SOUTH CHINA LAND LIMITED 南華置地有限公司 (Incorporated in the Cayman Islands with limited liability) (Stock Code: 8155) INTERIM REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2008 CHARACTERISTICS OF THE GROWTH ENTERPRISE MARKET (“GEM”) OF THE STOCK EXCHANGE OF HONG KONG LIMITED (THE “STOCK EXCHANGE”) GEM has been positioned as a market designed to accommodate companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors. Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board and no assurance is given that there will be a liquid market in the securities traded on GEM. - 1 - INTERIM RESULTS The Board of Directors (the “Board”) of South China Land Limited 南華置地有限公司 (“the Company”) announces that the unaudited consolidated results of the Company and its subsidiaries (collectively, the “Group”) for the three months and six months ended 30 June 2008, together with the comparative unaudited figures for the corresponding period in 2007, are as follows: CONDENSED CONSOLIDATED INCOME STATEMENT Three months ended 30 June Six months ended 30 June 2008 2007 2008 2007 Notes HK$’000 HK$’000 HK$’000 HK$’000 (Unaudited) (Unaudited (Unaudited) (Unaudited and restated) and restated) Revenue 3 10,472 7,083 18,396 13,753 Direct operating expenses (4,457) (3,447) (8,679) (7,596) Other operating income 548 10 159 17 Selling and distribution costs (3,998) (2,335) (6,354) (4,795) Administrative expenses (3,783 ) (1,741 ) (8,658 ) (2,495) Operating loss 4 (1,218 ) (430) (5,136 ) (1,116) Finance costs 6 (7,169 ) (3,804 ) (13,967 ) (4,566) Loss before income tax (8,387) (4,234) (19,103 ) (5,682) Taxation 7 – – – – Loss for the period (8,387) (4,234) (19,103 ) (5,682) Attributable to: Equity holders of the Company (8,271 ) (3,883) (18,396) (5,331) Minority interests (116 ) (351 ) (707 ) (351) (8,387) (4,234) (19,103 ) (5,682) Loss per share – Basic 9 HK1.63 cents HK0.77 cent HK3.63 cents HK1.05 cents – Diluted 9 N/A N/A N/A N/A - 2 - CONDENSED CONSOLIDATED BALANCE SHEET As at As at 30 June 31 December 2008 2007 Notes HK$’000 HK$’000 (Unaudited) (Audited) ASSETS AND LIABILITIES Non-current assets Property, plant and equipment 10 917 710,031 Goodwill 355,271 355,271 Recoverable from an intermediate holding company and a fellow subsidiary 88,777 88,777 Prepayments 4,868 6,564 449,833 1,160,643 Current assets Trade receivables 11 5,047 4,780 Property under development 10 815,645 – Amount due from a minority shareholder of a subsidiary 12,359 12,561 Prepayments and other receivables 13,495 8,563 Bank balances and cash 36,062 19,702 882,608 45,606 Current liabilities Trade payables 12 4,536 4,590 Other payables, accruals and receipts in advance 10,127 4,866 Amount due to an intermediate holding company 139,405 46,553 Amount due to a fellow subsidiary – 962 Amount due to related parties 762 10,200 Amount due to a director – 2,898 Bank borrowings 12,000 24,000 166,830 94,069 Net current assets/(liabilities) 715,778 (48,463) Total assets less current liabilities 1,165,611 1,112,180 Non-current liabilities Bank borrowings 97,524 56,000 Convertible notes 683,526 669,559 Deferred tax liabilities 110,971 110,971 892,021 836,530 Net assets 273,590 275,650 Capital and reserves Share capital 5,065 5,065 Share premium and reserves 156,595 158,094 Equity attributable to equity holders of the Company 161,660 163,159 Minority interests 111,930 112,491 Total equity 273,590 275,650 - 3 - CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months ended 30 June 2008 Equity attributable to equity holder of the Company Employee Convertible Share Share Capital compensation Exchange note equity Accumulated Minority Total capital premium reserve reserve reserve reserve losses Total interests equity HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 At 1 January 2007 5,065 11,483 6,044 – – – (21,596) 996 – 996 Loss for the period (as restated) – – – – – – (5,331) (5,331) (351) (5,682) Acquisition of subsidiaries – – – – – – – – 234,014 234,014 Issue of convertible notes – – – – – 75,594 – 75,594 – 75,594 Equity-settled share-based compensation – – – 633 – – – 633 – 633 Exchange realignment – – – – 2,681 – – 2,681 – 2,681 At 30 June 2007 (as restated) 5,065 11,483 6,044 633 2,681 75,594 (26,927) 74,573 233,663 308,236 At 1 January 2008 5,065 11,483 6,044 1,951 32,861 148,232 (42,477) 163,159 112,491 275,650 Loss for the period – – – – – – (18,396) (18,396) (707) (19,103) Equity-settled share-based compensation – – – 861 – – – 861 – 861 Exchange realignment – – – – 16,036 – – 16,036 146 16,182 At 30 June 2008 5,065 11,483 6,044 2,812 48,897 148,232 (60,873) 161,660 111,930 273,590 - 4 - CONDENSED CONSOLIDATED CASH FLOW STATEMENT Six months ended 30 June 2008 2007 HK$’000 HK$’000 (Unaudited) (Unaudited and restated) Net cash used in operating activities (105,754) (8,524) Net cash used in investing activities (262) (9,437) Net cash from financing activities 122,376 24,595 Net increase in cash and cash equivalents 16,360 6,634 Cash and cash equivalents, beginning of the period 19,702 1,388 Cash and cash equivalents, end of the period 36,062 8,022 Analysis of the balance of cash and cash equivalents Bank balances and cash 36,062 8,022 - 5 - Notes: 1. BASIS OF PRESENTATION The unaudited consolidated income statement for the three months and six months ended 30 June 2008 has not been audited by the Company’s auditors but has been reviewed by the Company’s audit committee. These interim financial statements should be read in conjunction with the 2007 annual report. The financial statements have been prepared 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 and the Rules Governing the Listing of Securities on the Growth Enterprise Market of the Stock Exchange of Hong Kong Limited. The accounting policies and methods of computation used in the preparation of the interim financial statements are consistent with those used in the annual financial statements for the year ended 31 December 2007. 2. RESTATEMENT OF COMPARATIVE FIGURES Certain comparative figures had been restated to conform with the current period’s presentation. The non-cash imputed interest on the zero-coupon convertible notes in an amount of HK$4,229,000 and indirect expenses in an amount of HK$1,473,000 were expensed to the consolidated income statement, instead of capitalized as construction in progress on the consolidated balance sheet as shown in the interim report for the six months ended 30 June 2007. The restatement had led to an increase in the loss for the six months ended 30 June 2007 by HK$5,702,000. 3. REVENUE Revenue comprises sales of magazines, advertising income and promotion project income. 4. OPERATING LOSS Operating loss for the three months and six months ended 30 June 2008 is arrived at after charging depreciation of HK$96,000 and HK$185,000 respectively (three months and six months ended 30 June 2007: HK$96,000 and HK$183,000 respectively). 5. SEGMENT INFORMATION (a) Business segments An analysis of the Group’s revenue and operating loss by business segments are as follows: Turnover Operating profit/(loss) Six months ended 30 June Six months ended 30 June 2008 2007 2008 2007 HK$’000 HK$’000 HK$’000 HK$’000 (Unaudited) (Unaudited (Unaudited) (Unaudited and restated) and restated) Publications 18,396 13,753 185 1,114 Property investment and development – – (3,741 ) (1,140 ) Unallocated – – (1,580 ) (1,090 ) 18,396 13,753 (5,136 ) (1,116 ) - 6 - (b) Geographical segments An analysis of the Group’s revenue and operating loss by geographical location are as follows: Turnover Operating profit/(loss) Six months ended 30 June Six months ended 30 June 2008 2007 2008 2007 HK$’000 HK$’000 HK$’000 HK$’000 (Unaudited) (Unaudited (Unaudited) (Unaudited and restated) and restated) Hong Kong 18,396 13,753 (1,395 ) 24 Other regions of the People’s Republic of China – (1,140 ) – (3,741 ) 18,396 13,753 (5,136 ) (1,116 ) 6. FINANCE COSTS Three months ended 30 June Six months ended 30 June 2008 2007 2008 2007 HK$’000 HK$’000 HK$’000 HK$’000 (Unaudited) (Unaudited (Unaudited) (Unaudited and restated) and restated) Interest charged on bank borrowings repayable within five years 968 2,357 2,229 2,357 Non-cash imputed interest on convertible notes 7,169 3,467 13,967 4,229 Others 337 337 – – Total interest 8,137 6,161 16,196 6,923 Less: interest capitalized on property under development/construction in progress (2,357 ) (2,357 ) (968 ) (2,229) 7,169 3,804 13,967 4,566 7. TAXATION No Hong Kong profits tax was provided as the Group had no estimated assessable profits arising in or derived from Hong Kong during the three months and six months ended 30 June 2008 (three months and six months ended 30 June 2007: Nil).