Zhong An Group Limited - Proxy Solicitation & Information Statement 2009

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Zhong An Real Estate Limited, you should at once hand this circular to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

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

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ZHONG AN REAL ESTATE LIMITED

(incorporated in the Cayman Islands with limited liability)

(Stock code: 672)

MAJOR TRANSACTION

21 December 2009

			Page
Definitions . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
Letter from the Board
Appendix I	–	Financial information of the Group . . . . . . . . . . . . . . . . . . . . . . .	I-1
Appendix II	–	Valuation report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	II-1
Appendix III	–	General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1

– i –

DEFINITIONS

In this circular, the following expressions shall, unless the context requires otherwise, have the following meanings:

“Bid Confirmation” the land use right bid confirmations ( ) in respect of the Land dated 29 October 2009 and entered into between Zhejiang Zhong’an and Yuyao Bureau of Land and Resources “Board” the board of Directors “Company” Zhong An Real Estate Limited, an exempted company incorporated in the Cayman Islands with limited liability, the shares of which are listed on the Stock Exchange “Director(s)” the director(s) of the Company “GDP” gross domestic product “Group” the Company and its subsidiaries “Hong Kong” the Hong Kong Special Administrative Region of the PRC “Independent Third Party” a party who is (i) not a connected person of the Company and (ii) independent of and not connected with any of the directors, chief executive and substantial shareholders of the Company or any of its subsidiaries, or any of their respective associates “km” kilometre “Land No.1” the land located at south to Beihuan West Road and west to Xinjian North Road, Yuyao, Zhejiang Province, the PRC. ( ) with a site area of approximately 65,159 sq. m. “Land No.2” the land located at south to Beihuan West Road and west to Zhongjiang, Yuyao, Zhejiang Province, PRC. ( ) with a site area of approximately 132,041 sq. m. “Land No.3” the land located at north to Jinxing Road and west to Zhongjiang, Yuyao, Zhejiang Province, PRC. ( ) with a site area of approximately 198,094 sq. m.

– 1 –

DEFINITIONS

“Land Transfer Price” RMB2,075,290,000 (equivalent to approximately HK$2,358,284,000), being the price for the transfer of land use right in respect of the Land
“Latest Practicable Date” 15 December 2009, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular
“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange
“Ningbo Commodity” Ningbo Commodity Auction Company Limited* ( )
“PRC” the People’s Republic of China which, for the purposes of this circular, excludes Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan
“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“Share(s)” ordinary share(s) of HK$0.10 each in the share capital of the Company
“Shareholder(s)” holder(s) of the Shares “Stock Exchange” The Stock Exchange of Hong Kong Limited “Transaction” the transactions contemplated under the Bid Confirmation
“Yuyao” Yuyao, Zhejiang Province, the PRC ( )
“Yuyao Bureau of Land and Yuyao Bureau of Land and Resources, Zhejiang Resources” Province, the PRC* ( )
“Zhejiang Zhong’an” Zhejiang Zhong’an Property Development Co., Ltd.* ( ), a limited liability company incorporated in the PRC and is a non-wholly owned subsidiary of the Company

“HK$”	Hong Kong dollar(s), the lawful currency of Hong
	Kong
“RMB”	Renminbi Yuan, the lawful currency of the PRC

– 2 –

DEFINITIONS

“sq. m.” square metre(s) “%” per cent.

denotes English translation of the name of a Chinese company or entity, or vice versa, and is provided for identification purposes only.

In this circular, for the purpose of illustration only, amounts quoted in RMB have been converted into HK$ at the rate of RMB0.88 to HK$1.00. Such exchange rate has been used, where applicable, for purposes of illustration only and does not constitute a representation that any amounts were or may have been exchanged at these or any other rates or at all.

– 3 –

LETTER FROM THE BOARD

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ZHONG AN REAL ESTATE LIMITED

(incorporated in the Cayman Islands with limited liability) (Stock code: 672)

Executive Directors: Mr. Shi Kancheng (alias Shi Zhongan)

Mr. Lou Yifei Ms. Shen Tiaojuan Mr. Zhang Jiangang

Registered Office: Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Independent non-executive Directors:

Professor Pei Ker Wei Professor Wang Shu Guang Dr. Loke Yu

Principal place of business in Hong Kong: Unit 2509, 25/F Harbour Centre 25 Harbour Road Wanchai Hong Kong

21 December 2009

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION

1. Background

On 30 October 2009, the Board announced that on 29 October 2009 Zhejiang Zhong’an, a subsidiary of the Company, has participated in the open tender auction of the state-owned land use right of the Land and has succeeded in its bid of RMB2,075,290,000 (equivalent to approximately HK$2,358,284,000) through an open tender auction organized and held by Ningbo Commodity, as agent of Yuyao Bureau of Land and Resources.

On 29 October 2009, the Group entered into the Bid Confirmation with Yuyao Bureau of Land and Resources, pursuant to which the parties to the Bid Confirmation agreed that Zhejiang Zhong’an shall purchase the land use right in respect of the Land at the Land Transfer Price.

– 4 –

LETTER FROM THE BOARD

The Land, comprising Land No.1, Land No.2 and Land No.3, is located at northern part of Yuyao, close to Beihuan West Road, to Xinjian North Road and other main roads. The site area of the Land is approximately 395,294 sq.m..

The purpose of this circular is to give you further information regarding the Transaction.

2. Principal terms of the Bid Confirmation

Date: 29 October 2009

Parties:

Zhejiang Zhong’an
Yuyao Bureau of Land and Resources

To the best the Directors’ knowledge, information and belief having made all reasonable enquiry, Yuyao Bureau of Land and Resources is an Independent Third Party. Land for transfer: Land No.1, Land No.2 and Land No.3 (collectively the “Land”) Term of land use right: 40 years for Land No.1 which is designated for commercial purpose and 70 years for Land No.2 and Land No.3 which are designated for residential purpose Land Transfer Price: RMB2,075,290,000 (equivalent to approximately HK$2,358,284,000)

Zhejiang Zhong’an shall pay the Land Transfer Price by two installments as follows:

RMB1,037,645,000 (equivalent to approximately HK$1,179,142,000) on or before 9 November 2009 (which has already been paid as at the Latest Practicable Date)
RMB1,037,645,000 (equivalent to approximately HK$1,179,142,000) on or before 30 November 2009

As Zhejiang Zhong’an and Yuyao Bureau of Land and Resources are still negotiating and finalising the terms of the contract(s) for the transfer of the land use right of State-owned land in respect of the Land (“ Land Transfer Contract ”), the Land Transfer Contract has not been entered into as at the date of the Latest Practicable Date.

– 5 –

LETTER FROM THE BOARD

Zhejiang Zhong’an and Yuyao Bureau of Land Resources are still negotiating on the following terms of the Land Transfer Contract:

(A) details of the river reformation work of the river situated on the Lands which is required to be carried out by the Group; and
(B) date of delivery of the Land as the levelling of the Lands, construction of the boundary walls, demolition and resettlement work of the Lands have not been completed. The Lands should be delivered to Zhejiang Zhong’an after completion of such work.

Zhejiang Zhong’an will pay the balance of the Land Transfer Price pursuant to the terms of the Land Transfer Contract once it has been finalised. The Executive Directors do not consider that this will be considered a default of the Bid Confirmation by Zhejiang Zhong’an.

It is currently expected that barring unforeseen circumstances, the Land Transfer Contract will be entered into by end of January 2010.

3. Land Transfer Price

The Land Transfer Price has been and will be funded by the Group’s internal resources.

The Land Transfer Price was arrived at as a result of a successful bid by Zhejiang Zhong’an at an open auction and such price was determined having taken into account the existing property market conditions of Yuyao and the development potential of the Land.

4. Reasons for the Transaction

The Group is principally engaged in property development, leasing and hotel operation.

The Land is located at northern part of Yuyao, close to Beihuan West Road, to Xinjian North Road and other main roads. It is also in the proximity of several specialized commodity markets and exhibition centre, and the Land is also with good scenery resources. It is planned that there will be clusters of specialized markets and business and trade. This will be one of the locations in Yuyao with great development potential.

Yuyao is one of the top 20 county cities ( ) among the top 100 county cities ( ) in the PRC in 2008 and is one of the top 10 cities of Zhejiang Province in terms of GDP in 2008. The overall economy of Yuayo is managed well. The growth rate of the GDP is maintained at a high level in recent years. The average growth rate is above 14% on annual basis. The residents of Yuyao have good standard of living and high purchasing

– 6 –

LETTER FROM THE BOARD

power. The high end villa type property is at a preliminary stage in Yuyao. The Group plans to build a high end five star hotel and large property complex with commercial and high quality residual units. This will bring considerable income and profits to the Group.

The Directors believe that the Transaction will enrich the Group’s landbank and will bring forth development and opportunity for the Group.

The Directors are of the view that the Transaction is in line with the business expansion strategy of the Group. The Directors (including the independent non-executive Directors) consider that the Transaction is in the ordinary and usual course of business of the Group, the terms of the Transaction are on normal commercial terms which are fair and reasonable and the Transaction is in the interests of the Company and the Shareholders as a whole.

5. Financial Effect of the Transaction

As set out in Appendix II to this circular, CB Richard Ellis Limited currently ascribes no commercial value to the Land. Had the Group paid all the land premium and obtained all the relevant state-owned land use right certificates of the Land, the capital value of the Land as at 20 November 2009 was in the sum of RMB2,142,000,000.

Upon completion of the Transaction, it is expected that the assets and liabilities of the Group will not change. There will also be no impact on the income statement or reserves of the Group. It is also expected that the Transaction will increase the Group’s revenue in the long run.

6. Major Transaction

The Transaction constitutes a major transaction for the Company under Chapter 14 of the Listing Rules and is conditional on approval by the Shareholders.

Under Rule 14.44 of the Listing Rules, Shareholders’ approval for the purchase of the Land may be obtained by written Shareholders’ approval without the need of convening a general meeting if (a) no Shareholder is required to abstain from voting if the Company were to convene a general meeting for the approval of the Transaction; and (b) written approval has been obtained from a Shareholder or a closely allied group of Shareholders who together hold more than 50% in nominal value of the issued share capital of the Company giving the right to attend and vote at general meetings to approve the Transaction.

So far as the Directors are aware after making reasonable enquiries, no Shareholder would have been required to abstain from voting if the Company were to convene a general meeting for the approval of the Transaction. Therefore, the transaction would be approved by way of written shareholders’ approval from a shareholder or a closely allied group of shareholders pursuant to Rule 14.44 of the Listing Rules.

– 7 –

LETTER FROM THE BOARD

On 29 October 2009, written approval for the Transaction was given by Whole Good Management Limited, a Shareholder holding 1,357,300,000 Shares, representing about 69.87% of the issued share capital of the Company as at the date of such approval. Accordingly, no extraordinary general meeting of the Company will be convened for the purposes of approving the Transaction.

7. Additional information

Your attention is drawn to the information set out in the appendices to this circular.

Yours faithfully, By order of the Board of Zhong An Real Estate Limited Shi Kancheng Chairman

– 8 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. SUMMARY OF FINANCIAL RESULTS

The summary of the consolidated results of the Group for each of the three years ended 31 December 2006, 2007 and 2008 and the consolidated assets and liabilities of the Group as at 31 December 2006, 31 December 2007 and 31 December 2008 as set out below is extracted from the 2008 annual report of the Company.

The auditors’ reports from Ernst & Young in respect of the Group’s audited consolidated financial statements for each of the three years ended 31 December 2006, 2007 and 2008 did not contain any qualifications. There were no other exceptional items or extraordinary items of the Group during each of the three years ended 31 December 2006, 2007 and 2008.

Results

Year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 1,437,841 330,043 672,733 442,175 485,068 203,076 (159,860) (51,596) (112,501) 282,315 433,472 90,575 253,986 391,306 81,966 28,329 42,166 8,609 282,315 433,472 90,575	Year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 1,437,841 330,043 672,733 442,175 485,068 203,076 (159,860) (51,596) (112,501) 282,315 433,472 90,575 253,986 391,306 81,966 28,329 42,166 8,609 282,315 433,472 90,575	Year ended 31 December 2008 2007 2006 RMB’000 RMB’000 RMB’000 1,437,841 330,043 672,733 442,175 485,068 203,076 (159,860) (51,596) (112,501) 282,315 433,472 90,575 253,986 391,306 81,966 28,329 42,166 8,609 282,315 433,472 90,575
442,175 (159,860)	485,068 (51,596)	203,076 (112,501
282,315	433,472
253,986 28,329	391,306 42,166	81,966 8,609
282,315	433,472

Assets, Liabilities and Minority Interests

Total Assets Total Liabilities Minority Interests	31 December 2008 2007 RMB’000 RMB’000 6,326,363 7,685,374 (2,283,911) (3,749,400) (110,573) (81,681) 3,931,879 3,854,293	2006 RMB’000 2,179,323 (1,931,741) (46,155) 201,427

– I-1 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following is the audited financial statements and notes to the financial statements of the Group for the year ended 31 December 2008 as extracted from the annual report 2008 of the Company:

Consolidated Income Statement

Notes Revenue 5 Cost of sales Gross profit Other income 5 Selling and distribution costs Administrative expenses Other expenses Increase in fair value of investment properties 14 Finance costs 6 Profit before tax 7 Income tax 9 Profit for the year Attributable to: Equity holders of the Company 10 Minority interests Dividends Proposed final 11 Earnings per share attributable to ordinary equity holders of the Company (RMB) 12 Basic	Year ended 31 December 2008 2007 RMB’000 RMB’000 1,437,841 330,043 (941,291) (165,701) 496,550 164,342 57,475 60,661 (45,387) (26,309) (101,607) (77,709) (60,851) (4,469) 104,235 405,776 (8,240) (37,224) 442,175 485,068 (159,860) (51,596) 282,315 433,472 253,986 391,306 28,329 42,166 282,315 433,472 38,853 – 13 cents 26 cents	Year ended 31 December 2008 2007 RMB’000 RMB’000 1,437,841 330,043 (941,291) (165,701) 496,550 164,342 57,475 60,661 (45,387) (26,309) (101,607) (77,709) (60,851) (4,469) 104,235 405,776 (8,240) (37,224) 442,175 485,068 (159,860) (51,596) 282,315 433,472 253,986 391,306 28,329 42,166 282,315 433,472 38,853 – 13 cents 26 cents
	496,550 57,475 (45,387) (101,607) (60,851) 104,235 (8,240) 442,175 (159,860)	164,342 60,661 (26,309 (77,709 (4,469 405,776 (37,224
		485,068 (51,596
	282,315
	253,986 28,329	391,306 42,166
	282,315 38,853 13 cents

– I-2 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Balance Sheet

Notes NON-CURRENT ASSETS Property and equipment 13 Investment properties 14 Properties under development 15 Goodwill 16 Available-for-sale investments 17 Deferred tax assets 18 Total non-current assets CURRENT ASSETS Completed properties held for sale Properties under development 15 Inventories Trade receivables 20 Prepayments, deposits and other receivables 21 Pledged deposits 22 Cash and cash equivalents 22 Total current assets CURRENT LIABILITIES Trade payables 23 Bills payable 24 Other payables and accruals 25 Advances from customers 26 Interest-bearing bank and other borrowings 27 Tax payable 9 Total current liabilities NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES	Year ended 31 December 2008 2007 RMB’000 RMB’000 200,739 37,151 1,146,500 958,913 1,034,200 997,961 15,292 63,928 3,300 – 20,188 21,738	Year ended 31 December 2008 2007 RMB’000 RMB’000 200,739 37,151 1,146,500 958,913 1,034,200 997,961 15,292 63,928 3,300 – 20,188 21,738
	2,420,219 219,171 1,326,318 3,549 10,857 677,808 16,343 1,652,098 3,906,144 485,222 – 287,585 368,986 142,117 251,139 1,535,049 2,371,095 4,791,314	2,079,691
		212,820 1,433,404 – – 920,746 196 3,038,517
		5,605,683
		406,155 196 283,268 1,301,721 438,197 393,283
		2,822,820
		2,782,863
		4,862,554

– I-3 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Notes TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Interest-bearing bank and other borrowings 27 Deferred tax liabilities 18 Total non-current liabilities Net assets EQUITY Equity attributable to equity holders of the Company Issued capital 28 Reserves 29 Proposed final dividend 11 Minority interests Total equity	Year ended 31 December 2008 2007 RMB’000 RMB’000 4,791,314 4,862,554 521,789 854,716 227,073 71,864 748,862 926,580 4,042,452 3,935,974	Year ended 31 December 2008 2007 RMB’000 RMB’000 4,791,314 4,862,554 521,789 854,716 227,073 71,864 748,862 926,580 4,042,452 3,935,974
		854,716 71,864
		926,580
		3,935,974

	185,339 3,707,687 38,853 3,931,879 110,573	190,808 3,663,485 –
		3,854,293 81,681
	4,042,452	3,935,974

– I-4 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Changes In Equity

			Attributabl	e to equity h	olders of the	Company
Issued capital RMB’000 Note 28(a) – – – – – – 51,805 – 139,003 –	Share premium account RMB’000 Note 28(b) – – – – – – 3,403,547 (170,428) (139,003) –	Contributed surplus RMB’000 Note 29(a) 39,318 – – – – – – – – –	Capital reserve RMB’000 Note 29(b) 6,326 – – 3,440 – – – – – –	Statutory surplus reserve RMB’000 Note 29(c) 15,174 – – – – – – – – 46,474	Statutory reserve fund RMB’000 Note 29(c) 2,099 – – – – – – – – 4,005	Exchange fluctuation reserve RMB’000 – – (26,804) – – – – – – –	Retained profits RMB’000 138,510 391,306 – – – – – – – (50,479)	Proposed final dividend RMB’000 – – – – – – – – – –	Total RMB’000 201,427 391,306 (26,804) 3,440 – – 3,455,352 (170,428) – –	Minority interests RMB’000 46,155 42,166 – (11,440) (200) 5,000 – – – –	Total equity RMB’000 247,582 433,472 (26,804 (8,000 (200 5,000 3,455,352 (170,428 – –
190,808	3,094,116	39,318	9,766	61,648	6,104	(26,804)	479,337	–	3,854,293	81,681	3,935,974

190,808 – – – (5,469) – – –	3,094,116 – – – (117,295) – – –	39,318 – – – – – – –	9,766 – – – – (315) – –	61,648 – – – – – – 46,288	6,104 – – – – – – 1,737	(26,804) – (53,321) – – – – –	479,337 253,986 – – – – (38,853) (48,025)	– – – – – – 38,853 –	3,854,293 253,986 (53,321) – (122,764) (315) – –	81,681 28,329 – 248 – 315 – –	3,935,974 282,315 (53,321 248 (122,764 – – –
185,339	2,976,821*	39,318*	9,451*	107,936*	7,841*	(80,125) 646,445		38,853	3,931,879	110,573	4,042,452

* These reserve accounts comprise the consolidated reserves of RMB3,707,687,000 (2007: RMB3,663,485,000) in the consolidated balance sheet.

– I-5 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Cash Flow Statement

Notes Cash flows from operating activities Profit before tax Adjustments for: Depreciation 7, 13 Amortisation of land use rights 7, 15 Gain on disposal of a subsidiary 7 Gain on disposal of items of property and equipment 5 Excess of the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition of a subsidiary 7 Increase in fair value of investment properties 7, 14 Goodwill impairment 7, 16 Dividend income from short-term investments 5 Finance costs 6 Interest income 5 Increase in properties under development Decrease in completed properties held for sale Increase in trade receivables Decrease/(increase) in prepayments, deposits and other receivables Increase in inventories Increase in trade payables (Decrease)/increase in bills payable Decrease in other payables and accruals (Decrease)/increase in advances from customers Cash used in operating activities Interest received Interest paid Income tax and land appreciation tax paid Net cash outflow from operating activities	Year ended 31 December 2008 2007 RMB’000 RMB’000 442,175 485,068 15,996 5,627 11,296 2,087 – (4) – (62) – (19,689) (104,235) (405,776) 48,636 – – (6,481) 8,240 37,224 (54,709) (27,262) 367,399 70,732 (782,011) (809,838) 910,844 90,925 (10,857) – 84,675 (425,108) (3,549) – 79,067 75,915 (196) 196 (1,763) (236,054) (932,735) 624,035 (289,126) (609,197) 49,372 27,262 (64,283) (94,530) (62,508) (63,446) (366,545) (739,911)	Year ended 31 December 2008 2007 RMB’000 RMB’000 442,175 485,068 15,996 5,627 11,296 2,087 – (4) – (62) – (19,689) (104,235) (405,776) 48,636 – – (6,481) 8,240 37,224 (54,709) (27,262) 367,399 70,732 (782,011) (809,838) 910,844 90,925 (10,857) – 84,675 (425,108) (3,549) – 79,067 75,915 (196) 196 (1,763) (236,054) (932,735) 624,035 (289,126) (609,197) 49,372 27,262 (64,283) (94,530) (62,508) (63,446) (366,545) (739,911)
	367,399 (782,011) 910,844 (10,857) 84,675 (3,549) 79,067 (196) (1,763) (932,735) (289,126) 49,372 (64,283) (62,508) (366,545)	70,732 (809,838 90,925 – (425,108 – 75,915 196 (236,054 624,035
		(609,197 27,262 (94,530 (63,446
		(739,911

– I-6 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes Net cash outflow from operating activities Cash flows from investing activities Acquisition of a subsidiary 34 Acquisition of an additional equity interest in a subsidiary Disposal of a subsidiary Purchases of investment properties Purchases of items of property and equipment Proceeds from disposal of items of property and equipment Purchases of available-for-sale investments Dividend income from short-term investments 5 (Increase)/decrease in pledged deposits Net cash outflow from investing activities Cash flows from financing activities Capital contributions by minority shareholders Proceeds from issue of shares Repurchase and cancellation of shares New interest-bearing bank and other borrowings Repayment of interest-bearing bank and other borrowings Net cash (outflow)/inflow from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of year Effect of foreign exchange rate changes, net Cash and cash equivalents at end of year Analysis of balances of cash and cash equivalents Cash and bank balances 22	Year ended 31 December 2008 2007 RMB’000 RMB’000 (366,545) (739,911) (187,506) (232,223) – (7,500) – (21) (216) (7,588) (9,376) (22,667) 1,515 1,316 (3,300) – – 6,481 (16,147) 37,804 (215,030) (224,398) 248 5,000 – 3,284,924 (122,764) – 19,100 1,022,413 (648,107) (412,780) (751,523) 3,899,557 (1,333,098) 2,935,248 3,038,517 130,073 (53,321) (26,804) 1,652,098 3,038,517 1,652,098 3,038,517	Year ended 31 December 2008 2007 RMB’000 RMB’000 (366,545) (739,911) (187,506) (232,223) – (7,500) – (21) (216) (7,588) (9,376) (22,667) 1,515 1,316 (3,300) – – 6,481 (16,147) 37,804 (215,030) (224,398) 248 5,000 – 3,284,924 (122,764) – 19,100 1,022,413 (648,107) (412,780) (751,523) 3,899,557 (1,333,098) 2,935,248 3,038,517 130,073 (53,321) (26,804) 1,652,098 3,038,517 1,652,098 3,038,517
	(187,506) – – (216) (9,376) 1,515 (3,300) – (16,147) (215,030) 248 – (122,764) 19,100 (648,107) (751,523) (1,333,098) 3,038,517 (53,321)	(232,223 (7,500 (21 (7,588 (22,667 1,316 – 6,481 37,804
		(224,398
		5,000 3,284,924 – 1,022,413 (412,780
		3,899,557
		2,935,248 130,073 (26,804
	1,652,098 1,652,098

– I-7 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Balance Sheet

Notes NON-CURRENT ASSETS Interests in subsidiaries 19 Property and equipment 13 Total non-current assets CURRENT ASSETS Amounts due from subsidiaries 19 Prepayments, deposits and other receivables 21 Cash and cash equivalents 22 Total current assets CURRENT LIABILITIES Amounts due to subsidiaries 19 Other payables and accruals 25 Total current liabilities NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES Net assets EQUITY Issued capital 28 Reserves 29 Total equity	As at 31 December 2008 2007 RMB’000 RMB’000 1,018,948 473,577 576 –	As at 31 December 2008 2007 RMB’000 RMB’000 1,018,948 473,577 576 –
	1,019,524 1,958,224 839 62,797 2,021,860 116,828 1,867 118,695 1,903,165 2,922,689	473,577
		1,148,684 11,412 1,652,663
		2,812,759
		23,132 16,056
		39,188
		2,773,571
		3,247,148
	2,922,689	3,247,148

	185,339 2,737,350	190,808 3,056,340
	2,922,689	3,247,148

– I-8 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes to Financial Statements

1. Corporate information

Zhong An Real Estate Limited (the “Company”) is a limited liability company incorporated as an exempted company in the Cayman Islands on 13 March 2007 under the Companies Law (revised) of the Cayman Islands. The registered office of the Company is located at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands.

In preparation for the listing of the Company on the Main Board of The Hong Kong Stock Exchange, the Company and its subsidiaries (the “Group”) underwent a reorganisation (the “Reorganisation”), as a result of which the Company became a holding company of the subsidiaries comprising the Group. The Reorganisation included the following principal steps:

Prior to the commencement of the Reorganisation, Mr. Shi Kancheng (alias Shi Zhongan) (“Mr. Shi”) directly held a 90% equity interest of Zhejiang Zhong’an Property Development Co., Ltd. (“Zhejiang Zhong’an”) and Anhui Zhong’an Real Estate Co., Ltd. (“Anhui Zhong’an”), companies established in the People’s Republic of China (the “PRC”). In addition, Mr. Shi wholly owned two overseas entities, namely, Ideal World Investments Limited (“Ideal World”) and Zhong’an (Canada) Ltd. (“Canada Zhong’an”).
On 23 June 2006, pursuant to an agreement entered into between Mr. Shi and Qirui Enterprise Management (Hangzhou) Co., Ltd. (“Qirui”), a wholly-owned subsidiary of Ideal World, Mr. Shi transferred his 90% equity interest in Zhejiang Zhong’an to Qirui. As a result, Ideal World held a 90% equity interest of Zhejiang Zhong’an, and hence indirectly owned Zhejiang Zhong’an’s subsidiaries.
On 15 August 2006, Zhejiang Zhong’an acquired from Mr. Shi his 58.4% equity interest in Anhui Zhong’an. Thereafter, Anhui Zhong’an became a subsidiary of Zhejiang Zhong’an.
On 12 March 2007, Ideal World acquired a 95% equity interest in Anhui Zhong’an Real Estate Development Co., Ltd. (“Anhui Zhong’an Property Development”) from Canada Zhong’an. Afterwards, Ideal World became the immediate holding company of all other subsidiaries in the Group.
Mr. Shi transferred 1,000,000 nil-paid shares of the Company to Whole Good Management Limited (“Whole Good”), an investment company wholly owned by Mr. Shi, at nil consideration on 17 October 2007.
On 17 October 2007, the Company acquired the entire issued share capital of Ideal World from Mr. Shi in consideration of the allotment and issue of 1,000,000 new shares of HK$0.10 each of the Company, credited as fully paid, to Whole Good, by crediting the 1,000,000 existing nil-paid shares held by Whole Good as fully paid. Following this transfer, the Company became the ultimate holding company of the Group.

The Group is principally engaged in property development, leasing and hotel operation. The Group’s property development projects during the year are all located in Zhejiang and Anhui Provinces, the PRC. There were no significant changes in the nature of the Group’s principal activities during the year.

In the opinion of the Directors, the holding company and the ultimate holding company of the Company is Whole Good Management Limited, a company incorporated in the British Virgin Islands on 3 May 2007. Whole Good Management Limited is wholly owned by Mr. Shi, Chairman and Chief Executive Officer of the Company.

2.1 Basis of preparation

The consolidated financial statements have been prepared on a continuing basis as if the Reorganisation had been completed as at the beginning of the financial years presented. The acquisition of Ideal World and other subsidiaries pursuant to the Reorganisation was regarded as a business combination under common control, because the Company, Ideal World and other subsidiaries of the Company set out in note 19 are ultimately

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controlled by the same party, Mr. Shi, before and after the Reorganisation. The consolidated income statements, balance sheets, cash flow statements and statements of changes in equity of the companies now comprising the Group have been prepared as if the Reorganisation had been completed at the beginning of the financial years presented, or from the respective dates of establishment incorporation of the companies (where this is a shorter period), to the extent of interests held by the Company’s shareholders.

These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”), which comprise standards and interpretations approved by the International Accounting Standards Board (“IASB”), and International Accounting Standards and Standing Interpretations Committee interpretations approved by the International Accounting Standards Committee that remain in effect, and the disclosure requirements of the Hong Kong Companies Ordinance. They have been prepared under the historical cost convention, except for investment properties which have been measured at fair value as explained in the accounting policies set out below. These financial statements are presented in Renminbi (“RMB”) and all values are rounded to the nearest thousand except when otherwise indicated.

Basis of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries for the year ended 31 December 2008. Except as described in the introduction paragraph of that note, the results of subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. All income, expenses and unrealised gains and losses resulting from intercompany transactions and intercompany balances within the Group are eliminated on consolidation in full.

The acquisition of subsidiaries during the year has been accounted for using the purchase method of accounting. This method involves allocating the cost of the business combinations to the fair value of the identifiable assets acquired, and liabilities and contingent liabilities assumed at the date of acquisition. The cost of the acquisition is measured at the aggregate of the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.

Minority interests represent the interests of outside shareholders not held by the Group in the results and net assets of the Company’s subsidiaries. An acquisition of minority interests is accounted for using the entity concept method whereby the difference between the consideration and the book value of the share of the net assets acquired is recognised as an equity transaction.

2.2 Impact of new and revised International Financial Reporting Standards

The Group has adopted the following new interpretations and amendments to IFRSs for the first time for the current year’s financial statements. Except for in certain cases, giving rise to new and revised accounting policies and additional disclosures, the adoption of these interpretations and amendments has had no significant effect on these financial statements.

IAS 39 and IFRS 7 Amendments to IAS 39 – Financial instruments: Recognition and Amendments Measurement and IFRS 7 Financial Instruments Disclosures – Reclassification of Financial Assets
IFRIC 11 IFRS 2 – Group and Treasury Share Transactions
IFRIC 12 Service Concession Arrangements
IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

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The principal effects of adopting these new and revised IFRSs are as follows:

Amendments to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments: Disclosures – Reclassification of Financial Assets

The amendments to IAS 39 permit an entity to reclassify a non-derivative financial asset classified as held for trading, other than a financial asset designated by an entity as at fair value through profit or loss upon initial recognition, out of the fair value through profit or loss category if the financial asset is no longer held for the purpose of selling or repurchasing in the near term, if specified criteria are met.

Amendments to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments: Disclosures – Reclassification of Financial Assets

A debt instrument that would have met the definition of loans and receivables (if it had not been required to be classified as held for trading at initial recognition) may be classified out of the fair value through profit or loss category or (if it had not been designated as available for sale) may be classified out of the available-for-sale category to the loans and receivables category if the entity has the intention and ability to hold it for the foreseeable future or until maturity.

In rare circumstances, financial assets that are not eligible for classification as loans and receivables may be transferred from the held-for-trading category to the available-for-sale category or to the held to maturity category (in the case of a debt instrument), if the financial asset is no longer held for the purpose of selling or repurchasing in the near term.

The financial asset shall be reclassified at its fair value on the date of reclassification and the fair value of the financial asset on the date of reclassification becomes its new cost or amortised cost, as applicable. The amendments to IFRS 7 require extensive disclosures of any financial asset reclassified in the situations described above. The amendments are effective from 1 July 2008.

As the Group has not reclassified any of its financial instruments, the amendments have had no impact on the financial position or results of operations of the Group.

IFRIC 11 IFRS 2 – Group and Treasury Share Transactions

This interpretation requires arrangements whereby an employee is granted rights to the Group’s equity instruments to be accounted for as an equity-settled scheme, even if the Group buys the instruments from another party, or the shareholders provide the equity instruments needed. As the Group has no such transactions, this interpretation has no impact on the financial position as results of operations of the Group.

IFRIC 12 – Service Concession Arrangements

This interpretation applies to service concession operators and explains how to account for obligation undertaken and rights received in service concession arrangements. No member of the Group is an operator and, therefore, this interpretation has had no impact on the financial position or results of operations of the Group.

IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

This interpretation provides guidance on how to assess the limit on the amount of surplus in a defined benefit scheme that can be recognised as an asset under IAS 1 Employee Benefits. As the Group has no defined benefit scheme, this interpretation has had no impact on the financial position or results of operations of the Group.

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2.3 Impact of issued but not yet effective International Financial Reporting Standards

The Group has not applied the following new and revised IFRS and IFRIC interpretations, that have been issued but are not yet effective, in the consolidated financial statements.

IFRS 1 and IAS 27 Amendments to IFRS 1 First-time Adoption of IFRSs and IAS 27 Amendments Consolidated and Separate Financial Statements – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate[1]
� IFRS 2 Amendments Amendments to IFRS 2 Share-based Payment – Vesting Conditions and Cancellations[1]
� IFRS 3 (Revised) Business Combinations[2] � IFRS 7 Amendments Amendments to IFRS 7 Financial Instruments: Disclosures[1] � IFRS 8 Operating Segments[1] � IAS 1 (Revised) Presentation of Financial Statements[1] � IAS 23 (Revised) Borrowing Costs[1] � IAS 27 (Revised) Consolidated and Separate Financial Statements[2] � IAS 32 and IAS 1 Amendments to IAS 32 Financial Instruments: Presentation and IAS 1 Amendments Presentation of Financial Statements – Puttable Financial Instruments and Obligations Arising on Liquidation[1]
� IAS 39 Amendment Amendment to IAS 39 Financial Instruments: Recognition and Measurement – Eligible Hedged Items[2]
� IFRIC – 9 and IAS 39 Amendment to IFRIC 9 Reassessment of Embedded Derivatives and IAS 39 Amendments Financial Instruments: Recognition and Measurement[2]
� IFRIC – 13 Customer Loyalty Programmes[3] � IFRIC – 15 Agreement for the Construction of Real Estate[1] � IFRIC – 16 Hedges of a Net Investment in a Foreign Operation[4] � IFRIC – 17 Distribution of Non-cash Assets to Owners[2] � IFRIC – 18 Transfers of Assets from Customers[2]

Apart from the above, the IASB has issued Improvements to IFRSs* primarily with a view to removing inconsistencies and clarifying wording. These amendments are effective for annual periods beginning on or after 1 January 2009, although there are separate transitional provisions for each standard.

1 Effective for annual periods beginning on or after 1 January 2009
2 Effective for annual periods beginning on or after 1 July 2009
3 Effective for annual periods beginning on or after 1 July 2008
4 Effective for annual periods beginning on or after 1 October 2008
Improvements to IFRS contain amendments to IFRS 5, IFRS 7, IAS 1, IAS 8, IAS 10, IAS 16, IAS 18, IAS 19, IAS 20, IAS 23, IAS 27, IAS 28, IAS 29, IAS 31, IAS 34, IAS 36, IAS 38, IAS 39, IAS 40 and IAS 41.

The Group is in the process of making an assessment of the impact of these new and revised IFRSs upon initial application. So far, it has concluded that while the adoption of IFRS 8 and IAS 1 (Revised) may result in new or amended disclosures and the adoption of IFRS 3 (Revised), IAS 27 (Revised) may result in changes in accounting policies, these new and revised IFRSs are unlikely to have a significant impact on the Group’s results of operations and financial position.

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2.4 Summary of significant accounting policies

Subsidiaries

A subsidiary is an entity whose financial and operating policies the Company controls, directly or indirectly, so as to obtain benefits from its activities.

The results of subsidiaries are included in the Company’s income statement to the extent of dividends received and receivable. The Company’s interests in subsidiaries are stated at cost less any impairment losses.

Goodwill

Goodwill arising on the acquisition of subsidiaries represents the excess of the cost of the business combination over the Group’s interest in the net fair value of the acquirees’ identifiable assets acquired, and liabilities and contingent liabilities assumed as at the date of acquisition.

Goodwill arising on acquisition is recognised in the consolidated balance sheet as an asset, initially measured at cost and subsequently at cost less any accumulated impairment losses.

The carrying amount of goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units.

Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash-generating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognised. An impairment loss recognised for goodwill is not reversed in a subsequent period.

Where goodwill forms part of a cash-generating unit (group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Excess over the cost of business combinations

Any excess of the Group’s interest in the net fair value of the acquirees’ identifiable assets, liabilities and contingent liabilities over the cost of acquisition of subsidiaries, after reassessment, is recognised immediately in the income statement.

Impairment of non-financial assets other than goodwill

Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than inventories, deferred tax assets, financial assets, completed properties held for sale, properties under development, investment properties, goodwill and non-current assets), the asset’s recoverable amount is estimated. An asset’s recoverable amount is the higher of the asset’s or cash-generating unit’s value in use and its fair value less costs to sell, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to the income statement in the period in which it

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arises in those expense categories consistent with the function of the impaired asset, unless the asset is carried at a revalued amount, in which case the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset other than goodwill is reversed only if there has been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in prior years. A reversal of such an impairment loss is credited to the income statement in the period in which it arises, unless the asset is carried at a revalued amount, in which case the reversal of the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

Related parties

A party is considered to be related to the Group if:

(a) the party, directly or indirectly through one or more intermediaries, (i) controls, is controlled by, or is under common control with, the Group; (ii) has an interest in the Group that gives it significant influence over the Group; or (iii) has joint control over the Group;
(b) the party is an associate;
(c) the party is a jointly-controlled entity;
(d) the party is a member of the key management personnel of the Group or its parent;
(e) the party is a close member of the family of any individual referred to in (a) or (d);
(f) the party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (d) or (e); or
(g) the party is a post-employment benefit plan for the benefit of the employees of the Group, or of any entity that is a related party of the Group.

Property and equipment and depreciation

Property and equipment, other than construction in progress (“CIP”), are stated at cost less accumulated depreciation and any impairment losses. The cost of an item of property and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after items of property and equipment have been put into operation, such as repairs and maintenance, is normally charged to the income statement in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of an item of property and equipment, and where the cost of the item can be measured reliably, the expenditure is capitalised as an additional cost of that asset or as a replacement.

Depreciation is calculated on the straight-line basis to write off the cost of each item of property and equipment to its residual value over its estimated useful life. The estimated residual values and useful lives for this purpose are as follows:

	Useful lives	Residual value
Properties	20 years	5% to10%
Machinery	10 years	5%
Office equipment	5 years	5%
Motor vehicles	5 years	5%

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When parts of an item of property and equipment have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is depreciated separately.

Residual values, useful lives and the depreciation method are reviewed, and adjusted if appropriate, at least at each balance sheet date.

An item of property and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognised in the income statement in the year the asset is derecognised is the difference between the net sales proceeds and the carrying amount of the relevant asset.

CIP represents renovation works in progress and is stated at cost less any impairment losses, and is not depreciated. Cost mainly comprises the direct costs during the period of construction. CIP is reclassified to the appropriate category of property, plant and equipment or investment properties when completed and ready for use.

Investment properties

Investment properties are interests in land and buildings (including the leasehold interest under an operating lease for a property which would otherwise meet the definition of an investment property) held to earn rental income and/or for capital appreciation, rather than for use in the production or supply of goods or services or for administrative purposes; or for sale in the ordinary course of business. Such properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the balance sheet date.

Gains or losses arising from changes in the fair values of investment properties are included in the income statement in the year in which they arise.

Any gains or losses on the retirement or disposal of an investment property are recognised in the income statement in the year of the retirement or disposal.

When the Group completes the construction or development of a self-constructed investment property, any difference between the fair value of the property at the completion date and its previous carrying amount is recognised in the income statement.

Properties under development

Properties under development are intended to be held for sale after completion. On completion, the properties are transferred to completed properties held for sale.

Properties under development are stated at the lower of cost and net realisable value and comprise land costs, construction costs, borrowing costs, professional fees and other costs directly attributable to such properties incurred during the development period.

Properties under development which are intended to be held for sale and expected to be completed within 12 months from the balance sheet date are classified as current assets.

Properties under development which are intended to be held for sale and expected to be completed beyond 12 months from the balance sheet date are classified as non-current assets.

Completed properties held for sale

Completed properties held for sale are stated in the balance sheet at the lower of cost and net realisable value. Cost is determined by an apportionment of the total costs of land and buildings attributable to the unsold properties. Net realisable value takes into account the selling price, less estimated costs to be incurred in selling the properties based on prevailing market conditions.

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Operating leases

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Where the Group is the lessor, assets leased by the Group under operating leases are included in non-current assets, and rentals receivable under the operating leases are credited to the income statement on the straight-line basis over the lease terms. Where the Group is the lessee, rentals payable under the operating leases are charged to the income statement on the straight-line basis over the lease terms.

Prepaid land lease payments under operating leases are initially stated at cost and subsequently recognised on the straight-line basis over the lease terms.

Investments and other financial assets

Financial assets in the scope of IAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, and available-for-sale financial assets, as appropriate. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

The Group assesses whether a contract contains an embedded derivative when the Group first becomes a party to it and assesses whether an embedded derivative is required to be separated from the host contract when the analysis shows that the economic characteristics and risks of the embedded derivative are not closely related to those of the host contract. Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required under the contract.

The Group determines the classification of its financial assets after initial recognition and, where allowed and appropriate, re-evaluates this designation at the balance sheet date.

All regular way purchases and sales of financial assets are recognised on the trade date, that is, the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading. Financial assets are classified as held for trading if they are acquired for the purpose of sale in the near term. Gains or losses on investments held for trading are recognised in the income statement. The net fair value gain or loss recognised in the income statement does not include any dividends on these financial assets, which are recognised in accordance with the policies set out for “Recognition of revenue” below.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are subsequently carried at amortised cost using the effective interest method less any allowance for impairment. Amortised cost is calculated taking into account any discount or premium on acquisition and includes fees that are an integral part of the effective interest rate and transaction costs. Gains and losses are recognised in the income statement when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets in listed and unlisted equity securities that are designated as available for sale or are not classified in any of the other two categories. After initial recognition, available-for-sale financial assets are measured at fair value, with gains or losses recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in the income statement. Interest and dividends earned are reported as interest income and

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dividend income, respectively and are recognised in the income statement as “Other income” in accordance with the policies set out for “Recognition of revenue” below. Losses arising from the impairment of such investments are recognised in the income statement as “Impairment losses on available-for-sale financial assets” and are transferred from the available-for-sale investment revaluation reserve.

When the fair value of unlisted equity securities cannot be reliably measured because (a) the variability in the range of reasonable fair value estimates is significant for that investment or (b) the probabilities of the various estimates within the range cannot be reasonably assessed and used in estimating fair value, such securities are stated at cost less any impairment losses.

Fair value

The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business at the balance sheet date. For investments where there is no active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s length market transactions; reference to the current market value of another instrument which is substantially the same; a discounted cash flow analysis; and other valuation models.

Impairment of financial assets

The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset or a group of financial assets is impaired.

Assets carried at amortised cost

If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly or through the use of an allowance account. The amount of the impairment loss is recognised in the income statement. Loans and receivables together with any associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised has been transferred to the Group.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed by adjusting the allowance account. Any subsequent reversal of an impairment loss is recognised in the income statement, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

In relation to trade and other receivables, a provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor and significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor) that the Group will not be able to collect all of the amounts due under the original terms of an invoice. The carrying amount of the receivables is reduced through the use of an allowance account. Impaired debts are derecognised when they are assessed as uncollectible.

Assets carried at cost

If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Impairment losses on these assets are not reversed.

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Available-for-sale financial assets

If an available-for-sale asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in the income statement, is transferred from equity to the income statement. A provision for impairment is made for available-for-sale equity investments when there has been a significant or prolonged decline in the fair value below its cost or where other objective evidence of impairment exists. The determination of what is “significant” or ’’prolonged” requires judgement. In addition, the Group evaluates other factors, such as the share price volatility. Impairment losses on equity instruments classified as available for sale are not reversed through the income statement.

Impairment losses on debt instruments are reversed through the income statements, if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment loss is recognised in the income statement.

Derecognition of financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised where:

the rights to receive cash flows from the asset have expired;
the Group retains the rights to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a “pass-through” arrangement; or
the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Where the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Where continuing involvement takes the form of a written and/or purchased option (including a cash-settled option or similar provision) on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that the Group may repurchase, except in the case of a written put option (including a cash-settled option or similar provision) on an asset measured at fair value, where the extent of the Group’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.

Financial liabilities at amortised cost (including interest-bearing loans and borrowings)

Financial liabilities, including trade payables, bills payable, other payables and accruals, and interest-bearing loans and borrowings, are initially stated at fair value less directly attributable transaction costs and are subsequently measured at amortised cost, using the effective interest method unless the effect of discounting would be immaterial, in which case they are stated at cost. The related interest expense is recognised within “Finance costs” in the income statement.

Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the amortisation process.

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Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in the income statement.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on the weighted average basis. Net realisable value is based on estimated selling prices less any estimated costs to be incurred on disposal.

Cash and cash equivalents

For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise cash on hand and demand deposits, and short-term highly liquid investments that are readily convertible into known amounts of cash, are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Group’s cash management.

For the purpose of the balance sheets, cash and cash equivalents comprise cash on hand and at banks, including term deposits, and assets similar in nature to cash, which are not restricted as to use.

Provisions

A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation.

When the effect of discounting is material, the amount recognised for a provision is the present value at the balance sheet date of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in “Finance costs” in the income statement.

Employee retirement benefits

Pursuant to the relevant regulations of the PRC government, the companies comprising the Group operating in Mainland China (the “PRC group companies”) have participated in a local municipal government retirement benefits scheme (the “Scheme”), whereby the PRC group companies are required to contribute a certain percentage of the salaries of their employees to the Scheme to fund their retirement benefits. The only obligation of the Group with respect to the Scheme is to pay the ongoing contributions under the Scheme. Contributions under the Scheme are charged to the income statement as incurred.

Income tax

Income tax comprises current and deferred tax. Income tax is recognised in the income statement, or in equity if it relates to items that are recognised directly in equity in the same or a different period.

Current tax is provided at rates applicable to entities in the Mainland China on the income for statutory financial reporting purposes, as adjusted for income and expense items which are not assessable or deductible for income tax purposes.

Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

– I-19 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Deferred tax liabilities are recognised for all taxable temporary differences, except:

where the deferred tax liability arises from goodwill or the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carryforward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax credits and unused tax losses can be utilised, except:

where the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each 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 deferred tax asset to be utilised. Conversely, previously unrecognised deferred tax assets are reassessed at each balance sheet date and are recognised to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Government grants

Government grants are recognised at their fair value where there is reasonable assurance that the grants will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognised as income over the periods necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, the fair value is credited to a deferred income account and is released to the income statement over the expected useful life of the relevant asset by equal annual instalments.

Recognition of revenue

Revenue from the sale of properties in the ordinary course of business is recognised when all the following criteria are met:

(a) the significant risks and rewards of ownership of the properties are transferred to the purchasers;
(b) neither continuing managerial involvement to the degree usually associated with ownership, nor effective control over the properties are retained;

– I-20 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(c) the amount of revenue can be measured reliably;
(d) it is probable that the economic benefits associated with the transaction will flow to the Group; and
(e) the cost incurred or to be incurred in respect of the transaction can be measured reliably.

The above criteria are met when construction of the relevant properties has been completed and has obtained the project completion report issued by the relevant government authorities, the properties have been delivered to the purchasers, and the collectibility of related receivables is reasonably assured. Payments received on properties sold prior to the date of revenue recognition are included in the consolidated balance sheet under current liabilities.

Property leasing income derived from the leasing of the Group’s investment properties is recognised on a time proportion basis over the lease terms.

Property management fee income derived from the provision of property maintenance and management services is recognised upon the rendering of services.

Hotel operating income which includes room rental, food and beverage sales and other ancillary services is recognised when the services are rendered.

Interest income is accrued on a time proportion basis, taking into account the principal outstanding and the effective interest rate applicable.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, that is, assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. The capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs capitalised.

Dividends

Final dividends proposed by the Directors are classified as a separate allocation of retained profits within the equity section of the balance sheet, until they have been approved by the shareholders in a general meeting. When these dividends have been approved by the shareholders and declared, they are recognised as a liability.

Interim dividends are simultaneously proposed and declared. Consequently, interim dividends are recognised immediately as a liability when they are proposed and declared.

Foreign currencies

These financial statements are presented in Renminbi (“RMB”) which is the presentation currency of the Group. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Foreign currency transactions are initially recorded using the functional currency rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rates of exchange ruling at the balance sheet date. All differences are taken to the income statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

The functional currencies of non-PRC established companies are currencies other than the RMB. As at the balance sheet date, the assets and liabilities of these entities are translated into RMB at the exchange rates ruling at the balance sheet date and their income statements are translated into RMB at the weighted

– I-21 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

average rates for the year. The resulting exchange differences are included in the exchange fluctuation reserve. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the income statement.

For the purpose of the consolidated cash flow statement, the cash flows of non-PRC established companies are translated into RMB at the exchange rates ruling at the dates of the cash flows. Frequently recurring cash flows of non-PRC established companies which arise throughout the year are translated into RMB at the weighted average exchange rates for the year.

3. Significant accounting judgements and estimates

The preparation of the Group’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amounts of the assets or liabilities affected in the future.

Judgements

In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements:

(i) Operating lease commitments – the Group as lessor

The Group has entered into commercial property leases on its investment property portfolio. The Group has determined, based on an evaluation of the terms and conditions of the arrangements, that it retains all the significant risks and rewards of ownership of these properties which are leased out on operating leases.

(ii) Classification between investment properties and owner-occupied properties

The Group determines whether a property qualifies as an investment property, and has developed criteria in making that judgement. Investment property is a property held to earn rentals or for capital appreciation or both. Therefore, the Group considers whether a property generates cash flows largely independently of the other assets held by the Group.

Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. If these portions could be sold separately, the Group accounts for the portions separately. If the portions could not be sold separately, the property is an investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes. Judgement is made on an individual property basis to determine whether ancillary services are so significant that a property does not qualify as an investment property.

(iii) Classification between investment properties and properties held for sale

The Group develops properties held for sale and properties held to earn rentals and/or for capital appreciation. Judgement is made by management on determining whether a property is designated as an investment property or a property held for sale. The Group considers its intention for holding the properties at the early development stage of the related properties. During the course of construction, the related properties under construction are accounted for as properties under development whatever the properties are intended for sale and/or to be held to earn rentals and/or for capital appreciation after its completion. Upon completion of the properties, the properties held for sale are transferred to completed properties held for sale and are stated at cost, while the properties held to earn rentals and/or for capital appreciation are transferred to investment properties and are subject to revaluation at each balance sheet date.

– I-22 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Estimation uncertainty

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, are disclosed below:

(i) Estimation of fair value of investment properties

Investment properties were revalued as at 31 December 2008 based on the appraised market value by independent professional valuers. Such valuations were based on certain assumptions, which are subject to uncertainty and might materially differ from the actual results. In making the estimate, the Group considers information from current prices in an active market for similar properties and uses assumptions that are mainly based on market conditions existing at each balance sheet date.

In the absence of current prices in an active market for similar properties, the Group considers information from a variety of sources, including:

(a) current prices in an active market for properties of a different nature, condition or location or subject to different leases or other contracts, adjusted to reflect those differences;
(b) recent prices of similar properties on less active markets, with adjustments to reflect any changes in economic conditions since the date of the transactions that occurred at those prices; and
(c) discounted cash flow projections based on reliable estimates of future cash flows, supported by the terms of any existing lease and other contracts and (when possible) by external evidence such as current market rents for similar properties in the same location and condition, and using discount rates that reflect current market assessments of the uncertainty in the amount and timing of the cash flows.

The principal assumptions for the Group’s estimation of the fair value include those related to current market rents for similar properties in the same location and condition, appropriate discount rates, expected future market rents and future maintenance costs. The carrying amount of investment properties at 31 December 2008 was RMB1,146,500,000 (2007: RMB958,913,000).

(ii) Net realisable value of properties under development and completed properties held for sale

The Group’s properties under development and completed properties held for sale are stated at the lower of cost and net realisable value. Based on the Group’s historical experience and the nature of the subject properties, the Group makes estimates of the selling prices, the costs of completion of properties under development, and the costs to be incurred in selling the properties based on prevailing market conditions.

If there is an increase in costs to completion or a decrease in net sales value, the net realisable value will decrease and this may result in a provision for properties under development and completed properties held for sale. Such provision requires the use of judgements and estimates. Where the expectation is different from the original estimate, the carrying value and provision for properties in the period in which such estimate is changed will be adjusted accordingly.

(iii) Impairment of goodwill

The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discounted rate in order to calculate the present value of those cash flows. The carrying amount of goodwill at 31 December 2008 was RMB15,292,000 (2007: RMB63,928,000). More details are given in note 16.

– I-23 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(iv) PRC corporate income tax

The Group is subject to income taxes in Mainland China. As a result of the fact that certain matters relating to the income taxes have not been confirmed by the local tax bureau, objective estimate and judgement based on currently enacted tax laws, regulations and other related policies are required in determining the provision of income taxes to be made. Where the final tax outcome of these matters is different from the amounts originally recorded, the differences will have impact on the income tax and tax provisions in the period in which the differences realise.

(v) PRC land appreciation tax (“LAT”)

The Group is subject to LAT in Mainland China. The provision of LAT is based on management’s best estimates according to the understanding of the requirements set forth in the relevant PRC tax laws and regulations. The actual LAT liabilities are subject to the determination by the tax authorities upon the completion of the property development projects. The Group has not finalised its LAT calculation and payments with the tax authorities for its property development projects. The final outcome could be different from the amounts that were initially recorded.

(vi) Deferred tax assets

Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. The carrying value of deferred tax assets relating to recognised tax losses at 31 December 2008 was RMB20,188,000 (2007: RMB21,738,000). The amount of unrecognised tax losses at 31 December 2008 was RMB10,008,000 (2007: RMB18,085,000). Further details are contained in note 18 to the financial statements.

(vii) Impairment of trade and other receivables

Impairment of trade and other receivables is made based on assessment of the recoverability of trade and other receivables. The identification of impairment of trade and other receivables requires management’s judgement and estimates. Where the actual outcome or expectation in the future is different from the original estimates, such differences will have impact on the carrying value of the receivables and doubtful debt expenses/write-back of doubtful debt in the period in which such estimate is changed.

(viii) Useful lives and impairment of property and equipment

The Group’s management determines the estimated useful lives and related depreciation charges for its items of property and equipment. This estimate is based on the historical experience of the actual useful lives of items of property and equipment of similar nature and functions. It could change significantly as a result of technical innovations and its competitor’s actions. Management will increase the depreciation charge where useful lives are less than previously estimates, or it will write off or write down technically obsolete assets that have been abandoned.

The carrying value of an item of property and equipment is reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable in accordance with the accounting policy as disclosed in the relevant part of this section. The recoverable amount of an item of property and equipment is calculated as the higher of its fair value less costs to sell and value in use, the calculations of which involves the use of estimates.

4. Segment information

The Group’s turnover and profit for the financial year ended 31 December 2008 were mainly derived from the property development business. The principal assets employed by the Group and the Group’s property development projects are both located in Mainland China. Accordingly, no analysis by business or geographical segments is presented.

– I-24 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5. Revenue and other income

Revenue, which is also the Group’s turnover, represents income from the sale of properties, property leasing income, property management fee income and hotel operating income during the year, net of business tax and other sales related taxes and discounts allowed.

An analysis of revenue and other income is as follows:

Revenue Sale of properties Property leasing income Property management fee income Hotel operating income Less: Business tax and surcharges Other income Interest income Excess of the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition of a subsidiary Dividend income from short-term investments Government grants Gain on foreign exchange differences Gain on disposal of items of property and equipment Others Finance costs Interest on bank loans Interest on other loans Total interest Less: Interest capitalised in properties under development Average interest rate of borrowing costs capitalised	2008 RMB’000 1,444,392 32,091 9,242 49,507 (97,391) 1,437,841	2007 RMB’000 318,662 11,002 4,077 14,502 (18,200) 330,043 27,262 19,689 6,481 3,794 3,080 62 293 60,661 2007 RMB’000 72,869 21,661 94,530 (57,306) 37,224 7.33%
	54,709 – – 2,300 – – 466	27,262 19,689 6,481 3,794 3,080 62 293
	57,475 2008 RMB’000 66,968 3,396
	70,364 (62,124)	94,530 (57,306
	8,240 7.88%

6. Finance costs

– I-25 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

7. Profit before tax

The Group’s profit before tax is arrived at after charging/(crediting):

		2008	2007
	Notes	RMB’000	RMB’000
Cost of properties sold		910,844	165,701
Depreciation	13	15,996	5,627
Amortisation of land use rights	15	11,296	2,087
Goodwill impairment	16	48,636	–
Minimum lease payments under operating leases:
– Office premises		3,156	3,094
Auditors’ remuneration		2,754	1,972
Staff costs including directors’ remuneration (note 8):
– Salaries and other staff costs		41,296	21,332
– Pension scheme contributions (1)		2,181	1,330
Direct operating expenses (including repairs and maintenance)
arising on rental-earning investment properties		928	1,032
Excess of the acquirer’s interest in the net fair value of the
identifiable assets, liabilities and contingent liabilities over the
cost of acquisition of a subsidiary	5	–	(19,689)
Gain on disposal of a subsidiary		–	(4)
Changes in fair value of investment properties	14	(104,235)	(405,776)

(1) Pension scheme contributions

As stipulated by the relevant PRC regulations, the Group participates in a defined pension scheme. All employees are entitled to an annual pension equal to a fixed proportion of the average salary amount within the geographical area of their last employment at their retirement date. The Group is required to make contributions to the local social security bureau at rates raging from 15% to 24% of the standard salaries set by the local authorities annually. The Group has no obligation for the payment of pension benefits beyond the annual contributions to the local social security bureau as set out above. The Group has no right to forfeit the contributions made by the Group on behalf of its employees.

8. Directors’ and employees’ remuneration

Directors’ remuneration

Fees Other emoluments: Salaries, bonuses and allowances Pension scheme contributions	2008 RMB’000 300 2,613 16 2,929	2007 RMB’000 50 1,366 12
		1,428

– I-26 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Details of the emoluments of the Directors of the Company are set out below:

2008

Fee RMB’000 – – – – –	Salaries RMB’000 840 385 385 420 2,030	Bonuses RMB’000 238 109 109 119 575	Pension scheme contributions RMB’000 4 4 4 4 16	Allowances RMB’000 2 2 2 2 8	Total RMB’000 1,084 500 500 545
					2,629

100 50 150 300	– – – –	– – – –	– – – –	– – – –	100 50 150
					300
300	2,030	575	16	8	2,929

2007

Fee RMB’000 – – – – –	Salaries RMB’000 61 47 37 47 192	Bonuses RMB’000 393 274 233 262 1,162	Pension scheme contributions RMB’000 3 3 3 3 12	Allowances RMB’000 3 3 3 3 12	Total RMB’000 460 327 276 315
					1,378

17 8 25 50	– – – –	– – – –	– – – –	– – – –	17 8 25
					50
50	192	1,162	12	12	1,428

– I-27 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

There was no arrangement under which a Director waived or agreed to waive any remuneration during the year (2007: Nil).

The five highest paid employees during the year included four (2007: two) Directors, details of whose remuneration are set out above. Details of the remuneration of the remaining one (2007: three) non-director, highest paid employee during the year are as follows:

Salaries, bonuses and allowances Pension scheme contributions	2008 RMB’000 298 2 300	2007 RMB’000 1,172 13
		1,185

The emoluments of the non-director, highest paid employee fell within the range of nil to RMB1 million during the year.

During the year, no emoluments were paid by the Group to the Directors as an inducement to join or upon joining the Group or as compensation for loss of office.

9. Income tax

No provision for Hong Kong profits tax has been made as the Group had no assessable profits arising in Hong Kong during the financial year.

On 16 March 2007, the PRC Corporate Income Tax Law (the “New CIT Law”) was approved by the National People’s Congress and became effective on 1 January 2008. Under the New CIT Law, the income tax rate became 25% starting from 1 January 2008. Therefore, provision for the PRC income tax has been provided at the applicable income tax rate of 25% (2007: 33%) on the assessable profits of the Group’s subsidiaries in Mainland China.

According to the requirements of the Provisional Regulations of the PRC on Land Appreciation Tax (the “LAT”) effective from 1 January 1994, and the Detailed Implementation Rules on the Provisional Regulations of the PRC on LAT effective from 27 January 1995, all income from the sale or transfer of the state-owned prepaid land lease payments, buildings and their attached facilities in Mainland China is subject to LAT at progressive rates ranging from 30% to 60% of the appreciation value, with an exemption provided for property sales of ordinary residential properties if their appreciation values do not exceed 20% of the sum of the total deductible items.

The Group has estimated, made and included in taxation a provision for LAT 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 and the tax authorities might disagree with the basis on which the provision for LAT is calculated.

Current tax: PRC corporate income tax for the year PRC LAT for the year Deferred tax: Relating to origination and reversal of temporary differences Total tax charge for the year	2008 RMB’000 78,132 116,886 (35,158) 159,860	2007 RMB’000 29,434 36,198 (14,036)
		51,596

– I-28 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

A reconciliation of the tax expense applicable to profit before tax using the statutory rates for the countries in which the Company and its subsidiaries are domiciled to the tax expense at the effective tax rates is as follows:

Profit before tax Tax at the statutory tax rate of 25% (2007: 33%) Effect of lower enacted tax rate used for the recognition of deferred tax Lower tax rate for specific provinces or local authority Expenses not deductible for tax Effect of capitalisation of tax arising from transfer from properties under development to investment properties Reversal of capitalised tax arising from transfer properties under development to investment properties (a) Tax losses utilised from previous periods Tax losses not recognised Provision for land appreciation tax Tax effect on land appreciation tax Tax charge at the Group’s effective rate Tax payable in the balance sheet represents: PRC corporate income tax PRC land appreciation tax	2008 RMB’000 442,175	2007 RMB’000 485,068 160,072 (12,553) (793) 3,233 (128,584) – – 5,968 36,198 (11,945) 51,596 288,365 104,918 393,283
	110,544 – (69) 12,714 – (46,525) (6,970) 2,502 116,886 (29,222) 159,860 32,656 218,483	160,072 (12,553 (793 3,233 (128,584 – – 5,968 36,198 (11,945
		51,596
		288,365 104,918
	251,139

(a) According to a notice No.[2006]31 issued by the State Administration of Tax, the PRC, in March 2006, a transfer from properties under development to investment properties by a property developer is considered as a deemed sale and is subject to corporate income tax upon transfer. Accordingly, the Group computed the tax arising from the transfer of properties under development to investment properties in 2007 based on the fair value and carrying amount of the properties at the point of transfer at the enacted tax rate of 33%. Relevant income tax amounting to RMB191,917,000 was capitalised as initial cost of investment properties upon transfer and included in tax payable as at 31 December 2007.

In October 2008, the State Administration of Tax, the PRC, issued a new notice No. [2008]828 regarding the type of transaction aforementioned which supersedes the notice No. [2006]31. According to the new notice, such transaction is not considered as a deemed sale and is no longer subject to corporate income tax any more. In addition, tax related to transactions incurred before 1 January 2008 which has not been settled after 1 January 2008 will not be required to settle. As the Group had not settled above tax payable till the issue of the new notice, tax payable amounting to RMB191,917,000 was reversed and deferred tax liability related to the fair value adjustment of the investment properties was recognised accordingly during the year. The effect of the lower enacted tax rate used for the recognition of the deferred tax liability amounting to RMB46,525,000 was credited to the income statement during the year.

10. Profit attributable to equity holders of the Company

The consolidated profit attributable to equity holders of the Company for the year ended 31 December 2008 includes a loss of RMB17,388,000 (2007: a profit of RMB26,549,000) which has been dealt with in the financial statements of the Company (note 29).

– I-29 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

11. Dividends

									2008	2007
									RMB’000	RMB’000
Proposed	final	–	RMB0.02	(2007:	Nil)	per	ordinary	share	38,853	–

The proposed final dividend for the year is subject to the approval of the Company’s shareholders at the forthcoming annual general meeting.

12. Earnings per share attributable to the equity holders of the Company

The calculation of basic earnings per share is based on the profit for the year attributable to ordinary equity holders of the Company of RMB253,986,000 (2007: RMB391,306,000) and the weighted average ordinary shares of 1,974,812,000 (2007: 1,528,408,000) in issue during the year after taking into account of the repurchase of shares as set out in note 28 during the year.

Diluted earnings per share amounts for the years ended 31 December 2007 and 2008 have not been presented as there were no diluting events during these years.

13. Property and equipment

Group

Properties RMB’000 12,590 (3,212) 9,378	Machinery RMB’000 1,408 (656) 752	Office equipment RMB’000 20,010 (2,799) 17,211	Motor vehicles Construction in progress RMB’000 RMB’000 16,281 210 (6,681) – 9,600 210	Motor vehicles Construction in progress RMB’000 RMB’000 16,281 210 (6,681) – 9,600 210	Total RMB’000 50,499 (13,348
					37,151

9,378 1,508 – (9,166) 193 171,723	752 9 – (63) – –	17,211 2,746 (1,515) (3,795) – –	9,600 4,627 – (2,972) – –	210 486 – – (193) –	37,151 9,376 (1,515 (15,996 – 171,723
173,636	698	14,647	11,255	503	200,739

186,014 (12,378)	1,417 (719)	21,187 (6,540)	20,908 (9,653)	503 –	230,029 (29,290
173,636	698	14,647	11,255	503	200,739

– I-30 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Group

Properties RMB’000 12,086 (2,148) 9,938 9,938 504 – – (1,064) 9,378	Machinery RMB’000 1,403 (525) 878 878 5 – – (131) 752	Office equipment RMB’000 3,908 (1,006) 2,902 2,902 16,037 88 (1) (1,815) 17,211	Motor vehicles RMB’000 12,219 (4,900) 7,319 7,319 5,911 240 (1,253) (2,617) 9,600	Construction in progress RMB’000 – – – – 210 – – – 210	Total RMB’000 29,616 (8,579)
					21,037

					21,037 22,667 328 (1,254) (5,627)
					37,151

12,590 (3,212)	1,408 (656)	20,010 (2,799)	16,281 (6,681)	210 –	50,499 (13,348)
9,378	752	17,211	9,600	210	37,151

– I-31 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Company

Office equipment RMB’000 – – –	Motor vehicles RMB’000 – – –	Total RMB’000 – –
		–

– 213 (20)	– 442 (59)	– 655 (79
193	383	576

213 (20)	442 (59)	655 (79
193	383	576

Certain of the Group’s property and equipment with a net book value of approximately RMB163,872,000 (2007: Nil) were pledged to secure interest-bearing bank loans granted to the Group as disclosed in note 27(v).

14. Investment properties

At beginning of year Additions Transfer from properties under development (note 15) Transfer from completed properties held for sale Tax arising from investment properties transferred from properties under development Gain from fair value adjustments At end of year	2008 RMB’000 958,913 216 11,416 71,720 – 104,235 1,146,500	2007 RMB’000 149,900 32,888 178,432 – 191,917 405,776
		958,913

(a) All investment properties of the Group were revalued at the end of the year by an independent professional qualified valuer, CB Richard Ellis Limited, at fair value. CB Richard Ellis Limited is an industry specialist in investment property valuation. The fair value represents the amount at which the assets could be exchanged between a knowledgeable and willing buyer and a seller in an arm’s length transaction at the date of valuation, in accordance with the International Valuation Standards.

– I-32 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(b) The carrying amounts of the investment properties shown above that situated on the leasehold land in Mainland China are as follows:

Leases of over 50 years Leases of between 20 and 50 years	2008 RMB’000 – 1,146,500 1,146,500	2007 RMB’000 – 958,913
		958,913

The Group leases out investment properties under operating lease arrangements. All leases run for a period of one to fifteen years, with an option to renew the leases after the expiry dates, at which time all terms will be renegotiated. The Group’s total future minimum lease receivables under non-cancellable operating leases generated from investment properties are as follows:

Within one year In the second to fifth years, inclusive After five years	2008 RMB’000 37,092 127,349 57,879 222,320	2007 RMB’000 31,748 111,574 29,843
		173,165

(d) Certain of the Group’s investment properties with a value of RMB1,134,900,000 (2007: RMB946,367,000) were pledged to secure interest-bearing bank loans granted to the Group as disclosed in note 27(i).

15. Properties under development

At beginning of year Additions Acquisition of a subsidiary (note 34) Amortisation of land use rights recognised as expenses Transfer to property and equipment (note 13) Transfer to investment properties (note 14) Transfer to completed properties held for sale At end of year Current assets Non-current assets	2008 RMB’000 2,431,365 761,397 351,106 (11,296) (171,723) (11,416) (988,915) 2,360,518	2007 RMB’000 1,175,003 1,019,449 487,000 (2,087 – (178,432 (69,568
		2,431,365

	1,326,318 1,034,200	1,433,404 997,961
	2,360,518	2,431,365

The Group’s properties under development were located in Mainland China.

– I-33 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The carrying amounts of the properties under development situated on the leasehold land in Mainland China are as follows:

Leases of over 50 years Leases of between 20 and 50 years	2008 RMB’000 1,236,038 1,124,480 2,360,518	2007 RMB’000 1,639,113 792,252
		2,431,365

Certain of the Group’s properties under development with a net book value of RMB153,798,000 (2007: RMB1,117,186,000) were pledged to secure interest-bearing bank loans granted to the Group as disclosed in note 27(ii).

16. Goodwill

Group At 31 December 2007: Cost Accumulated impairment Net carrying amount Cost at 1 January 2008, net of accumulated impairment Impairment during the year Cost and carrying amount at 31 December 2008 At 31 December 2008: Cost Accumulated impairment Net carrying amount	RMB’000 63,928 –
	63,928

	63,928 (48,636
	15,292

	63,928 (48,636
	15,292

Impairment testing of goodwill

Goodwill acquired through business combinations has been allocated to a specific property development project cash-generating unit for impairment testing. The recoverable amount of the cash-generating unit has been determined based on a value in use calculation. To calculate this, a cash flow projection is prepared for the specific property development project. The discount rate applied to the cash flow projections beyond a one-year period is 12%.

– I-34 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Key assumptions used in the value in use calculation

The following describes the key assumptions on which management has based its cash flow projections to undertake impairment testing of goodwill:

Revenue from the the selling price is estimated by management by reference to the property development average selling price of a similar property in the same area project Cost of construction the cost of construction is estimated the

the cost of construction is estimated by the engineering department based on the projected cost to completion of the project

Discount rate

the discount rate used is after tax and reflect specific risks relating to property development project.

17. Available-for-sale investments

Unlisted equity investment, at cost	2008 RMB’000 3,300	2007 RMB’000 –

The unlisted equity investments were stated at cost because the range of reasonable fair value estimates is so significant that the Directors are of the opinion that their fair values cannot be measured reliably. In addition, the Directors are of the opinion that the underlying values of investments were not less than the carrying values of the investments as at 31 December 2008.

18. Deferred tax assets and liabilities

The movements in deferred tax assets and liabilities are as follows:

Deferred tax assets

At 1 January 2007 Acquisition of a subsidiary Deferred tax credited to the income statement during the year At 31 December 2007 and 1 January 2008 Deferred tax charged to the income statement during the year At 31 December 2008	Losses available for offsetting against future taxable profit RMB’000 9,025 7,067 5,646
	21,738 (1,550)
	20,188

In accordance with the PRC laws and regulations, tax losses could be carried forward for five years to offset against its future taxable profits. Deferred tax assets relating to unutilised tax losses are recognised to the extent that it is probable that sufficient taxable profit will be available to allow such deferred tax assets to be utilised.

The Group has tax losses arising in Hong Kong of RMB2,563,000 that are available indefinitely for offsetting against future taxable profits of the companies in which the losses arose. The Group also has tax losses arising in Mainland China of RMB7,445,000 (2007: RMB1,081,000) that will expire in one to five

– I-35 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

years for offsetting against future taxable profit. Deferred tax assets have not been recognised in respect of these losses as they have arisen in subsidiaries that have been loss-making for some time and it is not considered probable that taxable profits will be available against which the tax losses can be utilised.

Deferred tax liabilities

At 1 January 2007 Acquisition of a subsidiary Deferred tax credited to the income statement during the year At 31 December 2007 and 1 January 2008 Reversal of capitalised tax arising from transfer properties under development to investment properties Deferred tax credited to the income statement during the year At 31 December 2008	Fair value adjustment arising from acquisition of a subsidiary RMB’000 (23,034) (22,327) 5,584	Fair value adjustment of investment properties RMB’000 (34,893) – 2,806	Total RMB’000 (57,927) (22,327) 8,390 (71,864) (191,917) 36,708 (227,073)
	(39,777) – 16,825	(32,087) (191,917) 19,883	(71,864 (191,917 36,708
	(22,952)	(204,121)

Pursuant to the New CIT Law, a 10% withholding tax is levied on dividends declared to foreign investors from the foreign investment enterprises established in Mainland China. The requirement has become effective from 1 January 2008 and applies to earnings after 31 December 2007. A lower withholding tax rate may be applied if there is a tax treaty between China and the jurisdiction of the foreign investors. For the Group, the applicable rate is 10%. The Group is therefore liable to withholding taxes on dividends distributed by those subsidiaries established in Mainland China in respect of earnings generated from 1 January 2008.

At 31 December 2008, no deferred tax has been recognised for withholding taxes that would be payable on the unremitted earnings that are subject to withholding taxes of the Group’s subsidiaries established in Mainland China. In the opinion of the Directors, it is not probable that these subsidiaries will distribute such earnings in the foreseeable future. The aggregate amount of temporary differences associated with investments in subsidiaries in Mainland China for which deferred tax liabilities have not been recognised totalled approximately RMB28,261,000 at 31 December 2008 (2007: Nil).

There are no income tax consequences attaching to the payment of dividends by the Company to its shareholders.

– I-36 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

19. Interests in subsidiaries

Company

Unlisted shares, at cost Loan to subsidiaries	2008 RMB’000 100 1,018,848 1,018,948	2007 RMB’000 100 473,477
		473,577

The amounts due from and to subsidiaries included in the Company’s current assets and current liabilities of RMB1,958,224,000 (2007: RMB1,148,684,000) and RMB116,828,000 (2007: RMB23,132,000), respectively, are unsecured, interest-free and are repayable on demand or within one year.

The amounts advanced to the subsidiaries included in the interests in subsidiaries above are unsecured, interest-free and have no fixed terms of repayment. In the opinion of the Directors, these advances are considered as quasi-equity loans to the subsidiaries.

Particulars of the subsidiaries are as follows:

								Nominal	Percentage of	Percentage of	Percentage of
								value of	equity interest
							Place and date of	registered	attributable to the
							incorporation/	capital as at	Group as at		31
							establishment/	31 December	December			Principal
Name of			company				operation	2008	2008		2007	activities
Ideal World				Investments British Virgin Islands				US$1	100%		100%	Investment
	Limited (4)						6 November 2003					holding
							Mainland China	US$29,800,000	100%		100%	Investment
Qirui Enterprise					Management 21 November 2005							holding
	(Hangzhou) Co., Ltd. (1)
							Mainland China	RMB100,000,000	90%		90%	Property
Zhejiang Zhong’an Property 26 December 1997												development
	Development Co., Ltd. (3)											and leasing
							Mainland China	US$5,000,000	95%		95%	Property
Anhui Zhong’an					Real Estate 9 August 2001							development
	Development Co., Ltd. (2)
Anhui Zhong’an					Real Estate Mainland China 17 January 2003			RMB57,000,000	84.2%	84.2%		Property development
	Co.,	Ltd. (4)					Mainland China	RMB50,000,000	90%		90%	Property
Hangzhou White Horse 27 June 2002												development
	Property Development Co.,
	Ltd.	(3)
Hangzhou Danube						Real Estate Mainland China 7 March 2003		RMB50,000,000	92.6%		90%	Property development
	Co.,	Ltd. (4)
							Mainland China	RMB10,000,000	87.1%	87.1%		Property leasing
Shanghai			Zhong’an Property 19 January 2004
	Development Co., Ltd. (4)

– I-37 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

==> picture [395 x 619] intentionally omitted <==

----- Start of picture text -----

||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
|Nominal|Percentage|of|
|value|of|equity|interest|
|Place|and|date|of|registered|attributable|to|the|
|incorporation/|capital|as|at|Group|as|at|31|
|establishment/|31|December|December|Principal|
|Name|of|company|operation|2008|2008|2007|activities|
|Mainland|China|RMB2,000,000|81%|81%|Property|leasing|
|Zhejiang|Zhong’an|Property|3|April|1997|
|Development|Xiaoshan|Co.,|
|Ltd.|[(4)]|
|Mainland|China|RMB2,000,000|89.4%|89.4%|Property|
|Hangzhou|Zhong’an|Highlong|20|September|2005|management|
|Commercial|Buildings|Co.,|
|Ltd.|[(4)]|
|Mainland|China|RMB3,000,000|81.1%|81.0%|Property|
|Hangzhou|Xiaoshan|Property|18|November|1998|management|
|Management|Co.,|Ltd.|[(4)]|
|Mainland|China|US$79,800,000|100%|100%|Property|
|Henlly|Enterprise|Management|4|December|2006|development|
|(Hangzhou)|Co.,|Ltd.|[(1)]|
|Huijun|(International)|Holdings|Hong|Kong|HK$100,000|100%|100%|Investment|
|Limited|[(4)]|4|March|2005|holding|
|Mainland|China|US$77,600,000|99.7%|99.7%|Property|
|Zhejiang|Huijun|Real|Estate|1|April|2005|development|
|Co.,|Ltd.|[(1)]|
|Mainland|China|US$59,700,000|100%|100%|Consultation|
|Hangzhou|Huijun|Information|5|December|2007|management|
|Technology|Co.,|Ltd.|[(1)]|
|Mainland|China|US$29,990,000|100%|100%|Investment|
|Hangzhou|Jun|Jie|Investment|4|December|2007|management|
|Co.,|Ltd.|[(1)]|
|Mainland|China|RMB1,000,000|99.7%|100%|Property|
|Hangzhou|White|Horse|17|December|2007|management|
|Property|Management|Co.,|
|Ltd.|[(3)]|
|Mainland|China|RMB10,000,000|90%|84.2%|Hotel|
|Hangzhou|Xiaoshan|Zhong|An|28|May|2007|management|
|Holiday|Inn|Co.,|Ltd.|[(4)]|
|China|Bright|Management|British|Virgin|Islands|US$1|100%|100%|Investment|
|Limited|[(4)]|13|November|2007|holding|
|Esteem|High|Enterprises|British|Virgin|Islands|US$1|100%|100%|Investment|
|Limited|[(4)]|13|November|2007|holding|
|Everplus|Management|British|Virgin|Islands|US$1|100%|100%|Investment|
|Limited|[(4)]|13|November|2007|holding|
|Gain|Large|Enterprises|British|Virgin|Islands|US$1|100%|100%|Investment|
|Limited|[(4)]|13|November|2007|holding|
|Plenty|Management|Limited|[(4)]|British|Virgin|Islands|US$1|100%|100%|Investment|
|13|November|2007|holding|

----- End of picture text -----

– I-38 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

==> picture [395 x 379] intentionally omitted <==

----- Start of picture text -----

|||||||||||
|---|---|---|---|---|---|---|---|---|---|
|Nominal|Percentage|of|
|value|of|equity|interest|
|Place|and|date|of|registered|attributable|to|the|
|incorporation/|capital|as|at|Group|as|at|31|
|establishment/|31|December|December|Principal|
|Name|of|company|operation|2008|2008|2007|activities|
|Hong|Kong|HK$1|100%|N/A|Construction|
|Hong|Kong|Bo|Kai|26|February|2008|design|
|Construction|Design|
|Limited|[(4)]|
|Hong|Kong|HK$1|100%|N/A|Property|
|Hong|Kong|Hui|Yuan|Real|26|February|2008|development|
|Estate|Limited|[(4)]|
|Mainland|China|RMB20,000,000|94.5%|N/A|Property|
|Hangzhou|Zheng|Jiang|Real|16|March|2006|development|
|Estate|Development|Co.,|
|Ltd.|(a)|[(4)]|
|Mainland|China|RMB350,000,000|100%|N/A|Hotel|
|He|Fei|Zhong|An|Holiday|Inn|18|March|2008|management|
|Co.,|Ltd.|[(3)]|
|Mainland|China|USD12,000,000|100%|N/A|Material|trading|
|Hui|Jun|Construction|Materials|16|July|2008|
|Trading|(Hangzhou)|Co.,|
|Ltd.|[(1)]|
|Mainland|China|USD49,990,000|100%|N/A|Investment|
|Hangzhou|Hui|Hong|29|February|2008|management|
|Investment|Management|Co.,|
|Ltd.|[(1)]|
|Mainland|China|USD29,900,000|100%|N/A|Material|
|Hangzhou|De|Hong|New|1|February|2008|manufacture|
|Construction|Materials|
|Manufacture|Co.,|Ltd.|[(1)]|

----- End of picture text -----

Notes:

N/A Not yet incorporated/established or acquired by the Group.

(a) This subsidiary was acquired by the Group in January 2008.
(b) Type of legal entities:
(1) Wholly foreign-owned enterprise;
(2) Sino-foreign equity joint venture;
(3) Limited liability company invested by foreign invested enterprise;
(4) Limited liability company.

20. Trade receivables

The Group’s trading terms with its customers are mainly lease receivables on credit. The credit period is generally one month, extending up to three months for major customers. All balances of the trade receivables as at the end of the year are neither past due nor impaired.

– I-39 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

21. Prepayments, deposits and other receivables

Due from other related parties Prepayments – for land acquisition – for acquisition of a subsidiary – for projects Advance to suppliers Deposits – for acquisition of a subsidiary – for land acquisition – others Tax recoverable Other receivables	Group 2008 2007 RMB’000 RMB’000 8,292 9,199 51,421 54,878 – 163,600 1,888 – 122,213 71,806 210,000 210,000 128,950 – 14,633 4,405 25,570 65,034 114,841 341,824 677,808 920,746	Company 2008 2007 RMB’000 RMB’000 – – – – – – – – – – – – – – – – – – 839 11,412 839 11,412	Company 2008 2007 RMB’000 RMB’000 – – – – – – – – – – – – – – – – – – 839 11,412 839 11,412
			11,412

The above balances are unsecured, interest-free and have no fixed terms of repayment. The fair values of the prepayments, deposits and other receivables at the end of these years approximate to their corresponding carrying amounts.

22. Cash and cash equivalents and pledged deposits

Cash and bank balances Time deposits Less: Pledged deposits Cash and cash equivalents	Group 2008 2007 RMB’000 RMB’000 1,652,098 3,038,517 16,343 196 1,668,441 3,038,713 (16,343) (196) 1,652,098 3,038,517	Company 2008 2007 RMB’000 RMB’000 62,797 1,652,663 – – 62,797 1,652,663 – – 62,797 1,652,663	Company 2008 2007 RMB’000 RMB’000 62,797 1,652,663 – – 62,797 1,652,663 – – 62,797 1,652,663
			1,652,663

Cash at banks earns interest at floating rates based on daily bank deposit rates. Short term time deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group, and earn interest at the respective short term time deposit rates. The bank balances and pledged deposits are deposited with creditworthy banks with no recent history of default.

As at 31 December 2008, the deposits were pledged to banks as guarantees to construction safety and mortgage facilities granted to purchasers of the Group’s properties. As at 31 December 2007, the deposits were pledged to banks for bills payable facilities granted to the Group as disclosed in note 24.

– I-40 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

23. Trade payables

An ageing analysis of the trade payables as at the balance sheet date, based on the payment due dates, is as follows:

Within six months Over six months but within one year Over one year	2008 RMB’000 472,654 2,803 9,765 485,222	2007 RMB’000 394,101 7,170 4,884
		406,155

The above balances are unsecured and interest-free and are normally settled based on progress of construction. The fair values of the trade payables at the end of these years approximate to their corresponding carrying amounts.

24. Bills payable

The maturity profile of the Group’s bills payable is as follows:

			2008	2007
			RMB’000	RMB’000
Within	six	months	–	196

The bills payable was secured by way of pledge of the Group’s deposits as disclosed in note 22.

25. Other payables and accruals

Due to a Director Deposits related to construction Payables for acquisition of a subsidiary Interest expenses accrued Other payables	Group 2008 2007 RMB’000 RMB’000 – 38 28,991 20,955 203,114 210,372 6,080 8,114 49,400 43,789 287,585 283,268	Company 2008 2007 RMB’000 RMB’000 – – – – – – – – 1,867 16,056 1,867 16,056	Company 2008 2007 RMB’000 RMB’000 – – – – – – – – 1,867 16,056 1,867 16,056
			16,056

Other payables are interest-free and repayable on demand. The fair values of other payables and accruals at the end of these financial years approximate to their corresponding carrying amounts.

26. Advances from customers

Advances from customers represent sales proceeds received from buyers in connection with the Group’s pre-sale of properties during these financial years.

– I-41 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

27. Interest-bearing bank and other borrowings

Group Current: Bank loans-secured Other loans-unsecured Non-current: Bank loans-secured Repayable: Within one year or on demand Over one year but within two years Over two years but within five years Over five years Current liabilities Non-current liabilities	2008 RMB’000 142,117 – 142,117 521,789 2008 RMB’000 142,117 62,753 217,330 241,706 663,906 142,117 521,789	2007 RMB’000 268,000 170,197
		438,197

		854,716

		2007 RMB’000 438,197 90,900 265,316 498,500
		1,292,913

		438,197

		854,716

Except for certain short-term bank loans and other loans respectively amounting to RMB5,000,000 (2007: RMB183,000,000) and nil (2007: RMB170,197,000), bore interest at fixed rates, all bank loans bore interest at floating rates.

The Group’s bank loans bore interest at rates ranging from 5.31% to 8.61% per annum (2007: 6.19% to 8.21% per annum). The Group’s other loans bore interest at 5.75% per annum (2007: 5.75% per annum) which had all been settled in 2008.

As at 31 December 2008, all bank loans of the Group were in Renminbi. As at 31 December 2007, except for the unsecured other loans and certain secured bank loans aggregating to US$33,000,000 (equivalent to RMB240,316,000) which were denominated in United States dollars, all borrowings were in Renminbi.

The Group’s bank and other loans are secured by:

(i) the Group’s investment properties with a value of approximately RMB1,134,900,000 (2007: RMB946,367,000) for bank loans (note 14);
(ii) the Group’s properties under development amounting to approximately RMB153,798,000 (2007: RMB1,117,186,000) for bank loans (note 15);
(iii) the Group’s completed properties held for sale amounting to approximately RMB22,689,000 for bank loans as at 31 December 2007;
(iv) a guarantee provided by Mr. Shi for other loans of RMB170,197,000 as at 31 December 2007; and

– I-42 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(v) the Group’s property and equipment with a net book value of approximately RMB163,872,000 (2007: Nil) were pledged for bank loans (note 13)

The fair values of the interest-bearing bank loans and other borrowings at the end of these years approximate to their corresponding carrying amounts.

28. Share capital

Authorised: 4,000,000,000 (2007: 4,000,000,000) ordinary shares of HK$0.10 each Issued and fully paid: 1,942,672,000 (2007: 2,000,000,000) ordinary shares of HK$0.10 each	2008 ’000 HK$400,000 RMB185,339	2007 ’000 HK$400,000

		RMB190,808

(a) Issued capital

During the year, the Company repurchased 57,328,000 of its own shares on the Stock Exchange of Hong Kong.

The purchased shares were cancelled during the year and the issued capital of the Company was reduced by the par value thereof. The premium paid on the purchase of the shares has been charged to the share premium of the Company accordingly.

The purchase of the Company’s shares during the year was pursuant to the repurchase mandate granted by the shareholders to the Directors at the last annual general meeting of the Company, with a view to benefiting shareholders as a whole by enhancing the net asset value per share and earnings per share of the Group.

(b) Share premium

The share premium of the Company represents the excess of ordinary shares paid by the shareholders over the nominal value.

A summary of the transactions during the year with reference to the above movements in the Company’s issued ordinary share capital is detailed in the consolidated statement of changes in equity.

29. Reserves

Group

(a) Contributed surplus

The contributed surplus of the Group represents the difference between the aggregate of the nominal value of the paid-up capital of the subsidiaries acquired pursuant to the Reorganisation over the nominal value of the Company’s shares issued in exchange therefor. Prior to the incorporation of the Company, the contributed surplus represents the aggregate of the normal value of the paid-up capital of the subsidiaries of the Group.

(b) Capital reserve

Capital reserve represents additional contribution made by the shareholders of the Company’s subsidiaries and, in case of acquisition of an additional minority interest of a subsidiary, the difference between the cost of acquisition and the minority interest acquired.

– I-43 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(c) Statutory surplus reserve and statutory reserve fund

In accordance with the Company Law of the PRC and the respective articles of association of the PRC group companies, the subsidiaries of the Group that are domiciled in Mainland China are required to allocate 10% of their profit after tax, as determined in accordance with PRC Accounting Regulations to the statutory surplus reserve (the “SSR”) until such reserve reaches 50% of their respective registered capital.

In addition, certain of the PRC group companies are foreign investment enterprises which are not subject to the SSR allocation. According to the relevant PRC regulations applicable to foreign investment enterprises, these subsidiaries are required to allocate certain portion (not less than 10%) of its profit after tax in accordance with PRC Accounting Regulations to the statutory reserve fund (the “SRF”) until such reserve reaches 50% of its registered capital.

The SSR and the SRF are non-distributable except in the event of liquidation and, subject to certain restrictions set out in the relevant PRC regulations, can be used to offset accumulated losses or be capitalised as paid-up capital.

Company

At 1 January 2007 Profit for the year Issue of shares Share issue expenses Capitalisation issue Exchange realignment At 31 December 2007 Loss for the year Repurchase and cancellation of shares Exchange realignment At 31 December 2008	Share premium account RMB’000 – – 3,403,547 (170,428) (139,003) –	Exchange fluctuation reserve RMB’000 – – – – – (64,325)	Retained profits RMB’000 – 26,549 – – – –	Total RMB’000 – 26,549 3,403,547 (170,428) (139,003) (64,325)
	3,094,116 – (117,295) –	(64,325) – – (184,307)	26,549 (17,388) – –	3,056,340 (17,388) (117,295) (184,307)
	2,976,821	(248,632)	9,161	2,737,350

30. Related party transactions

In addition to the transactions and balances detailed elsewhere in these consolidated financial statements, the Group had the following material transactions with related parties during the year:

(a) Amounts of loan interest charged by Directors during the years ended 31 December 2007 and 2008 are set out as below:

Mr. Zhang Jiangang Mr. Lou Yifei Ms. Shen Tiaojuan	2008 RMB’000 – – – –	2007 RMB’000 60 6 384
		450

– I-44 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The interests on loans from Directors were charged at an interest rate of 12% per annum.

(b) Remunerations of key management personnel of the Group which comprises Directors and key employees of the Group has been disclosed in note 8.
(c) As disclosed in notes 21 and 25, the Group had balances due from other related parties at the end of the years ended 31 December 2007 and 2008, and had no balance due to a Director for the year ended 31 December 2008 (2007: RMB38,000). All the balances due from/to a Director and other related parties were arising from non-trade activities, unsecured, interest-free and repayable on demand.

31. Commitments

The Group had the following commitments for property development expenditure at the balance sheet date:

	2008	2007
	RMB’000	RMB’000
Contracted, but not provided for:
Properties under development	568,744	437,493

32. Operating lease commitments

As lessor

The Group leases out its investment properties and certain completed properties for sale under operating lease arrangements, on terms ranging from one to fifteen years and with an option for renewal after the expiry dates, at which time all terms will be renegotiated.

As at the balance sheet dates, the Group had total future minimum lease receivables under non-cancellable operating leases with its tenants falling due as follows:

Within one year After one year but not more than five years More than five years	2008 RMB’000 38,131 128,176 57,879 224,186	2007 RMB’000 32,854 113,230 29,843
		175,927

As lessee

The Group leases certain of its office premises under operating lease arrangements, negotiated for terms of five years with an option for renewal after the expiry dates, at which time all terms will be renegotiated.

– I-45 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

As at the balance sheet dates, the Group had total future minimum lease payments under non-cancellable operating leases falling due as follows:

Within one year After one year but not more than five years More than five years	2008 RMB’000 4,580 10,711 34,488 49,779	2007 RMB’000 2,396 4,399 –
		6,795

33. Contingent liabilities

		2008	2007
		RMB’000	RMB’000
Guarantees	given to banks for:
Mortgage	facilities granted to purchasers of the Group’s properties	116,295	523,015

The Group provided guarantees in respect of the mortgage facilities granted by certain banks to the purchasers of the Group’s properties. Pursuant to the terms of the guarantee arrangements, in case of default on mortgage payments by the purchasers, the Group is responsible to repay the outstanding mortgage loans together with any accrued interest and penalty owed by the defaulted purchasers to the banks. The Group is then entitled to take over the legal titles of the related properties. The Group’s guarantee periods commence from the dates of grant of the relevant mortgage loans and end after the execution of individual purchasers’ collateral agreements.

The Group did not incur any material losses during the financial years in respect of the guarantees provided for mortgage facilities granted to purchasers of the Group’s properties. The Directors consider that in case of default on payments, the net realisable value of the related properties can cover the repayment of the outstanding mortgage loans together with any accrued interest and penalty, and therefore no provision has been made in connection with the guarantees.

34. Acquisition of a subsidiary

In January 2008, the Group acquired a 100% equity interest of Hangzhou Zheng Jiang Real Estate Development Co., Ltd. (“Zheng Jiang”) from an independent third party at a total cash consideration of RMB370,360,000. Before the acquisition, Zheng Jiang had no business activities. The sole purpose of the acquisition was to acquire a piece of vacant land owned by Zheng Jiang.

– I-46 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The fair values of the identifiable assets and liabilities of Zheng Jiang as at the date of acquisition and the corresponding carrying amounts immediately before the acquisition were:

Note Net assets acquired: Properties under development 15 Cash and cash equivalents Satisfied by: Prepayments, deposits and other receivables Cash	Fair value recognised on acquisition RMB’000 351,106 10,000 361,106 163,600 197,506 361,106	Previous carrying amount RMB’000 120,000 10,000
		130,000

An analysis of the net outflow of cash and cash equivalents in respect of the acquisition of a subsidiary is as follows:

Cash consideration paid Cash and cash equivalents acquired Net outflow of cash and cash equivalents in respect of the acquisition of a subsidiary	As at the acquisition date RMB’000 (197,506) 10,000
	(187,506)

From the date of the acquisition, Zheng Jiang’s results have had no significant impact on the Group’s consolidated revenue or profit for the year ended 31 December 2008.

– I-47 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

35. Financial instruments by category

The carrying amounts of each of the categories of financial instruments as at the balance sheet date are as follows:

2008 Financial assets Loans and receivables RMB’000 Available-for-sale investments – Trade receivables 10,857 Financial assets included in prepayments, deposits and other receivables 476,716 Pledged deposits 16,343 Cash and cash equivalents 1,652,098 2,156,014 Financial liabilities Trade payables Financial liabilities included in other payables and accruals Interest-bearing bank and other borrowings 2007 Financial assets Financial assets included in prepayments, deposits and other receivables Pledged deposits Cash and cash equivalents	Group Available -for-sale financial assets RMB’000 3,300 – – – – 3,300	Total RMB’000 3,300 10,857 476,716 16,343 1,652,098
		2,159,314

		Financial liabilities at amortised cost RMB’000 485,222 287,585 663,906
		1,436,713

		Group Loans and receivables RMB’000 565,428 196 3,038,517
		3,604,141

– I-48 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Financial liabilities

Trade and bills payables Financial liabilities included in other payables and accruals Interest-bearing bank and other borrowings	Financial liabilities at amortised cost RMB’000 406,351 283,268 1,292,913
	1,982,532

Company

Financial assets

Interests in subsidiaries Financial assets included in prepayments, deposits and other receivables Amounts due from subsidiaries Cash and cash equivalents	2008 Loans and receivables RMB’000 1,018,848 839 1,958,224 62,797 3,040,708	2007 Loans and receivables RMB’000 473,477 11,412 1,148,684 1,652,663
		3,286,236

Financial Liabilities

Financial liabilities included in other payables and accruals Amounts due to subsidiaries	2008 Financial liabilities at amortised cost RMB’000 1,867 116,828 118,695	2007 Financial liabilities at amortised cost RMB’000 16,056 23,132
		39,188

36. Financial risk management objectives and policies

The Group’s principal financial instruments comprise cash and cash equivalents, pledged deposits and interest-bearing bank and other borrowings. The main purpose of these financial instruments is to raise finance for the Group’s operations. The Group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.

– I-49 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The main risks arising from the Group’s financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. The Group does not hold or issue derivative financial instruments for trading purposes. The Directors reviews and agrees policies for managing each of these risks and they are summarised below:

(a) Interest rate risk

The Group has no significant interest-bearing assets. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s bank loans with floating interest rates. The Group has not used any interest rate swaps to hedge its interest rate risk.

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group’s profit before tax (through the impact on floating rate borrowings).

			Increase/	Increase/
			(decrease)	(decrease)
			in basis	in profit
			points	before tax
				RMB’000
2008
RMB			50	(2,368)
RMB			(50)	2,368
2007
RMB			50	(3,161)
United	states	dollar	50	(777)
RMB			(50)	3,161
United	states	dollar	(50)	777

(b) Foreign currency risk

The Group’s businesses are located in Mainland China and all transactions are conducted in RMB. Most of the Group’s assets and liabilities are denominated in RMB, except for the United States Dollar bank loan as disclosed in note 27 and certain bank balances denominated in Hong Kong Dollars (“HK$”) and United States Dollars (“US$”). The Group has not hedged its foreign exchange rate risk.

The following table demonstrates the sensitivity at the balance sheet date to a reasonably possible change in the US$ and HK$ exchange rates, with all other variables held constant, of the Group’s profit before tax.

– I-50 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

	Increase/
	(decrease)	Increase/
	in foreign	(decrease)
	currency	in profit
	rate	before tax
	%	RMB’000
2008
If HK$ weakens against US$	5	(953)
If HK$ strengthens against US$	5	953
If RMB weakens against US$	5	4
If RMB strengthens against US$	5	(4)
2007
If HK$ weakens against US$	5	73,626
If HK$ strengthens against US$	5	(73,626)
If RMB weakens against US$	5	(12,053)
If RMB strengthens against US$	5	12,053

(c) Credit risk

The Group has no concentration of credit risk. The Group’s cash and cash equivalents are mainly deposited with overseas banks and state-owned banks in Mainland China. The carrying amounts of the other receivables, pledged deposits and cash and cash equivalents included in the consolidated balance sheet represent the Group’s maximum exposure to credit risk in relation to its financial assets. The Group has no other financial assets which carry significant exposure to credit risk. The Group has arranged bank financing for certain purchasers of its property units and has provided guarantees to secure the obligations of such purchasers for repayments. Detailed disclosures of these guarantees are made in note 33.

(d) Liquidity risk

The Group monitors its risk to a shortage of funds using a recurring liquidity planning tool. This tool considers the maturity of both its financial instruments and financial assets (e.g., trade receivables) and projected cash flows from operations.

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans and other interest-bearing loans. 21% of the Group’s debts would mature in less than one year as at 31 December 2008 (2007: 34%) based on the carrying values of borrowings reflected in the financial statements.

– I-51 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The maturity profile of the Group’s financial liabilities as at the balance sheet date, based on the contractual undiscounted payments, was as follows:

Group

Interest-bearing bank and other borrowings Trade payables Other payables and accruals Interest-bearing bank and other borrowings Trade and bills payables Other payables and accruals	On demand RMB’000 – 485,222 287,585 772,807 On demand RMB’000 170,197 406,155 283,268 859,620	Less than 3 months RMB’000 – – – – Less than 3 months RMB’000 – – – –	2008 3 to less than 12 months 1 to 5 years RMB’000 RMB’000 142,117 280,083 – – – – 142,117 280,083 2007 3 to less than 12 months 1 to 5 years RMB’000 RMB’000 268,000 356,216 196 – – – 268,196 356,216	Over 5 years RMB’000 241,706 – – 241,706 Over 5 years RMB’000 498,500 – – 498,500	Total RMB’000 663,906 485,222 287,585
					1,436,713

					Total RMB’000 1,292,913 406,351 283,268
					1,982,532

The maturity profile of the Company’s financial liabilities as at the balance sheet date, based on the contractual undiscounted payments, was as follows:

Company

Due to subsidiaries Other payables and accruals	On demand RMB’000 116,828 1,867 118,695	Less than 3 months RMB’000 – – –	2008 3 to less than 12 months 1 to 5 years RMB’000 RMB’000 – – – – – –	Over 5 years RMB’000 – – –	Total RMB’000 116,828 1,867
					118,695

– I-52 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Due to subsidiaries Other payables and accruals	On demand RMB’000 23,132 16,056 39,188	Less than 3 months RMB’000 – – –	2007 3 to less than 12 months 1 to 5 years RMB’000 RMB’000 – – – – – –	Over 5 years RMB’000 – – –	Total RMB’000 23,132 16,056
					39,188

(e) Capital management

The primary objective of the Group’s capital management is to safeguard the Group’s ability to continue as a going concern and to maintain healthy capital ratios in order to support its business and maximise shareholders’ value.

The Group manages its capital structure and makes adjustments to it, in the light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes for managing capital during the years ended 31 December 2008 and 31 December 2007.

The Group monitors capital using a gearing ratio, which is net debt divided by the capital plus net debt. Net debt includes interest-bearing bank and other borrowings, trade and bills payable and other payables and accruals, less cash and cash equivalents. Capital represents equity attributable to equity holders of the Company. The gearing ratios as at the balance sheet dates were as follows:

Group

Interest-bearing bank and other borrowings (note 27) Trade and bills payables Other payables and accruals Less: Cash and cash equivalents Net debt Equity attributable to equity holders of the Company Capital and net debt Gearing ratio	2008 RMB’000 663,906 485,222 287,585 (1,652,098)	2007 RMB’000 1,292,913 406,351 283,268 (3,038,517)
	(215,385) 3,931,879	(1,055,985) 3,854,293
	3,716,494 (6%)	2,798,308

		(38%)

37. Comparative amounts

Certain comparative amounts have been reclassified and restated to conform with the current year’s presentation.

38. Approval of the financial statements

The financial statements were approved and authorised for issue by the Board of Directors on 31 March

– I-53 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTH ENDED 30 JUNE 2009

The following is the unaudited condensed consolidated financial statements and notes to the financial statements of the Group for the six months ended 30 June 2009 extracted from the 2009 interim report of the Company.

The unaudited condensed consolidated financial statements have not been audited, but have been reviewed by the Company’s Audit Committee.

Condensed Consolidated Income Statement

Notes Revenue 4 Cost of sales Gross profit Other income 4 Selling and distribution costs Administrative expenses Other expenses Increase in fair value of investment properties Finance costs Profit before tax 5 Income tax 6 Profit for the year Attributable to: Equity holders of the Company Minority interests Earnings per share attributable to ordinary equity holders of the Company (RMB) Basic 7 Dividends Interim 8	Unaudited For the six months ended 30 June 2009 2008 RMB’000 RMB’000 330,640 1,288,872 (212,230) (828,997) 118,410 459,875 16,082 56,480 (16,558) (25,031) (37,171) (32,004) (13,762) (52,480) 63,232 151,977 (10,784) (6,676) 119,449 559,941 (35,585) (226,102) 83,864 333,839 72,647 302,758 11,217 31,081 83,864 333,839 0.04 0.15 38,853 –	Unaudited For the six months ended 30 June 2009 2008 RMB’000 RMB’000 330,640 1,288,872 (212,230) (828,997) 118,410 459,875 16,082 56,480 (16,558) (25,031) (37,171) (32,004) (13,762) (52,480) 63,232 151,977 (10,784) (6,676) 119,449 559,941 (35,585) (226,102) 83,864 333,839 72,647 302,758 11,217 31,081 83,864 333,839 0.04 0.15 38,853 –
	118,410 16,082 (16,558) (37,171) (13,762) 63,232 (10,784) 119,449 (35,585)	459,875
		56,480 (25,031 (32,004 (52,480 151,977 (6,676
		559,941 (226,102
	83,864
	72,647 11,217	302,758 31,081
	83,864 0.04 38,853

– I-54 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Condensed Consolidated Statement of Comprehensive Income

Notes Profit for the period Other comprehensive income Exchange differences arising on translation of the financial statements of foreign subsidiaries Total comprehensive income for the period Total comprehensive income attributable to: Equity holders of the Company Minority interests	Unaudited For the six months ended 30 June 2009 2008 RMB’000 RMB’000 83,864 333,839 77 (72,613) 83,941 261,226 72,724 230,145 11,217 31,081 83,941 261,226

– I-55 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Condensed Consolidated Statement of Financial Position

Notes NON-CURRENT ASSETS Property and equipment 9 Investment properties Properties under development 10 Goodwill Available-for-sale investments Deferred tax assets Total non-current assets CURRENT ASSETS Completed properties held for sale Properties under development 10 Inventories Trade receivables 11 Prepayments, deposits and other receivables Pledged deposits 12 Cash and cash equivalents 12 Total current assets CURRENT LIABILITIES Trade payables 13 Other payables and accruals Advances from customers Interest-bearing bank and other borrowings 14 Tax payable Total current liabilities NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Interest-bearing bank and other borrowings 14 Deferred tax liabilities Total non-current liabilities NET ASSETS	Unaudited 30 June 2009 Audited 31 December 2008 RMB’000 RMB’000 195,532 200,739 1,314,400 1,146,500 972,391 1,034,200 5,314 15,292 3,300 3,300 18,344 20,188	Unaudited 30 June 2009 Audited 31 December 2008 RMB’000 RMB’000 195,532 200,739 1,314,400 1,146,500 972,391 1,034,200 5,314 15,292 3,300 3,300 18,344 20,188
	2,509,281 407,833 1,005,970 9,401 13,198 727,727 25,844 1,728,469 3,918,442 305,041 290,824 560,683 61,920 202,709 1,421,177 2,497,265 5,006,546 676,125 242,881 919,006	2,420,219
		219,171 1,326,318 3,549 10,857 677,808 16,343 1,652,098
		3,906,144
		485,222 287,585 368,986 142,117 251,139
		1,535,049
		2,371,095
		4,791,314
		521,789 227,073
		748,862
	4,087,540	4,042,452

– I-56 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Notes EQUITY Equity attributable to equity holders of the Company Issued capital 15 Reserves Minority interests Total equity	Unaudited 30 June 2009 Audited 31 December 2008 RMB’000 RMB’000 185,339 185,339 3,780,411 3,746,540 3,965,750 3,931,879 121,790 110,573 4,087,540 4,042,452	Unaudited 30 June 2009 Audited 31 December 2008 RMB’000 RMB’000 185,339 185,339 3,780,411 3,746,540 3,965,750 3,931,879 121,790 110,573 4,087,540 4,042,452
		3,931,879
		110,573
		4,042,452

– I-57 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Condensed Consolidated Statement of Changes in Equity

					Unaudited
Issued capital RMB’000 190,808 – –	Share premium account RMB’000 3,094,116 – –	Contributed surplus RMB’000 39,318 – –	Capital reserve RMB’000 9,766 – –	Statutory surplus reserve RMB’000 61,648 – –	Statutory reserve fund RMB’000 6,104 – –	Exchange fluctuation reserve Retained profits RMB’000 RMB’000 (26,804) 479,337 – 302,758 (72,613) –	Total Minority interests RMB’000 RMB’000 3,854,293 81,681 302,758 31,081 (72,613) –		Total equity RMB’000 3,935,974 333,839 (72,613
190,808 3,094,116 39,318 – – – (1,738) (62,211) –			9,766 11,921 –	61,648 – –	6,104 – –	(99,417) 782,095 – – – –	4,084,438 112,762 4,197,200 11,921 (11,921) – (63,949) – (63,949
189,070	3,031,905	39,318	21,687	61,648	6,104	(99,417) 782,095	4,032,410	100,841	4,133,251

185,339 – –	2,976,821 – –	39,318 – –	9,451 – –	107,936 – –	7,841 – –	(80,125) 685,298 – 72,647 77 –	3,931,879 72,647 77	110,573 11,217 –	4,042,452 83,864 77
185,339 –	2,976,821 –	39,318 –	9,451 –	107,936 –	7,841 –	(80,048) 757,945 4,004,603 – (38,853) –		121,790 –	4,126,393 (38,853
185,339	2,976,821 39,318 9,451 107,936 7,841 (80,048) 719,902* 4,004,603							121,790	4,087,540

These reserve accounts comprise the consolidated reserves of RMB3,780,411,000 (2008: RMB3,843,340,000) in the condensed consolidated statement of financial position.

– I-58 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Condensed Consolidated Cash Flow Statement

Cash generated from operating activities Net cash inflow from operating activities Net cash outflow from investing activities Net cash inflow/(outflow) from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 1 January Effect of foreign exchange rate changes, net Cash and cash equivalents at 30 June Analysis of balances of cash and cash equivalents Cash and bank balances	Unaudited For the six months ended 30 June 2009 2008 RMB’000 RMB’000 126,005 240,825 52,932 165,084 (11,924) (372,109) 35,286 (442,159) 76,294 (649,184) 1,652,098 3,038,517 77 (72,613) 1,728,469 2,316,720 1,728,469 2,316,720	Unaudited For the six months ended 30 June 2009 2008 RMB’000 RMB’000 126,005 240,825 52,932 165,084 (11,924) (372,109) 35,286 (442,159) 76,294 (649,184) 1,652,098 3,038,517 77 (72,613) 1,728,469 2,316,720 1,728,469 2,316,720
	52,932 (11,924) 35,286 76,294 1,652,098 77	165,084 (372,109 (442,159
		(649,184 3,038,517 (72,613
	1,728,469 1,728,469

– I-59 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes to the Condensed Consolidated Financial Statements

1. Corporate information

The Company is a limited liability company incorporated as an exempted company in the Cayman Islands on 13 March 2007 under the Companies Law (revised) of the Cayman Islands. The registered office of the Company is located at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands.

The Group is principally engaged in property development, leasing and hotel operation. The Group’s property development projects during the six months ended 30 June 2009 are all located in Zhejiang and Anhui Provinces, the People’s Republic of China (the “PRC”). There were no significant changes in the nature of the Group’s principal activities during the period under review.

In the opinion of the Directors, the holding company and the ultimate holding company of the Company is Whole Good Management Limited, a company incorporated in the British Virgin Islands on 3 May 2007. Whole Good Management Limited is wholly owned by Mr. Shi Kancheng (alias Shi Zhongan) (“Mr. Shi”), Chairman and Chief Executive Officer of the Company.

This unaudited condensed consolidated interim financial information was approved by the Board for issued on 7 September 2009.

2. Basis of presentation and accounting policies

This unaudited condensed consolidated interim financial information for the six months ended 30 June 2009 has been prepared in accordance with International Accounting Standard (“IAS”) 34, “Interim Financial Reporting”. The condensed consolidated interim financial information should be read in conjunction with the Group’s annual financial statements for the year ended 31 December 2008, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”).

Except as described below, the accounting policies applied are consistent with those of the annual financial statements of the Group for the year ended 31 December 2008, as described in those annual financial statements.

The following new standards and amendments to standards are adopted for the first time for the financial year beginning 1 January 2009:

IFRS 1 First-time Adoption of IFRSs and IAS 27 Consolidated and Separate Financial Statements – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate

The IAS 27 Amendment requires all dividends from subsidiaries, associates or jointly controlled entities to be recognised in the income statement in the separate financial statements. The amendment is applied prospectively only. The IFRS 1 Amendment allows a first-time adopter of IFRSs to measure its investment in subsidiaries, associates or jointly-controlled entities using a deemed cost of either fair value or the carrying amount under the previous accounting practice in the separate financial statements. The adoption of IAS 27 Amendment has no impact on the consolidated financial statements. As the Group is not a first-time adopter of IFRSs, the IFRS 1 Amendment is not applicable to the Group.

IFRS 2 Share-based Payment – Vesting Conditions and Cancellations

The Standard has been amended to clarify the definition of vesting conditions and to prescribe the accounting treatment of an award that is effectively cancelled because a non-vesting condition is not satisfied. The adoption of this amendment did not have any impact on the financial position or performance of the Group.

IFRS 7 Financial Instruments: Disclosures

The amended standard requires additional disclosure about fair value measurement and liquidity risk. Fair value measurements are to be disclosed by source of inputs using a three level hierarchy for each class of financial instrument. In addition, a reconciliation between the beginning and ending balance for Level 3

– I-60 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

fair value measurements is now required, as well as significant transfers between Level 1 and Level 2 fair value measurements. The amendments also clarify the requirements for liquidity risk disclosures. The fair value measurement disclosures and the liquidity risk disclosures are not significantly impacted by the amendments.

IFRS 8 Operating Segments

This standard requires disclosure of information about the Group’s operating segments and replaces the requirement to determine primary (business) and secondary (geographical) reporting segments of the Group. Adoption of this Standard did not have any effect on the financial position or performance of the Group. The Group determined that the operating segments were the same as the business segments previously identified under IAS 14 Segment Reporting.

IAS 1 Revised Presentation of Financial Statements

The revised Standard separates owner and non-owner changes in equity. The statement of changes in equity includes only details of transactions with owners, with non-owner changes in equity presented as a single line. In addition, the Standard introduces the statement of comprehensive income: it presents all items of recognised income and expense, either in one single statement, or in two linked statements. The Group has elected to present two statements.

IAS 23 Borrowing Costs (Revised)

IAS 23 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. As the Group’s current policy for borrowing costs aligns with the requirements of the revised standard, the revised standard did not have any impact on the financial position or performance of the Group.

IAS 32 Financial Instruments: Presentation and IAS 1 Puttable Financial Instruments and Obligations Arising on Liquidation

The standards have been amended to allow a limited scope exception for puttable financial instruments to be classified as equity if they fulfill a number of specified criteria. The adoption of these amendments did not have any impact on the financial position or performance of the Group.

IFRIC-Int 9 Reassessment of Embedded Derivatives and IAS 39 Financial Instruments: Recognition and Measurement

These amendments to IFRIC-Int 9 require an entity to assess whether an embedded derivative must be separated from a host contract when the entity reclassifies a hybrid financial asset out of the fair value through profit or loss category. This assessment is to be made based on circumstances that existed on the later of the date the entity first became a party to the contract and the date of any contract amendments that significantly change the cash flows of the contract. IAS 39 now states that if an embedded derivative cannot be reliably measured, the entire hybrid instrument must remain classified as at fair value through profit or loss.

IFRIC-Int 13 Customer Loyalty Programmes

This interpretation requires customer loyalty credits to be accounted for as a separate component of the sales transaction in which they are granted. A portion of the fair value of the consideration received is allocated to the award credits and deferred. This is then recognised as revenue over the period that the award credits are redeemed. As the Group currently has no applicable customer loyalty award credits, the interpretation is not applicable to the Group and therefore is unlikely to have any financial impact on the Group.

– I-61 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

IFRIC-Int 15 Agreements for the Construction of Real Estate

IFRIC-Int 15 clarifies when and how an agreement for the construction of real estate should be accounted for as a construction contract in accordance with IAS 11 Construction Contracts or an agreement for the sale of goods or services in accordance with IAS 18 Revenue. The adoption of this amendments did not have any impact on the financial position or performance of the Group.

IFRIC-Int 16 Hedges of a Net Investment in a Foreign Operation

The interpretation is to be applied prospectively. IFRIC-Int 16 provides guidance on the accounting for a hedge of a net investment. As such it provides guidance on identifying the foreign currency risks that qualify for hedge accounting in the hedge of a net investment, where within the group the hedging instruments can be held in the hedge of a net investment and how an entity should determine the amount of foreign currency gain or loss, relating to both the net investment and the hedging instrument, to be recycled on disposal of the net investment. As the Group currently has no hedge of a net investment in a foreign operation, the interpretation is unlikely to have any impact on the Group.

Improvements to IFRSs

In May 2008 the International Accounting Standards Board (“IASB”) issued its first omnibus of amendments to its standards, primarily with a view to removing inconsistencies and clarifying wording. There are separate transitional provisions for each standard. The adoption of the following amendments resulted in changes to accounting policies but did not have any impact on the financial position or performance of the Group.

IAS 1 Presentation of Financial Statements: Assets and liabilities classified as held for trading in accordance with IAS 39 Financial Instruments: Recognition and Measurement are not automatically classified as current in the statement of financial position. The Group adopted such accordingly and analysed whether management’s expectation of the period of realisation of financial assets and liabilities differed from the classification of the instrument. This did not result in any reclassification of financial instruments between current and non-current in the statement of financial position.

IAS 16 Property, Plant and Equipment: Replace the term “net selling price” with “fair value less costs to sell”. The Group amended its accounting policy accordingly, which did not result in any change in the financial position.

IAS 20 Accounting for Government Grants and Disclosure of Government Assistance: Requires government loans granted in the future with no or at a below-market rate of interest to be recognized and measured in accordance with IAS 39 Financial Instruments: Recognition and Measurement and the benefit of the reduced interest to be accounted for as a government grant.

IAS 23 Borrowing Costs: The definition of borrowing costs is revised to consolidate the two types of items that are considered components of ‘borrowing costs’ into one – the interest expense calculated using the effective interest rate method calculated in accordance with IAS 39. The Group has amended its accounting policy accordingly which did not result in any change in its financial position.

The amendments to the following standards below did not have any impact on the accounting policies, financial position or performance of the Group:

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
IFRS 7 Financial Instruments: Disclosures
IAS 8 Accounting Policies, Change in Accounting Estimates and Error
IAS 10 Events after the Reporting Period
IAS 16 Property, Plant and Equipment
IAS 18 Revenue
IAS 19 Employee Benefits
IAS 27 Consolidated and Separate Financial Statements
IAS 28 Investment in Associates
IAS 31 Interest in Joint Ventures

– I-62 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

IAS 34 Interim Financial Reporting
IAS 36 Impairment of Assets
� IAS 38 Intangible Assets � IAS 39 Financial Instruments: Recognition and Measurement

Impact of issued but not yet effective international financial reporting standards

The Group has not applied the following new and revised IFRSs, that have been issued but are not yet effective, in these interim condensed consolidated financial statements.

IFRS 2 Amendment Amendments to IFRS 2 Share-based Payment – Group Cash-settled Share-based Payment Transactions[2] IFRS 3 (Revised) Business Combinations[1] IAS 27 (Revised) Consolidated and Separate Financial Statements[1] IAS 39 Amendment Amendment to IAS 39 Financial Instruments: Recognition and Measurement – Eligible Hedged Items[1] IFRIC-Int 17 Distribution of Non-cash Assets to Owners[1] IFRIC-Int 18 Transfers of Assets from Customers[1]

Apart from the above, IASB has also issued Improvements to IFRSs* which sets out amendments to a number of IFRSs primarily with a view to removing inconsistencies and clarify wording. The Group expects to adopt the amendments to IFRSs from 1 January 2010. There are separate transitional provisions for each standard.

1 Effective for annual periods beginning on or after 1 July 2009
2 Effective for annual periods beginning on or after 1 January 2010
Improvements to IFRSs contains amendments to IFRS 2, IFRS 5, IFRS 8, IAS 1, IAS 7, IAS 17, IAS 18, IAS 36, IAS 38, IAS 39, IFRIC-Int 9 and IFRIC-Int 16.

The Group is in the process of making an assessment of the impact of these new and revised IFRSs upon initial application. So far, it has concluded that the adoption of IFRS 3 (Revised), IAS 27 (Revised) may result in changes in accounting policies, these new and revised IFRSs are unlikely to have a significant impact on the Group’s results of operations and financial position.

3. Segment information

The Group’s turnover and profit for the six months ended 30 June 2008 and 30 June 2009 were mainly derived from the property development business. The principal assets employed by the Group and the Group’s property development projects are both located in the PRC. Accordingly, no analysis by business and geographical segments is presented.

4. Revenue and other income

Revenue, which is also the Group’s turnover, represents revenue from the sale of properties, leasing, hotel operation and management fee income during the period under review, net of business tax and other sales related taxes and discounts allowed.

– I-63 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

An analysis of revenue and other income is as follows:

Revenue Sale of properties Leasing income Management fee income Revenue from hotel operations Others Less: Business tax and surcharges Other income Interest income Government grants Gain on foreign exchange differences Others	Unaudited For the six months ended 30 June 2009 2008 RMB’000 RMB’000 302,607 1,323,005 19,265 11,164 3,360 2,763 23,589 22,126 46 144 (18,227) (70,330) 330,640 1,288,872 13,979 26,247 – 2,300 10 27,904 2,093 29 16,082 56,480	Unaudited For the six months ended 30 June 2009 2008 RMB’000 RMB’000 302,607 1,323,005 19,265 11,164 3,360 2,763 23,589 22,126 46 144 (18,227) (70,330) 330,640 1,288,872 13,979 26,247 – 2,300 10 27,904 2,093 29 16,082 56,480
	13,979 – 10 2,093	26,247 2,300 27,904 29
	16,082

5. Profit before tax

The Group’s profit before tax is arrived at after charging/(crediting):

	Unaudited	Unaudited
	For the six months
	ended 30 June
	2009	2008
	RMB’000	RMB’000
Cost of properties sold	202,466	820,481
Depreciation	5,685	5,655
Minimum lease payments under operating leases
– Office premises	1,926	979
Auditors’ remuneration	258	357
Staff costs including directors’ remuneration:
– Salaries and other staff costs	19,314	20,860
– Retirement benefits scheme contributions	1,627	1,358
Direct operating expenses
(including repairs and maintenance) arising
on rental-earning investment properties	183	823
Goodwill impairment	9,978	41,343
Changes in fair value of investment properties	(63,232)	(151,977)

6. Income tax

No provision for Hong Kong profits tax has been made as the Group had no assessable profits arising in Hong Kong during the period under review.

Provision for the PRC income tax has been provided at the applicable income tax rate of 25% on the assessable profits of the Group’s subsidiaries in Mainland China.

– I-64 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Current tax: PRC corporate income tax PRC land appreciation tax Deferred tax: Relating to origination and reversal of temporary differences Total tax charge	Unaudited For the six months ended 30 June 2009 2008 RMB’000 RMB’000 19,986 98,870 1,635 101,971 13,964 25,261 35,585 226,102	Unaudited For the six months ended 30 June 2009 2008 RMB’000 RMB’000 19,986 98,870 1,635 101,971 13,964 25,261 35,585 226,102
		226,102

7. Earnings per share attributable to the equity holders of the Company

The calculation of basic earnings per share is based on the profit for the six months ended 30 June 2009 attributable to ordinary equity holders of the Company of RMB72,647,000 (corresponding period in 2008: RMB302,758,000) and the ordinary shares of 1,942,672,000 (corresponding period in 2008: 1,993,051,005) in issue during the six months ended 30 June 2009.

Diluted earnings per share amount has not been presented as there were no diluting events during the period under review.

8. Dividends

Dividends on ordinary shares declared and paid during the six month period 2008 final dividend per ordinary share: RMB0.02 (2007: Nil) 2009 interim dividend proposed per ordinary share: RMB0.02 (2008: Nil)	Unaudited For the six months ended 30 June 2009 2008 RMB’000 RMB’000 38,853 – 38,853 –	Unaudited For the six months ended 30 June 2009 2008 RMB’000 RMB’000 38,853 – 38,853 –

		–

Notes:

(a) At a meeting held on 31 March 2009, the Directors proposed a final dividend of RMB0.02 per ordinary share for the year ended 31 December 2008, which was paid on 29 May 2009 and has been reflected as an appropriation of retained earnings for the six months ended 30 June 2009.

– I-65 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) At a meeting held on 7 September 2009, the Company’s directors declared an interim dividend of RMB0.02 per ordinary share. This proposed dividend, based on the number of shares outstanding at the date of the meeting, is not reflected as a dividend payable in this interim financial information, but will be reflected as an appropriation of retained earnings for the year ending 31 December 2009.

9. Property and equipment

		Unaudited	Unaudited	Unaudited
Properties RMB’000 186,014 (12,378) 173,636	Machinery RMB’000 1,417 (719) 698	Office equipment RMB’000 21,187 (6,540) 14,647	Motor vehicles Construction in progress RMB’000 RMB’000 20,908 503 (9,653) – 11,255 503		Total RMB’000 230,029 (29,290)
					200,739

173,636 1,946 (1,946) – (4,394) 169,242 186,014 (16,772)	698 – – – (33) 665 1,417 (752)	14,647 475 – (20) (186) 14,916 21,642 (6,726)	11,255 126 – – (1,072) 10,309 21,034 (10,725)	503 400 – (503) – 400 400 –	200,739 2,947 (1,946) (523) (5,685)
					195,532
					230,507 (34,975)
169,242	665	14,916	10,309	400	195,532

– I-66 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

		Unaudited	Unaudited	Unaudited
Properties RMB’000 12,590 (3,212) 9,378 9,378 – 165,282 (2,541)	Machinery RMB’000 1,408 (656) 752 752 319 – (71)	Office equipment RMB’000 20,010 (2,799) 17,211 17,211 653 – (1,652)	Motor vehicles Construction in progress RMB’000 RMB’000 16,281 210 (6,681) – 9,600 210 9,600 210 3,889 544 – – (1,391) –		Total RMB’000 50,499 (13,348
					37,151
					37,151 5,405 165,282 (5,655
172,119	1,000	16,212	12,098	754	202,183

177,872 (5,753)	1,727 (727)	20,663 (4,451)	20,170 (8,072)	754 –	221,186 (19,003
172,119	1,000	16,212	12,098	754	202,183

All property and equipment were carried at cost.

10. Properties under development

At the beginning of year/ period Additions Acquisition of a subsidiary (note 16) Amortisation of land use rights recognised as expenses Transfer to investment properties Transfer to completed properties held for sale Transfer to property and equipment At the period/year end Current assets Non-current assets	Unaudited 30 June 2009 Audited 31 December 2008 RMB’000 RMB’000 2,360,518 2,431,365 111,692 761,397 – 351,106 – (11,296 (102,721) (11,416 (391,128) (988,915 – (171,723 1,978,361 2,360,518	Unaudited 30 June 2009 Audited 31 December 2008 RMB’000 RMB’000 2,360,518 2,431,365 111,692 761,397 – 351,106 – (11,296 (102,721) (11,416 (391,128) (988,915 – (171,723 1,978,361 2,360,518
		2,360,518

	1,005,970 972,391	1,326,318 1,034,200
	1,978,361	2,360,518

The Group’s properties under development were located in Mainland China.

– I-67 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

11. Trade receivables

12. Cash and cash equivalents

Cash and bank balances Time deposits Less: Pledged deposits Cash and cash equivalents	Unaudited 30 June 2009 Audited 31 December 2008 RMB’000 RMB’000 1,639,313 1,652,098 115,000 16,343	Unaudited 30 June 2009 Audited 31 December 2008 RMB’000 RMB’000 1,639,313 1,652,098 115,000 16,343
	1,754,313 (25,844)	1,668,441 (16,343)
	1,728,469	1,652,098

Cash at banks earns interest at floating rates based on daily bank deposit rates. Short term time deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group, and earn interest at the respective short term time deposit rates. The bank balances and time deposits are deposited with creditworthy banks with no recent history of default.

As at 30 June 2009, the deposits of RMB25,844,000 were pledged to banks as guarantees to construction safety and mortgage facilities granted to purchasers of the Group’s properties (2008: RMB16,343,000).

13. Trade payables

An ageing analysis of the trade payables as at the balance sheet date, based on the payment due date, is as follows:

Within six months Over six months but within one year Over one year	Unaudited 30 June 2009 Audited 31 December 2008 RMB’000 RMB’000 217,765 472,654 74,834 2,803 12,442 9,765 305,041 485,222	Unaudited 30 June 2009 Audited 31 December 2008 RMB’000 RMB’000 217,765 472,654 74,834 2,803 12,442 9,765 305,041 485,222
		485,222

The above balances are unsecured and interest-free. The fair values of the trade payables at 30 June 2009 and 31 December 2008 approximate to their corresponding carrying amounts.

– I-68 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

14. Interest-bearing bank and other borrowings

Current: Bank loans – secured Non-current: Bank loans – secured Repayable: Within one year or on demand Over one year but within two years Over two years but within five years Over five years Current liabilities Non-current liabilities	Unaudited 30 June 2009 Audited 31 December 2008 RMB’000 RMB’000 61,920 142,117 676,125 521,789	Unaudited 30 June 2009 Audited 31 December 2008 RMB’000 RMB’000 61,920 142,117 676,125 521,789
		521,789

	61,920 61,625 349,000 265,500	142,117 62,753 217,330 241,706
	738,045 61,920 676,125	663,906

		142,117

		521,789

As at 30 June 2009, all bank borrowings bore interest at floating rates.

The Group’s bank borrowings bore interest at rates ranging from 5.40% to 6.53 % (2008: 5.31% to 8.61%) per annum.

Movement in interest-bearing bank and other borrowings are as follows:

At 1 January Addition Repayment Effect of foreign exchange rate changes	Unaudited For the six months ended 30 June 2009 2008 RMB’000 RMB’000 663,906 1,292,913 200,000 14,100 (125,861) (392,310) – (13,966) 738,045 900,737	Unaudited For the six months ended 30 June 2009 2008 RMB’000 RMB’000 663,906 1,292,913 200,000 14,100 (125,861) (392,310) – (13,966) 738,045 900,737
		900,737

The Group’s bank loans are secured by:

(i) the Group’s investment properties with an aggregate carrying amount of approximately RMB1,058,164,000 (2008: RMB1,134,900,0000) were pledged for bank loans;
(ii) the Group’s properties under development amounting to approximately RMB327,000,000 (2008: 153,798,000) were pledged for bank loans;
(iii) the Group’s properties under the category of property and equipment amounting to approximately RMB153,506,000 (2008: RMB163,872,000) were pledged for bank borrowings; and

– I-69 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The fair values of the interest-bearing bank loans and other borrowings at 30 June 2009 and 31 December 2008 approximate to their corresponding carrying amounts.

15. Share capital

Authorised: 4,000,000,000 ordinary shares of HK$0.10 each Issued and fully paid: 1,942,672,000 ordinary shares of HK$0.10 each	Unaudited 30 June 2009 ’000 HK$400,000 RMB185,339	Audited 31 December 2008 ’000 HK$400,000

		RMB185,339

During the six months ended 30 June 2009, the Company has repurchased nil (corresponding period in 2008: 19,244,000) ordinary shares on the Stock Exchange and nil (corresponding period in 2008: 18,217,000) ordinary shares were cancelled on or before 30 June 2009.

16. Acquisition of a subsidiary

In January 2008, the Group acquired a 100% equity interest of Hangzhou Zheng Jiang Real Estate Development Co., Ltd. (“Zheng Jiang”) from an independent third party at a total cash consideration of RMB361,106,000. Before the acquisition, Zheng Jiang had no business activities. The sole purpose of the acquisition was to acquire a piece of vacant land owned by Zheng Jiang.

The fair values of the identifiable assets and liabilities of Zheng Jiang as at the date of acquisition and the corresponding carrying amounts immediately before the acquisition were:

Fair value recognised on acquisition Note RMB’000 Net assets acquired: Properties under development 10 351,106 Cash and cash equivalents 10,000 361,106 Satisfied by: Prepayments, deposits and other receivables 163,600 Cash 197,506 361,106	Fair value recognised on acquisition Note RMB’000 Net assets acquired: Properties under development 10 351,106 Cash and cash equivalents 10,000 361,106 Satisfied by: Prepayments, deposits and other receivables 163,600 Cash 197,506 361,106	Previous carrying amount RMB’000 120,000 10,000
		130,000

	163,600 197,506
	361,106

– I-70 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

An analysis of the net outflow of cash and cash equivalents in respect of the acquisition of a subsidiary is as follows:

	As at the acquisition date
	RMB’000
Cash consideration paid	(197,506)
Cash and cash equivalents acquired	10,000
Net outflow of cash and cash equivalents
in respect of the acquisition of a subsidiary	(187,506)

The Group did not acquire a subsidiary during the period under review.

17. Related party transactions

In addition to the transactions and balances detailed elsewhere in this interim report, the Group had the following transactions with related parties during the period under review:

Compensation of key management personnel of the Group which comprises Directors was RMB2,196,617 for the six months ended 30 June 2009 (corresponding period in 2008: RMB2,121,007).

18. Capital commitments

The Group had the following commitments for property development expenditure at the balance sheet date:

Contracted, but not provided for: Properties under development Contingent liabilities Guarantees given to banks for: Mortgage facilities granted to purchasers of the Group’s properties	Unaudited 30 June 2009 Audited 31 December 2008 RMB’000 RMB’000 828,475 568,744 Unaudited 30 June 2009 Audited 31 December 2008 RMB’000 RMB’000 24,023 116,295

19. Contingent liabilities

The Group provided guarantees in respect of the mortgage facilities granted by certain banks to the purchasers of the Group’s properties. Pursuant to the terms of the guarantee arrangements, in case of default on mortgage payments by the purchasers, the Group is responsible to repay the outstanding mortgage loans together with any accrued interest and penalty owed by the defaulted purchasers to banks. The Group is then entitled to take over the legal title of the related properties. The Group’s guarantee period commences from the date of grant of the relevant mortgage loan and ends after the execution of individual purchasers’ collateral agreements.

– I-71 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group did not incur any material losses during the period under review in respect of the guarantee provided for mortgage facilities granted to purchasers of the Group’s properties. The Directors consider that in case of default on payments, the net realisable value of the related properties can cover the repayment of the outstanding mortgage loans together with any accrued interest and penalty, and therefore no provision has been made in connection with the guarantees.

20. Post balance sheet events

There are no events to cause material impact on the Group from the balance sheet date to the date of this interim report.

4. ADDITIONAL INFORMATION OF THE GROUP

INDEBTEDNESS, LIQUIDITY AND FINANCIAL RESOURCES

At the close of business on 31 October 2009 (being the latest practicable date for the purpose of this indebtedness statement):

(1) the Group had bank borrowings of approximately RMB62,333,000, which would be due within one year, and the long term bank borrowings of approximately RMB565,134,000; and
(2) the Group had aggregate contingent liabilities of approximate RMB627,028,000 regarding guarantees provided by the Group in respect of the mortgage facilities granted by certain banks and Housing Fund Management Authorities* ( ) to the purchasers of the Group’s properties.

Save as disclosed above and otherwise mentioned herein, and apart from intra-group liabilities, none of the members of the Group had, at the close of business on 31 October 2009, any outstanding mortgages, charges, debenture, loan capital issued and outstanding or agreed to be issued, bank loan and overdraft or other similar indebtedness, finance leases or hire purchase commitments, liabilities under acceptances or acceptance credits or any guarantee or other material contingent liabilities.

WORKING CAPITAL

The Directors, after due and careful consideration, are of the opinion that, in the absence of unforeseen circumstances and based on the present available banking facilities and the internal resources of the Group, the Group will have sufficient working capital for its present requirements for the next 12 months from the date of this circular.

MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2008, being the date to which the latest audited financial statements of the Group were made up.

– I-72 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

FINANCIAL AND TRADING PROSPECTS

For the six months ended 30 June 2009, the Group had achieved unaudited revenue and net profit attributable to Shareholders of RMB330,640,000 and RMB72,647,000 respectively, as compared to those of corresponding period in 2008 of RMB1,288,872,000 and RMB302,758,000 respectively. The reduction is due to the fact that the Group had smaller area of properties sold and delivered, and the average sales price was lower as the majority of the properties sold and delivered derived from Anhui Province during this period under review compared with that of 2008 that mostly derived from Hangzhou. The earnings per share for the six months ended 30 June 2009 was RMB0.04, as compared to that of corresponding period in 2008 of RMB0.15.

The Group’s balance sheet as at 30 June 2009 is very liquid with cash and cash equivalent of RMB1,728,469,000 (31 December 2008: RMB1,652,098,000). As at 30 June 2009, the ratio of total liabilities to total assets of the Group was 36.4% (31 December 2008: 36.1%) and the ratio of bank loans and other borrowings to shareholder’s funds of the Group was 18.6% (31 December 2008: 16.9%). The financial position of the Group as at 30 June 2009 is sound.

In view of the financial crisis in 2008, the scale of the construction had been reduced that affected the saleable gross floor area of the Group in 2009. However, with the recovery of the real estate market, the Group has increased the scale of construction within the first quarter of 2009 so as to lay down the foundation for future stable development of the Group. The Group will remain cautiously optimistic about the real estate market in the PRC. The Group will continue to adopt the low cost strategy and to keep the pace of the existing projects such that we can achieve a quick asset turnover and higher profits. Hence, in the third quarter of 2009, the Group had acquired two plots of land in Qiandao Lake and Hangzhou respectively at the considerations of approximately RMB215 million and RMB550 million to enrich the Group’s landbank and to bring forth development and opportunity for the Group.

The Group will be well positioned for future growth with additional acquisitions in its key focus area and further enhance the Group’s competitive position in the market for the rest of 2009.

– I-73 –

APPENDIX II

VALUATION REPORT

The following is the text of a letter with the summary of values and valuation certificate received from CB Richard Ellis Limited, an independent property valuer, prepared for the purpose of incorporation in the circular in connection with its valuation as at 20 November 2009 on the Land for incorporation in this circular.

==> picture [82 x 47] intentionally omitted <==

34/F Central Plaza 18 Harbour Road Wanchai, Hong Kong T 852 2820 2800 F 852 2810 0830

香港灣仔港灣道十八號中環廣場三十四樓電話 852 2820 2800 傳真 852 2810 0830

21 December 2009

The Board of Directors 996 Xiaoshao Road, Xiaoshan District, Hangzhou, Zhejiang Province, the PRC

Dear Sirs,

In accordance with your instructions for us to value on the Land, we confirm that we have carried out inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the capital value of such property interests as at 20 November 2009 (the “date of valuation”).

Our valuation is our opinion of Market Value which is defined as “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.”

Unless otherwise stated, our valuation is prepared in accordance with the “First Edition of The HKIS Valuation Standards on Properties” published by The Hong Kong Institute of Surveyors (the “HKIS”). We have also complied with all the requirements contained in Paragraph 34(2), (3) of Schedule 3 of the Companies Ordinance (Cap. 32), Chapter 5, Practice Note 12 and Practice Note 16 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

– II-1 –

APPENDIX II

VALUATION REPORT

Our valuation has been made on the assumption that the owner sells the properties on the open market without the benefit or burden of a deferred term contract, leaseback, joint venture, management agreement or any similar arrangement, which would serve to affect the values of the property interests.

Unless otherwise stated, all the property interests are valued by the direct comparison method on the assumption that each property can be sold with the benefit of vacant possession. Comparison is based on prices realized on actual transactions or asking prices of comparable properties. Comparable properties with similar sizes, characters and locations are analyzed, and carefully weighted against all respective advantages and disadvantages of each property in order to arrive at a fair comparison of value.

We have valued the property interests on the basis that the property will be or can be developed and completed in accordance with the Group’s latest development schemes provided to us. We have assumed that approvals from relevant authorities for such schemes have been obtained. In arriving at our opinion of value, we have adopted the direct comparison approach by making reference to comparable sales evidence as available in the relevant market to arrive at the capital value of the property as if the property were completed at the date of valuation and have also taken into account of the development costs to be spent to reflect the quality of the completed development. The “capital value of the property as if completed” represents our opinion of the aggregate selling prices of the property assuming that it would have been completed at the date of valuation.

In the course of our valuation for the property interests in the PRC, we have relied on the legal opinion provided by the Group’s PRC legal adviser, Zhejiang Fajun Law Office (the “PRC Legal Opinion”). We have been provided with extracts from title documents relating to such property interests. We have not, however, searched for the original documents to verify ownership or existence of any amendment which do not appear on the copies handed to us. All documents have been used for reference only.

We have relied to a considerable extent on information given by the Group, in particular, but not limited to, planning approvals, statutory notices, easements, tenancies and floor areas. No on-site measurement has been taken. Dimensions, measurements and areas included in the valuation certificate are only approximations. We have taken every reasonable care in both inspecting the information provided to us and making relevant enquiries. We have no reason to doubt the truth and accuracy of the information provided to us by the Group, which is material to the valuation. We were also advised by the Group that no material facts have been omitted from the information provided to us.

We have inspected the properties to such extent as for the purpose of this valuation. In the course of our inspection, we did not notice any serious defects. However, we have not carried out any structural survey nor any tests were made on the building services. Therefore, we are not able to report whether the properties are free of rot, infestation or any other structural defects. We have not carried out investigations on the site to determine the suitability of the ground conditions and the services etc. for any future development.

– II-2 –

VALUATION REPORT

APPENDIX II

No allowance has been made in our valuation neither for any charges, mortgages or mounts owing on the property interests nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the property interests are free from encumbrances, restrictions and outgoing of an onerous nature which could affect their values.

Unless otherwise stated, all monetary amounts are stated in Renminbi (“RMB”).

We enclose herewith our valuation certificate.

Yours faithfully, For and on behalf of CB Richard Ellis Limited

Leo M Y Lo

MHKIS MRICS Director

Valuation & Advisory Services

Note: Mr. Lo is a member of the Royal Institution of Chartered Surveyors, a member of the Hong Kong Institute of Surveyors. He has over 6 years’ valuation experience in the PRC and Hong Kong.

– II-3 –

VALUATION REPORT

APPENDIX II

VALUATION CERTIFICATE

Property interests contracted to be held by the Group for future development

Property

Description and tenure

Details of occupancy

Capital value in existing state as at 20 November 2009

The property comprises a parcel of land with a total site area of approximately 395,294 sq.m..

A parcel of land, The property comprises a parcel of South of Beihuan land with a total site area of West Road and West approximately 395,294 sq.m.. of Xinjian North Road, Yuyao, Ningbo, As advised by the Group, the total Zhejiang Province, expected gross floor area of the the People’s Republic buildings and structures to be of China constructed on the property is approximately 475,294 sq.m., which includes various villas with a total gross floor area of approximately 63,500 sq.m., various townhouses with a total gross floor area of approximately 65,000 sq.m., various office units with a total gross floor area of approximately 70,000 sq.m., various serviced apartment units with a total gross floor area of approximately 91,240 sq.m., a shopping mall with a total gross floor area of approximately 60,000 sq.m., a five-star hotel of 350 rooms with a total gross floor area of approximately 42,000 sq.m., a club with a total gross floor area of approximately 3,554 sq.m. and underground spaces with a total gross floor area of approximately 80,000 sq.m.

The property is currently vacant.

No Commercial Value

As advised, the proposed development will be completed in 2014.

The land use rights of the property has hold for a State-owned Land Use Rights Listing Notice with various terms of 40 and 70 years respectively for commercial and residential uses.

– II-4 –

VALUATION REPORT

APPENDIX II

Notes:

Pursuant to the following the Bid Confirmations dated 29 October 2009 entered into between Yuyao Bureau of Land and Resources ( ) and the Group, the Group shall purchase the land use rights in respect of the Land at a total consideration of RMB2,075,290,000.

Land No. 1 South of Beihuan West Road and West of Xinjian North Road 2 South of Beihuan West Road and West of Zhongjiang 3 North of Jinxing Road and West of Zhongjiang Total:	Land Area Land Use/Term (sq.m.) 65,159 Commercial: 40 years 132,041 Residential: 70 years 198,094 Residential: 70 years 395,294	Consideration (RMB) 342,090,000 693,210,000 1,039,990,000
		2,075,290,000

As advised by the Group, the Group has not obtained any State-owned Land Use Rights Certificate of the property as at 20 November 2009.
Pursuant to the Land Planning Instruction of the State-owned Land Use Rights ( ) for the property issued by Yuyao Urban Planning Bureau ( ) dated 22

September 2009, the proposed development of the property with a site area of approximately 395,294 sq.m. is limited to the following parameters:

Land No. 1 2, 3 Total	Land Area Usage (sq.m.) 65,159 Commercial 330,135 Residential 395,294	Plot Ratio 2.2-3.0 0.4 1.0	Building Density (%) <=40 <=35 <=35	Green Space Ratio Remarks (%) >=20 The proposed development shall comprise a five-star hotel, a large-scale shopping center and other commercial facility with at least a total gross floor area of 150,000 sq.m. above the ground, in which the five-star hotel with at least 350 rooms; and the shopping mall with at least a total gross floor area of 60,000 sq.m.; 0.8 car parking lot per 100 sq.m. >=30 2 car parking lots per unit >=30

– II-5 –

VALUATION REPORT

APPENDIX II

Pursuant to the State-owned Land Use Rights Listing Notice ( Yuyao Bureau of Land and Resources ( ) dated 27 October 2009, the property with a site area of approximately 395,294 sq.m. is limited to the following parameters:
( ) issued by
) dated 27 October 2009, the development of the

Land No. 1 South of Beihuan West Road and West of Xinjian North Road 2 South of Beihuan West Road and West of Zhongjiang 3 North of Jinxing Road and West of Zhongjiang Total	Land Area (sq.m.) 65,159 132,041 198,094 395,294	Land Use Commercial Residential Residential	Building Density (%) <=40 <=35 <=35 <=35	Green Space Ratio (%) >=20 >=30 >=30 >=30	Remarks Land Lease Term: 40 Years Land Lease Term: 70 Years Land Lease Term: 70 Years
					Plot Ratio: 1.0

For the purpose of this valuation report, we have ascribed no commercial value to the property. Had the Group paid all of the land premium and obtained all the relevant State-owned Land Use Rights Certificate(s) of the property, the capital value of the property as at 20 November 2009 was in the sum of RMB2,142,000,000 (100% interests attributable to the Group: RMB2,142,000,000).
We have been provided with a legal opinion on the property prepared by the Group’s legal adviser which contains, inter alia, the following information:
i. After settlement of the entire land premium according to the Bid Confirmations mentioned above, the Group shall not have any impediment to obtain the State-owned Land Use Rights Certificate of the property.

– II-6 –

GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts, the omission of which would make any statement in this circular misleading.

2. DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES

As at the Latest Practicable Date, the interests and short positions of the Directors or chief executive of the Company in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be: (i) notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO; (ii) recorded in the register required to be kept by the Company under Section 352 of the SFO; or (iii) notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers were as follows:

Long positions in Shares of the Company:

			Approximate
			percentage of the
			Company’s
	Capacity and	Number of	issued share
Name	nature of interest	Shares	capital
Shi Kancheng	Interest of controlled	1,357,300,000	69.87
	corporation (Note)

Note: These Shares are held by Whole Good Management Limited, which is wholly and beneficially owned by Mr Shi Kancheng.

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GENERAL INFORMATION

APPENDIX III

Long positions in underlying shares of the Company

			Approximate
		Number of	percentage of the
		underlying	Company’s
	Capacity and	shares held	issued share
Name	nature of interest	(Note)	capital
Shi Kancheng	Beneficial owner	2,400,000	0.12
Shen Tiaojuan	Beneficial owner	1,200,000	0.06
Zhang Jiangang	Beneficial owner	1,100,000	0.06
Lou Yifei	Beneficial owner	1,100,000	0.06
Loke Yu	Beneficial owner	300,000	0.02
Pei Ker Wei	Beneficial owner	300,000	0.02
Wang Shu Guang	Beneficial owner	300,000	0.02

Note: This represents the number of Shares which will be allotted and issued to the respective Directors upon the exercise of the share options granted to each of them pursuant to the share option scheme adopted by the Company as announced in the announcement of the Company dated 9 July 2009.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and chief executive of the Company had any interests or short positions in the Shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers to be notified to the Company and the Stock Exchange.

3. SUBSTANTIAL SHAREHOLDERS AND OTHER PERSONS WITH INTERESTS IN THE COMPANY WHICH ARE DISCLOSEABLE UNDER SECTION 336 OF PART XV OF THE SFO

As at the Latest Practicable Date, so far as is known to the Directors and chief executive of the Company, the following persons (other than a Director or chief executive of the Company) had or was deemed or taken to have an interest or short position in the Shares or underlying Shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, who was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital

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GENERAL INFORMATION

APPENDIX III

carrying rights to vote in all circumstances at general meetings of the Company, or were required, pursuant to Section 336 of the SFO, to be entered in the register referred to therein:

Long positions in Shares of the Company:

			Approximate
			percentage of
			the Company’s
		Number of	issued share
Name of Shareholder	Capacity	Shares	capital
Whole Good Management	Beneficial owner	1,357,300,000	69.87
Limited (Note)
Atlantis Investment	Investment manager	156,000,000	8.03
Management Limited

Note: The entire issued share capital of Whole Good Management Limited is wholly and beneficially owned by Mr Shi Kancheng. Mr. Shi Kancheng is the sole director of Whole Good Management Limited

Save as disclosed above, as at the Latest Practicable Date, so far as is known to the Directors and chief executive of the Company, there is no other person (other than the Director or chief executive of the Company) who had interests or short positions in the Shares and underlying Shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO; or, had a direct or indirect interests amounting to 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of the Company and/ or any subsidiaries of the Company, or are required, pursuant to Section 336 of the SFO, to be entered in the register referred to therein.

4. LITIGATION

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries was engaged in any litigation or arbitration of material importance and no litigation or claim of material importance is known to the Directors to be pending or threatened by or against the Company or any of its subsidiaries.

5. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had a service contract with the Company which was not determinable by the Company within one year without payment of compensation other than statutory compensation.

– III-3 –

GENERAL INFORMATION

APPENDIX III

6. DIRECTORS’ INTEREST IN ASSETS

None of the Directors has since 31 December 2008, being the date to which the latest published audited accounts of the Company were made up, any direct or indirect interest in any assets which have been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

7. DIRECTORS’ INTEREST IN CONTRACTS

None of the Directors was materially interested in any contract or arrangement subsisting at the Latest Practicable Date, and which was significant in relation to the business of the Group as a whole.

8. COMPETING BUSINESS

As at the Latest Practicable Date, none of the Directors has any business or interest which competes or may compete with the business of the Group and any other conflict of interest which any such person has or may have with the Group.

9. PROFESSIONAL QUALIFICATIONS

The company secretary of the Company is Mr. Lam Yau Yiu. He is a fellow Certified Public Accountant in Hong Kong and a fellow member of the Association of Chartered Certified Accountants.

10. MATERIAL CONTRACTS

Saved as disclosed below, no other contract (not being contracts in the ordinary course of business) had been entered into by any member of the Group within two years immediately preceding the date of this circular and up to the Latest Practicable Date which are or may be material:

(a) the Bid Confirmation;
(b) the agreement dated 15 January 2008 and entered into between Shanghai Ren Hao Gong Yi Pin Co., Ltd. ( ) and Hangzhou Danube Real Estate Co., Ltd. ( ), a subsidiary of the Company, pursuant to which the Group acquired from Shanghai Ren Hao Gong Yi Pin Co., Ltd. ( ), the entire issued share capital of Hangzhou Zheng Jiang Real Estate Development Co., Ltd.* ( ), at the consideration of RMB370,360,000;
(c) the contract for the transfer of the land use right of state-owned land dated 15 October 2009 and entered into between Zhejiang Zhong’an and Yuhang Distric Bureau, Hangzhou Bureau of Land and Resources, Zhejiang Province, the PRC

– III-4 –

GENERAL INFORMATION

APPENDIX III

( ), pursuant to which the Group acquired a piece of land situated at Xiaoheshan area, western part of Hangzhou, Zhejiang Province, the PRC at a consideration of RMB550,000,000.

11. EXPERT AND CONSENT

(a) CB Richard Ellis Limited is a corporation of professional surveyors and property valuers.
(b) CB Richard Ellis Limited has given and has not withdrawn its written consent to the issue of this circular with the reference to its name and its letter and references to its name in the form and context in which it appears.
(c) As at the Latest Practicable Date, CB Richard Ellis Limited did not have any shareholding, directly or indirectly, in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for shares in any member of the Group.
(d) As at the Latest Practicable Date, CB Richard Ellis Limited did not have any interest, direct or indirect, in any assets which since 31 December 2008, the date to which the latest published audited financial statements of the Group were made up, have been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

12. MISCELLANEOUS

(a) The registered office of the Company is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands.
(b) The head office and principal place of business of the Company in Hong Kong is at Unit 2509, 25/F, Harbour Centre, 25 Harbour Road, Wanchai, Hong Kong.
(c) The Hong Kong share registrar and transfer office of the Company is Tricor Investor Services Limited, 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.
(d) In the event of inconsistency, the English text of this circular shall prevail over the Chinese text.

– III-5 –

GENERAL INFORMATION

APPENDIX III

13. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours from 9:00 a.m. to 5:00 p.m. (except Saturdays and public holidays) at the head office and principal place of business of the Company in Hong Kong at Unit 2509, 25/F, Harbour Centre, 25 Harbour Road, Wanchai, Hong Kong from the date of this circular up to and including 4 January 2010:

(a) the memorandum of association and articles of association of the Company;
(b) the annual reports of the Company for the two years ended 31 December 2008;
(c) the letter, valuation certificates and valuation reports relating to the Land, prepared by CB Richard Ellis Limited, the text of which is set out in Appendix II to this circular;
(d) the letter of consent from CB Richard Ellis Limited referred to in the paragraph headed “Expert and Consent” in this appendix; and
(e) a copy of each of the material contracts referred to in the paragraph headed “Material contracts” in this appendix.

– III-6 –

AI assistant

Zhong An Group Limited — Proxy Solicitation & Information Statement 2009

49381_rns_2009-12-21_8ebb6d3e-0c76-4fc5-8733-10aba2d4a896.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

ZHONG AN REAL ESTATE LIMITED

MAJOR TRANSACTION

CONTENTS

DEFINITIONS

DEFINITIONS

ZHONG AN REAL ESTATE LIMITED

To the Shareholders

MAJOR TRANSACTION

1. Background

2. Principal terms of the Bid Confirmation

LETTER FROM THE BOARD

3. Land Transfer Price

4. Reasons for the Transaction

5. Financial Effect of the Transaction

6. Major Transaction

7. Additional information

1. SUMMARY OF FINANCIAL RESULTS

Results

Assets, Liabilities and Minority Interests

2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Income Statement

Consolidated Balance Sheet

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Consolidated Statement of Changes In Equity

Consolidated Cash Flow Statement

Balance Sheet

Notes to Financial Statements

1. Corporate information

2.1 Basis of preparation

APPENDIX I

Basis of consolidation

2.2 Impact of new and revised International Financial Reporting Standards

Amendments to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments: Disclosures – Reclassification of Financial Assets

Amendments to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments: Disclosures – Reclassification of Financial Assets

IFRIC 11 IFRS 2 – Group and Treasury Share Transactions

IFRIC 12 – Service Concession Arrangements

IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

2.3 Impact of issued but not yet effective International Financial Reporting Standards

2.4 Summary of significant accounting policies

Subsidiaries

Goodwill

Excess over the cost of business combinations

Impairment of non-financial assets other than goodwill

APPENDIX I

Related parties

Property and equipment and depreciation

Investment properties

Properties under development

Completed properties held for sale

Operating leases

Investments and other financial assets

Financial assets at fair value through profit or loss

Loans and receivables

Available-for-sale financial assets

APPENDIX I

Fair value

Impairment of financial assets

Assets carried at amortised cost

Assets carried at cost

Available-for-sale financial assets

Derecognition of financial assets

Financial liabilities at amortised cost (including interest-bearing loans and borrowings)

Derecognition of financial liabilities

Inventories

Cash and cash equivalents

Provisions

Employee retirement benefits

Income tax

Government grants

Recognition of revenue

Borrowing costs

Dividends

Foreign currencies

3. Significant accounting judgements and estimates

Judgements

Zhong An Group Limited Proxy Solicitation & Information Statement 2009