary registration operation registered capital Directly Indirectly activities %% Changzhou Greatmind PRC PRC RMB100,000,000 - 100 Development Properties and sale of Developments Limited* properties Guangzhou Junyue Real PRC PRC RMB382,103,000 - 100 Development Estate Limited* and sale of properties Guangzhou Junya Real PRC PRC RMB60,220,000 - 100 Development Estate Limited* and sale of properties Guangzhou Junde Real PRC PRC HK$60,000,000 - 100 Development Estate Limited* and sale of properties Road King (China) BVI PRC HK$1,300,000,000 100 - Investment Infrastructure Limited holding Road King Infrastructure BVI # US$1 100 - Provision of Finance (2004) Limited financial services Road King Infrastructure BVI # US$1 100 - Provision of Finance (2007) Limited financial services RKI Finance Limited BVI # US$1 100 - Provision of financial services RK Properties Finance BVI # US$1 - 100 Provision of (2007) Limited financial services Road King Infrastructure Hong Kong Hong Kong HK$2 - 100 Provision of Management Limited management services RK Properties Hong Kong Hong Kong HK$1 - 100 Provision of Management Limited management services * PRC PRC RMB2,114,078,000 - 100 Development and sale of properties RK Properties Holdings BVI # US$1 - 100 Investment Limited holding Sunco Property Holdings BVI # US$250 - 89.46 Investment Company Limited holding PRC PRC RMB600,000,000 - 89.46 Investment ** holding PRC PRC RMB760,000,000 - 89.46 Investment ** holding

F-142 Proportion of nominal value of Issued and issued ordinary fully paid shares capital/ ordinary registered capital Place of share held by the incorporation/ Place of capital/paid Company Principal Name of subsidiary registration operation registered capital Directly Indirectly activities %% ** PRC PRC RMB235,000,000 - 89.46 Development and sale of properties PRC PRC RMB40,000,000 - 89.46 Development ** and sale of properties ** PRC PRC RMB55,000,000 - 89.46 Development and sale of properties ** PRC PRC RMB110,000,000 - 89.46 Development and sale of properties ** PRC PRC RMB10,000,000 - 89.46 Development and sale of properties PRC PRC RMB250,000,000 - 89.46 Development ** and sale of properties ** PRC PRC RMB40,000,000 - 89.46 Development and sale of properties PRC PRC RMB30,000,000 - 89.46 Development ** and sale of properties PRC PRC RMB40,000,000 - 89.46 Development ** and sale of properties PRC PRC RMB160,000,000 - 89.46 Development ** and sale of properties PRC PRC RMB50,000,000 - 89.46 Development ** and sale of properties

# The subsidiaries of the Company are either investment holding or provision of financial services companies only and do not have any operations. * The subsidiaries of the Company are wholly foreign owned enterprises in the PRC. ** The subsidiaries of the Company are foreign owned enterprises in the PRC.

F-143 The above table lists the subsidiaries of the Company which, in the opinion of the Directors, principally affect the results of the year or constituted a substantial portion of the net asset of the Group. To give details of other subsidiaries would, in the opinion of the Directors, result in particulars of excessive length.

None of the subsidiaries had any debt securities at the end of the year except for Road King Infrastructure Finance (2004) Limited and Road King Infrastructure Finance (2007) Limited, which have issued HK$1,559 million (2007: HK$1,536 million) of guaranteed notes and HK$2,682 million (2007: HK$2,634 million) of senior notes respectively.

43. Total assets less current liabilities/net current assets

The Group’s total assets less current liabilities at 31 December 2008 amounted to HK$15,419,328,000 (2007: HK$14,807,869,000) . The Group’s net current assets at 31 December 2008 amounted to HK$8,590,609,000 (2007: HK$8,240,272,000).

F-144 REGISTERED OFFICE OF PRINCIPAL AND REGISTERED OFFICES OF THE ISSUER THE COMPANY RKI Finance (2010) Limited Road King Infrastructure Limited P.O. Box 957 Suite 501 Clarendon House Offshore Incorporations Centre 5th Floor, Tower 6 2 Church Street Road Town The Gateway Hamilton HM 11 Tortola 9 Canton Road Bermuda British Virgin Islands Tsimshatsui, Kowloon Hong Kong

PRINCIPAL AGENT TRUSTEE REGISTRAR Deutsche Bank AG, DB Trustees (Hong Kong) Limited Deutsche Bank Hong Kong Branch 48th Floor, Cheung Kong Center Luxembourg S.A. 48th Floor, Cheung Kong Center 2 Queen’s Road Central, 2 Boulevard Konrad Adenauer 2 Queen’s Road Central, Hong Kong L-1115 Luxembourg Hong Kong

LEGAL ADVISERS TO THE ISSUER AND THE COMPANY as to Hong Kong law as to English law Richards Butler in association with Reed Smith LLP Sidley Austin LLP 20th Floor, Alexandra House Level 39 Woolgate Exchange 16-20 Chater Road Two International Finance Centre 25 Basinghall Street Central 8 Finance Street London EC2V 5HA Hong Kong Central United Kingdom Hong Kong as to Bermuda as to PRC law and British Virgin Islands law Global Law Office Conyers Dill & Pearman 15th Floor, Tower, China Central 2901, One Exchange Square Place 8 Connaught Place No. 81 Jianguo Road Central Chaoyang District Hong Kong Beijing 100025 China

LEGAL ADVISERS TO THE JOINT LEAD MANAGERS as to English law as to PRC law Linklaters Commerce & Finance Law Offices Jingtian & Gongcheng 10th Floor, Alexandra House 6th Floor, NCI Tower 34th Floor, Tower 3, 18 Chater Road A12 Jianguomenwai Avenue China Central Place 77, Hong Kong Chaoyang District Jianguo Road, Beijing 100022 Chaoyang District China Beijing 100025 China

CERTIFIED PUBLIC ACCOUNTANTS Deloitte Touche Tohmatsu 35th Floor, One Pacific Place 88 Queensway Hong Kong