Hong Long Holdings Limited (incorporated in the Cayman Islands with limited liability)

Transcription

1 IMPORTANT If you are in any doubt about any contents of this prospectus, you should obtain independent professional advice. Hong Long Holdings Limited (incorporated in the Cayman Islands with limited liability) GLOBAL OFFERING Number of Offer Shares offered pursuant to the Global Offering : 250,000,000 (subject to the Over-allotment Option) Number of Hong Kong Offer Shares : 25,000,000 (subject to re-allocation) Number of International Placing Shares : 225,000,000 (subject to re-allocation and the Over-allotment Option) Maximum Offer Price : Not more than HK$2.06 per Offer Share and not less than HK$1.43 per Offer Share payable in full on application, subject to refund, plus brokerage of 1%, SFC transaction levy of 0.004% and Stock Exchange trading fee of 0.005% Nominal value : HK$0.01 each Stock code : 1383 Sponsor China Everbright Capital Limited Global Coordinator, Sole Bookrunner and Lead Manager China Everbright Securities (HK) Limited The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this prospectus, 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 prospectus. A copy of this prospectus, having attached thereto the documents specified in the section headed Documents delivered to the Registrar of Companies in Hong Kong in Appendix IX to this prospectus, has been registered by the Registrar of Companies in Hong Kong as required by section 342C of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission and the Registrar of Companies in Hong Kong take no responsibility for the contents of this prospectus or any other documents referred to above. The Offer Price is expected to be fixed by agreement among the Global Coordinator (on behalf of the Underwriters) and the Company on the Price Determination Date. The Price Determination Date is expected to be on or around Tuesday, 13 February 2007 and, in any event, not later than Wednesday, 14 February The Offer Price will be not more than HK$2.06 and is currently expected to be not less than HK$1.43 unless otherwise announced. Investors applying for Hong Kong Offer Shares must pay, on application, the maximum Offer Price of HK$2.06 for each Offer Share together with a brokerage of 1%, SFC transaction levy of 0.004% and Stock Exchange trading fee of 0.005%. The Global Coordinator, on behalf of the Underwriters, may, with the consent of the Company, reduce the number of Offer Shares being offered pursuant to the Global Offering and/or the indicative Offer Price range below that stated in this prospectus (which is HK$1.43 to HK$2.06 per Share) at any time on or prior to the morning of the last day for lodging applications under the Hong Kong Public Offer. In such a case, notices of the reduction in the number of Offer Shares and/or the indicative Offer Price range will be published in the South China Morning Post and the Hong Kong Economic Times not later than the morning of the day which is the last day for lodging applications under the Hong Kong Public Offer. If applications for Offer Shares have been submitted prior to the day which is the last day for lodging applications under the Hong Kong Public Offer, then even if the number of Offer Shares and/or the Offer Price range is so reduced, such applications cannot be subsequently withdrawn. If, for any reason, the Offer Price is not agreed among the Company and the Global Coordinator (on behalf of the Underwriters), the Global Offering (including the Hong Kong Public Offer) will not proceed. The obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement to subscribe for, and to procure applicants for the subscription for, the Hong Kong Offer Shares, are subject to termination by the Global Coordinator (on behalf of the Hong Kong Underwriters) if certain grounds arise prior to 8:00 a.m. on the Listing Date. Such grounds are set out in the section entitled Underwriting Underwriting Arrangements and Expenses Grounds for termination of this prospectus. It is important that you refer to that section for further details. 8 February 2007

2 EXPECTED TIMETABLE 2007 (Note 1) Application lists open (Note 2)... 11:45 a.m. on Tuesday, 13 February Latest time for the following: Lodging WHITE and YELLOW Application Forms... Giving electronic application instructions to HKSCC (Note 3)... 12:00 noon on Tuesday, 13 February 12:00 noon on Tuesday, 13 February Application lists close (Note 2)... 12:00 noon on Tuesday, 13 February Price Determination Date (Note 4)... onorabout Tuesday, 13 February Announcement of the Offer Price, the levels of indication of interest in the International Placing, the results of applications in the Hong Kong Public Offer and the basis of allotment of the Hong Kong Offer Shares to be published in the South China Morning Post and the Hong Kong Economic Times on or before... Wednesday, 21 February Share certificates to be despatched on or before (Note 5)... Refund cheques to be despatched on or before (Note 5)... Wednesday, 21 February Wednesday, 21 February Dealings in Shares on the Stock Exchange expected to commence on... Notes: Thursday, 22 February 1. All times refer to Hong Kong local time, except as otherwise stated. Details of the structure of the Global Offering, including its conditions, are set out in the section headed Structure of the Global Offering of this prospectus. 2. If there is a black rainstorm warning or a tropical cyclone warning signal number 8 or above in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Tuesday, 13 February 2007, the application lists will not open and close on that day. Further information is set out in the paragraph headed Effect of bad weather on the opening of the application lists in the section headed How to apply for Hong Kong Offer Shares of this prospectus. 3. Applicants who apply by giving electronic application instructions to HKSCC should refer to the section headed How to apply for Hong Kong Offer Shares Applying by giving electronic application instructions to HKSCC of this prospectus. 4. This is the currently expected Price Determination Date, which in any event will not be later than Wednesday, 14 February If, for any reason, the Offer Price is not agreed by the Company and the Global Coordinator (on behalf of the Underwriters) by Wednesday, 14 February 2007, the Global Offering, including the Hong Kong Public Offer, will not proceed. i

3 EXPECTED TIMETABLE 5. Refund cheques will be issued with respect to wholly or partially unsuccessful applications and also with respect to successful applications in the event that the Offer Price is less than the maximum Offer Price per Share payable on application. Applicants for 1,000,000 Hong Kong Offer Shares or more and who have indicated in their Application Forms that they wish to collect refund cheques and Share certificates (as relevant) personally from the Company s Hong Kong branch share registrar may collect refund cheques (where applicable) and Share certificates (where applicable) from Tricor Investor Services Limited at 26th Floor, Tesbury Centre, 28 Queen s Road East, Hong Kong from 9:00 a.m. to 1:00 p.m. on Wednesday, 21 February 2007 or any other place and date hereafter notified by the Company in the South China Morning Post and the Hong Kong Economics Times as the place and date of despatch of Share certificates/refund cheques. Individual applicants who opt for personal collection must not authorise any other person to make their collection on their behalf. Applicants being corporations which opt for personal collection must attend by their authorized representatives, each bearing a letter of authorization from such corporation stamped with the corporation s chop. Both individuals and authorized representatives (if applicable) must produce, at the time of collection, evidence of identity acceptable to Tricor Investor Services Limited. Uncollected Share certificates and refund cheques will be despatched by ordinary post at the applicants own risk to the addresses specified in the relevant Application Forms promptly thereafter. Further information is set out in the section entitled How to apply for Hong Kong Offer Shares Despatch/collection of Share certificates and refund cheques of this prospectus. Share certificates will only become valid certificates of title if the Hong Kong Public Offer has become unconditional in all respects and the right of termination described in the section entitled Underwriting Underwriting Arrangements and Expenses Grounds for termination has not been exercised, which is currently expected to be at 8:00 a.m. on Thursday 22 February For details of the structure of the Global Offering, including its conditions, you should refer to the section entitled Structure of the Global Offering of this prospectus. ii

4 TABLE OF CONTENTS You should rely only on the information contained in this prospectus and the Application Forms to make your investment decision. The Company has not authorised anyone to provide you with information that is different from what is contained in this prospectus and the Application Forms. Any information or representation not made in this prospectus and the Application Forms must not be relied on by you as having been authorised by the Company, the Global Coordinator, the Sponsor, the Underwriters, any of their respective directors, officers, employees, agents or representatives or any other parties involved in the Global Offering. Page Expected Timetable... Table of Contents... i iii Summary... 1 Definitions Risk Factors Waivers from Strict Compliance with the Listing Rules Information about this Prospectus and the Global Offering Directors and Parties Involved in the Global Offering Corporate Information Industry Overview History and Development Business Pre-IPO Finance Investor Warrant Deed Directors, Senior Management and Staff Substantial Shareholders Relationship with the Controlling Shareholders iii

5 TABLE OF CONTENTS Page Share Capital Financial Information Future Plans and Use of Proceeds Underwriting Structure of the Global Offering How to Apply for Hong Kong Offer Shares Appendix I Accountants Report... I-1 Appendix II Profit Estimate... II-1 Appendix III Unaudited Pro Forma Financial Information... III-1 Appendix IV Property Valuation... IV-1 Appendix V Summary of the Constitution of the Company and Cayman Islands Company Law... V-1 Appendix VI Summary of PRC Rules and Regulations Relating to the Property Sector.... VI-1 Appendix VII Statutory and General Information... VII-1 Appendix VIII Summary of the Notes and the Warrant Deed... VIII-1 Appendix IX Documents Delivered to the Registrar of Companies in Hong Kong and Available for Inspection... IX-1 iv

6 SUMMARY This summary aims to give you an overview of the information contained in this prospectus and should be read in conjunction with the full text of this prospectus. Since this is only a summary, it does not contain all information that may be important to you. You should read the entire prospectus before you decide to invest in the Offer Shares. There are risks associated with any investment. Some of the particular risks in investing in the Offer Shares are set forth in the section headed Risk factors to this prospectus. You should read that section carefully before making any decision to invest in the Offer Shares. OVERVIEW The Group is principally engaged in the property development of mid-range residential and commercial properties in Guangdong Province, the PRC. The Group is also engaged in property leasing of commercial properties. During the Track Record Period, properties developed by the Group included (i) residential properties; (ii) commercial properties including shopping mall and shopping arcade that were complementary with the Group s residential development; and (iii) industrial park, with an aggregate site area and total GFA of approximately 158,980 sq.m. and 506,146 sq.m. respectively. As at the Latest Practicable Date, properties developed or proposed to be developed by the Group included (i) residential; and (ii) commercial (including shopping malls and shopping arcade that are complementary with the Group s residential developments). The Directors expect that the future property development projects of the Group will continue to focus on residential and commercial complex. Over the years, the Group has successfully established its reputation in Shenzhen, the PRC and was accredited with a number of awards. Details of the Group s awards are set out in the sub-section headed Accreditation under the Business section to this prospectus. The target customers of the Group s residential and commercial development properties cover different market segments: (i) residential properties the Group targets middle-class individuals; and (ii) commercial properties the Group targets domestic and foreign reputable retail chains, department stores, supermarkets, as well as enterprises engaging in the businesses of food and beverage, entertainment and beauty. During the Track Record Period, the sale of the Group s developed property constituted approximately 86.5%, 92.9%, 87.5% and 20.6% of the Group s total turnover respectively. During the same period, the Group had commenced the development of a commercial and residential complex in Shenzhen, namely (Hong Long Plaza). Its residential portion comprises approximately 1,500 residential units, and over 1,000 residential units of which were subscribed by purchasers on the first day of pre-sale in October The residential and commercial portions of (Hong Long Plaza) were available for occupation in October 2006 and December 2006 respectively. While the Group expects to continue its principal property development business in Shenzhen with the view of benefiting from the continuous economic growth of the region, the Group also intends to expand the geographical coverage of the Group s business in Guangdong Province and other cities in the southern China, should the appropriate business opportunities arise. As at the Latest Practicable Date, the Group had land reserves comprising six parcels of land in Huizhou and 1

7 SUMMARY one parcel of land in Meizhou, with an aggregate site area and expected total GFA of approximately 529,291 sq.m. and approximately 1,259,045 sq.m. respectively. Both Huizhou and Meizhou are in Guangdong Province. With regard to the property leasing business, the Group primarily leases non-residential properties developed either by itself or by Independent Third Parties in Guangdong Province, the PRC. As a complement to the property leasing business, the Group also provides related management services to its leased properties. During the Track Record Period, the property leasing and related management businesses amounted to approximately 13.5%, 7.1%, 12.5% and 79.4% of the Group s total turnover respectively. As at the Latest Practicable Date, the Group had more than 170 tenants. The following map sets out the locations of the Group s property development projects and land reserves in various parts of Guangdong Province, the PRC as at the Latest Practicable Date: Guangdong Province Meizhou land reserve Huizhou Shenzhen property development land reserve Below are the Group s properties/future development projects located within Shenzhen, Huizhou and Meizhou. Shenzhen Harbor City Hong Long Plaza Huizhou Greenview Garden Mid-level Garden Dynasty Garden Meizhou Bauhinia Garden 2

8 SUMMARY BUSINESS OBJECTIVES AND STRATEGIES The Group s business objectives are to increase its market share and to become one of the leading property developers in Guangdong Province, the PRC and other cities in southern China. The Group will continue to focus on the development of mid-range properties, and intends to pursue new business opportunities and further expand its geographical coverage in Guangdong Province and other cities in southern China. To this end, the Group has been carrying out the following strategies to achieve these objectives: To continue its focus on the development of mid-range residential and commercial properties To further expand the land reserves of the Group To strengthen the related management services in the property leasing business in order to raise the overall market value of the Group s leasing properties With Shenzhen as its base, to further expand the Group s geographical coverage in Guangdong Province and other cities in southern China To emphasize on the design of its property development projects in order to meet the market demand To form long-term strategic partnership with suppliers, contractors and lessees to enhance the Group s competitive advantages COMPETITIVE STRENGTHS The Directors believe that the Group is well-positioned to achieve its business objectives. The Directors consider the principal competitive advantages of the Group to be as follows: The Group differentiates itself from traditional property developers by operating a parallel property leasing business which provides a stable inflow of recurring income, expands customer base and diversifies market risks The Directors and the Group s senior management have extensive knowledge and experience in property development and property leasing businesses in the PRC, particularly southern China The Group has successful track record in developing properties with quality design The Group has established a good reputation in Shenzhen, the PRC 3

9 SUMMARY SUMMARY OF TRACK RECORD PERIOD The following table sets out a summary of the audited consolidated results of the Group during the Track Record Period which has been prepared in accordance with HKFRS issued by the HKICPA together with the unaudited comparative figures for the eight months ended 31 August This summary should be read in conjunction with the Accountants Report as set out in Appendix I to this prospectus. Eight months Years ended 31 December ended 31 August RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 (unaudited) Turnover 65, , ,541 72,019 17,398 Cost of sales (40,639) (133,609) (55,957) (32,725) (7,313) Gross profit 24,921 64,136 92,584 39,294 10,085 Other revenue 597 1,434 3, Selling and distribution expenses (10,762) (906) (10,028) (1,520) (4,398) General and administrative expenses (5,702) (8,061) (9,765) (6,103) (6,580) Other operating expenses (1,260) (2,109) (3,694) (1,638) (1,978) Profit/(loss) from operations 7,794 54,494 72,221 30,774 (2,410) Increase in fair value of investment properties 4, ,250 6,390 6,483 Finance costs (2,409) (2,197) (361) (88) (1,374) Profit before taxation 9,777 53,057 79,110 37,076 2,699 Income tax (4,569) (12,858) (14,814) (6,760) (3,093) Profit/(loss) for the year/ period 5,208 40,199 64,296 30,316 (394) Attributable to: Equity holders of the company 5,072 40,160 63,531 30, Minority interests (30) (472) Profit/(loss) for the year/ period 5,208 40,199 64,296 30,316 (394) Earnings per share (RMB cents)

10 SUMMARY PROFIT ESTIMATE FOR THE YEAR ENDED 31 DECEMBER 2006 Estimated consolidated profit attributable to equity holders before revaluation increase of investment properties net of related deferred tax (1)(4)... notless than RMB210 million (approximately HK$210 million) Pro forma estimated earnings per Share (a) Basic (2)(5)... notless than RMB0.210 (HK$0.210) (b) Fully diluted basis (after taking into account the Pre-IPO Share Options granted) (3)(5)... notless than RMB0.205 (HK$0.205) (c) Weighted average basis (4)(5)... notless than RMB0.282 (HK$0.282) Notes: (1) The bases on which the above estimate has been prepared are set out in Appendix II to this prospectus. (2) The calculation of the pro forma estimated earnings per Share is based on the estimated consolidated profit attributable to equity holders before revaluation increase of investment properties net of related deferred tax for the year ended 31 December 2006 assuming that the Company had been listed since 1 January 2006 and a total of 1,000,000,000 Shares were in issue during the entire year. This calculation assumes that the Over-allotment Option will not be exercised and does not take into account any Shares that may be allotted pursuant to the Pre-IPO Share Options or any options which may be granted under the Share Option Scheme and any Shares which may be allotted and issued or repurchased by the Company pursuant to the Issuing Mandate and the Repurchase Mandate. (3) The Company granted the Pre-IPO Share Options on 31 January Under the terms of the offer letters in relation to the Pre-IPO Share Option, the total number of Shares subject to the Pre-IPO Share Options is 23,000,000 Shares. The calculation of unaudited pro forma estimated earnings per Share is based on the above estimated consolidated profit attributable to the Shareholders (before revaluation increase of investment properties net of related deferred tax) for the year ended 31 December 2006 and assuming that a total of 1,023,000,000 Shares, comprising 1,000,000,000 Shares to be issued immediately after the completion of the Global Offering, the Capitalisation Issue and the conversion of the Convertible Note, and 23,000,000 Shares to be issued pursuant to the exercise of all the Pre-IPO Share Options, have been in issue since 1 January 2006, but without taking into account of any Shares which may be allotted and issued upon the exercise of the Over-allotment Option or any option which may be granted under the Share Option scheme. (4) The calculation of the estimated earnings per Share on a weighted average basis is based on the estimated consolidated profit attributable to equity holders before revaluation increase of investment properties net of related deferred tax for the year ended 31 December 2006 and a weighted average number of approximately 750,000,000 Shares issued and outstanding during the year. This calculation assumes that the Over-allotment Option will not be exercised and does not take into account any Shares that may be allotted pursuant to the Pre-IPO Share Options or any options which may be granted under the Share Option Scheme, any Shares which may be issued pursuant to the Convertible Note and any Shares which may be allotted and issued or repurchased by the Company pursuant to the Issuing Mandate and the Repurchase Mandate. (5) The estimated profit figure and estimated earnings per Share figure are converted into Hong Kong dollars at the rate of RMB1=HK$1 for illustration purposes. 5

11 SUMMARY GLOBAL OFFERING STATISTICS Based on an Offer Price per Share of HK$1.43 Market capitalisation of the Shares (1)... approximately HK$1,430 million Based on an Offer Price per Share of HK$2.06 approximately HK$2,060 million Prospective price/earnings multiple before revaluation of investment properties (a) Basic (2) times 9.8 times (b) Pro forma fully diluted basis (3) times 10.0 times (c) Weighted average basis (4) times 7.3 times Adjusted net tangible asset value per Share (5)... HK$0.45 HK$0.60 Notes: (1) The calculation of market capitalisation is based on 1,000,000,000 Shares expected to be in issue following the Global Offering, the Capitalisation Issue and conversion of the Convertible Note, assuming that the Over-allotment Option is not exercised and without taking into account any Shares which may be allotted pursuant to Pre-IPO Share Options or any options which may be granted under the Share Option Scheme or any Shares which may be allotted and issued or repurchased by the Company pursuant to the Issuing Mandate and the Repurchase Mandate. (2) The calculation of the basic prospective price/earnings multiple is based on the basic estimated earnings per Share at the respective Offer Price of HK$1.43 and HK$2.06 per Share assuming that the Over-allotment Option is not exercised and without taking into account any Pre-IPO Share Options or any options which may be granted under the Share Option Scheme or any Shares which may be allotted and issued or repurchased by the Company pursuant to the Issuing Mandate and the Repurchase Mandate. (3) The calculation of the prospective price/earnings multiple on a pro forma fully diluted basis is based on the estimated earnings per Share on a pro forma fully diluted basis at the respective Offer Price of HK$1.43 and HK$2.06 per Share assuming that the Pre-IPO Options have been exercised in full, the Over-allotment Option is not exercised and without taking into account any other options which may be granted under the Share Option Scheme or any Shares which may be issued pursuant to the Convertible Note or any Shares which may be allotted and issued or repurchased by the Company pursuant to the Issuing Mandate and the Repurchase Mandate. (4) The calculation of the prospective price/earnings multiple on a weighted average basis is based on the above estimated earnings per Share on a weighted average basis at the respective offer price of HK$1.43 and HK$2.06 per Share assuming that the Over-allotment Option is not exercised and without taking into account any Shares which may be allotted pursuant to the Pre-IPO Share Options on any options which may be granted under the Share Option Scheme or any Shares which may be issued pursuant to the Convertible Note or any Shares which may be allotted and issued or repurchased by the Company pursuant to the Issuing Mandate and the Repurchase Mandate. (5) The adjusted net tangible asset value per Share is based on 1,000,000,000 Shares expected to be in issue following the Global Offering, the Capitalisation Issue and conversion of the Convertible Note assuming that the Over-allotment Options is not exercised and without taking into account any Shares which may be allotted pursuant to the Pre-IPO Share Options or any options which may be granted under the Share Option Scheme or any Shares which may be allotted and issued or repurchased by the Company pursuant to the Issuing Mandate and the Repurchase Mandate. 6

12 SUMMARY If the Over-allotment Option is exercised in full, the adjusted net tangible asset value per Share will be approximately HK$0.45 per Share (based on an Offer Price of HK$1.43 per Share) or approximately HK$0.60 per Share (based on an Offer Price of HK$2.06 per Share), while the earnings per Share on a pro forma fully diluted basis will be diluted to approximately HK$0.198 per Share. The Directors believe that this will not have any material effect on the Shareholders. DIVIDENDS The Company had not declared or paid any dividends during the Track Record Period and for the financial year ended 31 December The Company intends to pay dividends of approximately 25% to 30% of the consolidated profit attributable to Shareholders beginning from the financial year ending 31 December In the future, the Company will re-evaluate its dividend policy in light of the Group s financial position and the prevailing economic climate. However, the declaration of dividend is subject to the recommendation of the Directors and any final dividend to be declared is subject to Shareholders approval. The amount of dividends actually proposed to Shareholders will depend upon a number of factors, including the Group s earnings, the Group s general financial conditions, cash requirements and availability, the provisions of relevant laws and other factors considered relevant by the Directors. REASONS FOR THE GLOBAL OFFERING AND USE OF PROCEEDS The Listing is expected to increase the Group s exposure to international investors. The Directors expect that the levels of accountability and transparency to which the Group will be subject after the Global Offering will improve its corporate governance, increase customer confidence and awareness in its projects and therefore strengthen its brand name. In addition, with the additional capital raised from the Global Offering, the Directors believe that the Group will be in a better position to capture a larger market share for its property development and property leasing businesses in the PRC. Assuming an Offer Price of HK$1.75 per Share (being the midpoint of the stated Offer Price range of HK$1.43 to HK$2.06 per Share), the net proceeds of the Global Offering, after deducting the underwriting fees and estimated expenses payable by the Company in connection with the Global Offering, are estimated to be approximately HK$400 million. The Directors at present intend to apply the net proceeds as follows: approximately HK$160 million to finance the expansion of land reserves in the PRC (mainly in Guangdong Province and other cities in southern China); approximately HK$90 million to finance the development project of Greenview Garden ( ) in Huizhou; approximately HK$80 million to finance the development project of Shenzhen Yinghua in Baoan District, Shenzhen; 7

13 SUMMARY approximately HK$63 million to repay part of the Loan Note. For details of the Loan Note, please refer to the paragraph headed Loan Note under the section headed Pre-IPO Finance Investor of this prospectus; and the balance of approximately HK$7 million as additional general working capital of the Group. In the event that the Offer Price is determined at the highest end of the indicative Offer Price range between HK$1.43 to HK$2.06 per share, the net proceeds from the Global Offering will be approximately HK$478 million. In such case, the net proceeds from the Global Offering for the expansion of land reserves in the PRC, the development project of Shenzhen Yinghua in Baoan District and the general working capital will be increased to approximately HK$200 million, HK$90 million and HK$35 million respectively. Save for the above changes, there will not be any further changes in the use of proceeds from the Global Offering under such circumstance. In the event that the Offer Price is determined at the lowest end of the indicative Offer Price range between HK$1.43 to HK$2.06 per Share, the net proceeds from the Global Offering will be approximately HK$325 million. In such case, the net proceeds from the Global Offering for the expansion of land reserves in the PRC, the development project of Greenview Garden ( ) in Huizhou and the development project of Yinghua project in Baoan District decreased to approximately HK$115 million, HK$70 million and HK$70 million respectively. Save for the above changes, there will not be any further changes in the use of proceeds from Global Offering under such circumstance. Should the Over-allotment Option be exercised in full, the Company will receive additional net proceeds of approximately HK$60 million. The Directors intend to use approximately HK$50 million to finance the expansion of land reserves and approximately HK$10 million as additional general working capital of the Group. To the extent that the net proceeds of the Global Offering are not immediately used for the above purposes, it is the present intention of the Directors that such proceeds will be placed on short term deposits with licensed banks and/or authorised financial institutions in Hong Kong and/or the PRC. 8

14 SUMMARY RISK FACTORS The Directors consider that there are certain risks involved in the Group s businesses and the details of such risks are set out in the section headed Risk factors to this prospectus. The risks can be broadly divided into six main categories including (i) risks relating to the Group; (ii) risk relating to the pre-ipo financing; (iii) risks relating to the property industry in the PRC; (iv) risks relating to the PRC; (v) risks relating to the Global Offering; and (vi) risks relating to statements made in this prospectus, which are summarised below: Risks relating to the Group The Group relies on the performance of the property market in Guangdong Province, the PRC The Group does not have insurance or its insurance may not be sufficient to cover potential losses and claims The Group may be subject to legal and business risks if it fails to obtain or renew the qualification certificates The Group may encounter difficulties or disputes relating to the non-wholly owned subsidiaries of the Group and their other shareholders Completion of the legal procedure for the transfer of 49% interest in Huizhou Yintaida requires third party cooperation and may take time The Group provides mortgage loans guarantee to its property buyers and may become liable to mortgagee banks if its property buyers default on their mortgage payments The Group may not be able to realise its future development plans in accordance with its planned timetable The Group has not obtained valid realty title certificates to certain properties that it owns, leases or occupies The Group may be liable to property buyers for damages if it does not deliver individual property ownership certificates in a timely manner The Group may not have adequate resources to fund land acquisitions or property developments, or to secure the Group s financing obligations The Group may not be able to obtain sites that are suitable for property developments Limitation of property valuation assumptions may affect the actual value of the Group s properties 9

15 SUMMARY Reliance on several independent contractors may affect the Group s development projects The relevant PRC tax authorities may challenge the basis on which the Group calculated its LAT obligations The Group s operations are dependent on the knowledge and experience of its key management personnel The Group faces fluctuations in fair value adjustments on investment properties The Group may face risks relating to pre-sale of properties The Group has limited experience in property development in new markets The Group recorded net current liabilities during each of the Track Record Period The Group is substantially supported by the rental income generated from its property leasing business before the period when its property development project is completed Certain properties of the Group pledged to the banks pursuant to certain pledge agreements entered into by the Group may be foreclosed if there is any non-compliance of the terms under these pledge agreements and the loan agreements in respect of which these pledge agreements were entered into The Group is impacted by the property leasing market Uncertainty exists for the Group s future developments, namely Longhua project and Yinghua project, to obtain the relevant land use rights certificates The Group may be subject to penalty in respect of its loans to Shenzhen Xingjida Instability in profit generating ability in the future Risk relating to the pre-ipo financing There will be a change in shareholding in Access Achievement and Hong Long Shenzhen if the Access Achievement Share Charge B and the HLSZ Equity Charges are enforced Risks relating to the property industry in the PRC The PRC government may adopt measures to curtail the overheating of the property sector Real estate development in the PRC is still at an early stage and lacks adequate infrastructural support 10

16 SUMMARY The Group faces intense competition Potential liability for environmental issues may affect the Group s business PRC rules and regulations involves uncertainty Risks relating to the PRC PRC political and economic policies could affect the Group s business Foreign exchange control and currency conversion may affect the Group s operations and financial conditions as well as the value of the Shares Risks relating to the Global Offering There has been no prior public market for the Shares and the liquidity and market price of the Shares may be volatile The subscribers of the Shares may experience immediate dilution and may experience further dilution if the Group issues additional Shares in the future The Shareholders interest in the Company will be diluted upon exercise of the Pre-IPO Share Options and issuance of additional Shares Risks relating to statements made in this prospectus Certain facts and statistics included in this prospectus may not be relied upon Forward looking statements may be inaccurate PRE-IPO SHARE OPTIONS The Company has conditionally granted an aggregate of ten Pre-IPO Share Options. A summary of the principal conditions attached to the Pre-IPO Share Options is set out in the section headed Pre-IPO Share Options in Appendix VII to this prospectus. The purpose of the Pre-IPO Share Options is to recognise the contributions made by certain employees of the Group towards its growth and success. As at the Latest Practicable Date, a total of ten Pre-IPO Share Options were granted to ten employees of the Group, giving a right to these grantees to subscribe for Shares at HK$0.6 per Share during the period from the expiry of six months from the Listing Date to five years from the Listing Date. The exercise of the Pre-IPO Share Options would entitle the grantees to an aggregate of 23,000,000 Shares, representing approximately 2.3% of the entire issued share capital of the Company immediately following the Global Offering, the Capitalisation Issue and the conversion of the Convertible Note assuming the Over-allotment Option, all Pre-IPO Share Options, and any options that may be granted under the Share Option Scheme are not exercised. 11

17 DEFINITIONS In this prospectus, unless the context otherwise requires, the following terms and expressions shall have the following meanings: Access Achievement Access Achievement Limited, a limited liability company incorporated on 2 December 2005 under the laws of the BVI Access Achievement Release A Access Achievement Release B Access Achievement Share Charge A Access Achievement Share Charge B Application Form(s) Articles or Articles of Association associate(s) the deed of release dated 31 January 2007 executed by (Mr. Zeng Sheng), (Mr. Zeng Yunshu) and LBCCA whereby LBCCA released and discharged the Access Achievement Share Charge A the deed of release dated 31 January 2007 executed by the Company and LBCCA whereby LBCCA agreed to release and discharge 71% of issued share capital of Access Achievement from the charge over 100% of the issued share capital of Access Achievement under the Access Achievement Share Charge B upon the Listing and upon the partial repayment of the Loan Note to the extent of US$8,000,000 the deed of charge dated 5 October 2006 executed by (Mr. Zeng Sheng) and (Mr. Zeng Yunshu) in favour of LBCCA charging all the shares in the issued capital of Access Achievement beneficially owned by (Mr. Zeng Sheng) and (Mr. Zeng Yunshu) for securing the performance of the obligations by Access Achievement under the Convertible Note and the Loan Note the deed of charge dated 31 January 2007 executed by the Company in favour of LBCCA charging all shares in the issued capital of Access Achievement beneficially owned by the Company securing the performance of the obligations by the Company and Access Achievement under the Convertible Note and the Loan Note WHITE application form(s) and YELLOW application form(s) relating to the Hong Kong Public Offer, or where the context so requires, any of them the articles of association of the Company, adopted on 31 January 2007, a summary of certain provisions of which is set out in Appendix V to this prospectus has the meaning ascribed to it under the Listing Rules 12

18 DEFINITIONS Baoan Zhongzi (Shenzhen Baoan Zhongzi Company Limited), a limited liability company established in the PRC which owns approximately 14.29% equity interest in Shenzhen Yinghua Beijing Tianbao (Beijing Tianbao Hualong Technology Company Limited), a limited liability company established in the PRC and a former shareholder of Huizhou Yintaida Beijing Yintaida (Beijing Yintaida Technology Development Company Limited), a limited liability company established in the PRC, which owns 49% equity interest in Huizhou Yintaida Beijing Yuanwang (Beijing Yuanwang Information Engineering Company Limited), a limited liability company established in the PRC and a former shareholder of Huizhou Yintaida Board the board of Directors business day any day (other than a Saturday, Sunday or public holiday) on which banks are generally open for business in Hong Kong BVI CAGR Capitalisation Issue CCASS CCASS Broker Participant the British Virgin Islands compound annual growth rate the issue of Shares to be made upon capitalisation of part of the share premium account of the Company upon completion of the Global Offering referred to in the paragraph headed Written resolutions of all the Shareholders passed on 31 January 2007 in Appendix VII to this prospectus the Central Clearing and Settlement System established and operated by HKSCC a person admitted to participate in CCASS as a broker participant CCASS Custodian Participant a person admitted to participate in CCASS as a custodian participant 13

19 DEFINITIONS CCASS Investor Participant a person admitted to participate in CCASS as an investor participant who may be an individual or joint individuals or a corporation CCASS Participant a CCASS Broker Participant, a CCASS Custodian Participant or a CCASS Investor Participant chief executive the chief executive (as defined in the SFO) of the Company China Everbright or Sponsor China Everbright Capital Limited, a licensed corporation under the SFO to engage in type 1 (dealing in securities), type 4 (advising on securities) and type 6 (advising on corporate finance) activities China Everbright Securities or Global Coordinator or Bookrunner or Lead Manager Companies Law Companies Ordinance China Everbright Securities (HK) Limited, a licensed corporation under the SFO to engage in type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (advising on asset management) activities the Companies Law, Chapter 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) as amended, supplemented or otherwise modified from time to time Company or Hong Long Hong Long Holdings Limited ( ), an exempted company incorporated in the Cayman Islands with limited liability on 20 July 2006 Completed Properties Controlling Shareholder(s) represents properties for which construction work have completed and which are available for occupation has the meaning ascribed to it under the Listing Rules and, in the case of the Company, means Grand Prosperity, (Mr. Zeng Sheng) and (Mr. Zeng Yunshu), individually and as a group of persons Convertible Note the secured zero coupon convertible note dated 5 October 2006 in the principal amount of US$8,000,000 issued by Access Achievement pursuant to the Subscription Agreement and as amended by the Novation Deed 14

20 DEFINITIONS Deed of Non-competition the deed of non-competition entered into by the Controlling Shareholders in favour of the Company, the details of which are set out in the paragraph headed Non-competition undertakings in the section headed Relationship with the Controlling Shareholders of this prospectus Deposit Charge Director(s) the deed of charge dated 4 October 2006 executed by Access Achievement in favour of LBCCA creating a first fixed legal charge over the balance from time to time standing to the credit of the US dollar current and savings accounts opened and maintained by Access Achievement in its own name with The Hongkong and Shanghai Banking Corporation Limited, as amended by a supplemental agreement thereto dated 31 January 2007, securing the performance of the obligations by the Company and Access Achievement under the Convertible Note and the Loan Note the director(s) of the Company Fee Letters a letter dated 4 October 2006 between Lehman Brothers Asia Limited and Access Achievement in respect of the arrangement fee paid by Access Achievement to Lehman Brothers Asia Limited pursuant to the Subscription Agreement; and a letter dated 4 October 2006 between LBCCA and Access Achievement in respect of the upfront fee paid by Access Achievement to LBCCA pursuant to the Subscription Agreement GDP GFA gross domestic product gross floor area Global Offering the Hong Kong Public Offer and the International Placing Grand Prosperity Group, we and us Grand Prosperity Limited, a limited liability company incorporated on 17 July 2006 under the laws of BVI which is owned as to 80% by (Mr. Zeng Sheng) and 20% by (Mr. Zeng Yunshu) the Company and its subsidiaries, or, where the context so requires, in respect of the period before the Company became the holding company of its present subsidiaries, the present subsidiaries of the Company and the business operated by such subsidiaries 15

21 DEFINITIONS Guarantee HK$ and HK cents the deed of joint and several guarantee and indemnity dated 5 October 2006 executed by (Mr. Zeng Sheng) and (Mr. Zeng Yunshu) in favour of LBCCA, as amended and supplemented by a supplemental agreement thereto dated 31 January 2007, whereby (Mr. Zeng Sheng) and (Mr. Zeng Yunshu) agreed to guarantee the performance of the obligations by the Company and Access Achievement under the Convertible Note and the Loan Note Hong Kong dollars and cents, respectively, the lawful currency of Hong Kong HKAS Hong Kong Accounting Standards issued by the HKICPA HKFRS HKICPA HKSCC HKSCC Nominees HLSZ Equity Charges HLSZ Equity Charge A HLSZ Equity Charge B Hong Kong Financial Reporting Standards issued by the HKICPA Hong Kong Institute of Certified Public Accountants Hong Kong Securities Clearing Company Limited HKSCC Nominees Limited HLSZ Equity Charge A and HLSZ Equity Charge B collectively the deed of charge dated 25 September 2006 executed by Access Achievement in favour of LBCCA charging the paid up registered capital in Hong Long Shenzhen in the amount of RMB25,000,000, as supplemented and amended by a side letter dated 29 September 2006 from LBCCA to Access Achievement the deed of charge dated 19 October 2006 executed by Access Achievement in favour of LBCCA charging the paid up registered capital in Hong Long Shenzhen in the amount of RMB63,600,000 16

22 DEFINITIONS HLSZ Release Hong Kong the deed of release dated 31 January 2007 executed between Access Achievement and LBCCA whereby LBCCA agreed to release and discharge 71.78% of the paid up registered capital of Hong Long Shenzhen from the charge under over 100% of the paid up registered capital under the HLSZ Equity Charges upon the Listing and upon the partial repayment of the Loan Note to the extent of US$8,000,000 the Hong Kong Special Administrative Region of the PRC Hong Kong Offer Shares the 25,000,000 Offer Shares initially offered for subscription under the Hong Kong Public Offer, representing 10% of the initial number of the Offer Shares, subject to the re-allocation as described in the section headed Structure of the Global Offering of this prospectus Hong Kong Public Offer the offer of the Hong Kong Offer Shares for subscription by the members of the public in Hong Kong (subject to re-allocation as described in the section headed Structure of the Global Offering of this prospectus) for cash at the Offer Price, payable in full on application, and subject to the terms and conditions stated in this prospectus and the Application Forms Hong Kong Underwriters Hong Kong Underwriting Agreement the underwriters of the Hong Kong Public Offer listed in the section Underwriting Hong Kong Underwriters of this prospectus the conditional Hong Kong Public Offer underwriting agreement dated 7 February 2007 entered into between, among others, the Company and the Hong Kong Underwriters relating to the Hong Kong Public Offer, particulars of which are summarised in the section headed Underwriting of this prospectus 17

23 DEFINITIONS Hong Long Commercial (Shenzhen Hong Long Commercial Management Company Limited), a limited liability company established in the PRC on 18 February 2001, formerly known as (Shenzhen Baorun Decoration Materials Company Limited), being a non-wholly owned subsidiary of the Company which is owned as to approximately 93.63% by Hong Long Shenzhen, approximately 4.21% by (Ms. Ouyang Wanqiong) and approximately 2.16% by (Mr. Bu Jie) Hong Long Commercial Development (Shenzhen Hong Long Commercial Development Company Limited), a limited liability company established in the PRC on 8 December 1999 (formerly known as (Shenzhen Hong Long Commercial Apartment Company Limited)), a former shareholder of Hong Long Shenzhen Hong Long Shenzhen (Hong Long Properties (Shenzhen) Company Limited) (formerly known as (Shenzhen Hong Long Industrial Company Limited)), a limited liability company established in the PRC on 28 September 2000 and a wholly-owned subsidiary of the Company Hua Tie Property (Hua Tie Property Company), a company established in the PRC and a former shareholder of Shenzhen Yinghua Hua Tie Shenzhen (Hua Tie Property (Shenzhen) Company), a company established in the PRC and a former shareholder of Shenzhen Yinghua Huizhou Yintaida Independent Third Parties (Huizhou Yintaida Company Limited), a limited liability company established in the PRC on 23 December 2002, being a non-wholly owned subsidiary of the Company which is owned as to 51% by Hong Long Shenzhen and 49% by Beijing Yintaida persons or companies which are independent of and not connected with any of the directors, chief executive, Substantial Shareholders of the Company or any of its subsidiaries and their respective associates, and Independent Third Party means any of them 18

24 DEFINITIONS International Placing the conditional placing of the International Placing Shares at the Offer Price to selected professional, institutional and private investors as set out under the section headed Structure of the Global Offering of this prospectus International Placing Shares International Underwriters International Underwriting Agreement the 225,000,000 Offer Shares expected to be initially offered for subscription pursuant to the International Placing, representing 90% of the initial number of the Offer Shares, subject to re-allocation and the Over-Allotment Option as described in the section headed Structure of the Global Offering of this prospectus the underwriters of the International Placing, who are expected to enter into the International Underwriting Agreement to underwrite the International Placing the conditional international placing underwriting agreement relating to the International Placing and expected to be entered into by, among others, the Company and the International Placing Underwriters on or about the Price Determination Date Issuing Mandate the general unconditional mandate given to the Directors by the Shareholders relating to the issue of new Shares, particulars of which are set forth in the paragraph headed Written resolutions of all the Shareholders passed on 31 January 2007 in Appendix VII to this prospectus LAT (Land Appreciation Tax) as defined in (PRC Provisional Regulations on Land Appreciation Tax) of 1994 and its implementation rules Latest Practicable Date 31 January 2007, being the latest practicable date prior to the printing of this prospectus for ascertaining certain information contained herein 19

25 DEFINITIONS LBCCA Lehman Brothers Commercial Corporation Asia Limited, a company incorporated in Hong Kong and is 100% owned by its ultimate parent Lehman Brothers Holdings Inc ( Lehman Brothers ). Lehman Brothers, an innovator in global finance, serves the financial needs of corporations, governments and municipalities, institutional clients, and high net worth individuals worldwide. Founded in 1850, Lehman Brothers maintains leadership positions in equity and fixed income sales, trading and research, investment banking, private investment management, asset management and private equity. Lehman Brothers is headquartered in New York, with regional headquarters in London and Tokyo, and operates in a network of offices around the world. Listco Share Charge Listing Listing Date Listing Rules Loan Note Longhua project the deed of charge dated 31 January 2007 executed by Grand Prosperity in favour of LBCCA charging all the Shares beneficially owned by Grand Prosperity prior to the Global Offering the listing of the Shares on the Main Board the date on which dealings of the Shares on the Main Board of the Stock Exchange first commence, which is currently expected to be on 22 February 2007 the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited the secured zero coupon loan note dated 5 October 2006 in the principal amount of US$17,000,000 issued by Access Achievement pursuant to the Subscription Agreement and as amended by the Novation Deed a future property development project of the Group, details of which are set out in the sub-paragraph headed Projects where agreements have been signed pending completion of the relevant procedures in the section headed Business of this prospectus Main Board the stock exchange (excluding the option markets) operated by the Stock Exchange which is independent from and operated in parallel with the Growth Enterprise Market of the Stock Exchange 20

26 DEFINITIONS Ministry of Finance (Ministry of Finance of the PRC), the regulatory authority responsible for the supervision and regulation of financial activities in the PRC Ministry of Land and Resources (Ministry of Land and Resources of the PRC) Notes Novation Deed the Convertible Note and the Loan Note collectively the deed of novation dated 31 January 2007 executed by Access Achievement, the Company and LBCCA whereby, amongst other terms, the rights and obligations of Access Achievement under the Convertible Note and the Loan Note shall be performed, discharged and observed by the Company while at the same time all obligations and liabilities of Access Achievement under the Convertible Note and the Loan Note (to the extent capable of being performed by Access Achievement) shall continue and subsist Offer Price the final price per Share in Hong Kong dollars (exclusive of brokerage, SFC transaction levy, and the Stock Exchange trading fee) at which the Offer Shares are to be subscribed for and issued pursuant to the Global Offering, to be determined as further described in the section entitled Structure of the Global Offering Pricing of the Global Offering of this prospectus Offer Shares the Hong Kong Offer Shares and the International Offer Shares together, where relevant, with any additional Shares issued pursuant to the exercise of the Over-allotment Option 21

27 DEFINITIONS Over-allotment Option PRC or China the option expected to be granted by the Company to the Global Coordinator (for itself and on behalf of the International Underwriters), exercisable at any time from the Listing Date until 30 days after the last date for the lodging of applications under the Hong Kong Public Offer, to require the Company to allot and issue up to an aggregate of 37,500,000 additional new Shares representing 15% of the initial Offer Shares, at the Offer Price per Share to cover, among other things, over-allocations in the International Placing, if any the People s Republic of China which, for the purpose of this prospectus, excludes Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan PRC Legal Adviser Zhong Lun Law Firm, the legal adviser to the Company as to PRC laws Pre-IPO Share Options Price Determination Agreement the options granted by the Company to ten employees of the Group prior to the Listing Date, as described in the section headed Pre-IPO Share Options in Appendix VII to this prospectus the agreement expected to be entered into between the Company and the Global Coordinator (for itself and on behalf of the Underwriters) on or before the Price Determination Date to record the agreement on the Offer Price Price Determination Date the date, expected to be on or around 13 February 2007 (or such later date as may be agreed between the Global Coordinator (for itself and on behalf of the Underwriters) and the Company), on which the Offer Price is fixed for the purpose of the Global Offering and in any event no later than 14 February 2007 Reorganisation Repurchase Mandate the corporate reorganisation of the Group in preparation for the Listing, particulars of which are set out in the sub-paragraph headed Corporate reorganisation under the paragraph headed Further information about the Company in Appendix VII to this prospectus the general unconditional mandate to repurchase Shares given to the Directors by the Shareholders, particulars of which are set forth in the paragraph headed Written resolutions of all the Shareholders passed on 31 January 2007 in Appendix VII to this prospectus 22

28 DEFINITIONS RMB Renminbi, the lawful currency of the PRC SAFE (the State Administration of Foreign Exchange of the PRC) SAIC (Shenzhen Administration for Industry and Commerce), the regulatory authority responsible for the supervision and regulation of the industrial and commercial activities in Shenzhen, the PRC Security SFC SFO Share(s) Shareholder(s) Share Option Scheme the security to secure the performance of obligations by the Company and Access Achievement under the Convertible Note and the Loan Note as set out in the paragraph headed Security under the section Pre-IPO Finance Investor in this prospectus the Securities and Futures Commission of Hong Kong the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) as amended, supplemented or otherwise modified from time to time ordinary share(s) with nominal value of HK$0.01 each in the share capital of the Company holder(s) of the Shares the share option scheme conditionally adopted by the Company on 31 January 2007, the principal terms of which are set out in the paragraph headed Share Option Scheme in Appendix VII to this prospectus Shenzhen Cairun (Shenzhen Cairun Property Development Company Limited), a limited liability company established in the PRC on 22 March 1993 and a former shareholder of Hong Long Shenzhen Shenzhen Jing Peng Lian (Shenzhen Jing Peng Lian Development Company Limited), a limited liability company established in the PRC on 28 July 1995 and a former shareholder of Huizhou Yintaida Shenzhen Li Feng Tong (Shenzhen Li Feng Tong Investment Company Limited), a limited liability company established in the PRC on 28 April 1997 and a former shareholder of Hong Long Shenzhen 23

29 DEFINITIONS Shenzhen Runda (Shenzhen Runda Trading Services Company), a company established in the PRC on 1 April 1993 and a former shareholder of Hong Long Commercial Shenzhen Xingjida (Shenzhen Xingjida Industrial Development Company Limited), a limited liability company established in the PRC on 3 July 2000 and a former shareholder of Hong Long Commercial Shenzhen Yinghua (Shenzhen Yinghua Development Company Limited), a limited liability company established in the PRC on 6 May 1998, being a non-wholly owned subsidiary of the Company which is owned as to approximately 85.71% by Hong Long Shenzhen and approximately 14.29% by Baoan Zhongzi SLTB sq.ft. Shenzhen Local Tax Bureau square feet Stock Borrowing Agreement the stock borrowing agreement dated 7 February 2007 entered into between China Everbright Securities and Grand Prosperity pursuant to which China Everbright Securities may borrow up to 37,500,000 Shares from Grand Prosperity Stock Exchange The Stock Exchange of Hong Kong Limited Subscription Agreement the subscription agreement dated 4 October 2006 entered into between Access Achievement and LBCCA pursuant to which Access Achievement agreed to issue, and LBCCA subscribe for, the Convertible Note and the Loan Note, as amended by a supplemental agreement thereto dated 31 January 2007 subsidiary(ies) Substantial Shareholder(s) has the meaning ascribed to it under section 2 of the Companies Ordinance has the meaning ascribed to it under the Listing Rules and in the context of the Company, means Grand Prosperity, (Mr. Zeng Sheng) and (Mr. Zeng Yunshu) 24

30 DEFINITIONS Supplemental Warrant Deed the supplemental deed to the Warrant Deed dated 31 January 2007 executed by Grand Prosperity as grantor, (Mr. Zeng Sheng) and (Mr. Zeng Yunshu) as guarantors, and LBCCA as grantee and the Company amending and supplementing the Warrant Deed Track Record Period the three financial years ended 31 December 2005 and the eight months ended 31 August 2006 Underwriters collectively, the Hong Kong Underwriters and the International Underwriters Underwriting Agreements the Hong Kong Underwriting Agreement and the International Underwriting Agreement US$ and US cents Warrant Warrant Deed WFOE Xingning Zhonglian Yinhua project United States dollars and cents, respectively, the lawful currency of the United States of America the warrant granted by Grand Prosperity to LBCCA under the Warrant Deed the warrant deed dated 5 October 2006 executed by Grand Prosperity as grantor, (Mr. Zeng Sheng) and (Mr. Zeng Yunshu) as guarantors and LBCCA as grantee for the grant by Grand Prosperity to LBCCA of a warrant conferring rights on LBCCA to purchase certain Shares, as amended and supplemented by the Supplemental Warrant Deed wholly foreign-owned enterprise (Xingning Zhonglian Industrial Company Limited) (formerly known as (Xingning Tongda Industrial Company Limited)), a limited liability company established in the PRC on 21 July 1997 and a former shareholder of Hong Long Shenzhen a future property development project of the Group, details of which are set out in the sub-paragraph headed Projects where agreements have been signed pending completion of the relevant procedures in the section headed Business of this prospectus 25

31 DEFINITIONS Yintaida Education (Huizhou Yintaida Education Investment Company Limited), a limited liability company established in the PRC on 27 November 2003 and owned as to 80% by (Mr. Yang Weifang) and 20% by (Mr. Zhao Guangliang) % per cent. Unless the context requires otherwise, amounts denominated in RMB have been converted into HK$, for the purpose of illustration only, using the exchange rate of RMB1 = HK$1. No representation is made that any amount in RMB or HK$ could have been or could be converted at the above rates or at any other rates or at all. For ease of reference, the names of certain PRC entities have been included in this prospectus in both English and Chinese languages. The English names are the unofficial translation of their respective Chinese name, and in the event of any inconsistency, the Chinese version shall prevail. Unless otherwise specified, all references to any shareholding in the Company assume no exercise of the Over-allotment Option. 26

32 RISK FACTORS Prospective investors in the Offer Shares should consider carefully all of the information set forth in this prospectus and, in particular, the following risks in connection with an investment in the Company. The Group s business, financial condition or results of operations could be materially and adversely affected by any of these risks. The trading price of the Shares could decline due to any of these risks and you may lose all or part of your investment. RISKS RELATING TO THE GROUP The Group relies on the performance of the property market in Guangdong Province, the PRC As at the Latest Practicable Date, all of the Group s development projects and land reserves are located in Guangdong Province. Even though demand for properties in Guangdong Province has been growing rapidly in recent years, there is no assurance that such demand will continue at past levels or that the Group will be able to benefit from its future growth. In addition, although the Group may consider to pursue business opportunities in other cities in the southern China in the future, the Directors anticipate that Guangdong Province remains to be the Group s primary focus. In the event that there are any adverse developments in the political, economic and social conditions of Guangdong Province and such changes may directly or indirectly affect the property market in Guangdong Province and hence, the Group s business, the profitability and operation of the Group may be adversely affected. The Group does not have insurance or its insurance may not be sufficient to cover potential losses and claims According to the Directors best knowledge and understanding as to the industry practice for property development in the PRC, property developers, including the Group, are not required to maintain insurance for third party liability or liability in relation to destruction of or damage to its property development projects, or personal injuries that may occur during the process of properties construction, or allegedly tortuous acts committed on construction sites, or the property liability claims in connection with the completed projects. The Group may be sued or held liable for damages due to any tortuous acts. If the Group suffers from any losses, damages and liabilities, it may affect the Group in terms of financial resources and/or reputation and/or its operation which may constitute a material impact to the Group. The Group may be subject to legal and business risks if it fails to obtain or renew the qualification certificates According to the PRC rules and regulations, newly established developers must obtain a (interim qualification certificate) whereas established developers must obtain (qualification certificate) before commencing business in property development. The interim qualification certificate is granted for a year and be renewed for a further term of not more than two years and the qualification certificate is subject to annual review. Before granting the new qualification certificates, the local authority will consider whether 27

33 RISK FACTORS the property developers have fulfilled all of the statutory requirements under the relevant PRC rules and regulations. Failure to meet the requirements within the specified timeframe could result in the revocation of the qualification certificates. If any members of the Group is unable to obtain or renew their respective qualification certificates, they may not be permitted to commence/continue their businesses, which could materially and adversely affect the Group s operation and financial situation. The Group may encounter difficulties or disputes relating to the non-wholly owned subsidiaries of the Group and their other shareholders The Group currently has three non-wholly owned subsidiaries, namely Shenzhen Yinghua, Hong Long Commercial and Huizhou Yintaida (which the Group currently owns approximately 85.71%, approximately 93.63% and 51% respectively). The Group may also in the future enter into other joint venture arrangements with third parties depending on appropriate commercial opportunities. Though the Group currently owns the majority equity interests in and controls each of Shenzhen Yinghua, Hong Long Commercial and Huizhou Yintaida, the smooth and effective operations of these companies have in the past depend to a large extent on the amicable relationship between the Group and the other shareholders of these companies and the mutual compliance with the terms and contractual obligations between them respectively. While the relationships of the Group with the minority shareholders of these companies are regulated either by the relevant constitutions or other agreements entered into between them, in the event that a deadlock or disagreement arises between the Group and any of these minority shareholders in respect of the business of these companies or other contractual arrangement with the Group, the Group may be adversely affected. The Group cannot provide any assurance that its relationship with the minority shareholders can at all times be amicably maintained, and the Group would not have commercial disputes with any of these minority shareholders, or such minority shareholders would not dishonour their agreements or undertakings with the Group. In particular, these minority shareholders may: have economic or business interests inconsistent with the Group; take actions contrary to their previous agreements or undertakings, or actions contrary to the objectives or policies of the Group; be unable or unwilling to fulfil their obligations to the Group; have disputes with the Group relating to the business operations of these non-wholly owned subsidiaries. If any difficulties, disagreements or disputes cropped up with any of these minority shareholders, the Group may be forced to resolve such difficulties, disagreements or disputes through legal procedures or other alternatives that the Group may then be advised, and the prospects of these non-wholly owned subsidiaries and/or the Group could be adversely affected. 28

34 RISK FACTORS Completion of the legal procedure for the transfer of 49% interest in Huizhou Yintaida requires third party cooperation and may take time On 8 August 2006, Hong Long Shenzhen entered into an equity transfer agreement with Beijing Yintaida pursuant to which Beijing Yintaida granted to Hong Long Shenzhen an option (the Option ) to purchase Beijing Yintaida s entire 49% equity interest in Huizhou Yintaida at a consideration of RMB85,000,000 (the Exercise Price ). On 5 February 2007, Hong Long Shenzhen exercised the Option and remitted the Exercise Price. As at the date of this prospectus, the legal procedure for the transfer of the 49% equity interest in Huizhou Yintaida from Beijing Yintaida to Hong Long Shenzhen has not commenced, and after the relevant legal procedure commences, it is expected to take certain time to complete. As advised by the PRC Legal Adviser, the application for registration of transfer of equity shall be made with the relevant authority within 30 days from the transfer and new business licence shall be issued within 10 days from approval date for the registration of the equity transfer. However, to complete the legal procedure for such transfer of equity interest requires active cooperation from certain third parties, including the execution of all relevant transfer and supporting documents by the transferee and the timely processing of the relevant transfer documents by the relevant government authorities, and the Group cannot assure that these third party cooperations can be obtained within the time frame the Group desires. If any of these cooperations is not as forthcoming as the Group expects, the transfer of the 49% equity interest in Huizhou Yintaida may not be able to be completed within the time frame currently expected by the Group and hence Huizhou Yintaida may not, from the PRC legal perspective, become a wholly owned subsidiary of the Group within the estimated time. The Group provides mortgage loans guarantee to its property buyers and may become liable to mortgagee banks if its property buyers default on their mortgage payments The Group has arrangements with various local banks in the PRC for the provision of mortgage loan to its property buyers. In accordance with market practice, local banks in the PRC require the Group to provide guarantees in respect of these mortgage loans. These guarantees are discharged upon, among others (i) the issuance of the realty title certificate and the mortgage of the relevant property (with the realty title certificate) to the creditor; (ii) two years after the expiry date of loan debt; and (iii) the settlement of mortgage loans between banks and purchasers of the Group s properties. According to the Directors best knowledge and understanding as to the industry practice, the Group does not conduct any independent credit checks on its property buyers but relies on credit checks conducted by the mortgagee banks. If any purchasers of the Group s properties defaults on payment in mortgage loans during the guarantee period and the proceeds for any foreclosure by the bank are insufficient to cover the outstanding loan, the Group, as the guarantor of the mortgage loans, may be liable for the amount outstanding. As at 31 December 2003, 2004 and 2005 and 31 August 2006, the Group provided maximum guarantees over mortgage loans for its property buyers of approximately RMB700,000,000, RMB700,000,000, RMB370,000,000 and RMB370,000,000 respectively. Even though the Group has not experienced any default so far, there is no assurance that 29

35 RISK FACTORS default will not occur in the future. If any default on the mortgage loans occurs and the Group s relevant guarantees are called upon, the Group s financial condition and therefore business operation could be adversely affected. The Group may not be able to realise its future development plans in accordance with its planned timetable According to the current PRC rules and regulations in respect of land grant, the relevant authorities will generally issue the formal land use rights certificate in respect of a piece of land after the developer has signed the ( State-owned Land Grant Contract of Land Use Rights ), has paid the land grant fee in full and has complied with the relevant land grant conditions. It cannot be ensured that the land authorities will grant the Group with the appropriate land use rights in a timely manner. In the event that the relevant land use rights certificate cannot be obtained by the Group within the planned timetable for its project developments, the business and financial situation of the Group may be adversely affected. In addition, under the existing PRC rules and regulations, if a property developer fails to develop its land within the terms stipulated in the relevant ( State-owned Land Grant Contract of Land Use Rights ), unless otherwise approved by the relevant government authorities, the relevant government authority may issue a warning to or impose a penalty on the developer or even forfeit the land. Should the Group fail to develop its future projects, including those set out in the paragraph headed Projects for future development in the section headed Business of this prospectus within the stipulated timeframe and penalty is imposed on the Group or the Group s land use rights on a particular land is forfeited, the Group s business and/or financial conditions would be adversely affected. The Group has not obtained valid realty title certificates to certain properties that it owns, leases or occupies As confirmed by the PRC Legal Adviser, there is no system to issue realty title certificates ( ) for club houses and car parking spaces in Shenzhen. Accordingly, the Group has not obtained (i) valid realty title certificates ( ) for the club houses and the car parking spaces of (Harbor City); and (ii) valid realty title certificates ( ) for the car parking spaces of (Hong Long Plaza). The Group leased out part of the club house and part of the car parking spaces in (Harbor City) on a monthly and hourly basis, respectively. For the two years ended 31 December 2005 and the eight months ended 31 August 2006, income generated by the club houses and car parking spaces of Harbor City amounted to approximately RMB101,970, RMB194,590 and RMB170,610 respectively. Details of (Harbor City) and (Hong Long Plaza) are set out in the sub-section headed Completed properties under the section headed Business of this prospectus. 30

36 RISK FACTORS The Group may be liable to property buyers for damages if it does not deliver individual property ownership certificates in a timely manner Property developers in the PRC are required to deliver to its property buyers the relevant individual property ownership certificates within a period of time after delivery of the property or within a time frame set out in the relevant sale and purchase agreements. It is the Group s general practice to specify the deadline for the delivery of the individual property ownership certificates in the sale and purchase agreements. Under the existing PRC rules and regulations, the Group is required to apply for the initially registered property ownership certificates with the relevant registration authority within 90 days after completion of the property and apply for the general property ownership certificates. The Group is then required to assist the property purchasers to submit the relevant property sale and purchase agreements, together with the relevant application documents within regulated periods after delivery of the properties, to the administrative authorities reviewing the application for the individual property ownership certificates. Delays by the various authorities in reviewing the application documents and granting the approvals as well as other factors may affect timely delivery of the general and the individual property ownership certificates. The Group may become liable to the buyers for late delivery of the individual property ownership certificates due to such delays or for any other reason beyond the Group s control. The Group may not have adequate resources to fund land acquisitions or property developments, or to secure the Group s financing obligations There is no guarantee that the Group will have sufficient cash flows for land acquisitions or property developments or achieve sufficient pre-sales, sales and leasing to finance land acquisitions or property developments. In addition, there is no assurance that the Group may secure external financing on acceptable terms. The Group s ability to arrange adequate financing for land acquisitions or property developments on acceptable terms allowing the Group to earn reasonable returns depends on a number of factors that are beyond its control. The PRC government has in recent years implemented a number of policies to further tighten lending requirements for property developers. These policies may restrict the Group s ability to obtain bank loans for property developments. Therefore, the Group s businesses and financial condition may be adversely affected if the Group is unable to finance its developments by internal resources. The Group may not be able to obtain sites that are suitable for property developments Majority of the Group s revenue is from sale of self-developed properties. This revenue stream is dependent on the Group s ability to sell its property development projects. To maintain a growth in its business in the future, the Group may be required to replenish its land reserves with suitable sites for development. The Group s ability in identifying and acquiring suitable sites for development is subject to a number of factors that are beyond its control. 31

37 RISK FACTORS Under the existing PRC rules and regulations, the land supply in the PRC is substantially controlled by the PRC government. As a result, the PRC government policies towards land supply directly affect the Group s ability in acquiring appropriate land reserves identified and the costs of the land acquisition. The PRC central and local governments may regulate how property developers, including the Group, obtain land reserves for property development. The Group s business, financial condition and operation results may be adversely affected if the Group is unable to obtain land reserves at prices for reasonable returns. Limitation of property valuation assumptions may affect the actual value of the Group s properties The property valuation report prepared by a qualified independent property valuer, Knight Frank Petty Limited is included in Appendix IV to this prospectus. The valuations in the above-mentioned report are based on assumptions, which, by their nature, are uncertain and subjective and may differ from actual results. In respect of future development properties held for sales, the valuations are based on assumptions that (i) the properties will be completed or developed as currently proposed, (ii) regulatory and governmental approvals for the proposals have been or will be obtained. For properties owned by the Group s project companies with an attributable interest of less than 100%, the valuation further assumes that the Group s interest in the relevant project company in the property or business is equal to the Group s proportionate ownership interest in the relevant company or business. These valuations may not be the actual value the Group may achieve from these properties. Unforeseen changes in a particular property development may affect the value of the Group s properties. Reliance on several independent contractors may affect the Group s development projects The Group hires independent contractors to carry out landscape design, foundation, construction and utilities installation and other works in its property development. The Group cannot ensure that the services of these independent contractors will always be satisfactory to the Group. In addition, if these independent contractors cease to provide services to the Group, or if the Group cannot find suitable contractors as replacement, or those replacement contractors cause delay in work or incur additional charges, the Group s businesses or financial performance will be subject to adverse effects. The relevant PRC tax authorities may challenge the basis on which the Group calculated its LAT obligations Under the existing PRC tax rules and regulations, the Group is obliged to pay LAT which is levied upon the revenue received from the sales and transfer of properties. The Group generally estimates and makes provisions for the full amount of applicable LAT in accordance with the relevant PRC tax rules and regulations as required by the relevant local tax authority. During the Track Record Period, the Group made a LAT provision in the amount of Nil, Nil, Nil and RMB1,945,000, respectively. For the same periods, the Group did not make any LAT payments. 32

38 RISK FACTORS LAT on pre-sales The Group pre-sold Hong Long Plaza during the period from November 2005 to December 2005 and delivered its residential units in October In accordance with the current rules and regulations in Shenzhen, the PRC, property developers that derived revenue and income from property developments are subject to LAT. In this regard, any potential provision in relation to LAT for the pre-sale of properties in and after November 2005 may be required. However, under the principal accounting policies that has been adopted by the Group and the general acceptable accounting practices in Hong Kong during the Track Record Period, the Group shall match the relevant costs (including costs of properties and LAT which is based on profit arising from sales of properties) with revenue recognised. Therefore, no LAT provision in respect of pre-sales has been made during the year ended 31 December 2005 and the eight months ended 31 August The related LAT was charged to the income statement of the Group upon the delivery of Hong Long Plaza since October The Directors estimated that the LAT for the year ended 31 December 2006 amounts to approximately RMB97,000,000. LAT on actual transfer of real estate properties (excluding pre-sales) (i) For properties delivered from November 2005 to December 2005 but contracts entered into before November 2005 The Group recognised sales for certain commercial units of Harbor City during these two months upon the transfer of risks and ownership of Harbor City. The tax notices, namely (Shen Di Shui Fa 2005 No. 521) and (Shen Di Shui Fa 2005 No. 609) did not mention that the tax treatments for those transitional cases where the pre-sale contracts were signed before 1 November 2005 but revenue was recognised after 1 November In this respect, based on the enquiry with tax officials of SLTB conducted by the Group, they advised that they would not require property developers to pay LAT under this scenario. Thus, no LAT provision has been made during the year ended 31 December (ii) For properties delivered from January to August 2006 The Group sold certain commercial units of Harbor City (classified as completed properties held for sale) during the period and recognised the sales accordingly. LAT of approximately RMB1,945,000 was computed based on the actual sales and development costs attributable to these sold properties and charged to the income statement of the Group for the eight months ended 31 August This actual LAT calculation basis is in accordance with the LAT notice issued by the SLTB on 1 August (Shen Di Shui Fa 2006 No. 454). There is no assurance that the relevant PRC tax authorities will not challenge the basis on which the Group calculated its LAT obligations. On 28 December 2006, the State Tax Bureau issued ( ) (State Tax Bureau Notice on Administration on Liquidation Issues of Land Appreciation Tax of Property Development Enterprises (Guo Shui Fa 2006 No.187)) (the 2006 Notice ). The 2006 Notice became 33

39 RISK FACTORS effective on 1 February The PRC Legal Adviser has advised that the 2006 Notice is not a new policy for the collection and management of LAT but only sets out the procedures for clearance of LAT. The Group s operations are dependent on the knowledge and experience of its key management personnel The Group s operations are dependent on the knowledge and experience of the executive Directors and a number of senior management personnel. The future performance of the Group is dependent, to a large extent, on the continuing efforts made by the executive Directors and senior management personnel. However, the Group may not be able to replace, retain, attract, hire other qualified managerial personnel in the future. Should any of the Directors and the existing key management personnel cease to render services to the Group, there may be a material and adverse impact on the Group s operation and profitability. The Group faces fluctuations in fair value adjustments on investment properties During the Track Record Period, the Group has recorded upward fair value adjustments on investment properties amounting to approximately RMB4,392,000, RMB760,000, RMB7,250,000 and RMB6,483,000 respectively. According to HKAS 40 Investment property issued by the HKICPA, investment properties can be recorded by using either the fair value model or the cost model. The Directors have selected the fair value model for the value of investment properties because they are of the view that periodic fair value adjustments in accordance with the prevailing market conditions can provide a more up-to-date picture of the fair value of the investment properties of the Group. However, upward fair value adjustments, which reflect unrealised capital gain of the investment properties at the relevant accounting dates, do not generate actual cash inflow to the Group for Shareholders until such investment properties are actually disposed of. Moreover, property values are subject to market fluctuation and there is no assurance that the Group will continue to record similar levels of fair value adjustments on investment properties in the future. Should there be any downward fair value adjustments in the Group s investment properties in the future, the Group s results may be adversely affected. The Group may face risks relating to pre-sale of properties The Group may fail to complete a property development project which has been pre-sold. In such circumstances, the Group may be liable to purchasers of pre-sold units for losses suffered. These losses may even exceed the purchase price paid in respect of the pre-sold units. In addition, if a pre-sold property development project is not completed according to schedule, the purchasers of pre-sold units may be entitled to compensation for such late delivery. If the delay extends beyond a certain period, these purchasers may even be entitled to have the pre-sale agreements terminated and claim damages thereafter. Moreover, the Group utilises proceeds from pre-sales of properties as a source to finance its property development projects. Consequently, any restriction in the Group s ability to pre-sell its properties, including any increase in the expenditure it must incur prior to obtaining a pre-sale permit, may have an adverse effect on the Group s cashflows, businesses and financial position. 34

40 RISK FACTORS The Group has limited experience in property development in new markets The Group has been pursuing its property development business in Guangdong Province, the PRC, during the Track Record Period. The Group has relatively less experience in the property development business in other provinces of the PRC. There is no assurance that the Group s expertise in the property development business in Guangdong Province can be applied to other provinces or cities in the PRC. Should the Group s future development projects in other provinces or cities in the PRC are unsuccessful, the Group s reputation and financial results may be adversely affected. The Group recorded net current liabilities during each of the Track Record Period As at 31 December 2003, 31 December 2004 and 31 August 2006, the Group recorded net current liabilities of approximately RMB72,324,000, RMB35,131,000 and RMB133,392,000 respectively while net current assets of approximately RMB17,419,000 was recorded as at 31 December The reasons for net current liabilities are mainly due to (i) the Group s operation; and (ii) the financing structure/practice, details of which are set out below: The Group s operation According to the accounting principles generally accepted in Hong Kong and accounting policies adopted by the Group, the Group classifies investment properties which are held for long term (including for recurrent rental and property management income purpose) as non-current assets; and properties under development (where the Group shall pre-sell and deliver upon completion of the construction works) as current assets. During the Track Record Period, the Group had both investment properties and properties under development. Further details are set out in the sub-paragraph headed Investment property under the section headed Financial information of this prospectus. For the construction costs incurred, the Group classified the costs that shall be settled within twelve months as current liabilities. The combined effect lowers the current assets value of the Group. The financing structure/practice The Group usually finances its development properties by (i) bank loans; (ii) pre-sale receipts; and (iii) general working capital. More than 50% of the bank loans are to be repaid within one year which is classified as current liabilities. The receipts from pre-sale are also treated as current liabilities until recognition as revenue upon completion and delivery of properties to purchasers. This financing practice of the Group also leads to net current liabilities position during the Track Record Period. The Directors believe that the Group s net current liabilities situation is temporary. The situation will be improved by: (i) The recognition of revenue upon completion and delivery shall reduce the current liabilities to a larger extent than the decrease in inventories because of the profit on sales. For illustration, the net current liabilities of 35

41 RISK FACTORS RMB133,392,000 as at 31 August 2006 shall be improved subsequently upon completion and delivery by reducing receipt in advance of RMB445,535,000 and offset by reduction of inventories of RMB224,347,000 and net current assets of RMB87,796,000 will be resulted. (ii) The re-financing of short term loans by utilizing the medium term loans under the new banking facilities of RMB800,000,000. Please refer to the sub-paragraph headed Liquidity, financial resources and capital structure under the section headed Financial information to this prospectus. As at 31 December 2003, the Group s current liabilities mainly comprised short-term bank loans of approximately RMB177,650,000, trade and other payables and accruals of approximately RMB140,701,000 and receipts in advance of approximately RMB218,791,000. As at 31 December 2004, the Group s current liabilities mainly comprised short-term bank loans of approximately RMB100,000,000, trade and other payables and accruals of approximately RMB113,012,000 and receipts in advance of approximately RMB101,316,000. As at 31 December 2005, the Group s current liabilities mainly comprised short-term and current portion of long-term bank loans of approximately RMB126,200,000, trade and other payables and accruals of approximately RMB131,056,000 and receipts in advance of approximately RMB291,236,000. As at 31 August 2006, the Group s current liabilities mainly comprised short-term bank loans of approximately RMB230,000,000, trade and other payables and accruals of approximately RMB212,104,000 and receipts in advance of approximately RMB446,035,000. Details of indebtedness and liquidity, financial resources and capital structure of the Group are set out in the section headed Financial information in this prospectus. In the event that the Group is unable to generate sufficient cash flows from its operations to meet its operating expenditure, the Group will have to seek alternative financing arrangements. If the Group is unable to obtain sufficient funds to finance its operations, the Group s existing operations, performance and prospects may be adversely affected. The Group is substantially supported by the rental income generated from its property leasing business before the period when its property development project is completed During the Track Record Period, rental income and management fees generated from the Group s property leasing business amounted to approximately RMB8,823,000, RMB13,955,000, RMB18,543,000 and RMB13,809,000, equivalent to approximately 17.7%, 25.0%, 131.3% and 98.1% of the Group s total net cash generated from operating activities as set out in Appendix I to this prospectus. In this regard, the Group is substantially supported by the rental income generated from its property leasing business before the time when new project is completed and therefore revenue can be recognised. 36

42 RISK FACTORS Certain properties of the Group pledged to the banks pursuant to certain pledge agreements entered into by the Group may be foreclosed if there is any non-compliance of the terms under these pledge agreements and the loan agreements in respect of which these pledge agreements were entered into In March 2005, the Group entered into a loan agreement with a bank for banking facilities of RMB250,000,000 to fund the development of (Hong Long Plaza). The term of the loan is for a period from 16 March 2005 to 16 March To provide security to the loan, the Group has pledged to the bank (i) Level 8, Hong Long Building, Nanhai Avenue, Nanshan District, Shenzhen, Guandong Province, the PRC ( ); and (ii) 134 retail shop units of (Baorun Ornament Materials Mall). Details of the two pledged properties are set out as properties numbered one and four in Appendix IV to this prospectus. As at the Latest Practicable Date, the Group has already repaid an aggregate amount of approximately RMB150,000,000 and the outstanding amount was approximately RMB100,000,000. If the Group breaches the terms of the pledge agreements or otherwise there are defaults in the obligations under the facilities, the banks may foreclose any or even all of the pledged properties, which may materially and adversely affect the Group s operation and its future plan. The Group is impacted by the property leasing market The Group is also engaged in the property leasing business in order to diversify the Group s source of revenue and to maintain a stable cash flow. The Group expects the property leasing business to provide a stable turnover in the future. As at the Latest Practicable Date, all of the Group s leasing properties that are available for rent and located in Shenzhen with an aggregate GFA of approximately 87,160 sq.m.. In the event that the leasing market in Shenzhen experiences a material downturn, the Group s business and operation will be adversely affected. Furthermore, the Directors believe that the Group s property leasing business and its future growth are dependent on the Group s ability to expand its property leasing portfolio and to identify suitable properties to pursue the property leasing business. The Group may incur significant costs in expanding and identifying suitable properties for its property leasing business. In addition, the Group may not be able to maintain the rental income under its property leasing business. The Group may not be able to renew the leases or leases new tenants upon the expiry of the existing leases. There is no guarantee that the intended return on the Group s property leasing business can be achieved. 37

43 RISK FACTORS Uncertainty exists for the Group s future developments, namely Longhua project and Yinghua project, to obtain the relevant land use rights certificates The Group has entered into agreements with Independent Third Parties to develop or acquire interests in its future property development projects, namely Longhua project and Yinghua project in Shenzhen, the PRC. Details of which are set out in the sub-paragraph headed Projects where agreements have been signed pending completion of the relevant legal procedures in the section headed Business of this prospectus. As at the Latest Practicable Date, the land use rights in respect of Longhua project and Yinghua project were not granted in the Group s name. Pursuant to the relevant agreements, if the conditions for the development of Longhua project including the grant of the land use rights are not fulfilled on or before 31 March 2007, the agreements will be terminated and as a result, the Group will not proceed with Longhua project. In relation to the Yinghua project, the Group has agreed to pay for balance of land and relocation costs at RMB48,500,000 and RMB12,000,000 respectively with respect to Yinghua project. Details of the agreement are set out in the paragraph headed Liquidity, financial resources and capital structure cash flow information in the section headed Financial information of this prospectus. As at 31 August 2006, the cost incurred for Yinghua project amounted to approximately RMB99,253,000, which included the payables of balance of land and relocation costs of RMB48,500,000 and RMB12,000,000 respectively (as mentioned in the above paragraph) details of which are set out in the paragraph headed Prepayments in the section headed Financial information of this prospectus. The Group is in the process of obtaining the land use rights. There is no assurance on the timing for obtaining the land use rights or the recoverability of the cost that had been already paid by the Group. The Group may be subject to penalty in respect of its loans to Shenzhen Xingjida Pursuant to an agreement entered in January 2002 with Shenzhen Xingjida, the Group provided loans to Shenzhen Xingjida in a sum of approximately RMB49,540,000 between January 2002 and December Details of the loans and the background of the loans are set out in the paragraph headed Property leasing business leased properties that are not developed by the Group in the section headed Business of this prospectus. As advised by the PRC Legal Adviser, such loans provided by the Group to Shenzhen Xingjida violated the PRC rules and regulations, namely Lending General Provisions and is subject to (a) potential penalty of one to five times of interest that has received from the Group; and (ii) possibility that the loans to be cancelled by The People s Bank of China. Instability in profit generating ability in the future During the Track Record Period, the Group s profit generating ability have been in a cyclical fluctuation. For the three years ended 31 December 2005, the Group recorded the net profits of approximately RMB5,072,000, RMB40,160,000 and RMB63,531,000 respectively. The Directors are of the view that the cyclical fluctuations for the Group s profit generating ability may still continue to exist in the future as it will be subject to a 38

44 RISK FACTORS number of factors such as the PRC overall economy and property market s development, the Group s ability to secure land bank and to timely deliver its property development projects to the market. RISK RELATING TO THE PRE-IPO FINANCING There will be a change in shareholding in Access Achievement and Hong Long Shenzhen if the Access Achievement Share Charge B and the HLSZ Equity Charges are enforced The Group has given Access Achievement Share Charge B and HLSZ Equity Charges in favour of LBCCA. Details of these charges are set out in the paragraph headed Security in the section headed Pre-IPO Finance Investor of this prospectus. Each of Access Achievement and Hong Long Shenzhen is currently owned by the Company. Should LBCCA enforce these charges in event of default by the Group, Access Achievement will be held by the Company and LBCCA (or its purchasers) as to 71% and 29% respectively and Hong Long Shenzhen will be held by the Company and LBCCA (or its purchasers) as to 71.78% and 28.22% respectively. RISKS RELATING TO THE PROPERTY INDUSTRY IN THE PRC The PRC government may adopt measures to curtail the overheating of the property sector In recent years, the PRC government has introduced, among other things, policies to restrict future developments of the property market in the PRC to cool down the overheat PRC property market. The PRC government s measures to control the growth in the industry may also limit access to capital resources, reduce market demand, and increase the operating costs of the property developers. The PRC government may adopt additional and stringent measures, which could further subdue the development of the property industry and adversely affect the Group s operations in particular. Further information on the measures taken by the PRC government are set out in the section headed Summary of PRC Rules and Regulations Relating to the Property sector in Appendix VI to this prospectus. Real estate development in the PRC is still at an early stage and lacks adequate infrastructural support The Directors believe that private ownership of property in the PRC is still at an early stage of development. Despite the rapid growing demand for private residential properties in the PRC, particularly in Guangdong Province, in recent years, the development of the real estate market can be subject to social, political, economic and legal factors as well as other factors which may affect the Group. The lack of an efficient and liquid secondary market for residential real estate may discourage investors from acquiring new properties because resale could be a long and costly process. The limited amount of mortgage financing available to 39

45 RISK FACTORS PRC individuals, compounded by the uncertainty factors in legal title and enforceability of property rights, may inhibit demand for private residential developments. In the event of over-supply, prices may fall which may adversely affect the Group s revenue and profitability. The Group faces intense competition The PRC property development market is highly competitive. The Directors believe that the Group s competitors are mainly local private and governmental property developers. The Directors further believe that the PRC s accession into the World Trade Organisation may further attract entry of foreign competitors, which may lead to intensified competition and affect the operating results of the Group. Potential liability for environmental issues may affect the Group s business The Group s business is subject to PRC environmental rules and regulations, including air, noise and water pollution and waste discharge. The Directors undertake to comply with the applicable PRC environmental laws and regulations from time to time. Compliance with such laws and regulations may substantially increase the Group s property development costs. Under the PRC environmental rules and regulations, property developments of the Group is subject to environmental impact assessments. Before commencement of property development, submission to the relevant government authorities for approval of environmental impact assessment is required. At completion of each property development, the relevant government authorities will inspect the site to ensure that applicable environmental standards have been complied with, and the inspection report, together with other specified documents, will be submitted to the local construction administration authorities for their record. As at the Latest Practicable Date, the Group had complied with such requirements for all of its completed property developments and properties under development. However, it is possible that the environmental impact assessments failed to reveal all potential environmental liabilities that may have a material adverse effect on the Group s business and financial condition. PRC rules and regulations involve uncertainty The legal system in the PRC is a civil law system based on written statutes. Unlike common law systems, it is a system in which decided legal cases will not serve as precedent decisions. The Group s operating entities in the PRC are subject to rules and regulations applicable to foreign investment enterprises in general. These laws, regulations and legal requirements are relatively new. Their interpretation and enforcement involve uncertainties which could limit the legal protections available to Hong Kong and foreign investors. 40

46 RISK FACTORS RISKS RELATING TO THE PRC PRC political and economic policies could affect the Group s business Since 1970 s, the PRC has undergone and is still undergoing various transformations including that of the economic system in the PRC. Such reforms have resulted in a shift in focus of the PRC government to economic establishment. The Directors consider that factors such as political and social may also lead to further adjustment of the reform measures. These adjustment process may not always have a positive effect on the operations of the Group. Further, if measures relating to inflation control, interest rates and bases for taxation and additional restrictions on currency exchange and remittances abroad by the PRC government are introduced, it may also lead to a negative impact on the Group s business. It is not within the Group s foreseeability whether changes in the PRC s political, economic and social conditions, laws, regulations and policies will have any adverse effect on its current or future business, results of operations or financial condition. Foreign exchange control and currency conversion may affect the Group s operations and financial conditions as well as the value of the Shares As at the Latest Practicable Date, RMB is not a freely convertible currency in the international currency market and its exchange rate system is a managed-floating-rate system. Since 21 July 2005, RMB was no longer pegged to the US dollars but to a basket of currencies. As all of the Group s sales are settled in RMB, any material exchange rate volatility relating to RMB may give rise to uncertainties in the value of the Group s PRC assets, earnings and dividends. Also, the PRC government may at its discretion restricts access to foreign currencies for current account transactions in the future. Changes in the foreign exchange control system may prevent the Group from satisfying sufficient foreign currency demands and the Group may not be able to pay dividends in foreign currencies to the Shareholders. Any devaluation of RMB may cause the Group to incur capital depreciation in its assets and investments in the PRC as well as causing material adverse effects on the Group s operations and financial condition. RISKS RELATING TO THE GLOBAL OFFERING There has been no prior public market for the Shares and the liquidity and market price of the Shares may be volatile Prior to the Global Offering, there has been no public market for the Shares. The initial public offering price range per Share was the result of negotiations among the Group and the Global Coordinator, on behalf of the Underwriters. The Offer Price may differ significantly from the market price for the Shares following the Global Offering. The Group has made application to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in the Shares on the Stock Exchange. There is no assurance that the Global Offering will result in the development of an active, liquid public trading market for the Shares. In addition, the price and trading volume of the Shares may be volatile. Factors including variations in the Group s revenues, earnings and cashflows or any other developments may affect the volume and price at which the Shares will be traded. 41

47 RISK FACTORS The subscribers of the Shares may experience immediate dilution and may experience further dilution if the Group issues additional Shares in the future The Offer Price is higher than the net tangible assets value per Share immediately prior to the Global Offering. Subscribers of the Shares in the Global Offering may experience an immediate dilution in pro forma consolidated net tangible assets value to HK$0.60 per Share, based on the maximum Offer Price of HK$2.06, assuming the Global Coordinator will not exercise the Over-allotment Option. To expand the Group s business, the Company may offer and issue additional Shares in the future. The Company may also issue additional Shares pursuant to the Share Option Scheme. Shareholders may be imposed dilution in the net tangible assets book value per Share if the Company issues additional Shares in the future at a price lower than the net tangible assets value per Share. The Shareholders interest in the Company will be diluted upon exercise of the Pre-IPO Share Options and issuance of additional Shares The Group has granted Pre-IPO Share Options to ten employees. The full exercise of these options would entitle the grantees an aggregate of 23,000,000 Shares, representing 2.3% of the issued share capital of the Company immediately following the Global Offering, the Capitalisation Issue and the conversion of the Convertible Note assuming the Over-allotment Option or any Pre-IPO Share Options are not exercised and without taking account Shares falling to be issued upon the exercise of any options that may be granted under the Share Option Scheme. Exercise of any of the Pre-IPO Share Options will have a dilution effect on the shareholdings of the Shareholders at the time of such exercise of the Pre-IPO Share Options as well as on the earnings/loss per Share for the relevant financial year of the Group. Details of the Pre-IPO Share Options and their dilution effect to the shareholding of the Company upon the Listing are set out in the section headed Pre-IPO Share Options in Appendix VII to this prospectus. RISK RELATING TO STATEMENTS MADE IN THIS PROSPECTUS Certain facts and statistics included in this prospectus may not be relied upon Certain information and statistics contained in this prospectus under the section headed Industry overview are derived from various official governmental publications. While reasonable care has been exercised in the reproduction of such information, it has not been independently verified by the Group, the Global Coordinator, the Sponsor, the Underwriters or any of their respective affiliates or advisers and may not be accurate, complete or up-to-date. The Group makes no representation as to the correctness or accuracy of such information and, accordingly, such information should not be unduly relied upon. 42

48 RISK FACTORS Forward looking statements may be inaccurate Except information in relation to the profit estimate, information in this prospectus contains certain forward-looking statements and information relating to the Group that are based on the belief of the Directors as well as assumptions based on the information currently available to them. In this prospectus, the words believe, consider, estimate, expect, and similar expressions, as they relate to the Company or the Group or the Directors, are intended to, among others, identify forward-looking statements. Such statements reflect the current views of the Directors with respect to, among others, future events and are subject to certain risks, uncertainties and assumptions, including the risk factors described in this prospectus. Should one or more of these risks or uncertainties materialise, or should underlying assumptions are proved to be incorrect, the Group s financial condition may be adversely affected and vary materially from those described herein as believed, considered, estimated or expected. 43

49 WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES For the purpose of the Listing, the Company has sought a number of waivers from the Stock Exchange in relation to strict compliance with certain requirements under the Listing Rules. Details of such waivers are categorised and described below. 1. MANAGEMENT PRESENCE IN HONG KONG Pursuant to Rule 8.12 of the Listing Rules, the Company must have a sufficient management presence in Hong Kong. This normally means that at least two of the executive Directors must be ordinarily resident in Hong Kong. Given that the business and operation of the Group are primarily located, managed and conducted in the PRC and only one executive Director is ordinarily resident in Hong Kong, the Company does not and, in the foreseeable future, will not have a management presence in Hong Kong as required under the Listing Rules. Accordingly, the Company has applied for, and the Stock Exchange has granted a waiver from compliance with the requirements under Rule 8.12 of the Listing Rules. In order to maintain effective communication with the Stock Exchange, the Company has put in place the following measures to ensure that regular communication is maintained between the Stock Exchange and the Company: (a) The Company will appoint a compliance adviser to act as its alternative channel of communication with the Stock Exchange pursuant to Rule 3A.19 of the Listing Rules. (b) By a compliance adviser agreement (the Compliance Adviser Agreement ) proposed to be entered into by the Company and Mega Capital (Asia) Company Limited, the Company will, on or before the Listing, appoint Mega Capital (Asia) Company Limited as its compliance adviser for a term to be expired on the date on which the Company distributes its financial results for its first full financial year after the Listing Date pursuant to Chapter 3A of the Listing Rules, and Mega Capital (Asia) Company Limited will agree, amongst other things, to act as the Company s principal channel of communication with the Stock Exchange. (c) (d) In order to fulfil its obligations under the Compliance Adviser Agreement, Mega Capital (Asia) Company Limited will provide to the Stock Exchange with the names, home and office telephone numbers and, where available, facsimile numbers of at least one of its officers who will act as its contact person with the Stock Exchange and the Company upon Listing and during the term of the Compliance Adviser Agreement, as well as the contact details of a further alternate person in case such officer(s) is unable to be reached for any reason. Provisions will be incorporated in the Compliance Adviser Agreement where Mega Capital (Asia) Company Limited will have access at all times to the authorised representatives, the Directors and other officers of the Company to ensure that it is in a position to provide prompt responses to any queries or requests from the Stock Exchange in respect of the Company. Further, the 44

50 WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES Compliance Adviser will agree that it will be the compliance adviser to the Company unless and until the earlier of the expiry or termination of its appointment pursuant to the terms of the Compliance Adviser Agreement. (e) The Company has (i) appointed (Mr. Zeng Yunshu), a PRC resident and (Dr. Han Qinchun), a Hong Kong resident, as two authorised representatives (the Authorised Representatives ); (ii) authorised the Authorised Representatives and their alternates to speak on behalf of the Company; (iii) ensured that the Authorised Representatives will comply with the relevant requirements of the Listing Rules at all times; and (iv) provided the Stock Exchange with the contact details of each Authorised Representative. The Authorised Representatives will have access to the board of Directors and senior management of the Company at all times. (f) (g) The Company has also provided the Stock Exchange contact details of the executive Directors and the company secretary of the Company, including mobile phone numbers, office phone numbers, fax numbers and addresses, to ensure that each of its executive Directors and company secretary will be readily contactable when necessary to deal promptly with enquiries from the Stock Exchange. Each of the Directors (including the independent non-executive Directors), the Authorised Representatives and their alternates possesses valid travel documents to visit Hong Kong and will be able to meet with the Stock Exchange within a reasonable period of time as and when required. (h) Two of the proposed independent non-executive Directors, namely (Dr. Li Jun) and (Mr. Cheung Ngai Lam), and (Mr. Chu Kin Wang, Peleus), the company secretary of the Company, are Hong Kong residents and will be available to meet with the Stock Exchange on short notice as and when required. (Dr. Han Qinchun) and (Mr. Chu King Wang, Peleus) will also be authorised to accept service of process and notices on behalf of the Company in Hong Kong. (i) It has also been stressed to the Directors and the Authorised Representatives the importance of maintaining regular and uninterrupted communication with the Stock Exchange and the requirements as set out in Rule 8.12 of the Listing Rules. The Sponsor believes that the Company, the Directors and the Authorised Representatives fully understand their obligations under the relevant rules and the importance of their compliance with such requirements. 45

51 WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES 2. STOCK BORROWING In order to facilitate the settlement of any over-allocations in connection with the Global Offering, China Everbright Securities may choose to borrow Shares from shareholders of the Company under a stock borrowing arrangement, or acquire Shares from other sources, including pending exercise of the Over-allotment Option. Such stock borrowing arrangement may include the Stock Borrowing Agreement entered into between China Everbright Securities (on behalf of the Underwriters) and Grand Prosperity under which China Everbright Securities may borrow from Grand Prosperity certain number of Shares not exceeding the maximum number of Shares to be allotted upon full exercise of the Over-allotment Option. For the purposes of the Stock Borrowing Agreement, a waiver has been granted by the Stock Exchange to Grand Prosperity from strict compliance with Rule 10.07(1)(a) of the Listing Rules which otherwise restricts the disposal of shares by controlling shareholders following a new listing. The waiver is granted subject to the conditions that: (a) the stock borrowing arrangement with Grand Prosperity under the Stock Borrowing Agreement with China Everbright Securities will only be effected by China Everbright Securities for the settlement of over-allocations in connection with the International Placing; (b) (c) (d) (e) the maximum number of Shares borrowed from Grand Prosperity will be limited to the maximum number of Shares which may be issued upon exercise of the Over-allotment Option; the same number of Shares borrowed from Grand Prosperity will be returned to Grand Prosperity or its nominees (as the case may be) no later than three business days following the earlier of (i) the last day for exercising the Over-allotment Option; (ii) the day on which the Over-allotment Option is exercised in full; or (iii) such earlier time as may be agreed in writing between the borrower and Grand Prosperity; Grand Prosperity will not receive any payment or benefit from China Everbright Securities or any of the International Underwriters in consideration for the borrowed Shares or in respect of such stock borrowing arrangement; and the stock borrowing arrangement will be conducted in compliance with all applicable laws and regulatory requirements. 46

52 WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES 3. THE LATEST FINANCIAL PERIOD REPORTED ON BY THE REPORTING ACCOUNTANTS REQUIRED UNDER THE LISTING RULES AND THE COMPANIES ORDINANCE Rule 4.04(1) of the Listing Rules stipulates that the Company is required to include in this prospectus an accountants report covering the consolidated results of the Group in respect of each of the three financial years immediately preceding the issue of this prospectus. Paragraph 27 of Part I of the Third Schedule to the Companies Ordinance requires the Company to set out in this prospectus a statement as to, inter alia, the gross trading income or sales turnover during the three years preceding the date of this prospectus, including an explanation of the method used for the computation of such income or turnover and a reasonable break-down between the more important trading activities. Paragraph 31 of Part II of the Third Schedule to the Companies Ordinance requires the Company to include in this prospectus a report by the auditors with respect to, inter alia, the profits and losses and assets and liabilities of the Group in respect of each of the three financial years immediately preceding the issue of this prospectus. In such circumstances, an application has been made to the Stock Exchange for a waiver from strict compliance with Rule 4.04(1) of the Listing Rules, and such waiver has been granted by the Stock Exchange subject to the condition that the Listing Date is on or before 28 February An application has also been made to the SFC for a certificate of exemption from strict compliance with paragraph 27 of Part I and paragraph 31 of Part II of the Third Schedule to the Companies Ordinance in relation to the inclusion of the accountants report for the full year ended 31 December 2006 in this prospectus on the ground that it would be unduly burdensome for the Company to do so and a certificate of exemption has been granted by the SFC under section 342(A) of the Companies Ordinance. The Directors have confirmed that they have performed sufficient due diligence on the Group to ensure that, save as disclosed in this prospectus, up to the date of the Prospectus, there has been no material adverse change in the financial position or prospects of the Group since 31 August 2006 and that there is no event since 31 August 2006 which would adversely and materially affect the information shown in the accountants report of the Group as set forth in Appendix I to this prospectus. 47

53 INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING This prospectus is published solely in connection with the Global Offering which is sponsored by the Sponsor. Subject to the terms of the Underwriting Agreements, the Hong Kong Offer Shares are fully underwritten by the Hong Kong Underwriters and the International Placing Shares are fully underwritten by the International Underwriters. Particulars of the Underwriters and the underwriting arrangements are set forth in the section headed Underwriting to this prospectus. DIRECTORS RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS This prospectus contains particulars given in compliance with the Companies Ordinance, the Securities and Futures (Stock Market Listing) Rules of Hong Kong and the Listing Rules for the purpose of giving information to the public with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this prospectus 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 prospectus misleading. UNDERWRITING This prospectus is published solely in connection with the Hong Kong Public Offer which forms part of the Global Offering. For applicants under the Hong Kong Public Offer, this prospectus and the Application Forms set out the terms and conditions of the Hong Kong Public Offer. The Listing is sponsored by the Sponsor. The Hong Kong Public Offer is fully underwritten by the Hong Kong Underwriters under the terms of the Hong Kong Underwriting Agreement and the International Placing will be fully underwritten by the International Underwriters pursuant to the International Underwriting Agreement and are subject to the Company and the Global Coordinator (on behalf of the Underwriters) agreeing on the Offer Price. The Global Offering is managed by the Global Coordinator. If, for any reason, the Offer Price is not agreed among the Company and the Global Coordinator (on behalf of the Underwriters) on or before the Price Determination Date, the Global Offering will not proceed. For information about the Underwriters and the underwriting arrangements, see the section headed Underwriting in this prospectus. 48

54 INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING RESTRICTIONS ON SALE OF OFFER SHARES Each person acquiring the Offer Shares under the Global Offering will be required to, or be deemed by his acquisition of Offer Shares to, confirm that he is aware of the restrictions on offers of the Offer Shares described in this prospectus. No action has been taken to permit an offering of the Offer Shares or the distribution of this prospectus in any jurisdiction other than Hong Kong. Accordingly, this prospectus may not be used for the purpose of, and does not constitute, an offer or invitation in any jurisdiction or in any circumstances in which such an offer or invitation is not authorized or to any person to whom it is unlawful to make such an offer or invitation. The distribution of this prospectus and the offering of the Offer Shares in other jurisdictions are subject to restrictions and may not be made except as permitted under the applicable securities laws of such jurisdictions pursuant to registration with or authorisation by the relevant regulatory authorities an exemption therefrom. APPLICATION FOR LISTING ON THE STOCK EXCHANGE The Company has applied to the Listing Committee of the Stock Exchange for the granting of the listing of, and permission to deal in, the Shares in issue and the Offer Shares to be issued pursuant to the Global Offering (including the additional Shares which may be issued pursuant to the exercise of the Over-allotment Option, any Shares to be issued under the Capitalisation Issue and pursuant to the conversion of the Convertible Note, any Shares which may be issued under the Pre-IPO Share Options and the Share Option Scheme). Save as disclosed in this prospectus, no part of the share or loan capital of the Company is listed on or dealt in on any other stock exchange and no such listing or permission to list is being or proposed to be sought in the near future. HONG KONG BRANCH REGISTER AND STAMP DUTY All Offer Shares issued pursuant to applications made in the Hong Kong Public Offer will be registered on the Company s branch register of members to be maintained in Hong Kong. The Company s principal register of members will be maintained in the Cayman Islands by Butterfield Fund Services (Cayman) Limited. Dealings in Offer Shares registered in the branch register of members of the Company maintained in Hong Kong will be subject to Hong Kong stamp duty. PROFESSIONAL TAX ADVICE RECOMMENDED Potential investors in the Global Offering are recommended to consult their professional advisers if they are in any doubt as to the taxation implications of subscribing for, purchasing or holding of and dealing in the Offer Shares. None of the Company, the Global Coordinator, the Sponsor, the Underwriters, any of their respective directors or any other person or party involved in the Global Offering accepts responsibility for any tax effects on, or liabilities of, any person resulting from the subscription for, purchase or holding of, or dealing in the Offer Shares. 49

55 INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING STABILISATION AND OVER-ALLOTMENT OPTION Stabilisation is a practice used by underwriters in some markets to facilitate the distribution of securities. To stabilize, the underwriters may bid for, or purchase, the newly issued securities in the secondary market, during a specified period of time, to retard and, if possible, prevent a decline in the market price of the securities below the offer price. In Hong Kong, the price at which stabilisation is effected is not permitted to exceed the offer price. In connection with the Global Offering, the Global Coordinator, as the stabilizing manager, or its affiliates or any person acting for it, on behalf of the Underwriters, may over-allocate or effect transactions with a view to stabilizing or maintaining the market price of the Offer Shares at a level higher than that which might otherwise prevail for a limited period after the commencement of trading in the Shares on the Stock Exchange. Such transactions may be effected in compliance with all applicable laws and regulatory requirements. However, there is no obligation on the Global Coordinator, its affiliates or any person acting for it to do this. Such stabilisation, if commenced, will be conducted at the absolute discretion of the Global Coordinator, its affiliates or any person acting for it and may be discontinued at any time, and must be brought to an end after a limited period. In connection with the International Placing, the Global Coordinator may over-allocate up to and not more than an aggregate of 37,500,000 additional Shares and cover such over-allocations by exercising the Over-allotment Option or by making purchases in the secondary market at prices that do not exceed the Offer Price or through stock borrowing arrangements or a combination of these means. Further details of the Over-allotment Option and stabilisation are set out in the paragraphs headed Over-allotment Option and Stabilisation of the section headed Structure of the Global Offering of this prospectus. PROCEDURE FOR APPLICATION FOR HONG KONG OFFER SHARES The procedure for applying for Hong Kong Offer Shares is set out in the section entitled How to apply for Hong Kong Offer Shares of this prospectus and on the relevant Application Forms. STRUCTURE OF THE GLOBAL OFFERING Details of the structure of the Hong Kong Public Offer, the International Placing and the Global Offering, including its conditions, are set out in the section entitled Structure of the Global Offering in this prospectus. 50

56 DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING DIRECTORS Name Address Nationality Executive Directors (ZENG Yunshu) Flat 603, Tower 1 Yadian Ju, World Garden Nanshan District Shenzhen, Guangdong Province The PRC (HAN Qinchun) Flat 5G, Tower 23 Mei Hin Court South Horizons Hong Kong Chinese Chinese (ZENG Sheng) Flat P406, Chun Shui An Building Portofino, Hua Qiao Cheng Nanshan District Shenzhen, Guangdong Province The PRC Chinese (YE Qingdong) Flat 5C, Tower 12 Wei Lan Hai An Phase 2 Hou Hai Road Nanshan District Shenzhen, Guangdong Province The PRC (OUYANG Junxin) Flat 101, Tower 55 Song Ping Cun Nanshan District Shenzhen, Guangdong Province The PRC Chinese Chinese Non-executive Directors (ZHANG Huaqiao) (CHEN Junyu) 7D, Branksome Grande 3 Tregunter Path Mid-levels Hong Kong Apt 1001, Bamboo Grove 80 Kennedy Road Wanchai Hong Kong Chinese Chinese 51

57 DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING Name Address Nationality Independent non-executive Directors (LI Jun) (CHEUNG Ngai Lam) Flat A, 16 Floor Tower Two The Redhill Peninsula 18 Pak Pat Shan Hong Kong 41A Tower One University Heights 23 Pokfield Road Hong Kong Italian Chinese (LIN Weifang) Unit 32C, Building 16 Meilin First Village Shenzhen, Guangdong Province The PRC Chinese 52

58 DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING PARTIES INVOLVED IN THE GLOBAL OFFERING Sponsor Global Coordinator, Sole Bookrunner and Lead Manager Co-Lead Managers China Everbright Capital Limited 40/F., Far East Finance Centre, 16 Harcourt Road, Hong Kong China Everbright Securities (HK) Limited 36/F., Far East Finance Centre, 16 Harcourt Road, Hong Kong China Merchants Securities (HK) Co., Ltd. 48/F., One Exchange Square, 8 Connaught Place, Central, Hong Kong Kingsway Financial Services Group Limited 5/F., Hutchison House, 10 Harcourt Road, Central, Hong Kong Co-Managers BCOM Securities Company Limited 3rd Floor, Far East Consortium Building, 121 Des Voeux Road Central, Hong Kong First Shanghai Securities Limited 19/F., Wing On House, 71 Des Voeux Road Central, Hong Kong Goldbond Securities Limited 39/F., Tower One, Lippo Centre, 89 Queensway, Hong Kong Kingston Securities Limited Suite 2801, 28th Floor One International Finance Centre, 1 Harbour View Street, Central, Hong Kong Mega Capital (Asia) Company Limited Room 3406, 34/F., Edinburgh Tower, The Landmark, 15 Queen s Road Central, Hong Kong OSK Asia Securities Limited , 12/F., World-wide House, 19 Des Voeux Road Central, Hong Kong 53

59 DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING Legal adviser to the Sponsor and Underwriters Legal advisers to the Company as to Hong Kong law: Sidley Austin Level 39 Two International Finance Centre 8 Finance Street Central Hong Kong as to Hong Kong law: Deacons 5/F, Alexandra House 18 Chater Road Central Hong Kong as to PRC law: Zhong Lun Law Firm 13/F, Building 1 China Merchant Tower 118 Jianquo Road Chaoyang District Beijing The PRC as to Cayman Islands law: Conyers Dill & Pearman Cricket Square Hutchins Drive George Town Grand Cayman KY Cayman Islands Auditors and reporting accountants Property valuer Receiving banker KPMG 8/F, Prince s Building 10 Chater Road Central Hong Kong Knight Frank Petty Limited 4/F, Shui On Centre 6-8 Harbour Road Wanchai Hong Kong Bank of China (Hong Kong) Limited 1 Garden Road Central Hong Kong 54

60 CORPORATE INFORMATION Registered office Principal place of business in the PRC Principal place of business in Hong Kong Company secretary and qualified accountant Authorised representatives Audit committee Remuneration committee Nomination committee Principal share registrar and transfer office in Cayman Islands Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY Cayman Islands Level 8, Hong Long Building Nanhai Avenue Nanshan District Shenzhen, Guangdong Province The PRC Suite 6403, 64/F, Central Plaza 18 Harbour Road Wanchai Hong Kong (Mr. Chu Kin Wang, Peleus) (FCPA FCCA ACIS) (Mr. Zeng Yunshu) (Dr. Han Qinchun) (Mr. Cheung Ngai Lam) (Chairman) (Dr. Li Jun) (Ms. Lin Weifang) (Dr. Li Jun) (Chairman) (Mr. Zeng Yunshu) (Mr. Cheung Ngai Lam) (Ms. Lin Weifang) (Chairlady) (Dr. Li Jun) (Mr. Cheung Ngai Lam) Butterfield Fund Services (Cayman) Limited Butterfield House 68 Fort Street P.O. Box 705 George Town Grand Cayman Cayman Islands 55

61 CORPORATE INFORMATION Hong Kong branch share registrar and transfer office Principal bankers Tricor Investor Services Limited 26th Floor Tesbury Centre 28 Queen s Road East Hong Kong In Hong Kong: The Hongkong and Shanghai Banking Corporation Limited 1 Queen s Road Central Hong Kong In the PRC: China Bank of Communications Shenzhen Shekou Branch Block A, 1/F Haijing Plaza 18 Taizi Road Shekou, Nanshan District Shenzhen, Guangdong Province the PRC Agricultural Bank of China Shenzhen Nanshan Branch First Floor, Shandong Mansion Nanyou Avenue, Nanshan District Shenzhen, Guangdong Province the PRC Shenzhun Rural Commercial Bank Shiyan Branch 415 Baoshi East Road Shiyan Street Shenzhen, Guangdong Province the PRC Hua Xia Bank Shenzhen Shanbu Branch 1/F, Block 521 The Bagualing Industrial Zone Bagua San Road Futian District Shenzhen, Guangdong Province the PRC 56

62 INDUSTRY OVERVIEW The information in the section below has been derived, in part, from various official government publications. This information has not been independently verified by the Company, the Global Coordinator, the Sponsor, the Underwriters or any of their respective affiliates or advisers. The information may not be consistent with other information compiled within or outside the PRC. ECONOMIC DEVELOPMENT The development of the PRC economy The PRC economy has grown significantly since the introduction of economic reforms in the late 1970 s. Such economic reforms and the strong growth of the economy are expected to continue following China s accession to the World Trade Organisation in According to the National Bureau of Statistics of China and the National People s Congress, the PRC recorded GDP of approximately RMB18,232.1 billion and GDP per capita of approximately RMB13,600 in Compared to the GDP of approximately RMB10,965.5 billion in 2001, the PRC achieved a CAGR of approximately 13.6% during the period 2001 to The annual growth rate recorded in 2005 was approximately 9.9%. The 10th Five-Year ( ) Plan for National Economic and Social Development by the PRC Government (the 10th Five-Year Plan ) had come to an end in During the period covered by the 10th Five-Year Plan, the average annual GDP growth was approximately 9.5%, which exceeded the estimated annual growth of 7% by 2005 set in the 10th Five-Year Plan. Moreover, the target for GDP per capita of RMB9,400 was achieved in 2004 at RMB10,561. The 11th Five-Year ( ) Plan for National Economic and Social Development (the 11th Five-Year Plan ) was announced at the 10th National People s Congress held in March Some of the targets included in the 11th Five-Year Plan are as follow: (i) Average annual GDP growth of 7.5%; (ii) GDP per capita to reach US$2,400 (equivalent to approximately RMB19,200); and (iii) Annual growth of 5% for per capita disposable income for urban residents. The 11th Five-Year Plan of the PRC also emphasizes an improvement in the quality of life for both urban and rural residents. The per capita disposable income of urban residents and the per capita net income of rural residents are both aimed to grow at an average annual rate of 5% respectively. The livelihood of both urban and rural residents will see improvements in terms of housing, transportation, education, culture, health and the environment. Furthermore, an addition of 45 million agricultural laborers are to be transferred into non-farm jobs in urban areas. 57

63 INDUSTRY OVERVIEW The table below sets out selected economic and growth statistics on GDP, per capita disposable income and urbanization in the PRC in the periods indicated: Nominal GDP Real GDP growth GDP per capita Population Urban population Urbanization rate Per capita disposable income of urban residents Per capita net income of rural residents (RMB billion) (%) (RMB) (million) (million) (%) (RMB) (RMB) , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,255.0 Growth, as demonstrated by CAGRs from 2001 to % 13.9% 4.1% 10.8% 7.6% Sources: (i) National Bureau of Statistics of China and (ii) National People s Congress The development of Guangdong Province economy Guangdong Province is located in the South-eastern coast of China. Three special economic zones, namely, Shenzhen, Zhuhai and Shantou are located in Guangdong Province. In 2005, Guangdong Province achieved GDP of approximately RMB2,170.1 billion, contributing to approximately 11.9% of the total GDP of the PRC. These statistics demonstrate that Guangdong Province plays a major role in the PRC economy despite the PRC Government encourage more investment into relatively less developed regions of the country such as the North-western part of China. The growth in GDP attained a CAGR of approximately 19.5% from 2001 to 2005, outpacing the national growth of CAGR of approximately 13.6% during the same period. By the end of 2005, Guangdong Province had a population of approximately million. The per capita disposable income of urban residents was RMB14,769.9 and the per capita net income of rural residents was RMB4,690.5 in 2005, both of which have well surpassed the national levels of RMB10,493 and RMB3,255 respectively and indicate that Guangdong Province is one of the most affluent provinces in China Approximately 58,800 multinational companies and enterprises have established their offices and operations in Guangdong Province by the end of 2005, which has also led to an increase in the number of expatriates relocating to Guangdong Province for work or residential purposes and in the demand for residential properties in Guangdong Province. 58

64 INDUSTRY OVERVIEW The table below sets out selected economic and growth statistics on GDP, per capita disposable income, and foreign direct investment ( FDI ) in Guangdong Province for the periods indicated: Nominal GDP Real GDP growth GDP per capita Population Per capita disposable income of urban residents Per capita net income of rural residents (RMB billion) (%) (RMB) (million) (RMB) (RMB) , , , , , , , , , , , , , , , , , , , , , , ,690.5 Growth, as demonstrated by CAGRs from 2000 to % 12.9% 1.2% 8.6% 5.1% Sources: (i) China Statistical Yearbook 2005 ( ( ) ) and (ii) Bureau of Statistics of Guangdong The development of the Shenzhen economy Shenzhen is located in the Southern part of Guangdong Province and comprises approximately 1,952.8 sq. km in area according to the Shenzhen Municipal Government. By the end of 2005, Shenzhen had a population of approximately 8.3 million. Shenzhen has experienced significant growth of GDP in recent years from approximately RMB248.2 billion in 2001 to approximately RMB492.7 billion in 2005, representing CAGR of approximately 18.7% and exceeding the CAGR of national GDP of approximately 13.6% over the same period. The per capita disposable income of urban residents was approximately RMB21,494.4, which is well above the national levels of approximately RMB10,493 as stated in the China Statistical Yearbook Shenzhen has also experienced significant growth in FDI in recent years. According to the Bureau of Statistics of Shenzhen, the value of FDI amounted to approximately US$3.0 billion in 2005, representing an annual growth of approximately 26.3% over According to the Bureau of Statistics of Shenzhen, approximately 114 of the global top 500 companies have invested in Shenzhen. 59

65 INDUSTRY OVERVIEW According to the CICC ( ), an institute founded in Hong Kong which principally engaged in conducting evaluation and researches on city competitiveness, Shenzhen was ranked the first among all cities in the PRC and Taiwan in 2005 in terms of overall growth competitive strengths. The table below sets out selected economic statistics including the increase in GDP, per capita disposable income and FDI in Shenzhen for the periods indicated: Nominal GDP Real GDP Growth GDP per capita Population Per capita disposable income of urban residents Foreign direct investment (RMB billion) (%) (RMB) (million) (RMB) (US$ m) , , , , , , , , , , , , , , , , , ,969.0 Growth, as demonstrated by CAGRs from 2000 to % 8.8% 14.1% (0.1%) 8.6% Source: Bureau of Statistics of Shenzhen ( ) Baoan District and Nanshan District of Shenzhen Baoan District, Shenzhen A number of the Group s completed projects and land reserves including (Hong Long Plaza), Baorun Ornament Materials Mall, Longhua Project and Yinghua project are located in Baoan District, which is located in the Western part of Shenzhen. According to (Shenzhen Baoan Region People s Government), Baoan District covers an area of approximately 733,000 square metres and Shenzhen s Baoan International Airport is also situated there. According to the Shenzhen Real Estate Yearbook (2005), Baoan District has recorded the highest year-on-year growth in terms of residential area sold, in comparison with other districts in Shenzhen. Nanshan District, Shenzhen (Harbor City), one of the Group s completed projects, is located in Nanshan District, a well-developed area located in the South-western part of Shenzhen, which covers a site area and total GFA of approximately 19,822 sq.m. and 95,577 sq.m. respectively. 60

66 INDUSTRY OVERVIEW The development of the Huizhou economy According to the information provided by the Huizhou Municipal Government, Huizhou is located in the South-eastern part of Guangdong Province and comprises approximately 11,200 sq. km in area. By the end of 2005, Huizhou had a population of approximately 3.7 million. Huizhou has experienced significant growth in GDP in recent years from approximately RMB47.6 billion in 2001 to approximately RMB80.4 billion in 2005, representing CAGR of approximately 14.0% and in line with the CAGR of national GDP of approximately 13.6% over the same period. The per capita disposable income of urban residents was RMB14,884 and the per capita net income of rural residents was RMB4,698 in 2005, both of which have well surpassed the national levels of RMB10,493 and RMB3,255 respectively. Huizhou has also experienced significant growth in FDI in recent years. The value of FDI amounted to approximately US$1,041.9 million in 2005, representing an annual growth of approximately 64.8% over The table below sets out selected economic and growth statistics including the increase in GDP, per capita disposable income and FDI in Huizhou for the periods indicated: Nominal GDP Real GDP growth GDP per capita Population Per capita disposable income of urban residents Foreign direct investment (RMB billion) (%) (RMB) (million) (RMB) (US$ m) , , , , , , , , , , , , , , , , ,041.9 Growth, as demonstrated by CAGRs from 2000 to % 6.8% 5.7% 8.7% 0.2% Source: Bureau of Statistics of Huizhou 61

67 INDUSTRY OVERVIEW The development of the Meizhou economy Meizhou is located in the North-eastern part of Guangdong Province and comprises approximately 15,800 sq. km in area. By the end of 2005, Meizhou had a population of approximately 5.0 million. Meizhou has experienced significant growth in GDP in recent years from approximately RMB19.0 billion in 2001 to approximately RMB27.2 billion in 2004, representing CAGR of approximately 12.7% from 2001 to 2004 and in line with the CAGR of national GDP of approximately 13.4% over the same period. The per capita disposable income of urban residents was approximately RMB14,884 in 2005, which has well surpassed the national level of approximately RMB10,493. Meizhou has also experienced significant growth in recent years. The value of FDI amounted to approximately US$1,041.9 million in 2005, representing an annual growth of approximately 64.9% over The table below sets out selected economic statistics including the increase in GDP, per capita disposable income and FDI in Meizhou for the periods indicated: Per capita disposable income of urban residents Foreign direct investment Nominal GDP Real GDP growth Population (RMB billion) (%) (million) (RMB) (US$ m) , , , , Growth, as demonstrated by CAGRs from 2001 to % 0.7% 3.0% 32.3% Source: Bureau of Statistics of Meizhou 62

68 INDUSTRY OVERVIEW REAL ESTATE MARKET In the 1990 s, the PRC government commenced real estate reform, which has resulted in the transition of the real estate market in the nation from a state-allocated housing program to a market system. A brief timeline of recent key housing reforms is set out as follows: 1994 The regulation for sale of public housing was promulgated and an all-round housing fund to be funded by both employers and employees was established 1995 Regulations regarding sales and pre-sales of real estate were implemented 1998 The state-allocated housing program was abolished 1999 Maximum mortgage term was extended to 30 years and maximum mortgage finance was increased from 70% to 80% 2002 Rules regarding the grant of state-owned land use rights by way of public tender, auction and listing-for-sale were issued at the state level, which require that land use rights for the purposes of commercial use, tourism, entertainment, commodity residential properties and other operational purposes can only be granted by the government through public tender, auction or listing-for-sale 2003 Rules for more stringent administration of real estate loans were promulgated by the PRC Government in order to reduce the credit and systematic risks associated with such loans The State Council issued a circular, which emphasized sustainable and healthy development of the real estate market 2004 Restriction of mortgage available to borrowers China Banking Regulatory Commission issued guidelines regarding risks of real estate loans for commercial banks to further strengthen the risk control of commercial banks on real estate loans The State Council issued a notice that for real estate development projects (excluding economical housing projects), it requires the portion of capital funds financed by property developers to increase from 20% or above to 35% or above Ministry of Construction amended administrative measures on the pre-sale of commercial housing in cities 63

69 INDUSTRY OVERVIEW 2005 The PRC government introduced additional measures to cool down speculation in certain regional markets including, among others, increasing the minimum required down payment to 30% of the total purchase price and eliminating the preferential mortgage interest rate for residential housing 2006 The PRC government announced certain new measures in order to slow down the rapid economic growth in the PRC by changes in monetary policies and investment in fixed assets. Such new policies also include the imposition of tighter reins on land and lending. In May 2006, the State Council together with other related government agencies announced a number of new policies for the purposes of (i) discouraging excessive growth of the high-end residential property sector in the PRC, and (ii) stimulating the development of mass-market residential property projects which have higher degree of affordability. In addition, nine PRC government bodies, including the Ministry of Construction, the State Administration of Taxation, the Ministry of State Land and Resources, the Development and Reform Commission, the Compliance Department, the Ministry of Finance, the Bureau of Statistics, the State Administration of Taxation, the Ministry of Land Resource, the China Banking Regulatory Commission and the People s Bank of China jointly announced in May 2006 that: (i) except with the approval of the Ministry of Construction, at least 70% of the total development and construction area of any new residential projects should consist of units that are less than 90 square metres in size (the 90:70 requirements); (ii) new land supply for the development of townhouse will be discontinued and those for high-end residential properties will also be restricted; (iii) effective from 1 June, 2006, operating tax of 5% will be levied on the total sale price of any residential properties sold within 5 years of purchase (for properties that has been held for a period greater than 5 years prior to re-sale, then the operating tax shall be levied on the profit from such sale except for ordinary residential properties in which case a full tax exemption may be granted); (iv) effective from June 2006, the minimum down-payment for property purchases (other than first time purchases of properties of less than 90 square metres in size) will be increased from 20% to 30% of the total purchase price; and (v) banks are not permitted to provide loans to a property developer whose total capital fund is less than 35% of the total investment amount in an intended development project. 64

70 INDUSTRY OVERVIEW The Directors believe that the Group would not be materially affected by the aforesaid measures and policies. Those measures and policies are to adjust the overall construction area of a city instead of a particular project. It is ruled that for the commodity housing units newly approved or constructed on or after 1 June 2006, the construction area of suite-style units (including economy housing units) under 90 square metres must reach 70% or above. All the projects developed by the Group comply with the city planning and have gone through the approval procedures. As such, the Group s projects will not be affected by the 90:70 requirement; and the Group s results and experience are primarily from the development of small to medium size residential units. Further information on housing reforms and recent regulatory developments is set out in the section headed Summary of PRC rules and regulations relating to the property sector in Appendix VI to this prospectus. The property development in the PRC According to the National Bureau of Statistics of China, the investment value in the real estate market in the PRC has recorded a steady increase since Such increase was mainly driven by the growth in the PRC economy. In 2005, the nominal GDP of the PRC was approximately RMB18,232.1 billion, representing a CAGR of approximately 15.3% for the period from 2000 to In line with the nominal GDP growth, the investment value in the real estate market in the PRC increased from approximately RMB498.4 billion in 2000 to approximately RMB1,315.8 billion in 2004, representing a CAGR of approximately 27.5% for the period. Investment value RMB billion 1,600 Nominal GDP RMB billion 16,000 1,200 12, , , Investment value in real estate in the PRC Nominal GDP of the PRC Source: National Bureau of Statistics of China

71 INDUSTRY OVERVIEW In line with the growth in investment value in the real estate market in the PRC, the properties under construction and completed recorded an increase respectively. According to the National Bureau of Statistics of China, properties under construction in the PRC was approximately 3,765.0 million square metres in 2004, representing a CAGR of approximately 9.2% for the period from 2000 to Properties completed was approximately 2,070.2 million square metres in 2004, representing a CAGR of approximately 3.3% for the period from 2000 to Million sq.m 4,000 3,500 3,000 2,500 2,000 1,500 1, Properties under construction in the PRC Properties completed in the PRC Source: National Bureau of Statistics of China

72 INDUSTRY OVERVIEW According to the National Bureau of Statistics of China, residential properties sold increased from approximately million square metres in 2000 to approximately million square metres in 2004, accounting for approximately 88.5% of the total properties sold in 2004 and representing a CAGR of approximately 19.5% for the period from 2000 to The commercial properties sold in 2004 was approximately 44 million square metres, accounting for approximately 11.5% of the total properties sold in 2004 and representing a CAGR of approximately 20.9% for the period from 2000 to Million sq.m Commercial properties sold in the PRC Residential properties sold in the PRC Source: National Bureau of Statistics of China

73 INDUSTRY OVERVIEW According to the National Bureau of Statistics of China, the average selling price of residential properties has recorded a steady growth since In 2004, the average selling price of residential properties in the PRC was approximately RMB2,549, representing a CAGR of approximately 6.95% from approximately RMB1,948 in RMB/sq.m 3,000 2,750 2,500 2,250 2,000 1,750 1, Average selling price of residential properties in the PRC Source: National Bureau of Statistics of China

74 INDUSTRY OVERVIEW The property development in Guangdong province According to the National Bureau of Statistics of China and the source from CEIC Data Company Limited, the investment value in the real estate market in Guangdong Province has been increasing significantly since Such increase was mainly driven by the growth in Guangdong Province s economy. The nominal GDP of Guangdong Province increased from approximately RMB950.6 billion in 2000 to approximately RMB2,170.1 billion in 2005, representing a CAGR of approximately 17.9% for the period. It was slightly higher than the CAGR of China s nominal GDP in the same period. The investment value in residential properties in Guangdong Province increased from approximately RMB59.4 billion in 2000 to approximately RMB88.9 billion in 2004, representing a CAGR of approximately 10.6% for the period from 2000 to The investment value in commercial properties in Guangdong Province increased from approximately RMB26.5 billion in 2000 to approximately RMB46.6 billion in 2004, representing a CAGR of approximately 15.2% for the period. Investment value RMB billion 200 Nominal GDP RMB billion 2, , , Investment value in commercial properties in Guangdong province Investment value in residential properties in Guangdong province Nominal GDP of Guangdong province 0 Source: National Bureau of Statistics of China

75 INDUSTRY OVERVIEW According to the source from CEIC Data Company Limited, properties under construction in Guangdong Province was million square metres in 2004, representing a CAGR of approximately 9.1% for the period from 2000 to 2004, and of which million square metres were residential properties, accounting for 75.4% of the total properties under construction in On the other hand, the GFA of properties completed in Guangdong Province was approximately 44.7 million square metres in 2004, representing a CAGR of approximately 9.0% for the period from 2000 to 2004, and of which 35.6 million square metres were residential properties, accounting for 79.7% of the total properties completed in Million sq.m Properties under construction in Guangdong Province Properties completed in Guangdong Province Source: CEIC Data Company Limited 70

76 INDUSTRY OVERVIEW According to the National Bureau of Statistics of China, the floor space of residential properties sold in Guangdong Province in 2004 was approximately 30.1 million square metres, accounting for approximately 90% of the total properties sold in Guangdong Province in The CAGR of residential properties sold was approximately 10.6% for the period from 2000 to As for the commercial properties sold in 2004, the floor space sold was approximately 2.5 million square metres, accounting for approximately 7.4% of the total properties sold in The CAGR of commercial properties was approximately 5.1% for the period from 2000 to Million sq.m Commercial properties sold in Guangdong Province Residential properties sold in Guangdong Province Source: National Bureau of Statistics of China

77 INDUSTRY OVERVIEW According to the National Bureau of Statistics of China, the average selling price of residential properties has recorded a significant increase since In 2004, the average selling price of residential properties in Guangdong Province was RMB3,298 per square metre, whereas it was approximately RMB2,973 per square metre in It represented a CAGR of approximately 2.6%. RMB/sq.m 3,500 3,000 2,500 2,000 1,500 1, Average selling price of residential properties in Guangdong province Source: National Bureau of Statistics of China

78 INDUSTRY OVERVIEW The property development in Shenzhen According to the Bureau of Statistics of Shenzhen, the nominal GDP of Shenzhen in 2005 was RMB492.7 billion, representing a CAGR of approximately 26.0% for the period from 2001 to In line with the nominal GDP growth, the investment value in the real estate market in Shenzhen increased from approximately RMB30.3 billion in 2001 to approximately RMB41.9 billion in 2005, representing a CAGR of approximately 8.6% for the period. Investment RMB billion 100 Nominal GDP RMB billion Investment value in real estate in Shenzhen Nominal GDP of Shenzhen Source: Bureau of Statistics of Shenzhen City

79 INDUSTRY OVERVIEW As the investment value in real estate in Shenzhen has increased in the past few years, the GFA of properties under construction and completed therefore increased. According to the CEIC Data Company Limited, the GFA of properties under construction in Shenzhen was approximately 34.0 million square metres in 2005, representing a CAGR of approximately 9.2% for the period from 2001 to Thousand sq.m. 50,000 40,000 30,000 20,000 10, Properties under construction in Shenzhen Properties completed in Shenzhen Source: CEIC Data Company Limited 74

80 INDUSTRY OVERVIEW According to the CEIC Data Company Limited, the GFA of residential properties sold in Shenzhen in 2004 was approximately 3.4 million square metres, accounting for approximately 90.4% of the total properties sold in In line with the drop in the total floor space completed, the CAGR of GFA of residential properties sold for the period from 2000 to 2004 was approximately 1%. The low CAGR was mainly driven by the decline in the total floor area completed. Thousand sq.m. 6,000 5,000 4,000 3,000 2,000 1, Residential properties sold in Shenzhen Commercial properties sold in Shenzhen Source: CEIC Data Company Limited 75

81 INDUSTRY OVERVIEW According to the CEIC Data Company Limited, the average selling price of residential properties in Shenzhen has recorded a significant increase since The average selling price of residential properties in Shenzhen increased from approximately RMB5,517 in 2001 to approximately RMB7,040 in 2005, representing a CAGR of approximately 6.2% for the period. RMB square meter 8,000 7,400 6,800 6,200 5,600 5, The average selling price of residential properties in Shenzhen Source: CEIC Data Company Limited 76

82 INDUSTRY OVERVIEW The development of the Huizhou real estate market According to the Bureau of Statistics of Huizhou, investment in the real estate market in Huizhou has maintained a sustainable growth rate in recent years with investment value of approximately RMB1,064.7 million recorded in 2001 and RMB4,378 million recorded in 2005, representing a CAGR of approximately 42.4% for the period. Meanwhile, the total GFA sold in 2001 and 2005 was approximately million square metres and 1,367.6 million square metres respectively, representing a CAGR of approximately 31.7%. The table below sets out the increase in the value of real estate investment and total GFA sold in Huizhou for the periods indicated: Real estate investment (RMB million) GFA sold ( 000 square metres) , , , , , , ,367.6 Source: Bureau of Statistics of Huizhou 77

83 INDUSTRY OVERVIEW According to the Bureau of Statistics of Huizhou, the increase in demand for real estate in Huizhou is also reflected by the continuous growth in the average price of properties. The average price of properties increased from approximately RMB1,732.7 per square metres in 2001 to approximately RMB2,597 per square metres in 2005, representing a CAGR of approximately 14.4% for the period. The chart below illustrates the increasing trend of real estate prices in Huizhou for the periods indicated: RMB per sq.m. 5,000 4,000 3,000 2,000 1, The average price of overall properties in Huizhou City Source: Bureau of Statistics of Huizhou According to the Bureau of Statistics of Huizhou, the development cost of property increased by approximately 54%, and hence such increase directly reflected on the selling price of property. The selling price increased to approximately RMB2,349.4 in 2002 from approximately RMB1,732.7 in 2001, representing an increase of approximately 35.6%. In 2003, the cost of property dropped by approximately 17%, and hence the average selling price of property dropped consistently. The average selling price dropped to approximately RMB1,939.4 in 2003, representing a decline of approximately 17%. 78

84 INDUSTRY OVERVIEW The development of Meizhou real estate market According to the Bureau of Statistics of Meizhou, the investment in the real estate market in Meizhou has maintained a sustainable growth in recent years with investment value of approximately RMB1,305 million recorded in 2001 and RMB978.1 million recorded in The table below sets out the increase in the value of real estate investment for the periods indicated: Real estate investment (RMB million) , , , , Sources: (i) Bureau of Statistics of Guangdong Province and (ii) Bureau of Statistics of Meizhou According to an article 2005 (Report on the analysis of the real estate markets of regions in Guangdong Province, 2005) prepared by (Real Estate Market Analysis Division of Guangdong Province), the investment in residential properties and commercial properties in the Northern regions (including the five cities of Qingyuan ( ), Yunfu ( ), Heyuan ( ), Meizhou ( ), Shaoguan ( )) decreased by approximately 1% respectively, while the investment in the properties for other purposes increased by approximately 3%. The main reason was, among other things, the tightening of national monetary policy in 2005 which reduced the reliance of developers on domestic loans and increased the share of self-raised capital, hence reducing the corresponding investment risks and bought certain impacts on the regions. While the local developers are optimistic about the market, the pace of land development slowed down when compared with the corresponding period of last year and the phenomenon of land hoarding is obvious. The local market consumption continues to strengthen since the beginning of Property prices have increased significantly, but remain the lowest among all regions in Guangdong Province at RMB1,491 per sq.m.. 79

85 HISTORY AND DEVELOPMENT HISTORY AND DEVELOPMENT Hong Long Shenzhen The history of the Group can be traced back to September 2000, when Hong Long Shenzhen was established as a limited company with a registered capital of RMB10,000,000. Hong Long Shenzhen was then owned as to 50% by Shenzhen Cairun, an Independent Third Party whose business activities included trading and property development, 45% by Shenzhen Li Feng Tong, an Independent Third Party (save for its shareholding in Hong Long Shenzhen) and 5% by Hong Long Commercial Development, an Independent Third Party (save for its shareholding in Hong Long Shenzhen). Shortly after its establishment, Hong Long Shenzhen in October 2000 entered into a co-operation agreement with an Independent Third Party to jointly develop Harbor City, the Group s first property development project. On 29 June 2001, the then shareholders of Hong Long Shenzhen, namely Shenzhen Li Feng Tong and Hong Long Commercial Development respectively entered into an equity transfer agreement with Xingning Zhonglian, an Independent Third Party (save for its shareholding in Hong Long Shenzhen), to transfer their entire equity interests, as to 45% and 5% respectively, in Hong Long Shenzhen to Xingning Zhonglian for a respective consideration of RMB4,000,000 and RMB300,000, which were determined with reference to the then registered capital of Hong Long Shenzhen. On 13 August 2001, a new business license was issued by SAIC with respect to such transfers. On 20 August 2001, a shareholders resolution was passed to increase the registered capital of Hong Long Shenzhen from RMB10,000,000 to RMB25,000,000, with additional capital of RMB15,000,000 contributed by (Mr. Zeng Sheng), a Director. Upon the completion of the capital contribution, Hong Long Shenzhen was owned as to 60% by (Mr. Zeng Sheng), 20% by Shenzhen Cairun and 20% by Xingning Zhonglian respectively. On 29 October 2001, a new business license was issued by SAIC with respect to such increase in registered capital. On 15 November 2001, Xingning Zhonglian and Shenzhen Cairun entered into an equity transfer agreement pursuant to which Shenzhen Cairun agreed to transfer its 20% equity interest in Hong Long Shenzhen to Xingning Zhonglian for a consideration of RMB5,000,000, which was determined with reference to the then registered capital of Hong Long Shenzhen. After the transfer, Hong Long Shenzhen was owned as to 60% by (Mr. Zeng Sheng) and 40% by Xingning Zhonglian. On 13 December 2001, a new business license was issued by SAIC with respect to such transfer. In April 2002, Hong Long Shenzhen obtained its first qualification certificate ( ). Within the same month, the construction work of Harbor City was formally commenced. In June 2003, Hong Long Shenzhen acquired the land use right of Hong Long Plaza. In September 2003, the construction work of Harbor City was completed. 80

86 HISTORY AND DEVELOPMENT On 18 March 2004, (Mr. Zeng Sheng), (Ms. Wu Lijun) and Xingning Zhonglian entered into an equity transfer agreement pursuant to which Xingning Zhonglian agreed to transfer its 40% equity interest in Hong Long Shenzhen as to 20% to (Mr. Zeng Sheng) and 20% to (Ms. Wu Lijun). The consideration for each of the transfers was RMB5,000,000 and was determined with reference to the then registered capital of Hong Long Shenzhen. After the transfers, Hong Long Shenzhen was owned as to 80% and 20% by (Mr. Zeng Sheng) and (Ms. Wu Lijun) respectively. On 11 October 2004, the aforesaid equity transfers were approved by SAIC. In June 2005, Hong Long Shenzhen obtained (Notice of Resumption of Construction Work) for the resumption of the construction works of the Group s third development project, Hong Long High Technology Industrial Park. On 28 March 2006, each of (Mr. Zeng Sheng) and (Ms. Wu Lijun) entered into an equity transfer agreement with Access Achievement, pursuant to which (Mr. Zeng Sheng) and (Ms. Wu Lijun) agreed to transfer their 80% and 20% equity interests respectively, in Hong Long Shenzhen to Access Achievement. The total consideration for such transfers was RMB71,918,000 and was determined with reference to the valuation report on the net assets of Hong Long Shenzhen issued by (Shenzhen Sinocoms Appraisal Company Limited) dated 15 September On 12 June 2006, a new business licence was issued by SAIC with respect to such transfers. Hong Long Shenzhen was then transferred into a WFOE, and its business scope was changed to property development within the scope of legally obtained land use rights. On 15 June 2006, the directors of Hong Long Shenzhen passed a resolution to change its name from ( Shenzhen Hong Long Industrial Company Limited ) to its existing name ( Hong Long Properties (Shenzhen) Company Limited ). The change of name has been approved by SAIC on 21 June 2006 and by (Nanshan Bureau of Trade and Industry) on 7 July A new business licence was issued by SAIC on 21 June In July 2006, Hong Long Shenzhen successfully renewal of its then qualification certificate, its current qualification certificate will be expired in June On 25 August 2006, a directors resolution was passed to increase the registered capital of Hong Long Shenzhen to RMB88,600,000, and the total amount of investment to RMB152,200,000. On 8 September 2006, Nanshan Bureau of Trade and Industry approved the capital increase. On the same day, Hong Long Shenzhen obtained the approval in relation to capital increase from the People s Government of Shenzhen. On 8 October 2006, a directors resolution was passed to increase the total amount of investment of Hong Long Shenzhen from RMB152,200,000 to RMB177,200,000. On 12 October 2006, Nanshan Bureau of Trade and Industry approved the capital increase. On 13 October 2006, Hong Long Shenzhen obtained the approval from the People s Government of Shenzhen. On 19 October 2006, a new business license was issued by SAIC. 81

87 HISTORY AND DEVELOPMENT Hong Long Commercial With an aim to providing itself a stable inflow of recurring income, Hong Long Shenzhen together with Shenzhen Xingjida, an Independent Third Party (save for its shareholding in Hong Long Commercial through a capital injection became the shareholders of Hong Long Commercial as to 88.95% and 4.68% respectively in May At the time of the aforesaid capital injection, the business scope of Hong Long Commercial included trading of construction materials, domestic commerce, sale and supply of other raw materials. After the capital injection, the shareholders of Hong Long Commercial were Hong Long Shenzhen (as to 88.95%), Shenzhen Xinjida (as to 4.68%), and the then existing shareholders, namely Shenzhen Runda (as to 4.21%) and Mr. Bu Jie (as to 2.16%). In September 2003, Hong Long Commercial expanded its scope of business to include information consultancy services. On 24 August 2004, the shareholders of Hong Long Commercial passed a resolution to further expand its business scope to property management. On 12 December 2004, the shareholders of Hong Long Commercial passed a resolution to further include the business of commercial management into its business scope. In April 2006, Hong Long Commercial obtained its first qualification certificate in property management ( ). On 20 April 2006, Hong Long Shenzhen and Shenzhen Xingjida entered into an agreement pursuant to which Shenzhen Xingjida agreed to transfer its entire equity interest of 4.68% in Hong Long Commercial to Hong Long Shenzhen at a consideration of RMB1,000,000, which was determined with reference to the then market conditions. After the transfer, Hong Long Commercial was owned as to approximately 93.63% by Hong Long Shenzhen, approximately 4.21% by Shenzhen Runda and approximately 2.16% by (Mr. Bu Jie). A new business licence was issued by SAIC on 15 May 2006 with respect to such transfer. On 15 June 2006, Shenzhen Runda and (Ms. Ouyang Wanqiong), an Independent Third Party (save for its shareholding in Hong Long Commercial) entered into an agreement pursuant to which Shenzhen Runda agreed to transfer its entire 4.21% equity interest in Hong Long Commercial to (Ms. Ouyang Wanqiong) at a consideration of RMB450,000 which was determined with reference to the then market conditions. After the transfer, Hong Long Commercial was owned as to approximately 93.63% by Hong Long Shenzhen, approximately 4.21% by (Ms. Ouyang Wanqiong) and approximately 2.16% by (Mr. Bu Jie) respectively. A business licence was issued by SAIC on 21 June In August 2006, the shareholders of Hong Long Commercial passed a resolution to further expand its business scope to include property agency. Such expansion was subsequently approved by SAIC. As a result, the scope of business Hong Long Commercial included trading in construction materials, domestic commercial, supply of materials, information consultation, property management, consultation in commercial management, property agency. 82

88 HISTORY AND DEVELOPMENT Huizhou Yintaida With an aim to achieve its strategy in expanding geographical coverage beyond Shenzhen, Hong Long Shenzhen had been looking for business opportunity. To this end, it had in 2004 identified Huizhou Yintaida, a limited company established in December 2002 with the then business scope included property development, property sales, indoor and outdoor decoration, site foundation and pipelines project and sales of construction materials. Huizhou Yintaida owns the land use rights of parts of the five pieces of land located in Huizhou, Guangdong province, through public auctioning in March On 8 September 2004, the then shareholders of Huizhou Yintaida, Beijing Yintaida, an Independent Third Party (save for its shareholding in Huizhou Yintaida), and Hong Long Shenzhen entered into an agreement pursuant to which Beijing Yintaida agreed to transfer its 2% equity interest in Huizhou Yintaida to Hong Long Shenzhen for a consideration of RMB200,000 which was determined with reference to the then registered capital of Huizhou Yintaida. At the time of the transfer, the principal assets of Huizhou Yintaida is its ownership in the land use rights certificate for 5 parcels of land of site area of approximately 446,743 sq.m. (the Huizhou Land ), which is currently the planned location for part of the Group s future properties development projects, namely Greenview Garden, Mid-level Garden and Dynasty Garden. On 10 September 2004, a shareholders resolution was passed to increase the registered capital of Huizhou Yintaida from RMB10,000,000 to RMB20,000,000, with the additional capital of RMB10,000,000 contributed by Hong Long Shenzhen. Upon the completion of the capital contribution and upon the transfer of 1% equity interest in Huizhou Yintaida by Beijing Yintaida to Hong Long Shenzhen, Huizhou Yintaida became a subsidiary of the Group and became owned as to 51% by Hong Long Shenzhen and 49% by Beijing Yintaida. The Directors confirmed that the consideration for acquiring the 51% interest in Huizhou Yintaida was based on the agreement dated 8 September 2004 under which the parties agreed, among others, that upon Hong Long Shenzhen obtained 51% equity interest in Huizhou Yintaida at a consideration of RMB10,200,000 through capital contribution, both parties would cooperate to develop the Huizhou Land. The revised business license was issued by (Guangdong Boluo Administration for Industry and Commerce) on 20 September Huizhou Yintaida is an operating subsidiary and a project company of the Group. In November 2005, Huizhou Yintaida obtained its first qualification certificate with expiry in November In November 2006, Huizhou Yintaida successfully renewed its qualification certificate for a further term of one year. On 2 February 2007, Hong Long Shenzhen exercised its right under an equity transfer agreement dated 8 August 2006 entered into between Hong Long Shenzhen and Beijing Yintaida in relation to the acquisition by Hong Long Shenzhen of the 49% equity interest in Huizhou Yintaida owned by Beijing Yintaida at a consideration of RMB85,000,000, and upon completion of the registration procedures for the transfer of the equity interest, Huizhou Yintaida will become a wholly-owned subsidiary of the Company. According to the opinion of the PRC Legal Adviser, there are no legal obstacles in principle in effecting the equity transfer and pursuant to the applicable rules and regulations, application for 83

89 HISTORY AND DEVELOPMENT registration of the change of equity shall be made with the relevant authority within 30 days from the transfer and new business licence shall be issued within 10 days from approval date for the registration of the equity transfer. For details, please refer to the paragraph headed Pledge of Land Use Rights of Huizhou Yintaida in this section. Shenzhen Yinghua Shenzhen Yinghua was established in May In March 2005, Hong Long Shenzhen entered into an equity transfer agreement with one of the then shareholders, (Mr. Mao Bingxian), an Independent Third Party (save for its shareholding in Shenzhen Yinghua), in Shenzhen Yinghua to transfer his entire equity interest of approximately 35.71% in Shenzhen Yinghua to Hong Long Shenzhen for a consideration of RMB4,000,000, which was determined with reference to the then development progress of Shenzhen Yinghua. On 8 June 2005, Hong Long Shenzhen further increased its equity interest in Shenzhen Yinghua by acquiring from its then shareholder, Hua Tie Shenzhen, of an equity interest of 50% for a consideration of RMB5,755,000, which was determined with reference to the assessed net asset value in accordance with the valuation report issued by (Zhong Qi Hua Ping Bao Zi (2005) No. 0305) on 15 March As a result of the transfers, Shenzhen Yinghua was owned as to approximately 85.71% and 14.29% by Hong Long Shenzhen and Baoan Zhongzi respectively. The revised business license was issued by SAIC on 18 July Shenzhen Yinghua is an operating subsidiary and a project company of the Group. At the time of Hong Long Shenzhen acquiring Shenzhen Yinghua, Shenzhen Yinghua had the right to develop a property project in Shenzhen. The project was approved by (Shenzhen Municipal Government) in December 2002 and it was agreed that this property development project re-transacts the procedure in accordance with the prevailing land premium standard, details of which are set out in Appendix VI to this prospectus. In June 2003, Shenzhen Land Resources Bureau (Baoan Branch) issued to the project the (Review List for Planning and Design Highlights). The acquisition of Shenzhen Yinghua enables Hong Long Shenzhen to secure its land reserve. As at the Latest Practicable Date, Shenzhen Yinghua has not yet applied for its qualification certificate. As advised by the PRC Legal Adviser, applicants for qualification certificate in Shenzhen is required to submit, among other things, ( State-owned Land Grant Contract of Land Use Rights ). As confirmed by the PRC Legal Adviser, as Shenzhen Yinghua has not entered into a state-own land grant contract of land use rights with the relevant government authorities and therefore cannot apply for the qualification certificate at the current stage. 84

90 HISTORY AND DEVELOPMENT Set out below is the shareholding structure of the Group immediately prior to the Reorganisation, details of which are set out in the section headed Corporate Reorganisation in Appendix VII to this prospectus: (Zeng Sheng) (Note 1) (Wu Lijun) (Note 1) 80% 20% Hong Long Shenzhen (Established in the PRC) property development and property investment 85.71% (Note 2) 51% (Note 3) 93.63% (Note 4) Shenzhen Yinghua (Established in the PRC) Property development Huizhou Yintaida (Established in the PRC) Property development Hong Long Commercial (Established in the PRC) Property leasing and sub-leasing Notes: 1. (Ms. Wu Lijun) is the spouse of (Mr. Zeng Sheng). 2. The remaining approximately 14.29% equity interest in Shenzhen Yinghua is owned by Baoan Zhongzi, an Independent Third Party. 3. The remaining 49% equity interest in Huizhou Yintaida is owned by Beijing Yintaida, a connected person of the Company for the purpose of the Listing Rules. 4. The remaining approximately 6.37% equity interest in Hong Long Commercial is owned approximately 4.21% by (Ms. Ouyang Wanqiong) and approximately 2.16% by (Mr. Bu Jie). (Ms. Ouyang Wanqiong) is an Independent Third Party save for her approximately 4.21% shareholding in Hong Long Commercial. In addition to being a shareholder owning 2.16% equity interest in Hong Long Commercial, (Mr. Bu Jie) is the sole executive director and legal representative of Hong Long Commercial. Save as above, (Mr. Bu Jie) is an Independent Third Party. 85

91 HISTORY AND DEVELOPMENT REORGANISATION The companies comprising the Group underwent the Reorganisation to rationalise the Group s structure in preparation for the Listing. As a result, the Company became the holding company of the Group. The major steps of the Reorganisation are set out in the paragraph headed Corporate Reorganisation in Appendix VII to this prospectus. Set out below is the Group s corporate and shareholding structure immediately after completion of the Global Offering, the Capitalisation Issue and the conversion of the Convertible Note, assuming the Over-allotment Option has not been exercised and no Shares are issued pursuant to the Pre-IPO Share Options and options granted under the Share Option Scheme (all percentages shown are approximate figures). (Zeng Sheng) (Note 1) (Zeng Yunshu) (Note 2) 80% 20% Grand Prosperity (Incorporated in the BVI) Investment holding (Han Qinchun) (Note 3) LBCCA (Note 7) Public 67% 1.4% 6.6% 25% the Company (Incorporated in the Cayman Islands) Investment holding 100% (Note 8) Access Achievement (Incorporated in the BVI) Investment holding 100% (Note 8) Hong Long Shenzhen (Established in the PRC) operating subsidiary, property development and property investment 85.71% (Note 4) 51% (Note 5) 93.63% (Note 6) Shenzhen Yinghua (Established in the PRC) operating subsidiary, Property development Huizhou Yintaida (Established in the PRC) operating subsidiary, Property development Hong Long Commercial (Established in the PRC) operating subsidiary, Property leasing and sub-leasing Notes: 1. (Mr. Zeng Sheng) is an executive Director. 2. (Mr. Zeng Yunshu) is the father of (Mr. Zeng Sheng) and is an executive Director. 3. (Dr. Han Qinchun) is an executive Director. 4. The remaining approximately 14.29% equity interest in Shenzhen Yinghua is owned by Baoan Zhongzi, an Independent Third Party. 86

92 HISTORY AND DEVELOPMENT 5. The remaining 49% equity interest in Huizhou Yintaida is owned by Beijing Yintaida. On 2 February 2007, Hong Long Shenzhen exercised its right to acquire from Beijing Yintaida the 49% equity interests in Huizhou Yintaida pursuant to the Equity Transfer Agreement dated 8 August 2006 (as defined in the paragraph headed Pledge of Land Use Rights of Huizhou Yintaida in this section). As result of the acquisition, Huizhou Yintaida will become a wholly-owned subsidiary of the Company upon completion of the registration procedures for the equity transfer. 6. The remaining approximately 6.37% equity interest in Hong Long Commercial is owned approximately 4.21% by (Ms. Ouyang Wanqiong), an Independent Third Party. and approximately 2.16% by (Mr. Bu Jie), a director of Hong Long Commercial ,000,000 Shares will be held by LBCCA upon the conversion of the Convertible Note on the Listing Date. Assuming the Warrant is exercised by LBCCA in full and no Performance Shares will be delivered back to Grand Prosperity and the Security as described under the paragraph headed Security in the section headed Pre-IPO Finance Investor of this prospectus has been discharged and there are no adjustments as mentioned on pages VIII-6 to VIII-8 of this prospectus, LBCCA will hold approximately 11.6% interests in the Company, Grand Prosperity will hold approximately 67% interest in the Company, and (Dr. Han Qinchun) will hold approximately 1.4% interest in the Company. 8. If LBCAA enforces the Access Achievement Share Charge B, Access Achievement will be held by the Group and LBCCA as to 71% and 29% respectively. If LBCCA enforces the HLSZ Equity Charges in full, Hong Long Shenzhen will be held by the Group and LBCCA as to 71.78% and 28.22% respectively. Please refer to the paragraph headed Security in the section headed Pre-IPO Finance Investor in this prospectus for details of the Access Achievement Share Charge B and the HLSZ Equity Charges. In preparation for the Listing, the Group underwent the Reorganisation which involved, inter alia, establishment of the Company as the listing vehicle to be held by the then shareholders of Hong Long Shenzhen, namely (Mr. Zeng Sheng) and (Ms. Wu Lijun), who through their newly established company incorporated in the BVI, namely Access Achievement, a wholly-owned subsidiary of the Company, acquire the entire equity interest in Hong Long Shenzhen. Details of the Reorganisation are set out below: Reorganisation of the shareholding structure of Hong Long Shenzhen (1) The Reorganisation effected in preparation for the Listing involved the following: (a) (b) on 2 December 2005, Access Achievement was incorporated in the BVI with an authorised share capital of US$50,000 divided into 500,000 shares of US$0.10 each. On 19 December 2005, an aggregate of 25,800 shares were allotted and issued at par, as to 20,640 shares to (Mr. Zeng Sheng) and 5,160 shares to (Ms. Wu Lijun). on 28 March 2006, Access Achievement acquired the entire equity interest in Hong Long Shenzhen as to 80% from (Mr. Zeng Sheng) and 20% from (Ms. Wu Lijun) for a total consideration of RMB71,918,000. The nature of Hong Long Shenzhen changed from a domestic private enterprise to a WFOE after such acquisition. The value was by reference to the assessed net assets value of Hong Long Shenzhen and its subsidiaries in accordance with the valuation report issued by (Shenzhen Sinocoms Appraisal Co., Ltd.) on 15 September As a result of the above acquisition, 87

93 HISTORY AND DEVELOPMENT Hong Long Shenzhen became a wholly-owned subsidiary of the Group. This acquisition was approved by Nanshan Bureau of Trade and Industry on 11 April 2006 and by SAIC on 12 June (c) on 17 July 2006, Grand Prosperity was incorporated in the BVI with an authorised share capital of US$50,000 divided into 50,000 shares of US$1.00 each. On the same day, an aggregate of 100 shares were allotted and issued at par, as to 80 shares to (Mr. Zeng Sheng) and 20 shares to (Ms. Wu Lijun). (d) (e) on 20 July 2006, the Company was incorporated in the Cayman Islands with one nil-paid share of HK$0.01 issued and allotted to Codan Trust Company (Cayman) Limited, which was transferred to Grand Prosperity on the same day. on 20 July 2006, 99 nil-paid Shares of HK$0.01 each were issued and allotted by the Company to Grand Prosperity. (f) on 9 September 2006, (Ms. Wu Lijun) transferred 20 shares held by her in the issued capital of Grand Prosperity to (Mr. Zeng Yunshu) in consideration of US$ On 9 September 2006, Ms. Wu Lijun transferred 5,160 shares held by her in the issued capital of Access Achievement to (Mr. Zeng Yunshu) in consideration of US$ (g) on 19 September 2006, Grand Prosperity allotted and issued at par an aggregate of 9,900 shares, as to 7,980 shares to (Mr. Zeng Sheng) and 1,980 shares to (Mr. Zeng Yunshu), pro-rata to their then shareholding in Grand Prosperity. Upon completion of such allotment and issue, an aggregate of 10,000 shares of Grand Prosperity was issued and allotted, as to 8,000 shares to (Mr. Zeng Sheng) and 2,000 shares to (Mr. Zeng Yunshu). (h) on 19 September 2006, Access Achievement allotted and issued at par an aggregate of 74,200 shares, as to 59,360 shares to (Mr. Zeng Sheng) and 14,840 shares to (Mr. Zeng Yunshu), pro-rata to their then shareholding in Access Achievement. Upon completion of such allotment and issue, an aggregate of 100,000 shares of Access Achievement was issued and allotted, as to 80,000 shares to (Mr. Zeng Sheng) and 20,000 shares to (Mr. Zeng Yunshu). (i) on 31 January 2007, the Company issued and allotted, credited as fully paid at par, 83,999,900 Shares to Grand Prosperity, and credited as fully paid at par the 100 nil paid Shares already held by Grand Prosperity, in consideration for an aggregate of 100,000 shares of US$0.10 each representing the entire issued share capital of Access Achievement transferred to the Company as to 80,000 shares by (Mr. Zeng Sheng) and 20,000 shares (Mr. Zeng Yunshu) pursuant to an agreement for sale and purchase entered into between the Company as purchaser, and (Mr. Zeng Sheng) and (Mr. Zeng Yunshu) as vendors on the same day. 88

94 HISTORY AND DEVELOPMENT (2) The following transfer took place after the Reorganisation: On 31 January 2007, Grand Prosperity transferred 1,680,000 Shares owned by it to (Dr. Han Qinchun) in consideration of HK$6,900,000. PLEDGE OF LAND USE RIGHTS OF HUIZHOU YINTAIDA The Pledge A loan agreement dated 30 September 2004 was entered into by and between Yintaida Education as borrower, and a third party commercial bank (the Bank ) as lender, for an amount of RMB75,000,000 (the Bank Loan ) for a period of ten years commencing from 11 October 2004 at an interest rate of 6.336% per annum. The purpose of the Bank Loan was to fund the construction by Yintaida Education of a secondary schoollisted on the list of core schools of the government of Boluo County, Huizhou, Guangdong Province (the School ). A pledge agreement (the Pledge ) entered into among the Bank, Huizhou Yintaida and Yintaida Education dated 30 September 2004 over the land use rights of two parcels of land granted to Huizhou Yintaida (the Land Use Rights Certificates numbers Bo Fu Guo Yong (2004) Di and Bo Fu Guo Yong (2004) Di respectively) with a total site area of 200,000 square metres (the Pledged Land ), was entered into by Huizhou Yintaida in favour of the Bank. The Bank Loan was further secured by (i) the personal guarantees from (Mr. Yang Weifang) and (Mr. Zhao Guangliang), each of them is a director of Huizhou Yintaida and a shareholder of Yintaida Education; (ii) a charge over the income of the School from lodging fees receivable by Yintaida Education from time to time; (iii) and a pledge of a parcel of land owned by Yintaida Education. In consideration of the Pledge, Beijing Yintaida entered into a share pledge (the Share Pledge ) with Hong Long Shenzhen under which Beijing Yintaida pledged its 49% equity interest in Huizhou Yintaida to Hong Long Shenzhen as a security for the repayment of the Bank Loan by Yintaida Education. Under the Share Pledge, Beijing Yintaida further agreed that it would replace the Pledge with charges of its own assets not later than November 2008, in default of which Hong Long Shenzhen shall have the right to acquire Beijing Yintaida s 49% equity interest in Huizhou Yintaida pledged under the Share Pledge for a consideration not higher than RMB85,000,000. Save for the Share Pledge, the 49% of Huizhou Yintaida held by Beijing Yintaida is currently free from any other encumbrances. Option to Purchase Interest in Huizhou Yintaida by Hong Long Shenzhen Hong Long Shenzhen entered into an equity transfer agreement dated 8 August 2006 with Beijing Yintaida (the Equity Transfer Agreement ), under which Beijing Yintaida agreed to sell to Hong Long Shenzhen Beijing Yintaida s entire 49% equity interest in Huizhou Yintaida at a consideration of RMB85,000,000 (the Exercise Price ) on or before 15 April 2007, beyond which the Equity Transfer Agreement shall lapse and cease to have effect. The right to purchase was granted to Hong Long Shenzhen at no premium. Under the Equity Transfer Agreement, in the event that Hong Long Shenzhen exercises the right to purchase the 49% equity interest in Huizhou Yintaida, a sum of RMB68,000,000 from the Exercise Price will be applied by Beijing Yintaida to fully repay the Bank Loan and to discharge the Pledge. 89

95 HISTORY AND DEVELOPMENT The Directors confirmed that the Exercise Price was reached by Hong Long Shenzhen and Beijing Yintaida at arm s length negotiation by taking into account (i) Huizhou Yintaida entering into the Pledge; (ii) the bank valuation of the Pledged Land in 2004 at RMB167,200,000 as set out in the Pledge entered into among the Bank, Huizhou Yintaida and Yintaida Education; and (iii) allowance for possible appreciation of the value of the Pledged Land. Reasons of Entering Into the Pledge and the Option Prior to 8 September 2004, Huizhou Yintaida was wholly owned by Beijing Yintaida and three other Shareholders which were Independent Third Parties. Hong Long Shenzhen acquired 51% equity interest in Huizhou Yintaida in September 2004 by way of equity transfer and further capital contribution, after which Huizhou Yintaida has been owned by Hong Long Shenzhen and Beijing Yintaida. The Pledge was a condition precedent to Beijing Yintaida agreeing to such acquisitions by Hong Long Shenzhen. In order to acquire Huizhou Yintaida, Hong Long Shenzhen agreed to the provision of the Pledge by Huizhou Yintaida in favour of the Bank as a security for the Bank Loan. In addition, the directors of Hong Long Shenzhen believed that the establishment of the School, which was adjacent to the five parcels of land (State-owned Land Use Rights Transfer Contract No. (2003) F) with a site area of approximately 446,743 square metres (the Huizhou Land ), which comprises the Pledged Land, would increase the market value of the Huizhou Land and therefore would be in the interests of Huizhou Yintaida. The Equity Transfer Agreement was entered into such that the Company would be able to acquire the 49% equity interest of Huizhou Yintaida owned by Beijing Yintaida and Beijing Yintaida would be able to apply the Exercise Price to repay the Bank Loan and to discharge the Pledge. Discharge of the Pledge In order to discharge the Pledge before the Listing Date, on 2 February 2007, Hong Long Shenzhen exercised its right under the Equity Transfer Agreement to acquire from Beijing Yintaida the 49% equity interest in Huizhou Yintaida, and upon completion of the registration procedures for the equity transfer, Huizhou Yintaida will become a wholly-owned subsidiary of the Group. At the same time, Beijing Yintaida transferred the Exercise Price to Yintaida Education for its repayment of the Bank Loan and according to the confirmation dated 5 February 2007 from the Bank, the Bank undertook to the Company to release and discharge the Pledge on or before 9 February 2007, and the Directors confirmed that, in any event the Pledge would be discharged on or before the Listing Date. PROPERTY INTEREST RENTED BY THE GROUP IN HONG KONG On 30 January 2007, the Company rented the premises of 6403, 64th Floor, Central Plaza, 18 Harbour Road, Wanchai, Hong Kong as its office premises in Hong Kong. 90

96 BUSINESS OVERVIEW The Group is principally engaged in the property development of mid-range residential and commercial properties in Guangdong Province, the PRC. The Group is also engaged in property leasing of commercial properties. During the Track Record Period, properties developed by the Group included (i) residential properties; (ii) commercial properties including shopping mall and shopping arcade that were complementary with the Group s residential development; and (iii) industrial park, with an aggregate site area and total GFA of approximately 158,980 sq.m. and 506,146 sq.m. respectively. As at the Latest Practicable Date, properties developed or proposed to be developed by the Group included (i) residential; and (ii) commercial (including shopping malls and shopping arcade that are complementary with the Group s residential developments). The Directors expected that the future property development projects of the Group will continue to focus on residential and commercial complex. Over the years, the Group has successfully established its reputation in Shenzhen, the PRC and was accredited with a number of awards. Details of the Group s awards are set out in the sub-section headed Accreditation under the Business section to this prospectus. The target customers of the Group s residential and commercial properties cover different market segments: (i) residential properties the Group targets middle-class individuals; and (ii) commercial properties the Group targets domestic and foreign reputable retail chains, department stores, supermarkets, as well as enterprises engaging in the businesses of food and beverage, entertainment and beauty. During the Track Record Period, the sale of the Group s developed property constituted approximately 86.5%, 92.9%, 87.5% and 20.6% of the Group s total turnover respectively. During the same period, the Group had commenced the development of a commercial and residential complex in Shenzhen, namely (Hong Long Plaza). Its residential portion comprises approximately 1,500 residential units and over 1,000 residential units of which were subscribed by purchasers on the first day of pre-sale in October The residential and commercial portions of (Hong Long Plaza) were available for occupation in October 2006 and December 2006 respectively. While the Group expects to continue its principal property development business in Shenzhen with the view of benefiting from the continuous economic growth of the region, the Group also intends to expand the geographical coverage of the Group s business in Guangdong Province and other cities in the southern China, should the appropriate business opportunities arise. As at the Latest Practicable Date, the Group had land reserves comprising six parcels of land situated in Huizhou and one parcel of land in Meizhou, with an aggregate site area and expected total GFA of approximately 529,291 sq.m. and approximately 1,259,045 sq.m. respectively. Both Huizhou and Meizhou are in Guangdong Province. With regard to the property leasing business, the Group primarily leases non-residential properties developed either by itself or by Independent Third Parties in Guangdong Province, the PRC. As a complement to the property leasing business, the Group also provides related management services to its leased properties. During the Track Record Period, the property leasing and related management businesses amounted to approximately 13.5%, 7.1%, 12.5% and 79.4% of the Group s total turnover respectively. As at the Latest Practicable Date, the Group had more than 170 tenants. 91

97 BUSINESS The following map sets out the locations of the Group s property development projects and land reserves in various parts of Guangdong Province, the PRC as at the Latest Practicable Date. Guangdong Province Meizhou land reserve Huizhou Shenzhen property development land reserve Below are the Group s properties/future development projects located within Shenzhen, Huizhou and Meizhou. Shenzhen Harbor City Hong Long Plaza Huizhou Greenview Garden Mid-level Garden Dynasty Garden Meizhou Bauhinia Garden BUSINESS OBJECTIVE AND STRATEGIES The Group s business objectives are to increase its market share and to become one of the leading property developers in Guangdong Province, the PRC and other cities in southern China. The Group will continue to focus on the development of mid-range properties, and intends to pursue business opportunities and to further expand its geographical coverage in Guangdong Province and other cities in southern China. To this end, the Group has been carrying out the following strategies to achieve these objectives: To continue its focus on the development of mid-range residential and commercial properties The Group has been focusing on the development of mid-range residential and commercial properties during the Track Record Period. Both (Harbor City) and (Hong Long Plaza) are developments of mid-range residential and commercial properties. The Directors, having taken into account that the Group s accumulated experience in developing mid-range residential and commercial properties during the Track Record Period and with the aim to benefit from the anticipated continuous growth in the demand for such properties as a result of the continuous growth of economy in Guangdong Province, intend to continue focusing on developing the mid-range residential and commercial properties in the future. 92

98 BUSINESS To further expand the land reserves of the Group During the Track Record Period, the Group successfully obtained six parcels of land through the acquisitions of equity interests in other property developing companies with land reserves in Guangdong Province. The Directors are of the view that such acquisitions enable the Group to obtain the lands at lower cost as compared with the cost of land acquired through public tender, auction or listing-for-sale. Having taken into account the experience obtained in acquiring land through the acquisition of equity interests in property developing companies and the benefit of lower land cost, the Directors intend to acquire land through similar acquisitions in the future should opportunities arise. The Group would also acquire the land through public tender, auction or listing-for-sale. To strengthen the related management services in the property leasing business in order to raise the overall market value of the Group s leasing properties With an aim to enhance quality and therefore increase the value of its leasing properties so as to build the Group s image of operating high quality leasing properties, the Group operates its own property management team. Apart from the provision of general property management services, the Group s property management team also conducts market analysis and determines strategic position for each property project that is available for leasing, determines advertising activities before the property projects are launched to the market, unifies decoration, recruits and selects lessees by taking into account whether their reputation, nature and scale of business are in line with the strategic position of the relevant property projects. With Shenzhen as its base, to further expand the Group s geographical coverage in Guangdong Province and other cities in southern China Since its establishment in 2000, the Group has been focusing its businesses in Shenzhen until 2004 and 2006 when the Group successfully obtained land use right certificates in respect of six parcels of land situated in Huizhou and one parcel of land situated in Meizhou in Guangdong Province. The Directors, having taken into account the overwhelming response received from the pre-sale of the residential units of (Hong Long Plaza) and significant growth in net profit for the three financial years of 2003, 2004 and 2005, believe that the Group has established its foundation and reputation in Shenzhen and is ready to expand its business and geographical coverage. To emphasize on the design of its development projects in order to meet the market demand The Directors believe that the results of rapid and continued development of Guangdong Province have caused the standard of living in that region to rise with increased demand for properties with better design and quality. Since its first development project, (Harbor City), the Group has placed emphasis on the design of its developing properties, which the Directors consider to be one of the factors contributing to the Group s success. 93

99 BUSINESS To form long-term strategic partnership with suppliers, contractors and lessees to enhance the Group s competitive advantages The Group emphasizes the quality of its working partners including contractors and suppliers. During the Track Record Period, the Group generally engaged its working partners with recognized experience and qualification. Through the establishment of strategic alliances with the working partners, the Group can improve its competitive advantages. In addition, the Group also invites existing lessees for prior leasing arrangement in relation to new property projects that are available for leasing in the future. The Directors believe that the prior leasing arrangements can reduce lessee recruiting costs for the Group, attract more customer flows to the new property projects and also facilitate the establishment of long-term business relationships with the lessees. COMPETITIVE STRENGTHS The Directors believe that the Group is well-positioned to achieve its business objectives. The Directors consider the principal competitive advantages of the Group to be as follows: The Group differentiates itself from traditional property developers by operating a parallel property leasing business which provides a stable inflow of recurring income, expands customer base and diversifies market risks A property development project generally takes more than one year to complete, during which, a substantial amount of capital will be required. The Directors believe that as an expanding property developer, the Group needs abundant and recurring cash inflows to support its daily operations and therefore growth. In this regard, the Group started to operate its property leasing business since 2001 as the Directors believe that through operating such property leasing business the Group can ensure a stable inflow of revenue, expand its customer base and diversify market risk. The Directors and the Group s senior management have extensive knowledge and experience in property development and property leasing businesses in the PRC, particularly southern China The Directors and senior management of the Group have extensive experience in, and in-depth knowledge of, the property market in Guangdong Province, the PRC. In addition, majority members of the Group s management team are stable and have served in their capacity since the Group s commencement of its property leasing and property development businesses in 2001 and in 2002, respectively. The Directors believe that such experience and knowledge are crucial to the future development of the Group s businesses. Further details of the directors and senior management of the Group are set out in the section headed Directors, senior management and staff to this prospectus. 94

100 BUSINESS The Group has successful track record in developing properties with quality design Over the years, the Group achieve awards, in terms of design, for its properties. The Directors are of the view that such awards represents market recognition of the Group s properties and facilitates the Group s to build up its brandname. The Group has established a good reputation in Shenzhen, the PRC In addition to various awards and certificates that the Group received on its self-developed properties and leasing properties managed by its own property management arm, the Group s proven track record also indicates that its properties are in high demand. The Group s newly released project, (Hong Long Plaza), was well received by the market when over 1,000 residential units of a total of approximately 1,500 residential units were subscribed by purchasers on the first day of pre-sale in October As to the Group s leasing properties, the Group recorded occupancy rates of approximately 83.4%, 99.7%, 99.7% and 99.2% as at 31 December 2003, 2004, 2005 and 31 August The Directors believe that the above-mentioned track record is the evidence of the Group s successful establishment in Shenzhen and believe that the Group is well-positioned to expand its business and geographical coverage. 95

101 BUSINESS ACCREDITATION Set out below is a summary of the major awards/certifications accredited to the Group and/or its projects since its establishment. By company/property: Time of grant Awards/accreditation Awarding organization (Harbor City) May 2003 March 2003 Model Project for Best Healthy Residence ( ) Project of Innovation in Quality Residence in Shenzhen, the PRC ( ) Shenzhen Commercial News ( ) Shenzhen Special Zone Press ( ) Model Project for Innovative and Classic Residence ( ) The Center for Housing Industrialization ( ), Shenzhen Department of Residential ( ), China Real Estate Business ( ), Shenzhen Evening News ( ) January 2003 November 2002 October 2002 Model Project for Residence Index in Shenzhen, the PRC ( ) Prize for Best Residence ( ) Model Project for Quality Residence in Shenzhen, the PRC ( ) China Real Estate Index System ( ) Shenzhen Commercial News ( ), Shenzhen Property Purchasing Club ( ), Shenzhen Collective Property Purchasing Club ( ) Southern Metropolitan News ( ), Southern Daily ( ), Southern Weekend ( ), 21st Century Business Herald ( ) 96

102 BUSINESS Time of grant Awards/accreditation Awarding organization (Hong Long Plaza) November 2005 October 2005 September 2005 Award in Vision in the Commercial Real Estate Field ( ) International Gold Medal for Landscaping and International Golden Medal for Construction ( ) 2005 Best Innovative Small-scale Residential Project in Shenzhen, China ( ) Commercial Real Estate Exhibition Organization Committee in Shenzhen, the PRC ( ), Shenzhen Special Zone Press ( ) China Council for the Promotion of International Trade Shenzhen Sub-council ( ), Shenzhen Ling Shi Culture Propagation Co., Ltd. ( ), Shenzhen Design Federation ( ) Shenzhen Press Group ( ), Shenzhen Evening News ( ), 2005 Autumn Meeting Organization Committee in Shenzhen ( ) 97

103 BUSINESS Time of grant Awards/accreditation Awarding organization Baorun Ornament Materials Mall ( ) October 2005 October 2005 July 2005 October Best Representative of Shenzhen s Past 25-year ( ) Top Ten Home Construction and Decoration Material Market in Shenzhen, the PRC ( ) 2005 Most Popular Construction and Decoration Material Market in the Baoan District, Shenzhen, the PRC ( ) Specialty Home Products Retailer ( ) Shenzhen Commercial News ( ), 2005 Autumn Meeting Organization Committee in Shenzhen (2005 ), Guangdong Decoration Industry Association ( ) Shenzhen Commercial News ( ), 2005 Autumn Meeting Organization Committee in Shenzhen (2005 ) Guangdong Decoration Industry Association ( ) Baoan Daily Group ( ) Jing Newspaper ( ) 98

104 BUSINESS PROPERTY DEVELOPMENT BUSINESS Information about the Group s properties As at the Latest Practicable Date, properties developed or to be developed by the Group included (i) residential; and (ii) commercial (including shopping malls and shopping arcades that are complementary with the Group s residential developments) which can broadly be classified into three categories, namely completed properties, properties under development, properties for future development. For its property development projects, the Group adopts the strategy to sell residential properties and normally retains ownerships in non-residential properties for leasing. In the event that the selling price of the non-residential property market is attractive, the Group will consider selling its non-residential properties. During the Track Record Period, the Group had also developed a property project for industrial use, namely Hong Long High Technology Industrial Park. By a sale and purchase agreement dated 24 November, 2006, the Group sold the Hong Long High Technology Industrial Park to an Independent Third Party. Details of the Hong Long High Technology Industrial Park and the disposal are set out in the paragraph headed Property developed during the Track Record Period but transferred to an Independent Third Party in this section of this prospectus. Set out below is the information with respect to the Group s completed properties and properties for future development. Further details in relation to, among other things, properties operated and leased by the Group are set out in the sub-paragraph headed Property leasing business in this section of this prospectus. 99

105 Properties Harbor City (Notes 1 and 2) Hong Long Plaza (Notes 1 and 2) Greenview Garden phase I (Notes 1, 2, 3 and 4) Properties held for future development Projects with land use rights certificates phase II (Notes 1, 2, 3 and 4) Mid-level Garden (Notes 1, 2, 3 and 4) Dynasty Garden (Notes 1, 2, 3 and 4) Bauhinia Garden (Notes 1, 2 and 4) Projects that have signed agreements and pending to proceed the relevant legal procedures Yinghua project (Note 2) Longhua project (Notes 2 and 11) Location Shenzhen, Guangdong Province Shenzhen, Guangdong Province Huizhou, Guangdong Province Huizhou, Guangdong Province Huizhou, Guangdong Province Huizhou, Guangdong Province Meizhou, Guangdong Province Shenzhen, Guangdong Province Shenzhen, Guangdong Province Type Commercial/ residential Commercial/ residential Commercial/ residential Commercial/ residential Commercial/ residential Commercial/ residential Commercial/ residential Commercial/ residential Commercial/ residential 100 Site area (sq.m.) 19,822 19,832 43, , , ,000 28,526 9,237 30,598 Actual/expected GFA (sq.m.) 95, , , , , ,114 85,000 57, ,800 Actual/expected saleable GFA (sq.m.) 75, , , , , ,614 84,000 N/A 137,800 GFA under pre-sale permits (sq.m.) (note 5) 75, ,250 N/A (Note 10) GFA sold (sq.m.) (note 6) 72,765 (Note 8) N/A (Note 10) N/A (Note 10) N/A (Note 10) N/A (Note 10) N/A (Note 10) N/A (Note 10) 71,860 N/A N/A N/A N/A N/A N/A N/A Outstanding GFA (sq.m.) (note 7) 3,136 64,390 N/A N/A N/A N/A N/A N/A N/A BUSINESS Actual or estimated commencement time for construction April 2002 February 2005 January 2007 early 2007 June 2008 October 2008 July 2007 late 2007 N/A (Note 11)) Actual or estimated completion time for construction September 2003 October 2006 December 2007 mid-2008 December 2009 December 2010 December 2008 late 2008 N/A (Note 11) Actual or estimated commencement time for pre-sale September 2002 October 2005 June 2007 March 2008 September 2009 September 2009 April 2008 N/A N/A (Note 11) Operating subsidiaries that holding the development project Hong Long Shenzhen Hong Long Shenzhen Huizhou Yintaida Huizhou Yintaida Huizhou Yintaida Huizhou Yintaida Hong Long Shenzhen Shenzhen Yinghua Note 9 Interest of the operating subsidiaries owned by the Group (%) (Note 3) 100 (Note 3) 100 (Note 3) 100 (Note 3) (Note 11)

106 BUSINESS Notes: 1. Set out below are the relevant certificates/permits obtained for each of the Group s development property/projects. Harbor City and Hong Long Plaza: (i) (Planning Permit of Construction Land); (ii) (Planning Permit of Construction Project); (iii) (Permit of Commencement of Construction Project); (iv) (Pre-sale Permit); and (v) (Realty Title Certificate). As advised by the PRC Legal Adviser, no (State-owned Land Use Rights Certificate) is issued in Shenzhen and (Realty Title Certificate) is used instead (or earlier) since Greenview Garden, Mid-level Garden and Dynasty Garden: (i) (State-owned Land Use Rights Certificate); and (ii) (Planning Permit of Construction Land). Bauhinia Garden: (State-owned Land Use Rights Certificate). 2. Relevant information regarding the background for obtaining the land for each of the Group s development properties are set out below. 3. Huizhou Yintaida, one of the Group subsidiaries that holds the development projects of Greenview Garden, Mid-level Garden and Dynasty Garden, became a member of the Group since September It is a project company that holds (State-owned Land Use Rights Certificate) and (Planning Permit of Construction Land) for Greenview Garden, Mid-level Garden and Dynasty Garden. It is owned by the Group as to 51% and on 5 February 2007, the Group exercised the option to acquire the remaining 49% equity interest from the other shareholder. After the application for registration of the change of equity interest is completed, a new business licence will be issued upon the approval of the relevant authority. Details of the option is set out in the sub-paragraph headed Option to Purchase Interest in Huizhou Yintaida by Hong Long Shenzhen under the section headed Business to this prospectus. The Group obtained Garden on 16 January (Planning Permit of Construction Project) of Greenview 4. According to a document issued by the Land Bureau of Boluo County, the clean-up of plant seedings and related debris ( ) on the land in Huizhou were in progress resulting the delay in development by the Group on its land reserve and such delay does not render any compensation to be imposed on the Group. For the land in Meizhou, the delay in development is due to (change in planning) which is within the scope and accepted by the relevant governmental authorities for delay in development, resulting no land idle penalty was imposed on the Group. 5. GFA under pre-sale permits refers to the GFA granted under the pre-sale permits as at the Latest Practicable Date. 6. GFA sold refers to the GFA sold under the relevant sale and purchase agreements as at the Latest Practicable Date. 7. Outstanding GFA refers to the balance after deducting GFA sold from GFA under pre-sale permits as at the Latest Practicable Date. 8. It includes the commercial portion with a total GFA of approximately 9,059 square metres that were assigned to the Independent Third Party pursuant to the Co-operation Agreement. 9. The Directors currently plan that once the relevant title certificate for this project is obtained, a new project company will be established to manage and hold the ownership of this project. 101

107 BUSINESS 10. The pre-sale permits for properties held for future development were not obtained as at the Latest Practicable Date. 11. The Directors currently do not have a concrete plan for the Longhua project because the relevant land use rights certificates have not been registered in the name of the Group. Pursuant to the supplemental agreement dated 19 September 2006 entered into between the Group and the Independent Third Party, if such condition could not be fulfilled on or before 31 March 2007, the Group will cease the co-operation with the Independent Third Party for development of Longhua project. If the relevant title certificates for the land of property are obtained, the Directors currently plan to commence the development work in Please refer to the sub-paragraph headed Longhua project of this section for details. a) Completed Properties (Harbor City) Background Information In October 2000, the Group entered into a co-operation agreement (the Co-operation Agreement ) with the then owner, an Independent Third Party, of the land (the Land ) located at the junction of Tao Yuan Road ( ) and Qianhai Road ( ) in Nanshan District, Shenzhen, the PRC to jointly develop Harbor City on the Land. Pursuant to the Co-operation Agreement, the Group would be responsible for (i) the provision of funds required for the development; (ii) the overall design and development of Harbor City whereas the Independent Third Party to the Co-operation Agreement would be responsible for the provision of the Land. Subsequently, the two parties to the Co-operation Agreement entered into the properties allotment agreement and its supplemental agreement respectively in August and September 2002 to agree that when the development of Harbor City was completed, the Group would be assigned the entire residential portion and commercial portion of approximately 39% of the total GFA of Harbor City while the Independent Third Party to the Co-operation Agreement would be assigned the remaining parts of the commercial portion of approximately 61% of the total GFA of Harbor City. In September 2003, when the 102